--- page 1 ---
GLOBAL
OFFERING
Joint Sponsors, Sponsor-Overall Coordinators, Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Overall Coordinator, Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
(in alphabetical order)
方舟云康控股有限公司
Fangzhou Inc.
Stock Code : 6086
(A company incorporated in the Cayman Islands with limited liability)


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Important: If you have doubt about any of the contents in this prospectus, you should obtain independent professional advice.
Fangzhou Inc.
ʮ̡
(A company incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the
Global Offering
: 23,800,000 Offer Shares (subject to the
Over-allotment Option)
Number of Hong Kong Offer Shares : 2,380,000 Offer Shares (subject to
reallocation)
Number of International Offer Shares : 21,420,000 Offer Shares (subject to
reallocation and the Over-allotment
Option)
Maximum Offer Price : HK$8.36 per Offer Share plus brokerage
of 1%, SFC transaction levy of
0.0027%, AFRC transaction levy of
0.00015% and the Stock Exchange
trading fee of 0.00565% (payable in
full on application in Hong Kong
dollars, subject to refund)
Nominal value : US$0.00002 per Offer Share
Stock code : 6086
Joint Sponsors, Sponsor-Overall Coordinators, Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Overall Coordinator, Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers (in alphabetical order)
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this prospectus, make no
representation as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss howsoever arising from or in relianc e upon the whole or any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the section headed “Documents Delivered to the Registrar of Companies a nd Available on Display” in Appendix V , has been registered by
the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 o f the Laws of Hong Kong). The Securities and Futures
Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred to abo ve.
The Offer Price is expected to be determined by agreement between the Overall Coordinators (for themselves and on behalf of the Underwriters) and our C ompany by 12:00 noon on Friday, July 5, 2024 . The Offer
Price will be not more than HK$8.36 and is currently expected to be not less than HK$7.60. If, for any reason, the Offer Price is not agreed between the Ove rall Coordinators (for themselves and on behalf of the
Underwriters) and our Company by 12:00 noon on Friday, July 5, 2024 , the Global Offering will not proceed and will lapse.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, where considered appropriate and with our consent, reduce the numbe r of Hong Kong Offer Shares and/or the indicative Offer Price
range below that is stated in this prospectus at any time in or prior to the morning of the last day for lodging applications under the Hong Kong Public Off ering. In such case, notices of the reduction in the number of
Hong Kong Offer Shares and/or the indicative Offer Price range will be published on the websites of the Stock Exchange at www.hkexnews.hk and our Company at investors.jianke.com as soon as practicable following
the decision to make such reduction, and in any event not later than the morning of the last day for lodging applications under the Hong Kong Public Offer ing. For more details, see “Structure of the Global Offering”
and “How to Apply for Hong Kong Offer Shares.”
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure subscribers for, the Hong Ko ng Offer Shares, are subject to termination by the Overall
Coordinators (for themselves and on behalf of the Hong Kong Underwriters) if certain events shall occur prior to 8:00 a.m. on the Listing Date. Such gro unds are set out in the section headed “Underwriting” in this
prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offe red, sold, pledged or transferred within the United States or
to, or for the account or benefit of U.S. persons, except in transactions exempt from, or not subject to, the registration requirements of the U.S. Secu rities Act. The Offer Shares are being offered and sold (1) solely to
QIBs as defined in Rule 144A pursuant to an exemption from registration under the U.S. Securities Act, and (2) outside the United States in offshore tra nsactions in reliance on Regulation S.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this prospectus to the p ublic in relation to the Hong Kong Public Offering.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk and our website at investors.jianke.com . If you require a printed copy of this prospectus, you may download and print from
the website addresses above.
IMPORTANT
June 28, 2024


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IMPORTANT NOTICE TO INVESTORS
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide printed copies of this prospectus to the public in relation to the
Hong Kong Public Offering.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk
under “HKEXnews > New Listings > New Listing Information” and our website at
investors.jianke.com . If you require a printed copy of this prospectus, you may download and
print from the website addresses above.
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
White Form
eIPO service
www.eipo.com.hk
Enquiries: +852 2862
8600
Friday, June 28, 2024 –
9:00 a.m. to 6:00 p.m.
Tuesday, July 2, 2024 –
9:00 a.m. to 6:00 p.m.
Wednesday, July 3, 2024
– 9:00 a.m. to 6:00 p.m.
Thursday, July 4, 2024 –
9:00 a.m. to 12:00 noon
Investors who would like to
receive a physical Share
certificate. Hong Kong
Offer Shares successfully
applied for will be
allotted and issued in
your own name.
From 9:00 a.m. on Friday,
June 28, 2024 to 11:30
a.m. on Thursday,
July 4, 2024 (Hong Kong
time).
The latest time for
completing full payment
of application monies will
be 12:00 noon on
Thursday, July 4, 2024
(Hong Kong time).
HKSCC EIPO
channel
Y our broker or custodian
who is a HKSCC
Participant will submit an
EIPO application on your
behalf through HKSCC’s
FINI system in
accordance with your
instructions.
Investors who would not
like to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the earliest
and latest time for giving
such instructions, as this
may vary by broker or
custodian.
We will not provide any physical channels to accept any application for the Hong Kong
Offer Shares by the public. The contents of this prospectus are identical to the prospectus as
registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses above.
IMPORTANT
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Please refer to “How to Apply for Hong Kong Offer Shares” for further details on the
procedures through which you can apply for the Hong Kong Offer Shares electronically.
Y our application through the White Form eIPO service or the HKSCC EIPO channel
must be for a minimum of 500 Hong Kong Offer Shares and in one of the numbers set out in
the table below. If you are applying through the White Form eIPO service, you may refer to
the table below for the amount payable for the number of Shares you have selected. Y ou must
pay the respective maximum amount payable on application in full upon application for Hong
Kong Offer Shares. If you are applying through the HKSCC EIPO channel, you are required
to pre-fund your application based on the amount specified by your broker or custodian, as
determined based on the applicable laws and regulations in Hong Kong.
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
500 4,222.16 6,000 50,665.86 40,000 337,772.42 400,000 3,377,724.25
1,000 8,444.31 7,000 59,110.18 45,000 379,993.98 500,000 4,222,155.30
1,500 12,666.47 8,000 67,554.49 50,000 422,215.54 600,000 5,066,586.35
2,000 16,888.62 9,000 75,998.79 60,000 506,658.63 700,000 5,911,017.42
2,500 21,110.77 10,000 84,443.11 70,000 591,101.74 800,000 6,755,448.48
3,000 25,332.94 15,000 126,664.67 80,000 675,544.85 900,000 7,599,879.55
3,500 29,555.08 20,000 168,886.21 90,000 759,987.95 1,000,000 8,444,310.60
4,000 33,777.24 25,000 211,107.76 100,000 844,431.05 1,190,000
(1) 10,048,729.61
4,500 37,999.41 30,000 253,329.32 200,000 1,688,862.12
5,000 42,221.55 35,000 295,550.87 300,000 2,533,293.18
Notes:
(1) The maximum number of Hong Kong Offer Shares you may apply for, which is 50% of the Offer Shares
initially available for subscription under the Hong Kong Public Offering.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, AFRC transaction levy and the Stock
Exchange trading fee. If your application is successful, the brokerage will be paid to the Exchange Participants
and the SFC transaction levy, the AFRC transaction levy and the Stock Exchange trading fee will be paid to
the Stock Exchange (in the case of the SFC transaction levy and the AFRC transaction levy, collected by the
Stock Exchange on behalf of the SFC and the AFRC, respectively).
No application for any other number of Hong Kong Offer Shares will be considered and
any such application is liable to be rejected.
IMPORTANT
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Should there be any changes to the dates mentioned in the following expected
timetable of the Hong Kong Public Offering, an announcement will be made and
published on the website of the Stock Exchange at www.hkexnews.hk and our website at
investors.jianke.com of the revised timetable.
Hong Kong Public Offering commences ............................. .9:00 a.m. on
Friday, June 28, 2024
Latest time for completing electronic applications under the
White Form eIPO service through the designated website at
www.eipo.com.hk (2) ........................................... 1 1:30 a.m. on
Thursday, July 4, 2024
Application lists open (3) .......................................... 1 1:45 a.m. on
Thursday, July 4, 2024
Latest time for (a) completing payment for White Form eIPO
applications by effecting internet banking transfer(s) or PPS
payment transfer(s) and (b) giving electronic application
instructions to HKSCC ...................................... .12:00 noon on
Thursday, July 4, 2024
If you are instructing your broker or custodian who is a HKSCC Participant to apply for
Hong Kong Offer Shares on your behalf, you are advised to contact your broker or custodian
for the latest time for giving such instructions, which may be different from the latest time as
stated above.
Application lists close
(3) ........................................ .12:00 noon on
Thursday, July 4, 2024
Expected Price Determination Date (4) ......................... Friday, July 5, 2024
Announcement of the final Offer Price, the level of indications
of interest in the International Offering, the level of applications
in the Hong Kong Public Offering and the basis of
allocation of the Hong Kong Offer Shares to be published on
the website of the Stock Exchange at www.hkexnews.hk and
our website at investors.jianke.com by(5) .......................... 1 1:00 p.m. on
Monday, July 8, 2024
EXPECTED TIMETABLE (1)
– iii –


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Results of allocation in the Hong Kong Public Offering to be available through a variety
of channels as described in “How to Apply for Hong Kong Offer Shares—B. Publication of
Results,” including through:
(1) the designated results of allocation website at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment ) with a “search by
ID” function from ............................................ 1 1:00 p.m.
on Monday, July 8, 2024
to 12:00 midnight on
Sunday, July 14, 2024
(2) the allocation results telephone enquiry line by calling
+852 2862 8555 between 9:00 a.m. and 6:00 p.m. on ...... Tuesday, July 9, 2024,
Wednesday, July 10, 2024,
Thursday, July 11, 2024
and Friday, July 12, 2024
Share certificates in respect of wholly or partially successful
applications to be dispatched or deposited into CCASS on
or before
(6)(7) ........................................ Monday, July 8, 2024
White Form e-Refund payment instructions or refund checks in respect of
wholly or partially unsuccessful applications (or wholly
successful applications, if applicable) to be dispatched on
or before
(8) .......................................... Tuesday, July 9, 2024
Dealings in the Shares on the Stock Exchange to commence at ........... .9:00 a.m. on
Tuesday, July 9, 2024
Notes:
(1) All dates and times refer to Hong Kong local dates and times.
(2) Y ou will not be permitted to submit your application under the White Form eIPO service through the
designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you
have already submitted your application and obtained an application reference number from the designated
website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment
of application monies) until 12:00 noon on the last day for submitting applications, when the application lists
close.
(3) If there is/are a tropical cyclone warning signal number 8 or above, a “black” rainstorm warning signal and/or
Extreme Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday,
July 4, 2024 , the application lists will not open or close on that day. See “How to Apply for Hong Kong Offer
Shares—E. Severe Weather Arrangements.”
EXPECTED TIMETABLE (1)
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(4) The Offer Price is expected to be determined on or before Friday, July 5, 2024 (which, at the earliest, could
be Thursday, July 4, 2024 ) and in any event not later than 12:00 noon on Friday, July 5, 2024 . If, for any
reason, the Offer Price is not agreed between the Overall Coordinators (for themselves and on behalf of the
Underwriters) and our Company by 12:00 noon on Friday, July 5, 2024 , the Global Offering will not proceed
and will lapse.
(5) None of the websites or any of the information contained on the websites forms part of this prospectus.
(6) Physical Share certificate(s) of equal or over 1,000,000 Hong Kong Offer Shares issued in applicants’ own
name may be collected in person from the Hong Kong Share Registrar, Computershare Hong Kong Investor
Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong
Kong, from 9:00 a.m. to 1:00 p.m. on Tuesday, July 9, 2024 . Applicants being individuals must not authorize
any other person to collect on their behalf. Applicants being corporations must attend by their respective
authorized representative bearing a letter of authorization from the corporation stamped with the corporation’s
chop. Evidence of identity acceptable to the Hong Kong Share Registrar, Computershare Hong Kong Investor
Services Limited, must be produced at the time of collection. Uncollected Share certificate(s) will be sent to
the addresses specified in the relevant application instructions by ordinary post at the applicants’ own risk. See
“How to Apply for Hong Kong Offer Shares—D. Dispatch/Collection of Share Certificates and Refund of
Application Monies.”
(7) The Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date, which is
expected to be Tuesday, July 9, 2024 , provided that the Global Offering has become unconditional in all
respects and the right of termination described in “Underwriting—Underwriting Arrangements and
Expenses—Hong Kong Public Offering—Grounds for Termination” has not been exercised. Investors who
trade Shares prior to the receipt of Share certificates or prior to the Share certificates becoming valid evidence
of title do so entirely at their own risk.
(8) White Form e-Refund payment instructions or refund checks will be issued in respect of wholly or partially
unsuccessful applications pursuant to the Hong Kong Public Offering and in respect of wholly successful
applications in the event that the Offer Price is less than the price payable per Offer Share on application. Part
of the applicant’s Hong Kong identity card number, national identification document number or passport
number, or, if the application is made by joint applicants, part of the Hong Kong identity card number, national
identification document number or passport number of the first-named applicant, provided by the applicant(s)
may be printed on the refund check, if any. Such data would also be transferred to a third party for refund
purposes. Banks may require verification of an applicant’s Hong Kong identity card number, national
identification document number or passport number before encashment of the refund check. Inaccurate
completion of an applicant’s Hong Kong identity card number, national identification document number or
passport number may invalidate or delay encashment of the refund check.
The above expected timetable is a summary only. For details of the structure of the Global
Offering, including its conditions, and the procedures for applications for Hong Kong Offer
Shares, see “Structure of the Global Offering” and “How to Apply for Hong Kong Offer
Shares,” respectively.
If the Global Offering does not become unconditional or is terminated in accordance with
its terms, the Global Offering will not proceed. In such a case, our Company will make an
announcement as soon as practicable thereafter.
EXPECTED TIMETABLE (1)
–v–


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IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This prospectus is issued by us solely in connection with the Hong Kong Public
Offering and does not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Hong Kong Offer Shares offered by this prospectus pursuant to the
Hong Kong Public Offering. This prospectus may not be used for the purpose of making,
and does not constitute, an offer or invitation in any other jurisdiction or in any other
circumstances. No action has been taken to permit a public offering of the Hong Kong
Offer Shares in any jurisdiction other than Hong Kong and no action has been taken to
permit the distribution of this prospectus in any jurisdiction other than Hong Kong. The
distribution of this prospectus for purposes of a public offering and the offering and sale
of the Hong Kong Offer Shares in other jurisdictions are subject to restrictions and may
not be made except as permitted under the applicable securities laws of such jurisdictions
pursuant to registration with or authorisation by the relevant securities regulatory
authorities or an exemption therefrom.
You should rely only on the information contained in this prospectus to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this prospectus. We have not
authorised anyone to provide you with information that is different from what is
contained in this prospectus. Any information or representation not contained nor made
in this prospectus must not be relied on by you as having been authorised by us, the Joint
Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the
Capital Market Intermediaries, any of their respective directors, officers, employees,
agents or representatives of any of them or any other parties involved in the Global
Offering.
Page
Expected Timetable ................................................. i i i
Contents .......................................................... v i
Summary ......................................................... 1
Definitions ........................................................ 2 7
Glossary of Industry Terms .......................................... 4 3
Forward-looking Statements .......................................... 4 6
Risk Factors ...................................................... 4 8
Waivers from Strict Compliance with the Listing Rules .................... 1 1 0
CONTENTS
–v i–


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Information about this Prospectus and the Global Offering ................ 1 1 5
Directors and Parties Involved in the Global Offering ..................... 1 2 0
Corporate Information .............................................. 1 3 2
Industry Overview ................................................. 1 3 5
Regulatory Overview ............................................... 1 5 1
History, Reorganization and Corporate Structure ........................ 1 8 0
Business .......................................................... 2 1 1
Contractual Arrangements ........................................... 3 0 0
Relationship with the Controlling Shareholders .......................... 3 2 2
Connected Transactions ............................................. 3 2 7
Directors and Senior Management ..................................... 3 3 2
Substantial Shareholders ............................................ 3 4 4
Share Capital ..................................................... 3 4 7
Financial Information ............................................... 3 5 1
Future Plans and Use of Proceeds ..................................... 4 1 2
Underwriting ...................................................... 4 1 6
Structure of the Global Offering ...................................... 4 3 4
How to Apply for Hong Kong Offer Shares ............................. 4 4 6
Appendix I Accountants’ Report ................................... I - 1
Appendix II Unaudited Pro Forma Financial Information ................ II-1
Appendix III Summary of the Constitution of the Company and
Cayman Company Law ............................... III-1
Appendix IV Statutory and General Information ....................... I V - 1
Appendix V Documents Delivered to the Registrar of Companies and
Available on Display ................................. V - 1
CONTENTS
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This summary aims to give you an overview of the information contained in this
prospectus. As this is a summary, it does not contain all the information that may be
important to you. You should read the entire document before you decide to invest in the
Offer Shares. V arious expressions used in this section are defined in the sections headed
“Definitions” and “Glossary of Industry Terms” in this prospectus.
There are risks associated with any investment. Some of the particular risks in
investing in the Offer Shares are set out in the section headed “Risk Factors.” You should
read that section carefully before you decide to invest in the Offer Shares.
OVERVIEW
We are the largest online chronic disease management platform in China in terms of
average MAU in 2023, according to CIC. We commenced our business with a focus on chronic
disease management to address the needs of patients with chronic diseases, such as
hypertension, cardiovascular and respiratory chronic diseases. Leveraging our chronic disease
management platform, we are dedicated to providing tailored medical care and precision
medicine for a growing population of chronic disease patients, with a view towards extending
our services to a wider range of disease areas.
To address the needs of patients with chronic diseases for convenient and accessible
medical care services, we provide comprehensive medical services and online retail pharmacy
services through our Jianke Platform. Our comprehensive medical services include follow-up
physician consultations and e-prescription services conducted by registered physicians and
in-house medical professionals through our hospital-to-home (“ H2H”) service platform. We
also provide online retail pharmacy services, offering a wide range of pharmaceutical and
healthcare products directly to our customers. Our comprehensive medical services and online
retail pharmacy services are supported by our chronic disease management service center and
robust pharmaceutical supply chain.
SUMMARY
–1–


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In addition, our platform’s large and active user base allows us to effectively connect and
engage with doctors and patients, providing them targeted medical knowledge and content. By
leveraging these powerful network effects, our platform provides pharmaceutical companies
with customized content and marketing solutions to better inform physicians and patients about
chronic disease conditions and treatment options, as well as increase disease awareness among
the public.
Leveraging our technological capabilities, we provide digitalized solutions for key
participants in the healthcare industry. The following diagram illustrates the major services or
products provided in, and key characteristics of, each of our business segments, as well as key
highlights of our operating data.
Key characteristics of each business segment
Smart Healthcare
Service Platform
Customized Content and Marketing Solutions
• Academic community services and patient community services
• Search engine optimization, provision of medical surveys, and distributor data
integration services, etc.
• Follow-up consultations
Comprehensive Medical Services
• E-prescriptions services
• Pharmaceutical products and home delivery1
Online Retail Pharmacy Services
• Healthcare products and home delivery1
• Prescription verification or e-prescription
services (if needed)
Build on existing
physician-patient
relationships
Focused on chronic
disease patients
A broad selection of
prescription
pharmaceuticals
Market insights leveraging the
large and active user base on
Jianke Platform
/g132212,000+ registered
physicians practicing offline
at 15,600+ medical
institutions2
/g132Approximately 58.8% registered
physicians were working for
Class III Hospitals2
Medical Resources
/g1328.4 million average
MAU3
/g132169 CDM staff led by
medical professionals2
CDM Service Capabilities
/g132212,000+ drug SKUs offered2
/g1321,400+ suppliers2
/g13281%+ of GMV are
prescription drugs4
Pharmaceutical Supply Chain
/g132Data engine recorded
83.9 million consultations and
45.7 million prescriptions2
/g132AI medical assistant handled
43.1% routine consultations
independently4
Technology Infrastructure
/g132760+ collaborated
pharmaceutical companies2
Notes:
1. Delivery services are provided by qualified third-party logistics and courier companies.
2. As of December 31, 2023.
3. For the year ended December 31, 2023.
4. During the Track Record Period.
SUMMARY
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OUR BUSINESS AND V ALUE PROPOSITIONS
We have established a full-service online chronic disease management platform that
provides significant value to key participants in the chronic disease management industry. Our
large customer base anchored in “real world” physician-patient relationships, long-term
collaboration with leading pharmaceutical companies, and highly efficient business operations
have positioned us to capture these opportunities and bring value to industry participants.
Value Propositions
/g57More convenient and affordable access
to prescriptions and pharmaceuticals
/g57Improved treatment adherence and
better long-term outcomes
/g57
/g57
/g57/g57
/g57
/g57
/g57
Manage chronic disease patients
more effectively and efficiently
A more comprehensive portfolio of
available pharmaceutical products
Alternative channel to reach
patients and physicians outside of
hospital pharmacies
Custom services and solutions for
physician/patient education
/g57Industry insights and market
intelligence
Alleviate the burden on the overloaded
public healthcare system
Allow hospitals to maintain
connectivity with patients through
online physician-patient relationships
/g57Highly relevant health and
disease awareness content Physician education content and
academic exchange
Co
p
ni
es
m
a
Our online chronic disease management platform primarily provides the following
services. For details, see “Business—Our Online Chronic Disease Management Platform.”
 Comprehensive Medical Services. Our H2H services enable patients and physicians
to engage in online follow-up consultations, typically after initial in-person
consultations, and physicians can issue e-prescriptions through our H2H service
platform, which are fulfilled through our pharmaceutical supply chain. Our H2H
service platform was launched to address chronic disease patients’ treatment needs
created by the lack of ready access to reliable medical resources in China, and to
capitalize on the burgeoning demand for remote consultations driven by its
accessibility, flexibility, reduced outpatient waiting time and cost-effectiveness. We
provide a package of services to patients on our H2H service platform, including
online consultation, e-prescription and sales of pharmaceutical and other products,
and charge them a service fee based on the services used. This service fee is
SUMMARY
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comprised of online consultation fees, e-prescription service fees, and sales of
pharmaceutical and other products. Apart from the aforementioned charges, there
are no other fees payable by patients or registered physicians to us for the use of our
H2H service platform.
As a complement to our online services, we also provide medical services offline at
Jingtai Hospital and Qishi Hospital. Our offline hospitals generate revenue mainly
from provision of medical services, such as consultation, health check-up, treatment
and prescription services. For each year during the Track Record Period, revenue
generated from the provision of offline medical services at our offline hospitals
represented less than 1.0% of our total revenue, which was insignificant to our
overall business. For details, see “Business—Our Online Chronic Disease
Management Platform—Comprehensive Medical Services—Our Offline Hospitals.”
 Online Retail Pharmacy Services. We provide various healthcare products through
our online retail pharmacy service platform, along with convenient home delivery
for our customers through qualified third-party couriers. This allows patients to
ensure the continuity of their medications and treatments without the inconvenience
of arranging for hospital appointments. We also offer home-use medical devices and
accessories, nutritional supplements and other wellness products. We generate
revenue from the sales of such pharmaceutical and healthcare products on our
platform. To facilitate the purchase of prescription drugs, we also provide
e-prescription assistance services, which are typically offered in conjunction with
the sales of prescription drugs, and this package is recorded as part of our online
retail pharmacy services revenue. Apart from the aforementioned charges, we do not
charge customers any additional fees for our online retail pharmacy services. We
also operate a number of offline pharmacies, which made insignificant revenue
contributions during the Track Record Period.
 Customized Content and Marketing Solutions. We provide pharmaceutical
companies with a variety of customized content and marketing solutions to better
inform physicians and patients about chronic disease conditions and raise awareness
about treatment options. These services were introduced after recognizing that such
needs of pharmaceutical companies can be addressed by leveraging the large and
active user base on our Jianke Platform. Our academic community services facilitate
knowledge among physicians through publication of medical news articles and short
videos on our Jianke Platform, hosting online medical conferences, and physician
live stream video sessions with specialist physicians. Our patient community
services offer relevant educational content according to the interests of our patient
users. Our users have complimentary access to such contents published on the Jianke
Platform, and we charge service fees to pharmaceutical companies on a case-by-case
basis. We also provide other solutions such as search engine optimization, provision
of medical surveys, and distributor data integration services. Our customized
content and marketing solutions business line serves as an extension of our supplier
management strategy by forging mutually beneficial and synergistic relationships
with pharmaceutical companies who are our suppliers.
SUMMARY
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Our Growth and Key Operating Data
Since we began operating the Jianke mobile applications and website in-house in July
2019, we have been focused on strengthening our business foundation and scaling our business
through organic growth. Our past efforts have enabled us to build a large user base with
approximately 42.7 million registered users as of December 31, 2023. As a result of our efforts,
our business scale and operating results have continued to grow and improve, with the total
GMV of our Jianke Platform and our operations on third-party e-commerce platforms
increasing from RMB1,945.4 million in 2021 to RMB2,430.3 million and RMB2,481.5 million
in 2022 and 2023, respectively. The following table sets out certain key operating metrics of
our Jianke Platform as of the dates or for the years indicated. For a detailed discussion of the
growth in our key operating metrics during the Track Record Period, see “Business—Our
Online Chronic Disease Management Platform—Our Growth and Key Operating Data.”
As of/For the year ended
December 31,
2021 2022 2023
Number of paying users (1) 2,538,606 3,878,195 4,439,660
Comprehensive medical services 360,511 553,033 730,251
Online retail pharmacy services 2,183,933 3,457,326 4,025,907
Average spending per paying user
(2)
(RMB) 766.3 626.7 (10) 558.9 (10)
Comprehensive medical services 2,269.7 1,767.6 1,450.4
Online retail pharmacy services 516.1 420.2 353.3
Average monthly active users (MAU)
(3) 8,823,986 9,135,433 (11) 8,441,036 (11)
Average user retention rate (4) 77.3% 78.7% 79.0%
Number of registered physicians (5) 191,106 205,000 212,892
Average physician retention rate (6) 85.1% 91.9% (12) 93.2%
Repeat purchase rate (7) 82.0% 83.3% 84.2%
Conversion rate of active users to
paying users on H2H service
platform
(8) 32.6% 42.9% 36.2% (13)
Conversion rate of active users to
paying users on online retail
pharmacy service platform
(8) 14.7% 14.8% 17.7%
Total GMV (9)
(RMB in millions) 1,945.4 2,430.3 2,481.5
Prescription drug GMV as a percentage
of total GMV 88.9% 84.2% (14) 81.1% (14)
Notes:
(1) “Paying users” refer to users who engage in revenue generating activities such as physician
consultations or purchase of pharmaceutical products, as opposed to “non-paying users” who only
engage in non-revenue generating activities such as participating in academic or patient community
services, attending free online consultations, or browsing other content available to them free of charge.
There are overlapping users who are both paying users of our comprehensive medical services and
online retail pharmacy services. Such users are counted only once when determining the total paying
users on our platform.
SUMMARY
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(2) Average spending per paying user refers to the total GMV for a year divided by the number of paying
users for the same year.
(3) Monthly active users (MAU) refer to the number of active users who access our services on the Jianke
Platform at least once during a calendar month, where such access includes browsing on the Jianke
Platform, use of our online consultation services, e-prescription services and customer services,
purchase of pharmaceutical and other healthcare products, and participation in patient community
services. Average MAU for each year during the Track Record Period is the mean MAU by month during
the year.
(4) User retention rate in a given month refers to the percentage of total active users in the same month of
the preceding year who remained active on the Jianke Platform during the next 12 months. A user is
considered to have remained active during the 12-month period if he/she accessed our services at least
once during the period, where such access includes browsing on the Jianke Platform, use of our online
consultation services, e-prescription services and customer services, purchase of pharmaceutical and
other healthcare products, and participation in patient community services. Average user retention rate
for each year during the Track Record Period is the mean user retention rate by month during the year.
(5) Number of registered physicians refers to the total number of physicians registered on the Jianke
Platform as of a given date.
(6) Physician retention rate in a given month refers to the percentage of total active registered physicians
in the same month of the preceding year who remained active on the Jianke Platform during the next
12 months. A registered physician is considered to have remained active during the 12-month period if
he/she engaged in an activity at least once during the period, where such activity includes provision of
online consultation services and e-prescription services, and participation in academic community
services through activities such as publishing articles or participating in live streams. Average physician
retention rate for each year during the Track Record Period is the mean physician retention rate by
month during the year.
(7) Repeat purchase rate refers to the amount spent by users who placed two or more orders during a year
divided by the total GMV for the same year.
(8) Conversion rate of active users to paying users on our H2H service platform or online retail pharmacy
service platform refers to the number of paying users divided by the number of active users on our H2H
service platform or the Jianke Online Pharmacy App, respectively.
(9) Total GMV refers to our total gross merchandise volume, which is the total value of all orders placed
on the Jianke Platform and through third-party e-commerce platforms.
(10) The decrease in average spending per paying user primarily reflected the rapid expansion of our paying
user base during the Track Record Period, which enabled us to negotiate more favorable procurement
terms as our business scale increased, and in turn offer more competitive pricing on a range of products
while preserving our overall gross profit margins.
(11) The elevated average MAU in 2022 primarily reflected the exceptionally high user activity in December
2022 driven by the COVID-19 pandemic which was effectively mitigated by early 2023. Our average
MAU in 2023 was generally in line with that in 2021, although the latter was slightly higher due to the
increased healthcare-related online traffic driven by the ongoing COVID-19 pandemic during that
period.
(12) Our average physician retention rate increased significantly in 2022 because we focused on cultivating
the engagement and quality of our accumulated base of registered physicians. For details, see
“Business—Medical Professional Network—Registered Physicians.”
(13) The conversion rate of active users to paying users on our H2H service platform decreased in 2023 as
we introduced more free-of-charge patient education contents on our H2H service platform to attract
new users, expand our user base, stimulate user activity and increase user stickiness.
(14) The decrease in prescription drug GMV as a percentage of our total GMV was primarily due to (i) the
increased sales of OTC drugs as a result of the resurgence of COVID-19 in the second half of 2022; and
(ii) a decrease in prescription drug GMV mainly due to a shift in our product mix, which reflected an
increased proportion of certain higher margin OTC drugs within our product portfolio.
SUMMARY
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Our revenue amounted to RMB1,758.7 million, RMB2,204.3 million and RMB2,434.3
million in 2021, 2022 and 2023, respectively. The following table sets forth the breakdown of
our revenue by business line for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Comprehensive
medical services 719,693 40.9 868,171 39.4 983,654 40.4
Online retail pharmacy
services 1,011,427 57.5 1,252,123 56.8 1,297,106 53.3
Customized content and
marketing solutions 27,553 1.6 60,254 2.7 87,046 3.6
Others – – 23,755 1.1 66,502 2.7
Total 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
Since 2022, we have engaged in the wholesale of pharmaceutical products to third-party
distributors for the purpose of inventory management. Such sales enable the mitigation of
inventory risk for certain items where actual sales may have deviated from original projections.
Revenue generated from these transactions is immaterial. Our future participation in such
transactions would largely depend on our future considerations and needs in inventory
management. As such, revenue generated from such sales is classified as “Others” in our
consolidated statements of profit or loss and other comprehensive income.
In addition, a significant portion of our revenue during the Track Record Period was
attributable to the sales of pharmaceutical and other healthcare products with service
package
(1), which accounted for 98.1%, 97.0% and 96.2% of our total revenue in 2021, 2022
and 2023, respectively. Such revenue was driven by our wide-ranging portfolio of
pharmaceutical products, and also reflects the positive impact of offering medical services
(including e-prescription and prescription refill services) through our registered physicians and
in-house medical professionals. These services are an integral component of our product and
service package, playing a vital role in driving patient retention and promoting treatment
adherence. Furthermore, our registered physicians also provided online consultation services,
which accounted for 0.3%, 0.3% and 0.2% of our total revenue in 2021, 2022 and 2023,
respectively. Revenue generated from customized content and marketing solutions accounted
for the remaining 1.6%, 2.7% and 3.6% of our total revenue in the respective years, as set forth
in the table below.
(1) Excluding revenue contribution from online consultation services.
SUMMARY
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For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Revenue from:
Sales of pharmaceutical
and other healthcare
products with service
package
(1) 1,726,693 98.1 2,138,509 97.0 2,342,942 96.2
Online consultation
services 4,427 0.3 5,539 0.3 4,320 0.2
Customized content and
marketing solutions 27,553 1.6 60,254 2.7 87,046 3.6
Total 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
Note:
(1) Excluding revenue contribution from online consultation services.
Our gross profit in 2021, 2022 and 2023 amounted to RMB219.6 million, RMB380.6
million and RMB487.4 million, respectively. The following table sets forth the breakdown of
our gross profit and gross profit margin by business line for the years indicated.
For the year ended December 31,
2021 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB’000 % RMB’000 % RMB’000 %
Comprehensive medical
services 40,543 5.6 122,078 14.1 149,738 15.2
Online retail pharmacy
services 155,000 15.3 206,693 16.5 263,191 20.3
Customized content and
marketing solutions 24,105 87.5 51,483 85.4 72,277 83.0
Others – – 330 1.4 2,201 3.3
Total 219,648 12.5 380,584 17.3 487,407 20.0
The growth of our revenue and gross profit during our Track Record Period reflected our
overall strategy of growing our business foundation and expanding our business scale. For a
discussion of our revenue and gross profit during the Track Record Period, see “Financial
Information—Description of Certain Consolidated Statements of Profit or Loss and Other
Comprehensive Income Items.”
SUMMARY
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Our Chronic Disease Management (CDM) Service Center
To support our comprehensive medical services and online retail pharmacy services, we
established our CDM service center to improve patient experience by providing professional
medical advice and services to customers. Our CDM service center had a team of 169 staff
members led by our in-house medical professionals as of December 31, 2023. The medical
expertise of these medical professionals enables us to offer more professional solutions to
patients, including consultation follow-up services, prescription consultations, patient
education, medication reminders and drug refill notifications. For details, see “Business—Our
Chronic Disease Management (CDM) Service Center.”
Our Robust Pharmaceutical Supply Chain
Over the years, we have established a robust pharmaceutical supply chain. As of
December 31, 2023, we had collaborated with over 760 pharmaceutical companies, including
multinational companies and large domestic pharmaceutical companies. Our business model
further enables us to foster mutually beneficial relationships with these pharmaceutical
companies as we are able to provide them with alternative distribution channels, valuable
market insights and feedback, as well as value-added services such as our customized content
and marketing solutions. As of December 31, 2023, we had procured products from over 1,400
suppliers and had offered over 212,000 drug SKUs, of which approximately 61.6% were
prescription drugs and approximately 38.4% were OTC drugs. In 2021, 2022 and 2023, our
prescription drug GMV represented approximately 88.9%, 84.2% and 81.1% of our total GMV ,
respectively. Our GMV refers to gross merchandise volume, the total value of all orders placed
on the Jianke Platform and through third-party e-commerce platforms. For details, see
“Business—Collaboration with Pharmaceutical Companies.”
COMPETITIVE LANDSCAPE
According to CIC, the overall market size of the chronic disease management market in
China in terms of GMV grew rapidly from RMB2,425.5 billion in 2015 to RMB7,737.5 billion
in 2023, representing a CAGR of 15.6%, and is expected to continue to grow at a CAGR of
10.5% from 2023 to 2030 and reach RMB15,535.8 billion in 2030. Driven by the vast needs
of chronic disease patients in China, the total GMV generated from the online chronic disease
management market in China increased from RMB27.6 billion in 2015 to RMB178.1 billion in
2023, at a CAGR of 26.3%, and is expected to reach RMB1,153.9 billion in 2030 at a CAGR
of 30.6%.
As of December 31, 2023, there were over 50 service providers in the online chronic
disease management market in China, according to CIC. Our Group was the largest online
chronic disease management platform in China in terms of MAU in 2023.
SUMMARY
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In addition, we recorded a total of RMB2.01 billion prescription drug GMV in 2023,
which ranked first in terms of prescription drug GMV in the online to-consumer CDM market
in China. The proportion of our prescription drug GMV represented approximately 81.1% of
our total GMV in 2023, which was the highest in the online to-consumer CDM market in China.
For details, see “Industry Overview” in this prospectus.
OUR STRENGTHS
We believe that the following competitive strengths contribute to our success and
differentiate us from our competitors: (i) leading online chronic disease management platform
in China; (ii) loyal and active paying user base anchored on long-term physician-patient
relationships; (iii) technology-driven platform to enhance customer satisfaction and operating
efficiency; (iv) strong and synergistic relationships with leading pharmaceutical companies; (v)
innovation-driven approach and ability to evolve our business as new opportunities arise; and
(vi) seasoned management team and strong investor base supporting our long-term growth.
OUR STRATEGIES
We will focus on the following key growth strategies to achieve our long-term goal of
empowering physicians and patients to better treat and manage chronic disease: (i) enhance
connectivity between physicians and patients and increase user engagement on our platform;
(ii) redefine the standard for smart chronic disease management services by expanding our
expertise in chronic disease specialties and focusing on continuous innovation; (iii) build and
grow our high-quality user base; (iv) continue to broaden our product selection to better satisfy
the needs of our users; and (v) continue to attract and retain talent to support our growth.
SUMMARY OF KEY FINANCIAL INFORMATION
The summary historical financial data set forth below has been derived from, and should
be read in conjunction with, our consolidated financial statements, including the accompanying
notes, set forth in the Accountants’ Report in Appendix I to this prospectus, as well as the
information set forth in “Financial Information” of this prospectus. Our consolidated financial
information was prepared in accordance with HKFRSs.
SUMMARY
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Summary of the Consolidated Statements of Profit or Loss and Other Comprehensive
Income
The following table sets forth a summary of our consolidated statements of profit or loss
and other comprehensive income for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Revenue 1,758,673 2,204,303 2,434,308
Cost of sales (1,539,025) (1,823,719) (1,946,901)
Gross profit 219,648 380,584 487,407
Loss before taxation (303,950) (383,289) (196,711)
Loss and total comprehensive income
for the year (303,989) (383,302) (196,788)
Attributable to:
Equity shareholders of the Company (303,964) (383,302) (196,788)
Non-controlling interests (25) – –
Non-HKFRS Measures
We believe that the presentation of non-HKFRS measures, namely adjusted net loss/profit
(non-HKFRS measure) and adjusted net loss/profit margin (non-HKFRS measure), facilitates
comparisons of operating performance from year to year and provides useful information for
investors to understand and evaluate our consolidated results of operations in the same manner
as our management by eliminating the impact of certain items. The use of adjusted net
loss/profit (non-HKFRS measure) and adjusted net loss/profit margin (non-HKFRS measure)
has limitations as analytical tools, and you should not consider them in isolation from, or as
a substitute for analysis of, our results of operations or financial condition as reported under
HKFRS. See “Financial Information—Non-HKFRS Measure: Adjusted Net Loss/Profit and
Adjusted Net Loss/Profit Margin” in this prospectus for details.
We define adjusted net loss/profit (non-HKFRS measure) as loss and total comprehensive
income for the year after excluding the effects of (i) equity settled share-based transactions; (ii)
listing expenses; (iii) changes in the carrying amount of preferred shares liability; and
(iv) foreign exchange from preferred shares liability. We account for the compensation cost
from equity settled share-based transactions with employees, which is a non-cash item and
does not result in cash outflow. We exclude listing expenses arising from activities relating to
the Listing. In addition, we eliminate the impact of changes in the carrying amount of preferred
shares liability and foreign exchange differences associated with our Preferred Shares,
primarily because these are non-cash items in nature. The convertible redeemable preferred
shares will be automatically converted into ordinary shares upon the completion of the Global
SUMMARY
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Offering, upon which the carrying amount of the financial liabilities will be transferred to share
capital and capital reserve. We define adjusted net loss/profit margin (non-HKFRS measure) as
adjusted net loss/profit (non-HKFRS measure) divided by revenue for the year and multiplied
by 100%.
The following table reconciles our adjusted net loss/profit (non-HKFRS measure) for the
years indicated:
For the year ended December 31,
2021 2022 2023
RMB’000, except for percentages
Reconciliation of net loss to adjusted net
loss/profit (non-HKFRS measure)
Loss and total comprehensive income for
the year (303,989) (383,302) (196,788)
Add:
Equity settled share-based transactions 7,904 13,648 5,233
Listing expenses 13,453 21,273 25,081
Changes in the carrying amount of preferred
shares liability 107,220 120,614 143,176
Foreign exchange from preferred shares
liability (31,409) 138,326 30,463
Adjusted net (loss)/profit (non-HKFRS
measure) (206,821) (89,441) 7,165
Adjusted net (loss)/profit margin (non-
HKFRS measure) (11.8)% (4.1)% 0.3%
Since we began to operate the Jianke mobile applications and website in-house in July
2019, we actively grew our user base and business scale, which resulted in rapid growth of our
H2H services and online retail pharmacy services during the Track Record Period. These
efforts have had a positive effect on revenue, gross profit, and gross profit margin trends after
2019. Our revenue increased from RMB1,758.7 million in 2021 to RMB2,204.3 million and
RMB2,434.3 million in 2022 and 2023, respectively. Such increase was primarily driven by the
expansion of our paying user base. Our gross profit increased from RMB219.6 million in 2021
to RMB380.6 million in 2022 and further to RMB487.4 million in 2023.
As we achieved scale and were able to negotiate more favorable procurement terms, we
gained greater flexibility in price-setting. As a result, and our gross profit margin increased
from 12.5% in 2021 to 17.3% in 2022 and further to 20.0% in 2023.
SUMMARY
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Our net loss increased from RMB304.0 million in 2021 to RMB383.3 million in 2022,
primarily because we recorded other net loss of RMB134.2 million in 2022 compared to other
net income of RMB33.0 million in 2021, which mainly arose from foreign exchange loss in
relation to the Preferred Shares denominated in US dollars as a result of the fluctuation of
foreign exchange rates. Our net loss decreased to RMB196.7 million in 2023, primarily
because we had attracted and retained a larger paying user base, and leveraged our supply chain
capabilities to procure pharmaceutical and healthcare products at more attractive prices.
Summary of the Consolidated Statements of Financial Position
The following table sets forth a summary of our consolidated statements of financial
position as of the dates indicated.
As of December 31,
2021 2022 2023
RMB’000
Total non-current assets 36,579 43,711 54,014
Total current assets 312,110 475,170 467,354
Total current liabilities 311,861 477,049 481,942
Net current assets/(liabilities) 249 (1,879) (14,588)
Total assets less current liabilities 36,828 41,832 39,426
Total non-current liabilities 1,377,082 1,751,740 1,940,889
Net liabilities (1,340,254) (1,709,908) (1,901,463)
While we had net current assets of RMB0.2 million as of December 31, 2021, we recorded
net current liabilities of RMB1.9 million as of December 31, 2022, primarily due to an increase
in contract liabilities in 2022 as a result of the increased advance payment from customers
because there was a surge of drug orders on our platform in December 2022 as a result of the
COVID-19 pandemic in China, but logistics services were affected during the pandemic,
resulting in delays in shipment and delivery of our orders. As of December 31, 2023, we
recorded net current liabilities of RMB14.6 million, which was primarily attributable to the
trade and other payables incurred to support our increased business scale.
We recorded net liabilities of RMB1,340.3 million, RMB1,709.9 million and
RMB1,901.5 million as of December 31, 2021, 2022 and 2023, respectively, primarily due to
the convertible redeemable preferred shares of RMB1,368.8 million, RMB1,737.9 million and
RMB1,911.5 million that we recorded as of December 31, 2021, 2022 and 2023, respectively.
Upon the completion of the Global Offering, all of our convertible redeemable preferred shares
will be re-classified from liabilities to equity as a result of the automatic conversion into
ordinary shares, which is expected to reverse our net liabilities position into a net assets
position. Our net liabilities increased from RMB1,340.3 million to RMB1,709.9 million as of
December 31, 2021 and 2022, respectively, primarily due to our loss and total comprehensive
income for the year of RMB383.3 million in 2022, which was partially offset by a decrease
SUMMARY
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resulting from equity settled share-based transactions amounting to RMB13.6 million in 2022.
Our net liabilities increased from RMB1,709.9 million to RMB1,901.5 million as of December
31, 2022 and 2023, respectively, primarily due to our loss and total comprehensive income for
the year of RMB196.7 million in 2023, which was partially offset by a decrease resulting from
equity settled share-based transactions of RMB5.2 million in 2023. For further details, see the
consolidated statements of changes in equity set out in the Accountants’ Report in Appendix
I to this prospectus.
Summary of the Consolidated Statements of Cash Flow
The following table sets forth the breakdown of our cash flows for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Net cash generated from/(used in)
operating activities (203,655) (49,965) 22,282
Net cash (used in)/generated from
investing activities (4,323) 14,315 16,418
Net cash generated from/(used in)
financing activities (11,407) 82,233 (29,308)
Net increase/(decrease) in cash and
cash equivalents (219,385) 46,583 9,392
Cash and cash equivalents at the
beginning of the year 307,817 84,658 134,907
Effect of foreign exchange rate changes (3,774) 3,666 2,018
Cash and cash equivalents
at the end of the year 84,658 134,907 146,317
We recorded net cash used in operating activities of RMB203.7 million, and RMB50.0
million in 2021 and 2022, respectively, which was primarily due to losses recorded for the year.
Although we achieved continuous increase in revenue and gross profit, our operating expenses
increased substantially along with the growth of our business. For a discussion of our cash
flows during the Track Record Period, see “Financial Information—Liquidity and Capital
Resources—Cash Flows.”
SUMMARY
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Key Financial Ratios
The following table sets forth the details of our key financial ratios as of the dates or for
the years indicated. For details, see “Financial Information—Key Financial Ratios.”
As of/For the Y ear Ended December 31,
2021 2022 2023
Gross profit margin 12.5% 17.3% 20.0%
Net loss margin (17.3)% (17.4)% (8.1)%
Adjusted net (loss)/profit margin (non-
HKFRS measure) (11.8)% (4.1)% 0.3%
Current ratio 1.0 1.0 1.0
Quick ratio 0.6 0.7 0.7
BUSINESS SUSTAINABILITY AND PATH TO PROFITABILITY
Since our inception, we have pioneered innovative solutions to address pain points in
chronic disease management by leveraging our deep insights into China’s healthcare system
and applying our spirit of innovation to create stakeholder value. Our online retail pharmacy
platform was initially launched to address the needs of chronic disease patients for repeat
prescription drug refills and the inconvenience of regular trips to major hospitals in China. As
our platform evolved, our realization that trusted physician-patient relationships were also
essential to chronic disease management led us to launch our H2H service platform and
operating model in 2018, which provides easy connectivity between patients and their
physicians, and enables more effective chronic disease management through online follow-up
consultations, e-prescriptions, and physician/patient education modules.
We believe the foundation to our long-term commercial success lies in building user base
scale and brand reputation. As such, we have dedicated ourselves to cultivating an active and
loyal community of patients and physicians on our Jianke Platform, and developing and
strengthening business relationships with pharmaceutical companies. We continuously focused
on developing and shaping consumer behavior and preferences, developing new sales channels
and introducing new services and products to address the needs of our key stakeholders to
solidify our relationships. As a result of our efforts, the key operating metrics of our business
have also experienced positive growth, such as our expanding paying user base, increasing
number of registered physicians, and sustained high average user retention rate and repeat
purchase rate. In 2023, our Jianke Platform had an average of approximately 8.4 million MAU.
In addition, our average user retention rate remained consistently high throughout the Track
Record Period, at 77.3%, 78.7% and 79.0% in 2021, 2022 and 2023, respectively, which was
higher than the industry average of approximately 30-35% for the respective years, according
to CIC. For details, see “—Our Business and V alue Proposition—Our Growth and Key
Operating Data.”
SUMMARY
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In 2021 and 2022, our adjusted net loss (non-HKFRS measure) was RMB206.8 million
and RMB89.4 million, respectively. As our user base expanded and we effectively improved
our operating efficiency, our net losses started to decrease, and we recorded adjusted net profit
(non-HKFRS measure) of RMB7.2 million in 2023, which primarily reflected our decreased
net losses for the same year. In addition, our net operating cash outflow in 2021 and 2022
amounted to RMB203.7 million and RMB50.0 million, respectively, primarily due to our
initiatives to incentivize physician activity and to attract and develop a loyal customer base. In
2023, we recorded a net operating cash inflow of RMB22.3 million, which was primarily
attributable to our increased sales volume of pharmaceutical and healthcare products and
improved operating efficiency. For a year-on-year analysis of our financial performance, see
“Financial Information—Description of Certain Consolidated Statements of Profit or Loss and
Other Comprehensive Income Items—Comparison of Results of Operations.” These financial
results primarily reflect the significant costs and expenses we incurred in growing our user
base, assembling our own team after we began to operate the Jianke Platform in-house,
investing in our research and development capabilities to optimize the functions of our mobile
applications and website, and increasing our marketing efforts to promote user engagement and
enhance brand recognition, which we believe are crucial for long-term growth and success.
We believe there will continue to be a significant need for better chronic disease
management in China for years to come. As a pioneer and leader in this growing industry
segment, we believe that our active user base of patients and physicians, strong relationships
with pharmaceutical companies, and ability to offer diversified and well-designed services and
products will enable us to capture future growth opportunities. Going forward, we expect to
sustain our revenue growth and achieve profitability by, among other things, (i) building
economies of scale, controlling operating expenses and further improving our operating
efficiency by enhancing the productivity of our in-house teams, adapting our staffing strategy
to evolving business requirements, streamlining internal workflows, and leveraging technology
to drive cost-efficient and centralized management; (ii) building a high-quality user base by
expanding and diversifying our product portfolio, especially high-margin, prescription, and
difficult-to-source drugs for chronic diseases, to meet evolving user needs; (iii) introducing
products and services which can bring higher value-added and increased scale, including
content offerings in multimedia formats; and (iv) lowering procurement costs and improving
our gross profit margin by leveraging our growing procurement volumes and strengthened
bargaining power to negotiate more favorable input prices and procurement terms.
Our Directors believe that, considering the industry trend towards online to-consumer
CDM platforms and by implementing the above strategies, our business is and will continue to
be sustainable and our profitability will improve. For a detailed business sustainability and
path to profitability analysis, see “Financial Information—Business Sustainability and Path to
Profitability.”
SUMMARY
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Working Capital Sufficiency
We recorded net current liabilities of RMB14.6 million as of December 31, 2023, which
was primarily attributable to the trade and other payables incurred to support our increased
business scale. Going forward, we remain committed to implementing measures aimed at
enhancing our operating cash flows. Leveraging our growing user base and procurement
volumes, our bargaining power will improve, which will enable us to secure more favorable
input prices and lower our overall procurement costs. We are also actively streamlining our
operations to achieve economies of scale and optimizing our expense structure. Moreover, we
are actively monitoring our trade payables and receivables settlement to ensure that we have
sufficient working capital. In addition, we had proceeds of US$8.6 million from our Series D+
financing in December 2022, and expect to receive net proceeds from the Global Offering of
approximately HK$55.42 million based on the low end of the Offer Price range (assuming that
the Over-allotment Option is not exercised), all of which contribute to our capital resource
pool. While we recorded net liabilities throughout the Track Record Period, this was primarily
due to the convertible redeemable preferred shares that we recorded as of the end of each year
during the Track Record Period. Upon the completion of the Global Offering, all of our
convertible redeemable preferred shares will be automatically converted to ordinary shares.
Based on the financial resources available to us (including our cash and cash equivalents
on hand, cash generated from operating activities, and the estimated net proceeds from the
Global Offering), our expansion plan, and the estimated cash generated from operating
activities, our Directors are of the view that we will have sufficient working capital for the next
12 months from the date of this prospectus. For details, see “Financial Information—Liquidity
and Capital Resources—Working Capital.”
Based on the foregoing, our Directors are of the view that our Group has a sustainable
business. The foregoing forward-looking statements are based on numerous assumptions
regarding our present and future business strategies and the environment in which we will
operate in the future. These forward-looking statements are subject to risks, uncertainties and
other factors, some of which are beyond our control, which may cause the actual results,
performance or achievements, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking statements.
For related risks, see “Forward-looking Statements” section in this prospectus.
After due consideration of the foregoing factors and discussions with the management,
the Joint Sponsors have no reason to believe that the Directors’ foregoing views are
unreasonable.
SUMMARY
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--- page 27 ---
RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
Our Directors confirm that there has been no material adverse change in our financial,
operational or trading positions or prospects since December 31, 2023, being the date of our
consolidated financial statements as set out in the Accountants’ Report, and up to the date of
this prospectus. Despite our expanding business scale, we expect to record an increased amount
of loss in 2024, primarily because we expect to grant all the remaining RSUs under our existing
share-based incentive plan in 2024, which will result in a significant increase in administrative
expenses arising from increased share-based compensation. Our future profitability is
uncertain and subject to various factors. For details, see “Risk Factors—We have a history of
net losses and negative operating cash flow. We cannot ensure future profitability.”
MAJOR CUSTOMERS AND SUPPLIERS
We have a broad base of customers. Customers for our comprehensive medical services
and online retail pharmacy services are mainly individual users, and we occasionally sell
pharmaceutical products to offline pharmacies and pharmaceutical distributors. For our
customized content and marketing solutions, our customers are mainly pharmaceutical
companies. For each year during the Track Record Period, revenue derived from our five
largest customers accounted for less than 5.0% of our total revenue. All of our five largest
customers for the years ended December 31, 2021, 2022 and 2023 were Independent Third
Parties. See “Business—Our Customers” for details.
We mainly procure pharmaceutical products including prescription drugs, OTC drugs,
medical device and accessories, from authorized distributors of multinational and domestic
pharmaceutical companies. In 2021, 2022 and 2023, purchases from our top five suppliers
accounted for 60.9%, 57.2% and 51.5% of our total purchases, respectively, and purchases
from our largest supplier alone accounted for 20.5%, 14.8% and 15.7% of our total purchases
during each of those years, respectively. For details on our suppliers, see “Business—Our
Suppliers.”
Overlapping Customers and Suppliers
During the Track Record Period, certain of our customers were also our suppliers. We
sold certain types of pharmaceutical products to these companies as part of our inventory
management strategy, and procured certain other types of pharmaceutical products, medical
devices, healthcare and nutritional supplements and other wellness products from them. The
products sold to, and purchased from, these companies were different. To the best knowledge
and belief of our Directors, two of our five largest customers were also our suppliers in each
of 2022 and 2023. None of our five largest customers in 2021 were also our supplier that year.
SUMMARY
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--- page 28 ---
Our Directors confirm that all of our sales to and purchases from these companies were
conducted in the ordinary course of business under normal commercial terms, and none of our
sales to and purchases from these overlapping entities were the same or back-to-back sales
during the Track Record Period. For details of such overlaps during our Track Record Period,
see “Business—Overlapping Customers and Suppliers.”
MATERIAL RELATED PARTY TRANSACTIONS
During the Track Record Period, we entered into a number of transactions with related
parties, including Mr. Xie, our Controlling Shareholder, and companies controlled by Mr. Xie
or over which Mr. Xie had significant influence.
 Purchase of Goods . In 2021, although we had begun procuring products mainly from
independent third-party suppliers, we still sourced RMB4.7 million of goods from
Guangzhou Jianke, leveraging their established relationships with suppliers
and pharmaceutical wholesale capabilities. These purchases encompassed
pharmaceutical products, medical devices, healthcare and nutritional supplements
and other wellness products for our online retail pharmacy services and
comprehensive medical services segments. We ceased to procure products from
related parties in 2022.
 Advance of Borrowings . In 2021, we provided liquidity support, in the form of
advance of borrowings, to a number of related parties. These included companies
over which Mr. Xie had significant influence, such as Guangzhou Jianke, as well as
Mr. Xie and companies controlled by Mr. Xie. We ceased to provide advance of
borrowings to related parties in 2022.
See “Financial Information—Description of Certain Consolidated Statements of Profit or
Loss and Other Comprehensive Income Items—Recognition of Impairment Losses,” “Financial
Information—Liquidity and Capital Resources—Cash Flows—Net Cash Flows Generated
from/(used in) Financing Activities” and “Financial Information—Material Related Party
Transactions” in this prospectus for details.
RISK FACTORS
We are exposed to risks inherent in providing online healthcare services and selling
pharmaceutical and healthcare products in China. Claims, user complaints or administrative
penalties may be made or imposed against us or the relevant pharmaceutical companies if any
of the products sold through our Jianke Platform are deemed or proven to be unsafe, ineffective
or defective, or if they are found to contain illicit substances or infringe on any third party’s
intellectual property rights. According to the Drug Administration Law (), if
compensation claims related to product quality are received by a drug trading enterprise, it
shall pay the compensation first, and then have the right to recover such payment from the drug
manufacturer or holder of drug marketing authorization. We may also be subject to allegations
of having engaged in practices such as improperly issuing prescriptions, sale of counterfeit and
SUMMARY
–1 9–


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substandard medicines or other healthcare products or providing inadequate warnings or
insufficient or misleading disclosures of side effects. We also face risks of medical liability
claims arising from medical services provided through our Jianke Platform. Such claims may
be made against us, our registered physicians (in relation to their provision of online
consultation and e-prescription services) and our in-house medical professionals (in relation to
their provision of e-prescription services). In particular, the physicians and pharmaceutical
companies that we partner with, may provide sub-standard services, mishandle sensitive
information, engage in other misconduct or commit medical malpractice, which could subject
us to medical liability claims. According to the Regulation on Handling Medical Accidents
(ஈଣૢԷ), medical institutions and patients can resolve civil liability disputes,
including compensation for medical accidents, through negotiation. According to the Civil
Code of the PRC (Պ), if a patient sustains any harm in the course of
medical treatment due to the failure of the medical institution or its medical staff, the medical
institution shall be liable for compensation. See “Risk Factors—Risks Relating to Our Business
and Industry—We may be subject to product liability or medical liability claims, or claims or
administrative penalties for counterfeit, substandard or unauthorized products on our platform,
which could cause us to incur significant expenses and be liable for significant damage.”
With respect to our customized content and marketing solutions, under the relevant PRC
laws, we are required to closely monitor the content published on our platform. We may be
subject to potential liabilities for any unlawful actions of users of our websites. We and the
relevant pharmaceutical companies may also be subject to liability for content distributed
through our Jianke Platform that are deemed unlawful by relevant authorities. See “Risk
Factors—Risks Relating to Our Business and Industry—We may be subject to liability for
content available on our platform that is alleged to be factually incorrect, socially destabilizing,
obscene, defamatory, libelous or otherwise unlawful.”
In addition to the risks highlighted above, there are certain other risks in our operations
and in connection with the Global Offering, many of which are beyond our control. We believe
the most significant risks we face include: (i) if we fail to manage the growth and expansion
of our business, our results of operations, financial condition and growth prospects may be
materially and adversely affected; (ii) we operate in an emerging and dynamic industry, and our
historical results of operations and financial performance may not be indicative of future
performance; (iii) we have a history of net losses and negative operating cash flow. We cannot
ensure future profitability; (iv) maintaining customers’ trust in our Jianke Platform is critical
to our success, and any failure to do so could damage our reputation and brand; (v) we may
fail to attract or retain sufficient users or registered physicians to our platform; (vi) the
potential reversion of patients to offline clinics and hospitals in a post-COVID-19
environment might impact our business and results of operations; (vii) we, our directors,
management and employees may from time to time become party to litigation, regulatory
investigations, other legal or administrative disputes and proceedings that may have an adverse
impact to our reputation and business prospects; (viii) we may be subject to penalties or
disputes against us for failure to manage our in-house medical professionals and registered
physicians; (ix) if we fail to keep up with rapid changes in big data analysis, AI technology and
other technologies, our future success may be adversely affected; (x) we collect and process a
SUMMARY
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large amount of data in the ordinary course of our business. Any improper use or disclosure of
such data, security breaches or attacks against our platform, and any potential reach or failure
to protect confidential and proprietary information, could damage our reputation and adversely
impact our business, results of operations and financial condition; and (xi) the proper
functioning of our technology infrastructure is essential to our business, and any failure to
maintain the satisfactory performance, security and integrity of our technology infrastructure
would materially and adversely impair our ability to provide services and affect our business,
reputation, financial condition and results of operations. See “Risk Factors” of this prospectus
for details of our risk factors, which you should read carefully and in full before you decide
to invest in our shares.
PRE-IPO INVESTMENTS
We have received several rounds of Pre-IPO Investments since our establishment. For
further details of the identity and background of the Pre-IPO Investors and the principal terms
of the Pre-IPO Investments, see “History, Reorganization and Corporate Structure—Pre-IPO
Investments” for details.
CONTROLLING SHAREHOLDERS
Mr. Xie and Mr. Zhou (pursuant to the Concert Deed), together with Fangrong
Management Limited, Fangzhan Holdings L.P ., Xingyu Holdings L.P ., Celaeno Group Limited,
Silica Brothers Corp. and Asia Tech Investments Ltd., are acting together as a group of
Controlling Shareholders. Immediately following completion of the Global Offering (assuming
that the weighted voting rights structure is cancelled and without taking into account the Shares
which may be allotted and issued upon the exercise of the Over-allotment Option), our ultimate
Controlling Shareholders, Mr. Xie (through Fangrong Management Limited, a limited liability
company wholly-owned by Mr. Xie, Fangzhan Holdings L.P . and Xingyu Holdings L.P ., each
a limited partnership whose general partner is Xingyu Inc., a company wholly owned by Mr.
Xie) and Mr. Zhou (through his wholly-owned companies, i.e. Celaeno Group Limited and
Silica Brothers Corp.) will indirectly hold 276,605,527 Shares and 236,624,057 Shares in our
Company, representing approximately 20.64% and 17.65% of shareholding interest in the
Company, respectively.
Asia Tech Investments Ltd. is a platform holding the underlying incentive shares granted
to our Directors and senior management in the total amount of 116,875,898 Class A Ordinary
Shares under the RSU Scheme. As approximately 51.34% and 48.41% of interest in Asia Tech
Investments Ltd. were held by Mr. Xie and Mr. Zhou, respectively, each of Mr. Xie and Mr.
Zhou is deemed to be interested in the Shares of the Company held by Asia Tech Investments
Ltd. in accordance with SFO, representing approximately 8.72% of shareholding interest in the
Company immediately following the completion of the Global Offering (assuming that the
Over-allotment Option is not exercised).
SUMMARY
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On June 12, 2024, Mr. Xie and Mr. Zhou were conferred by Tech-Med Investments (S)
Pte. Ltd. to exercise the voting rights attached to 138,430,610 Shares held by Tech-Med
Investments (S) Pte. Ltd. through a deed of voting proxy, representing approximately 10.33%
of shareholding interest in the Company immediately following the completion of the Global
Offering. The voting proxy arrangement will take effect immediately before the Listing. For
details, see “History, Reorganization and Corporate Structure—Deed of V oting Proxy.”
Therefore, immediately upon completion of the Global Offering (assuming the weighted
voting rights structure is cancelled and without taking into account the Shares which may be
allotted and issued upon the exercise of the Over-allotment Option), Mr. Xie and Mr. Zhou
(together with Fangrong Management Limited, Fangzhan Holdings L.P ., Xingyu Holdings L.P .,
Celaeno Group Limited, Silica Brothers Corp. and Asia Tech Investments Ltd.) as a group of
Controlling Shareholders, by virtue of their shareholding together with the voting proxy
conferred upon them as mentioned above, will control an aggregate of 768,536,092 Shares,
representing approximately 57.34% of shareholding interest in our Company.
See “Relationship with the Controlling Shareholders” for further details.
CAPITALIZATION OF THE COMPANY
As of the Latest Practicable Date, we had adopted a weighted voting rights structure,
which will be cancelled, through the re-classification of all existing classes of shares into a
single class of Ordinary Shares, immediately prior to Listing. For details, see “History,
Reorganization and Corporate Structure—Capitalization of the Company.”
CONTRACTUAL ARRANGEMENTS
The operations of our Consolidated Affiliated Entities are subject to various foreign
ownership restrictions under PRC laws and regulations. In order to maintain and exercise
control over our Consolidated Affiliated Entities, we have adopted Contractual Arrangements.
These Contractual Arrangements allow us to enjoy substantially all of the economic benefits
of our Consolidated Affiliated Entities and consolidate their results of operations into ours. See
“Contractual Arrangements” for further details.
SUMMARY
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The following simplified diagram illustrates the flow of economic benefits from our Consolidated Affiliated Entities to our Group stipulated
under the Contractual Arrangements.
Fangzhou Yunkang
Guangzhou Fangming
Investment Enterprise
(Limited Partnership)(2)
Shenzhen
Kaichuang Lianyu
Technology
Consulting Co., Ltd.(2)
Beijing Yiershan
Technology Co., Ltd.(2)
Offshore
Onshore
Provide consultation services
47%
33%
20%
Fangzhou Inc.
Fangzhou Limited
100%
New WFOE
100%
Pay consultation service fees
Fangzhou
Health Beijing Fangyixing
Fangzhou Information
100%
100% 100%
70%
Qishi
Hospital Fangzhou Media
30% 100% 100% 100% 100% 100%
Fangzhou
Internet Hospital
Fangzhou
Medicine
Xinjiang
Internet Hospital
50% Yunyi Information
Jingtai Hospital(1)
Liu Xiukui(1)
50%
70%
Promoter
30%
100%
Fangzhou
Pharmaceutical
100% 100%
Chengdu Fangyixing
Information
Technology Co., Ltd.
51% 100%
Fangzhou Beijing
Heilongjiang
Chengguang Lanjiang
Pharmaceutical
Retail Co., Ltd.
Shanghai Fangyixing
Information
Technology Co., Ltd.
Ruishi
Hospital
Notes:
(1) Liu Xiukui is the registered promoter of Jingtai Hospital and a nominee of the New WFOE and Fangzhou Y unkang. The New WFOE and Fangzhou Y unkang each h olds 70%
and 30% of the registered capital and promoter’s interest in Jingtai Hospital.
(2) Guangzhou Fangming Investment Enterprise (Limited Partnership) is a limited partnership wholly-owned by Mr. Xie. Shenzhen Kaichuang Lianyu Te chnology Consultancy Co.,
Ltd. is a limited liability company owned as to 55% and 45%, respectively, by Zhang Xinwei ( ੵอਃ) and Wang Wenchao ( ӓၲ൴), each of whom holds equity interest in
Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. as a nominee appointed by Crescent Point. Beijing Yiershan Technology Co., Ltd. is a limi ted liability company
wholly owned by Y ang Jinghua ( เหശ), the mother of Mr. Zhou, who holds equity interest in Beijing Yiershan Technology Co., Ltd. as the nominee on behalf of Mr. Zhou.
SUMMARY
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REGULATORY OVERVIEW
On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ
) (the “ Trial Measures ”) and five supporting guidelines (collectively, the “ Trial
Measures and Supporting Guidelines ”), which came into effect on March 31, 2023. The Trial
Measures and Supporting Guidelines will regulate both direct and indirect overseas offering
and listing of PRC domestic companies’ securities by adopting a filing-based regulatory
regime. Pursuant to the Trial Measures and Supporting Guidelines, the Global Offering would
be deemed as an indirect overseas securities offering by a PRC domestic company. According
to the CSRC’s press conference for the release of the Trial Measures and the Notice on
Administration for the Filing of Overseas Offering and Listing by Domestic Companies, on or
prior to March 31, 2023, domestic companies that have already submitted valid applications for
overseas offering and listing, but have not obtained an approval from overseas regulatory
authorities or stock exchanges, may reasonably arrange the timing for submitting their filing
applications with the CSRC, and must complete the filing before the completion of their
overseas offering and listing. We have completed filing with the CSRC on March 22, 2024 for
the Listing and the Global Offering in accordance with the Trial Measures.
FUTURE PLANS AND USE OF PROCEEDS
Assuming an Offer Price of HK$7.98 per Share (being the mid-point of the indicative
Offer Price range of HK$7.60 to HK$8.36 per Share), we estimate that we will receive net
proceeds of approximately HK$63.07 million from the Global Offering after deducting the
underwriting commissions and other estimated expenses paid and payable by us in connection
with the Global Offering and assuming that the Over-allotment Option is not exercised. In line
with our strategies, we currently intend to use our proceeds from the Global Offering for the
purposes and in the amounts set forth below:
(i) approximately 67.4%, or HK$42.51 million, will be used for business expansion in
the next three to five years;
(ii) approximately 16.0%, or HK$10.09 million, will be used for research and
development activities in the next five years;
(iii) approximately 11.6%, or HK$7.32 million, will be used for our potential
investments and acquisitions or strategic alliances with other stakeholders in the
value chain of the online chronic disease management industry; and
(iv) approximately 5.0%, or HK$3.15 million, will be used for our working capital and
general corporate purposes.
See “Future Plans and Use of Proceeds” for details.
SUMMARY
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OFFERING STATISTICS
The statistics in the following table are based on the assumptions that 23,800,000 Shares
will be issued pursuant to the Global Offering and the Over-allotment Option is not exercised:
Based on
Offer Price
of HK$7.60
Based on
Offer Price
of HK$8.36
Market capitalization of our Shares (1) HK$10,186.03
million
HK$11,204.64
million
Unaudited pro forma adjusted net tangible assets
of the Group per Share as of December 31,
2023
(2)
HK$0.11 HK$0.12
Notes:
(1) The calculation of market capitalization is based on 1,340,267,457 Shares expected to be in issue
immediately upon completion of the Global Offering.
(2) The unaudited pro forma adjusted net tangible assets of the Group per Share is arrived at after the
adjustments as described in “Appendix II—Unaudited Pro Forma Financial Information” and on the
basis that a total of 1,213,025,279 Shares (which is calculated based on 1,189,225,279 Shares at
December 31, 2023 and adjusted for 23,800,000 Shares newly issued upon the Global Offering but
exclude 127,242,178 Class A Ordinary Shares issued to Asia Tech Investments Ltd., Endeavor Cloud
Limited, FAST GOAL INTERNA TIONAL LIMITED, Gaoxin Thrive Limited, Mr. ZOU Y uming and
Torano Investments Limited in May 2024) were in issue immediately following the completion of the
Global Offering assuming the Over-allotment Option is not exercised.
DIVIDENDS
No dividend has been paid or declared by our Company during the Track Record Period.
Any future declarations and payments of dividends will be at the absolute discretion of our
Board and if necessary, subject to the approval of our Shareholders at general meetings. There
can be no assurance that we will be able to declare or distribute any dividend in the amount
set out in any plan of the Board or at all. Currently, we do not have any dividend policy or
intention to declare or pay any dividends in the near future. As advised by our legal advisor
as to Cayman Islands law, notwithstanding that the Company may have accumulated losses, the
Company may declare dividend (a) out of profits of the Company if the Company has sufficient
profits, realised or unrealised, unless such is contrary to the accounting principles adopted by
the Company or (b) out of the share premium of the Company if following the date on which
the dividend is proposed to be paid, the Company is able to pay its debts as they fall due in
the ordinary course of business. In determining whether to declare a dividend, our Board will
need to be satisfied that the declaration of dividend is in the best interest of the Company and
may make provision for losses. Investors should not purchase our Shares with the expectation
of receiving cash dividends.
SUMMARY
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LISTING EXPENSES
Assuming an Offer Price of HK$7.98 per Share (being the mid-point of the indicative
Offer Price range of HK$7.60 to HK$8.36 per Share), and assuming that the Over-allotment
Option is not exercised, the aggregate commissions and fees, together with the Stock Exchange
listing fee, SFC transaction levy, AFRC transaction levy and Stock Exchange trading fee, legal
and other professional fees, printing and other expenses relating to the Global Offering, which
are paid or payable by us, are estimated to be approximately RMB115.7 million, accounting for
66.8% of gross proceeds from the Global Offering. Up to December 31, 2023, we incurred
listing expenses in the amount of RMB64.8 million, of which RMB60.8 million was recognized
in the consolidated statements of profit or loss and other comprehensive income, and RMB4.0
million was recognized as deferred listing expenses in the consolidated statements of financial
position as of December 31, 2023 which will be recognized as a reduction from equity upon
the Listing. We expect to further incur additional listing expenses of approximately RMB50.9
million after the Track Record Period, of which approximately RMB 28.0 million is expected
to be recognized in our consolidated statements of profit or loss and other comprehensive
income, and approximately RMB22.9 million is expected to be deducted from equity upon the
Listing under the relevant accounting standards. By nature, our listing expenses are composed
of (i) underwriting related expenses of approximately RMB24.3 million; and (ii) non-
underwriting related expenses of approximately RMB91.4 million, which consist of fees and
expenses of legal advisors and Reporting Accountants of approximately RMB63.5 million and
other fees and expenses of approximately RMB27.9 million.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We are applying for the Listing under Rule 8.05(3) of the Listing Rules and satisfy the
market capitalization/revenue test, among other things, with reference to (i) our revenue for the
year ended December 31, 2023, being RMB2,434.3 million, which is significantly over
HK$500 million as required by Rule 8.05(3) of the Listing Rules; and (ii) our expected market
capitalization at the time of the Listing, which, based on the low end of the Offer Price range,
would exceed HK$4 billion as required by Rule 8.05(3) of the Listing Rules.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following terms shall
have the following meanings. Certain industry terms are explained in the section headed
“Glossary of Industry Terms”.
“Accountants’ Report” the accountants’ report on the historical information of
the Company and its subsidiaries included in the
Accountants’ Report in Appendix I to this prospectus
“affiliate(s)” with respect to any specified person, any other person,
directly or indirectly, controlling or controlled by or
under direct or indirect common control with such
specified person
“AFRC” the Accounting and Financial Reporting Council
“Articles” or “Articles of
Association”
the articles of association of our Company conditionally
adopted on June 14, 2024 with effect from the Listing
Date, a summary of which is set out in “Summary of the
Constitution of the Company and Cayman Company
Law” in Appendix III
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Beijing Fangyixing” Beijing Fangyixing Information Technology Co., Ltd. ( ̏
ʮ̡), a limited liability company
established in the PRC on August 12, 2019 and a
wholly-owned subsidiary of the Company
“Board” the board of Directors
“business day” any day (other than a Saturday, Sunday or public holiday
in Hong Kong) on which banks in Hong Kong are
generally open for normal banking business
“BVI” the British Virgin Islands
“Capital Market
Intermediaries”
the capital market intermediaries as named in the section
headed “Directors and Parties Involved in the Global
Offering” of this prospectus
“Cayman Companies Act” or
“Companies Act”
the Companies Act (2023 Revision) of the Cayman
Islands, as amended or supplemented from time to time
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
DEFINITIONS
–2 7–


--- page 37 ---
“China” or “the PRC” the People’s Republic of China, and for the purposes of
this prospectus only, except where the context requires
otherwise, excluding Hong Kong, the Macao Special
Administrative Region of the PRC and Taiwan
“CIC” or “Industry
Consultant”
China Insights Industry Consultancy Limited, an
independent professional market research and consulting
company
“Class A Ordinary Shares” class A ordinary shares in the share capital of the
Company with a par value of US$0.00002 each,
conferring a holder of a Class A Ordinary Share one vote
per share on any resolution tabled at the Company’s
general meeting
“Class B Ordinary Shares” class B ordinary shares in the share capital of the
Company with a par value of US$0.00002 each,
conferring weighted voting rights in the Company such
that a holder of a Class B Ordinary Share is entitled to
twenty votes per share on any resolution tabled at the
Company’s general meeting
“close associate(s)” has the meaning ascribed to it under the Listing Rules
“Companies Ordinance” Companies Ordinance (Chapter 622 of the Laws of Hong
Kong), as amended, supplemented or otherwise modified
from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as
amended, supplemented or otherwise modified from time
to time
“Company”, “our Company”,
“the Company” or
“Fangzhou Inc.”
Fangzhou Inc. (ʮ̡), an exempted
company with limited liability incorporated in the
Cayman Islands on September 26, 2019
“Compliance Advisor” Somerley Capital Limited
“Concert Deed” the deed of act-in-concert entered into by Mr. Xie and
Mr. Zhou on September 26, 2019, further information on
which is set out in “History, Reorganization and
Corporate Structure—Concert Party Arrangement”
“connected person(s)” has the meaning ascribed to it under the Listing Rules
DEFINITIONS
–2 8–


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“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
“Consolidated Affiliated
Entities”
the entities we control through the contractual
arrangements, namely Fangzhou Y unkang and its
subsidiaries (each a “ Consolidated Affiliated Entity ”),
details of which are set out in the section headed
“History, Reorganization and Corporate Structure”
“Contractual Arrangements” a series of contractual arrangements entered into by,
Fangfeng Technology, Fangzhou Y unkang and the
Fangzhou Y unkang Registered Shareholders, the details
of which are described in the section “Contractual
Arrangements”
“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules and
unless the context otherwise requires, refers to Mr. Xie,
Mr. Zhou, Fangrong Management Limited, Fangzhan
Holdings L.P ., Xingyu Holdings L.P ., Celaeno Group
Limited, Silica Brothers Corp. and Asia Tech Investments
Ltd., as further detailed in the section headed
“Relationship with the Controlling Shareholders”
“Crescent Point” Crescent China Investment Management Ltd., a private
equity manager incorporated in the British Virgin Islands
on October 28, 2020 and regulated by the British Virgin
Islands Financial Services Commission, which is
ultimately controlled by David McKee Hand, our non-
executive Director; or where the context requires, in
respect of certain historical events, Crescent Fund
Management Pte. Ltd., an investment manager
incorporated in Singapore on December 17, 2012 and
licensed by the Monetary Authority of Singapore
“Crescent Point Vehicles” Crescent Trident Singapore Pte. Ltd., Asia-Pac
E-Commerce Opportunities Pte. Ltd., CP Pharmatech
Singapore Pte. Ltd. and Tech-Med Investments (S) Pte.
Ltd.
“CSRC” the China Securities Regulatory Commission of the PRC
(ึ)
“Director(s)” the director(s) of our Company
DEFINITIONS
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“EIT Law” PRC Enterprise Income Tax Law ( ʕശɛ͏΍ձ਷Άุ
) which was adopted by the National People’s
Congress on 16 March 2007 and recently amended and
became effective on 29 December 2018
“Exchange Act” the U.S. Securities and Exchange Act of 1934, as
amended
“Exchange Participants” has the meaning ascribed to it under the Listing Rules
“Extreme Conditions” extreme conditions caused by a super typhoon as
announced by the Government of Hong Kong
“Fangfeng Technology” or
“New WFOE”
Guangdong Fangfeng Technology Co., Ltd. (߅ࢤ
ʮ̡), a limited liability company established in
the PRC on February 12, 2020 and a wholly-owned
subsidiary of the Company
“Fangzhou Beijing” Fangzhou Jianke (Beijing) Health Management Co., Ltd.
(܄(̏ԯ)ʮ̡), a limited liability
company established in the PRC on October 20, 2021 and
a wholly-owned subsidiary of the Company
“Fangzhou Health” Guangdong Fangzhou Health Management Technology
Co., Ltd. (ʮ̡), a limited
liability company established in the PRC on November 8,
2021 and a wholly-owned subsidiary of the Company
“Fangzhou Information” Guangzhou Fangzhou Information Technology Co., Ltd.
(ʮ̡), a limited liability
company established in the PRC on September 29, 2019
and a wholly-owned subsidiary of the Company
“Fangzhou Internet Hospital” Guangzhou Fangzhou Internet Hospital Co., Ltd. ( ᄿψ˙
ʮ̡), a limited liability company
established in the PRC on May 18, 2020 and a
Consolidated Affiliated Entity of the Group
“Fangzhou Limited” Fangzhou Limited, a company with limited liability
incorporated in Hong Kong on October 24, 2019 and a
wholly-owned subsidiary of the Company
“Fangzhou Media” Guangzhou Fangzhou Media Co., Ltd. ( ᄿψ˙ЋෂదϞ
ʮ̡), a limited liability company established in the
PRC on August 4, 2020 and a Consolidated Affiliated
Entity of the Group
DEFINITIONS
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“Fangzhou Medicine” Guangzhou Fangzhou Medicine Co., Ltd. ( ᄿψ˙Ћᔼᖹ
ʮ̡), a limited liability company established in the
PRC on August 20, 2019 and a Consolidated Affiliated
Entity of the Group
“Fangzhou Pharmaceutical” Guangzhou Fangzhou Pharmaceutical Co., Ltd. ( ᄿψ˙
ʮ̡), a limited liability company established
in the PRC on March 23, 2004 and a wholly-owned
subsidiary of the Company
“Fangzhou Yunkang” or
“Guangzhou Guanghuikang”
Guangzhou Fangzhou Y unkang Information Technology
Group Co., Ltd. (ʮ̡)
(formerly known as Guangzhou Guanghuikang Medicine
Co., Ltd. (ʮ̡)), a limited liability
company established in the PRC on April 28, 2020 and a
Consolidated Affiliated Entity of the Group
“Fangzhou Yunkang Registered
Shareholders”
the registered shareholders of Fangzhou Y unkang,
namely, Guangzhou Fangming Investment Enterprise
(Limited Partnership) (ҳ༟Άุ(Υྫ)),
Shenzhen Kaichuang Lianyu Technology Consultancy
Co., Ltd. (ʮ̡) and
Beijing Yiershan Technology Co., Ltd. (Ҧ
ʮ̡), holding 47%, 33% and 20% of the equity
interest in Fangzhou Y unkang, respectively
“FIE” foreign invested entity
“FIL” the Foreign Investment Law of the PRC ( ʕശɛ͏΍ձ
) adopted by the National People’s
Congress on 15 March 2019 and became effective on 1
January 2020
“FINI” an online platform operated by HKSCC that is mandatory
for admission to trading and, where applicable, the
collection and processing of specified information on
subscription in and settlement for all new listings
“GDP” gross domestic product (all references to GDP growth
rates are to real as opposed to nominal growth rates of
GDP)
“General Rules of HKSCC” the General Rules of HKSCC as may be amended or
modified from time to time and where the context so
permits, shall include the HKSCC Operational
Procedures
DEFINITIONS
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“Global Offering” the Hong Kong Public Offering and the International
Offering
“Governmental Authority” any governmental, regulatory, or administrative
commission, board, body, authority, or agency, or any
stock exchange, self-regulatory organization, or other
non-governmental regulatory authority, or any court,
judicial body, tribunal, or arbitrator, in each case whether
national, central, federal, provincial, state, regional,
municipal, local, domestic, foreign, or supranational
“Group”, “our Group”,
“the Group”, “we”, “us”,
or “our”
the Company, its subsidiaries and the Consolidated
Affiliated Entities from time to time, and where the
context requires, in respect of the period prior to our
Company becoming the holding company of its present
subsidiaries, such subsidiaries as if they were
subsidiaries of our Company at the relevant time
“Guangdong Jianke” Guangdong Jianke Medicine Co., Ltd. (ᔼᖹϞ
ʮ̡), a limited liability company established in the
PRC on July 6, 2007
“Guangzhou Jianke” Guangzhou Jianke Pharmaceutical Co., Ltd. (ᖹ
ʮ̡), a limited liability company established in
the PRC on August 23, 2006
“Guangzhou Yunyi” Guangzhou Y unyi Huiyao Medicine Co., Ltd. ( ᄿψථᔼ
ʮ̡), a limited liability company
established in the PRC on May 3, 2013
“H2H platform” or
“H2H service platform”
the platforms where we offer H2H services, which are
online medical services forming the primary part of our
comprehensive medical services. These platforms include
the Jianke Doctor App (ᔼ͛), Jianke Hospital App
(ᔼ৫) and certain of our WeChat mini programs
“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the
PRC
“HKFRSs” Hong Kong Financial Reporting Standards, as issued by
the Hong Kong Institute of Certified Public Accountants
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
DEFINITIONS
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“HKSCC EIPO” the application for Hong Kong Offer Shares to be issued
in the name of HKSCC Nominees and deposited directly
into CCASS to be credited to your designated HKSCC
Participant’s stock account through causing HKSCC
Nominees to apply on your behalf, including by
instructing your broker or custodian who is a HKSCC
Participant to give electronic application instructions via
HKSCC’s FINI system to apply for Hong Kong Offer
Shares on your behalf
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“HKSCC Operational
Procedures”
the operational procedures of HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of CCASS, FINI or any other
platform, facility or system established, operated and/or
otherwise provided by or through HKSCC, as from time
to time in force
“HKSCC Participant” a person admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
“Hong Kong dollars” or
“HK dollars” or “HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong Offer Shares” the 2,380,000 Shares being initially offered for
subscription in the Hong Kong Public Offering (subject
to reallocation as described in the section headed
“Structure of the Global Offering”)
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription
by the public in Hong Kong at the Offer Price (plus
brokerage of 1%, SFC transaction levy of 0.0027%,
AFRC transaction levy of 0.00015% and Stock Exchange
trading fee of 0.00565%) on the terms and subject to the
conditions described in this prospectus, as further
described in “Structure of the Global Offering—The
Hong Kong Public Offering”
“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited
DEFINITIONS
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“Hong Kong Takeovers Code”
or “Takeovers Code”
Code on Takeovers and Mergers and Share Buy-backs
issued by the SFC, as amended, supplemented or
otherwise modified from time to time
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering as
listed in “Underwriting—Hong Kong Underwriters”
“Hong Kong Underwriting
Agreement”
the underwriting agreement, dated June 27, 2024, relating
to the Hong Kong Public Offering, entered into by,
among others, our Company, the Joint Sponsors and the
Overall Coordinators (for themselves and on behalf of the
Hong Kong Underwriters), as further described in
“Underwriting—Underwriting arrangements and
expenses—Hong Kong Public Offering—Hong Kong
Underwriting Agreement”
“ICP License” the value-added telecommunications business operation
license for Internet information service
“Independent Third Party(ies)” any entity or person who is not a connected person of our
Company or an associate of such person within the
meaning ascribed to it under the Listing Rules
“Initial WFOE” or “Fangzhan
Technology”
Guangdong Fangzhan Technology Co., Ltd. (߅࢝
ʮ̡), a limited liability company established in
the PRC on November 2, 2015 and a wholly-owned
subsidiary of the Company
“International Offer Shares” the 21,420,000 Shares being initially offered for
subscription under the International Offering together,
where relevant, with any additional Shares that may be
sold pursuant to any exercise of the Over-allotment
Option (subject to reallocation as described in the section
headed “Structure of the Global Offering”)
“International Offering” the offer of the International Offer Shares at the Offer
Price, in the United States to QIBs only in reliance on
Rule 144A and outside the United States in offshore
transactions in accordance with Regulation S or any other
available exemption from registration under the U.S.
Securities Act, as further described in the section headed
“Structure of the Global Offering”
“International Underwriters” the underwriters of the International Offering
DEFINITIONS
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--- page 44 ---
“International Underwriting
Agreement”
the underwriting agreement relating to the International
Offering expected to be entered into by, among others,
our Company, our Controlling Shareholders, the Joint
Sponsors, the Overall Coordinators and the International
Underwriters on or about the Price Determination Date,
as further described in “Underwriting—International
Offering—International Underwriting Agreement”
“Jianke Platform” the platforms where we offer certain of our services,
including Jianke Doctor App (ᔼ͛), Jianke Hospital
App (ᔼ৫), Jianke Online Pharmacy App (ၣɪ
ֳthe website of Jianke.com and WeChat official
accounts and mini programs. The aforementioned mobile
applications and the website (the “ Jianke mobile
applications and website ”) were at times historically
operated by Guangdong Jianke under license and
authorization from the Initial WFOE
“Jingtai Hospital” Jingtai Hospital ( ౻इᔼ৫), a private non-enterprise
established in the PRC on July 20, 2011 and a subsidiary
of the Company
“Joint Bookrunners”,
“Joint Global Coordinators”,
“Joint Lead Managers”
the joint bookrunners, the joint global coordinators and
the joint lead managers as named in the section headed
“Directors and Parties Involved in the Global Offering”
of this prospectus
“Joint Sponsors” Citigroup Global Markets Asia Limited and ABCI Capital
Limited
“Latest Practicable Date” June 20, 2024, being the latest practicable date for
ascertaining certain information in this prospectus before
its publication
“Laws” all laws, statutes, legislation, ordinances, rules,
regulations, guidelines, opinions, notices, circulars,
orders, judgments, decrees, or rulings of any
Governmental Authority (including, without limitation,
the Stock Exchange and the SFC) of all relevant
jurisdictions
DEFINITIONS
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“Listing” the listing of the Shares on the Main Board of the Stock
Exchange
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date, expected to be Tuesday, July 9, 2024 , on which
the Shares are to be listed and on which dealings in the
Shares are to be first permitted to take place on the Stock
Exchange
“Listing Rules” the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“Main Board” the stock exchange (excluding the option market)
operated by the Stock Exchange which is independent
from and operates in parallel with GEM (formerly known
as the Growth Enterprise Market) of the Stock Exchange
“Memorandum” or
“Memorandum of
Association”
the memorandum of association of the Company
conditionally adopted on June 14, 2024 with effect from
the Listing Date, a summary of which is set out in
“Summary of the Constitution of the Company and
Cayman Company Law” in Appendix III
“MIIT” Ministry of Industry and Information Technology of the
PRC (ʷ௅)
“MOF” the Ministry of Finance of the PRC (݁
௅)
“MOFCOM” the Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷
ਠਕ௅)
“MOHRSS” the Ministry of Human Resources and Social Security of
the PRC (ღ௅)
“Mr. Ma” Mr. MA Haozhi (қ), one of the passive shareholders
of Y unyi Inc.
“Mr. Su” Mr. SU Zhan (࢝one of the passive shareholders of
Guangdong Jianke and Y unyi Inc.
“Mr. Xie” Mr. XIE Fangmin ( ᑽ˙ઽ), an executive Director,
Chairman of the Board and chief executive officer of the
Company
DEFINITIONS
–3 6–


--- page 46 ---
“Mr. Zhou” Mr. ZHOU Feng, an executive Director and chief strategy
officer of the Company
“NDRC” National Development and Reform Commission of the
PRC (ึ)
“NHC” National Health Commission of the PRC ( ʕശɛ͏΍ձ
ึ)
“NMPA” National Medical Products Administration of the PRC ( ʕ
္ຖ၍ଣ҅)
“NPC” National People’s Congress of the PRC (ɽ
ึ)
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage, SFC transaction levy, AFRC transaction levy
and Stock Exchange trading fee), expressed in Hong
Kong dollars, at which Hong Kong Offer Shares are to be
subscribed for pursuant to the Hong Kong Public
Offering and International Offer Shares are to be offered
pursuant to the International Offering, to be determined
as described in “Structure of the Global
Offering—Pricing and Allocation”
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares together, where relevant, with any additional
Shares to be issued by our Company pursuant to the
exercise of the Over-allotment Option
“Ordinary Share(s)” or
“Share(s)”
ordinary shares in the share capital of the Company with
a par value of US$0.00002 each
“Overall Coordinators” Citigroup Global Markets Asia Limited, ABCI Capital
Limited and Essence International Securities (Hong
Kong) Limited
“Over-allotment Option” the option expected to be granted by our Company to the
International Underwriters, exercisable by the
Overall Coordinators (for themselves and on behalf of the
International Underwriters) at any time from the Listing
Date until 30 days after the last day for lodging
applications under the Hong Kong Public Offering,
pursuant to which we may be required to allot and issue
up to an aggregate of 3,570,000 additional Shares,
representing not more than 15% of the Offer Shares
initially available under the Global Offering, at the Offer
Price to, among other things, cover over-allocations in
the International Offering, if any, details of which are
described in “Structure of the Global Offering—Over-
allotment Option”
DEFINITIONS
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“PBOC” People’s Bank of China
“PRC Legal Advisor” Zhong Lun Law Firm, our legal advisor on PRC law
“Pre-IPO Investment(s)” the pre-IPO investment(s) in our Company undertaken by
the Pre-IPO Investors, details of which are set out in
“History, Reorganization and Corporate Structure—Pre-
IPO Investments”
“Pre-IPO Investor(s)” the investors of the Pre-IPO Investments
“Pre-IPO Shareholders’
Agreement”
the amended and restated shareholders’ agreement
entered into between, among others, the Company,
certain Group companies, the Controlling Shareholders
and the Pre-IPO Investors dated December 30, 2022
“Pre-reorganization Group” the Initial WFOE and Guangzhou Y unyi
“Preferred Share(s)” preferred shares(s) in the share capital of the Company
with a par value of US$0.00002 each, including the
Series A Preferred Shares, Series A-1 Preferred Shares,
Series B Preferred Shares, Series C Preferred Shares,
Series D Preferred Shares and Series D+ Preferred Shares
“Price Determination Date” the date, expected to be on or about Friday, July 5, 2024 ,
on which the Offer Price is to be fixed for the purposes
of the Global Offering
“QIB” a qualified institutional buyer within the meaning of Rule
144A
“Qishi Hospital” Guangdong Qishi Hospital Management Co., Ltd. (؇
ʮ̡), a limited liability company
established in the PRC on September 30, 2020
“Regulation S” Regulation S under the U.S. Securities Act
“Reorganization” the corporate restructuring of the Group in preparation
for the Listing, as described in “History, Reorganization
and Corporate Structure—Reorganization and Disruption
of Production and Business Operations
Incident—Reorganization”
“RMB” or “Renminbi” Renminbi, the lawful currency of China
DEFINITIONS
–3 8–


--- page 48 ---
“RSU Platforms” Endeavor Cloud Limited, FAST GOAL
INTERNA TIONAL LIMITED and Gaoxin Thrive
Limited, which hold the Shares underlying the RSUs
granted to the grantees who are neither Directors nor
other core connected persons of our Company under the
RSU Scheme
“RSU Scheme” the restricted share unit scheme adopted by our Company
on January 1, 2020
“Ruishi Hospital” Guangdong Ruishi Hospital Management Co., Ltd. (؇
ʮ̡), a limited liability company
established in the PRC on June 7, 2023 and a
Consolidated Affiliated Entity of the Group
“Rule 144A” Rule 144A under the U.S. Securities Act
“SAFE” the State Administration of Foreign Exchange of the PRC
(̮ි၍ଣ҅)
“SAIC” the State Administration of Industry and Commerce
of the PRC (၍ଣᐼ҅),
which has now been merged into the SAMR
“SAMR” the State Administration for Market Regulation of the
PRC (̹ఙ္ຖ၍ଣᐼ҅)
“SASAC” the State-owned Assets Supervision and Administration
Commission of the State Council of the PRC ( ʕശɛ͏΍
ึ)
“Series A Investor(s)” holder(s) of the Series A Preferred Shares
“Series A Preferred Shares” the series A preferred shares with a par value of
US$0.00002 each in the authorized share capital of the
Company following the Reorganization, details of which
are described in the section headed “History,
Reorganization and Corporate Structure”
“Series A-1 Investor(s)” holder(s) of the Series A-1 Preferred Shares
DEFINITIONS
–3 9–


--- page 49 ---
“Series A-1 Preferred Shares” the series A-1 preferred shares with a par value of
US$0.00002 each in the authorized share capital of the
Company following the Reorganization, details of which
are described in the section headed “History,
Reorganization and Corporate Structure”
“Series B Investor(s)” holder(s) of the Series B Preferred Shares
“Series B Preferred Shares” the series B preferred shares with a par value of
US$0.00002 each in the authorized share capital of the
Company following the Reorganization, details of which
are described in the section headed “History,
Reorganization and Corporate Structure”
“Series C Investor(s)” holder(s) of the Series C Preferred Shares
“Series C Preferred Shares” the series C preferred shares with a par value of
US$0.00002 each in the authorized share capital of the
Company following the Reorganization, details of which
are described in the section headed “History,
Reorganization and Corporate Structure”
“Series D Investor(s)” holder(s) of the Series D Preferred Shares
“Series D Preferred Shares” the series D preferred shares with a par value of
US$0.00002 each in the authorized share capital of the
Company following the Reorganization, details of which
are described in the section headed “History,
Reorganization and Corporate Structure”
“Series D+ Investor(s)” holder(s) of the Series D+ Preferred Shares
“Series D+ Preferred Shares” the series D+ preferred shares with a par value of
US$0.00002 each in the authorized share capital of the
Company following the Reorganization, details of which
are described in the section headed “History,
Reorganization and Corporate Structure”
“SFC” Securities and Futures Commission of Hong Kong
“SFO” or “Securities and
Futures Ordinance”
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Shareholder(s)” holder(s) of our Share(s)
DEFINITIONS
–4 0–


--- page 50 ---
“Sponsor-Overall
Coordinators”
Citigroup Global Markets Asia Limited and ABCI Capital
Limited
“STA” State Taxation Administration of the PRC ( ʕശɛ͏΍ձ
೼ਕᐼ҅)
“Stabilizing Manager” Citigroup Global Markets Asia Limited
“State Council” State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered
into between the Stabilizing Manager or any person
acting for it and Celaeno Group Limited on or about the
Price Determination Date, pursuant to which the
Stabilizing Manager or any person acting for it may
borrow up to 3,570,000 Shares from Celaeno Group
Limited to cover over-allocations in the International
Offering
“Stock Exchange” or “Hong
Kong Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subsidiary” or “subsidiaries” has the meaning ascribed to it in section 15 of the
Companies Ordinance
“substantial shareholder(s)” has the meaning ascribed to it in the Listing Rules
“Track Record Period” the years ended December 31, 2021, 2022 and 2023
“U.S. Securities Act” United States Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“United States”, “U.S.” or
“US”
United States of America, its territories, its possessions
and all areas subject to its jurisdiction
“US dollars”, “U.S. dollars”,
“US$” or “USD”
United States dollars, the lawful currency of the United
States
“V AT” value-added tax
“weighted voting rights” has the meaning ascribed to it in the Listing Rules
DEFINITIONS
–4 1–


--- page 51 ---
“White Form eIPO” the application for Hong Kong Offer Shares to be issued
in the applicant’s own name, submitted online through
the designated website of the White Form eIPO Service
Provider, at www.eipo.com.hk
“White Form eIPO Service
Provider”
Computershare Hong Kong Investor Services Limited
“Xinjiang Internet Hospital” Xinjiang Fangzhou Internet Hospital Co., Ltd. ( อᖛ˙Ћ
ʮ̡), a limited liability company
established in the PRC on May 7, 2020 and a subsidiary
of the Company
“Yunyi Inc.” Y unyi Inc., an exempted company with limited liability
incorporated in the Cayman Islands on August 10, 2015,
which was the ultimate parent company of the Pre-
reorganization Group
“Yunyi Information” Guangdong Fangzhou Y unyi Information Technology
Co., Ltd. (ʮ̡), a limited
liability company established in the PRC on June 6, 2022
and a subsidiary of the Company
“Yunyi Limited” Y unyi Limited, a company with limited liability
incorporated in Hong Kong on August 28, 2015 and a
wholly-owned subsidiary of Y unyi Inc.
“%” per cent
* For identification purposes only.
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures preceding them.
Translated English names of Chinese natural persons, legal persons, governmental
authorities, institutions or other entities for which no official English translation exist are
unofficial translations for identification purposes only. If there is any inconsistency, the
Chinese names shall prevail.
In this prospectus, the terms “associate,” “close associate,” “core connected person,”
“connected person,” “connected transaction,” “controlling shareholder ,” “subsidiary” and
“substantial shareholder” shall have the meanings given to such terms in the Listing Rules,
unless the context otherwise requires.
DEFINITIONS
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This glossary of industry terms contains definitions of certain terms used in this
prospectus in connection with our Company and our business. These terms and their
definitions may not correspond to standard industry definitions, and may not be directly
comparable to similarly titled terms adopted by other companies operating in the same
industries as our Company.
“AI” artificial intelligence, the use of machine to aid or replace
human in doing certain tasks by simulating the sight,
hearing, senses and thinking of human
“associate chief doctor” the second highest professional rank for doctors ( ਓ˴΂
ࢪin China; an associate chief doctor may supervise
attending and resident doctors, direct research work of a
specific field, and typically handle complex medical
cases
“attending doctor” the third highest professional rank for doctors (ࢪ)
in China; an attending doctor may supervise resident
doctors and typically undertake medical treatment,
teaching, research and disease prevention work
“average spending per paying
user”
the total GMV for a year divided by the number of paying
users for the same year
“CAGR” compound annual growth rate
“CDM” or “chronic disease
management”
the establishment of an integrated system of intervention
and management for chronic disease throughout different
stages of the continuum of chronic disease care,
ultimately strengthening disease control, preventing
disease deterioration, and controlling the overall medical
cost
“chief doctor” the highest professional rank for doctors (ࢪi n
China; a chief doctor is generally in charge of a specific
clinical department
“chronic diseases” non-communicable chronic diseases that last one year or
more and require ongoing medical attention or limit
activities of daily living or both
“Class I hospitals” Class I hospitals include community health centers and
township health centers that directly provide prevention,
medical care and rehabilitation services to residents
GLOSSARY OF INDUSTRY TERMS
–4 3–


--- page 53 ---
“Class III hospitals” top-level hospitals that provide high-level specialized
medical services to several regions and performing
advanced teaching and research tasks, which are
designated as Class III hospitals by the NHC hospital
classification system
“conversion rate” the number of paying users divided by the number of
active users
“COVID-19” coronavirus disease 2019, a disease caused by a novel
virus designated as severe acute respiratory syndrome
coronavirus
“customer lifetime value” a projection of the net profit contributed to the whole
future relationship with a customer
“e-prescription” electronic prescription, the digital version of a paper
prescription
“GMV” gross merchandise volume, the total value of all orders
placed, regardless of whether the services or products are
performed or delivered or whether the products are
returned
“H2H” hospital-to-home
“MAU” monthly active users and, in relation to us, the number of
active users who access our services on the Jianke
Platform at least once during a calendar month
“OTC drugs” drugs which may, upon receiving the NMPA approval, be
sold over the counter in China at dispensers, pharmacies
or retail outlets without requiring a prescription by a
medical practitioner
“registered physician(s)” external physician(s) registered on our H2H service
platform who practice(s) offline at third party medical
institutions
“registered users” patient users registered on the Jianke Platform
GLOSSARY OF INDUSTRY TERMS
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“repeat purchase rate” the amount spent by users who placed two or more orders
during a year divided by the total GMV for the same year
“retention rate” the percentage of total active users/registered physicians
in the same month of the preceding year who remained
active on the Jianke Platform during the next 12 months
“SKU” stock keeping unit
“tiered medical treatment
system”
China’s tiered medical treatment system classifies
patients according to their disease severity and treatment
difficulty, so that different levels of medical institutions
can undertake the diagnosis and treatment of their own
treatment capabilities to gradually realize the
specialization of medical institutions at all levels, and
effectively balance various medical service resources,
divert the general outpatient, rehabilitation and nursing
care undertaken by the original large and medium-sized
medical institutions to the primary medical institutions
GLOSSARY OF INDUSTRY TERMS
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Certain statements in this prospectus are forward looking statements that are, by their
nature, subject to significant risks and uncertainties. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as “will”,
“expect”, “aim”, “potential”, “continue”, “anticipate”, “estimate”, “believe”, “going forward”,
“ought to”, “may”, “see”, “should”, “intend”, “plan”, “projection”, “could”, “vision”, “goals”,
“objective”, “target”, “schedules”, “outlook” or other similar expressions) are not historical
facts, are forward-looking and may involve estimates and assumptions and are subject to risks
(including but not limited to the risk factors detailed in this prospectus), uncertainties and other
factors some of which are beyond our Company’s control and which are difficult to predict.
Accordingly, these factors could cause actual results or outcomes to differ materially from
those expressed in the forward-looking statements.
Our forward-looking statements have been based on assumptions and factors concerning
future events that may prove to be inaccurate. Those assumptions and factors are based on
information currently available to us about the businesses that we operate. The risks,
uncertainties and other factors, many of which are beyond our control, that could influence
actual results include, but are not limited to:
 our operations and business prospects;
 our ability to maintain relationship with, and the actions and developments
affecting, our major customers and suppliers in the future;
 future developments, trends and conditions in the industries and markets in which
we operate;
 general economic, political and business conditions in the markets in which we
operate;
 any changes in the laws, rules and regulations of the PRC government and the rules,
regulations and policies of the relevant governmental authorities relating to all
aspects of our business and our business plans and strategies;
 our ability to identify and satisfy user demands and preferences;
 the ability of third parties to perform in accordance with contractual terms and
specifications;
 our ability to maintain good relationships with business partners;
 our ability to retain senior management and key personnel;
 our business strategies and plans to achieve these strategies;
FORW ARD-LOOKING STATEMENTS
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 the actions of and developments affecting our competitors;
 our ability to control costs and expenses;
 our ability to defend our intellectual rights and protect confidentiality;
 our dividend policy;
 changes or volatility in interest rates, foreign exchange rates, equity prices, trading
volumes, commodity prices and overall market trends;
 capital market developments;
 the actions and developments of our competitors; and
 all other risks and uncertainties described in the section headed “Risk Factors” in
this prospectus.
Since actual results or outcomes could differ materially from those expressed in any
forward-looking statements, we strongly caution investors against placing undue reliance on
any such forward-looking statements. Any forward-looking statement speaks only as of the
date on which such statement is made, and, except as required by the Listing Rules, we
undertake no obligation to update any forward-looking statement or statements to reflect events
or circumstances after the date on which such statement is made or to reflect the occurrence
of unanticipated events. Statements of or references to our intentions or those of any of our
Directors are made as of the date of this prospectus. Any such intentions may change in light
of future developments.
All forward-looking statements in this prospectus are expressly qualified by reference to
this cautionary statement.
FORW ARD-LOOKING STATEMENTS
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Prospective investors should consider carefully all of the information presented in
this prospectus and, in particular , should consider the following risks and special
considerations in connection with an investment in our Company before making any
investment decision in relation to the Shares. The occurrence of any of the following risks
may have a material adverse effect on the business, results of operations, financial
condition and future prospects of our Company. This prospectus contains certain
forward-looking statements regarding our plans, objectives, expectations, and intentions
which involve risks and uncertainties. Our actual results could differ materially from
those discussed in this prospectus. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed elsewhere in this
prospectus. The trading price of the Shares could decline due to any of these risks and
you may lose all or part of your investments.
You should carefully read and consider all of the information in this prospectus
including the risks and uncertainties described below before deciding to make any
investment in our Shares. Our business, financial condition or results of operations could
be materially adversely affected by any of these risks and uncertainties. The trading price
of our Shares could decline due to any of these risks and uncertainties. As a result, you
may lose part or all of your investment.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
If we fail to manage the growth and expansion of our business, our results of operations,
financial condition and growth prospects may be materially and adversely affected.
We have been expanding the type and scale of our business and the geographic presence
of our services since our inception. We have evolved from an online retail pharmacy service
platform to an online chronic disease management platform, providing comprehensive medical
services, online retail pharmacy services and customized content and marketing solutions. As
of December 31, 2023, we had over 212,000 registered physicians from over 15,600 medical
institutions, which provided us with robust medical knowledge profile based on real world
experience of chronic disease management. Going forward, we may continue to evolve and
launch more new business initiatives as we address more pressing needs of the online CDM
industry. Such expansion in business may increase the complexity of our operations and place
a significant strain on our managerial, operational, financial and human resources. Our current
and planned personnel, business systems, operation procedures and controls may not be
adequate to support our future operations. We cannot assure you that we will be able to
effectively manage our growth or to implement all these business systems, operation
procedures and control measures successfully, neither can we guarantee that our new business
initiatives will be as successful as expected or achieve profitability.
RISK FACTORS
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We operate in an emerging and dynamic industry, and our historical results of operations
and financial performance may not be indicative of future performance.
We operate in the emerging and dynamic online chronic disease management platform
industry. This industry is relatively new and it is uncertain whether such industry would
achieve and sustain high levels of demand and consumer acceptance. We have experienced
steady growth during the Track Record Period. The number of paying users of our Jianke
Platform grew from approximately 2.5 million in 2021 to 3.9 million and 4.4 million in 2022
and 2023, respectively. Our revenue increased from RMB1,758.7 million in 2021 to
RMB2,204.3 million in 2022, and further increased to RMB2,434.3 million in 2023. Although
our business has grown rapidly during the Track Record Period, due to our limited operating
history, our historical growth and past revenue may not be indicative of our future
performance. We cannot assure you that we will be able to achieve similar results or grow at
the same rate as we had in the past or at all. Rather than relying on our historical operating and
financial results to evaluate us, you should consider our business prospects in light of the risks
and difficulties we may encounter as an early stage company operating in an emerging and
dynamic industry, including, among other things, our ability to:
 innovate and adapt our platforms and solutions to meet evolving needs of existing
and potential customers;
 grow our user base and enhance our user engagement;
 develop and maintain relationships with our existing business partners and attract
new business partners to our ecosystem;
 develop or implement additional strategic initiatives to further enhance our
monetization;
 navigate in an evolving regulatory environment;
 maintain a reliable, secure, high-performance and scalable technology
infrastructure;
 aggregate and process chronic disease management data, which is fundamental to
the development and performance of our platforms and solutions;
 continuously improve the algorithms underlying our AI medical assistant;
 adopt new technologies or adapt our technology infrastructure to changing customer
needs or emerging industry standards;
 attract, retain and motivate talented employees; and
 increase brand awareness among existing and potential customers through various
marketing and promotional activities.
RISK FACTORS
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If we fail to address any of the foregoing risks and challenges, our business, financial
condition and results of operations may be materially and adversely affected. In addition, as
our business develops and in response to competition and changes in the industry and
regulatory environment, we may continue to introduce new product and service offerings,
improve our existing product and service offerings or adjust and optimize our business model.
There can be no assurance that we may be able to achieve the expected results for any such
changes, and our financial condition and results of operations may be materially and adversely
affected as a result.
We have a history of net losses and negative operating cash flow. We cannot ensure future
profitability.
During the Track Record Period, we experienced net losses and negative cash flows from
operations. We incurred net losses of RMB304.0 million, RMB383.3 million and RMB196.7
million for the years ended December 31, 2021, 2022 and 2023, respectively. We incurred net
losses during the Track Record Period primarily due to the significant amount of cost of sales
and operating expenses incurred to drive the growth of our services, enhance brand awareness
and lay a solid foundation to support our future expansion. In addition, we recorded finance
costs which primarily represent financial liabilities recognized with respect to our convertible
redeemable preferred shares. For details, see “—Changes to the carrying amount of our
convertible redeemable preferred shares may materially and adversely affect our financial
condition and results of operations.” Our future profitability will depend on a variety of
factors, including the performance of our business, competitive landscape, demands of chronic
disease patients, macroeconomic and regulatory environment and labor costs, as well as the
uncertainties associated with the COVID-19 pandemic, among other things. Therefore, our
revenue may not grow at the rate we expect and it may not increase sufficiently to offset the
increase in our costs and expenses. As a result, we may continue to incur losses in the future.
In addition, while we recorded net cash generated from operating activities of RMB22.3
million for the year ended December 31, 2023, our net cash used in operating activities was
RMB203.7 million and RMB50.0 million for the years ended December 31, 2021 and 2022,
respectively. To date, we have financed our operations principally from capital contributions
from shareholders, revenue from provision of services and sales of products, and debt
financing. If we fail to generate sufficient cash flow from our operations, or if we fail to
maintain sufficient cash and financing, our liquidity position may be adversely affected. If we
do not have sufficient cash flows to fund our business, operations and capital expenditure, our
business and financial position will be materially and adversely affected.
We recorded net current liabilities during the Track Record Period.
We recorded net current liabilities of RMB14.6 million as of December 31, 2023,
primarily attributable to the trade and other payables incurred to support our increased business
scale. We cannot assure you that we will not record net current liabilities in the future. Net
current liabilities expose us to liquidity risks and constrain our operational flexibility. Our
future liquidity and the payment of trade and other payables will primarily depend on our
ability to generate adequate cash inflows from our operating activities. If we experience a
shortage in cash flow generated from operations, our liquidity position may be materially and
adversely affected, which, in turn, may adversely affect our results of operations and financial
position.
RISK FACTORS
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We are subject to extensive and evolving regulatory requirements. Future regulations may
impose additional requirements and obligations on our business that could materially and
adversely affect our business, reputation, financial condition and results of operations.
We are subject to legal and regulatory requirements of multiple industries in the PRC due
to the nature of our business. These legal and regulatory requirements primarily cover the
industries of healthcare and the Internet.
V arious regulatory authorities of the PRC government are authorized to promulgate and
implement regulations governing aspects of the healthcare and Internet-related business. The
healthcare industry is under heavy regulation, and any violation of the relevant laws, rules and
regulations may result in harsh penalties and, under certain circumstances, lead to criminal
prosecution.
Also, the regulations of both the healthcare and the Internet sectors are relatively new and
evolving, and it is uncertain how the newly issued regulations will be interpreted or enforced.
For example, on August 25, 2021, the National Healthcare Security Administration, the NHC,
NDRC, the Ministry of Finance of PRC, MOHRSS, SAMR, National Administration of
Traditional Chinese Medicine, and NMPA jointly issued the Pilot Scheme for Deepening
Medical Service Price Reform ()( “ Pilot Scheme ”). The
Pilot Scheme provides that the PRC governments will locate five trial cities and three trial
provinces to establish the price catalogs for controlling the price of medical services. As of the
Latest Practicable Date, the trial cities and provinces did not include Guangzhou or Guangdong
province, and it remained uncertain whether the Pilot Scheme extended to the provision of
online medical services in China. However, the regulatory climate in China is evolving. We
cannot rule out the possibility that some common practices in the online medical services
industry, which we also adopt, might be deemed by the relevant authorities as being subject to
any newly issued regulations. Any amendments of the current regulatory environment may
result in increased compliance costs on our business, require us to modify our business models
as well as product and service offerings in a manner that may undermine our product and
service offerings’ attractiveness to our users, or may even have to suspend or terminate certain
business operations. We may also become subject to fines or other penalties. In each case, our
business, financial condition and results of operations may be materially and adversely
affected.
We have identified what we believe are the primary areas of government regulation that,
if amended, would be costly to us. These areas include, but are not limited to, administration
of medical practitioners and medical institutions, sales, supply, distribution and advertising of
pharmaceutical products, including prescription and OTC drugs and medical devices, online
medical treatment, operation of the e-commerce platform for our online retail pharmacy
services, value-added telecommunications services, Internet advertising, cybersecurity and
confidentiality of user information. See “Regulatory Overview.” There could be other laws and
regulations applicable to our business that we have not identified or that, if changed, may be
costly to us, and we cannot predict all the ways in which implementation of such laws and
regulations may affect us.
RISK FACTORS
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Furthermore, the introduction of new product and service offerings may require us to
comply with additional laws and regulations. Compliance may require obtaining appropriate
permits, licenses or certificates as well as expending additional resources to monitor
developments in the relevant regulatory environment. The failure to adequately comply with
these future laws and regulations may delay, or possibly prevent, some of our products or
services from being offered to users, which may have a material adverse effect on our business,
financial condition and results of operations.
Existing laws governing issues such as privacy, property ownership, medical malpractice
and other form of torts, liability theories based on contracts, and sales and other taxes, etc. may
also apply to data processing, online chronic disease management service offering and other
online services, and such uncertainty may take years to resolve. In addition, due to the
increased popularity of the online chronic disease management services and the significant
impact of any safety and security breach in the digital health solutions on the society generally,
it is possible that a number of laws and regulations may be adopted with respect to healthcare,
chronic disease management and online chronic disease management industries. The adoption
of additional laws or regulations, the application to our business of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the application to our
business of existing laws and regulations that are traditionally not applicable to digital forms
of services, may heighten requirements on healthcare, online chronic disease management and
other Internet-based service offerings, which could, in turn, increase our cost of doing
business, disrupt our operations and impede the development or growth of the online chronic
disease management industry.
We may be subject to regulatory investigations, administrative proceedings or legal
disputes arising from the conduct of our in-house medical professionals and registered
physicians, which may result in penalties or damages payable.
Medical practice of physicians is strictly regulated under PRC laws, rules and regulations.
Physicians who practice at medical institutions must hold practicing licenses and may only
practice within the scope of their licenses and at the specific medical institutions as stated in
their licenses. Under applicable PRC regulations, a physician is required to register the medical
institutions at which he or she practices in his or her license. If a physician is found practicing
at a medical institution not registered in his or her license, the physician would be subject to
regulatory penalties, from warning to suspension of practice and, in the worst-case scenario,
revocation of licenses. A physician practicing in multiple institutions must apply to register or
file with competent in-charge administrative authorities and can only have the right to
prescribe medicine at the registered or filed practicing institution. If the physician issues a
prescription in a medical institution not registered in his or her license, the relevant medical
institution would also be subject to regulatory penalties, including a fine of up to RMB5,000
and, in the worst-case scenario, revocation of the medical institution’s Practicing License for
Medical Institutions.
RISK FACTORS
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We cannot assure you that our in-house medical professionals and registered physicians
will complete the registration and relevant government procedures in a timely manner, or at all,
or that our in-house medical professionals and registered physicians will not practice outside
the permitted scope of their respective licenses or strictly take their individual responsibilities
under the applicable laws and regulations in connection with medical services especially online
chronic disease management services. Our failure to properly manage or check the registration
of our in-house medical professionals or registered physicians may subject us to administrative
penalties, including fines, or, in the worst-case scenario, revocation of our Practicing License
for Medical Institutions, which could materially and adversely affect our business. Meanwhile,
if our in-house medical professionals and registered physicians are found to have deficient
registration or found to be practicing beyond the scope permitted by relevant authorities, they
may be disciplined and lose their practicing licenses. In the event that the multi-institution
practices of our in-house medical professionals and registered physicians are in breach of their
contractual obligations owed to other institutions, such as non-compete obligations, we may be
exposed to indemnity or other legal liabilities if we are deemed to have aided in these breaches,
and are therefore susceptible to legal disputes and potential damages. As a result, we may no
longer be able to employ them in offering our services, which could materially and adversely
affect our business. In addition, there can be no assurance that we could timely find qualified
replacements on commercially reasonable terms, or at all.
Most of our registered physicians are not our employees and we have limited control over
their practice and the quality of their services on our platforms. There can be no assurance that
our monitoring of their services would be sufficient to control the quality of their work, or they
will strictly adhere to the specified work scope and quality requirements and comply with
applicable laws and ethical rules. In the event that our registered physicians fail to meet our
quality and operating standards pursuant to our agreements or as required by relevant PRC laws
and regulations or ethical rules, the service quality of our online CDM business may be
adversely affected. Furthermore, due to our contractual relationships with registered
physicians, we could be perceived as being responsible for their actions and, as a result, suffer
reputation damage and could be brought into legal proceedings that are costly and time-
consuming to defend. This may adversely affect our ability to attract and retain participants of
our online CDM platform, which could materially and adversely affect our business.
In addition, the Measures for the Administration of Internet Diagnosis and Treatment
(Trial) require physicians to obtain the consent of the medical institution where they are
registered to practice to carry out Internet diagnosis and treatment activities. For details, see
“Regulatory Overview—Regulations on Healthcare Services—Internet Hospitals.” If any of
our registered physicians fails to obtain the requisite consent, his or her employed medical
institution may not allow them to provide services through our platform. As of the Latest
Practicable Date, there were no laws or regulations requiring Internet hospitals to obtain such
consent from the physicians’ registered place of practice, or imposing liability or penalty on
Internet hospitals for the failure to obtain such consent. However, any changes or amendments
to the current regulatory environment may adversely impact our ability to provide online
consultation services through our platform, which may affect our business and result in
increased compliance costs.
RISK FACTORS
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As of the Latest Practicable Date, we had implemented policies to ensure our registered
physicians are permitted to issue the prescription and our practicing in-house medical
professionals to register our medical institution in their licenses as required under the relevant
PRC regulations. Nevertheless, there can be no assurance that all of such medical professionals
will strictly abide by these policies and that the relevant healthcare administrative authorities
would not retrospectively find deficiency in the registration of these medical professionals and
subject the relevant medical professionals and/or us to penalties, which could materially and
adversely affect our business.
Sale of prescription drugs is subject to stringent legal and regulatory scrutiny, which may
expose us to risks and challenges.
Sale of prescription drugs is subject to stringent legal and regulatory scrutiny, which may
expose us to risks and challenges. In particular, under the Measures for Supervision and
Management of the Quality of Drug Operation and Use (຾ᐄձԴ͜ሯඎ္ຖ၍ଣ፬
) promulgated by the SAMR in 2023, a company is prohibited from either selling
prescription drugs to consumers without prescription or offering gifts of prescription drugs
directly or in disguised form as accompanying other drugs or goods purchased to the public.
A company in violation of such prohibitions shall be instructed to rectify, imposed a fine of not
less than RMB5,000 but not more than RMB50,000 on the company that fails to make
corrections within a prescribed time limit, and shall be imposed a fine of not less than
RMB50,000 but not more than RMB200,000 if harmful consequences are caused. The Drug
Administration Law (), which was last amended in 2019, abolished the
restriction on online sale of prescription drugs and adopted the principle of keeping online and
offline sales consistent. On August 3, 2022, the SAMR promulgated the Measures for
Supervision and Administration of Online Pharmaceuticals Sales (the “ Measures ”) (ၣ
), which took effect on December 1, 2022 aiming to enhance the
supervision of online pharmaceutical sales and related platform services. The Measures
provides specific and explicit rules for the online sales of prescription drugs, which is
perceived to be more conducive to online prescription drug sellers including us, but also
presents challenges for us to be in compliance. The Measures provides that, among others,
online prescription drug sellers shall (i) ensure the accuracy and reliability of the source of
prescription; (ii) keep records of any prescription for at least five years and no less than one
year after the expiration date of the prescription drugs; and (iii) disclose safety warnings
including “prescription drugs should only be purchased and used with prescriptions and
guidance of licensed pharmacists” when displaying information of prescription drugs. On April
7, 2021, the General Office of the State Council issued the Opinions on Serving the “Six
Stables” and “Six Safeguards” and Further Doing a Good Job in the Reform of “Delegating
Power, Delegating Regulation and Serving Service” (ਕ“ʬᖢ”“ڭ”ආɓӉਂλ“׳
؂”จԈ) which allow online sales of prescription drugs other than those
under special state control on the premise of ensuring the authenticity and reliability of the
electronic prescription sources.
RISK FACTORS
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It remains uncertain that our sales of prescription drugs are and will be in full compliance
with the relevant laws and regulations or any new laws and regulations that may be
promulgated in the future, which are evolving and subject to amendment from time to time.
Any failure to comply with such laws and regulations could subject us to disciplinary warnings
and administrative penalties, which may in turn materially and adversely affect our business,
results of operations, financial condition and prospects. Additionally, we cannot assure you that
our scrutiny measures and mechanism will be effective or sufficient. There may be loopholes
in our scrutiny measures and such measures may not be able to detect prescriptions abuse or
fraudulent orders effectively and timely. As the methods used to bypass or cheat our scrutiny
measures may change frequently and may not be recognized until they succeed, we may be
unable to anticipate these methods or to implement adequate preventative measures. Failure to
effectively screen the sale of prescription drugs could expose us to liabilities under PRC laws
and regulations, which may incur significant liabilities and our business, financial condition
and results of operations could be materially and adversely affected.
Maintaining customers’ trust in our Jianke Platform is critical to our success, and any
failure to do so could damage our reputation and brand.
We provide online chronic disease management services primarily through our Jianke
Platform. We have been building our brand name and reputation for our ecosystem as we
believe that our ability to maintain customers’ trust in our services and platform is critical to
our success in the rapidly expanding online chronic disease management industry in China. Our
ability to maintain customers’ trust in our services is primarily affected by the following
factors:
 our ability to maintain superior customer experience and the quality of services and
products provided through our platform;
 the breadth of offerings of our services and their efficiency in addressing our
customers’ needs and meeting their expectations;
 the reliability, security and functionality of our platform;
 our ability to adopt new technologies or adapt our information infrastructure to
changing user requirements or emerging industry standards; and
 our ability to increase brand awareness among existing and potential customers
through various marketing and promotional activities.
Any loss of trust in our platform could harm the value of our brand and reputation, and
result in participants ceasing to utilize our platform as well as reducing the level of their
activity on our platform, which could materially and adversely affect our business, financial
condition and results of operations. Furthermore, there can be no assurance that our brand
promotion efforts would be effective. Such efforts may be expensive, which may, in turn,
materially and adversely affect our financial condition and results of operations.
RISK FACTORS
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Any negative review, publicity or other public disclosures, comment or allegation about
our Company, affiliates or subsidiaries, related parties, our in-house medical professionals,
registered physicians and pharmaceutical companies that we cooperate with, among others,
may harm our brand, reputation and public image. We may also face challenges from others
seeking to profit from, or defame, our brand. Any of the foregoing may result in loss of existing
and potential customers or business partners for our platform and, in turn, have a material
adverse effect on our business, financial condition, results of operations and prospects.
We may be subject to product liability or medical liability claims, or claims or
administrative penalties for counterfeit, substandard or unauthorized products on our
platform, which could cause us to incur significant expenses and be liable for significant
damage.
We are exposed to risks inherent in providing online healthcare services and selling
pharmaceutical and healthcare products in China. Claims, user complaints or administrative
penalties may be made or imposed against us or the relevant pharmaceutical companies if any
of the products sold through our Jianke Platform are deemed or proven to be unsafe, ineffective
or defective, or if they are found to contain illicit substances or infringe on any third party’s
intellectual property rights. According to the Drug Administration Law (), if
compensation claims related to product quality are received by a drug trading enterprise, it
shall pay the compensation first, and then have the right to recover such payment from the drug
manufacturer or holder of drug marketing authorization. Pursuant to the PRC Product Quality
Law (), where a defective product causes physical injury or
damage to property, the victim may claim compensation from the manufacturer or from the
seller of the product. Where the liability ought to be borne by the manufacturer, the seller has
a right of recourse against the manufacturer. We may also be subject to allegations of having
engaged in practices such as improperly issuing prescriptions, sale of counterfeit and
substandard medicines or other healthcare products or providing inadequate warnings or
insufficient or misleading disclosures of side effects.
In addition, in the event that any use or misuse of the products we sell results in personal
injury, suicide or death, product liability claims may be brought against us for damages. If we
are unable to defend ourselves against such claims, among other things, we may be subject to
civil liabilities for physical injury, death or other losses caused by our products, to criminal
liabilities, and to the revocation of our business licenses or relevant permits. In addition, we
may be required to suspend sales or cease sales of the relevant products.
We face risks of medical liability claims arising from medical services provided through
our Jianke Platform. Such claims may be made against us, our registered physicians (in relation
to their provision of online consultation and e-prescription services) and our in-house medical
professionals (in relation to their provision of e-prescription services). In particular, the
physicians and pharmaceutical companies that we partner with, may provide sub-standard
services, mishandle sensitive information, engage in other misconduct or commit medical
malpractice, which could subject us to medical liability claims. According to the Regulation on
Handling Medical Accidents (ஈଣૢԷ), medical institutions and patients can
RISK FACTORS
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resolve civil liability disputes, including compensation for medical accidents, through
negotiation. According to the Civil Code of the PRC (Պ), if a patient
sustains any harm in the course of medical treatment due to the failure of the medical
institution or its medical staff, the medical institution shall be liable for compensation.
Although we carry insurance covering medical malpractice claims in amounts that we believe
are appropriate in light of the risks attendant to our business, successful medical liability
claims could result in substantial damage awards that may exceed the limits of our insurance
coverage.
Any product liability claims and medical liability claims made against us could cause
negative publicity, impairment of users’ confidence in us, decrease in number of platform
participants, significant decrease in sales volume and may result in fines and penalties from
regulatory authorities. Any claims made against us could be costly to defend, result in
substantial damage against us and divert the attention of our management team from our
operations, which could have a material adverse effect on our business, financial condition,
results of operations and reputation. In the event that such product liability or medical liability
claims are attributable to our suppliers, registered physicians or other business partners, there
can be no assurance that we will obtain full indemnification from them. Even if we do, our
reputation may still be severely impaired.
We may fail to attract or retain sufficient users or registered physicians to our platform.
We have built a broad user base for our comprehensive medical services and online retail
pharmacy services. The number of paying users of our Jianke Platform grew from
approximately 2.5 million in 2021 to 3.9 million and 4.4 million in 2022 and 2023,
respectively. Our ability to acquire and retain sufficient paying users for our platform primarily
depends on the overall experience we provide to our users as well as the actual or perceived
effectiveness of our services. In order to attract and retain users for our services and increase
the conversion rate of active users to paying users on our platform, we must continue to build
our brand and reputation, as well as effectively market and precisely target our services to
prospective users. To retain and engage our user base, we must provide personalized, superior
user experience, offer quality services covering a wide range of user demands and cultivate
users’ stickiness to our platform. However, we cannot assure you that our users will consider
their experience satisfactory or our services effective. In addition, some users may encounter
difficulties in navigating our platform or experience technical difficulties.
We also need sufficient physicians to be registered and maintained on our Jianke Platform
for the provision of our H2H services. As of December 31, 2023, we had more than 212,000
registered physicians on our H2H service platform, providing online consultation and
e-prescription services. We cannot assure you that these registered physicians will stay on our
platform or that we will be able to attract more physicians to be registered on our platform. For
example, as physicians have responsibilities at the hospitals where they work, they may be
unwilling or unable to set aside additional hours from their schedule to participate in our H2H
services. Furthermore, they may not share our vision about online chronic disease management
services and may prefer to focus on their traditional practices. Furthermore, our competitors
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may offer more subsidies or compensation to attract our registered physicians to their
platforms, and those physicians may not stay at our platform or their engagement in our
platform may decrease. If we fail to attract or retain sufficient number of registered physicians,
our online chronic disease management services may not further develop and we may not be
able to provide satisfactory services or user experience.
If we fail to address any of the foregoing or other similar challenges, we may be unable
to attract new users and existing users may become dissatisfied with our services and
discontinue their engagement with us. As a result, our business, results of operations and
financial condition could be materially and adversely affected.
The potential reversion of patients to offline clinics and hospitals in a post-COVID-19
environment might impact our business and results of operations.
As a result of the COVID-19 pandemic, consumers increasingly used online platforms for
medical services such as online consultations and drug purchases. Although the COVID-19
pandemic abated in 2023, our revenue increased from RMB2,204.3 million in 2022 to
RMB2,434.3 million in 2023, demonstrating the continued adoption of online healthcare
services and development of consumer habits. However, we cannot guarantee the sustained
adoption of online healthcare services in a post-COVID-19 environment, and the potential
reversion of patients to offline clinics and hospitals might impact the business of our Jianke
Platform.
We recorded net liabilities during the Track Record Period.
We recorded net liabilities of RMB1,340.3 million, RMB1,709.9 million and
RMB1,901.5 million as of December 31, 2021, 2022 and 2023, respectively, primarily due to
the convertible redeemable preferred shares of RMB1,368.8 million, RMB1,737.9 million and
RMB1,911.5 million that we recorded as of December 31, 2021, 2022 and 2023, respectively.
Upon the completion of the Global Offering, all of our convertible redeemable preferred shares
will be re-classified from liabilities to equity as a result of the automatic conversion into
ordinary shares, which is expected to reverse our net liabilities position into a net assets
position. However, there can be no assurance that we will not experience liquidity problems in
the future. If we fail to generate sufficient revenue from our operations, or if we fail to maintain
sufficient cash and financing, we may not have sufficient cash flows to fund our business
operations and capital expenditure, and our business, financial condition and results of
operations will be adversely affected as a result.
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Changes to the carrying amount of our convertible redeemable preferred shares may
materially and adversely affect our financial condition and results of operations.
As of December 31, 2021, 2022 and 2023, the carrying amount of the convertible
redeemable preferred shares we issued amounted to RMB1,368.8 million, RMB1,737.9 million
and RMB1,911.5 million, respectively. Immediately prior to the completion of the Global
Offering, all of our convertible redeemable preferred shares will be automatically converted to
ordinary shares. However, the redemption price of our convertible redeemable preferred shares
may change from time to time. We initially recognized our convertible redeemable preferred
shares as financial liabilities at the present value of their redemption price, which represents
the highest amount we would need to pay in case of the occurrence of any triggering events.
Changes in the carrying amount of such financial liabilities are recognized in our consolidated
statements of profit or loss and other comprehensive income, and may result in significant
fluctuations in profit or loss from year to year.
We are subject to risks associated with our relationship with pharmaceutical companies
for our product sales and customized content and marketing solutions.
Through our partnerships with pharmaceutical companies, we have access to a variety of
pharmaceutical products at competitive prices. As of December 31, 2023, we had procured
products from over 1,400 suppliers and had offered over 212,000 drug SKUs. In addition, our
customized content and marketing solutions to pharmaceutical companies have become an
important component of our overall business. Our customized content and marketing solutions
serve as an extension of our supplier management strategy, which helps us forge mutually
beneficial and synergistic relationships with pharmaceutical companies from whom we procure
our pharmaceutical products. Our results of operations and prospects are thus significantly
dependent on our relationship and continued collaboration with pharmaceutical companies. We
cannot assure you that we will be able to maintain a good relationship with pharmaceutical
companies or maintain our collaboration with them on terms acceptable to us. If we lose any
of our current pharmaceutical company partners for any reason, we cannot assure you that we
will be able to find alternative partners on terms acceptable to us, or at all.
We typically enter into purchase agreements with pharmaceutical companies, which
generally do not ensure the availability of products or the continuation of particular pricing
practices or payment terms beyond the end of the contractual term. In addition, our agreements
with these companies typically do not restrict them from selling products to other buyers. We
cannot assure you that the pharmaceutical companies we currently cooperate with will continue
to sell products to us on commercially acceptable terms, or at all. Even if we maintain good
relationships with these companies, their ability to supply products to us in sufficient quantity
and at competitive prices may be adversely affected by economic conditions, labor actions,
regulatory or legal decisions, customs and import restrictions, natural disasters or other matters
beyond our control. In the event that we are not able to purchase pharmaceutical products at
favorable prices, our revenue and cost of sales may be materially and adversely affected.
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Moreover, we usually enter into service agreements with pharmaceutical companies to
provide customized content and marketing solutions on a case-by-case basis. We cannot assure
you that our partners will not terminate such relationship with us and divert part or all of their
business to our competitors. In the event that we fail to maintain our relationship and
collaboration with pharmaceutical companies, our results of operations, financial condition and
prospects may be materially adversely affected.
We source pharmaceutical products from suppliers, and our revenue and results of
operations will be adversely affected if we fail to maintain and manage these relationships
properly.
Our business is dependent to a large extent upon the stable supply of pharmaceutical
products from our suppliers. We mainly procure pharmaceutical products, including
prescription drugs, OTC drugs, medical device and accessories, from authorized distributors of
multinational and domestic pharmaceutical companies. In 2021, 2022 and 2023, purchases
from our five largest suppliers accounted for 60.9%, 57.2% and 51.5% of our total purchases
for the years, respectively, and purchases from our largest supplier accounted for 20.5%, 14.8%
and 15.7% of our total purchases for the same years, respectively. Although we believe our
reliance on our major suppliers is relatively limited as there are several other pharmaceutical
companies in China with similar supply ability, in case of any significant delay in delivery, the
inability of our key suppliers to meet their quantity and/or quality obligations or the
unavailability of alternative suppliers could hinder our business plan, which could, in turn,
have a material adverse effect on our business, financial condition and results of operations.
In addition, we typically do not enter into long-term arrangements with our suppliers, and
most of our current agreements with our suppliers do not prohibit them from working with our
competitors. Our competitors may be more effective in providing incentives to our suppliers
to prioritize their orders in case of short supply. If these suppliers choose not to partner with
us, our business and results of operations may be materially and adversely affected. If we fail
to effectively maintain these relationships, our business and results of operations may be
adversely affected.
If we fail to keep up with rapid changes in big data analysis, AI technology and other
technologies, our future success may be adversely affected.
We utilize AI, big data analysis, and other advanced data technology tools to assist in our
provision of online medical consultations, prescription verifications and realize smart supply
chain management in our online retail pharmacy services. The efficiency of our business will
depend, in part, on our ability to adapt and respond effectively to the technology development
in AI and big data analysis on a timely basis. The healthcare sector has started to improve
technology-oriented capabilities and leverage innovative applications to reshape the concept of
prevention, diagnosis and treatments, such as AI-assisted medical services, online physician-
patient communications and e-prescription verifications conducted with the assistance of AI
technology. If we are unable to design products and solutions that catch up with such trend in
a timely manner, our market share may shrink and our results of operations and financial
conditions may be negatively impacted.
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If we are unable to develop new solutions that satisfy our customers and provide
enhancements and new features for our Jianke Platform and solutions that keep pace with rapid
technological and industrial change, our business, results of operations and financial condition
could be adversely affected. If our competitors are able to deliver more efficient, convenient
and secure services and solutions at lower prices by using new technologies, it could adversely
impact our ability to maintain and increase our market share.
We need to continuously modify and enhance our services and solutions to adapt to
changes and innovation in these technologies. Technology issues relating to the operation of
our platforms can negatively impact the performance of services. Our AI medical assistant
could cause problems if it fails to deliver accurate information from its interaction with user
and may further impact the physician’s judgments in forming diagnosis and/or issuing
prescriptions based on information provided by the AI medical assistant. Any failure of our big
data analysis and AI technology to operate effectively with evolving or new technologies could
reduce the demand for our services. We may need to continue to invest substantial resources
in research and development to enhance our technology. If we are unable to respond to these
changes in a cost-effective manner, our services may become less marketable and less
competitive or obsolete, and our business, results of operations and financial condition could
be adversely affected.
We collect and process a large amount of data in the ordinary course of our business. Any
improper use or disclosure of such data, security breaches or attacks against our
platform, and any potential reach or failure to protect confidential and proprietary
information, could damage our reputation and adversely impact our business, results of
operations and financial condition.
We process personal information of the users of our platforms when they register as users
and use the services of our platforms. In 2021, 2022 and 2023, the number of paying users of
our Jianke Platform was approximately 2.5 million, 3.9 million and 4.4 million, respectively.
In order for our users to understand how their personal information is handled or processed in
accordance with the relevant laws and regulations, we have developed our own privacy policy,
which is embedded in our mobile applications and website. In addition, we have implemented
internal policies to safeguard our users’ personal information in accordance with the Personal
Information Protection Law, which specify, among others, the requirements regarding
identification and classification of personal information, measures on collection, storage,
processing, use, transmission, provision, disclosure and deletion of personal information,
mechanism to ensure individual’s rights with respect to their privacy, and security incident
response mechanisms. We have also adopted policies on personal information protection
impact assessment, pursuant to which we would conduct assessment on our personal
information processing activities that involve greater risks, especially when processing
sensitive personal information. In addition, we have made significant efforts to deploy various
cybersecurity techniques to improve our privacy and data security systems and processes. Even
though we have already taken necessary organizational and technical measures in accordance
with applicable laws to protect the safety of our network facilities and the data processed by
us, we still face risks inherent in handling large volumes of data and in securing and protecting
such data, in particular, the risks of protecting the data in and hosted on our system, including
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against attacks on our system by external parties or improper behavior by our employees;
addressing concerns related to privacy and sharing, safety, security and other factors; and
complying with applicable laws, rules and regulations relating to the collection, use, disclosure
or security of personal information, including any requests from regulatory and government
authorities relating to such data. Any system failure or security breach or lapse that results in
the unauthorized release of our user data could harm our reputation and brand and,
consequently, our business, in addition to exposing us to potential legal liability.
The proper functioning of our technology infrastructure is essential to our business, and
any failure to maintain the satisfactory performance, security and integrity of our
technology infrastructure would materially and adversely impair our ability to provide
services and affect our business, reputation, financial condition and results of operations.
The satisfactory performance, reliability and availability of our technology infrastructure
are critical to our success and our ability to attract and retain users and provide superior user
experience. Developing and maintaining technology platforms by ourselves is time-consuming,
expensive and complex, and may involve unforeseen difficulties. We may encounter technical
obstacles, and it is possible that we may discover additional problems that prevent our
technologies from operating properly and, consequently, adversely affect our platforms and
other aspects of our business where we apply our technologies. Any system interruptions
caused by telecommunications failures, computer viruses, hacking or other attempts to harm
our systems that result in the unavailability or slowdown of our infrastructure could reduce the
volume of products sold and the attractiveness of service and product offerings on our
platforms. Our servers may also be vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to system interruptions, website slowdown
or unavailability, delays or errors in transaction processing, loss of data or the inability to
accept and fulfill sales orders. Security breaches, computer viruses and hacking attacks have
become more prevalent in our industry.
Material performance problems, defects or errors in our existing or new websites and
mobile applications may arise in the future and may result from technical issues beyond our
control or undetected in our testing. These defects and errors, and any failure by us to identify
and address them, could result in loss of revenue or market share, diversion of development
resources, harm to our reputation and increased service and maintenance costs. Defects or
errors may discourage existing or potential users from utilizing our services and solutions.
Correction of defects or errors could prove to be impossible or impracticable. The costs
incurred in correcting any defects or errors may be substantial and could have a material
adverse effect on our business, financial condition and results of operations. Defects or errors
may also affect our registered physicians and pharmaceutical companies or other participants
who rely on our technologies in the operation of their businesses, which may have a material
adverse effect on our reputation, business, results of operations and prospects.
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Our operations depend on the performance of the Internet infrastructure, mobile
networks and fixed telecommunications networks in China, and our business could be
disrupted by network interruptions.
Almost all access to the Internet and mobile networks in China is maintained through
state-owned telecommunication operators under the administrative control and regulatory
supervision of the MIIT. We primarily rely on a limited number of telecommunication service
providers to provide us with data communications capacity through local telecommunications
lines and Internet data centers to host our servers. We have limited access to alternative
networks or services in the event of disruptions, failures or other problems with China’s public
communications networks, such as the Internet, mobile networks or the fixed
telecommunications networks. With the expansion of our business, we may be required to
upgrade our technology and infrastructure to keep up with the increasing traffic on our
platforms. We cannot assure you that the public communications infrastructure in China will
be able to support the demands associated with the continued growth in usage. In addition, we
have no control over the costs of the services provided by public communications service
providers. If the prices we pay for their services rise significantly, our financial performance
may be adversely affected. Furthermore, if mobile network access fees or other charges to
mobile users increase, our user traffic may decline, and our business may be adversely affected.
The growth and activity of our customers and users who access or use our platforms
through mobile devices depend on their effective use of mobile operating systems which
we do not control.
Customers and users can access our mobile applications and website through mobile
devices. We depend on our customers and users to download specific mobile applications that
are suited for their particular devices. As new mobile devices are released, it is difficult to
predict the problems we may encounter in developing applications for new or alternative
devices. We may need to devote significant resources to the development, support and
maintenance of applications that can be integrated into such new or alternative devices, and
may face increased costs to distribute or have customers use our mobile applications. In the
event that it becomes more difficult for our customers and users to access and use our platforms
on their mobile devices, or if our customers and users choose not to access or use our platforms
through their mobile devices or to use mobile devices that do not offer access to our platforms,
our customer and user growth could be harmed and our business, financial condition and results
of operations may be materially and adversely affected.
We may be held liable for information or content displayed on, retrieved from, or linked
to our mobile applications or WeChat mini programs, which may materially and
adversely affect our business and prospects, reputation, results of operations and
financial condition.
We offer chronic disease management services to individual users through our mobile
applications and WeChat mini programs, which are regulated by the Administrative Provision
on Mobile Internet Applications Information Services (the “ Mobile Applications
Provisions ”), which was amended by the Cyberspace Administration of China (the “ CAC”), on
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June 14, 2022 and implemented on August 1, 2022. The Mobile Applications Provisions
specifies specific obligations to be complied with by the application providers, including the
obligation to authenticate users’ real identity information, obligation to manage information
content, obligation to protect personal information, requirement to obtain prior permission to
provide Internet news and information services, prohibition of inducing users to download,
fulfillment of obligation to protect network security, fulfillment of obligation to protect data
security, fulfillment of obligation to protect minors, conduct security assessments of new
technologies, applications and functions with public opinion attributes or social mobilization
capacity in accordance with the law, formulate public management rules in accordance with the
law, sign service agreements with registered users, and dispose of registered users in violation
of the law and in breach of the contract in accordance with the law. We cannot assure you that
all the information and contents uploaded onto, displayed on, retrieved from, or linked to our
mobile applications and mini programs would be compliant with the Mobile Applications
Provisions at all times. In the event of any violation, we may be subject to administrative
penalties, including warning, service suspension, or removal of our mobile applications or mini
programs, which would materially and adversely affect our business and prospects, reputation,
results of operations and financial condition.
We are subject to limitations in our publicity and promotion of healthcare-related services
and products.
Our in-house medical professionals, registered physicians and other relevant third parties
involved in the provision of our online chronic disease management services are subject to
rules and regulations restricting the promotion or dissemination of information about the
professional healthcare services and practice provided by licensed doctors, and the publication
or marketing efforts for the predominant purpose of promoting the products or services of
doctors to users or potential users. In addition, we are subject to certain limitations in
promoting services and products. Such restrictions may affect our ability to further enhance our
brand recognition or secure new business opportunities in the future.
Under PRC laws and regulations, all advertisements published online containing drug
names, applicable symptoms treated by such drugs (major functions) or other drug-related
content, and advertisements published online containing medical device names and the
applicable scope, performance, structure and composition, function and other contents relevant
to medical device are subject to examination by relevant government authorities. We are
prohibited from publishing advertisements of prescription drugs on the platforms that we
operate and must ensure that any advertisement of medical treatments and drugs does not
include any assertion or guarantee as to the function and safety or any statement of curative rate
and effectiveness of such medical treatment, drugs or medical devices. Any violation of
advertisement-related laws and regulations may subject us to fines, or even suspension of our
business or revocation of our business license.
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Our platform provides pharmaceutical companies with customized content and marketing
solutions to better inform physicians and patients about chronic disease conditions and
treatment options. Although we have implemented internal procedures to examine the contents
displayed on the platforms we operate, we cannot guarantee that our existing practices of
monitoring the information disseminated or published on our platforms would be effective in
ensuring compliance with all relevant rules and regulations related to the promotion of
healthcare-related services and products. Should there be any change in the relevant rules and
regulations, or in the interpretation thereof, we and the third parties may be deemed to be in
breach of such rules and regulations and be subject to regulatory penalties or disciplinary
actions, which may materially and adversely affect our business and prospects, reputation,
results of operations and financial condition.
We may be subject to liability for content available on our platform that is alleged to be
factually incorrect, socially destabilizing, obscene, defamatory, libelous or otherwise
unlawful.
Under PRC laws, we are required to monitor content available on our platform for content
that may be factually incorrect, socially destabilizing, obscene, superstitious, defamatory or
otherwise unlawful, and promptly take appropriate actions with respect to such content. Our
burden to monitor content on our platform may increase as our platform activity grows and we
introduce more features and functions on our platform. We may also be subject to potential
liabilities for any unlawful actions of users of our websites or mobile applications. With respect
to our customized content and marketing solutions, we and the relevant pharmaceutical
companies may also be subject to liability for content distributed through our Jianke Platform
by us, or by the relevant pharmaceutical companies, that are deemed unlawful by relevant
authorities. It may be difficult to determine the type of content that may result in liability to
us, and we may not always be able to identify non-compliant content through our monitoring
and evaluation processes. While the terms of use of our platform requires our users to assume
all responsibilities and legal consequences for the contents they post or distribute on our
platform, we cannot guarantee their strict compliance with the same. If we are found to be
liable, we may be subject to fines, have our relevant business operation licenses revoked, or
be prevented from operating our websites or mobile applications in the PRC.
In addition, claims may be brought against us for defamation, libel, negligence, copyright,
patent or trademark infringement, tort (including personal injury), other unlawful activity or
other theories and claims based on the nature and contents of information posted on our
websites and mobile applications, including articles, videos, product reviews and message
boards, by our participants such as our users, registered physicians, suppliers and other
business partners. Regardless of the outcome of such a dispute or lawsuit, we may suffer from
negative publicity and reputational damage as a result, which may adversely affect our
business.
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Security and privacy breaches may hurt our business.
Our platforms and solutions involve the storage and handling of a large volume of users’
personal and medical data. We cannot guarantee that we will not experience cyber-attacks of
varying degrees, including attempts to hack into our system which may lead to a leakage of
sensitive personal medical information. The security measures we build may also be breached
due to error, malfeasance or otherwise of employees of ours. Additionally, outside parties may
attempt to fraudulently induce employees or physicians to disclose sensitive or account
information in order to gain access to the system, or may otherwise obtain access. Any such
breach or unauthorized access could result in significant legal and financial exposure, damage
to our reputation and a loss of confidence in the security of our solutions and services that
could have an adverse effect on our business and results of operations. Because the techniques
used to obtain unauthorized access, disable or degrade service or sabotage systems change
frequently and often are not recognized until launched against a target, we may be unable to
anticipate these techniques or to implement adequate preventative measures. If an actual or
perceived breach of security occurs, the market perception of the effectiveness of our security
measures could be harmed, we could lose customers and we may be exposed to significant legal
and financial risks, including legal claims and regulatory fines and penalties. Any of these
actions could have a material and adverse effect on our business and results of operations.
If we are unable to compete effectively, our business, results of operations and financial
condition may be materially and adversely affected.
The industries we operate in are highly competitive. We face intense competition in the
platforms, services and solutions we provide. Our competitors mainly include, but are not
limited to, pharmaceutical retail companies (such as traditional offline pharmacies and online
platforms) and companies that offer online chronic disease management services. See “Industry
Overview” and “Business—Competition” for more details.
Some of these competitors may have longer operating histories, more project experience,
more established brand names, larger user base and greater financial, technical and marketing
resources than we do, and in turn may have an advantage in attracting and retaining customers.
Meanwhile, large technology companies with substantial resources, technical expertise and
greater brand power could enter or further expand in the markets where we operate to compete
with us. Further, if one or more of our competitors and potential competitors were to merge or
partner with another of our competitors, or if a new entrant emerged with substantial resources,
the change in the competitive landscape could adversely affect our ability to compete
effectively. If we fail to compete effectively, demand for our services may go down, which
could result in a material and adverse impact on our results of operations, financial condition
and growth prospects.
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We rely on third-party logistics and courier companies to fulfill and deliver orders placed
on our Jianke Platform. If these logistics and courier companies fail to provide reliable
delivery services, our business and results of operations may be adversely affected.
We engage qualified third-party logistics and courier companies for delivery. Any failure
by these third parties to timely and properly deliver our products may affect our business and
reputation. These third parties’ timely and proper delivery of products may also be interrupted
or compromised due to events beyond our and their control, including extreme weather
conditions, natural disasters, imposition of logistics-related regulatory measures and labor
unrest. We may not be able to find alternative logistics and courier companies, whether on
favorable terms or at all, to deliver and fulfill the orders placed through our online retail
pharmacy platform. If orders are not delivered and fulfilled timely and in a proper condition,
our business and reputation may suffer and cause material and adverse impact on our results
of operation.
Our delivery, return and exchange policies may affect our results of operations.
We have adopted delivery policies that do not necessarily pass the full delivery costs on
to our users. We have also adopted policies that permit the return and exchange of certain of
our products in certain circumstances for specified reasons. We may also be required by law
to adopt new or amend existing return and exchange policies from time to time. For example,
pursuant to the Consumer Protection Law and relevant regulations and rules, users are
generally entitled to return products purchased within seven days upon receipt without reason
when they purchase the products from business operators on the Internet with certain
exceptions, such as for pharmaceutical products. These policies subject us to additional costs
and expenses which we may not recoup through increased revenue. Our ability to handle a large
volume of returns is unproven. If we revise these policies to reduce our costs and expenses, our
users may be dissatisfied, which may result in loss of existing users or failure to acquire users
at a desirable pace, and may materially and adversely affect our results of operations.
In 2021, 2022 and 2023, our product return rate, representing the percentage of products
returned after delivery for both comprehensive medical services and online retail pharmacy
services, was 0.2%, 0.3% and 0.3%, respectively. The corresponding number of the return
orders in each year of the Track Record Period was approximately 11,000, 21,000 and 33,300,
respectively. If our product return rates increase or are higher than expected, our revenues and
costs can be negatively impacted. Furthermore, as we may not be able to return some products
to our suppliers pursuant to our contracts with them, or if return rates for such products
increase significantly, we may experience an increase in our inventory balance, inventory
impairment and fulfillment costs, which may materially and adversely affect our working
capital. As a result, our business, financial condition and results of operations may be
materially and adversely affected.
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Failure to manage our inventory effectively could have a material and adverse effect on
our business, financial condition and results of operations.
Our inventories have increased significantly from RMB111.5 million as of December 31,
2021 to RMB126.5 million as of December 31, 2022 and RMB136.0 million as of December
31, 2023. In 2021, 2022 and 2023, our inventory turnover days were 21.4 days, 23.8 days and
24.6 days, respectively. Inventory levels in excess of user demand may result in inventory
write-downs, expiration of products or an increase in inventory holding costs and a potential
negative effect on our liquidity. As we plan to continue expanding our product offerings, we
expect to include more products in our inventory, which will make it more challenging for us
to manage our inventory effectively and will put more pressure on our warehousing system.
If we fail to manage our inventory effectively, we may be subject to a heightened risk of
inventory obsolescence, a decline in inventory values, and significant inventory write-downs
or write-offs. In addition, we may be required to lower sale prices in order to reduce inventory
level, which may lead to lower gross profit margins. A higher level of near-expiry drugs (which
our internal policy categorizes as pharmaceutical products expiring in less than six months) in
the future may also require us to sell such products at a discount, return them to upstream
suppliers in accordance with the relevant supply agreements, or dispose of them due to
inventory obsolescence. Such sale of near-expiry drugs may increase our exposure to product
liability claims and result in potential negative perceptions of the Jianke Platform, which could
in turn damage our reputation and affect our business. For details, see “ —We may be subject
to product liability or medical liability claims, or claims or administrative penalties for
counterfeit, substandard or unauthorized products on our platform, which could cause us to
incur significant expenses and be liable for significant damage” and “—Maintaining
customers’ trust in our Jianke Platform is critical to our success, and any failure to do so could
damage our reputation and brand.” High inventory levels may also require us to commit
substantial capital resources, preventing us from using that capital for other important
purposes. Any of the above may materially and adversely affect our results of operations and
financial condition.
Conversely, if we underestimate user demand, or if our suppliers fail to provide products
to us in a timely manner, we may experience inventory shortages, which may, in turn, require
us to acquire inventories at higher costs or result in unfulfilled user orders, leading to a
negative impact on our financial condition and user relationships.
We depend on our demand forecasts for various kinds of products to make purchase
decisions and to manage our inventory. Demand for products, however, can change
significantly between the time inventory is ordered and the date by which we target to sell it.
Demand may be affected by seasonality, new product launches, changes in product life cycles
and pricing, product defects, changes in customer spending patterns, manufacturer back orders
and other vendor-related problems, as well as the volatile economic environment in China, and
our users may not order products in the quantities that we expect. In addition, when we begin
selling a new product, it may be difficult to establish supplier relationships, determine
appropriate product selection, and accurately forecast the demand. The acquisition of certain
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types of inventory may require significant lead time and prepayment, and they may not be
returnable. We cannot assure you that we will be able to maintain proper inventory levels for
our online retail pharmacy services at all times, and any such failure may have a material and
adverse effect on our business, financial condition and results of operations.
If we are unable to fulfill our performance obligations in respect of contract liabilities,
our business, financial condition and results of operations may be materially and
adversely affected.
We incurred contract liabilities of RMB18.1 million, RMB89.4 million and RMB19.9
million as of December 31, 2021, 2022 and 2023, respectively. Our contract liabilities relate
to advance payments received from our customers in respect of sales of pharmaceutical and
healthcare products or loyalty points program, which are recognized as revenue when users
make payments by these loyalty points. See “Financial Information—Description of Certain
Key Items of Consolidated Statements of Financial Position—Contract Liabilities” for details.
If we fail to fulfill such performance obligations, our customers may also require us to refund
the advance payments they have made, which may adversely affect our cash flow and our
ability to meet our working capital requirements, and in turn cause our business, financial
condition and results of operations to be materially and adversely affected. In addition, if we
fail to fulfill our performance obligations under our contracts with customers, it may also
adversely affect our relationship with such customers, which may in turn affect our reputation
and results of operations.
Our business and results of operations may be harmed by disruptions to our network or
data center facilities, or by our failure to timely and effectively scale and adapt our
existing technologies and infrastructure.
We have experienced, and may experience in the future, network and service disruptions,
outages and other performance problems due to a variety of factors, including infrastructure
changes, human or software errors, hardware failure, computer viruses, fraud and security
attacks. While we have disaster recovery plans in place, they might not adequately protect us
in the event of a system failure.
Going forward, we intend to cooperate with various third-party entities, such as wearable
device manufactures, and will explore the possibilities of new technologies, which will demand
greater data storage and processing capacities. We cannot assure you that we will be able to
adequately expand our data center facilities to meet the increased infrastructure capacity
demand in a timely manner, or on favorable economic terms. Further, we do not have sufficient
control over the operation of the data center facilities and therefore cannot afford the same
level of protection to them as compared to those facilities that are owned by us or located
within our premises. Data center facilities leased by us are vulnerable to damage or interruption
from earthquakes, floods, fires, power loss, telecommunications failures, break-ins, sabotage,
acts of terrorism, intentional acts of vandalism, operator errors and other similar events or
misconduct. Despite precautions taken at these facilities and the disaster recovery plans we
maintain, the occurrence of a natural disaster, an act of terrorism or other act of malfeasance,
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a decision to close the facilities without adequate notice, or other unanticipated problems at
these facilities could result in lengthy interruptions in our service and solutions and the loss of
data and our business, in which case we may not be able to switch to new data centers or move
data from one data center to another on a timely basis, or at all.
Any disruption or failure in our system or the technology infrastructure could hinder our
ability to deliver solutions and services, and the day-to-day management of our business, and
could result in corruption, loss or unauthorized disclosure of proprietary, confidential or other
data, which in turn may harm our reputation and business, entail claims and liabilities and deter
prospective customers.
Failure to deal effectively with any fictitious transactions or other fraudulent conduct
would materially and adversely affect our business, financial condition and results of
operations.
We may face risks with respect to fraudulent activities on our platform. For example, our
users may engage in fictitious transactions by submitting false prescription to purchase
prescription drugs on our platforms. Users may also provide false information to medical
professionals on our platforms in order to obtain prescriptions that they are not supposed to get.
We typically verify the identity of patients using real-name authentication services provided by
third parties, and we cannot guarantee the effectiveness of their operations and reliability of
their services, over which we have no control. Although we have implemented various
measures to detect and reduce the occurrence of fraudulent activities on our platform, there can
be no assurance that such measures will be effective in combating fraudulent transactions or
improving overall satisfaction of our users. Such fictitious transactions and fraudulent conduct
may subject us to lawsuits, regulatory investigations, fines and penalties against us. Moreover,
illegal, fraudulent or collusive activities by our employees, such as fraud, bribery or
corruption, could also subject us to liability or negative publicity or cause losses. Although we
have internal controls and policies with regard to quality control and other relevant matters, we
cannot assure you that such controls and policies will prevent fraud or illegal activity by our
employees. Negative publicity and user sentiment generated as a result of actual or alleged
fraudulent or deceptive conduct on our platform or by our employees would severely diminish
our users’ confidence in us, reduce our ability to attract new or retain existing users, damage
our reputation and diminish the value of our brand names, and materially and adversely affect
our business, financial condition and results of operations.
We invest significantly in research and development, and we may not be able to recoup
the investments we make, which in turn could adversely impact our financial condition
and results of operations.
Our success depends in part on our ability to continually enhance our core capabilities and
solutions. If we are unable to respond to rapid technological changes in a cost-effective manner
and develop new features and functions that satisfy our customers’ demands, our services and
solutions may become less marketable and less competitive, and our business, results of
operations and financial condition may be adversely affected.
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We have made, and will continue to make, investments in research and development to
enhance our technology which we believe to be helpful to our business, such as big data
analysis and AI technology. Although investments in research and development are critical to
our success, they may not yield the desired results. We may experience difficulties that could
delay or impede the development, after having committed significant time and financial
resources. Even if research and development projects successfully lead to new core capabilities
or solutions, they may require a lengthy period of time for testing before commercial launch,
and the final solutions we offer to the market may not be well-received by our customers or
generate sufficient revenue to cover the expenses incurred.
If we fail to obtain and maintain the requisite licenses, permits and approvals applicable
to our business, or fail to obtain additional licenses that become necessary as a result of
new enactment or promulgation of laws and regulations or the expansion of our business,
our business and results of operations may be materially and adversely affected.
Healthcare, chronic disease management and online chronic disease management
industries in China are highly regulated, requiring multiple licenses, permits, filings and
approvals to conduct and develop business. As of the Latest Practicable Date, we had obtained
the following valid licenses which are crucial to our business through our Consolidated
Affiliated Entities: value-added telecommunication business operation license for provision of
Internet information services, or ICP License, license for radio and TV program production and
operation, online drug information offering license, the license for practicing of medical
institutions, medical devices operation license and pharmaceutical trade license. Some of the
licenses we hold are subject to periodic renewal. If we fail to maintain or renew one or more
of our licenses and certificates when their current term expires, or obtain such renewals on a
timely manner, our operations could be disrupted. In addition, under relevant PRC laws and
regulations, our Consolidated Affiliated Entities as license holders are required to update
certain licenses if any change to their respective name, registered capital or legal representative
during the validity period of such license. If we fail to properly renew and maintain all such
requisite licenses on time, we may face penalties and in extreme circumstances, order to
suspend or terminate our business.
In addition, the licenses we held may be deemed insufficient due to adoption of any new
laws and regulations or any change to regulatory environment, which may restrain our ability
to expand our business scope and may subject us to fines or other regulatory actions.
Furthermore, as we develop and expand our business scope, we may need to obtain additional
permits and licenses and we cannot assure that we will be able to obtain such permits on time
or at all.
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We may be subject to penalties levied for loans extended to related parties during the
Track Record Period.
During the Track Record Period, we made advances to a number of related parties. See
“Financial Information—Material Related Party Transactions” for details.
As advised by our PRC Legal Advisor, any financing arrangements or lending
transactions between non-financial institutions is prohibited by Article 61 of the General
Lending Provisions () promulgated by PBOC in June 1996. Furthermore,
pursuant to Article 73 of the General Lending Provisions, PBOC may impose a fine on the
non-compliant lender of one to five times of the income received by the lender from such loans.
Notwithstanding the General Lending Provisions, the Supreme People’s Court has made new
interpretations concerning financing arrangements and lending transactions between non-
financial institutions under the Provisions of the Supreme People’s Court on Several Issues
concerning the Application of Law in the Trial of Private Lending Cases (৫ᗫ
) (the “ Judicial Interpretations on Private
Lending Cases ”), which came into effect on September 1, 2015 and was amended on August
19, 2020 and December 29, 2020. According to Article 10 of the Judicial Interpretations on
Private Lending Cases, the Supreme People’s Court recognizes the validity and legality of
financing arrangements and lending transactions between non-financial institutions so long as
certain requirements, such as the interest rates charged, are satisfied and there is no violation
of mandatory provisions of applicable laws and regulations. If PBOC imposes penalties against
us under the General Lending Provisions, our business, financial position and results of
operations could be adversely affected.
The continued and collaborative efforts of our senior management and key employees are
crucial to our success, and our business may be harmed if we lose their services.
Our success depends on the continued and collaborative efforts of our senior management
and key employees. If, however, one or more of our executives or other key personnel are
unable or unwilling to continue to provide services to us, we may not be able to find suitable
replacements easily, or at all. Competition for management and key personnel is intense and
the pool of qualified candidates is limited. We may not be able to retain the services of our
executives or key personnel, or attract and retain experienced executives or key personnel in
the future. If any of our executive officers or key employees joins a competitor or forms a
competing business, we may lose crucial business secrets, know-hows, customers and other
valuable resources. Our future success will also depend on our ability to attract and retain
highly skilled AI and data analytics experts, quality professionals with medical education
background or experience, and skilled employees in the areas of technology, managerial,
editorial, finance, marketing, sales and customer service. Qualified individuals are in high
demand, and we may not be able to successfully attract, assimilate or retain the personnel we
need to succeed.
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We may be subject to intellectual property infringement claims or other allegations,
which could result in payment of substantial damages, penalties and fines and removal of
data or technology from our system.
Our internal procedures and licensing practices may not be effective in completely
preventing the unauthorized use of copyrighted materials or the infringement by us of other
rights of third parties. The validity, enforceability and scope of protection of intellectual
property rights in Internet-related industries is still evolving. As we face increasing
competition and as litigation becomes a more common way to resolve disputes in China, we
face a higher risk of being the subject of intellectual property infringement claims.
We cannot assure you that our operations or any aspects of our business do not or will not
infringe upon or otherwise violate patents, copyrights or other intellectual property rights held
by third parties. We may from time to time in the future be subject to legal proceedings and
claims relating to the intellectual property rights of others. In addition, there could also be
existing intellectual property of which we are not aware that our operations and business may
inadvertently infringe. We cannot assure you, however, that we will not become subject to
intellectual property laws in other jurisdictions. If a claim of infringement brought against us
is successful, we may be required to pay substantial penalties or other damages and fines or to
enter into license agreements which may not be available on commercially reasonable terms or
at all, or we may be subject to injunctions or court orders. Even if allegations or claims lack
merit, defending against them could be costly and time consuming and may significantly divert
the efforts and resources of our management and other personnel.
Competitors and other third parties may claim as well that our officers or employees have
infringed, misappropriated or otherwise violated their software, confidential information, trade
secrets or other proprietary technology in the course of their employment with us. Although we
take steps to prevent the unauthorized use or disclosure of such third-party information,
intellectual property or technology by our officers and employees, we cannot guarantee that
any policies or contractual provisions that we have implemented or may implement will be
effective. If a claim of infringement, misappropriation or violation is brought against us or one
of our officers or employees, we may suffer reputational harm and may be required to pay
substantial damages, subject to injunction or court orders or be required to remove the data and
redesign our technology, any of which could adversely affect our business, financial condition
and results of operations.
We may not be able to prevent unauthorized use of our intellectual property, which could
harm our business and competitive position.
We rely on a combination of copyright, trademark, patent and other intellectual property
laws, trade secret protection and confidentiality and invention assignment agreements with our
employees and third parties and other measures to protect our intellectual property rights.
However, there can be no assurance that any of our pending patents, trademarks, software
copyrights or other intellectual property applications will issue or be registered. Any
intellectual property rights we have obtained or may obtain in the future may not be sufficient
to provide us with a competitive advantage, and could be challenged, invalidated,
circumvented, infringed or misappropriated.
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Despite our efforts to protect our intellectual property rights, unauthorized parties may
attempt to copy or otherwise obtain and use our copyrighted content and other intellectual
property. Monitoring for infringement or other unauthorized use of our intellectual property
rights is difficult and costly, and such monitoring may not be effective. From time to time, we
may have to resort to courts or administrative proceedings to enforce our intellectual property
rights, which may result in substantial cost and diversion of resources. We may not prevail in
lawsuits we initiate and the damages or other remedies awarded, if any, may not be
commercially meaningful.
Failure to comply with anti-corruption laws and regulations, or effectively manage our
employees, affiliates and business partners such as suppliers, could severely damage our
reputation, and materially and adversely affect our business, financial condition, results
of operations and prospects.
We are subject to risks in relation to actions taken by us, our employees, affiliates or
suppliers that constitute violations of the anti-corruption laws and regulations. There have been
several instances of corrupt practices in the pharmaceutical industry, including, among other
things, receipt of kickbacks, bribes or other illegal gains or benefits by pharmacies, hospitals
and medical practitioners from manufacturers, distributors and pharmacies in connection with
the prescription of pharmaceutical products. While we adopt strict internal procedures and
work closely with relevant government agencies to ensure compliance of our business
operations with relevant laws and regulations, our efforts may not be sufficient to ensure that
we comply with relevant laws and regulations at all times. If we, our employees, affiliates,
suppliers, or other business partners violate these laws, rules or regulations, we could be
subject to fines and/or other penalties. In the case of our online retail pharmacy business, the
products involved may be seized and our operations may be suspended. Actions by PRC
regulatory authorities or the courts to provide an interpretation of PRC laws and regulations
that differs from our interpretation or to adopt additional anti-bribery or anti-corruption related
regulations could also require us to make changes to our operations. Our reputation, corporate
image, and business operations may be materially and adversely affected if we fail to comply
with these measures or become the target of any negative publicity as a result of actions taken
by us, our employees, affiliates or suppliers, which may in turn have a material adverse effect
on our business, financial condition, results of operations and prospects.
Our business and prospects depend on our ability to build our brand and reputation. Any
damage to the reputation and recognition of our brand names, including negative
publicity against us or our directors, shareholders, officers, employees or business
partners, may materially and adversely affect our business operations and prospects.
We believe that maintaining and enhancing our brands is of significant importance to the
success of our business. Well-recognized brands are important to enhancing our attractiveness
to our customers. Since we operate in a highly competitive market, brand maintenance and
enhancement directly affect our ability to maintain our market position. The successful
promotion of our brand will depend on the effectiveness of our marketing efforts and amount
of word-of-mouth referrals we received from satisfied customers. We may incur extra expenses
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in promoting our brand. However, we cannot assure you that these activities are and will be
successful or that we can achieve the brand promotion effect we expect. In addition, if
incidents occur or are perceived to have occurred, whether or not such incidents are our fault,
we could be subject to adverse publicity. In particular, given the popularity of social media,
including WeChat in China, any negative publicity, whether true or not, could quickly
proliferate and harm consumer perceptions and confidence in our brand. Negative publicity or
any lawsuits and investigations against us, our services, our shareholders, directors, officers,
employees or our business partners may harm our brand image and in turn adversely affect our
business and results of operations. Certain of the negative publicity may come from malicious
harassment or unfair competition acts by third parties, which are beyond our control. Intense
negative publicity may divert our management’s attention and may adversely impact our
business. We cannot assure you that our brand, public image and reputation will not be
materially and adversely affected in the future.
We, our directors, management and employees may from time to time become party to
litigation, regulatory investigations, other legal or administrative disputes and
proceedings that may have an adverse impact to our reputation and business prospects.
In the course of our ordinary business operations, we, our directors, management and
employees may from time to time become a party to litigation, legal proceedings, claims,
disputes or arbitration proceedings. Any ongoing litigation, legal proceedings, claims, disputes
or arbitration proceedings may distract our senior management’s attention and consume our
time and other resources. In addition, even if we, our directors, management and employees
ultimately succeed in such litigation, legal proceedings, claims, disputes or arbitration
proceedings, there may be negative publicity attached to such litigation, legal proceedings,
claims, disputes or arbitration proceedings, which may materially and adversely affect our
reputation and brand names. As the Jianke mobile applications and website were at times
historically operated by Guangdong Jianke under license and authorization from the Initial
WFOE, and there were certain related parties who used “Jianke” or “܄as part of their
company names or trademarks, any negative publicity or disputes relating to these companies
may be wrongly attributed to us, which may in turn materially and adversely affect the public
perception of our brand, harm our reputation and materially and adversely affect our business,
financial condition and results of operations. In addition, any claims made against us could be
costly to defend against. In the case of an adverse verdict, we may be required to pay
significant monetary damages, assume significant liabilities or suspend or terminate parts of
our operations. As a result, our business, financial condition, results of operations and
prospects may be materially and adversely affected. As a publicly listed company, we will face
additional exposure to claims and lawsuits.
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Future investments in and acquisitions of complementary assets, technologies and
businesses may fail and may adversely affect our business, results of operations and
financial performance.
We may invest in or acquire assets, technologies and businesses that are complementary
to our existing business. Our investments or acquisitions may not yield the results we expect.
In addition, investments and acquisitions could result in the use of substantial amounts of cash,
potentially dilutive issuances of equity securities, significant amortization expenses related to
goodwill or intangible assets and exposure to potential unknown liabilities of the acquired
business. Moreover, the cost of identifying and consummating investments and acquisitions,
and integrating the acquired businesses into ours, may be significant, and the integration of
acquired businesses may be disruptive to our existing business operations. We may also have
to obtain approval from the relevant PRC governmental authorities for the investments and
acquisitions and comply with any applicable PRC rules and regulations, which may be costly,
and we cannot assure you that we will obtain such approvals timely or at all. In the event that
our investments and acquisitions are not successful, our results of operations and financial
condition may be materially and adversely affected.
We are subject to credit risk with respect to trade and other receivables, and
prepayments.
Our trade and other receivables are generally due within 180 days from the date of billing.
As of December 31, 2021, 2022 and 2023, we recorded net trade debtors and bills receivable
of RMB7.6 million, RMB29.4 million and RMB24.1 million, respectively. We also recorded
other receivables of RMB40.8 million, RMB57.0 million and RMB77.0 million as of those
same dates. These primarily represent rebates from suppliers, receivables from third-party
e-commerce platforms, and deposits in connection with our procurement of pharmaceutical
products. Accordingly, we face credit risk in collecting trade receivables due from customers.
Our performance, liquidity and profitability would be adversely affected if significant amounts
due to us are not settled on time or substantial impairment is incurred. The bankruptcy or
deterioration of the credit condition of any of these customers or suppliers could also
materially and adversely affect our business, results of operations and financial condition.
We recognized impairment losses of RMB0.3 million, RMB0.2 million and RMB0.1
million in 2021, 2022 and 2023, respectively, which were related to trade receivables from
enterprise customers for our customized content and marketing solution services. Such loss
allowance was estimated based on available information that the management deems
reasonable and applicable. As such estimation involves difficult subjective judgment and is
subject to inherent limitations, we cannot guarantee any loss allowance we may make will be
sufficient to cover all such actual losses, in which case our results of operations may be
affected.
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We also face uncertainties arising from our prepayments. During the Track Record Period,
we made prepayments for renovation, decoration, online promotional and advertising services,
and for procurement of pharmaceutical and other products. As of December 31, 2021, 2022 and
2023, the balance of our prepayments was RMB10.2 million, RMB64.0 million and RMB18.5
million, respectively. However, there is no guarantee that the service providers and suppliers
will perform their obligations in a timely manner. If they fail to provide the services or
products to us in a timely manner or at all, we may be exposed to prepayment default and
impairment loss risk in relation to the prepayments, which may in turn materially and adversely
affect our business and financial position. While we did not incur impairment losses on
prepayments during the Track Record Period, we cannot assure you that we will not incur such
impairment losses in the future.
We may not be able to obtain additional capital when desired, on favorable terms or at
all.
We may require additional cash resources if we incur operating losses or for future growth
and development of our business, 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
issue additional equity or debt securities or obtain new or expanded credit facilities. Our ability
to obtain external financing in the future is subject to a variety of uncertainties, including our
future financial condition, results of operations, cash flows, share price performance, liquidity
of international capital and lending markets and the PRC governmental regulations over
foreign investment and the PRC healthcare and online chronic disease management industries.
In addition, incurring indebtedness would subject us to increased debt service obligations and
could result in operating and financing covenants that would restrict our operations. There can
be no assurance that financing would be available in a timely manner or in amounts or on terms
favorable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all,
could severely restrict our liquidity as well as have a material adverse effect on our business,
financial condition and results of operations. Moreover, any issuance of equity or equity-linked
securities could result in significant dilution to our existing shareholders.
The wide variety of payment methods that we accept subjects us to third-party payment
processing related risks.
We accept payments using a variety of methods, including payment on delivery, bank
transfers, online payments through various third-party online payment platforms such as
WeChat Pay and AliPay. We may be charged interchange and other fees for certain payment
methods, which may increase over time and raise our operating costs and lower our profit
margins. We may also be subject to fraud and other illegal activities in connection with the
various payment methods we offer, including online payment and cash on delivery options. We
are also subject to various rules, regulations and requirements governing electronic funds
transfers, both in China and globally, which could change or be reinterpreted to make it
difficult or impossible for us to comply with. If we fail to comply with these rules or
requirements, we may be subject to fines and higher transaction fees and lose our ability to
accept credit and debit card payments from our users, process electronic funds transfers or
facilitate other types of online payments, and our business, financial condition and results of
operations could be materially and adversely affected.
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Our risk management and internal control systems may not be thorough or effective in all
respects.
We seek to establish risk management and internal control systems consisting of an
organizational framework, policies, procedures and risk management methods that are
appropriate for our business operations, and seek to continue to improve these systems. See
“Business—Risk Management and Internal Control” for further details. However, due to the
inherent limitations in the design and implementation of risk management and internal control
systems, we cannot assure that our risk management and internal control systems will be able
to identify, prevent and manage all risks. Our internal procedures are designed to monitor our
operations and ensure their overall compliance. However, our internal control procedures may
be unable to identify all non-compliance incidents in a timely manner or at all. It is not always
possible to timely detect and prevent fraud and other misconduct committed by our employees
or third parties, and the precautions we take to prevent and detect such activities may not be
effective.
Furthermore, we cannot assure you that our risk management and internal control systems
will be effectively implemented. Since our risk management and internal control systems
depend on their implementation by our employees, we cannot assure you that all of our
employees will adhere to such policies and procedures, and the implementation of such policies
and procedures may involve human errors or mistakes, which may materially and adversely
affect our business and results of operations. Moreover, as we are likely to offer a broader and
more diverse range of services and solutions in the future, the expansion and diversification of
our service offerings will require us to continue to enhance our risk management capabilities.
If we fail to adapt our risk management policies and procedures to our evolving business in a
timely manner, our business, financial condition and results of operations could be materially
and adversely affected.
We have limited insurance coverage, which could expose us to significant costs and
business disruption.
We have obtained insurance to cover certain potential risks and liabilities. However, we
do not have any business disruption insurance to cover all of our operations in the PRC, and
we cannot guarantee you that our coverage will be adequate to compensate for all losses that
may occur, particularly with respect to loss of business or operation. Any business disruption,
litigation, regulatory action, outbreak of epidemic disease or natural disaster could also expose
us to substantial costs and diversion of resources. There can be no assurance that our insurance
coverage is sufficient to prevent us from any loss or that we will be able to successfully claim
our losses under our current insurance policy on a timely basis, or at all. If we incur any loss
that is not covered by our insurance policies, or the compensated amount is significantly less
than our actual loss, our business, financial condition and results of operations could be
materially and adversely affected.
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Failure to make adequate contributions to various statutory employee benefit plans as
required by PRC regulations may subject us to penalties.
Companies operating in China are required to participate in various statutory employee
benefit plans, including certain social insurance, housing funds and other welfare-oriented
payment obligations, complete related registration with the competent authorities and
contribute to the plans in amounts equal to certain percentages of salaries, including bonuses
and allowances, of employees up to a maximum amount specified by the local government
from time to time at locations where our employees are based. During the Track Record Period,
we had not made full contributions to the social insurance and housing provident fund based
on the actual salary level of some of our employees as prescribed by relevant laws and
regulations. As of December 31, 2021, 2022 and 2023, our accumulated provision for social
insurance and housing provident fund contributions amounted to RMB19.1 million, RMB37.4
million and RMB36.8 million, respectively. See “Business—Employees” for details.
Pursuant to applicable PRC laws and regulations, under-contribution to social insurance
within a prescribed period may subject us to a daily overdue charge of 0.05% of the delayed
payment amount. If such payment is not made within the stipulated period, the competent
authority may further impose a fine of one to three times of the overdue amount. Pursuant to
relevant PRC laws and regulations, if there is a failure to pay the full amount of housing
provident fund as required, the housing provident fund management center may require
payment of the outstanding amount within a prescribed period. If the payment is not made
within such time limit, an application may be made to the PRC courts for compulsory
enforcement. We cannot assure you that the relevant government authorities will not require us
to pay the outstanding amount within a prescribed time and impose late charges or fines on us,
which may materially and adversely affect our business, financial condition and results of
operations.
Our allotment and issuance of Shares pursuant to the RSU Scheme may materially impact
our results of operations.
We have adopted the RSU Scheme to attract and retain key personnel by offering them
incentives linked to the value of our Shares. The RSU Scheme permits the granting of RSUs
to senior management, employees and advisors of our Group and other persons as approved by
the Board or the authorized administrator of the RSU Scheme. Each RSU is a conditional right
to receive a Share at the end of the vesting period, subject to vesting conditions provided for
under the RSU Scheme. For details, see “Appendix IV—D. RSU Scheme” in this prospectus.
As a result of the Shares that were allotted and issued pursuant to the RSU Scheme, we expect
to incur significant expenses of equity settled share-based transactions in the future because we
have adopted HKFRS 2 ( Share-based Payment ) for the accounting treatment of the RSU
Scheme, which requires us to account for the Shares allotted and issued as share-based
compensation using a fair-value-based method and recognize such expenses in our
consolidated statement of profit or loss and other comprehensive income. As such, our results
of operations may be materially impacted.
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Any severe or prolonged slowdown in the economy may adversely affect our business and
results of operations.
COVID-19 had a severe and negative impact on the Chinese and the global economy.
Whether this will lead to a prolonged downturn in the economy is still unknown. Even before
the outbreak of COVID-19, the global macroeconomic environment was facing numerous
challenges. There is considerable uncertainty over the long-term effects of the expansionary
monetary and fiscal policies which had been adopted by the central banks and financial
authorities of some of the world’s leading economies. The recent global inflationary pressure
and the conflicts in Ukraine and the imposition of broad economic sanctions on Russia could
raise energy prices and disrupt global markets. Unrest, terrorist threats and the potential for war
in the Middle East and elsewhere may increase market volatility across the globe. Any severe
or prolonged slowdown in the economy may materially and adversely affect our business,
results of operations and financial condition.
Our results of operations may be subject to seasonal fluctuations.
Our business and industry are subject to seasonality associated with spending activities
and patterns related to the consumption of medical services and pharmaceutical products in
China. For example, in first quarters which coincide with the Chinese New Y ear holiday, online
and offline hospitals and pharmacies in China generally experience a lower volume of patient
visits and other activities, and we typically expect a lower demand for our services and
products as a result. As we continue to grow and expand our business and as the industry where
we operate continues to evolve, the seasonality of our business is subject to a variety of
uncertainties and may change in patterns in the future, and the impact of seasonality on our
results of operations may also increase in the future. As a result, comparing our operating
results on a period to period basis may not be meaningful, and our results of operations and the
price of our Shares may fluctuate from time to time due to seasonality.
Any catastrophe, including natural catastrophes, outbreaks of health epidemics and other
extraordinary events, could disrupt our business operations.
Since late January 2020, the outbreak of COVID-19 has materially and adversely affected
the global economy. The COVID-19 pandemic has also resulted in temporary closures of many
corporate offices, retail stores, manufacturing facilities and factories across China. During the
period of regional lockdown, hospitals had limited operations for consultations and home
delivery of our products to these areas has been temporarily disrupted. In addition, our Jingtai
Hospital was temporarily closed and our supply of certain medications used to treat fever was
temporarily disrupted during the COVID-19 outbreak. The effects of the continuing spread and
prolonged occurrence of the COVID-19 on our business or our industry will depend on a
number of factors outside our control, including any resurgence and the extent of its spread,
and such effects could be material. To the extent COVID-19 adversely affects our business and
results of operations, it may also have the effect of heightening many of the other risks
described in this prospectus, such as those relating to our reliance on third parties for the
provision of supplies and delivery services, and our ability to generate sufficient cash flows to
fund our operational and financing needs.
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In addition to COVID-19, our business could be materially and adversely affected by
natural disasters, other health epidemics or other public safety concerns. Natural disasters may
give rise to server interruptions, breakdowns, system failures, technology platform failures or
Internet failures, which could cause the loss or corruption of data or malfunctions of software
or hardware as well as adversely affect our ability to operate our platforms and provide services
and solutions. Our business could also be adversely affected if our employees are affected by
health epidemics. In addition, our results of operations could be adversely affected to the extent
that any health epidemic harms the economy in general. Our headquarters are located in
Guangzhou, Guangdong province, where most of our management and the majority of our
employees are based. Most of our system hardware and back-up systems are hosted in facilities
located in our headquarters and Dongguan, Guangdong province. Consequently, if any natural
disasters, health epidemics or other public safety concerns were to affect Guangdong province,
our operation may experience material disruptions, which may materially and adversely affect
our business, financial condition and results of operations.
RISKS RELATING TO OUR CONTRACTUAL ARRANGEMENTS
If the PRC government finds that the contractual agreements that establish the structure
for operating certain of our business in China do not comply with applicable PRC
regulations, or if these regulations or the interpretation of existing regulations change in
the future, we could be subject to severe consequences, including the nullification of the
contractual arrangements and being forced to relinquish our interests in those operations.
Foreign ownership in entities that provide Internet and other related businesses, including
the value-added telecommunication services, and that are engaged in medical institutions
business and related businesses, including Internet medical institutions, is subject to provisions
under current PRC laws and regulations, unless certain exceptions are available. See
“Contractual Arrangements—Overview of Laws and Regulations of the PRC relating to
Foreign Ownership Restrictions and the Application thereof to the Group’s Businesses” for
further details.
We are a company incorporated in the Cayman Islands and our PRC subsidiaries are
considered foreign-invested enterprises. To ensure compliance with the PRC laws and
regulations, we conduct our business in China through our Consolidated Affiliated Entities
based on the Contractual Arrangements. Such Contractual Arrangements enable us to (i)
receive substantially all of the economic benefit from our Consolidated Affiliated Entities in
consideration for the services provided by the WFOE to the Consolidated Affiliated Entities;
(ii) exercise effective control over our Consolidated Affiliated Entities; and (iii) hold an
exclusive option to purchase all or part of the equity interests in Consolidated Affiliated
Entities when and to the extent permitted by the PRC laws. As a result of these Contractual
Arrangements, we have control over and are the primary beneficiary of our Consolidated
Affiliated Entities and hence consolidate their financial results under HKFRS. See
“Contractual Arrangements—Summary of the Material Terms of the Contractual
Arrangements” for further details.
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Our PRC Legal Advisor has advised us that (i) the ownership structure of the
Consolidated Affiliated Entities does not violate any applicable PRC law, regulations or rules
currently in effect in any material respects; and (ii) the Contractual Arrangements governed by
PRC laws are not in violation of provisions of applicable PRC laws or regulations currently in
effect, and valid and binding upon each party to such arrangements in accordance with their
terms and applicable PRC laws and regulations currently in effect. However, we have been
further advised by our PRC Legal Advisor that the interpretation and application of current and
future PRC laws, rules and regulations may be amended from time to time. See “Contractual
Arrangements—Legality of the Contractual Arrangements” for further details. Thus, the PRC
governmental authorities may take a view contrary to the above-mentioned opinion. It is
uncertain whether any new PRC laws or regulations relating to Contractual Arrangements will
be adopted or if adopted, what they would provide. If the ownership structure, contractual
arrangements, and businesses of our PRC subsidiaries or our Consolidated Affiliated Entities
are found to be in violation of any existing or future PRC laws or regulations, or our PRC
subsidiaries or our Consolidated Affiliated Entities fail to obtain or maintain any of the
required permits or approvals to operate our business, the relevant PRC governmental
authorities would have discretion to take action in dealing with such violations or failures,
which could cause significant disruption to our business operations and severely damage our
reputation, which would in turn have a material adverse effect on our financial condition and
results of operations. If occurrences of any events results in our inability to direct the activities
of our Consolidated Affiliated Entities in China that most significantly impact their economic
performance and/or our failure to receive the economic benefits and residual returns from our
Consolidated Affiliated Entities, and we are unable to restructure our ownership structure and
operations in a satisfactory manner, we may not be able to consolidate the financial results of
our Consolidated Affiliated Entities in our consolidated financial statements.
Our Contractual Arrangements may not be as effective in providing operational control
as direct ownership.
We rely on a series of Contractual Arrangements with Fangzhou Y unkang and Fangzhou
Y unkang Registered Shareholders to conduct our business operations in China, including
online pharmaceutical products sale, medical consultation service and academic community
service. For a description of these Contractual Arrangements, see “Contractual
Arrangements—Summary of the material terms of the Contractual Arrangements.” However,
the Contractual Arrangements may not be as effective as direct ownership in providing us with
control over our Consolidated Affiliated Entities. Direct ownership would allow us, for
example, to directly or indirectly exercise our rights as a shareholder to effect changes in the
boards of directors of Fangzhou Y unkang, which, in turn, could effect changes, subject to any
applicable fiduciary obligations at the management level. However, under the contractual
arrangements, as a legal matter, if Fangzhou Y unkang or their respective equity holders fail to
perform their respective obligations under the Contractual Arrangements, we may have to (i)
incur substantial costs; (ii) expend significant resources to enforce those arrangements; and
(iii) resort to litigation or arbitration and rely on legal remedies under PRC laws. These
remedies may include seeking specific performance or injunctive relief and claiming damages,
any of which may not be effective. In the event we are unable to enforce these contractual
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arrangements or we experience significant delays or other obstacles in the process of enforcing
these contractual arrangements, we may not be able to exert effective control over Fangzhou
Y unkang and may lose control over the assets owned by our Consolidated Affiliated Entities.
As a result, we may be unable to consolidate our Consolidated Affiliated Entities in our
consolidated financial statements, which could materially and adversely affect our financial
condition and results of operations.
Any failure by Fangzhou Yunkang or Fangzhou Yunkang Registered Shareholders to
perform their obligations under our contractual arrangements with them would have a
material adverse effect on our business.
If Fangzhou Y unkang or their shareholders fail to perform their respective obligations
under the contractual arrangements, we may have to incur substantial costs and expend
additional resources to enforce such arrangements. We may also have to rely on legal remedies
under PRC law, including seeking specific performance or injunctive relief, and contractual
remedies, which we cannot assure you will be sufficient or effective. For example, if Fangzhou
Y unkang Registered Shareholders were to refuse to transfer their equity interests in Fangzhou
Y unkang to us or our designee if we exercise the purchase option pursuant to these Contractual
Arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take
legal actions to compel them to perform their contractual obligations.
All the agreements under our Contractual Arrangements are governed by PRC law and
provide for the resolution of disputes through arbitration in China. Accordingly, these contracts
would be interpreted in accordance with PRC law and any disputes would be resolved in
accordance with PRC legal procedures. The legal system in the PRC is different from those in
some other jurisdictions. See “—Risks Relating to Regulations—Developments in the PRC
legal system may affect our business and limit the legal protection available to you.”
Meanwhile, there are very few precedents and little formal guidance as to how contractual
arrangements in the context of a consolidated variable interest entity should be interpreted or
enforced. There remain uncertainties regarding the ultimate outcome of such proceeding if
legal action becomes necessary. In addition, under PRC law, although rulings by arbitrators are
final, if the losing parties fail to carry out the arbitration awards within a prescribed time limit,
the prevailing parties may only resort to PRC courts for enforcement of the arbitration awards
through arbitration award recognition proceedings, which would require additional expenses
and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer
significant delay or other obstacles in the process of enforcing these contractual arrangements,
we may not be able to exert effective control over Fangzhou Y unkang, and our ability to
conduct our business may be negatively affected.
In addition, Fangzhou Y unkang Registered Shareholders may be involved in personal
disputes with third parties or other incidents that may have an adverse effect on their respective
equity interests in Fangzhou Y unkang and the validity or enforceability of our Contractual
Arrangements with Fangzhou Y unkang and their respective shareholders. For example, if any
of the equity interests of Fangzhou Y unkang is inherited by a third party with whom the current
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Contractual Arrangements are not binding, we could lose our control over Fangzhou Y unkang
or have to maintain such control by incurring unpredictable costs, which could cause
significant disruption to our business and operations and harm our financial condition and
results of operations.
We may lose the ability to use, or otherwise benefit from, the licenses, approvals and
assets held by our Consolidated Affiliated Entities if any of our Consolidated Affiliated
Entities declares bankruptcy or becomes subject to a dissolution or liquidation
proceeding.
As part of our Contractual Arrangements, our Consolidated Affiliated Entities are holding
or in the future may hold certain assets that are critical to the operation of our business,
including intellectual property and premise and licenses of value-added telecommunication
services or the Practice License of Medical Institution. If our Consolidated Affiliated Entities
go bankrupt and all or part of their assets become subject to liens or rights of third-party
creditors, we may be unable to continue some or all of our business activities we currently
conduct through the Contractual Arrangement, which could materially and adversely affect our
business, financial condition and results of operations. Under the Contractual Arrangements,
our Consolidated Affiliated Entities may not, in any manner, sell, transfer, mortgage or dispose
of their assets or legal or beneficial interests in the business without our prior consent. In
addition, if our Consolidated Affiliated Entities undergo a voluntary or involuntary liquidation
proceeding, independent third-party creditors may claim rights to some or all of these assets,
thereby hindering our ability to operate our business, which could materially and adversely
affect our business, financial condition and results of operations.
The Fangzhou Yunkang Registered Shareholders may have potential conflicts of interest
with us.
Fangzhou Y unkang Registered Shareholders may have actual or potential conflicts of
interest with us. These shareholders may breach, or cause Fangzhou Y unkang to breach, or
refuse to renew, the existing Contractual Arrangements we have with them and Fangzhou
Y unkang, which would have a material and adverse effect on our ability to effectively control
Fangzhou Y unkang and receive economic benefits from them. For example, Fangzhou Y unkang
Registered Shareholders may be able to cause our agreements with Fangzhou Y unkang to be
performed in a manner adverse to us by, among other things, failing to remit payments due
under the contractual arrangements to us on a timely basis. We cannot assure you that when
conflicts of interest arise any or all of these shareholders will act in the best interests of our
Company or such conflicts will be resolved in our favor.
Currently, we could exercise our purchase option under the exclusive option agreements
with these shareholders to request them to transfer all of their equity interests in Fangzhou
Y unkang to a PRC entity or individual designated by us, to the extent permitted by PRC law.
For individuals who are also our directors and officers, we rely on them to abide by the laws
of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to the
company that requires them to act in good faith and in what they believe to be the best interests
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of the company and not to use their position for personal gains. Fangzhou Y unkang Registered
Shareholders have executed powers of attorney to appoint the New WFOE or a person
designated by the New WFOE to vote on their behalf and exercise voting rights as Fangzhou
Y unkang Registered Shareholders. If we cannot resolve any conflict of interest or dispute
between us and Fangzhou Y unkang Registered Shareholders, we would have to rely on legal
proceedings, which could result in disruption of our business and subject us to substantial
uncertainty as to the outcome of any such legal proceedings.
Our Contractual Arrangements may be subject to scrutiny by the PRC tax authorities and
a finding that we owe additional taxes could negatively affect our financial condition and
the value of your investment.
Under PRC laws, rules and regulations, arrangements and transactions among related
parties, such as the Contractual Arrangements, may be subject to audit or inquiry by the PRC
tax authorities. We could face material and adverse tax consequences, if the PRC tax authorities
determine that our Contractual Arrangements do not represent an arms-length price and adjust
our Consolidated Affiliated Entities’ income in the form of a transfer pricing adjustment. A
transfer pricing adjustment could, among other things, result in a reduction, for PRC tax
purposes, of expense deductions recorded by our Consolidated Affiliated Entities, which could
in turn increase their tax liabilities. In addition, the PRC tax authorities may impose late
payment fees and other penalties to our Consolidated Affiliated Entities for under-paid taxes.
Our results of operations may be materially and adversely affected if our tax liabilities increase
or if we are found to be subject to late payment fees or other penalties.
Our current corporate structure and business operations may be affected by the Foreign
Investment Law.
On March 15, 2019, the National People’s Congress promulgated the Foreign Investment
Law, which took effect on January 1, 2020. Since it is relatively new, uncertainties exist in
relation to its interpretation and implementation. The Foreign Investment Law does not
explicitly classify whether variable interest entities that are controlled through contractual
arrangements would be deemed as foreign invested enterprises if they are ultimately
“controlled” by foreign investors. However, it has a catch-all provision under definition of
“foreign investment” that includes investments made by foreign investors in China through
other means as provided by laws, administrative regulations or the State Council. Therefore,
it still leaves leeway for future laws, administrative regulations or provisions of the State
Council to provide for contractual arrangements as a form of foreign investment, until when
it remains uncertain whether our Contractual Arrangements will be deemed to be in violation
of the market access requirements for foreign investment in the PRC and if yes, how our
contractual arrangements should be dealt with.
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The Foreign Investment Law grants national treatment to foreign-invested entities, except
for those foreign-invested entities that operate in industries specified as either “restricted” or
“prohibited” from foreign investment in the Special Administrative Measures (Negative List)
for Access of Foreign Investment jointly promulgated by Ministry of Commerce, or MOFCOM,
and the National Development and Reform Commission, or the NDRC, and the latest version
of which took effect in December 2021. The Foreign Investment Law provides that
foreign-invested entities are not allowed to operate in “prohibited” industries and their
operating in “restricted” industries shall satisfy certain conditions and will require market entry
clearance and other approvals from relevant PRC government authorities. For example,
foreign-invested entities are not allowed to engage in the domestic express delivery of letters
business. We are a company incorporated in the Cayman Islands and our PRC subsidiaries are
considered foreign-invested enterprises. Accordingly, none of these subsidiaries are eligible to
operate domestic express delivery of letters business in the PRC. As a result, our engagement
in such business activities (if any) will be conducted through our Consolidated Affiliated
Entities and their subsidiaries in the PRC. On December 26, 2019, the Supreme People’s Court
issued the Interpretations on Certain Issues Regarding the Applicable of Foreign Investment
Law, or the FIL Interpretations, which came into effect on January 1, 2020. In accordance with
the FIL Interpretations, any claim to invalidate an investment agreement will be supported by
courts if such agreement is found to be entered into for purposes of making investments in the
“prohibited industries” under the negative list or for purposes of investing in “restricted
industries” while failing to satisfy the conditions set out in the negative list. If our control over
our Consolidated Affiliated Entities through contractual arrangements are deemed as foreign
investment in the future, and any business of our Consolidated Affiliated Entities is “restricted”
or “prohibited” from foreign investment under the “negative list” effective at the time, we may
be deemed to be in violation of the Foreign Investment Law, the contractual arrangements that
allow us to have control over our Consolidated Affiliated Entities may be deemed as invalid
and illegal, and we may be required to unwind such contractual arrangements and/or restructure
our business operations, any of which may have a material adverse effect on our business
operations.
Furthermore, if future laws, administrative regulations or provisions mandate further
actions to be taken by companies with respect to existing contractual arrangements, we may
face substantial uncertainties as to whether we can complete such actions in a timely manner,
or at all. Failure to take timely and appropriate measures to cope with any of these or similar
regulatory compliance challenges could materially and adversely affect our current corporate
structure and business operations.
Certain terms of the Contractual Arrangements may not be enforceable under PRC laws.
The Contractual Arrangements provide for dispute resolution by way of arbitration in the
Shenzhen Court of International Arbitration (the “ SCIA ”), in accordance with the then
effective arbitration rules. The arbitration shall be conducted in Shenzhen. The Contractual
Arrangements contain provisions to the effect that the arbitral body may award remedies over
the shares and/or assets of the Consolidated Affiliated Entities, injunctive relief and/or order
the winding up of the Consolidated Affiliated Entities. These agreements also contain
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provisions to the effect that courts of competent jurisdictions are empowered to grant interim
remedies in support of the arbitration pending the formation of an arbitral tribunal. However,
under PRC laws, these terms may not be enforceable. Under PRC laws, an arbitral body does
not have the power to grant injunctive relief or to issue a provisional or final liquidation order
for the purpose of protecting assets of or equity interests in the Consolidated Affiliated Entities
in case of disputes. In addition, interim remedies or enforcement order granted by overseas
courts such as Hong Kong and the Cayman Islands may not be recognizable or enforceable in
the PRC. PRC laws allow the arbitral body to grant an award of transfer of assets of or equity
interests in the Consolidated Affiliated Entities in favor of an aggrieved party. In the event of
non-compliance with such award, enforcement measures may be sought from the court.
However, the court may or may not support the award of an arbitral body when deciding
whether to take enforcement measures. In case the Contractual Arrangements provide that
courts in competent jurisdictions may grant and/or enforce interim remedies or in support of
arbitration, such interim remedies (even if granted by courts in competent jurisdictions in favor
of an aggrieved party) may not be recognized, or enforced by PRC courts. As a result, in the
event that Fangzhou Y unkang and Fangzhou Y unkang Registered Shareholders breach any of
the Contractual Arrangements, we may not be able to obtain sufficient remedies in a timely
manner, and our ability to exert effective control over our Consolidated Affiliated Entities and
conduct our business could be materially and adversely affected.
RISKS RELATING TO REGULATIONS
Changes in the political and economic policies, as well as the interpretation and
enforcement of laws, rules and regulations, may affect our business, financial condition,
results of operations and prospects.
Since substantially all of our operations are based in the PRC, our business, financial
condition, results of operations and prospects are affected by economic, political, and legal
developments in the PRC. The overall economic growth may be influenced by the
governmental regulations and policies in relation to resource allocation, monetary policies,
regulations of financial services and institutions, preferential treatment to particular industries
or companies and others. For example, the Chinese government has implemented various
measures to encourage economic growth and guide the allocation of resources; however, we
cannot guarantee the extent to which our business operations will be able to benefit from such
measures, if at all. Laws, rules and regulations may also be amended from time to time, and
the application, interpretation and enforcement of such evolving laws, rules and regulations
may affect our business operations. Any of the foregoing may have a material and adverse
effect on our business, financial condition, results of operations and prospects.
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We are subject to a variety of laws and other obligations regarding cybersecurity and data
protection in China, and our failure to comply with any of them could result in
proceedings against us by government authorities or others and harm our public image
and reputation, which could materially and adversely affect our business, financial
condition, and results of operations.
We are subject to PRC laws relating to the collection, use, sharing, retention, security, and
transfer of confidential and private information, such as personal information and other data.
These laws continue to develop, and the PRC government may adopt other rules and
restrictions in the future. Non-compliance could result in penalties or other significant legal
liabilities.
Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing
Committee of the National People’s Congress on November 7, 2016 and took effect on June 1,
2017, we, as an online chronic disease management service provider, are obligated to provide
technical assistance and support to public security and national security authorities to protect
national security or assist with criminal investigations. In addition, the PRC Cybersecurity Law
stipulates that personal information and important data collected and generated by a critical
information infrastructure operator in the course of its operations in China must be stored in
China.
On September 14, 2022, the CAC, issued the Decision on Amending the PRC
Cybersecurity Law (Draft for Comments), increased the penalty cap, so after the amendment
comes into effect, it could have an increased impact on our financial condition if we breach the
PRC Cybersecurity Law.
In addition, the PRC Data Security Law, which was promulgated by the Standing
Committee of the National People’s Congress on June 10, 2021 and took effect on September
1, 2021, which applies to data processing activities, including the collection, storage, use,
processing, transmission, availability and disclosure of data, and security supervision of such
activities within the territory of the PRC. Moreover, the Personal Information Protection Law,
which was issued by the SCNPC on August 20, 2021, stipulated the general rules and principles
on personal information processing and further increased the potential liability of personal
information processor.
To further clarify the cross-border data transfer mechanism established by the Personal
Information Protection Law, on July 7, 2022, the CAC promulgated the Measures for the
Security Assessment of Data Cross-border Transfer () (the
“Measures ”), which became effective on September 1, 2022. The Measures outline the
requirements and procedures for security assessments on cross-border transfer of important
data or personal information collected within the PRC. We operate business within the PRC and
all the data and personal information collected and generated during our operation is stored
within the PRC. We do not transfer data collected and generated in the course of our domestic
operations abroad. We do not expect the Measures to have material impact on our business
operations in respect of the cross-border data transfer. However, since the Measures was newly
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promulgated, there are uncertainties as to its interpretation and application. We cannot assure
you that relevant regulatory authorities will take the same view as ours. In the event if the
regulatory authorities deem certain of our activities as a cross-border data transfer, we will be
subject to the relevant requirements.
Regulatory requirements on cybersecurity and data privacy are constantly evolving and
can be subject to significant changes, which may result in uncertainties about the scope of our
responsibilities in that regard. For example, The Regulations on Network Data Security
Management (Draft for Comments) (the “ Draft Network Data Regulations ”) was released by
CAC on November 14, 2021. According to the Draft Network Data Regulations, data
processors seeking a public listing in Hong Kong that affect or may affect national security are
required to apply for cybersecurity review. The CAC has solicited comments on this draft until
December 13, 2021, however, as of the Latest Practicable Date, the Network Data Regulations
had not yet been formally adopted and there is no timetable as to when it will be enacted. As
such, substantial uncertainties exist with respect to the interpretation and implementation of the
Draft Network Data Regulations, including the standards for determining whether a listing in
Hong Kong “affects or may affect national security.” At this stage, we are unable to predict the
possible consequences of these drafts, if any, and we are monitoring and assessing the
rule-making process closely. Any failure, or perceived failure to maintain the security of our
user data or to comply with applicable PRC privacy, data security and personal information
protection laws and obligations may result liabilities, including governmental or data
protection authority enforcement actions and investigations, fines, penalties, enforcement
orders requiring us to cease operating in a certain way, litigation, or adverse publicity, and may
require us to expend significant resources in responding to and defending allegations and
claims.
On December 28, 2021, Measures for Cybersecurity Review was issued by CAC jointly
with other governmental authorities, which took effect on February 15, 2022. Under the
Measures for Cybersecurity Review, the procurement of network products and services by
critical information infrastructure operators and the data processing activities conducted by
network platform operators which affect or may affect national security shall be subject to
cybersecurity review. Besides, according to Article 7 of the Measures for Cybersecurity
Review, a network platform operator who processes the personal information of more than one
million users and is seeking for listing in a foreign country must apply for a cybersecurity
review. In addition, according to Article 16 of the Measures for Cybersecurity Review, member
organizations of the cybersecurity review working mechanism (the “ Working Members ”) may
initiate cybersecurity review towards network products, network services, and data processing
activities ex officio, which means we may be also subject to cybersecurity review when the
Working Members initiate such cybersecurity review ex officio. According to Article 10 of
Regulations on the Security Protection of Critical Information Infrastructure, the security
protection departments of critical information infrastructure will timely notify the
identification results to the operators. As of the Latest Practicable Date, we had not received
such notification.
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Subject to further official guidance and implementation rules relating to the Measures for
Cybersecurity Review, we may be required to apply for cybersecurity review in consideration
of the provisions of the Draft Network Data Regulations and Article 16 of the Measures for
Cybersecurity Review. Any failure to comply with applicable cybersecurity, privacy, and data
protection laws and regulations could result in proceedings against us by government
authorities or others, including notification for rectification, confiscation of illegal earnings,
fines, or other penalties and legal liabilities against us, which could materially and adversely
affect our business, financial condition, and results of operations. In addition, any negative
publicity on our website or platform’s safety or privacy protection mechanism and policy could
harm our public image and reputation and materially and adversely affect our business,
financial condition, and results of operations.
Developments in the PRC legal system may affect our business and limit the legal
protection available to you.
Our operating subsidiary and operations are mainly located in the PRC. Our business in
the PRC is subject to the PRC laws and regulations applicable to foreign investment in the
PRC. The PRC legal system is a civil law system based on written statutes. Unlike the common
law legal system, prior court decisions in a civil law system have little precedential value and
can only be used as a reference. Laws, rules and regulations in relation to economic matters
are promulgated from time to time, including those related to such as foreign investment,
corporate organization and governance, commerce, taxation, finance, foreign exchange and
trade, so as to develop a comprehensive system of commercial law. Many of these laws and
regulations are relatively new and are subject to further implementation and interpretation.
There may also be new laws and regulations to cover new economic activities in the PRC, and
we cannot assure you that our business operations will not be adversely affected in the future.
In addition, we cannot assure you that we have obtained all the permits or licenses
required for conducting our business in China or will be able to maintain our existing licenses
or obtain new ones. If the PRC government considers that we were operating without the
requisite approvals, licenses or permits or promulgates new laws and regulations that require
additional approvals or licenses or imposes additional restrictions on the operation of any part
of our business, it has the power, among other things, to levy fines, confiscate our income,
revoke our business licenses, and require us to discontinue our relevant business or impose
restrictions on the affected portion of our business. Any of the foregoing actions may have a
material adverse effect on our business and results of operations. Due to the evolving
regulatory landscape, changes in interpretation of laws and regulations could also subject us to
non-compliance risks and potential penalties and fines. For example, there is uncertainty as to
the characterization of income received by our registered physicians through our platform. If
the tax authority’s interpretation of current regulations is clarified and is different from ours,
we may potentially be required to pay any arrears and be subject to penalties of up to three
times the amount of individual income tax that we failed to withhold for registered physicians
on our platform, although our PRC Legal Advisor has advised us that such possibility is remote
because: (i) the legal liability to pay PRC individual income tax, which technically cannot be
shifted, falls on the registered physicians, and not us. As such, the possibility of us being
required to pay PRC individual income tax for the physicians registered on our platform is
remote; and (ii) we do not have any obligation to withhold tax in respect of business income
of our registered physicians. Since the income received by registered physicians is deemed to
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be business income (instead of labor service income) under the current framework of the PRC
Individual Income Tax Law, and the recharacterization of such income as labor service income
is remote under the current practice of the tax authorities, the possibility of us being subject
to penalties for failing to withhold taxes is also remote.
China’s M&A Rules and certain other PRC regulations establish complex procedures for
some acquisitions of PRC companies by foreign investors, which could make it more
difficult for us to pursue growth through acquisitions in China.
On August 8, 2006, six PRC regulatory authorities, including the MOFCOM and other
government authorities jointly issued the Rules on Mergers and Acquisitions of Domestic
Enterprise by Foreign Investors () which was
effective as of September 8, 2006, and amended on June 22, 2009 (the “ M&A Rules ”). The
M&A Rules, and other recently adopted regulations and rules concerning mergers and
acquisitions established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time consuming and complex. For example, the
M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction
in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important
industry is concerned, such transaction involves factors that impact or may impact national
economic security, or such transaction will lead to a change in control of a domestic enterprise
which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-monopoly
Law of the PRC () promulgated by the SCNPC effective in
August 2008, which was recently amended on June 24, 2022 and effective on August 1, 2022,
and the Provisions of the State Council on the Thresholds for Declaring Concentration of
Business Operators () require that transactions
which are deemed concentrations and involve parties with specified turnover thresholds
(meaning during the previous fiscal year, (i) the total global turnover of all operators
participating in the transaction exceeds RMB12 billion and at least two of these operators each
had a turnover of more than RMB800 million within China; or (ii) the total turnover within
China of all the operators participating in the concentration exceeded RMB4 billion, and at
least two of these operators each had a turnover of more than RMB800 million within China)
must be cleared by anti-monopoly enforcement authority of the State Council before they can
be completed. On December 14, 2020, the SAMR announced three cases of administrative
penalties for the failures of acquirers to make proper concentration declarations to authorities
about their past acquisitions.
In addition, in 2011, the General Office of the State Council promulgated a Notice on
Establishing the Security Review System for Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (ݟ
), also known as Circular 6, which officially established a security review system
for mergers and acquisitions of domestic enterprises by foreign investors. Further, MOFCOM
promulgated the Regulations on Implementation of Security Review System for the Merger and
Acquisition of Domestic Enterprises by Foreign Investors (Իᒅྤʫ
), effective in September 2011, to implement Circular 6. Under
Circular 6, a security review is required for mergers and acquisitions by foreign investors
having “national defense and security” concerns and mergers and acquisitions by which foreign
investors may acquire the “de facto control” of domestic enterprises with “national security”
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concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance
and actual impact of the transaction when deciding whether a specific merger or acquisition is
subject to security review. If MOFCOM decides that a specific merger or acquisition is subject
to a security review, it will submit it to the Inter-Ministerial Panel, an authority established
under Circular 6 led by the NDRC, and MOFCOM under the leadership of the State Council,
to carry out security review. The regulations prohibit foreign investors from bypassing the
security review by structuring transactions through entrustment, trusts, indirect investments,
leases, loans, control through contractual arrangements or offshore transactions. On December
19, 2020, the NDRC and MOFCOM jointly promulgated the Measures on the Security Review
of Foreign Investment (), effective on January 18, 2021, setting
forth provisions concerning the security review mechanism on foreign investment, including
the types of investments subject to review, review scopes and procedures, among others. The
Office of the Working Mechanism of the Security Review of Foreign Investment ( ̮ਠҳ༟τ
܃the “ Office of the Working Mechanism ”) will be established under
NDRC, who will lead the task together with MOFCOM. Foreign investor or relevant parties in
China must declare the security review to the Office of the Working Mechanism prior to the
investments in, among other industries, important information technology and Internet
products and services, important financial services, key technologies and other important fields
relating to national security, and obtain de facto control in the target enterprise.
In the future, we may grow our business by acquiring complementary businesses.
Complying with the requirements of the above-mentioned regulations and other relevant rules
to complete such transactions could be time consuming, and any required approval processes,
including obtaining approval from MOFCOM, NDRC or its local counterparts may delay or
inhibit our ability to complete such transactions. It is unclear whether our business would be
deemed to be in an industry that raises national defense and security or national security
concerns. However, MOFCOM, NDRC or other government agencies may publish
explanations in the future determining that our business is in an industry subject to the security
review, in which case our future acquisitions in China, including those by way of entering into
contractual control arrangements with target entities, may be closely scrutinized or prohibited.
We may be required to obtain prior approval or subject to filings or other requirements
from the CSRC, CAC or other PRC regulatory authorities for the listing and trading of
our Shares on the Stock Exchange.
The M&A Rules include, among other things, provisions that purport to require that an
offshore special purpose vehicle formed for the purpose of an overseas listing of securities in
a PRC company obtain the approval of the CSRC prior to the listing and trading of such special
purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC
published on its official website procedures regarding its approval of overseas listings by
special purpose vehicles. However, uncertainty remains regarding the scope and applicability
of the M&A Rules to offshore special purpose vehicles. For details, see “History,
Reorganization and Corporate Structure—Regulatory Requirements of the PRC.”
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Furthermore, on February 17, 2023, the CSRC released the Trial Administrative Measures
of Overseas Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯Бᗇ
) (the “ Trial Measures ”) and five supporting guidelines
(collectively, the “ Trial Measures and Supporting Guidelines ”), which came into effect on
March 31, 2023. The Trial Measures and Supporting Guidelines will regulate both direct and
indirect overseas offering and listing of PRC domestic companies’ securities by adopting a
filing-based regulatory regime. Pursuant to the Trial Measures and Supporting Guidelines,
where an issuer submits an application for initial public offering to competent overseas
regulators, such issuer must file with the CSRC within three business days after such
application is submitted. The Trial Measures and Supporting Guidelines also require
subsequent reports to be filed with the CSRC on material events, such as change of control or
voluntary or forced delisting of the issuer(s) who have completed overseas offerings and
listings.
On the same day, the CSRC also held a press conference for the release of the Trial
Measures and issued the Notice on Administration for the Filing of Overseas Offering and
Listing by Domestic Companies (),
which, among others, clarifies that (i) the domestic companies that have already been listed
overseas on or before March 31, 2023 are not required to complete the filling procedures
immediately, and they shall be required to file with the CSRC when subsequent matters such
as refinancing are involved; (ii) on or prior to March 31, 2023, domestic companies that have
already submitted valid applications for overseas offering and listing but have not obtain an
approval from overseas regulatory authorities or stock exchanges may reasonably arrange the
timing for submitting their filing applications with the CSRC, and must complete the filing
before the completion of their overseas offering and listing; and (iii) a six-month transition
period will be granted to domestic companies which, prior to March 31, 2023, have already
obtained the approval from overseas regulatory authorities or stock exchanges (such as pass of
hearing for listing in Hong Kong), but have not completed the overseas listing; if such domestic
companies complete their overseas offering and listing on or prior to September 30, 2023, they
are not required to complete the filing procedures immediately.
In addition, on February 24, 2023, the CSRC, the MOF, the National Administration of
State Secrets Protection and the National Archives Administration of China jointly issued the
Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies (̋੶ྤʫΆุྤ̮೯БᗇՎձ
) (the “ Confidentiality and Archives Administration
Provisions ”), which took effect on March 31, 2023, according to which, overseas securities
regulators and competent overseas authorities may request to inspect, investigate or collect
evidence from a domestic company concerning its overseas offering and listing or from the
domestic securities companies and securities service providers that undertake relevant
businesses for such domestic companies, such inspection, investigation and evidence collection
shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC or
other competent Chinese authorities will provide necessary assistance pursuant to bilateral and
multilateral cooperation mechanisms. The domestic company, securities companies and
securities service providers shall first obtain approval from the CSRC or other competent
Chinese authorities before cooperating with the inspection and investigation by the overseas
securities regulator or competent overseas authority, or providing documents and materials
requested in such inspection and investigation. As the Confidentiality and Archives
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Administration Provisions are relatively new, and therefore there are substantial uncertainties
with respect to their interpretation and implementation. For details, see “Regulatory
Overview—Regulations on Overseas Listing.”
If the CSRC, CAC or other relevant PRC regulatory agencies subsequently determine that
approval or filing is required for this Global Offering, we cannot guarantee that we will be able
to obtain such approval or filing in a timely manner, or at all. The CSRC, CAC or other PRC
regulatory agencies also may take actions requiring us, or making it advisable for us, not to
proceed with this Global Offering. If we proceed with any of such offering without obtaining
the CSRC’s or other relevant PRC regulatory agencies’ approval or filing to the extent it is
required, or if we are unable to comply with any new approval or filing requirements, we may
face regulatory actions or other sanctions from the CSRC, CAC or other PRC regulatory
agencies. These regulatory agencies may impose fines and penalties on our operations in
China, limit our ability to pay dividends outside of China, limit our operating privileges in
China, delay or restrict the repatriation of the proceeds from this Global Offering into China
or take other actions that could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Furthermore, if there are any other approvals, filings and/or other administration
procedures to be obtained from or completed with the CSRC, CAC or other PRC regulatory
agencies as required by any new laws and regulations for this Global Offering, we cannot
assure you that we can obtain the required approval or complete the required filings or other
regulatory procedures in a timely manner, or at all. Any failure to obtain the relevant approvals
or complete the filings and other relevant regulatory procedures may subject us to regulatory
actions or other sanctions from relevant PRC regulatory agencies, which may have a material
adverse effect on our business, financial condition or results of operations.
We may be classified as a “PRC resident enterprise” for PRC enterprise income tax
purposes, which could result in unfavorable tax consequences to us and our Shareholders
and have a material adverse effect on our results of operations and the value of your
investment.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise
established outside of the PRC with a “de facto management body” within the PRC is
considered a “resident enterprise” and will be subject to the enterprise income tax on its global
income at the rate of 25%. The implementation rules define the term “de facto management
body” as the body that exercises full and substantial control over and overall and substantial
management of the business, productions, personnel, accounts and properties of an enterprise.
In 2009, the STA issued a circular (the “ STA 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
STA ’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 STA 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
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following conditions are met: (i) the primary location where senior management personnel and
departments that are responsible for the day-to-day operational management is in the PRC; (ii)
decisions relating to the enterprise’s financial and human resource matters are made or are
subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary
assets, accounting books and records, company seals, and board and shareholder resolutions,
are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior
executives habitually reside in the PRC.
We believe that neither we nor any of our offshore subsidiaries are 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 we and/or our offshore subsidiaries are a PRC resident enterprise for enterprise income tax
purposes, we and/or our offshore subsidiaries will be subject to the uniform 25% enterprise
income tax on our world-wide income, which could materially reduce our net income. In
addition, we and/or our offshore subsidiaries will also be subject to PRC enterprise income tax
reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC
resident enterprise for enterprise income tax purposes, gains realized on the sale or other
disposition of our Shares may be subject to PRC tax, and dividends we pay may be subject to
PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case
of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty).
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 Shares.
The heightened scrutiny over acquisition transactions by PRC tax authorities may have
a negative impact on our business operations, our acquisition or restructuring strategy or
the value of your investment in us.
Pursuant to the Notice on Strengthening the Administration of Enterprise Income Tax
Concerning Proceeds from Equity Transfers by Non-Resident Enterprises, or STA Circular 698,
issued by the STA in December 2009 with retroactive effect from January 1, 2008, where a
non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by
disposition of the equity interests of an overseas non-public holding company, or an Indirect
Transfer, and such overseas holding company is located in a tax jurisdiction that (i) has an
effective tax rate of less than 12.5% or (ii) does not impose income tax on the foreign income
of its residents, the non-resident enterprise, being the transferor, must report to the competent
tax authority of the PRC resident enterprise this Indirect Transfer. Using a “substance over
form” principle, the PRC tax authority may disregard the existence of the overseas holding
company if it lacks a reasonable commercial purpose and was established for the purpose of
reducing, avoiding or deferring PRC tax.
On February 3, 2015, the STA issued the Announcement on Several Issues Concerning
Enterprise Income Tax for Indirect Transfer of Assets by Non-Resident Enterprises, or STA
Circular 7, which abolished certain provisions in STA Circular 698, as well as certain other
rules providing clarification on STA Circular 698. STA Circular 7 provided comprehensive
guidelines relating to, and also heightened the PRC tax authorities’ scrutiny over, indirect
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transfers by a non-resident enterprise of PRC taxable assets. Under STA Circular 7, the PRC
tax authorities are entitled to reclassify the nature of an indirect transfer of PRC taxable assets,
when a non-resident enterprise transfers PRC taxable assets indirectly by disposing of equity
interests in an overseas holding company directly or indirectly holding such PRC taxable
assets, by disregarding the existence of such overseas holding company and considering the
transaction to be a direct transfer of PRC enterprise without any other reasonable commercial
purpose. However, STA Circular 7 contains certain exemptions, including (i) where a
non-resident enterprise derives income from the indirect transfer of PRC taxable assets by
acquiring and selling shares of an overseas listed company which holds such PRC taxable
assets on a public market; and (ii) where the income from a transfer of PRC taxable assets by
the non-resident enterprise would have been exempted from PRC enterprise income tax under
an applicable tax treaty or arrangement.
On October 17, 2017, the STA issued the Announcement on Matters Concerning
Withholding and Payment of Income Tax of Non-resident Enterprises from Source, or STA
Circular 37, which became effective on December 1, 2017 and abolished STA Circular 698 as
well as certain provisions in STA Circular 7. STA Circular 37 further clarifies the practice and
procedure of withholding non-resident enterprise income tax. Pursuant to STA Circular 37,
where the party responsible for deducting such income tax did not or was unable to make such
deduction, or the non-resident enterprise receiving such income failed to declare and pay the
taxes that should have been deducted to the relevant tax authority, both parties may be subject
to penalties.
We may conduct acquisitions or sales involving changes in offshore corporate structures,
and historically our Shares were transferred by certain then Shareholders to our current
Shareholders. We face uncertainties as to the reporting and other implications of certain past
and future transactions where PRC taxable assets are involved, including transfer of our Shares
by non-PRC resident enterprise Shareholders unless such Shareholders acquire and sell such
Shares on the public market after we are listed. We may be subject to filing obligations or taxed
or subject to withholding obligations in such transactions under STA Circular 7 and STA
Circular 37. For transfer of Shares in us by Shareholders that are non-PRC resident enterprises,
our PRC subsidiaries may be requested to assist in the filing under STA Circular 7 and STA
Circular 37. We cannot assure you that the PRC tax authorities will not adjust any capital gains
and impose tax return filing obligations on us or require us to provide assistance for the
investigation of PRC tax authorities with respect thereto. Any PRC tax imposed on a transfer
of our Shares or any adjustment of such gains would cause us to incur additional costs and may
have a negative impact on the value of your investment in us.
Y ou may be subject to PRC income tax on dividends from us or on any gain realized on
the transfer of our Shares.
Under the EIT Law and its implementation rules, PRC withholding tax at the rate of 10%
is generally applicable to dividends from PRC sources paid to investors that are resident
enterprises outside of China, which do not have an establishment or place of business in China,
or which have such establishment or place of business if the relevant income is not effectively
connected with the establishment or place of business. Any gain realized on the transfer of
shares by such investors is subject to 10% PRC income tax if such gain is regarded as income
derived from sources within China. Under the PRC Individual Income Tax Law and its
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implementation rules, dividends from sources within China paid to foreign individual investors
who are not PRC residents are generally subject to a PRC withholding tax at a rate of 20% and
gains from PRC sources realized by such investors on the transfer of shares are generally
subject to 20% PRC income tax. Any such PRC tax liability may be reduced by the provisions
of an applicable tax treaty.
We may be classified as a PRC resident enterprise for PRC enterprise income tax
purposes. For details, see “—We may be classified as a “PRC resident enterprise” for PRC
enterprise income tax purposes, which could result in unfavorable tax consequences to us and
our Shareholders and have a material adverse effect on our results of operations and the value
of your investment.” As substantially all of our business operations are in China, it is unclear
whether dividends we pay with respect to our Shares, or the gain realized from the transfer of
our Shares, would be treated as income derived from sources within China and as a result be
subject to PRC income tax if we are considered a PRC resident enterprise. If PRC income tax
is imposed on gains realized through the transfer of our Shares or on dividends paid to our
non-resident investors, the value of your investment in our Shares may be materially and
adversely affected. Furthermore, our Shareholders whose jurisdictions of residence have tax
treaties or arrangements with China may not qualify for benefits under such tax treaties or
arrangements.
In addition, pursuant to the Arrangement Between the Mainland of China and the Hong
Kong Special Administrative Region for the Avoidance of Double Taxation on Income (the
“Double Tax Avoidance Arrangement ”) and the Notice of the State Taxation Administration
on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties
issued on February 20, 2009 by STA, if a Hong Kong resident enterprise owns more than 25%
of the equity interest in a PRC company at all times during the twelve-month period
immediately prior to obtaining a dividend from such company, the 10% withholding tax on
dividends is reduced to 5% provided certain other conditions and requirements under the
Double Tax Avoidance Arrangement and other applicable PRC laws are satisfied at the
discretion of the relevant PRC tax authority. However, based on the Notice of the State
Taxation Administration on Certain Issues with Respect to the Enforcement of Dividend
Provisions in Tax Treaties, if the relevant PRC tax authorities determine, in their discretion,
that a company benefits from such reduced income tax rate due to a structure or arrangement
that is primarily tax-driven, the PRC tax authorities may adjust the preferential tax treatment.
Based on the Notice of the State Taxation Administration on the Recognition of Beneficial
Owners in Tax Treaties, or Circular 9, issued on February 3, 2018 by STA and effective from
April 1, 2018, when determining the applicant’s status of the “beneficial owner” regarding tax
treatments in connection with dividends, interests or royalties in the tax treaties, several
factors, including without limitation, whether the applicant is obligated to pay more than 50%
of his or her income in twelve months to residents in a third country or region, whether the
business operated by the applicant constitutes the actual business activities, and whether the
counterparty country or region to the tax treaties does not levy any tax or grant tax exemption
on relevant incomes or levies tax at an extremely low rate, will be taken into account, and it
will be analyzed according to the actual circumstances of the specific cases. If our Hong Kong
subsidiaries are determined by PRC government authorities as receiving benefits from reduced
income tax rates due to a structure or arrangement that is primarily tax-driven, it would
materially and adversely affect the amount of dividends.
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PRC regulations of loans and direct investment by offshore holding companies to PRC
and regulations on currency conversion may delay or prevent us from using the proceeds
of the Global Offering 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.
We may transfer funds to our PRC subsidiaries or finance our PRC subsidiaries by means
of Shareholders’ loans or capital contributions after completion of the Global Offering.
According to the relevant PRC regulations on foreign invested enterprises in China, capital
contributions to our PRC subsidiaries are subject to the registration with the SAMR or its local
counterpart and registration with a local bank authorized by SAFE. Any loans to our PRC
subsidiaries, which are foreign-invested enterprises, or FIEs, cannot exceed a statutory limit,
or as an alternative, subject to the calculation approach and limitation as provided by the
People’s Bank of China, and shall be filed with SAFE or its local counterparts through the
online filing system of SAFE after the loan agreement is signed and at least three business days
before the borrower withdraws any amount from the foreign loan. Additionally, any medium
or long-term loans to be provided by us to our PRC subsidiaries must be registered with the
NDRC. We may not be able to obtain these government registrations or approvals, or complete
these government filings on a timely basis, if at all. If we fail to receive such registrations or
approvals or complete such filings, our ability to provide loans or capital contributions to our
PRC subsidiaries in a timely manner may be negatively affected, which could materially and
adversely affect our liquidity and our ability to fund and expand our business.
On March 30, 2015, SAFE promulgated the Circular on Reforming the Administration
Measures on Conversion of Foreign Exchange Registered Capital of Foreign-invested
Enterprises, or Circular 19. Circular 19, however, allows foreign-invested enterprises in China
to use their registered capital settled in Renminbi converted from foreign currencies to make
equity investments, but the registered capital of a foreign-invested company settled in
Renminbi converted from foreign currencies remains not allowed to be used for investment in
the security markets, offering entrustment loans or purchases of any investment properties,
unless otherwise regulated by other laws and regulations. On June 9, 2016, SAFE further issued
the Circular of the State Administration of Foreign Exchange on Reforming and Regulating
Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16,
which, among other things, amended certain provisions of Circular 19. According to Circular
19 and Circular 16, the flow and use of the Renminbi capital converted from foreign
currency-denominated registered capital of a foreign-invested company is regulated such that
Renminbi capital may not be used for business beyond its business scope or to provide loans
to persons other than affiliates unless otherwise permitted under its business scope. If our
Consolidated Affiliated Entities require financial support from us or our PRC subsidiaries in
the future, and we find it necessary to use foreign currency-denominated capital to provide
such financial support, our ability to fund our Consolidated Affiliated Entities’ operations will
be subject to statutory limits and restrictions, including those described above. The applicable
foreign exchange circulars and rules may limit our ability to transfer the net proceeds from the
Global Offering to our PRC subsidiaries and convert the net proceeds into Renminbi, which
may adversely affect our business, financial condition and results of operations.
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We may be subject to penalties, including restrictions on our ability to inject capital into
our PRC subsidiaries and our PRC subsidiaries’ ability to distribute profits to us, if our
resident Shareholders or beneficial owners in China fail to comply with relevant PRC
foreign exchange regulations.
SAFE issued the Notice on Relevant Issues Relating to Domestic Residents’ Investment
and Financing and Round-Trip Investment through Special Purpose V ehicles, or Circular 37,
effective on July 4, 2014. Circular 37 requires PRC residents, including PRC individuals and
institutions, to register with SAFE or its local branches in connection with their direct
establishment or indirect control of an offshore special purpose vehicle, for the purpose of
overseas investment and financing, with such PRC residents’ legally owned assets or equity
interests in domestic enterprises or offshore assets or interests. In addition, such PRC residents
must update their foreign exchange registrations with SAFE or its local branches when the
offshore special purpose vehicle in which such residents directly hold the equity interests
undergoes material events relating to any change of basic information (including change of
such PRC individual shareholder, name and operation term), increases or decreases in
investment amount, share transfers or exchanges, or mergers or divisions.
If any shareholder holding interest in an offshore special purpose vehicle, who is a PRC
resident as determined by Circular 37, fails to fulfill the required foreign exchange registration
with the local SAFE branches, the PRC subsidiaries of that offshore special purpose vehicle
may be prohibited from distributing their profits and dividends to their offshore parent
company or from carrying out other subsequent cross-border foreign exchange activities, and
the offshore special purpose vehicle may be restricted in its ability to contribute additional
capital to its PRC subsidiaries. Moreover, failure to comply with the SAFE registration
described above could result in liability under PRC laws for evasion of applicable foreign
exchange restrictions.
On February 13, 2015, SAFE promulgated the Notice of the State Administration of
Foreign Exchange on Further Simplifying and Improving the Policies of Foreign Exchange
Administration Applicable to Direct Investment, or SAFE Circular 13, effective June 1, 2015.
In accordance with SAFE Circular 13, entities and individuals are required to apply for foreign
exchange registration of foreign direct investment and overseas direct investment, including
those required under Circular 37, with qualified banks, instead of SAFE. The qualified banks,
under the supervision of SAFE, directly examine the applications and conduct the registration.
We may not be fully informed of the identities of all our Shareholders or beneficial
owners who are PRC residents, and therefore, we may not be able to identify all our
Shareholders or beneficial owners who are PRC residents to ensure their compliance with
Circular 37 or other related rules. In addition, we cannot provide any assurance that all of our
Shareholders and beneficial owners who are PRC residents will comply with our request to
make, obtain or update any applicable registrations or comply with other requirements required
by Circular 37 or other related rules in a timely manner. Even if our Shareholders and
beneficial owners who are PRC residents comply with such request, we cannot provide any
assurance that they will successfully obtain or update any registration required by Circular 37
or other related rules in a timely manner due to many factors, including those beyond our and
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their control. If any of our Shareholders who is a PRC resident as determined by Circular 37
fails to fulfill the required foreign exchange registration, our PRC subsidiaries may be
prohibited from distributing their profits and dividends to us or from carrying out other
subsequent cross-border foreign exchange activities, and we may be restricted in our ability to
contribute additional capital to our PRC subsidiaries, which may adversely affect our business.
We principally rely on dividends and other distributions on equity paid by our PRC
subsidiaries to fund any cash and financing requirements we may have. Any limitation on
the ability of our PRC subsidiaries to make payments to us could have a material adverse
effect on our ability to conduct our business or financial condition.
We are a holding company, and we principally rely on dividends and other distributions
on equity that may be paid by our PRC subsidiaries and remittances from our Consolidated
Affiliated Entities, for our cash and financing requirements, including the funds necessary to
pay dividends and other cash distributions to the holders of our Shares and service any debt we
may incur. If our PRC subsidiaries or our Consolidated Affiliated Entities incur debt on their
own behalf in the future, the instruments governing the debt may restrict their ability to pay
dividends or make other distributions to us.
Under PRC laws and regulations, wholly foreign-owned enterprises in China may pay
dividends only out of their retained earnings as determined in accordance with PRC accounting
standards and regulations. In addition, a wholly foreign-owned enterprise is required to set
aside at least 10% of its after-tax profits each year, after making up previous years’
accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount
of such a fund reaches 50% of its registered capital. Our PRC subsidiaries may also allocate
a portion of their respective after-tax profits based on PRC accounting standards to discretional
reserve funds. These reserve funds are not distributable as cash dividends.
More restrictions and substantial vetting process may be put forward for cross-border
transactions falling under both the current account and the capital account. Any limitation on
the ability of our Consolidated Affiliated Entities to make remittance to our wholly-owned PRC
subsidiaries to pay dividends or make other distributions to us could materially and adversely
limit our ability to grow, make investments or acquisitions that could be beneficial to our
business, pay dividends, or otherwise fund and conduct our business.
Restrictions on the remittance of Renminbi into and out of China and regulations on
currency conversion may limit our ability to pay dividends and other obligations, and
affect the value of your investment.
We receive substantially all of our revenue in Renminbi. Under our current corporate
structure, our income is primarily derived from dividend payments from our PRC subsidiaries.
We may convert a portion of our revenue into other currencies to meet our foreign currency
obligations, such as payments of dividends declared in respect of our Shares, if any. Shortages
in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit
sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their
foreign currency denominated obligations.
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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 SAFE approval by complying
with certain procedural requirements. However, approval from or registration or filings with
competent government authorities is required where Renminbi is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies. Pursuant to the SAFE Circular 19, a foreign-invested
enterprise may convert up to 100% of the foreign currency in its capital account into Renminbi
on a discretionary basis according to the actual needs. The SAFE Circular 16 provides for an
integrated standard for conversion of foreign exchange under capital account items on a
discretionary basis, which applies to all enterprises registered in China. In addition, the SAFE
Circular 16 has narrowed the scope of purposes for which an enterprise must not use the
Renminbi funds so converted, which include, among others, (i) payment for expenditure
beyond its business scope or otherwise as prohibited by the applicable laws and regulations;
(ii) investment in securities or other financial products other than banks’ principal-secured
products; (iii) provision of loans to non-affiliated enterprises, except where it is expressly
permitted in the business scope of the enterprise; and (iv) construction or purchase of
non-self-used real properties, except for real estate developers. If the foreign exchange
management system affects our ability from obtaining sufficient foreign currencies to satisfy
our foreign currency needs, we may not be able to pay dividends in foreign currencies to our
Shareholders.
Fluctuations in exchange rates could result in foreign currency exchange losses.
The Renminbi has fluctuated against the U.S. dollar, at times significantly and
unpredictably. During the Track Record Period, we recorded foreign exchange gain of
RMB27.6 million in 2021 and foreign exchange losses of RMB134.7 million and RMB28.4
million in 2022 and 2023, respectively. The value of Renminbi against the U.S. dollar and other
currencies is affected by changes in China’s political and economic conditions and by China’s
foreign exchange policies, among other things. We cannot assure you that Renminbi will not
appreciate or depreciate significantly in value against the Hong Kong dollar or U.S. dollar in
the future. It is difficult to predict how market forces or PRC or U.S. government policy may
impact the exchange rate between Renminbi and the Hong Kong dollar or U.S. dollar in the
future.
The proceeds from the Global Offering will be received in Hong Kong dollars. As a result,
any appreciation of the Renminbi against the U.S. dollar, the Hong Kong dollar or any other
foreign currencies may result in the decrease in the value of our proceeds from the Global
Offering. Conversely, any depreciation of the Renminbi may adversely affect the value of, and
any dividends payable on, our Shares in foreign currency. In addition, there are limited
instruments available for us to reduce our foreign currency risk exposure at reasonable costs.
Furthermore, we are also currently required to complete filings with and obtain approvals from
SAFE before converting significant sums of foreign currencies into Renminbi. All of these
factors could materially and adversely affect our business, financial condition, results of
operations and prospects, and could reduce the value of, and dividends payable on, our Shares
in foreign currency terms.
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Y ou may experience difficulties in effecting service of process upon or enforcing foreign
judgments against us or our Directors or officers.
Most of our assets are situated in the PRC and most of our directors and officers reside
and most of their respective assets are located in the PRC. Therefore, there remains the
possibility that it may be difficult to effect service of process outside the PRC upon most of
our directors and officers, including with respect to matters arising under applicable securities
laws. The PRC does not have treaties providing for the reciprocal recognition and enforcement
of judgments of courts with the United States and many other countries. Consequently, you
may experience difficulties in enforcing against us or our directors or officers in the PRC any
judgments obtained from courts outside of the PRC.
On July 14, 2006, Hong Kong and the PRC entered into the Arrangement between the
Courts of the Mainland and Courts of the Hong Kong Special Administrative Region on
Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters
Where the Parties Involved Have a Choice of Court Agreement (the “ 2006 Arrangement ”),
effective from August 1, 2008. Pursuant to the 2006 Arrangement, a party with an enforceable
final court judgment rendered by any designated PRC court or any designated Hong Kong court
requiring payment of money in a civil and commercial case according to a written choice of
court agreement, may apply for recognition and enforcement of the judgment in the relevant
PRC court or Hong Kong court. A written choice of court agreement is defined as any
agreement in writing entered into between parties after the effective date of the 2006
Arrangement in which a Hong Kong court or a PRC court is expressly designated as the court
having sole jurisdiction for the dispute. Therefore, it may not be possible to enforce a judgment
rendered by a Hong Kong court in the PRC pursuant to the 2006 Arrangement if the parties in
the dispute did not enter into a written choice of court agreement. In January 2019, Hong Kong
and the PRC entered into another arrangement on court judgment recognition and
enforcement—the Arrangement on Reciprocal Recognition and Enforcement of Judgments in
Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special
Administrative Region (the “ 2019 Arrangement ”), which took effect on January 29, 2024 and
superseded the 2006 Arrangement, save for contracts containing exclusive jurisdiction
agreements signed before January 29, 2024. The Mainland Judgments in Civil and Commercial
Matters (Reciprocal Enforcement) Ordinance (Chapter 645 of the Laws of Hong Kong), which
implements the 2019 Arrangement, came into operation on January 29, 2024 as well. The new
regime no longer limits enforceable judgments to those granting monetary awards and whose
parties have written and exclusive choice of forum agreement. However, uncertainties exist
with respect to the interpretation and enforcement of the newly implemented laws in practice.
RISK FACTORS
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Failure to comply with PRC regulations regarding the registration requirements for
employee share ownership plans or share option plans may subject the PRC plan
participants or us to fines and other legal or administrative sanctions.
In February 2012, the State Administration of Foreign Exchange, or SAFE, promulgated
the Notices on Issues Concerning the Foreign Exchange Administration for Domestic
Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company,
replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC
citizens who reside in China for a continuous period of not less than one year and participate
in any stock incentive plan of an overseas publicly listed company are required to register with
SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such
overseas-listed company, and complete certain other procedures, unless certain exceptions are
available. In addition, an overseas-entrusted institution must be retained to handle matters in
connection with the exercise or sale of stock options and the purchase or sale of shares and
interests. We and our executive officers and other employees who are PRC citizens or non-PRC
citizens living in China for a continuous period of not less than one year and have been granted
options will be subject to these regulations when our company becomes an overseas-listed
company upon the completion of the Global Offering. Failure to complete SAFE registrations
may subject them or us to fines or supervision measures. 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 STA, has issued certain circulars concerning employee share options and
restricted shares. Under these circulars, our employees working in China who exercise share
options or are granted restricted shares will be subject to PRC individual income tax. Our PRC
subsidiary has obligations to file documents related to employee share options or restricted
shares with relevant tax authorities and to withhold individual income taxes for those
employees who exercise their share options. 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 government authorities.
It may be difficult for overseas regulators to conduct investigation or collect evidence
within China.
Shareholder claims or regulatory investigation that are common in jurisdictions outside
China are difficult to pursue as a matter of law or practicality in China. Cooperation
mechanism with the securities regulatory authorities of another country or region to implement
cross-border supervision and administration may not be efficient in the absence of mutual and
practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities
Law, or Article 177, which became effective in March 2020, no overseas securities regulator
is allowed to directly conduct investigation or evidence collection activities within the territory
of the PRC, and without the consent by the PRC securities regulatory authorities and the other
competent governmental agencies, no entity or individual may provide documents or materials
related to securities business to any foreign party. While detailed interpretation of or
implementation rules under Article 177 have yet to be promulgated, the inability for an
overseas securities regulator to directly conduct investigation or evidence collection activities
within China may further increase difficulties faced by you in protecting your interests.
RISK FACTORS
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In addition, on February 24, 2023, CSRC and other three PRC regulatory authorities
jointly issued the Confidentiality and Archives Administration Provisions, which will take
effect on March 31, 2023, according to which, overseas securities regulators and competent
overseas authorities may request to inspect, investigate or collect evidence from a domestic
company concerning its overseas offering and listing or from the domestic securities
companies and securities service providers that undertake relevant businesses for such
domestic companies, such inspection, investigation and evidence collection shall be conducted
under a cross-border regulatory cooperation mechanism, and the CSRC or other competent
Chinese authorities will provide necessary assistance pursuant to bilateral and multilateral
cooperation mechanisms. The domestic company, securities companies and securities service
providers shall first obtain approval from the CSRC or other competent Chinese authorities
before cooperating with the inspection and investigation by the overseas securities regulator or
competent overseas authority, or providing documents and materials requested in such
inspection and investigation. As the Confidentiality and Archives Administration Provisions
are relatively new, there are uncertainties with respect to their interpretation and
implementation.
Any failure or perceived failure by us to comply with the anti-monopoly laws and
regulations may result in governmental investigations or enforcement actions, litigation
or claims against us and could have an adverse effect on our business, financial condition
and results of operations.
The PRC anti-monopoly enforcement agencies have in recent years strengthened
enforcement under the Anti-monopoly Law of PRC (). In March
2018, the SAMR was formed as a new governmental agency to take over, among other things,
the anti-monopoly enforcement functions from the relevant departments under the MOFCOM,
the NDRC and the SAIC, respectively. Since its inception, the SAMR has continued to
strengthen anti-monopoly enforcement. On December 28, 2018, the SAMR issued the Notice
on Anti-monopoly Enforcement Authorization (), which grants
authorities to its province-level branches to conduct anti-monopoly enforcement within their
respective jurisdictions. On September 11, 2020, the SAMR issued Anti-monopoly Compliance
Guideline for Operators (), which requires, under the Anti-
monopoly Law of the PRC, operators to establish anti-monopoly compliance management
systems to prevent anti-monopoly compliance risks. On February 7, 2021, the Anti-Monopoly
Commission of the State Council promulgated the Guidelines to Anti-Monopoly in the Field of
Internet Platforms (), (the “ Anti-
Monopoly Guidelines ”), which took effect on the same date and operate as a compliance
guidance for platform economy operators under the existing PRC anti-monopoly laws and
regulations. The Anti-Monopoly Guidelines aim at specifying some of the circumstances under
which an activity of Internet platforms may be identified as monopolistic conduct as well as
setting out filing procedures for concentration of undertakings involving variable interest
entities. The Anti-Monopoly Guidelines mainly covers five aspects, including general
provisions, monopoly agreements, abusing market dominance, concentration of undertakings,
and abusing of administrative powers eliminating or restricting competition.
RISK FACTORS
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Recently, the SAMR has imposed administrative penalties in a number of anti-monopoly
cases in the Internet industry, and the regulatory environment for anti-monopoly in the Internet
industry has been tightening. Given the uncertainties of the interpretation and implementation
of the Anti-Monopoly Guidelines and considering the evolving legislative activities and varied
local implementation practices of anti-monopoly and competition laws and regulations in the
PRC, we may be required to make expenditures and adjust our business practice to comply with
existing or future laws and regulations, which may increase our costs and limit our ability to
operate our business. In addition, failure or perceived failure to comply with Anti-Monopoly
Guidelines or other anti-monopoly related laws and regulations may result in investigations or
enforcement actions, litigation or claims against us and could have an adverse effect on our
business, financial conditions and results of operations.
Failure to comply with PRC property-related laws and regulations regarding certain of
our leased properties may adversely affect our business, financial condition and results of
operations.
We leased certain properties in the PRC in connection with our business operations. Some
of these properties do not meet certain property-related requirements under PRC laws and
regulations. For example, as of the Latest Practicable Date, leasing agreements of 12 of our
leased properties for operation had not been registered and filed with the competent PRC
government authorities as required by applicable PRC laws and regulations. We cannot assure
you that the lessors will cooperate and complete the registration in a timely manner. Our PRC
Legal Advisor has advised us that failure to complete the registration and filing of lease
agreements will not affect the validity of such leases but could result in the imposition of fines
up to RMB10,000 for each leased property that is unregistered if we fail to rectify the
noncompliance within the time frame prescribed by the relevant authorities.
Furthermore, as of the Latest Practicable Date, some of the lessors of our lease properties
had not provided us with their property ownership certificates, and some lease agreements had
expired without renewal, for most of which we were in the process of obtaining relevant
property ownership certificates and renewing relevant lease agreements. If our lessors are not
the owners of the properties and they have not obtained consents from the owners or their
lessors, our leases could be invalidated or terminated as a result of challenges by third parties.
If that occurs, we may have to renegotiate the leases with the owners or other parties who have
the right to lease the properties, and the terms of the new leases may be less favorable to us.
Although we may seek damages from such lessors, such leases may be void and we may be
forced to relocate, which may negatively influence our operations.
RISK FACTORS
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RISKS RELATING TO THE GLOBAL OFFERING
There has been no prior public market for our Shares prior to the Global Offering, and
you may not be able to resell our Shares at or above the price you pay, or at all.
Prior to the completion of the Global Offering, there has been no public market for our
Shares. There can be no guarantee that an active trading market for our Shares will develop or
be sustained after completion of the Global Offering. The Offer Price is the result of
negotiations between our Company and the Overall Coordinators (for themselves and on behalf
of the Underwriters), which may not be indicative of the price at which our Shares will be
traded following completion of the Global Offering. The market price of our Shares may drop
below the Offer Price at any time after completion of the Global Offering. We have applied to
the Stock Exchange for the listing of, and permission to deal in the Share. A Listing on the
Stock Exchange, however, does not guarantee that an active and liquid trading market for our
Shares will develop, or if it does develop, that it will be sustained following the Global
Offering, or that the market price of the Shares will not decline following the Global Offering.
In addition, the trading volume and the trading price of our Shares may be volatile and
could fluctuate widely in response to factors beyond our control, including general market
conditions of the securities markets in Hong Kong, China, the United States and elsewhere in
the world. In particular, the performance and fluctuation of the market prices of other
companies with business operations located mainly in China that have listed their securities in
Hong Kong may affect the volatility in the price of and trading volumes for our Shares. A
number of China-based companies have listed their securities, and some are in the process of
preparing for listing their securities, in Hong Kong. Some of these companies have experienced
significant volatility. The trading performances of the securities of these companies at the time
of or after their offerings may affect the overall investor sentiment towards China-based
companies listed in Hong Kong and consequently may impact the trading performance of our
Shares. These broad market and industry factors may significantly affect the market price and
volatility of our Shares, regardless of our actual operating performance, and may result in
losses on your investment in our Shares.
In addition to market and industry factors, the price and trading volume for our Shares
maybe highly volatile for specific business reasons. In particular, factors such as variations in
our revenue, earnings, and cash flow could cause the market price of our Shares to change
substantially. Any of these factors may result in large and sudden change in the volume and
trading price of our Shares.
RISK FACTORS
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The actual or perceived sale or availability for sale of substantial amounts of our Shares,
especially by our directors, executive officers and substantial Shareholders, could
adversely affect the market price of our Shares.
Future sales of a substantial number of our Shares, especially by our directors, executive
officers and existing Shareholders, or the perception or anticipation of such sales, could
negatively impact the market price of our Shares in Hong Kong and our ability to raise equity
capital in the future at a time and price that we deem appropriate.
The Shares held by our existing Shareholders, excluding the RSU Platforms, are subject
to certain lock-up periods. See “Underwriting—Underwriting Arrangements and Expenses.”
While we currently are not aware of any intention of such persons to dispose of significant
amounts of their Shares after the expiry of the lock-up periods, we cannot assure you that they
will not dispose of any Shares they may own now or in the future. The effect of such disposal,
if any, on the market price of the Shares cannot be predicted.
Y ou will incur immediate and substantial dilution and may experience further dilution in
the future.
As the Offer Price of Shares is higher than the net tangible book value per share of our
Shares immediately prior to the Global Offering, purchasers of our Shares in the Global
Offering will experience an immediate dilution. If we issue additional Shares in the future,
purchasers of our Shares in the Global Offering may experience further dilution in their
shareholding percentage.
We cannot assure you that we will declare and distribute any amount of dividends in the
future and you may have to rely on price appreciation of our 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 have not yet
adopted a dividend policy with respect to future dividends. Therefore, you should not rely on
an investment in our Shares as a source for any future dividend income.
Our Board has discretion as to whether to distribute dividends, subject to certain
restrictions under Cayman Islands law, namely that our Company may pay dividends out of
profits or share premium, provided always that in no circumstances may a dividend be paid out
of share premium 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. Even if our Board 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 subsidiary, our financial condition, contractual restrictions and other
factors deemed relevant by our board of directors. Accordingly, the return on your investment
RISK FACTORS
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in our Shares will likely depend entirely upon any future price appreciation of our Shares.
There is no guarantee that our Shares will appreciate in value or even maintain the price at
which you purchased the Shares. Y ou may not realize a return on your investment in our Shares
and you may even lose your entire investment in our Shares.
The industry facts, statistics and forecasts in this prospectus that were obtained from
various government publications and the industry report have not been independently
verified.
This prospectus, particularly the section headed “Industry Overview,” contains
information and statistics relating to the healthcare market. Such information and statistics
have been derived from third-party reports, either commissioned by us or publicly accessible,
and other publicly available sources. The information and statistics from such sources have not
been independently verified by us, the Controlling Shareholders, the Joint Sponsors, the
Sponsor-Overall Coordinators, the Overall Coordinators, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital Market
Intermediaries, any of our or their respective directors, officers or representatives or any other
party, other than CIC, involved in the Global Offering and no representation is given as to its
accuracy. Collection methods of such information may be flawed or ineffective, or there may
be discrepancies between published information and market practice, which may result in the
statistics being inaccurate. Y ou should therefore not place undue reliance on such information.
In addition, we cannot assure you that such information is stated or compiled on the same basis
or with the same degree of accuracy as similar statistics presented elsewhere. In any event, you
should consider carefully the importance placed on such information or statistics.
Y ou should read the entire document carefully and should not rely on any information
contained in press articles or other media regarding us and the Global Offering.
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and the Global Offering. Prior to the publication of this prospectus, there
has been press and media coverage regarding us. Such press and media coverage may include
references to certain information that does not appear in this prospectus, including certain
operating and financial information and projections, valuations and other information. We have
not authorized the disclosure of any such information in the press or media and do not accept
any responsibility for any such press or media coverage or the accuracy or completeness of any
such information or publication. We make no representation as to the appropriateness,
accuracy, completeness or reliability of any such information or publication. To the extent that
any such information is inconsistent or conflicts with the information contained in this
prospectus, we disclaim responsibility for it and you should not rely on such information.
RISK FACTORS
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Our Controlling Shareholders have significant influence over our Company and their
interests may not be aligned with the interests of our other Shareholders.
Our Controlling Shareholders have substantial influence over our business and
operations, including matters relating to management and policies, decisions in relation to
acquisitions, expansion plans, business consolidation, the sale of all or substantially all of our
assets, nomination of directors, dividends or other distributions, as well as other significant
corporate actions. Following the completion of the Global Offering and assuming that the
Over-allotment Option is not exercised, our Controlling Shareholders will collectively control
approximately 57.34% of the voting power of our outstanding share capital. The concentration
of voting power and the substantial influence of our Controlling Shareholders over our
Company may discourage, delay or prevent a change in control of our Company, which could
deprive other Shareholders of an opportunity to receive a premium for their Shares as part of
a sale of our Company and reduce the price of our Shares. In addition, the interests of our
Controlling Shareholders may differ from the interests of our other Shareholders. Subject to the
Listing Rules, our Articles of Association and other applicable laws and regulations, our
Controlling Shareholders will continue to have the ability to exercise substantial influence over
us and to cause us to enter into transactions or take, or fail to take, actions or make decisions
which conflict with the best interests of our other shareholders.
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In preparation for the Global Offering, we have sought the following waivers from strict
compliance with the relevant provisions of the Listing Rules.
W AIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, an issuer must have sufficient management
presence in Hong Kong. This normally means that at least two of its executive directors must
be ordinarily resident in Hong Kong.
We do not have sufficient management presence in Hong Kong for the purposes of
satisfying the requirements under Rule 8.12 of the Listing Rules. The headquarters, senior
management, business operations and assets of our Company are primarily located, managed
and conducted in the PRC. Currently, though one of our executive Directors, namely Mr. ZOU
Y uming (ཅρჼ), is ordinarily resident in Hong Kong, none of the other executive Directors
of our Company principally resides in Hong Kong, and our Company does not and, for the
foreseeable future, will not have sufficient management presence in Hong Kong. The Directors
consider that the appointment of additional executive Directors who will be ordinarily resident
in Hong Kong, or relocation of another existing executive Directors to Hong Kong, would not
be beneficial to, or appropriate for, our Group and therefore would not be in the best interests
of our Company and the Shareholders as a whole. Accordingly, we have applied to the Stock
Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with the
requirements under Rule 8.12 of the Listing Rules. We will put in place the following adequate
and efficient arrangements to achieve regular and effective communication with the Stock
Exchange as well as compliance with the Listing Rules:
(a) pursuant to Rule 3.05 of the Listing Rules, we have appointed and will continue to
maintain two authorized representatives, namely Mr. Xie and Mr. Zhou, each an
executive Director, to be the principal communication channel at all times between
the Stock Exchange and our Company. Each of our authorized representatives is
available to meet with the Stock Exchange in Hong Kong within a reasonable
timeframe upon the request of the Stock Exchange and will be readily contactable
by telephone, facsimile and/or e-mail to deal promptly with enquiries from the Stock
Exchange. Both of our authorized representatives are authorized to communicate on
our behalf with the Stock Exchange;
(b) each of our Directors has provided his/her respective contact details (such as mobile
phone numbers, office phone numbers, residential phone numbers, email addresses
and fax numbers) to each of the authorized representatives and to the Stock
Exchange. This will ensure that each of the authorized representatives and the Stock
Exchange will have the means to contact all the Directors (including the independent
non-executive Directors) promptly as and when required, including means to
communicate with the Directors when they are traveling;
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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(c) all Directors who are not ordinarily resident in Hong Kong have confirmed they
have or can apply for valid travel documents to visit Hong Kong and will be able
to come to Hong Kong to meet with the Stock Exchange within a reasonable period
of time when required;
(d) we have retained the services of a compliance advisor, being Somerley Capital
Limited (the “ Compliance Advisor ”), in accordance with Rule 3A.19 of the Listing
Rules. The Compliance Advisor will serve as an additional channel of
communication with the Stock Exchange in addition to the authorized
representatives of our Company. The Compliance Advisor will provide our
Company with professional advice on ongoing compliance with the Listing Rules.
We will ensure that the Compliance Advisor has prompt access to our Company’s
authorized representatives and Directors who will provide to the Compliance
Advisor such information and assistance as the Compliance Advisor may need or
may reasonably request in connection with the performance of the Compliance
Advisor’s duties. The Compliance Advisor will also provide advice in compliance
with Rule 3A.23 of the Listing Rules;
(e) meetings between the Stock Exchange and the Directors could be arranged through
the authorized representatives or the Compliance Advisor, or directly with the
Directors within a reasonable time frame. Our Company will inform the Stock
Exchange as soon as practicable in respect of any change in the authorized
representatives and/or the Compliance Advisor in accordance with the Listing Rules;
and
(f) our Company will also appoint other professional advisors (including legal advisors
in Hong Kong) after the Listing to assist us in addressing any enquiries which may
be raised by the Stock Exchange and to ensure that there will be prompt and
effective communication with the Stock Exchange.
W AIVER IN RELATION TO JOINT COMPANY SECRETARIES
Pursuant to Rules 8.17 and 3.28 of the Listing Rules, the company secretary must be an
individual who, by virtue of his or her academic or professional qualifications or relevant
experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of
the company secretary. Pursuant to Note 1 to Rules 3.28 of the Listing Rules, the Stock
Exchange considers the following academic or professional qualifications to be acceptable:
(a) a Member of The Hong Kong Chartered Governance Institute;
(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159
of the Laws of Hong Kong); and
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(c) a certified public accountant as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong).
Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience”,
the Stock Exchange will consider the individual’s:
(a) length of employment with the issuer and other issuers and the roles he or she
played;
(b) familiarity with the Listing Rules and other relevant laws and regulations including
the Securities and Futures Ordinance, Companies Ordinance, Companies (Winding
Up and Miscellaneous Provisions) Ordinance and the Takeovers Code;
(c) relevant training taken and/or to be taken in addition to the minimum requirement
under Rule 3.29 of the Listing Rules; and
(d) professional qualifications in other jurisdictions.
Our Company has appointed Mr. ZOU Y uming ( ཅρჼ)( “ Mr. Zou ”) and Ms. FUNG Po
Ting ( ඹᘒణ)( “ Ms. Fung ”) of TMF Hong Kong Limited as joint company secretaries of our
Company. Ms. Fung is an associate member of The Hong Kong Chartered Governance Institute
and The Chartered Governance Institute in the United Kingdom and therefore meets the
qualification requirements under Note 1 to Rule 3.28 of the Listing Rules and is in compliance
with Rule 8.17 of the Listing Rules.
Mr. Zou joined our Group as vice president of strategic development in August 2018 and
was appointed as our chief financial officer in April 2021. He is responsible for corporate
finance and financial management of the Group, investor relations, and secretarial affairs of the
Board. Prior to joining our Group, he served as a trader and an executive director in JP Morgan
Chase & Co. from July 2003 to July 2018.
Accordingly, while Mr. Zou does not possess the formal qualifications required of a
company secretary under Rule 3.28 of the Listing Rules, we have applied to the Stock
Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with the
requirements under Rules 3.28 and 8.17 of the Listing Rules such that Mr. Zou may be
appointed as a joint company secretary of our Company.
The waiver was granted for a three-year period on the condition that Ms. Fung, as a joint
company secretary of our Company, will work closely with, and provide assistance to, Mr. Zou
in the discharge of his duties as a joint company secretary and in gaining the relevant
experience under Rule 3.28 of the Listing Rules. The waiver will be revoked immediately if
Ms. Fung ceases to provide assistance to Mr. Zou as the joint company secretary for the
three-year period after the Listing. In addition, Mr. Zou will comply with the annual
professional training requirement under Rule 3.29 of the Listing Rules and will enhance his
knowledge of the Listing Rules during the three-year period from the Listing Date. Our
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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Company will further ensure that Mr. Zou has access to the relevant training and support that
would enhance his understanding of the Listing Rules and the duties of a company secretary
of an issuer listed on the Stock Exchange. Before the end of the three-year period, our
Company must demonstrate and seek for the Stock Exchange’s confirmation that Mr. Zou,
having had the benefits from Ms. Fung’s assistance during the three-year period, has attained
the relevant experience under Note 2 to Rule 3.28 of the Listing Rules and is capable of
discharging the function of a company secretary, so that a waiver will not be necessary.
Please refer to the section headed “Directors and Senior Management” for further
information regarding the qualifications of Mr. Zou and Ms. Fung.
W AIVER IN RELATION TO CONTINUING CONNECTED TRANSACTIONS
We have entered into transactions which will constitute continuing connected transactions
of our Company under the Listing Rules following the completion of the Global Offering. We
have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from
strict compliance with (where applicable) (i) the announcement and independent shareholders’
approval requirements, (ii) the annual cap requirement, and (iii) the requirement of limiting the
term of the continuing connected transactions set out in Chapter 14A of the Listing Rules for
such continuing connected transactions. For further details in this respect, see the section
headed “Connected Transactions.”
W AIVER IN RELATION TO PUBLIC FLOAT
Rule 8.08 of the Listing Rules provides that there must be an open market in the securities
for which listing is sought. Rule 8.08(1)(a) of the Listing Rules provides that this will normally
mean that at least 25% of the issuer’s total number of issued shares must at all times be held
by the public. Rule 8.08(1)(d) of the Listing Rules provides that the Stock Exchange may,
subject to certain conditions and at its discretion, accept a lower percentage of public float of
between 15% and 25% in the case of issuers with an expected market capitalization at the time
of listing of over HK$10 billion.
Based on an Offer Price of HK$7.60 per Offer Share (being the lower end of the
indicative Offer Price range stated in this prospectus), we will have a market capitalization at
the time of Listing of over HK$10 billion.
Accordingly, we have applied to the Stock Exchange for it to exercise its discretion under
Rule 8.08(1)(d) of the Listing Rules to grant, and the Stock Exchange has granted us, a waiver
from strict compliance with the requirement under Rule 8.08(1)(a) of the Listing Rules, such
that the minimum percentage of Shares from time to time held by the public shall be the higher
of (i) 18.59%, being the percentage of Shares to be held by the public immediately following
the completion of the Global Offering (assuming the Over-allotment Option is not exercised)
or (ii) such percentage of Shares to be held by the public immediately following the exercise
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–1 1 3–


--- page 123 ---
of the Over-allotment Option, on the conditions that we shall make appropriate disclosure of
such lower prescribed percentage of public float in this prospectus and confirm sufficiency of
public float in our successive annual reports after Listing.
In support for the application of the waiver, we have confirmed to the Stock Exchange
that:
(a) we have an expected market capitalization at the time of Listing of over HK$10
billion;
(b) there will be an open market in the Shares, and the number of Shares and the extent
of their distribution would enable the market to operate properly with a lower
percentage of public float;
(c) we will make appropriate disclosure of the lower prescribed percentage of public
float in this prospectus;
(d) we will implement appropriate measures and mechanisms to ensure continual
maintenance of the minimum public float prescribed by the Stock Exchange;
(e) we will confirm sufficiency of public float in our successive annual reports after the
Listing; and
(f) in the event that the public float percentage falls below the minimum percentage
prescribed by the Stock Exchange, we will take appropriate steps to ensure that the
minimum percentage of public float prescribed by the Stock Exchange is complied
with.
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–1 1 4–


--- page 124 ---
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed director who is named
as such in this prospectus) collectively and individually accept full responsibility, includes
particulars given in compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules (Chapter 571V
of the Laws of Hong Kong) and the Listing Rules for the purpose of giving information to the
public with regard to our Group. Our Directors, having made all reasonable enquiries, confirm
that to the best of their knowledge and belief the information contained in this prospectus is
accurate and complete in all material respects and not misleading or deceptive, and there are
no other matters the omission of which would make any statement herein or this prospectus
misleading.
GLOBAL OFFERING
This prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. For applicants under the Hong Kong Public Offering,
this prospectus contain the terms and conditions of the Hong Kong Public Offering.
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this prospectus and on the terms and subject to the conditions set
out herein and therein. No person is authorised to give document information in connection
with the Global Offering or to make any representation not contained in this prospectus, and
any information or representation not contained herein and therein must not be relied upon as
having been authorised by our Company, the Joint Sponsors, the Sponsor-Overall Coordinators,
the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Underwriters, the Capital Market Intermediaries, any of their respective
directors, agents, employees or advisors or any other party involved in the Global Offering.
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by the
Overall Coordinators. Pursuant to the Hong Kong Underwriting Agreement, the Hong Kong
Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the
Hong Kong Underwriting Agreement, subject to agreement on the Offer Price to be determined
between the Overall Coordinators (for themselves and on behalf of the Underwriters) and our
Company on the Price Determination Date. The International Placing is expected to be fully
underwritten by the International Underwriters subject to the terms and conditions of the
International Underwriting Agreement, which is expected to be entered into on or about the
Price Determination Date.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–1 1 5–


--- page 125 ---
The Offer Price is expected to be determined by agreement between the Overall
Coordinators (for themselves and on behalf of the Underwriters) and our Company by 12:00
noon on Friday, July 5, 2024 . If, for any reason, the Offer Price is not agreed between the
Overall Coordinators (for themselves and on behalf of the Underwriters) and our Company by
12:00 noon on Friday, July 5, 2024 , the Global Offering will not proceed and will lapse.
See the section headed “Underwriting” for further information about the Underwriters and
the underwriting arrangements.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The application procedures for the Hong Kong Offer Shares are set forth in “How to
Apply for Hong Kong Offer Shares” in this prospectus.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set forth in
the section headed “Structure of the Global Offering” in this prospectus.
RESTRICTIONS ON OFFER AND SALE OF SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his acquisition of the Shares to, confirm that he is aware
of the restrictions on offers and sales of the Shares described in this prospectus.
No action has been taken to permit a public offering of the Offer Shares or the distribution
of this prospectus in any jurisdiction other than Hong Kong. Accordingly, without limitation
to the following, this prospectus may not be used for the purpose of, and does not constitute,
an offer or invitation in any jurisdiction or in any circumstances in which such an offer or
invitation is not authorized or to any person to whom it is unlawful to make such an offer or
invitation. The distribution of this prospectus and the offering and sales of the Offer Shares in
other jurisdictions are subject to restrictions and may not be made except as permitted under
the applicable securities laws of such jurisdictions pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom. In
particular, the Hong Kong Offer Shares have not been publicly offered or sold, directly or
indirectly, in the PRC or the United States.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–1 1 6–


--- page 126 ---
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee of the Stock Exchange for the listing of, and
permission to deal in our Shares in issue and to be issued pursuant to the Global Offering
(including the additional Shares which may be issued pursuant to the exercise of the
Over-allotment Option).
Dealings in the Shares on the Stock Exchange are expected to commence on Tuesday,
July 9, 2024 . Save as disclosed in this prospectus, no part of our share or loan capital is listed
on or dealt in on any other stock exchange and no such listing or permission to list is being or
proposed to be sought on the Stock Exchange or any other stock exchange as of the date of this
prospectus. All the Offer Shares will be registered on the Hong Kong share register of our
Company in order to enable them to be traded on the Stock Exchange.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of,
and permission to deal in, the Shares on the Stock Exchange is refused before the expiration
of three weeks from the date of the closing of the application lists, or such longer period (not
exceeding six weeks) as may, within the said three weeks, be notified to our Company by or
on behalf of the Stock Exchange.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors as to the taxation implications of subscribing for, purchasing, holding or disposal of,
and/or dealing in the Shares or exercising rights attached to them. None of us, the Joint
Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital
Market Intermediaries, any of their respective directors, officers, employees, agents or
representatives or any other person or party involved in the Global Offering accepts
responsibility for any tax effects on, or liabilities of, any person resulting from the
subscription, purchase, holding, disposition of, or dealing in, the Shares or exercising any
rights attached to them.
OVER-ALLOTMENT OPTION AND STABILIZATION
Details of the arrangements relating to the Over-allotment Option and stabilization are set
out in the section headed “Structure of the Global Offering” in this prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–1 1 7–


--- page 127 ---
HONG KONG REGISTER OF MEMBERS AND HONG KONG STAMP DUTY
The Company’s principal register of members will be maintained by its principal share
registrar, Conyers Trust Company (Cayman) Limited in the Cayman Islands. All of the Shares
issued pursuant to the Global Offering will be registered on the Company’s Hong Kong share
register to be maintained in Hong Kong by its Hong Kong Share Registrar, Computershare
Hong Kong Investor Services Limited. Dealings in the Shares registered in our Company’s
Hong Kong share register will be subject to Hong Kong stamp duty. Unless determined
otherwise by our Company, dividends payable in Hong Kong dollars in respect of Shares will
be paid to the shareholders listed on the Hong Kong share register of our Company, by ordinary
post, at the shareholders’ risk, to the registered address of each shareholder.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the Shares on the Stock
Exchange and compliance with the stock admission requirements of HKSCC, the Shares will
be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS
with effect from the date of commencement of dealings in the Shares on the Stock Exchange
or any other date HKSCC chooses. Settlement of transactions between Exchange Participants
is required to take place in CCASS on the second settlement day after any trading day. All
activities under CCASS are subject to the General Rules of HKSCC and HKSCC Operational
Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS. Investors should seek the advice of their brokers or other professional advisors for
details of those settlement arrangements as such arrangements may affect their rights and
interests.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations of certain Renminbi
amounts into Hong Kong dollars, of Renminbi amounts into U.S. dollars and of Hong Kong
dollars into U.S. dollars at specified rates. Unless we indicate otherwise, the translation of
Renminbi into Hong Kong dollars, of Renminbi into U.S. dollars and of Hong Kong dollars
into U.S. dollars, and vice versa, in this prospectus was made at the following rates:
RMB0.9120 to HK$1.00
RMB7.1192 to US$1.00
HK$7.8062 to US$1.00
No representation is made that any amounts in Renminbi, Hong Kong dollars or U.S.
dollars can be or could have been at the relevant dates converted at the above rates or any other
rates or at all.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–1 1 8–


--- page 128 ---
LANGUAGE
If there is any inconsistency between the English version of this prospectus and the
Chinese translation of this prospectus, the English version of this prospectus shall prevail
unless otherwise stated. However, if there is any inconsistency between the names of any of
the entities mentioned in this English document which are not in the English language and their
English translations, the names in their respective original languages shall prevail.
ROUNDING
Any discrepancies in any table in this prospectus between total and sum of amounts listed
therein are due to rounding.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–1 1 9–


--- page 129 ---
DIRECTORS
Name Address Nationality
Executive Directors
XIE Fangmin ( ᑽ˙ઽ) Flat 1102
215 Huangpu Avenue Central
Tianhe District, Guangzhou
Guangdong Province
the PRC
Chinese
ZHOU Feng 151 Stevens Rd
#07-08
Singapore 257872
Singaporean
ZOU Y uming ( ཅρჼ) Flat C, 10F, Block 2
20 Shan Kwong Rd
Happy V alley
Hong Kong
American
Non-executive Director
David McKee HAND 10 Ridley Park
Singapore 248485
American
Independent non-executive
Directors
W ANG Haizhong (׀2201, No. 1
Manluyuan Sixth Street
Zhucun Street
Zengcheng District, Guangzhou
Guangdong Province
the PRC
Chinese
KANG Wei (ࠨRoom 202, Unit 2, Building 8
88 North East 4th Ring Road
Chaoyang District, Beijing
the PRC
Chinese
ZHU Xiaolu ( ϡʃ༩) Flat 1001, Unit 2, Block 2
9th Court Naoshikou Avenue
Xicheng District, Beijing
the PRC
Chinese
Please see the section headed “Directors and Senior Management” in this prospectus for
further details of our Directors.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 120 –


--- page 130 ---
PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Sponsors Citigroup Global Markets Asia Limited
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Sponsor-Overall Coordinators Citigroup Global Markets Asia Limited
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Overall Coordinators Citigroup Global Markets Asia Limited
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 121 –


--- page 131 ---
Joint Global Coordinators Citigroup Global Markets Asia Limited
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
China Galaxy International Securities
(Hong Kong) Co., Limited
20/F, Wing On Centre
111 Connaught Road Central
Hong Kong
Joint Bookrunners Citigroup Global Markets Asia Limited
(in relation to the Hong Kong Public
Offering)
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
Citigroup Global Markets Limited
(in relation to the International Offering)
33 Canada Square
Canary Wharf
London E14 5LB
United Kingdom
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 122 –


--- page 132 ---
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
China Galaxy International Securities
(Hong Kong) Co., Limited
20/F, Wing On Centre
111 Connaught Road Central
Hong Kong
China Everbright Securities (HK) Limited
33/F, Everbright Centre
108 Gloucester Road
Wan Chai
Hong Kong
China Merchants Securities (HK)
Co., Limited
48/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Citrus Securities Limited
Room 2201, 22/F, OfficePlus@Wan Chai
303 Hennessy Road
Wan Chai
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 123 –


--- page 133 ---
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central
Hong Kong
Fosun International Securities Limited
Suite 2101-2105, 21/F, Champion Tower
3 Garden Road
Central
Hong Kong
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
GF Securities (Hong Kong) Brokerage
Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Long Bridge HK Limited
Unit 3302, 33/F, West Tower
Shun Tak Centre
No. 168-200 Connaught Road Central
Hong Kong
Shenwan Hongyuan Securities (H.K.)
Limited
Level 6, Three Pacific Place
1 Queen’s Road East
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 124 –


--- page 134 ---
Tiger Brokers (HK) Global Limited
1/F, No. 308 Des V oeux Road Central
Sheung Wan
Hong Kong
Victory Securities Company Limited
11th Floor, Y ardley Commercial Building
3 Connaught Road West
Sheung Wan
Hong Kong
Yue Xiu Securities Company Limited
Rooms Nos. 4917-4937, 49/F,
Sun Hung Kai Centre
No. 30 Harbour Road
Wanchai
Hong Kong
Zhongtai International Securities Limited
19/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Joint Lead Managers Citigroup Global Markets Asia Limited
(in relation to the Hong Kong Public
Offering)
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
Citigroup Global Markets Limited
(in relation to the International Offering)
33 Canada Square
Canary Wharf
London E14 5LB
United Kingdom
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 125 –


--- page 135 ---
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
China Galaxy International Securities
(Hong Kong) Co., Limited
20/F, Wing On Centre
111 Connaught Road Central
Hong Kong
China Everbright Securities (HK) Limited
33/F, Everbright Centre
108 Gloucester Road
Wan Chai
Hong Kong
China Merchants Securities (HK)
Co., Limited
48/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Citrus Securities Limited
Room 2201, 22/F, OfficePlus@Wan Chai
303 Hennessy Road
Wan Chai
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central
Hong Kong
Fosun International Securities Limited
Suite 2101-2105, 21/F, Champion Tower
3 Garden Road
Central
Hong Kong
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 126 –


--- page 136 ---
GF Securities (Hong Kong)
Brokerage Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
Huatai Financial Holdings
(Hong Kong) Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Long Bridge HK Limited
Unit 3302, 33/F, West Tower,
Shun Tak Centre
No. 168-200 Connaught Road Central
Hong Kong
Shenwan Hongyuan Securities
(H.K.) Limited
Level 6, Three Pacific Place
1 Queen’s Road East
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, No. 308 Des V oeux Road Central
Sheung Wan
Hong Kong
Victory Securities Company Limited
11th Floor, Y ardley Commercial Building
3 Connaught Road West
Sheung Wan
Hong Kong
Yue Xiu Securities Company Limited
Rooms Nos. 4917-4937, 49/F,
Sun Hung Kai Centre
No. 30 Harbour Road
Wanchai
Hong Kong
Zhongtai International Securities Limited
19/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 127 –


--- page 137 ---
Capital Market Intermediaries Citigroup Global Markets Asia Limited
(in relation to the Hong Kong Public
Offering)
50/F, Champion Tower
Three Garden Road
Central
Hong Kong
Citigroup Global Markets Limited
(in relation to the International Offering)
33 Canada Square
Canary Wharf
London E14 5LB
United Kingdom
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Essence International Securities
(Hong Kong) Limited
39/F, One Exchange Square
Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
China Galaxy International Securities
(Hong Kong) Co., Limited
20/F, Wing On Centre
111 Connaught Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 128 –


--- page 138 ---
China Everbright Securities (HK) Limited
33/F, Everbright Centre
108 Gloucester Road
Wan Chai
Hong Kong
China Merchants Securities (HK) Co.,
Limited
48/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Citrus Securities Limited
Room 2201, 22/F, OfficePlus@Wan Chai
303 Hennessy Road
Wan Chai
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central
Hong Kong
Fosun International Securities Limited
Suite 2101-2105, 21/F, Champion Tower
3 Garden Road
Central
Hong Kong
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
GF Securities (Hong Kong) Brokerage
Limited
27/F, GF Tower
81 Lockhart Road
Wan Chai
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 129 –


--- page 139 ---
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
Long Bridge HK Limited
Unit 3302, 33/F, West Tower
Shun Tak Centre
No. 168-200 Connaught Road Central
Hong Kong
Shenwan Hongyuan Securities (H.K.)
Limited
Level 6, Three Pacific Place
1 Queen’s Road East
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, No. 308 Des V oeux Road Central
Sheung Wan
Hong Kong
Victory Securities Company Limited
11th Floor, Y ardley Commercial Building
3 Connaught Road West
Sheung Wan
Hong Kong
Yue Xiu Securities Company Limited
Rooms Nos. 4917-4937, 49/F,
Sun Hung Kai Centre
No. 30 Harbour Road
Wanchai
Hong Kong
Zhongtai International Securities Limited
19/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
Auditor and Reporting Accountants KPMG
Certified Public Accountants
8/F, Prince’s Building
10 Chater Road
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 130 –


--- page 140 ---
Legal Advisors to the Company As to Hong Kong and U.S. laws:
Kirkland & Ellis
26/F, Gloucester Tower
The Landmark
15 Queen’s Road Central
Hong Kong
As to PRC laws:
Zhong Lun Law Firm
6/10/11/16/17F, Two IFC
8 Century Avenue
Pudong New Area
Shanghai, the PRC
As to Cayman Islands laws:
Conyers Dill & Pearman
29th Floor, One Exchange Square
8 Connaught Place, Central
Hong Kong
Legal Advisors to the Joint Sponsors and
the Underwriters
As to Hong Kong and U.S. laws:
Sullivan & Cromwell (Hong Kong) LLP
20th Floor, Alexandra House
18 Chater Road, Central
Hong Kong
As to PRC laws:
Jingtian & Gongcheng
34/F, Tower 3
China Central Place
77 Jianguo Road
Chaoyang District
Beijing, the PRC
Industry Consultant China Insights Industry Consultancy
Limited
10F, Block B, Jing’an International Center
88 Puji Road, Jing’an District
Shanghai, the PRC
Receiving Bank The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 131 –


--- page 141 ---
Registered Office Cricket Square
Hutchins Drive
PO Box 2681
Grand Cayman
KY1- 1111
Cayman Islands
Head Office and Principal Place of
Business in the PRC
Floor 1-2, 4th Street
Building S, Kehui Jingu
No. 99, Science Avenue
Luogang Science City
Huangpu District
Guangzhou
Guangdong Province
the PRC
Principal Place of Business in Hong Kong 31/F, Tower Two, Times Square
1 Matheson Street
Causeway Bay
Hong Kong
Company’s Website investors.jianke.com
(A copy of this prospectus is available on
the Company’ s website. Except for the
information contained in this prospectus,
none of the other information contained on
the Company’ s website forms part of this
prospectus.)
Joint Company Secretaries ZOU Y uming ( ཅρჼ)
Flat 10C
20 Shan Kwong Road
Happy V alley
Hong Kong
FUNG Po Ting ( ඹᘒణ)
(ACG, HKACG )
31/F, Tower Two, Times Square
1 Matheson Street
Causeway Bay
Hong Kong
CORPORATE INFORMATION
– 132 –


--- page 142 ---
Authorised Representatives XIE Fangmin ( ᑽ˙ઽ)
Flat 1102
215 Huangpu Avenue Central
Tianhe District, Guangzhou
Guangdong Province
the PRC
ZHOU Feng
151 Stevens Rd
#07-08
Singapore 257872
Audit Committee ZHU Xiaolu (Chairman)
W ANG Haizhong
KANG Wei
Remuneration Committee KANG Wei (Chairlady)
ZHU Xiaolu
David McKee HAND
Nomination Committee XIE Fangmin (Chairman)
ZHU Xiaolu
W ANG Haizhong
Compliance Advisor Somerley Capital Limited
20/F China Building
29 Queen’s Road Central
Hong Kong
Hong Kong Share Registrar Computershare Hong Kong
Investor Services Limited
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong
CORPORATE INFORMATION
– 133 –


--- page 143 ---
Principal Share Registrar and
Transfer Office
Conyers Trust Company (Cayman)
Limited
Cricket Square
Hutchins Drive
PO Box 2681
Grand Cayman KY1- 1111
Cayman Islands
Principal Banks HSBC Bank (China) Company Ltd.
Unit 06-11, 11F, Block A, Huakai Plaza
Y uan Mei Road, Nancheng District
Dongguan, Guangdong Province
the PRC
China Merchants Bank Guangzhou
Branch Development District Sub-branch
286 Kexue Avenue, Kexuecheng
Guangzhou, Guangdong Province
the PRC
CORPORATE INFORMATION
– 134 –


--- page 144 ---
The information and statistics set out in this section and other sections of this
prospectus were extracted from the report prepared by CIC, which was commissioned by
us, and from various official government publications and other publicly available
publications. We engaged CIC to prepare the CIC Report, an independent industry report,
in connection with the Global Offering. The information from official government sources
has not been independently verified by us, the Joint Sponsors, the Sponsor-Overall
Coordinators, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, the Capital Market
Intermediaries, any of their respective directors and advisers, or any other persons or
parties involved in the Global Offering, and no representation is given as to its accuracy.
SOURCE OF INFORMATION
We commissioned CIC, a market research and consulting company and an Independent
Third Party, to conduct research and analysis of, and to produce a report on, the chronic disease
management market in China for the period from 2015 to 2030 (the “ CIC Report ”). The CIC
Report has been prepared by CIC independent of the influence of our Group and other
interested parties. We have agreed to pay CIC a total fee of RMB1,090,000 for the preparation
and use of the CIC Report, and we believe that such fees are consistent with the market rate.
CIC is a consulting firm founded in Hong Kong and provides professional industry consulting
services across multiple industries. CIC’s services include industry consultancy services,
commercial due diligence and strategic consulting.
In compiling and preparing the report, CIC conducted both primary and secondary
research using a variety of resources. Primary research involved interviewing key industry
experts and leading industry participants. Secondary research involved analyzing data from
various publicly available data sources, including but not limited to the National Bureau of
Statistics, National Healthcare Security Administration, National Medical Products
Administration, the NHC, World Health Organization, and CIC’s database. The market
projections in the CIC report are based on the following key assumptions: (i) the overall social,
economic and political environment in China is expected to remain stable during the forecast
period; (ii) China’s economic and industrial development is likely to maintain a steady growth
trend over the next decade; (iii) related key industry drivers are likely to propel continued
growth in China’s healthcare industry throughout the forecast period; (iv) the negative impact
caused by COVID-19 outbreak on the industry is expected to be limited, taking into account
the COVID-19 pandemic has driven a sharp increase in demand and supply of online healthcare
services and fostered the habit of physicians and patients using online platforms for consulting,
drug ordering and health/disease management; and (v) there is no extreme force majeure or
industry regulation in which the market may be affected dramatically or fundamentally.
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OVERVIEW OF THE HEALTHCARE INDUSTRY IN CHINA
China has a significant healthcare sector, with sizable and steadily increasing healthcare
expenditure. According to CIC, China’s healthcare expenditure grew from RMB4,097 billion
in 2015 to RMB9,961 billion in 2023, representing a CAGR of 11.7%, and is expected to reach
RMB19,369 billion in 2030, representing a CAGR of 10.0%. Chronic disease management
expenditure as a percentage of total healthcare expenditure in China increased from 59.2% in
2015 to 77.7% in 2023 and is expected to continue to increase and reach 80.2% in 2030,
according to CIC. The following chart illustrates China’s historical and projected expenditure
from 2015 to 2030.
Healthcare expenditures in China, 2015-2030E
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2026E2025E 2027E 2028E 2029E 2030E
Chronic disease management
Overall
CAGR 2015-2023 2023-2030E
15.6% 10.5%
11.7% 10.0%
RMB billion
2,426 2,858 3,394 3,953 4,564 4,976 6,010 6,853 7,738 8,649 9,628 10,637 11,741 12,918 14,177
15,536
1,672 1,776 1,866 1,960
2,020 2,241
2,048
2,116
2,223
2,390
2,578
2,822
3,059
3,313
3,577
3,833
4,097 4,634 5,260
5,912
6,584
7,218
8,058
8,969
9,961
11,039
12,206
13,459
14,800
16,231
17,753
19,369
Source: the CIC report
According to CIC, China’s healthcare expenditure is primarily driven by the following
factors:
 Aging population . China’s population aged 65 and above reached 216.8 million in
2023, accounting for 15.4% of China’s total population, and is expected to reach
259.1 million in 2030, or 18.3% of the total population. China’s demographic shift
is expected to create significant demand for healthcare products and healthcare
services, particularly as the elderly population generally have a greater need for
medication and disease management. The growing incidence of chronic disease in
China is primarily due to population aging and lifestyle changes.
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 Rising per capita disposable income. Along with economic growth and urbanization,
Chinese residents’ disposable income has continued to rise. From 2015 to 2023,
annual per capita disposable income increased from RMB21,966.2 to RMB39,218.0,
representing a CAGR of 7.5%. Personal medical spending is expected to represent
an increasingly meaningful portion in an individual’s consumption, reaching an
estimated 11.1% of total per capita consumption expenditure in China by 2030
according to CIC.
 Growing health awareness. Individuals are increasingly demanding greater control
over the management of their health and well-being, driven by shifting
demographics, a growing prevalence of chronic diseases, as well as technological
advancement that have enabled more diseases to be treated, or be preventable or
detectable at an earlier stage.
Despite the increasing healthcare demand and expenditures in China, quality medical
resources remain scarce and unevenly distributed.
Online Healthcare Retail and Services Market in China
The online healthcare retail and services market in China represents healthcare services
provided through to-consumer pharmaceutical retail and online-to-offline (O2O) retail, as well
as online medical consultation services. The market size of online healthcare retail and services
market in China in terms of sales revenue grew significantly from RMB6.1 billion in 2015 to
RMB330.4 billion in 2023, and is expected to further increase at a CAGR of 26.6% from 2023
to reach RMB1,722.9 billion in 2030, according to CIC. The chart below sets forth the online
healthcare retail and services market in China in terms of sales revenue from 2015 to 2030.
Online healthcare retail and services market in China, in terms of sales revenue,
2015-2030E
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2026E2025E 2027E 2028E 2029E 2030E
RMB billion
Online healthcare retail and services market in China 64.7% 26.6%
CAGR 2015-2023 2023-2030E
6.1 11.1 21.1 41.6 70.9 129.4
194.5
275.2 330.4
426.4
543.5
688.1
867.1
1,090.0
1,722.9
1,369.7
Source: the CIC Report
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The online healthcare retail and services market in China is fragmented. The following
table sets out the competitive landscape of the online healthcare retail and services market in
China in terms of sales revenue in 2023.
Competitive landscape of online healthcare retail and services market in China
Company
Company A(1)
Company B(2)
Company C(3)
Our Group
Company D(4)
Listed Online retail pharmacy
Online retail pharmacy
Pharmaceutical O2O and
drug express business
Chronic disease management
Online medical consultation
Listed
Listed
Not listed
Listed
~19.3%
~10.7%
~1.3%
0.8%
~0.7%
1
2
3
4
5
Market share in terms
of sales revenue Listing status Business focus
Notes:
1. Company A, founded in 2019, is a leading online business-to-consumer platform, which provides
pharmaceutical products in China. It is a listed company on the Hong Kong Stock Exchange, with its
business focusing on online retail pharmacy, online medical consultation and health management
services.
2. Company B, founded in 2014, is a leading online business-to-consumer platform, which provides
pharmaceutical products in China. It is a listed company on the Hong Kong Stock Exchange, with its
business focusing on online retail pharmacy, online medical consultation and digital medical marketing
services.
3. Company C, founded in 2014, is a pioneer in providing express digital healthcare service in China. It
is a listed company on the Hong Kong Stock Exchange, with its business focusing on pharmaceutical
retail and medical consultation, primarily with online-to-offline solutions.
4. Company D, founded in 2014, is a leading online platform, which provides online medical services in
China. It is a listed company on the Hong Kong Stock Exchange, with its business focusing on online
medical consultation, health management and online pharmaceutical retail services.
CHINA’S CHRONIC DISEASE MANAGEMENT MARKET
Introduction to Chronic Disease Management
Chronic disease management (CDM) is the consistent care and support for chronic
disease patients, requiring professional medical care, in-depth knowledge and various
additional resources from the entire healthcare system. Chronic disease management provides
patients with a wide spectrum of medical services and products, including physician
consultation, medical treatment and prescription drugs. The success of CDM usually involves
the engagement of multiple stakeholders, including, but not limited to, physicians, patients,
healthcare institutions, relevant government sectors, pharmaceutical companies, pharmacies,
insurance companies, as well as online platforms.
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The prevalence of chronic disease in China continues to rise. According to CIC, the most
common chronic diseases in China primarily include hypertension, chronic respiratory
diseases, diabetes and hepatitis B. Due to China’s rising prevalence of chronic diseases,
demand for healthcare services and products is expected to continue to grow with a strong
momentum. Patients with chronic diseases require periodic medical consultations and regular
drug refills to manage the disease. According to CIC, although prescription drugs for chronic
disease patients are available at online or offline retail pharmacies, the majority of patients
with chronic diseases in China tend to seek treatment in offline hospitals and obtain
prescription drugs from offline hospital pharmacies. The chart below illustrates the CDM
system in China.
General
hospitals
Community
hospitals Clinics
Internet
hospitals
Healthcare Institutions
In-hospital pharmacies
Out-hospital pharmacies
Online retail pharmacies
Pharmacies Chronic disease
patients
Consultation
&
prescription
Drug
delivery
or
Purchase
in store
Payment
Payment
Basic national
medical insurance
Out-of-pocket payment
Commercial insurance
Source of
payment
Medical
prescription
China Banking and Insurance
Regulatory Commission
Supervision
National Healthcare
Security Administration
National Medical
Products Administration
National Health
Commission
Supervision
Supervision
Source: the CIC report
The chronic disease management system in China faces a number of challenges, including
the lack of professional medication instruction, inconvenience in drug purchase and refills, and
inadequate treatment adherence. Due to the uneven distribution of medical resources in China,
patients typically need to spend substantial time commuting to hospitals and queuing for
follow-up consultations. After the conclusion of each consultation session, the connection
between patients and physicians is typically not maintained. As a result, patients face difficulty
in making a follow-up appointment with the same physician and may lose treatment continuity.
In the absence of ongoing medical guidance, patients may fail to follow physicians’
instructions for taking medications or obtaining timely prescription refills.
Despite increasing demand and expenditure for CDM services, quality medical resources
remain scarce in China and their distribution is uneven, which has become a structural
weakness in CDM. In addition, long queuing times at hospitals, lack of maintenance
mechanisms for the long-term physician-patient relationships, lack of effective patient
management tools and limited selection of prescription drugs also pose challenges to effective
CDM.
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Market Size of China’s Chronic Disease Management Market
The overall market size of CDM market in China in terms of GMV grew rapidly from
RMB2,425.5 billion in 2015 to RMB7,737.5 billion in 2023, representing a CAGR of 15.6%,
and is expected to continue to grow at a CAGR of 10.5% from 2023 to 2030 and reach
RMB15,535.8 billion in 2030. Our GMV refers to gross merchandise volume, the total value
of all orders placed on the Jianke Platform and through third-party e-commerce platforms.
Major segments of the CDM market in China include services provided to individual
consumers, businesses and hospitals. To-consumer CDM services include medical consultation
and retail pharmacy services provided through either online or offline channels to individual
patients, while online to-consumer CDM services only represent those to-consumer CDM
services provided through online channels. Revenue generated from to-consumer CDM
services are directly paid by the individual patients. The rest of CDM market include
CDM-related services provided to other types of customers (such as businesses and medical
institutions) as well as medical treatments and physical examinations provided for chronic
disease patients that could only be conducted by offline medical institutions. To-consumer
CDM market includes all services that can be extended online in order to leverage the market
potential of online platforms. Since physical examinations that can only be conducted in offline
medical institutions, such services are not included in the to-consumer CDM market.
To-business CDM services are provided to business customers and the revenue generated from
such services are paid by the businesses instead of individuals. Typical to-business CDM
services include distribution services of chronic disease drugs, where service providers
purchase drugs from manufacturers or other sources, and distribute such drugs to other
businesses, such as pharmacies or hospitals. Such a business model is more similar to a trading
and distribution business, which is fundamentally different from to-consumer CDM services
that serve individual patients. To-hospital CDM services refer to the construction of
information system (such as SaaS) for hospitals that facilitates the treatment and management
of chronic disease patients. Typical functions of such information system include online
registration, electronic prescription and personal digital records for chronic disease patients.
Other segments of CDM market include physical examinations and treatment for patients with
chronic diseases that can only be conducted in offline medical institutions. These services
cannot be provided through Internet hospitals or online CDM platforms.
To-consumer CDM market has significant potential, which is primarily driven by the
increasing aging population with chronic disease in China, while the capacity of Class III
hospitals which provide better medical services in China is limited. The market size of
to-consumer CDM market grew at a CAGR of 13.9% from RMB543.4 billion in 2015 to
RMB1,541.0 billion in 2023, and is expected to continue to grow and reach RMB3,732.7
billion in 2030, representing a CAGR of 13.5%. According to CIC, the market size of
to-consumer CDM market is projected to grow at a faster pace than the overall CDM market
in China from 2023 to 2030. The following diagram sets forth the historical and forecast market
size of China’s CDM market from 2015 to 2030.
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China’s chronic disease management market, 2015-2030E
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2026E2025E 2027E 2028E 2029E 2030E
RMB billion
To-consumer CDM market 13.9%
15.6%
13.5%
10.5%Overall
CAGR 2015-2023 2023-2030E
1,882.1 2,238.6 2,686.1 3,147.7 3,642.3 3,983.7 4,805.2 5,490.7 6,196.5 6,912.0 7,672.6 8,430.7 9,244.4
10,933.7 11,803.1
543.4 619.8 708.2 804.9 921.8 992.4
1,205.2
1,362.7
1,541.0
1,736.9
1,955.4
2,206.4
2,496.6
2,837.3
3,732.7
3,242.9
2,425.5 2,858.4 3,394.3 3,952.6 4,564.1 4,976.1
6,010.4
6,853.4
7,737.5
8,648.9
9,628.0
10,637.1
11,741.0
12,917.5
14,176.6
15,535.8
10,080.2
Source: the CIC report
The to-consumer CDM market in China consists of online and offline sectors, which
represent the medical consultations and retail pharmacy services provided to individual end
customers through online and offline channels, respectively. According to CIC, online
to-consumer CDM platforms primarily provide online consultation and retail pharmacy
services to end customers. The market size of online to-consumer CDM market in terms of
GMV grew significantly from RMB0.5 billion in 2015 to RMB45.5 billion in 2023,
representing a CAGR of 75.6%, and is expected to further increase at a CAGR of 44.5% from
2023 to 2030 and reach RMB599.5 billion in 2030. In addition, the penetration rate of online
to-consumer CDM market increased from 0.1% in 2015 to 2.9% in 2023 and is expected to
continue to grow and reach 16.1% in 2030, according to CIC. The chart below sets forth the
to-consumer CDM market in terms of GMV from 2015 to 2030.
China’s chronic disease management (to-consumer) market,
in terms of GMV , 2015-2030E
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2026E2025E 2027E 2028E 2029E 2030E
RMB billion
Online to-consumer CDM
Offline to-consumer CDM
Penetration rate of online CDM
75.6%
13.9%
44.5%
13.5% 11.1%
13.5%Overall
CAGR 2015-2023 2023-2030E
542.9 618.9 706.6 802.0 916.2 979.2 1,185.7 1,335.1 1,496.0 1,670.0 1,859.1 2,065.7
2,292.8 2,543.6
2,822.2
3,133.1
140.6
203.9
293.7
420.7
599.5
3,732.6
0.90.5
8.2%
0.1%
2,837.3
0.1%
13.2
0.2%
3,242.9
0.6%
1.6
1,955.4
1,205.3
2.9
0.4%
5.5
6.4%
1.3%
2,496.7
543.4
2.0%
19.6
804.9
619.8
1.6%
27.6
1,362.7 45.5
2.9%
3.9%
708.2
4.9%
10.4%
13.0%
16.1%
921.7 992.4
1,541.5
1,736.9
2,206.3
66.9
96.3
Source: the CIC report
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CHINA’S ONLINE CHRONIC DISEASE MANAGEMENT MARKET
Introduction of Online Chronic Disease Management
Online chronic disease management refers to the provision of chronic disease
management services through an online platform, typically including online consultation and
sales of chronic disease medicines through online pharmacies. Online CDM platforms are
online platforms that focus on providing an efficient and effective solution to address the needs
of chronic disease patients, with revenue primarily contributed by CDM. Compared to
traditional offline chronic disease management platforms, including public hospitals, online
platforms streamlines the CDM process by saving patients’ time spent on traffic and queues to
obtain drugs from hospitals or pharmacies, and making face-to-face appointment with
physicians for follow-up consultations or repeat prescriptions. It provides particular
convenience for elderly patients who face greater transportation barriers to offline CDM
platforms. In addition, online platforms usually have access to more pharmaceutical products
than hospitals or offline pharmacies, providing physicians and patients a greater variety of
treatment options. Due to the convenience and benefits that online CDM platforms provide,
users of online CDM platforms typically make repeat purchase of pharmaceutical products or
repeat appointment for physician consultations.
Moreover, online CDM platforms typically have databases to store patients’ medical
records, making it easy for patients to share their past medical history with registered
physicians on the platform, which in turn facilitate patient consultation and communications
with physicians. By accumulating and conducting analysis on collected user data, online
platforms can obtain deeper insights into patients’ habits and preferences. Such insights enable
multiple players in the industry chain, including pharmaceutical companies, hospitals, as well
as the online platforms themselves, to provide better services tailored to the needs of chronic
disease patients.
Market Size of China’s Online Chronic Disease Management Services
Driven by the vast needs of chronic disease patients in China, the total GMV generated
from the online CDM market in China increased from RMB27.6 billion in 2015 to RMB178.1
billion in 2023, at a CAGR of 26.3%, and is expected to reach RMB1,153.9 billion in 2030 at
a CAGR of 30.6%.
China’s online chronic disease management market,
in terms of GMV , 2015-2030E
19.6
33.5
63.7
83.8
27.6 34.4 41.3
0.5 51.8 65.1 64.7
54.7 70.6 77.95.5 13.2
1,153.9
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2026E2025E 2027E 2028E 2029E 2030E
103.4
RMB billion
To-consumer
Others
75.6%
22.5%
26.3%
44.5%
22.7%
30.6%Overall
CAGR 2015-2023 2023-2030E
0.9 1.6 2.9
27.1 39.7
45.5 66.9
96.3
140.6
203.9
293.7
420.7
599.5
105.8 132.6 164.2 251.4202.1
310.0 379.1 460.1
554.4
513.9
672.8
880.8
133.4 178.1
231.1
298.4
392.0
27.6
Source: the CIC report
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The online CDM market comprises both online to-consumer platforms and online
platforms that provide CDM services to businesses and hospitals. Online to-consumer CDM
platform mainly offers online medical consultation and online retail pharmacy services to
individual customers with chronic conditions, allowing patients to purchase prescription drugs
online and obtain drug refills in time. Online to-consumer CDM services are typically provided
through websites, mobile applications and WeChat mini programs. Among these channels or
interfaces, the mobile application interface is growing rapidly in line with the mobile trend.
Although the COVID-19 pandemic has come under control, the user adoption of online
to-consumer healthcare services and the consumer habits cultivated will continue to persist.
After experiencing the convenience brought by online consultations, online drug purchase and
online chronic disease management services during the pandemic years, consumers have
developed behavioral changes and will continue to maintain this habit in the future. Moreover,
driven in part by the pandemic, the infrastructure for online to-consumer healthcare services
has matured, with the ability to support more services online, thereby driving market growth.
The total GMV generated from China’s online to-consumer CDM market grew from RMB0.5
billion in 2015 to RMB45.5 billion in 2023, representing a CAGR of 75.6%, and is expected
to reach RMB599.5 billion in 2030, representing a CAGR of 44.5%.
Competitive Landscape of China’s Online Chronic Disease Management Market
As of December 31, 2023, there were over 50 service providers in the online chronic
disease management market in China, according to CIC. Our Group was the largest online
chronic disease management platform in China in terms of MAU in 2023. We ranked third in
the online to-consumer chronic disease management market in China in terms of GMV
generated from online direct CDM sales with a market share of approximately 1.3%, according
to CIC.
The table below sets forth the top five players in China’s online to-consumer CDM market
in terms of GMV generated from online direct sales in 2023:
Company
GMV related to
CDM business(1)
(RMB billion)
Company A
Company B
Our Group
Company E(3)
Company D
Market share
in China’s
to-consumer
online CDM market
~7.5%
~5.7%
5.1%
~4.8%
NA
Market share in
China’s online
CDM market
~1.9%
~1.5%
1.3%
~1.2%
~0.6%
Listing status
Specialized
online CDM
platform(2)
Listed
Listed
Not listed
Not listed
Listed
×
×
√
√
×
~3.4
~2.6
2.3
~2.2
~1.0
1
2
3
4
5
Notes:
1. Only include GMV generated from online direct sales of each company, including online direct sales through
third-party platforms. GMV generated by third-party retailers on the company’s platform is not included.
2. A platform is defined as a specialized online CDM platform if it is primarily dedicated to providing service,
such as online consultations and online retail pharmacy services to patients with chronic diseases, and the
GMV associated with CDM business accounts for over 50.0% of its total GMV .
3. Company E is a specialized online CDM platform that mainly provides online consultation, online retail
pharmacy services and health management services to chronic disease patients, as well as AI assistance and
data support services to physicians in medical institutions.
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Drivers and Future Trends of Online Chronic Disease Management in China
According to CIC, the following factors are drivers and trends for the growth of online
chronic disease management in China:
 Limited capacity of Class III hospitals . China has a large population with chronic
diseases, driving the demand for chronic disease management services. According to
CIC, chronic disease patients in China tend to visit large hospitals, especially Class
III hospitals, expecting to receive better medical services. As a result, patients with
chronic diseases have long taken up a substantial portion of medical resources in
Class III hospitals for medicine and follow-up consultations, over-burdening the
resource-constrained public hospitals. Undertaking most of the chronic disease
management services, Class III hospitals have become overloaded and inefficient,
failing to meet patients’ expectation. By offering chronic disease patients convenient
access to follow-up consultations and prescriptions, online chronic disease
management platforms can help alleviate the burden on Class III hospitals and
improve their efficiency. As such, the PRC government supports the use of Internet
hospital services as part of its overarching public health goal of relieving the burden
on major hospitals in China, and promoting online options for patients who only
need routine consultations and periodic prescriptions.
 Growing out-of-hospital prescription market. The PRC government has promulgated
a series of policies limiting pharmaceutical sales through public hospitals. As a
result, it has become increasingly difficult for pharmaceutical companies to
distribute their products through hospital pharmacies. Pharmaceutical companies
have sought alternative distribution channels, such as online platforms, to expand
sales and obtain accurate market data for marketing analysis. Meanwhile, hospital
pharmacies have reduced their selection of available drugs, often excluding
high-priced chronic disease medications, such as imported originator drugs and
specialty drugs. Online CDM platforms has been playing a more important role to
address the needs of both pharmaceutical companies and chronic disease patients.
Although national reimbursement provides coverage for the broadest population on
fundamental medical care, it does not fully cover the innovative drugs for chronic
or critical diseases. As a result, chronic disease patients still need to pay
out-of-pocket for medical services beyond the basic level covered by national
reimbursement. In addition, national reimbursement has relatively low coverage rate
in rural areas, and for patients treated in non-local hospitals, especially those in
other provinces, they cannot directly be reimbursed for the medical expenses, and it
is complicated to apply for reimbursement. Considering the limited coverage of
national reimbursement, online CDM platforms, in contrast, which face patients
nationwide and provide more choices of innovative chronic disease drugs, have
more advantages than offline hospitals.
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 National reimbursement payment available for online medication. The growth of
online chronic disease management has been limited by China’s medical insurance
system, which only allows for reimbursement for drugs purchased from hospitals or
offline pharmacies. Since September 2019, the National Medical Insurance
Administration has issued a series of policies allowing Internet-based medical
services to be covered by the medical insurance system. The COVID-19 pandemic
outbreak has further accelerated the development of China’s online healthcare
services in various aspects, including the online payment and reimbursement for
drug purchases, thereby further promote the development of the online chronic
disease management platforms.
 Increasing acceptance of online medical services. Y ounger patients are generally
more willing to accept online medical services compared to elderly patients.
However, the suspension of most of the non-emergency services at public hospitals
during the COVID-19 outbreak led to elderly patients’ increasing adoption of online
medical services. As a result, the number of consultations on various online
platforms has increased significantly. According to CIC, patients across a range of
age groups are expected to adopt online chronic disease management in the future.
Challenges for Online CDM Platforms in China
According to CIC, market challenges for online CDM platforms in China include:
 In order to ensure successful treatment, patients with chronic diseases should adhere
to their medication schedule and provide feedback to their physicians on a regular
basis. Unfortunately, due to inadequate disease condition awareness, a significant
portion of chronic disease patients may fail to comply with their physician’s
prescribed treatment regimen. To promote sustained patient adherence, online
chronic disease management (CDM) platforms can provide reminders for patients to
purchase and take their medication on time, and physicians on these platforms can
conduct regular follow-up consultations with their patients.
 Managing chronic diseases necessitates the involvement of licensed physicians who
can offer medical consultations and medication instructions to patients. In addition,
professional pharmacists are required to review prescriptions and supervise drug
management. Establishing such a professional team and refining overall chronic
disease management procedures typically takes a significant amount of time for a
platform.
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Costs and Price Trend for the Online CDM Platform Market in China
The costs for online CDM platforms in China primarily consist of the procurement costs
for chronic disease drugs. The diagram below sets forth the historical and expected bid prices
of some best-selling chronic disease drugs at retail pharmacies:
Average Bid Prices (Per Tablet) of Best-Selling Chronic Disease Drugs
in Retail Pharmacies, 2016-2026E
90
10
0
100
110
120
130
2025E20182016 2017 2019 2024E 2020 2021 2022 2023 2026E
Biktarvy tablets (Gilead)
Dienogest tablet (2mg) (Bayer)
Valsartan and Amlodipine tablets (I) (80mg/5mg) (Novartis)
Sildenafil tablets (100mg) (Pfizer)
Nifedipine controlled-release tablets (30mg) (Bayer)
RMB
Source: the CIC report
The procurement prices of most chronic disease drugs have remained relatively stable in
recent years and are expected to keep constant in the future.
Key Entry Barriers in Online Chronic Disease Management Platform in China
New market entrants to the online chronic disease management market are confronted
with a number of barriers, including those relating to:
 Physician resources. To manage the long-term healthcare needs of users, platforms
providing online services to patients require substantial amount of resources on the
supply side and in-depth collaboration with physicians. Such resources typically
include collaboration with physicians with expertise in certain diseases, access to
hospitals and other healthcare institutions (such as medical imaging centers), as well
as in-house experts responding to users’ consultation requests. It would be difficult
and expensive for new entrants to establish an extensive network with practicing
physicians and hospitals and recruit a team of capable medical professionals in the
short term.
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 Accumulation of data. As online chronic disease management platforms are
data-driven, a market player’s capabilities in collecting and processing data are
crucial to its success. All these capabilities, however, are relatively difficult for
market entrants to obtain within a short period of time. Information in relation to
medical cases is also important for online chronic disease management platform
industry participants, including physicians, hospitals, pharmaceutical companies,
and online healthcare platforms. Physicians and medical institutions require
customer feedback to conduct research, and pharmaceutical companies require
customer feedback to formulate their business strategies. Online chronic disease
management platforms could build up connection and strengthen the collaboration
with such industry participants through data accumulation and analysis. However, it
takes substantial time for an online chronic disease management platform to
accumulate data, thereby becoming a barrier to their success.
 Infrastructure to ensure data privacy . Security and confidentiality of patient data is
critically important to online chronic disease management platforms. Any failure or
perceived failure to protect patients’ confidential information may result in the loss
of substantial or all users on the platform. An online chronic disease management
platform needs to develop a robust IT infrastructure and continuously strengthen its
data protection system to ensure the protection of users’ data. The establishment and
implementation of a stringent internal control over data collection, processing and
sharing is also critical for an online chronic disease management platform to protect
user’s privacy. It takes substantial capital and technical resources to build up,
maintain and continuously strengthen such system, which poses challenges for new
entrants.
 Reputation and customer retention . According to CIC, patients tend to consult
physicians and purchase drugs from familiar sources, such as established chronic
disease management platforms with solid reputation or platforms/physicians
referred by trusted persons. Therefore, new platforms with limited operating history
and little market recognition may find it difficult to attract customers. Chronic
disease patients tend to establish a long-term relationship with one or a few
physicians on a certain chronic disease management platform for follow-up
consultations. The records of the patients’ long term health conditions as well as
prescription and treatment history accumulated on such platform would be difficult
to transfer to another platform. As a result, chronic disease patients are likely to stay
with a chronic disease management platform. Online chronic disease management
platforms with long operating history and wide customer base are likely to develop
high customer retention, making it difficult for new entrants to attract customers.
 Regulatory barriers. According to CIC, chronic disease patients have a solid
demand for prescription drugs. Selling prescription drugs to patients online can
provide convenient access to drug refills for patients and can bring stable source of
revenue to the platform. However, sales of prescription drug is strictly regulated in
China. Companies that distribute and sell prescription and/or OTC drugs are
required to obtain licenses to do so, and abide by various laws and regulations,
which is a barrier for new entrants.
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 Relationship with pharmaceutical companies. Online chronic disease management
platforms require substantial amount of resources on the supply side in order to
fulfill the long-term healthcare and treatment demands of users. Large-scale players
are more likely to succeed in building online CDM platforms as they usually have
built up and maintained good relationships with pharmaceutical companies, which
enable them to have a stable supply of drugs with competitive prices.
OVERVIEW OF DIGITAL HEALTHCARE MARKETING SERVICES IN CHINA
Healthcare marketing services primarily refer to promotional outreach and
communications by healthcare product and service providers that are designed to drive sales
for pharmaceutical and medical device companies. According to CIC, digital healthcare
marketing solutions in China can be categorized into (i) patient education services; (ii) medical
content creation services; and (iii) digital detailing services.
 Patient education services are designed to help healthcare companies educate
patients by distributing customized content produced by qualified physicians about
medical knowledge or healthcare information on their platforms (including
websites, mobile applications, WeChat mini programs and official accounts). This
service is committed to improving patient medication adherence, and ultimately
increase sales for pharmaceutical companies. Service providers can utilize their
patient management services to provide patients with guidance and regular
follow-ups after online consultations and help them follow their treatment regimens,
which can ultimately increase the sales for pharmaceutical companies.
 Medical content creation services are mainly online medical education courses
sponsored by healthcare companies which are designed in text and multimedia
formats to help patients gain medical knowledge. Sponsored medical programs can
also be offered to physicians, allowing the pharmaceutical and medical device
companies to increase their brand awareness. Sponsored medical programs can take
a variety of forms, including recorded lectures, live lectures, online medical
conferences hosted by physicians and interviews with physicians.
 Digital detailing services help pharmaceutical companies deliver customized
content, including, among others, drug information and indication, treatment
methods and medical academic research to their target physicians through multiple
channels, such as websites, mobile applications or WeChat mini programs, thereby
increasing physicians’ awareness and understanding of the pharmaceutical
companies’ products, which in turn influences their prescribing decisions and drives
the sales of the pharmaceutical companies’ prescription drugs. In addition, digital
detailing services allow medical representatives to directly connect with target
physicians to present the benefits of the companies’ products and communicate
product updates through digital platforms.
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Key Benefits and Market Drivers
Increased Efficiency
Compared to traditional marketing relying on face-to-face interactions with medical
representatives, digital marketing can reach a wider group of physicians more efficiently and
achieve better return on marketing spending. Digital marketing is less expensive for than
traditional marketing. For example, the customized content can be directly delivered to many
physicians and patients at the same time through an online platform and online academic
conferences or online visits can save significant costs that would otherwise be incurred in
offline events. In addition, online marketing campaigns can be implemented more rapidly than
traditional marketing campaigns that require in-person interaction. Corporate customers are
also able to obtain feedback on their online marketing campaigns on a real-time basis.
Favorable Government Policies
China has adopted various policies including centralized procurement and the
“two-invoice” policy to improve the financial sustainability of its basic medical insurance.
Since the rollout of these policies, drug and medical device prices have been on a downward
trend and healthcare companies are in urgent need of controlling sales costs, increasing the
demand for cost-effective marketing tools, such as precision digital marketing.
Market Size of Digital Healthcare Marketing Services in China
The market size of digital healthcare marketing services in China in terms of service fees
grew rapidly from RMB3.5 billion in 2015 to RMB59.4 billion in 2023, representing a CAGR
of 42.5%, and is expected to continue to grow at a CAGR of 22.8% from 2023 to 2030 and
reach RMB250.5 billion in 2030. The following diagram sets forth the historical and forecast
market size of the digital healthcare marketing services in China from 2015 to 2030.
Market Size of Digital Healthcare Marketing Services in China, 2015-2030E
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2026E2025E 2027E 2028E 2029E 2030E
RMB billionDigital healthcare marketing services 42.5% 22.8%
CAGR 2015-2023 2023-2030E
3.5 3.3 2.9 4.9 9.1 17.0
27.4
41.8
59.4
81.4
105.8
132.7
161.3
191.0
250.5
220.9
Source: the CIC report
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Competitive Landscape of Digital Healthcare Marketing Services Market in China
The digital healthcare marketing services market in China is highly fragmented. The top
five service providers had a total market share of approximately 10.5% in terms of revenue in
2023. Our Group had a market share of approximately 0.1% in the digital healthcare marketing
services market in China as measured by revenue generated from such services in 2023,
according to CIC. The table below sets forth the five largest digital healthcare marketing
service providers in China in terms of revenue in 2023.
Company Listing status
Company A
Company B
Company F(1)
Company G(2)
Company H(3)
~6.5%
~2.2%
~0.8%
~0.7%
~0.3%
Listed
Listed
Listed
Listed
Listed
~3,900
~1,300
~470
~370
~160
1
2
3
4
5
Revenue generated from digital
healthcare marketing services
(RMB million)
Market share in China’s digital
healthcare marketing services
market
Notes:
1. Company F, founded in 2014, is a leading online medical service platform in China with its business
focusing on providing pharmaceutical products and SaaS services to medical institutions and
pharmacies, digital healthcare marketing services to pharmaceutical companies and online medical
consultation and e-prescription services to patients. Company F is listed on the Hong Kong Stock
Exchange.
2. Company G, founded in 2013, is a leading online professional physician platform in China with its
business focusing on providing digital health marketing services for pharmaceutical companies, medical
literature and information to physicians, information system services to hospitals and online CDM
services to patients. Company G is listed on the Hong Kong Stock Exchange.
3. Company H, founded in 2012, is a leading online professional physician platform in China. Company
H focuses its business on providing medical literature and information to physicians as well as
real-world study (RWS) solutions and digital health marketing services to pharmaceutical companies.
Company H is listed on the Hong Kong Stock Exchange.
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REGULATIONS ON FOREIGN INVESTMENT AND OVERSEAS INVESTMENT
Regulations on Company Establishment and Foreign Investment
The establishment, operation and management of corporate entities in the PRC are
governed by the PRC Company Law () (the “ PRC Company
Law”), which was promulgated by the National People’s Congress (the “ NPC”) in December
1993 and further amended in December 1999, August 2004, October 2005, December 2013 and
October 2018, respectively. According to the PRC Company Law, companies are generally
classified into two categories: limited liability companies and companies limited by shares.
The PRC Company Law also applies to foreign-invested limited liability companies. According
to the PRC Company Law, where laws on foreign investment have other stipulations, such
stipulations shall prevail.
Investment in the PRC by foreign investors are mainly regulated by the Catalogue of
Industries for Encouraging Foreign Investment (2022 Edition) ( ོᎸ̮ਠҳ༟ପุͦ፽
(2022وwhich was promulgated by the Ministry of Commerce of the PRC (the
“MOFCOM ”) and the National Development and Reform Committee (the “ NDRC ”) on
October 26, 2022 and took effect on January 1, 2023, and the Special Administrative Measures
for Access of Foreign Investment (2021 Edition) ( (2021 ϋ
وthe “ Negative List ”), which was promulgated by the MOFCOM and the NDRC on
December 27, 2021 and took effect on January 1, 2022. The Negative List sets out several
restrictive measures in a unified manner, such as the requirements on shareholding percentages
and management, for the access of foreign investments in the industries listed in the Negative
List and the industries that are prohibited for foreign investment. Any industries not falling in
the Negative List shall be administered under the principle of equal treatment to domestic and
foreign investment. The industry of medical devices production and operation is not listed in
the Negative List, which means the foreign investment in the business operated by us in PRC
shall not be restricted or prohibited.
On March 15, 2019, the NPC promulgated the Foreign Investment Law ( ʕശɛ͏΍ձ
) (the “ FIL”), which came into effect on January 1, 2020, pursuant to which,
it is applicable to the investment activities in the PRC carried out directly or indirectly by
foreign natural persons, enterprises or other organizations. The Implementation Rules to the
Foreign Investment Law (ૢԷ), promulgated by the State
Council on December 26, 2019 and became effective on January 1, 2020, further clarify that
the state encourages and promotes foreign investment, protects the lawful rights and interests
of foreign investors, regulates foreign investment administration, continues to optimize foreign
investment environment, and advances a higher-level opening. On December 30, 2019, the
MOFCOM and the SAMR jointly promulgated the Measures for Information Reporting on
Foreign Investment (), which became effective on January 1, 2020,
pursuant to which, where a foreign investor carries out investment activities in the PRC
directly or indirectly, the market regulatory authorities shall forward the investment
information submitted by foreign investor or the foreign-invested enterprise to the competent
commence administrative authorities.
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REGULATIONS ON HEALTHCARE SERVICES
General Policies
According to the Guiding Opinions on Vigorously Advancing the “Internet Plus” Action
(ጐ฽પආ“ʝᑌၣ+”ኬจԈ) (the “Opinions” ) issued by the State
Council on July 1, 2015, Internet enterprises are encouraged to cooperate with medical
institutions in establishing online medical information platforms, strengthen the integration of
regional health care service resources, and make full use of the Internet, big data and other
means to improve the capability to prevent and control major diseases and unexpected public
health incidents.
Pursuant to the Opinions on Promoting the Development of “Internet Plus Health Care”
(ආ“ʝᑌၣ+ᔼᐕ਄ੰ”จԈ) issued by the General Office of
the State Council on April 25, 2018, which encouraged medical institutions to apply the
Internet and other information technologies to expand the space and content of medical
services, and develop an online-offline integrated medical service model covering stages
before, during and after diagnosis. The development of Internet hospitals depending on medical
institutions shall be permitted. Medical institutions may use Internet hospital as the second
name and, based on physical hospitals, use Internet technology to provide safe and appropriate
medical services, allowing online subsequent visits for some common diseases and chronic
diseases. After reviewing documents of the medical records and profiles of patients, physicians
shall be allowed to prescribe online for some common diseases and chronic diseases.
Pursuant to The 13th Five-year Plan for Health and Wellness ( “ɤɧʞ”ሊ͛ၾ਄ੰ஝
ྌ) (the “Plan”), which was promulgated by the State Council on December 27, 2016, it is
proposed to strengthen the informatization of the population health and fully implement
“Internet Plus” medical and healthcare people-benefiting service. The Plan also encourages the
establishment of regional platform and enhances the flow of high-quality healthcare resources
to the Midwest and the primary level. On July 17, 2018, the NHC and the National
Administration of Traditional Chinese Medicine jointly promulgated three documents,
including the Measures for the Administration of Internet Diagnosis and Treatment (Trial)
(ج(༊Б)), the Measures for the Administration of Internet Hospitals
(Trial) (ج(༊Б)) and the Specifications for the Administration of
Remote Medical Services (Trial) (ਕ၍ଣ஝ᇍ(༊Б)). Pursuant to the
Measures for the Administration of Internet Hospitals (Trial), “Internet hospitals” include: (1)
Internet hospitals as the second name of physical medical institutions, and (2) Internet
hospitals that are independently established on the support of physical medical institutions.
Internet Hospitals
According to the Measures for the Administration of Internet Hospitals (Trial), the state
implements access management for Internet hospitals pursuant to the Administrative
Regulations on Medical Institutions ( ᔼᐕዚ࿴၍ଣૢԷ) and the Implementation
Measures of the Administrative Regulations on Medical Institutions (݄
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). Before implementing access for Internet hospitals, provincial health administrative
departments shall establish provincial Internet medical service supervision platforms to
connect with information platforms of Internet hospitals to achieve real-time supervision.
Establishing an Internet hospital is governed by the administrative approval process as
stipulated in the Measures for the Administration of Internet Hospitals (Trial). According to the
Measures for the Administration of Internet Hospitals (Trial), applying for establishing an
Internet hospital is required to submit an application to the practice registration authority of its
supported physical medical institution, and submit the application form, the feasibility research
report on the establishment, the address of the supported physical medical institution, and the
agreement jointly signed by the applicant and the supported physical medical institution in
relation to establishing an Internet hospital through cooperation. If a physical medical
institution intends to establish an Internet hospital information platform through cooperation
with a third-party institution, the relevant cooperation agreement should be submitted. For an
Internet hospital set up through cooperation, if the cooperation partner changes or other
circumstance occurs that will invalidate the cooperation agreement, reapplication for
establishing an Internet hospital shall be required.
The health administrative department of the State Council and the competent departments
of traditional Chinese medicine shall be responsible for the supervision and administration of
the Internet hospitals across China. The local health administrative departments at all levels
(including the competent departments of traditional Chinese medicine) shall be responsible for
the supervision and management of Internet hospitals within their respective jurisdictions.
In terms of practicing rules on Internet hospitals, the Measures for the Administration of
Internet Hospitals (Trial) provides that where a third-party institution jointly establishes an
Internet hospital on the support of its physical medical institution, it shall provide the physical
medical institution with professional services such as physicians and pharmacists, and
information technology support services, and clarify the responsibilities and rights of all
parties in respect of medical services, information security, and privacy protection through
agreements and contracts. In terms of supervision and management of Internet hospitals, the
Measures for the Administration of Internet Hospitals (Trial) clarifies that provincial health
administrative departments and the registration authorities for Internet hospitals jointly
implement supervision on Internet hospitals through the provincial internet medical service
supervision platform, focusing on the supervision on Internet hospitals’ personnel,
prescriptions, diagnosis and treatment behaviors, patients’ privacy protection and information
security. Internet hospitals shall adopt information security protection measures for Level 3
information system in accordance with relevant information security laws and regulations,
including completion of filings with local public security authorities. According to the
Measures for the Administration of Internet Diagnosis and Treatment (Trial), physicians are
required to obtain the consent of the medical institution where they are registered to practice
to carry out Internet diagnosis and treatment activities. Physicians can only provide follow-up
diagnosis services through Internet hospitals for patients that have been diagnosed with certain
common diseases or chronic diseases, unless the patients are in physical hospitals and the
physicians in the physical hospital invites other physicians to provide diagnosis services
through Internet hospital.
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Administrative Regulations on Medical Institution and Implementation Measures of the
Administrative Regulations on Medical Institutions set out the regulatory framework for the
management and operation of the medical institutions, and the operation of Internet hospitals
shall comply with Administrative Regulations on Medical Institutions and Implementation
Measures of the Administrative Regulations on Medical Institutions as well. Additionally, the
Basic Standards for Internet Hospitals (Trial) ( ʝᑌၣᔼ৫ਿ͉ᅺ๟(༊Б)) as attached to
the Measures for the Administration of Internet Hospitals (Trial) sets forth specific
requirements for diagnosis and treatment items, departments, personnel, buildings and device
and equipment, and rules and regulations of Internet hospitals.
Medical Institutions
According to the Administrative Regulations on Medical Institutions (Revised in 2022)
(ᔼᐕዚ࿴၍ଣૢԷ(2022ࠈࡌthe “Regulations” ), promulgated by the State Council,
effective on September 1, 1994, and revised on February 6, 2016 and 29 March, 2022,
hospitals, health centers, sanatoriums, out-patient departments, clinics, health clinics, health
posts (rooms) and first aid stations are medical institutions. The health administrative
departments of the local people’s governments at or above the county level shall be responsible
for the supervision and administration of the medical institutions within their respective
administrative regions. The establishment of medical institutions by entities or individuals
shall be subject to the examination and approval of the health administrative department of the
local people’s governments at or above the county level and obtain the written approval for the
establishment of medical institutions. Furthermore, according to the Regulations, the practice
of medical institutions shall complete the registration and obtain Practicing License for
Medical Institution. Where the practicing is without authorization or obtaining the Practicing
License for Medical Institution, the health administrative department of the people’s
government at or above the county level must cease its practicing activities and confiscate the
illegal incomes, medicines and medical devices in accordance with the law, and it can be
imposed fines of not less than five times but not more than 20 times the illegal gains; where
the illegal gains are less than RMB10,000, it shall be counted as RMB10,000. Medical
institutions must conduct medical diagnosis and treatment activities in accordance with
registered and approved subjects and shall not employ non-medical technical personnel in
medical and health technical work.
Patient Diagnosis Service
According to the Measures for the Administration of Internet Diagnosis and Treatment
(Trial) (ج(༊Б)), Internet diagnosis and treatment activities shall be
provided by the medical institutions that have obtained a “Practicing License for Medical
Institution”, and the Internet-based diagnosis services provided by a medical institution shall
be consistent with its diagnosis subjects. Physicians and nurses carrying out Internet diagnosis
and treatment activities shall be able to be found in the national electronic registration system
of physicians and nurses. A medical institution shall conduct electronic real-name verification
for the medical staff members carrying out Internet diagnosis and treatment activities.
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According to the Measures for the Administration of Internet Hospitals (Trial) ( ʝᑌၣ
ج(༊Б)), Internet hospitals must inform the patients of the risks and obtain their
consents. When a patient receives medical treatment in a physical medical institution and the
physician receiving such patient invites other physicians to hold group consultation of
physicians through the Internet hospital, the physicians attending the group consultation may
issue diagnosis opinions and a prescription; and when a patient does not receive medical
treatment in a physical medical institution, a physician may only provide subsequent visits for
a patient of some common diseases and chronic diseases through the Internet hospital. Internet
hospitals may provide contract signing service for family physicians. When a patient’s
condition changes or there are other circumstances under which online diagnosis and treatment
services are inappropriate, the physician shall direct the patient to receive medical treatment
in a physical medical institution. Internet diagnosis and treatment activities shall not be carried
out for any patient receiving initial diagnosis.
Medical Practitioners
On August 20, 2021, the Standing Committee of the National People’s Congress (the
“SCNPC”) promulgated the Law on Physicians of the People’s Republic of China (the
“Physicians Law” )(), which became effective on March 1, 2022.
According to the Physicians Law, when taking medical, preventive or healthcare measures and
when signing relevant medical certificate, the physicians shall conduct diagnosis and
investigation personally and fill out the medical files without delay as required. No physicians
may conceal, forge or destroy any medical files or the relevant data.
On November 5, 2014, the National Health and Family Planning Commission of PRC (the
“NHFPC”, currently known as the NHC), NDRC, the Ministry of Human Resources and Social
Security, the State Administration of Traditional Chinese Medicine, and the China Insurance
Regulatory Commission (currently known as the China Banking and Insurance Regulatory
Commission), jointly issued Several Opinions on Promoting and Standardizing Multi-Place
Practice of Physicians (ʍจԈ), which puts forward to
simplify the registration procedure of the multiple place practice and proposes the feasibility
of exploring the “record management”. According to the Administrative Measures for the
Registration of Medical Practitioners (), promulgated by the
NHFPC on February 28, 2017, effective on April 1, 2017, medical practitioners shall obtain the
Practice Certificate for Medical Practitioners to practice upon registration. Person who fails to
obtain the Practice Certificate for Medical Practitioners shall not engage in medical treatment,
prevention and healthcare activities. Moreover, under the Administrative Measures for the
Registration of Medical Practitioners (), a medical practitioner
practicing in multiple institutions at the same place of practice shall determine one institution
as his or her primary practicing institution, and apply for registration to the competent
administrative authorities of health and family planning that approve the practice at such
institution, and for other institutions where a medical practitioner intends to practice, he or she
should apply for the record at the relevant administrative authorities of health and family
planning that approve the practice of such institutions, which names should be indicated in the
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record. In addition, a medical practitioner intends to add the practicing institution beyond the
place of practice, he or she should apply for registering such institution to the relevant
administrative authorities of health and family planning authority that approve the practice of
such institutions.
Prescription Management
According to the Measures for the Administration of Prescriptions ()
(the “Measures” ) issued by the NHFPC on February 14, 2007, effective on May 1, 2007,
registered medical practitioner shall obtain the corresponding prescription right at the
registered practice place and the registered medical practitioner shall issue prescriptions
according to the requirements of medical treatment, disease prevention, healthcare, and subject
to the treatment standards and drug instructions. Under any of the following circumstances, the
health administrative department at or above the county level shall request the medical
institutions to make corrections within a grace period, and may impose the fine no more than
RMB5,000; and under serious circumstances, Practicing License for Medical Institution shall
be revoked: (1) prescribing by a pharmacist who has not obtained the right to prescribe or
whose prescription right has been canceled; (2) prescribing narcotic drugs and the psychotropic
drugs of category I by pharmacists who have not obtained the prescription right for such
narcotic drugs and psychotropic drugs; (3) employing persons who have not obtained the
qualifications for the professional and technical positions of pharmaceutical science to conduct
the prescription adjustment. If the medical practitioners issue prescriptions without obtaining
prescription rights at a medical institution not registered in their licenses, during their
practicing activities, they will be given a warning or be ordered to suspend their practicing
activities for a period of not less than six months but not more than one years and under the
serious circumstances, their Practice Certificates for Medical Practitioners will be revoked.
REGULATIONS ON PHARMACEUTICAL OPERATION
On September 20, 1984, the SCNPC promulgated the Drug Administration Law (ۜ
), which was amended in 2001, 2013, 2015 and 2019 respectively to regulate all
entities or individuals engaging in research, manufacture, operation, use, supervision and
management of drugs within the PRC. Pursuant to the Drug Administration Law,
pharmaceutical operation, including pharmaceutical wholesale and pharmaceutical retail
business, is not permitted without obtaining the Pharmaceutical Operation License. Where the
trading of drugs is conducted without a Pharmaceutical Operation License, the illegal incomes
by selling drugs shall be confiscated and the local Food and Drug Administration (the “FDA”,
now known as the Medical Products Administration, or the “MPA”) shall impose the fine
ranging from 15 to 30 times of the value of the illegally sold drugs (including sold or unsold
drugs). The Implementation Rules for the Drug Administration Law (ૢ
Է), was promulgated by the State Council in August 2002 and amended in 2016 and 2019,
which emphasized the detailed implementation rules of drugs administration. The Measures for
Supervision and Management of the Quality of Drug Operation and Use (຾ᐄձԴ͜ሯ
) promulgated by the SAMR on September 27, 2023 and effective on
January 1, 2024, stipulates the procedures for applying the Pharmaceutical Operation License
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and the requirements and qualifications for pharmaceutical wholesalers or pharmaceutical
retailers with respect to their management system, quality and etc. The valid term of the
Pharmaceutical Operation License (຾ᐄ஢̙ᗇ) is five years and shall be renewed
through application during the period ranging from six months to two months prior to its
expiration date.
On May 9, 2022, the NMPA promulgated the Implementation Regulations of the Drug
Administration Law of the PRC (Revised Draft for Comments) (ج
ૢԷ(ᅄӋจԈᇃ)) (the “ Draft Implementation Regulations ”), which has not
been formally adopted as of the Latest Practicable Date.
The major purpose of the Draft Implementation Regulations is to further strengthen the
supervision and management of drug, to ensure the drug use safety, to promote the high-quality
development of the drug industry and to provide more detailed implementation rules for the
Drug Administration Law of the PRC () and the V accine
Administration Law of the PRC (). The Draft Implementation
Regulations stipulated, among other things, that third-party platform providers shall not be
directly involved in online drug sales activities. As a self-operated online retail pharmacy
platform, we only engage in self-operated online drug trading business and do not offer
third-party platform services for online drug trading. Therefore, the requirements under the
Draft Implementation Regulations that third-party platform providers shall not be directly
involved in online drug sales activities would not have a material adverse impact on our
operations.
In addition, the Draft Implementation Regulations set out detailed provisions regarding
the management of drug sales operations and businesses. For example, drug retailers engaging
in online selling prescription drugs shall ensure that the source of the prescription is true and
reliable. Assuming the Draft Implementation Regulations is adopted in its current form, the
Company’s PRC Legal Advisors are of the view that the Draft Implementation Regulations
would not have material adverse impact on our business, since the operation of the Jianke
Platform and relevant online drug trading business are in compliance with the Draft
Implementation Regulations in all material aspects if promulgated in its current form.
According to the Measures on Prescription Drugs and OTC Drugs Classification
Management (Trial) (ج(༊Б)) and the Interim Provisions
on the Circulation of Prescription and OTC Drugs (Trial) (ஷ၍ଣᅲБ
֛(༊Б)), which were both promulgated by the State Drug Administration, which was
restructured and integrated into the CFDA, in 1999 and became effective in January 2000,
drugs are divided into prescription drugs and over-the-counter drugs, or OTC drugs. For
prescription drugs, the dispensing, purchase and use can only be based on the prescription
issued by the certified medical practitioner or certified medical assistant practitioner. In
addition, the prescription drugs can only be advertised and promoted in professional medical
magazines. The pharmaceutical wholesale enterprises distributing prescription drugs and/or
OTC drugs, as well as pharmaceutical retail enterprises selling prescription drugs and/or Class
A OTC drugs are required to obtain the Pharmaceutical Operation License.
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According to the Measures for Supervision and Management of the Quality of Drug
Operation and Use () promulgated by the SAMR on
September 27, 2023 and effective on January 1, 2024, the pharmaceutical operation enterprises
shall establish a quality management system that covers the whole process of pharmaceutical
operation, carry out quality management activities and other measures to ensure the
pharmaceutical quality. In addition, a pharmaceutical operation enterprise shall not sell
prescription drugs to consumers without prescription or offering gifts of prescription drugs
directly or in disguised form as accompanying other drugs or goods purchased to the public and
the enterprise in violation of such prohibitions shall be instructed to rectify, imposed a fine of
not less than RMB5,000 but not more than RMB50,000 on the company that fails to make
corrections within a prescribed time limit, and shall be imposed a fine of not less than
RMB50,000 but not more than RMB200,000 if harmful consequences are caused. The newly
revised Drug Administration Law of the PRC () in 2019
abolishes the restriction on online sale of prescription drugs and adopts the principle of keeping
online and offline sales consistent and the newly revised Regulations for Implementation of the
Drug Administration Law of the PRC (ૢԷ) in 2019
further stipulates certain provisions to the online sale of drugs. Furthermore, in accordance
with the Administrative Standard of Pharmaceutical Operating Quality (຾ᐄሯඎ၍ଣ
஝ᇍ), promulgated by the CFDA in April 2000 and amended in 2012, 2015 and 2016
respectively, the pharmaceutical operation enterprises shall take effective quality control
measures over the process of procurement, storage, transportation and sale of drugs in order to
ensure their quality. On April 7, 2021, the General Office of the State Council issued the
Opinions on Serving the “Six Stables” and “Six Safeguards” and Further Doing a Good Job in
the Reform of “Delegating Power, Delegating Regulation and Serving Service” (ਕ
“ʬᖢ”“ڭ”ආɓӉਂλ“؂”จԈ) which allows online sales of
prescription drugs other than those under special state control on the premise of ensuring the
authenticity and reliability of the electronic prescription sources.
According to the Implementing Opinions on Carrying out the Two-invoice System for
Drug Procurement among Public Medical Institutions (for Trial Implementation) (ίʮ
મᒅʕપБ“ՇୃՓ”จԈ(༊Б)), which came into effect on
December 26, 2016, the two-invoice system means one invoice between the pharmaceutical
manufacturer and the pharmaceutical distributor, and one invoice between the pharmaceutical
distributor and the medical institution, and thereby only allows a single level of distributor for
the sale of pharmaceutical products from the pharmaceutical manufacturer to the medical
institution.
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REGULATIONS ON INTERNET PHARMACEUTICAL TRANSACTION SERVICES
The Interim Provisions on the Examination and Approval of Internet Drug Transaction
Services () were promulgated by the CFDA on
September 29, 2005 and became effective on December 1, 2005, which stipulates that the
CFDA is in charge of examination and approval of the services provided for Internet
pharmaceutical transactions between pharmaceutical production enterprises, pharmaceutical
marketing enterprises and medical institutions, and the provincial FDA shall implement the
examination and approval of the services provided for Internet pharmaceutical transactions
with third-party enterprises engaged by pharmaceutical production enterprises, pharmaceutical
wholesales enterprises on their own websites, as well as Internet pharmaceutical transactions
services to individual consumers. According to the Interim Provisions on the Examination and
Approval of Internet Drug Transaction Services, enterprises engaging in providing drug
transaction services over the internet must obtain an Internet Drug Transaction Qualification
Certificate valid for five years. The Interim Provisions on the Examination and Approval of
Internet Drug Transaction Services further stipulates that any enterprise engaging in online
pharmaceutical product trading services to individual consumers shall be established in the
form of a pharmaceutical retail chain enterprise. According to the Drug Administration Law
and the Administrative Standard of Pharmaceutical Operating Quality, the operation of
pharmaceutical retail chain enterprise shall be in compliance with the acceptance standards
provided by regulations and the CFDA. After obtaining the Internet Drug Transaction
Qualification Certificate issued by the competent food and drug supervision and administration
authority, the applicant shall obtain the permit for operation of telecommunications services as
required by the Internet Measures, or go through the formalities for record-filing. According
to the Decision on the Cancelation of the Third Batch of Items Subject to Administrative
Permission by Local Governments Designated by the Central Government (ୋɧ
), promulgated by the State Council on
January 12, 2017, except for the third party platform, all the examination and approval of
Internet drug trading service company implemented by FDAs of provincial level are canceled.
According to the Decision on the Cancelation of V arious Items Subject to Administrative
Permission () issued by the State Council on
September 22, 2017, the enterprises engaging in internet drug transaction service as a
third-party platform shall no longer be subject to the examination and approval of the CFDA
before carrying out such business.
On August 3, 2022, the SAMR promulgated the Measures for Supervision and
Administration of Online Pharmaceuticals Sales (the “ Measures ”) (ၣഖቖਯ္ຖ၍ଣ
), which took effect on December 1, 2022. The Measures provides specific and explicit
rules for the online sales of prescription drugs, which is perceived to be more conducive online
prescription drug sellers including us. The Measures provides that, among others, online
prescription drug sellers shall (1) ensure the accuracy and reliability of the source of
prescription, (2) keep records of any prescription for at least five years and no less than one
year after the expiration date of the prescription drugs, and (3) disclose safety warnings
including “prescription drugs should only be purchased and used with prescriptions and
guidance of licensed pharmacists” when displaying information of prescription drugs. The
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Measures also imposes certain obligations on platform service providers for online
pharmaceutical sales, including, among others, that platform service providers should (1)
enhance the scrutiny on the required licenses and permits of online pharmaceutical merchants
for online pharmaceuticals sales, (2) establish the examination and inspection system for online
pharmaceutical sales activities, and (3) promptly stop any illegal behavior upon discovery and
report it to the relevant local governmental authorities. Our PRC Legal Advisor is of the view
that the Measures would not have material adverse impact on our business, since we are in
compliance with the Measures in all material aspects during the Track Record Period and up
to the Latest Practicable Date.
REGULATIONS ON ONLINE DRUG INFORMATION SERVICES
The Measures Regarding the Administration of Drug Information Service over the
Internet () was promulgated by CFDA on July 8, 2004 and
amended on November 17, 2017, pursuant to which the Internet drug information services is
to provide drug (including medical device) information services to online users, which is
divided into commercial internet drug information services and non-commercial internet drug
information services. Furthermore, the information relating to drugs shall be accurate and
scientific in nature, and its provision shall comply with the relevant laws and regulations. No
product information of stupefacient, psychotropic drugs, medicinal toxic drugs,
radiopharmaceutical, detoxification drugs and pharmaceutics made by medical institutes shall
be distributed on the website. In addition, advertisements relating to drugs (including medical
devices) shall be approved by the NMPA or its competent branches, and shall specify the
approval document number. According to the Measures Regarding the Administration of Drug
Information Service over the Internet, any website operator that intends to provide drugs
(including medical devices) information services shall, prior to applying for an operation
permit or record-filing from the State Council’s department in charge of information industry
or the telecom administrative authority at the provincial level, file an application with the
provincial FDA, and shall be subject to the examination and approval thereof for obtaining the
qualifications for providing Internet drug information services. The validity term for the
Internet Drug Information Service Qualification Certificate (ࣣi s
five years and may be renewed at least six months prior to its expiration date upon a
re-examination by the relevant governmental authorities.
REGULATIONS ON V ALUE-ADDED TELECOMMUNICATION SERVICES
License for Value-added Telecommunications Services
The Telecommunications Regulations of the PRC (ૢԷ) (the
“Telecommunications Regulations” ), promulgated by the State Council on September 25,
2000 and amended on July 29, 2014 and February 6, 2016, provide a regulatory framework for
telecommunications services providers in the PRC. The Telecommunications Regulations
require telecommunications services providers to obtain an operating license prior to the
commencement of their operations. The Telecommunications Regulations categorize
telecommunications services into basic telecommunications services and value-added
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telecommunications services. According to the Catalog of Telecommunications Business ( ཥ
ุਕʱᗳͦ፽), attached to the Telecommunications Regulations, which was promulgated
by the Ministry of Information Industry (the “MII”, now known as the Ministry of Industry
and Information Technology, or the “MIIT”) on February 21, 2003 and amended by the MIIT
on December 28, 2015 and June 6, 2019, the Internet information services and the online data
processing and transaction processing services fall within the value-added telecommunications
services. The Administrative Measures on Telecommunications Business Operating Licenses
(), which was promulgated by the MIIT on March 1, 2009 and
amended on July 3, 2017, sets forth more specific provisions regarding the types of licenses
required to operate value-added telecommunications services, the qualifications and
procedures for obtaining such licenses and the administration and supervision of such licenses.
Foreign Investment in Value-Added Telecommunications Business
In December 2001, in order to comply with China’s commitments with respect to its entry
into the WTO, the State Council promulgated the Regulation for the Administration of
Foreign-Invested Telecommunications Enterprises (), which
was last revised in March 2022 and took effect on May 1, 2022 (the “2022 FITE
Regulations” ). The 2022 FITE Regulations removed the qualification requirement on the
primary foreign investor in a foreign invested value-added telecommunications enterprise for
having a good track record and operational experience in the value-added telecommunications
industry as stipulated in the previous version. Pursuant to the 2022 FITE Regulations, foreign
investors may hold an aggregate of no more than 50% of the total equity in any value-added
telecommunications business in China. In July 2006, the MII released the Notice on
Strengthening the Administration of Foreign Investment in and Operation of V alue-added
Telecommunications Business (ஷ
) (the “MII Notice” ), pursuant to which, domestic telecommunications enterprises are
prohibited to rent, transfer or sell a telecommunications business operation license to foreign
investors in any form, or provide any resources, premises, facilities and other assistance in any
form to foreign investors for their illegal operation of any telecommunications business in
China. In addition, under the MII Notice, the Internet domain names and registered trademarks
used by a foreign-invested value-added telecommunication service operator shall be legally
owned by that operator (or its shareholders).
REGULATIONS ON ONLINE TRADING
On January 26, 2014, SAIC issued the Administrative Measures for Online Trading ( ၣ
) (the “Online Trading Measures” ), which replaced its previous Interim
Measures for the Administration of Online Commodities Transaction and Relevant Services
(). The Online Trading Measures aim to
regulate online commodity trading and relevant services, setting standards for online
commodity trading operators and relevant services providers, including third-party trading
platform operators, concerning qualifications, after-sale services, terms of use, user privacy
protection, data preservation, compliance with applicable laws in respect of intellectual
property rights protection and unfair competition. In order to further regulate online transaction
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activities, on March 15, 2021, SAMR issued the Online Trading Supervision Measures ( ၣ
), effective on May 1, 2021, and replace the Online Trading Measures.
The Online Trading Supervision Measures shall apply to the business activities of selling
commodities or providing services in social networking, internet live streaming or other
information network activities and it further regulates the operations of online trading.
On August 31, 2018, the SCNPC promulgated the E-Commerce Law of the PRC ( ʕശ
), effective on January 1, 2019, which aims to regulate the
e-commerce activities conducted within the territory of the PRC. Pursuant to the E-Commerce
Law, an e-commerce business shall, in business operation, abide by the principles of
voluntariness, equality, equity and good faith, observe the law and business ethics, fairly
participate in market competition, perform obligations in aspects including protection of
consumer rights and interests, environment, intellectual property rights, cybersecurity and
individual information, assume responsibility for quality of products or services, and accept the
supervision by the government and the public.
REGULATIONS ON INTERNET INFORMATION SERVICES
The Administrative Measures on Internet Information Services (ਕ၍ଣ፬
) (the “Internet Measures” ), promulgated by the State Council on September 25, 2000
and amended on January 8, 2011, requires that a commercial operator of Internet content
provision services must obtain a value-added telecommunications business operating license
for the provision of Internet information services from the appropriate telecommunications
authorities.
The State Administration of Press, Publication, Radio, Film and Television (the
“SAPPRFT ”) issued a Notice on Strengthening the Management of Live-Streaming Service for
the Network Audio-visual Programs (ஷ
) in September 2016, pursuant to which an internet live-streaming service provider shall:
(i) provide necessary censorship on the content of live-streams; (ii) establish a mechanism to
timely identify unlawful content, prevent any unlawful content from being distributed and
replace the content with backup programs; and (iii) record live-streaming programs and keep
the records for at least 60 days. Shortly after this notice, in November 2016, the Cyberspace
Administration of China (the “ CAC”) promulgated the Administrative Provisions on Internet
Live-Streaming Services (), pursuant to which an internet
live-streaming service provider shall: (i) establish a live-streaming content review platform;
(ii) require authentication for the registration of live-streaming content providers; and (iii)
enter into a service agreement with live-streaming service users to specify each of the
live-streaming service user’s and the content provider’s rights and obligations.
The State Administration of Radio, Film and Television (the “SARFT”) and MII jointly
issued the Regulations for the Administration of Internet Audiovisual Program Services ( ʝ
) (the “Audiovisual Regulations” ) on December 20, 2007,
which was revised on August 28, 2015 by the SAPPRFT. The Audiovisual Regulations require
that online audio and video service providers obtain a permit from the National Radio and
Television Administration (the “ NTRA ”) in accordance with the Audiovisual Regulations.
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On November 18, 2019, the CAC, Ministry of Culture and Tourism of PRC (the “ MCT”)
and the NRTA jointly issued the Promulgation of the Administrative Provisions on Online
Audio and Video Information Services () (the “Audio and
Video Provisions” ), which took effect on January 1, 2020. The Audio and Video Provisions
require that online audio and video information service providers: (i) acquire relevant
qualifications required by law and regulations; (ii) adopt rules and policies in relation to, for
example, user registration, information distribution and review, information security
management, emergency disposal, educational training for employees, the protection of minors
and intellectual property rights protection; (iii) verify personal information submitted by users
as required under applicable laws; and (iv) undertake technical and other necessary measures
to ensure network security and stable operations. Organizations and individuals are prohibited
from utilizing online audio and video information services and the related information
technology to carry out illegal activities that infringe upon the legitimate rights and interests
of others.
On December 31, 2021, the CAC and other three regulatory authorities jointly
promulgated the Administrative Provisions on Internet Information Service Algorithm
Recommendation (), which became effective on March
1, 2022. The Administrative Provisions on Internet Information Service Algorithm
Recommendation stipulates that algorithm recommendation service providers with public
opinion attributes or social mobilization capabilities shall submit the relevant information
within ten business days from the date of providing such services. Pursuant to the
Administrative Provisions on Internet Information Service Algorithm Recommendation,
algorithmic recommendation service providers are required to provide users with options that
are not specific to their personal characteristics, or provide users with convenient options to
cancel algorithmic recommendation services and shall not set up algorithm models against
applicable laws, regulations and social norms, including without limitation inducing users to
indulge or engage in excess consumption.
REGULATIONS ON INTERNET ADVERTISING
The SCNPC released the Advertising Law of the People’s Republic of China ( ʕശɛ
) on October 27, 1994 and latest amended on April 29, 2021, which provides
that the Internet information service providers shall not publish medical, drugs, medical
machinery or health food advertisements in disguised form of introduction of healthcare and
wellness knowledge.
The Interim Measures for Administration of Internet Advertising ( ʝᑌၣᄿѓ၍ଣᅲБ
) (the “Internet Advertising Measures” ) regulating the Internet-based advertising
activities, were adopted by the SAIC on July 4, 2016. According to the Internet Advertising
Measures, Internet advertisers are responsible for the authenticity of the advertisements
content. Publishing and circulating advertisements through the Internet shall not affect the
normal use of the Internet by users. It is not allowed to induce users to click on the content of
advertisements by any fraudulent means, or to attach advertisements or advertising links in the
emails without permission.
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Pursuant to the Interim Administrative Measures for Censorship of Advertisements for
Drugs, Medical Devices, Dietary Supplements and Foods for Special Medical Purpose ( ᖹ
), which were
promulgated by the SAMR on December 24, 2019, effective on March 1, 2020, an enterprise
seeking to advertise its drugs, medical devices, dietary supplement or food for special medical
purpose must apply for an advertisement approval number. The validity period of the
advertisement approval number concerning a drug, medical device, dietary supplement or food
for special medical purpose shall be consistent with that of the registration certificate or
record-filing certificate or the production license of the product, whichever is the shortest.
Where no validity period is set forth in the registration certificate, record-filing certificate or
the production license of the product, the advertisement approval number shall be valid for two
years. The content of an approved advertisement may not be altered without prior approval.
Where any alteration to the advertisement is needed, a new advertisement approval shall be
obtained.
REGULATIONS ON INTERNET LIVE STREAMING SERVICES
On November 4, 2016, the CAC issued Administrative Provisions on Internet Live-
Streaming Services (), which became effective on December 1,
2016. Under the regulation, “internet live streaming” refers to the activities of continuously
releasing real-time information to the public based on the internet in forms such as video,
audio, images and texts, and “internet live-streaming service providers” refers to the operators
that provide internet live-streaming platform services. In addition, the internet live-streaming
service providers shall take various measures when operating its services, such as examining
and verifying the authenticity of the identification information and file this information for
record.
In November 2020, the NRTA issued the Notice on Strengthening the Administration of
Online Show Live and E-commerce Live Streaming (ᅧ၍ଣ
), which set forth registration requirements for platforms providing online show live
streaming or e-commerce live streaming to have their information and business operations
registered by November 30, 2020. The Notice made it clear that live streaming platforms
should implement real-name management systems. Live streaming platforms should manage
the contents of live studios and the corresponding hosts with labels by categories such as
“music”, “dance”, “singing”, “fitness”, “games”, “travel”, “food” and “life services”. Live
streaming platforms should set up business-level rating systems for live studios and hosts,
refine program quality ratings and the rating systems if there are violations, and the
recommendations or promotions for live studios and hosts shall be associated with such ratings.
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REGULATIONS ON INTERNET SECURITY
On November 7, 2016, the SCNPC promulgated the Cyber Security Law of the PRC ( ʕ
), which became effective on June 1, 2017. In accordance with the
Cyber Security Law, network operators must comply with applicable laws and regulations and
fulfill their obligations to safeguard network security in conducting business and providing
services. Network service providers must take technical and other necessary measures as
required by Laws to safeguard the operation of networks, respond to network security
effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality
and usability of network data.
On December 28, 2021, the CAC, NDRC, MIIT and other ten PRC regulatory authorities
jointly issued the Cybersecurity Review Measures (), effective on
February 15, 2022. The Cybersecurity Review Measures require that, (i) any procurement of
network products and services by critical information infrastructure operators, which affects or
may affect national security, or (ii) any data processing activities by network platform
operators, which affects or may affect national security, including that any network platform
operators which has personal information of more than one million users and is going to be
listed abroad, shall be subject to cybersecurity review. Since the measures were recently
promulgated, there exists uncertainties with respect to their interpretation and implementation.
On 14 November 2021, the CAC publicly solicited opinions on the Draft Data Security
Regulations ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)). According to the Draft Data Security
Regulations, data processors shall, in accordance with relevant state provisions, apply for cyber
security review when carrying out the following activities:(i) the merger, reorganization or
separation of Internet platform operators that have acquired a large number of data resources
related to national security, economic development or public interests, which affects or may
affect national security; (ii) data processors that handle the personal information of more than
one million people intends to be listed abroad; (iii) the data processor intends to be listed in
Hong Kong, which affects or may affect national security; and (iv) other data processing
activities that affect or may affect national security. As of the Latest Practicable Date, the Draft
Data Security Regulations has not been formally adopted.
REGULATIONS ON PERSONAL INFORMATION OR DATA PROTECTION
The Data Security Law of the PRC (), which was
promulgated by the Standing Committee of the NPC on June 10, 2021 and took effect on
September 1, 2021, provides that China shall establish a data classification and grading
protection system, formulate the important data catalogs to enhance the protection of important
data. The conduct of data handling activities shall be in compliance with the provisions of laws
and administrative regulations, establishing and completing a data security management
system for the entire workflow, organizing and conducting data security education and training,
adopting corresponding technical measures and other necessary measures to ensure data
security, strengthening risk monitoring, taking immediate disposition measures and promptly
reporting to relevant authorities when data security incidents occur. Processors of important
data shall specify the person responsible for data security and management agencies,
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implement data security protection responsibilities, periodically conduct risk assessments of
such data handling activities as provided and submit risk assessment reports to the relevant
authorities. Relevant authorities will establish the measures for the cross-border transfer of
important data. If any company violates the Data Security Law of the PRC and other applicable
measures to provide important data outside China, such company may be punished by
administration sanctions, including penalties, fines, and/or possible suspension of relevant
business or revocation of the business license. In December 2011, the MIIT issued Several
Provisions on Regulating the Market Order of Internet Information Services (ڦ
), which provide that an Internet information service provider may
not collect any user’s personal information or provide any such information to third parties
without such user’s consent. Pursuant to the Several Provisions on Regulating the Market
Order of Internet Information Services, Internet information service providers are required to,
among others, (i) expressly inform the users of the method, content and purpose of the
collection and processing of such users’ personal information and may only collect such
information necessary for the provision of its services; and (ii) properly maintain the users’
personal information, and in case of any leak or possible leak of a user’s personal information,
Internet information service providers must take immediate remedial measures and, in severe
circumstances, make an immediate report to the telecommunications regulatory authority.
Pursuant to the Decision on Strengthening the Protection of Online Information (׵
), issued by the SCNPC in December 2012, and the Order for the
Protection of Telecommunication and Internet User Personal Information (ձʝᑌၣ͜
), issued by the MIIT in July 2013, any collection and use of any user
personal information must be subject to the consent of the user, and abide to the applicable law,
rationality and necessity of the business and fall within the specified purposes, methods and
scopes in the applicable laws. In addition, the CAC, the MIIT, the Ministry of Public Security
(the “MPS”) and the SAMR jointly issued the Notice on Promulgation of the Rules on the
Scope of Necessary Personal Information for Common Types of Mobile Internet Applications
() in March 2021, effective on May
1, 2021, specifying that the operator of an internet application shall not refuse an user to use
the App’s basic functional services on the ground that the user disagree with the collection of
unnecessary personal information.
In addition, the Cyber Security Law provides that: (i) to collect and use personal
information, network operators shall follow the principles of legitimacy, rightfulness and
necessity, disclose rules of data collection and use, clearly express the purposes, means and
scope of collecting and using the information, and obtain the consent of the persons whose data
is gathered; (ii) network operators shall neither gather personal information unrelated to the
services they provide, nor gather or use personal information in violation of the provisions of
laws and administrative regulations or the scopes of consent given by the persons whose data
is gathered; and shall dispose of personal information they have saved in accordance with the
provisions of laws and administrative regulations and agreements reached with users; (iii)
network operators shall not divulge, tamper with or damage the personal information they have
collected, and shall not provide the personal information to others without the consent of the
persons whose data is collected. However, if the information has been processed and cannot be
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recovered and thus it is impossible to match such information with specific persons, such
circumstance is an exception. Furthermore, under the Cyber Security Law, network operators
of key information infrastructure generally shall, during their operations in the PRC, store the
personal information and important data collected and produced within the territory of the
PRC.
On September 14, 2022, the CAC, issued the Decision on Amending the PRC
Cybersecurity Law (Draft for Comments), proposed to be amended in the following four
aspects: firstly, to improve the legal liability system for violating the general provisions on the
security of cyber operation; secondly, to amend the legal liability system for the security
protection of critical information infrastructure; thirdly, to adjust the legal liability system for
network information security; and fourthly, to amend the legal liability system for the
protection of personal information.
The Critical Information Infrastructure Security Protection Regulations (ਿᓾ
ᚐૢԷ), which was promulgated by the State Council on July 30, 2021 and took
effect on September 1, 2021, stipulates the definition and the identification procedure of the
critical information infrastructure. Critical information infrastructure refers to important
network infrastructure, information systems in important industries and sectors such as public
telecommunications and information services, energy, transportation, public services,
e-government, national defense science, or important network infrastructure, information
systems which may gravely harm national security, national economy and people’s livelihood,
or the public interest upon their destruction, loss of functionality, or data leakage. Competent
departments and supervision and management departments of important industries and sectors
are the protection work departments, who are responsible for formulating related identification
rules of critical information infrastructures. Operators of critical information infrastructure
shall undertake cybersecurity protection duties to respond to cybersecurity incidents, prevent
cyberattacks and unlawful or criminal activities, ensure the secure and stable operation of
critical information infrastructure, and safeguard the integrity, confidentiality, and usability of
data based on cybersecurity multi-level protection. Meanwhile, critical information
infrastructure operators shall undergo a security review according to national cybersecurity
regulations if the network products and services they purchase may influence national security.
Personal Information Protection Law of the PRC (),
which was issued by the Standing Committee of the NPC on August 20, 2021 and effective on
November 1, 2021, provides detailed rules on handling personal information and legal
responsibilities, including but not limited to the scope of personal information and the ways of
processing personal information, the establishment of rules for processing personal
information, the individuals’ rights and the processors’ obligations in the handling of personal
information, the requirements on data localization and cross-border data transfer, the
requirements for consent and the requirements on processing of sensitive personal information.
Critical information infrastructure operators and personal information processors processing
personal information reaching quantities provided by the State cybersecurity and
informatization department shall store personal information collected and produced within the
borders of the PRC domestically; where they need to provide it abroad, they shall pass a
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security assessment organized by the State cybersecurity and informatization department.
Processor of personal information shall, based on purpose and methods of processing of
personal information, categories of personal information, the impacts on individuals’ rights and
interests, and potential security risks, take the following measures to ensure that personal
information processing activities comply with the provisions of laws and administrative
regulations, and prevent unauthorized access as well as the leakage, tampering or loss of
personal information:
 Developing internal management rules and operating procedures.
 Conducting classified management of personal information.
 Taking corresponding security technical measures such as encryption and de-
identification.
 Determining in a reasonable manner the operation privileges relating to personal
information processing, and providing security education and trainings for
employees on a regular basis.
 Developing and organizing the implementation of emergency plans for personal
information security incidents.
 Other measures as provided by laws and administrative regulations.
Company violates the Personal Information Protection Law in handling personal
information may face penalties, fines, suspension of relevant business or revocation of the
business license.
On November 14, 2021, the CAC published a draft of the Administrative Regulations for
Internet Data Security ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)), or the Draft Internet Data
Security Regulations, for public comments. The Draft Internet Data Security Regulations
proposed to provide more detailed guidelines on the current rules on various aspects of data
processing. Pursuant to Article 2 and Article 73 of the Draft Internet Data Security Regulations,
the regulations applies to data processing activities by utilizing internet as well as cyber data
security supervision and management activities within the PRC. “Cyber data” refers to any
information that is electronically recorded, whereas “data processing activities” refer to
activities such as data collection, storage, usage, processing, transmission, provision,
disclosure and deletion. In general, any company engages in data processing activities through
Internet within the PRC will be subject to the Draft Internet Data Security Regulations. On
December 28, 2021, the CAC, jointly with the other 12 governmental authorities, promulgated
the Cybersecurity Review Measures (), which took effect on February
15, 2022. The Cybersecurity Review Measures and the Draft Internet Data Security
Regulations (together, the “Cybersecurity Regulations”) have imposed a cybersecurity review
obligation on certain data handlers. Under the Cybersecurity Regulations, operators of critical
information infrastructure to procure network products and services, and network platform
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operators to carry out data processing activities that affect or may affect national security, shall
be subject to cybersecurity review. In particular, according to the Draft Internet Data Security
Regulations, data handlers seeking listing in Hong Kong that affect or may affect national
security are required to apply for cybersecurity review.
The Provisions on Administration of Security Vulnerability of Network Products ( ၣഖ
) (the “Provisions” ), which was jointly promulgated by the MIIT,
CAC and MPS on July 12, 2021 and took effect on September 1, 2021, has established rules
for the suppliers of network products (both hardware and software), the network operators and
the organizations or individuals who conduct the detection, collection, publication of security
vulnerability of network products and other related activities. All the three types of entities
shall set up communication channel to receive report of security vulnerability of network
products, and shall keep the log of received information on security vulnerability for at least
6 months. Specifically, the network operators shall take immediate measures to verify and fix
the security vulnerability upon detection of the vulnerability.
On July 7, 2022, the CAC has publicly solicited opinions on the Measures for the Security
Assessment of Data Cross-border Transfer (), which took effect on
September 1, 2022. The Measures for the Security Assessment of Data Cross-border Transfer
requires the data processor providing data overseas and falling under any of the following
circumstances apply for the security assessment of cross-border data transfer by the national
cybersecurity authority through its local counterpart: (i) where the data processor intends to
provide important data overseas; (ii) where the critical information infrastructure operator and
any data processor who has processed personal information of more than 1,000,000 people
intend to provide personal information overseas; (iii) where any data processor who has
provided personal information of 100,000 people or sensitive personal information of 10,000
people to overseas recipients accumulatively since January 1 of the last year intends to provide
personal information overseas; and (iv) other circumstances where the security assessment of
data cross-border transfer is required as prescribed by the CAC. Furthermore, the data
processor shall conduct a self-assessment on the risk of data cross-border transfer prior to
applying for the foregoing security assessment, under which the data processor shall focus on
certain factors including, among others, the legitimacy, fairness and necessity of the purpose,
scope and method of data cross-border transfer and the data processing of overseas recipients,
the risks that the cross-border data transfer may bring to national security, public interests and
the legitimate rights and interests of individuals or organizations as well as whether the
cross-border data transfer related contracts or the other legally binding documents to be entered
with overseas recipients have fully included the data security protection responsibilities and
obligations. On August 31, 2022, the CAC, issued the Guidelines for Declaring Data
Cross-border Security Assessment (First Edition), which further clarifies the scope of
application, declaration methods and processes of data cross-border security assessment. On
February 24, 2023, the CAC issued the Measures for the Standard Contract for Cross-border
Transfer of Personal Information () (the “ Measures ”) and the
Standard Contract for Cross-border Transfer of Personal Information (Υ
Ν) (the “SCC”), which was officially implemented on June 1, 2023. Pursuant to the
Measures, for personal information cross-border transfer that do not trigger the security
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assessment, the activity of transferring personal information abroad may be carried out after
the SCC enters into force. Meanwhile, personal information processors shall, within 10
working days after the SCC enters into effect, apply for filing with the cyberspace
administration at the provincial level by submitting the SCC and a personal information
protection impact assessment report. The SCC shall be concluded in strict accordance with the
Annex of the Measures, stipulating a number of obligations on the personal information
processor and the overseas recipient to protect the rights and interests of the subject of personal
information.
Pursuant to the Ninth Amendment to the Criminal Law of the PRC ( ʕശɛ͏΍ձ਷Α
ࣩ(ɘ)), issued by the SCNPC in August 2015, which became effective in November
2015, any Internet service provider that fails to fulfill its obligations related to Internet
information security administration as required under applicable laws and refuses to rectify
upon orders shall be subject to criminal penalty. Furthermore, Interpretations of the Supreme
People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the
Application of Law in the Handling of Criminal Cases Involving Infringement of Personal
Information (༆ᙑ), issued on
May 8, 2017 and effective on June 1, 2017, clarified certain standards for the conviction and
sentencing of the criminals in relation to personal information infringement. In addition, on
May 28, 2020, the National People’s Congress adopted the Civil Code of the PRC ( ʕശɛ
Պ) (the “Civil Code” ), which became effective on January 1, 2021. Pursuant
to the Civil Code, the personal information of a natural person shall be protected by the law.
Any organization or individual shall legally obtain such personal information of others when
necessary and ensure the safety of such information, and shall not illegally collect, use, process
or transmit personal information of others, or illegally purchase or sell, provide or make public
personal information of others.
Pursuant to the Regulations for Medical Institutions on Medical Records Management
() released on November 20, 2013, and effective on January 1,
2014, the medical institutions and medical practitioners shall strictly protect the privacy
information of patients, and any leakage of patients’ medical records for non-medical,
non-teaching or non-research purposes is prohibited. The NHFPC released the Measures for
Administration of Population Health Information (Trial) (ج(༊Б))
on May 5, 2014, which refers the medical health service information as the population
healthcare information, and emphasizes that such information cannot be stored in offshore
servers, and the offshore servers shall not be hosted or leased. Pursuant to the Management
Measures of Standards, Safety and Service of National Health and Medical Big Data (Trial)
(ج(༊Б)), promulgated by the NHC on
July 12, 2018, the medical institutions should establish relevant safety management systems,
operation instructions and technical specifications to safeguard the safety of healthcare big data
generated in the process of health management service or prevention and cure service of
diseases. And it also stipulates that such healthcare big data should be stored in onshore servers
and shall not be provided overseas without safety assessment.
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REGULATIONS RELATING TO ANTI-MONOPOLY IN CHINA
According to the PRC Anti-Unfair Competition Law (ن
), which took effect on December 1, 1993 and last amended on April 23, 2019, unfair
competition refers to that the operator disrupts the market competition order and damages the
legitimate rights and interests of other operators or consumers in violation of the provisions of
the Anti-unfair Competition Law in the production and operating activities. Pursuant to the
PRC Anti-unfair Competition Law, operators shall abide by the principle of voluntariness,
equality, impartiality, integrity and adhere to laws and business ethics during market
transactions, and operators in violation shall bear corresponding civil, administrative or
criminal liabilities depending on the specific circumstances.
The PRC Anti-monopoly Law (), which took effect on
August 1, 2008 and last amended on June 24, 2022, prohibits monopolistic conduct such as
entering into monopoly agreements, abusing market dominance and concentration of
undertakings that may have the effect of eliminating or restricting competition. On March 10,
2023, the SAMR issued the Provisions on the Prohibitions of Acts of Abuse of Dominant
Market Positions (), which took effect on April 15, 2023,
to further prevent and prohibit the abuse of dominant market positions. On February 7, 2021,
the Anti-monopoly Commission of the State Council promulgated the Guidelines to Anti-
Monopoly in the Field of Internet Platforms () (the
“Anti-Monopoly Guidelines” ), which took effect on the same date and will operate as a
compliance guidance for platform economy operators under the existing PRC anti-monopoly
laws and regulations. The Anti-Monopoly Guidelines mainly covers five aspects, including
general provisions, monopoly agreements, abusing market dominance, concentration of
undertakings, and abusing of administrative powers eliminating or restricting competition.
REGULATIONS ON LOANS BETWEEN NON-FINANCIAL INSTITUTIONS
According to the General Lending Provisions () promulgated by PBOC in
June 1996, any financing arrangements or lending transactions between non-financial
institutions is prohibited. Furthermore, pursuant to Article 73 of the General Lending
Provisions, PBOC may impose a fine on the non-compliant lender of one to five times of the
income received by the lender from such loans. Notwithstanding the General Lending
Provisions, the Supreme People’s Court has made new interpretations concerning financing
arrangements and lending transactions between non-financial institutions under the Provisions
of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial
of Private Lending Cases (஝
) (the “ Judicial Interpretations on Private Lending Cases ”), which came into effect on
September 1, 2015 and was amended on August 19, 2020 and December 29, 2020. According
to Article 10 of the Judicial Interpretations on Private Lending Cases, the Supreme People’s
Court recognizes the validity and legality of financing arrangements and lending transactions
between non-financial institutions so long as certain requirements, such as the interest rates
charged, are satisfied and there is no violation of mandatory provisions of applicable laws and
regulations. Our PRC Legal Advisor advised us that, under the Judicial Interpretations on
Private Lending Cases, PRC courts will support a non-financial institution’s claim for interests
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on loans as long as the annual interest rate does not exceed four times of the loan prime rate,
as published by the National Interbank Funding Center, for loans with maturities of one year
applicable on the date of loan agreement, or other interest rate specified in the Judicial
Interpretations on Private Lending Cases applicable on the date of such loan agreement. Based
on the above, our PRC Legal Advisor advised us that we become subject to any penalty with
respect to our advance of borrowings to related parties pursuant to the General Lending
Provisions is low, and our advance of borrowings to related parties do not constitute material
non-compliance of any applicable laws and regulations.
REGULATIONS ON INTELLECTUAL PROPERTY RIGHTS
China has made substantial efforts to adopt comprehensive legislation governing
intellectual property rights, including trademarks, patents, copyrights and domain names.
Trademarks
Trademarks are protected by the PRC Trademark Law ()
promulgated by the SCNPC on August 23, 1982, latest amended on April 23, 2019 and effective
on November 1, 2019, as well as the Implementation Regulations of the PRC Trademark Law
(ૢԷ) promulgated by the State Council on August 3, 2002
and amended on April 29, 2014, pursuant to which, the Trademark Office of National
Intellectual Property Administration, or the Trademark Office, is responsible for trademark
registrations and administration, and grants a term of ten years to registered trademarks and
another ten years if requested upon expiry of the first or any renewed ten-year term. In
addition, the PRC Trademark Law has adopted a “first-to-file” principle with respect to
trademark registration.
Patents
According to the PRC Patent Law () amended by the SCNPC
on December 27, 2008 and became effective on October 1, 2009, as well as the Detailed Rules
for the Implementation of the PRC Patent Law ()
promulgated by the State Council on January 9, 2010 and amended on December 11, 2023, the
National Intellectual Property Administration is responsible for administering patents in the
PRC. The PRC Patent Law and its implementation rules provide for three types of patents,
“invention”, “utility model” and “design”. The PRC Patent Law was further amended by the
SCNPC on October 17, 2020 and became effective on June 1, 2021, pursuant to which, the
duration of design patents are changed from ten years to fifteen years, commencing from the
date of application.
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Copyrights
Pursuant to the PRC Copyright Law () amended by the
SCNPC on February 26, 2010, became effective on April 1, 2010, and latest amended on
November 11, 2020 and took effect on June 1, 2021 and the Implementing Regulations of the
PRC Copyright Law (ૢԷ) promulgated by the State
Council on August 2, 2002, latest amended on January 30, 2013 and became effective on March
1, 2013, the PRC citizens, legal persons, and other organizations shall, enjoy copyright in their
works, whether published or not, which include, among others, works of literature, art, natural
science, social science, engineering technology and computer software. The copyright owner
enjoys various kinds of rights, including right of publication, right of authorship and right of
reproduction.
Domain Names
Internet domain name registration and related matters are primarily regulated by the
Administrative Measures on Internet Domain Names () promulgated
by the MIIT on August 24, 2017 and took effect on November 1, 2017, and the Implementing
Rules of Registration of Country Code Top-level Domain Name (the “ ccTLD Registration
Rules ”), promulgated by the China Internet Network Information Center (the “ CNNIC ”) on
June 18, 2019 and took effect on the same day, pursuant to which, the MIIT is in charge of the
administration of PRC Internet domain names and the CNNIC is responsible for the daily
administration of CN domain names and Chinese domain names. The registration of domain
names follows a “first come, first file” principle. The applicants will become the holders of
such domain names upon the completion of the registration procedure.
REGULATIONS ON TAXATION
Enterprise Income Tax
Pursuant to the PRC Enterprise Income Tax Law ()
(the “ EIT Law ”), promulgated by the SCNPC on March 16, 2007, latest amended and effective
on December 29, 2018, and the Implementation Regulations of the Enterprise Income Tax Law
of the PRC (ૢԷ) (the “ EITIR ”) promulgated by the
State Council on December 6, 2007, latest amended and effective on April 23, 2019, the
enterprise income tax of both domestic and foreign-invested enterprises is unified at 25% with
certain exceptions. Enterprises are classified as “resident enterprises” and “non-resident
enterprises”, resident enterprises typically pay an enterprise income tax at the rate of 25%
while non- resident enterprises without any branches in the PRC should pay an enterprise
income tax in connection with their income from the PRC at the reduced tax rate of 10%.
Enterprises established under the law of foreign countries or regions whose “de facto
management bodies” which is defined as the management bodies that exercise full and
substantial control and overall management over the business, productions, personnel, accounts
and properties of the enterprises are located in the PRC are considered as PRC tax resident
enterprises, and will generally be subject to enterprise income tax at the rate of 25% of their
global income.
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Value-added Tax
Pursuant to the Provisional Regulations on V alue-added Tax of the PRC ( ʕശɛ͏΍
೼ᅲБૢԷ) promulgated by the State Council on December 13, 1993, latest
amended and became effective on November 19, 2017, and the Implementing Rules for the
Provisional Regulations on V alue-added Tax of the PRC (೼ᅲБૢԷྼ
) promulgated by the Ministry of Finance (the “ MOF”) on December 25, 1993, latest
amended on October 28, 2011 and became effective on November 1, 2011, all enterprises and
individuals that engage in the sale of goods, the provision of processing, repair and
replacement services, the sale of services, intangible assets or immovable properties and the
importation of goods within the territory of the PRC must pay value-added tax (the “ VAT”).
The V A T tax rates generally applicable are simplified as 17%, 11%, 6% and 3%, and the V A T
tax rate applicable to the small-scale taxpayers is 3%.
Dividends Withholding Tax
Pursuant to the EIT Law and the EITIR, dividends generated after January 1, 2008 and
payable by foreign-invested companies in China to their foreign investors that are non-resident
enterprises as defined under the law are subject to withholding tax at a rate of 10%, unless any
such foreign investor’s jurisdiction of incorporation has a tax treaty with PRC that provides for
a different withholding arrangement. Pursuant to the Arrangement Between the Mainland of
China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation
and Prevention of Fiscal Evasion with Respect to Taxes on Income(ਜ
τર) (the “ Double Tax Avoidance
Arrangement ”) promulgated on August 21, 2006 and last amended on December 6, 2019,
where a Hong Kong resident enterprise that holds more than a 25% equity interest in a PRC
resident enterprise at any time within 12 consecutive months before receiving the dividend, the
competent PRC tax authority may determine the Hong Kong resident enterprise to have
satisfied the relevant conditions and requirements under such Double Tax Avoidance
Arrangement, and the withholding tax rate on the dividends the Hong Kong resident enterprise
receives from a PRC resident enterprise may be reduced to 5% from 10% applicable under the
EIT Law and the EITIR.
However, based on the Notice of the State Administration of Taxation on Certain Issues
with Respect to the Enforcement of Dividend Provisions in Tax Treaties (׵
) promulgated and took effect on February 20, 2009
by the State Administration of Taxation (the “ SAT”), where the relevant PRC tax authorities
determine, in their discretion, that a company benefits from such reduced income tax rate due
to a transaction or arrangement that is primarily tax-driven, such PRC tax authorities may
adjust the preferential tax treatment. Based on the Notice of the State Administration of
Taxation on Issues concerning the “Beneficial Owner” in Tax Treaties (೼
ʕ“Ϟɛ”ʮѓ) which was promulgated by the SA T on February 3,
2018 and came into effect on April 1, 2018, a comprehensive analysis will be used to determine
beneficial ownership based on the actual situation of a specific case combined with certain
principles, and if an applicant is obliged to pay more than 50% of its income to a third country
(region) resident within 12 months of the receipt of the income, or the business activities
undertaken by an applicant did not constitute substantive business activities including
substantive manufacturing, distribution, management and other activities, the applicant was
unlikely to be recognized as an beneficial owner to enjoy tax treaty benefits.
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REGULATIONS ON FOREIGN EXCHANGE
Regulations on Foreign Currency Exchange
Foreign exchange regulations in the PRC are primarily governed by the Administration
Rules on the Foreign Exchange of the PRC ( ̮ි၍ଣૢԷ) (the “ Exchange Rules ”)
promulgated by the State Council on January 29, 1996, latest amended and became effective
on August 5, 2008 as well as the Administration Rules of the Settlement, Sale and Payment of
Foreign Exchange () (the “ Administration Rules ”) issued by
the People’s Bank of China on June 20, 1996 and became effective on July 1,1996. Under the
Exchange Rules, the Renminbi is convertible for current account items, including the
distribution of dividends, interest and royalty payments, trade and service-related foreign
exchange transactions. Conversion of Renminbi for capital account items, such as direct
investment, loan, securities investment and repatriation of investment, however, is still subject
to the approval of the State Administration of Foreign Exchange (the “ SAFE ”). Under the
Administration Rules, foreign-invested enterprises may only buy, sell and/or remit foreign
currencies at banks authorized to conduct foreign exchange business after providing valid
commercial documents required and, in the case of capital account item transactions, obtaining
approval from the SAFE. Capital investments by foreign-invested enterprises outside of China
are also subject to limitations, including approval by regulatory government bodies like the
MOFCOM, the SAFE and the NDRC or their local counterparts.
On May 11, 2013, the SAFE promulgated the Circular on Printing and Distributing the
Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign
Investors and the Supporting Documents (Ι೯<ટҳ
֛>), which specifies that the administration by the SAFE
or its local branches over direct investment by foreign investors in the PRC shall be conducted
by way of registration. Institutions and individuals shall register with the SAFE and/or its
branches for their direct investment in the PRC. Banks shall process foreign exchange business
relating to the direct investment in the PRC based on the registration information provided by
the SAFE and its branches.
On February 13, 2015, the SAFE promulgated the Notice of the State Administration of
Foreign Exchange on Further Simplifying and Improving the Foreign Exchange Administration
Policies on Direct Investments (ટҳ༟̮ි၍ଣ
) (the “ SAFE Circular 13 ”), which took effect on June 1, 2015. The SAFE
Circular 13 specifies that the administrative examination and approval procedures with the
SAFE or its local branches relating to the foreign exchange registration approval for domestic
direct investments as well as overseas direct investments have been canceled, and qualified
banks are delegated the power to directly conduct such foreign exchange registrations under
the supervision of the SAFE or its local branches.
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On March 30, 2015, the SAFE issued the Circular of the State Administration of Foreign
Exchange on Reforming the Management Approach regarding the Settlement of Foreign
Exchange Capital of Foreign-invested Enterprises (̮ਠҳ༟Άุ
) (the “ SAFE Circular 19 ”), which took effect and replaced
previous regulations from June 1, 2015. Pursuant to the SAFE Circular 19, up to 100% of
foreign currency capital of a foreign-invested enterprise may be converted into RMB capital
according to the actual operation of the enterprise within the business scope at its will and the
RMB capital converted from foreign currency registered capital of a foreign-invested
enterprise may be used for equity investments within the PRC provided that such usage shall
fall into the business scope of the foreign-invested enterprise, which will be regarded as the
reinvestment of foreign-invested enterprise. Although the SAFE Circular 19 allows for the use
of RMB converted from the foreign currency-denominated capital for equity investments in the
PRC, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted
RMB for purposes beyond the business scope, for securities investments, for entrusted loans
or for inter-company RMB loans.
On June 9, 2016, the SAFE promulgated the Notice of the State Administration of Foreign
Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management
Policy of Capital Account (ஷ
) (the “ SAFE Circular 16 ”), which reiterates some of the rules set forth in Circular 19,
but changes the prohibition against using RMB capital converted from foreign currency
denominated registered capital of a foreign-invested company to issue RMB entrusted loans to
a prohibition against using such capital to issue loans to non-affiliated enterprises. In addition,
SAFE promulgated the Circular Regarding Further Promotion of the Facilitation of Cross-
Border Trade and Investment () (the “ SAFE
Circular 28 ”) on October 23, 2019, which expressly allows foreign-invested enterprises that
do not have equity investments in their approved business scope to use their capital obtained
from foreign exchange settlement to make domestic equity investments as long as there is a
truthful investment and such investment is in compliance with the foreign investment-related
laws and regulations.
On April 10, 2020, the SAFE promulgated Notice of the SAFE on Optimizing Foreign
Exchange Administration to Support the Development of Foreign-related Business (̮
), (the “ SAFE Circular 8 ”), according
to which, under the prerequisite of ensuring true and compliant use of funds and compliance
with the prevailing administrative provisions on use of income under the capital account,
enterprises which satisfy the criteria are allowed to use income under the capital account, such
as capital funds, foreign debt and overseas listing, etc. for domestic payment, without prior
provision of proof materials for veracity to the bank for each transaction.
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REGULATIONS ON OVERSEAS LISTING
On 6 July 2021, the General Office of the CPC Central Committee and the General Office
of the State Council jointly promulgated the Opinions on Strictly Cracking Down on Illegal
Securities Activities (จԈ), which emphasized the
need to strengthen the administration over illegal securities activities and the supervision on
overseas listings of China-based companies, and proposed to take effective measures, such as
promoting the construction of relevant regulatory systems to deal with the risks and incidents
faced by China-based overseas-listed companies, and provided that the special provisions of
the State Council on overseas offering and listing by those companies limited by shares will
be revised and therefore the duties of relevant domestic authorities and regulatory authorities
will be clarified. As there are no further explanations or detailed rules or regulations with
respect to such opinions, there are still uncertainties regarding the interpretation and
implementation of such opinions.
On August 8, 2006, six PRC regulatory authorities, including the MOFCOM and other
government authorities jointly issued the Rules on Mergers and Acquisitions of Domestic
Enterprise by Foreign Investors () which was
effective as of September 8, 2006, and amended on June 22, 2009 (the “ M&A Rules ”). The
M&A Rules, and other recently adopted regulations and rules concerning mergers and
acquisitions established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time consuming and complex. Our PRC Legal
Advisor is of the opinion that prior CSRC approval under the M&A Rules for this Global
Offering is not required because (i) the CSRC currently has not issued any definitive rule or
interpretation concerning whether offerings akin to this Global Offering are subject to the
M&A Rules; (ii) none of the incorporation or acquisition of the PRC subsidiaries involves the
merger with or acquisition of the equity or asset of a PRC domestic enterprise as defined under
the M&A Rules; and (iii) that no provision in the M&A Rules clearly classified contractual
arrangements as a type of transaction subject to the M&A Rules. However, there is uncertainty
as to how the M&A Rules will be interpreted or implemented, and we cannot assure you that
the relevant PRC government authorities, including the CSRC, will reach the same conclusion
as our PRC Legal Advisor.
On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ
) (the “ Trial Measures ”) and five supporting guidelines (collectively, the “ Trial
Measures and Supporting Guidelines ”), which came into effect on March 31, 2023. The Trial
Measures and Supporting Guidelines will regulate both direct and indirect overseas offering
and listing of PRC domestic companies’ securities by adopting a filing-based regulatory
regime.
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Pursuant to the Trial Measures and Supporting Guidelines, if the issuer both meets the
following criteria, the overseas securities offering and listing conducted by such issuer will be
deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of
the issuer’s operating revenue, total profit, total assets or net assets as documented in its
audited consolidated financial statements for the most recent fiscal year is accounted for by
domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in
the PRC, or its main place(s) of business are located in the PRC, or the majority of senior
management staff in charge of its business operations and management are PRC citizens or
have their usual place(s) of residence located in the PRC. Therefore, the Global Offering would
be deemed as an indirect overseas securities offering by a PRC domestic company. Where an
issuer submits an application for initial public offering to competent overseas regulators, such
issuer must file with the CSRC within three business days after such application is submitted.
The Trial Measures and Supporting Guidelines provide that, an overseas offering and listing is
prohibited under any of the following circumstances: if (i) such securities offering and listing
is explicitly prohibited by provisions in laws, administrative regulations and relevant state
rules; (ii) the intended securities offering and listing may endanger national security as
reviewed and determined by competent authorities under the State Council in accordance with
law; (iii) the domestic company intending to make the securities offering and listing, or its
controlling shareholder(s) and the actual controller, have committed relevant crimes such as
corruption, bribery, embezzlement, misappropriation of property or undermining the order of
the socialist market economy during the latest three years; (iv) the domestic company intending
to make the securities offering and listing is currently under investigations for suspicion of
criminal offenses or major violations of laws and regulations, and no conclusion has yet been
made thereof; or (v) there are material ownership disputes over equity held by the domestic
company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the
controlling shareholder(s) and/or actual controller. If domestic companies fail to fulfill the
above-mentioned filing procedures or offer and list in an overseas market against the
prohibited circumstances, the domestic companies, controlling shareholders and actual
controllers of such domestic companies as well as the directly liable persons-in-charge and
other directly liable persons would be required to rectify, warned and/or fined in accordance
with the Trial Measures. The Trial Measures and Supporting Guidelines also require
subsequent reports to be filed with the CSRC on material events, such as change of control or
voluntary or forced delisting of the issuer(s) who have completed overseas offerings and
listings.
According to the CSRC’s press conference for the release of the Trial Measures and the
Notice on Administration for the Filing of Overseas Offering and Listing by Domestic
Companies, on or prior to March 31, 2023, domestic companies that have already submitted
valid applications for overseas offering and listing, but have not obtained an approval from
overseas regulatory authorities or stock exchanges, may reasonably arrange the timing for
submitting their filing applications with the CSRC, and must complete the filing before the
completion of their overseas offering and listing. We have completed filing with the CSRC on
March 22, 2024 for the Listing and the Global Offering in accordance with the Trial Measures.
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On February 24, 2023, the CSRC, the MOF, the National Administration of State Secrets
Protection and the National Archives Administration of China jointly issued the Confidentiality
and Archives Administration Provisions, which took effect on March 31, 2023, according to
which, overseas securities regulators and competent overseas authorities may request to
inspect, investigate or collect evidence from a domestic company concerning its overseas
offering and listing or from the domestic securities companies and securities service providers
that undertake relevant businesses for such domestic companies, such inspection, investigation
and evidence collection shall be conducted under a cross-border regulatory cooperation
mechanism, and the CSRC or other competent Chinese authorities will provide necessary
assistance pursuant to bilateral and multilateral cooperation mechanisms. The domestic
company, securities companies and securities service providers shall first obtain approval from
the CSRC or other competent Chinese authorities before cooperating with the inspection and
investigation by the overseas securities regulator or competent overseas authority, or providing
documents and materials requested in such inspection and investigation. To be specific, a
domestic company that plans to, either directly or through its overseas listed entity, publicly
disclose or provide to relevant individuals or entities including securities companies, securities
service providers and overseas regulators, (i) any documents and materials that contain state
secrets or working secrets of government agencies, shall first obtain approval from competent
authorities and file with competent secrecy administrative department; (ii) any other
documents and materials that, if leaked, will be detrimental to national security or public
interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
A domestic company that provides documents and materials to securities companies and
securities service providers shall abide by applicable national regulations on confidentiality in
handling such documents and materials, and shall provide a written statement simultaneously.
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OVERVIEW
We are the largest online chronic disease management platform in China in terms of
average MAU in 2023, according to CIC. We commenced our business with a focus on chronic
disease management to address the needs of patients with chronic disease, such as
hypertension, cardiovascular and respiratory chronic diseases. Leveraging our chronic disease
management platform, we are dedicated to providing tailored medical care and precision
medicine for a growing population of chronic disease patients, with a view towards extending
our services to a wider range of disease areas.
Y unyi Inc., the ultimate parent company of the Pre-reorganization Group, was established
and commenced operations in August 2015 under the leadership of Mr. Xie with the support
from a group of passive shareholders and investors. Mr. Zhou subsequently joined Y unyi Inc.
in November 2015 as a director and later became a shareholder, working jointly with Mr. Xie
to lead the management and operations of the Pre-reorganization Group. In September 2019,
Fangzhou Inc., the ultimate parent company of the Group, was established. Our founders
self-funded the establishment of the Group.
BUSINESS MILESTONES
The following is a summary of our key business development milestones since our
inception in 2015:
Y ear Event
2015 We established Y unyi Inc., and the Initial WFOE entered into
Guangzhou Y unyi Contractual Arrangements (as defined below) with
Guangzhou Y unyi to acquire its effective control and substantially all
economic benefits, and obtained our online pharmacy license.
2018 We were among the earliest recipients of a newly issued national-
level internet hospital license, and pioneered our unique H2H model.
2019 We experienced tremendous growth in the number of registered
physicians and patients in our H2H platform, and entered into a
number of partnerships with leading global pharma companies.
Our Company was incorporated as the investment holding company
of our Group.
2020 We obtained approval to implement pilot programs for social health
insurance reimbursement of online pharmacy purchases, and
improved our home delivery services to include cold-chain delivery
of prescription drugs.
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Y ear Event
2021 Our customized content and marketing solutions business line
continued its rapid growth with the launch of a number of projects
and collaborations with leading global and local pharmaceutical
companies.
2022 Fangzhou Information was recognized as a High and New
Technology Enterprise ( ৷อҦஔΆุ) on December 19, 2022.
2023 Our Group was among the first cohort in Guangzhou to be designated
as a major disease and social health insurance “dual-channel” offline
pharmacy, allowing patients to purchase certain drugs on the National
Reimbursement Drug List of China with the benefit of public medical
insurance reimbursement.
MAJOR SUBSIDIARY AND CONSOLIDATED AFFILIATED ENTITY
The principal business activities and date of establishment and commencement of
business of the member of our Group that made a material contribution to our results of
operations during the Track Record Period are shown below:
Name of entity Principal business activities
Date of establishment
and commencement
of business
Fangzhou Medicine Internet hospital and online
retail pharmacy services
August 20, 2019
MAJOR SHAREHOLDING CHANGES OF OUR COMPANY AND YUNYI INC.
Y unyi Inc., the ultimate parent company of the Pre-reorganization Group, was established
on August 10, 2015 as an exempted company with limited liability in the Cayman Islands, with
an authorized share capital of US$50,000 with par value of US$0.0001 each.
Between November 2015 and June 2019, Y unyi Inc. conducted three rounds of pre-IPO
financing resulting in the aggregate issuance of 23,033,009 series A preferred shares with par
value of US$0.0001 each, the aggregate issuance of 16,836,401 series A-1 preferred shares
(subject to adjustments thereafter) with par value of US$0.0001 each and the aggregate
issuance of 28,197,656 series B preferred shares (subject to adjustments thereafter) with par
value of US$0.0001 each, further details of which are set out in the section headed “—Pre-IPO
Investments.”
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Our Company, Fangzhou Inc., was incorporated as an exempted company with limited
liability in the Cayman Islands on September 26, 2019 with an authorized share capital of
US$50,000 divided into 500,000,000 shares with par value of US$0.0001 each.
In December 2020, our Company adopted a weighted voting rights structure and
conducted series C round of pre-IPO financing resulting in the aggregate issuance of
31,036,067 Series C Preferred Shares with par value US$0.0001 each, further details of which
are set out in the section headed “—Pre-IPO Investments.” As a result of (a) the adoption of
the weighted voting rights structure, (b) the completion of series C round of pre-IPO financing,
(c) the reservation of Series A-1 Preferred Shares and Series B Preferred Shares as a result of
anti-dilution adjustments up to the completion of series C round of pre-IPO financing, and
(d) the issuance of shares reserved for certain pre-IPO investors in series A-1 and series B
rounds of pre-IPO financing, our Company’s authorized share capital comprised (i)
298,979,316 Class A Ordinary Shares with par value of US$0.0001 each, (ii) 90,038,425 Class
B Ordinary Shares with par value of US$0.0001 each, (iii) 23,033,009 Series A Preferred
Shares with par value of US$0.0001 each, (iv) 17,365,639 Series A-1 Preferred Shares with par
value of US$0.0001 each, (v) 39,547,544 Series B Preferred Shares with par value of
US$0.0001 each, and (vi) 31,036,067 Series C Preferred Shares with par value of US$0.0001
each. Each Class A Ordinary Share entitles the holder to exercise one vote, each Class B
Ordinary Share entitles the holder to exercise 20 votes and each Preferred Share entitles the
holder to exercise such number of votes as equals the whole number of Ordinary Shares into
which such holder’s collective Preferred Shares are convertible, respectively, on any resolution
tabled at the Company’s general meetings. The weighted voting rights structure will be
cancelled through the re-classification of all existing classes of shares into a single class of
Ordinary Shares immediately prior to Listing.
On August 9, 2021, our Company conducted a share split pursuant to which each issued
and unissued share was subdivided into five shares of the corresponding class with par value
of US$0.00002 each, following which the authorized share capital of our Company became
US$50,000 divided into (i) 1,494,896,580 Class A Ordinary Shares of US$0.00002 par value
each, (ii) 450,192,125 Class B Ordinary Shares of US$0.00002 par value each, (iii)
115,165,045 Series A Preferred Shares of US$0.00002 par value each, (iv) 86,828,195 Series
A-1 Preferred Shares of US$0.00002 par value each, (v) 197,737,720 Series B Preferred Shares
of US$0.00002 par value each, and (vi) 155,180,335 Series C Preferred Shares of US$0.00002
par value each.
In May 2022, we conducted series D round of pre-IPO financing resulting in the aggregate
issuance of 8,664,773 Series D Preferred Shares with par value of US$0.00002 each, following
which the issued share capital of our Company comprised (i) 167,370,215 Class A Ordinary
Shares of US$0.00002 par value each, (ii) 450,192,125 Class B Ordinary Shares of
US$0.00002 par value each, (iii) 115,165,045 Series A Preferred Shares of US$0.00002 par
value each, (iv) 86,828,195 Series A-1 Preferred Shares of US$0.00002 par value each, (v)
197,737,720 Series B Preferred Shares of US$0.00002 par value each, (vi) 155,180,335 Series
C Preferred Shares of US$0.00002 par value each, and (vii) 8,664,773 Series D Preferred
Shares of US$0.00002 par value each, further details of which are set out in the section headed
“—Pre-IPO Investments.”
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In December 2022, we conducted series D+ round of pre-IPO financing resulting in the
aggregate issuance of 8,086,871 Series D+ Preferred Shares with par value of US$0.00002
each, following which the issued share capital of our Company comprised (i) 167,370,215
Class A Ordinary Shares of US$0.00002 par value each, (ii) 450,192,125 Class B Ordinary
Shares of US$0.00002 par value each, (iii) 115,165,045 Series A Preferred Shares of
US$0.00002 par value each, (iv) 86,828,195 Series A-1 Preferred Shares of US$0.00002 par
value each, (v) 197,737,720 Series B Preferred Shares of US$0.00002 par value each, (vi)
155,180,335 Series C Preferred Shares of US$0.00002 par value each, (vii) 8,664,773 Series
D Preferred Shares of US$0.00002 par value each, and (viii) 8,086,871 Series D+ Preferred
Shares of US$0.00002 par value each, further details of which are set out in the section headed
“ —Pre-IPO Investments.”
In May 2024, the Company allotted and issued 5,453,428, 33,268,750, 32,900,000,
32,120,000, 3,500,000 and 20,000,000 Class A Ordinary Shares of par value of US$0.00002
each to Asia Tech Investments Ltd., Endeavor Cloud Limited, Gaoxin Thrive Limited, FAST
GOAL INTERNA TIONAL LIMITED, Mr. ZOU Y uming and Torano Investments Limited,
respectively.
SHARE CONVERSION
On June 14, 2024, our Shareholders also resolved to, among other things, conduct a share
conversion immediately prior to the completion of the Global Offering, pursuant to which each
issued Class A Ordinary Share, Class B Ordinary Share and Preferred Share shall be converted
into Ordinary Share on a one-to-one basis.
MAJOR ACQUISITIONS, DISPOSALS AND MERGERS
Throughout the Track Record Period and as of the Latest Practicable Date, we did not
conduct any major acquisitions, mergers or disposals.
REORGANIZATION AND DISRUPTION OF PRODUCTION AND BUSINESS
OPERATIONS INCIDENT
Business Reorganization from Guangdong Jianke to the Pre-reorganization Group
Guangdong Jianke was incorporated under the laws of the PRC on July 6, 2007 and
commenced online pharmacy operations in 2010.
In preparation for a proposed listing of the business, Y unyi Inc., an exempted company
incorporated in the Cayman Islands with limited liability, was established as the proposed
listing vehicle on August 10, 2015 with an authorized share capital of US$50,000. Mr. Zhou
became a director of Y unyi Inc. in November 2015, working jointly with Mr. Xie to lead the
management and operations of the Pre-reorganization Group, being the Initial WFOE and
Guangzhou Y unyi. In order to facilitate future fund raising activities including a proposed
listing and to set up a new business vehicle with a more streamlined shareholding and operating
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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structure, on October 28, 2015, Mr. Xie, other passive shareholders (including Mr. Su and Mr.
Ma) and all Series A Investors unanimously entered into an agreement to transfer the assets and
intellectual property rights from Guangdong Jianke to the Pre-reorganization Group at nil
consideration as part of a pre-listing business reorganization.
Prior to above transfer, Guangdong Jianke was owned as to 55% and 45% by Mr. Su and
Mr. Xie, respectively. As of the Latest Practicable Date, the shareholding structure of
Guangdong Jianke remained unchanged. Guangdong Jianke was principally engaged in online
pharmacy operations through the Jianke mobile applications and website prior to above
transfer.
From 2016 to July 2019 (“ Transfer Period ”), Guangdong Jianke’s intellectual property
rights relating to business on our Jianke Platform and third-party e-commerce platforms,
including trademarks, domain name registration and software copyrights, were successively
transferred to the Pre-reorganization Group. However, there were significant challenges and
delays associated with the overall migration to the Initial WFOE, especially due to the
difficulties associated with transferring Guangdong Jianke’s stores on third party platforms to
the Pre-reorganization Group. As a result, during the Transfer Period, the Initial WFOE allowed
the overall operations of the Jianke mobile applications and website to continue to be carried
out by Guangdong Jianke under license and authorization from the Initial WFOE. After the
Transfer Period, given that (i) the overall operations of the Jianke mobile applications and
website were conducted by the Pre-reorganization Group and subsequently by the Group, and
(ii) the business operations of Guangdong Jianke have ceased, to the best knowledge of our
Directors, there is no potential competition and cooperation between the businesses of the
Group and Guangdong Jianke as of the Latest Practicable Date.
Structure of the Pre-reorganization Group
Mr. Xie and Mr. Zhou entered into an acting in concert arrangement and collectively held
35% of the equity interest in Y unyi Inc. in 2018. Mr. Su and Mr. Ma collectively held 28% of
the equity interest in Y unyi Inc. and served as nominee shareholders of Guangzhou Y unyi, the
operating entity under the contractual arrangements of the Pre-reorganization Group.
Accordingly, the Initial WFOE entered into various agreements on November 20, 2015 that
constitute the contractual arrangements (“ Guangzhou Yunyi Contractual Arrangements ”)
with, among others, Guangzhou Y unyi, under which it acquired effective control over the
financial and operational management and results of Guangzhou Y unyi and are entitled to
substantially all the economic benefit derived from the operations of Guangzhou Y unyi.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Details of the simplified corporate structure of the Pre-reorganization Group are set out
below:
Yunyi Inc.
(Cayman Islands)
Mr. Xie
and
Mr. Zhou
Yunyi Limited
(Hong Kong)
28%
100%
100%
Initial WFOE
(PRC)
Guangzhou Yunyi
(PRC)
Guangzhou
Yunyi
Contractual
Arrangements
Mr. SuMr. Xie Mr. Ma
45% 53% 2%
Offshore
Onshore
Mr. Su and
Mr. Ma
35%
Nominee Shareholders
Other investors
and incentive
platforms(1)
37%
Note:
(1) Similar to the adoption of weighted voting rights structure, as a token of trust on the management team and
to enable the management team to maintain control over the operation of the Group, streamline the
decision-making procedure and adhere to the consistent strategic plans, each of Crescent Trident Singapore
Pte. Ltd., Asia-Pac e-Commerce Opportunities Pte. Ltd. and CP Pharmatech Singapore Pte. Ltd. executed a
power of attorney on April 7, 2017, April 7, 2017 and September 4, 2018 respectively, pursuant to which each
of them unconditionally, indefinitely and irrevocably authorized and appointed Fangming Investment
Management Limited, a company controlled by Mr. Xie, to exercise the voting power attached to the series A
preferred shares, series A-1 preferred shares and series B preferred shares held by them, representing
approximately 28% of the total issued share capital of Y unyi Inc. On September 4, 2018, being the date on
which all powers of attorney have been duly executed, Mr. Xie could exercise the voting power attached to
the shares representing approximately 63% of the total issued share capital of Y unyi Inc. As of the Latest
Practicable Date, all aforementioned powers of attorney were valid and effective.
Disruption of Production and Business Operations Incident
In June 2019, the board of directors of Y unyi Inc. consisted of 6 directors, namely: Mr.
Xie, Mr. Zhou, Mr. Su, Mr. Ma, Mr. David Hand (“ Mr. Hand ”) and Mr. Kong Qingrong (“ Mr.
Kong ”). Mr. Hand and Mr. Kong were appointed by Crescent Point.
During the second quarter of 2019, the Pre-reorganization Group undertook its periodic
strategic business review. As part of this process, Mr. Su and Mr. Ma were found to be involved
in a series of merchandise transactions, largely occurring from January to June 2019, between
the Pre-reorganization Group and an entity (the “ Undisclosed Party ”) which had been
established and owned by Mr. Ma’s relative and Mr. Su’s long term business partner, without
any disclosure of their relationship. Mr. Su and Mr. Ma, leveraging their standing as
shareholders and directors of the Pre-reorganization Group, referred the Undisclosed Party to
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the Pre-reorganization Group as an ordinary supplier. Accordingly, the Pre-reorganization
Group entered into various transactions with the Undisclosed Party, whereby the Undisclosed
Party supplied merchandise such as pharmaceutical and healthcare products to the Pre-
reorganization Group, and the Pre-reorganization Group provided order management and
fulfillment services to the Undisclosed Party, including warehousing, logistics and delivery
services, such as collection of funds, management of inventory products, and sending and
receiving customer orders, but with the Pre-reorganization Group charging substantially lower
service fees as compared with service fees in similar transactions which the Pre-reorganization
Group entered into around the same period. As a result of these transactions, the Pre-
reorganization Group suffered an insignificant loss in revenue. Despite such insignificant loss
in revenue, the other directors of Y unyi Inc. considered that such transactions were a conflict
of interest and detrimental to the Pre-reorganization Group and other shareholders as a whole,
and demanded the termination of such transactions.
After discovering the background of the Undisclosed Party, the board of directors of
Y unyi Inc. further strengthened the internal controls of the Pre-reorganization Group by
adopting certain recommended measures as advised by its internal control advisor, including
i) establishing a related party disclosure system and requiring directors and management to
represent that they will satisfy relevant disclosure and approval requirements; ii) conducting
regular review and inspection of related-party transactions; iii) maintaining and updating the
list of related parties; iv) establishing anonymous whistle-blowing procedures; v) requiring the
audit department to report to the board of directors immediately after discovering abnormal
transactions; vi) conducting employee training regarding the group’s anti-fraud policy; and vii)
specifying the penalty on persons who failed to comply with the relevant requirements. The
Company has continuously implemented and monitored such internal control measures
since then. During the Track Record Period, the Group did not provide similar order
management and fulfillment services to any other party. This was due to a strategic business
decision prior to 2020 to discontinue such types of services, and focus on developing the
Company’s core comprehensive medical services, online retail pharmacy services, and
customized content and marketing solutions business segments.
On July 24, 2019, Mr. Su, Mr. Ma and their co-conspirators, forcibly entered the offices
of Initial WFOE and Guangzhou Y unyi located at No. 4 and No. 6, Kehuisi Road, Science City,
Guangzhou (ි̬൑̬໮eʬ໮), restricted employees’ rights to access or
leave the office and broke into Mr. Xie’s office and removed by force numerous objects (the
“Disruption of Production and Business Operations Incident ”).
On July 31, 2019, the other shareholders of Y unyi Inc. (being all ordinary shareholders
other than Mr. Su and Mr. Ma) unanimously approved resolutions removing Mr. Su and Mr. Ma
from their office as directors.
After an investigation by the Guangdong Provincial Public Security Bureau, Mr. Ma and
two other defendants were arrested and charged with sabotage of production and/or business
operations ( ॎᕸ͛ପ຾ᐄໆ) in October 2019. Mr. Su was arrested for the same crime on
December 14, 2020.
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On September 24, 2021, Mr. Ma was found guilty of the charge at first instance by the
People’s Court of Huangpu District of Guangzhou. Mr. Ma elected to appeal the verdict, and
his appeal trial was held on June 14, 2022. On February 16, 2023, the Guangzhou Intermediate
People’s Court issued a second instance (final) judgment on this case, which dismissed the
appeal and upheld the original verdict.
On June 23, 2021, Mr. Su was released on bail. On the basis of the established factual
findings from the aforesaid judgments against Mr. Ma, the Guangzhou Huangpu District
People’s Procuratorate undertook a public prosecution of Mr. Su’s case, which was accepted by
the People’s Court of Huangpu District of Guangzhou. On July 19, 2023, Mr. Su was found
guilty of the charge at first instance by the People’s Court of Huangpu District of Guangzhou.
On July 21, 2023, Mr. Su elected to appeal the verdict. On October 27, 2023, the Guangzhou
Intermediate People’s Court issued a second instance (final) judgment on this case, which
dismissed the appeal and upheld the original verdict.
Reorganization
Considering the negative impact of the Disruption of Production and Business Operations
Incident and potential future attempts by Mr. Su and Mr. Ma to cause damage to the
Pre-reorganization Group, business partners of the Pre-reorganization Group urged the board
of directors of Y unyi Inc. to take action so as to ensure sound and stable operations. Moreover,
employees of the Pre-reorganization Group expressed their concerns about further negative
incidents similar to the Disruption of Production and Business Operations Incident and future
business of the Pre-reorganization Group. In addition, since the Disruption of Production and
Business Operations Incident, Mr. Su and Mr. Ma have disavowed the Guangzhou Y unyi
Contractual Arrangements of the Initial WFOE which they had previously entered into and
declared the agreements to be null and void, while refusing to discharge their duties as nominee
shareholders of Guangzhou Y unyi under the Guangzhou Y unyi Contractual Arrangements, all
of which created a significant obstacle to maintaining ongoing operations of the Pre-
reorganization Group.
To avoid the negative effects brought by the Disruption of Production and Business
Operations Incident and in view of the potential instability of the business and management of
the Pre-reorganization Group, Mr. Xie, Mr. Zhou and other shareholders of Y unyi Inc. (other
than Mr. Su and Mr. Ma) had no alternative but to establish the Company on September 26,
2019 as the new proposed listing vehicle. Since early 2020, the Group, operating through the
Company, its subsidiaries and consolidated affiliated entities, and with significant efforts from
the management team, and support from the existing shareholders, has been able to continue
serving its customers with minimal interruption.
For the same purpose, the Initial WFOE was transferred to Fangzhou Limited to avoid
further interruption. Accordingly, Y unyi Inc. convened a meeting of shareholders on February
7, 2021. At such meeting, with the support of approximately 98.6% of the votes cast by the
shareholders of Y unyi Inc. present, a resolution was passed to subsequently approve the sale
of 100% of the equity interest in the Initial WFOE (including the Guangzhou Y unyi Contractual
Arrangements) to Fangzhou Limited for a consideration of US$94,700,000. With a view to
facilitating such acquisition and recover relevant intellectual property rights as soon as
possible, the consideration was equal to the paid-in capital of the Initial WFOE and greatly
exceeded the valuation of the Initial WFOE as assessed by Shenzhen Y ongming Asset
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Appraisal Firm (הan independent valuer, in its valuation
report, which was RMB21,297,100. The consideration for the acquisition was later distributed
to the shareholders of Y unyi Inc. in accordance with its then effective articles of association.
Based on the distribution waterfall outlined by the then effective articles of association of
Y unyi Inc., the proceeds of the sale were distributed entirely to the series B and series A-1
preferred shareholders. The holders of series A preferred shares and ordinary shares (including
Mr. Xie, Mr. Zhou, Mr. Ma and Mr. Su) did not receive any distribution of proceeds from the
sale. The process of reorganization from the Pre-reorganization Group to the Group, as
described in this paragraph and the paragraph above, are collectively referred to as the
“Reorganization ”.
In order to support the business of the Company and in accordance with the remaining
shareholders’ stated goals for the Reorganization, the series A-1 preferred shareholders and
series B preferred shareholders who were entitled to a distribution from Y unyi Inc. voluntarily
entered into a letter of undertaking to contribute a total distribution amount of US$94,700,000
to the Company without any shareholding increase in the Company.
Details of the simplified corporate structure of the Group after the Reorganization, the
adoption of weighted voting rights structure and the completion of Series C round financing are
set out as follows:
The Company
(Cayman Islands)
Fangzhou Limited
(HK)
38.64%(1)54.56%(1) 6.80%(1)
100%
100%
New WFOE Fangzhou Yunkang
Contractual
Arrangements(3)
Offshore
Onshore
Initial WFOE
100%
Mr. Zhou Other investors and
reserved incentive platformsMr. Xie
Guangzhou Yunyi
Contractual
Arrangements(2)
Guangzhou
Yunyi
Notes:
(1) The figures set out the respective voting power conferred upon the shareholder(s) under the weighted voting
rights structure adopted in December 2020.
(2) The Initial WFOE entered into Guangzhou Y unyi Contractual Arrangements with, among others, Guangzhou
Y unyi on November 20, 2015.
(3) The New WFOE entered into Contractual Arrangements with, among others, Fangzhou Y unkang on June 19,
2020 (which superseded the contractual arrangements entered into on April 28, 2020).
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The Company’s legal advisor as to Cayman Islands law also confirmed that (i) the
removal of Mr. Su and Mr. Ma as directors of Y unyi Inc., (ii) the sale of the Initial WFOE to
Fangzhou Limited by Y unyi Limited, and (iii) the distribution of the sale proceeds of the Initial
WFOE did not violate the then effective articles of association of Y unyi Inc. or any applicable
law, regulation, order or decree in the Cayman Islands.
The Company’s PRC Legal Advisor is of the view that the Reorganization did not violate
the then articles of association of members of the Pre-reorganization Group incorporated in the
PRC nor the then effective applicable law, regulation in the PRC.
The Directors believe that the Reorganization, the transactions with Undisclosed Party
and the Disruption of Production and Business Operations Incident will not negatively affect
the Company’s suitability for listing under Rule 8.04 of the Listing Rules nor the suitability of
the Directors under Rules 3.08 and 3.09 of the Listing Rules on the basis that:
(i) the historical disruptions and damages suffered by the Pre-reorganization Group
were solely caused by misconduct of Mr. Su and Mr. Ma without the involvement
of any other shareholders, directors or management members of Pre-reorganization
Group/the Group;
(ii) Mr. Su and Mr. Ma are no longer directors nor shareholders of the Group after
completion of the Reorganization and therefore would not be able to cause any
ongoing material adverse impact to the Group’s business operations and financial
positions;
(iii) the purchase price of the Initial WFOE was above the fair market value as assessed
by the independent valuer and the Reorganization was in compliance with the laws
and regulations of the PRC and Cayman Islands;
(iv) the Directors of the Group, namely Mr. Xie, Mr. Zhou and Mr. David McKee HAND,
being also directors of the Pre-reorganization Group, have performed timely
rectification and adopted measures to protect the shareholders of the Pre-
reorganization Group as a whole, and as a result the disruptions and damages did not
cause any material adverse impact to the Group’s business operations and financial
positions;
(v) during the process of handling the relevant issues, Mr. Xie, Mr. Zhou and Mr. David
McKee HAND have demonstrated the required levels of skill, care and diligence as
a director of a listed company and consistently performed their fiduciary duties to
protect the shareholders of the Company as a whole; and
(vi) upon identification of the transactions with Undisclosed Party, Mr. Xie, Mr. Zhou
and Mr. David McKee HAND, as directors of the Pre-reorganization Group, have
made significant efforts to further strengthen the internal control systems of the
Group through a series of measures including establishment of whistle-blowing
mechanisms, establishment of scope of authority and responsibility for each
employee position and also enhancement of separation of duties. In addition, after
the Disruption of Production and Business Operations Incident, the aforementioned
Directors have made their best endeavours to minimize the damage caused to the
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Pre-reorganization Group and its business by timely reporting the same to the
Guangzhou Municipal Public Security Bureau, maintaining relationship with
relevant business partners and retaining employees and have effectively protected
the Group’s business and operations from damage caused by the Disruption of
Production and Business Operations Incident.
Due Diligence by the Joint Sponsors
In respect of the transactions with the Undisclosed Party, the Joint Sponsors (i) reviewed
various documents including a summary of the Pre-reorganization Group’s board discussion
materials, the Pre-reorganization Group’s internal investigation materials and a consultant
report on the transactions with the Undisclosed Party; and (ii) interviewed each of the six
incumbent directors of Y unyi Inc. at the relevant time and the persons responsible for the
Pre-reorganization Group’s procurement and accounting matters.
In respect of the Disruption of Production and Business Operations Incident, the Joint
Sponsors reviewed (i) the Pre-reorganization Group’s records of internal investigations and
follow-up corporate actions following the Disruption of Production and Business Operations
Incident; (ii) the first instance criminal judgment against Mr. Ma dated September 24, 2021
handed down by the People’s Court of Huangpu District of Guangzhou; (iii) the second
instance (final) criminal judgment against Mr. Ma dated February 16, 2023 handed down by the
Guangzhou Intermediate People’s Court; (iv) the first instance criminal judgment against Mr.
Su dated July 19, 2023 handed down by the People’s Court of Huangpu District of Guangzhou;
and (v) the second instance (final) criminal judgment against Mr. Su dated October 27, 2023
handed down by the Guangzhou Intermediate People’s Court.
In respect of the Reorganization, the Joint Sponsors (i) reviewed the Pre-reorganization
Group’s and the Group’s relevant records of board and shareholder approvals as well as the
appraiser’s valuation report of the Initial WFOE; (ii) interviewed each of the six incumbent
directors of Y unyi Inc. at the relevant time to understand the Reorganization and the basis of
the transfer price of the Initial WFOE; (iii) reviewed advice from the Company’s Cayman
Islands, Hong Kong and PRC counsels; and (iv) consulted the Company’s and the Joint
Sponsors’ PRC legal advisors.
Based on the Joint Sponsors’ due diligence set forth above, nothing has come to the Joint
Sponsors’ attention that would lead them to disagree with the Company’s conclusions (i) that
the remaining directors were not involved in the transactions with the Undisclosed Party; (ii)
regarding the corporate actions that the Pre-reorganization Group and the Group took in
response to (a) the transactions with the Undisclosed Party and (b) the Disruption of Production
and Business Operations Incident; (iii) regarding the fairness and legality of the
Reorganization; and (iv) regarding the Company’s suitability for listing and the suitability of
the Directors under Rules 3.08 and 3.09 of the Listing Rules.
Public Shareholders’ Risks
On the basis of legal analysis provided by Cayman Islands, Hong Kong and PRC
counsels, and to the best of the knowledge of the Company, we reasonably believe that Mr. Su
and Mr. Ma do not have any solid legal grounds under Cayman Islands, Hong Kong or PRC
laws for recourse against the Company, or any other member of the Group or any of their
respective shareholders, for any claim of “loss of interests” in Y unyi Inc. and the Pre-
reorganization Group due to the Reorganization (including acquisition of the Initial WFOE).
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In order to further protect the interests of future public shareholders of the Group, Mr. Xie
and Mr. Zhou have undertaken to provide an indemnity to the public shareholders of the
Company after the Listing for any potential loss suffered by the public shareholders as a result
of litigation by Mr. Su and Mr. Ma against the Group.
Restructuring of the Group’s PRC Entities after the Disruption of Production and
Business Operations Incident
Accordingly, the New WFOE entered into various agreements on June 19, 2020 that
constitute the Contractual Arrangements (which superseded the contractual arrangements
entered into on April 28, 2020) with, among others, Fangzhou Y unkang, under which all
economic benefits arising from the business of our Consolidated Affiliated Entities are
transferred to the New WFOE to the extent permitted by the PRC laws and regulations. For
further details on the Contractual Arrangements, see “Contractual Arrangements.”
The following chart sets forth our Group’s simplified corporate and shareholding
structure immediately prior to our restructuring after the Disruption of Production and Business
Operations Incident:
100%
Fangzhou
Limited
100%
The Company
(Cayman Islands)
Initial WFOE New WFOE
Contractual
Arrangements
Fangzhou Yunkang
Guangzhou Yunyi
Contractual
Arrangements
Guangzhou Yunyi
Guangzhou Fangming
Investment Enterprise
(Limited Partnership)(1)
Shenzhen Kaichuang
Lianyu Technology
Consultancy Co., Ltd.(1)
Beijing Yiershan
Technology Co., Ltd.(1)
100%
47%
33%
20%
Note:
(1) As of the Latest Practicable Date, Guangzhou Fangming Investment Enterprise (Limited Partnership) is
wholly-owned by Mr. Xie. Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. is owned as to 55%
and 45%, respectively, by Zhang Xinwei ( ੵอਃ) and Wang Wenchao ( ӓၲ൴), each of whom holds equity
interest in Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. as a nominee appointed by Crescent
Point. Beijing Yiershan Technology Co., Ltd. is wholly owned by Y ang Jinghua ( เหശ), the mother of Mr.
Zhou, who holds equity interest in Beijing Yiershan Technology Co., Ltd. as a nominee on behalf of Mr. Zhou.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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As part of our restructuring in contemplation of the Global Offering, we implemented the
following onshore restructuring, which comprises steps undertaken in respect of our
subsidiaries in the PRC.
(1) Acquisition of Fangzhou Pharmaceutical
Fangzhou Pharmaceutical was acquired by Guangzhou Fangming Investment Enterprise
(Limited Partnership) (ҳ༟Άุ(Υྫ)), a partnership owned by Mr. Xie, and
Liu Xiukui in July 2020 as nominee shareholders on behalf of Fangzhou Medicine, at nil
consideration, which was determined based on market fair value and the financial position of
Fangzhou Pharmaceutical at the time. The nominee arrangement aimed to streamline the
relevant approval procedures and accelerate the completion of acquisition of Fangzhou
Pharmaceutical. Since both nominees were domestic individual investors, the equity transfer
process was considerably simpler than for a foreign investor, without the need to submit
materials related to any complex corporate structure or registration.
On April 19, 2021, Fangzhou Information acquired the entire equity interest in Fangzhou
Pharmaceutical from Liu Xiukui and Guangzhou Fangming Investment Enterprise (Limited
Partnership) (ҳ༟Άุ(Υྫ)) at nil consideration, which was determined
after taking into account the purpose of the onshore restructuring. Both Liu Xiukui and
Guangzhou Fangming Investment Enterprise (Limited Partnership) held equity interest in
Fangzhou Pharmaceutical as nominees on behalf of Fangzhou Medicine.
(2) Acquisition of Beijing Fangyixing
On August 12, 2019, Beijing Fangyixing was established as a limited liability company
in the PRC and was wholly-owned by Mr. Xie. On the same day, Mr. Xie and Mr. Zhou entered
into an acting-in-concert arrangement to jointly control Beijing Fangyixing since its date of
incorporation. On February 12, 2020, New WFOE entered into a series of contractual
arrangements with, among others, Beijing Fangyixing and Mr. Xie, through which New WFOE
had acquired effective control over Beijing Fangyixing. As Beijing Fangyixing is not engaged
in any business that is categorized as “Restricted” or “Prohibited” in the Negative List, in order
to fulfill the narrowly tailored requirement of the contractual arrangements and as part of the
restructuring in contemplation of the Global Offering, the contractual arrangement was
terminated by New WFOE, Beijing Fangyixing and Mr. Xie on April 28, 2021.
On April 28, 2021, Fangzhou Information acquired the entire equity interest in Beijing
Fangyixing from Mr. Xie at a consideration of RMB1.0 million, which was determined based
on the then paid-in capital of Beijing Fangyixing, and the payment of such consideration was
fully settled on February 25, 2022.
(3) Acquisition of Xinjiang Internet Hospital
On May 7, 2020, Xinjiang Internet Hospital was established as a limited liability
company in the PRC and was owned by Mr. Xie and Liu Xiukui as to 90% and 10%,
respectively. Each of Mr. Xie and Liu Xiukui was the nominee of Fangzhou Medicine.
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On May 11, 2021, Fangzhou Y unkang and Fangzhou Information each acquired 30% and
70% of the equity interest in Xinjiang Internet Hospital, respectively, from Mr. Xie and Liu
Xiukui at nil consideration, which was determined based on the then paid-in capital of Xinjiang
Internet Hospital.
(4) Acquisition of Fangzhou Internet Hospital, Qishi Hospital and Fangzhou Media
On August 4, 2020, Fangzhou Media was established as a limited liability company in the
PRC and was owned by Yingtan Jianwang Innovation Investment Center ( ᜻ᆐ਄ၣ௴อҳ༟
ʕː), a company wholly-owned by Mr. Xie, and Liu Xiukui as to 95% and 5%, respectively.
Each of Yingtan Jianwang Innovation Investment Center and Liu Xiukui was the nominee of
Fangzhou Medicine.
On May 13, 2021, Fangzhou Y unkang acquired the entire equity interest in Fangzhou
Media from Liu Xiukui and Yingtan Jianwang Innovation Investment Center ( ᜻ᆐ਄ၣ௴อҳ
༟ʕː) at nil consideration, which was determined based on the paid-in capital of Fangzhou
Media.
On September 30, 2020, Qishi Hospital was established as a limited liability company in
the PRC and was owned by Yingtan Jianwang Innovation Investment Center ( ᜻ᆐ਄ၣ௴อҳ
༟ʕː), a company wholly-owned by Mr. Xie, and Liu Xiukui as to 95% and 5%, respectively.
Each of Yingtan Jianwang Innovation Investment Center and Liu Xiukui was the nominee of
Fangzhou Medicine.
On June 3, 2021, Fangzhou Y unkang acquired the entire equity interest in Qishi Hospital
from Liu Xiukui and Yingtan Jianwang Innovation Investment Center ( ᜻ᆐ਄ၣ௴อҳ༟ʕː)
at nil consideration, which was determined based on the then paid-in capital of Qishi Hospital.
On May 18, 2020, Fangzhou Internet Hospital was established as a limited liability
company in the PRC and was owned by Mr. Xie and Liu Xiukui as to 99% and 1%,
respectively. Each of Mr. Xie and Liu Xiukui was the nominee of Fangzhou Medicine.
On June 16, 2021, Fangzhou Y unkang acquired the entire equity interest in Fangzhou
Internet Hospital from Mr. Xie and Liu Xiukui at nil consideration, which was determined
based on the then paid-in capital of Fangzhou Internet Hospital.
(5) Acquisition of Fangzhou Medicine
On August 20, 2019, Fangzhou Medicine was established as a limited liability company
in the PRC and was wholly-owned by Mr. Xie. On the same day, Mr. Xie and Mr. Zhou entered
into an acting-in-concert arrangement to jointly control Fangzhou Medicine since its date of
incorporation date.
On April 19, 2021, Fangzhou Y unkang acquired the entire equity interest in Fangzhou
Medicine from Mr. Xie at nil consideration, which was determined based on the then paid-in
capital of Fangzhou Medicine.
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(6) Capital injection into Fangzhou Information by Blue Saffron Asia Pte. Ltd. and
Acquisition of Fangzhou Information
On September 29, 2019, Fangzhou Information was established as a limited liability
company in the PRC and was owned by Mr. Xie and Liu Xiukui as to 99% and 1%,
respectively. Mr. Xie and Liu Xiukui were the nominees of Fangzhou Medicine.
On May 26, 2021, the registered capital of Fangzhou Information was increased to
RMB30.303 million, with Blue Saffron Asia Pte. Ltd., a company incorporated in Singapore
and an Independent Third Party of the Company, subscribed for additional RMB303,000. Upon
completion of such capital injection, Fangzhou Information was owned by Mr. Xie, Liu Xiukui
and Blue Saffron Asia Pte. Ltd. as to 98.01%, 0.99% and 1.00%, respectively. Accordingly,
Fangzhou Information was converted from a limited liability company into a sino-foreign
equity joint venture limited company.
In order to acquire the entire equity interests in Fangzhou Information by the Group, on
July 16, 2021, New WFOE acquired the entire equity interest in Fangzhou Information from
Mr. Xie, Liu Xiukui and Blue Saffron Asia Pte. Ltd. at a consideration of RMB1 million, nil
and RMB303,000, respectively, which was determined based on the registered capital of
Fangzhou Information subscribed by each of the shareholders, and the payment of such
consideration was fully settled on March 3, 2022. Upon completion of such transfer, Fangzhou
Information became an indirect wholly-owned subsidiary of the Group.
(7) Incorporation of several subsidiaries
On November 8, 2021, Fangzhou Health was incorporated as a wholly-owned subsidiary
of Fangzhou Information. On December 13, 2021, Heilongjiang Chengguang Lanjiang
Pharmaceutical Retail Co., Ltd. (ʮ̡) was incorporated and
was held as to 51% and 49% by Fangzhou Pharmaceutical and Y ang Y ukun, an Independent
Third Party of the Company, respectively. On December 31, 2021, Shanghai Fangyixing
Information Technology Co., Ltd. (ʮ̡) was incorporated as a
wholly-owned subsidiary of Fangfeng Technology. Fangzhou Beijing was incorporated and
was held as to 99% and 1% by Fangzhou Pharmaceutical and Beijing Duoshi Weidan Cosmetic
and Hairdressing Co., Ltd. (ʮ̡), an Independent Third Party of
the Company, respectively. On March 23, 2022, Fangzhou Pharmaceutical acquired the 1%
equity interest in Fangzhou Beijing from Beijing Duoshi Weidan Cosmetic and Hairdressing
Co., Ltd. at a consideration of RMB10,000, which was determined based on the registered
capital of Fangzhou Beijing. On June 6, 2022, Y unyi Information was incorporated in the PRC
and was held by the New WFOE and Fangzhou Y unkang as to 50% and 50%, respectively.
(8) Removal of Guangzhou Yunyi
The Initial WFOE entered into various agreements on November 20, 2015 that constitute
the Guangzhou Y unyi Contractual Arrangements with, among others, Guangzhou Y unyi, under
which the Initial WFOE have acquired effective control over the financial and operational
management and results of Guangzhou Y unyi and are entitled to substantially all the economic
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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benefit derived from the operations of Guangzhou Y unyi. Following the incorporation of
Fangzhou Medicine on August 20, 2019, Guangzhou Y unyi’s business gradually migrated to
Fangzhou Medicine. As of the Latest Practicable Date, Guangzhou Y unyi had no business
operation.
Pursuant to the terms of the relevant agreements in Guangzhou Y unyi Contractual
Arrangements, the Initial WFOE is entitled to transfer its rights and obligations under the
agreements with written notice to Guangzhou Y unyi, Mr. Su, Mr. Ma and Mr. Xie. In order to
reduce the management cost of the Company and improve management efficiency of the
Guangzhou Y unyi Contractual Arrangements and the Contractual Arrangements, considering
that Guangzhou Y unyi has no business operation, on March 27, 2023 the Initial WFOE
transferred all its rights and obligations under the Guangzhou Y unyi Contractual Arrangements
to Guangdong Fangming Technology Co., Ltd. (ʮ̡), a limited liability
company that was held by Mr. Xie and Liu Xiukui as to 90% and 10%, respectively, by serving
a written notice on such transfer to Guangzhou Y unyi, Mr. Su, Mr. Ma and Mr. Xie. Upon such
transfer, Guangzhou Y unyi was no longer controlled by the Initial WFOE and accordingly
excluded from our Group.
CONCERT PARTY ARRANGEMENT
Pursuant to the Concert Deed entered into by Mr. Xie and Mr. Zhou dated September 26,
2019 and their mutual undertakings issued in February 2024, Mr. Xie and Mr. Zhou confirmed
and agreed that they have acted and will continue to act in concert and collectively for all
material management affairs and the arrival and/or execution of all commercial decisions,
including but not limited to financial and operational matters, of our Group since date of the
Concert Deed, and they have casted and will continue to cast unanimous vote collectively for
or against all resolutions in all Board and Shareholders’ meetings and discussions of the Group.
If Mr. Xie and Mr. Zhou are unable to reach a consensus on relevant matters after extensive
discussion, Mr. Xie’s opinion shall take precedence. Please see the section headed “Substantial
Shareholders” for details of the shareholding interest of our Controlling Shareholders.
DEED OF VOTING PROXY
On June 12, 2024, Tech-Med Investments (S) Pte. Ltd. executed a deed of voting proxy
(the “ Voting Proxy ”), pursuant to which Tech-Med Investments (S) Pte. Ltd. irrevocably and
unconditionally appointed Mr. Xie and Mr. Zhou jointly as its true and lawful attorney and
proxy with respect to all the Shares held by it at the general meetings of the Company, effective
immediately before the Listing. The V oting Proxy shall automatically terminate if Crescent
Point’s ownership falls below 30% of the Company’s total issued share capital, whether held
directly or through indirect means. By entrusting such voting rights jointly to Mr. Xie and Mr.
Zhou, Tech-Med Investments (S) Pte. Ltd. affirms its support and faith in the leadership and
management of Mr. Xie and Mr. Zhou to act in a manner that is aligned with the interests of
our Group and Shareholders as a whole. The voting proxy arrangement will be beneficial to the
overall strategic planning and decision-making process of the Company.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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CAPITALIZATION OF THE COMPANY
As of the Latest Practicable Date, our Company has adopted a weighted voting rights
structure. Under this structure, our Company’s authorized share capital comprises
1,478,144,936 Class A Ordinary Shares, 450,192,125 Class B Ordinary Shares, 115,165,045
Series A Preferred Shares, 86,828,195 Series A-1 Preferred Shares, 197,737,720 Series B
Preferred Shares, 155,180,335 Series C Preferred Shares, 8,664,773 Series D Preferred Shares
and 8,086,871 Series D+ Preferred Shares. Each Class A Ordinary Share entitles the holder to
exercise one vote, each Class B Ordinary Share entitles the holder to exercise 20 votes and each
Preferred Share entitles the holder to exercise such number of votes as equals the whole
number of Ordinary Shares into which such holder’s collective Preferred Shares are
convertible, respectively, on any resolution tabled at the Company’s general meetings. The
weighted voting rights structure will be cancelled immediately prior to Listing, and each Class
A Ordinary Share, Class B Ordinary Share and Preferred Share will be automatically converted
into one Share.
The following table sets out our shareholding structure upon the completion of the Global
Offering assuming the weighted voting rights structure is cancelled and the Over-allotment
Option is not exercised.
Shareholders
Ordinary
Shares
Aggregate
ownership/
voting right
percentage upon
completion of
the Global
Offering (1)
Fangrong Management Limited (2) 265,538,362 19.81%
Xingyu Holdings L.P . (2) 5,585,180 0.42%
Fangzhan Holdings L.P . (2) 5,481,985 0.41%
Celaeno Group Limited (3) 186,158,297 13.89%
Silica Brothers Corp. (3) 50,465,760 3.77%
Tech-Med Investments (S) Pte. Ltd. (4) 138,430,610 10.33%
CP Pharmatech Singapore Pte. Ltd. (4) 126,151,645 9.41%
Crescent Trident Singapore Pte. Ltd. (4) 115,165,045 8.59%
Asia-Pac E-Commerce Opportunities Pte. Ltd. (4) 57,696,515 4.30%
Endeavor Cloud Limited (5) 33,268,750 2.48%
FAST GOAL INTERNA TIONAL LIMITED (5) 32,120,000 2.40%
Gaoxin Thrive Limited (5) 32,900,000 2.45%
Asia Tech Investments Ltd. (5) 116,875,898 8.72%
HBM Trident 2 Holdings Ltd. (6) 58,420,980 4.36%
CTCB Holdings Limited (7) 5,415,483 0.40%
A TI Opportunities (Nevis) Ltd (8) 3,249,290 0.24%
GIG Hong Kong Limited (9) 28,247,975 2.11%
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Shareholders
Ordinary
Shares
Aggregate
ownership/
voting right
percentage upon
completion of
the Global
Offering (1)
Liansheng Hanhai Limited
(ʮ̡)(10) 14,007,415 1.05%
V olcanics V enture Fund, L.P . (11) 11,205,930 0.84%
Prime Orient Holdings Ltd. (12) 6,582,337 0.49%
Mr. ZOU Y uming (13) 3,500,000 0.26%
Torano Investments Limited (13) 20,000,000 1.49%
Public Shareholders 23,800,000 1.78%
Total 1,340,267,457 100%
Notes:
(1) Assuming the weighted voting rights structure is cancelled and the Over-allotment Option is not exercised.
(2) Fangrong Management Limited is wholly-owned by Mr. Xie. Each of Fangzhan Holdings L.P . and Xingyu
Holdings L.P . is controlled by Mr. Xie.
(3) Each of Celaeno Group Limited and Silica Brothers Corp. is wholly-owned by Mr. Zhou.
(4) For details of Crescent Point V ehicles, see the section headed “—Pre-IPO Investments—5. Information about
the principal Pre-IPO Investors—Crescent Point.”
(5) Endeavor Cloud Limited, FAST GOAL INTERNA TIONAL LIMITED, Gaoxin Thrive Limited and Asia Tech
Investments Ltd. are platforms holding the underlying incentive shares in the total amount of 215,164,648
Class A Ordinary Shares under the RSU Scheme.
(6) For details of HBM Trident 2 Holdings Ltd., see the section headed “—Pre-IPO Investments—5. Information
about the principal Pre-IPO Investors—HBM Healthcare Investments AG.”
(7) For details of CTCB Holdings Limited, see the section headed “—Pre-IPO Investments—5. Information about
the principal Pre-IPO Investors—CTCB Holdings Limited.”
(8) For details of A TI Opportunities (Nevis) Ltd, see the section headed “—Pre-IPO Investments—5. Information
about the principal Pre-IPO Investors—A TI Opportunities (Nevis) Ltd.”
(9) For details of GIG Hong Kong Limited, see the section headed “—Pre-IPO Investments—5. Information about
the principal Pre-IPO Investors—GTJA Investment Group.”
(10) For details of Liansheng Hanhai Limited, see the section headed “—Pre-IPO Investments—5. Information
about the principal Pre-IPO Investors—Liansheng Hanhai.”
(11) For details of V olcanics V enture Fund, L.P ., see the section headed “—Pre-IPO Investments—5. Information
about the principal Pre-IPO Investors—V olcanics V enture.”
(12) For details of Prime Orient Holdings Ltd., see the section headed “—Pre-IPO Investments—5. Information
about the principal Pre-IPO Investors—Prime Orient Holdings Ltd.”
(13) In May 2024, 3,500,000 and 20,000,000 Shares underlying the RSUs were allotted and issued to Mr. ZOU
Y uming and Torano Investments Limited (a company wholly owned by Mr. Zou to hold certain Shares
underlying the RSUs granted to him), respectively, pursuant to the RSU Scheme.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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PRE-IPO INVESTMENTS
1. Overview
We have received six rounds of investment since our establishment, which are
summarized below. All of our Pre-IPO Investors were issued Preferred Shares in our Company
pursuant to the below Pre-IPO Investments.
Financing
Round
Date of
initial share
purchase
agreement
Date of last
payment of
consideration
Total number of
shares under the
share purchase
agreement(s)
Cost per Share
paid
(8)
Total gross funds
raised by
the Company
Discount
to the
Offer Price (9)
Post-money
valuation of
our Company
1. Series A (1) October 28, 2015 November 30, 2015 23,033,009 (7)
(115,165,045
shares after share
split)
US$0.17 US$20 million 83.37% US$120 million
2. Series A-1 (2) April 2, 2017 May 18, 2018 17,365,639 (7)
(86,828,195 shares
after share split)
US$0.36 US$31 million 64.78% US$279 million
3. Series B (3) September 4, 2018 January 11, 2019 39,547,544 (7)
(197,737,720
shares after share
split)
US$0.36 US$70.6 million 64.78% US$450.58
million
4. Series C (4) June 30, 2020 December 28, 2020 31,036,067 (7)
(155,180,335
shares after share
split)
US$0.29 US$45 million 71.63% US$340 million
5. Series D (5) December 25, 2021 April 14, 2022 8,664,773 US$0.92 US$8 million 10.00% US$1,208
million
6. Series D+ (6) December 30, 2022 January 4, 2023 8,086,871 US$1.06 US$8.6 million 3.69% premium US$1,400
million
Notes:
(1) Series A investor includes Crescent Trident Singapore Pte. Ltd.
(2) Series A-1 investors include Asia-Pac E-Commerce Opportunities Pte. Ltd., Liansheng Hanhai Limited
(“Liansheng ”), Xingyu Holdings L.P . and V olcanics V enture Fund, L.P . Penta Investment Asia Limited
(“Penta ”) was the original Series A-1 Investor. Pursuant to a letter of undertaking dated February 7, 2021
among the Company, Series A-1 Investors, Series B Investors and Fangzhou Limited, Penta has agreed to
cooperate with Liansheng, an investor of Penta, to make Liansheng to hold shares in the Company directly.
(3) Series B investors include CP Pharmatech Singapore Pte. Ltd., Trident 2 Healthcare (S) Pte. Ltd., Asia-Pac
E-Commerce Opportunities Pte. Ltd. and GIG Hong Kong Limited.
(4) Series C investors include Tech-Med Investments (S) Pte. Ltd. and Trident 2 Healthcare (S) Pte. Ltd.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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(5) Series D investors include CTCB Holdings Limited and A TI Opportunities (Nevis) Ltd.
(6) Series D+ investors include Prime Orient Holdings Ltd., Fangrong Management Limited and Celaeno Group
Limited.
(7) The share purchase transactions were completed before the share split conducted on August 9, 2021.
(8) The cost per share paid after taking into account the effect of share split conducted on August 9, 2021.
(9) The discount to the Offer Price is calculated based on the assumption that the Offer Price is HK$7.98 per
Share, being the mid-point of the indicative Offer Price range of HK$7.60 to HK$8.36.
2. Principal terms of the Pre-IPO Investments
Lock-up period All the Pre-IPO Investors will be subject to a lock-up at the
time of Listing for a period of at least six months following
the Listing.
Use of proceeds from the
Pre-IPO Investments
We utilized all of the proceeds from the Pre-IPO
Investments for the development and operation of our
business in accordance with the business plan or budget as
approved by the Board. As of the Latest Practicable Date,
approximately 95.9% of the net proceeds received by us
from the Pre-IPO Investments had been utilized.
Strategic benefits the
Pre-IPO Investors
brought to our Company
At the time of the Pre-IPO Investments, our Directors were
of the view that our Company would benefit from the
additional capital provided by the Pre-IPO Investors’
investments in our Company and their knowledge and
experience. Our Pre-IPO Investors include professional
institutional investors which can provide us with
professional advice on our Group’s development
(including strategy planning) and our corporate
governance (including financial management and talent
development). The Pre-IPO Investments also demonstrate
the Pre-IPO Investors’ confidence in the business and
operation of our Group.
Basis of determining the
consideration paid
The consideration for the Pre-IPO Investments were
determined based on arm’s length negotiations between
our Company and the Pre-IPO Investors after taking into
consideration the timing of the investments and the status
of our business and operating entities.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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3. Special rights of the Pre-IPO Investors
All of our Pre-IPO Investors are currently bound by the terms of the existing articles of
association, which will be replaced by our Articles effective from the Listing Date. Certain
special rights in relation to our Company were granted to the Pre-IPO Investors, including,
among others, information and observer rights, right of first offer, nomination of directors,
right of first refusal, redemption right and several covenants which require prior approval from
holders of Preferred Shares. All such special rights (except for redemption right, which will be
terminated upon the Company’s filing of its listing application, provided that the redemption
right shall be reinstated automatically upon the earliest of (i) the return of or rejection by the
regulatory authority in relation to such listing application; (ii) the Company withdraws its
listing application or terminates the initial public offering; (iii) the lapse of such listing
application and the Company fails to refile the listing application within 3 months; or (iv) the
Company fails to complete a qualified initial public offering by December 31, 2024) will
terminate effective upon completion of the Global Offering.
4. Public Float
Immediately following the Global Offering (assuming the weighted voting rights
structure is cancelled and without taking into account any Shares which may be allotted and
issued pursuant to the exercise of the Over-allotment Option), each of Crescent Point V ehicles
is advised by Crescent Point, and will be collectively interested in approximately 30.90% of
the total issued share capital of our Company. Therefore, they will be considered as core
connected persons of our Company and the Shares held by Crescent Point V ehicles will not be
counted towards the public float for the purpose of Rule 8.08 of the Listing Rules upon the
Listing.
As Mr. Xie and Mr. Zhou are our Directors and Controlling Shareholders, the Shares held
by Mr. Xie (through Fangrong Management Limited, a limited liability company wholly-owned
by Mr. Xie, Fangzhan Holdings L.P . and Xingyu Holdings L.P ., each a limited partnership
whose general partner is Xingyu Inc., a company wholly owned by Mr. Xie) and Mr. Zhou
(through his wholly-owned companies, i.e. Celaeno Group Limited and Silica Brothers Corp.)
will not be counted towards the public float for the purpose of Rule 8.08 of the Listing Rules
upon the Listing.
Upon completion of the Listing (assuming the weighted voting rights structure is
cancelled and without taking into account any Shares which may be allotted and issued
pursuant to the exercise of the Over-allotment Option), Asia Tech Investments Ltd. will hold
approximately 8.72% equity interest in our Company for the benefit of grantees under the RSU
Scheme who are Directors and Mr. ZOU Y uming will hold approximately 1.75% equity interest
(i.e. representing an aggregate of 23,500,000 Shares underlying RSUs granted to him under the
RSU Scheme), the Shares held by them will not be counted towards the public float for the
purpose of Rule 8.08 of the Listing Rules upon the Listing.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Except for the Shares held by Crescent Point V ehicles, Asia Tech Investments Ltd., Mr.
Xie and Mr. Zhou (together with Fangrong Management Limited, Fangzhan Holdings L.P .,
Xingyu Holdings L.P ., Celaeno Group Limited and Silica Brothers Corp.) and Mr. ZOU
Y uming (together with Torano Investments Limited), none of the other Shareholders (i) is a
core connected person of the Group; (ii) has been financed directly or indirectly by a core
connected person of the Group for the subscription of Shares; or (iii) is accustomed to take
instructions from a core connected person of the Group in relation to the acquisition, disposal,
voting or other disposition of the Shares registered in his/her/its name or otherwise held by
him/her/it, the Shares held by other Shareholders representing approximately 18.59% of the
total issued share capital of our Company immediately following the Global Offering
(assuming the weighted voting rights structure is cancelled and without taking into account any
Shares which may be allotted and issued pursuant to the exercise of the Over-allotment
Option), will be counted towards the public float for the purpose of Rule 8.08 of the Listing
Rules upon the Listing.
We have applied to the Stock Exchange to request the Stock Exchange to exercise its
discretion under Rule 8.08(1)(d) of the Listing Rules, and the Stock Exchange has granted our
Company a waiver from strict compliance with the requirements of Rule 8.08(1)(a) of the
Listing Rules, pursuant to which the public float of our Company may fall below 25% of the
total issued share capital of our Company. For details of the relevant waiver, see “Waivers from
Strict Compliance with the Listing Rules—Waiver in relation to Public Float” in this
prospectus.
5. Information about the Pre-IPO Investors
Set out below is a description of the Pre-IPO Investors that are private equity funds and
investment companies, and that have made meaningful investments in our Company (each
holding between 0.25% to 33.23% of the total issued Shares immediately prior to the Global
Offering (assuming all the Preferred Shares are converted into Ordinary Shares)).
Crescent Point
Each of Crescent Point V ehicles is a limited liability company incorporated under the
laws of Singapore and advised by Crescent Point, a private equity manager regulated by the
British Virgin Islands Financial Services Commission with an investment focus in Asia and
ultimately controlled by David McKee Hand, a non-executive Director of the Company.
The ultimate beneficial owner of Crescent Trident Singapore Pte. Ltd. and Asia-Pac
E-Commerce Opportunities Pte. Ltd. is David McKee Hand. The ultimate beneficial owner of
CP Pharmatech Singapore Pte. Ltd. and Tech-Med Investments (S) Pte. Ltd. is Danai
Rojanavanichkul, a high net worth individual and an Independent Third Party (except for his
interest in the Company disclosed in this prospectus).
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 211 ---
Crescent Point V ehicles approached our Company for investment opportunities upon
conducting industry research, and it invested in our Company because of our development
potential and the prospect of the healthcare industry. Immediately prior to the Global Offering,
Crescent Point V ehicles collectively held approximately 33.23% of the total issued Shares
(assuming all Preferred Shares are converted into Ordinary Shares). Immediately following
completion of the Global Offering (assuming the weighted voting rights structure is cancelled
and without taking into account the Shares which may be allotted and issued upon the exercise
of the Over-allotment Option), Crescent Point V ehicles collectively will hold approximately
32.64% of the total issued share capital of our Company.
Liansheng Hanhai
Liansheng Hanhai Limited (ʮ̡) is a limited liability company
incorporated under the laws of BVI. Liansheng Hanhai Limited is principally engaged in
investment holdings and is ultimately controlled and beneficially owned by Lin Li ( ᘺɢ), an
Independent Third Party of the Company. Mr. Lin is the major shareholder of a company
principally engaged in sales and distribution of computer peripheral equipment. Liansheng
Hanhai Limited approached our Company for investment opportunities upon conducting
industry research, and it invested in our Company because of our development potential and
the prospect of the healthcare industry. Immediately prior to the Global Offering, Liansheng
Hanhai Limited held approximately 1.06% of the total issued Shares (assuming all Preferred
Shares are converted into Ordinary Shares). Immediately following completion of the Global
Offering (assuming the weighted voting rights structure is cancelled and without taking into
account the Shares which may be allotted and issued upon the exercise of the Over-allotment
Option), Liansheng Hanhai Limited will hold approximately 1.05% of the total issued share
capital of our Company.
V olcanics V enture
V olcanics V enture Fund, L.P . is a limited liability partnership incorporated under the laws
of the Cayman Islands and is focused on equity investments in early or growth stage companies
in the fields of internet innovation and healthcare. The general partner of V olcanics V enture
Fund, L.P . is V olcanics V enture GP , L.P ., an Independent Third Party of the Company. To the
best knowledge of our Directors, no ultimate beneficial owner of any limited partner or general
partner holds more than 30% equity of V olcanics V enture Fund, L.P . V olcanics V enture Fund,
L.P . approached our Company for investment opportunities upon conducting industry research,
and it invested in our Company because of our development potential and the prospect of the
healthcare industry. Immediately prior to the Global Offering, V olcanics V enture Fund, L.P .
held approximately 0.85% of the total issued Shares (assuming all Preferred Shares are
converted into Ordinary Shares). Immediately following completion of the Global Offering
(assuming the weighted voting rights structure is cancelled and without taking into account the
Shares which may be allotted and issued upon the exercise of the Over-allotment Option),
V olcanics V enture Fund, L.P . will hold approximately 0.84% of the total issued share capital
of our Company.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 212 ---
HBM Healthcare Investments AG
Trident 2 Healthcare (S) Pte. Ltd. is a limited liability company incorporated under the
laws of Singapore and is a wholly-owned subsidiary of HBM Trident 2 Holdings Ltd., a limited
liability company incorporated in the Cayman Islands, which is in turn 100% controlled by
HBM Healthcare Investments (Cayman) Ltd. HBM Healthcare Investments (Cayman) Ltd. is
a wholly-owned subsidiary of HBM Healthcare Investments AG, a SIX Swiss Exchange listed
investment company with USD2.2 billion net assets and an Independent Third Party of the
Company. Our Company became acquainted with HBM Healthcare Investments AG through
introduction by Crescent Point, one of our Pre-IPO Investors. It invested in our Company
because of our development potential and the prospect of the healthcare industry. In May 2024,
Trident 2 Healthcare (S) Pte. Ltd. transferred all of the Shares held by it to HBM Trident 2
Holdings Ltd.. Immediately prior to the Global Offering, HBM Trident 2 Holdings Ltd. held
approximately 4.44% of the total issued Shares (assuming all Preferred Shares are converted
into Ordinary Shares). Immediately following completion of the Global Offering (assuming the
weighted voting rights structure is cancelled and without taking into account the Shares which
may be allotted and issued upon the exercise of the Over-allotment Option), HBM Trident 2
Holdings Ltd. will hold approximately 4.36% of the total issued share capital of our Company.
The board of directors of HBM Healthcare Investments (Cayman) Ltd. has sole voting and
investment power with respect to the Shares held by HBM Trident 2 Holdings Ltd.. The board
of directors of HBM Healthcare Investments (Cayman) Ltd. is comprised of Jean-Marc Lesieur,
Richard Coles, Sophia Harris, Dr. Andreas Wicki, Paul Woodhouse and Mark Kronenfeld, none
of whom has individual voting or investment power with respect to such Shares, and each
disclaims beneficial ownership of such Shares except to the extent of any pecuniary interest
therein.
GTJA Investment Group
GIG Hong Kong Limited is a limited company incorporated under the laws of Hong Kong
and is a group member of GTJA Investment Group. GTJA Investment Group invests in early
and growth-stage companies in China and around the world with a focus on medical and
healthcare industry. GIG Hong Kong Limited is wholly-owned by Shanghai GTJA Investment
Management Co., Ltd., which is in turn wholly-owned by Shenzhen Gaotejia Investment Group
Co., Ltd (ʮ̡), whose ultimate beneficial owner is BIAN Zhuang
(ʼ୿), an Independent Third Party of the Company. GTJA Investment Group approached our
Company for investment opportunities upon conducting industry research, and it invested in
our Company because of our development potential and the prospect of the healthcare industry.
Immediately prior to the Global Offering, GIG Hong Kong Limited held approximately 2.15%
of the total issued Shares (assuming all Preferred Shares are converted into Ordinary Shares).
Immediately following completion of the Global Offering (assuming the weighted voting rights
structure is cancelled and without taking into account the Shares which may be allotted and
issued upon the exercise of the Over-allotment Option), GIG Hong Kong Limited will hold
approximately 2.11% of the total issued share capital of our Company.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 213 ---
CTCB Holdings Limited
CTCB Holdings Limited is a BVI-registered investment company founded by Malus
Holdings Limited, focusing on the Technology, Media and Telecom (TMT) sectors. The
management team is comprised of experts with an extensive background at banks, securities
companies, listed enterprises, and Internet companies, along with significant experience in the
TMT sector investment, operations, and capital markets. CTCB Holdings Limited is
wholly-owned by Malus Holdings Limited, which is a BVI limited company wholly owned by
WEI Shuming (׼an Independent Third Party of the Company. CTCB Holdings Limited
approached our Company for investment opportunities upon conducting industry research, and
it invested in our Company because of our development potential and the prospect of the
healthcare industry. Immediately prior to the Global Offering , CTCB Holdings Limited held
approximately 0.41% of the total issued Shares (assuming all Preferred Shares are converted
into Ordinary Shares). Immediately following completion of the Global Offering (assuming the
weighted voting rights structure is cancelled and without taking into account the Shares which
may be allotted and issued upon the exercise of the Over-allotment Option), CTCB Holdings
Limited will hold approximately 0.40% of the total issued share capital of our Company.
ATI Opportunities (Nevis) Ltd
A TI Opportunities (Nevis) Ltd is principally engaged in investment holdings and is owned
as to 100% by Hengdeli International Company Limited, a wholly owned subsidiary of
Hengdeli Holdings Limited (Stock Code: 3389), a company listed on the Stock Exchange and
an Independent Third Party of the Company. Our Company became acquainted with A TI
Opportunities (Nevis) Ltd through introduction by Crescent Point, one of our Pre-IPO
Investors. It invested in our Company because of our development potential and the prospect
of the healthcare industry. Immediately prior to the Global Offering, A TI Opportunities (Nevis)
Ltd held approximately 0.25% of the total issued Shares (assuming all Preferred Shares are
converted into Ordinary Shares). Immediately following completion of the Global Offering
(assuming the weighted voting rights structure is cancelled and without taking into account the
Shares which may be allotted and issued upon the exercise of the Over-allotment Option), A TI
Opportunities (Nevis) Ltd will hold approximately 0.24% of the total issued share capital of
our Company.
Prime Orient Holdings Ltd.
Prime Orient Holdings Ltd. is an investment holding company investing mainly in
consumer-oriented businesses in Asia and an Independent Third Party of the Company. Prime
Orient Holdings Ltd. is wholly-owned by Lawrence Harding, who has over 20 years of
experience in investing in a variety of sectors globally. Mr. Harding is the founder and
managing partner of Presidio Capital, a private investment group focusing on the origination
and structuring of investments and making investments in emerging markets. Our Company
became acquainted with Prime Orient Holdings Ltd. through introduction by Crescent Point,
one of our Pre-IPO Investors. It invested in our Company because of our development potential
and the prospect of the healthcare industry. Immediately prior to the Global Offering, Prime
Orient Holdings Ltd. held approximately 0.50% of the total issued Shares (assuming all
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 214 ---
Preferred Shares are converted into Ordinary Shares). Immediately following completion of the
Global Offering (assuming the weighted voting rights structure is cancelled and without taking
into account the Shares which may be allotted and issued upon the exercise of the
Over-allotment Option), Prime Orient Holdings Ltd. will hold approximately 0.49% of the total
issued share capital of our Company.
Except for Crescent Point V ehicles, who will collectively be interested in approximately
30.90% of the total issued share capital of our Company immediately following completion of
the Global Offering (assuming the weighted voting rights structure is cancelled and without
taking into account the Shares which may be allotted and issued upon the exercise of the
Over-allotment Option), and therefore each a core connected person of our Company, to the
best knowledge of the Directors, all other Pre-IPO Investors are independent from the Group.
COMPLIANCE WITH GUIDE FOR NEW LISTING APPLICANTS
Based on the documents provided by the Company relating to the Pre-IPO Investments,
the Joint Sponsors confirm that the Pre-IPO Investments are in compliance with Chapter 4.2
of the Guide for New Listing Applicants issued by the Stock Exchange.
REGULATORY REQUIREMENTS OF THE PRC
According to the Regulations for Merger and Acquisition of Domestic Enterprises by
Foreign Investors(the “ M&A Rules ”) jointly issued
by MOFCOM, the SASAC, the STA, the CSRC, the SAIC and the SAFE on August 8, 2006,
effective as of September 8, 2006 and amended on June 22, 2009, if a PRC company or
individual intends to acquire its/his/her related domestic company through an offshore
company which it/he/she lawfully established or controls, such acquisition shall be subject to
the examination and approval of MOFCOM. The M&A Rules, among other things, further
purports to require that an offshore special vehicle, or a special purpose vehicle, formed for
listing purposes and controlled directly or indirectly by PRC companies or individuals, shall
obtain the approval of the CSRC prior to the listing and trading of such special purpose
vehicle’s securities on an overseas stock exchange, especially in the event that the special
purpose vehicle acquires shares of or equity interests in the PRC companies in exchange for
the shares of offshore companies.
Zhong Lun Law Firm, our legal advisor as to the laws of the PRC, is of the opinion that,
unless new laws and regulations are enacted or MOFCOM and CSRC publish new provisions
or interpretations on the M&A Rules in the future, prior CSRC or MOFCOM approval for the
Global Offering is not required because (i) the CSRC currently has not issued any definitive
rule or interpretation concerning whether offerings akin to this Global Offering are subject to
the M&A Rules; (ii) none of the incorporation or acquisition of the PRC subsidiaries involves
the merger with or acquisition of the equity or asset of a PRC domestic enterprise as defined
under the M&A Rules; and (iii) no provision in the M&A Rules clearly classified contractual
arrangements as a type of transaction subject to the M&A Rules. However, there is uncertainty
as to how the M&A Rules will be interpreted or implemented.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 215 ---
SAFE REGISTRATION IN THE PRC
Pursuant to the SAFE Circular on Foreign Exchange Administration of Overseas Investment,
Financing and Round-trip Investments Conducted by Domestic Residents through Special Purpose
V ehicles
(the “ SAFE Circular 37 ”), promulgated by SAFE and which replaced the Circular on Relevant
Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and
Roundtrip Investment through Offshore Special Purpose V ehiclesࣿ
 (the “SAFE Circular 75 ”) which became
effective on July 14, 2014, (a) a PRC resident must register with the local SAFE branch before he
or she contributes assets or equity interests in an overseas special purpose vehicle (the “ Overseas
SPV”) that is directly established or indirectly 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 Overseas SPV’s PRC resident
shareholder(s), the name of the Overseas SPV , terms of operation, or any increase or reduction of
the Overseas SPV’s 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 SAFE Circular on Further Simplification and Improvement in Foreign
Exchange Administration on Direct Investment݁
 (the “ SAFE Circular 13 ”), promulgated by SAFE which became effective on June
1, 2015, the power to accept SAFE registration was delegated from local SAFE to local banks
where the assets or interest in the domestic entity are located.
Mr. Xie has completed the registration under the SAFE Circular 37 in October 2019.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 216 ---
CORPORATE STRUCTURE IMMEDIATELY AFTER COMPLETION OF THE RESTRUCTURING AND PRIOR TO THE GLOBAL
OFFERING
The following diagram illustrates the corporate and shareholding structure of our Group immediately prior to the completion of the Global
Offering.
Fangzhou Inc.
Fangzhou Limited
100%
11.44%
Celaeno
Group
Limited(3)(4)
14.14%
Fangrong
Management
Limited(2)(4)
20.17%
Silica
Brothers
Corp.(3)(4)
3.83%
Xingyu
Holdings
L.P.(2)(4)
0.42%
Fangzhan
Holdings
L.P.(2)(4)
0.42%
RSU
Platforms(6)
7.47%
Other
Pre-IPO
Shareholders
Offshore
Onshore
Initial WFOE
Fangzhou
Health Beijing Fangyixing
New WFOE
Fangzhou Information
100% 100%
100%
100% 100%
Contractual
Arrangements
70%
Fangzhou Yunkang
Qishi
Hospital Fangzhou Media
30% 100% 100% 100% 100% 100%
Guangzhou Fangming
Investment Enterprise
(Limited Partnership)(9)
Shenzhen
Kaichuang Lianyu
Technology
Consultancy Co., Ltd.(9)
Beijing Yiershan
Technology Co., Ltd.(9)
47%
33%
20%
Fangzhou
Internet Hospital
Fangzhou
Medicine
Xinjiang
Internet Hospital
50% Yunyi Information
Jingtai Hospital(7)
Liu Xiukui(7)
50%
70%
Promoter
30%
100%
Fangzhou
Pharmaceutical
100% 100%
Chengdu Fangyixing
Information
Technology Co., Ltd.
51% 100%
Fangzhou Beijing
Heilongjiang
Chengguang Lanjiang
Pharmaceutical
Retail Co., Ltd.(8)
Shanghai Fangyixing
Information
Technology Co., Ltd.
Ruishi
Hospital
Crescent
Point
Vehicles(5)
33.23%
Asia Tech
Investments
Ltd.(4)
8.88%
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 217 ---
Notes:
(1) The above diagram assumes that the weighted voting rights structure has been cancelled.
(2) Fangrong Management Limited is wholly-owned by Mr. Xie. The general partner of Fangzhan Holdings L.P . and Xingyu Holdings L.P . is Xingyu Inc., a co mpany wholly owned
by Mr. Xie.
(3) Each of Celaeno Group Limited and Silica Brothers Corp. is wholly-owned by Mr. Zhou.
(4) Approximately 51.34% and 48.41% of interest in Asia Tech Investments Ltd. were held by Mr. Xie and Mr. Zhou, respectively. Therefore, each of Mr. Xi e and Mr. Zhou is
deemed to be interested in the Shares of the Company held by Asia Tech Investments Ltd. in accordance with SFO.
Mr. Xie and Mr. Zhou (pursuant to the Concert Deed), together with Fangrong Management Limited, Fangzhan Holdings L.P ., Xingyu Holdings L.P ., Celaen o Group Limited,
Silica Brothers Corp. and Asia Tech Investments Ltd., are acting together as a group of Controlling Shareholders. Immediately before the Listing (as suming the weighted voting
rights structure is cancelled, all Preferred Shares are fully converted into Ordinary Shares), our ultimate Controlling Shareholders will collect ively control approximately 47.86%
of the voting interests in the Company.
(5) Each of Crescent Point V ehicles is advised by Crescent Point, which is ultimately controlled by David McKee Hand, our non-executive Director. On J une 12, 2024, Tech-Med
Investments (S) Pte. Ltd. executed a deed of voting proxy, pursuant to which Tech-Med Investments (S) Pte. Ltd. irrevocably and unconditionally appo inted Mr. Xie and Mr. Zhou
jointly as its true and lawful attorney and proxy with respect to all the Shares held by it at the general meetings of the Company, effective immediately before the Listing.
(6) Endeavor Cloud Limited, FAST GOAL INTERNA TIONAL LIMITED and Gaoxin Thrive Limited are platforms holding underlying incentive shares in the tota l amount of
98,288,750 Class A Ordinary Shares under the RSU Scheme.
(7) Liu Xiukui is the registered promoter of Jingtai Hospital and a nominee of the New WFOE and Fangzhou Y unkang. The New WFOE and Fangzhou Y unkang each h olds 70%
and 30% of the registered capital and promoter’s interest in Jingtai Hospital.
(8) The remaining 49% interest in Heilongjiang Chengguang Lanjiang Pharmaceutical Retail Co., Ltd. is held by Y ang Y ukun ( เ͗տ), and an Independent Third Party.
(9) Guangzhou Fangming Investment Enterprise (Limited Partnership) is a limited partnership wholly-owned by Mr. Xie. Shenzhen Kaichuang Lianyu Te chnology Consultancy Co.,
Ltd. is a limited liability company owned as to 55% and 45%, respectively, by Zhang Xinwei ( ੵอਃ) and Wang Wenchao ( ӓၲ൴), each of whom holds equity interest in
Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. as a nominee appointed by Crescent Point. Beijing Yiershan Technology Co., Ltd. is a limi ted liability company
wholly owned by Y ang Jinghua ( เหശ), the mother of Mr. Zhou, who holds equity interest in Beijing Yiershan Technology Co., Ltd. as the nominee on behalf of Mr. Zhou.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 218 ---
CORPORATE STRUCTURE IMMEDIATELY FOLLOWING THE GLOBAL OFFERING
The following diagram illustrates the corporate and shareholding structure of our Group immediately following the completion of the Global
Offering (assuming the weighted voting rights structure is cancelled and the Over-allotment Option is not exercised).
Fangzhou Inc.
Fangzhou Limited
100%
1.78%11.24%
Celaeno
Group
Limited(2)(3)
13.89%
Fangrong
Management
Limited(1)(3)
19.81%
Silica
Brothers
Corp.(2)(3)
3.77%
Xingyu
Holdings
L.P.(1)(3)
0.42%
Fangzhan
Holdings
L.P.(1)(3)
0.41%
RSU
Platforms(4)
7.33%
Other
Pre-IPO
Shareholders
Other Public
Shareholders
Offshore
Onshore
Initial WFOE
Fangzhou
Health Beijing Fangyixing
New WFOE
Fangzhou Information
100% 100%
100%
100% 100%
Contractual
Arrangements
70%
Fangzhou Yunkang
Qishi
Hospital Fangzhou Media
30% 100% 100% 100% 100% 100%
Guangzhou Fangming
Investment Enterprise
(Limited Partnership)(8)
Shenzhen
Kaichuang Lianyu
Technology
Consultancy Co., Ltd.(8)
Beijing Yiershan
Technology Co., Ltd.(8)
47%
33%
20%
Fangzhou
Internet Hospital
Fangzhou
Medicine
Xinjiang
Internet Hospital
50% Yunyi Information
Jingtai Hospital(6)
Liu Xiukui(6)
50%
70%
Promoter
30%
100%
Fangzhou
Pharmaceutical
100% 100%
Chengdu Fangyixing
Information
Technology Co., Ltd.
51% 100%
Fangzhou Beijing
Heilongjiang
Chengguang Lanjiang
Pharmaceutical
Retail Co., Ltd.(7)
Shanghai Fangyixing
Information
Technology Co., Ltd.
Ruishi
Hospital
32.64%
Crescent
Point
Vehicles(5)
8.72%
Asia Tech
Investments
Ltd.(3)
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
– 209 –


--- page 219 ---
Notes:
(1) Fangrong Management Limited is wholly-owned by Mr. Xie. The general partner of Fangzhan Holdings L.P . and Xingyu Holdings L.P . is Xingyu Inc., a co mpany wholly owned
by Mr. Xie.
(2) Each of Celaeno Group Limited and Silica Brothers Corp. is wholly-owned by Mr. Zhou.
(3) Approximately 51.34% and 48.41% of interest in Asia Tech Investments Ltd. were held by Mr. Xie and Mr. Zhou, respectively. Therefore, each of Mr. Xi e and Mr. Zhou is
deemed to be interested in the Shares of the Company held by Asia Tech Investments Ltd. in accordance with SFO.
Mr. Xie and Mr. Zhou (pursuant to the Concert Deed), together with Fangrong Management Limited, Fangzhan Holdings L.P ., Xingyu Holdings L.P ., Celaen o Group Limited,
Silica Brothers Corp. and Asia Tech Investments Ltd., are acting together as a group of Controlling Shareholders. Immediately following the complet ion of the Global Offering
(assuming the weighted voting rights structure is cancelled and the Over-allotment Option is not exercised), our ultimate Controlling Shareholder s, by virtue of their shareholding
together with the voting proxy conferred upon them, will collectively control approximately 57.34% of shareholding interest in the Company.
(4) Endeavor Cloud Limited, FAST GOAL INTERNA TIONAL LIMITED and Gaoxin Thrive Limited are platforms holding underlying incentive shares in the tota l amount of
98,288,750 Shares under the RSU Scheme.
(5) Each of Crescent Point V ehicles is advised by Crescent Point, which is ultimately controlled by David McKee Hand, our non-executive Director. On J une 12, 2024, Tech-Med
Investments (S) Pte. Ltd. executed a deed of voting proxy, pursuant to which Tech-Med Investments (S) Pte. Ltd. irrevocably and unconditionally appo inted Mr. Xie and Mr. Zhou
jointly as its true and lawful attorney and proxy with respect to all the Shares held by it at the general meetings of the Company, effective immediately before the Listing.
(6) Liu Xiukui is the registered promoter of Jingtai Hospital and a nominee of the New WFOE and Fangzhou Y unkang. The New WFOE and Fangzhou Y unkang each h olds 70%
and 30% of the registered capital and promoter’s interest in Jingtai Hospital.
(7) The remaining 49% interest in Heilongjiang Chengguang Lanjiang Pharmaceutical Retail Co., Ltd. is held by Y ang Y ukun ( เ͗տ), and an Independent Third Party.
(8) Guangzhou Fangming Investment Enterprise (Limited Partnership) is a limited partnership wholly-owned by Mr. Xie. Shenzhen Kaichuang Lianyu Te chnology Consultancy Co.,
Ltd. is a limited liability company owned as to 55% and 45%, respectively, by Zhang Xinwei ( ੵอਃ) and Wang Wenchao ( ӓၲ൴), each of whom holds equity interest in
Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. as a nominee appointed by Crescent Point. Beijing Yiershan Technology Co., Ltd. is a limi ted liability company
wholly owned by Y ang Jinghua ( เหശ), the mother of Mr. Zhou, who holds equity interest in Beijing Yiershan Technology Co., Ltd. as the nominee on behalf of Mr. Zhou.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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--- page 220 ---
OVERVIEW
We are the largest online chronic disease management platform in China in terms of
average MAU in 2023, according to CIC. We commenced our business with a focus on chronic
disease management to address the needs of patients with chronic diseases, such as
hypertension, cardiovascular and respiratory chronic diseases. Leveraging our chronic disease
management platform, we are dedicated to providing tailored medical care and precision
medicine for a growing population of chronic disease patients, with a view towards extending
our services to a wider range of disease areas.
The market for online chronic disease management services in China is at an inflection
point, with vast market potential created by a favorable regulatory environment for online
prescription drug sales and the establishment of a tiered medical treatment system to promote
more efficient allocation of medical resources. According to CIC, the market size of online
to-consumer CDM market in terms of GMV in China increased from RMB0.5 billion in 2015
to RMB45.5 billion in 2023, representing a CAGR of 75.6%, and is expected to reach
RMB599.5 billion in 2030, representing a CAGR of 44.5%.
To address the needs of patients with chronic diseases for convenient and accessible
medical care services, we provide comprehensive medical services and online retail pharmacy
services through our Jianke Platform. Our comprehensive medical services include follow-up
physician consultations and e-prescription services conducted by registered physicians and
in-house medical professionals through our H2H service platform. We also provide online
retail pharmacy services, offering a wide range of pharmaceutical and healthcare products
directly to our customers. Our comprehensive medical services and online retail pharmacy
services are supported by our chronic disease management service center and robust
pharmaceutical supply chain.
In addition, our platform’s large and active user base allows us to effectively connect and
engage with doctors and patients, providing them targeted medical knowledge and content. By
leveraging these powerful network effects, our platform provides pharmaceutical companies
with customized content and marketing solutions to better inform physicians and patients about
chronic disease conditions and treatment options, as well as increase disease awareness among
the public.
With our technological capabilities, we provide digitalized solutions for key participants
in the healthcare industry. Anchored in long-term physician-patient relationships, our
ecosystem enables us to capture the significant customer lifetime value of chronic disease
patients, while also addressing the needs of other key stakeholders in the healthcare system,
including physicians and pharmaceutical companies. Our Jianke Platform improves
connectivity between patients and physicians, resulting in better treatment efficiency and
enabling physicians to manage their chronic disease patients in a more efficient manner. The
following diagram illustrates the major services or products provided in, and key
characteristics of, each of our business segments, as well as key highlights of our operating
data.
BUSINESS
–2 1 1–


--- page 221 ---
Key characteristics of each business segment
Smart Healthcare
Service Platform
Customized Content and Marketing Solutions
• Academic community services and patient community services
• Search engine optimization, provision of medical surveys, and distributor data
integration services, etc.
• Follow-up consultations
Comprehensive Medical Services
• E-prescriptions services
• Pharmaceutical products and home delivery1
Online Retail Pharmacy Services
• Healthcare products and home delivery1
• Prescription verification or e-prescription
services (if needed)
Build on existing
physician-patient
relationships
Focused on chronic
disease patients
A broad selection of
prescription
pharmaceuticals
Market insights leveraging the
large and active user base on
Jianke Platform
/g132212,000+ registered
physicians practicing offline
at 15,600+ medical
institutions2
/g132Approximately 58.8% registered
physicians were working for
Class III Hospitals2
Medical Resources
/g1328.4 million average
MAU3
/g132169 CDM staff led by
medical professionals2
CDM Service Capabilities
/g132212,000+ drug SKUs offered2
/g1321,400+ suppliers2
/g13281%+ of GMV are
prescription drugs4
Pharmaceutical Supply Chain
/g132Data engine recorded
83.9 million consultations and
45.7 million prescriptions2
/g132AI medical assistant handled
43.1% routine consultations
independently4
Technology Infrastructure
/g132760+ collaborated
pharmaceutical companies2
Notes:
1. Delivery services are provided by qualified third-party logistics and courier companies.
2. As of December 31, 2023.
3. For the year ended December 31, 2023.
4. During the Track Record Period.
BUSINESS
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--- page 222 ---
Leveraging our Jianke Platform and big data analysis capabilities, we have accumulated
significant amounts of user data, which allows us to analyze user attributes, recognize our
customers’ needs and preferences, and continuously improve our products and services. As of
December 31, 2023, our Jianke Platform had approximately 42.7 million registered users. For
the year ended December 31, 2023, our Jianke Platform had an average of approximately 8.4
million MAU. As of December 31, 2023, our H2H service platform had more than 212,000
registered physicians from over 15,600 medical institutions. As of December 31, 2023,
approximately 58.8% of our registered physicians were working for Class III hospitals and
approximately 38.4% of our registered physicians had obtained a title of associate chief
physician or above. By analyzing the prescription data and diagnosis records of our registered
physicians, we have developed an AI medical assistant, which helped consolidate information
provided by the patients for physicians’ reference in approximately 65.7% of consultations
during the Track Record Period.
We benefit from a high proportion of prescription drug sales and high spending per user,
which reflects an active and high quality base of physicians and patient users. In 2021, 2022
and 2023, our prescription drug GMV represented approximately 88.9%, 84.2% and 81.1% of
our total GMV , respectively, which was the highest in the industry for the same years,
according to CIC. Our prescription drug GMV as a percentage of our total GMV decreased
slightly in 2022, primarily due to increased sales of OTC drugs as a result of the resurgence
of COVID-19 in the second half of 2022. For 2023, the percentage of prescription drug GMV
decreased primarily due to a shift in our product mix, which reflected an increased proportion
of certain higher margin OTC drugs within our product portfolio. Our GMV refers to gross
merchandise volume, the total value of all orders placed on the Jianke Platform and through
third-party e-commerce platforms. We also achieved high spending per paying user during the
Track Record Period. The average spending per paying user amounted to RMB766.3,
RMB626.7 and RMB558.9 in 2021, 2022 and 2023, respectively, which was higher than the
industry average for the respective year, according to CIC. This was primarily attributable to
frequent interaction among physicians and patients which enhanced patients’ confidence in our
platform and encouraged better treatment adherence and treatment compliance.
Our revenue in 2021, 2022 and 2023 amounted to RMB1,758.7 million, RMB2,204.3
million and RMB2,434.3 million, respectively. In particular, revenue generated from our
comprehensive medical services in 2021, 2022 and 2023 amounted to RMB719.7 million,
RMB868.2 million and RMB983.7 million, respectively.
OUR V ALUE PROPOSITIONS
China is confronting an increasing prevalence of chronic diseases, primarily driven by a
number of trends, including an increasing aging population, earlier onset of chronic diseases,
and an increasing number of terminal diseases becoming manageable chronic conditions due
to recent medical advances. Successful chronic disease management typically requires
long-term medical care. A significant number of chronic disease patients seek routine
consultations and prescription refills at major hospitals in first- and second-tier cities, where
the majority of medical resources are concentrated, further burdening China’s already
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overloaded healthcare system. According to CIC, the soaring demand for medical treatment and
uneven distribution of medical resources create a significant opportunity to help physicians
more efficiently manage their patient load, while addressing the needs of chronic disease
patients for convenient and easy access to medical care.
We have established a full-service online chronic disease management platform that
provides significant value to key participants in the chronic disease management industry. Our
large customer base anchored in “real world” physician-patient relationships, ongoing
collaboration with leading pharmaceutical companies, and highly efficient business operations
have positioned us to capture these opportunities and bring value to industry participants.
Value Propositions
/g57More convenient and affordable access
to prescriptions and pharmaceuticals
/g57Improved treatment adherence and
better long-term outcomes
/g57
/g57
/g57/g57
/g57
/g57
/g57
Manage chronic disease patients
more effectively and efficiently
A more comprehensive portfolio of
available pharmaceutical products
Alternative channel to reach
patients and physicians outside of
hospital pharmacies
Custom services and solutions for
physician/patient education
/g57Industry insights and market
intelligence
Alleviate the burden on the overloaded
public healthcare system
Allow hospitals to maintain
connectivity with patients through
online physician-patient relationships
/g57Highly relevant health and
disease awareness content Physician education content and
academic exchange
Co
p
ni
es
m
a
For patients. Due to the limited medical resources in many regional hospitals and clinics
in China, we recognize that chronic disease patients may often be confronted with difficulties
in obtaining timely routine medical treatment and prescription refills. Our platform reduces
patients’ time spent on commuting to hospitals, and queuing for physician consultations or
prescriptions refills. Our chronic disease management service center also provides a number of
long-term value-added services, including patient education, medication guidance and
prescription refill notifications. We believe that providing patients with easy access to medical
consultations and prescriptions can help to improve treatment adherence, and lead to better
long-term outcomes. In addition, our patient community services also enable patients to receive
targeted medical content, such as articles, short videos, and video live streams, by following
a specific physician or disease area on our Jianke Platform.
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For physicians. We recognize that physicians in many traditional medical institutions
have limited tools to effectively manage the large volume of chronic disease patients. Our
platform facilitates ongoing remote interactions between physicians and their patients,
enabling physicians to be more efficient in providing routine consultations and treatment for
a larger cohort of patients. We also provide physicians with a significantly more comprehensive
portfolio of pharmaceutical products for which they are able to issue prescriptions so as to
better serve the diverse needs of their patients. Moreover, our academic community services
provide physicians with a platform to learn and engage with peers, and stay informed about
new developments relating to their areas of practice.
For pharmaceutical companies. Pharmaceutical companies’ access to hospital pharmacy
distribution has become increasingly challenging due to policy changes in recent years. Our
platform provides pharmaceutical companies with a novel alternative channel to reach patients
and physicians outside of hospital pharmacies. In addition, we are able to provide
pharmaceutical companies with a variety of customized content and marketing solutions to
better inform physicians and patients about chronic disease conditions and raise awareness
about treatment options.
For hospitals. Many hospitals in China have limited resources for chronic disease
management. Our online chronic disease management platform is aligned with the PRC
government’s overarching public health goal of relieving the burden on major hospitals in
China and promoting online options for patients requiring routine consultations and periodic
prescriptions. It effectively complements traditional healthcare services and relieves the burden
of the overloaded public healthcare system. It further benefits hospitals by allowing healthcare
providers to stay connected to their long-term chronic disease patients through online
physician-patient relationships established by physicians registered on our platform. When
such patients require offline medical services, such as surgical treatments or in-patient care,
these patients would be inclined to procure such services from the hospitals at which their
physicians are employed.
OUR STRENGTHS
Leading online chronic disease management platform in China
We are the largest online chronic disease management platform in China in terms of
average MAU in 2023, according to CIC. As one of the earliest pioneers in the Internet
healthcare industry, we commenced our business with a strategic focus on chronic diseases,
which have become a growing public healthcare concern in China. According to CIC, the
number of chronic disease patients in China increased from 330.7 million in 2015 to 504.5
million in 2023, representing a CAGR of 5.4% and is expected to continue to grow and reach
574.7 million in 2030, representing a CAGR of 1.9% from 2023 to 2030. The soaring demand
for medical treatment and uneven distribution of medical resources in China create a
significant opportunity to help physicians more efficiently manage their patient load, while
addressing the needs of chronic disease patients for convenient and easy access to medical care.
Leveraging the deep experience of our senior management team, we have remained at the
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forefront of the industry as a continuous innovator of services to address these needs. We
started our business in online retail pharmacy services and subsequently launched our H2H
service platform, enabling us to provide integrated online chronic disease management
services.
 H2H service platform . In 2018, we launched our H2H service platform to build on
existing offline physician-patient relationships and help provide more convenient
connectivity between patients and their physicians. Under our model, after an initial
in-person consultation, the patient and physician are able to easily connect online
through our platform, which also provides physicians with tools for more efficient
chronic disease management. Follow-up consultations can be performed virtually
through the platform, and physicians are also able to issue electronic prescriptions,
which we can fulfill through our pharmaceutical supply chain, and deliver directly
to patients using qualified third-party couriers. As of December 31, 2023, our H2H
service platform had more than 212,000 registered physicians from over 15,600
medical institutions.
 Online retail pharmacy service platform . Chronic disease patients require regular
disease monitoring, and often need ongoing treatment with prescription medications.
Due to the uneven distribution of medical resources in China, many chronic disease
patients are confronted with difficulties in obtaining convenient routine medical
treatment and easy access to a range of prescription medications. To address such
challenges, we developed our online retail pharmacy service platform, providing
customers with access to a wide selection of prescription drugs and convenient home
delivery. In addition, we provide online consultation and medication guidance
through our in-house medical professionals or registered physicians for customers
seeking to purchase pharmaceutical products.
To support our H2H service platform and online retail pharmacy service platform, we
established our chronic disease management service center, which we believe is a key
competitive advantage that sets us apart from our peers. The medical expertise of our CDM
staff allows us to offer a more professional standard of service to our customers, including
patient education, medication guidance and drug refill notifications, while improving our
customer satisfaction and customer retention.
Our H2H service platform and online retail pharmacy service platform provide a
comprehensive portfolio of services. Anchored in long-term physician-patient relationships,
our ecosystem enables us to capture the significant customer lifetime value of chronic disease
patients, while also addressing the needs of other key stakeholders in the healthcare system,
including physicians and pharmaceutical companies. This ability to connect and bring value to
each of these critical stakeholders distinguishes us from our competitors.
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Loyal and active paying user base anchored on long-term physician-patient relationships
Patients with chronic conditions typically require recurring medical consultations and
prescriptions, many of which are routine and can be done remotely. Individual users can obtain
online consultation and e-prescriptions, and complete medicine purchase all on our H2H
platform and online retail pharmacy service platform. In particular, our H2H service platform
provides individual users with easy access to medical resources and enables physicians to more
efficiently manage their cohort of chronic disease patients. Anchored on existing patient-
physician relationships, our platform significantly benefits registered physicians by providing
them the convenience of conducting online follow-up consultations with their existing, and
often long-term, patients. This in turn enables more effective patient management, especially
for patients who may have difficulties attending in-person consultations. Our online retail
pharmacy service platform attracts users by offering a comprehensive selection of healthcare
products, with a focus on providing a broad selection of prescription pharmaceuticals to serve
the diverse needs of chronic disease patients. As individual users deepen their relationship with
the registered physicians and rely on services available on our platform, their consumption
behavior shifts towards online chronic disease management and they become more loyal to our
platform. With a high-quality user base, we are well-positioned to expand our service and
product offerings to increase our market share. Our Jianke Platform and users are characterized
by the following features:
 Broad user base . Our H2H service platform and online retail pharmacy service
platform have attracted a broad user base. As of December 31, 2023, our Jianke
Platform had approximately 42.7 million registered users. For the year ended
December 31, 2023, our Jianke Platform had an average of approximately 8.4
million MAU. For the years ended December 31, 2021, 2022 and 2023, our
advertising and platform service fees as a percentage of our total revenue was 4.4%,
3.9% and 3.8%, respectively, which was lower than the industry average for the
respective year, according to CIC.
 Highly active and loyal users . Chronic disease patients typically require long-term
medical care and follow-up treatment. Our H2H service platform fosters an
interactive network of patients and physicians based on existing long-term
relationships, resulting in strong user retention and repeat purchases. In 2021, 2022
and 2023, the repeat purchase rate on our Jianke Platform was 82.0%, 83.3% and
84.2%, respectively, which was higher than the industry average for the respective
year, according to CIC. For the year ended December 31, 2023, the average retention
rate of our registered physicians was approximately 93.2%. In addition, our average
user retention rate remained consistently high throughout the Track Record Period,
at 77.3%, 78.7% and 79.0% in 2021, 2022 and 2023, respectively, which was higher
than the industry average of approximately 30-35% for the respective years,
according to CIC.
 Strong willingness to pay . Typically referred by physicians after an initial offline
consultation, patients on our H2H service platform generally exhibit a strong
willingness to pay. For the year ended December 31, 2023, the conversion rate of
active users to paying users on our H2H service platform was 36.2%. We also
achieved high spending per paying user, which amounted to RMB766.3, RMB626.7
and RMB558.9 in 2021, 2022 and 2023, respectively, which was higher than the
industry average for the respective year, according to CIC.
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Technology-driven platform to enhance customer satisfaction and operating efficiency
We take a pragmatic approach in our technology development efforts, with a focus on
rapid prototyping and iteration. In addition, we employ a variety of technologies across our
Jianke Platform with the aim of providing a better user experience and improving our operating
efficiency.
 Improved customer satisfaction. We utilize big data analytics to enhance user
experience and continuously improve our products and services. We have
accumulated significant user information, including users’ browsing history,
consultation records, prescriptions and refill data. By tracking and analyzing such
data, we are able to more accurately assess the needs of our customers, and provide
more tailored services, such as medication guidance, prescription refill reminders,
side effect warnings and targeted medical content.
 Proven operating efficiency. We are focused on developing smart, AI-assisted
technologies to increase our operating efficiency. For example, based on anonymous
analysis of prescription data and diagnosis records of our registered physicians, we
have developed an AI medical assistant to automatically generate responses to
common patient queries. Our AI medical assistant provided assistance for
approximately 65.7% of consultations during the Track Record Period. With the help
of our AI medical assistant, the number of orders processed per person per day by
our customer service personnel increased from 67.3 in 2019 when we first launched
our AI medical assistant, to 366.2 in 2023, representing a CAGR of 52.7% from
2019 to 2023. We also employ (i) big data analytics to help determine pricing and
improve our conversion rate; and (ii) neural networks to improve our search and
recommendation engine.
 Smart supply chain management. We implement a “just-in-time” inventory
management strategy, with the goal of maintaining low inventory levels and
achieving rapid inventory turnover in order to reduce working capital requirements
and improve operating efficiency. We have launched a smart supply chain
management system supported by our image recognition and warehouse
management technologies. This system utilizes powerful data analytics to optimize
inventory levels based on predicted levels of demand, automatically replenish
inventory as necessary to optimize our order fulfillment rates, and bring greater
efficiency to our warehouse operations. For the year ended December 31, 2023, our
inventory turnover days were 24.6 days, which, according to CIC, were significantly
lower than most other online pharmaceutical retailers in China for the same year. In
addition, our proprietary procurement system enabled us to procure products from
over 1,400 suppliers and to offer over 212,000 drug SKUs as of December 31, 2023.
By connecting directly to the inventory systems of our major suppliers, we have
access to real-time price data from suppliers, enabling us to compare suppliers’
bidding prices over 122,000 times a day. This automated approach allows us to
minimize procurement search costs, while ensuring favorable pricing. Since the
launch of our smart supply chain management system, we have lowered the
procurement costs for 59.4% of SKUs purchased as of December 31, 2023.
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Strong and synergistic relationships with leading pharmaceutical companies
In recent years, the PRC government has promulgated a series of policies intended to
reduce the sale of prescription drugs through hospital pharmacies, resulting in a shift of
prescription drug sales to other channels. Our Jianke Platform provides pharmaceutical
companies with a novel alternative distribution channel outside of hospital pharmacies.
Leveraging our broad user base of patients and physicians, we have become the partner-of-
choice of leading multinational and domestic pharmaceutical companies. For instance, we have
established strong collaborations with Pfizer Inc., Gilead Sciences, Inc., Novartis AG, and
Baiyunshan Pharmaceutical among many others.
Since the inception of our online retail pharmacy service platform, we have developed
strong relationships with pharmaceutical companies in order to better serve the needs of our
customers. These relationships have enabled us to build a strong foundation for our supply
chain infrastructure, and have a deep understanding of the pharmaceutical industry and the
needs of our pharmaceutical company partners.
Based on this accumulated knowledge, we designed our platform with a focus on
facilitating online connectivity between physicians and their patients in order to improve
treatment compliance and adherence. By leveraging such trusted physician-patient
relationships and our large user base of chronic disease patients, we are able to offer
pharmaceutical companies a variety of customized content and marketing solutions to better
inform physicians and patients about chronic disease conditions and potential treatment
options, increase disease awareness among the public, and provide overall market intelligence.
We believe that our platform is unique among competitors in that it serves as a sales channel
for pharmaceutical products and provides pharmaceutical companies with a channel to better
educate patients and physicians about chronic disease conditions and potential treatment
options.
In turn, our collaboration with pharmaceutical companies allows us to maintain a stable
supply of pharmaceutical products at attractive prices, while helping to attract and retain
physicians and patients on our platform. As we grow in scale, we have better bargaining power
to obtain more favorable prices from suppliers, which gives us greater flexibility in offering
discounts and promotions to develop our user base and to maintain competitive pricing against
our competitors. As we rapidly grow our base of registered physicians and patients, our
platform is able to attract additional pharmaceutical companies for collaboration, resulting in
a virtuous cycle that propels our business growth.
Innovation-driven approach and ability to evolve our business as new opportunities arise
Innovation has always been at the core of our business. With the experience and vision
of our senior management team, we have a keen understanding of China’s evolving healthcare
system and are highly perceptive to the pain points and needs of industry stakeholders. We have
been a pioneer in developing products and services to address white space markets and believe
that continuous improvement and evolution of our products and services will continue to be
key to our long-term success.
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We initially launched our platform with online retail pharmacy, and quickly established
our chronic disease management service center in order to offer a more professional standard
of service to our customers. As our platform grew, we realized that trusted physician-patient
relationships were also essential for helping our patients manage their chronic disease
conditions. In 2018, we introduced our H2H service platform, which provides easy
connectivity between patients and their physicians, and enables more effective chronic disease
management. We believe that this ability to continuously evolve our services and business
model and adapt to market needs sets us apart from our competitors.
Due to China’s changing healthcare regulatory landscape, it has become increasingly
challenging for pharmaceutical companies to reach doctors through sales representatives and
other traditional channels. Meanwhile, China’s large scale Internet traffic platforms are
reaching maturity, making it increasingly difficult and expensive to target niche audiences. Our
ecosystem for chronic disease management allows us to access a large user base of physicians
and chronic disease patients. We developed customized content and marketing solutions to help
pharmaceutical companies reach this audience. For details, see “—Strong and synergistic
relationships with leading pharmaceutical companies.”
Seasoned management team and strong investor base supporting our long-term growth
We benefit from the leadership of our management team which has a strong technology
background, along with an in-depth understanding of China’s Internet healthcare industry. Our
senior management team consists of members with extensive experience and expertise across
a range of industries and specialties, including healthcare, pharmaceutics, technology, Internet
and sales and marketing. We have also attracted a strong investor base which includes leading
private equity and venture capital funds, and leading healthcare investors who have provided
us with significant resources to support our growth and long-term development.
Our seasoned management team is led by Mr. Xie and Mr. Zhou. Mr. Xie, our founder,
chairman of the Board, executive Director and chief executive officer, has more than 15 years
of experience in China’s medical and healthcare industry. In recognition of Mr. Xie’s
achievements and his contribution to the industry, he was awarded the “Outstanding Influential
Entrepreneur Award 2022” at the 11th China Finance Summit and named as the “Top 10
Healthcare Industry Innovation and Startup Entrepreneurs of the Y ear” by iyiou.com in May
2017, as well as the “Top 10 Charismatic People in China Chain Pharmacies of the Y ear” by
the Institute of Medical Economics of National Medical Products Administration in July 2018.
In addition, Mr. Zhou, our executive Director and chief strategy officer, has extensive
management experience and worked with a number of Internet and e-commerce companies in
China prior to joining our Group, including serving as the chief executive officer in Lashou
Group Inc., a company principally engaged in e-commerce services. Leveraging their
professional expertise and industry insights, we established our online retail pharmacy service
platform and our H2H service platform.
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OUR STRATEGIES
We will focus on a number of key growth strategies to achieve our long-term goal of
empowering physicians and patients to better treat and manage chronic diseases.
Enhance connectivity between physicians and patients and increase user engagement on
our platform
We believe that there are significant opportunities to continue to enhance the levels of
connectivity and engagement between physicians and patients on our H2H service platform.
We intend to expand our operations team in order to provide better support for physicians on
our platform, especially for newly registered physicians who may lack familiarity with the
functions of our platform. In addition, we plan to create more narrowly targeted approaches for
encouraging physician activity by segmenting and profiling our registered physicians
according to a number of factors, including, among others, geographic regions, years of
medical experience, professional rank, hospital grade and platform activity level. We also
intend to continue to add functionality and disease specific reference content to help physicians
improve the level of care they are able to provide, thereby increasing the number of additional
patients they can serve and manage through our platform.
Our technology infrastructure and front-end applications serve a crucial role in our
platform ecosystem. As more physicians and patients join our platform, we will make
investments, both in in-house capabilities and strategic partnerships and acquisitions, to
improve their user experience and reduce interaction and cognitive frictions.
We also plan to invest further in raising our brand awareness among physicians and
patients, in order to enhance their stickiness to our platform, and drive greater platform
engagement. We will employ various marketing and promotional activities, including but not
limited to, media and social media engagement, conference sponsorships, and marketing
campaigns.
Redefine the standard for smart chronic disease management services by expanding our
expertise in chronic disease specialties and focusing on continuous innovation
Our online chronic disease management platform provides an efficient and effective
solution to address the needs of chronic disease patients, but we believe there remain
significant opportunities for future development and innovation. Leveraging our established
ecosystem, we aim to broaden our service coverage for additional disease specialties and
indications with substantial patient needs. We will also partner with experienced specialists,
medical institutions, and pharmaceutical companies to share their expertise and create
standardized treatment regimens which can be quickly and easily referenced by other
physicians on our platform. As our platform develops, we intend to add additional modules to
our platform to interface with wearable devices to enable real-time monitoring and diagnosis.
We seek to develop broader service coverage and functionalities on our platform by investing
in in-house development as well as through strategic alliances and investment opportunities.
We believe these initiatives will enable our platform to become an indispensable tool for both
physicians and their patients in managing chronic diseases.
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Build and grow our high-quality user base
In the early stage of building our business foundation, we prioritized scaling our business.
Through our efforts, we acquired a substantial user base, and became the largest online chronic
disease management platform in China in 2023 in terms of average MAU, according to CIC.
As of December 31, 2023, our H2H service platform had over 212,000 registered physicians
from over 15,600 medical institutions. While we believe continuing to grow the number of
users on our platform is essential to our business growth, we also want to focus on maintaining
a highly active user base with strong customer loyalty and retention. We believe that the key
to achieving this goal is to leverage our accumulated experience and deep operational expertise
to develop and identify effective strategies for addressing the evolving needs of our users, and
deliver a superior user experience.
Continue to broaden our product selection to better satisfy the needs of our users
Our ability to provide a broad range of prescription drugs is our key competitive
advantage. As of December 31, 2023, we had procured products from over 1,400 suppliers and
had offered over 212,000 drug SKUs. We intend to further develop this capability by expanding
our collaboration with both new and existing pharmaceutical companies, and leveraging our
broad user base of physicians and patients to serve market segments with significant patient
needs. We will target a mix of new specialty drugs for existing indications, as well as
expanding our platform for additional specialties, such as cardiovascular, cerebrovascular,
infectious diseases, dermatology, psychiatry and gynecology. By continuously expanding our
product offering, we believe we will be able to better address the diverse needs of our
customers.
In addition, the pharmaceutical supply chain in China is fragmented, often with
significant regional pricing differences for identical drugs. We intend to expand our warehouse
coverage and sourcing capability to additional geographic regions in order to achieve more
favorable procurement prices from a broader network of suppliers.
Continue to attract and retain talent to support our growth
The ability to attract, train and retain talented employees is essential to our growth
strategy. We intend to actively recruit personnel with strong backgrounds in AI and data
science, healthcare, chronic disease management, and the pharmaceutical industry. We believe
that a balanced mix of skill sets is crucial to our continued development and innovation efforts.
Our approach to attracting talent and expertise will entail a combination of structured
campus recruitment programs and lateral hires. In order to retain top talents, we intend to
provide an attractive employee benefits package, including participation in an incentive share
scheme, along with significant opportunities for training and career advancement.
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OUR ONLINE CHRONIC DISEASE MANAGEMENT PLATFORM
Overview
We are the largest online chronic disease management platform in China in terms of
average MAU in 2023. We commenced our business with a focus on chronic disease
management to address the needs of chronic disease patients, with a view to extend our
services to a wider range of disease areas.
Due to the limited medical resources in many regional hospitals and clinics in China, we
recognize that many chronic disease patients are confronted with difficulties in obtaining
timely routine medical treatment and easy access to a range of prescription medications. To
resolve the pain points of patients, we provide online chronic disease management services
through our Jianke Platform. Leveraging our technology capabilities, we provide digitalized
solutions for major stakeholders in the healthcare system, addressing their needs and creating
value through continuous innovation.
Our online chronic disease management platform primarily provides the following
services:
 Comprehensive Medical Services. Our comprehensive medical services primarily
include our H2H services, where patients and physicians are able to engage in online
follow-up consultations, typically after initial in-person consultations, and
physicians can issue e-prescriptions through our H2H service platform. We fulfill
e-prescriptions through our pharmaceutical supply chain, and engage qualified
third-party couriers for home delivery. Our H2H service platform was launched to
address chronic disease patients’ treatment needs created by the lack of ready access
to reliable medical resources in China, and to capitalize on the burgeoning demand
for remote consultations driven by its accessibility, flexibility, reduced outpatient
waiting time and cost-effectiveness. We also provide medical services offline at
Jingtai Hospital and Qishi Hospital.
 Online Retail Pharmacy Services. We provide a variety of healthcare products
through our online retail pharmacy service platform, along with convenient home
delivery for our customers through qualified third-party couriers. Our product
offering consists primarily of prescription and OTC drugs, and we are especially
focused on providing a broad selection of prescription pharmaceuticals, which
patients can procure by relying on an existing prescription, or by requesting for an
e-prescription which our in-house medical professionals can assist to issue. This
allows patients to ensure the continuity of their medications and treatments without
the inconvenience of arranging for hospital appointments. In addition, our platform
offers home-use medical devices and accessories, healthcare and nutritional
supplements and other wellness products. We also operate a number of offline
pharmacies, which contributed an insignificant portion to our revenue for each year
during the Track Record Period.
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 Customized Content and Marketing Solutions. We provide pharmaceutical
companies with a variety of customized content and marketing solutions to better
inform physicians and patients about chronic disease conditions and raise awareness
about treatment options. We offered such services during the Track Record Period
after recognizing that such needs of pharmaceutical companies can be addressed by
leveraging the large and active user base on our Jianke Platform. Our academic
community services facilitate knowledge among physicians through publication of
medical news articles and short videos on our Jianke Platform, hosting online
medical conferences, and physician live stream video sessions with specialist
physicians. Our patient community services offer relevant educational content
according to the interests of our patient users. We also provide additional
customized content and marketing solutions, including search engine optimization,
provision of medical surveys, and distributor data integration services. Our
customized content and marketing solutions business line also serves as an extension
of our supplier management strategy, which helps us forge mutually beneficial and
synergistic relationships with pharmaceutical companies from whom we procure our
pharmaceutical products.
Our Growth and Key Operating Data
Since we began operating the Jianke mobile applications and website in-house in July
2019, we have been focused on strengthening our business foundation and scaling our business
through organic growth. Our past efforts have enabled us to build a large user base with
approximately 42.7 million registered users as of December 31, 2023. For the year ended
December 31, 2023, our Jianke Platform had an average of approximately 8.4 million MAUs.
The number of registered physicians on our H2H platform increased from 191,106 as of
December 31, 2021 to 205,000 and 212,892 as of December 31, 2022 and 2023, respectively.
As of December 31, 2023, our registered physicians came from over 15,600 medical
institutions, approximately 58.8% of them were working for Class III hospitals and
approximately 38.4% of them had obtained a title of associate chief physician or above.
As our user base grew substantially and leveraging our strong medical resources of highly
qualified registered physicians, we were able to focus on developing a high-quality base of
loyal and active users with strong willingness to pay. In 2021, 2022 and 2023, the conversion
rate of active users to paying users on our H2H service platform were 32.6%, 42.9% and
36.2%, respectively, while that of our online retail pharmacy service platform increased from
14.7% to 14.8% and 17.7%, respectively. Our conversion rate growth was primarily
attributable to more effective marketing measures we took to promote our brand and develop
consumer behavior on our platform. In particular, the notable increase in conversion rate for
our H2H service platform in 2022 was primarily due to the implementation of measures aimed
at enhancing the accessibility of our platform and simplifying the purchasing process. Such
measures include: (i) migration of users from our WeChat official account to our WeChat
mini-app, which provides a more streamlined user experience, (ii) enhancements to our pricing
system to allow for more targeted discounts to new users, and (iii) an improved
recommendation algorithm which provides customers with alternatives for out of stock
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products. The conversion rate of our H2H service platform decreased in 2023 as we introduced
more free-of-charge patient education contents on our H2H service platform to attract new
users, expand our user base, stimulate user activity and increase user stickiness. We anticipate
improvements in our conversion rates as we continue to introduce new features aimed at
enhancing the user experience on our platform.
As a result of the increased conversion rate during the Track Record Period, our number
of paying users increased from approximately 2.5 million in 2021, to 3.9 million and 4.4
million in 2022 and 2023, respectively. In particular, the number of paying users for our
comprehensive medical services increased rapidly by 53.4% from 2021 to 2022 and by 32.0%
from 2022 to 2023. Similarly, the number of paying users for our online retail pharmacy
services increased by 58.3% from 2021 to 2022 and by 16.4% from 2022 to 2023. For the year
ended December 31, 2023, we also achieved high average retention rates for both our
registered physicians and users of approximately 93.2% and 79.0%, respectively, which attest
to the loyalty of our user base. Moreover, the repeat purchase rate of our paying users remained
consistently high during the Track Record Period, as demonstrated in the table below,
indicating our success in developing user stickiness on our platform.
Accordingly, we achieved an average spending per paying user of RMB766.3, RMB626.7
and RMB558.9 in 2021, 2022 and 2023, respectively, which was higher than the industry
average for the respective year, according to CIC. While average spending per paying user
exhibited a downward trend during the Track Record Period, this was mainly a reflection of the
rapid expansion of our paying user base during the Track Record Period, which enabled us to
negotiate more favorable procurement terms as our business scale increased, and in turn offer
more competitive pricing on a range of products. Our average spending per paying user for
comprehensive medical services was generally higher at RMB2,269.7 in 2021, RMB1,767.6 in
2022 and RMB1,450.4 in 2023. This is a result of the nature of H2H services as we primarily
serve patients with the need for prescription drugs, which generally have higher unit prices.
The average spending per paying user for our online retail pharmacy services was RMB516.1
in 2021, RMB420.2 in 2022 and RMB353.3 in 2023. The decrease in average spending per
paying user primarily reflected the rapid expansion of our overall base of new paying users
during the Track Record Period. This was in line with our business focus of expanding our user
base and developing user stickiness on our platform. Although our average spending per paying
user decreased in 2022 and 2023, we were able to expand our user base while achieving
improved gross profit margins by leveraging our supply chain capabilities to procure
pharmaceutical and healthcare products at more favorable prices.
As a result of the above, the total GMV of our Jianke Platform and our operations on
third-party e-commerce platforms increased from RMB1,945.4 million in 2021 to RMB2,430.3
million and RMB2,481.5 million in 2022 and 2023, respectively. In particular, our prescription
drug GMV accounted for a significant percentage of total GMV at 88.9%, 84.2% and 81.1%
in 2021, 2022 and 2023, respectively.
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The following table sets out certain key operating metrics of our Jianke Platform as of the
dates or for the years indicated.
As of/For the year ended
December 31,
2021 2022 2023
Number of paying users (1) 2,538,606 3,878,195 4,439,660
Comprehensive medical services 360,511 553,033 730,251
Online retail pharmacy services 2,183,933 3,457,326 4,025,907
Average spending per paying user
(2)
(RMB) 766.3 626.7 (10) 558.9 (10)
Comprehensive medical services 2,269.7 1,767.6 1,450.4
Online retail pharmacy services 516.1 420.2 353.3
Average monthly active users (MAU)
(3) 8,823,986 9,135,433 (11) 8,441,036 (11)
Average user retention rate (4) 77.3% 78.7% 79.0%
Number of registered physicians (5) 191,106 205,000 212,892
Average physician retention rate (6) 85.1% 91.9% (12) 93.2%
Repeat purchase rate (7) 82.0% 83.3% 84.2%
Conversion rate of active users to
paying users on H2H service
platform
(8) 32.6% 42.9% 36.2% (13)
Conversion rate of active users to
paying users on online retail
pharmacy service platform
(8) 14.7% 14.8% 17.7%
Total GMV (9)
(RMB in millions) 1,945.4 2,430.3 2,481.5
Prescription drug GMV as a percentage
of total GMV 88.9% 84.2% (14) 81.1% (14)
Notes:
(1) “Paying users” refer to users who engage in revenue generating activities such as physician
consultations or purchase of pharmaceutical products, as opposed to “non-paying users” who only
engage in non-revenue generating activities such as participating in academic or patient community
services, attending free online consultations, or browsing other content available to them free of charge.
There are overlapping users who are both paying users of our comprehensive medical services and
online retail pharmacy services. Such users are counted only once when determining the total paying
users on our platform.
(2) Average spending per paying user refers to the total GMV for a year divided by the number of paying
users for the same year.
(3) Monthly active users (MAU) refer to the number of active users who access our services on the Jianke
Platform at least once during a calendar month, where such access includes browsing on the Jianke
Platform, use of our online consultation services, e-prescription services and customer services,
purchase of pharmaceutical and other healthcare products, and participation in patient community
services. Average MAU for each year during the Track Record Period is the mean MAU by month during
the year.
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(4) User retention rate in a given month refers to the percentage of total active users in the same month of
the preceding year who remained active on the Jianke Platform during the next 12 months. A user is
considered to have remained active during the 12-month period if he/she accessed our services at least
once during the period, where such access includes browsing on the Jianke Platform, use of our online
consultation services, e-prescription services and customer services, purchase of pharmaceutical and
other healthcare products, and participation in patient community services. Average user retention rate
for each year during the Track Record Period is the mean user retention rate by month during the year.
(5) Number of registered physicians refers to the total number of physicians registered on the Jianke
Platform as of a given date.
(6) Physician retention rate in a given month refers to the percentage of total active registered physicians
in the same month of the preceding year who remained active on the Jianke Platform during the next
12 months. A registered physician is considered to have remained active during the 12-month period if
he/she engaged in an activity at least once during the period, where such activity includes provision of
online consultation services and e-prescription services, and participation in academic community
services through activities such as publishing articles or participating in live streams. Average physician
retention rate for each year during the Track Record Period is the mean physician retention rate by
month during the year.
(7) Repeat purchase rate refers to the amount spent by users who placed two or more orders during a year
divided by the total GMV for the same year.
(8) Conversion rate of active users to paying users on our H2H service platform or online retail pharmacy
service platform refers to the number of paying users divided by the number of active users on our H2H
service platform or the Jianke Online Pharmacy App, respectively.
(9) Total GMV refers to our total gross merchandise volume, which is the total value of all orders placed
on the Jianke Platform and through third-party e-commerce platforms.
(10) The decrease in average spending per paying user primarily reflected the rapid expansion of our paying
user base during the Track Record Period, which enabled us to negotiate more favorable procurement
terms as our business scale increased, and in turn offer more competitive pricing on a range of products
while preserving our overall gross profit margins.
(11) The elevated average MAU in 2022 primarily reflected the exceptionally high user activity in December
2022 driven by the COVID-19 pandemic which was effectively mitigated by early 2023. Our average
MAU in 2023 was generally in line with that in 2021, although the latter was slightly higher due to the
increased healthcare-related online traffic driven by the ongoing COVID-19 pandemic during that
period.
(12) Our average physician retention rate increased significantly in 2022 because we focused on cultivating
the engagement and quality of our accumulated base of registered physicians. For details, see
“Business—Medical Professional Network—Registered Physicians.”
(13) The conversion rate of active users to paying users on our H2H service platform decreased in 2023 as
we introduced more free-of-charge patient education contents on our H2H service platform to attract
new users, expand our user base, stimulate user activity and increase user stickiness.
(14) The decrease in prescription drug GMV as a percentage of our total GMV was primarily due to (i) the
increased sales of OTC drugs as a result of the resurgence of COVID-19 in the second half of 2022; and
(ii) a decrease in prescription drug GMV mainly due to a shift in our product mix, which reflected an
increased proportion of certain higher margin OTC drugs within our product portfolio.
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The following table sets forth a breakdown of our revenue by business line for the years
indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Comprehensive
medical services 719,693 40.9 868,171 39.4 983,654 40.4
Online retail
pharmacy services 1,011,427 57.5 1,252,123 56.8 1,297,106 53.3
Customized content
and marketing
solutions 27,553 1.6 60,254 2.7 87,046 3.6
Others – – 23,755 1.1 66,502 2.7
Total 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
Since 2022, we have engaged in the wholesale of pharmaceutical products to third-party
distributors for the purpose of inventory management. Such sales enable the mitigation of
inventory risk for certain items where actual sales may have deviated from original projections.
Revenue generated from these transactions is immaterial. Our future participation in such
transactions would largely depend on our future considerations and needs in inventory
management. As such, revenue generated from such sales is classified as “Others” in our
consolidated statements of profit or loss and other comprehensive income.
In addition, a significant portion of our revenue during the Track Record Period was
attributable to the sales of pharmaceutical and other healthcare products with service
package
(1), which accounted for 98.1%, 97.0% and 96.2% of our total revenue in 2021, 2022
and 2023, respectively. Such revenue was driven by our wide-ranging portfolio of
pharmaceutical products, and also reflects the positive impact of offering medical services
(including e-prescription and prescription refill services) through our registered physicians and
in-house medical professionals. These services are an integral component of our product and
service package, playing a vital role in driving patient retention and promoting treatment
adherence. Furthermore, our registered physicians also provided online consultation services,
which accounted for 0.3%, 0.3% and 0.2% of our total revenue in 2021, 2022 and 2023,
respectively. Revenue generated from customized content and marketing solutions accounted
for the remaining 1.6%, 2.7% and 3.6% of our total revenue in the respective years, as set forth
in the table below.
(1) Excluding revenue contribution from online consultation services.
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For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Revenue from:
Sales of pharmaceutical
and other healthcare
products with service
package
(1) 1,726,693 98.1 2,138,509 97.0 2,342,942 96.2
Online consultation
services 4,427 0.3 5,539 0.3 4,320 0.2
Customized content and
marketing solutions 27,553 1.6 60,254 2.7 87,046 3.6
Total 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
Note:
(1) Excluding revenue contribution from online consultation services.
There is no overlapping business or transaction between our different business lines.
Revenue generated from e-prescription services and/or sales of pharmaceutical products and
other products is recorded according to the business line through which such e-prescription
services were provided and/or orders were placed.
The table below sets forth a breakdown of our revenue by distribution channel for the
years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Online retail
pharmacy services 1,011,427 57.5 1,252,123 56.8 1,297,106 53.3
– Jianke Platform 945,047 53.7 1,169,075 53.0 1,138,834 46.8
– Third-party
e-commerce
platforms 63,898 3.6 79,939 3.6 155,045 6.4
– Offline
pharmacies 2,482 0.1 3,109 0.1 3,227 0.1
Comprehensive
medical services 719,693 40.9 868,171 39.4 983,654 40.4
– Jianke Platform 711,658 40.5 859,226 39.0 973,046 40.0
– Offline hospitals 8,035 0.5 8,945 0.4 10,608 0.4
Customized content
and marketing
solutions 27,553 1.6 60,254 2.7 87,046 3.6
Others – – 23,755 1.1 66,502 2.7
Total 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
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The table below sets forth a breakdown of our gross profit and gross profit margin by
distribution channel for the years indicated.
For the year ended December 31,
2021 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB’000 % RMB’000 % RMB’000 %
Online retail
pharmacy services 155,000 15.3 206,693 16.5 263,191 20.3
– Jianke Platform 146,790 15.5 194,634 16.6 247,767 21.8
– Third-party
e-commerce
platforms 7,362 11.5 10,958 13.7 14,324 9.2
– Offline
pharmacies 848 34.2 1,101 35.4 1,100 34.1
Comprehensive
medical services 40,543 5.6 122,078 14.1 149,738 15.2
– Jianke Platform 40,250 5.7 121,868 14.2 149,168 15.3
– Offline hospitals 293 3.6 210 2.3 570 5.4
Customized content
and marketing
solutions 24,105 87.5 51,483 85.4 72,277 83.0
Others – – 330 1.4 2,201 3.3
Total 219,648 12.5 380,584 17.3 487,407 20.3
Comprehensive Medical Services
Since our inception, we have focused on providing online chronic disease management
services, which cover a variety of chronic diseases, such as cardiovascular and respiratory
chronic diseases. We believe there is a substantial need for healthcare services from patients
with chronic diseases, who typically require routine medical consultations and prescription
refills in order to monitor and control their disease condition. Due to the uneven distribution
of medical resources in China, these patients may need to spend substantial time on a regular
basis commuting to crowded hospitals and queuing for follow-up consultations and
prescription refills. To address these needs, we offer a range of medical services with our H2H
service platform, a hospital-to-home telemedicine service platform.
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H2H Services
Our H2H services primarily include online medical consultation services, e-prescription
and prescription refill services which are supported by our chronic disease management service
center powered by our AI technology. See “—Our Chronic Disease Management (CDM)
Service Center” and “—AI Technology” for details. The following diagram illustrates the
service process of our H2H services.
3 Self-owned
Warehouse
Complete
onboarding
6 Provide pharmaceutical
products and home delivery
services1
Patients
Physicians
Fulfill
e-prescriptions
# H2H service process
CDM Service Center
169 CDM staff led by medical professionals
Provide services of prescription consultation, patient
education, medication reminder, drug re-fill notifications
Provide AI-enabled
long-term services
(with multi-site
registration)
Visit offline
hospitals for
initial in-person
consultation
1
Offline
Hospitals
2 Patient scans
physician’s
QR code to create
a connection through
the H2H platform
Jianke Doctor App (for patients)
Jianke Hospital App (for physicians)
54
Visit Internet hospital
Internet
Hospital
7
/g131Highly active and loyal users/g131Broad user base /g131Strong willingness to pay
Provide online
consultation and
e-prescription
services
Services/products provided by Jianke
Note:
(1) Delivery services are provided by qualified third-party logistics and courier companies.
Our H2H services are primarily provided through our proprietary mobile applications.
The following screenshots illustrate the interface of Jianke Doctor App (ᔼ͛), our mobile
application for patients, and Jianke Hospital App (ᔼ৫), our mobile application for
physicians. Our H2H services are also accessible through our desktop application and WeChat
official account and mini program.
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Interface of Jianke Doctor App Interface of Jianke Hospital App
Our platform includes a physician profile catalog where patients can browse the
backgrounds of our registered physicians. Each physician has a profile page that displays the
physician’s key experience, areas of expertise, user feedback, consultation fee and available
consultation time slots. The following screenshots illustrate the physician profile catalog on
our Jianke Doctor App.
Patient’s interface Patient can browse physicians’ backgrounds
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During the consultation session, a physician may advise his or her patient to conduct an
examination or diagnostic test at a hospital or, if necessary, visit the physician in person.
However, since chronic disease patients typically require periodic prescription drug refills and
follow-up medical consultations to treat their condition, patients and physicians will continue
to rely on our platform for ongoing communication and chronic disease management. As
physicians refer new patients to our platform, and existing patients build engagement with their
doctors through our platform, we anticipate that our user base and user retention will continue
to grow.
Our H2H service platform provides a unique QR code for each registered physician. A
patient can scan a physician’s QR code with his or her mobile phone using WeChat or our
Jianke Doctor App in order to “connect” with the physician on our platform. Once connected,
the patient is able to make appointments for follow-up consultations or request prescription
refills. The following screenshots illustrate how a patient and a physician can connect using the
Jianke Doctor and Jianke Hospital mobile applications.
Physician’s QR code Patient’s interface Patient scanning the
QR code
Online Consultation and E-prescription Services
Our online consultation services encompass consultations on a wide range of conditions
and cases, with a primary focus on common and chronic illnesses, such as cardiovascular
diseases and respiratory diseases. Our registered physicians have expertise in a range of
specialties, allowing patients to seek consultations according to their individual needs. In
contrast to a number of other telemedicine platforms focusing on completely virtual
consultations, our online consultation services are anchored on existing offline physician-
patient relationships. Although first-time patients may utilize our platform for their initial
consultations, our online consultation services typically arise after in-person consultations with
our registered physicians at the hospitals where they work. During the consultation session, the
patient can communicate with the physician through texts, pictures and audio messages.
Although patients are generally encouraged to follow through with the same physicians due to
the long-term and recurring nature of chronic diseases, they may switch to other physicians or
establish patient-physician relationships with different physicians, for instance where they
have different chronic conditions that require different expertise.
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Our Jianke Platform empowers physicians to use their free time to provide online
consultations for their patients, significantly improving their productivity. The agreements that
we entered into with registered physicians during the Track Record Period did not contain any
exclusive/non-competition terms. We also do not impose fixed working hours or mandatory
minimum active hours on registered physicians. As such, registered physicians have the
flexibility to decide the amount of time they would allocate to their other commitments such
as their offline hospital work, and the proportion of their free time that they would use to
provide online consultation services through our platform.
In addition, our platform helps registered physicians to effectively manage their time and
handle the high patient volumes at offline hospitals. This in turn, encourages them to on-board
new patients to our platform. During the Track Record Period, to the best knowledge of the
Directors, the registered physicians on our platform did not encounter any capacity issues in
allocating their time between offline hospital work and online consultations through our
platform. We remain committed to enhancing our platform with new features that improve the
user experience for registered physicians and increase their overall patient management
efficiency.
Our H2H service platform is anchored on existing patient-physician relationships, and
enables physicians to easily conduct online follow-up consultations with their cohort of chronic
disease patients, while providing patients with added convenience. This approach is
particularly effective for chronic disease management since such consultations are typically not
time-sensitive, and physicians can use their free time to serve these patients. We believe that
by providing physicians with additional functionality which increases their efficiency, they will
be motivated to use our platform more frequently and encourage their existing offline
long-term chronic disease patients to use our Jianke Platform. Moreover, we provide
compensation to registered physicians to encourage activity on our platform and ensure that
patient needs are met. Our compensation structure is designed to reward registered physicians
who conduct online consultation and remain active on our H2H service platform based on
various activity metrics, which further incentivizes them to continue introducing new patients
to our platform.
Based on the patient’s inputs during consultation sessions, the physician can prescribe
medication in addition to providing medical advice. If the physician wishes to prescribe
medication to the patient, our Jianke Hospital App provides an easy-to-use interface for
creating e-prescriptions, which are issued through our platform and sent directly to the patient.
The patient can place an order directly through our platform, and the e-prescription is also
recorded in the patient’s account for future reference. Even if patients do not complete an order
through our platform, they are still able to access their e-prescriptions. We do not have internal
policies that limit patients using our comprehensive medical services or e-prescription services
to purchasing the prescribed drugs from our platform. As advised by our PRC Legal Advisor,
there are currently no existing rules or regulations in the PRC that require private medical
institutions (including internet hospitals) to separate prescription and dispensation of drugs.
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To the best knowledge of our management and as advised by our PRC Legal Advisor, as
of the Latest Practicable Date, there were no laws, rules or regulations in China that explicitly
stipulate whether and how the compensations that an online chronic disease management
platform pays to registered physicians should be shared with hospitals or medical institutions
where the physicians are employed. In addition, there are no provisions in our agreements with
registered physicians that require service fees received by physicians to be shared with the
medical intuitions they are employed in. On the basis of the foregoing, we believe there was
no revenue sharing mechanism during the Track Record Period between the registered
physicians and the hospitals or medical institutions where they were employed in. In line with
industry practice, there was also no revenue sharing mechanism between the Company and
such hospitals or medical institutions. Given that the overall demand for healthcare in China
exceeds the capacity of offline hospitals, the diversion of patients online for routine
consultations and prescription medications is not expected to have a material impact on the
business of offline hospitals.
If a patient needs drug refills, our Jianke Doctor App also provides a refill function that
allows a patient to have quick access to consult with the physician to obtain an e-prescription
for the refill. We typically verify the identity of patients using the real-name authentication
services provided by Independent Third Parties.
After a patient makes an order through our platform, the order is fulfilled through our
central warehouse. For the year ended December 31, 2023, our robust pharmaceutical supply
chain has enabled us to fulfill a monthly average of more than 16,000 prescription and OTC
drug SKUs with active sales. We engage qualified third-party couriers for home delivery.
Monetization of H2H Services
We provide a package of services to patients on our H2H platform, including online
consultation, e-prescription and sales of pharmaceutical and other products, and charge them
a service fee based on the services used. This service fee is comprised of online consultation
fees, e-prescription service fees, and sales of pharmaceutical and other products. We do not
participate in initial offline consultations between physicians and patients, and therefore do not
charge patients for such service. Patients that use our online consultation service are typically
charged an online consultation fee as set by the relevant registered physician. In certain
instances, registered physicians may also provide online consultations free of charge. During
the Track Record Period, we paid the online consultation fees from patients to the relevant
registered physician in full, and these fees were recorded as revenue and in our cost of sales.
If patients purchase prescription drugs through our H2H platform, we charge for the sale of
pharmaceutical products along with an e-prescription service fee, which are sold as a package
and recorded as part of our H2H service revenue. Apart from the aforementioned charges, there
are no other fees payable by patients or registered physicians for the use of our H2H platform.
As such, a significant portion of revenue that we generate from comprehensive medical
services is tied to the sale of pharmaceutical products. As the sale of pharmaceutical products
through our H2H platform is rooted in physician-patient relationships and our provision of
comprehensive medical services, such sales are differentiated from pharmaceutical sales under
our online retail pharmacy services.
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We and our registered physicians enter into service agreements, pursuant to which our
registered physicians provide users with online consultation and e-prescription services subject
to relevant rules and regulations. Registered physicians have discretion to set their own
consultation fees, which are subject to a cap of RMB1,000 per consultation, and typically range
from RMB10 to RMB50 per consultation. A physician’s fee may be determined based on a
variety of factors, including but not limited to the specific physician’s level of expertise,
experience and reputation. Some registered physicians may choose to offer their consultation
services free of charge in order to attract more patients and build their reputation. The price for
each consultation is explicitly displayed under the profile of each registered physician on our
platform. Users are required to make payment directly on our platform prior to each
consultation session. Registered physicians do not receive additional fees for issuing
e-prescriptions for patients during each online consultation or for any pharmaceutical sales.
Patients who receive an e-prescription after their consultation may place an order directly
through our Jianke Doctor App.
We compensate registered physicians for online consultation and other services they
provide through our platforms. For online consultation services provided, they are
compensated based on the consultation services provided to the patients. We also compensate
them based on their activity level and other services they provide. The amount of such
compensation is determined based on a number of factors, including, among others, the number
of hours spent conducting online consultations on our platform and their participation and
contribution to our academic community and patient community services. We typically
calculate the compensation payable to registered physicians on a monthly basis and registered
physicians are entitled to request cash payments through their accounts on the Jianke Hospital
App.
The following flowchart illustrates the services and fund flows between the key
stakeholders involved in our comprehensive medical services.
Suppliers
Jianke’s Self-owned Warehouse
Physicians
Patients
Jianke’s Internet Hospital
Pharmaceutical products(1)
Delivery(2)
Payment
Payment
Pharmaceutical products(1)
Initial consultation
Place order
Payment Multi-site practice
Primary practicing
institution
a
nk
e
’
s
 I
n
t
er
n
e
t
 H
osp
it
Execute order
1
6
2
3
4
5
Online consultation
and e-prescription
Steps 2 ~ 6: Repeatable process throughout the
Fund flow
entire patient journey
Notes:
(1) Pharmaceutical products include prescription drugs and other pharmaceutical products.
(2) Delivery services are provided by qualified third-party logistics and courier companies.
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Our Responsibilities
Our responsibilities under the H2H services are summarized below:
 Registration and verification . We register accounts for both patient and physician
users. We verify the physician’s identity and qualification before registering the
physician on our H2H service platform. We typically ask the physician to provide an
electronic copy of his or her national identity card, practicing physician
qualification certificate (ࣣpracticing physician’s license (ੂุᗇ
ࣣand physician’s title certificate (ࣣOur employees check the
information submitted by the physician against the registration information on the
NHC’s website. If necessary, our employees will reach out to relevant hospitals to
confirm the physician’s information. After we have reviewed and verified the
physician’s identity and qualification, we will register the physician on our platform
and activate his or her account. In addition, registered physicians on our platform
are required to maintain valid practicing certificates and complete valid multi-site
practice registration with local physicians’ authorities, which will allow them to
practice at the multiple sites registered on their licenses, including our platform. We
also reserve the right to modify the relevant terms regarding physicians’ scope of
services, pricing and how services are performed. As of the Latest Practicable Date,
to the best of our knowledge, all of the registered physicians who are allowed to
provide online consultation and e-prescription services on our platform have valid
practicing certificates and have completed multi-site registrations with the relevant
authorities. We review the validity of their practicing certificates and practice
registrations at least annually. Registered physicians who fail to maintain valid
certification or registration will not be allowed to provide online consultation and
e-prescription services on our platform.
 User account administration and protection . We administer users’ accounts on our
platforms. We are committed to protecting information and privacy of our users. We
have implemented data security policies and developed procedures such as regular
system checks, user authorization review and data back-up to safeguard the
information stored on our platforms.
 E-prescription and refills . After the patient receives the prescription, the patient can
place an order through an online pharmacy on the Jianke Doctor App. The
e-prescription is recorded in the patient’s account for future reference. If a patient
needs drug refills, the Jianke Doctor App provides a refill function, giving the
patient quick access to consult with the physician and obtain an e-prescription for
the refill.
 Record keeping . We keep a record for each patient’s medical consultation history
and prescription history. The patient can access his or her records on the Jianke
Doctor App and send the record to the physicians registered on our platform. We also
keep a record for each physician’s medical consultation history and prescription
history. The physician can log on to the Jianke Hospital App to check his or her past
consultation sessions and prescriptions.
 System maintenance and upgrades . We maintain and upgrade our Jianke Platform
from time to time to ensure smooth online operation, optimize our platform
functionalities and improve user experience.
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Our Offline Hospitals
As a complement to our online services, we also provide medical services offline at
Jingtai Hospital and Qishi Hospital. Jingtai Hospital is located in Baiyun District, Guangzhou,
Guangdong Province. It operates 10 specialty departments and has outpatient capabilities. As
of December 31, 2023, Jingtai Hospital had 22 full-time employees, including four qualified
physicians. Qishi Hospital, which is also located in Guangzhou, had minimal offline operations
during the Track Record Period. As of December 31, 2023, Qishi Hospital had 22 full-time
employees, including eight qualified physicians. Our offline hospitals generate revenue mainly
from provision of medical services, such as consultation, health check-up, treatment and
prescription services. For each year during the Track Record Period, revenue generated from
the provision of offline medical services at our offline hospitals represented less than 1.0% of
our total revenue, which was insignificant to our overall business. Our offline hospitals
generated a modest amount of gross profit for each year comprising the Track Record Period,
which had an immaterial impact on our overall financial performance. Given that we intend to
focus on our online businesses going forward, our offline hospitals will not constitute a major
part of our overall development plans or future business strategy. As such, we expect to
maintain minimal operations at our offline hospitals primarily to supplement our online
business. These operations include providing facilities for offline medical care and onsite
medical practice training activities for our in-house medical professionals. By maintaining
such operations at our offline hospitals, we are able to gain valuable insights into the dynamics
of patients and physicians in offline settings, which in turn enables us to better understand the
needs of our registered physicians.
Online Retail Pharmacy Services
We recognize that chronic disease patients in China often face significant challenges and
inconvenience in obtaining prescription drugs. In order to address these pain points, we operate
an online retail pharmacy service platform, providing customers with a wide range of
pharmaceutical products, with special focus on prescription drugs to serve the needs of chronic
disease patients. In addition, our platform offers home-use medical devices and accessories,
healthcare and nutritional supplements and other wellness products. We provide convenient
home delivery for our customers by engaging qualified third-party logistics and courier
companies, such as SF Express, YTO Express, ZTO Express and China Postal Express and
Logistics, among others. Our online retail pharmacy services can be accessed round the clock
through our mobile application, Jianke Online Pharmacy App (ֳas well as our
WeChat mini program and our website Jianke.com. Our user account details are synced across
our Jianke Platform, and re-registration is not required when users login to our various
applications or portals. We also provide our products through established third-party
e-commerce platforms, such as JD.com, Pinduoduo, Meituan and Ping An Good Doctor, among
others. We typically run self-operated stores on these e-commerce platforms in order to
broaden our market reach and enhance our brand awareness. Users can make payment at the
time they place the order using Alipay or WeChat Pay.
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The following screenshots illustrate the interfaces of Jianke Online Pharmacy App, our
WeChat mini program and our website.
The mobile application interface The mini program interface
The website interface
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If an order placed by a patient includes a prescription drug, we will require patients to
upload a valid prescription for the relevant drug. Where the patient uploads a previously issued
prescription, our in-house medical professionals are responsible for reviewing and verifying
the prescription before approving the order. If the patient does not have a readily available
prescription, the patient will be prompted to enter into a consultation session with our in-house
medical professionals or registered physicians in order to obtain a proper prescription. To
facilitate such purchase, we provide e-prescription assistance services as part of our online
retail pharmacy services. The e-prescription assistance service is typically offered in
conjunction with the sales of prescription drugs, and this package is recorded as part of our
online retail pharmacy services revenue. This service is primarily provided by our in-house
medical professionals and, to a lesser extent, the external physicians registered with us. In
many instances, our medical professionals call patients to confirm their health conditions and
symptoms before issuing e-prescriptions. Other than the abovementioned fees, we and the
registered physicians do not charge patients any additional fees for our online retail pharmacy
services.
Revenue generated from our online retail pharmacy services consists primarily of sales of
various pharmaceutical and healthcare products on our platform. In 2021, 2022 and 2023, we
recognized revenue from our online retail pharmacy services of RMB1,011.4 million,
RMB1,252.1 million and RMB1,297.1 million, respectively. See “—Pricing” for details of the
pricing policy of our online retail pharmacy services.
The following flowchart illustrates the services and fund flows between the key
stakeholders involved in our online retail pharmacy services.
SuppliersJianke’s Online Pharmacy
& Self-owned Warehouse
In-house medical professionals
or registered physicians
Patients
Payment
Pharmaceutical and
wellness products(1)
a
nk
e
’
s
 O
n
li
n
e
 P
h
ar
m
a
Payment(4)
Payment
Place order
Pharmaceutical and
wellness products(1)
E-prescription
verification
(2)
E-prescription services (if needed) (3)
Product flow
Order flow
Service flow
Payment flow
1
4
3
2
2
Notes:
(1) Include prescription and OTC drugs, medical devices, healthcare and nutritional supplements and other
wellness products.
(2) For the situation where a patient places an order for prescription drugs and uploads a previously issued
prescription.
(3) E-prescription service is provided by physicians for patients who place an order for prescription drugs but do
not have an existing prescription for the relevant prescription drugs.
(4) We do not pay our in-house medical professionals separately for e-prescription services. We compensate our
registered physicians for their activity on our platform.
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Our Products
Our products sold on the online retail pharmacy service platform primarily include the
following:
 Prescription drugs . We provide a variety of prescription drugs that cover a range of
medical specialties, including, but not limited to, cardiovascular diseases,
respiratory diseases, men’s and women’s health, dermatology, infectious diseases
and psychiatry. We typically ask users to upload their prescriptions when placing an
order. Our in-house medical professionals will review the prescription and approve
the transaction upon verifying the authenticity of the prescription. We also provide
e-prescription assistance services for users without a prescription. See “—Our
Online Chronic Disease Management Platform—Comprehensive Medical
Services—H2H Services—Online Consultation and E-prescription Services” for
details.
 OTC drugs . We also provide a wide spectrum of OTC drugs. Users can place an
order either through Jianke Online Pharmacy App or Jianke.com. The OTC drugs we
provide cover a variety of disease areas, primarily including cold and fever, oral
diseases, ear, nose and throat diseases, gastroenteritis and dermatosis.
 Medical devices and accessories . We provide a variety of home-use medical devices
and accessories, including blood pressure monitors, blood glucose monitors,
atomizer and oxygen inhalers, nasal wash systems. We also offer various home-use
medical care accessories, such as cotton swabs, bandages and thermometer.
 Healthcare and nutritional supplements . We provide a broad spectrum of healthcare
and nutritional supplements satisfying the needs of all age group, including
vitamins, minerals, herbal supplement products, sports nutrition products, diet
products, sleeping aids supplements, eyesight protection products, pregnancy and
maternity products and blood sugar support supplements.
 Other products . In addition to the above, we also provide other products, such as
reproductive health products and beauty products.
During the Track Record Period, we maintained a stable number of SKUs for our drug
offerings. As of December 31, 2023, we had offered over 212,000 drug SKUs, of which
approximately 61.6% were prescription drugs and approximately 38.4% were OTC drugs. For
the year ended December 31, 2023, we offered a monthly average of more than 16,000 SKUs
of prescription and OTC drugs with active sales on our online retail pharmacy service platform.
Given the spectrum of products offered on our platform, the average unit price of products
offered typically ranges from less than RMB100 to approximately RMB5,000. We do not rely
on a single or a few products to generate revenue, and no single SKU accounted for more than
5% of the total GMV during the Track Record Period.
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The table below sets forth the breakdown of revenue by product type for the years
indicated. The service package, which is offered together with the different product types,
includes online consultation and e-prescription services provided through our H2H service
platform and our online retail pharmacy service platform.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Prescription drugs
and service
package 1,560,799 90.2 1,878,425 87.6 1,969,563 83.9
OTC drugs and
service package 106,262 6.1 160,383 7.5 242,934 10.3
Other healthcare
products and
service package 64,059 3.7 105,241 4.9 134,765 5.7
Total 1,731,120 100.0 2,144,049 100.0 2,347,262 100.0
The table below sets forth the breakdown of gross profit and gross profit margin by
product type for the years indicated. The service package, which is offered together with the
different product types, includes online consultation and e-prescription services provided
through our H2H service platform and our online retail pharmacy service platform.
For the year ended December 31,
2021 2022 2023
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
RMB’000 % RMB’000 % RMB’000 %
Prescription drugs
and service
package 169,915 10.9 272,030 14.5 300,794 15.3
OTC drugs and
service package
(1) 4,445 4.2 10,609 6.6 52,475 21.6
Other healthcare
products and
service package 21,183 33.1 46,462 44.1 61,861 45.9
Total 195,543 11.3 329,101 15.3 415,130 17.7
Note:
(1) Gross profit margins of our OTC drugs and service package were lower than those for our prescription drugs
and service package in 2021 and 2022, primarily due to our relatively smaller scale in sourcing of OTC drugs.
The increase in the gross profit margin of our OTC drugs and service package in 2022 and 2023 primarily
reflected a shift in product mix, as we increased the proportion of certain higher margin OTC drugs within our
portfolio.
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Our Responsibilities
Our responsibilities under the online retail pharmacy services are summarized below:
 Drug procurement . We procure drugs and pharmaceutical products from
pharmaceutical companies and display the drugs or pharmaceutical products on our
Jianke Platform.
 Consultations and customer services . We respond to users’ inquiries on our online
retail pharmacy service platforms and verify the prescription uploaded by patients.
 Sales and delivery . We sell drugs and pharmaceutical products on our Jianke
Platform. We collaborate with third-party couriers to deliver the products to
customers in the PRC. The cost of delivery is charged separately from the product
price, and is based on the delivery method, destination and product weight, among
other things.
 Product return and exchange . We handle return and exchange of products with
quality defects within seven days from the date on which the customer receives the
products. For details, see “—Sales and Marketing—Customer Service.”
 User’ s account administration and protection . We administer user’s accounts on our
platforms. We are committed to protecting information and privacy of our users,
patients and physicians. We have implemented data security policy and developed
procedures such as regular system checks, user authorization review and data
back-up to safeguard the information stored on our platforms.
 System maintenance and upgrades . We maintain and upgrade our Jianke Platform
from time to time to improve user experience.
Offline Pharmacies
We operated three, four and two offline pharmacies as of December 31, 2021, 2022 and
2023, respectively. As of December 31, 2023, the two offline pharmacies we operated were
located in Guangzhou and Beijing respectively, and had an aggregate of eight full-time
employees, including four pharmacists. These offline pharmacies generate revenue primarily
from sales of pharmaceutical products, medical devices and other healthcare products. Revenue
generated from our offline pharmacies accounted for less than 1.0% of our total revenue for
each year during the Track Record Period, which was immaterial to our overall business. Given
that we intend to focus on our online businesses going forward, we expect the revenue
generated from our offline pharmacies to continue to be minimal in the future.
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Customized Content and Marketing Solutions
Due to China’s evolving healthcare regulatory landscape, it has become increasingly
challenging for pharmaceutical companies to reach doctors through sales representatives and
other traditional channels. Meanwhile, China’s large scale Internet traffic platforms are
reaching maturity, making it increasingly difficult and expensive to target niche audiences. Our
ecosystem for chronic disease management, including our comprehensive medical services and
online retail pharmacy services, allows us to provide pharmaceutical companies with
customized content and marketing solutions that reach a large, highly engaged audience of
physicians and chronic disease patients.
Our customized content and marketing solutions help pharmaceutical companies to
expand their digital marketing efforts. Our services include (i) patient education services,
which help pharmaceutical companies formulate patient education initiatives to improve
medication adherence, (ii) creation of targeted medical content for patients, and (iii) digital
detailing services, which include facilitation of online academic exchange between physicians.
These services may encompass search engine optimization, search engine marketing,
dissemination of articles and short videos on popular science and medical content, production
of live stream segments featuring science and medical content, online conferences, and other
multimedia presentations. In addition to publishing content on our Jianke Platform, these
services may also involve leveraging third-party platforms such as Douyin (ࠪKuai Shou
(Ҟ˓), Weibo ( ฆ௹), Xiaohongshu (ࣣߎand Zhihu (˷). We generate revenue from
pharmaceutical companies by charging them service fees on a project basis.
For customized content and marketing services, we have established a content governance
framework to strictly review the content posted on our Jianke Platform and strengthen the
management of information posted by users. Medical news, articles and short videos on our
Jianke Platform, as well as chat content during live streaming, are subject to content review
before being posted. Pursuant to the PRC Cybersecurity Law, if we identify any information
that is prohibited by laws and administrative regulations from release or transmission, we will
refuse the publication of such information or immediately stop transmission and take measures
such as deletion to prevent dissemination of such information, and keep relevant records.
Academic Community Services
Through our academic community services, we provide physician education content,
disseminating knowledge about chronic disease conditions and potential treatment options.
This includes publication of medical news articles and short videos on our Jianke Platform,
hosting of online medical conferences, and live stream video sessions with specialist
physicians.
In particular, within the Jianke Hospital App, we launched our “Academic World ( ኪஔ
˂ή)” module which enables physicians to follow topics and content related to their specialty
areas, including recorded and live stream lectures by leading physicians. The following
screenshot illustrates the interface of the “Academic World” function.
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Our academic community services are provided in collaboration with pharmaceutical
companies, which, pursuant to the relevant agreements, either provide us with educational
content or commission us to create content in the form of articles, short videos or live stream
lectures. The content primarily includes various medical-related topics, including introductions
to pharmaceutical products, along with instructions and risk indications. Our users have
complimentary access to the content published on our platforms, and we charge service fees to
pharmaceutical companies on a case-by-case basis.
Patient Community Services
Our patient community services ( ᔼ୨) can be accessed through the Jianke Doctor App,
allowing patients to follow content from a specific physician or disease area. The educational
content complements our service offerings and helps us build our brand image and improve
user retention. Our patient community services are also provided in collaboration with
pharmaceutical companies, which either provide us with educational content or commission us
to create content in the form of articles, short videos or live stream lectures.
We launched the “Lectures from Renowned Physicians ( Τᔼʃሙੀ)” module in May
2021. We collaborate with renowned physicians registered on our platform to produce short
video clips of lectures in selected disease areas, such as liver health, cardiovascular health,
men’s health, and psychiatry, which are of relevance and interest to patients on our platform.
We also launched a live stream function, “Advice from Renowned Physicians (ΤᔼႭ)”,
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through which we collaborate with physicians to provide live stream lectures to our patients.
The following screenshots illustrate the interface of the “Lectures from Renowned Physicians”
and “Advice from Renowned Physicians” modules.
“Lectures from Renowned Physicians” “Advice from Renowned Physicians”
Our academic community services and patient community services both utilize our live
streaming platform. Our live streaming sessions are usually provided in the form of a lecture
followed by a Q&A session. Each live session typically lasts 30 to 60 minutes. During the
Track Record Period, we provided more than 15,000 live streaming sessions through our
academic community and patient community services.
Other Customized Content and Marketing Solutions
Our additional customized content and marketing solutions include search engine
optimization, provision of medical surveys, and distributor data integration services. We enter
into agreements with pharmaceutical companies and charge them a service fee on a
case-by-case basis.
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For search engine optimization services, we provide pharmaceutical companies with a
number of solutions to improve their presentation in search results on third-party search engine
platforms. We also help pharmaceutical companies conduct surveys among patients to gather
market feedback on their pharmaceutical products and share anonymized and aggregated data
so that they can better understand patients’ needs. In addition, we provide distributor data
integration (DDI) services to pharmaceutical companies. Our DDI system captures data related
to sales and inventory of their products which can be automatically shared and transmitted from
our system to the pharmaceutical companies, allowing them to track and monitor the sales
performance of their products in real time.
Monetization of Customized Content and Marketing Solutions
We generate revenue from pharmaceutical companies who are looking for a cost-effective
way to reach patients and physicians. We do not charge patient users for patient community
services or academic community services provided under customized content and marketing
solutions. The services we provide for a specific project or engagement with a pharmaceutical
company is tailored to the client’s needs. A contract will typically include a package of
services, which may include production and distribution of customized short videos, online
lectures and courses and live-streaming lectures, as well as other customized content and
marketing solutions.
We typically charge a lump sum fee for our services, which is calculated based on the
estimated costs for providing such services, the quantity and complexity of the services, and
an estimate of the time and staffing needed to complete such services. As such, the lump sum
fee charged would depend on the nature and scope of services provided, and typically ranges
from RMB50,000 to RMB3.0 million.
The following flowchart illustrates the services and fund flows between the key
stakeholders involved in our provision of customized content and marketing solutions services.
Patients & Physicians
Pharmaceutical Companies Payment
Customized content
and marketing solutions Display contents(1)
Service flow
Fund flow
1
2
1
Note:
(1) Contents typically include patient feedback and market insights, physician and patient community services and
education materials.
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Others
Since 2022, we have engaged in the wholesale of pharmaceutical products to third-party
distributors for the purpose of inventory management. Such sales enable the mitigation of
inventory risk for certain items where actual sales may have deviated from original projections.
Revenue generated from these transactions is immaterial. Our future participation in such
transactions would depend on our future considerations and needs in inventory management.
As such, revenue generated from such sales is classified as “Others” in our consolidated
statements of profit or loss and other comprehensive income.
Our wholesale of pharmaceutical products are primarily made to distributors with whom
we already have prior business relationships, including distributors that supply products to us,
so as to mitigate counter-party risks. Products sold to, and products purchased from, such
distributors are not the same. Such sales to distributors and purchases from the same
distributors are not inter-related nor inter-contingent transactions, and the terms of each
transaction are negotiated on an arm’s length basis.
OUR CHRONIC DISEASE MANAGEMENT (CDM) SERVICE CENTER
Overview
To support our comprehensive medical services and online retail pharmacy services, we
established our chronic disease management (“ CDM”) service center. Our CDM service center
aims to improve patient experience on our Jianke Platform by providing professional medical
advice and services to customers. Our CDM service center does not provide offline services.
Our CDM service center had a team of 169 staff members led by our in-house medical
professionals as of December 31, 2023, out of which 33 of them were our in-house medical
professionals. The medical expertise of these medical professionals enables us to offer more
professional solutions to patients, including prescription consultation, patient education,
medication reminder and drug refill notifications. The remaining staff members comprised of
mainly sales and marketing personnel and general and administrative personnel. Our CDM
service center provides patients with easy access to illustrations and reminders on proper use
of medicines and potential side effects in association with such medicines, which alleviates
physicians’ workload to respond to patients’ routine inquiries.
We believe that pharmaceutical companies seek to collaborate with us to provide chronic
disease management services because our CDM service center enables them to develop a
long-term and stable patient user base by ensuring patient compliance with the treatment
regimen, raising patient awareness and to further improve their products and customer service.
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Our Responsibilities
Our CDM service center is designed to support and complement our H2H and online retail
pharmacy services by providing ancillary services that are tailored to the needs of patients with
chronic conditions. It aims to facilitate patient adherence to medication and treatment plans,
thereby improving the overall effectiveness of chronic disease management. The following
diagram illustrates the key services provided through our CDM service center.
CDM Service Center
Jianke
Platform
Comprehensive
Medical Services
Online Retail
Pharmacy Services
Customized Content and
Marketing Services
Post-consultation services
Medication
reminder
services
Prescription consultation
services
Drug-refill
notification
services
Patient education
services
Our in-house medical
professionals provide post-
consultation follow-up services
by calling patients up to track
their health conditions and
medication adherence. Through
such phone calls, we establish
online health records for
patients and periodically
remind them to arrange for
further follow-up consultations
or health examinations.
We send reminders
to our patients
through WeChat
messages or our
mobile applications
when they are
required to take
their medicines.
Our in-house medical
professionals and
registered physicians are
available for consultations
when our customers have
medical concerns or queries
in the process of selecting
and purchasing medication
on our Jianke Platform.
We notify patients
according to their
health records
when medication
refills are
required.
We offer a wide array of
chronic disease management-
related information,
including diet and exercise
planning advice, to our users
through our WeChat account,
mobile applications and
phone calls.
Collaboration with Pharmaceutical Companies
We collaborate with pharmaceutical companies on CDM services, such as providing
medication guidance or gathering patient feedback by phone, WeChat or text messages through
our platform, or other means. We also inform patients about potential medication side effects,
and help answer questions they may have regarding their medication.
MEDICAL PROFESSIONAL NETWORK
We have established a medical professional network consisting of our in-house medical
professionals, as well as physicians registered on our platforms.
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Our In-House Medical Professionals
As of December 31, 2023, we had 55 in-house medical professionals, 33 of whom were
part of team of staff members that was operating our CDM service center. Our in-house medical
professionals comprise the following three categories:
 Medical assistants . Our medical assistants are the first points of contact for our
patients. They have relevant medical background or experiences and typically
handle routine communications with patients on general medical issues and provide
guidance and responses to basic medical inquiries, which are aimed at improving the
adherence of patients.
 Professional medical and pharmacy personnel . Our professional medical and
pharmacy personnel are physicians and pharmacists with practice qualifications.
They provide systematic treatment advice and medication guidance to our patients
based on guidelines issued by WHO for the care and treatment of persons diagnosed
with various chronic diseases.
 Special medical expert consultants . Our special medical expert consultants are chief
doctors or higher level physicians with more than 15 years of medical practice
experiences. They are typically leading experts in their practice medical area and
provide consultations and guidance in complex medical cases. They also provide
training lectures to our in-house medical professionals.
We have adopted stringent hiring procedures for our in-house medical professionals,
which involve multiple rounds of interviews and probation evaluations. Our in-house medical
professionals are recruited through recruiting websites, recruiters and referrals. We generally
select candidates with a strong medical background and adequate relevant experiences. We
require our senior level in-house medical professionals to maintain a relevant professional
certification. While our in-house medical professionals are mainly engaged in providing
general medical guidance and e-prescription services, nine of them had also provided online
consultation services on our H2H service platform as of December 31, 2023.
Registered Physicians
We provide most of our comprehensive medical services through physicians registered on
the Jianke Hospital App. As of December 31, 2023, our H2H service platform had more than
212,000 registered physicians from over 15,600 medical institutions, and approximately 58.8%
of our registered physicians were working for Class III hospitals. For details on our physician
qualifications, see “—Our Quality Control System—Physician Qualification.”
To register on the Jianke Hospital App, a physician is required to submit his or her
personal identity information for our review. We typically require the physician to provide his
or her (i) national identity card; (ii) valid practicing licenses; and (iii) staff ID, if applicable,
from the hospitals where they have been working at. We register the physicians who (i) have
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over three years of independent clinical experience as a practicing physician; and (ii) satisfy
the requirements to provide online medical services under the Measures for the Administration
of Internet Hospitals (Trial) (ج(༊Б)) and the Measures for the
Administration of Internet Diagnosis and Treatment (Trial) (ج(༊Б)).
In particular, the Measures for the Administration of Internet Diagnosis and Treatment
(Trial) require physicians to obtain the consent of the medical institution where they are
registered to practice to carry out Internet diagnosis and treatment activities. For details, see
“Regulatory Overview—Regulations on Healthcare Services—Internet Hospitals.” If any of
our registered physicians fail to obtain the requisite consent, their employed medical institution
may not allow them to provide services through our platform. As advised by our PRC Legal
Advisor, as of the Latest Practicable Date, there were no laws and regulations that require
Internet hospitals to obtain such consent from the registered place of practice of physicians,
and there are also no regulations which expressly stipulate that Internet hospitals will be found
liable or penalized for any failure in obtaining the consent from the registered place of practice
of physicians; therefore, the likelihood that we will be exposed to liability or claims from
medical institutions seeking compensation for a registered physician’s failure to obtain the
requisite consent is remote. As of the Latest Practicable Date, all of the registered physicians
on our Jianke Platform have obtained the aforesaid consent required.
Since the launch of our H2H service platform, we have made extensive efforts to increase
the physician base on our platform. We attract physicians primarily through the following
approaches:
 Business development efforts . Our employees visit hospitals to introduce our
platforms to practicing physicians and invite them to join us. In order to source more
qualified physicians, we will broaden the types of hospitals we approach, from
major public hospitals to smaller, private or speciality hospitals. We will also expand
the geographic coverage of our business development efforts, to deepen our
penetration of lower-tier cities. As our platform develops, we will broaden our
service coverage for additional disease specialties and indications with substantial
patient needs, which will enable us to attract physicians with different specialization
and professional experience.
 Incentivization . We established compensation policies to encourage registered
physicians to be active and participate on our platforms. This compensation is based
on various criteria, such as the amount of active time spent on our platforms, the
number of patients served in a given period, and their contribution to our live
streaming and academic community and patient community services, among other
performance indicators.
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 Collaboration with pharmaceutical companies . We maintain ongoing collaboration
with both multinational and domestic pharmaceutical companies. This allows us to
offer a wide range of pharmaceutical products compared to the limited drug
offerings by hospitals, which allow doctors to better address the medical needs of
patients for various chronic disease drugs.
 Continuous development of our platforms . We have been continuously improving
our product and service offerings. Our comprehensive product offering enables
physicians to prescribe drugs to satisfy patients’ full range of needs. Our academic
community services provide physicians a platform to share their expertise and
experiences, improving their reputation. We believe the quality services we provide
will continuously attract physicians to our platforms.
 Word-of-mouth effect among physicians . Since we launched our H2H services, an
increasing number of physicians have registered on our H2H service platform and
provided medical services to a wider patient base. We believe our platform enables
physicians to improve time efficiency and provide ongoing monitor and treatment
for more patients. We have also provided physicians with a comprehensive portfolio
of pharmaceutical products which enable them to prescribe drugs to satisfy chronic
disease patients’ full range needs. We will continue to encourage the physicians who
benefited from our platform to make word-of-mouth referrals to their fellow
physicians, thereby attracting natural traffic to our platform.
As a result of our ongoing business development efforts and the continuous development
of our platform, we had over 212,000 physicians registered on our H2H service platform as of
December 31, 2023. In the PRC, licensed physicians are subject to periodic assessment of their
professional skills, achievements and ethics by institutions or organizations authorized by the
public health department and are assigned professional qualification ranks. As of December 31,
2023, 38.4% of our registered physicians had obtained a title of associate chief doctor or above.
We do not rely on particular star or key physicians on our platform because (i) our H2H
business model is primarily anchored upon existing physician-patient relationships. As such,
instead of employing strategies to promote particular physicians as key or star physicians, we
are focused on attracting and retaining physicians who utilize the Jianke Platform to effectively
manage their chronic disease patients; and (ii) given the wide range of medical specialties
covered and the large number of registered physicians on our platform, the revenue
contribution and service hours of registered physicians are scattered without any significantly
large proportion of revenue or service hours being contributed by any particular physician.
Accordingly, there is no key-man or concentration risk in terms of the service hours or revenue
contribution by any particular physician on our Jianke Platform.
In order to retain our registered physicians, we continuously add new features and
functionality to our platform to improve the user experience and allow doctors to manage their
patients more efficiently. As a result of such initiatives, our average physician retention rate
increased from 85.1% in 2021 to 91.9% in 2022 and further increased to 93.2% in 2023. The
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significant increase in average physician retention rate for 2022 was primarily due to a number
of new features, including: (i) a list of recommended drugs based on conversations between the
physician and the patient, allowing physicians to conveniently suggest appropriate medications
to patients; (ii) an anonymized telephone consultation function and an improved frame rate for
video consultations to meet specific needs of certain medical specialties; (iii) an outpatient
appointment function to enable convenient scheduling of offline follow-up appointments; and
(iv) a dashboard to provide physicians with comprehensive data and analytics.
Going forward, we will continue to implement our current physician recruitment and
retention strategies. We expect to continue providing compensation to incentivize to our
registered physicians, and do not expect such compensation to have a significant negative
impact on our profitability, especially as we continue to increase in scale. In addition, we will
also review the effectiveness of our strategies from time to time, make necessary adjustments
and introduce new AI-assisted features to continuously improve the user experience of our
registered physicians.
We generally enter into standardized framework service and privacy agreements with
physicians registered on our Jianke Platform. The key terms of these agreements include the
following:
 Online medical practitioner certification . Physicians seeking to register and provide
medical services on our Jianke Platform must present us with satisfactory online
medical practitioner certifications, failing which we are entitled to request for
rectification or deny their registration. We do not charge them any fees for
successful registration.
 Provision of services . The registered physicians provide online consultation and
e-prescription services to the patient users of our Jianke Platform.
 Payment and settlement terms . We pay our registered physicians on a monthly basis
based on our compensation policies which consider various criteria, such as the
amount of active time spent on our platforms, the number of patients served in a
given period, and their contribution to our live streaming and academic community
and patient community services, among other performance indicators. The
compensation received by a registered physician includes service fees payable based
on our compensation policies and consultation fees charged by the relevant
registered physician during the relevant period.
 Term and termination . The service agreements can be terminated upon mutual
consent.
During the Track Record Period, the annual compensation received by each registered
physician, which primarily consisted of service fees paid based on our compensation policies
and, to a lesser extent, consultation fees charged by the relevant registered physician, typically
ranged from RMB100 to RMB10,000. In 2021, 2022 and 2023, the average annual
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compensation of registered physicians who received compensation from us was RMB3,568,
RMB3,311 and RMB3,111, respectively. These decreases were primarily the result of the
ongoing optimization of our physician compensation structure. By continuously enhancing our
ability to interpret physician’s online behavior, we are able to better evaluate their effective
activities, and optimize their compensation levels accordingly.
COLLABORATION WITH PHARMACEUTICAL COMPANIES
We believe that our relationship with pharmaceutical companies is crucial to our business.
Pharmaceutical companies are the source of pharmaceutical products we sell through our
platforms. At the same time, we also provide valuable market insights, feedback and
value-added services to pharmaceutical companies. Through our mutually beneficial business
model with pharmaceutical companies, we have been able to incentivize their collaboration
with us and develop long-standing and strong relationships with them. As of December 31,
2023, we had collaborated with over 760 pharmaceutical companies, including large
multinational and domestic pharmaceutical companies, such as Pfizer Inc., Gilead Sciences,
Inc., Novartis AG, and Baiyunshan Pharmaceutical among many others.
Historically, hospital pharmacies were the primary distribution outlet for prescription
drugs in China. However, in recent years, the PRC government has issued a series of policies
seeking to gradually reduce hospitals’ reliance on revenue from drug sales, and to limit the
potential for over-prescription of expensive and/or unnecessary drugs. As a result, the selection
of prescription drugs available at hospital pharmacies has become increasingly scarce.
However, according to CIC, as China’s per capita income and per capita healthcare
expenditures grow, patients’ demand for various generic drugs and innovative drugs is expected
to increase, in spite of potentially higher prices and out-of-pocket costs for these drugs.
Our platform provides pharmaceutical companies with an alternative distribution channel
other than hospital pharmacies. Leveraging our broad user base of patients and physicians, we
have become the partner-of-choice of leading multinational companies and domestic
pharmaceutical companies. Meanwhile, our collaborations enable us to maintain stable supply
channels and attractive procurement prices for a variety of high demand and often difficult-
to-source drugs, while helping us provide educational content targeted towards patients and
physicians on our platform.
We have had success in working with pharmaceutical companies that focus on branded
generic drugs and new-to-market drugs approved by NMPA. In the case of branded generic
drugs, their availability at hospital pharmacies has decreased in recent years due to regulatory
reforms and cost controls. Our platform allows physician and patients to continue to have
access to these drugs even when they may no longer be available from the hospital pharmacies.
For newly approved specialty drugs, pharmaceutical companies also face a number of
distribution challenges, including a lack of social insurance coverage, and a lack of access to
hospital pharmacies. It can take years for a drug to become widely available at hospital
pharmacies after NMPA approval, resulting in a significant opportunity cost for both
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pharmaceutical companies and patients who may benefit from the transformational and
lifesaving nature of these drugs. We view our ability to enable faster access to newly approved
drugs as hugely beneficial for all stakeholders.
OUR SUPPLY CHAIN
As of December 31, 2023, we had procured products from over 1,400 suppliers and had
offered over 212,000 drug SKUs, of which approximately 61.6% were prescription drugs and
approximately 38.4% were OTC drugs. In 2021, 2022 and 2023, our prescription drug GMV
represented approximately 88.9%, 84.2% and 81.1% of our total GMV , respectively, which was
the highest in the industry for the same years, according to CIC. We endeavor to negotiate
favorable terms with suppliers to manage our cost of sales and improve our operating
efficiency.
Supplier Selection and Management
As of December 31, 2023, we had procured products from over 1,400 suppliers. We have
established a qualified supplier system to manage suppliers.
We perform background checks on our supplier candidates, including examining their
business licenses, published annual reports and relevant licenses and certificates for their
products, and conducting on-site visits before we include them into our qualified supplier
system.
When selecting suppliers within our qualified supplier system, we evaluate our
procurement needs based on our calculations of optimal inventory level and utilize our smart
supply chain management system to identify a suitable supplier. We typically select suppliers
with pharmaceutical trade licenses which offer competitive prices for products that satisfy our
volume requirement with strong fulfillment capability and favorable credit terms.
We have put in place stringent rules governing the operations of suppliers on our platform
to ensure that the pharmaceutical products provided on our platform comply with applicable
PRC laws and regulations. We have established a quality control team dedicated to the
management of our suppliers with respect to their qualifications, product quality and
maintenance of pharmaceutical trade licenses.
Inventory Management
For pharmaceutical products, we maintain and actively manage inventories to ensure
cost-efficiency, quality control and timely delivery, and continually seek to improve our
inventory control. We maintain such inventory in a leased warehouse located in Guangzhou.
We implement a “just-in-time” inventory management strategy, with the goal of maintaining
low inventory levels and achieving rapid inventory turnover in order to reduce working capital
requirements and improve operating efficiency. Our smart supply chain management system
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utilizes data analytics to optimize inventory levels based on predicted levels of demand,
automatically replenish inventory as necessary to optimize our order fulfillment rates, and
bring greater efficiency to our warehouse operations.
We monitor our inventory level and evaluate our needs for procurement on a daily basis,
taking into account the sales forecast, sales volume fluctuation, delivery time after
procurement, and necessary processing time for our quality control inspections, which are
generated by our inventory system algorithm.
We manage our inventory carefully in order to minimize our exposure to near-expiry
drugs, which our internal policy categorizes as pharmaceutical products expiring in less than
six months. Given that the majority of our inventory comprises pharmaceutical products for
chronic diseases, which are by nature subject to fewer fluctuations in demand, we plan our
inventory procurement based on sales forecasts and manage our inventory on a
“first-in-first-out” basis to minimize inventory risk. We also have internal policies that impose
cut-off production dates or minimum remaining shelf-life when procuring inventory. As such,
we have not faced material issues with near-expiry drugs during the Track Record Period. In
the event that we have an increased level of near-expiry drugs in the future, we may sell them
at a discount, return them to upstream suppliers in accordance with the relevant supply
agreements, or dispose of them for inventory obsolescence. In addition, our internal policy
prohibits the sale of products within one month of their expiry date. During the Track Record
Period, we were in material compliance with such policy and did not actively engage in the
purchasing or selling of drugs within one month of their expiry date. See also “Risk
Factors—Risks Relating to our Business and Industry—Failure to manage our inventory
effectively could have a material and adverse effect on our business, financial condition and
results of operations.”
OUR QUALITY CONTROL SYSTEM
We are exposed to risks inherent in providing online healthcare services and selling
pharmaceutical and healthcare products in China. Claims, user complaints or administrative
penalties may arise if any of our products are deemed or proven to be unsafe, ineffective or
defective, or they are found to contain illicit substances or infringe on any third party’s
intellectual property rights. According to the Drug Administration Law (), if
compensation claims related to product quality are received by a drug trading enterprise, it
shall pay the compensation first, and then have the right to recover such payment from the drug
manufacturer or holder of drug marketing authorization. We may also be subject to allegations
of having engaged in practices such as improperly issuing prescriptions, sale of counterfeit and
substandard medicines or other healthcare products or providing inadequate warnings or
insufficient or misleading disclosures of side effects. We also face risks of medical liability
claims arising from medical services provided through our Jianke Platform. Such claims may
be made against us, our registered physicians (in relation to their provision of online
consultation and e-prescription services) and our in-house medical professionals (in relation to
their provision of e-prescription services). In particular, the physicians and pharmaceutical
companies that we partner with, may provide sub-standard services, mishandle sensitive
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information, engage in other misconduct or commit medical malpractice, which could subject
us to medical liability claims. According to the Regulation on Handling Medical Accidents
(ஈଣૢԷ), medical institutions and patients can resolve civil liability disputes,
including compensation for medical accidents, through negotiation. According to the Civil
Code of the PRC (Պ), if a patient sustains any harm in the course of
medical treatment due to the failure of the medical institution or its medical staff, the medical
institution shall be liable for compensation. For details, see “Risk Factors—Risks Relating to
Our Business and Industry—We may be subject to product liability or medical liability claims,
or claims or administrative penalties for counterfeit, substandard or unauthorized products on
our platform, which could cause us to incur significant expenses and be liable for significant
damage.” During the Track Record Period and up to the Latest Practicable Date, we were not
involved in any material claims for medical or product liabilities against us, our registered
physicians or in-house medical professionals.
We recognize these key risks in our business and have designed our quality control system
to monitor those risk points, such as practice license check and background check, physician
behavior on our platforms, prescription verification, and authenticity of products on our online
retail pharmacy service platform. We have established comprehensive quality control
procedures to ensure the quality of our services and products.
Physician Qualification
The skills, competence and attitude of our in-house medical professionals and registered
physicians are essential for the quality of comprehensive medical service that our users receive.
We have adopted stringent procedures and standards to recruit in-house medical
professionals and physicians registered on our platforms. To ensure the authenticity of the
identification of physicians registered on our H2H service platform, we have adopted
standardized internal guidelines specifying comprehensive verification procedures, which
require our staff to review and verify the national identity cards, practicing physician
qualification certificates (ࣣpracticing physician’s licenses (ࣣand
physician’s title certificates (ࣣof the medical professional before granting
permission to their registration on our platform. We use online facial recognition and ID
scanning technology to verify identity based on these certificates or licenses, work permits or
photos on the official websites of the hospital where the medical professional practices.
In addition, to ensure that the registered physicians and in-house medical professionals
hold valid practicing certificates which is required for completing multi-site registrations with
the relevant authorities, we cross-check the medical professional’s basic information and
practicing status on the official websites of the NHC or the medical professional’s practicing
hospital, and the National Government Service Platform (ਕ̨̻). Medical
professionals offering online consultations on our platform are required to be practicing
physicians with at least three years of independent clinical experience.
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We also provide comprehensive training for our medical professionals, comprising
orientation training on fundamental medical knowledge and on-the-job professional training of
certain medical subjects. Our training includes lectures provided by our experienced in-house
medical professionals, and onsite medical practice training activities conducted at our offline
hospital.
Consultation Review
To maintain medical consultation quality and efficiency, we require our in-house medical
professionals and registered physicians to ask about the patient’s complete medication and
treatment history before giving prudent medical advice during the consultation session.
Physicians are required to promptly respond to patients’ inquiries. Our system calculates the
response rate of each registered physician, and a physician whose response rate is less than
70% per month will be reminded by the relevant physician management personnel. If there is
no improvement, the physician will be suspended from providing consultation services on our
platform for a certain period.
Prescription Management and Sale of Prescription Drugs
We accept prescription refills from licensed healthcare providers and also offer online
prescription services. Our in-house medical professionals and registered physicians can renew
existing prescriptions and issue new prescriptions only after fully completing our registration
process. We have a stringent, AI-assisted prescription verification system to manage the risks
associated with the sales of prescription drugs, which is implemented and closely monitored by
our in-house medical professionals and registered physicians. Our system enforces the review
procedure by pharmacists to make sure that all prescriptions are properly and legitimately
issued and comply with relevant laws and regulations, with the assistance of AI to identify any
potential medical risks. For example, when a patient places an order on our platforms to
purchase prescription drugs, our in-house medical professionals or physicians registered on our
platform usually call the patient to confirm the suitability of the prescribed drugs and to inform
the patient the potential side effects of the prescription drugs. Our in-house medical
professionals or registered physicians also follow up with patients after a period of time
subsequent to the drug purchase to collect information on the effect, side effects, allergic
reactions and other conditions experienced by the patient.
We also implement strict procedures to manage our sale of prescription drugs in order to
ensure compliance with applicable rules and regulations, including the Measures for
Supervision and Administration of Online Pharmaceutical Sales which came into effect on
December 1, 2022. For instance, we screen products sold on our Jianke Platform to ensure that
none of them are prohibited from online sales. We have also taken measures to ensure that the
product information displayed on our platform clearly distinguishes prescription drugs from
OTC drugs, and specifically indicates whether a product is a prescription drug. Where a
purchase is made based on an existing prescription, the prescription will be reviewed by the
pharmacists on our platform. The implementation of our internal control measures in relation
to our sale of prescription drugs will be reviewed on a regular basis.
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Product Quality Control
We have established a series of internal policies to control the quality of our products we
offer on our platforms.
Selection and Management of Suppliers
We have established a supplier system consisting of qualified suppliers. We have put in
place stringent rules governing the operations of suppliers to ensure that the pharmaceutical
products provided on our platform comply with applicable PRC laws and regulations. For
details, see “—Our Supply Chain—Supplier Selection and Management.”
Inspection and Acceptance of Pharmaceutical Products
We have an internal policy for the acceptance and inspection of pharmaceutical products,
and guiding and supervising the quality management of drug purchase, storage, maintenance
and transportation. Our quality management team is required to sample, inspect, and record the
quality of pharmaceutical products we procure. We typically require the employees who check
and inspect our pharmaceutical products to have an academic background in medication,
pharmacy, biology, chemistry or other relevant qualifications.
We require our employees to store the products we procure in a quarantine area. We
typically ask our employees to keep such designated area clean and in compliance with the
storage requirements of relevant pharmaceutical products. The quarantine area shall be
segregated from other areas and shall be clearly identified to ensure that the pharmaceutical
products are free from contamination or pollution.
Our employees are required to take samples of the pharmaceutical products and check and
verify the pharmaceutical product sample in terms of its packaging and exterior appearance,
label, user’s instruction, and qualifications.
 Packaging and exterior appearance . Our employees should check whether the
packages have clearly indicated the generic name, specification, marketing
approvals, manufacturer, production number, production date, expiry date, approval
number, as well as other specifications. Our employees should also check whether
there are any damages to the packages.
 Label . Our employees should check whether the label correctly states product name,
specification, usage and dosage, approval number, production number and
manufacturer.
 User’ s instruction. Our employees should check the product name, composition,
traits, indications, specifications, usage and dosage, adverse events and side effects
precautions, drug interactions and overdose, clinical trials, pharmacology and
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toxicology as well as other details in the user’s instruction. We maintain a different
set of standards for the inspection of user’s instruction for traditional Chinese
medicines and other specialty drugs.
 Qualifications . The procured package shall contain product qualifications. For
imported drugs, we typically require our employees to check the sealed supporting
documents for quality management, such as Drug Registration Certificate (ൗ̅
ࣣor Imported Drug Customs Clearance Form (ஷᗫఊ).
Warehouse Management
We are committed to performing stringent quality control throughout every stage of our
business operations, including procurement, product inspection, warehousing, sales and
delivery. We are actively involved in setting quality policies and standards, and improving
quality control management through different means in our business operation. We have
established a series of internal quality management protocols that provide guidance on and
regulations of various aspects of our operations, including, among others, the product quality,
product shelf life management, product return, product recall and warehousing. Before
warehousing, we inspect the appearance, packaging, labels and specifications of the products
and examine the products according to the delivery orders and the inspection reports issued by
the supplier. For products stored in our warehouses, we conduct regular quality maintenance,
inspection and management, and monitor the storage conditions to ensure compliance with the
quality standards. Our warehouses are equipped with temperature and humidity control systems
as well as ventilation facilities to ensure that the pharmaceutical products are stored according
to their labelling. The temperature and humidity in our warehouses are monitored and any
system failure will be reported on a timely basis for repair.
We store our pharmaceutical products in accordance with their relevant categories. We
require our employees to properly handle pharmaceutical products to prevent any
contamination, mix-ups and cross-contaminations.
During the Track Record Period and up to the Latest Practicable Date, there had not been
any material product recall and return, customer complaints and disputes or product quality and
safety issues related to our business.
Content Screening on Our Platform
Under the relevant PRC laws, we are required to closely monitor the content published
on our platform. We may be subject to potential liabilities for any unlawful actions of users of
our websites or mobile applications. With respect to our customized content and marketing
solutions, we and the relevant pharmaceutical companies may also be subject to liability for
content distributed through our Jianke Platform by us, or by the relevant pharmaceutical
companies, that are deemed unlawful by relevant authorities. For details, see “Risk
Factors—Risks Relating to Our Business and Industry—We may be subject to liability for
content available on our platform that is alleged to be factually incorrect, socially destabilizing,
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obscene, defamatory, libelous or otherwise unlawful.” During the Track Record Period and up
to the Latest Practicable Date, we were not involved in any material claims for liability against
us for the content distributed through Jianke Platform.
We have implemented internal control measures to screen the information and content
published on our platform to ensure their accuracy, reliability and compliance with relevant
laws and regulations.
 Educational content created or produced by our staff or medical professionals to increase
awareness of general medical knowledge, typically including texts, graphics and pictures,
videos and live streaming sessions, is reviewed and vetted by our medical editorial
manager to verify its quality and accuracy. If such content involves potential legal or
compliance risks or other sensitive issues, our legal department staff and the designated
content production personnel will conduct additional reviews to assess its reliability and
carefully manage our risk exposure.
 Promotional content published in collaboration with pharmaceutical companies, typically
including articles, videos and live streaming sessions, is reviewed and vetted by our
medical editorial manager to verify its quality and accuracy before being uploaded and
displayed on our platform.
TECHNOLOGY AND RESEARCH AND DEVELOPMENT
Technology is fundamental to our business and one of our key strengths. We intend to
continue improving and upgrading our technology to enhance the efficiency of our operations,
optimize our data models to support our decision making, and continuously improve our
services to satisfy the needs of our users.
Our Research and Development System
We have established an agile business-centered delivery system for research and
development (R&D) projects that covers four areas: delivery tools, software architecture,
development process, and R&D organization.
With respect to delivery tools, we have deployed an automated delivery pipeline based on
a DevOps model to perform continuous integration and delivery of R&D projects. We are able
to rapidly build, test, and deploy high quality applications, and application deployment times
can be vastly reduced.
In terms of software architecture, we build applications based on microservices and cloud
native technologies, enabling rapid application development, debugging, and delivery.
Our development process is based on an agile development framework. We have
established an R&D management process covering the entire software development lifecycle,
including project initiation, requirement gathering, planning and design, plan iteration, weekly
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development cycles, testing and deployment, system maintenance and operation, development
review and feedback. This approach has enabled us to achieve effective control of key project
dependencies and ensure quality output.
We had a total of 114 employees on our R&D team as of December 31, 2023. Our product
management team ensures that our development process and project execution are aligned with
the needs and objectives of our lines of business and wider organization. The AI and big data
R&D teams guide our overall R&D efforts to leverage cutting-edge technology and innovation
across our development efforts. Our quality assurance, maintenance and operations, and project
management teams focus on mitigating the various elements of project risk in order to ensure
quality delivery. Most of our research and development personnel are based in Guangzhou and
Beijing.
Our Research and Development Initiatives
During the Track Record Period, our research and development initiatives included the
following:
 We have made significant enhancements to our H2H service platform, including the
implementation of an intelligent pre-consultation system which is powered by our
AI medical assistant. Our upgraded online consultation system now employs
real-time streaming and other cutting-edge technologies, enabling patients and
physicians to communicate more effectively through various media formats,
including graphics, audio and video. Furthermore, we have integrated knowledge
graphing technology into our platform to develop a prescription verification system
that checks the suitability of physicians’ prescriptions. Using the deep learning
technology, we also introduced an intelligent prescription image system that
significantly improves the efficiency of e-prescription review and verification.
 Our online retail pharmacy platform has undergone significant technology upgrades.
We rebuilt our transaction and fulfillment systems, incorporating a micro-service
architecture, event-driven workflow and cloud-native technologies, to enable
support for processing millions of daily orders. We also implemented deep learning
technology to enhance our product recommendation engine. Furthermore, through
the use of advanced technologies such as computer vision, natural language
processing and real-time data analysis, we have developed a comprehensive risk
warning system that helps with detecting price display errors on our platform and
mislabeled prices in the orders.
 We have enhanced our supply chain management, through the implementation of
data mining and machine learning algorithms. We developed intelligent packaging
optimization algorithms and built a mechanized assembly line to automate
merchandise packing, labeling and parcel sealing, drastically improving the
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efficiency of our warehouse operations. In addition, we have introduced a drug
authenticity traceability system to trace the sources and destination of drugs
throughout the whole process of drug production, distribution and use.
Our Research and Development Investment
We invest substantial resources in research and development. We incurred RMB46.0
million, RMB61.8 million and RMB41.5 million of research and development costs in 2021,
2022 and 2023, respectively, accounting for 2.6%, 2.8% and 1.7% of our total revenue for the
same years, respectively.
The table below sets forth a breakdown of our research and development costs both in
absolute amount and as a percentage of our total research and development costs for the years
indicated:
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Staff costs 40,549 88.2 55,019 89.1 38,238 92.1
Share-based
compensation 1,660 3.6 4,149 6.7 1,608 3.9
Depreciation of
right-of-use
assets 1,648 3.6 1,177 1.9 1,333 3.2
Outsourcing
expenses 947 2.1 361 0.6 136 0.3
Others 1,146 2.5 1,077 1.7 217 0.5
Total 45,950 100.0 61,783 100.0 41,532 100.0
Our research and development costs increased from 2021 to 2022, primarily due to the
increase in staff costs, which constituted the largest component of our research and
development costs, as we grew our research and development team by recruiting members with
strong background and expertise in software development, AI and big data, which were
instrumental to strengthening our research and development capabilities and developing and
enhancing our service offerings. Our research and development costs decreased in 2023,
primarily because our robust in-house research and development capabilities allowed us to
optimize our research staffing and operate with greater efficiency.
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Big Data Analysis
We use big data analytics to enhance customer experience and user retention and to
improve our operation efficiency. The following summarizes the major aspects of our big data
analysis.
 User profiling. Our Jianke Platform has enabled us to accumulate large data sets of
user information, including users’ browsing history, past consultations, prescriptions
and refill frequency. To accurately profile our customers, we flag various user traits
and generate user portraits. We analyze these user portraits with our data algorithms,
and seek to understand our customers’ needs, interests and preferences, make
marketing decisions and continuously improve and tailor our services and products.
 Supplier management. Capitalizing on big data analytics, we are able to actively
compare, analyze and manage suppliers. Our data analysis system adopts intelligent
supplier comparison algorithm system to improve our supplier management process
and reduce procurement costs. With access to real-time information, we are able to
timely compare over 560 suppliers’ bidding prices of over 34,000 products for over
122,000 times a day, which reduces labor costs and ensures favorable prices,
contributing to our operation efficiency and profitability.
 Pricing optimization. We have accumulated massive historical data from our past
transactions and have developed an operational pricing model based on various
factors. The operational pricing model enables us to produce optimal pricing ranges
for our products to optimize our profits.
AI Technology
We have developed an AI medical assistant to streamline the consultation process on our
H2H service platform. Before each consultation session, our AI medical assistant will ask the
patient a few common questions, including the patient’s symptoms, medication history and
allergy history. Leveraging natural language processing (NLP) technology, a summary will be
generated from the patient’s responses and submitted to the physician. With such information,
the physician can have a general understanding of the patient’s conditions before the
consultation session, which will enable the physician to provide medical advice to the patient
more efficiently. By using our AI medical assistant prior to consultation sessions, we reduce
the waiting time for patient and facilitate the consultation efficiency for both the patient and
the physician. The following screenshots illustrate the communication between a patient and
our AI medical assistant.
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AI medical assistant prompting patient to
describe symptoms and reasons for
consultation
Patient to input
symptoms
and reasons for
consultation
Conversation between
AI medical assistant and patient
Summary of information
gathered by AI medical assistant
(Patient details)
(Not pregnant)
(Any pregnancy)
(Any history of drug allergy)
(None)
(None)
(Any major illnesses suffered)
(Not using any medication)
(Any current use of medication)
(Less than a month)
(Duration of symptoms)
(Description of Conditions)
(Main complaint: Some
heatiness recently, dry and
cracked lips)
(Duration of symptoms: Less
than a month)
(Use of medication: Not using
any medication)
(Medical history: None)
(Allergy history: None)
(Pregnancy status: Not pregnant)
Option to upload images
such as medical history
and examination reports
(images accessible by the
physician only)
(Submit)
Our AI medical assistant can also automatically respond to non-medical customer service
inquiries. Our AI medical assistant’s responses are supported by NLP technology and
knowledge graph technology. NLP technology enables our AI medical assistant to understand
natural languages input by customers. Knowledge graph technology enables our AI medical
assistant to extract relevant information from pre-defined database and organize responses into
natural language in order to generate automatic replies to communicate with patients in
continuous dialogues. During the Track Record Period, our AI medical assistant responded and
successfully resolved approximately 43.1% of all incoming customer inquiries without manual
assistance from our staff, effectively reducing the workload of our customer service staff and
improved service efficiency. With the help of our AI medical assistant, the average number of
orders processed per person per day by our customer service personnel increased from 67.3 in
2019 when we first launched our AI medical assistant, to 366.2 in 2023, representing a CAGR
of 52.7% from 2019 to 2023.
Going forward, we intend to continue to improve our technology and to provide accurate,
efficient, valuable and reproducible solutions by collecting and analyzing medical data and
optimizing our AI technologies. This includes additional functionality to streamline paper-
based prescriptions and laboratory tests, and digitalize patient data, and additional support
systems to assist physicians with diagnosis and clinical workflow. We also plan to develop our
AI technology in computer vision, medical knowledge graph, natural language processing,
recommendation algorithm, and image synthesis to enhance our services.
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Cold Chain Delivery
We believe that the broader adoption of temperature-sensitive biopharmaceutical drugs in
the treatment of chronic diseases provides us with additional opportunities to better serve our
patients. Since May 2020, we have engaged third-party logistics companies to provide cold
chain home delivery services for pharmaceutical products that require strict temperature
control during the delivery process. In addition, we have invested in additional warehouse
facilities and equipment to support the storage and distribution of cold-chain pharmaceutical
products.
INFORMATION SECURITY AND DATA PRIV ACY PROTECTION
Security of Our Information Systems
Our network configuration uses sophisticated security protocols for communications
among within our network and for external communications. We utilize a system of firewalls,
encryption and identity verification methods to prevent unauthorized access to our system.
To minimize the risk of data loss, we conduct regular data backup procedures and
maintain a comprehensive data recovery mechanism. Our database can only be accessed by
certain designated and authorized personnel after clearance approval and identity verification
procedures, whose actions are recorded and monitored. We have data disaster recovery
procedures in place. We conduct frequent reviews of our back-up systems to ensure that they
are well-maintained and functional. We have also implemented procedures such as regular
system checks, password policy, user authorization reviews and approval and data back-up, to
safeguard our information assets and ensure the proper management of our operational data.
We also have data recovery procedures in place in case of extreme information disasters.
We maintain a proper physical environment such as appropriate temperatures and
humidity level for our servers to function. We promulgate server management policies to
ensure the safety of our servers and that only authorized personnel can gain access to our server
rooms, and such access is documented in daily logs for record-keeping. In particular, we have
adopted a multi-level protection scheme for our information systems to support the operations
of our business in accordance with the requirements of the PRC Cybersecurity Law. We have
also established internal management policies, such as the Information System Operation
Management Policies, the Network and Information Security Incident Response Plan and Asset
Procurement Management Policies, which specified the requirements and guidelines for
procuring network products to ensure our management of information systems.
During the Track Record Period and up to the Latest Practicable Date, we had not been
subject to any material fines or sanctions due to non-compliance with cybersecurity laws or
regulations. In the opinion of our PRC Legal Advisor, we have complied in all material aspects
with relevant cybersecurity laws and regulations, including those newly enacted, during the
Track Record Period and up to the Latest Practicable Date.
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Data Security and Personal Information Protection
We are committed to protecting information and privacy, especially individual-specific
information, of our users and all participants on our platforms. We have adopted a series of
internal policies on personal information protection and data security management to ensure
our compliance with applicable data security and personal information protection laws and
regulations. We also have a dedicated team led by our vice president that is responsible for
cybersecurity and data security management. In order for our users to understand how their
personal information is handled in accordance with the relevant laws and regulations, we have
developed our own privacy policy, which is embedded in our mobile applications and website.
We encrypt user data in network transmissions and in backend storage to ensure confidentiality,
and remove identifying information of individual users for information used in our technology
development. We only collect and process users’ personal information that are legally required
for our business operations and narrowly tailor their usage to the extent possible. For instance,
when users register on our mobile applications and WeChat mini programs, they consent to and
authorize the collection, processing and use of their personal information and the relevant data
generated during the course of using our services. The personal information we collect and
process for our comprehensive medical services and online retail pharmacy services mainly
include (i) users’ basic information, including the name, mobile phone number and address for
product delivery; and (ii) users’ personal health information, including their past prescriptions
and diagnosis or treatment history. We collect, process and use such user data within the scope
of authorization only for the purpose of providing services to them, such as payment processing
and providing customer service.
We have adopted robust encryption algorithms for protected information and
implemented stringent rules for data extraction and transmission to ensure the confidentiality
of the users of our online consultation and prescription renewal service. We have implemented
relevant internal policies, procedures and controls to ensure that user data are protected and
that leakage and loss of such data is avoided. We have formulated policies for data
administration setting out standardized procedures for the management of data and related
security risks, which all of our staff are required to adhere to. We review such policies on a
regular basis, and conduct regular trainings for our employees on data management and
protection.
The degree of access to and control of data and protected information is determined by
reference to the staff member’s role and seniority and based on strict necessity. We have
implemented duty segregation mechanisms among our data administration staff in daily
operations. Teams with access to protected data in the course of their operations are subject to
strict approval and operation procedures regarding data and processing. Our system keeps a
daily log of authorization of data extraction and transmission activities, and access to and
operation of data are logged and monitored and subject to review. In the event of an
information security breach, we perform investigations and exercise damage control. Under our
data protection mechanisms and procedures, any operation violating information security
regulations will result in internal disciplinary action. We also have the right to dismiss any
employee who misuse or otherwise disclose data collected through our Jianke Platform without
appropriate authorization or in breach of any applicable regulations, and may pursue legal
proceedings against them for any damage caused to us or our users by reason of such conduct.
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As and when required by relevant laws and regulations, we intend to consult external
advisors in relation to the protection of user data. We have formulated procurement policies of
network products and services to ensure the products and services we procure have obtained
necessary certificates and sales license as required by the PRC Cybersecurity Law and other
applicable laws and regulations. The network products and services that we purchase and use
are general network products and services available in the marketplace without significant risks
of supply chain disruption. During the Track Record Period and up to the Latest Practicable
Date, we did not experience any material information leakage or loss of user data.
On November 14, 2021, the CAC published a draft of the Administrative Regulations for
Internet Data Security ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)), or the Draft Internet Data
Security Regulations, for public comments. For details relating to the Draft Internet Data
Security Regulations, please refer to “Regulatory Overview – Regulations on Personal
Information or Data Protection”. The Draft Internet Data Security Regulations provide that
data processors conducting the following activities must apply for cybersecurity review: (i)
merger, reorganization, or division of Internet platform operators that have acquired a large
number of data resources related to national security, economic development, or public
interests, which affects or may affect national security; (ii) a listing in a foreign country by a
data processor processing over one million users’ personal information; (iii) a listing in Hong
Kong which affects or may affect national security; or (iv) other data processing activities that
affect or may affect national security. There has been no further clarifications from PRC
governmental authorities as of the Latest Practicable Date as to the standards for determining
such activities that “affects or may affect national security”. Substantial uncertainties exist
with respect to the enactment timetable, final content, interpretation, and implementation of the
measures, including the standards for determining whether a listing in Hong Kong “affects or
may affect national security”. On December 28, 2021, the CAC, jointly with the other 12
governmental authorities, promulgated the Cybersecurity Review Measures (ݟ
), which took effect on February 15, 2022. For details relating to the Cybersecurity
Review Measures, please refer to “Regulatory Overview – Regulations on Personal
Information or Data Protection”. The Cybersecurity Review Measures and the Draft Internet
Data Security Regulations (together, the “Cybersecurity Regulations”) have imposed a
cybersecurity review obligation on certain data handlers. However, under applicable
cybersecurity and data privacy laws and regulations in the PRC, it is not a mandatory
requirement to confirm with or consult with the CAC in relation to whether we need to apply
for a cybersecurity review for our proposed listing in Hong Kong. As of the Latest Practicable
Date, we have not conducted any consultation or made an application to CAC for our proposed
Listing in Hong Kong. However, our PRC Legal Advisor had a real-name consultation on
September 30, 2022 with China Cybersecurity Review Technology and Certification Center
(“CCRC ”), which has been renamed as the China Cybersecurity Review, Certification and
Market Regulation Big Data Center as of December 25, 2023, and is authorized by the CAC
for receiving and accepting the submission of cybersecurity reviews and answering public
inquiry relating to the cybersecurity review. The CCRC confirmed that as the proposed listing
in Hong Kong is not a “foreign listing” as provided under Article 7 of the Measures for
Cybersecurity Review 2022, we do not need to voluntarily apply for cybersecurity review for
the proposed listing in Hong Kong unless explicitly notified by relevant regulators.
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Pursuant to the Cybersecurity Review Measures, the key factors that shall be taken into
account for assessing national security risk mainly include whether there will be any illegal
control or supply chain interruption of critical information infrastructure, any illegal data use
or any illegal cross-border data transfer. We are not an operator of critical information
infrastructure and the network products and services purchased and used by us are commonly
seen in the market. There is also no obvious risk of supply chain interruption of critical
information infrastructure. Meanwhile, we operate business within mainland China and all the
data generated during the operation is stored within the PRC. In addition, as of the Latest
Practicable Date, we have not been subject to any material fines or sanctions by any competent
government authorities (including CAC) in relation to data and cybersecurity. Furthermore, we
have implemented internal policies on personal information protection, data security
management and cybersecurity management to ensure compliance with applicable laws and
regulations.
As for the cybersecurity review for the data processing activities that “affect or may affect
the national security” initiated by the Cybersecurity Review Office under the CAC stipulated
in Article 16 of the Measures for Cybersecurity Review 2022, it is still uncertain about the
meaning of “affect or may affect the national security”. To the best of our knowledge, we
believe that the data we collect and store do not give rise to any state secrets concern in any
material respect. Our PRC Legal Advisor is of the opinion that the relevant regulations and
rules relating to state secrets are not applicable to our existing data.
As advised by our PRC Legal Advisor, our business operations and financial performance
will not be materially and adversely affected by the Cybersecurity Regulations, and there are
currently no substantive obstacles for us to fulfill the obligations that may be applicable to us
in all material respects, on the basis that (1) as of the Latest Practicable Date, we have not been
subject to any material fines or sanctions by any competent government authorities (including
CAC) in relation to data and cybersecurity; (2) we have not been informed by any government
authorities that we are deemed as an operator of critical information infrastructure, nor have
we received any notice, enquiries or investigations from relevant government authorities
indicating that we need to apply for cybersecurity review with respect to the Listing, and as
advised by our PRC Legal Advisor, if any competent PRC governmental authorities deem it
necessary to conduct a cybersecurity review of a company, it will proactively notify the
company concerned; (3) we had established various internal cybersecurity and data protection
policies, procedures, and measures, which are continuously optimized in their implementation,
to ensure secured data processing activities and prevent unauthorized access or use of data; and
(4) we continuously followed the legislative and regulatory development in cybersecurity and
data protection, maintained ongoing communication with relevant government authorities and
implemented all necessary measures in a timely manner to ensure continuous compliance with
the relevant laws and regulations. Based on the aforesaid and the consultation with the CCRC,
our Directors do not foresee any material legal impediment for us to undertake measures to
comply with the Cybersecurity Regulations should they be adopted in the current form in all
material respects. Based on their independent due diligence, the Joint Sponsors have no reason
to believe that the foregoing views of the Directors and the Company’s PRC Legal Advisor are
unreasonable.
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To ensure our Company’s continuous regulatory compliance with the Cybersecurity
Regulations, we have implemented internal policies on personal information protection, data
security management and cybersecurity management to ensure compliance relevant laws and
regulations. We also have a dedicated team responsible for cybersecurity and data security
management by taking stringent technical measures to safeguard our technology infrastructure.
In anticipation of the Draft Internet Data Security Regulations to become effective in the
future, we have studied the specific requirements under the regulations and will proactively
implement various measures to ensure timely compliance, including thoroughly reviewing our
business practices and operational policies, improving our privacy policies and service
agreements. We will closely monitor the legislative and regulatory development in connection
with cybersecurity and data protection, including the Draft Internet Data Security Regulations
and the interpretation or implementation rules of laws and regulations of cybersecurity and data
protection, proactively maintain communications with relevant authorities, and adjust and
enhance our data protection practices in a timely manner to ensure compliance once the
regulations come into effect. If the Draft Internet Data Security Regulations become effective
in their current form, we do not foresee any material legal impediment for us to comply with
the regulations.
Our operations are subject to ongoing supervision by the MIIT and other relevant
authorities, and we may receive rectification notices as part of the regular supervision process.
On August 31, 2020, the MIIT issued a notice requiring 101 applications, including the Jianke
Online Pharmacy App (ֳversion 5.3.0), to rectify issues such as over-scope
collection of personal information. Upon receipt of the notice, we actively took rectification
measures, including adjusting the frequency of collection of International Mobile Equipment
Identity (IMEI) information, optimizing the instructions and settings of personalized push
services, and improving the compliance settings of the authorization interface for calling up
device permissions. We completed the rectification within the prescribed time frame and was
not penalized by the MIIT and other relevant authorities.
On January 9, 2023, we received a rectification notice from the Guangdong
Communications Administration in respect of our Jianke Doctor App (ᔼ͛) (version
6.1.1) (the “ GCA Notice ”), informing of issues relating to (i) the App’s collection of personal
data before relevant consent was obtained; (ii) the App’s collection of geographical location
data in the background after the application was closed; and (iii) frequent automatic launch of
the application. We had noticed issue (i) prior to receiving the GCA Notice, and had already
rectified issue (i) in the upgraded App (version 6.1.5). We discovered that issues (ii) and (iii)
were caused by third-party software development kits, and promptly disabled the relevant
background location tracking function and network monitoring function which had caused
automatic launch upon network change. We completed the rectification required by the GCA
Notice and submitted an explanatory report to the Guangdong Communications Administration
on January 10, 2023. As a result, the rectified App (version 6.1.7) was placed on the application
market without any resultant administrative penalty.
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We will continuously conduct self-examination and rectification to ensure that our mobile
applications are in compliance with the applicable regulatory requirements. In the opinion of
our PRC Legal Advisor, our Group has complied in all material aspects with all applicable PRC
laws and regulations relating to data privacy and protection during the Track Record Period and
up to the Latest Practicable Date on the basis that: (i) our Directors confirmed that, save as
disclosed above, our Group’s mobile applications, websites and WeChat mini programs had not
been criticized or investigated by the relevant governmental authorities for personal
information collection; (ii) we had not been subject to any fines or other penalties due to
non-compliance with data privacy and protection laws or regulations; and (iii) we are not, and
have not been, subject to litigation or legal proceedings in respect of any alleged breach of
applicable regulatory requirements relating to data privacy and protection.
SALES AND MARKETING
Sales Model and Marketing Strategies
We have adopted a variety of strategies to market our services to target customers. With
respect to our H2H services, substantially all of our patient users are invited to our platform
by registered physicians during offline consultations and therefore, we regard our relationship
with physicians as the key to expanding our patient user base. We have a physician operation
team which is devoted to developing and maintaining relationships with physicians. Our
business development personnel generally approach physicians directly to introduce our
platform and encourage them to register on our platform and recommend our platform to their
patients in offline consultations. In addition, we leverage the broad reach and influence of our
pharmaceutical company partners to help bring physicians onto our platform. To develop
partnerships with pharmaceutical companies, we primarily rely on our business development
team which engages directly with pharmaceutical companies and their relevant business units
to introduce our platform. For approaches that we have adopted to attract registered physicians
and develop relationships with pharmaceutical companies, see “—Medical Professional
Network—Registered Physicians” and “—Collaboration with Pharmaceutical Companies” in
this section.
We adopt various methods to attract potential patient users and customers to our online
retail pharmacy services. Generally, we conduct our sales and marketing through a combination
of natural traffic, external marketing and promotional activities:
 We generate natural traffic through word-of-mouth referrals due to the variety of
services and content offered on our platform, including online consultation services,
and health and wellness content. We continuously seek to improve our services in
order to build our brand recognition to attract more natural traffic.
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 External marketing is carried out through mobile application stores and online and
offline marketing activities, including online advertisements on websites, mobile
applications, and search engines. In addition, we have developed our social media
presence by distributing content, such as video clips on short-video platforms, and
live broadcast sessions to facilitate dissemination of professional content among
physicians. In addition, we actively participate in industry events, trade shows and
conferences.
 To develop a loyal user base, we implemented a membership system where users can
earn “growth points” (࠽ڗbased on their activity on our platform, such as their
level of spending and frequency of product orders. We implement a five-tier
membership structure, with Regular, Silver, Gold, Platinum and Diamond levels.
The number of growth points accumulated will determine the user’s membership
tier, which will in turn entitle them to various benefits, such as gift packs,
promotional pricing, or discount codes and vouchers.
 To enhance user stickiness and incentivize repeat purchases, we offer our users a
loyalty points program where they can earn and accumulate “health coins” ( ਄ੰ࿆)
through making purchases, checking-in daily on our platform, or participating in any
lucky draws or giveaways that may be held on our platform. The number of health
coins that a member can earn for a specific activity will depend on their membership
tier, where members of higher tiers will be able to earn a greater number of health
coins. These health coins are essentially loyalty points which the users can use to
redeem discount vouchers or utilize directly towards the payment of their purchases.
Health coins earned by each account during a year will expire at the end of the
following year. We believe this program will facilitate the conversion of our active
users to paying users and increase their repeat purchase rate.
 Throughout the year, we may launch various marketing and promotional activities
to encourage customer retention or enhance customer conversion on our Jianke
Platform. One of our primary promotional tools is to offer discount vouchers. These
vouchers provide price discounts or free shipping for first-time purchases by new
users, selected products, or on orders that exceed a certain size threshold. During the
Track Record Period, customers who used these vouchers enjoyed savings in the
range of 5% to 10% on their orders. In addition, we periodically run promotional
campaigns that offer competitive prices on selected products to drive sales.
As of December 31, 2023, our sales and marketing team comprised 109 sales and
marketing professionals. Going forward, we do not foresee making any substantial changes to
the above user attraction and retention strategies. We believe these strategies, such as our
membership system and loyalty points program, will continue to enable us to acquire and retain
loyal customers so as to achieve stable revenue growth and increase profitability. We also
expect to continue to offer discounts and promotions to users from time to time, and do not
expect such initiatives to have significant negative impact on our gross margins, especially as
we continue to increase in scale and achieve greater pricing flexibility.
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Pricing
The online consultation fees of our comprehensive medical services are set by physicians
at their discretion through the Jianke Hospital App, which do not exceed a cap of RMB1,000
per consultation, and typically range from RMB10 to RMB50 per consultation. In determining
the cap, we generally consider factors such as the common pricing levels of comparable
Internet hospitals, expense levels on diseases covered on our Jianke Platform, and the
compensation levels payable to our registered physicians. Physicians may determine their own
consultation fees based on a variety of factors, including their level of expertise, experience
and reputation. Some may also choose to offer their consultation services free of charge in
order to attract more patients and build their reputation. Physicians are also able to set
individualized consultation prices for patients seeking repeat consultations.
We determine the prices of our pharmaceutical and other healthcare products offered
through our Jianke Platform by taking into account the purchase volume, purchase prices of the
products, the NMPA guidance prices and our operational and logistical costs in trading of the
products and providing the online retail pharmacy services to our customers. We offer
competitive pricing to attract and retain users. Leveraging our cooperative relationship with
pharmaceutical manufactures, we typically negotiate for prices that are comparable to or lower
than those offered to retailers in other healthcare product sales channels. We also offer our
customers coupons and discounts to encourage repeat purchases.
For our customized content and marketing solutions, we determine the prices of our
service offerings on a case-by-case basis, primarily by taking into account our staff costs,
expenses on technical support in providing the solutions and the period of time that we need
in completing such solutions. Our price also varies based on the range of coverage on target
audiences and the level of influence of the platform chosen for the marketing solutions.
Users can make payment online when placing orders on our Jianke Doctor App, Jianke
Online Pharmacy App, WeChat mini program or Jianke.com, which can direct registered users
to third-party payment platforms, including WeChat Pay and Alipay. A small minority of users
who do not have access to online payment channels may choose payment upon delivery,
typically in cash. In line with common industry practice, third-party logistics companies which
we engage for delivery of our parcels are authorized to collect such offline payments on our
behalf.
Customer Service
Providing high-quality customer service is one of our top priorities. Customers can make
queries and complaints regarding our products and services by making phone calls to, initiating
instant messaging conversation with, or leaving messages for our customer service
representatives.
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We generally allow users to modify or cancel an order through our online system or
customer service center before the order is picked and packed for delivery. We generally allow
customers to return or exchange products with quality defects within seven days from the date
on which the customer receives the affected products. Users should submit an application for
return or exchange of the products. If the application has been accepted, we will either return,
exchange or repair the products as along as the application is in compliance with the Laws of
the People’s Republic of China on Protection of Consumer Rights and Interests and the
manufacturers’ authorized standard for product return or repair. If part of the products has gone
missing, is broken or suffers performance failure or delay in delivery due to logistic reasons,
we have implemented a policy of allowing return of products when the user has filed a request
within seven days after the delivery of the products. Our products are typically delivered within
three to ten days after users place an order, depending on the locations where the products are
to be delivered. We did not encounter any material or any significant number of product returns
during the Track Record Period. In 2021, 2022 and 2023, our product return rate, representing
the percentage of products returned after delivery for both comprehensive medical services and
online retail pharmacy services, was 0.2%, 0.3% and 0.3%, respectively.
In particular, we have adopted an internal drug quality management procedure to handle
complaints or return requests from users. We categorize users’ complaints into several
categories, including (i) serious complaints—if the drugs have adverse effects endangering
users’ health and safety; (ii) important complaints—if the drugs have quality issues but are less
likely to cause serious harm to users; and (iii) minor complaints—the drugs have met industry
standards and without quality issues. Our quality control department and operation department
are responsible for responding to relevant complaints. Both of these departments are required
to keep records and handle the complaints within a specific timeline. For medical products with
quality issues, we will report such incidents to the relevant suppliers or pharmaceutical
companies.
During the Track Record Period and up to the Latest Practicable Date, (i) we were not
subject to any material administrative or other penalties from the PRC government authorities
in connection with product quality or drug safety, (ii) we did not experience any incidents
related to material product liability exposure, and (iii) we did not receive any material
complaints from consumers, or any material product returns, in connection with product
quality.
OUR CUSTOMERS
We have a broad base of customers. For our comprehensive medical services and online
retail pharmacy services, our customers primarily consist of individual users, and we
occasionally sell pharmaceutical products to offline pharmacies in small amount. For our
customized content and marketing solutions, our customers are mainly pharmaceutical
companies. We generally do not enter into long-term agreements with our customers.
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We generally enter into standardized framework service and privacy agreements with
individual users of our comprehensive medical services. The key terms of these agreements
include the following:
 Scope of services . We provide access to medical consultation and e-prescription
services provided by registered physicians on our Jianke Platform. Medical
consultations provided by registered physicians will be based on the patient’s
subjective description of his or her medical condition, and any advice given pursuant
to such consultations remain the opinion of the relevant registered physicians. We
do not guarantee any treatment outcome from the consultations provided by the
registered physicians through our Jianke Platform.
 Sales of products . We sell products at prices published on our Jianke Platform and
reserve the right to adjust prices without notice.
 Representations about medical conditions and prescriptions used . We typically
require users to represent and warrant that their description of their medical
condition to our registered physicians and medical professionals, and the
prescriptions they use for the purchase of prescription medicines from our Jianke
Platform are true and authentic.
 Return or exchange policies . Customers are generally allowed to return or exchange
products under agreed circumstances, such as wrong delivery or the discovery of
quality defects, within seven days from the date on which the customer receives the
affected products.
 Terms and termination . Our standard agreements typically have indefinite terms and
allow us to terminate under specified circumstances.
 Standard terms and conditions . Our standard terms and conditions form part of the
agreement, in which issues of confidentiality and dispute resolution, among others,
are covered.
We also enter into standardized framework service and privacy agreements with
customers of our online retail pharmacy services. The key terms of these agreements include
the following:
 Sales of products . We sell products at prices published on our Jianke Platform and
reserve the right to adjust prices without notice.
 Representations about medical conditions and prescriptions used . We typically
require users to represent and warrant that their description of their medical
condition to our medical professionals, and the prescriptions they use for the
purchase of prescription medicines from our Jianke Platform are true and authentic.
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 Return or exchange policies . Customers are generally allowed to return or exchange
products under agreed circumstances, such as wrong delivery or the discovery of
quality defects, within seven days from the date on which the customer receives the
affected products.
 Terms and termination . Our standard agreements typically have indefinite terms and
do not allow either party to terminate without cause.
 Standard terms and conditions . Our standard terms and conditions form part of the
agreement, in which issues of confidentiality and dispute resolution, among others,
are covered.
The key terms of our agreements with pharmaceutical companies for customized content
and marketing solutions include the following:
 Provision of services . The scope of our services is customized on a case-by-case
basis.
 Payment and settlement term . Service fees are decided based on the scope of
services provided and the costs involved. We typically extend a credit term of up to
60 days from the invoice date.
 Term and termination . We generally do not enter into long-term agreements. The
service agreements are usually project-based or for the provision of one-time
services. Agreements typically can be terminated under agreed circumstances or
upon mutual consent.
Revenue from our five largest customers combined in each year of the Track Record
Period amounted to RMB13.7 million, RMB23.1 million and RMB53.3 million, accounting for
0.8%, 1.1% and 2.2% of our total revenue for the respective years. All of our five largest
customers during the Track Record Period were Independent Third Parties.
OUR SUPPLIERS
We mainly procure pharmaceutical products, including prescription drugs, OTC drugs,
medical device and accessories, from authorized distributors of multinational and domestic
pharmaceutical companies. The key terms of our purchase agreements with these
pharmaceutical and other healthcare product suppliers include the following:
 Product procurement . Our suppliers provide us with products of agreed quality and
standards. The prices of goods supplied are determined on an order-by-order basis,
depending on the type and volume of products purchased. Our suppliers are typically
responsible for delivering the goods to our designated warehouses.
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 Payment and settlement . Credit terms extended by suppliers typically range from 35
to 75 days from the invoice date.
 Rebate policy . We are eligible for rebates with certain suppliers, provided that we
achieve certain purchasing volumes with such suppliers. The amount of rebates
varies among different products and are usually given by way of a deduction against
the invoice amount on a monthly, quarterly, bi-annual, or annual basis, as the case
may be.
 Return or exchange policies . We are generally allowed to return or exchange
products under agreed circumstances, such as delivery shortage or the discovery of
quality defects, within eight days from the date on which we receive the affected
products, provided that we inspect such products within 24 hours of receipt.
 Terms and termination . We generally enter into purchase agreements with a term of
approximately one year, which can be terminated upon mutual agreement.
We engage third-party logistics and courier companies for the delivery of the orders of
pharmaceutical and other products placed on our Jianke Platform. The key terms of the service
agreements we enter into with these companies include the following:
 Delivery services . The third-party logistics and courier companies are responsible
for collecting the packages prepared by us, delivering them to the designated place,
and returning undeliverable packages to us.
 Payment and settlement terms . The settlement terms typically include a credit term
of 30-90 days. We settle delivery service fees on a monthly basis.
 Term and termination . We generally enter into service agreements with a term of one
year, which can be automatically renewed for an additional year or renewed upon
mutual agreement. The agreements typically can be terminated upon mutual consent,
or by the service provider under agreed circumstances including, among others, our
prolonged non-payment without due cause.
Purchases from our five largest suppliers combined in each year of the Track Record
Period amounted to RMB1,203.9 million, RMB1,309.2 million and RMB1,273.0 million,
accounting for 60.9%, 57.2% and 51.5% of our total purchases for the respective years, and
purchases from our largest supplier alone accounted for 20.5%, 14.8% and 15.7% of our total
purchases for the respective years. See “Risk Factors—Risks Relating to Our Business and
Industry—We source pharmaceutical products from suppliers, and our revenue and results of
operations will be adversely affected if we fail to maintain and manage these relationships
properly.”
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All of our five largest suppliers during the Track Record Period were Independent Third
Parties, and none of our Directors, their associates or any shareholders which, to the knowledge
of our Directors, owned more than 5% of the issued share capital of the Company as of the
Latest Practicable Date, had any interest in any of our five largest suppliers during the Track
Record Period.
We believe we have sufficient alternative suppliers for pharmaceutical and healthcare
products that can provide us with substitutes of comparable quality and prices. During the
Track Record Period, we did not experience any disruption to our business as a result of any
significant shortage or delay in supply of the products we sourced from our suppliers. During
the Track Record Period, we did not experience any material fluctuation in the price of
pharmaceutical products that we purchased. We believe that if there is any material increase in
our purchase costs of pharmaceutical products, we will be able to pass on such increase to our
customers by increasing the selling prices.
The following table sets forth details of our five largest suppliers during the Track Record
Period.
For the Y ear Ended December 31, 2021
Ranking Supplier
Products/
Services
Procured
Y ear in which
Business
Relationship
Commenced
Typical Credit
Term and
Payment Method
Purchase
Amount
Percentage
of Total
Purchase
(RMB’000) %
1 Company A
(1) Drugs 2017 60 days; wire
transfer
405,603 20.5
2 Company B (2) Drugs 2016 30 days; wire
transfer
310,365 15.7
3 Company C (3) Drugs 2020 60 days; wire
transfer
229,880 11.6
4 Company D (4) Drugs 2016 60 days; wire
transfer
197,317 10.0
5 Company E (5) Drugs 2016 60 days; wire
transfer
60,701 3.1
Total 1,203,866 60.9
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For the Y ear Ended December 31, 2022
Ranking Supplier
Products/
Services
Procured
Y ear in which
Business
Relationship
Commenced
Typical Credit
Term and
Payment Method
Purchase
Amount
Percentage
of Total
Purchase
(RMB’000) %
1 Company D
(4) Drugs 2016 60 days; wire
transfer
338,988 14.8
2 Company B (2) Drugs 2016 60 days; wire
transfer
306,956 13.4
3 Company A (1) Drugs 2017 45 days; wire
transfer
300,878 13.2
4 Company C (3) Drugs 2020 75 days; wire
transfer
281,744 12.3
5 Company F (6) Drugs 2020 45 days; wire
transfer
80,644 3.5
Total 1,309,210 57.2
For the Y ear Ended December 31, 2023
Ranking Supplier
Products/
Services
Procured
Y ear in which
Business
Relationship
Commenced
Typical Credit
Term and
Payment Method
Purchase
Amount
Percentage
of Total
Purchase
(RMB’000) %
1 Company D
(4) Drugs 2016 60 days; wire
transfer, banker’s
drafts
389,114 15.7
2 Company B
(2) Drugs 2016 60 days; wire
transfer, banker’s
drafts
281,555 11.4
3 Company C
(3) Drugs 2020 75 days; wire
transfer
263,340 10.7
4 Company A (1) Drugs 2017 60 days; wire
transfer, banker’s
drafts
232,483 9.4
5 Company F
(6) Drugs 2020 45 days; wire
transfer, banker’s
drafts
106,545 4.3
Total 1,273,037 51.5
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Notes:
(1) Company A is a company established in the PRC with limited liability that is listed on the Hong Kong Stock
Exchange. It is a PRC state-owned enterprise with a registered capital of RMB3,120.7 million, and is in the
business of pharmaceutical distribution in China.
(2) Company B is a company incorporated in Hong Kong with limited liability that is listed on the Hong Kong
Stock Exchange. It is the controlling shareholder of a PRC state-owned enterprise with a registered capital of
RMB18,507.0 million, and is in the business of pharmaceutical distribution in China.
(3) Company C is a non-listed company established in the PRC with limited liability. It is a PRC state-owned
enterprise with a registered capital of RMB61.0 million, and is in the business of pharmaceutical distribution
in China.
(4) Company D is a non-listed company established in the PRC with limited liability. It is a PRC state-owned
enterprise with a registered capital of RMB2,449.3 million, and is in the business of pharmaceutical
distribution in China.
(5) Company E is a company established in the PRC with limited liability that is listed on the Shanghai Stock
Exchange. It is a non-state-owned enterprise with a registered capital of RMB3,908.9 million, and is in the
business of pharmaceutical distribution in China.
(6) Company F is a non-listed company established in the PRC with limited liability. It is a non-state-owned
enterprise with a registered capital of RMB10.3 million, and is in the business of pharmaceutical distribution
in China.
OVERLAPPING CUSTOMERS AND SUPPLIERS
During the Track Record Period, certain of our customers were also our suppliers. We had
sold certain types of pharmaceutical products to these companies as part of our inventory
management strategy, and procured certain other types of pharmaceutical products, medical
devices, healthcare and nutritional supplements and other wellness products from them. The
products sold to, and purchased from, these companies were different.
For the year ended December 31, 2023, to the best knowledge and belief of our Directors,
two of our five largest customers were also our suppliers. Our aggregate sales to these two
customers amounted to RMB30.6 million in 2023, accounting for less than 2.0% of our total
revenue for the same year. Our purchases from these two companies amounted to RMB7.8
million in 2023, accounting for less than 1.0% of our total purchases for the same year.
For the year ended December 31, 2022, to the best knowledge and belief of our Directors,
two of our five largest customers were also our suppliers. Our aggregate sales to these two
customers amounted to RMB9.5 million in 2022, accounting for less than 0.5% of our total
revenue for the same year. Our purchases from these two companies amounted to RMB15.9
million in 2022, accounting for less than 1.0% of our total purchases for the same year.
None of our five largest customers in 2021 were also our supplier during the same year.
Our Directors confirm that all of our sales to and purchases from these companies were
conducted in the ordinary course of business under normal commercial terms, and none of our
sales to and purchases from these overlapping entities were the same or back-to-back sales
during the Track Record Period.
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Save as disclosed above, there were no major suppliers during the Track Record Period
who were also our major customers during the corresponding period, or vice versa.
COMPETITION
We believe we have achieved a strong competitive position in the online CDM platform
healthcare market in China. We compete against other online pharmaceutical retail companies
and other online healthcare service providers, especially other online chronic disease
management platforms.
We believe the major competitive factors in our industry includes:
 Physician resources;
 Relationships with pharmaceutical companies;
 Technology capabilities;
 Accumulation of data and medical case information;
 Infrastructure to ensure data privacy;
 Reputation and customer retention; and
 Compliance with applicable laws and regulations.
We believe that we are well positioned to effectively compete on the basis of the
foregoing factors. However, some of our current or future competitors may have greater brand
recognition, better supplier relationships, larger customer bases or greater financial, technical
or marketing resources than we do. See “Risk Factors—Risks Relating to Our Business and
Industry—If we are unable to compete effectively, our business, results of operations and
financial condition may be materially and adversely affected” and “Industry
Overview—China’s Online Chronic Disease Management Market—Competitive Landscape of
China’s Online Chronic Disease Management Market.”
SEASONALITY
Our business and industry are subject to seasonality associated with spending activities
and patterns related to the consumption of medical services and pharmaceutical products in
China. For example, in the first quarter, which coincides with the Chinese New Y ear holiday,
online and offline hospitals and pharmacies in China generally experience a lower volume of
patient visits and other activities, and we typically expect a lower demand for our services and
products during that period as a result. However, given our significant growth during the Track
Record Period, the effect of seasonality on our operating results was not particularly apparent,
and seasonal factors had minimal impact on our overall business and financial performance.
See “Risk Factors—Risks Relating to Our Business and Industry—Our results of operations
may be subject to seasonal fluctuations.”
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A W ARDS AND RECOGNITION
During the Track Record Period, we had received awards and recognitions for the quality
of our services and products. Representative awards and recognitions are set forth below.
Y ear Awards and recognitions Issuing authority/forum
2023 2023 Guangdong Specialized and
Innovative Small-Medium
Enterprise (2023ਖ਼ၚतอʕ
ʃΆุ)
Department of Industry and
Information Technology of
Guangdong Province (؇
ʷᝂ)
2023 Guangzhou Outstanding Software
Enterprise ( ᄿψ̹ᎴӸழ΁Άุ)
Guangzhou Software Industry
Association ( ᄿψ̹ழ΁Б
ุ՘ึ)
2023 Innovative Project for Online Public
Interest ( ၣഖʮू௴อධͦ)
Cyberspace Administration of
Guangzhou (ڦ
፬)
2023 Influential Brand of Technological
Innovation (೐)
Business School of Chinese
Academy of Management
Science (Ӻ
৫ਠኪ৫)/Discovery
Magazine (ٟThe
21st China Scientists Forum
(ሞእ)
2022 2022 Comprehensive Health Quality
Manufacturing Leadership Award
(2022 ɽ਄ੰሯிˏჯᆤ)
The 3rd International Quality
Festival (ሯ
ື)/2022 Global
Consumption Leadership
Summit (2022 Όଢऊ൬ჯኬ
ึ)
2022 List of Health Consumer Service
Providers—Impact Category ( ਄ੰ
ਕዚ࿴࿮ఊ— ᅂᚤɢᗳй)
China International Consumer
Products Expo 2022—
Global Healthcare Consumer
Forum (2022 ϋʕ਷਷ყऊ൬
௹ᚎึ— Όଢᔼᐕऊ൬ሞ
እ)
2022 2022 Digital Transformation Impetus
Award (2022પਗɢᆤ)
The 11th China Finance
Summit (ʕ਷ৌ຾
ึ)
2021 2021 Jinge Award—Internet
Healthcare Innovative Award
(ᆤ— ʝᑌၣᔼᐕ௴อᆤ)
Healthcare Industry Insurance
Summit (ᎈ
ึ)
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INTELLECTUAL PROPERTY
We rely on a combination of patent, copyright, trademark and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. As of the Latest Practicable
Date, we had registered in China a total of 236 trademarks, 24 patents, 56 software copyrights
and 21 domain names. For details, see “Appendix IV—B. Further Information about our
Business—2. Intellectual Property Rights” in this prospectus.
Intellectual property rights are important to the success of our business. We have
comprehensive intellectual property protection policies and related internal control systems to
ensure our ability to obtain and maintain patents and other intellectual property and proprietary
protections for commercially important technologies, inventions and know-hows related to our
business, defend and enforce our patents, preserve the confidentiality of our trade secrets, and
operate without infringing, misappropriating or otherwise violating the valid, enforceable
intellectual property rights of third parties.
We protect our intellectual property rights, including trademarks, patents, copyrights and
domain names, strictly in accordance with the relevant laws and regulations. We regularly
improve and update our intellectual property management system in line with the development
of our business. We seek to maintain registration of intellectual property rights that are material
to our business under appropriate categories and in appropriate jurisdictions. On the other
hand, for proprietary know-hows that are not patentable and processes the patents for which are
difficult to enforce, we expect to rely on business confidentiality agreements to safeguard our
interests in this respect. We have entered into confidentiality agreements, or employment
agreements with confidentiality terms, with our employees, requiring them to strictly comply
with our confidentiality requirements.
Our Directors confirm that we were not involved in any material disputes or pending legal
proceedings in respect of, and we had not received notice of any claims of infringement of, any
intellectual property rights during the Track Record Period and up to the Latest Practicable
Date.
EMPLOYEES
The following table sets forth the number of full-time employees by function as of
December 31, 2023.
Number of
employees % of total
General and administrative personnel 125 24.3%
Research and development personnel 112 21.7%
Operational personnel 114 22.1%
Sales and marketing personnel 109 21.2%
In-house medical professionals 55 10.7%
Total 515 100.0%
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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 provident fund 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
staff, up to a maximum amount specified by the local government from time to time.
During the Track Record Period, we did not pay social insurance and housing provident
fund in full for certain employees based on their actual salary levels in accordance with
applicable PRC laws and regulations. This occurred primarily due to inadvertent oversight of
the relevant PRC laws and regulations, the implementation of which vary from city to city. As
advised by our PRC Legal Advisor, if the PRC government is of the view that our contributions
to employees’ social insurance or housing provident fund do not comply with the requirements
under the relevant PRC laws and regulations, we may be ordered to pay the underpaid amount
and may be required to pay a late payment fee of up to 0.05% of our underpaid social insurance
contribution for each day of delay, and may be imposed fines in an aggregate amount ranging
from one to three times of the underpaid social insurance contribution. Our PRC Legal Advisor
has also advised us that, in the event that we fail to pay the housing provident fund in full, the
housing provident fund management center may order us to pay the amount within a prescribed
time limit. If we fail to do so upon the expiration of the abovementioned time limit, further
application will be made to the People’s Court for compulsory enforcement. Notwithstanding
the above-mentioned underpaid amount, the MOHRSS issued the Urgent Notice on Enforcing
the Requirement of the General Meeting of the State Council and Stabilization the Levy of
Social Insurance Payment (൬ᅄϗʈ
) on September 21, 2018, which promotes the reduction in the amount of social
insurance contributions by companies to avoid overburdening enterprises, and prohibits local
authorities from self-organizing collection and clearance of all past arrears of enterprises.
As of the Latest Practicable Date, we were neither aware of any employee complaints
filed against us nor involved in any material labor disputes with our employees with respect
to social insurance or housing provident fund contributions. As of the Latest Practicable Date,
no administrative action, fine or penalty had been imposed against us by relevant authorities
with respect to our under-contribution to employees’ social insurance or housing provident
fund, nor had we received any order to make up for the underpaid amount. If we were to receive
notices from the relevant government authorities, we would pay any underpaid contribution
and the related late payment fees within the prescribed period. Our PRC Legal Advisor is of
the opinion that the risk of us being subject to fine is low, provided that we will make the
payment within the prescribed period. As of December 31, 2021, 2022 and 2023, our
accumulated provision for (or under-contribution to) social insurance and housing provident
fund contributions amounted to RMB19.1 million, RMB37.4 million and RMB36.8 million,
respectively. We had rectified our social insurance and housing provident fund contribution
non-compliance by the end of June 2023. Since July 2023, we have been making all social
insurance and housing provident fund contributions in accordance with applicable PRC laws
and regulations.
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In light of the above, our Directors are of the view that the maximum amount of our
potential liabilities under these underpaid social insurance and housing provident fund
contributions has no material adverse impact on our business, financial condition and results
of operations.
We are committed to establishing a competitive and fair remuneration. In order to
effectively motivate our employees, we continually refine our remuneration and incentive
policies through market research. We conduct performance evaluation for our employees every
year to provide feedback on their performance. Compensation for our staff typically consists
of base salary and a performance-based bonus.
We typically enter into standard employment agreements and confidentiality agreements
with our senior management and key personnel. These contracts include a standard non-
compete covenant that prohibits the employee from competing with us, directly or indirectly,
during his or her employment and for up to two years after termination of his or her
employment. We maintain a good working relationship with our employees, and we have not
experienced any material labor disputes.
During the Track Record Period, we also engaged outsourcing agencies to place certain
supporting staff for our daily operations, such as warehouse management personnel and
customer service personnel. We typically enter into labor outsourcing agreements with these
agencies for a period of two years, which may be renewed upon mutual agreement. We require
our outsourcing agencies to pay the social insurance and housing provident funds for the staff
who have labor relations with them. Such a requirement is considered at our on initial stage of
selecting suppliers. During the Track Record Period and up to the Latest Practicable Date, we
did not discover any outsourcing agencies that did not fulfill their obligations or had made
material underpayments; neither had there been any disqualification of, or termination of
collaboration with, outsourcing agencies due to incidents of non-compliance with relevant laws
and regulations or breaches of agreements by them.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
We are committed to promoting corporate social responsibility and sustainable
development and integrating it into all major aspects of our business operations. We consider
corporate social responsibility as part of our core philosophy that is crucial to our ability to
create sustainable value for our shareholders. Accordingly, our Board is in the process of
adopting a comprehensive policy on environmental, social and corporate governance
responsibilities (the “ ESG Policy ”) in accordance with the Listing Rules, which will set forth
our corporate social responsibility objectives, including (i) the appropriate risk governance on
ESG matters; (ii) identification of key stakeholders and the communication channels to engage
with them; (iii) our ESG governance structure; (iv) our ESG strategy formation procedures; (v)
our ESG risk management and monitoring; and (vi) the identification of key performance
indicators and mitigating measures.
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Governance on ESG Matters
We actively identify and monitor the actual and potential impact of environmental and
social risks on our business, strategies and financial performance over the short, medium and
long term, and we seek to incorporate such issues into our business, strategies and financial
planning. After the Listing, we will establish an ESG committee, which will be led and
supervised by our management and be responsible for establishing, adopting and reviewing our
ESG Policy. The key principal duties and responsibilities of our ESG committee include:
 keeping abreast of the latest ESG-related laws and regulations in different countries,
including the applicable sections of the Listing Rules, keeping our management
informed of any changes in such laws and regulations and updating our ESG Policy
in accordance with the latest regulatory updates;
 identifying our key stakeholders based on our business operations and understanding
such stakeholders’ influences and dependence with respect to ESG matters;
 assessing ESG-related risks on a regular basis according to applicable laws,
regulations and policies, especially risks in relation to climate change, to ensure we
fulfill our responsibilities with respect to ESG matters;
 ensuring and continuously monitoring the implementation of our ESG Policy;
 periodically reviewing the effectiveness of our ESG Policy; and
 reporting to our management on an annual basis on the implementation of our ESG
Policy and preparing the ESG report.
During the Track Record Period and up to the Latest Practicable Date, we had not been
subject to any material fines or other penalties due to non-compliance with health, safety or
environmental regulations.
Assessment and Mitigation of ESG Risks
We have identified the following ESG risks which we consider material and may have an
impact on our business, strategies or financial performance.
 Health, safety, and product quality risks. In the course of providing comprehensive
medical services and online retail pharmacy services, we are exposed to risks inherent in
providing online healthcare services and selling pharmaceutical and healthcare products,
where we may face allegations of selling unsafe, ineffective or defective products. We
may also be subject to allegations of having engaged in practices such as improperly
issuing prescriptions, sale of counterfeit and substandard medicines or other healthcare
products or providing inadequate warnings or insufficient or misleading disclosures of
side effects. For details, see “Risk Factors—We may be subject to product liability or
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medical liability claims, or claims or administrative penalties for counterfeit, substandard
or unauthorized products on our platform, which could cause us to incur significant
expenses and be liable for significant damage.” To mitigate these risks, we have
established a quality control team dedicated to monitoring these risk points, by taking
stringent measures relating to practice license and background checks, monitoring
physician behavior on our platforms, verification of prescriptions, and ensuring the
authenticity of products on our online retail pharmacy service platform. For details, see
“—Our Quality Control System.”
 Prescription management and sales of prescription drugs. We implement strict
procedures to manage our e-prescription services and sales of prescription drugs, which
are provided as part of our comprehensive medical services and online retail pharmacy
services. For example, our registered physicians and in-house medical professionals are
responsible for issuing new prescriptions or prescription refills. We also have an
AI-assisted prescription verification system which helps our registered physicians and
in-house medical professionals to identify potential prescription-related risks. When a
patient places an order on our platforms to purchase prescription drugs, our in-house
medical professionals or physicians registered on our platform usually call the patient to
confirm the suitability of the prescribed drugs and to inform the patient the potential side
effects of the prescription drugs. They may also follow up with patients after a period of
time subsequent to the drug purchase to collect information on the effect, side effects,
allergic reactions and other conditions experienced by the patient. For details, see “—Our
Quality Control System—Prescription Management and Sale of Prescription Drugs.”
 Energy conservation. We recognize that the facilities and equipment in our operating
premises consume substantial energy. We therefore actively explore strategies to reduce
energy consumption. For instance, we actively promote energy conservation and
consumption reduction in our daily operations. We encourage the purchase and use of
energy-efficient electronic equipment in our office premises, including the choice lighting
and other electrical appliances used. Our employees are required to ensure that the air
conditioning and other power-consuming equipment at our office premises are switched
off timely whenever they are not in use.
 Product packaging. As a significant portion of our sales orders is delivered by riders, it
is important that our products sold are packaged appropriately to withstand the delivery
process. We therefore consume substantial packaging materials, which may be bespoke,
and which entails a certain degree of environmental and climate-related risks. To mitigate
such risks, we primarily use paper packaging bags as packaging materials in an effort to
reduce the consumption of packaging materials. In addition, we strongly encourage our
employees to practice effective packaging, and to properly dispose recyclable materials,
so as to prevent wastage of resources.
 Content screening. For our customized content and marketing services, we have
established a content governance framework to strictly review the content posted on our
platform. We implement internal control measures to screen the information and content
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published on our platform to ensure their accuracy, reliability and compliance with
relevant laws and regulations. Educational content created or produced by our staff or
medical professionals to increase awareness of general medical knowledge, typically
including texts, graphics and pictures, videos and live streaming sessions, is reviewed and
vetted by our medical editorial manager to verify its quality and accuracy. If such content
involves potential legal or compliance risks or other sensitive issues, our legal department
staff and the designated content production personnel will conduct additional reviews to
assess its reliability and carefully manage our risk exposure. Promotional content
published in collaboration with pharmaceutical companies, typically including articles,
videos and live streaming sessions, is reviewed and vetted by our medical editorial
manager to verify its quality and accuracy before being uploaded and displayed on our
platform. For details, see “—Our Quality Control System—Product Quality
Control—Content Screening on Our Platform.”
 Ethical marketing. The interactions between us, our registered physicians and our
customers are governed by laws and regulations, industry standards and our internal
policies and procedures. We require registered physicians to observe professional
standards in the course of providing services on our platform, which include
recommending the most suitable treatments to patients, and we do not offer incentives to
registered physicians for promoting particular brands of drugs to patients. In accordance
with applicable laws and regulations, our policies require our employees to present and
market the products and services offered on the Jianke Platform honestly and accurately,
and such sales and marketing communications must be consistent with product labeling.
Accordingly, product-related promotional or advertorial contents which violate applicable
laws and regulations are strictly prohibited from publication on our platform. We believe
the accurate and balanced presentation of information will contribute to patient education
and knowledge dissemination, and enhance credibility and cultivate strong relationships
with our customers based on trust.
We do not operate any production facilities. Therefore, we are not subject to significant
health, safety or environmental risks. We do not expect to incur any material liabilities or
expenditures in health, safety and environmental issues. It is also expected that potential
physical risks such as disruptions arising from extreme weather conditions, and transition risks
in relation to changes in climate-related regulations and policy would not have a material
impact on our operation in the short, medium and long terms.
Metric and Targets for Evaluating and Managing the Risks
In line with our vision for sustainable development, we have established a set of key
performance indicators to evaluate and oversee our environmental protection performance. Our
energy consumption is mainly derived from electricity consumption of our offices, offline
pharmacies and hospital. Our electricity consumption is also the main source of our indirect
greenhouse gases emissions. We also consume water and packaging materials during our daily
operations. The table below sets forth a quantitative analysis of our environmental performance
during the Track Record Period.
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For the year ended December 31,
2021 2022 2023
Electricity consumption
(kWh in thousands) 1,322 1,457 1,678
Water consumption (tons) 7,262 10,393 11,797
Packaging materials consumed
(RMB’000) 6,830 8,382 8,443
Packaging materials consumed as a
percentage of revenue (%) 0.4 0.4 0.3
Although we believe our business operations do not directly produce pollutants that
directly affect environment, we have implemented internal policies to reduce our carbon
footprint, such as reducing the energy consumption through: (i) installing energy efficient
lighting and ensuring lights are switched off when out of use either manually or through
automatic sensors; (ii) encouraging employees to go paperless where possible, and where
printing is necessary, to conscientiously save paper by using double-sided printing, printing
multiple pages in a single sheet, or reducing font-size and page count; (iii) switching off certain
IT equipment or automatic power shutdown for certain systems and devices; and (iv) installing
air conditioning controls, with measures including requirements on lowest temperature, regular
maintenance of air cooling technologies and optimal timing controls. By 2028, we target to
achieve a 20% reduction per unit revenue in electricity and water consumption and a 10%
reduction per unit revenue in packaging materials consumed.
Corporate Social Responsibility
We support and participate in socially responsible projects that align with our core values
and mission and promote the development of the chronic disease management industry more
generally. We provide physician and patient education, improve access to treatment, and
facilitate effective management of chronic diseases. In our workplace, we adopt occupational
health and safety policies and organize relevant training to ensure the health, safety and welfare
of our employees. We also organize fellowship activities and distribute holiday benefits to our
employees to foster team cohesion. We actively participate in charity work, including
donations to community workers and schools based on their needs. During the COVID-19
pandemic, we donated protective facial masks to schools, hospitals and frontline health
workers to support and alleviate the pandemic’s impact on the community.
PROPERTIES
Our corporate headquarters is located in Guangzhou, Guangdong Province. As of the
Latest Practicable Date, we did not own any properties, and we leased 52 properties in the PRC.
Our leased properties in the PRC are primarily used for office, business and warehouse
purposes.
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As of the Latest Practicable Date, among our 52 leased properties, 10 properties had title
defects that may adversely affect our ability to continue to lease them in the future. The title
defects are mainly due to the failure of the lessors to provide property ownership certificates
regarding their legal right to lease such properties, or the failure of the lessors to provide a
certificate showing the owner of the properties’ consent on renting the properties. Should
disputes arise due to title encumbrances to such properties or government action, we may
encounter difficulties in continuing to lease such properties and may be required to relocate.
For risks relating to our leased properties, see “Risk Factors—Risks Relating to
Regulations—Failure to comply with PRC property-related laws and regulations regarding
certain of our leased properties may adversely affect our business, financial condition and
results of operations.”
Our Directors believe that our use of these leased properties individually or collectively
will not have a material adverse effect on our business, financial condition or results of
operations. Even if we are required to vacate from the properties, we believe we will be able
to readily find comparable properties to relocate and the costs and expenses we may incur for
relocation will be immaterial. As of the Latest Practicable Date, we were not aware of any
ownership controversy or dispute or third-party claims, nor had we been imposed any
administrative penalties.
In addition, as of the Latest Practicable Date, we had not registered the lease agreements
for 12 leased properties with the relevant PRC government authorities. Our PRC Legal Advisor
has advised us that, according to the applicable PRC laws and regulations, we, as the lessee,
may be required by the relevant PRC authorities to register the relevant lease agreements
within a prescribed time limit. If we fail to do so, we may be subject to fines ranging from
RMB1,000 to RMB10,000 for each non-registered lease agreement, and our maximum penalty
for lease non-registration during the Track Record Period is RMB120,000. However, as of the
Latest Practicable Date, we had not been fined by the relevant PRC authorities with respect to
these non-registered lease agreements, and our PRC Legal Advisor has advised us that the
non-registration of such lease agreements would not affect their validity. Given that the amount
of potential penalties accounts for an insubstantial portion of our total revenue during the Track
Record Period, we believe that the abovementioned defects of our leased properties will not
have a material adverse effect on our business, financial condition and results of operations.
As of December 31, 2023, none of the properties leased by us had a carrying amount of
15% or more of our consolidated total assets. According to Chapter 5 of the Listing Rules and
section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance
with Provisions) Notice, this prospectus is exempt from the requirements of section 342(1)(b)
of the Companies (Winding up and Miscellaneous Provisions) Ordinance to include all
interests in land or buildings in a valuation report as described under paragraph 34(2) of the
Third Schedule to the Companies (Winding up and Miscellaneous Provisions) Ordinance.
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INSURANCE
We consider our insurance coverage to be adequate as we have in place all the mandatory
insurance policies required by Chinese laws and regulations and in accordance with the
commercial practices in the industries in which we operate.
We primarily maintain medical liability insurance, motor vehicle insurance, and property
insurance with respect to our warehouse, including inventories and equipment. Such insurance
covers the risk of property damage and damage due to natural disasters and certain accidents
such as malicious damages, theft and explosion of water tanks and water pipes. We also provide
social insurance, including pension insurance, unemployment insurance, work-related injury
insurance, maternity insurance and medical insurance for our employees.
We do not maintain any business interruption insurance, product liability insurance,
key-man life insurance or insurance policies for our network infrastructures, or information
technology systems. We also do not maintain insurance policies against risks relating to the
Contractual Arrangements. For risks related to our insurance coverage, see “Risk
Factors—Risks Relating to Our Business and Industry—We have limited insurance coverage,
which could expose us to significant costs and business disruption.”
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
From time to time, we have been, and may in the future be, involved in various claims
and lawsuits in the ordinary course of our business. For more details on potential risks arising
from litigation and other legal proceedings, see “Risk Factors—Risks Relating to Our Business
and Industry—We, our directors, management and employees may from time to time become
party to litigation, regulatory investigations, other legal or administrative disputes and
proceedings that may have an adverse impact to our reputation and business prospects.”
During the Track Record Period and up to the Latest Practicable Date, we were not aware
of any material pending or threatened legal, arbitral or administrative proceedings against us
or any of our Directors which, in the opinion of our Directors, could have had a material
adverse effect on our business operations or financial condition as a whole.
Compliance
During the Track Record Period and up to the Latest Practicable Date, we had not been
subject to any review, inquiry, or investigation by any PRC regulatory authority in relation to
our comprehensive medical services and online retail pharmacy services. As advised by our
PRC Legal Advisor, according to Measures for the Administration of Internet Hospitals (Trial)
(ج(༊Б)), the Measures for the Administration of Prescriptions ( ஈ
) and other relevant PRC laws and regulations, (i) physicians of Internet hospitals
can only provide patients with follow-up consultation services for common and chronic
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diseases; (ii) prescription services shall be provided by physicians who have obtained
appropriate prescription authority in the registered place of practice, and prescriptions should
be issued in accordance with the requirements of the code of practice and drug instructions;
(iii) the dispensing and purchase of prescription drugs should be based on the prescriptions
issued by licensed medical practitioner or licensed medical assistant practitioner. Given that (i)
our online consultation services are targeted at common and chronic disease management; (ii)
we verify the practicing physician qualification certificate (ࣣpracticing
physician’s license (ࣣand physician’s title certificate (ࣣto check
that our registered physicians are permitted to provide consultations and issue e-prescriptions
through our Jianke Platform; (iii) we maintain records for each patient’s medical consultation
history and prescription history; (iv) we have implemented policies to ensure that our in-house
medical professionals review the prescriptions and approve the sales of prescription drugs upon
verification of the authenticity of the prescription; and (v) we recruited experienced and
qualified legal officers and established a Legal Department that is responsible for keeping
up-to-date on the changes in regulations and for organizing regular trainings to ensure our
compliance with relevant laws and regulations, our PRC Legal Advisor is of the view that our
comprehensive medical services and online retail pharmacy services have complied with the
Measures for the Administration of Internet Hospitals (Trial) (ج(༊
Б)), the Measures for the Administration of Prescriptions () and other
relevant PRC laws and regulations in all material aspects during the Track Record Period and
up to the Latest Practicable Date. Furthermore, to the best of our knowledge, none of our
registered physicians and in-house medical professionals had been found to have had deficient
registration or to have been practicing beyond the permitted scope during the Track Record
Period. Based on the Joint Sponsors’ discussions with the management, the Company’s PRC
Legal Advisor and the Joint Sponsors’ PRC legal advisor, and the Joint Sponsors’ review of the
Company’s internal control measures with the assistance of the Company’s internal control
consultant, nothing has come to the Joint Sponsors’ attention that would lead them to disagree
with the foregoing views of the Company and its PRC Legal Advisor.
We are engaged in audio-visual business related to popularization of medical knowledge
in the form of video uploading or live streaming through Jianke Platform. According to the
Administrative Provisions on Internet Audio-Video Program Services (ਕ
), the provider of audio-video program is required to obtain the License for Online
Transmission of Audio-Visual Programs (ၣഖෂᅧൖᛓືͦ஢̙ᗇ) (the “ A VP License”).
As advised by our PRC Legal Advisor, the Cultural Market Comprehensive Enforcement Office
of Guangzhou Municipal Culture, Radio, Television and Tourism Bureau (ࣚ
ඟ) (the “ Enforcement Office ”) is the competent authority responsible
for the law enforcement works of cultural market cases within its jurisdiction. Pursuant to
consultations conducted with the Enforcement Office in June 2023, the Enforcement Office
verbally confirmed that engaging in audio-visual business related to popularization of medical
knowledge does not fall within the scope of obtaining an A VP License under relevant laws and
regulations; therefore, the Group is not required to obtain an A VP License and would not be
penalized for not obtaining an A VP License. As of the Latest Practicable Date, we had not been
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penalized for engaging in audio-visual business without holding an A VP License. Based on the
foregoing, our PRC Legal Advisor is of the view that as of the Latest Practicable Date, we were
not required to apply for the A VP License and would not be penalized for not obtaining an A VP
License.
During the Track Record Period and up to the Latest Practicable Date, except as disclosed
in “—Employees” and “—Properties,” we had complied with applicable PRC laws and
regulations in all material respects and had not been and were not involved in any
non-compliance incidents that led to fines, enforcement actions or other penalties that could,
individually or in the aggregate, have a material adverse effect on our business, financial
condition or results of operations.
LICENSES, PERMITS AND APPROV ALS
As advised by our PRC Legal Advisor, during the Track Record Period and as of the
Latest Practicable Date, we had duly obtained and maintained all material licenses, permits and
certificates from relevant authorities for our operations, and such licenses, permits and
certificates have remained in full effect. Our PRC Legal Advisor has advised us that there is
no material legal impediment to renewing our licenses, permits and certificates required for our
operations, provided that we have complied with all applicable PRC laws and regulations
during the Track Record Period. For details, see “Risk Factors—Risks Relating to Our
Business and Industry—If we fail to obtain and maintain the requisite licenses, permits and
approvals applicable to our business, or fail to obtain additional licenses that become necessary
as a result of new enactment or promulgation of laws and regulations or the expansion of our
business, our business and results of operations may be materially and adversely affected.”
The following table sets forth a list of material licenses, permits and approvals currently
held by us.
No. Entity
Name of the license,
permit or approval Grant date (1) Expiration date
1. Fangzhou Y unkang Drug Trading License August 26, 2020 August 25, 2025
2. Fangzhou Y unkang V alue-added
Telecommunication
Business License
October 21, 2022 December 14,
2025
3. Fangzhou Y unkang Food Business License September 21,
2020
September 20,
2025
4. Fangzhou Y unkang Internet Drug Information
Service Qualification
Certificate
July 1, 2020 June 30, 2025
5. Fangzhou Y unkang Class II Medical Device
Business Registration
December 14,
2020
December 14,
2025
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No. Entity
Name of the license,
permit or approval Grant date (1) Expiration date
6. Fangzhou Y unkang V alue-added
Telecommunication
Business License
November 14,
2023
November 14,
2028
7. Fangzhou Medicine Drug Trading License January 19, 2020 January 18, 2025
8. Fangzhou Medicine V alue-added
Telecommunication
Business License
April 23, 2024 March 10, 2025
9. Fangzhou Medicine Food Business License January 7, 2020 January 6, 2025
10. Fangzhou Medicine Internet Drug Information
Service Qualification
Certificate
March 11, 2020 March 10, 2025
11. Fangzhou Medicine Medical Devices Business
License
September 15,
2020
January 18, 2025
12. Fangzhou Medicine Class II Medical Device
Business Registration
January 3, 2020 NA
13. Fangzhou Pharmaceutical Drug Trading License December 20,
2019
December 19,
2024
(2)
14. Fangzhou Pharmaceutical Medical Devices Business
License
January 5, 2021 January 4, 2026
15. Fangzhou Pharmaceutical Registration for Sales of
Pre-packaged Food
August 12, 2022 NA
16. Fangzhou Internet Hospital Practice License of Medical
Institution
November 2,
2020
November 1,
2025
17. Fangzhou Internet Hospital Internet Drug Information
Qualification Certificate
April 26, 2021 April 25, 2026
18. Xinjiang Internet Hospital Practice License of Medical
Institution
May 19, 2020 May 18, 2025
19. Xinjiang Internet Hospital Internet Drug Information
Qualification Certificate
July 20, 2020 July 19, 2025
20. Fangzhou Media Internet Drug Information
Qualification Certificate
May 19, 2021 May 18, 2026
21. Fangzhou Information Internet Drug Information
Service Qualification
November 27,
2019
November 26,
2024 (2)
22. Jingtai Hospital Practice License of Medical
Institution
September 13,
2023
September 13,
2028
23. Jingtai Hospital Internet Drug Information
Service Qualification
April 19, 2021 April 18, 2026
24. Qishi Hospital Internet Drug Information
Service Qualification
May 17, 2021 May 16, 2026
25. Qishi Hospital Practice License of Medical
Institution
July 12, 2022 May 11, 2026
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No. Entity
Name of the license,
permit or approval Grant date (1) Expiration date
26. Fangzhou Beijing Drug Trading License January 10, 2022 January 9, 2027
27. Fangzhou Beijing Food Business License January 27, 2022 January 26, 2027
28. Y unyi Information V alue-added
Telecommunication
Business License
August 2, 2022 August 2, 2027
29. Ruishi Hospital Practice License of Medical
Institution
January 26, 2024 January 25, 2029
Notes:
(1) Grant date refers to the latest date on which the relevant license was granted or renewed.
(2) We plan to renew the license before expiration. We and our PRC Legal Advisor are not aware of any
circumstances that are expected to cause any material impediment to obtaining such renewal.
RISK MANAGEMENT AND INTERNAL CONTROL
We have adopted and implemented various policies and procedures to ensure rigorous risk
management and internal control, and we are dedicated to continually improving these policies
and procedures.
We have adopted and currently maintain risk management and internal control systems,
which consist of policies and procedures that we consider appropriate for our business
operations. We are devoted to continually improving these systems. Our risk management and
internal control policies and procedures cover various aspects of our business operations, such
as information technology, internal audit, human resources and regulatory risk management.
Our Board of Directors is responsible for the establishment and update of our internal control
systems, while our senior management monitors the daily implementation of the internal
control procedures and measures with respect to each subsidiaries and functional departments.
Information Security Risk Management
We pay close attention to risk management relating to our information technology
systems as storage and protection of user data and other related information is critical to us.
We have adopted a set of security safeguard measures to protect the data we have accumulated
and stored, including, but not limited to, encryption technology for data transmission and
storage, conducting data classification management and applying strict user data access and
usage management policies.
We have adopted a rigorous encrypted algorithm to store data and strictly execute a data
accessing and transmitting policy to ensure the confidentiality of our electronic data. We have
also developed strict internal control and data accessing mechanisms and detailed approval and
operation procedures regarding data collection and processing. Under such mechanisms and
procedures, any operation violating information security regulations will result in internal
disciplinary action. Our staff are expected to undertake periodical training on data protection.
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We also have a comprehensive data backup system to encrypt and store data on servers
in different locations in order to minimize the risk of data loss. Furthermore, we have
designated personnel to be responsible for inspecting and reporting any suspicious data
deriving and transmitting activities, as well as enhancing our data protection system pursuant
to the changes of laws and regulations and technology development. Meanwhile, such
personnel has been designated to take charge of reviewing, discussing and improving our
technologies in managing information security and our internal control system to ensure
adequate protection is given to our database.
Internal Audit Risk Management
We have established an audit committee to monitor the implementation of our risk
management policies across our Group on an ongoing basis to ensure that our internal control
system is effective in identifying, managing and mitigating risks involved in our business
operations. The audit committee consists of three members, Mr. Zhu Xiaolu, Dr. Wang
Haizhong, Ms. Kang Wei, all of whom are independent non-executive Directors. See “Directors
and Senior Management” in this prospectus for the professional qualifications and experiences
of the members of our audit committee.
We also maintain an internal audit department which is responsible for reviewing the
effectiveness of internal control and reporting to the audit committee and senior management
on any issues identified. Our internal audit department members are required to report to
management to discuss any internal control issues we face and the corresponding measures to
implement toward resolving such issues. The internal audit department reports to the audit
committee to ensure that any major issues identified are channeled to the committee on a timely
basis. The audit committee then discusses the issues and reports to the board of directors, if
necessary.
Human Resources Risk Management
We provide regular and specialized training tailored to the needs of our employees in
different departments. Through the training sessions, we ensure our staff’s skill sets and
knowledge level of our policies remain up-to-date, enabling them to better discover and meet
consumers’ and merchants’ needs. We have in place an employee handbook and a code of
conduct approved by our management and have distributed them to all of our employees. The
handbook contains internal rules and guidelines regarding work ethics, fraud prevention
mechanisms, negligence and corruption. We provide employees with regular training, as well
as resources to explain the guidelines contained in the employee handbook.
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Regulatory Compliance and Legal Risk Management
Compliance risk refers to the risk of being subject to legal and regulatory sanctions, and
the risk of major financial and reputational losses as a result of our failure to comply with
relevant laws, regulations, rules and guidelines. Meanwhile, legal risk refers to the risk of legal
liability arising from violations of laws and regulations, breaches of contracts, infringements
on the legal rights of others or otherwise in connection with any contract or business activity
in which we are involved.
In order to manage our compliance and legal risk exposures effectively, we have designed
and adopted strict internal procedures to ensure the compliance of our business operations with
the relevant rules and regulations. For instance, our legal department reviews and manages our
contracts for our business operations, and conducts the necessary due diligence before we enter
into any contract or business arrangements. They also liaise with our business operations team
to conduct periodic regulatory review, so as to ensure that all relevant governmental approval,
licenses and permits necessary for our business activities and operations are duly and timely
obtained, renewed and maintained.
Anti-corruption and Anti-bribery Risk Management
We have implemented strict policies and guidelines relating to anti-corruption, anti-
bribery and anti-deception, including policies that prohibit the acceptance of gifts, hospitality
and other offers by interested third parties. These policies are expressly included in our
employee handbook, which our employees are required to acknowledge and observe. In
addition, as we and our employees deal with a variety of third parties in our operations, we
have implemented internal procedures with respect to anti-bribery, anti-corruption and conflict
of interest matters. First of all, we require each department to perform self-check on any
violations in key processes and roles on a regular basis, and report to the internal audit
department any violation or trace of possible risk events. Second, employees and parties
outside our Group are encouraged to provide information regarding any potential violation via
phone, email, letters and other means, and we would offer rewards in return for such
information. Third, our internal audit department carefully evaluates risk events and conducts
investigations when necessary. Lastly, our internal audit department conducts internal audits on
a regular basis. We impose on directors, senior management and employees penalties, and
require compensation for any losses incurred as a result of any activities concerning bribery
and corruption. During the Track Record Period and up to the Latest Practicable Date, our
Directors were not aware of any bribery, corruption or deception incidents, such as collusion
between the platforms, pharmaceutical companies and physicians to encourage the prescription
of certain medicines and mislead the patients. Going forward, we will continually review the
implementation of our risk management policies and measures to ensure their effectiveness and
sufficiency.
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Two-invoice System and National Centralized Procurement
According to relevant rules promulgated by the PRC government authorities, the
two-invoice system generally requires a drug manufacturer to issue only one invoice to its
distributor, followed by the distributor issuing a second invoice directly to the end customer
hospital. Only one distributor is permitted to distribute drug products between the
manufacturer and the hospital. The system also encourages manufacturers to sell drug products
directly to hospitals. Pharmaceutical manufacturers and distributors who fail to implement the
two-invoice system may be disqualified from attending future bidding events or providing
distribution for hospitals and blacklisted for drug procurement practices. Public medical
institutions undertake the obligation to verify the consistency between invoices, goods and
records before they store and use drugs. Our business mainly focuses on online to-consumer
chronic disease management and the sales of pharmaceutical products to individuals,
pharmacies and non-public medical institutions is not subject to the “two-invoice system”.
During the Track Record Period and up to the Latest Practicable Date, we did not directly sell
pharmaceutical products to public medical institutions. As such, the implementation of the
“two-invoice system” does not have any material impact on our business and financial
performance.
In addition, since 2019, the State Council and other relevant authorities issued a series of
policies on bolstering reform of the medical and healthcare system, including certain
centralized procurement policies. According to the Notice on Issuance of the Pilot Plan
Regarding the Organization of Centralized Procurement and Use of Drugs ( ਷ਕ৫፬ʮᝂᗫ
) by the State and the Implementation
Opinions on Region Expansion of the Organization of Centralized Procurement and Use of
Drugs by the State (จԈ),
the State planned to organize centralized procurement and use of certain types of pilot drugs
to lower drug prices, reduce patients’ drug cost burden, and lower the transaction costs of
pharmaceutical enterprises. In 2021, the State Council published an updated policy Opinion on
Promoting the Normalization and Institutionalization of Centralized V olume-Based
Procurement of Drugs (ٙ࢝
จԈ) to provide additional details and clarification on the centralized procurement scheme.
The scheme included an initial procurement scope covering drugs listed in the Drug Catalog
for Basic Medical Insurance, which exhibited widespread usage and high procurement prices,
with the goal of gradually expanding to additional drugs which are deemed to be clinical
necessities with widespread demand. In principle, all holders of registration certificates of
drugs falling under the scope of the centralized volume-based procurement and meet the
requirements for the centralized volume-based procurement in terms of quality standards,
production capacity, and supply stability, may participate in such procurement. In addition, all
public medical institutions are required to participate in the centralized volume-based drug
procurement.
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We do not sell pharmaceutical products directly or indirectly to public medical
institutions and are therefore not directly subject to the centralized procurement policies.
However, such policies have indirectly impacted us by lowering the general market price of
drugs subject to the centralized procurement scheme, which in turn has increased sales of these
drugs. Although the prices of these drugs were lowered to different extents as an indirect result
of such centralized procurement policies during the Track Record Period, we did not
experience any significant decrease in our gross profit margin as a result of such price changes
during the same period, primarily because (i) only a portion of the SKUs on our platform were
affected by centralized procurement policies; and (ii) the impact of any price reductions
resulting from the inclusion of these drugs in the centralized procurement scheme is generally
offset by decreases in our procurement costs and changes in demand for these SKUs. We will
utilize our strategy to further expand and diversify our SKUs to maintain and increase our
revenue. In addition, we will continue to monitor the development of centralized procurement
policies and negotiate with our suppliers for price adjustments compensation for relevant drugs
where appropriate, so as to maximize our profitability.
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BACKGROUND
We currently conduct our online consultation and e-prescription services, online retail
pharmacy services and online academic community services (the “ Relevant Businesses ”)
through our Consolidated Affiliated Entities, namely Fangzhou Y unkang together with its
subsidiaries, which were all established under the PRC laws.
Since the Relevant Businesses are classified as foreign investment restricted or prohibited
businesses under the applicable PRC laws, regulations or rules, in order to comply with the
PRC laws and regulations and maintain effective control over the operation of the Relevant
Businesses, Fangfeng Technology (the “ New WFOE ”) entered into a series of contractual
arrangements with Fangzhou Y unkang and the Fangzhou Y unkang Registered Shareholders on
June 19, 2020 (the “ Contractual Arrangements ”), under which the New WFOE is entitled to
substantially all economic benefits arising from the business of the Consolidated Affiliated
Entities to the extent permitted by the PRC laws and regulations. Under the Contractual
Arrangements, we have acquired effective control over the financial and operational
management and results of Fangzhou Y unkang and are entitled to substantially all the economic
benefits derived from the operations of Fangzhou Y unkang. For the years ended December 31,
2021, 2022 and 2023, the Consolidated Affiliated Entities, namely Fangzhou Y unkang and its
wholly controlled subsidiaries (i.e. Fangzhou Medicine, Fangzhou Internet Hospital, Qishi
Hospital, Fangzhou Media and Ruishi Hospital), in aggregate contributed to 92.56%, 92.53%
and 93.37% of the total revenue of the Group, respectively.
Our Directors believe that the Contractual Arrangements are fair and reasonable because:
(i) the Contractual Arrangements were freely negotiated and entered into among the parties
thereto; (ii) by entering into the Exclusive Service Agreement with the New WFOE, our
Consolidated Affiliated Entities will enjoy better economic and technological support from us,
as well as a better market reputation after the Listing, and (iii) a number of other companies
use similar arrangements to accomplish the same purpose.
OVERVIEW OF LA WS AND REGULATIONS OF THE PRC RELATING TO FOREIGN
OWNERSHIP RESTRICTIONS AND THE APPLICATION THEREOF TO THE
GROUP’S BUSINESSES
Overview
Investment activities in the PRC by foreign investors are principally governed by the
Catalogue of Industries for Encouraging Foreign Investment ( ོᎸ̮ਠҳ༟ପุͦ፽(2022
و)) (the “ Catalogue ”), and the Special Administrative Measures for Access of Foreign
Investment (݄(૶ఊ)) (the “ Negative List ”), both of which
were promulgated and are amended from time to time by the MOFCOM and the NDRC. The
Catalogue and the Negative List lay out the basic framework for foreign investment in China,
classifying businesses into three categories with regard to foreign investment: “encouraged”,
“restricted” and “prohibited”. Industries not listed in the Catalogue and the Negative List are
generally deemed as falling into a fourth category “permitted” unless specifically restricted by
other PRC laws.
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Prohibited Business
Set out below is a summary of our businesses that are subject to foreign investment
prohibition:
Radio and Television Program Production and Operation Service
Our Relevant Businesses involve providing online short videos, online lectures and
courses, live-streaming and other online academic community service through mobile
application. In order to provide such services, each of Fangzhou Medicine and Fangzhou
Media, being wholly-owned subsidiaries of Fangzhou Y unkang, holds a license for production
and operation of radio and television programs ( ᄿᅧཥൖືͦႡЪ຾ᐄ஢̙ᗇ)( “ R&T
License ”) to provide filming and recording services of online short videos, online lectures and
courses, which falls within the scope of the production and operation of radio and television
programs, where foreign investment is prohibited according to the Negative List.
Our PRC Legal Advisor made a telephone consultation with the Radio and Television
Administration of Guangdong Province (ᄿᅧཥൖ҅), and understands that an internet
platform operator like Fangzhou Medicine which makes customized short videos, online
lectures and courses and live-streaming lectures for a fee and providing such videos or
live-streaming services to its users/customers by uploading them on its internet platform is
required to obtain a R&T License. As advised by our PRC Legal Advisor, the Radio and
Television Administration of Guangdong Province is the competent authority and the officer
consulted is competent to give such confirmation.
Internet Audio-Visual Program Service
Fangzhou Medicine also holds a license for operation of internet cultural business ( ၣ
ഖ˖ʷ຾ᐄ஢̙ᗇ) to provide pre-recorded courses and live-streaming courses to users
through its mobile applications, which falls within the scope of internet audio-visual program
services, where foreign investment is prohibited according to the Negative List.
Restricted Business
Set out below is a summary of our businesses that are subject to foreign investment
restriction:
Online hospital services and relevant online retail pharmacy services
According to the Negative List, a medical institution falls within the “restricted” category
under the Negative List and foreign investors are only allowed to invest in medical institutions
in the form of joint ventures. According to the Provisional Measures for the Administration of
Medical Institutions in the Form of Sino-foreign Equity or Contractual Joint V enture ( ʕ̮
) (the “ Medical Institutions Administration Measures ”),
operation of “medical institutions” falls within the “restricted category” and foreign investors
CONTRACTUAL ARRANGEMENTS
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are not allowed to hold more than 70% equity interests in a “medical institution”. However, as
the PRC internet healthcare industry is relatively new and evolving, neither the Negative List
nor the Medical Institutions Administration Measures provides clear guidance on the
categorization of operation of “online hospital services” in terms of foreign investment
restrictions. Our PRC Legal Advisor is of the view that, in practice, foreign investment
restrictions on “online hospital services” are subject to the supervision and administration of
the local competent authority responsible for supervision and administration of foreign
investment and local health administrative departments, and there might be difference in the
policy, guidance and interpretation adopted by the authorities in different provinces.
In Guangdong province, Fangzhou Y unkang and its subsidiaries, namely Fangzhou
Medicine, Fangzhou Internet Hospital and Qishi Hospital, are engaged in online internet
hospital services such as online consultation and e-prescription services. Ruishi Hospital, a
wholly-owned subsidiary of Fangzhou Y unkang, holds a medical institution practice license
(ᔼᐕዚ࿴ੂุ஢̙ᗇ) and intends to conduct online hospital services. Our PRC Legal
Advisor, the PRC legal advisor of the Joint Sponsors and the Company conducted
consultation with the competent government authority responsible for supervision and
administration of foreign investment in Guangdong province, namely Department of
Commerce of Guangdong Province (ਠਕᝂ). The Department of Commerce of
Guangdong Province verbally confirmed that, (i) no applicable PRC laws, regulations or rules
have provided clear guidance on application or approval for foreign invested enterprise’s
operation of “online hospital services and relevant online retail pharmacy services”, (ii) the
application by foreign invested enterprise is subject to the authorities’ review on a case-by-case
basis, (iii) there exists enormous difficulty and significant uncertainty on whether an
application from a foreign invested enterprise for operating “online hospital services and
relevant online retail pharmacy services” within its respective jurisdictions would be approved,
and currently no such approval has ever been issued in Guangdong province; and (iv) prior to
obtaining approval for operating “online hospital services and relevant online retail pharmacy
services”, foreign invested enterprise cannot engage in such business and such business shall
only be conducted by a domestic enterprise whose shareholders are purely domestic investors
rather than foreign investors. As advised by our PRC Legal Advisor, the Department of
Commerce of Guangdong Province is the competent authority and the officers interviewed are
competent to give such confirmation in respect of foreign investments. Our PRC Legal Advisor
is also of the view that, notwithstanding the abovementioned 70% limit on foreign investment,
based on the above confirmation, within the Guangdong province, in practice, the likelihood
of obtaining approval by a foreign invested enterprise for the operation of online hospital
services and relevant online retail pharmacy services is remote and without such approval, a
foreign invested enterprise is prohibited from holding any equity interest in such Relevant
Businesses operated by Fangzhou Y unkang, Fangzhou Medicine, Fangzhou Internet Hospital
and Qishi Hospital.
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In Xinjiang province, Xinjiang Internet Hospital holds a medical institution practice
license ( ᔼᐕዚ࿴ੂุ஢̙ᗇ) and the medical institution type of Xinjiang Internet
Hospital is internet hospital. With respect to the local foreign restriction in internet hospital,
our PRC Legal Advisor, the PRC legal advisor of the Joint Sponsors and the Company
conducted consultation with the competent government authority, namely the Health
Commission of Xinjiang Production and Construction Corps (ࡰ
ึ). The Health Commission of Xinjiang Production and Construction Corps verbally
confirmed that in Xinjiang, internet hospitals are regulated as offline hospitals and foreign
investors are not allowed to hold, either directly or indirectly, more than 70% equity interest
in a medical institution. As advised by our PRC Legal Advisor, the Health Commission of
Xinjiang Production and Construction Corps is the competent authority and the officers
interviewed are competent to give such confirmation in respect of foreign investments. Upon
completion of the restructuring in contemplation of the Global Offering, Xinjiang Internet
Hospital was held as to 70% and 30% by Fangzhou Information (a wholly-owned subsidiary
of the New WFOE) and Fangzhou Y unkang, respectively.
Offline medical institution business
Jingtai Hospital, a subsidiary of the Company, holds a medical institution practice license
and only provides offline hospital services in Guangzhou as a complement to the online
healthcare services of the Company. According to the Medical Institutions Administration
Measures, operation of “medical institutions” falls within the “restricted category” and foreign
investors are not allowed to hold more than 70% equity interests in a “medical institution”. Liu
Xiukui is the registered promoter of Jingtai Hospital and a nominee of the New WFOE and
Fangzhou Y unkang. Since Jingtai Hospital does not provide online hospital services, the New
WFOE as a foreign investor is allowed to hold 70% equity interests in Jingtai Hospital.
Therefore, the New WFOE and Fangzhou Y unkang hold 70% and 30% of the registered capital
and promoter’s interest in Jingtai Hospital, respectively.
V alue-added telecommunication service
Each of Fangzhou Y unkang, Fangzhou Medicine, Y unyi Information and Fangzhou Media
holds an ICP License in the Group to operate value-added telecommunication services through
our platform. Fangzhou Medicine mainly provides the value-added telecommunication services
in relation to the operation of Jianke Platform, online internet hospital services and online sales
of pharmaceutical products. Each of Fangzhou Medicine and Fangzhou Media is wholly owned
by Fangzhou Y unkang. Y unyi Information is held by the New WFOE and Fangzhou Y unkang
as to 50% and 50%, respectively. Y unyi Information is expected to conduct online hospital
services and relevant online retail pharmacy services once approval from competent authority
has been obtained.
CONTRACTUAL ARRANGEMENTS
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According to the revised “Regulation for the Administration of Foreign-Invested
Telecommunications Enterprises” () (the “ Regulation ”) that
came into effect on May 1, 2022, the qualification requirement on the primary foreign investor
in a foreign invested value-added telecommunications enterprise for having a good track record
and operational experience in the value-added telecommunications industry (the
“Qualification Requirement ”) was removed.
On May 24, 2022, our PRC Legal Advisor conducted a phone inquiry with the MIIT
through service hotline and the relevant MIIT officer confirmed that, (i) the Qualification
Requirement has been removed, and (ii) whether a foreign investment enterprise can obtain an
ICP License is subject to the examination by MIIT. As advised by our PRC Legal Advisor, the
MIIT is the competent authority and the officer consulted was competent to give such
confirmation. Accordingly, Y unyi Information submitted an application to the MIIT and
obtained an ICP License issued by MIIT dated August 2, 2022. Information on Y unyi
Information’s ICP License has been posted on the official website of MIIT and could be
searched on the telecommunication services business market integrated management
information system of MIIT government service platform (ڦ
ӻ୕). Foreign investors may hold an aggregate of no more than 50% of
the total equity in any value-added telecommunications business in the PRC. According to the
Negative List and the Telecommunications Regulations of the PRC (ૢ
Է), additional value added telecommunication service business is considered “restricted”,
which is subject to restrictions on percentage of foreign ownership (not holding more than
50%, except for e-commerce, domestic multi-party communications, storage-forwarding and
call centers). However, according to the abovementioned confirmation of the Department of
Commerce of Guangdong Province (ਠਕᝂ), merely holding the ICP License without
any approval for operating “online hospital services and relevant online retail pharmacy
services” does not enable Y unyi Information to operate any of the Relevant Businesses.
Our PRC Legal Advisor is of the view that, notwithstanding the abovementioned ICP
License and 50% limit on foreign ownership, based on the above confirmation, within
Guangdong province, in practice, the likelihood of obtaining approval for a foreign invested
enterprise to operate online hospital services and relevant online retail pharmacy services is
remote and without such approval, Y unyi Information as a foreign invested enterprise is
prohibited from holding any equity interest in such business. Meanwhile, foreign investors or
foreign invested enterprise could not hold any equity in Fangzhou Medicine. For more details,
see “—Online hospital services and relevant online retail pharmacy services”. The purpose of
establishing Y unyi Information and obtaining the ICP License pursuant to relevant PRC law is
to eventually transfer the online hospital services and relevant online retail pharmacy services
to Y unyi Information once restrictions of providing such services by foreign invested
companies are lifted. The Company expects that, under the current shareholding structure of
the Group, Fangzhou Media and Y unyi Information will not engage in the non-restricted
business that can be operated separately from the foreign investment restricted or prohibited
businesses in the foreseeable future.
CONTRACTUAL ARRANGEMENTS
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Permitted Business
Set out below is a summary of our businesses that are not subject to foreign investment
prohibition or restriction:
Online sales of pharmaceutical products on third party platforms, offline pharmacy chain
operation and drug warehousing
Fangzhou Y unkang and Fangzhou Medicine are also engaged in online sales of
pharmaceutical products on third party platforms, offline pharmacy chain operation and drug
warehousing. According to the Negative List, foreign investors are permitted to invest in online
sales of pharmaceutical products on third-party platforms, offline pharmacy chain operation
and drug warehousing (the “ Permitted Business ”). However, it would be impracticable and
disruptive for Fangzhou Y unkang and Fangzhou Medicine to separate such applicable
Permitted Business from Fangzhou Y unkang and Fangzhou Medicine, and/or transfer it to the
New WFOE, for the following reasons:
(a) The Drug Trading License is a prerequisite for providing online retail pharmacy
services, and the transfer of offline pharmacy chain operation and drug warehousing
business would render the Drug Trading License invalid.
According to the Drug Administration Law of the PRC last revised and effective
from December 1, 2019 ()( “ Drug Administration
Law”), a drug trading license (“ Drug Trading License ”) is a prerequisite for
providing retail pharmacy services, and any entity conducting pharmacy operation
and holding the corresponding Drug Trading License shall, among other things, (i)
possess business premises, equipment, warehousing facilities and a hygienic
environment commensurate with the drugs to be distributed by it, (ii) employ
pharmacists or other pharmacy technicians with corresponding qualifications, and
(iii) have established management or staff corresponding to the drug trading
business (collectively, “ Pre-requisite Requirements ”). Within the Group, only
Fangzhou Y unkang and Fangzhou Medicine are eligible for the application and
holding of the Drug Trading License applicable to retail pharmacy service and
pharmacy chain operation, as they could satisfy the Pre-requisite Requirements,
while other subsidiaries of the Group do not possess certain offline pharmacy and
warehousing facilities to apply for or hold the Drug Trading License applicable to
retail pharmacy service and pharmacy chain operation in accordance with the
relevant PRC laws. To apply for or maintain the validity of a Drug Trading License,
the operator shall possess certain offline pharmacy and warehousing facilities in
accordance with Drug Administration Law and other relevant drug retail regulations.
Therefore, a transfer of Fangzhou Y unkang or Fangzhou Medicine’s offline
pharmacy chain operation and drug warehousing business to the New WFOE would
render them unable to provide any online retail pharmacy services.
CONTRACTUAL ARRANGEMENTS
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(b) Transfer of drug trading business on third-party platforms to the New WFOE would
have a material adverse impact and interruption on the operation of the Group as a
whole.
The Pre-requisite Requirements must be satisfied for operators engaged in drug
trading business with a Drug Trading License. Within the Group, only Fangzhou
Y unkang and Fangzhou Medicine are eligible for the application and/or holding of
the Drug Trading License applicable to retail pharmacy service and pharmacy chain
operation, which is a prerequisite for conducting online drug trading business on
third-party platforms. Accordingly, transferring such drug trading business operating
on third-party platforms to the New WFOE would result in violation of relevant laws
and regulations due to the lack of Drug Trading License. In addition, with respect
to the online stores operated by Fangzhou Medicine on third party platforms,
pursuant to the published policy of, or discussion of the Company with, such
platforms, the Company understands that such platforms prohibit any change in the
operating entity of the online stores, using the New WFOE to launch new online
stores would result in a loss of customers and have a material adverse impact on the
operation of the Group, jeopardizing our sales and brand reputation.
Based on the above, it would be impracticable and disruptive for the New WFOE to
directly or indirectly hold equity interests in Fangzhou Medicine and Fangzhou Y unkang and
then apply for the Drug Trading Licenses and engage in online sales of pharmaceutical
products on third party platforms, offline pharmacy chain operation and drug warehousing.
NARROWLY TAILORED CONTRACTUAL ARRANGEMENTS
In light of the above, we believe that the Contractual Arrangements are narrowly tailored
to achieve our business purposes and minimize the potential conflict with relevant PRC laws
and regulations and to enable the Group to consolidate the financial results of our Consolidated
Affiliated Entities which are engaged in the operation of the Relevant Businesses.
We will make periodic inquiries with relevant PRC authorities to understand any new
regulatory development and will unwind and terminate the Contractual Arrangements as soon
as practicable to the extent permissible and we will directly hold the maximum percentage of
ownership interests permissible under the applicable PRC laws and regulations if the
applicable PRC laws and regulations allow foreign ownership.
CONTRACTUAL ARRANGEMENTS
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CONTRACTUAL ARRANGEMENTS
The following simplified diagram illustrates the flow of economic benefits from our Consolidated Affiliated Entities to our Group stipulated
under the Contractual Arrangements.
Fangzhou Yunkang
Guangzhou Fangming
Investment Enterprise
(Limited Partnership)(2)
Shenzhen
Kaichuang Lianyu
Technology
Consulting Co., Ltd.(2)
Beijing Yiershan
Technology Co., Ltd.(2)
Offshore
Onshore
Provide consultation services
47%
33%
20%
Fangzhou Inc.
Fangzhou Limited
100%
New WFOE
100%
Pay consultation service fees
Fangzhou
Health Beijing Fangyixing
Fangzhou Information
100%
100% 100%
70%
Qishi
Hospital Fangzhou Media
30% 100% 100% 100% 100% 100%
Fangzhou
Internet Hospital
Fangzhou
Medicine
Xinjiang
Internet Hospital
50% Yunyi Information
Jingtai Hospital(1)
Liu Xiukui(1)
50%
70%
Promoter
30%
100%
Fangzhou
Pharmaceutical
100% 100%
Chengdu Fangyixing
Information
Technology Co., Ltd.
51% 100%
Fangzhou Beijing
Heilongjiang
Chengguang Lanjiang
Pharmaceutical
Retail Co., Ltd.
Shanghai Fangyixing
Information
Technology Co., Ltd.
Ruishi
Hospital
Notes:
(1) Liu Xiukui is the registered promoter of Jingtai Hospital and a nominee of the New WFOE and Fangzhou Y unkang. The New WFOE and Fangzhou Y unkang each h olds 70%
and 30% of the registered capital and promoter’s interest in Jingtai Hospital.
(2) Guangzhou Fangming Investment Enterprise (Limited Partnership) is a limited partnership wholly-owned by Mr. Xie. Shenzhen Kaichuang Lianyu Te chnology Consultancy Co.,
Ltd. is a limited liability company owned as to 55% and 45%, respectively, by Zhang Xinwei ( ੵอਃ) and Wang Wenchao ( ӓၲ൴), each of whom holds equity interest in
Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. as a nominee appointed by Crescent Point. Beijing Yiershan Technology Co., Ltd. is a limi ted liability company
wholly owned by Y ang Jinghua ( เหശ), the mother of Mr. Zhou, who holds equity interest in Beijing Yiershan Technology Co., Ltd. as the nominee on behalf of Mr. Zhou.
CONTRACTUAL ARRANGEMENTS
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SUMMARY OF THE MATERIAL TERMS OF THE CONTRACTUAL
ARRANGEMENTS
Exclusive Service Agreement
As part of the Contractual Arrangements, New WFOE and Fangzhou Y unkang entered
into the exclusive consultancy and service agreement on June 19, 2020 (the “ Exclusive Service
Agreement ”). Pursuant to the Exclusive Service Agreement, the New WFOE agreed to be
engaged as the exclusive provider to Fangzhou Y unkang of technical support, consultation and
other services for a monthly service fee, including the following services:
(i) provision of the following technology development, transfer and consultancy
services:
a. development of technology in respect of new business;
b. supporting and maintenance of technology in respect of current business;
c. regular updating of all business contents; and
d. provision and maintenance of all hardware and network necessarily requested
for operation of business;
(ii) staff training and on-board training services;
(iii) public relations services;
(iv) market survey, research and consultancy services;
(v) short-term and mid-term market development and market planning services;
(vi) human resources management and internal information management;
(vii) development, updating and daily maintenance of network;
(viii) the use of any relevant software and trademarks legally owned by the New WFOE;
and
(ix) other services provided by the New WFOE from time to time based on the business
requirements and the services capacity of the New WFOE.
Pursuant to the Exclusive Service Agreement, the New WFOE has the exclusive and
complete proprietary rights to all intellectual properties developed in the performance of
obligations under the Exclusive Service Agreement, whether developed by Fangzhou Y unkang,
the New WFOE, or jointly.
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The effective period of the Exclusive Service Agreement shall be ten years, and the
Exclusive Service Agreement shall be automatically renewed for a term of ten years upon
expiration of the effective period. Notwithstanding the above arrangement, the New WFOE
shall be entitled to exercise its unilateral right to terminate by prior written notice to Fangzhou
Y unkang based on its own judgment. Subject to applicable laws and unless stated otherwise in
the Exclusive Service Agreement, Fangzhou Y unkang does not have the right to unilaterally
terminate the agreement.
Exclusive Option Agreement
As part of the Contractual Arrangements, New WFOE, Fangzhou Y unkang and the
Fangzhou Y unkang Registered Shareholders entered into the exclusive option agreement on
June 19, 2020 (the “ Exclusive Option Agreement ”). Pursuant to the Exclusive Option
Agreement, the New WFOE (or any designee) was granted an irrevocable, unconditional and
exclusive right to purchase all or any of the equity interest in and/or assets of Fangzhou
Y unkang held at present or in the future for a consideration equivalent to the lowest price
permitted under the PRC laws at the time of purchasing. Subject to the relevant PRC laws and
regulations, the Fangzhou Y unkang Registered Shareholders shall compensate the New WFOE
with an amount equivalent to any purchase price, or profits, distributions, dividends or bonus
received from the New WFOE.
Fangzhou Y unkang and the Fangzhou Y unkang Registered Shareholders, among other
things, have covenanted that:
(i) without the prior written consent of the New WFOE, they shall not in any manner
supplement, change or amend the constitutional documents of Fangzhou Y unkang,
increase or decrease their registered capital, or change the structure of their
registered capital in other manner;
(ii) they shall maintain Fangzhou Y unkang’s corporate existence in accordance with
good financial and business standards and practices, obtain and maintain all
necessary government licenses and permits by prudently and effectively operating
their business and handling their affairs;
(iii) without the prior written consent of the New WFOE, they shall not at any time
following the signing of the Exclusive Option Agreement sell, transfer, pledge or
dispose of in any manner any assets of Fangzhou Y unkang (except for disposal of
assets generated from ordinary course of business) or legal or beneficial interest in
the business or revenues of Fangzhou Y unkang, or allow the encumbrance thereon
of any security interest;
(iv) without the prior written consent of the New WFOE, Fangzhou Y unkang shall not
incur, inherit, guarantee or assume any debt, except for debts incurred in the
ordinary course of business;
CONTRACTUAL ARRANGEMENTS
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--- page 319 ---
(v) Fangzhou Y unkang shall always operate all of its business during the ordinary
course of business to maintain their asset value and refrain from any action/omission
that may adversely affect the Fangzhou Y unkang’s operating status and asset value;
(vi) without the prior written consent of the New WFOE, they shall not cause Fangzhou
Y unkang to execute any material contract with a value above RMB100,000, except
the contracts executed in the ordinary course of business;
(vii) without the prior written consent of the New WFOE, they shall not cause Fangzhou
Y unkang to provide any person with any loan or credit except those provided in the
ordinary course of business;
(viii) they shall provide the New WFOE with information on Fangzhou Y unkang’s
business operations and financial condition at the request of the New WFOE;
(ix) if requested by the New WFOE, they shall procure and maintain insurance in respect
of Fangzhou Y unkang’s assets and business from an insurance carrier acceptable to
the New WFOE, at an amount and type of coverage typical for companies that
operate similar businesses;
(x) without the prior written consent of the New WFOE, they shall not cause or permit
Fangzhou Y unkang to merge, consolidate with, acquire or invest in any person;
(xi) they shall immediately notify the New WFOE of the occurrence or possible
occurrence of any litigation, arbitration or administrative proceedings relating to
Fangzhou Y unkang’s assets, business or revenue;
(xii) to maintain the ownership by Fangzhou Y unkang of all of its assets, they shall
execute all necessary or appropriate documents, take all necessary or appropriate
actions and file all necessary or appropriate complaints or raise necessary and
appropriate defenses against all claims;
(xiii) without the prior written consent of the New WFOE, Fangzhou Y unkang shall not
in any manner distribute dividends to its shareholders, provided that upon the
written request of the New WFOE, Fangzhou Y unkang shall immediately distribute
all distributable profits to its shareholders;
(xiv) at the request of the New WFOE, they shall appoint any persons designated by the
New WFOE as the directors, executive directors or shareholders representative
supervisors of Fangzhou Y unkang; and
(xv) unless otherwise mandatorily required by the PRC laws, Fangzhou Y unkang shall
not be dissolved or liquidated without prior written consent by the New WFOE.
CONTRACTUAL ARRANGEMENTS
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--- page 320 ---
In addition, the Fangzhou Y unkang Registered Shareholders, among other things, have
covenanted that:
(i) without the written consent of the New WFOE, they shall not sell, transfer, pledge
or dispose of in any other manner the legal or beneficial interest in Fangzhou
Y unkang, or allow the encumbrance thereon of any security interest, except for
pledge created in accordance with the Equity Pledge Agreement;
(ii) without the written consent of the New WFOE, they shall procure the shareholders’
meeting and/or board meeting of Fangzhou Y unkang not to approve sell, transfer,
pledge or dispose of in any other manner the legal or beneficial interest in Fangzhou
Y unkang, or allow the encumbrance thereon of any security interest, except for
pledge created in accordance with the Equity Pledge Agreement; and
(iii) each of the Fangzhou Y unkang Registered Shareholders will transfer to the New
WFOE or its appointee(s) by way of gift any profit or dividend in accordance with
the PRC law.
The Exclusive Option Agreement shall remain effective until the New WFOE exercises
its unilateral right to terminate by prior written notice to Fangzhou Y unkang and the Fangzhou
Y unkang Registered Shareholders. Subject to applicable laws and unless stated otherwise in the
Exclusive Option Agreement, Fangzhou Y unkang and the Fangzhou Y unkang Registered
Shareholders do not have the right to unilaterally terminate the agreement.
Equity Pledge Agreement
As part of the Contractual Arrangements, New WFOE, Fangzhou Y unkang and the
Fangzhou Y unkang Registered Shareholders entered into the equity pledge agreement on June
19, 2020 (the “ Equity Pledge Agreement ”). Pursuant to the Equity Pledge Agreement, the
Fangzhou Y unkang Registered Shareholders agreed to pledge all their respective equity
interests in Fangzhou Y unkang that they own, including any interest or dividend paid for the
shares, to the New WFOE, as a security interest to guarantee the performance of contractual
obligations by Fangzhou Y unkang and the Fangzhou Y unkang Registered Shareholders under
these agreements, the Exclusive Option Agreement, the Exclusive Service Agreement and the
Powers of Attorney.
Should an event of default (as provided in the Equity Pledge Agreement) occur, unless it
is rectified or waived, the New WFOE shall have the right to exercise all such rights as a
secured party under any applicable PRC laws and the Equity Pledge Agreement.
The pledges under the Equity Pledge Agreement have been duly registered with the
relevant PRC legal authority pursuant to the PRC laws and regulations.
CONTRACTUAL ARRANGEMENTS
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The Equity Pledge Agreement will remain effective until all obligations under the
Exclusive Option Agreement, the Exclusive Service Agreement and the Powers of Attorney
have been fully performed.
Powers of Attorney
As part of the Contractual Arrangements, each of the Fangzhou Y unkang Registered
Shareholders has executed a power of attorney on June 19, 2020 (collectively, the “ Powers of
Attorney ”). Pursuant to the Powers of Attorney, each of the Fangzhou Y unkang Registered
Shareholders irrevocably appointed the New WFOE and their designated persons as their
attorneys-in-fact to exercise on its behalf, and agreed and undertook not to exercise, any and
all right that it has in respect of its equity interests in Fangzhou Y unkang, including without
limitation:
(i) to convene and attend shareholders’ meetings of Fangzhou Y unkang;
(ii) to file documents with the relevant companies registry;
(iii) to exercise all shareholder’s rights and shareholder’s voting rights in accordance
with law and the constitutional documents of Fangzhou Y unkang, including but not
limited to the sale, transfer, pledge or disposal of any or all of the equity interests
in Fangzhou Y unkang;
(iv) to execute any and all written resolutions and meeting minutes on behalf of such
shareholder; and
(v) to nominate or appoint the legal representatives, directors, supervisors, chief
executive officer and other senior management of Fangzhou Y unkang.
As a result of the Powers of Attorney, we, through the New WFOE, are able to exercise
management control over the activities that most significantly impact the economic
performance of Fangzhou Y unkang.
The Powers of Attorney also provided that, in order to avoid potential conflicts of interest,
where the Fangzhou Y unkang Registered Shareholders are officers or directors of our Group,
the Powers of Attorney are granted in favour of other unrelated officers or Directors of our
Group.
Further, the Powers of Attorney shall remain effective for so long as each shareholder
holds equity interest in Fangzhou Y unkang.
CONTRACTUAL ARRANGEMENTS
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Spouse Undertakings
The spouse of each of Mr. Xie, Mr. Wang Wenchao ( ӓၲ൴) and Ms. Y ang Jinghua ( เ
หശ), being the shareholders of the Fangzhou Y unkang Registered Shareholders (collectively,
the “ Ultimate Beneficial Shareholders ”), has signed an undertaking on June 19, 2020
(collectively, the “ Spouse Undertakings ”) to the effect, among other things, that:
(i) he/she will not make any claim against any equity interests held by his/her spouse
as a registered shareholder in Fangzhou Y unkang;
(ii) should he/she by any reason hold any equity interest in Fangzhou Y unkang, he/she
will be bound by, as amended from time to time, the Exclusive Option Agreement,
the Equity Pledge Agreement and the Powers of Attorney. He/she undertook to
comply with the obligations of Fangzhou Y unkang’s shareholders as set out in the
aforementioned agreements, and for this purpose, to execute agreements on
substantially similar terms as the aforementioned agreements upon New WFOE’s
request; and
(iii) each spouse will enter into all necessary documents and take all necessary actions
to ensure the due performance of the Contractual Arrangements as amended from
time to time.
Commitment Letters
Each of the Ultimate Beneficial Shareholders has issued a commitment letter
(collectively, the “ Commitment Letters ”) dated April 6, 2023 to Fangzhou Y unkang and the
New WFOE, respectively. According to the Commitment Letters, each of the Ultimate
Beneficial Shareholders (i) acknowledges the establishment of the Exclusive Service
Agreement, Exclusive Option Agreement, Equity Pledge Agreement, Powers of Attorney
(collectively, the “ VIE Agreements ”) and recognizes the content and arrangements under the
VIE Agreements; (ii) undertakes not to do anything that violates the VIE Agreements; (iii)
undertakes not to enjoy any actual beneficial interest in Fangzhou Y unkang by virtue of
indirectly holding equity interest in Fangzhou Y unkang; (iv) would make every effort to assist
in and to ensure the Fangzhou Y unkang Registered Shareholders’ performance of obligations
or liabilities under the VIE Agreements, including but not limited to the adoption of internal
resolutions, the assistance in business registration, etc.; (v) undertakes that, except with written
consent or instruction from the New WFOE or its parent company, the Ultimate Beneficial
Shareholders would not do anything that may change, affect or alter the terms or arrangements
of the VIE Agreements, or refuse to perform any obligations or liabilities under the VIE
agreements, or terminate the VIE Agreements, or make any claims against or decide to dispose
of any shares, assets, business in Fangzhou Y unkang Registered Shareholders, Fangzhou
Y unkang or Fangzhou Y unkang’s subsidiaries or participating companies; and (vi) undertakes
to use all efforts to procure Fangzhou Y unkang Registered Shareholders’ compliance with any
subsequent modification, supplement, termination or other arrangement in connection with the
VIE Agreements.
CONTRACTUAL ARRANGEMENTS
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Dispute Resolution
Each of the agreements under the Contractual Arrangements contains a dispute resolution
provision. Pursuant to such provision, in the event of any dispute arising from the performance
of or relating to the Contractual Arrangements, any party has the right to submit the relevant
dispute to the Shenzhen Court of International Arbitration for arbitration, in accordance with
the then effective arbitration rules. The arbitration shall be conducted in Shenzhen and the
language used during the arbitration shall be Chinese. The arbitration award shall be final and
binding on all parties. The dispute resolution provisions in the agreements under the
Contractual Arrangements also provide that the arbitral tribunal may award remedies over the
shares or assets of Fangzhou Y unkang or injunctive relief (e.g. limiting the conduct of business,
limiting or restricting transfer or sale of shares or assets) or order the winding up of Fangzhou
Y unkang; any party may apply to the courts of Hong Kong, the Cayman Islands (being the
place of incorporation of our Company), the PRC and the places where the principal assets of
Fangzhou Y unkang are located for interim remedies or injunctive relief.
However, our PRC Legal Advisor has advised that the above provisions may not be
enforceable under the PRC laws. For instance, the arbitral tribunal has no power to grant such
injunctive relief, nor will it be able to order the winding up of Fangzhou Y unkang pursuant to
the current PRC laws. In addition, interim remedies or enforcement order granted by overseas
courts such as Hong Kong and the Cayman Islands may not be recognizable or enforceable in
the PRC. Even if the abovementioned provisions may not be enforceable under the PRC laws,
the remaining provisions of the dispute resolution clauses are legal, valid and binding on the
parties to the agreement under the Contractual Arrangements.
As a result of the above, in the event that Fangzhou Y unkang or the Fangzhou Y unkang
Registered Shareholders breach any of the Contractual Arrangements, we may not be able to
obtain sufficient remedies in a timely manner, and our ability to exert effective control over our
Consolidated Affiliated Entities and conduct our business could be materially and adversely
affected. See “Risk Factors—Risks Relating to our Contractual Arrangements” in this
prospectus for further details.
Succession
According to the terms of the Exclusive Option Agreement and the Equity Pledge
Agreement, the Fangzhou Y unkang Registered Shareholders have undertaken that the
provisions set out in the Exclusive Option Agreement and the Equity Pledge Agreement are
also binding on the successors of the Fangzhou Y unkang Registered Shareholders.
According to the terms of the Powers of Attorney and as confirmed by our PRC Legal
Advisor, the Fangzhou Y unkang Registered Shareholders have undertaken that they have
carried out all appropriate measures and executed all necessary documents, such that in the
event of their loss of capacity, bankruptcy or under other circumstance which would affect their
exercise of equity interest in Fangzhou Y unkang, their successor who, as a result, obtains
shareholding or relevant rights in Fangzhou Y unkang would not be able to affect or impede the
performance of obligations under the relevant agreements.
CONTRACTUAL ARRANGEMENTS
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--- page 324 ---
In addition, each of the spouses of the ultimate beneficial owner of the Fangzhou Y unkang
Registered Shareholders have executed an irrevocable undertaking dated June 19, 2020,
respectively. See “—Spouse Undertakings” for details.
Conflict of Interest
Each of the Fangzhou Y unkang Registered Shareholders has given their irrevocable
undertakings in the Powers of Attorney under the Contractual Arrangements which address
potential conflicts of interests that may arise in relation to the Contractual Arrangements. See
“—Powers of Attorney” for details.
Loss Sharing
None of the agreements constituting the Contractual Arrangements provides that the
Company, the New WFOE or other PRC subsidiaries of ours, are obligated to share the losses
of Fangzhou Y unkang, but if Fangzhou Y unkang suffers any losses or material difficulties of
business, the New WFOE may provide financial support as permitted under the PRC laws at
its discretion to Fangzhou Y unkang under the terms of the Exclusive Business Cooperation
Agreement. Further, Fangzhou Y unkang is a limited liability company and shall be solely liable
for its own debts and losses with assets and properties owned by it.
Under the PRC laws and regulations, the Company or the New WFOE are not expressly
required to share the losses of Fangzhou Y unkang or provide financial support to Fangzhou
Y unkang. Despite the foregoing, given that the Group conducts the Relevant Businesses in the
PRC through Fangzhou Y unkang which holds the requisite PRC licenses and approvals, and
that Fangzhou Y unkang’s results of operations and assets and liabilities are consolidated into
the Group’s results of operations and assets and liabilities under the applicable accounting
principles, the Company’s business, financial condition and results of operations would be
adversely affected if Fangzhou Y unkang suffered losses.
Liquidation
Pursuant to the Exclusive Option Agreement and the Powers of Attorney, in the event of
a mandatory liquidation required by the PRC laws, the Fangzhou Y unkang Registered
Shareholders shall give the proceeds they received from liquidation as a gift to the New WFOE
(or its designee(s) in the case of the Contractual Arrangements) to the extent permitted by the
PRC laws.
Insurance
Our Company does not maintain an insurance policy to cover the risks relating to the
Contractual Arrangements.
Confirmation on Interference and Encumbrance
As of the Latest Practicable Date, we had not encountered any interference or
encumbrance from any PRC governing bodies in operating its businesses through our
Consolidated Affiliated Entities under the Contractual Arrangements.
CONTRACTUAL ARRANGEMENTS
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Safeguards for the Interest of Our Shareholders
The Company is of the view that Fangzhou Y unkang Registered Shareholders would not
compromise the level of protection afforded to our Shareholders in the control of Fangzhou
Y unkang and/or enforcement of the Contractual Arrangements based on the following reasons:
Each of the Fangzhou Y unkang Registered Shareholders has been duly incorporated and
is validly existing under the PRC laws. As advised by our PRC Legal Advisor, each of
Fangzhou Y unkang Registered Shareholders enjoys civil rights and assumes civil obligations
independently as a legal entity in accordance with the PRC laws. Besides, the Company’s PRC
Legal Advisor is of the opinion that each of the VIE Agreements is binding on the parties
thereto and none of them would fall within the circumstances which would render a contract
void as stipulated in the PRC Civil Code. See “—Legality of the Contractual Arrangements”
for details. Therefore, each of Fangzhou Y unkang Registered Shareholders shall be bound by
the VIE Agreements and undertake obligations accordingly.
To further ensure that the Ultimate Beneficial Shareholders would not compromise the
level of protection afforded to our Shareholders in the control of Fangzhou Y unkang and the
enforcement of the Contractual Arrangements, each of the Ultimate Beneficial Shareholders
has issued a commitment letter dated April 6, 2023 to Fangzhou Y unkang and the New WFOE,
respectively. See “—Commitment Letters” for details.
In addition, the spouse of each of the Ultimate Beneficial Shareholders has signed an
undertaking to ensure they would not affect the Contractual Arrangements and will take all
necessary actions to ensure the due performance of the Contractual Arrangements. See
“—Spouse Undertakings” for details.
Therefore, the Company is of the view that, Fangzhou Y unkang Registered Shareholders
would not compromise the level of protection afforded to our Shareholders in the control of
Fangzhou Y unkang and/or enforcement of the Contractual arrangements.
Safeguards for the Interest of the Company
Our PRC Legal Advisor is of the view that, the Group’s current Contractual Arrangements
provide sufficient safeguards for the interest of the Company and its subsidiaries and it is not
necessary to have the subsidiaries of Fangzhou Y unkang be included as parties to the VIE
Agreements, based on the following reasons:
Fangzhou Y unkang, as the direct controlling shareholders, has direct equity control over
its subsidiaries, and could make decisions and achieve effective control over the business,
operations, assets and other equities or interests of its subsidiaries through its rights as a
shareholder, such as the right to its subsidiaries’ distributions of dividends directly as the direct
shareholder under PRC laws and the subsidiaries’ articles of associations.
CONTRACTUAL ARRANGEMENTS
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Pursuant to the Exclusive Service Agreement, services provided by the New WFOE to
Fangzhou Y unkang shall also apply to the subsidiaries controlled by Fangzhou Y unkang,
Fangzhou Y unkang shall procure its subsidiaries to perform their obligations under the
Exclusive Service Agreement. Pursuant to the Equity Pledge Agreement, relevant persons shall
not sell, transfer, pledge or dispose of any assets, or business (other than in the ordinary course
of business operations), or any legal or beneficial interest in the income, or permit the creation
of any security interest therein of Fangzhou Y unkang or any of its subsidiaries at any time after
the execution of the agreement by any means without the prior written consent of the New
WFOE. Therefore, the subsidiaries of Fangzhou Y unkang would be bound by the VIE
Agreements to exercise their rights and perform their obligations thereunder.
The Company is of the view that it is not necessary to have the subsidiaries of Fangzhou
Y unkang be included as parties to the VIE Agreements, otherwise, (i) any future amendment,
supplement, disposition or other arrangement to the VIE Agreements or the Contractual
Arrangements shall be approved and signed by all the subsidiaries, which is time consuming
and repetitive, and such amendment, supplement, disposition or arrangement shall still require
approval from Fangzhou Y unkang, as the direct controlling shareholders to the subsidiaries,
that makes no difference comparing with subsidiaries’ not being parties to the VIE Agreements;
(ii) where the equity of the subsidiaries is pledged or the shareholders’ rights are entrusted, the
Company’s customers or partners may doubt the stability of such subsidiaries’ shareholding
structure and worry about relevant business risk, which may have adverse impact to the
operation of the Group; and (iii) any inclusion of new subsidiaries under Fangzhou Y unkang
would require the VIE Agreements to be re-executed among all relevant parties concerned,
which would be extremely cumbersome as the Group’s operating scale and organizational
structure grow over time.
To further providing safeguards for the interest of the Company or its subsidiaries, each
of the Ultimate Beneficial Shareholders has issued a commitment letter dated April 6, 2023 to
Fangzhou Y unkang and the New WFOE, respectively. See “—Commitment Letters” for details.
Therefore, our PRC Legal Advisor is of the view that the Group’s current Contractual
Arrangements provide sufficient safeguards for the interest of the Company or its subsidiaries,
and it is not necessary to have the subsidiaries of Fangzhou Y unkang be included as parties to
the VIE Agreements.
CONTRACTUAL ARRANGEMENTS
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LEGALITY OF THE CONTRACTUAL ARRANGEMENTS
Based on the above, our PRC Legal Advisor is of the opinion that the Contractual
Arrangements are narrowly tailored to minimize the potential conflict with the relevant PRC
laws and regulations and that:
(i) parties to the Contractual Arrangements have obtained all necessary approvals and
authorizations to execute and perform the Contractual Arrangements;
(ii) parties to each of the agreements are entitled to execute the agreements and perform
their respective obligations thereunder. Each of the agreements is binding on the
parties thereto and none of them would fall within the contract void circumstances
as stipulated in the Civil Code of People’s Republic of China ( ʕശɛ͏΍ձ਷͏
Պ)( “ Civil Code ”). Pursuant to Articles 144, 146, 153 and 154 of the Civil
Code, a contract is void if the civil juristic act: (i) is performed by a person who has
no capacity for performing civil juristic acts; (ii) is performed by a person and
another person based on a false expression of intent; (iii) is in violation of the
mandatory provisions of laws or administrative regulations, unless such mandatory
provisions do not lead to invalidity of such a civil juristic act; (iv) offends the public
order or good morals; or (v) is conducted through malicious collusion between a
person who performs the act and a counterparty thereof and thus harms the lawful
rights and interests of another person;
(iii) none of the Contractual Arrangements violates any provisions of the articles of
association of Fangzhou Y unkang or the New WFOE;
(iv) the parties to the Contractual Arrangements are not required to obtain any approvals
or authorizations from the PRC governmental authorities, except that:
(a) the exercise of the option by the New WFOE of its right under the Exclusive
Option Agreement to acquire all or part of the equity interests in Fangzhou
Y unkang is subject to the approvals of, consent of, filing with and/or
registrations with the PRC governmental authorities;
(b) any share pledge contemplated under the Equity Pledge Agreement is subject
to the registration with the competent administration for market regulation; and
(c) the arbitration awards/interim remedies provided under the dispute resolution
provision of the Contractual Arrangements shall be recognized by PRC courts
before compulsory enforcement;
(v) the Contractual Arrangements is valid, legal and binding under the PRC laws and
regulations, and the adoption of the Contractual Arrangements does not constitute a
breach of the relevant PRC laws and regulations, except for the following provisions
regarding dispute resolution and the liquidating committee. See “—Dispute
Resolution” for details.
CONTRACTUAL ARRANGEMENTS
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However, we have been advised by our PRC Legal Advisor that there are uncertainties
regarding the interpretation and application of the current and future PRC laws and regulations
over the validity of the Contractual Arrangements, as well as whether we or our Consolidated
Affiliated Entities can obtain any of the approvals that may be required by PRC regulatory
authorities from time to time. Accordingly, there can be no assurance that the PRC regulatory
authorities will not take a view that is contrary to or otherwise different from the above
opinions of our PRC Legal Advisor in the future. See “Risk Factors—Risks Relating to our
Contractual Arrangements—If the PRC government finds that the contractual agreements that
establish the structure for operating certain of our business in China do not comply with
applicable PRC regulations, or if these regulations or the interpretation of existing regulations
change in the future, we could be subject to severe consequences, including the nullification
of the contractual arrangements and being forced to relinquish our interests in those
operations.”
Given that the Contractual Arrangements will constitute non-exempt continuing
connected transactions of our Company, a waiver has been sought from and has been granted
by the Stock Exchange, details of which are disclosed in the section headed “Connected
Transactions” in this Prospectus.
DEVELOPMENT IN THE PRC LEGISLATION ON FOREIGN INVESTMENT IN THE
PRC
The Foreign Investment Law
On January 1, 2020, the Foreign Investment Law which was adopted at the second session
of the thirteenth National People’s Congress came into force. The Foreign Investment Law
replaced the former foreign investment legal foundation in the PRC consisting of three laws:
the Sino-Foreign Equity Joint V enture Enterprise Law, the Sino-Foreign Cooperative Joint
V enture Enterprise Law and the Wholly Foreign-Invested Enterprise Law. On December 26,
2019, the State Council released the Implementation Rules to the Foreign Investment Law of
the PRC (ૢԷ) (the “ Foreign Investment Law
Implementing Regulations ”), which took effect on January 1, 2020. For details of the Foreign
Investment Law and the Foreign Investment Law Implementing Regulations, see “Regulatory
Overview—Regulations on Foreign Investment and Overseas Investment.”
Impact and Potential Consequences of the Foreign Investment Law on our Contractual
Arrangements
Conducting operations through contractual arrangements has been adopted by many
PRC-based companies, including us, to obtain and maintain necessary licenses and permits in
the industries that are currently subject to foreign investment restrictions or prohibitions in the
PRC. The Foreign Investment Law does not explicitly prohibit or restrict a foreign investor to
rely on contractual arrangements to control the majority of its business that is subject to foreign
investment restrictions or prohibitions in the PRC. As advised by our PRC Legal Advisor,
contractual arrangements are not specified as a form of foreign investment under the Foreign
CONTRACTUAL ARRANGEMENTS
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Investment Law or the Foreign Investment Law Implementation Regulations, and if future
laws, regulations and provisions do not prescribe contractual arrangements as a form of foreign
investment and relevant laws and regulations in respect of foreign investment remain
unchanged, our Contractual Arrangements as a whole and each of the agreements comprising
the Contractual Arrangements will not be affected, with an exception, for which, see “Risk
Factors—Risks Relating to our Contractual Arrangements—If the PRC government finds that
the contractual agreements that establish the structure for operating certain of our business in
China do not comply with applicable PRC regulations, or if these regulations or the
interpretation of existing regulations change in the future, we could be subject to severe
consequences, including the nullification of the contractual arrangements and being forced to
relinquish our interests in those operations.” In any event, we will take reasonable steps in
good faith to seek compliance with the Foreign Investment Law.
However, there are possibilities that future laws, administrative regulations and
provisions prescribed by the State Council may regard the Contractual Arrangements as a form
of foreign investment, at which time it will be uncertain whether the Contractual Arrangements
will be deemed to be in violation of the then effective foreign investment access requirements
and how the above-mentioned Contractual Arrangements will be handled. In addition, the
specific review standards by the relevant authorities determining the Contractual Arrangements
as a form of the foreign investment is unpredictable, and the interpretation or implementation
ultimately adopted by the relevant authorities of the Foreign Investment Law or the Foreign
Investment Law Implementation Regulations may be inconsistent with our PRC Legal
Advisors’ understanding.
ACCOUNTING ASPECTS OF THE CONTRACTUAL ARRANGEMENTS AND
CONSOLIDATION OF FINANCIAL RESULTS OF OUR CONSOLIDATED
AFFILIATED ENTITIES
According to HKFRS 10-Consolidated Financial Statements, a subsidiary is an entity that
is controlled by another entity (known as the parent). An investor controls an investee when it
is exposed, or has rights to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Although our Company does
not directly or indirectly own the Consolidated Affiliated Entities, the Contractual
Arrangements as mentioned above enable our Company to exercise control over the
Consolidated Affiliated Entities.
As a result of the Contractual Arrangements, our Company has obtained control of our
Consolidated Affiliated Entities through the New WFOE and, at our Company’s sole discretion,
can receive substantially all of the economic interest returns generated by our Consolidated
Affiliated Entities. Accordingly, our Consolidated Affiliated Entities’ results of operations,
assets and liabilities, and cash flows are consolidated into our Company’s financial statements.
CONTRACTUAL ARRANGEMENTS
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COMPLIANCE WITH THE CONTRACTUAL ARRANGEMENTS
Our Group has adopted the following measures to ensure the effective operation of our
Group with the implementation of the Contractual Arrangements and our compliance with the
Contractual Arrangements:
(i) major issues arising from the implementation and compliance with the Contractual
Arrangements or any regulatory enquiries from government authorities will be
submitted to our Board, if necessary, for review and discussion on an occurrence
basis;
(ii) our Board will review the overall performance of and compliance with the
Contractual Arrangements at least once a year;
(iii) our Company will disclose the overall performance and compliance with the
Contractual Arrangements in our annual reports; and
(iv) our Company will engage external legal advisors or other professional advisors, if
necessary, to assist the Board to review the implementation of the Contractual
Arrangements, review the legal compliance of the New WFOE and our Consolidated
Affiliated Entities to deal with specific issues or matters arising from the
Contractual Arrangements.
CONTRACTUAL ARRANGEMENTS
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CONTROLLING SHAREHOLDERS
Mr. Xie and Mr. Zhou (pursuant to the Concert Deed), together with Fangrong
Management Limited, Fangzhan Holdings L.P ., Xingyu Holdings L.P ., Celaeno Group Limited,
Silica Brothers Corp. and Asia Tech Investments Ltd., are acting together as a group of
Controlling Shareholders. Immediately following completion of the Global Offering (assuming
the weighted voting rights structure is cancelled and without taking into account the Shares
which may be allotted and issued upon the exercise of the Over-allotment Option), our ultimate
Controlling Shareholders, Mr. Xie (through Fangrong Management Limited, a limited liability
company wholly-owned by Mr. Xie, Fangzhan Holdings L.P . and Xingyu Holdings L.P ., each
a limited partnership whose general partner is Xingyu Inc., a company wholly owned by Mr.
Xie) and Mr. Zhou (through his wholly-owned companies, i.e. Celaeno Group Limited and
Silica Brothers Corp.) will indirectly hold 276,605,527 Shares and 236,624,057 Shares in our
Company, representing approximately 20.64% and 17.65% of shareholding interest in the
Company, respectively.
Asia Tech Investments Ltd. is a platform holding the underlying incentive shares granted
to our Directors and senior management in the total amount of 116,875,898 Class A Ordinary
Shares under the RSU Scheme. As approximately 51.34% and 48.41% of interest in Asia Tech
Investments Ltd. were held by Mr. Xie and Mr. Zhou, respectively, each of Mr. Xie and Mr.
Zhou is deemed to be interested in the Shares of the Company held by Asia Tech Investments
Ltd. in accordance with SFO, representing approximately 8.72% of shareholding interest in the
Company immediately following the completion of the Global Offering (assuming that the
Over-allotment Option is not exercised).
On June 12, 2024, Mr. Xie and Mr. Zhou were conferred by Tech-Med Investments (S)
Pte. Ltd. to exercise the voting rights attached to 138,430,610 Shares held by Tech-Med
Investments (S) Pte. Ltd. through a deed of voting proxy, representing approximately 10.33%
of shareholding interest in the Company immediately following the completion of the Global
Offering. The voting proxy arrangement will take effect immediately before the Listing. For
details, see “History, Reorganization and Corporate Structure—Deed of V oting Proxy.”
Therefore, immediately following completion of the Global Offering (assuming the
weighted voting rights structure is cancelled and without taking into account the Shares which
may be allotted and issued upon the exercise of the Over-allotment Option), Mr. Xie and Mr.
Zhou (together with Fangrong Management Limited, Fangzhan Holdings L.P ., Xingyu
Holdings L.P ., Celaeno Group Limited, Silica Brothers Corp. and Asia Tech Investments Ltd.)
as a group of Controlling Shareholders, by virtue of their shareholding together with the voting
proxy conferred upon them as mentioned above, will control an aggregate of 768,536,092
Shares, representing approximately 57.34% of shareholding interest in our Company.
Please see the section headed “Substantial Shareholders” for details of the shareholding
interest of our Controlling Shareholders.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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COMPETITION
As of the Latest Practicable Date, none of the Controlling Shareholders and their
respective close associates had any interest in any business that competes or is likely to
compete, either directly or indirectly with our Group’s business, which would require
disclosure under Rule 8.10 of the Listing Rules.
INDEPENDENCE FROM CONTROLLING SHAREHOLDERS
Having considered the following factors, our Directors are satisfied that we are capable
of carrying on our business independently from our Controlling Shareholders and their close
associates after the Listing.
Management Independence
Our business is managed and conducted by our Board and senior management. Upon
Listing, our Board will consist of seven Directors comprising three executive Directors, one
non-executive Director and three independent non-executive Directors. For more information,
please see the section headed “Directors and Senior Management.”
Immediately following completion of the Global Offering, Mr. Xie and Mr. Zhou will
hold directorships in our Controlling Shareholders and their respective close associates as set
out below:
Our Company Our Controlling Shareholders
Name Positions Responsibilities Positions Responsibilities
Mr. Xie Executive
Director
Overall business
management of
the Group
Sole director of
Fangrong
Management
Limited
As confirmed by
Mr. Xie, the
company is
special purpose
vehicle for
investment
holding
purpose.
Mr. Zhou Executive
Director
Strategic
planning,
operation and
investment and
financing of the
Group
Sole director of
each Celaeno
Group Limited
and Silica
Brothers Corp.
As confirmed by
Mr. Zhou, these
companies are
special purpose
vehicles for
investment
holding
purpose.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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Our Directors consider that our Board as a whole and members of the senior management
are able to perform their roles in our Group independently and that our Group is capable of
managing our business independently from the Controlling Shareholders and their close
associates. We consider that the roles of Mr. Xie and Mr. Zhou as the Controlling Shareholders
will not materially impact their abilities to discharge their duties of skill, care and diligence to
our Group for the following reasons:
(a) each Director is aware of his/her fiduciary duties as a director which require, among
other things, that he/she acts for the benefit and in the interest of our Company and
does not allow any conflict between his/her duties as a Director and his/her personal
interests;
(b) our daily management and operations are carried out by a senior management team,
all of whom have substantial experience in the industry in which our Company is
engaged, and will therefore be able to make business decisions that are in the best
interests of our Group;
(c) we have three independent non-executive Directors and certain matters of our
Company must always be referred to the independent non-executive Directors for
review;
(d) in the event that there is a potential conflict of interest arising out of any transaction
to be entered into between our Group and our Directors or their respective
associates, the interested Director(s) is required to declare the nature of such interest
before voting at the relevant Board meetings of our Company in respect of such
transactions; and
(e) we have adopted a series of corporate governance measures to manage conflicts of
interest, if any, between our Group and our Controlling Shareholders which would
support our independent management. Please see “—Corporate Governance
Measures” in this section for further information.
Based on the above, our Directors believe that our Board as a whole and together with our
senior management team are able to perform the managerial role independently from our
Controlling Shareholders.
Operational Independence
Our Group is not operationally dependent on the Controlling Shareholders. Our Group
(through our subsidiaries and Consolidated Affiliated Entities) holds all material licenses and
owns all relevant intellectual properties necessary to carry on our business. We have sufficient
capital, facilities, equipment and employees to operate our business independently from our
Controlling Shareholders. We also have independent access to our customers and an
independent management team to operate our business.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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Based on the above, our Directors believe that we are able to operate independently of our
Controlling Shareholders.
Financial Independence
We have independent internal control and accounting systems. We also have an
independent finance department responsible for discharging the treasury function. We are
capable of obtaining financing from third parties, if necessary, without reliance on our
Controlling Shareholders. As of the Latest Practicable Date, there were no outstanding loans
or guarantees provided by, or granted to, our Controlling Shareholders or their respective close
associates.
Based on the above, our Directors are of the view that they and our senior management
are capable of carrying on our business independently of, and do not place undue reliance on,
our Controlling Shareholders and their respective close associates.
CORPORATE GOVERNANCE MEASURES
The Company and the Directors are committed to upholding and implementing the
highest standards of corporate governance and recognize the importance of protecting the
rights and interests of all Shareholders, including the rights and interests of our minority
Shareholders.
We have adopted the following measures to ensure good corporate governance standards
and to avoid potential conflicts of interest between our Group and our Controlling
Shareholders:
(a) under the Articles, where the Company has knowledge that any Shareholder is,
under the Listing Rules, required to abstain from voting on any particular resolution
of the Company or restricted to vote only for or only against any particular
resolution of the Company, any votes cast by or on behalf of such Shareholder in
contravention of such requirement or restriction shall not be counted;
(b) our Company has established internal control mechanisms to identify connected
transactions. Upon the Listing, if our Company enters into connected transactions
with our Controlling Shareholders or any of their associates, our Company will
comply with the applicable Listing Rules;
(c) the independent non-executive Directors will review, on an annual basis, whether
there are any conflicts of interests between the Group and our Controlling
Shareholders and provide impartial and professional advice to protect the interests
of our minority Shareholders;
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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(d) our Controlling Shareholders will undertake to provide all information necessary,
including all relevant financial, operational and market information and any other
necessary information as required by the independent non-executive Directors for
the purpose of their annual review;
(e) our Company will disclose decisions on matters reviewed by the independent
non-executive Directors either in its annual reports or by way of announcements as
required by the Listing Rules;
(f) where our Directors reasonably request the advice of independent professionals,
such as financial advisors, the appointment of such independent professionals will
be made at our Company’s expense;
(g) we have appointed Somerley Capital Limited as our compliance advisor to provide
advice and guidance to us in respect of compliance with the applicable laws and
regulations, as well as the Listing Rules, including various requirements relating to
corporate governance; and
(h) we have established our audit committee, remuneration committee and nomination
committee with written terms of reference in compliance with the Listing Rules and
the Code on Corporate Governance and Corporate Governance Report in Appendix
C1 to the Listing Rules. All of the members of our audit committee, including the
chairman, are independent non-executive Directors.
Based on the above, our Directors are satisfied that sufficient corporate governance
measures have been put in place to manage conflicts of interest that may arise between our
Group and our Controlling Shareholders, and to protect our minority Shareholders’ interests
after the Listing.
RELATIONSHIP WITH THE CONTROLLING SHAREHOLDERS
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OVERVIEW
We have entered into certain agreements and arrangements with certain individual and
entities that will, upon the Listing, become our connected persons (as defined under Chapter
14A of the Listing Rules). Following the Listing, the transactions contemplated under such
agreements will constitute our continuing connected transactions under Chapter 14A of the
Listing Rules.
OUR CONNECTED PERSONS
The table below sets forth the party who will become our connected person upon Listing
and the nature of its relationship with our Group:
Name of our connected person Connected Relationship
Guangzhou Fangming Investment
Enterprise (Limited Partnership)
(“Guangzhou Fangming ”)
Guangzhou Fangming is indirectly controlled by
Mr. Xie, an executive Director of the Company,
and is therefore a connected person of our
Company under Rule 14A.07 of the Listing
Rules.
CONTINUING CONNECTED TRANSACTIONS
Transaction
Applicable
Listing Rules Waiver sought
Proposed annual caps for
the year ending December 31,
2024 2025 2026
(RMB’000) (RMB’000) (RMB’000)
Non-exempt continuing connected transactions
Contractual
Arrangements
14A.34 to 14A.36,
14A.49, 14A.51 to
14A.59 and 14A.71
Waiver from (i)
announcement
requirement and
independent
shareholders’
approval
requirements; (ii)
setting annual cap;
and (iii) limiting
the period of
agreement to a
fixed term
N/A N/A N/A
CONNECTED TRANSACTIONS
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Non-exempt Continuing Connected Transactions
Contractual Arrangements
Background
As disclosed in the section headed “Contractual Arrangements”, the business operations
of the Consolidated Affiliated Entities constitute a business restricted to foreign investment in
the PRC. Therefore, we cannot directly acquire the entire equity interest in the Consolidated
Affiliated Entities. In light of such restriction and in order to exercise effective control over our
Consolidated Affiliated Entities, we have entered into the Contractual Arrangements with
Fangzhou Y unkang and the Fangzhou Y unkang Registered Shareholders (namely, Guangzhou
Fangming, Shenzhen Kaichuang Lianyu Technology Consultancy Co., Ltd. and Beijing
Yiershan Technology Co., Ltd.) on June 19, 2020, pursuant to which our Group (i) receives
substantially all of the economic benefits from our Consolidated Affiliated Entities in
consideration for the services provided by Fangfeng Technology to the Consolidated Affiliated
Entities; (ii) exercise effective control over our Consolidated Affiliated Entities through
Fangfeng Technology; and (iii) hold an exclusive option to purchase all or part of the equity
interests in Fangzhou Y unkang when and to the extent permitted by the PRC laws.
See the section headed “Contractual Arrangements” in this prospectus for details of the
key terms of the Contractual Arrangements.
Listing Rules Implications
The transactions contemplated under the Contractual Arrangements are continuing
connected transactions of our Group and are subject to reporting, announcement and
independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
Our Directors, including our independent non-executive Directors, are of the view that (i)
the Contractual Arrangements are fundamental to our Group’s legal structure and business
operations; and (ii) the Contractual Arrangements are on normal commercial terms or on terms
more favorable to our Group in the ordinary and usual course of our Group’s business and are
fair and reasonable or to the advantage of our Group and are in the interests of our Shareholders
as a whole. Accordingly, notwithstanding that the transactions contemplated under the
Contractual Arrangements technically constitute continuing connected transactions under
Chapter 14A of the Listing Rules, our Directors consider that, given that our Group is placed
in a special situation in relation to the connected transactions rules under the Contractual
Arrangements, it would be unduly burdensome and impracticable, and would add unnecessary
administrative costs to our Company, for all the transactions contemplated under the
Contractual Arrangements to be subject to strict compliance with the requirements set out
under Chapter 14A of the Listing Rules, including, among other things, the announcement and
approval of independent Shareholders.
CONNECTED TRANSACTIONS
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--- page 338 ---
W AIVER APPLICATIONS
The Contractual Arrangements
In relation to the Contractual Arrangements, we have applied to the Stock Exchange for,
and the Stock Exchange has granted, a waiver from strict compliance with (i) the
announcement, circular and independent shareholders’ approval requirements under Chapter
14A of the Listing Rules in respect of the transactions contemplated under the Contractual
Arrangements pursuant to Rule 14A.105 of the Listing Rules, (ii) the requirement of setting an
annual cap for the transactions under the Contractual Arrangements under Rule 14A.53 of the
Listing Rules, and (iii) the requirement of limiting the term of the Contractual Arrangements
to three years or less under Rule 14A.52 of the Listing Rules, for so long as the Shares are
listed on the Stock Exchange subject however to the following conditions:
(a) No change without independent non-executive Directors’ approval
No changes to the terms of any of the agreements constituting the Contractual
Arrangements will be made without the approval of the independent non-executive Directors.
(b) No Change without Independent Shareholders’ Approval
Save as described in paragraph (d) below, no changes to the terms of any of the
agreements constituting the Contractual Arrangements will be made without the approval of the
independent Shareholders. Once independent Shareholders’ approval of any change has been
obtained, no further announcement or approval of the independent Shareholders, will be
required under Chapter 14A of the Listing Rules unless and until further changes are proposed.
The periodic reporting requirement regarding the Contractual Arrangements in the annual
reports of our Company (as set out in paragraph (c) below) will however continue to be
applicable.
(c) Economic Benefits Flexibility
The Contractual Arrangements shall continue to enable our Group to receive the
economic benefits derived by the Consolidated Affiliated Entities through: (i) our Group’s
potential right (if and when so allowed under the applicable PRC laws) to acquire the equity
interests in and/or assets of the Consolidated Affiliated Entities; (ii) the business structure
under which the net profits generated by the Consolidated Affiliated Entities (after deducting
the necessary costs, expenses, taxes and other statutory contribution in relation to the
respective fiscal year) is substantially retained by us (such that no annual caps shall be set on
the amount of services fees payable to the New WFOE under the Exclusive Service
Agreement); and (iii) our right to control the management and operation of, as well as, in
substance, all of the voting rights of the Consolidated Affiliated Entities.
CONNECTED TRANSACTIONS
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--- page 339 ---
(d) Renewal and reproduction
On the basis that the Contractual Arrangements provide an acceptable framework for the
relationship between our Company and our subsidiaries in which our Company has direct
shareholding, on one hand, and the Consolidated Affiliated Entities, on the other hand, that
framework may be renewed and/or reproduced upon the expiry of the existing arrangements or
in relation to any existing or new wholly foreign-owned enterprise or operating company
(including branch company) engaging in the same business as that of our Group which our
Group might wish to establish when justified by business expediency, without obtaining the
approval of the Shareholders, on substantially the same terms and conditions as described
under the section headed “Contractual Arrangements” in this prospectus. The directors, chief
executive or substantial shareholders of any existing or new wholly foreign-owned enterprise
or operating company (including branch company) engaging in the same business as that of our
Group which our Group may establish when justified by business expediency will, upon
renewal and/or cloning of the Contractual Arrangements, however be treated as our Group’s
connected persons and transactions between these connected persons and our Group other than
those under similar contractual arrangements shall comply with Chapter 14A of the Listing
Rules. This condition is subject to the relevant PRC laws, regulations and approvals.
(e) Ongoing Reporting and Approvals
We will disclose details relating to the Contractual Arrangements on an ongoing basis as
follows:
(i) The Contractual Arrangements in place during each financial period will be
disclosed in our annual report and accounts in accordance with the relevant
provisions of the Listing Rules.
(ii) Our independent non-executive Directors will review the Contractual Arrangements
annually and confirm in our annual report and accounts for the relevant year that:
(i) the transactions carried out during such year have been entered into in accordance
with the relevant provisions of the Contractual Arrangements; (ii) no dividends or
other distributions have been made by the Consolidated Affiliated Entities to the
holders of its equity interests which are not otherwise subsequently assigned or
transferred to our Group; and (iii) any new contracts entered into, renewed or
reproduced between our Group and the Consolidated Affiliated Entities during the
relevant financial period under paragraph (d) above are fair and reasonable, or
advantageous, so far as our Group is concerned and in the interests of the Company
and the Shareholders as a whole.
(iii) Our auditors will carry out review procedures annually on the transactions carried
out pursuant to the Contractual Arrangements and will provide a letter to our
Directors with a copy to the Stock Exchange confirming that the transactions carried
out pursuant to the Contractual Arrangements have received the approval of our
CONNECTED TRANSACTIONS
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Directors and that no dividends or other distributions have been made by the
Consolidated Affiliated Entities to the holders of its equity interests which are not
otherwise subsequently assigned/transferred to our Group.
(iv) For the purposes of Chapter 14A of the Listing Rules, and in particular the definition
of “connected person”, the Consolidated Affiliated Entities will be treated as the
Company’s wholly-owned subsidiaries, and the directors, chief executives or
substantial shareholders (as defined in the Listing Rules) of the Consolidated
Affiliated Entities and its associates will be treated as the Company’s “connected
persons.” As such, transactions between these connected persons and our Group
(including, for this purpose, the Consolidated Affiliated Entities) other than those
under the Contractual Arrangements shall comply with Chapter 14A of the Listing
Rules.
The Consolidated Affiliated Entities further undertake that, for so long as the Shares are
listed on the Stock Exchange, the Consolidated Affiliated Entities will provide our Group’s
management and our auditors with full access to its relevant records for the purpose of
procedures to be carried out by our auditors’ on the connected transactions.
CONFIRMATION FROM THE DIRECTORS
Our Directors, including the independent non-executive Directors, are of the view that the
continuing connected transactions as set out above have been entered into in our ordinary and
usual course of business and on normal commercial terms, and are fair and reasonable and in
the interests of the Company and the Shareholders as a whole.
CONFIRMATION FROM THE JOINT SPONSORS
Based on the representations, confirmations, documentation and data provided by the
Company and participation in the due diligence and discussion with the Company and the PRC
Legal Advisor, the Joint Sponsors are of the view that the continuing connected transactions
as set out above have been entered into in the ordinary and usual course of business of the
Company on normal commercial terms which are fair and reasonable, and in the interests of
the Shareholders as a whole.
The Joint Sponsors are of the view that with respect to the term of the relevant agreements
underlying the Contractual Arrangements which is of an indefinite duration, it is a justifiable
and normal business practice to ensure that (i) the financial and operational policies of
Fangzhou Y unkang can be effectively controlled by the Group, (ii) the Group can obtain
substantially all of the economic benefits derived from Fangzhou Y unkang, and (iii) any
possible leakages of assets and values of Fangzhou Y unkang can be prevented, on an
uninterrupted basis.
CONNECTED TRANSACTIONS
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DIRECTORS AND SENIOR MANAGEMENT
The Board consists of seven Directors, comprising three executive Directors, one
non-executive Director and three independent non-executive Directors. The following table
provides certain information about the Directors:
Name Age Position(s)
Date of joining
the Group
(including the Pre-
reorganization
Group)
Date of
appointment as a
Director
Roles and
responsibilities
XIE Fangmin
(ᑽ˙ઽ)
45 Chairman of the
Board, executive
Director and
chief executive
officer
August 10, 2015 September 26,
2019
Overall business
management of
the Group
ZHOU Feng 55 Executive Director
and chief
strategy officer
November 20, 2015 September 26,
2019
Strategic planning,
operation and
investment and
financing of the
Group
ZOU Y uming
(ཅρჼ)
43 Executive Director
and chief
financial officer
August 1, 2018 August 9, 2021 Corporate finance
and financial
management of
the Group,
investor
relations, and
secretarial
affairs of the
Board
David
McKee
HAND
50 Non-executive
Director
September 4, 2018 December 14,
2020
Providing strategic
advice on the
business
development,
operations and
management of
our Group
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Name Age Position(s)
Date of joining
the Group
(including the Pre-
reorganization
Group)
Date of
appointment as a
Director
Roles and
responsibilities
W ANG
Haizhong
(׀)
57 Independent
non-executive
Director
June 27, 2024 June 27, 2024 Providing
independent
opinion and
judgment to the
Board
KANG Wei
(ࠨ)
56 Independent
non-executive
Director
June 27, 2024 June 27, 2024 Providing
independent
opinion and
judgment to the
Board
ZHU Xiaolu
(ϡʃ༩)
40 Independent
non-executive
Director
June 27, 2024 June 27, 2024 Providing
independent
opinion and
judgment to the
Board
DIRECTORS
Executive Directors
Mr. XIE Fangmin ( ᑽ˙ઽ), aged 45, is our founder, chairman of the Board, executive
Director and chief executive officer. He has been our Director since September 26, 2019 and
was re-designated as an executive Director in September 2021. He is responsible for overall
business management of the Group. Mr. Xie joined Guangdong Jianke and became one of its
shareholders in 2011, and founded Y unyi Inc., the ultimate parent company of the Pre-
reorganization Group, in August 2015. Prior to that, Mr. Xie served in Baidu (China) Co., Ltd.
Guangzhou Branch (ܓ(ʕ਷)ʮ̡ᄿψʱʮ̡) from August 2005 to March 2009 and his
last position was director of value-added services of the operation department. In the early
2000s, Mr. Xie worked at eLong.com ( ᖵᎲၣ), an online travel services provider in the PRC.
Mr. Xie received a master’s degree in business administration from the Sun Y at-Sen
University ( ʕʆɽኪ), in Guangzhou, the PRC in June 2010. He also received an executive
master’s degree in business administration from The Hong Kong University of Science and
Technology (Ҧɽኪ) in Hong Kong, the PRC and Tsinghua University ( ૶ശɽኪ)i n
Beijing, the PRC in June 2017 and June 2022 respectively.
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Mr. ZHOU Feng , aged 55, is our executive Director and chief strategy officer. He has
been our Director since September 26, 2019 and was re-designated as an executive Director in
September 2021. He is responsible for strategic planning, operation and investment and
financing of the Group. Mr. Zhou joined the Pre-reorganization Group in November 2015
focusing on management and operations and later became a shareholder, working jointly with
Mr. Xie to lead the management and operations of the Group.
Mr. Zhou served as the chief executive officer in Lashou Group Inc., a company
principally engaged in e-commerce services, from December 2012 to October 2014. He served
as a vice president in Fortune Software (Beijing) Co. Ltd. ( ৌబழ΁(̏ԯ)ʮ̡), a
company principally engaged in finance technology services, from May 2011 to April 2012,
and was primarily responsible for operation and management of the personal business of the
company. From November 2007 to November 2009, Mr. Zhou served as an executive vice
president in Beijing Kaituo Tianji Information Technology Co., Ltd. (Ҧஔ
ʮ̡), a company principally engaged in operation of communication platform, and was
mainly responsible for sales operation of the company. He worked at sales and operations
department in Baidu Online Network Technology (Beijing) Co. Ltd. (ίᇞၣഖҦஔ(̏ԯ)
ʮ̡) from April 2005 to September 2007. Mr. Zhou served at Dell (China) Co., Ltd. ( Ꮦ
ဧ(ʕ਷)ʮ̡) from November 2003 to April 2005 with his last position as marketing
director of the software & peripherals centre of competence. In the 1990s, Mr. Zhou worked
at a number of companies in electronics industry in Singapore including Duet-ESM Electronics
(S) Pte Ltd and Sony Marketing International (Singapore) Pte Ltd.
Mr. Zhou has been deeply involved in managing and supervising the Company’s business
operations. He spent a significant amount of his time traveling to the Company’s offices in the
PRC, and has also made extensive use of teleconference and online collaboration tools to
efficiently manage and supervise the Company’s business operation in the PRC.
Mr. Zhou received a bachelor’s degree in electronic engineering from Tsinghua
University ( ૶ശɽኪ) in Beijing, the PRC in July 1993 and a master’s degree in business
administration from Y ale University in New Haven Connecticut, the US in May 2003.
Mr. ZOU Yuming ( ཅρჼ), aged 43, is our executive Director and chief financial officer.
He has been our Director since August 9, 2021 and was re-designated as an executive Director
in September 2021. He is responsible for corporate finance and financial management of the
Group, investor relations, and secretarial affairs of the Board. Mr. Zou joined our Group as vice
president of strategic development in August 2018 and was appointed as our chief financial
officer in April 2021.
Prior to joining our Group, Mr. Zou served as a trader and an executive director in JP
Morgan Chase & Co. from July 2003 to July 2018. Since January 2020, he has served as an
independent non-executive director of eCargo Holdings Limited, a company listed on the
Australian Securities Exchange (ASX: ECG).
DIRECTORS AND SENIOR MANAGEMENT
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Mr. Zou has been deeply involved in managing and supervising the Company’s business
operations. He efficiently manages and supervises the Company’s business operation in the
PRC by making extensive use of teleconference and online collaboration tools, as well as
traveling frequently to the Company’s offices in the PRC.
Mr. Zou received both a bachelor’s degree in economics and a master’s degree in statistics
from Harvard University in Cambridge, Massachusetts, the US in June 2003. Mr Zou is a
Chartered Financial Analyst (CFA) and obtained the qualification from the Chartered Financial
Analyst Institute in 2009.
Non-executive Director
Mr. David McKee HAND , aged 50, is our non-executive Director. He has been our
Director since December 14, 2020 and was re-designated as a non-executive Director in
September 2021. Mr. Hand is mainly responsible for providing strategic advice on the business
development, operations and management of our Group. He is a Partner and the Head of Ares
Asia Private Equity since October 2023 and oversees all of Ares Asia’s private equity
investment in the Asia-Pacific region. Prior to Ares Asia, he was a co-founder, managing
director and managing partner of Crescent Point since January 2003 and was mainly
responsible for overseeing all of Crescent Point’s activities and investments.
He served as an analyst in the investment banking division of Morgan Stanley & Co. LLC
from July 1996 to July 1999. Mr. Hand was a director of Baozun Inc., a company listed on the
NASDAQ and the Hong Kong Stock Exchange (NASDAQ: BZUN, HKEX: 9991), from 2011
to April 2018, and was mainly responsible for providing general corporate oversight to the
company as a director.
Mr. Hand received a bachelor’s degree in economics from Y ale University in New Haven,
Connecticut, the US in May 1996 and a master’s degree in business administration from
Harvard University in Cambridge, Massachusetts, the US in June 2004.
Independent Non-executive Directors
Dr. W ANG Haizhong (׀)aged 57, was appointed as our independent non-
executive Director on June 27, 2024. He is responsible for providing independent opinion and
judgment to the Board.
Dr. Wang is currently a professor and doctoral supervisor of the School of Business of Sun
Y at-Sen University ( ʕʆɽኪ), having been working at Sun Y at-Sen University since August
2005. Dr. Wang was a professor of the School of Business Administration of Guangdong
University of Finance and Economics (ৌ຾ɽኪ) from May 1996 to December 2003. He
served as an assistant research fellow and lecturer in South Asia Research Center of Sichuan
University ( ̬ʇɽኪ) from July 1992 to April 1996. He has been a member of the Industrial
Corporate Brand Development Expert Committee of the Ministry of Industry and Information
Technology of the PRC (ʷ௅) since June 2012.
DIRECTORS AND SENIOR MANAGEMENT
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Dr. Wang received a bachelor degree in agricultural economics from Southwestern
University of Finance and Economics (ৌ຾ɽኪ) in Sichuan Province, the PRC in July
1989, and a master degree in law from Sichuan University ( ̬ʇɽኪ) in Sichuan Province, the
PRC in July 1992. He also received a doctoral degree in management from Sun Y at-Sen
University ( ʕʆɽኪ) in Guangdong Province, the PRC in December 2002. He completed
post-doctoral study in School of Economics and Management of Tsinghua University ( ૶ശɽ
ኪ) in Beijing, the PRC in September 2005.
Ms. KANG Wei (ࠨ)aged 56, was appointed as our independent non-executive
Director on June 27, 2024. She is responsible for providing independent opinion and judgment
to the Board.
Ms. Kang is currently the executive advisor of Beijing RDPAC International Consulting
Co., Ltd. (ʮ̡)( “ RDPAC”), a company principally engaged in
pharmaceutical registration, compliance and commercialization consultancy services, having
held that position since February 2018. She has also been an executive consultant in RDPAC
since October 2023. She served as a vice general manager and was responsible for leading the
nephrology business unit of Beijing Fresenius Kabi Pharmaceutical Co., Ltd. ( ̏ԯ൬ಌˈ౶̔
ʮ̡) from 2010 to September 2017. Ms. Kang served at Shanghai Novartis
Trading Ltd. (ʮ̡) from July 1995 to February 2011 and her last position
was senior marketing director.
Ms. Kang received a bachelor’s degree in cell-biology from Xiamen University (ɽ
ኪ) in Fujian, the PRC in July 1989 and a master’s degree in business administration from
University of Western Sydney in Sydney, Australia in September 2004. She received an
advance program certificate from Dartmouth College in New Hampshire, the US in April 2010,
and a postgraduate certificate in leadership capability in Glasgow Caledonian University in
United Kingdom in February 2010.
Mr. ZHU Xiaolu ( ϡʃ༩), aged 40, was appointed as our independent non-executive
Director on June 27, 2024. He is responsible for providing independent opinion and judgment
to the Board.
Mr. Zhu has been a partner of Junchuan Capital ( ёʇ༟͉) since December 2022. He
successively served as a co-chief financial officer and the chief financial officer of Qutoutiao
Inc., a company listed on the NASDAQ (NASDAQ: QTT), principally engaged in operation of
mobile content platforms, from May 2019 to November 2022. Prior to that, Mr. Zhu served at
Qunar Cayman Islands Limited, a company previously listed on the NASDAQ and delisted in
March 2017, from November 2014 to November 2017 with his last position as the chief
financial officer. From April 2012 to October 2014, Mr. Zhu served as a vice president of
finance in Beijing Lashou Internet Technology Co., Ltd. (ʮ̡), a
company mainly engaged in operation of Lashou.com. Mr. Zhu served as a manager of
investment banking in Goldman Sachs Gao Hua Securities Company Limited ( ৷ସ৷ശᗇՎ
ப΂ʮ̡) from July 2009 to March 2011.
DIRECTORS AND SENIOR MANAGEMENT
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Mr. Zhu received a bachelor degree in law from Peking University ( ̏ԯɽኪ) in Beijing,
the PRC in July 2005, and a Juris Doctor degree from Duke University in Durham, North
Carolina, the US in May 2009.
SENIOR MANAGEMENT
The following table provides information about members of the senior management of the
Group:
Name Age Position(s)
Date of joining
the Group
(including the
Pre-reorganization
Group)
Date of appointment
as senior
management
Roles and
responsibilities
XIE Fangmin
(ᑽ˙ઽ)
45 Chairman of the
Board, executive
Director and chief
executive officer
August 10, 2015 August 10, 2015 Overall business
management of
the Group
ZHOU Feng 55 Executive Director
and chief strategy
officer
November 20, 2015 November 20, 2015 Strategic
planning,
operation and
investment and
financing of the
Group
ZOU Y uming
(ཅρჼ)
43 Executive Director
and chief financial
officer
August 1, 2018 August 1, 2018 Corporate finance
and financial
management of
the Group,
investor
relations, and
secretarial
affairs of the
Board
For biographical details of Mr. XIE Fangmin ( ᑽ˙ઽ), Mr. ZHOU Feng and Mr. ZOU
Yuming ( ཅρჼ), please see “—Executive Directors” of this section.
DIRECTORS AND SENIOR MANAGEMENT
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DIRECTORS’ AND SENIOR MANAGEMENT’S INTERESTS
Save as disclosed above, none of our Directors or senior management members has been
a director of any public company the securities of which are listed on any securities market in
Hong Kong or overseas in the three years immediately preceding the date of this Prospectus.
Save as disclosed above, to the best of the knowledge, information and belief of our
Directors having made all reasonable enquiries, there was no other matter with respect to the
appointment of our Directors that needs to be brought to the attention of our Shareholders and
there was no information relating to our Directors that is required to be disclosed pursuant to
Rules 13.51(2)(h) to (v) of the Listing Rules as of the Latest Practicable Date.
As of the Latest Practicable Date, save for the interests in the shares of the Company held
by Mr. Xie, Mr. Zhou and Mr. ZOU Y uming, our executive Directors, and by Mr. David McKee
Hand, our non-executive Director, which are disclosed in the section headed “Statutory and
General Information—C. Further Information about Our Directors” in Appendix IV in this
prospectus, none of our Directors held any interest in the securities within the meaning of Part
XV of the SFO.
As of the Latest Practicable Date, none of our Directors or senior management are related
to other Directors or senior management of our Company.
JOINT COMPANY SECRETARIES
Mr. ZOU Yuming ( ཅρჼ) was appointed as one of the joint company secretaries of our
Company on September 6, 2021. For details of his biography, see “—Executive Directors.”
Ms. FUNG Po Ting ( ඹᘒణ), was appointed as one of the joint company secretaries of
our Company on May 3, 2023. Ms. Fung is a manager of the listing services department of
TMF Hong Kong Limited, responsible for providing corporate secretarial and compliance
services to listed companies. She has over 12 years of experience in the corporate secretarial
field. Ms. Fung is an associate member of The Hong Kong Chartered Governance Institute and
The Chartered Governance Institute in the United Kingdom. Ms. Fung obtained her master’s
degree in Corporate Governance and her bachelor’s degree in Corporate Administration of
Business Administration from Hong Kong Metropolitan University (formerly known as The
Open University of Hong Kong) in 2020 and 2016, respectively.
DIRECTORS’ REMUNERATION
For the details of the service contracts and appointment letters that we have entered into
with the Directors, see the section headed “Statutory and General Information—C. Further
Information about Our Directors—1. Particulars of Directors’ service contracts and
appointment letters” in Appendix IV .
DIRECTORS AND SENIOR MANAGEMENT
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The aggregate amount of remuneration (including basic salaries, housing allowances,
other allowances and benefits in kind, contributions to pension plans and discretionary
bonuses) for the Directors for the years ended December 31, 2021, 2022 and 2023 was RMB5.8
million, RMB8.7 million and RMB12.7 million, respectively.
For the years ended December 31, 2021, 2022 and 2023, the aggregate amount of
remuneration (including basic salaries, housing allowances, other allowances and benefits in
kind, contributions to pension plans and discretionary bonuses) for the five highest paid
individuals who are neither a Director nor chief executive of the Group were RMB2.5 million,
RMB3.4 million and RMB3.7 million, respectively.
Save as disclosed above, no other payments have been paid or are payable in respect of
the Track Record Period to the Directors by the Group.
During the Track Record Period, no amount was paid to, or receivable by, the Directors
or the five highest paid individuals as an inducement to join or upon joining the Group. No
compensation was paid to, or receivable by, the Directors, past Directors or the five highest
paid individuals during the Track Record Period for the loss of office as director of any member
of the Group or of any other office in connection with the management of the affairs of any
member of the Group. None of the Directors waived any emoluments during the Track Record
Period.
RSU SCHEME
We adopted the RSU Scheme. For further details, please see the section headed “Statutory
and General Information—D. RSU Scheme” in this Prospectus.
CORPORATE GOVERNANCE CODE
We have adopted certain corporate governance measures in compliance with the
Corporate Governance Code set out in Appendix C1 to the Listing Rules (the “ Corporate
Governance Code ”). We aim to achieve a high standard of corporate governance, which is
crucial to safeguard the interests of the Shareholders. To accomplish this, we expect to comply
with the Corporate Governance Code after the Listing, except for the following:
Pursuant to code provision C.2.1 in the Corporate Governance Code as set out in
Appendix C1 to the Listing rules, the roles of chairman and chief executive officer should be
separate and should not be performed by the same individual.
Mr. XIE Fangmin is currently serving as the chairman of the Board as well as the chief
executive officer of our Company. As Mr. Xie is the founder of our Group and has been
managing our Group’s business since its establishment, our Directors consider that vesting the
roles of chairman and chief executive officer in Mr. Xie is beneficial to the business prospects
and management of our Group by ensuring consistent leadership within our Group. Taking into
account all the corporate governance measures that we are going to implement upon Listing,
our Board considers that the balance of power and authority for the present arrangement will
DIRECTORS AND SENIOR MANAGEMENT
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--- page 349 ---
not be impaired and this structure will enable our Company to make and implement decisions
promptly and effectively. Accordingly, our Company had not segregated the roles of its
chairman and chief executive officer. Our Board will continue to review and consider splitting
the roles of chairman of our Board and the chief executive officer of our Company at an
appropriate time if necessary, taking into account the circumstances of our Group as a whole.
Saved as disclosed above, as of the Latest Practicable Date and to the best of the
knowledge, information and belief of our Directors, having made all reasonable enquiries, the
Directors are not aware of any deviation from provisions in the Corporate Governance Code
as set out in Appendix C1 to the Listing Rules.
BOARD COMMITTEE
Save and except that nomination committee is chaired by Mr. Xie, each of our audit
committee and remuneration committee is chaired by an independent non-executive Director.
All committees comprise a majority of independent non-executive Directors.
Audit Committee
We have established an audit committee in compliance with Rule 3.21 of the Listing
Rules and the Corporate Governance Code. The primary duties of the audit committee are to
review and supervise the financial reporting process and internal audit system of the Group,
review and approve connected transactions and to advise the Board. The audit committee
comprises three independent non-executive Directors, namely Mr. ZHU Xiaolu, Dr. W ANG
Haizhong and Ms. KANG Wei. Mr. ZHU Xiaolu, being the chairman of the committee, is
appropriately qualified as required under Rules 3.10(2) and 3.21 of the Listing Rules.
Remuneration Committee
We have established a remuneration committee in compliance with Rule 3.25 of the
Listing Rules and the Corporate Governance Code. The primary duties of the remuneration
committee are to review and make recommendations to the Board regarding the terms of
remuneration packages, bonuses and other compensation payable to the Directors and senior
management. The remuneration committee comprises one non-executive Director and two
independent non-executive Directors, namely Ms. KANG Wei, Mr. ZHU Xiaolu and Mr. David
McKee HAND. Ms. KANG Wei is the chairlady of the committee.
Nomination Committee
We have established a nomination committee in compliance with Rule 3.27A of the
Listing Rules and the Corporate Governance Code. The primary duties of the nomination
committee are to make recommendations to the Board regarding the appointment of Directors
and Board succession. The nomination committee comprises one executive Director, and two
independent non-executive Directors, namely Mr. XIE Fangmin, Mr. ZHU Xiaolu and Dr.
W ANG Haizhong. Mr. XIE Fangmin is the chairman of the committee.
DIRECTORS AND SENIOR MANAGEMENT
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BOARD DIVERSITY POLICY
We recognize and embrace the benefits of having a diverse Board and see increasing
diversity at the Board level as an essential element in maintaining our competitive advantage.
The nomination committee will review annually the structure, size and composition of our
Board and where appropriate, make recommendations on changes to our Board to complement
our corporate strategy.
In relation to reviewing and assessing our Board composition, our nomination committee
will consider a number of aspects, including but not limited to gender, age, cultural and
educational background, ethnicity, professional qualifications, skills, knowledge, length of
service and industry and regional experience. Meanwhile, our Company will consider the
above factors based on our business mode and our specific needs, and the ultimate decision will
be based on merit and contribution that the selected candidates will bring to our Board.
We have taken, and will continue to take, steps to promote gender diversity at all levels
of our Company, including but not limited to our Board and the senior management levels.
While we recognise that gender diversity at our Board level can be improved given one out of
seven of our Directors is female upon the Listing, we will continue to apply the principle of
appointments based on merits with reference to our board diversity policy as a whole, and we
have also taken, and will continue to take steps to promote gender diversity at all levels of our
Company, including but not limited to the Board and the management levels. After the Listing,
we will strive to achieve gender balance of the Board through certain measures to be
implemented by our nomination committee in accordance with our board diversity policy. In
particular, taking into account the business needs of our Group and changing circumstances
from time to time that may affect our Group’s business plans, we will actively identify female
individuals suitably qualified to become our Board members and we aim to achieve a target of
30% female representation in our Board, during the period of which we are listed on the Stock
Exchange. To further ensure gender diversity of our Board in a long run, our Group will also
identify and select several female individuals with a diverse range of skills, experience and
knowledge in different fields from time to time, and maintain a list of such female individuals
who possess qualities to become our Board members, which will be reviewed by our
nomination committee quarterly in order to develop a pipeline of potential successors to our
Board to promote gender diversity of our Board.
Our nomination committee will discuss and where necessary, agree on the additional
measurable objectives for achieving diversity on the Board and recommend them to the Board
for adoption. We aim to maintain an appropriate balance of diversity perspectives of our Board
that are relevant to our business growth. After the Listing, our Board will monitor the
implementation of the board diversity policy and review the board diversity policy from time
to time to ensure its continued effectiveness. We will also disclose in our annual corporate
governance report a summary of the board diversity policy together with information regarding
the implementation of the board diversity policy.
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COMPLIANCE ADVISOR
We have appointed Somerley Capital Limited as the compliance advisor (the
“Compliance Advisor ”) pursuant to Rule 3A.19 of the Listing Rules. The Compliance Advisor
will provide us with guidance and advice as to compliance with the Listing Rules and
applicable Hong Kong laws. Pursuant to Rules 3A.23 of the Listing Rules, the Compliance
Advisor will advise the Company in certain circumstances and/or matters including:
(a) before the publication of any regulatory announcement, circular, or financial report;
(b) where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
(c) where we propose to use the proceeds of the Global Offering in a manner different
from that detailed in this prospectus or where the business activities, development
or results of the Group deviate from any forecast, estimate or other information in
this prospectus; and
(d) where the Stock Exchange makes an inquiry to the Company regarding unusual
movements in the price or trading volume of its listed securities or any other matters
in accordance with Rule 13.10 of the Listing Rules.
The term of appointment of the Compliance Advisor shall commence on the Listing Date
and is expected to end on the date on which we comply with Rule 13.46 of the Listing Rules
in respect of our financial results for the first full financial year commencing after the Listing
Date.
CONFIRMATION FROM OUR DIRECTORS
Rule 3.09D of the Listing Rules
Each of our Directors confirms that he or she (i) has obtained the legal advice referred
to under Rule 3.09D of the Listing Rules in September 2021, and (ii) understands his or her
obligations as a director of a listed issuer under the Listing Rules.
Rule 3.13 of the Listing Rules
Each of the independent non-executive Directors confirms (i) his or her independence as
regards each of the factors referred to in Rules 3.13(1) to (8) of the Listing Rules; (ii) that he
or she has no past or present financial or other interests in the business of our Company or its
subsidiaries or any connection with any core connected person (as defined in the Listing Rules)
of our Company; and (iii) that there are no other factors that may affect his or her independence
at the time of his or her appointment.
DIRECTORS AND SENIOR MANAGEMENT
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Rule 8.10 of the Listing Rules
Each of the Directors confirms that as of the Latest Practicable Date, he or she did not
have any interest in a business which materially competes or is likely to compete, directly or
indirectly, with the business of our Group, and requires disclosure under Rule 8.10 of the
Listing Rules.
DIRECTORS AND SENIOR MANAGEMENT
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SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following the completion of the Global
Offering, assuming the weighted voting rights structure is cancelled and the Over-allotment
Option is not exercised and each Class A Ordinary Share, Class B Ordinary Share and Preferred
Share will be automatically converted into one Ordinary Share upon the Global Offering
becoming unconditional, the following parties will have interests and/or short positions in the
Shares or underlying Shares of our Company that (i) would fall to be disclosed to the Company
and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO,
or, (ii) will be, directly or indirectly, interested in 10% or more of the nominal value of any
class of our share capital carrying rights to vote in all circumstances at general meetings of our
Company:
Name
Capacity/Nature of
interest
Shares held as at the date of this
prospectus (1)
Shares held immediately
following the completion of the
Global Offering (2)
Number of
Shares (1)
Approximate
percentage (1)
Number of
Shares (2)
Approximate
percentage (2)
Mr. XIE Fangmin Interest in controlled
corporations (3)
276,605,527 21.01% 276,605,527 20.64%
Interest of a party to
an agreement (4)
236,624,057 17.97% 236,624,057 17.65%
Interest of a party to
an agreement (10)
138,430,610 10.52% 138,430,610 10.33%
Interest in a
controlled
corporation
(11)
116,875,898 8.88% 116,875,898 8.72%
Mr. ZHOU Feng Interest in controlled
corporations (5)
236,624,057 17.97% 236,624,057 17.65%
Interest of a party to
an agreement (4)
276,605,527 21.01% 276,605,527 20.64%
Interest of a party to
an agreement (10)
138,430,610 10.52% 138,430,610 10.33%
Interest in a
controlled
corporation
(11)
116,875,898 8.88% 116,875,898 8.72%
Celaeno Group Limited Beneficial owner (5) 186,158,297 14.14% 186,158,297 13.89%
Fangrong Management
Limited
Beneficial owner (3) 265,538,362 20.17% 265,538,362 19.81%
Asia Tech Investments
Ltd.
Beneficial owner (11) 116,875,898 8.88% 116,875,898 8.72%
Crescent ACSO
Investment
Management Ltd
Interest in controlled
corporations
(6)
115,165,045 8.75% 115,165,045 8.59%
SUBSTANTIAL SHAREHOLDERS
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Name
Capacity/Nature of
interest
Shares held as at the date of this
prospectus (1)
Shares held immediately
following the completion of the
Global Offering (2)
Number of
Shares (1)
Approximate
percentage (1)
Number of
Shares (2)
Approximate
percentage (2)
Crescent Trident
Singapore Pte. Ltd.
Beneficial owner (6) 115,165,045 8.75% 115,165,045 8.59%
Crescent Point Investment
manager (9)
437,443,815 33.23% 437,443,815 32.64%
Danai Rojanavanichkul Interest in controlled
corporations (7)(8)
264,582,255 20.10% 264,582,255 19.74%
V eneto Holdings Ltd. Interest in controlled
corporations (7)(8)
264,582,255 20.10% 264,582,255 19.74%
Tech-Med Cayman III
Ltd.
Interest in controlled
corporations (8)
138,430,610 10.52% 138,430,610 10.33%
Tech-Med Investments
(S) Pte. Ltd. (11)
Beneficial owner (8) 138,430,610 10.52% 138,430,610 10.33%
CP Pharmatech
Singapore Pte. Ltd.
Beneficial owner (7) 126,151,645 9.58% 126,151,645 9.41%
David McKee HAND Interest in controlled
corporations (9)
437,443,815 33.23% 437,443,815 32.64%
Notes:
(1) The table above assumes that the weighted voting rights structure is cancelled.
(2) The table above assumes the weighted voting rights structure is cancelled and the Over-allotment Option
is not exercised and each Class A Ordinary Share, Class B Ordinary Share and Preferred Share will be
converted into one Ordinary Share upon the Global Offering becoming unconditional.
(3) Fangrong Management Limited is wholly-owned by Mr. Xie. Each of Fangzhan Holdings L.P . and
Xingyu Holdings L.P . is controlled by Mr. Xie. Therefore, Mr. Xie is deemed to be interested in the
265,538,362, 5,481,985 and 5,585,180 Shares held by Fangrong Management Limited, Fangzhan
Holdings L.P . and Xingyu Holdings L.P ., respectively, under the SFO.
(4) Mr. Xie and Mr. Zhou are parties to the Concert Deed, according to which Mr. Xie and Mr. Zhou
confirmed and agreed that they have acted and will continue to act in concert and collectively for all
material management affairs and the arrival and/or execution of all commercial decisions, including but
not limited to financial and operational matters, of our Group since date of the Concert Deed, and they
have casted and will continue to cast unanimous vote collectively for or against all resolutions in all
Board and Shareholders’ meetings and discussions of the Group. Therefore, Mr. Xie and Mr. Zhou are
deemed to be jointly interested in the aggregate number of Shares held by each other.
(5) Each of Celaeno Group Limited and Silica Brothers Corp. is wholly-owned by Mr. Zhou. Therefore, Mr.
Zhou is deemed to be interested in 186,158,297 and 50,465,760 Shares held by Celaeno Group Limited
and Silica Brothers Corp., respectively, under the SFO.
(6) Crescent Trident Singapore Pte. Ltd. is controlled by Crescent ACSO Investment Management Ltd,
which is ultimately controlled by David McKee Hand.
SUBSTANTIAL SHAREHOLDERS
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(7) CP Pharmatech Singapore Pte. Ltd. is controlled by V eneto Holdings Ltd., which is in turn ultimately
controlled by Danai Rojanavanichkul.
(8) Tech-Med Investments (S) Pte. Ltd. is controlled by Tech-Med Cayman III Ltd., which is in turn
controlled by V eneto Holdings Ltd., and is in turn ultimately controlled by Danai Rojanavanichkul.
(9) Each of Crescent Point V ehicles is advised by Crescent Point, which is ultimately controlled by David
McKee Hand.
(10) Effective immediately before the Listing, Mr. Xie and Mr. Zhou will be entitled to exercise the voting
rights attached to 138,430,610 Shares, representing approximately 10.33% of shareholding interest in
the Company immediately following the completion of the Global Offering, held by Tech-Med
Investments (S) Pte. Ltd. pursuant to the deed of voting proxy executed by Tech-Med Investments (S)
Pte. Ltd. on June 12, 2024. For details, see “History, Reorganization and Corporate Structure—Deed of
V oting Proxy.”
(11) Asia Tech Investments Ltd. is a platform holding the underlying incentive shares granted to our
Directors and senior management in the total amount of 116,875,898 Class A Ordinary Shares under the
RSU Scheme. Approximately 51.34% and 48.41% interest of Asia Tech Investments Ltd. were held by
Mr. Xie and Mr. Zhou, respectively. Therefore, each of Mr. Xie and Mr. Zhou is deemed to be interested
in the Shares of the Company held by Asia Tech Investments Ltd. in accordance with SFO.
Except as disclosed above, our Directors are not aware of any other person who will,
immediately following the completion of the Global Offering (assuming the weighted voting
rights structure is cancelled and the Over-allotment Option is not exercised and each Class A
Ordinary Share, Class B Ordinary Share and Preferred Share will be automatically converted
into one Share upon the Global Offering becoming unconditional), have any interest and/or
short positions in the Shares or underlying shares of our Company which would fall to be
disclosed to the Company pursuant to the provisions of Divisions 2 and 3 of Part XV of the
SFO, or, will be, directly or indirectly, interested in 10% or more of the nominal value of any
class of our share capital carrying rights to vote in all circumstances at general meetings of our
Company. Our Directors are not aware of any arrangement which may at a subsequent date
result in a change of control of our Company or any other member of our Group.
SUBSTANTIAL SHAREHOLDERS
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AUTHORIZED AND ISSUED SHARE CAPITAL
The following is a description of the authorized and issued share capital of our Company
immediately prior to and upon the completion of the Global Offering, assuming that (i) the
Global Offering becomes unconditional and the Offer Shares are issued pursuant to the Global
Offering, (ii) the weighted voting rights structure is cancelled, and (iii) the Over-allotment
Option is not exercised.
1. Share capital at the date of this prospectus
(i) Authorized share capital
Description of Shares
Number
of Shares
Approximate
aggregate
nominal
value of
Shares
Approximate
percentage
of
authorized
share
capital
(US$) (%)
Class A Ordinary Shares 1,478,144,936 29,562.90 59.13
Class B Ordinary Shares 450,192,125 9,003.84 18.01
Series A Preferred Shares 115,165,045 2,303.30 4.60
Series A-1 Preferred Shares 86,828,195 1,736.56 3.47
Series B Preferred Shares 197,737,720 3,954.75 7.91
Series C Preferred Shares 155,180,335 3,103.61 6.21
Series D Preferred Shares 8,664,773 173.30 0.35
Series D+ Preferred Shares 8,086,871 161.74 0.32
Total 2,500,000,000 50,000.00 100.00
(ii) Issued and to be issued, fully paid or credited to be fully paid
Description of Shares
Number
of Shares
Approximate
aggregate
nominal
value of
Shares
Approximate
percentage
of issued
share
capital
(US$) (%)
Class A Ordinary Shares 294,612,393 5,892.25 22.38
Class B Ordinary Shares 450,192,125 9,003.84 34.20
Series A Preferred Shares 115,165,045 2,303.30 8.75
Series A-1 Preferred Shares 86,828,195 1,736.56 6.60
Series B Preferred Shares 197,737,720 3,954.75 15.02
Series C Preferred Shares 155,180,335 3,103.61 11.79
Series D Preferred Shares 8,664,773 173.30 0.66
Series D+ Preferred Shares 8,086,871 161.74 0.61
Total 1,316,467,457 26,329.35 100.00
SHARE CAPITAL
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2. Share capital immediately following the completion of the Global Offering (assuming
the weighted voting rights structure is cancelled, the Over-allotment Option is not
exercised and each Class A Ordinary Share, Class B Ordinary Share and Preferred
Share is converted into one Share)
Description of Shares
Number
of Shares
Approximate
aggregate
nominal
value of
Shares
(US$)
Authorized share capital 2,500,000,000 50,000.00
Description of Shares
Number
of Shares
Approximate
aggregate
nominal
value of
Shares
Approximate
percentage
of issued
share
capital
(US$) (%)
Shares in issue 1,316,467,457 26,329.35 98.22
Shares to be issued pursuant to the
Global Offering 23,800,000 476.00 1.78
Total 1,340,267,457 26,805.35 100.00
The tables above do not take into account any Shares that may be issued or repurchased
by the Company under the general mandates granted to our Directors referred to below.
RANKING
The Offer Shares will rank pari passu in all respects with all Shares then in issue or to
be issued as mentioned in this prospectus, and will qualify and rank equally for all dividends
or other distributions declared, made or paid on the Shares on a record date which falls after
the date of this prospectus.
CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS ARE REQUIRED
The Company will have only one class of Shares, namely ordinary shares, and each ranks
pari passu with the other Shares upon completion of the Global Offering.
SHARE CAPITAL
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Pursuant to the Cayman Companies Act and the terms of the Memorandum of Association
and Articles of Association, our Company may from time to time by ordinary resolution of
shareholders (i) increase its capital; (ii) consolidate and divide its capital into shares of larger
amount; (iii) divide its shares into several classes; (iv) subdivide its shares into shares of
smaller amount; and (v) cancel any shares which have not been taken. In addition, our
Company may subject to the provisions of the Cayman Companies Act reduce its share capital
or capital redemption reserve by its shareholders passing a special resolution. See the section
headed “Summary of the Constitution of the Company and Cayman Company Law—2. Articles
of Association—(a) Shares—(iii) Alteration of capital” in Appendix III for further details.
GENERAL MANDATE TO ISSUE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general unconditional mandate to allot, issue and deal with Shares with a total nominal value
of not more than the sum of:
 20% of the aggregate nominal value of the Shares in issue immediately following
completion of the Global Offering (excluding any Shares to be issued pursuant to the
exercise of the Over-allotment Option, if any); and
 the aggregate nominal value of Shares repurchased by the Company under the
authority referred to in the paragraph headed “—General Mandate to Repurchase
Shares” in this section.
This general mandate to issue Shares will expire at the earliest of:
 the conclusion of the next annual general meeting of our Company unless otherwise
renewed by an ordinary resolution of our Shareholders in a general meeting, either
unconditionally or subject to conditions; or
 the expiration of the period within which our Company’s next annual general
meeting is required by the Memorandum of Association and Articles of Association
or any other applicable laws to be held; or
 the date on which it is varied or revoked by an ordinary resolution of our
Shareholders in general meeting.
See the section headed “Statutory and General Information—A. Further Information
about our Company and our Subsidiaries and Consolidated Affiliated Entities—5. Resolutions
of the Shareholders of Our Company dated June 14, 2024” in Appendix IV for further details
of this general mandate.
SHARE CAPITAL
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GENERAL MANDATE TO REPURCHASE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general unconditional mandate to exercise all the powers of our Company to repurchase our
own securities with nominal value of up to 10% of the aggregate nominal value of our Shares
in issue immediately following the completion of the Global Offering (excluding any Shares
to be issued pursuant to the exercise of the Over-allotment Option, if any).
The repurchase mandate only relates to repurchases made on the Stock Exchange, or on
any other stock exchange on which our Shares are listed (and which are recognized by the SFC
and the Stock Exchange for this purpose), and which are in accordance with the Listing Rules.
A summary of the relevant Listing Rules is set out in the section headed “Statutory and General
Information—A. Further Information about our Company and our Subsidiaries and
Consolidated Affiliated Entities—6. Repurchase of our own securities” in Appendix IV .
This general mandate to repurchase Shares will expire at the earliest of:
 the conclusion of the next annual general meeting of our Company unless otherwise
renewed by an ordinary resolution of our Shareholders in a general meeting, either
unconditionally or subject to conditions; or
 the expiration of the period within which our Company’s next annual general
meeting is required by the Memorandum of Association and Articles of Association
or any other applicable laws to be held; or
 the date on which it is varied or revoked by an ordinary resolution of our
Shareholders passed in a general meeting.
See the section headed “Statutory and General Information—A. Further Information
about our Company and our Subsidiaries and Consolidated Affiliated Entities—6. Repurchase
of our own securities” in Appendix IV for further details of the repurchase mandate.
SHARE CAPITAL
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You should read the following discussion and analysis in conjunction with our
consolidated financial information, including the notes thereto, included in the
Accountants’ Report set out in Appendix I to this prospectus. Our consolidated financial
information has been prepared in accordance with HKFRSs.
The following discussion and analysis contain forward-looking statements that
reflect our current views with respect to future events and financial performance that
involve risks and uncertainties. These statements are based on assumptions and analysis
made by us in light of our experience and perception of historical events, current
conditions and expected future developments, as well as other factors we believe are
appropriate under the circumstances. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors. We discuss
factors that we believe could cause or contribute to these differences below and elsewhere
in this prospectus, including those set forth in “Risk Factors” and “Forward-Looking
Statements” in this prospectus.
OVERVIEW
We are the largest online chronic disease management platform in China in terms of
average MAU in 2023, according to CIC.
We offer comprehensive medical services to patients, such as follow-up physician
consultations and e-prescription services, which are conducted by our registered physicians
and in-house medical professionals through our industry-leading H2H service platform and
online retail pharmacy service platform. We also provide online retail pharmacy services to
offer a variety of pharmaceutical products to customers. Our comprehensive medical services
and online retail pharmacy services are supported by a chronic disease management service
center consisting of 169 staff members as of December 31, 2023 and a robust supply chain.
Leveraging our technological capability, we provide digitalized solutions for key participants
in the healthcare industry.
For the years ended December 31, 2021, 2022 and 2023, our revenue amounted to
RMB1,758.7 million, RMB2,204.3 million and RMB2,434.3 million, respectively. Our gross
profit in 2021, 2022 and 2023 amounted to RMB219.6 million, RMB380.6 million and
RMB487.4 million, respectively.
BASIS OF PRESENTATION AND PREPARATION
We were incorporated as an exempted company with limited liability under the laws of
Cayman Islands on September 26, 2019. We are principally engaged in online chronic disease
management services in China.
FINANCIAL INFORMATION
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Our consolidated financial information has been prepared in accordance with all
applicable HKFRSs, which collective term includes all applicable individual HKFRSs, Hong
Kong Accounting Standards (“ HKASs ”) and Interpretations issued by the Hong Kong Institute
of Certified Public Accountants (“ HKICPA ”). The HKICPA has issued a number of new and
revised HKFRSs. For the purpose of preparing our consolidated financial information, we have
consistently adopted all applicable new and revised HKFRSs that are effective during the Track
Record Period, except for any new standards or interpretations that are not yet effective for the
Track Record Period. The revised and new accounting standards and interpretations issued but
not yet effective for the Track Record Period are set out in note 32 to the Accountants’ Report
set out in Appendix I to this prospectus. The preparation of our consolidated financial
information in conformity with HKFRSs requires the use of certain accounting estimates. It
also requires management to exercise its judgment in the process of applying our accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to our consolidated financial information, are
disclosed in note 3 to the Accountants’ Report set out in Appendix I to this prospectus.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
We believe that the following factors have a major impact on our results of operations:
Growth of the online chronic disease management market in China
Our financial performance and future business growth depend on the development and
growth of the online chronic disease management market in China. According to CIC, the size
of online chronic disease management market in China in terms of GMV increased from
RMB27.6 billion in 2015 to RMB178.1 billion in 2023, representing a CAGR of 26.3%, and
is expected to continue to grow at a CAGR of 30.6% and reach RMB1,153.9 billion in 2030.
In addition, the market size of the online to-consumer chronic disease management market
grew rapidly at a CAGR of 75.6% from RMB0.5 billion in 2015 to RMB45.5 billion in 2023,
and is projected to reach RMB599.5 billion in 2030, representing a CAGR of 44.5%. The
growth of online chronic disease management market is largely driven by (i) the increasing
demand for chronic disease management services with the increase in the aging population with
chronic disease, while the capacity of Class III hospitals which provide better medical services
in China is limited; (ii) the growth of out-of-hospital prescription market; (iii) the expanded
coverage of national medical insurance for online medication; and (iv) the increasing
acceptance of online medical services across all age groups. As a leading online chronic disease
management platform in China, we expect to capture growth opportunities in this market,
which will impact our results of operations and future performance. See “Industry Overview”
in this prospectus for details.
FINANCIAL INFORMATION
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Our ability to establish a large and active user base
We believe that our user base is the foundation of our business. Our results of operations
will largely depend on our ability to build and monetize a large and active user base. In the
early stage of building our business, we prioritized scaling our business, and we were
especially committed to increasing our paying user base as well as the efficiency of our user
acquisition efforts through various marketing initiatives. These efforts were particularly
evident in 2021, when we made a strategic decision to rapidly expand the scale of our H2H
services. Since July 2019, when we commenced in-house operations of the Jianke mobile
applications and website, which were previously operated by Guangdong Jianke, we also
devoted significant efforts to enhancing user acquisition efficiency and improving conversion
rate of our active users to paying users in order to expand our paying user base. The number
of paying users on our Jianke Platform increased from 3.9 million for the year ended December
31, 2022 to 4.4 million for the year ended December 31, 2023. The conversion rate of active
users to paying users on our H2H service platform was 32.6%, 42.9% and 36.2% in 2021, 2022
and 2023, respectively. For those same years, the conversion rate of active users to paying
users on our online retail pharmacy service platform was 14.7%, 14.8% and 17.7%,
respectively.
Driven by the increase in our user base, the GMV of the Jianke Platform and third-party
e-commerce platforms increased from RMB1,945.4 million in 2021 to RMB2,430.3 million
and RMB2,481.5 million in 2022 and 2023, respectively.
Our ability to enrich our product and service offerings
Our revenue growth and results of operations depend on our ability to provide a wide
range and well-diversified portfolio of product and service offerings to address the needs of
different stakeholders in the industry. We have been a pioneer in online chronic disease
management services, offering online retail pharmacy services and comprehensive medical
services, such as physician consultations and e-prescriptions. As we focus on chronic disease
management, our users typically require periodic prescription drug refills and follow-up
medical consultations to treat their condition, which will continuously drive our sales revenue.
We endeavor to further enrich the services and products offered through our Jianke Platform.
For example, the number of products available on our platform has grown rapidly as we strived
to provide customers with a wide range of pharmaceutical products, with a special focus on
prescription drugs to serve the needs of chronic disease patients. As of December 31, 2023, we
had offered over 212,000 drug SKUs, of which approximately 61.6% were prescription drugs.
As a result, the average spending per user on our Jianke Platform amounted to RMB766.3,
RMB626.7 and RMB558.9 in 2021, 2022 and 2023, respectively, which was higher than the
industry average of approximately RMB200.0 for the same years, according to CIC. We will
also continue to broaden our selection of high-value-add products, such as health supplement
products and traditional Chinese medicine, to cater to users with such needs. We believe this
will enable us to expand our reach and coverage to serve a larger user base, which would in
turn drive our sales revenue.
FINANCIAL INFORMATION
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As the industry evolves, we expect to remain at the forefront in offering new products and
services. We will continue to expand our customized content and marketing solutions business
in order to provide relevant content to physicians and patients, while helping pharmaceutical
companies raise awareness about chronic disease conditions and treatment options among
targeted audience. In addition, we have utilized and will continue to utilize our big data
analytics capabilities to better understand our users so that we are able to serve their evolving
needs.
Our ability to attract and retain active registered physicians
Our results of operations and long term success depend in part on our ability to attract and
retain qualified physicians on our Jianke Platform. Through our expanding coverage of
registered physicians and patient users, we have helped facilitate real-world physician-patient
relationships, enabling us to build trust with patients and retain them to our platform. The
number of registered physicians on our platform experienced rapid growth since we began to
operate in-house in July 2019, reaching over 212,000 as of December 31, 2023. We plan to
further expand the number of physicians registered on our H2H service platform and cultivate
engagement from active registered physicians to better serve patients throughout the lifespan
of their chronic disease management. We will also focus on attracting physicians with a broader
range of specialties to our platform to increase the choices available to patients, while
providing us with greater monetization opportunities.
Our profitability
Our profitability is significantly affected by our growth strategies and business priorities.
During the Track Record Period, our business went through a dynamic period of expansion and
growth. Since we began to operate the Jianke mobile applications and website in-house in July
2019, we actively grew our user base and business scale, which resulted in rapid growth of our
H2H services and online retail pharmacy services during the Track Record Period. These
efforts have had a positive effect on our overall gross profit margin, which increased from
12.5% in 2021 to 17.3% in 2022 and further increased to 20.0% in 2023.
From 2021 to 2022, our gross profit margin increased from 12.5% to 17.3%, primarily
because we gained greater flexibility in setting our customer pricing as we were able to
negotiate more favorable procurement terms due to our increased business scale, which
resulted in decreased unit costs for a significant portion of the products sold on our Jianke
Platform in 2022. For instance, 30 of our top 50 best-selling drugs in 2022 by revenue with
comparable sales data in 2021 experienced a unit cost decrease of up to 63% from 2021 to
2022. As a result of our ongoing efforts to enhance our supply chain capabilities, our gross
profit margin further increased from 17.3% in 2022 to 20.0% in 2023, as we were able to
procure pharmaceutical and healthcare products at more favorable prices. We expect our gross
profit margins to continue to be affected by our business goals and strategies in the future.
FINANCIAL INFORMATION
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Our ability to effectively manage our costs and expenses and enhance operating efficiency
Our ability to achieve profitability is, to a large extent, dependent on our ability to control
our costs and expenses through enhancing our operating leverage and efficiency. Our cost of
sales primarily represents procurement costs for pharmaceutical and other products, which are
subject to various factors, such as our negotiating power with pharmaceutical companies and
suppliers. Our operating efficiency is also affected by our ability to optimize our expense
structure. During the Track Record Period, selling and distribution expenses were the largest
component of our operating expenses. Despite the increases in absolute amounts of our selling
and distribution expenses during the Track Record Period, our selling and distribution expenses
as a percentage of revenue exhibited a downward trend, primarily attributable to economies of
scale, a reduction in our compensation to registered physicians and our increased cost
efficiency after building up our in-house operation capabilities. We expect our costs and
expenses to remain substantial as we further expand our business.
We continuously seek to streamline our operations and we believe that controlling
operating expenses to achieve optimal operating efficiency is important to our success. We
believe the continued growth of our business and expansion of our market share can bring us
economies of scale, resulting in higher utilization of our services and technologies and stronger
bargaining power with pharmaceutical companies. In addition, we believe our services have
network effects that can promote our brand effectively and enhance our marketing efficiency.
Going forward, we will continue to adjust our marketing strategies to operate more efficiently
and effectively as our business grows.
Extensive and evolving legal and regulatory requirements for the healthcare and online
chronic disease management industries
Due to the complex nature of our business, we are subject to extensive and evolving legal
and regulatory requirements applicable to multiple industries in the PRC. These industries
primarily include healthcare, chronic disease management, e-commerce and the Internet.
V arious regulatory authorities of the PRC government are empowered to promulgate and
implement regulations governing broad aspects of these industries. Government regulation and
enforcement are evolving and subject to significant uncertainties, which affect the manner in
which we conduct our business as well as our ability to further grow and expand our business.
For instance, sales of pharmaceutical and healthcare products for chronic disease
management in China are subject to extensive and evolving government regulation and
supervision. These regulations will continue to evolve and new regulations and policies may
be introduced that affect the market landscape and our operations. Regulatory changes in these
industries may also increase our compliance burden and affect our business, profitability and
prospects. In particular, certain laws, rules and regulations may affect the pricing, demand and
sales of pharmaceutical and healthcare products, such as those relating to procurement,
prescription and dispensing of drugs by hospitals and other medical institutions, online sales,
retail pharmacy, government funding for private healthcare and medical services, and the
inclusion of products in the drugs catalogs for national basic medical insurance, on-the-job
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injury insurance and maternity insurance jointly promulgated by the National Healthcare
Security Administration and the MOHRSS. For details, see “Risk Factors—Risks Relating to
Our Business and Industry—We are subject to extensive and evolving regulatory requirements.
Future regulations may impose additional requirements and obligations on our business that
could materially and adversely affect our business, reputation, financial condition and results
of operations.”
IMPACT OF COVID-19 ON OPERATIONS
Since the end of 2019, the outbreak of COVID-19 has materially and adversely affected
the global economy. In response to intensifying efforts to contain the spread of COVID-19, the
PRC government took a number of actions, which included compulsory quarantining
arrangement, travel restrictions, remote work arrangement and public activities restrictions,
among others. The COVID-19 pandemic also resulted in temporary closures of many corporate
offices, retail stores, manufacturing facilities and factories across China. During the Track
Record Period, the COVID-19 pandemic has evolved in China, from being substantially
controlled in 2021, to a resurgence from March to June 2022 in Shanghai and many other cities
in China, and further in late 2022.
The COVID-19 pandemic also demonstrated the positive role online to-consumer chronic
disease management platforms can play in the healthcare industry to improve the availability
of medical resources and alleviate pressure on major hospitals in China. The pandemic also
cultivated consumer habits, accelerating user growth for the online to-consumer chronic
disease management market in China. It also prompted governmental and policy support for the
online chronic disease management market. The user adoption of online to-consumer
healthcare services and the consumer habits cultivated are also expected to persist post-
pandemic.
In light of the above, although hospital operations and our own business operations were
disrupted from time to time due to COVID-19 lockdown measures, as a whole, the COVID-19
outbreak did not materially affect our business and financial performance during the Track
Record Period. As consumers increasingly use online platforms for medical services such as
online consultations and drug purchases as a result of the COVID-19 outbreak, our revenue
increased from RMB1,758.7 million in 2021 to RMB2,204.3 million in 2022. Even as the
COVID-19 pandemic abated in 2023, we reached full-year revenue of RMB2,434.3 million,
demonstrating the continued adoption of online healthcare services and development of
consumer habits. As of December 31, 2023, we had cash and cash equivalents of RMB146.3
million. We believe that our current level of liquidity is sufficient for us to successfully
navigate an extended period of uncertainty. While COVID-19 pandemic in China has been
under control since early 2023, the future development of COVID-19 and its long-term effects
on our industry and business remain uncertain. See “Risk Factors—Risks Relating to Our
Business and Industry—Any catastrophe, including natural catastrophes, outbreaks of health
epidemics and other extraordinary events, could disrupt our business operations.”
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MATERIAL ACCOUNTING POLICY INFORMATION, JUDGEMENTS AND
ESTIMATES
The preparation of our consolidated financial information requires management to make
judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgments about
carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates. Our material accounting policy information and
judgments made by management in the application of HKFRSs that have significant effect on
the consolidated financial information and major sources of estimation uncertainty are set out
in detail in notes 2 and 3 to the Accountants’ Report set out in Appendix I to this prospectus.
Set out below are the material accounting policy information which we believe are most
important for an understanding of our financial condition and results of operations.
Revenue and Other Income
Income is classified by our Group as revenue when it arises from the sale of goods and
provision of services in the ordinary course of our business.
Our Group is the principal for our revenue transactions and recognizes revenue on a gross
basis. In determining whether our Group acts as a principal or as an agent, we consider whether
it obtains control of the products or services before they are transferred to our customers.
Control refers to our Group’s ability to direct the use of and obtain substantially all of the
remaining benefits from the products or services.
Our revenue and other income recognition policies are as follows:
Comprehensive Medical Services
Revenue from comprehensive medical services principally comprises (i) online
consultation services, e-prescription services and sales of pharmaceutical and other products on
our comprehensive medical service platform to individual customers; and (ii) physician
consultation services, physical examination services, surgery services and sales of
pharmaceutical products by our hospital to individual patients.
The revenue from the sales of pharmaceutical and healthcare products through
comprehensive medical service platform and hospital is recognized at the point in time when
control of pharmaceutical and healthcare products is transferred to the customers.
Online consultation services, e-prescription services, physician consultation services,
physical examination services and surgery service are generally rendered in a short period of
time and revenue is recognized at a point in time on completion of the related services when
the services are rendered and completed.
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Online Retail Pharmacy Services
Revenue from online retail pharmacy services is principally sales of pharmaceutical and
healthcare products to individual customers on our online retail pharmacy service platform,
third-party platforms and retail pharmacies, along which we provide online consultation
services and after-sales consultation services.
The revenue from online retail pharmacy services is recognized at the point in time when
control of pharmaceutical and healthcare products is transferred to the customers.
Customized Content and Marketing Solutions
Revenue from customized content and marketing solutions principally comprises content
and marketing solutions to pharmaceutical and healthcare products suppliers and third-parties.
We perform the services stipulated in the contracts during the continuous transfer of control of
the services to the customers and recognize revenue over time.
Others
Other revenue from pharmaceutical distribution is recognized at the point in time when
control of pharmaceutical and healthcare products is transferred to our customers.
Discount V ouchers
From time to time, we offer our customers discount vouchers free of charge through
various promotional and advertising activities, and the discount vouchers can only be utilized
when future purchases are made by the customers on certain specified pharmaceutical and
healthcare products of our Group. We recognize the discount vouchers as a reduction in
revenue when the customers apply the discount vouchers in future purchases.
Interest Income
Interest income is recognized as it accrues using the effective interest method. For
financial assets measured at amortized cost that are not credit-impaired, the effective interest
rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets,
the effective interest rate is applied to the amortized cost, which refers to gross carrying
amount net of loss allowance, of the asset.
Government Grants
Government grants are recognized in the consolidated statements of financial position
initially when there is reasonable assurance that they will be received and that we will comply
with the conditions attaching to them. Grants that compensate us for expenses incurred are
recognized as income in profit or loss on a systematic basis in the same periods in which the
expenses are incurred.
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Income Tax
Income tax for the period comprises current tax and movements in deferred tax assets and
liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in
profit or loss except to the extent that they relate to items recognized in other comprehensive
income or directly in equity, in which case the relevant amounts of tax are recognized in other
comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the period, using tax
rates enacted or substantively enacted at the end of each year during the Track Record Period,
and any adjustment to tax payable in respect of previous period.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences
respectively, being the differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax
losses and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax
assets to the extent that it is probable that future taxable profits will be available against which
the asset can be utilized, are recognized. Future taxable profits that may support the recognition
of deferred tax assets arising from deductible temporary differences include those that will
arise from the reversal of existing taxable temporary differences, provided those differences
relate to the same taxation authority and the same taxable entity, and are expected to reverse
either in the same period as the expected reversal of the deductible temporary difference or in
periods into which a tax loss arising from the deferred tax asset can be carried back or forward.
The same criteria are adopted when determining whether existing taxable temporary
differences support the recognition of deferred tax assets arising from unused tax losses and
credits, that is, those differences are taken into account if they relate to the same taxation
authority and the same taxable entity, and are expected to reverse in a period, or periods, in
which the tax loss or credit can be utilized.
The limited exceptions to recognition of deferred tax assets and liabilities are those
temporary differences arising from goodwill not deductible for tax purposes, the initial
recognition of assets or liabilities that affect neither accounting nor taxable profit (provided
they are not part of a business combination), and temporary differences relating to investments
in subsidiaries to the extent that, in the case of taxable differences, we control the timing of
the reversal and it is probable that the differences will not reverse in the foreseeable future, or
in the case of deductible differences, unless it is probable that they will reverse in the future.
The amount of deferred tax recognized is measured based on the expected manner of
realization or settlement of the carrying amount of the assets and liabilities, using tax rates
enacted or substantively enacted at the end of each period during the Track Record Period.
Deferred tax assets and liabilities are not discounted.
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The carrying amount of a deferred tax asset is reviewed at the end of each period during
the Track Record Period and is reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow the related tax benefit to be utilized. Any such
reduction is reversed to the extent that it becomes probable that sufficient taxable profits will
be available.
Additional income taxes that arise from the distribution of dividends are recognized when
the liability to pay the related dividends is recognized.
Current tax balances and deferred tax balances, and movements therein, are presented
separately from each other and are not offset. Current tax assets are offset against current tax
liabilities, and deferred tax assets against deferred tax liabilities, if we have the legally
enforceable right to set off current tax assets against current tax liabilities and the following
additional conditions are met:
— in the case of current tax assets and liabilities, we intend either to settle on a net
basis, or to realize the asset and settle the liability simultaneously; or
— in the case of deferred tax assets and liabilities, if they relate to income taxes levied
by the same taxation authority on either:
— the same taxable entity; or
— different taxable entities, which, in each future period in which significant
amounts of deferred tax liabilities or assets are expected to be settled or
recovered, intend to realize the current tax assets and settle the current tax
liabilities on a net basis or realize and settle simultaneously.
Credit Losses from Financial Instruments
We recognize a loss allowance for expected credit losses (“ECLs”) on financial assets
measured at amortized cost (including cash and cash equivalents, trade and other receivables
and amounts due from related parties).
Financial assets measured at fair value are not subject to the ECLs assessment.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as
the present value of all expected cash shortfalls (i.e. the difference between the cash flows due
to the Group in accordance with the contract and the cash flows that we expect to receive).
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The expected cash shortfalls are discounted using the following discount rates where the
effect of discounting is material:
— trade and other receivables: effective interest rate determined at initial recognition
or an approximation thereof.
The maximum period considered when estimating ECLs is the maximum contractual
period over which we are exposed to credit risk.
In measuring ECLs, we take into account reasonable and supportable information that is
available without undue cost or effort. This includes information about past events, current
conditions and forecasts of future economic conditions.
ECLs are measured on either of the following bases:
— 12-month ECLs: these are losses that are expected to result from possible default
events within the 12 months after the reporting date; and
— lifetime ECLs: these are losses that are expected to result from all possible default
events over the expected lives of the items to which the ECL model applies.
Loss allowances for trade receivables are always measured at an amount equal to lifetime
ECLs. ECLs on these financial assets are estimated using a provision matrix based on our
historical credit loss experience, adjusted for factors that are specific to the debtors and an
assessment of both the current and forecast general economic conditions at the reporting date.
During the Track Record Period, since there were changes in the business scale of customized
content and marketing solutions service and our expectations for the future economic
conditions, the expected credit loss rates were adjusted in accordance with our accounting
policy set out in note 2(i) to the Accountants’ Report.
For all other financial instruments, we recognize a loss allowance equal to 12-month
ECLs unless there has been a significant increase in credit risk of the financial instrument since
initial recognition, in which case the loss allowance is measured at an amount equal to lifetime
ECLs.
Significant Increases in Credit Risk
In assessing whether the credit risk of a financial instrument has increased significantly
since initial recognition, we compare the risk of default occurring on the financial instrument
assessed at the reporting date with that assessed at the date of initial recognition. In making this
reassessment, we consider that a default event occurs when (i) the borrower is unlikely to pay
its credit obligations to our Group in full, without recourse by our Group to actions such as
realizing security (if any is held); or (ii) the financial asset is 90 days past due. We consider
both quantitative and qualitative information that is reasonable and supportable, including
historical experience and forward-looking information that is available without undue cost or
effort.
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In particular, the following information is taken into account when assessing whether
credit risk has increased significantly since initial recognition:
— failure to make payments of principal or interest on their contractually due dates;
— an actual or expected significant deterioration in a financial instrument’s external or
internal credit rating (if available);
— an actual or expected significant deterioration in the operating results of the debtor;
and
— existing or forecast changes in the technological, market, economic or legal
environment that have a significant adverse effect on the debtor’s ability to meet its
obligation to our Group.
Depending on the nature of the financial instruments, the assessment of a significant
increase in credit risk is performed on either an individual basis or a collective basis. When the
assessment is performed on a collective basis, the financial instruments are grouped based on
shared credit risk characteristics, such as past due status and credit risk ratings.
ECLs are remeasured at each reporting date to reflect changes in the financial
instrument’s credit risk since initial recognition. Any change in the ECL amount is recognized
as an impairment gain or loss in profit or loss. We recognize an impairment gain or loss for all
financial instruments with a corresponding adjustment to their carrying amount through a loss
allowance account.
Basis of Calculation of Interest Income
Interest income recognized in accordance with note 2(s)(vi) to the Accountants’ Report
set out in Appendix I to this prospectus is calculated based on the gross carrying amount of the
financial asset unless the financial asset is credit-impaired, in which case interest income is
calculated based on the amortized cost (i.e. the gross carrying amount less loss allowance) of
the financial asset.
At each reporting date, we assess whether a financial asset is credit-impaired. A financial
asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable
events:
— significant financial difficulties of the debtor;
— a breach of contract, such as a default or past due event;
— it becoming probable that the borrower will enter into bankruptcy or other financial
reorganization;
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— significant changes in the technological, market, economic or legal environment that
have an adverse effect on the debtor; or
— the disappearance of an active market for a security because of financial difficulties
of the issuer.
Write-off Policy
The gross carrying amount of a financial asset is written off (either partially or in full)
to the extent that there is no realistic prospect of recovery. This is generally the case when the
Group determines that the debtor does not have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the write-off.
Subsequent recoveries of an asset that was previously written off are recognized as a
reversal of impairment in profit or loss in the period in which the recovery occurs.
Impairment of Non-Financial Assets
During the Track Record Period, our Directors considered that the Group as a whole
constitutes a single cash generating unit and assessed the impairment indication of the property,
plant and equipment and intangible assets at the end of reporting period by reviewing internal
and external sources of information. If any such indication exists, the asset’s recoverable
amount is estimated by using the value in use model. V alue in use was calculated by preparing
discounted cash flows and any shortfall of the recoverable amount against the carrying amounts
would be recognized as impairment.
The balance of property, plant and equipment amounted to RMB23.4 million, RMB31.3
million and RMB51.6 million as of December 31, 2021, 2022 and 2023, respectively. Such
balance mainly included (i) right-of-use assets in relation to our pharmacies, warehouses,
offices and dormitories through tenancy agreements; and (ii) leasehold improvement. The
balance of intangible assets amounted to RMB2.4 million, RMB2.5 million and RMB2.3
million as of December 31, 2021, 2022 and 2023, respectively. Such balance mainly included
computer software, license and trademark. Upon review of the aforesaid year-end balance and
assessment of the impairment indication for each respective year, the Group did not make any
impairment for the property, plant and equipment and intangible assets during the years ended
December 31, 2021, 2022 and 2023.
Credit Losses from Financial Guarantee Issued
Financial guarantees are contracts that require the issuer, or the guarantor, to make
specific payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the
holder incurs because a specified debtor fails to make payment when due in accordance with
the terms of a debt instrument.
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Financial guarantees issued are initially recognized within “trade and other payables” at
fair value, which is determined by reference to fees charged in an arm’s length transaction for
similar services, when such information is obtainable, or to interest rate differentials, by
comparing the actual rates charged by lenders when the guarantee is made available with the
estimated rates that lenders would have charged, had the guarantees not been available, where
reliable estimates of such information can be made. Where consideration is received or
receivable for the issuance of the guarantee, the consideration is recognized in accordance with
the Group’s policies applicable to that category of asset. Where no such consideration is
received or receivable, an immediate expense is recognized in profit or loss.
We monitor the risk that the specified debtor will default on the contract and recognize
a provision when ECLs on the financial guarantees are determined to be higher than the amount
carried in “trade and other payables” in respect of the guarantees (i.e. the amount initially
recognized, less accumulated amortization).
To determine ECLs, we consider changes in the risk of default of the specified debtor
since the issuance of the guarantee. A 12-month ECL is measured unless the risk that the
specified debtor will default has increased significantly since the guarantee is issued, in which
case a lifetime ECL is measured. The same definition of default and the same assessment of
significant increase in credit risk as described in note 2(i)(i) to the Accountants’ Report set out
in Appendix I to this prospectus apply.
Convertible Redeemable Preferred Shares
Convertible redeemable preferred shares give rise to financial liabilities if they are
redeemable in case of occurrence of triggering events which are beyond the control of both the
Group and the preferred shareholders. The conversion feature is recognised as a derivative
liability if it will or may be settled other than by the Group exchanging a fixed amount of cash
or another financial asset for a fixed number of the Group’s own equity instruments.
At initial recognition, the redemption liabilities resulting from the convertible redeemable
preferred shares are measured at the present value of the redemption amount. Subsequent
changes in the carrying amount of the redemption liabilities are recognised in profit or loss.
If the preferred shares are converted into ordinary shares, the carrying amount of the
financial liabilities is transferred to share capital and capital reserve.
Share-based Payments
The fair value of shares granted to directors, employees, advisors and other persons is
recognized as an expense with a corresponding increase in share-based payments reserve
within equity. The fair value is measured at grant date using the equity allocation method or
discounted cash flow method, taking into account the terms and conditions upon which the
shares were granted. Where the employees have to meet vesting conditions before becoming
unconditionally entitled to the shares, the total estimated fair value of the shares is spread over
the vesting period, taking into account the probability that the shares will vest.
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During the vesting period, the number of shares that is expected to vest is reviewed. Any
resulting adjustment to the cumulative fair value recognized in prior years is charged/credited
to the profit or loss for the period of the review, with a corresponding adjustment to the
share-based payments reserve. On vesting date, the amount recognized as an expense is
adjusted to reflect the actual number of shares that vest (with a corresponding adjustment to
the share-based payments reserve). The equity amount is recognized in the share-based
payments reserve until the shares are vested (when it is included in the amount recognized in
share premium).
DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME ITEMS
The following table sets forth a summary of our consolidated statements of profit or loss
and other comprehensive income for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Revenue 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
Cost of sales (1,539,025) (87.5) (1,823,719) (82.7) (1,946,901) (80.0)
Gross profit 219,648 12.5 380,584 17.3 487,407 20.0
Other net income/(loss) 33,005 1.9 (134,188) (6.1) (23,915) (1.0)
Selling and distribution expenses (309,291) (17.6) (330,248) (15.0) (343,770) (14.1)
Administrative expenses (138,967) (7.9) (177,483) (8.1) (171,477) (7.0)
Recognition of impairment losses (310) (0.0) (173) (0.0) (140) (0.0)
Loss from operations (195,915) (11.1) (261,508) (11.9) (51,895) (2.1)
Finance costs (108,035) (6.1) (121,781) (5.5) (144,816) (5.9)
Loss before taxation (303,950) (17.3) (383,289) (17.4) (196,711) (8.1)
Income tax (39) (0.0) (13) (0.0) (77) (0.0)
Loss and total comprehensive
income for the year (303,989) (17.3) (383,302) (17.4) (196,788) (8.1)
Attributable to:
Equity shareholders of the
Company (303,964) (17.3) (383,302) (17.4) (196,788) (8.1)
Non-controlling interests (25) (0.0) – – – –
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Non-HKFRS Measure: Adjusted Net Loss/Profit and Adjusted Net Loss/Profit Margin
To supplement our consolidated financial statements, which are presented in accordance
with HKFRSs, we also use adjusted net loss/profit (non-HKFRS measure) and adjusted net
loss/profit margin (non-HKFRS measure) as additional financial measures, which are not
required by, or presented in accordance with, HKFRSs. We believe adjusted net loss/profit
(non-HKFRS measure) and adjusted net loss/profit margin (non-HKFRS measure) facilitate
comparisons of operating performance from year to year and provides useful information to
investors and others to understand and evaluate our consolidated results of operations in the
same manner as our management by eliminating impacts of certain items.
However, our presentation of adjusted net loss/profit (non-HKFRS measure) and adjusted
net loss/profit margin (non-HKFRS measure) may not be comparable to similarly titled
measures presented by other companies. The use of adjusted net loss/profit (non-HKFRS
measure) and adjusted net loss/profit margin (non-HKFRS measure) has limitations as an
analytical tool, and you should not consider it in isolation from, or as a substitute for an
analysis of, our results of operations or financial condition as reported under HKFRSs.
We define adjusted net loss/profit (non-HKFRS measure) as loss and total comprehensive
income for the year, excluding the effects of (i) equity settled share-based transactions; (ii)
listing expenses; (iii) changes in the carrying amount of preferred shares liability; and (iv)
foreign exchange from the preferred shares liability. We account for the compensation cost
from equity settled share-based transactions with employees, which is a non-cash item and
does not result in cash outflow. We exclude listing expenses arising from activities relating to
the Global Offering. In addition, we eliminate the impacts of changes in the carrying amount
of preferred shares liability and foreign exchange differences associated with our Preferred
Shares, primarily because these are non-cash items in nature. The convertible redeemable
preferred shares will automatically convert into ordinary shares upon the completion of the
Global Offering. We define adjusted net loss/profit margin (non-HKFRS measure) as adjusted
net loss/profit (non-HKFRS measure) divided by revenue for the year and multiplied by 100%.
The following table reconciles our adjusted net loss/profit (non-HKFRS measure) for the
years indicated:
For the year ended December 31,
2021 2022 2023
RMB’000, except for percentages
Reconciliation of net loss to adjusted
net loss/profit
(non-HKFRS measure)
Loss and total comprehensive income
for the year (303,989) (383,302) (196,788)
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For the year ended December 31,
2021 2022 2023
RMB’000, except for percentages
Add:
Equity settled share-based transactions 7,904 13,648 5,233
Listing expenses 13,453 21,273 25,081
Changes in the carrying amount of
preferred shares liability 107,220 120,614 143,176
Foreign exchange from preferred shares
liability (31,409) 138,326 30,463
Adjusted net (loss)/profit
(non-HKFRS measure) (206,821) (89,441) 7,165
Adjusted net (loss)/profit margin
(non-HKFRS measure) (11.8)% (4.1)% 0.3%
Revenue
During the Track Record Period, we generated our revenue primarily from (i)
comprehensive medical services; (ii) online retail pharmacy services; (iii) customized content
and marketing solutions; and (iv) others. The following table sets forth the breakdown of our
revenue by business line for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Comprehensive medical
services 719,693 40.9 868,171 39.4 983,654 40.4
Online retail pharmacy
services 1,011,427 57.5 1,252,123 56.8 1,297,106 53.3
Customized content and
marketing solutions 27,553 1.6 60,254 2.7 87,046 3.6
Others – – 23,755 1.1 66,502 2.7
Total 1,758,673 100.0 2,204,303 100.0 2,434,308 100.0
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Comprehensive Medical Services
Revenue from comprehensive medical services primarily consists of (i) revenue from
online consultation services provided by physicians to patients, e-prescription services and
sales of pharmaceutical and other products on our H2H service platform; and (ii) revenue from
physician consultations and sales of pharmaceutical products through offline hospitals.
Online Retail Pharmacy Services
Revenue from online retail pharmacy services primarily represents revenue from sales of
pharmaceutical and healthcare products on our online retail pharmacy service platform,
third-party platforms and a number of offline retail pharmacies.
Customized Content and Marketing Solutions
Revenue from customized content and marketing solutions mainly represents revenue
derived from customized content and marketing solutions that we provided to pharmaceutical
companies.
Others
Revenue from others primarily represents revenue derived from wholesale of
pharmaceutical products to third-party distributors for the purpose of inventory management.
Cost of Sales
Our cost of sales for comprehensive medical services and online retail pharmacy services
primarily represents procurement costs for pharmaceutical and healthcare products. Our cost of
sales for customized content and marketing solutions primarily consists of staff costs. The
following table sets forth the breakdown of our cost of sales by business line for the years
indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Comprehensive medical
services 679,150 44.1 746,093 40.9 833,916 42.8
Online retail pharmacy
services 856,427 55.7 1,045,430 57.3 1,033,915 53.1
Customized content and
marketing solutions 3,448 0.2 8,771 0.5 14,769 0.8
Others – – 23,425 1.3 64,301 3.3
Total 1,539,025 100.0 1,823,719 100.0 1,946,901 100.0
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Our cost of sales primarily consists of (i) procurement costs for pharmaceutical and other
healthcare products; (ii) medical service costs directly related to registered physicians in
providing online consultations and cost of sales in relation to the operations of our offline
hospital; (iii) staff costs, representing wages, benefits and bonuses of our sales and marketing
personnel for our customized content and marketing solutions and staff of our offline hospital;
(iv) content production costs in connection with our customized content and marketing
solutions; and (v) others, mainly representing depreciation and amortization. The following
table sets forth the breakdown of our cost of sales by nature for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Procurement costs 1,516,288 98.5 1,796,325 98.5 1,912,293 98.2
Medical service costs 13,518 0.9 14,800 0.8 15,499 0.8
Staff costs 4,157 0.3 6,931 0.4 12,407 0.6
Content production costs 2,165 0.1 4,523 0.2 5,537 0.3
Others 2,897 0.2 1,140 0.1 1,165 0.1
Total 1,539,025 100.0 1,823,719 100.0 1,946,901 100.0
Gross Profit and Gross Profit Margin
Our gross profit represents our revenue less cost of sales. Our gross profit margin
represents our gross profit as a percentage of our revenue. The following table sets forth the
breakdown of our gross profit and gross profit margin by business line for the years indicated.
For the year ended December 31,
2021 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB’000 % RMB’000 % RMB’000 %
Comprehensive medical
services 40,543 5.6 122,078 14.1 149,738 15.2
Online retail pharmacy
services 155,000 15.3 206,693 16.5 263,191 20.3
Customized content and
marketing solutions 24,105 87.5 51,483 85.4 72,277 83.0
Others – – 330 1.4 2,201 3.3
Total 219,648 12.5 380,584 17.3 487,407 20.0
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Our gross profit margin increased from 12.5% in 2021 to 17.3% in 2022, and further
increased to 20.0% in 2023, primarily because we were able to negotiate more favorable
procurement terms for our pharmaceutical and healthcare products due to our increased
business scale.
Other Net Income/(Loss)
Other net loss or income primarily consist of (i) government grants, which mainly
represent incentives and subsidies received from local governments for the purpose of
encouraging business development; (ii) foreign exchange gain or loss primarily in connection
with changes in present value of redemption amount of Preferred Shares denominated in US
dollars; and (iii) other gain or loss, mainly representing interest income from cash deposits and
our donations. The following table sets forth the breakdown of our other net loss or income for
the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Government grants 4,442 526 1,026
Foreign exchange gain/(loss) 27,635 (134,660) (28,444)
Other gain/(loss) 928 (54) 3,503
Total 33,005 (134,188) (23,915)
Selling and Distribution Expenses
Our selling and distribution expenses primarily consist of (i) advertising and platform
service fees, which mainly represent advertising and marketing fees we paid to third-party
online platforms to promote our brand and services; (ii) service fees to registered physicians
as compensation for their activity on our platform, including the number of hours spent online
on our platform, and their contribution to our live streaming and academic community and
patient community services; (iii) logistics expenses for engaging third-party couriers for
delivery services; (iv) staff costs, representing wages, benefits and bonuses of our CDM
service center staff and our sales and marketing personnel for our comprehensive medical
services and online retail pharmacy services; (v) outsourcing expenses charged by outsourcing
agencies in connection with the outsourced support staff for our operations, such as customer
service personnel and warehouse workers; (vi) telecommunication expenses in relation to our
promotional activities, such as messaging services used in the user registration process; (vii)
share-based compensation to our sales and marketing personnel; and (viii) others, including
utilities and depreciation and amortization.
The following table sets forth the breakdown of our selling and distribution expenses for
the years indicated.
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For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Advertising and platform
service fees 77,714 25.1 86,101 26.0 91,379 26.6
Service fees to registered
physicians 96,781 31.3 78,543 23.8 68,235 19.8
Logistics expenses 50,176 16.2 57,672 17.5 54,692 15.9
Staff costs 39,019 12.6 52,193 15.8 52,336 15.2
Outsourcing expenses 26,713 8.6 28,025 8.5 47,990 14.0
Telecommunication
expenses 3,886 1.3 7,797 2.4 7,292 2.1
Share-based compensation 3,447 1.1 5,253 1.6 2,026 0.6
Others 11,555 3.8 14,664 4.4 19,820 5.8
Total 309,291 100.0 330,248 100.0 343,770 100.0
In 2021, 2022 and 2023, our selling and distribution expenses amounted to RMB309.3
million, RMB330.2 million and RMB343.8 million, respectively, accounting for 17.6%, 15.0%
and 14.1% of our total revenue for the same years, respectively. Despite the increases in
absolute amounts of our selling and distribution expenses during the Track Record Period, our
selling and distribution expenses as a percentage of revenue exhibited a downward trend,
which was primarily attributable to economies of scale, a reduction in our compensation to
registered physicians and our increased cost efficiency after building up our in-house operation
capabilities. See “—Comparison of Results of Operations” in this section for a detailed
discussion.
Administrative Expenses
Our administrative expenses primarily consist of (i) research and development costs,
including staff costs of R&D personnel, outsourcing expenses for our R&D activities,
depreciation of right-of-use assets, and share-based compensation to our R&D personnel. See
“Business—Technology and Research and Development—Our Research and Development
Investment” in this prospectus for a breakdown of our R&D expenses during the Track Record
Period; (ii) staff costs, representing wages, benefits and bonuses of our administrative
personnel; (iii) professional service fees, which primarily represent fees paid to professional
parties, including auditors, lawyers and consultants in connection with past rounds of financing
and the proposed Listing; (iv) handling fees that we paid to third-party payment platforms in
relation to our sales of pharmaceutical and other products; (v) business expenses, including
business development fees, office expenses and travel expenses incurred in our daily
operations; (vi) technical service fees paid to third-party service providers for online technical
support solutions; (vii) share-based compensation to our administrative personnel; (viii)
depreciation of right-of-use assets; (ix) outsourcing expenses for certain administrative
functions; and (x) others, including rent and utility expenses, telecommunication expenses
related to administrative activities, and depreciation and amortization.
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The following table sets forth the breakdown of our administrative expenses in absolute
amounts and as percentage of our total administrative expenses for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 % RMB’000 % RMB’000 %
Research and development
costs 45,950 33.1 61,783 34.8 41,532 24.2
Staff costs 28,724 20.7 37,126 20.9 38,831 22.6
Professional service fees 24,843 17.9 32,292 18.2 35,983 21.0
Handling fees 10,731 7.7 13,104 7.4 12,651 7.4
Business expenses 8,991 6.4 7,892 4.4 11,469 6.7
Technical service fees 6,651 4.8 6,313 3.6 10,989 6.4
Depreciation of right-of-use
assets 2,483 1.8 4,198 2.4 4,385 2.6
Outsourcing expenses 1,872 1.3 2,182 1.2 3,680 2.1
Share-based compensation 2,797 2.0 4,246 2.4 1,599 0.9
Others 5,925 4.3 8,347 4.7 10,358 6.1
Total 138,967 100.0 177,483 100.0 171,477 100.0
In 2021, 2022 and 2023, our administrative expenses amounted to RMB139.0 million,
RMB177.5 million and RMB171.5 million, respectively, accounting for 7.9%, 8.1% and 6.7%
of our total revenue for the same years, respectively. As we grew our business to achieve scale,
our administrative expenses as a percentage of revenue displayed a generally decreasing trend
during the Track Record Period, as we were able to achieve economies of scale, maintain
relatively stable fixed costs and implement cost effective strategies such as building up our
in-house capabilities. See “—Comparison of Results of Operations” in this section for a
detailed discussion.
Recognition of Impairment Losses
Our recognition of impairment losses, which mainly represent impairment losses
recognized on trade receivables from enterprise customers for our customized content and
marketing solution services, amounted to RMB0.3 million, RMB0.2 million and RMB0.1
million for the years ended December 31, 2021, 2022 and 2023, respectively.
Finance Costs
Our finance costs mainly represent (i) changes in the carrying amount of preferred shares
liability, which were recognized in relation to the present value of redemption amount of our
convertible redeemable preferred shares; and (ii) interest on lease liabilities and bank loans.
Our finance costs amounted to RMB108.0 million, RMB121.8 million and RMB144.8 million
for the years ended December 31, 2021, 2022 and 2023, respectively.
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Income Tax
Income tax primarily represents our total current and deferred tax expenses under the
relevant income tax rules and regulations in the jurisdictions where we operate. During the
Track Record Period and up to the Latest Practicable Date, we had fulfilled all of our tax
obligations and did not have any material unresolved tax disputes.
The following summarizes major factors affecting our applicable tax rates in the Cayman
Islands, Hong Kong and mainland China.
Cayman Islands
Under the current laws of the Cayman Islands, the Company and its subsidiaries
incorporated in the Cayman Islands are not subject to tax on income or capital gains.
Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends
to shareholders.
Hong Kong
The Company’s subsidiary domiciled in Hong Kong is subject to a two-tiered income tax
rate for taxable income earned in Hong Kong effectively since April 1, 2018. The first HK$2
million of assessable profits earned by the subsidiary in Hong Kong are subject to be taxed at
an income tax rate of 8.25%, while the remaining profits will continue to be taxed at the
existing tax rate, 16.5%. To avoid abuse of the two-tiered tax regime, each group of connected
entities can nominate only one entity to benefit from the two-tiered tax rate. Additionally,
payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not
subject to any Hong Kong withholding tax.
PRC
Under the EIT Law, our PRC operating entities, other than Fangzhou Information and
Fangzhou Media, are subject to a statutory enterprise income rate of 25.0%. Fangzhou
Information was recognized as a high and new technology enterprise and thereby entitled to a
preferential income tax rate of 15.0% in 2022. Fangzhou Media was eligible as a small
low-profit enterprise and entitled to a tax relief policy. The portion of annual taxable income
amount of a small low-profit enterprise, which does not exceed RMB1 million, shall be
computed at a reduced rate of 25% as taxable income amount, and be subject to enterprise
income tax at 20% tax rate.
BUSINESS SUSTAINABILITY AND PATH TO PROFITABILITY
Since our inception, we have pioneered innovative solutions to address pain points in
chronic disease management by leveraging our deep insights into China’s healthcare system
and applying our spirit of innovation to create value for key stakeholders. We initially launched
our online retail pharmacy platform to address the needs of chronic disease patients for repeat
prescription drug refills and the inconvenience of regular trips to major hospitals in China. As
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our platform evolved, we realized that trusted physician-patient relationships were also
essential for helping our patients manage their chronic conditions. This insight led us to launch
our H2H service platform and operating model in 2018, which provides easy connectivity
between patients and their physicians, and enables more effective chronic disease management
through online follow-up consultations, e-prescriptions, and physician/patient education
modules.
Our Historical Business Focus and Strong Growth
We believe that building the scale of our user base and the reputation of our brand are the
foundation to our long-term commercial success. As such, we have dedicated ourselves to
cultivating an active and loyal community of patients and physicians on our Jianke Platform,
and developing and strengthening business relationships with pharmaceutical companies. As
we solidify our relationships with key stakeholders, we have focused on developing and
shaping consumer behavior and preferences, developing new sales channels and introducing
new services and products to address their needs.
In 2021, we focused significant efforts on growing our paying user base and cultivate user
habits in order to better support our platform’s long-term development. In particular, we
undertook a strategic initiative to rapidly expand the scale of our H2H services. These efforts
primarily included promotions to attract users to our Jianke Platform, and incentives to
encourage physician and patient activities. Through these promotional initiatives, we were able
to cultivate user habits and develop a stronger paying user base. This has placed us in a solid
position to achieve sustainable long-term growth and profitability, reflected in the upward
trend in our gross profit margin of 17.3% and 20.0% in 2022 and 2023, respectively.
Robust Growth of Operating Metrics on Jianke Platform
From 2016 to 2019, in order to maintain the ongoing business operations of the Jianke
mobile applications and website during our business reorganization, their operations were
carried out by Guangdong Jianke under license and authorization from the Initial WFOE until
July 2019 when we began to operate them in-house. For more information, see
“History, Reorganization and Corporate Structure—Reorganization and Disruption of
Production and Business Operations Incident—Business Reorganization from Guangdong
Jianke to the Pre-reorganization Group” in this prospectus. GMV generated by the Jianke
Platform and through third-party e-commerce platforms increased from RMB1,945.4 million in
2021 to RMB2,430.3 million and RMB2,481.5 million in 2022 and 2023, respectively. Key
operating metrics of our business have also experienced positive growth, as summarized below:
 Paying user base expansion . The number of paying users on the Jianke Platform
grew from approximately 2.5 million in 2021 to 3.9 million and 4.4 million in 2022
and 2023, respectively.
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 Increase in registered physicians . The number of registered physicians on our H2H
service platform continued to increase since we began to operate the Jianke mobile
applications and website in-house in July 2019 and reached more than 212,000 as of
December 31, 2023.
 User loyalty and activity . The average spending per paying user on the Jianke
Platform was RMB766.3, RMB626.7 and RMB558.9 in 2021, 2022 and 2023,
respectively, which was higher than the industry average for the respective year,
according to CIC. In addition, our average user retention rate remained consistently
high throughout the Track Record Period, at 77.3%, 78.7% and 79.0% in 2021, 2022
and 2023, respectively, which was higher than the industry average of approximately
30-35% for the respective years, according to CIC.
Enhanced Operating Efficiency
During the Track Record Period, we made significant investment in building our teams
across different functions and enhancing our brand recognition. In 2021 and 2022, we invested
substantially in our sales and marketing, administrative, and research and development efforts,
including selling and marketing initiatives such as promoting our Jianke Platform through app
stores and different online and social media channels, and increases in headcount of our sales
and marketing, administrative and research and development teams, all of which resulted in an
increase in our operating expenses from RMB448.3 million in 2021 to RMB507.7 million in
2022. In 2023, our operating expenses further increased to RMB515.2 million as we continued
to expand our business scale. Despite the increase in the overall absolute amount during the
Track Record Period, our operating expenses as a percentage of revenue decreased from 25.5%
in 2021 to 23.0% in 2022, and further decreased to 21.2% in 2023, primarily attributable to
economies of scale and our increased cost efficiency after building up our in-house operating
capabilities. The table below sets forth a breakdown of our operating expenses and their
respective percentages to our revenue for the years indicated:
For the year ended December 31,
2021 2022 2023
RMB’000, except for percentages
Selling and distribution expenses 309,291 330,248 343,770
– As a percentage of total revenue 17.6% 15.0% 14.1%
Administrative expenses (excluding
research and development costs) 93,017 115,700 129,945
– As a percentage of total revenue 5.3% 5.2% 5.3%
Research and development costs 45,950 61,783 41,532
– As a percentage of total revenue 2.6% 2.8% 1.7%
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Our investment in sales and marketing activities, such as incentivizing physician activity
on our platform and advertising and promotion of our brand, has enabled us to grow our brand
reach and attract more users and physicians to register with us. Moreover, we aimed to
incentivize effective activity from physicians, such as providing online consultations,
e-prescriptions, and academic and patient community services. These activities, although not
profit-making to us, create a better user experience for patients, which we believe can improve
our overall user stickiness and increase the conversion rate of active users to paying users to
our H2H service platform, thereby reducing user acquisition costs and improving our
profitability. During the Track Record Period, our user acquisition costs, which were
equivalent to the total advertising and platform service fees recorded under our selling and
distribution expenses, decreased as a percentage of total revenue from 4.4% in 2021 to 3.9%
and 3.8% in 2022 and 2023, respectively.
In addition, our significant investment in cultivating our own team was made with the aim
to reduce reliance on outsourcing of core functions. Our total outsourcing expenses as a
percentage of revenue was 1.7%, 1.4% and 2.1% in 2021, 2022 and 2023, respectively. The
increase in 2023 was attributable to the increase in number of outsourced staff, particularly
customer service staff to support our growing user base, and storage services to support our
increased sales volume, which was partially offset by a decrease in outsourcing of R&D
services, as our robust in-house research and development capabilities allowed us to optimize
our research staffing and operate with greater efficiency. As we grow in scale, we believe that
having in-house teams with the capability to operate our core functions is crucial to building
a well-rounded business, and will also be more cost-effective for our business operations in the
long-run. To that end, we will continue to strengthen our in-house capabilities and enhance
their productivity. We will also adapt our staffing strategy to align with our evolving business
needs and enhance operating efficiency.
Sustained Financial Growth
In the early stage of building our business foundation, we prioritized scaling our business.
As we achieved scale, we gained greater flexibility in price-setting and were able to negotiate
more favorable procurement terms. As a result, our gross profit margin increased from 12.5%
in 2021 to 17.3% in 2022, and further to 20.0% in 2023.
In 2021 and 2022, our adjusted net loss (non-HKFRS measure) was RMB206.8 million
and RMB89.4 million, respectively. As we continued to expand our user base and effectively
improved our operating efficiency, our net losses started to decrease, and we recorded adjusted
net profit (non-HKFRS measure) of RMB7.2 million in 2023, which primarily reflected our
decreased net losses for the same year. In addition, our net operating cash outflow in 2021 and
2022 amounted to RMB203.7 million and RMB50.0 million, respectively, primarily due to our
initiatives to incentivize physician activity and to attract and develop a loyal customer base. In
2023, we recorded a net operating cash inflow of RMB22.3 million, which was primarily
attributable to our increased sales volume of pharmaceutical and healthcare products and
improved operating efficiency. For a year-on-year analysis of our financial performance, see
“—Description of Certain Consolidated Statements of Profit or Loss and Other Comprehensive
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Income Items—Comparison of Results of Operations.” These financial results primarily reflect
the significant costs and expenses we incurred in growing our user base, assembling our own
team after we began to operate the Jianke Platform in-house, investing in our research and
development capabilities to optimize the functions of our mobile applications and website to
improve user experience and increasing our selling and marketing efforts to promote user
engagement and enhance our brand recognition, which we believe are crucial as our foundation
for long-term growth and success.
Our Strategies to Deliver Sustainable Revenue Growth and Profitability
We believe there will continue to be a significant need for better chronic disease
management in China for years to come. According to CIC, the size of online chronic disease
management market in China in terms of GMV is expected to continue to grow at a CAGR of
30.6% from RMB178.1 billion in 2023 to RMB1,153.9 billion in 2030. In particular, the market
size of the online to-consumer chronic disease management market is projected to grow from
RMB45.5 billion in 2023 to reach RMB599.5 billion in 2030, representing a CAGR of 44.5%.
We believe that online to-consumer chronic disease management platforms are an
overarching trend in the PRC healthcare system, by providing patients with convenient access
to medical consultation and prescription services, and improving the availability, quality and
coverage of medical services in China. Online to-consumer chronic disease management
platforms enable patients to reach high quality healthcare providers and receive medical
consultations and prescriptions beyond physical constraints. In addition, the COVID-19
pandemic has expedited the market adoption of online healthcare services and cultivated
consumer habits, accelerating user growth for the online to-consumer chronic disease
management market in China. For details, see “—Impact of COVID-19 on Operations.”
Although the COVID-19 pandemic has come under control, we believe that the user adoption
of online to-consumer healthcare services and the consumer habits cultivated will persist
post-pandemic. As such, it is expected that demand for online to-consumer CDM services will
continue to grow.
As a pioneer and leader in this growing industry segment, we believe that our active user
base of patients and physicians, strong relationships with pharmaceutical companies, and
ability to offer diversified and well-designed services and products will enable us to capture
future growth opportunities. Going forward, we expect to sustain our revenue growth and
achieve profitability by continuing to build a high-quality user base, introducing higher margin
products and services, optimizing our procurement costs, and enhancing our operational
efficiency.
Our Directors believe that, considering the underlying industry trend towards online
to-consumer chronic disease management platforms and by implementing the strategies set out
below, our business is and will continue to be sustainable and our profitability will improve.
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Building economies of scale and controlling operating expenses
We have benefited from operational efficiency arising from the economies of scale we
have achieved, and will continue to actively control operating expenses and expect that our
operating expenses as a percentage of revenue will continue to decrease as our business
expands. In 2021, 2022 and 2023, our selling and distribution expenses amounted to
RMB309.3 million, RMB330.2 million and RMB343.8 million, respectively, representing
17.6%, 15.0% and 14.1% of our revenue for the same years, respectively. For those same years,
our administrative expenses amounted to RMB139.0 million, RMB177.5 million and
RMB171.5 million, respectively, representing 7.9%, 8.1% and 7.0% of our revenue for the
same years, respectively. Despite the increase in overall absolute amount during the Track
Record Period, our selling and distribution expenses and administrative expenses as a
percentage of revenue decreased from 25.5% in 2021 to 23.0% in 2022, and further decreased
to 21.2% in 2023, primarily attributable to economies of scale and our increased cost efficiency
after building up our in-house operating capabilities. The decrease in our selling and
distribution expenses as a percentage of revenue from 17.6% in 2021 to 15.0% in 2022, and
further to 14.1% in 2023, was also partly the result of the ongoing optimization of our
physician compensation structure. By continuously enhancing our ability to interpret
physician’s online behavior, we are able to better evaluate their effective activities, and
optimize their compensation levels accordingly.
Going forward, we intend to take the following measures to further improve our operating
efficiency:
 We will continue to adjust and optimize our staffing levels to enhance operating
efficiency. In 2021 and 2022, we focused on building our internal team and
strengthening our in-house operational capabilities, including ancillary functions,
such as IT development and human resources. As a result, our total staff costs
(recorded under selling and distribution expenses, administrative expenses and
research and development costs) as a percentage of revenue increased from 6.2% in
2021 to 6.5% in 2022. In 2023, our robust in-house research and development
capabilities enabled us to streamline our research staff and operate more efficiently.
This resulted in a reduction of our total staff costs as a percentage of revenue to
5.3% for the year. Going forward, we will continue to enhance the productivity of
our in-house teams and adapt our staffing strategy to align with our evolving
business requirements.
 We will further improve our centralized management, streamline internal workflows
and leverage technology to drive cost-effective management. For instance, our AI
medical assistant provided assistance for approximately 65.7% of consultations
during the Track Record Period. With the help of our AI medical assistant, the
average number of orders processed per person per day by our customer service
personnel increased from 67.3 in 2019 when we first launched our AI medical
assistant, to 366.2 in 2023, representing a CAGR of 52.7% from 2019 to 2023. In
addition, we have integrated knowledge mapping technology into our platform to
develop a prescription verification system that can check the suitability of
physicians’ prescriptions for our H2H services. Using deep learning technology, we
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have introduced an intelligent prescription image recognition system which
significantly improves the efficiency of e-prescription review and verification. We
also developed intelligent warehouse space allocation algorithms and built a
mechanized assembly line to automate merchandise packing, labeling and parcel
sealing, drastically improving the efficiency of our warehouse operations. Moreover,
we intend to invest in academic and on-the-job training to equip our sales and
business development staff with more useful and professional knowledge in online
chronic disease management so as to upgrade the overall quality and efficiency of
business development.
 As we continue to grow our user base, we expect to continue benefiting from greater
and heightened brand recognition to grow our business. We expect to attract and
retain users more through word-of-mouth referrals, and reduce our reliance on
extensive marketing and advertising campaigns. During the Track Record Period,
our advertising and platform service fees as a percentage of revenue decreased from
4.4% in 2021 to 3.9% in 2022, and further to 3.8% in 2023. Despite such decrease,
our revenue has continued to increase. This testifies to the effectiveness of
word-of-mouth referrals by physicians and patients in growing our brand reach.
Hence, as our business gains strong user engagement, we plan to gradually lower our
discounts and investment in marketing and promotional activities. While we still
consider marketing and advertising campaigns as an important channel for user
access expansion, we will optimize the placement of relevant advertising campaigns
to increase promotion efficiency we see fit. Moving forward, we will continue to
fine-tune our marketing strategies to operate more efficiently and effectively as our
business expands.
Building a high-quality user base
We will continue to focus on strengthening user activity and loyalty to build a
high-quality user base, which we expect to be one of the key factors driving our business
growth. We have accumulated experience that has enabled us to develop and identify effective
strategies for addressing the evolving needs of our users, so as to deliver a superior user
experience, which sustains the retention of an active and loyal user base. As a result of our
efforts, the repeat purchase rate on our Jianke Platform remained high during the Track Record
Period, at 82.0%, 83.3% and 84.2% in 2021, 2022 and 2023, respectively.
We anticipate that our large, high-quality user base will bring us additional monetization
opportunities. For example, we plan to expand the scope of chronic disease management
services offered on our platform and continue to enlarge and diversify our product portfolio,
especially prescription and difficult-to-source drugs for chronic diseases, in order to better
meet the evolving needs of our users. We plan to undertake a number of initiatives to to
optimize our product mix and further improve our gross profit margin and profitability: (i)
increase our procurement and sales of traditional Chinese medicine and nutritional products
which are effective for treating chronic diseases; (ii) collaborate with pharmaceutical
companies to pinpoint additional high-margin medications which would be beneficial to our
user base of chronic disease patients; (iii) ensure access to high margin, difficult-to-source
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medications, by leveraging our deep, long-standing relationships with pharmaceutical
companies, and demonstrating our platform’s unique ability by connecting pharmaceutical
companies with a vast pool of registered doctors and patients. As of December 31, 2023, we
had collaborated with more than 760 pharmaceutical companies. We plan to deepen our
collaboration with our existing pharmaceutical company partners to promote a more diversified
pool of SKUs. As of December 31, 2023, we had offered over 212,000 drug SKUs, and we
expect the number of SKUs offered on our platform to continue to grow in the future, which
will enable us to derive additional revenue from the enlarged user base. We believe that the
resources accumulated on our platform, including our patient and physician base, and supplier
network, will enable us to achieve economies of scale in promoting and selling these products.
With the expansion of our user base, we have seen increasing interest from
pharmaceutical companies in our platform as an efficient and targeted channel to reach patients
and physicians. We anticipate this will continue to drive strong revenue growth for our
customized content and marketing solutions. During the Track Record Period, we provided
more than 15,000 live streaming sessions via our platform, and we anticipate a further increase
in this number as we continue to advance this business segment.
Introducing products and services which can bring higher value-added and increased scale
We aim to build a chronic disease management ecosystem dedicated to serving the needs
of key stakeholders including patients, physicians and pharmaceutical companies. As we
develop a highly loyal user base, we plan to introduce new service and product offerings with
higher margins. We had a track record of successfully monetizing our user base through
introduction of high-value-added service and product offerings.
For example, we began to provide customized content and marketing solutions and
observed rapid revenue growth of this high margin business from RMB27.6 million in 2021 to
RMB60.3 million in 2022 and further to RMB87.0 million in 2023. To continue growing this
segment, we intend to enhance our service offerings to retain our existing pharmaceutical
company partners and attract new ones. This will involve broadening the services and
information covered on the platform, as well as refining and enriching the content in each
specialty area, adding subspecialties and providing more value to patients and physicians. We
also plan to expand our content offerings in multimedia formats, such as short form videos and
live streaming of medical seminars and conferences, in order to better engage users’ attention
and make the marketing campaigns more effective.
We are also expanding our product offerings to cater to diverse patient needs. We
regularly review and analyze our product mix in order to better meet the needs of our users.
In the future, we expect to further expand our product offerings of high-value-added products,
including healthcare and nutritional supplements and traditional Chinese medicines, which
would also complement our broad selection of prescription drug SKUs.
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Lowering procurement costs
As our business scale grows, we are increasingly able to negotiate more favorable prices
and commercial terms with suppliers, including lower per unit prices for certain SKUs. In
addition, our proprietary supply chain and procurement system allows us to link directly to the
inventory systems of our major suppliers and access real-time pricing and availability data.
This automated approach allows us to minimize procurement search costs while ensuring
favorable pricing. Since the launch of our smart supply chain management system, we have
been able to lower procurement costs for 59.4% of the SKUs we purchased as of December 31,
2023. The continued reduction in our procurement costs will allow us to improve our gross
profit margin and overall profitability.
Going forward, we expect to adopt a number of measures to further improve our gross
profit margin:
 As we gradually instill consumer habits and build customer loyalty to our services,
we aim to dynamically adjust and optimize our pricing levels to enhance our gross
profit margin.
 We expect to improve our overall procurement costs by leveraging our growing
procurement volumes and improved bargaining power to secure more favorable
input prices, credit terms, and rebates from existing suppliers and pharmaceutical
company partners, while expanding our sourcing channels to include additional
suppliers and pharmaceutical companies.
 We plan to further grow our high-margin customized content and marketing solution
business, which will further improve our overall gross profit margin profile.
COMPARISON OF RESULTS OF OPERATIONS
Y ear Ended December 31, 2023 Compared to Y ear Ended December 31, 2022
Revenue
Our revenue increased by 10.4% from RMB2,204.3 million in 2022 to RMB2,434.3
million in 2023, primarily reflecting the increase in revenue from comprehensive medical
services and customized content and marketing solutions.
Revenue generated from comprehensive medical services increased by 13.3% from
RMB868.2 million in 2022 to RMB983.7 million in 2023, primarily due to the increase in
number of paying users of our comprehensive medical services, which had increased by 32.0%
from 2022 to 2023. The growth in paying users primarily reflected our increased brand
recognition and the increasing public acceptance of online medical consultation services. The
increase in revenue was partially offset by a decrease in average spending per paying user of
our comprehensive medical services by 17.9% from 2022 to 2023, primarily reflecting the
lower initial spending of our new paying users.
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Revenue generated from online retail pharmacy services increased by 3.6% from
RMB1,252.1 million in 2022 to RMB1,297.1 million in 2023, which reflected the increased
sales volume of our pharmaceutical and healthcare products primarily driven by growth in the
number of paying users in this segment, which increased by 16.5% from 2022 to 2023. This
increase in sales volume was partially offset by a decline of approximately 15.9% in average
spending per paying user from 2022 to 2023, primarily because our increased business scale
enabled us to negotiate more favorable procurement terms and offer more competitive pricing
on a range of products while preserving our overall gross profit margins.
Revenue generated from customized content and marketing solutions increased by 44.3%
from RMB60.3 million in 2022 to RMB87.0 million in 2023, primarily due to our ongoing
marketing efforts aimed at reaching more enterprise customers and expanding our customer
base for this business segment.
Cost of Sales
Our cost of sales increased by 6.8% from RMB1,823.7 million in 2022 to RMB1,946.9
million in 2023, primarily reflecting the increase in our procurement of pharmaceutical and
healthcare products in line with the growing number of orders on our platform.
Gross Profit and Gross Profit Margin
Our gross profit increased by 28.1% from RMB380.6 million in 2022 to RMB487.4
million in 2023 as our business scale increased. Our overall gross profit margin increased from
17.3% in 2022 to 20.0% in 2023, primarily reflecting the increase in gross profit margins of
our comprehensive medical services and online retail pharmacy services.
The gross profit margin of our comprehensive medical services increased from 14.1% in
2022 to 15.2% in 2023, primarily because of our increased ability to negotiate for more
favorable procurement terms due to our increased business scale.
The gross profit margin of our online retail pharmacy services increased from 16.5% in
2022 to 20.3% in 2023, primarily due to the more favorable procurement terms we negotiated
with suppliers as a result of our increased sales and procurement volumes, as well as a shift
in product mix, as we increased the proportion of higher margin OTC drugs within our product
portfolio.
The gross profit margin of our customized content and marketing services decreased from
85.4% in 2022 to 83.0% in 2023, primarily due to an increase in the headcount of sales and
marketing personnel in line with our expansion of the customized content and marketing
services business.
FINANCIAL INFORMATION
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Other Net Loss
Our other net loss decreased by 82.2% from RMB134.2 million in 2022 to RMB23.9
million in 2023, primarily reflecting the decrease in foreign exchange loss in connection with
the changes in present value of redemption amount of Preferred Shares denominated in US
dollars, and to a lesser extent, our increase in other gain representing the interest income from
our increased cash deposits.
Selling and Distribution Expenses
Our selling and distribution expenses increased by 4.1% from RMB330.2 million in 2022
to RMB343.8 million in 2023. Our selling and distribution expenses as a percentage of revenue
decreased slightly from 15.0% in 2022 to 14.1% in 2023. The increase in our selling and
distribution expenses was primarily due to (i) an increase of RMB20.0 million in outsourcing
expenses reflecting the increase in number of outsourced staff, particularly customer service
staff to support our growing user base and provide high-quality customer service, and storage
services to support our increased inventory and sales; and (ii) an increase of RMB5.3 million
in advertising and platform service fees, primarily due to our increased marketing efforts.
Administrative Expenses
Our administrative expenses decreased by 3.4% from RMB177.5 million in 2022 to
RMB171.5 million in 2023. Our administrative expenses as a percentage of revenue decreased
from 8.1% in 2022 to 7.0% in 2023. The decrease in our administrative expenses was primarily
due to a decrease of RMB20.3 million in research and development costs as our robust in-house
research and development capabilities allowed us to optimize our research staffing and operate
with greater efficiency, which was partially offset by (i) an increase of RMB4.7 million in
technical service fees as we increased the procurement of data security and protection services
to improve the network security and reliability of our service platforms; (ii) an increase of
RMB3.7 million in professional service fees in connection with the Listing; and (iii) an
increase in RMB3.6 million in business expenses, primarily reflecting increased business
development activities and related office and travel expenses.
Recognition of Impairment Losses
Our recognition of impairment losses decreased from RMB173,000 in 2022 to
RMB140,000 in 2023 due to our assessment of the improved recovery of trade receivables.
Finance Costs
Our finance costs increased by 18.9% from RMB121.8 million in 2022 to RMB144.8
million in 2023, primarily due to an increase of RMB22.6 million in the carrying amount of
preferred shares liability recognized in relation to the present value of redemption amount of
our Preferred Shares.
FINANCIAL INFORMATION
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Income Tax
Our income tax expense increased from RMB13,000 in 2022 to RMB77,000 in 2023,
primarily reflecting the increase in our taxable income.
Loss and Total Comprehensive Income for the Y ear
As a result of the foregoing, our loss and total comprehensive income for the year
decreased by 48.7% from RMB383.3 million in 2022 to RMB196.7 million in 2023.
Y ear Ended December 31, 2022 Compared to Y ear Ended December 31, 2021
Revenue
Our revenue increased by 25.3% from RMB1,758.7 million in 2021 to RMB2,204.3
million in 2022, primarily due to the growth of each of our business lines.
Revenue generated from comprehensive medical services increased by 20.6% from
RMB719.7 million in 2021 to RMB868.2 million in 2022, primarily due to the increase in the
number of paying users of our comprehensive medical services, which grew by 53.4% from
2021 to 2022. This growth in paying users was the result of a combination of factors including
our increased marketing efforts to acquire new users, our enriched portfolio of products and
services, and the resurgence of COVID-19 in the second half of 2022 which accelerated the
adoption of online medical services. The increase in revenue was partially offset by a decrease
in average spending per paying user by approximately 22.1% from 2021 to 2022, as the
purchasing power of such new paying users was still ramping up in 2022.
Revenue generated from online retail pharmacy services increased by 23.8% from
RMB1,011.4 million in 2021 to RMB1,252.1 million in 2022, in line with the continuous sales
volume growth of our pharmaceutical and healthcare products. This increase was primarily
driven by the growth in the number of paying users of our online retail pharmacy services,
which increased by 58.3% from 2021 to 2022. The growth in paying users was the result of a
combination of factors including our increased marketing efforts to acquire new users, our
enriched portfolio of products and services, and the resurgence of COVID-19 in the second half
of 2022 which accelerated the adoption of online medical services. The increase in revenue was
partially offset by a decrease in average spending per paying user by approximately 18.6%
from 2021 to 2022, as the purchasing power of such new paying users was still ramping up in
2022.
Revenue generated from customized content and marketing solutions increased
significantly by 118.7% from RMB27.6 million in 2021 to RMB60.3 million in 2022, primarily
due to our continued marketing efforts to reach enterprise customers and expand our customer
base for this business. Our customized content and marketing solutions became increasingly
attractive to pharmaceutical companies due to their heightened interest in digital marketing,
and our rapidly growing user base of patients and registered physicians. In particular, the
number of registered users of our Jianke Platform increased by 30.7% from 28.0 million in
2021 to 36.6 million in 2022, and the number of our registered physicians increased from
191,106 as of December 31, 2021 to 205,000 as of December 31, 2022.
FINANCIAL INFORMATION
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Cost of Sales
Our cost of sales increased by 18.5% from RMB1,539.0 million in 2021 to RMB1,823.7
million in 2022, in line with the increase in our revenue, primarily due to an increase in our
procurement of pharmaceutical and healthcare products to fulfill the growing number of orders
on our platform.
Gross Profit and Gross Profit Margin
Our gross profit increased by 73.3% from RMB219.6 million in 2021 to RMB380.6
million in 2022 as we grew in business scale. Our gross profit margin increased from 12.5%
in 2021 to 17.3% in 2022, primarily due to the increase in gross profit margins of our
comprehensive medical services and online retail pharmacy services.
The gross profit margin of our comprehensive medical services increased from 5.6% in
2021 to 14.1% in 2022, primarily because we were able to negotiate more favorable
procurement terms due to our increased business scale, which also enabled us to have greater
flexibility in price-setting for our products. The number of paying users of our comprehensive
medical services increased by 53.4% from 2021 to 2022. The number of our registered
physicians increased from 191,106 as of December 31, 2021 to 205,000 as of December 31,
2022.
The gross profit margin of our online retail pharmacy services was 15.3% and 16.5% in
2021 and 2022, respectively. The slight increase was primarily due to more favorable
procurement terms we negotiated with suppliers as a result of our increased scale.
The gross profit margin of our customized content and marketing solutions decreased
from 87.5% in 2021 to 85.4% in 2022, primarily due to the increased content production costs
for customized content and marketing solutions and additions of business development staff,
leading to an increase in staff costs for this business.
Other Net Income/(Loss)
We recorded other net loss of RMB134.2 million in 2022 compared to other net income
of RMB33.0 million in 2021, primarily arising from foreign exchange loss in relation to the
Preferred Shares denominated in US dollars as a result of the fluctuation of foreign exchange
rates.
Selling and Distribution Expenses
Our selling and distribution expenses increased by 6.8% from RMB309.3 million in 2021
to RMB330.2 million in 2022. This increase was mainly attributable to (i) an increase of
RMB13.2 million in staff costs as a result of the increased headcount of our sales and
operational staff to support the expansion of our business and the increase in average salary
level of our sales and operational staff; (ii) an increase of RMB8.4 million in advertising and
platform service fees, primarily due to the growth of our business scale and our increased
marketing efforts to promote our brand and services to reach a larger potential user base; (iii)
an increase of RMB7.5 million in logistics expenses, primarily due to the increased sales
volume of pharmaceutical and healthcare products through our platform; and (iv) an increase
FINANCIAL INFORMATION
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of RMB3.9 million in telecommunication expenses, primarily due to the increased sales
volume of pharmaceutical and healthcare products through our platform, partially offset by a
decrease of RMB18.2 million in service fees to registered physicians, primarily reflecting the
result of optimizing the criteria for evaluating the number of hours that physicians were being
active on our platform, resulting in a decrease in service fees to registered physicians in 2022.
Selling and distribution expenses as a percentage of our revenue decreased from 17.6%
in 2021 to 15.0% in 2022, as our revenue grew at a faster rate primarily resulting from
economies of scale, a reduction in our compensation to registered physicians and our increased
cost efficiency after building up our in-house operating capabilities.
Administrative Expenses
Our administrative expenses increased by 27.7% from RMB139.0 million in 2021 to
RMB177.5 million in 2022. This increase was mainly attributable to (i) an increase of
RMB15.8 million in research and development costs, primarily due to the increased headcount
of our research and development staff and the increase in average salary level of our research
and development staff; (ii) an increase of RMB8.4 million in staff costs to administrative
personnel, primarily due to the increased hiring in line with our business growth and the
increase in average salary level of our administrative staff; (iii) an increase of RMB7.5 million
in professional service fees in connection with the Listing; and (iv) an increase of RMB2.4
million in handling fees, primarily due to the increased sale volume of pharmaceutical and
healthcare products through our platform.
Our administrative expenses as a percentage of revenue remained stable at 7.9% and 8.1%
in 2021 and 2022.
Recognition of Impairment Losses
Our recognition of impairment losses decreased from RMB310,000 in 2021 to
RMB173,000 in 2022, primarily due to the improved recovery of trade receivables.
Finance Costs
Our finance costs increased from RMB108.0 million in 2021 to RMB121.8 million in
2022, primarily due to the increase of RMB13.4 million in the carrying amount of preferred
shares liability recognized in relation to the present value of redemption amount of our Series
A to Series D+ Preferred Shares, and the interest of RMB0.4 million on bank loans.
Income Tax
Our income tax decreased from RMB39,000 in 2021 to RMB13,000 in 2022, primarily
due to a decrease in our taxable income.
Loss and Total Comprehensive Income for the Y ear
As a result of the foregoing, our loss and total comprehensive income for the year
increased from RMB304.0 million in 2021 to RMB383.3 million in 2022.
FINANCIAL INFORMATION
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DESCRIPTION OF CERTAIN KEY ITEMS OF CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
The following table sets forth a summary of our consolidated statements of financial
position as of the dates indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 23,376 31,260 51,639
Intangible assets 2,436 2,451 2,275
Other non-current assets 10,767 10,000 100
Total non-current assets 36,579 43,711 54,014
Current assets
Inventories 111,528 126,464 136,045
Trade and other receivables 48,321 86,411 101,142
Other current assets 23,808 26,357 34,761
Prepayments 10,167 63,999 18,474
Amounts due from related parties 33,628 12,032 –
Restricted bank deposits – 25,000 30,615
Cash and cash equivalents 84,658 134,907 146,317
Total current assets 312,110 475,170 467,354
Current liabilities
Trade and other payables 282,049 356,217 440,451
Contract liabilities 18,055 89,368 19,873
Bank loans – 10,154 5,005
Lease liabilities 9,958 12,796 15,346
Other current liabilities 1,799 8,502 1,252
Current taxation – 12 15
Total current liabilities 311,861 477,049 481,942
Net current assets/(liabilities) 249 (1,879) (14,588)
Total assets less current liabilities 36,828 41,832 39,426
Non-current liabilities
Lease liabilities 8,315 13,858 29,368
Convertible redeemable preferred shares 1,368,767 1,737,882 1,911,521
Total non-current liabilities 1,377,082 1,751,740 1,940,889
Net liabilities (1,340,254) (1,709,908) (1,901,463)
FINANCIAL INFORMATION
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Property, Plant and Equipment
Our property, plant and equipment consist of (i) right-of-use assets; (ii) furniture, fixtures
and other equipment; (iii) leasehold improvement; (iv) machinery and equipment; and (v)
motor vehicles. The following table sets forth the details of our property, plant and equipment
as of the dates indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Right-of-use assets 17,384 24,212 43,247
Furniture, fixtures and other equipment 1,509 2,903 3,360
Leasehold improvement 2,882 2,707 2,696
Machinery and equipment 458 646 1,891
Motor vehicles 1,143 792 445
Total 23,376 31,260 51,639
Our property, plant and equipment increased from RMB23.4 million as of December 31,
2021 to RMB31.3 million as of December 31, 2022, primarily due to (i) an increase of RMB6.8
million in right-of-use assets as we leased more office space and warehouses in line with our
business expansion; and (ii) an increase of RMB1.4 million in furniture, fixtures and other
equipment for our offices. Our property, plant and equipment further increased to RMB51.6
million as of December 31, 2023, primarily due to an increase of RMB19.0 million in
right-of-use assets as we leased more office space to support our business expansion.
Intangible Assets
Our intangible assets remained relatively stable at RMB2.4 million, RMB2.5 million and
RMB2.3 million as of December 31, 2021, 2022 and 2023, respectively. Our intangible assets
consist of computer software, licenses and trademarks. We recognized trademarks of
RMB131,000 in 2022. The useful life of our trademarks is estimated to be 10 years, which was
determined according to the Trademark Law of the People’s Republic of China.
Other Non-current Assets
We recorded other non-current assets of RMB10.8 million as of December 31, 2021 and
RMB10.0 million as of December 31, 2022. The balance mainly represented an investment in
a limited partnership investment vehicle of RMB10.0 million and RMB10.0 million as of
December 31, 2021 and 2022, respectively. In 2020, we had entered into an agreement to invest
in Shenzhen Xinlongyihao Investment Partnership (Limited Partnership) (“ Xinlongyihao
Investment ”) to hold 49.8% equity interests in Xinlongyihao Investment. RMB8.0 million was
injected to Xinlongyihao Investment in 2021. We accounted for this investment using the
equity method during the Track Record Period in accordance with the accounting policy set out
in note 2(d) to the Accountants’ Report. As of December 31, 2023, our non-current assets
decreased to RMB0.1 million because we disposed of the Xinlongyihao Investment in June
2023.
FINANCIAL INFORMATION
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Inventories
Our inventories mainly consist of pharmaceutical and healthcare products. The following
table sets forth the details of our inventories as of the dates indicated and inventory turnover
days for the years indicated.
As of/for the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Pharmaceutical and healthcare products 111,528 126,464 136,045
Inventory turnover days (1) 21.4 23.8 24.6
Note:
(1) Inventory turnover days for a year equals the average of the opening and closing inventory balance
divided by cost of sales for the relevant year and multiplied by 365 days.
Our inventories increased from RMB111.5 million as of December 31, 2021 to RMB126.5
million and RMB136.0 million as of December 31, 2022 and 2023, respectively. Such increase
was primarily due to the growth in sales volume of pharmaceutical and healthcare products.
Our inventory turnover days increased from 21.4 days for the year ended December 31,
2021 to 23.8 days and 24.6 days for the years ended December 31, 2022 and 2023, respectively,
primarily reflecting the increase in inventories we held to improve order fulfillment rates.
The following table sets forth an aging analysis of our inventories as of the dates
indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Within 6 months 106,304 123,043 127,085
Over 6 months but within 1 year 4,583 2,416 6,040
Over 1 year but within 2 years 641 1,005 2,920
Total 111,528 126,464 136,045
As of April 30, 2024, RMB117.4 million or 86.3% of our total inventories as of December
31, 2023 had been subsequently sold.
FINANCIAL INFORMATION
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Trade and Other Receivables
Our trade receivables represent outstanding amounts payable by and bills receivable from
our enterprise customers, mainly pharmaceutical companies, for the products and services we
provided in the ordinary course of our business. To a lesser extent, we also recorded trade
receivables from third-party e-commerce platforms where we operated online retail pharmacies
and customers from whom payments were due upon delivery. Our other receivables primarily
represented rebates from suppliers and deposits in connection with our procurement of
pharmaceutical products. The following table sets forth our trade and other receivables as of
the dates indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade debtors 7,599 28,534 24,299
Bills receivable – 1,000 –
Less: loss allowance (30) (146) (203)
7,569 29,388 24,096
Purchase rebates with suppliers 32,914 42,426 60,944
Deposits 5,849 7,596 10,487
Other receivables 1,989 7,001 5,615
40,752 57,023 77,046
Total 48,321 86,411 101,142
Trade Receivables
Fluctuations of our trade receivables primarily reflected the volume of business that we
provided to enterprise customers.
Our trade receivables are generally due within 180 days from the date of billing. We take
into consideration a number of factors in determining the credit terms of an enterprise
customer, including its cash flow condition and credit worthiness. Individual customers are
generally required to pay when placing an order and they do not enjoy a credit period. We seek
to maintain strict control over our outstanding receivables. We designate personnel to regularly
review our trade receivables balance and overdue balance, and we follow up with customers
with past due trade receivables. We conduct review on the recoverable amount of each
individual trade receivable balance at the end of each reporting period to ensure adequate
provision of impairment losses for irrecoverable amounts. Trade receivables are non-interest
bearing.
FINANCIAL INFORMATION
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The following table sets forth an aging analysis of our trade receivables as of the dates
indicated and trade receivables turnover days for the years indicated.
As of/For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Within 3 months 7,183 24,904 17,012
Over 3 months but within 6 months 378 2,833 5,160
Over 6 months but within 1 year 8 1,651 1,336
Over 1 year – – 588
Total 7,569 29,388 24,096
Trade receivables turnover days
(1) 0.9 3.1 4.0
Note:
(1) Trade receivables turnover days for a year equals the average of the opening and closing balance of trade
receivables divided by revenue for the relevant year and multiplied by 365 days.
Our trade receivables increased from RMB7.6 million as of December 31, 2021 to
RMB29.4 million as of December 31, 2022, primarily due to our increased business scale for
customized content and marketing solutions. Our trade receivables decreased to RMB24.1
million as of December 31, 2023, reflecting our improved recovery of trade receivables.
As of April 30, 2024, RMB16.9 million or 69.4% of our trade receivables as of December
31, 2023 had been subsequently settled. Based on our provision policy, which we believe to be
appropriate and to provide adequate assessment of our recovery risks, we believe there are no
material recovery risks arising from our trade receivables aged over three months because they
mainly reflected payments due from governmental agencies in relation to publicly funded
healthcare services, as well as multinational pharmaceutical companies. As a result, we did not
make any provisions for such amounts.
Our trade receivables turnover days increased from 0.9 days in 2021 to 3.1 days in 2022,
primarily reflecting an increased proportion of trade receivables due from enterprise customers
of our customized content and marketing solutions segment, to whom we typically grant credit
terms. Our trade receivables turnover days remained relatively stable at 4.0 days in 2023.
FINANCIAL INFORMATION
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Other Receivables
Our other receivables primarily represented rebates from suppliers and deposits in
connection with our procurement of pharmaceutical and other products. Our other receivables
increased from RMB40.8 million as of December 31, 2021 to RMB57.0 million as of December
31, 2022, and further increased to RMB77.0 million as of December 31, 2023, primarily due
to the increased rebate receivables from suppliers and deposits to suppliers for our purchase of
pharmaceutical and other products as we grew our business scale.
Our rebate receivables represent supplier-granted rebates that we have accumulated and
are entitled to claim or utilize in the future, typically as cash rebates or through deduction
against subsequent purchases from the relevant suppliers on a monthly, quarterly or annual
basis, as the case may be. These rebates will remain on our balance sheet as receivables until
they are claimed or utilized. The top five suppliers in terms of rebate receivables as of
December 31, 2023 accounted for 55.7% of our total rebate receivables as of the same date.
During the Track Record Period, our rebate receivables amounted to RMB32.9 million,
RMB42.4 million and RMB60.9 million as of December 31, 2021, 2022 and 2023, respectively.
As of April 30, 2024, RMB37.5 million or 48.7% of our other receivables as of December
31, 2023 had been subsequently settled of which RMB31.9 million or 52.3% of our rebate
receivables as of December 31, 2023 had been subsequently utilized.
Other Current Assets
Our other current assets primarily represent input value-added taxes to be verified or
credited in connection with our sales of pharmaceutical and healthcare products. Our other
current assets increased from RMB23.8 million as of December 31, 2021 to RMB26.4 million
as of December 31, 2022 primarily due to the capitalization of our listing expenses, partially
offset by a decrease of RMB2.2 million in input value-added taxes to be verified or credited.
Our other current assets further increased to RMB34.8 million as of December 31, 2023,
primarily reflecting the increase in input value-added tax to be verified or credited which
resulted from our increased sales.
Prepayments
Our prepayments primarily represent prepayments to service providers for renovation,
decoration, online promotional and advertising services provided to us and prepayments for our
procurement of pharmaceutical and other products. Our prepayments increased from RMB10.2
million as of December 31, 2021 to RMB64.0 million as of December 31, 2022, primarily due
to the prepayments we made to suppliers for pharmaceutical procurement during the
COVID-19 pandemic to ensure the stability of our supply chain. Our prepayments decreased
to RMB18.5 million as of December 31, 2023 as we were able make reduced prepayments to
our suppliers for the procurement of pharmaceutical products as the COVID-19 pandemic
abated.
FINANCIAL INFORMATION
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Trade and Other Payables
Trade Payables
Our trade payables primarily represent payables to our suppliers and registered physicians
on our platform, which are normally settled within 30 to 75 days. The following table sets forth
a breakdown of our trade payables as of the dates indicated and trade payables turnover days
for the years indicated.
As of/for the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade payables to third parties 191,500 220,083 292,944
Trade payables turnover days (1) 36.0 41.2 48.1
Note:
(1) Trade payables turnover days for a year equals the average of the opening and closing trade payables
balance of trade payables to third parties, divided by cost of sales for the relevant year and multiplied
by 365 days.
Our trade payables increased from RMB191.5 million as of December 31, 2021 to
RMB220.1 million as of December 31, 2022 and further increased to RMB292.9 million as of
December 31, 2023, which was in line with the increase in our inventory of pharmaceutical and
healthcare products as a result of our business expansion and the growth of the sales volume
of our products.
Our trade payables turnover days increased from 36.0 days in 2021 to 41.2 days and 48.1
days in 2022 and 2023, respectively, primarily because we lengthened our settlement period
with suppliers due to our increased procurement and ability to negotiate for more favorable
terms with suppliers.
As of April 30, 2024, RMB285.8 million or 97.6% of our trade payables as of December
31, 2023, had been subsequently settled.
FINANCIAL INFORMATION
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The following table sets forth an aging analysis of trade payables to third parties based
on the invoice dates as of the dates indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Within 1 month 137,328 118,582 181,163
1 to 3 months 52,747 99,781 110,683
Over 3 months but within 6 months 1,253 1,471 842
Over 6 months but within 1 year 145 88 169
Over 1 year but within 2 years 27 161 87
Total 191,500 220,083 292,944
Other Payables
Our other payables primarily consist of (i) staff cost payables; (ii) other tax payables; (iii)
deposits from suppliers for the procurement of pharmaceutical products; and (iv) other
payables and accrued charges, primarily representing rent payables, payables to registered
physicians and payables to suppliers for online promotional and advertising services and
logistics services. The following table sets forth a breakdown of our other payables as of the
dates indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Staff cost payables 33,688 52,253 53,829
Other tax payables 2,825 13,555 20,480
Deposits 1,395 1,132 1,444
Other payables and accrued charges 52,641 69,194 71,754
Total 90,549 136,134 147,507
Our other payables increased from RMB90.5 million as of December 31, 2021 to
RMB136.1 million as of December 31, 2022, primarily due to (i) an increase of RMB16.6
million in other payables and accrued charges, primarily reflecting increases in payables to
registered physicians, third-party logistics and courier companies, and marketing channels as
a result of the expansion of our business; (ii) an increase of RMB18.6 million in staff cost
payables primarily due to the increase in our accumulated provision for social insurance and
housing provident fund as a result of the increased headcount of our employees; and (iii) an
increase of RMB10.7 million in other tax payables as a result of our increased sales and gross
profit.
FINANCIAL INFORMATION
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Our other payables increased from RMB136.1 million as of December 31, 2022 to
RMB147.5 million as of December 31, 2023, primarily due to an increase of RMB6.9 million
in other tax payables resulting from our increased sales and gross profit.
As of April 30, 2024, RMB69.0 million or 46.8% of our other payables as of December
31, 2023, had been subsequently settled.
Contract Liabilities
Our contract liabilities represent (i) payments we receive in advance from customers for
sales of pharmaceutical and healthcare products, which are recognized as revenue when the
products are delivered; and (ii) advance payments from our customers’ loyalty points program,
which are recognized as revenue when users make payments by these loyalty points or when
these loyalty points expire. See “Business—Sales and Marketing—Sales Model and Marketing
Strategies” in this prospectus for more information about this program. The following table sets
forth a breakdown of our contract liabilities as of the dates indicated.
As of December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Advances from customers 13,841 83,448 15,254
Customers’ loyalty points program 4,214 5,920 4,619
Total 18,055 89,368 19,873
Our contract liabilities increased from RMB18.1 million as of December 31, 2021 to
RMB89.4 million as of December 31, 2022, primarily due to the increased advance payment
from customers because there was a surge of drug orders on our platform in December 2022
as a result of the COVID-19 pandemic in China, but logistics services were affected during the
pandemic, resulting in delays in shipment and delivery of our orders. Our contract liabilities
decreased to RMB19.9 million as of December 31, 2023, primarily reflecting the decrease in
advance payments received from customers.
As of April 30, 2024, RMB16.4 million or 82.3% of our contract liabilities as of
December 31, 2023, had been subsequently recognized as revenue.
FINANCIAL INFORMATION
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Other Current Liabilities
Our other current liabilities primarily represent value-added taxes accrued for the
payments in advance from customers of our online retail pharmacy services. Our other current
liabilities increased from RMB1.8 million as of December 31, 2021 to RMB8.5 million as of
December 31, 2022, primarily due to the increase in value-added taxes accrued in respect of
the increased advance payments from customers as of December 31, 2022. This increase in
advance payments was the result of a surge in COVID-19 related orders on our platform in
December 2022, which subsequently experienced significant shipping and logistics delays due
to the pandemic. Our other current liabilities decreased to RMB1.3 million as of December 31,
2023, primarily reflecting the decreased value-added taxes accrued in respect of our advance
payments from customers.
As of April 30, 2024, RMB1.2 million or 96.7% of our other current liabilities as of
December 31, 2023, had been subsequently settled.
Convertible Redeemable Preferred Shares
We issued convertible redeemable preferred shares to our investors during the Track
Record Period. As of December 31, 2021, 2022 and 2023, our convertible redeemable preferred
shares amounted to RMB1,368.8 million, RMB1,737.9 million and RMB1,911.5 million,
respectively. Immediately prior to the completion of the Global Offering, all of our convertible
redeemable preferred shares will be automatically converted to ordinary shares. See “History,
Reorganization and Corporate Structure” in this prospectus and note 25 to the Accountants’
Report set out in Appendix I to this prospectus for details of the convertible redeemable
preferred shares.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
During the Track Record Period, we primarily financed our operations through cash
inflow from operating activities and equity financing. As of December 31, 2023, we had cash
and cash equivalents of RMB146.3 million. As of April 30, 2024, we had unutilized banking
facilities of RMB106.5 million. We monitor and maintain a level of cash and cash equivalents
we believe adequate to finance our operations and mitigate the effects of fluctuations in cash
flows.
We had net current assets of RMB0.2 million as of December 31, 2021. As of December
31, 2022 and 2023, we had net current liabilities of RMB1.9 million and RMB14.6 million,
respectively. The following table sets forth our current assets and liabilities as of the dates
indicated.
FINANCIAL INFORMATION
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As of December 31,
As of
April 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current assets
Inventories 111,528 126,464 136,045 156,310
Trade and other
receivables 48,321 86,411 101,142 125,487
Other current assets 23,808 26,357 34,761 37,932
Prepayments 10,167 63,999 18,474 11,823
Amounts due from
related parties 33,628 12,032 – –
Restricted bank
deposits – 25,000 30,615 35,117
Cash and cash
equivalents 84,658 134,907 146,317 139,046
Total current assets 312,110 475,170 467,354 505,716
Current liabilities
Trade and other
payables 282,049 356,217 440,451 437,483
Contract liabilities 18,055 89,368 19,873 14,205
Bank loans – 10,154 5,005 –
Lease liabilities 9,958 12,796 15,346 15,250
Other current liabilities 1,799 8,502 1,252 1,593
Current taxation – 12 15 –
Total current
liabilities 311,861 477,049 481,942 468,531
Net current
assets/(liabilities) 249 (1,879) (14,588) 37,184
FINANCIAL INFORMATION
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We recorded net current liabilities of RMB1.9 million and RMB14.6 million as of
December 31, 2022 and 2023, respectively, which was primarily attributable to the trade and
other payables incurred to support our increased business scale. We expect our working capital
position to improve as our operating cash flow position improves. We plan to achieve this
primarily by increasing revenue and improving gross profit margin. Our procurement volume
is expected to increase with the growth of our business scale, and we expect to have better
bargaining power to obtain more favorable pricing and rebates from suppliers. With our
business expansion, we will enhance our cost and expense structure and improve operating
efficiency by making full use of economies of scale.
Our Directors believe that we have sufficient working capital to meet our present and
future cash requirements for at least the next 12 months from the date of publication of this
prospectus, taking into account our anticipated improvement in operating cash flows,
management of working capital, efforts to obtain more favorable credit terms from suppliers
and net proceeds from the Global Offering. The details of these factors are as follows:
 Improvement in operating cash flows . We had a large amount of net cash used in
operating activities in 2021, primarily due to our initiatives to offer more favorable
prices and discounts for our services to attract and develop a loyal customer base.
Our net cash used in operating activities decreased significantly for the year ended
December 31, 2022 as we gained greater flexibility in setting our customer pricing
as we were able to negotiate more favorable procurement terms due to our increased
business scale. As of December 31, 2023, we recorded net cash generated from
operating activities of RMB22.3 million.
 Management of trade payables and receivables settlement . We monitor and adjust
our trade payables and receivables settlement based on our cash position to ensure
that we have sufficient working capital for our operations. We have also endeavored
to obtain more favorable credit terms from suppliers of up to 75 days to manage the
settlement of trade payables.
 Net proceeds from the Global Offering. We expect to receive net proceeds from the
Global Offering of approximately HK$55.42 million based on the low end of the
Offer Price range set out in this prospectus (assuming that the Over-allotment
Option is not exercised).
After due consideration of the foregoing factors and discussions with the management,
the Joint Sponsors have no reason to believe that the Directors’ foregoing views are
unreasonable.
FINANCIAL INFORMATION
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Cash Flows
The following table sets forth the breakdown of our cash flows for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Operating cash flows before movements
in working capital (202,039) (95,577) 11,070
Changes in working capital (1,574) 45,613 11,286
Income tax paid (42) (1) (74)
Net cash generated from/(used in)
operating activities (203,655) (49,965) 22,282
Net cash (used in)/generated from
investing activities (4,323) 14,315 16,418
Net cash generated from/(used in)
financing activities (11,407) 82,233 (29,308)
Net increase/(decrease) in cash and
cash equivalents (219,385) 46,583 9,392
Cash and cash equivalents at the
beginning of the year 307,817 84,658 134,907
Effect of foreign exchange rate changes (3,774) 3,666 2,018
Cash and cash equivalents at the
end of the year 84,658 134,907 146,317
Net Cash Flows (Used in)/Generated from Operating Activities
We expect our operating cash flow position to improve as we improve profitability, which
we plan to achieve by (i) increasing revenue and improving gross profit margin; (ii) enhancing
cost and expense control capacity by making full use of economies of scale; and (iii)
continuously improving working capital management by proactive management of trade
receivables, trade payables and inventory turnover and deepened collaboration with our
suppliers. For example, we have been dynamically adjusting product mix to include products
of higher gross profit margin. In addition, our procurement volume increases with the growth
of our business scale, and we expect to have better bargaining power to obtain more favorable
price, credit terms and rebates from suppliers. Our smart supply chain management system also
helps us broaden our procurement channel and control costs of products. Going forward, we
believe our liquidity requirements will be satisfied by using funds from a combination of cash
from operations, bank balances and cash and net proceeds from the Global Offering.
FINANCIAL INFORMATION
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During the Track Record Period, our net cash flows used in or generated from operating
activities primarily comprised our loss before taxation for the year adjusted by non-cash and
non-operating items and changes in working capital.
For the year ended December 31, 2023, our net cash generated from operating activities
was RMB22.3 million, primarily reflecting our loss before taxation of RMB196.7 million, as
adjusted by (i) non-cash and non-operating items, which primarily consisted of finance costs
of RMB144.8 million and foreign exchange loss of RMB28.4 million; and (ii) changes in
working capital, which primarily resulted from an increase in trade and other payables of
RMB84.2 million, primarily due to the growth of our sales of pharmaceutical and healthcare
products and the corresponding procurement amount from suppliers, and a decrease in
prepayments of RMB45.5 million as we were able to make reduced prepayments to our
suppliers for the procurement of pharmaceutical products as the COVID-19 pandemic abated.
These were partially offset by (i) a decrease in contract liabilities of RMB69.5 million as our
receipt of advance payments on drug orders decreased; and (ii) an increase in trade and other
receivables of RMB14.9 million primary due to the increased trade receivables for our growing
customized content and marketing solutions segment.
For the year ended December 31, 2022, our net cash used in operating activities was
RMB50.0 million, primarily reflecting our loss before taxation of RMB383.3 million, as
adjusted by (i) non-cash and non-operating items, which primarily consisted of foreign
exchange loss of RMB134.7 million, and finance costs of RMB121.8 million; and (ii) changes
in working capital, which primarily resulted from an increase of RMB77.2 million in trade and
other payables primarily due to the growth of our sales of pharmaceutical and healthcare
products and the corresponding procurement amount from suppliers, and an increase of
RMB71.3 million in contract liabilities, which was primarily due to the increased advance
payment from customers attributable to a surge in COVID-19 related orders on our platform
in December 2022, which subsequently experienced significant shipping and logistics delays
due to the pandemic. These were partially offset by (i) an increase of RMB53.8 million in
prepayments, mainly representing the prepayments we made to suppliers for pharmaceutical
procurement during the COVID-19 pandemic to ensure the stability of our supply chain; (ii)
an increase of RMB38.3 million in trade and other receivables primarily due to an increase in
trade receivables from our increased business scale for customized content and marketing
solutions, and an increase in rebates from suppliers; and (iii) an increase of RMB14.9 million
in inventories which was in line with the growth in sales volume of pharmaceutical and
healthcare products.
For the year ended December 31, 2021, our net cash used in operating activities was
RMB203.7 million, primarily reflecting our loss before taxation of RMB304.0 million, as
adjusted by (i) non-cash and non-operating items, which primarily consisted of finance costs
of RMB108.0 million, foreign exchange gain of RMB27.6 million, and recognition of
impairment losses of RMB0.3 million; and (ii) changes in working capital, which primarily
resulted from an increase of RMB92.0 million in trade and other payables primarily due to the
growth of our sales of pharmaceutical and healthcare products and the corresponding
procurement amount from suppliers, and a decrease of RMB43.5 million in amounts due from
FINANCIAL INFORMATION
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related parties due to the settlement of related party transactions. See “—Material Related
Party Transactions” for more information. These were partially offset by a decrease of
RMB52.7 million in amounts due to related parties, an increase of RMB42.6 million in
inventories, and an increase of RMB32.2 million in trade and other receivables as a result of
an increase in rebates from suppliers.
See “—Description of Certain Key Items of Consolidated Statements of Financial
Position” for primary reasons relating to the underlying causes for our operating cash flow
changes.
Net Cash Flows (Used in)/Generated from Investing Activities
For the year ended December 31, 2023, our net cash generated from investing activities
was RMB16.4 million, which was primarily attributable to RMB12.0 million in repayments of
borrowings by related parties and proceeds of RMB10.0 million from our disposal of the
Xinlongyihao Investment in June 2023.
For the year ended December 31, 2022, our net cash generated from investing activities
was RMB14.3 million, which was primarily attributable to RMB21.6 million in repayments of
borrowings by related parties, partially offset by payment of RMB5.3 million for purchases of
property, plant and equipment and intangible assets and RMB2.0 million used for transaction
arising from Reorganization.
For the year ended December 31, 2021, our net cash used in investing activities was
RMB4.3 million, which was primarily attributable to (i) advance of RMB36.8 million for
advance of borrowings to related parties; (ii) payment of RMB8.0 million for other non-current
assets; and (iii) payment of RMB5.5 million for purchases of property, plant and equipment and
intangible assets, partially offset by RMB46.0 million in repayments of borrowings by related
parties. See “—Material Related Party Transactions” for more information.
Net Cash Flows Generated from/(Used in) Financing Activities
For the year ended December 31, 2023, our net cash used in financing activities was
RMB29.3 million, which primarily consisted of (i) payment of RMB60.6 million in restricted
bank deposits; (ii) repayment of RMB30.6 million of bank loans; and (iii) RMB16.9 million of
capital element of lease rentals paid, partially offset by (i) proceeds of RMB55.0 million from
maturity of restricted bank deposits; and (ii) proceeds of RMB25.6 million from bank loans.
For the year ended December 31, 2022, our net cash generated from financing activities
was RMB82.2 million, which primarily consisted of (i) proceeds of RMB110.2 million from
the issuance of convertible redeemable preferred shares; and (ii) proceeds of RMB24.8 million
from bank loans, partially offset by payment of RMB25.0 million of restricted bank deposits,
repayment of RMB14.8 million of bank loans, and RMB11.9 million of capital element of lease
rentals paid.
FINANCIAL INFORMATION
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For the year ended December 31, 2021, our net cash used in financing activities was
RMB11.4 million, which primarily consisted of RMB10.6 million of capital element of lease
rentals paid.
INDEBTEDNESS
The following table sets forth a breakdown of our indebtedness as of the dates indicated.
As of December 31,
As of
April 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Bank loans – 10,154 5,005 –
Lease liabilities 18,273 26,654 44,714 43,391
Convertible redeemable
preferred shares 1,368,767 1,737,882 1,911,521 1,964,559
Total 1,387,040 1,774,690 1,961,240 2,007,950
Our Directors confirm that as of the Latest Practicable Date, there was no material
covenant on any of our outstanding debt and there was no breach of any covenant during the
Track Record Period and up to the Latest Practicable Date. Our Directors further confirm that
there has not been any material change in the Group’s indebtedness since the Latest Practicable
Date up to the date of this prospectus.
Bank Loans
As of December 31, 2023, the repayment schedule of bank loans were within one year and
the balances were unsecured. As of April 30, 2024, we had unutilized banking facilities of
RMB106.5 million.
Our bank loans during the Track Record Period were denominated in RMB and were
primarily used to supplement our working capital. We had bank loans of RMB5.0 million as
of December 31, 2023, the interest rate of which was 3.69%.
Our Directors confirm that there were no material defaults in repayment of bank loans or
material breaches of financial covenants during the Track Record Period and up to the Latest
Practicable Date.
FINANCIAL INFORMATION
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Lease Liabilities
We recognized right-of-use assets and the corresponding lease liabilities in respect of all
leases, except for short-term leases and leases of low value assets. The table below sets forth
our lease liabilities as of the dates indicated.
As of December 31,
As of
April 30,
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current 9,958 12,796 15,346 15,250
Non-current 8,315 13,858 29,368 28,141
Total 18,273 26,654 44,714 43,391
Convertible Redeemable Preferred Shares
As of December 31, 2021, 2022, 2023 and April 30, 2024, the carrying amount of our
convertible redeemable preferred shares was RMB1,368.8 million, RMB1,737.9 million,
RMB1,911.5 million and RMB1,964.6 million, respectively. See “—Description of Certain
Key Items of Consolidated Statements of Financial Position—Convertible Redeemable
Preferred Shares” for details of the convertible redeemable preferred shares.
Except as disclosed above, we did not have any material mortgages, charges, debentures,
loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance lease
or hire purchase commitments, liabilities under acceptances (other than normal trade bills),
acceptance credits, which are either guaranteed, unguaranteed, secured or unsecured as of April
30, 2024.
CONTINGENT LIABILITIES
During the Track Record Period, we paid service fees to physicians we engaged to provide
medical consultation services. Without clear guidance in current regulations, there is
uncertainty as to the characterization of income received by our registered physicians through
our platform. If the tax authority’s interpretation of current regulations is clarified and is
different from ours, we might be responsible to withhold and report individual income tax for
the engaged physicians in relation to their services rendered on our platform. Should the
relevant tax authority find the engaged physicians’ relevant individual income tax paid is
improper or insufficient, we may be required to procure the engaged physicians file and pay
up the underpaid tax liabilities, and may be subject to penalties calculated 50% to 300% of the
underpaid tax. Our PRC Legal Advisor has advised us that the likelihood of us being subject
to such penalties is remote. As such, our Directors assessed and considered that, no provision
FINANCIAL INFORMATION
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is required to be made in this regard. For risks associated with the characterization of income
received by our registered physicians through our platform, see “Risk Factors—Risks Relating
to Regulations—Developments in the PRC legal system may affect our business and limit the
legal protection available to you.” Save as disclosed in this section, we did not have any
material contingent liabilities as of December 31, 2021, 2022, 2023 and April 30, 2024.
CAPITAL EXPENDITURES
The following table sets forth our capital expenditures for the years indicated.
For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Payment for purchases of property,
plant and equipment and intangible
assets 5,515 5,281 5,648
Payment for other non-current assets 8,000 – –
Deemed distribution – 2,000 –
Total 13,515 7,281 5,648
Our capital expenditures primarily consist of (i) purchases of property, plant and
equipment and intangible assets; (ii) other non-current assets; and (iii) deemed distribution
arising from the Reorganization.
We expect our capital expenditures in 2024 will primarily be used to purchase property,
plant and equipment and intangible assets. We plan to fund our planned capital expenditures
with our cash balance.
FINANCIAL INFORMATION
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KEY FINANCIAL RATIOS
The following table sets forth the details of our key financial ratios as of the dates or for
the years indicated.
As of/For the year ended December 31,
2021 2022 2023
Gross profit margin (1) 12.5% 17.3% 20.0%
Net loss margin (2) (17.3)% (17.4)% (8.1)%
Adjusted net (loss)/profit margin
(non-HKFRS measure) (3) (11.8)% (4.1)% 0.3%
Current ratio (4) 1.0 1.0 1.0
Quick ratio (5) 0.6 0.7 0.7
Notes:
(1) Gross profit margin is calculated using gross profit divided by revenue for the year and multiplied by
100%.
(2) Net loss margin is calculated using net loss divided by revenue for the year and multiplied by 100%.
(3) Adjusted net loss/profit margin (non-HKFRS measure) is calculated using the adjusted net loss/profit
(non-HKFRS measure) divided by revenue for the year and multiplied by 100%.
(4) Current ratio is calculated by using current assets divided by current liabilities as of the same date.
(5) Quick ratio is calculated by using current assets less inventories and divided by current liabilities as of
the same date.
See “—Comparison of Results of Operations” above for discussions on revenue growth
and fluctuation of our gross profit margin and net loss margin during the Track Record Period.
Current Ratio
Our current ratio remained at 1.0 as of December 31, 2021, 2022 and 2023. See
“—Description of Certain Key Items of Consolidated Statements of Financial Position” for
details of our current assets and current liabilities.
Quick Ratio
Consistent with our current ratio, our quick ratio remained relatively stable at 0.6 as of
December 31, 2021 and 0.7 as of December 31, 2022 and 2023.
FINANCIAL INFORMATION
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CONTRACTUAL OBLIGATIONS
Capital Commitments
As of December 31, 2021, 2022 and 2023, we had no material capital commitments.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet
transactions.
FINANCIAL RISKS DISCLOSURE
We are exposed to a variety of financial risks, including credit risk, liquidity risk, interest
rate risk and currency risk. We manage and monitor these exposures to ensure appropriate
measures are implemented on a timely and effective manner. See note 27 to the Accountants’
Report set out in Appendix I to this prospectus for more information. The discussion below
provides a summary of our financial risks.
Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in a financial loss to our Group. Our credit risk is primarily attributable to trade and
other receivables, guarantees and amounts due from related parties. Our exposure to credit risk
arising from cash and cash equivalents, restricted bank deposits and bills receivables is limited
because the counterparties are banks and financial institutions or enterprises with high-credit-
quality, for which we consider to have low credit risk.
Liquidity Risk
Our management reviews the liquidity position of our Group on an ongoing basis,
including review of the expected cash inflows and outflows in order to monitor our liquidity
requirements in the short and longer terms. Our policy is to regularly monitor our liquidity
requirements and compliance with lending covenants, to ensure that we maintain sufficient
reserves of cash and adequate committed lines of funding from major financial institutions to
meet our liquidity requirements in the short and longer term.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Our interest-bearing
financial assets and liabilities are at fixed interest rates at the end of the Track Record Period,
including restricted bank deposits, bank loans, lease liabilities and convertible redeemable
preferred shares, and the change of market interest rate does not expose us to interest rate risk.
Overall, our exposure to interest rate risk is not significant.
FINANCIAL INFORMATION
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Currency Risk
We are exposed to currency risk primarily given rise to cash balances and financial
liabilities that are denominated in a foreign currency, i.e. a currency other than the functional
currency of the operations to which the transactions relate. The currencies giving rise to this
risk are primarily US dollars.
MATERIAL RELATED PARTY TRANSACTIONS
During the Track Record Period, we entered into a number of transactions with related
parties, including Mr. Xie, our Controlling Shareholder, and companies controlled by Mr. Xie
or over which Mr. Xie had significant influence. The following table sets forth the amount of
our related party transactions during the Track Record Period.
For the year ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Purchase of goods 4,659 – –
Advance of borrowings to related
parties 36,814 – –
Repayments of borrowings by related
parties 46,006 21,596 12,032
Purchase of Goods
In 2021, we procured certain pharmaceutical products, medical devices, healthcare and
nutritional supplements and other wellness products from Guangzhou Jianke instead of directly
from third-party suppliers for our online retail pharmacy services and comprehensive medical
services. We made back-to-back orders with Guangzhou Jianke upon receiving orders on our
Jianke Platform, which helped reduce our inventory risks; as Guangzhou Jianke was qualified
for pharmaceutical wholesale, it had procured and kept products in stock for us, and was able
to sell off excess stock not taken up by us to other retailers. Moreover, we had only begun to
operate our Jianke mobile applications and websites in-house since July 2019, and were still
in the process of building up our supplier network and business scale. Procuring goods from
Guangzhou Jianke also enabled us to leverage their established relationships with suppliers for
more favorable procurement prices. During the Track Record Period, the commercial terms of
our transactions with Guangzhou Jianke were negotiated on an arm’s length basis, and all other
legal and standard terms were materially similar to those that we entered into with other
independent third parties. The prices of goods procured from Guangzhou Jianke during the
Track Record Period were generally comparable to market rate. As we rapidly developed our
own supplier network and relationships following the Reorganization, we were able to increase
our bargaining power with suppliers to negotiate more favorable procurement prices, and began
to procure products predominantly from independent third parties in 2021. As a result, we
purchased a modest amount of goods from Guangzhou Jianke amounting to RMB4.7 million
in 2021, and ceased to procure products from related parties in 2022. We do not have plans to
procure products from related parties in the future.
FINANCIAL INFORMATION
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Advance/Repayments of Borrowings to/by Related Parties
In 2021, our advance of borrowings to related parties amounted to RMB36.8 million,
primarily representing (i) advance of RMB21.9 million to a number of companies over which
Mr. Xie had significant influence; (ii) advance of RMB7.5 million to Y unyi Limited which was
used to repay Guangdong Jianke’s bank loan, and release Y unyi Limited from its corresponding
financial guarantee obligations; and (iii) advance of RMB7.4 million to Mr. Xie and companies
controlled by Mr. Xie to fund their working capital.
Since the end of 2021, we have ceased providing any new advances or loans to related
parties, and do not have plans to do so in the future. Accordingly, we did not record any
advance of borrowings to related parties in 2022 and 2023.
During the Track Record Period, we did not receive any interests from our advance of
borrowings to related parties.
In 2021, 2022 and 2023, we recorded repayments of borrowings from related parties of
RMB46.0 million, RMB21.6 million and RMB12.0 million, respectively. As of December 31,
2023, all advances of borrowings to related parties had been repaid.
Balance with Related Parties
Amounts Due from Related Parties
As of December 31, 2021 and 2022, the balance of amounts due from related parties were
all non-trade in nature, and amounted to RMB33.6 million and RMB12.0 million, respectively,
mainly consisting of advances that our Group granted to a number of companies over which
Mr. Xie had significant influence, or to Mr. Xie and companies controlled by Mr. Xie. As of
December 31, 2023, all such amounts due from related parties had been fully settled.
Our Directors confirm that all advance of borrowings to related parties during the Track
Record Period were non-trade in nature and had been settled as of December 31, 2023. For
further details on related party balance and transactions, see note 28 to the Accountants’ Report
set out in Appendix I to this prospectus.
We have established a comprehensive cash management policy to assess and monitor the
provision of advances, loans, borrowings or guarantees to related parties and third parties, and
our internal audit department will conduct regular monitoring and evaluation of the
effectiveness of our internal control policies. Before extending any advances, loans and
borrowings or providing guarantees to other companies, our financial department is required
to (i) thoroughly evaluate our liquidity and financial condition; (ii) conduct a comprehensive
analysis and assessment on the needs and necessity of such activities; and (iii) prepare a report
for the Board’s approval. We periodically assess the recoverability of our advances to other
companies. In particular, we regularly review the business performance of the parties to which
we provided advances, loans, borrowings or financial guarantees. If any risk of default is
identified, impairment losses will be made in accordance with applicable accounting
principles.
FINANCIAL INFORMATION
– 408 –


--- page 418 ---
DIVIDENDS
No dividend has been paid or declared by our Company during the Track Record Period.
Any future declarations and payments of dividends will be at the absolute discretion of our
Board and if necessary, subject to the approval by our Shareholders at a general meeting. There
can be no assurance that we will be able to declare or distribute any dividend in the amount
set out in any plan of the Board or at all. Currently, we do not have any dividend policy or
intention to declare or pay any dividends in the near future. As advised by our Cayman Islands
counsel, under the Companies Act and the Memorandum and Articles, the Company may
declare and pay a dividend out of either profits or share premium account, provided always that
in no circumstances may a dividend be declared or paid out of Share premium account if such
payment would result in the Company being unable to pay its debts as they fall due in the
ordinary course of business. Investors should not purchase our Shares with the expectation of
receiving cash dividends.
DISTRIBUTABLE RESERVES
As of December 31, 2023, we did not have any reserves available for distribution to our
Shareholders.
LISTING EXPENSES
Assuming an Offer Price of HK$7.98 per Share (being the mid-point of the indicative
Offer Price range of HK$7.60 to HK$8.36 per Share), and assuming that the Over-allotment
Option is not exercised, the aggregate commissions and fees, together with the Stock Exchange
listing fee, SFC transaction levy, AFRC transaction levy and Stock Exchange trading fee, legal
and other professional fees, printing and other expenses relating to the Global Offering, which
are paid or payable by us, are estimated to be approximately RMB115.7 million, accounting for
66.8% of gross proceeds from the Global Offering. Up to December 31, 2023, we incurred
listing expenses in the amount of RMB64.8 million, of which RMB60.8 million was recognized
in the consolidated statements of profit or loss and other comprehensive income, and RMB4.0
million was recognized as deferred listing expenses in the consolidated statements of financial
position as of December 31, 2023 which will be recognized as a reduction from equity upon
the Listing. We expect to further incur additional listing expenses of approximately RMB50.9
million after the Track Record Period, of which approximately RMB28.0 million is expected
to be recognized in our consolidated statements of profit or loss and other comprehensive
income, and approximately RMB22.9 million is expected to be deducted from equity upon the
Listing under the relevant accounting standards. By nature, our listing expenses are composed
of (i) underwriting related expenses of approximately RMB24.3 million; and (ii) non-
underwriting related expenses of approximately RMB91.4 million, which consist of fees and
expenses of legal advisors and Reporting Accountants of approximately RMB63.5 million and
other fees and expenses of approximately RMB27.9 million.
FINANCIAL INFORMATION
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--- page 419 ---
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of our Group
prepared in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the
Global Offering on our net tangible liabilities of our Group as if the Global Offering had been
completed on December 31, 2023. The unaudited pro forma statement of adjusted net tangible
assets has been prepared for illustrative purposes only and, because of its hypothetical nature,
it may not give a true picture of our net tangible assets of our Group had the Global Offering
been completed as of December 31, 2023 or at any future dates.
Consolidated net
tangible liabilities
of the Group as of
December 31, 2023
Estimated net
proceeds from the
Global Offering
Automatic
conversion of
convertible
redeemable
preferred shares
into ordinary
shares upon
the completion
of the Global
Offering as of
December 31, 2023
Unaudited pro
forma adjusted net
tangible
assets of
the Group
Unaudited pro forma
adjusted net tangible
assets of the Group
per Share as of
December 31, 2023
RMB’000(1) RMB’000(2)(5) RMB’000(3) RMB’000 RMB (4) HK$(5)
Based on an Offer Price of
HK$7.60 per Share (1,903,738) 111,360 1,911,521 119,143 0.10 0.11
Based on an Offer Price of
HK$8.36 per Share (1,903,738) 125,314 1,911,521 133,097 0.11 0.12
Notes:
(1) The consolidated net tangible liabilities of the Group as of December 31, 2023 is arrived at after deducting
intangible assets of RMB2,275,000 from the consolidated total deficit of our Group of RMB1,901,463,000 as
at December 31, 2023, as extracted from the financial information included in the Accountants’ Report set out
in Appendix I to this prospectus.
(2) The estimated net proceeds from the Global Offering are based on the estimated Offer Prices of HK$7.60 per
Share and HK$8.36 per Share, being the lower end price and higher end price of the estimated Offer Price
range respectively, and the expected issuance of 23,800,000 Shares, after deduction of the estimated
underwriting fees and other related listing expenses related to the Global Offering paid or payable by our
Group (excluding RMB60,821,000.00 of the listing expenses that had been charged to profit or loss up to
December 31, 2023), and does not take into account of any Shares which may be issued upon the exercise of
the Over-allotment Option.
(3) As of December 31, 2023, the aggregate carrying amount of convertible redeemable preferred shares was
RMB1,911,521,000. Upon the completion of the Global Offering, the convertible redeemable preferred shares
will be automatically converted into ordinary shares of our Company and will be reclassified from liabilities
to equity. Accordingly, for the purpose of the unaudited pro forma financial information, these liabilities are
assumed to have been reclassified to equity on December 31, 2023.
FINANCIAL INFORMATION
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--- page 420 ---
(4) The unaudited pro forma adjusted net tangible assets of the Group per Share is arrived at after the adjustments
as described in the preceding paragraphs and on the basis that a total of 1,213,025,279 Shares (which is
calculated based on 1,189,225,279 Shares at December 31, 2023 and adjusted for 23,800,000 Shares newly
issued upon the Global Offering but exclude 127,242,178 Class A Ordinary Shares issued to Asia Tech
Investments Ltd., Endeavor Cloud Limited, FAST GOAL INTERNA TIONAL LIMITED, Gaoxin Thrive
Limited, Mr. ZOU Y uming and Torano Investments Limited in May 2024) were in issue immediately following
the completion of the Global Offering assuming the Over-allotment Option is not exercised.
(5) The estimated net proceeds from the Global Offering and the unaudited pro forma adjusted net tangible assets
of our Group per Share are converted from or into Hong Kong dollars at an exchange rate of RMB1.00 to
HK$1.0965 being the exchange rate set by PBOC prevailing on June 20, 2024. No representation is made that
Hong Kong dollars amounts have been, could have been or may be converted into RMB, or vice versa, at that
rate or at any other rate.
(6) No adjustment has been made to the unaudited pro forma adjusted net tangible assets of our Group to reflect
any trading results or other transactions of our Group entered into subsequent to December 31, 2023.
NO MATERIAL ADVERSE CHANGE
Our Directors have confirmed, after performing all the due diligence work which our
Directors consider appropriate, that, as of the date of this prospectus, there has been no
material adverse change in our financial or operation or trading position or prospects since
December 31, 2023 and up to the date of this prospectus.
DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors have confirmed that, as of the Latest Practicable Date, they were not aware
of any circumstance that would give rise to a disclosure requirement under Rules 13.13 to
13.19 of the Listing Rules.
FINANCIAL INFORMATION
–4 1 1–


--- page 421 ---
FUTURE PLANS AND PROSPECTS
See “Business—Strategies” in this prospectus for a detailed description of our future
plans.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$63.07 million, after deducting underwriting commissions, fees and estimated expenses
payable by us in connection with the Global Offering, and assuming an Offer Price of HK$7.98
per Share, which is the mid-point of the indicative Offer Price range stated in this prospectus.
If the Offer Price is set at HK$8.36 per Share, which is the high end of the indicative Offer
Price range, the net proceeds from the Global Offering will increase by approximately
HK$7.65 million. If the Offer Price is set at HK$7.60 per Share, which is the low end of the
indicative Offer Price range, the net proceeds from the Global Offering will decrease by
approximately HK$7.65 million.
Assuming an Offer Price at the mid-point of the indicative Offer Price range, we currently
intend to apply these net proceeds for the following purposes:
(i) Approximately 67.4%, or HK$42.51 million, will be used for business expansion in
the next three to five years, in particular:
 Approximately 17.3%, or HK$10.91 million, is expected to be used for
promoting brand awareness by (i) increasing our online marketing and
promotional activities through major search engines, web portals, various
popular short-video platforms and app stores, and intensifying our marketing
efforts through online channels, such as increasing promotions on professional
medical websites and online medical communities, hosting healthcare-related
webinars and sponsoring virtual academic conferences, which we believe will
raise our brand awareness among pharmaceutical companies and prospective
physicians to attract more physicians to our platform; and (ii) investing into the
academic and on-the-job training of business development team to equip
business development personnel with latest professional knowledge in online
chronic disease management and industry best-practice in order to upgrade the
overall quality of our business development team.
 Approximately 21.5%, or HK$13.56 million, is expected to be used for
enhancing user growth and engagement, and maintaining a highly active user
base, by expanding our Jianke Platform through attracting and retaining more
physicians across China to strategically cover additional specialties such as
cardiovascular, cerebrovascular, infectious diseases, dermatology, psychiatry
and gynecology, to serve the diverse and evolving needs of chronic disease
patients. In particular, our business development staff will continue to focus on
developing our pool of registered physicians across a number of key
geographic areas and specialties where our platform may currently lack
coverage, or which we believe to be underserved.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 422 ---
 Approximately 23.1%, or HK$14.57 million, is expected to be used for
attracting and retaining talents, especially those with extensive experience in
media and technology-powered medical services and insights in the fields of
chronic disease management. Specifically, we plan to focus our talent
recruitment on the following: (i) engage experienced business development
personnel to continue maintaining and developing our relationships with
pharmaceutical companies. In particular, we will additionally hire
approximately 50 in-house business development staff by 2028, with
experience in sales function and/or pharmaceutical industry to be dedicated to
developing and maintaining our business relationships with pharmaceutical
companies and expanding the registered physicians on our platform; (ii) by
2028, recruit approximately 50 new media marketing personnel to
continuously develop and deepen our collaboration with the leading
pharmaceutical manufacturers or medical institutions in the world to enhance
our customized marketing services and diversify the patient education content
on our platform; and (iii) establish a senior innovative business development
team of approximately 10 staff by 2028 to explore the opportunities for
innovative business collaboration between our Group and other participants in
the healthcare industry.
 Approximately 5.5%, or HK$3.47 million, is expected to be used for expanding
product offerings and enhancing supply chain capabilities. We plan to (i)
establish two additional warehouses in regions with competitive sourcing
conditions, including Chengdu and Wuhan, each with a storage capacity of
approximately 8,000 to 10,000 square meters; (ii) upgrade our storage system
for approximately 1,000 square meters in our warehouses each year before
2028 to reduce storage outsourcing costs and improve our ability to ensure
proper storage of temperature-sensitive drugs; (iii) continue to establish
partnerships with qualified third-party delivery couriers with logistic
specialties, such as cold chain delivery capabilities.
(ii) Approximately 16.0%, or HK$10.09 million, will be used for research and
development activities in the next five years, including:
 Approximately 7.0%, or HK$4.41 million, will be used for recruiting a team of
approximately 40 software engineers by 2028, of which 70% are senior
software engineers and the remainder are junior software engineers. We plan to
offer competitive compensation packages combined of a base remuneration as
well as a performance-based rewarding mechanism to attract more experienced
software engineers and continue to incentivize them. Apart from maintaining
our infrastructure system, our software engineers are expected to focus on
upgrading the existing functions and developing new functions and modules of
our CDM platform, in order to improve the quality of our services and enhance
the engagement by patients and physicians on our CDM platform. Such
FUTURE PLANS AND USE OF PROCEEDS
– 413 –


--- page 423 ---
functions include standardized chronic disease management guidance for
physicians, intelligent medication guidance for patients, big data analysis on
medication data and patient feedbacks, and in-depth research in specific
diseases.
 Approximately 9.0%, or HK$5.68 million, will be used to (i) improve the
application of AI technology and big data analysis capabilities in chronic
disease management to more accurately capture user habits throughout their
activities, from seeking consultations, purchasing pharmaceutical products to
their preferences for viewing content on our platform, thereby improving user
experience and improving the conversion rate of paying users on our platform;
(ii) optimize our infrastructure in various technological areas, such as (a)
computer vision, to improve the efficiency of order identification and
processing and user information management, (b) natural language processing,
to optimize the question-answering engine of our AI medical assistant, and (c)
search-based recommendation algorithms to deliver the most relevant
information catered to the users’ evolving needs; (iii) improve stability of the
system to withstand the increasing pressure as we scale our online operations;
and (iv) optimize the functions of our WeChat mini programs and perform
routine system upgrade and maintenance.
(iii) Approximately 11.6%, or HK$7.32 million, will be used for our potential
investments and acquisitions or strategic alliances with other stakeholders in the
value chain of the online chronic disease management industry. We will focus on
companies with proven track records and advanced technology capabilities and
services, companies with complementary business lines, such as treatment and
rehabilitation for the major chronic disease types that enrich our service offerings
and potentially bring additional monetization channels, and companies which have
synergies with our current business. We also seek to acquire or cooperate with
companies with innovative business lines, including AI-assisted medical devices
which are employed to improve the quality and efficiency of online consultations,
medical media platforms which provide customized medical content or content
produced by KOLs in the medical industry, Internet healthcare services focusing on
specialized chronic disease departments, and smart retailing of pharmaceutical
products, such as Internet hospital operators and direct-to-patient (“DTP”) pharmacy
business operators. In selecting potential acquisition targets, we especially focus on
assessing their growth prospects and the synergies they can bring us for the
improvement of our service offerings. According to CIC, as of December 31, 2023,
there were over 1,700 licensed Internet hospitals in China and the number of DTP
pharmacy chains was over 2,000 in China as of the same date. As of the Latest
Practicable Date, we have not identified any specific targets for potential
acquisition.
(iv) Approximately 5.0%, or HK$3.15 million, will be used for our working capital and
general corporate purposes.
FUTURE PLANS AND USE OF PROCEEDS
– 414 –


--- page 424 ---
If the offer price is set at the Maximum Offer Price or the Minimum Offer Price of the
indicative Offer price range, the net proceeds of the Global Offering will increase or decrease
by approximately HK$7.65 million, respectively.
If the Over-allotment Option is exercised in full, the additional net proceeds we will
receive would be (i) HK$25.66 million (assuming an Offer Price of HK$8.36 per Share, being
the maximum Offer Price); (ii) HK$24.50 million (assuming an Offer Price of HK$7.98 per
Share, being the median of the Offer Price range); and (iii) HK$23.33 million (assuming an
Offer Price of HK$7.60 per Share, being the minimum Offer Price).
To the extent that the net proceeds from the Global Offering (including the net proceeds
from the exercise of the Over-allotment Option) are either more or less than expected, we may
adjust our allocation of the net proceeds for the above purposes on a pro rata basis. In such
event, we will comply with the appropriate disclosure requirements under the Listing Rules.
If the net proceeds of the Global Offering are not immediately applied to the above
purposes, we will only deposit those net proceeds into short-term interest-bearing accounts at
licensed commercial banks and/or other authorized financial institutions (as defined under the
Securities and Futures Ordinance or applicable laws and regulations in other jurisdictions).
FUTURE PLANS AND USE OF PROCEEDS
– 415 –


--- page 425 ---
HONG KONG UNDERWRITERS
Citigroup Global Markets Asia Limited
ABCI Securities Company Limited
Essence International Securities (Hong Kong) Limited
ICBC International Securities Limited
China Galaxy International Securities (Hong Kong) Co., Limited
China Everbright Securities (HK) Limited
China Merchants Securities (HK) Co., Limited
Citrus Securities Limited
CMB International Capital Limited
Fosun International Securities Limited
GF Securities (Hong Kong) Brokerage Limited
Huatai Financial Holdings (Hong Kong) Limited
Long Bridge HK Limited
Shenwan Hongyuan Securities (H.K.) Limited
Zhongtai International Securities Limited
Futu Securities International (Hong Kong) Limited
Tiger Brokers (HK) Global Limited
Victory Securities Company Limited
Y ue Xiu Securities Company Limited
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering.
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a
conditional basis. The International Offering is expected to be fully underwritten by the
International Underwriters. If, for any reason, the Offer Price is not agreed between the Overall
Coordinators (for themselves and on behalf of the Underwriters) and our Company by 12:00
noon on Friday, July 5, 2024 , the Global Offering will not proceed and will lapse.
The Global Offering comprises the Hong Kong Public Offering of initially 2,380,000
Hong Kong Offer Shares and the International Offering of initially 21,420,000 International
Offer Shares, subject, in each case, to reallocation on the basis as described in the section
headed “Structure of the Global Offering” as well as to the Over-allotment Option in the case
of the International Offering.
UNDERWRITING
– 416 –


--- page 426 ---
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, we are offering the Hong Kong
Offer Shares for subscription by the public in Hong Kong on the terms and conditions set out
in this prospectus and the Hong Kong Underwriting Agreement at the Offer Price.
Subject to (i) the Listing Committee granting approval for the listing of, and permission
to deal in, the Shares in issue and to be issued pursuant to the Global Offering (including any
additional Shares that may be issued pursuant to the exercise of the Over-allotment Option) on
the Main Board of the Stock Exchange and such approval not having been withdrawn prior to
the commencement of trading of the Shares on the Stock Exchange and (ii) certain other
conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters
have agreed severally, but not jointly, to subscribe or procure subscribers for their respective
applicable proportions of the Hong Kong Offer Shares being offered which are not taken up
under the Hong Kong Public Offering on the terms and conditions set out in this prospectus and
the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on, amongst other things, the
International Underwriting Agreement having been signed and becoming unconditional and not
having been terminated in accordance with its terms.
Grounds for Termination
The Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the
Hong Kong Underwriters) may, in their sole and absolute discretion, by giving notice (orally
or in writing) to our Company terminate the Hong Kong Underwriting Agreement with
immediate effect if, at any time prior to 8:00 a.m. on the Listing Date:
(a) there develops, occurs, exists or comes into effect:
(i) any local, national, regional or international event or circumstance or series of
events or circumstances in the nature of force majeure (including, without
limitation, any acts of government, declaration of a national, regional or
international emergency or war, calamity, crisis, epidemic, pandemic,
outbreak, escalation, mutation or aggravation of diseases, including, without
limitation, severe acute respiratory syndrome (SARS), swine or avian flu,
H5N1, H1N1, H1N7, H7N9, Ebola virus, Middle East respiratory syndrome
(MERS), COVID-19 and their related/mutated forms, comprehensive or
economic sanctions, labor disputes, strikes, lock-outs, other industrial actions,
fire, explosion, flooding, tsunami, earthquake, volcanic eruption, civil
commotion, riots, rebellion, public disorder, accident or interruption or delay
in transportation, acts of war, outbreak or escalation of hostilities (whether or
UNDERWRITING
– 417 –


--- page 427 ---
not war is declared), acts of God, acts of terrorism (whether or not
responsibility has been claimed), paralysis in government operations or other
state of emergency or calamity or crisis) in or affecting (directly or indirectly)
Hong Kong, the PRC, the United States, the United Kingdom, the European
Union (or any member thereof), the Cayman Islands, the BVI, Singapore or any
other jurisdiction relevant to our Group or the Global Offering (collectively,
the “ Relevant Jurisdictions ”); or
(ii) any change or development involving a prospective change (whether or not
permanent), or any event or circumstance or series of events or circumstances
resulting in or representing or likely to result in or represent a change or
development involving a prospective change (whether or not permanent), in
any local, national, regional or international financial, economic, political,
military, industrial, legal, fiscal, regulatory, currency, credit or market matters
or conditions or sentiments (including, without limitation, a change in matters
or conditions or sentiments in the stock and bond markets, money and foreign
exchange markets, inter-bank markets and credit markets, or any monetary or
trading settlement system, a change in the system under which the value of the
Hong Kong dollar is linked to that of the United States dollar) in or affecting
(directly or indirectly) any of the Relevant Jurisdictions, or affecting an
investment in the Offer Shares; or
(iii) any moratorium, suspension or restriction (including, without limitation, any
imposition of or requirement for any minimum or maximum price limit or price
range) in or on trading in securities generally on the Stock Exchange, the New
Y ork Stock Exchange, the NASDAQ Global Market, the London Stock
Exchange, the Tokyo Stock Exchange, the Singapore Stock Exchange, the
Shanghai Stock Exchange or the Shenzhen Stock Exchange; or
(iv) any general moratorium on commercial banking activities, or any disruption in
commercial banking activities or foreign exchange trading or securities
settlement or clearance services, procedures or matters, in or affecting (directly
or indirectly) Hong Kong, New Y ork, London or any of the other Relevant
Jurisdictions; or
(v) any new law, or any change or development involving a prospective change or
any event or circumstance or series of events or circumstances likely to result
in a change or development involving a prospective change in (or in the
interpretation or application by any court or other competent authority of)
existing laws, in each case, in or affecting any of the Relevant Jurisdictions; or
(vi) the imposition of sanctions or export controls, or the withdrawal of trading
privileges, in whatever form, directly or indirectly, in any of the Relevant
Jurisdictions; or
UNDERWRITING
– 418 –


--- page 428 ---
(vii) any change or development involving a prospective change in or affecting
taxation or exchange control, currency exchange rates or foreign investment
regulations (including, without limitation, a material devaluation of the Hong
Kong dollar, United States dollar or the Renminbi against any foreign
currencies), or the implementation of any exchange control, in any of the
Relevant Jurisdictions; or
(viii) any Proceedings being threatened or instigated or commenced or announced
against any member of our Group, any Director or any of the Controlling
Shareholders; or
(ix) any adverse change or prospective adverse change in or affecting the business,
business prospects, financial or trading position, or conditions (financial or
otherwise) of our Group; or
(x) any change or development involving a prospective change in, or a
materialization of, any of the risks set out in “Risk Factors;” or
(xi) any contravention by any member of our Group, any Director or any
Controlling Shareholder of any applicable laws, including, without limitation,
the Listing Rules, the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the PRC Company Law and all rules and
regulations applicable to members of our Group incorporated in the PRC
(including but not limited to cybersecurity laws); or
(xii) any non-compliance of this prospectus (or any other documents used in
connection with the contemplated offer and sale of the Offer Shares) or any
aspect of the Global Offering with the Listing Rules or any other applicable
laws; or
(xiii) any breach of any of the obligations imposed upon any party to the Hong Kong
Underwriting Agreement or the International Underwriting Agreement (other
than upon any of the Joint Sponsors, the Hong Kong Underwriters or the
International Underwriters); or
(xiv) any event, act or omission which gives or is likely to give rise to any liability
of any of the indemnifying parties (including our Company and our Controlling
Shareholders) pursuant to the Hong Kong Underwriting Agreement; or
(xv) other than with the prior written consent of the Overall Coordinators, the issue
or requirement to issue by our Company of any supplement or amendment to
this prospectus, the preliminary offering circular, the final offering circular, the
CSRC filings or any other document used in connection with the Global
Offering pursuant to the Companies Ordinance, the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, the Listing Rules or the CSRC rules
or any requirement or request of the Stock Exchange, HKSCC, the SFC, the
CSRC and/or any other relevant authority,
UNDERWRITING
– 419 –


--- page 429 ---
which, individually or in the aggregate, in the sole and absolute opinion of the Joint
Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters):
(i) has or will have or may have a material adverse effect on the assets, liabilities,
business, general affairs, management, prospects, shareholders’ equity,
revenues, profits, losses, earnings, results of operations, position or condition
(financial, operational, trading or otherwise), or performance of our Group as
a whole; or
(ii) has or will have or may have a material adverse effect on the success of the
Global Offering or the level of applications under the Hong Kong Public
Offering or the level of interest under the International Offering or the
distribution of Offer Shares or the anticipated dealings in the Shares in the
secondary market; or
(iii) makes or will make or may make it inadvisable, inexpedient, impracticable or
incapable for the Hong Kong Public Offering and/or the International Offering
to proceed or to market the Global Offering or to deliver or distribute the Offer
Shares on the terms and in the manner contemplated by this prospectus, the
Formal Notice, the preliminary offering circular or the final offering circular;
or
(iv) has or will have or may have the effect of making any material term of the
Hong Kong Underwriting Agreement (including underwriting) incapable of
performance in accordance with its terms or preventing or delaying the
processing of applications and/or payments pursuant to the Global Offering or
pursuant to the underwriting thereof; or
(b) there has come to the notice of any of the Joint Sponsors or the Overall
Coordinators:
(i) that any statement contained in any of the Offering Documents, the CSRC
filings and/or in any notices, announcements, advertisements, communications
or other documents issued or used by or on behalf of our Company in
connection with the Hong Kong Public Offering (including any supplement or
amendment thereto) (together, the “ Offer Related Documents ”) (excluding
the names, logos and addresses of the Underwriters expressly and specifically
for use therein) was, when it was issued, or has become untrue, incorrect,
inaccurate or incomplete in any material respect, or misleading or deceptive, or
that any forecast, estimate, expression of opinion, intention or expectation
contained in any of the Offer Related Documents was, when it was issued, or
has become unfair, misleading, dishonest or given in bad faith, or not based on
reasonable assumptions; or
UNDERWRITING
– 420 –


--- page 430 ---
(ii) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before this prospectus Date, constitute a material
misstatement in, or a material omission from, any of the Offer Related
Documents; or
(iii) any material adverse change, or any development involving a prospective
material adverse change, in or affecting the assets, liabilities, business, general
affairs, management, prospects, shareholders’ equity, revenues, profits, losses,
results of operations, position or condition (financial, operational or
otherwise), or performance of the Group as a whole; or
(iv) any demand by any creditor for repayment or payment of any indebtedness of
any member of our Group or in respect of which such member of our Group
is liable prior to its stated maturity; or
(v) any order or petition for the winding-up or liquidation of any member of our
Group, or any composition or arrangement made by any member of our Group
with its creditors, or any scheme of arrangement entered into by any member
of our Group, or any resolution for the winding-up of any member of our
Group, or any appointment of a provisional liquidator, receiver or manager
over all or part of the assets or undertaking of any member of our Group, or
anything analogous thereto occurring in respect of any member of our Group;
or
(vi) any breach of, or any event or circumstance rendering untrue, inaccurate,
incomplete or misleading in any respect, any of the representations, warranties,
agreements or undertakings given by our Company or any of the Controlling
Shareholders in the Hong Kong Underwriting Agreement; or
(vii) any Director or any member of our Group’s senior management or any
Controlling Shareholder being charged with an indictable offence or prohibited
by operation of law or otherwise disqualified from taking part in the
management or taking directorship of a company; or
(viii) the commencement by any authority or political or regulatory or administrative
body, agency or organization of any investigation or action, or an
announcement by any authority or political or regulatory or administrative
body, agency or organization that it intends to investigate or take any action,
against any member of our Group, any Director or any of the Controlling
Shareholders; or
(ix) any executive Director or the chief executive officer of our Company seeking
to retire, being removed from or vacating his or her office; or
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(x) the approval by the Listing Committee of the listing of, and permission to deal
in, the Shares in issue and to be issued pursuant to the Global Offering
(including the additional Shares which may be issued pursuant to the exercise
of the Over-allotment Option) is refused or not granted on or before the Listing
Date, or if granted, the approval is subsequently qualified (other than by
customary conditions), rejected, withdrawn, cancelled, revoked, withheld,
amended or invalidated; or
(xi) our Company withdraws any of the Offer Related Documents or the Global
Offering; or
(xii) any person (other than the Joint Sponsors) has withdrawn or is subject to
withdrawing its consent to the issue of any of the offering documents with the
inclusion of its report, letter and/or opinion (as the case may be) and references
to its name included in the form and context in which it respectively appears;
or
(xiii) any prohibition on our Company for whatever reason from offering, allotting,
issuing or selling any of the Offer Shares pursuant to the terms of the Global
Offering; or
(xiv) the notice of acceptance of the CSRC filings issued by the CSRC and/or the
results of the CSRC filings published on the website of the CSRC is qualified
(other than by customary conditions), rejected, withdrawn, cancelled, revoked,
withheld, amended or invalidated; or
(xv) a material portion of the orders placed or confirmed in the book-building
process have been withdrawn, terminated or cancelled.
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Undertakings to the Stock Exchange Pursuant to the Listing Rules
Undertakings by our Company
Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Stock Exchange
that we will not, at any time within six months from the Listing Date, issue any further Shares
or securities convertible into equity securities of us (whether or not of a class already listed)
or enter into any agreement to such an issue (whether or not such issue of Shares or securities
will be completed within six months from the Listing Date), except (a) pursuant to the Global
Offering (including pursuant to the Over-allotment Option) and (b) under any of the
circumstances provided under Rule 10.08 of the Listing Rules.
Undertakings by the Controlling Shareholders
Pursuant to Rule 10.07(1) of the Listing Rules, each of our Controlling Shareholders has
undertaken to the Stock Exchange and to us that, except pursuant to the Stock Borrowing
Agreement or in compliance with the requirements of the Listing Rules, he/it will not and will
procure that the relevant registered holder(s) will not, either directly or indirectly:
(i) in the period commencing on the date by reference to which disclosure of his/its
shareholding in our Company is made in this prospectus and ending on the date
which is six months from the Listing Date, dispose of, nor enter into any agreement
to dispose of or otherwise create any options, rights, interests or encumbrances in
respect of, any of the securities of our Company in respect of which he/it is shown
by this prospectus to be the beneficial owner (including 630,105,482 Shares held by
the Controlling Shareholders and 138,430,610 Shares held by Tech-Med
Investments (S) Pte. Ltd., representing approximately 47.01% and 10.33% of the
issued Shares of the Company, respectively, immediately following the completion
of the Global Offering, assuming that the Over-allotment Option is not exercised);
or
(ii) in the period of six months commencing on the date on which the period referred to
in paragraph (i) above expires, dispose of, nor enter into any agreement to dispose
of or otherwise create any options, rights, interests or encumbrances in respect of,
any of the securities referred to in paragraph (i) above if, immediately following
such disposal or upon the exercise or enforcement of such options, rights, interests
or encumbrances, he/it would cease to be a controlling shareholder (as defined in the
Listing Rules) of us (i.e. the Controlling Shareholders will not, during such period,
dispose of, nor enter into any agreement to dispose of or otherwise create any
options, rights, interests or encumbrances in respect of, more than 228,025,244
Shares, representing approximately 17.01% of the issued Shares of the Company
immediately following the completion of the Global Offering, assuming that the
Over-allotment Option is not exercised).
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Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, each of the Controlling
Shareholders has undertaken to the Stock Exchange and to us that, within the period
commencing on the date by reference to which disclosure of his/its shareholding in us is made
in this prospectus and ending on the date which is 12 months from the Listing Date, he/it will
and will procure that the relevant registered holder(s) will:
(a) when he/it pledges or charges any securities of our Company beneficially owned by
him/it in favor of an authorized institution (as defined in the Banking Ordinance
(Chapter 155 of the Laws of Hong Kong)) pursuant to Note 2 to Rule 10.07(2) of
the Listing Rules for a bona fide commercial loan, immediately inform our Company
of such pledge or charge together with the number of the securities so pledged or
charged; and
(b) when he/it receives indications, either verbal or written, from the pledgee or chargee
that any of the pledged or charged securities will be disposed of, immediately inform
our Company of such indications.
Upon being informed of matters referred to in paragraph (i) or (ii) above by any of the
Controlling Shareholders, our Company will inform the Stock Exchange and make an
announcement in accordance with the Listing Rules as soon as practicable.
Undertakings Pursuant to the Hong Kong Underwriting Agreement
Undertakings by our Company and our Controlling Shareholders in respect of our Company
Our Company has undertaken to each of the Joint Sponsors, the Sponsor-Overall
Coordinators, the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners,
the Joint Lead Managers, the Hong Kong Underwriters and the Capital Market Intermediaries
that, except for the offer, allotment and issue of the Offer Shares pursuant to the Global
Offering (including pursuant to the exercise of the Over-allotment Option), our Company will
not, and will procure each other member of our Group not to, without the prior written consent
of the Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters) and unless in compliance with the requirements of the Listing Rules, at
any time during the period commencing on the date of the Hong Kong Underwriting Agreement
and ending on, and including, the date falling six months after the Listing Date (the “ First
Six-Month Period ”):
(i) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree
to allot, issue or sell, assign, mortgage, charge, pledge, hypothecate, hedge, lend,
grant or sell any option, warrant, contract or right to subscribe for or purchase, grant
or purchase any option, warrant, contract or right to allot, issue or sell, or otherwise
transfer or dispose of or create an encumbrance over, or offer, contract or agree to
transfer or dispose of or create an encumbrance over, in each case either directly or
indirectly, conditionally or unconditionally, or repurchase, any legal or beneficial
interest in any Shares or other securities of our Company or any shares or other
securities of such other member of our Group, as applicable, or any interest in any
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of the foregoing (including, without limitation, any securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any warrants
or other rights to subscribe for or purchase, any Shares or other securities of our
Company or any shares or other securities of such other member of our Group, as
applicable, or any interest in any of the foregoing), or deposit any Shares or other
securities of our Company or any shares or other securities of such other member of
our Group, as applicable, with a depositary in connection with the issue of
depositary receipts;
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the beneficial and/or economic consequences of ownership (legal or
beneficial) of any Shares or other securities of our Company or any shares or other
securities of such other member of our Group, as applicable, or any interest in any
of the foregoing (including, without limitation, any securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any warrants
or other rights to subscribe for or purchase, any Shares or other securities of our
Company or any shares or other securities of such other member of our Group, as
applicable, or any interest in any of the foregoing);
(iii) enter into any transaction, directly or indirectly, with the same economic effect as
any of the transactions specified in paragraph (i) or (ii) above; or
(iv) offer to or agree to or announce or publicly disclose any intention to effect any of
the transactions specified in paragraph (i), (ii) or (iii) above,
in each case, whether any of the transactions specified in paragraph (i), (ii) or (iii) above
is to be settled by delivery of Shares or other securities of our Company or shares or other
securities of such other member of our Group, as applicable, or in cash or otherwise
(whether the issue of such Shares or other shares or securities or such transaction will be
completed within the First Six-Month Period or the Second Six-Month Period (as defined
below) or otherwise) provided that the foregoing restrictions shall not apply to the issue
of Shares by the Company pursuant to the Global Offering, or any change of the share
capital of any member of our Group resulting from incorporation of any new subsidiaries
of our Company or capital injection by other members of our Group without issuing any
new Shares as consideration for such change.
During the period of six months commencing on the date on which the First
Six-Month Period expires (the “ Second Six-Month Period ”), our Company shall not
enter into any of the transactions specified in paragraph (i), (ii) or (iii) above or offer to
or agree to or announce or publicly disclose any intention to effect any such transaction
if, immediately following such transaction or upon the exercise or enforcement of any
such option, right, interest or encumbrance, any of the Controlling Shareholders, directly
or indirectly, would cease to be a “controlling shareholder” (as defined in the Listing
Rules) of our Company. Until the expiry of the Second Six-Month Period, in the event
that our Company enters into any of the transactions specified in paragraph (i), (ii) or (iii)
above or offers to or agrees to or announces or publicly discloses any intention to effect
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any such transaction, our Company shall immediately inform the Joint Sponsors and the
Overall Coordinators in writing, and take all reasonable steps to ensure that it will not,
and no other act of our Company will, create a disorderly or false market in the Shares
or other securities of our Company.
Each of the Controlling Shareholders has jointly and severally undertaken to each of
the Joint Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong
Underwriters and the Capital Market Intermediaries to procure our Company to comply
with the above undertakings.
Each of our Company and the Controlling Shareholders agrees and undertakes to
each of the Joint Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators,
the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong
Kong Underwriters and the Capital Market Intermediaries that it/he will, and each of the
Controlling Shareholders further undertakes to each of the Joint Sponsors, the Sponsor-
Overall Coordinators, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters and the Capital
Market Intermediaries to procure that our Company will, comply with the minimum
public float requirements specified in the Listing Rules (as may be modified by any
waiver granted and not revoked by the Stock Exchange) (the “ Minimum Public Float
Requirement ”), and will not effect any purchase of Shares, or agree to do so, which may
reduce the holdings of Shares held by the public (as defined in Rule 8.24 of the Listing
Rules) to below the Minimum Public Float Requirement on or before the date falling one
year after the Listing Date without first having obtained the prior written consent of the
Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters).
Undertakings by our Controlling Shareholders in respect of Themselves
Each of our Controlling Shareholders has jointly and severally undertaken to each of our
Company, the Joint Sponsors, the Sponsor-Overall Coordinators, the Overall Coordinators, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong
Underwriters and the Capital Market Intermediaries that, except pursuant to the Stock
Borrowing Agreement, each of our Controlling Shareholders, and each of our Controlling
Shareholders will procure that each of the relevant registered holder(s), company(ies)
controlled by him/it or nominee(s) or trustee(s) holding on trust for him/it, without the prior
written consent of the Joint Sponsors and the Overall Coordinators (for themselves and on
behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of the
Listing Rules:
(a) will not, at any time during the First Six-Month Period:
(i) sell, offer to sell, contract or agree to sell, create any short position (as defined
in section 308 of the SFO), assign, mortgage, charge, pledge, hypothecate,
hedge, lend, grant or sell any option, warrant, contract or right to subscribe for
or purchase, grant or purchase any option, warrant, contract or right to sell, or
otherwise transfer or dispose of or create an encumbrance over, or offer,
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contract or agree to transfer or dispose of or create an encumbrance over, in
each case either directly or indirectly, conditionally or unconditionally, any
legal or beneficial interest in any Shares or other securities of our Company or
any interest in any of the foregoing (including, without limitation, any
securities convertible into or exchangeable or exercisable for or that represent
the right to receive, or any warrants or other rights to subscribe for or purchase,
any Shares or other securities of our Company or any interest in any of the
foregoing), or deposit any Shares or other securities of our Company with a
depositary in connection with the issue of depositary receipts;
(ii) enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the beneficial and/or economic consequences of ownership
(legal or beneficial) of any Shares or other securities of our Company or any
interest in any of the foregoing (including, without limitation, any securities
convertible into or exchangeable or exercisable for or that represent the right
to receive, or any warrants or other rights to subscribe for or purchase, any
Shares or other securities of our Company or any interest in any of the
foregoing);
(iii) enter into any transaction, directly or indirectly, with the same economic effect
as any of the transactions specified in paragraph (i) or (ii) above; or
(iv) offer to or agree to or announce or publicly disclose any intention to effect any
of the transactions specified in paragraph (i), (ii) or (iii) above,
in each case, whether any of the transactions specified in paragraph (i), (ii) or (iii)
above is to be settled by delivery of Shares or other securities of our Company or
in cash or otherwise (whether such transaction will be completed within the First
Six-Month Period or the Second Six-Month Period or otherwise);
(b) will not, during the Second Six-Month Period, enter into any of the transactions
specified in paragraph (a)(i), (ii) or (iii) above or offer to or agree to or announce
or publicly disclose any intention to effect any such transaction if, immediately
following such transaction or upon the exercise or enforcement of any such option,
right, interest or encumbrance, he/it, directly or indirectly, would cease to be a
“controlling shareholder” (as defined in the Listing Rules) of our Company;
(c) until the expiry of the Second Six-Month Period, in the event that he/it enters into
any of the transactions specified in paragraph (a)(i), (ii) or (iii) above or offers to
or agrees to or announces or publicly discloses any intention to effect any such
transaction, will immediately inform our Company, the Joint Sponsors and the
Overall Coordinators in writing, and take all reasonable steps to ensure that it will
not create a disorderly or false market in the Shares or other securities of our
Company.
For the avoidance of doubt, nothing herein shall prevent our Controlling
Shareholders from (i) purchasing additional Shares or other securities of our
Company and disposing of such additional Shares or securities of our Company in
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accordance with the Listing Rules; and (ii) using the Shares or other securities of our
Company or any interest therein beneficially owned by him/them as security
(including a charge or a pledge) in favor of an authorized institution (as defined in
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide
commercial loan; and
(d) at any time within the period commencing on the date of the Hong Kong
Underwriting Agreement and ending on the date which is 12 months after the Listing
Date, shall and shall procure that the relevant registered holder(s) shall:
(i) if and when he/it pledges or charges any Shares or other securities (or any
interest therein) of our Company beneficially owned by him/it, immediately
inform our Company, the Joint Sponsors and the Overall Coordinators in
writing of such pledge or charge together with the number of Shares or other
securities of our Company so pledged or charged; and
(ii) if and when he/it receives indications, either verbal or written, from the
pledgee or chargee that any of the pledged or charged Shares or other securities
(or any interest therein) of our Company will be disposed of, immediately
inform our Company, the Joint Sponsors and the Overall Coordinators in
writing of such indications.
Our Company has undertaken that upon being informed of matters referred to in
paragraph (d)(i) or (ii) above by any of our Controlling Shareholders, our Company shall
inform the Stock Exchange and/or any other relevant authorities and make an announcement
as soon as practicable, if required by and in accordance with the Listing Rules, the SFO and/or
any other applicable Laws.
Undertakings by Other Existing Shareholders
Each of the existing Shareholders other than the Controlling Shareholders has entered into
a lock-up undertaking (the “ Lock-up Undertaking ”) in favor of the Company, the Joint
Sponsors and the Overall Coordinators (acting for themselves and on behalf of the
Underwriters) that, except with the prior written consent of the Company, the Joint Sponsors
and the Overall Coordinators, it will not, and will procure that none of the relevant registered
holder(s) or its associates or companies controlled by it or any nominee or trustee holding on
trust for it will, at any time during the period commencing on June 27, 2024 and ending on,
and including, the date that is six months from the Listing Date (the “ Lock-up Period ”),
(i) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate,
hedge, lend, grant or sell any option, warrant, contract or right to purchase, grant or
purchase any option, warrant, contract or right to sell, or otherwise transfer or
dispose of or create any mortgage, charge, pledge, lien or other security interest or
any option, restriction, right of first refusal, right of pre-emption or other third party
claim, right, interest or preference or any other encumbrance of any kind (the
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“Encumbrance ”) over, or agree to transfer or dispose of or create an Encumbrance
over, either directly or indirectly, conditionally or unconditionally, any Shares or
other securities of the Company or any interest therein (including, without
limitation, any securities convertible into or exchangeable or exercisable for or that
represent the right to receive, or any warrants or other rights to purchase, any Shares
or other securities of the Company) directly or indirectly held by it as at the date
hereof and/or the Listing Date (the “ Lock-up Shares ”), or deposit any Lock-up
Shares or other securities of the Company with a depositary in connection with any
issue of depositary receipts, or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Lock-up Shares, or
(iii) enter into any transaction with the same economic effect as any transaction specified
in clause (i) or (ii) of this paragraph, or
(iv) offer to or agree to or contract to or announce or publicly disclose any intention to
effect any transaction specified in clause (i), (ii) or (iii) of this paragraph,
in each case, whether any of the transactions specified in clause (i), (ii) or (iii) of this paragraph
is to be settled by delivery of Shares or other securities of the Company or in cash or otherwise
(whether or not the issue of such Shares or other securities will be completed within the
Lock-up Period); provided that the foregoing shall not:
(a) apply to transactions relating to any Shares acquired by it in open market
transactions after the Listing (and in respect of certain existing Shareholder only,
shall not apply to transactions relating to any Shares acquired by it or its close
associate in the Global Offering or in open market transactions after the Listing); or
(b) apply to any transfer of Lock-up Shares to any nominee for the purposes of holding
such Lock-up Shares in CCASS, provided that such Lock-up Shares shall, at all
times, remain subject to the lock-up undertaking until the Lock-up Period expires;
or
(c) prevent it from using Lock-up Shares beneficially owned by it as security (including
a charge or a pledge) in favor of an authorized institution (as defined in the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial
loan made to it; or
(d) apply to any transfer of Lock-up Shares as may be required by applicable law or
regulations; or
(e) apply to any transfer of Lock-up Shares to its wholly-owned entities (or, in respect
of certain existing Shareholder(s), its affiliates), provided, however, that in any such
case, it shall be a condition to the transfer that the transferee executes a written
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undertaking (addressed to and in favor of the Company, the Joint Sponsors and the
Overall Coordinators) stating that the transferee is receiving and holding such
Lock-up Shares subject to the provisions of the Lock-up Undertaking.
Hong Kong Underwriters’ Interests in our Company
Save as disclosed in this prospectus, and save for their respective obligations under the
Hong Kong Underwriting Agreement and, if applicable, the Stock Borrowing Agreement, as of
the Latest Practicable Date, none of the Hong Kong Underwriters was interested, legally or
beneficially, directly or indirectly, in any Shares or any securities of any member of our Group
or had any right or option (whether legally enforceable or not) to subscribe for or purchase, or
to nominate persons to subscribe for or purchase, any Shares or any securities of any member
of our Group.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their
respective obligations under the Hong Kong Underwriting Agreement.
International Offering
International Underwriting Agreement
In connection with the International Offering, it is expected that we and our Controlling
Shareholders will enter into the International Underwriting Agreement with, among others, the
Joint Sponsors, the Overall Coordinators and the International Underwriters on or about the
Price Determination Date. Under the International Underwriting Agreement and subject to the
Over-allotment Option, the International Underwriters would, subject to certain conditions set
out therein, agree severally but not jointly to procure subscribers or purchasers for, or
themselves to subscribe for or purchase, their respective applicable proportions of the
International Offer Shares being offered pursuant to the International Offering.
It is expected that the International Underwriting Agreement may be terminated on
similar grounds as the Hong Kong Underwriting Agreement. Potential investors should note
that in the event that the International Underwriting Agreement is not entered into or is
terminated, the Global Offering will not proceed. Please refer to the section headed “Structure
of the Global Offering—The International Offering.”
Over-allotment Option
We are expected to grant the Over-allotment Option to the International Underwriters,
exercisable by the Overall Coordinators (for themselves and on behalf of the International
Underwriters) at any time from the Listing Date until 30 days after the last day for lodging
applications under the Hong Kong Public Offering, pursuant to which we may be required to
allot and issue up to an aggregate of 3,570,000 additional Shares, representing not more than
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15% of the Offer Shares initially available under the Global Offering, at the Offer Price to,
among other things, cover over-allocations in the International Offering, if any. See “Structure
of the Global Offering—Over-allotment Option.”
Underwriting Commissions and Expenses
The Underwriters and the Capital Market Intermediaries will receive an underwriting
commission of 8.0% of the aggregate Offer Price in respect of all of the Offer Shares, including
Offer Shares to be issued pursuant to the Over-allotment Option (the “ Fixed Fee ”). Our
Company may, at our sole discretion, pay an additional discretionary fee of up to 6.0% of the
aggregate Offer Price in respect of all of the Offer Shares, including Offer Shares to be issued
pursuant to the Over-allotment Option (the “ Discretionary Fee ”), to one or more
Underwriter(s) and Capital Market Intermediary(ies). Assuming the Discretionary Fee is paid
in full, the ratio of the Fixed Fee and the Discretionary Fee will be approximately 57%:43%.
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering, we
will pay an underwriting commission at the rate applicable to the International Offering to the
relevant International Underwriters (and not the Hong Kong Underwriters).
The aggregate underwriting commissions and fees payable to the Underwriters and the
Capital Market Intermediaries, together with the Stock Exchange listing fees, the SFC
transaction levy, the AFRC transaction levy and the Stock Exchange trading fee, legal and other
professional fees and printing and other expenses payable by us in relation to the Global
Offering are estimated to be approximately RMB115.7 million (assuming an Offer Price of
HK$7.98 per Offer Share (which is the mid-point of the indicative Offer Price range), the full
payment of the Discretionary Fee and the Over-allotment Option is not exercised at all).
Indemnity
Each of our Company and our Controlling Shareholders has agreed to jointly and
severally indemnify the Joint Sponsors, the Sponsor-Overall Coordinators, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Hong Kong Underwriters, the Capital Market Intermediaries and each of them for certain
losses which they may suffer or incur, including losses arising from their performance of their
obligations under the Hong Kong Underwriting Agreement or any breach by any of our
Company and the Controlling Shareholders of the Hong Kong Underwriting Agreement.
INDEPENDENCE OF THE JOINT SPONSORS
As of the Latest Practicable Date, Citigroup Global Markets Asia Limited and ABCI
Capital Limited satisfied the independence criteria applicable to sponsors set out in Rule 3A.07
of the Listing Rules.
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ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering
(together, the “ Syndicate Members ”) and their affiliates may each individually undertake a
variety of activities (as further described below) which do not form part of the underwriting or
stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments of our Group
and/or persons and entities with relationships with our Group and may also include swaps and
other financial instruments entered into for hedging purposes in connection with our Group’s
loans and other debts.
In relation to the Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of the Shares, entering into transactions with
those buyers and sellers in a principal capacity, including as a lender to initial purchasers of
the Shares (which financing may be secured by the Shares) in the Global Offering, proprietary
trading in the Shares, and entering into over the counter or listed derivative transactions or
listed or unlisted securities transactions (including issuing securities such as derivative
warrants listed on a stock exchange) which have as their underlying assets, assets including the
Shares. Such transactions may be carried out as bilateral agreements or trades with selected
counterparties. Those activities may require hedging activity by those entities involving,
directly or indirectly, the buying and selling of the Shares, which may have a negative impact
on the trading price of the Shares. All such activities could occur in Hong Kong and elsewhere
in the world and may result in the Syndicate Members and their affiliates holding long and/or
short positions in the Shares, in baskets of securities or indices including the Shares, in units
of funds that may purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by the Syndicate Members or their affiliates of any listed securities
having the Shares as their underlying securities, whether on the Stock Exchange or on any
other stock exchange, the rules of the stock exchange may require the issuer of those securities
(or one of its affiliates or agents) to act as a market maker or liquidity provider in the security,
which will also result in hedging activity in the Shares in most cases.
All such activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering”. Such activities may affect
the market price or value of the Shares, the liquidity or trading volume in the Shares and the
volatility of the price of the Shares, and the extent to which this occurs from day to day cannot
be estimated.
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It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or any person acting for
it) may not, in connection with the distribution of the Offer Shares, effect any
transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares), whether in the open market or otherwise,
with a view to stabilizing or maintaining the market price of any of the Offer Shares
at levels other than those which might otherwise prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the provisions
prohibiting insider dealing, false trading, price rigging and stock market
manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from time
to time, and expect to provide in the future, investment banking and other services to us and
our affiliates for which such Syndicate Members or their respective affiliates have received or
will receive customary fees and commissions.
In addition, the Syndicate Members or their respective affiliates may provide financing to
investors to finance their subscriptions of Offer Shares in the Global Offering.
UNDERWRITING
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part
of the Global Offering. Citigroup Global Markets Asia Limited, ABCI Capital Limited and
Essence International Securities (Hong Kong) Limited are the Overall Coordinators of the
Global Offering.
The listing of the Shares on the Stock Exchange is sponsored by the Joint Sponsors. The
Joint Sponsors have made an application on behalf of our Company to the Listing Committee
for the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned
in this prospectus.
23,800,000 Offer Shares will initially be made available (subject to the Over-allotment
Option) under the Global Offering comprising:
(i) the Hong Kong Public Offering of initially 2,380,000 Offer Shares (subject to
reallocation) in Hong Kong as described in the subsection headed “—The Hong
Kong Public Offering” below; and
(ii) the International Offering of initially 21,420,000 Offer Shares (subject to
reallocation and the Over-allotment Option) (a) outside the United States (including
to professional and institutional investors within Hong Kong) in offshore
transactions in accordance with Regulation S and (b) in the United States solely to
QIBs in reliance on an exemption from registration under the U.S. Securities Act
provided by, and in accordance with the restrictions of, Rule 144A or another
exemption from, or in a transaction not subject to, the registration requirements of
the U.S. Securities Act, as described in the subsection headed “—The International
Offering” below.
Investors may either:
(i) apply for Hong Kong Offer Shares under the Hong Kong Public Offering; or
(ii) apply for or indicate an interest for International Offer Shares under the
International Offering,
but may not do both.
The Offer Shares will represent approximately 1.78% of the issued share capital of our
Company immediately following the completion of the Global Offering, assuming the
Over-allotment Option is not exercised. If the Over-allotment Option is exercised in full, the
Offer Shares will represent approximately 2.04% of our enlarged issued share capital
immediately following the completion of the Global Offering.
References in this prospectus to applications, application monies or the procedures for
applications relate solely to the Hong Kong Public Offering.
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THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
Our Company is initially offering 2,380,000 Offer Shares (subject to reallocation) for
subscription by the public in Hong Kong at the Offer Price, representing approximately 10%
of the Offer Shares initially available under the Global Offering. The Offer Shares initially
offered under the Hong Kong Public Offering, subject to any reallocation of Offer Shares
between the International Offering and the Hong Kong Public Offering, will represent
approximately 0.18% of the total issued share capital of our Company immediately following
the completion of the Global Offering (assuming that the Over-allotment Option is not
exercised).
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to professional and institutional investors. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities that regularly invest in shares and other
securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in the
subsection headed “—Conditions of the Global Offering” below.
Allocation
Allocation of Offer Shares to investors under the Hong Kong Public Offering will be
based solely on the level of valid applications received under the Hong Kong Public Offering.
The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly
applied for by applicants. Such allocation could, where appropriate, consist of balloting, which
could mean that some applicants may receive a higher allocation than others who have applied
for the same number of Hong Kong Offer Shares, and those applicants who are not successful
in the ballot may not receive any Hong Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available under
the Hong Kong Public Offering (after taking into account any reallocation referred to below)
will be divided equally (to the nearest board lot) into two pools (with any odd lots being
allocated to pool A): pool A and pool B. The Hong Kong Offer Shares in pool A will be
allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares
with an aggregate price of HK$5 million (excluding the brokerage, the SFC transaction levy,
AFRC transaction levy and the Stock Exchange trading fee payable) or less. The Hong Kong
Offer Shares in pool B will be allocated on an equitable basis to applicants who have applied
for Hong Kong Offer Shares with an aggregate price of more than HK$5 million (excluding the
brokerage, the SFC transaction levy, AFRC transaction levy and the Stock Exchange trading
fee payable) and up to the total value in pool B.
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Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If any Hong Kong Offer Shares in one (but not both) of the
pools are unsubscribed, such Hong Kong Offer Shares will be transferred to the other pool to
satisfy demand in that other pool and be allocated accordingly. For the purpose of the
immediately preceding paragraph only, the “price” for Hong Kong Offer Shares means the
price payable on application therefor (without regard to the Offer Price as finally determined).
Applicants can only receive an allocation of Hong Kong Offer Shares from either pool A or
pool B and not from both pools. Multiple or suspected multiple applications under the Hong
Kong Public Offering and any application for more than 1,190,000 Hong Kong Offer Shares
is liable to be rejected.
Reallocation
The allocation of Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation under the Listing Rules. Paragraph 4.2 of
Practice Note 18 to the Listing Rules requires a clawback mechanism to be put in place, which
would have the effect of increasing the number of Hong Kong Offer Shares to certain
percentages of the total number of Offer Shares to be offered in the Global Offering if certain
prescribed total demand levels in the Hong Kong Public Offering are reached as further
described below:
 2,380,000 Offer Shares are initially available under the Hong Kong Public Offering,
representing approximately 10% of the Offer Shares initially available under the
Global Offering;
in the event that the International Offer Shares are fully subscribed or over-subscribed:
 if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 15 times or more but less than 50 times the number of Offer
Shares initially available under the Hong Kong Public Offering, then Offer Shares
will be reallocated to the Hong Kong Public Offering from the International
Offering, so that the total number of Offer Shares available under the Hong Kong
Public Offering will be 7,140,000 Offer Shares, representing approximately 30% of
the Offer Shares initially available under the Global Offering;
 if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 50 times or more but less than 100 times the number of Offer
Shares initially available under the Hong Kong Public Offering, then Offer Shares
will be reallocated to the Hong Kong Public Offering from the International
Offering, so that the total number of Offer Shares available under the Hong Kong
Public Offering will be 9,520,000 Offer Shares, representing approximately 40% of
the Offer Shares initially available under the Global Offering; and
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 if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents 100 times or more the number of Offer Shares initially available
under the Hong Kong Public Offering, then Offer Shares will be reallocated to the
Hong Kong Public Offering from the International Offering, so that the total number
of Offer Shares available under the Hong Kong Public Offering will be 11,900,000
Offer Shares, representing approximately 50% of the Offer Shares initially available
under the Global Offering.
The Offer Shares to be offered under the Hong Kong Public Offering and the International
Offering may also, in certain circumstances, be reallocated as between these offerings at the
discretion of the Overall Coordinators (for themselves and on behalf of the Underwriters).
Subject to the following paragraph, the Overall Coordinators may at their discretion reallocate
Offer Shares from the International Offering to the Hong Kong Public Offering to satisfy valid
applications under the Hong Kong Public Offering. In addition, if the Hong Kong Offer Shares
are not fully subscribed, the Overall Coordinators (for themselves and on behalf of the
Underwriters) have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares
to the International Offering, in such proportions as the Overall Coordinators deem
appropriate.
In the event that (i) the International Offer Shares are not fully subscribed and the Hong
Kong Offer Shares are fully subscribed or oversubscribed irrespective of the number of times;
or (ii) the International Offer Shares are fully subscribed or oversubscribed and the Hong Kong
Offer Shares are fully subscribed or over-subscribed with the number of Offer Shares validly
applied for under the Hong Kong Public Offering representing less than 15 times the number
of Offer Shares initially available under the Hong Kong Public Offering, the Overall
Coordinators have the authority to reallocate International Offer Shares originally included in
the International Offering to the Hong Kong Public Offering in such number as they deem
appropriate, provided that the total number of Offer Shares available under the Hong Kong
Public Offering following such reallocation shall not exceed 4,760,000 Offer Shares,
representing twice the Offer Shares initially available under the Hong Kong Public Offering,
and the Offer Price shall be fixed at the low-end of the indicative Offer Price range (i.e.
HK$7.60 per Offer Share) stated in this prospectus.
Details of any reallocation of Offer Shares between the Hong Kong Public Offering and
the International Offering will be disclosed in the results announcement of the Global Offering,
which is expected to be published on Monday, July 8, 2024 .
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Applications
Each applicant under the Hong Kong Public Offering will be required to give an
undertaking and confirmation in the application submitted by him/her/it that he/she/it and any
person(s) for whose benefit he/she/it is making the application has not applied for or taken up,
or indicated an interest for, and will not apply for or take up, or indicate an interest for, any
International Offer Shares under the International Offering. Such applicant’s application is
liable to be rejected if such undertaking and/or confirmation is/are breached and/or untrue (as
the case may be) or if he/she/it has been or will be placed or allocated International Offer
Shares under the International Offering.
Applicants under the Hong Kong Public Offering may (depending on application
channels) be required to pay, on application, the maximum Offer Price of HK$8.36 per Offer
Share in addition to brokerage of 1%, SFC transaction levy of 0.0027%, AFRC transaction levy
of 0.00015% and the Stock Exchange trading fee of 0.00565%, amounting to a total of
HK$4,222.16 for one board lot of 500 Shares. If an application is revoked, rejected, not
accepted or accepted in part only, or if the Offer Price as finally determined in the manner
described in “—Pricing and Allocation” below is less than the maximum Offer Price of
HK$8.36 per Offer Share, or if the conditions of the Global Offering as set out in
“—Conditions of the Global Offering” are not satisfied, appropriate refund payments
(including brokerage, SFC transaction levy, AFRC transaction levy and the Stock Exchange
trading fee attributable to the surplus application monies) will be made to the relevant
applicants, without interest. See the section headed “How to Apply for Hong Kong Offer
Shares.”
THE INTERNATIONAL OFFERING
Number of Offer Shares initially offered
Subject to reallocation as described above and the Over-allotment Option, the
International Offering will consist of an offering of initially 21,420,000 Offer Shares,
representing approximately 90% of the Offer Shares initially available under the Global
Offering. The number of Offer Shares initially offered under the International Offering, subject
to any reallocation of Offer Shares between the International Offering and the Hong Kong
Public Offering, will represent approximately 1.60% of our enlarged issued share capital
immediately following the completion of the Global Offering (assuming the Over-allotment
Option is not exercised).
Allocation
The International Offering will include selective marketing of Offer Shares to QIBs in the
United States in accordance with Rule 144A as well as professional and institutional investors
and other investors anticipated to have a sizeable demand for such Offer Shares in Hong Kong
and other jurisdictions outside the United States in reliance on Regulation S. Professional
investors generally include brokers, dealers, companies (including fund managers) whose
STRUCTURE OF THE GLOBAL OFFERING
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ordinary business involves dealing in shares and other securities and corporate entities that
regularly invest in shares and other securities. Allocation of Offer Shares pursuant to the
International Offering will be effected in accordance with the “book-building” process
described in the subsection headed “—Pricing and Allocation” below and based on a number
of factors, including the level and timing of demand, the total size of the relevant investor’s
invested assets or equity assets in the relevant sector and whether or not it is expected that the
relevant investor is likely to buy further Offer Shares, and/or hold or sell its Offer Shares, after
the Listing. Such allocation is intended to result in a distribution of the Offer Shares on a basis
which would lead to the establishment of a solid professional and institutional shareholder base
to the benefit of our Group and the Shareholders as a whole.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may require
any investor who has been offered Offer Shares under the International Offering and who has
made an application under the Hong Kong Public Offering to provide sufficient information to
the Overall Coordinators so as to allow them to identify the relevant applications under the
Hong Kong Public Offering and to ensure that they are excluded from any allocation of Offer
Shares under the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued or sold pursuant to the International
Offering may change as a result of reallocation as described in “—The Hong Kong Public
Offering—Reallocation” above and/or the exercise of the Over-allotment Option in whole or
in part.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, our Company is expected to grant the
Over-allotment Option to the International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the International Underwriters will have the right,
exercisable by the Overall Coordinators (for themselves and on behalf of the International
Underwriters) at any time from the Listing Date until 30 days after the last day for lodging
applications under the Hong Kong Public Offering, to require our Company to allot and issue
up to an aggregate of 3,570,000 additional Shares, representing not more than 15% of the Offer
Shares initially available under the Global Offering, at the Offer Price to, among other things,
cover over-allocations in the International Offering, if any.
If the Over-allotment Option is exercised in full, the additional Offer Shares to be issued
pursuant thereto will represent approximately 0.27% of the enlarged issued share capital
immediately following the completion of the Global Offering and the full exercise of the
Over-allotment Option. If the Over-allotment Option is exercised, an announcement will be
made.
STRUCTURE OF THE GLOBAL OFFERING
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STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the
distribution of securities. To stabilize, the underwriters may bid for, or purchase, the securities
in the secondary market, during a specified period of time, to retard and, if possible, prevent
a decline in the market price of the securities below the offer price. Such transactions may be
effected in jurisdictions where it is permissible to do so, in each case in compliance with all
applicable laws and regulatory requirements. In Hong Kong, the price at which stabilization is
effected is not permitted to exceed the offer price.
In connection with the Global Offering, the Stabilizing Manager or any person acting for
it may make purchases, over-allocate or effect transactions in the market or otherwise take such
stabilizing action(s) with a view to stabilizing or supporting the market price of the Shares at
a level higher than that which might otherwise prevail for a limited period after the Listing
Date. Any such stabilizing action will be effected in compliance with all applicable laws and
regulatory requirements, including the Securities and Futures (Price Stabilizing) Rules under
the SFO. However, there is no obligation on the Stabilizing Manager or any person acting for
it to conduct any such stabilizing action. Such stabilizing action, if taken, (i) will be conducted
at the absolute discretion of the Stabilizing Manager or any person acting for it, (ii) may be
discontinued at any time and (iii) is required to be brought to an end within 30 days after the
last day for lodging applications under the Hong Kong Public Offering.
Stabilizing action permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilizing) Rules of the SFO includes (i) over-allocating for the purpose of preventing or
minimizing any reduction in the market price of the Shares, (ii) selling or agreeing to sell the
Shares so as to establish a short position in them for the purpose of preventing or minimizing
any reduction in the market price of the Shares, (iii) purchasing or subscribing for or agreeing
to purchase or subscribe for the Shares pursuant to the Over-allotment Option in order to close
out any position established under (i) or (ii) above, (iv) purchasing or agreeing to purchase any
of the Shares for the sole purpose of preventing or minimizing any reduction in the market
price of the Shares, (v) selling or agreeing to sell any Shares in order to liquidate any position
established as a result of those purchases and (vi) offering or attempting to do anything as
described in (ii), (iii), (iv) or (v) above.
Specifically, prospective applicants for and investors in the Offer Shares should note that:
 the Stabilizing Manager or any person acting for it may, in connection with the
stabilizing action, maintain a long position in the Shares;
 there is no certainty as to the extent to which and the time or period for which the
Stabilizing Manager or any person acting for it will maintain such a long position;
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 liquidation of any such long position by the Stabilizing Manager or any person
acting for it and selling in the open market, may have an adverse impact on the
market price of the Shares;
 no stabilizing action can be taken to support the price of the Shares for longer than
the stabilization period, which will begin on the Listing Date, and is expected to
expire on Saturday, August 3, 2024 , being the 30th day after the last day for
lodging applications under the Hong Kong Public Offering. After this date, when no
further stabilizing action may be taken, demand for the Shares, and therefore the
price of the Shares, could fall;
 the price of the Shares cannot be assured to stay at or above the Offer Price by the
taking of any stabilizing action; and
 stabilizing bids or transactions effected in the course of the stabilizing action may
be made at any price at or below the Offer Price and can, therefore, be done at a
price below the price paid by applicants for, or investors in, the Offer Shares.
Our Company will ensure or procure that an announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of
the expiration of the stabilization period.
Over-allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager or any person acting for it may cover such over-allocations by exercising
the Over-allotment Option in full or in part, by using Shares purchased by the Stabilizing
Manager or any person acting for it in the secondary market at prices that do not exceed the
Offer Price or through the Stock Borrowing Agreement or by a combination of these means.
STOCK BORROWING AGREEMENT
In order to facilitate the settlement of over-allocations, if any, in connection with the
Global Offering, the Stabilizing Manager or any person acting for it may choose to borrow up
to 3,570,000 Shares (being the maximum number of Shares which may be issued pursuant to
the exercise of the Over-allotment Option) from Celaeno Group Limited, pursuant to the Stock
Borrowing Agreement, which is expected to be entered into between the Stabilizing Manager
or any person acting for it and Celaeno Group Limited on or around the Price Determination
Date.
If the Stock Borrowing Agreement is entered into, the borrowing of Shares will only be
effected by the Stabilizing Manager or any person acting for it for the sole purpose of covering
any short position prior to the exercise of the Over-allotment Option, in connection with
over-allocations in the International Offering.
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The same number of Shares so borrowed must be re-delivered to Celaeno Group Limited
on or before the third business day following the earlier of (a) the last day on which the
Over-allotment Option may be exercised, (b) the day on which the Over-allotment Option is
exercised in full and all relevant Shares have been issued and allotted by the Company, or (c)
such earlier time as the Stabilizing Manager or any person acting for it and Celaeno Group
Limited may from time to time agree in writing.
The stock borrowing arrangement described above will be effected in compliance with all
applicable laws, rules and regulatory requirements. No payment will be made to Celaeno Group
Limited by the Stabilizing Manager or any person acting for it in relation to such stock
borrowing arrangement.
PRICING AND ALLOCATION
Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or about
Friday, July 5, 2024 , by agreement between the Overall Coordinators (for themselves and on
behalf of the Underwriters) and our Company, and the number of Offer Shares to be allocated
under the various offerings will be determined shortly thereafter.
The Offer Price will not be more than HK$8.36 per Offer Share and is expected to be not
less than HK$7.60 per Offer Share, unless otherwise announced by our Company no later than
the morning of the last day for lodging applications under the Hong Kong Public Offering, as
further explained below.
The International Underwriters will be soliciting from prospective investors indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building,” is expected to continue up to, and to
cease on or about, the last day for lodging applications under the Hong Kong Public Offering.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, where
they deem appropriate, based on the level of interest expressed by prospective investors during
the book-building process, and with the consent of our Company, reduce the number of Offer
Shares and/or the indicative Offer Price range below that stated in this prospectus at any time
in or prior to the morning of the last day for lodging applications under the Hong Kong Public
Offering. In such case, our Company will, as soon as practicable following the decision to
make such reduction, and in any event not later than the morning of the last day for lodging
applications under the Hong Kong Public Offering, cause to be published on the website of the
Stock Exchange at www.hkexnews.hk and our website at investors.jianke.com notices of the
reduction in the number of Offer Shares and/or the indicative Offer Price range, the
cancellation of the Global Offering and the relaunch of the offering at the revised number of
Offer Shares and/or indicative Offer Price range. Our Company will also, as soon as practicable
following the decision to make such reduction, issue a supplemental or new prospectus
updating investors of the reduction in the number of Offer Shares and/or the indicative Offer
Price range, and giving investors at least three business days to consider the new information.
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The supplemental or new prospectus shall include at least the following: updated (a) indicative
Offer Price range and market capitalization; (b) listing timetable and underwriting obligations;
(c) price/earnings multiple (if applicable), unaudited pro forma and adjusted net tangible
assets; and (d) use of proceeds and working capital adequacy confirmation based on revised
estimated proceeds. In the event of a reduction in the number of Offer Shares, the Overall
Coordinators may also at their discretion reallocate the number of Offer Shares to be offered
under the Hong Kong Public Offering and the International Offering, provided that the number
of Offer Shares offered under the Hong Kong Public Offering shall not be less than 10% of the
Offer Shares available under the Global Offering (without taking into account any additional
Shares that may be issued pursuant to the Over-allotment Option).
In the absence of any such supplemental or new prospectus so published, the number of
Offer Shares will not be reduced and the Offer Price, if agreed upon by the Overall
Coordinators (for themselves and on behalf of the Underwriters) and our Company, will under
no circumstances be set outside the indicative Offer Price range as stated in this prospectus.
If there is any change to the offer size due to change in the number of Offer Shares
initially offered under the Global Offering (other than pursuant to the exercise of the
Over-allotment Option and/or the reallocation mechanism as disclosed in this prospectus), or
if the Offer Price falls outside the indicative Offer Price range as stated in this prospectus, or
if our Company becomes aware that there has been a significant change affecting any matter
contained in this prospectus or a significant new matter has arisen, the inclusion of information
in respect of which would have been required to be in this prospectus if it had arisen before
this prospectus was issued, after the issue of this prospectus and before the commencement of
dealings in our Shares as prescribed under Rule 11.13 of the Listing Rules, we are required to
cancel the Global Offering, issue a supplemental or new prospectus, and relaunch the offering
on FINI pursuant to the supplemental or new prospectus.
The final Offer Price, the level of applications in the Hong Kong Public Offering, the
level of indications of interest in the International Offering and the basis of allocation of the
Hong Kong Offer Shares are expected to be announced on Monday, July 8, 2024 on the
website of the Stock Exchange at www.hkexnews.hk and our website at investors.jianke.com .
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms and conditions of the Hong Kong Underwriting Agreement and is conditional
upon the International Underwriting Agreement being signed and becoming unconditional and
is subject to, among other things, our Company and the Overall Coordinators (for themselves
and on behalf of the Underwriters) agreeing on the Offer Price.
Our Company and the Controlling Shareholders expect to enter into the International
Underwriting Agreement relating to the International Offering on or about the Price
Determination Date. These underwriting arrangements, including the Underwriting
Agreements, are summarized in the section headed “Underwriting.”
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CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares will be conditional on:
(i) the Listing Committee granting approval for the listing of, and permission to deal in,
the Shares in issue and to be issued pursuant to the Global Offering (including the
additional Shares which may be issued pursuant to the exercise of the Over-
allotment Option) on the Main Board of the Stock Exchange, and such approval and
permission not subsequently having been withdrawn or revoked prior to the
commencement of dealings in the Shares on the Stock Exchange;
(ii) the Offer Price having been agreed between our Company and the Overall
Coordinators (for themselves and on behalf of the Underwriters);
(iii) the execution and delivery of the International Underwriting Agreement on or about
the Price Determination Date; and
(iv) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting
Agreement and the obligations of the International Underwriters under the
International Underwriting Agreement becoming and remaining unconditional and
not having been terminated in accordance with the terms of the respective
agreements.
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times) and, in any event, not later than the date which is 30 days after the date of
this prospectus.
If, for any reason, the Offer Price is not agreed between us and the Overall Coordinators
(for themselves and on behalf of the Underwriters) by 12:00 noon on Friday, July 5, 2024 , the
Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming unconditional
and not having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the dates and times specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of
the lapse of the Hong Kong Public Offering will be published on the websites of the Stock
Exchange at www.hkexnews.hk and our Company at investors.jianke.com on the next day
following such lapse. In such a situation, all application monies will be returned, without
interest, on the terms set out in “How to Apply for Hong Kong Offer Shares—D.
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Dispatch/Collection of Share Certificates and Refund of Application Monies.” In the
meantime, all application monies will be held in separate bank account(s) with the receiving
bank or other bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the
Laws of Hong Kong).
Share certificates for the Offer Shares will only become valid evidence of title at 8:00
a.m. on the Listing Date, which is expected to be Tuesday, July 9, 2024 (Hong Kong time),
provided that the Global Offering has become unconditional in all respects and the right of
termination described in “Underwriting—Underwriting Arrangements and Expenses—Hong
Kong Public Offering—Grounds for Termination” has not been exercised. Investors who trade
Shares prior to the receipt of Share certificates or prior to the Share certificates becoming valid
evidence of title do so entirely at their own risk.
DEALING
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. on Tuesday, July 9, 2024 (Hong Kong time), dealings in the Shares on the Stock
Exchange are expected to commence at 9:00 a.m. on Tuesday, July 9, 2024 (Hong Kong time).
The Shares will be traded in board lots of 500 Shares each. The stock code of the Shares will
be 6086.
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IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under “HKEXnews > New Listings > New Listing Information” and
our website at investors.jianke.com .
The contents of this prospectus are identical to the prospectus as registered with the
Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you
are applying:
 are 18 years of age or older;
 have a Hong Kong address (for the White Form eIPO service only); and
 are outside the United States, and are not a United States Person (as defined in
Regulation S under the U.S. Securities Act).
Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares
if you or the person(s) for whose benefit you are applying:
 are an existing Shareholder or a Director;
 are a close associate of any of the above;
 are a core connected person (as defined in the Listing Rules) of the Company or will
become a core connected person of the Company immediately upon completion of
the Global Offering; or
 have been allocated or have applied for any International Offer Shares or otherwise
participated in the International Offering.
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2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Friday, June 28,
2024 and end at 12:00 noon on Thursday, July 4, 2024 (Hong Kong time).
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application Channel Platform Target Investors Application Time
White Form eIPO
service
www.eipo.com.hk
Enquiries: +852 2862
8600
Friday, June 28, 2024 –
9:00 a.m. to 6:00 p.m.
Tuesday, July 2, 2024 –
9:00 a.m. to 6:00 p.m.
Wednesday, July 3, 2024
– 9:00 a.m. to 6:00 p.m.
Thursday, July 4, 2024 –
9:00 a.m. to 12:00 noon
Investors who would
like to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in your own
name.
From 9:00 a.m. on
Friday, June 28, 2024
to 11:30 a.m. on
Thursday, July 4, 2024
(Hong Kong time).
The latest time for
completing full payment
of application monies
will be 12:00 noon on
Thursday, July 4, 2024
(Hong Kong time).
HKSCC EIPO
channel
Y our broker or custodian
who is a HKSCC
Participant will submit
an EIPO application on
your behalf through
HKSCC’s FINI system
in accordance with your
instructions.
Investors who would not
like to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the earliest
and latest time for giving
such instructions, as this
may vary by broker or
custodian.
The White Form eIPO service and the HKSCC EIPO channel are facilities subject to
capacity limitations and potential service interruptions, and you are advised not to wait until
the last day for applications to apply for Hong Kong Offer Shares.
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For those applying through the White Form eIPO service, once you complete payment
in respect of any application instruction given by you or for your benefit through the White
Form eIPO service to make an application for Hong Kong Offer Shares, an actual application
shall be deemed to have been made. If you are a person for whose benefit the application
instructions are given, you shall be deemed to have declared that only one set of application
instructions has been given for your benefit. If you are an agent for another person, you shall
be deemed to have declared that you have only given one set of application instructions for the
benefit of the person for whom you are an agent and that you are duly authorized to give those
instructions as an agent.
For the avoidance of doubt, giving an application instruction under the White Form eIPO
service more than once and obtaining different application reference numbers without effecting
full payment in respect of a particular reference number will not constitute an actual
application.
If you apply through the White Form eIPO service, you are deemed to have authorized
the White Form eIPO Service Provider to apply on the terms and conditions in this
prospectus, as supplemented and amended by the terms and conditions of the White Form
eIPO service.
By instructing your broker or custodian to apply for Hong Kong Offer Shares on your
behalf through the HKSCC EIPO channel, you (and, if you are joint applicants, each of you
jointly and severally) are deemed to have instructed and authorized HKSCC to cause HKSCC
Nominees (acting as nominee for the relevant HKSCC Participants) to apply for Hong Kong
Offer Shares on your behalf and to do on your behalf all the things stated in this prospectus
and any supplement to it.
For those applying through the HKSCC EIPO channel, an actual application will be
deemed to have been made for any application instruction given by you or for your benefit to
HKSCC (in which case an application will be made by HKSCC Nominees on your behalf)
provided such application instruction has not been withdrawn or otherwise invalidated before
the closing time of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken by
HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or for any
breach of the terms and conditions of this prospectus.
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3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual/Joint Applicants For Corporate Applicants
 Full name(s) (2) as shown on your
identity document
 Identity document’s issuing country
or jurisdiction
 Identity document type, with order of
priority:
i. Hong Kong identity card
(“HKID ”); or
ii. National identification
document; or
iii. Passport
 Identity document number
 Full name(s) (2) as shown on your
identity document
 Identity document’s issuing country
or jurisdiction
 Identity document type, with order of
priority:
i. Legal Entity Identifier (“ LEI”)
registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate;
or
iv. Other equivalent document
 Identity document number
Notes:
(1) If you are applying through the White Form eIPO service, you are required to provide a valid e-mail
address, a contact telephone number and a Hong Kong address. Y ou are also required to declare that the
identity information provided by you follows the requirements as described in Note 2 below. In
particular, where you cannot provide a HKID number, you must confirm that you do not hold a HKID.
(2) The applicant’s full name as shown on their identity document must be used. If an applicant’s identity
document contains both English and Chinese names, both English and Chinese names must be used.
Otherwise, either English or Chinese name will be accepted. The order of priority of the applicant’s
identity document type must be strictly followed and where an individual applicant has a valid HKID,
the HKID number must be used when making an application for Hong Kong Offer Shares. Similarly, for
corporate applicants, a LEI number must be used if an entity has a LEI certificate.
(3) If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above, will
be required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID
of the asset management company or the individual fund, as appropriate, which has opened a trading
account with the broker will be required, as above.
(4) The maximum number of joint applicants holders on FINI is capped at 4 in accordance with market
practice.
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(5) If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type; and (ii)
the identity document number, for each of the beneficial owners or, in the case(s) of joint beneficial
owners, for each of the joint beneficial owners. If you do not include this information, the application
will be treated as being made for your benefit.
(6) If an application is made by an unlisted company and (i) the principal business of that company is
dealing in securities; and (ii) you exercise statutory control over that company, then the application will
be treated as being for your benefit and you should provide the required information in your application
as stated above.
“Unlisted company ” means a company with no equity securities listed on the Stock Exchange or any
other stock exchange.
“Statutory control ” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it which
carries no right to participate beyond a specified amount in a distribution of either profits or
capital).
For those applying through the HKSCC EIPO channel and making an application under
a power of attorney, the Overall Coordinators may accept it at their discretion and on any
conditions they think fit, including evidence of the attorney’s authority.
Failing to provide any required information may result in your application being rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 500 Shares
Permitted number of
Hong Kong Offer
Shares for
application and
amount payable on
application/successful
allotment
: Hong Kong Offer Shares are available for application in
specified board lot sizes only. Please refer to the amount
payable associated with each specified board lot size in
the table below.
The maximum Offer Price is HK$8.36 per Offer Share,
plus brokerage of 1%, SFC transaction levy of 0.0027%,
AFRC transaction levy of 0.00015% and the Stock
Exchange trading fee of 0.00565%.
If you are applying through the White Form eIPO
service, you may refer to the table below for the amount
payable for the number of Shares you have selected.
Y ou must pay the respective maximum amount payable
on application in full upon application for Hong Kong
Offer Shares.
If you are applying through the HKSCC EIPO channel,
you are required to pre-fund your application based on
the amount specified by your broker or custodian, as
determined based on the applicable laws and regulations
in Hong Kong.
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By instructing your broker or custodian to apply for
Hong Kong Offer Shares on your behalf through the
HKSCC EIPO channel, you (and, if you are joint
applicants, each of you jointly and severally) are
deemed to have instructed and authorized HKSCC to
cause HKSCC Nominees (acting as nominee for the
relevant HKSCC Participants) to arrange payment of the
final Offer Price, brokerage, SFC transaction levy,
AFRC transaction levy and the Stock Exchange trading
fee by debiting the relevant nominee bank account at the
designated bank for your broker or custodian.
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of Hong
Kong Offer
Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
500 4,222.16 6,000 50,665.86 40,000 337,772.42 400,000 3,377,724.25
1,000 8,444.31 7,000 59,110.18 45,000 379,993.98 500,000 4,222,155.30
1,500 12,666.47 8,000 67,554.49 50,000 422,215.54 600,000 5,066,586.35
2,000 16,888.62 9,000 75,998.79 60,000 506,658.63 700,000 5,911,017.42
2,500 21,110.77 10,000 84,443.11 70,000 591,101.74 800,000 6,755,448.48
3,000 25,332.94 15,000 126,664.67 80,000 675,544.85 900,000 7,599,879.55
3,500 29,555.08 20,000 168,886.21 90,000 759,987.95 1,000,000 8,444,310.60
4,000 33,777.24 25,000 211,107.76 100,000 844,431.05 1,190,000
(1) 10,048,729.61
4,500 37,999.41 30,000 253,329.32 200,000 1,688,862.12
5,000 42,221.55 35,000 295,550.87 300,000 2,533,293.18
Notes:
(1) The maximum number of Hong Kong Offer Shares you may apply for, which is 50% of the Offer Shares
initially available for subscription under the Hong Kong Public Offering.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, AFRC transaction levy and the Stock
Exchange trading fee. If your application is successful, the brokerage will be paid to the Exchange Participants
and the SFC transaction levy, the AFRC transaction levy and the Stock Exchange trading fee will be paid to
the Stock Exchange (in the case of the SFC transaction levy and the AFRC transaction levy, collected by the
Stock Exchange on behalf of the SFC and the AFRC, respectively).
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5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying investor
in your application as required under “—A. Application for Hong Kong Offer Shares—3.
Information Required to Apply” above. If you are suspected of submitting or causing to be
submitted more than one application, all of your applications will be rejected.
Multiple applications made either through (i) the White Form eIPO service, (ii) the
HKSCC EIPO channel or (iii) both channels concurrently are prohibited and will be rejected.
If you have made an application through the White Form eIPO service or the HKSCC EIPO
channel, you or the person(s) for whose benefit you have made the application shall not apply
for any International Offer Shares.
6. Terms and Conditions of an Application
By applying for Hong Kong Offer Shares through the White Form eIPO service or the
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following
things on your behalf):
(i) undertake to execute all relevant documents and instruct and authorize us and/or the
Overall Coordinators (or their agents or nominees), as our agents, to execute any
documents for you and to do on your behalf all things necessary to register any Hong
Kong Offer Shares allocated to you in your name or in the name of HKSCC
Nominees as required by the Articles of Association, and (if you are applying
through the HKSCC EIPO channel) to deposit the allotted Hong Kong Offer Shares
directly into CCASS for the credit of your designated HKSCC Participant’s stock
account on your behalf;
(ii) confirm that you have read and understood the terms and conditions and application
procedures set out in this prospectus and the designated website of the White Form
eIPO service (or as the case may be, the agreement you entered into with your
broker or custodian), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker or
custodian and HKSCC and observe the General Rules of HKSCC and the HKSCC
Operational Procedures for giving application instructions to apply for Hong Kong
Offer Shares;
(iv) confirm that you are aware of the restrictions on the Hong Kong Public Offering set
out in this prospectus and they do not apply to you or the person(s) for whose benefit
you have made the application;
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(v) confirm that you have read this prospectus and any supplement to it, and have relied
only on the information and representations contained therein in making your
application (or as the case may be, causing your application to be made), and will
not rely on any other information or representations;
(vi) agree that we, the Joint Sponsors, the Sponsor-Overall Coordinators, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Underwriters, the Capital Market Intermediaries, our and their
respective directors, officers, employees, partners, agents, advisors and other parties
involved in the Global Offering (the “ Relevant Persons ”), the Hong Kong Share
Registrar, the White Form eIPO Service Provider and HKSCC will not be liable for
any information and representations not in this prospectus and any supplement to it;
(vii) undertake and confirm that you or the person(s) for whose benefit you have made
the application have not applied for or taken up, or indicated an interest in, and will
not apply for or take up, or indicate an interest in, any International Offer Shares nor
participated in the International Offering;
(viii) agree to disclose the details of your application and your personal data and any other
personal data which may be required about you and the person(s) for whose benefit
you have made the application to us, the Relevant Persons, the Hong Kong Share
Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the SFC and any other
statutory regulatory or governmental bodies or otherwise as required by laws, rules
or regulations, for the purposes specified under “—G. Personal Data” below;
(ix) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
(x) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the Hong Kong Share
Registrar by way of publication of the results at the time and in the manner as
specified in “—B. Publication of Results” below;
(xi) confirm that you are aware of the situations specified in “—C. Circumstances in
Which Y ou Will Not Be Allocated Hong Kong Offer Shares” below;
(xii) agree that your application or HKSCC Nominees’ application, any acceptance of it
and the resulting contract will be governed by and construed in accordance with the
laws of Hong Kong;
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(xiii) agree and warrant that you have complied with the Companies Ordinance, the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Cayman
Companies Act, the Memorandum and Articles of Association, and laws of any place
outside Hong Kong that apply to your application, and that neither we nor the
Relevant Persons will breach any law inside and/or outside Hong Kong as a result
of the acceptance of your offer to purchase, or any action arising from your rights
and obligations under the terms and conditions contained in this prospectus;
(xiv) represent, warrant and undertake that (a) you understand that the Hong Kong Offer
Shares have not been and will not be registered under the U.S. Securities Act; and
(b) you and the person(s) for whose benefit you have made the application are
outside the United States (as defined in Regulation S) or are a person described in
paragraph (h)(3) of Rule 902 of Regulation S;
(xv) confirm that (a) your application or HKSCC Nominees’ application on your behalf
is not financed directly or indirectly by the Company, any of the directors, chief
executives, substantial shareholder(s) or existing shareholder(s) of the Company or
any of its subsidiaries or any of their respective close associates; and (b) you are not
accustomed or will not be accustomed to taking instructions from the Company, any
of the directors, chief executives, substantial shareholder(s) or existing
shareholder(s) of the Company or any of its subsidiaries or any of their respective
close associates in relation to the acquisition, disposal, voting or other disposition
of the Shares registered in your name or otherwise held by you;
(xvi) warrant that the information you have provided is true and accurate;
(xvii) confirm that you understand that we and the Overall Coordinators will rely on your
declarations and representations in deciding whether or not to allocate any Hong
Kong Offer Shares to you, and that you may be prosecuted for making a false
declaration;
(xviii) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated
to you under the application;
(xix) authorize us to place your name(s) or the name of HKSCC Nominees on our register
of members as the holder(s) of any Hong Kong Offer Shares allocated to you and
such other registers as may be required under the Memorandum and Articles of
Association, and we and/or our agents to send any Share certificate(s) and/or any
White Form e-Refund payment instructions and/or any refund check(s) to you or
the first-named applicant for joint application to the address specified in your
application instructions by ordinary post at your own risk, unless you are eligible to
collect the Share certificate(s) and/or refund check(s) in person;
(xx) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
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(xxi) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving application instructions to
HKSCC directly or indirectly or through the White Form eIPO service or by you
or by anyone as your agent or by any other person; and
(xxii) (if you are making the application as an agent for the benefit of another person)
warrant that (a) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving application instructions to HKSCC and (b) you have due
authority to give application instructions on behalf of that other person as its agent.
B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through White Form eIPO service or HKSCC EIPO channel:
Website The designated results of allocation
website at www.iporesults.com.hk
(alternatively:
www.eipo.com.hk/eIPOAllotment ) with
a “search by ID” function.
24 hours, from 11:00 p.m. on
Monday, July 8, 2024 to
12:00 midnight on Sunday,
July 14, 2024 (Hong Kong
time).
The full list of (i) wholly or partially
successful applicants using the White
Form eIPO service and HKSCC EIPO
channel, and (ii) the number of Hong
Kong Offer Shares conditionally allotted
to them, among other things, will be
displayed on the “Allotment Results”
page of the White Form eIPO service at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment ).
The website of the Stock Exchange at
www.hkexnews.hk and our website at
investors.jianke.com , which will provide
links to the above-mentioned websites of
the Hong Kong Share Registrar.
By 11:00 p.m. on Monday,
July 8, 2024 (Hong Kong
time).
Telephone +852 2862 8555 Between 9:00 a.m. and 6:00
p.m. on Tuesday,
July 9, 2024,
Wednesday, July 10, 2024,
Thursday, July 11, 2024
and Friday, July 12, 2024
(Hong Kong time).
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For those applying through the HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m. on Friday, July 5, 2024 (Hong Kong time).
HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on
Friday, July 5, 2024 (Hong Kong time) on a 24-hour basis, and should report any
discrepancies on allotments to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the final Offer Price, the level of indications of interest in the
International Offering, the level of applications in the Hong Kong Public Offering and the basis
of allocation of the Hong Kong Offer Shares on the website of the Stock Exchange at
www.hkexnews.hk and our website at investors.jianke.com by no later than 11:00 p.m. on
Monday, July 8, 2024 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the Hong Kong Share Registrar and their respective agents
and nominees have full discretion to reject or accept any application, or to accept only part of
any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
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4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer to
“—A. Application for Hong Kong Offer Shares—5. Multiple Applications
Prohibited” above on what constitutes multiple applications;
 your application instruction is incomplete;
 your payment (or confirmation of funds, as the case may be) is not made correctly;
 the Underwriting Agreements do not become unconditional or are terminated; or
 the Company or the Overall Coordinators believe that by accepting your application,
it or they would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
designated bank before balloting. After balloting of Hong Kong Offer Shares, the receiving
bank will collect the portion of these funds required to settle each HKSCC Participant’s actual
Hong Kong Offer Share allotment from their designated bank.
There is a risk of money settlement failure. In the extreme event of money settlement
failure by a HKSCC Participant (or its designated bank), who is acting on your behalf in
settling payment for your allotted shares, HKSCC will contact the defaulting HKSCC
Participant and its designated bank to determine the cause of failure and request such
defaulting HKSCC Participant to rectify or procure to rectify the failure.
However, if it is determined that such settlement obligation cannot be met, the affected
Hong Kong Offer Shares will be reallocated to the International Offering. Hong Kong Offer
Shares applied for by you through the broker or custodian may be affected to the extent of the
settlement failure. In the extreme case, you will not be allocated any Hong Kong Offer Shares
due to the money settlement failure by such HKSCC Participant. None of us, the Relevant
Persons, the Hong Kong Share Registrar and HKSCC is or will be liable if Hong Kong Offer
Shares are not allocated to you due to the money settlement failure.
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D. DISPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou will receive one Share certificate for all Hong Kong Offer Shares allotted to you
under the Hong Kong Public Offering (except pursuant to applications made through the
HKSCC EIPO channel where the Share certificates will be deposited into CCASS as described
below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
The Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing
Date, which is expected to be Tuesday, July 9, 2024 (Hong Kong time), provided that the
Global Offering has become unconditional in all respects and the right of termination described
in “Underwriting—Underwriting Arrangements and Expenses—Hong Kong Public
Offering—Grounds for Termination” has not been exercised. Investors who trade Shares prior
to the receipt of Share certificates or prior to the Share certificates becoming valid evidence
of title do so entirely at their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
The following sets out the relevant procedures and time:
White Form eIPO service HKSCC EIPO channel
Dispatch/collection of Share certificate
For physical Share
certificate(s) of
1,000,000 Offer
Shares or more
issued under your
own name
Collection in person from the
Hong Kong Share Registrar,
Computershare Hong Kong
Investor Services Limited at Shops
1712-1716, 17th Floor, Hopewell
Centre, 183 Queen’s Road East,
Wan Chai, Hong Kong.
Time: from 9:00 a.m. to 1:00 p.m.
on Tuesday, July 9, 2024 (Hong
Kong time)
Share certificate(s) will
be issued in the name of
HKSCC Nominees,
deposited into CCASS
and credited to your
designated HKSCC
Participant’s stock
account.
No action by you is
required.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 458 –


--- page 468 ---
White Form eIPO service HKSCC EIPO channel
If you are an individual, you must
not authorize any other person to
collect for you. If you are a
corporate applicant, your
authorized representative must
bear a letter of authorization from
your corporation stamped with
your corporation’s chop.
Both individuals and authorized
representatives must produce, at
the time of collection, evidence of
identity acceptable to the Hong
Kong Share Registrar.
Note: If you do not collect your
Share certificate(s) personally
within the time above, it/they will
be sent to the address specified in
your application instructions by
ordinary post at your own risk.
For physical Share
certificate(s) of
less than 1,000,000
Offer Shares issued
under your own
name
Y our Share certificate(s) will be
sent to the address specified in
your application instructions by
ordinary post at your own risk.
Time: Monday, July 8, 2024
Refund mechanism for surplus application monies paid by you
Date Tuesday, July 9, 2024 Subject to the
arrangement between
you and your broker or
custodian
Responsible party Hong Kong Share Registrar Y our broker or custodian
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 469 ---
White Form eIPO service HKSCC EIPO channel
Application monies
paid through single
bank account
White Form e-Refund payment
instructions to your designated
bank account.
Y our broker or custodian
will arrange refund to
your designated bank
account subject to the
arrangement between
you and it.
Application monies
paid through
multiple bank
accounts
Refund check(s) will be
dispatched to the address specified
in your application instructions by
ordinary post at your own risk.
Except in the event of any Severe Weather Signals (as defined below) in force in Hong
Kong on Monday, July 8, 2024 rendering it impossible for the relevant Share certificates to
be dispatched to HKSCC in a timely manner, the Company shall procure the Hong Kong Share
Registrar to arrange for delivery of the supporting documents and Share certificates in
accordance with the contingency arrangements as agreed between them. Y ou may refer to
“—E. Severe Weather Arrangements” in this section.
E. SEVERE WEATHER ARRANGEMENTS
The application lists will not open or close on Thursday, July 4, 2024 if there is/are:
 a tropical cyclone warning signal number 8 or above;
 a “black” rainstorm warning signal; and/or
 Extreme Conditions
(collectively, “ Severe Weather Signals ”)
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, July 4,
2024 (Hong Kong time).
Instead they will open at 11:45 a.m. and/or close at 12:00 noon on the next business day
which does not have Severe Weather Signals in force in Hong Kong at any time between 9:00
a.m. and 12:00 noon (Hong Kong time).
Prospective investors should be aware that a postponement of the opening/closing of the
application lists may result in a delay in the Listing Date. Should there be any changes to the
dates mentioned in “Expected Timetable,” an announcement will be made and published on the
Stock Exchange’s website at www.hkexnews.hk and our website at investors.jianke.com of
the revised timetable.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 460 –


--- page 470 ---
If a Severe Weather Signal is hoisted on Monday, July 8, 2024 :
 the Hong Kong Share Registrar will make appropriate arrangements for the delivery
of the Share certificates to CCASS so that they would be available for trading on
Tuesday, July 9, 2024 ; and
 for physical Share certificate(s) of less than 1,000,000 Hong Kong Offer Shares
issued under your own name, dispatch will be made by ordinary post when the post
office re-opens after the Severe Weather Signal is lowered or cancelled (e.g. in the
afternoon of Monday, July 8, 2024 or on Tuesday, July 9, 2024 ).
If a Severe Weather Signal is hoisted on Tuesday, July 9, 2024 , for physical Share
certificate(s) of 1,000,000 Hong Kong Offer Shares or more issued under your own name, you
may pick it/them up from the Hong Kong Share Registrar’s office after the Severe Weather
Signal is lowered or cancelled (e.g. in the afternoon of Tuesday, July 9, 2024 or on
Wednesday, July 10, 2024 ).
Prospective investors should be aware that if they choose to receive physical Share
certificates issued in their own name, there may be a delay in receiving the Share
certificates.
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the date of commencement of dealings in the Shares on the Stock
Exchange or any other date HKSCC chooses. Settlement of transactions between Exchange
Participants is required to take place in CCASS on the second settlement day after any trading
day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
Y ou should seek the advice of your broker or other professional advisors for details of
those settlement arrangements as such arrangements may affect your rights and interests.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 461 –


--- page 471 ---
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by the Company, the Hong Kong Share Registrar, the receiving bank and the
Relevant Persons about you in the same way as it applies to personal data about applicants
other than HKSCC Nominees. Such personal data may include client identifier(s) and your
identification information. By giving application instructions to HKSCC, you acknowledge
that you have read, understood and agree to all of the terms of the Personal Information
Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of the Company and the Hong Kong
Share Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
2. Reasons for the Collection of Y our Personal Data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure
that personal data supplied to the Company or its agents and the Hong Kong Share Registrar
is accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the Hong Kong
Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in delay or the inability of the
Company or Hong Kong Share Registrar to effect transfers or otherwise render their services.
It may also prevent or delay registration or transfers of Hong Kong Offer Shares which you
have successfully applied for and/or the dispatch of Share certificate(s) to which you are
entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform the
Company and the Hong Kong Share Registrar immediately of any inaccuracies in the personal
data supplied.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 462 –


--- page 472 ---
3. Purposes
Y our personal data may be used, held, processed and/or stored (by whatever means) for
the following purposes:
 processing your application and refund check and White Form e-Refund payment
instruction(s), where applicable, verification of compliance with the terms and
application procedures set out in this prospectus and announcing results of
allocation of Hong Kong Offer Shares;
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of the
Shares including, where applicable, HKSCC Nominees;
 maintaining or updating the Company’s register of members;
 verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the Shares, such as dividends, rights
issues, bonus issues, etc.;
 distributing communications from the Company and its subsidiaries;
 compiling statistical information and profiles of the holder of the Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable the
Company and the Hong Kong Share Registrar to discharge their obligations to
applicants for and holders of the Shares and/or regulators and/or any other purposes
to which applicants for and holders of the Shares may from time to time agree.
4. Transfer of Personal Data
Personal data held by the Company and the Hong Kong Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but the
Company and the Hong Kong Share Registrar may, to the extent necessary for achieving any
of the above purposes, disclose, obtain or transfer (whether within or outside Hong Kong) the
personal data to, from or with any of the following:
 the Company’s appointed agents such as financial advisors, receiving bank and
overseas principal share registrar;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 463 –


--- page 473 ---
 HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the Hong Kong Share Registrar, in each case for the purposes of
providing its services or facilities or performing its functions in accordance with its
rules or procedures and operating FINI and CCASS (including where applicants for
Hong Kong Offer Shares request a deposit into CCASS);
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
Hong Kong Share Registrar in connection with their respective business operations;
 the Stock Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, including for the
purposes of the Stock Exchange’s administration of the Listing Rules and the SFC’s
performance of its statutory functions; and
 any persons or institutions with which the holders of Hong Kong Offer Shares have
or propose to have dealings, such as their bankers, solicitors, accountants or brokers
etc.
5. Retention of Personal Data
The Company and the Hong Kong Share Registrar will keep the personal data of the
applicants for and holders of Hong Kong Offer Shares for as long as necessary to fulfil the
purposes for which the personal data were collected. Personal data which is no longer required
will be destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance
(Chapter 486 of the Laws of Hong Kong).
6. Access to and Correction of Personal Data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
the Company or the Hong Kong Share Registrar hold their personal data, to obtain a copy of
that data, and to correct any data that is inaccurate. The Company and the Hong Kong Share
Registrar have the right to charge a reasonable fee for the processing of such requests. All
requests for access to data or correction of data should be addressed to the Company, at the
Company’s registered address disclosed in “Corporate Information” or as notified from time to
time, for the attention of the joint company secretaries, or the Hong Kong Share Registrar for
the attention of the privacy compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 464 –


--- page 474 ---
The following is the text of a report set out on pages I-1 to I-65, received from the
Company’ s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the
purpose of incorporation in this prospectus.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF FANGZHOU INC., CITIGROUP GLOBAL MARKETS ASIA
LIMITED AND ABCI CAPITAL LIMITED
Introduction
We report on the historical financial information of Fangzhou Inc. (“the Company”) and
its subsidiaries (together, the “Group”) set out on pages I-4 to I-65, which comprises the
consolidated statements of financial position of the Group and the statements of financial
position of the Company as at December 31, 2021, 2022 and 2023, the consolidated statements
of profit or loss and other comprehensive income, the consolidated statements of changes in
equity and the consolidated statements of cash flows, for each of the years ended December 31,
2021, 2022 and 2023 (the “Relevant Periods”), and a summary of material accounting policy
information and other explanatory information (together, the “Historical Financial
Information”). The Historical Financial Information set out on pages I-4 to I-65 forms an
integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated June 28, 2024 (the “Prospectus”) in connection with the initial listing of shares
of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical
Financial Information that gives a true and fair view in accordance with the basis of preparation
and presentation set out in note 1 to the Historical Financial Information, and for such internal
control as the directors of the Company determine is necessary to enable the preparation of the
Historical Financial Information that is free from material misstatement, whether due to fraud
or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical
Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards
and plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –


--- page 475 ---
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountants consider internal control relevant to the entity’s
preparation of the Historical Financial Information that gives a true and fair view in accordance
with the basis of preparation and presentation set out in note 1 to the Historical Financial
Information in order to design procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our
work also included evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purpose of the
accountants’ report, a true and fair view of the Company’s and the Group’s financial position
as at December 31, 2021, 2022 and 2023 and of the Group’s financial performance and cash
flows for the Relevant Periods in accordance with the basis of preparation and presentation set
out in note 1 to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –


--- page 476 ---
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited and the Companies (Winding Up and Miscellaneous
Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to note 26(e) to the Historical Financial Information which states that no
dividends have been paid by the Company in respect of the Relevant Periods.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its
incorporation.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
June 28, 2024
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –


--- page 477 ---
HISTORICAL FINANCIAL INFORMATION
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The consolidated financial statements of the Group for the Relevant Periods, on which the
Historical Financial Information is based, were audited by KPMG Huazhen LLP Guangzhou
Branch under separate terms of engagement with the Company in accordance with Hong Kong
Standards on Auditing issued by the HKICPA (the “Underlying Financial Statements”).
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –


--- page 478 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
(Expressed in Renminbi (“RMB”))
Y ear ended December 31,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Revenue 4 1,758,673 2,204,303 2,434,308
Cost of sales (1,539,025) (1,823,719) (1,946,901)
Gross profit 219,648 380,584 487,407
Other net income/(loss) 5 33,005 (134,188) (23,915)
Selling and distribution expenses (309,291) (330,248) (343,770)
Administrative expenses (138,967) (177,483) (171,477)
Recognition of impairment losses 6(c) (310) (173) (140)
Loss from operations (195,915) (261,508) (51,895)
Finance costs 6(a) (108,035) (121,781) (144,816)
Loss before taxation 6 (303,950) (383,289) (196,711)
Income tax 7 (39) (13) (77)
Loss and total comprehensive income for the year (303,989) (383,302) (196,788)
Attributable to:
Equity shareholders of the Company (303,964) (383,302) (196,788)
Non-controlling interests (25) – –
Loss and total comprehensive income for the year (303,989) (383,302) (196,788)
Loss per share
Basic (in RMB) 10 N/A N/A N/A
Diluted (in RMB) N/A N/A N/A
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –


--- page 479 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in RMB)
As at December 31,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 11 23,376 31,260 51,639
Intangible assets 12 2,436 2,451 2,275
Other non-current assets 13 10,767 10,000 100
36,579 43,711 54,014----------- ----------- -----------
Current assets
Inventories 14 111,528 126,464 136,045
Trade and other receivables 15 48,321 86,411 101,142
Other current assets 16 23,808 26,357 34,761
Prepayments 10,167 63,999 18,474
Amounts due from related parties 28(c) 33,628 12,032 –
Restricted bank deposits 17 – 25,000 30,615
Cash and cash equivalents 18(a) 84,658 134,907 146,317
312,110 475,170 467,354----------- ----------- -----------
Current liabilities
Trade and other payables 19 282,049 356,217 440,451
Contract liabilities 20 18,055 89,368 19,873
Bank loans 21 – 10,154 5,005
Lease liabilities 22 9,958 12,796 15,346
Other current liabilities 1,799 8,502 1,252
Current taxation 24(a) –1 21 5
311,861 477,049 481,942-----------
----------- -----------
Net current assets/(liabilities) 249 (1,879) (14,588)----------- ----------- -----------
Total assets less current liabilities 36,828 41,832 39,426----------- ----------- -----------
Non-current liabilities
Lease liabilities 22 8,315 13,858 29,368
Convertible redeemable preferred shares 25 1,368,767 1,737,882 1,911,521
1,377,082 1,751,740 1,940,889----------- ----------- -----------
NET LIABILITIES (1,340,254) (1,709,908) (1,901,463)
CAPITAL AND RESERVES 26
Share capital 26(c) 86 86 86
Reserves (1,340,340) (1,709,994) (1,901,549)
TOTAL DEFICIT (1,340,254) (1,709,908) (1,901,463)
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –


--- page 480 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
(Expressed in RMB)
As at December 31,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment – 662 331
Investment in a subsidiary 30(a) 664,140 675,623 680,094
664,140 676,285 680,425----------- ----------- -----------
Current assets
Amount due from a subsidiary 30(b) 267,135 333,597 364,737
Amounts due from related parties 71 71 –
Other current assets 16 2,340 5,397 3,983
Prepayments 4,474 – 29
Cash and cash equivalents 18(a) 1,076 59,439 1,021
275,096 398,504 369,770----------- ----------- -----------
Current liabilities
Other payables 19 2,498 9,878 10,149
Lease liabilities – 324 336
2,498 10,202 10,485-----------
----------- -----------
Net current assets 272,598 388,302 359,285----------- ----------- -----------
Total assets less current liabilities 936,738 1,064,587 1,039,710----------- ----------- -----------
Non-current liabilities
Lease liabilities – 336 –
Convertible redeemable preferred
shares 25 1,368,767 1,737,882 1,911,521
1,368,767 1,738,218 1,911,521-----------
----------- -----------
NET LIABILITIES (432,029) (673,631) (871,811)
CAPITAL AND RESERVES 26
Share capital 26(c) 86 86 86
Reserves (432,115) (673,717) (871,897)
TOTAL DEFICIT (432,029) (673,631) (871,811)
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –


--- page 481 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in RMB)
Attributable to equity shareholders of the Company
Note
Share
capital
Share
premium
Other
reserves
Shares held
for the RSU
Incentive
Plan
Share-based
payments
reserve
Accumulated
losses Total
Non-
controlling
interest
Total
deficit
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(d)
Balance at January 1,
2021 86 18,130 (783,509) (11) – (276,865) (1,042,169) – (1,042,169)
Changes in equity for
2021:
Loss and total
comprehensive income
for the year – – – – – (303,964) (303,964) (25) (303,989)
Capital injection by the
non-controlling interest
of a subsidiary – – –––– – 3 0 3 3 0 3
Acquisition of additional
interest in a subsidiary
from its non-
controlling interest – – 303 – – (25) 278 (278) –
Deemed distribution 26(f)(ii) – – (2,303) – – – (2,303) – (2,303)
Equity settled share-
based transactions 26(f)(iii) – – – – 7,904 – 7,904 – 7,904
Shares vested under the
RSU Incentive Plan 26(f)(i) – 4,554 – 2 (4,556) – – – –
Balance at
December 31, 2021 86 22,684 (785,509) (9) 3,348 (580,854) (1,340,254) – (1,340,254)
Note
Share
capital
Share
premium
Other
reserves
Shares held
for the RSU
Incentive
Plan
Share-based
payments
reserve
Accumulated
losses
Total
deficit
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(d)
Balance at January 1, 2022 86 22,684 (785,509) (9) 3,348 (580,854) (1,340,254)
Changes in equity for 2022
Loss and total comprehensive income for the year – – – – – (383,302) (383,302)
Equity settled share-based transactions 26(f)(iii) – – – – 13,648 – 13,648
Shares vested under the RSU Incentive Plan 26(f)(i) – 7,391 – 1 (7,392) – –
Balance at December 31, 2022 86 30,075 (785,509) (8) 9,604 (964,156) (1,709,908)The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –


--- page 482 ---
Note
Share
capital
Share
premium
Other
reserves
Shares held
for the RSU
Incentive
Plan
Share-based
payments
reserve
Accumulated
losses
Total
deficit
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 26(d)
Balance at January 1, 2023 86 30,075 (785,509) (8) 9,604 (964,156) (1,709,908)
Changes in equity for 2023
Loss and total comprehensive income for the year – – – – – (196,788) (196,788)
Equity settled share-based transactions 26(f)(iii) – – – – 5,233 – 5,233
Shares vested under the RSU Incentive Plan 26(f)(i) – 6,918 – – (6,918) – –
Balance at December 31, 2023 86 36,993 (785,509) (8) 7,919 (1,160,944) (1,901,463)
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –


--- page 483 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in RMB)
Y ear ended December 31,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Operating activities
Cash (used in)/generated from operations 18(b) (203,613) (49,964) 22,356
Income tax paid 24(a) (42) (1) (74)
Net cash (used in)/generated from
operating activities (203,655) (49,965) 22,282----------- ----------- -----------
Investing activities
Repayments of borrowings by related parties 28(b) 46,006 21,596 12,032
Payment for purchases of property, plant and
equipment and intangible assets (5,515) (5,281) (5,648)
Payment for other non-current assets 13 (8,000) – –
Advance of borrowings to related parties 28(b) (36,814) – –
Deemed distribution – (2,000) –
Proceeds from disposal of other non-current
assets 13 – – 10,000
Proceeds from sale of property, plant and
equipment – – 34
Net cash (used in)/generated from
investing activities (4,323) 14,315 16,418----------- ----------- -----------
Financing activities
Proceed from the issuance of convertible
redeemable preferred shares 18(c) – 110,175 –
Proceed from bank loans 18(c) – 24,790 25,601
Capital injection by the non-controlling
interest of a subsidiary 303 – –
Payment for acquisition of additional interest
in a subsidiary from its non-controlling
interest (303) – –
Payment of restricted bank deposits – (25,000) (60,615)
Proceeds from maturity of restricted bank
deposits – – 55,000
Repayment of bank loans 18(c) – (14,790) (30,601)
Capital element of lease rentals paid 18(c) (10,592) (11,929) (16,904)
Interest element of lease rentals paid 18(c) (815) (752) (1,377)
Interest paid 18(c) – (261) (412)
Net cash (used in)/generated from
financing activities (11,407) 82,233 (29,308)-----------
----------- -----------
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –


--- page 484 ---
Y ear ended December 31,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Net (decrease)/increase in cash and cash
equivalents (219,385) 46,583 9,392
Cash and cash equivalents at the
beginning of the year 307,817 84,658 134,907
Effect of foreign exchange rate changes (3,774) 3,666 2,018
Cash and cash equivalents at the end of
the year 18(a) 84,658 134,907 146,317
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –


--- page 485 ---
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
(Expressed in RMB unless otherwise indicated)
1 BASIS OF PREPARATION AND PRESENTATION OF THE HISTORICAL FINANCIAL
INFORMATION
1.1 General information
The Company was incorporated as an exempted company with limited liability in the Cayman Islands on
September 26, 2019. The Company is an investment holding company and has not carried on any business since the
date of its incorporation save for the Group Reorganization (as defined below). The Company and its subsidiaries
(collectively the “Group”), are principally engaged in online chronic disease management services (the “Listing
Business”) in the People’s Republic of China (the “PRC”). The Group’s principal operations and geographic markets
are in the PRC.
Mr. Xie Fangmin and Mr. Zhou Feng (collectively the “Controlling Shareholders”) collectively controlled the
Company by entering into an acting-in-concert arrangement since the incorporation of the Company.
1.2 History, reorganization and basis of preparation and presentation of the Historical Financial
Information
To rationalize the corporate structure in preparation of the listing of the Company’s shares on The Stock
Exchange of Hong Kong Limited (“The Stock Exchange”), the Group underwent certain reorganization (the
“Reorganization”) in two distinct phases as following. Details of the Reorganization were set out in the section
headed “History, Reorganization and Corporate Structure” in the Prospectus.
1.2.1 Acquisition of Fangzhan Technology and rationalization of shareholding structure
Prior to the incorporation of the Company, the Listing Business was principally carried out by
Guangdong Fangzhan Technology Co., Ltd. (ʮ̡) (“Fangzhan Technology”) and its
subsidiary. Through the first phase of the Reorganization, the Listing Business was transferred to the Company
and certain shareholding arrangements were rationalized.
The first phase of the Reorganization involved neither any business combination nor any substantive
change in the ultimate control over the business and operations of the Group, and with a continuation of risks
and benefits to the equity shareholders of the Group. As such, the related Historical Financial Information has
been presented by applying a principle similar to that for a reverse acquisition, and the assets and liabilities
of the relevant entities recognized and measured at their historical carrying amounts prior to the first phase of
the Reorganization.
1.2.1.1 Acquisition of Fangzhan Technology
On December 14, 2020, the Company issued shares to the holders of Series A, Series A-1 and Series B
Preferred Shares (all of them are preferred shares holders of Y unyi Inc.) at a par value of USD0.0001, the
present value of which was amounted to RMB988,261,000 (see note 25).
On December 30, 2020, Fangzhou Limited, a wholly-owned subsidiary of the Company, acquired
Fangzhan Technology at a consideration of USD94,700,000 (equivalent to RMB658,722,000) from the then
equity owner, Y unyi Limited.
1.2.1.2 Contractual Arrangements of Fangzhou Yunkang
On April 28, 2020, Guangzhou Fangzhou Y unkang Information Technology Group Co., Ltd. ( ᄿψ˙Ћ
ʮ̡) (“Fangzhou Y unkang”) was incorporated. On the same date, Guangdong
Fangfeng Technology Co., Ltd. (ʮ̡) (“Fangfeng Technology”), a wholly-owned
subsidiary of the Company, entered into a series of contractual arrangements (the “Contractual Arrangements”)
with Fangzhou Y unkang and its nominee equity holders such that, Fangfeng Technology obtained the ability
to exercise effective control over Fangzhou Y unkang and obtain substantially all of the economic benefits of
Fangzhou Y unkang. Fangzhou Y unkang has not carried out any substantial business operations (including the
Listing Business) since the date of incorporation.
APPENDIX I ACCOUNTANTS’ REPORT
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1.2.1.3 Acquisition of subsidiaries under nominee agreement arrangements
To rationalize the shareholding structure, during April to June 2021, Fangzhou Y unkang acquired
Guangzhou Fangzhou Medicine Co., Ltd. (ʮ̡) (“Fangzhou Medicine”) from Mr. Xie
Fangmin at nil consideration and Fangzhou Y unkang acquired other five insignificant subsidiaries from related
parties, all of which were previously held on the Company’s behalf under certain nominee arrangements.
Similarly, during April 2021, Guangzhou Fangzhou Information Technology Co., Ltd. (߅ࢹڦ
ʮ̡) (“Fangzhou Information”) acquired Guangzhou Fangzhou Pharmaceutical Co., Ltd. ( ᄿψ˙Ћᖹ
ʮ̡) (“Fangzhou Pharmaceutical”) from Guangzhou Fangming Investment Enterprise (Limited
Partnership) (ҳ༟Άุ(Υྫ)) (“Fangming Investment”) and Ms. Liu Xiukui at nil
consideration and Fangzhou Information acquired another insignificant subsidiary from related parties, both
of which were previously held on the Company’s behalf under certain nominee arrangements:
1.2.2 Acquisition of Jingtai Hospital
As the second phase of the Reorganization, on April 19, 2021, Fangfeng Technology and Fangzhou
Y unkang acquired 70% and 30% of nominee shares of Jingtai Hospital ( ౻इᔼ৫) from the Controlling
Shareholders, respectively. Jingtai Hospital was previously acquired by Ms. Liu Xiukui on behalf of the
Controlling Shareholders on March 1, 2017 by way of a nominee arrangement.
The acquisition of Jingtai Hospital was a business combination under the common control of the
Controlling Shareholders and, has therefore been accounted for using the pooling of interest method as if the
acquisition had been completed since the date the entities came under the common control of the Controlling
Shareholders. The assets and liabilities of Jingtai Hospital have been included using the existing book values
from the Controlling Shareholders’ perspective. No adjustments were made to reflect fair values, or recognize
any new assets or liabilities as a result of such acquisition.
The consolidated statements of profit or loss and other comprehensive income, the consolidated
statements of changes in equity and the consolidated statements of cash flows of the Group for the Relevant
Periods as set out in this report include the financial performance and cash flows of the companies now
comprising the Group as if the current group structure had been in existence throughout the Relevant Periods.
The consolidated statements of financial position of the Group as at December 31, 2021 as set out in this report
have been prepared to present the financial position of the entities now comprising the Group as at those dates
as if the current group structure had been in existence as at the respective dates, taking into account the
respective dates of incorporation or establishment, where applicable. Intra-group balances, transactions and
unrealized gains/losses on intra-group transactions are eliminated in full in preparing the Historical Financial
Information.
Upon completion of the Reorganization, Fangzhou Inc. became the holding company of the entities now
comprising the Group. Details of the Group’s principal subsidiaries are set out below.
1.3 Subsidiaries
As at the date of this report, no statutory financial statements have been prepared for the Company, as it is an
investment holding company which is not subject to statutory audit requirements under the relevant rules and
regulations in the Cayman Islands.
Upon completion of the Reorganization and as at the date of this report, the Company has direct and indirect
interests in the following principal subsidiaries:
Proportion of ownership interest
Company name
Place and date of
incorporation/
establishment
Registered
capital Issued capital Equity interest
Held through
Contractual
arrangements
Principal
activities
Name of
auditor
Indirectly
(iii)
Direct held by the Company
Fangzhou Limited Hong Kong,
October 24, 2019
Hong Kong
Dollar (“HKD”)
10,000
HKD 10,000 100.00% – Investment holding (ii)
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 487 ---
Proportion of ownership interest
Company name
Place and date of
incorporation/
establishment
Registered
capital Issued capital Equity interest
Held through
Contractual
arrangements
Principal
activities
Name of
auditor
Indirectly
(iii)
Indirect held by the Company
Fangzhou Pharmaceutical (i) Mainland China,
March 23, 2004
RMB5,000,000 RMB580,000 100.00% – Wholesale and
supply chain
(ii)
Fangzhan Technology (i) Mainland China,
November 2, 2015
USD100,000,000 USD94,700,000 100.00% – Provision of internet
and e-commerce
services
(ii)(b)
Fangfeng Technology (i) Mainland China,
February 12, 2020
USD100,000,000 USD47,000,000 100.00% – Provision of internet
and e-commerce
services
(ii)(b)
Jingtai Hospital (i) Mainland China,
July 20, 2011
RMB500,000 RMB500,000 70.00% 30.00% Medical Service (ii)
Fangzhou Medicine (i)(iii) Mainland China,
August 20, 2019
RMB20,000,000 RMB70,000 – 100.00% Retail (ii)
Guangdong Qishi Hospital
Management Co., Ltd. (઼
ʮ̡) (i)(iii)
Mainland China,
September 30, 2020
RMB10,000,000 RMB5,000,000 – 100.00% Medical Service (ii)(b)
Notes:
(i) The English translation of these companies’ names are for reference only. The official names of these
companies are in Chinese. Except for Jingtai Hospital, which is a private non-enterprise hospital, other
companies incorporated in Mainland China are registered as limited liability companies under PRC laws.
(ii) The financial statements of the following companies now comprising the Group for each of the years ended
December 31, 2021, 2022 and 2023 were prepared in accordance with either HKFRSs issued by the HKICPA
or the relevant accounting rules and regulations applicable to enterprises in the PRC and were audited by the
respective auditors as indicated below:
Name of company Financial period Auditors
Jingtai Hospital Y ears ended December 31. 2021,
2022 and 2023
Dongguan Tiho Certified Public Accountants
LLPה( ౷ஷΥྫ)
Fangzhou Limited Y ears ended December 31, 2021
and 2022
Aston CPA And Associates Certified Public
Accountants
Fangzhou
Pharmaceutical
Y ear ended December 31, 2021 Guangdong Zhongguangrun Certified Public
Accountants LLP
ה( ౷ஷΥྫ)
Fangzhou
Pharmaceutical
Y ear ended December 31, 2022 Guangzhou Suihe Accounting Firm (General
Partnership)ה(౷ஷ
Υྫ)
Fangzhou Medicine Y ear ended December 31, 2021 Guangdong Zhongguangrun Certified Public
Accountants LLP
ה( ౷ஷΥྫ)
Fangzhou Medicine Y ear ended December 31, 2022 Guangzhou Suihe Accounting Firm (General
Partnership)ה(౷ஷ
Υྫ)
(a) All companies now comprising the Group have adopted December 31 as their financial year end date.
(b) During the Relevant Periods, no audited financial statements have been prepared for these companies.
(c) As at the date of this report, no audited financial statements for the year ended 31 December 2023 have
been issued for the companies listed above except for Jingtai Hospital.
APPENDIX I ACCOUNTANTS’ REPORT
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(iii) Upon completion of the Reorganization disclosed in note 1.2, the equity interest of these entities was held
directly by Fangzhou Y unkang, respectively.
The Historical Financial Information has been prepared in accordance with all applicable Hong Kong Financial
Reporting Standards (“HKFRSs”), which collective term includes all applicable individual HKFRSs, Hong Kong
Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). Further details of the material accounting policy information adopted are set out in note
2.
The HKICPA has issued a number of new and revised HKFRSs. For the purpose of preparing this Historical
Financial Information, the Group has consistently adopted all applicable new and revised HKFRSs that are effective
during the Relevant Periods, except for any new standards or interpretations that are not yet effective for the Relevant
Periods. The revised and new accounting standards and interpretations issued but not yet effective for the Relevant
Periods are set out in note 32.
The Historical Financial Information also complies with the applicable disclosure provisions of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.The accounting policies set out
below have been applied consistently to all periods presented in the Historical Financial Information.
1.4 Going concern assessment
The Group recorded net current liabilities of RMB14,588,000 and net liabilities of RMB1,901,463,000 as at
December 31, 2023. The net liabilities position was primarily caused by the convertible redeemable preferred shares
(see note 25) totaling RMB1,911,521,000 as at December 31, 2023. The Directors of the Company are of the opinion
that no material uncertainty exists related to events or conditions which, individually or collectively, may cast
significant doubt on the Group’s ability to continue as a going concern, taking into account the following factors:
– the Group have unutilized banking facilities of RMB48,899,500 as at December 31, 2023, which can be
utilized by the Group to fulfil its liquidity requirements when necessary;
– the Directors of the Company, based on the contract terms with the convertible redeemable preferred
shares holders, do not expect the convertible redeemable preferred shares would be redeemed within the
next twelve months from December 31, 2023; and
– the Directors have reviewed the Group’s cash flow projections, which cover a period of at least twelve
months from December 31, 2023 and are of the opinion that the Group will have sufficient working
capital to meet its liabilities and obligations as and when they fall due and to sustain its operations for
at least the next twelve months from December 31, 2023.
2 MATERIAL ACCOUNTING POLICY INFORMATION
(a) Basis of measurement
Item included in the Historical Financial Information of each entity in the Group are measured using the
currency that best reflects the economic substance of the underlying events and circumstances relevant to the entity
(the “Functional Currency”). The Historical Financial Information is presented in RMB, rounded to the nearest
thousand unless otherwise indicated.
The measurement basis used in the preparation of the Historical Financial Information is the historical cost
basis.
(b) Use of estimates and judgements
The preparation of the Historical Financial Information in conformity with HKFRSs requires management to
make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision affects both current and future periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –


--- page 489 ---
Judgements made by management in the application of HKFRSs that have significant effect on the Historical
Financial Information and major sources of estimation uncertainty are discussed in note 3.
(c) Consolidation
(i) Business combination involving entities under common control
A business combination involving entities under common control is a business combination in which all
of the combining entities are ultimately controlled by the same party or parties both before and after the
business combination, and that control is not transitory. The assets acquired and liabilities assumed are
measured based on their carrying amounts in the financial statements of the ultimate controlling party at the
combination date. The difference between the carrying amounts of the net assets acquired and the consideration
paid for the combination is adjusted to equity. Any costs directly attributable to the combination are recognized
in profit or loss when incurred. The combination date is the date on which one combining entity obtains control
of other combining entities.
(ii) Business combination involving entities not under common control
A business combination involving entities not under common control is a business combination in which
all of the combining entities are not ultimately controlled by the same party or parties both before and after
the business combination. Acquisition related costs are expensed when incurred. The acquiree’s identifiable
assets, liabilities and contingent liabilities, if the recognition criteria are met, are recognized by the Group at
their acquisition date fair value. The acquisition date is the date on which the acquirer obtains control of the
acquiree.
(iii) Subsidiaries and non-controlling interests
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or
has rights, to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. When assessing whether the Group has power, only substantive rights (held
by the Group and other parties) are considered.
An investment in a subsidiary is consolidated into the Historical Financial Information from the date
that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and
any unrealized profits arising from intra-group transactions are eliminated in full in preparing the Historical
Financial Information. Unrealized losses resulting from intra-group transactions are eliminated in the same
way as unrealized gains but only to the extent that there is no evidence of impairment.
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the
Company, and in respect of which the Group has not agreed any additional terms with the holders of those
interests which would result in the Group as a whole having a contractual obligation in respect of those
interests that meets the definition of a financial liability. For each business combination, the Group can elect
to measure any non-controlling interests either at fair value or at the non-controlling interests’ proportionate
share of the subsidiary’s net identifiable assets.
Non-controlling interests are presented in the consolidated statement of financial position within equity,
separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the
results of the Group are presented on the face of the consolidated statement of profit or loss and other
comprehensive income as an allocation of the total profit or loss and total comprehensive income for the period
between non-controlling interests and the equity shareholders of the Company.
Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for
as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling
interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to
goodwill and no gain or loss is recognized.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in
that subsidiary, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that
former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as
the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of
an investment in an associate or joint venture.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 490 ---
In the Company’s statements of financial position, an investment in a subsidiary is stated at cost less
impairment losses (see note 2(i)), unless the investment is classified as held for sale (or included in a disposal
group that is classified as held for sale).
(iv) Subsidiaries controlled through Contractual Arrangements
In order to comply with the PRC laws and regulations which prohibit or restrict foreign control of
companies involved in provision of internet content and other restricted businesses, the Group operates its
online consultation and e-prescription services, online retail pharmacy services and online academic
community services in the PRC through certain PRC operating entities, whose equity interests are held by
certain nominee shareholders (together “Nominee Shareholders”). The Group signed Contractual
Arrangements with the PRC operating entities and the Nominee Shareholders. The Contractual Arrangements
include exclusive consulting services agreements, exclusive purchase option agreement, equity pledge
agreement and voting proxy agreements, which enable the Group to:
 govern the financial and operating policies of the PRC operating entities;
 exercise equity holder voting rights of the PRC operating entities;
 receive substantially all of the economic interest returns generated by the PRC operating entities
in consideration for the technical support, consulting and other services provided exclusively by
Fangzhan Technology and Fangfeng Technology, at the discretion of Fangzhan Technology and
Fangfeng Technology;
 obtain an irrevocable and exclusive right to purchase part or all of the equity interests in the PRC
operating entities at any time and from time to time, at the minimum consideration permitted by
the relevant law in China at the time of transfer; and
 obtain a pledge over all of its equity interests from its respective Nominee Shareholders as
collateral for all of the PRC entity’s payments due to the Group to secure performance of entities’
obligation under the Contractual Arrangements.
Accordingly, the Group has rights to control these PRC operating entities and accordingly account for
them as entities controlled by the Group.
(d) Joint ventures
A joint venture is an arrangement whereby the Group and other parties contractually agree to share control of
the arrangement, and have rights to the net assets of the arrangement.
An investment in a joint venture is accounted for in the Historical Financial Information under the equity
method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under
the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s share of the
acquisition date fair values of the investee’s identifiable net assets over the cost of the investment (if any). The cost
of the investment includes purchase price, other costs directly attributable to the acquisition of the investment, and
any direct investment into the joint venture that forms part of the Group’s equity investment. Thereafter, the
investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any
impairment loss relating to the investment. At each reporting date, the Group assesses whether there is any objective
evidence that the investment is impaired. Any acquisition-date excess over cost, the Group’s share of the
post-acquisition, post-tax results of the investees and any impairment losses for the period are recognized in the
Group’s profit or loss, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other
comprehensive income is recognized in the Group’s other comprehensive income.
When the Group’s share of losses exceeds its interest in the joint venture, the Group’s interest is reduced to
nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the
carrying amount of the investment under the equity method, together with any other long-term interests that in
substance form part of the Group’s net investment in the joint venture, after applying the ECL model to such other
long-term interests where applicable (see note 2(i)).
Unrealized profits and losses resulting from transactions between the Group and its joint venture are eliminated
to the extent of the Group’s interest in the investee, except where unrealized losses provide evidence of an impairment
of the asset transferred, in which case they are recognized immediately in profit or loss.
APPENDIX I ACCOUNTANTS’ REPORT
– I-17 –


--- page 491 ---
In all other cases, when the Group ceases to have significant influence over a joint control over a joint venture,
it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognized
in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control
is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial
asset.
(e) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note
2(i)).
Cost includes expenditures that are directly attributable to the acquisition of an asset.
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are
determined as the difference between the net disposal proceeds and the carrying amount of the item and are
recognized in profit or loss on the date of retirement or disposal.
Depreciation is calculated to write off the cost of property, plant and equipment, less their estimated residual
value, if any, using the straight-line method over their estimated useful lives as follows:
Useful life
Machinery and equipment 3 - 10 years
Motor vehicles 4 years
Furniture, fixtures and other equipment 3 - 5 years
Leasehold improvement Shorter of the lease term and
estimated useful lives
Where parts of an item of property, plant and equipment have different useful lives, the cost is allocated on
a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its
residual value, if any, are reviewed annually.
(f) Research and development costs
Research and development costs comprise all costs that are directly attributable to research and development
activities or that can be allocated on a reasonable basis to such activities. Because of the nature of the Group’s
research and development activities, the criteria for the recognition of such costs as an asset are generally not met
until late in the development stage of the project when the remaining development costs are immaterial. Hence both
research costs and development costs are generally recognized as expenses in the period in which they are incurred.
(g) Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated
amortization and any accumulated impairment losses (see note 2(i)).
Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over
the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortized from the date
they are available for use and their estimated useful lives are as follows:
Useful life
Computer software 5 years
License 5 years
Trademark 10 years
Both the period and method of amortization are reviewed annually.
APPENDIX I ACCOUNTANTS’ REPORT
– I-18 –


--- page 492 ---
(h) Leased assets
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the
identified asset and to obtain substantially all of the economic benefits from that use.
As a lessee
At the lease commencement date, the Group recognizes a right-of-use asset and a lease liability, except
for short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the
Group enters into a lease in respect of a low-value asset, the Group decides whether to capitalize the lease on
a lease-by-lease basis. The lease payments associated with those leases which are not capitalized are
recognized as an expense on a systematic basis is over the lease term.
Where the lease is capitalized, the lease liability is initially recognized at the present value of the lease
payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, using a relevant incremental borrowing rate.
After initial recognition, the lease liability is measured at amortized cost and interest expense is
calculated using the effective interest method. V ariable lease payments that do not depend on an index or rate
are not included in the measurement of the lease liability and hence are charged to profit or loss in the
accounting period in which they are incurred.
The right-of-use asset recognized when a lease is capitalized is initially measured at cost, which
comprises the initial amount of the lease liability plus any lease payments made at or before the
commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets
also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying
asset or the site on which it is located, discounted to their present value, less any lease incentives received.
The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses (see
note 2(i)).
The lease liability is remeasured when there is a change in future lease payments arising from a change
in an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under
a residual value guarantee, or there is a change arising from the reassessment of whether the Group will be
reasonably certain to exercise a purchase, extension or termination option. When the lease liability is
remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset,
or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The lease liability is also remeasured when there is a change in the scope of a lease or the consideration
for a lease that is not originally provided for in the lease contract (“lease modification”) that is not accounted
for as a separate lease. In this case the lease liability is remeasured based on the revised lease payments and
lease term using a revised discount rate at the effective date of the modification. The only exceptions are rent
concessions that occurred as a direct consequence of the COVID-19 pandemic and met the conditions set out
in paragraph 46B of HKFRS 16 Leases . In such cases, the Group has taken advantage of the practical expedient
not to assess whether the rent concessions are lease modifications, and recognized the change in consideration
as negative variable lease payments in profit or loss in the period in which the event or condition that triggers
the rent concessions occurred.
In the consolidated statements of financial position, the current portion of long-term lease liabilities is
determined as the present value of contractual payments that are due to be settled within twelve months after
the reporting period.
The Group presents right-of-use assets and presents lease liabilities separately in the consolidated
statements of financial position.
APPENDIX I ACCOUNTANTS’ REPORT
– I-19 –


--- page 493 ---
(i) Credit losses and impairment of assets
(i) Credit losses from financial instruments
The Group recognizes a loss allowance for expected credit losses (“ECLs”) on financial assets measured
at amortized cost (including cash and cash equivalents, restricted bank deposits, trade and other receivables
and amounts due from related parties).
Financial assets measured at fair value are not subject to the ECLs assessment.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the
present value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group
in accordance with the contract and the cash flows that the Group expects to receive).
The expected cash shortfalls are discounted using the following discount rates where the effect
of discounting is material:
– trade and other receivables and amounts due from related parties: effective interest rate
determined at initial recognition or an approximation thereof.
The maximum period considered when estimating ECLs is the maximum contractual period over
which the Group is exposed to credit risk.
In measuring ECLs, the Group takes into account reasonable and supportable information that is
available without undue cost or effort. This includes information about past events, current conditions
and forecasts of future economic conditions.
ECLs are measured on either of the following bases:
– 12-month ECLs: these are losses that are expected to result from possible default events
within the 12 months after the reporting date; and
– lifetime ECLs: these are losses that are expected to result from all possible default events
over the expected lives of the items to which the ECL model applies.
Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs.
ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical
credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the
current and forecast general economic conditions at the reporting date.
For all other financial instruments, the Group recognizes a loss allowance equal to 12-month
ECLs unless there has been a significant increase in credit risk of the financial instrument since initial
recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.
Significant increases in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly since
initial recognition, the Group compares the risk of default occurring on the financial instrument assessed
at the reporting date with that assessed at the date of initial recognition. In making this reassessment,
the Group considers that a default event occurs when (i) the borrower is unlikely to pay its credit
obligations to the Group in full, without recourse by the Group to actions such as realizing security (if
any is held); or (ii) the financial asset is 90 days past due. The Group considers both quantitative and
qualitative information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort.
APPENDIX I ACCOUNTANTS’ REPORT
– I-20 –


--- page 494 ---
In particular, the following information is taken into account when assessing whether credit risk
has increased significantly since initial recognition:
– failure to make payments of principal or interest on their contractually due dates;
– an actual or expected significant deterioration in a financial instrument’s external or
internal credit rating (if available);
– an actual or expected significant deterioration in the operating results of the debtor; and
– existing or forecast changes in the technological, market, economic or legal environment
that have a significant adverse effect on the debtor’s ability to meet its obligation to the
Group.
Depending on the nature of the financial instruments, the assessment of a significant increase in
credit risk is performed on either an individual basis or a collective basis. When the assessment is
performed on a collective basis, the financial instruments are grouped based on shared credit risk
characteristics, such as past due status and credit risk ratings.
ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit
risk since initial recognition. Any change in the ECL amount is recognized as an impairment gain or loss
in profit or loss. The Group recognizes an impairment gain or loss for all financial instruments with a
corresponding adjustment to their carrying amount through a loss allowance account.
Basis of calculation of interest income
Interest income recognized in accordance with note 2(s)(vi) is calculated based on the gross
carrying amount of the financial asset unless the financial asset is credit-impaired, in which case interest
income is calculated based on the amortized cost (i.e. the gross carrying amount less loss allowance) of
the financial asset.
At each reporting date, the Group assesses whether a financial asset is credit-impaired. A
financial asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable events:
– significant financial difficulties of the debtor;
– a breach of contract, such as a default or past due event;
– it becoming probable that the borrower will enter into bankruptcy or other financial
reorganization;
– significant changes in the technological, market, economic or legal environment that have
an adverse effect on the debtor; or
– the disappearance of an active market for a security because of financial difficulties of the
issuer.
Write-off policy
The gross carrying amount of a financial asset is written off (either partially or in full) to the
extent that there is no realistic prospect of recovery. This is generally the case when the Group
determines that the debtor does not have assets or sources of income that could generate sufficient cash
flows to repay the amounts subject to the write-off.
Subsequent recoveries of an asset that was previously written off are recognized as a reversal of
impairment in profit or loss in the period in which the recovery occurs.
APPENDIX I ACCOUNTANTS’ REPORT
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(ii) Credit losses from financial guarantees issued
Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments
to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified
debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantees issued are initially recognized within “trade and other payables” at fair value,
which is determined by reference to fees charged in an arm’s length transaction for similar services, when such
information is obtainable, or to interest rate differentials, by comparing the actual rates charged by lenders
when the guarantee is made available with the estimated rates that lenders would have charged, had the
guarantees not been available, where reliable estimates of such information can be made. Where consideration
is received or receivable for the issuance of the guarantee, the consideration is recognized in accordance with
the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable,
an immediate expense is recognized in profit or loss.
The Group monitors the risk that the specified debtor will default on the contract and recognizes a
provision when ECLs on the financial guarantees are determined to be higher than the amount carried in “trade
and other payables” in respect of the guarantees (i.e. the amount initially recognized, less accumulated
amortization).
To determine ECLs, the Group considers changes in the risk of default of the specified debtor since the
issuance of the guarantee. A 12-month ECL is measured unless the risk that the specified debtor will default
has increased significantly since the guarantee is issued, in which case a lifetime ECL is measured. The same
definition of default and the same assessment of significant increase in credit risk as described in note 2(i)(i)
apply.
(iii) Impairment of other non-current assets
Internal and external sources of information are reviewed at the end of reporting period to identify
indications that the following assets may be impaired or an impairment loss previously recognized no longer
exists or may have decreased:
– property, plant and equipment;
– right-of-use assets;
– intangible assets;
– other non-current assets; and
– investment in a subsidiary in the Company’s statements of financial position.
If any such indication exists, the asset’s recoverable amount is estimated. In addition, for intangible
assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable
amount is estimated annually whether or not there is any indication of impairment.
– Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs of disposal and value
in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. Where an asset does not generate cash inflows largely independent of
those from other assets, the recoverable amount is determined for the smallest group of assets that
generates cash inflows independently (i.e. a cash-generating unit (“CGU”)).
– Recognition of impairment losses
An impairment loss is recognized in profit or loss if the carrying amount of an asset, or the CGU
to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of CGU
are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of
units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro
rata basis, except that the carrying value of an asset will not be reduced below its individual fair value
less costs of disposal (if measurable) or value in use (if determinable).
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– Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a
favourable change in the estimates used to determine the recoverable amount. An impairment loss in
respect of goodwill is not reversed.
A reversal of an impairment loss is limited to the asset’s carrying amount that would have been
determined had no impairment loss been recognized in prior periods. Reversals of impairment losses are
credited to profit or loss in the period in which the reversals are recognized.
(j) Inventories
Inventories are assets which are held for sale in the ordinary course of business.
Inventories are carried at the lower of cost and net realizable value.
Cost is calculated using the weighted average cost formula and comprises all costs of purchase and other costs
incurred in bringing the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs
necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period
in which the related revenue is recognized.
The amount of any write-down of inventories to net realizable value and all losses of inventories are
recognized as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down
of inventories is recognized as a reduction in the amount of inventories recognized as an expense in the period in
which the reversal occurs.
A right to recover returned goods is recognized for the right to recover products from customers sold with a
right of return.
(k) Contract liabilities
A contract liability is recognized when the customer pays non-refundable consideration before the Group
recognizes the related revenue (see note 2(s)). A contract liability would also be recognized if the Group has an
unconditional right to receive non-refundable consideration before the Group recognizes the related revenue. In such
cases, a corresponding receivable would also be recognized (see note 2(l)).
For a single contract with the customer, either a net contract asset or a net contract liability is presented. For
multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis.
When the contract includes a significant financing component, the contract balance includes interest accrued
under the effective interest method (see note 2(s)).
(l) Trade and other receivables
A receivable is recognized when the Group has an unconditional right to receive consideration. A right to
receive consideration is unconditional if only the passage of time is required before payment of that consideration
is due. If revenue has been recognized before the Group has an unconditional right to receive consideration, the
amount is presented as a contract asset.
Receivables are stated at amortized cost, using the effective interest method less allowance for credit losses
(see note 2(i)).
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial
institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value, having been within three months of maturity at
acquisition. Cash and cash equivalents are assessed for ECLs in accordance with the policy set out in note 2(i).
APPENDIX I ACCOUNTANTS’ REPORT
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(n) Trade and other payables
Trade and other payables are initially recognized at fair value. Subsequent to initial recognition, trade and
other payables are stated at amortized cost unless the effect of discounting would be immaterial, in which case they
are stated at invoice amounts.
(o) Convertible redeemable preferred shares
Convertible redeemable preferred shares give rise to financial liabilities if they are redeemable in case of
occurrence of triggering events which are beyond the control of both the Group and the preferred shareholders. The
conversion feature is recognized as a derivative liability if it will or may be settled other than by the Group
exchanging a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity
instruments.
At initial recognition, the redemption liabilities resulting from the convertible redeemable preferred shares are
measured at the present value of the redemption amount. Subsequent changes in the carrying amount of the
redemption liabilities are recognized in profit or loss.
If the preferred shares are converted into ordinary shares, the carrying amount of the financial liabilities is
transferred to share capital and capital reserve.
(p) Employee benefits
(i) Short-term employee benefits and contributions to defined contribution retirement plans
Salaries, annual bonuses, contributions to defined contribution retirement plans and the cost of
non-monetary benefits are accrued in the period in which the associated services are rendered by employees.
Where payment or settlement is deferred and the effect would be material, these amounts are stated at their
present values.
(ii) Share-based payments
The fair value of shares granted to directors, employees, advisers and other persons (collectively,
“eligible persons”) is recognized as an expense with a corresponding increase in share-based payments reserve
within equity. The fair value is measured at grant date using the equity allocation method or discounted cash
flow method, taking into account the terms and conditions upon which the shares were granted. Where the
employees have to meet vesting conditions before becoming unconditionally entitled to the shares, the total
estimated fair value of the shares is spread over the vesting period, taking into account the probability that the
shares will vest.
During the vesting period, the number of shares that is expected to vest is reviewed. Any resulting
adjustment to the cumulative fair value recognized in prior periods is charged/credited to the profit or loss for
the period of the review, with a corresponding adjustment to the share-based payments reserve. On vesting
date, the amount recognized as an expense is adjusted to reflect the actual number of shares that vest (with a
corresponding adjustment to the share-based payments reserve). The equity amount is recognized in the
share-based payments reserve until the shares are vested (when it is included in the amount recognized in share
premium).
(iii) Termination benefits
Termination benefits are recognized at the earlier of when the Group can no longer withdraw the offer
of those benefits and when it recognizes restructuring costs involving the payment of termination benefits.
(q) Income tax
Income tax for the period comprises current tax and movements in deferred tax assets and liabilities. Current
tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they
relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts
of tax are recognized in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or
substantively enacted at the end of each reporting period during the Relevant Periods, and any adjustment to tax
payable in respect of previous periods.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 498 ---
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being
the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax
bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that
it is probable that future taxable profits will be available against which the asset can be utilized, are recognized.
Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary
differences include those that will arise from the reversal of existing taxable temporary differences, provided those
differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the
same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising
from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether
existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses
and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same
taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.
The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences
arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit (provided they are not part of a business combination), and temporary differences
relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the
timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case
of deductible differences, unless it is probable that they will reverse in the future.
The amount of deferred tax recognized is measured based on the expected manner of realization or settlement
of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of
reporting period during the Relevant Periods. Deferred tax assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at the end of reporting period during the Relevant
Periods and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that
sufficient taxable profits will be available.
Additional income taxes that arise from the distribution of dividends are recognized when the liability to pay
the related dividends is recognized.
Current tax balances and deferred tax balances, and movements therein, are presented separately from each
other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against
deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets
against current tax liabilities and the following additional conditions are met:
– in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a
net basis, or to realize the asset and settle the liability simultaneously; or
– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
authority on either:
– the same taxable entity; or
– different taxable entities, which, in each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and
settle the current tax liabilities on a net basis or realize and settle simultaneously.
(r) Provisions and contingent liabilities
Provisions are recognized when the Group has a legal or constructive obligation arising as a result of a past
event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable
estimate can be made. Where the time value of money is material, provisions are stated at the present value of the
expenditure expected to settle the obligation.
APPENDIX I ACCOUNTANTS’ REPORT
– I-25 –


--- page 499 ---
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic
benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence
of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic
benefits is remote.
(s) Revenue and other income
Income is classified by the Group as revenue when it arises from the sale of goods and provision of services
in the ordinary course of the Group’s business.
The Group is the principal for its revenue transactions and recognizes revenue on a gross basis. In determining
whether the Group acts as a principal or as an agent, it considers whether it obtains control of the products or services
before they are transferred to the customers. Control refers to the Group’s ability to direct the use of and obtain
substantially all of the remaining benefits from the products or services.
The Group’s revenue and other income recognition policies are as follows:
(i) Online retail pharmacy services
Revenue from online retail pharmacy services is principally sales of pharmaceutical and healthcare
products to individual customers on the Group’s online retail pharmacy service platform, third party platforms
and retail pharmacies, along which the Group provides online consulting services and after-sales consulting
services.
The revenue from online retail pharmacy services is recognized at the point in time when control of
pharmaceutical and healthcare products is transferred to the customers.
(ii) Comprehensive medical services
Revenue from comprehensive medical services is principally comprised 1) online consultation services,
e-prescription services and sales of pharmaceutical and other products on the Group’s comprehensive medical
service platform to individual customers; and 2) physician consultation services, physical examination
services, surgery services and sales of pharmaceutical products by the Group’s hospital to individual patients.
The revenue from the sales of pharmaceutical and healthcare products through comprehensive medical
service platform and hospital is recognized at the point in time when control of pharmaceutical and healthcare
products is transferred to the customers.
Online consultation services, e-prescription services, physician consultation services, physical
examination services and surgery service are generally rendered in a short period of time and revenue is
recognized at a point in time on completion of the related services when the services are rendered and
completed.
(iii) Customized content and marketing solutions
Revenue from customized content and marketing solutions is principally comprised content and
marketing solutions to pharmaceutical and healthcare products suppliers and third parties. The Group performs
the services stipulated in the contracts during the continuous transfer of control of the services to the customers
and recognizes revenue over time.
(iv) Pharmaceutical distribution
Revenue from pharmaceutical distribution is recognized at the point in time when control of
pharmaceutical and healthcare products is transferred to the customers.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 500 ---
(v) Discount vouchers
From time to time, the Group offers its customers discount vouchers for free of charge through various
promotional and advertising activities, and the discount vouchers can only be utilized when future purchases
are made by the customers on certain specified pharmaceutical and healthcare products of the Group. The
Group recognizes the discount vouchers as a reduction in revenue when the customers apply the discount
vouchers in future purchases.
(vi) Interest income
Interest income is recognized as it accrues using the effective interest method. For financial assets
measured at amortized cost that are not credit-impaired, the effective interest rate is applied to the gross
carrying amount of the asset. For credit-impaired financial assets, the effective interest rate is applied to the
amortized cost (i.e. gross carrying amount net of loss allowance) of the asset.
(vii) Government grants
Government grants are recognized in the consolidated statements of financial position initially when
there is reasonable assurance that they will be received and that the Group will comply with the conditions
attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in profit
or loss on a systematic basis in the same periods in which the expenses are incurred.
(t) Translation of foreign currencies
Foreign currency transactions during the period are translated at the foreign exchange rates ruling at the
transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign
exchange rates ruling at the end of each reporting period during the Relevant Periods. Exchange gains and losses are
recognized in profit or loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated using the foreign exchange rates ruling at the transaction dates. The transaction date is the date on which
the Group initially recognizes such non-monetary assets or liabilities. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling
at the dates the fair value was measured.
(u) Related parties
(a) A person, or a close member of that person’s family, is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or the Group’s parent.
(b) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of
a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or
an entity related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
APPENDIX I ACCOUNTANTS’ REPORT
– I-27 –


--- page 501 ---
(viii) The entity, or any member of a group of which it is a part, provides key management personnel
services to the Group or to the Group’s parent.
Close members of the family of a person are those family members who may be expected to influence, or be
influenced by, that person in their dealings with the entity.
(v) Segment reporting
Operating segments, and the amounts of each segment item reported in the Historical Financial Information,
are identified from the financial information provided regularly to the Group’s most senior executive management
for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business
and geographical locations.
Individually material operating segments are not aggregated for financial reporting purposes unless the
segments have similar economic characteristics and are similar in respect of the nature of products and services, the
nature of production processes, the type or class of customers, the methods used to distribute the products or provide
the services, and the nature of the regulatory environment. Operating segments which are not individually material
may be aggregated if they share a majority of these criteria.
(w) Borrowing costs
Borrowing costs are expensed in the period in which they are incurred.
3 ACCOUNTING JUDGEMENT AND ESTIMATES
Key sources of estimation uncertainty
Note 23(a) contains information about the assumptions and their risk factors relating to fair value of shares
granted. Other key sources of estimation uncertainty in the process of applying the Group’s accounting policies are
as follows:
(a) Recognition of deferred tax assets
Deferred tax assets in respect of tax losses carried forward and deductible temporary differences are
recognized and measured based on the expected manner of realization or settlement of the carrying amount of
the relevant assets and liabilities, using tax rates enacted or substantively enacted at the end of each reporting
date. In determining a number of assumptions relating to the operating environment of the Group and require
a significant level of judgement exercised by the directors. Any change in such assumptions and judgement
would affect the carrying amounts of deferred tax assets to be recognized and hence the net profit or loss in
future years.
(b) Provision for diminution in value of inventories
Management reviews the ageing and expiry dates of inventories of the Group at the end of each
reporting period, and makes provision on obsolete and slow-moving inventory items identified that are no
longer suitable for sale. Management estimates the net realizable value for such inventories based primarily
current market condition and historical experience on similar inventories. Any change in the assumptions
would increase or decrease the amount of inventories write-down or the related reversals of write-down and
affect the Group’s consolidated financial position.
(c) Assessment on control over a private non-enterprise hospital
As set out in note 1.3, the Group operated a private non-enterprise hospital during the Relevant Periods.
The Group has entered into agreements with the hospital, pursuant to which the Group obtains contractual
rights to provide management services to the hospital and is entitled to receive income-based management
fees. All the three directors of the council of the private non-enterprise hospital are appointed by the Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-28 –


--- page 502 ---
The Group has exercised significant judgements in determining whether the Group has control over the
hospital. In exercising such judgement, the Group considers:
(i) the purpose and plan of the hospital;
(ii) what the relevant activities are and how decisions about those activities are made;
(iii) whether the rights of the Group give the current ability to direct the relevant activities;
(iv) whether rights exercisable by other parties as internal governance body members are substantive;
(v) whether the Group is exposed, or has rights, to variable returns from its involvement with the
hospital, and
(vi) whether the Group has the ability to use its power over the hospital to affect the amount of
returns.
Based on the assessment, the Group concluded that the Group has the decision-making power over the
internal governance body of the hospital to direct the relevant activities of the hospital, so the Group has
control over and thus has consolidated the hospital during the Relevant Periods.
(d) Provision for expected credit losses on trade receivables
The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based
on aging of trade receivables. The provision matrix is initially based on the Group’s historical observed default
rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking
information.
The assessment of the correlation among historical observed default rates and ECLs is a significant
estimate. The amount of ECLs is sensitive to changes in circumstances and forecast economic conditions. The
Group’s historical credit loss experience and forecast of economic conditions may also not be representative
of customer’s actual default in the future.
4 REVENUE AND SEGMENT REPORTING
(a) Revenue
The principal activities of the Group are online retail pharmacy services, comprehensive medical services and
customized content and marketing solutions.
Disaggregation of revenue
Disaggregation of revenue from contracts with customers by major products or service lines is as
follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Revenue from contracts with customers within
the scope of HKFRS 15
Online retail pharmacy services 1,011,427 1,252,123 1,297,106
Comprehensive medical services 719,693 868,171 983,654
Customized content and marketing solutions 27,553 60,254 87,046
Others – 23,755 66,502
1,758,673 2,204,303 2,434,308
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 503 ---
Disaggregation of revenue from contracts with customers by the timing of revenue recognition is set out
as below:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Disaggregated by timing of revenue recognition
- Point in time 1,731,120 2,144,049 2,312,533
- Over time 27,553 60,254 121,775
1,758,673 2,204,303 2,434,308
No revenue from individual customer contributes over 10% of total revenue of the Group for the
Relevant Periods.
The Group applies the practical expedient in paragraph 121 of HKFRS 15 of not disclosing the
transaction price allocated to the remaining performance obligation as the original expected duration of all the
contracts of the Group are within one year or less.
(b) Segment Reporting
The Group manages its businesses by divisions. In a manner consistent with the way in which information is
reported internally to the Group’s most senior executive management for the purposes of resource allocation and
performance assessment, the Group has presented three reportable segments. The measure used for reporting segment
profit is gross profit. The Group’s senior executive management is provided with segment information concerning
segment revenue and profit. Segment assets and liabilities are not reported to the Group’s senior executive
management regularly.
(i) Segment results
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Disaggregated by segment
Online retail pharmacy services
Revenue 1,011,427 1,252,123 1,297,106
Gross profit 155,000 206,693 263,191
Comprehensive medical services
Revenue 719,693 868,171 983,654
Gross profit 40,543 122,078 149,738
Customized content and marketing solutions
Revenue 27,553 60,254 87,046
Gross profit 24,105 51,483 72,277
Others
Revenue – 23,755 66,502
Gross profit – 330 2,201
Reportable segment gross profit derived from the
Group’s external customers 219,648 380,584 487,407
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 504 ---
(ii) Reconciliations of reportable segment profit
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Disaggregated by segment
Reportable segment profit derived from the Group’s
external customers 219,648 380,584 487,407
Other net income/(loss) 33,005 (134,188) (23,915)
Selling and distribution expenses (309,291) (330,248) (343,770)
Administrative expenses (138,967) (177,483) (171,477)
Recognition of impairment losses (310) (173) (140)
Finance costs (108,035) (121,781) (144,816)
Loss before taxation (303,950) (383,289) (196,711)
(iii) Geographic information
Analysis of the Group’s revenue and results as well as analysis of the Group’s carrying amount of
segment assets and additions to property, plant and equipment by geographical market has not been presented
as over 99% of the Group’s loss from operations for the years ended December 31, 2021, 2022 and 2023 are
generated from the PRC market.
5 OTHER NET INCOME/(LOSS)
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Government grants (i) 4,442 526 1,026
Foreign exchange gain/(loss) (ii) 27,635 (134,660) (28,444)
Other gain/(loss) 928 (54) 3,503
33,005 (134,188) (23,915)
Notes:
(i) Government grants represent various forms of incentives and subsidies granted to the Group by the local
government authorities in the PRC.
(ii) The foreign exchange gain or loss primarily resulted from the translation of the preferred shares which
denominated in USD as disclosed in note 25.
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –


--- page 505 ---
6 LOSS BEFORE TAXATION
Loss before taxation is arrived at after charging:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
(a) Finance costs
Interest on lease liabilities
(note 11(b)) 815 752 1,377
Interest on bank loans – 415 263
Changes in the carrying amount of preferred
shares liability (note 25) 107,220 120,614 143,176
108,035 121,781 144,816
(b) Staff costs (including directors’ emoluments)
Salaries, wages and other benefits 102,038 136,459 132,169
Equity settled share-based transactions (note 23) 7,904 13,648 5,233
Contributions to defined contribution
retirement plan (i) 10,411 14,810 9,643
120,353 164,917 147,045
Notes:
(i) Pursuant to the relevant labour rules and regulations in the PRC, the Group’s entities in the PRC
participate in defined contribution retirement benefit schemes (the “Schemes”) organized by the local
government authorities whereby the Group’s entities in the PRC are required to make contributions to
the Schemes based on certain percentages of the eligible employee’s salaries. The local government
authorities are responsible for the entire pension obligations payable to the retired employees.
The Group also operates a Mandatory Provident Fund Scheme (“the MPF scheme”) under the Hong
Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of
the Hong Kong Employment Ordinance and not previously covered by the defined benefit retirement
plan.
The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under
the MPF scheme, the employer and its employees are each required to make contributions to the plan
at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$30,000.
Contributions to the plan vest immediately, there is no forfeited contributions that may be used by the
Group to reduce the existing level of contribution.
The Group has no further material obligation for payment of other retirement benefits beyond the above
contributions.
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –


--- page 506 ---
(ii) Staff costs includes remuneration of directors and senior management (notes 8 and 28(a)).
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
(c) Other items
Amortization
– intangible assets (note 12) 656 722 795
Depreciation (note 11)
– property, plant and equipment 2,270 3,224 3,591
– right-of-use assets 10,210 13,490 15,929
12,480 16,714 19,520
Recognition of impairment losses
– trade debtors (note 27(a)) 310 173 140
Research and development costs 45,950 61,783 41,532
Listing expense 13,453 21,273 25,081
Cost of inventories (note 14(b)) 1,517,478 1,796,427 1,955,804
During the years ended December 31, 2021, 2022 and 2023, research and development costs includes staff
costs, depreciation and amortization of RMB44,065,000, RMB60,485,000 and RMB41,180,000 respectively, which
amounts are also included in the respective total amounts disclosed separately above or in note 6(b) for each of these
types of expenses.
7 Income tax in the consolidated statements of profit or loss and other comprehensive income
The Group is subject to income tax on an entity basis on profits arising in or derived from the jurisdictions
in which members of the Group are domiciled and operated.
(a) Taxation in the consolidated statements of profit or loss and other comprehensive income represents:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Current tax
Provision for the year 39 13 77
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –


--- page 507 ---
(i) The Cayman Islands income tax
Pursuant to the rules and regulations of the Cayman Islands, the Company is not subject to any income
tax in the Cayman Islands.
(ii) Hong Kong income tax
For the subsidiary in Hong Kong, the first HKD2 million of assessable profits are taxed at 8.25% and
the remaining assessable profits are taxed at 16.5%. No Hong Kong profits tax on the subsidiary has been
provided as there was no assessable profit arising in Hong Kong during the Relevant Periods.
(iii) The PRC corporate income tax
The provision for current income tax in Mainland China is based on a statutory tax rate of 25% of the
assessable profits of the PRC subsidiaries of the Group as determined in accordance with the Corporate Income
Tax Law of the PRC and the respective regulations except for Fangzhou Information and Guangzhou Fangzhou
Media Co., Ltd. (“Fangzhou Media”). Fangzhou Information was certified as “High and New Technology
Enterprises” (“HNTE”) and entitled to the preferential income tax rate of 15% for the three calendar years
since December 31, 2022.
Fangzhou Media was eligible as a small low-profit enterprise and entitled to a tax relief policy. The
portion of annual taxable income amount of a small low-profit enterprise, which does not exceed
RMB1 million, shall be computed at a reduced rate of 25% as taxable income amount, and be subject to
enterprise income tax at 20% tax rate.
(b) Reconciliation between tax expense and accounting loss at applicable tax rates:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Loss before taxation (303,950) (383,289) (196,711)
Notional tax on loss before taxation, calculated
at the rates applicable to loss in the
jurisdictions concerned (51,477) (26,688) 2,617
Tax concessions – 415 (770)
Tax effect of non-deductible expenses 1,133 1,720 1,026
Tax effect of temporary differences and tax
losses not recognized in current year (net) 50,383 27,041 (930)
Additional deduction of qualified research and
development costs (i) – (2,475) (1,866)
Actual tax expenses 39 13 77
(i) According to the relevant laws and regulations promulgated by the State Administration of Taxation of
the PRC, an additional 75% of qualified research and development costs incurred is allowed to be
deducted from taxable income.
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –


--- page 508 ---
8 DIRECTORS’ EMOLUMENTS
Details of directors’ emoluments during the Relevant Periods are as follows:
Y ear ended December 31, 2021
Note
Directors’
fees
Salaries,
allowances
and other
benefits
Discretionary
bonuses
Retirement
scheme
contributions
Equity settled
share-based
transactions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Xie Fangmin
(chief executive) (a) – 1,894 653 36 – 2,583
Mr. Zhou Feng (a) – 1,120 653 – – 1,773
Mr. Zou Y uming (d) – – – – 1,312 1,312
Non-executive directors
Mr. David Mckee Hand (b) – ––– – –
Mr. Kong Qingrong (c) – ––– – –
Mr. Wang Lei (c) – ––– – –
Ms. Liu Xiukui (c) –8 1 – 1 1 – 9 2
Total – 3,095 1,306 47 1,312 5,760
Y ear ended December 31, 2022
Note
Directors’
fees
Salaries,
allowances
and other
benefits
Discretionary
bonuses
Retirement
scheme
contributions
Equity settled
share-based
transactions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Xie Fangmin
(chief executive) (a) – 4,528 – 40 – 4,568
Mr. Zhou Feng (a) – 2,626 – – – 2,626
Mr. Zou Y uming (d) – 1,244 44 13 182 1,483
Non-executive directors
Mr. David Mckee Hand (b) – ––– – –
Total – 8,398 44 53 182 8,677
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –


--- page 509 ---
Y ear ended December 31, 2023
Note
Directors’
fees
Salaries,
allowances
and other
benefits
Discretionary
bonuses
Retirement
scheme
contributions
Equity settled
share-based
transactions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
Mr. Xie Fangmin
(chief executive) (a) – 5,569 1,057 69 – 6,695
Mr. Zhou Feng (a) – 3,096 1,057 – – 4,153
Mr. Zou Y uming (d) – 1,760 46 32 – 1,838
Non-executive director
Mr. David Mckee Hand (b) – ––– – –
Total – 10,425 2,160 101 – 12,686
Notes:
(a) Mr. Xie Fangmin and Mr. Zhou Feng were appointed as executive directors of the Company on
September 26, 2019.
(b) Mr. David Mckee Hand was appointed as a non-executive director of the Company on December 14,
2020. No remuneration was paid to him by the Group during the Relevant Periods.
(c) Mr. Kong Qingrong, Mr. Wang Lei and Ms. Liu Xiukui were appointed as non-executive directors of the
Company on December 14, 2020 and all of them resigned on August 9, 2021. No remuneration was paid
to Mr. Kong Qingrong and Mr. Wang Lei by the Group during the Relevant Periods.
(d) Mr. Zou Y uming was appointed as an executive director of the Company on August 9, 2021.
9 INDIVIDUALS WITH HIGHEST EMOLUMENTS
During the years ended December 31, 2021, 2022 and 2023, of the five individuals with the highest
emoluments, three, three and three are directors whose emoluments are disclosed in note 8. The aggregate of the
emoluments in respect of the other two, two and two individuals are as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Salaries and other benefits 1,923 2,185 2,016
Discretionary bonuses 181 76 1,156
Retirement scheme contributions 15 80 86
Equity settled share-based transactions 402 1,099 434
2,521 3,440 3,692
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –


--- page 510 ---
The emoluments of the two, two and two individuals with the highest emoluments are within the following
bands:
Y ear ended December 31,
2021 2022 2023
Number of
individuals
Number of
individuals
Number of
individuals
HKD1,000,001 – HKD1,500,000 2 1 1
HKD1,500,001 – HKD2,000,000 – – –
HKD2,000,001 – HKD2,500,000 – 1 –
HKD2,500,001 – HKD3,000,000 – – 1
222
10 LOSS PER SHARE
Loss per share information is not presented as its inclusion, for the purpose of the Historical Financial
Information, is not considered meaningful due to the basis of preparation and presentation of Historical Financial
Information of the Group as disclosed in note 1.
11 PROPERTY, PLANT AND EQUIPMENT
(a) Reconciliation of carrying amount of property, plant and equipment
Machinery
and
equipment
Motor
vehicles
Furniture,
fixtures and
other
equipment
Leasehold
improvement
Right-of-use
assets Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At January 1, 2021 2,263 294 2,582 5,573 31,874 42,586
Additions 209 1,108 1,228 2,444 8,783 13,772
Disposals – – – (272) (2,625) (2,897)
At December 31, 2021 and
January 1, 2022 2,472 1,402 3,810 7,745 38,032 53,461
Additions 276 – 2,357 1,669 21,974 26,276
Disposals – – (26) (60) (12,677) (12,763)
At December 31, 2022 and
January 1, 2023 2,748 1,402 6,141 9,354 47,329 66,974
Additions 1,412 – 1,856 1,677 35,325 40,270
Disposals (4) – (689) (1,638) (17,618) (19,949)
At December 31, 2023 4,156 1,402 7,308 9,393 65,036 87,295---------- ------- -- -------- ---------- ---------- -------
Accumulated depreciation:
At January 1, 2021 (1,900) (49) (1,772) (3,557) (13,063) (20,341)
Charge for the year
(note 6(c)) (114) (210) (529) (1,417) (10,210) (12,480)
Written back on disposals – – – 111 2,625 2,736
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –


--- page 511 ---
Machinery
and
equipment
Motor
vehicles
Furniture,
fixtures and
other
equipment
Leasehold
improvement
Right-of-use
assets Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At December 31, 2021 and
January 1, 2022 (2,014) (259) (2,301) (4,863) (20,648) (30,085)
Charge for the year
(note 6(c)) (88) (351) (960) (1,825) (13,490) (16,714)
Written back on disposals – – 23 41 11,021 11,085
At December 31, 2022 and
January 1, 2023 (2,102) (610) (3,238) (6,647) (23,117) (35,714)
Charge for the year
(note 6(c)) (167) (347) (1,394) (1,683) (15,929) (19,520)
Written back on disposals 4 – 684 1,633 17,257 19,578
At December 31, 2023 (2,265) (957) (3,948) (6,697) (21,789) (35,656)---------- ------- ---------- ---------- ---------- -------
Net book value:
At December 31, 2023 1,891 445 3,360 2,696 43,247 51,639
At December 31, 2022 646 792 2,903 2,707 24,212 31,260
At December 31, 2021 458 1,143 1,509 2,882 17,384 23,376
(b) Right-of-use assets
The analysis of expense items in relation to leases recognized in profit or loss is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Depreciation charge of right-of-use assets by
class of underlying asset:
– Pharmacies 1,275 1,575 1,452
– Warehouses 4,131 6,335 6,574
– Offices 4,643 5,443 7,533
– Dormitories 161 137 370
10,210 13,490 15,929
Expense relating to short-term leases 804 545 426
Interest on lease liabilities (note 6(a)) 815 752 1,377
Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in notes 18(c)
and 22, respectively.
The Group has obtained the right to use other properties as its pharmacies, warehouses, offices and dormitories
through tenancy agreements. The leases typically run for an initial period of 14 to 72 months. Lease payments are
usually increased by each year to reflect market rentals.
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –


--- page 512 ---
12 INTANGIBLE ASSETS
Computer
software License Trademark Total
RMB’000 RMB’000 RMB’000 RMB’000
Cost:
At January 1, 2021 102 2,720 – 2,822
Additions 579 – – 579
At December 31, 2021 and
January 1, 2022 681 2,720 – 3,401
Additions 606 – 131 737
At December 31, 2022 and
January 1, 2023 1,287 2,720 131 4,138
Additions 608 15 – 623
Disposals (14) – – (14)
At December 31, 2023 1,881 2,735 131 4,747----------- ----------- ----------- -----------
Accumulated amortization:
Balance at January 1, 2021 (27) (282) – (309)
Charge for the year (note 6(c)) (40) (616) – (656)
Balance at December 31, 2021 and
January 1, 2022 (67) (898) – (965)
Charge for the year (note 6(c)) (98) (616) (8) (722)
Balance at December 31, 2022 and
January 1, 2023 (165) (1,514) (8) (1,687)
Charge for the year (note 6(c)) (165) (620) (10) (795)
Written back on disposals 10 – – 10
Balance at December 31, 2023 (320) (2,134) (18) (2,472)-----------
----------- ----------- -----------
Carrying amounts:
At December 31, 2023 1,561 601 113 2,275
At December 31, 2022 1,122 1,206 123 2,451
At December 31, 2021 614 1,822 – 2,436
APPENDIX I ACCOUNTANTS’ REPORT
– I-39 –


--- page 513 ---
13 OTHER NON-CURRENT ASSETS
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Interest in an investment vehicle (i) 10,000 10,000 –
Others 767 – 100
10,767 10,000 100
Note:
(i) The balance mainly represented an investment in a limited partnership investment vehicle, which
intends to invest in the healthcare industry. The Group made investment of RMB2 million and RMB8
million in 2020 and 2021, respectively. The carrying amount of such investment amounted to RMB10
million, RMB10 million as at December 31, 2021 and 2022, respectively. The Group disposed the
investment at a consideration of RMB10 million in June 2023.
14 INVENTORIES
(a) Inventories in the consolidated statements of financial position comprise:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Pharmaceutical and healthcare products 111,528 126,464 136,045
(b) The analysis of the amount of inventories recognized as an expense and included in profit or loss is as
follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Carrying amount of inventories sold 1,516,288 1,796,376 1,912,293
Write-down of inventories 1,190 51 43,511
1,517,478 1,796,427 1,955,804
All of the inventories are expected to be recovered within one year.
APPENDIX I ACCOUNTANTS’ REPORT
– I-40 –


--- page 514 ---
15 TRADE AND OTHER RECEIV ABLES
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade debtors 7,599 28,534 24,299
Bills receivable – 1,000 –
Less: loss allowance (30) (146) (203)
7,569 29,388 24,096------------ ------------ ------------
Purchase rebates with suppliers 32,914 42,426 60,944
Deposits 5,849 7,596 10,487
Other receivables 1,989 7,001 5,615
40,752 57,023 77,046------------
------------ ------------
48,321 86,411 101,142
All of the trade and other receivables are expected to be recovered or recognized as expense within one year.
Ageing analysis:
As at the end of each reporting period during the Relevant Periods, the ageing analysis of trade debtors and
bills receivable (which are included in trade and other receivables), based on the invoice date and net of loss
allowance, is as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Within 3 months 7,183 24,904 17,012
Over 3 months but within 6 months 378 2,833 5,160
Over 6 months but within 1 year 8 1,651 1,336
Over 1 year – – 588
7,569 29,388 24,096
Trade debtors and bills receivable are generally due within 180 days from the date of billing. Further details
on the Group’s credit policy are set out in note 2(i).
APPENDIX I ACCOUNTANTS’ REPORT
– I-41 –


--- page 515 ---
16 OTHER CURRENT ASSETS
The Group:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Input value-added tax to be verified or credited 21,118 18,910 30,778
Others (i) 2,690 7,447 3,983
23,808 26,357 34,761
Note:
(i) The balance mainly represented the listing expenses to be deducted from equity upon the Listing.
The Company:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Listing expenses to be deducted from equity
upon the Listing 2,340 5,397 3,983
17 RESTRICTED BANK DEPOSITS
As at December 31, 2021, 2022 and 2023, deposits with bank of nil, RMB25,000,000 and RMB30,615,000
were pledged as securities for bills payable. As at December 31, 2022 and 2023, a subsidiary of the Group utilized
the banking facilities to issue bills of RMB50,000,000 and RMB68,715,000 respectively, to settle the inter-group
purchase transactions. The balance of bills payable was eliminated in the Historical Financial Information.
18 CASH AND CASH EQUIV ALENTS AND OTHER CASH FLOW INFORMATION
(a) Cash and cash equivalents comprise
The Group:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Cash on hand 21 24 52
Cash at bank 77,646 123,284 129,436
Cash equivalents placed at payment platforms 6,991 11,599 16,829
84,658 134,907 146,317
APPENDIX I ACCOUNTANTS’ REPORT
– I-42 –


--- page 516 ---
The Company:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Cash at bank 1,076 59,439 1,021
As at December 31, 2021, 2022 and 2023, the Group’s cash and cash equivalents situated in Mainland China
amounted to RMB50,416,000, RMB62,901,000 and RMB105,756,228 respectively. Remittance of funds out of
Mainland China is subject to relevant rules and regulations of foreign exchange control.
(b) Reconciliation of loss before taxation to cash generated from/(used in) operations
Y ear ended December 31,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Loss before taxation (303,950) (383,289) (196,711)
Adjustments for:
Recognition of impairment losses 6(c) 310 173 140
Expense of equity settled
share-based transactions 23(b) 7,904 13,648 5,233
Finance costs 6(a) 108,035 121,781 144,816
Foreign exchange (gain)/loss 5 (27,635) 134,660 28,444
Net loss/(gain) on disposal of property,
plant and equipment 161 14 (21)
Depreciation 6(c) 12,480 16,714 19,520
Amortization of intangible assets 12 656 722 795
Changes in working capital:
Increase in inventories (42,557) (14,936) (9,581)
(Increase)/decrease in prepayments (5,453) (53,832) 45,525
Increase in trade and other receivables (32,231) (38,263) (14,871)
Decrease in amounts due from related parties 43,450 – –
Increase in other current assets (10,542) (2,549) (8,404)
Increase in trade and other payables 92,017 77,177 84,216
Decrease in amounts due to related parties (52,737) – –
Increase/(decrease) in contract liabilities 5,942 71,313 (69,495)
Increase/(decrease) in other current liabilities 537 6,703 (7,250)
Cash (used in)/generated from operations (203,613) (49,964) 22,356
APPENDIX I ACCOUNTANTS’ REPORT
– I-43 –


--- page 517 ---
(c) Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabilities from financing activities, including both cash and
non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash
flows will be, classified in the Group’s consolidated statements of cash flows as cash flows from financing activities.
Convertible
redeemable
preferred
shares
Lease
liabilities Total
RMB’000 RMB’000 RMB’000
(note 25) (note 22)
At January 1, 2021 1,292,956 20,082 1,313,038
Changes from financing cash flows:
Capital element of lease rentals paid – (10,592) (10,592)
Interest element of lease rentals paid – (815) (815)
Total changes from financing cash flows – (11,407) (11,407)------------ ------------ ------------
Other changes:
Changes in the carrying amount of preferred
shares liability (note 6(a)) 107,220 – 107,220
Foreign exchange gain (31,409) – (31,409)
Interest expenses (note 6(a)) – 815 815
Additions on lease liabilities (note 11(a)) – 8,783 8,783
Total other changes 75,811 9,598 85,409 ------------
------------ ------------
At December 31, 2021 1,368,767 18,273 1,387,040
Convertible
redeemable
preferred
shares
Lease
liabilities Bank loans Total
RMB’000 RMB’000 RMB’000 RMB’000
(note 25) (note 22) (note 21)
At January 1, 2022 1,368,767 18,273 – 1,387,040----------- ----------- ----------- -----------
Changes from financing cash
flows:
Issuance of convertible redeemable
preferred shares (note 25) 110,175 – – 110,175
Proceed from bank loans – – 24,790 24,790
Repayment of bank loans – – (14,790) (14,790)
Interest paid – – (261) (261)
Capital element of lease rentals paid – (11,929) – (11,929)
Interest element of lease rentals paid – (752) – (752)
Total changes from financing cash
flows 110,175 (12,681) 9,739 107,233 ----------- ----------- ----------- -----------
APPENDIX I ACCOUNTANTS’ REPORT
– I-44 –


--- page 518 ---
Convertible
redeemable
preferred
shares
Lease
liabilities Bank loans Total
RMB’000 RMB’000 RMB’000 RMB’000
(note 25) (note 22) (note 21)
Other changes:
Foreign exchange loss 138,326 – – 138,326
Changes in the carrying amount of
preferred shares liability
(note 6(a)) 120,614 – – 120,614
Interest expenses (note 6(a)) – 752 415 1,167
Additions on lease liabilities
(note 11(a)) – 21,974 – 21,974
Disposal on lease liabilities – (1,664) – (1,664)
Total other changes 258,940 21,062 415 280,417-----------
----------- ----------- -----------
At December 31, 2022 1,737,882 26,654 10,154 1,774,690
Convertible
redeemable
preferred
shares
Lease
liabilities Bank loans Total
RMB’000 RMB’000 RMB’000 RMB’000
(note 25) (note 22) (note 21)
At January 1, 2023 1,737,882 26,654 10,154 1,774,690----------- ----------- ----------- -----------
Changes from financing cash
flows:
Proceed from bank loans – – 25,601 25,601
Repayment of bank loans – – (30,601) (30,601)
Interest paid – – (412) (412)
Capital element of lease rentals paid – (16,904) – (16,904)
Interest element of lease rentals paid – (1,377) – (1,377)
Total changes from financing cash
flows – (18,281) (5,412) (23,693) ----------- ----------- ----------- -----------
Other changes:
Foreign exchange loss 30,463 – – 30,463
Changes in the carrying amount of
preferred shares liability
(note 6(a)) 143,176 – – 143,176
Interest expenses (note 6(a)) – 1,377 263 1,640
Additions on lease liabilities
(note 11(a)) – 35,325 – 35,325
Disposal on lease liabilities – (361) – (361)
Total other changes 173,639 36,341 263 210,243-----------
----------- ----------- -----------
At December 31, 2023 1,911,521 44,714 5,005 1,961,240
APPENDIX I ACCOUNTANTS’ REPORT
– I-45 –


--- page 519 ---
19 TRADE AND OTHER PAYABLES
The Group:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Trade payables (ii) 191,500 220,083 292,944
Staff cost payables 33,688 52,253 53,829
Other tax payables 2,825 13,555 20,480
Deposits 1,395 1,132 1,444
Other payables and accrued charges 52,641 69,194 71,754
282,049 356,217 440,451
The Company:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Listing expense payables 1,936 8,817 7,153
Staff cost payables – 850 2,996
Other payables and accrued charges 562 211 –
2,498 9,878 10,149
Notes:
(i) All of the trade and other payables are expected to be settled or recognized as income within one year
or are repayable on demand.
(ii) As at the end of each reporting period during the Relevant Periods, the ageing analysis of trade payables
(which are included in trade and other payables), based on the invoice date, is as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Within 1 month 137,328 118,582 181,163
1 to 3 months 52,747 99,781 110,683
Over 3 months but within 6 months 1,253 1,471 842
Over 6 months but within 1 year 145 88 169
Over 1 year but within 2 years 27 161 87
191,500 220,083 292,944
APPENDIX I ACCOUNTANTS’ REPORT
– I-46 –


--- page 520 ---
20 CONTRACT LIABILITIES
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Advances from customers 13,841 83,448 15,254
Customers’ loyalty points program 4,214 5,920 4,619
Total 18,055 89,368 19,873
Movements in contract liabilities:
Contract
liabilities
RMB’000
Balance at January 1, 2021 12,113
Decrease in contract liabilities as a result of recognizing revenue during the year that
was included in the contract liabilities at the beginning of the year (12,113)
Increase in contract liabilities as a result of billing in advance 13,841
Increase in contract liabilities as a result of customers’ loyalty points program 4,214
Balance at December 31, 2021 and January 1, 2022 18,055
Decrease in contract liabilities as a result of recognizing revenue during the year that
was included in the contract liabilities at the beginning of the year (18,055)
Increase in contract liabilities as a result of billing in advance 83,448
Increase in contract liabilities as a result of customers’ loyalty points program 5,920
Balance at December 31, 2022 and January 1, 2023 89,368
Decrease in contract liabilities as a result of recognizing revenue during the year that
was included in the contract liabilities at the beginning of the year (89,368)
Increase in contract liabilities as a result of billing in advance 9,639
Increase in contract liabilities as a result of customers’ loyalty points program 10,234
Balance at December 31, 2023 19,873
As at December 31, 2021, 2022 and 2023, no receipts in advance from customers of the Group are expected
to be recognized as income after more than one year.
21 BANK LOANS
As at December 31, 2022 and 2023, all the Group’s bank loans are unsecured and repayable within 1 year.
As at December 31, 2021, 2022 and 2023, the unutilized banking facilities of the Group amounted to
RMB120,000,000, RMB60,000,000 and RMB48,899,500 respectively. The Group was not subject to the fulfilment
of covenants for the banking facilities.
APPENDIX I ACCOUNTANTS’ REPORT
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22 LEASE LIABILITIES
The following table shows the remaining contractual maturities of the Group’s lease liabilities at the end of
each reporting period during the Relevant Periods:
As at December 31,
2021 2022 2023
Present
value of the
minimum
lease
payments
Total
minimum
lease
payments
Present
value of the
minimum
lease
payments
Total
minimum
lease
payments
Present
value of the
minimum
lease
payments
Total
minimum
lease
payments
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year 9,958 10,703 12,796 13,858 15,346 16,770--------- --------- --------- --------- --------- ---------
After 1 year but within 2 years 6,682 6,861 7,011 7,483 10,194 11,136
After 2 years but within 5 years 1,633 1,665 6,847 7,266 19,174 20,057
8,315 8,526 13,858 14,749 29,368 31,193--------- --------- --------- --------- --------- ---------
18,273 19,229 26,654 28,607 44,714 47,963
Less: total future interest expenses (956) (1,953) (3,249)
Present value of lease liabilities 18,273 26,654 44,714
23 EQUITY SETTLED SHARE-BASED TRANSACTIONS
(a) RSU Incentive Plan
On January 1, 2020, the board of the Company approved the restricted share units incentive plan (the “RSU
Incentive Plan”) which is a share-based incentive plan to reward, retain and motivate the Group’s eligible persons
as approved by the Board or the authorized administrator of the RSU Incentive Plan. Under the RSU Incentive Plan,
the Directors of the Company are authorized, at their discretion, to grant restricted share of the Company to eligible
persons on a fair and reasonable basis with reference to the performance of the Company and contribution of the
individuals.
The shares granted would vest on specific dates, on condition that eligible persons remain in service without
any performance requirements. Once the vesting conditions underlying the respective shares are met, the shares are
considered duly and validly issued to the eligible persons. Unless approved by the board of the Company, any transfer
of restricted shares prior to the Listing shall be void.
APPENDIX I ACCOUNTANTS’ REPORT
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(i) Movements in RSUs granted are as follows:
Number of shares
Outstanding as of January 1, 2021 4,204,000
Granted on March 1, 2021 100,000
Shares vested before the date of shares split (1,240,235)
Effect of shares split 12,255,060
Granted on December 31, 2021 9,875,000
Shares vested after the date of shares split (2,945,013)
Outstanding as of December 31, 2021 22,248,812
Shares vested during the year (7,898,800)
Outstanding as of December 31, 2022 14,350,012
Shares vested during the year (6,948,763)
Outstanding as of December 31, 2023 7,401,249
During the years ended December 31, 2020 and 2021, the Group had granted RSUs to certain eligible
persons under the RSU Incentive Plan, which would be vested within 3.75 years since the date of grant.
As at December 31, 2021, 2022 and 2023, the weighted average remaining vesting periods for the shares
granted was 3.3 years, 2.3 years and 1.3 years respectively.
(ii) Fair value of shares and assumptions
The fair value of services received in return for shares granted is measured by reference to the fair value
of shares granted. The estimate of the fair value of the shares granted is measured based on equity allocation
method.
Grant date
December 31,
2020
March 1,
2021
December 31,
2021
RMB’000 RMB’000 RMB’000
Fair value at measurement date (USD) 0.08 0.08 0.30
Expected volatility 42% 44% 46%
Expected dividend yield – – –
Risk-free interest rate 0.26% 0.43% 0.95%
On August 9, 2021, the Company conducted a shares split pursuant to which each share in then issued
and unissued shares was subdivided into five shares of the corresponding class. In order to make the data
comparable during the Relevant Periods, the fair value at measurement date before the shares split are adjusted
to the caliber after the shares split. The fair value of shares at measurement date of December 31, 2020 and
March 1, 2021 above are adjusted after shares split from USD0.38 per share to USD0.08 per share.
The expected volatility was referenced to the average of daily historical share price volatility of
comparable companies operating in similar industry of the Company. Expected dividends are based on
historical dividends. Changes in the subjective input assumptions could materially affect the fair value
estimate.
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Equity settled share-based transactions expenses recognized in the consolidated statements of profit or
loss and other comprehensive income during the Relevant Periods:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Administrative expenses 4,457 8,395 3,207
Selling and distribution expenses 3,447 5,253 2,026
7,904 13,648 5,233
24 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(a) Current taxation in the consolidated statements of financial position represents:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
At the beginning of the year 3 – 12
Provisions for PRC corporate income tax
(note 7(a)) 39 13 77
Income tax paid (42) (1) (74)
At the end of the year – 12 15
(b) Deferred tax assets not recognized
In accordance with the accounting policy set out in note 2(q), the Group has not recognized deferred tax assets
in respect of temporary differences and cumulative tax losses of certain subsidiaries located in the PRC as it is not
probable that future taxable profits against which the losses or temporary differences can be utilized will be available
in the relevant tax jurisdiction and entity.
The following table presents the Group’s deductible temporary differences and cumulative tax losses for which
deferred tax assets were not recognized at the reporting dates:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Cumulative tax losses 402,429 525,314 262,827
Deductible temporary differences 36,588 13,615 65,314
Total 439,017 538,929 328,141
APPENDIX I ACCOUNTANTS’ REPORT
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The expiration information of the Group’s unrecognized deferred tax assets in respect of cumulative tax losses
is set out below:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
2022 13,937 – –
2023 35,025 35,025 –
2024 91,681 91,681 5,569
2025 61,842 61,842 22,837
2026 199,944 199,944 120,720
2027 – 136,822 76,433
2028 – – 37,268
Total 402,429 525,314 262,827
25 CONVERTIBLE REDEEMABLE PREFERRED SHARES
Since the date of incorporation, the Company has completed several rounds of financing arrangements by
issuing convertible redeemable preferred shares (“Preferred Shares”), details of which are as follows:
As at December 31, 2021 As at December 31, 2022 As at December 31, 2023
Notes
Number
of shares
original
issue price
Number
of shares
original
issue price
Number
of shares
Original
issue price
USD’000 USD’000 USD’000
Series A convertible redeemable
preferred shares of par value
at USD0.0001 each (i)(ii) 115,165,045 20,000 115,165,045 20,000 115,165,045 20,000
Series A-1 convertible
redeemable preferred shares
of par value at USD0.0001
each (i)(ii) 86,828,195 30,994 86,828,195 30,994 86,828,195 30,994
Series B convertible redeemable
preferred shares of par value
at USD0.0001 each (i)(ii) 197,737,720 70,583 197,737,720 70,583 197,737,720 70,583
Series C convertible redeemable
preferred shares of par value
at USD0.0001 each (ii) 155,180,335 45,000 155,180,335 45,000 155,180,335 45,000
Series D convertible
redeemable preferred shares
of par value at USD0.00002
each – – 8,664,773 8,000 8,664,773 8,000
Series D+ convertible
redeemable preferred shares
of par value at USD0.00002
each – – 8,086,871 8,600 8,086,871 8,600
APPENDIX I ACCOUNTANTS’ REPORT
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Notes:
(i) Pursuant to the Company’s resolution passed on December 14, 2020, in the best interests of the Company and
its shareholders, the Company approved to issue Series A, Series A-1 and Series B preferred shares to certain
investors at a par value of USD0.0001. When the Series A, Series A-1 and Series B Preferred Shareholders are
entitled to an annualized return of 10% based on the original issue price to Y unyi Inc. (“deemed original issue
price”), calculating from the original issue date (“deemed original issue date”), respectively.
The Group recognizes the difference between the consideration received and present value of the redemption
amount of Series A, Series A-1 and Series B Preferred Shares totalling RMB988,261,000 in other reserves in
the Historical Financial Information as disclosed in note 1.2.1.
(ii) On August 9, 2021, the Company conducted a shares split pursuant to which each share in then issued and
unissued share capital was subdivided into five shares of the corresponding class as disclosed in note 26(b).
The movements of the financial liabilities arising from the Preferred Shares during the Relevant Periods are
as follows:
Present value of
redemption
amount
RMB’000
At January 1, 2021 1,292,956
Changes in the carrying amount of preferred shares liability (note 6(a)) :
– Changes in present value of redemption amount 107,220
Exchange differences (31,409)
At December 31, 2021 and January 1, 2022 1,368,767
Issue of Series D Preferred Shares (note 18(c) ) 50,723
Issue of Series D+ Preferred Shares (note 18(c) ) 59,452
Changes in the carrying amount of preferred shares liability (note 6(a) ):
– Changes in present value of redemption amount 120,614
Exchange differences 138,326
At December 31, 2022 and January 1, 2023 1,737,882
Changes in the carrying amount of preferred shares liability (note 6(a) ):
– Changes in present value of redemption amount 143,176
Exchange differences 30,463
At December 31, 2023 1,911,521
The key terms of all series of the Preferred Shares are summarized as follows:
Conversion rights
The Preferred Shares shall be convertible, at the option of the holder thereof, at any time after the issue date
of Preferred Shares into such number of fully-paid and non-assessable ordinary shares or automatically be converted
into ordinary shares upon the closing of a qualified initial public offering (“IPO”), based on the then-effective
conversion price.
Redemption rights
The holders of Series D and D+ Preferred Shares shall have the right (but not be obliged) to require the
Company to redeem the Preferred Shares at any time beginning on the date that is four years following the issue date
of the Series D Preferred Shares, or at any time that holders of any other series of Preferred Shares require the
Company to redeem all or any part of the then outstanding Preferred Shares.
APPENDIX I ACCOUNTANTS’ REPORT
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The holders of Series A, A-1, B and C Preferred Shares shall have the right (but not be obliged) to require the
Company to redeem the Preferred Shares at any time beginning on the date that is four years following the issue date
of the Series D Preferred Shares, or at any time that holders of any other series of Preferred Shares require the
Company to redeem all or any part of the then outstanding Preferred Shares.
The redemption price shall be:
(a) Series A, A-1 and B Preferred Shares: a price which entitles such Preferred Shares to a simple
annualized return of 10% based on the deemed original issue price calculating from the deemed original
issue date, minus all paid dividends thereon up until the date of redemption;
(b) Series C Preferred Shares: a price which entitles such Preferred Shares to an internal rate of return of
10% per annum based on the original issue price calculating from the original issue date, minus all paid
dividends thereon up until the date of redemption;
(c) Series D and D+ Preferred Shares: a price which entitles such Preferred Shares to a simple annualized
return of 8% based on the original issue price calculating from the original issue date, minus all paid
dividends thereon up until the date of redemption.
Dividend rights
No dividends (other than those payable solely in ordinary shares) shall be declared or paid on the ordinary
shares or any future series of Preferred Shares, unless and until a dividend in like amount is declared and paid on
each outstanding Preferred Share (on an as-if-converted basis). The holders of Preferred Shares shall be entitled to
receive on a pari passu basis, when, as and if declared at the sole discretion of the board of directors, but only out
of funds that are legally available therefore, cash dividends at the rate or in the amount as the board of directors
considers appropriate.
Liquidation preferences
1. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, all assets
available for distribution shall be allocated to its shareholders in the following sequence:
a) Series D+ Preferred Shares: 100% of the original issue price, plus a simple annualized return of 8%
based on the original issue price calculating from the original issue date, plus all dividends accrued and
unpaid.
b) Series D Preferred Shares: 100% of the original issue price, plus a simple annualized return of 8% based
on the original issue price calculating from the original issue date, plus all dividends accrued and
unpaid.
c) Series C Preferred Shares: 100% of the original issue price, plus a simple annualized return of 10%
based on the original issue price calculating from the original issue date, plus all dividends accrued and
unpaid.
d) Series B Preferred Shares: 100% of the original issue price, plus a simple annualized return of 10%
based on the deemed original issue price calculating from the deemed original issue date, plus all
dividends accrued and unpaid.
e) Series A-1 Preferred Shares: 100% of the deemed original issue price, plus all dividends accrued and
unpaid.
f) Series A Preferred Shares: 100% of the deemed original issue price, plus all dividends accrued and
unpaid.
g) Remaining assets of the Company available for distribution to shareholders shall be distributed ratably
among the holders of outstanding ordinary shares and holders of Preferred Shares on an as-if-converted
basis.
APPENDIX I ACCOUNTANTS’ REPORT
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26 CAPITAL AND RESERVES
(a) Movements in components of equity
The reconciliation between the opening and closing balances of each component of the Group’s consolidated
equity is set out in the consolidated statements of changes in equity. Details of the changes in the Company’s
individual components of equity between the beginning and the end of the year are set out below:
Share
capital
Share
premium
Other
reserves
Shares held
for the RSU
Incentive
Plan
Share-based
payments
reserve
Accumulated
losses Total deficit
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2021 86 18,130 (329,539) (11) – (30,041) (341,375)
Changes in equity for 2021:
Loss and total comprehensive
i n c o m e f o r t h e y e a r ––––– (98,558) (98,558)
Equity settled share-based
transactions –––– 7,904 – 7,904
Shares vested under the RSU
Incentive Plan – 4,554 – 2 (4,556) – –
Balance at December 31, 2021
and January 1, 2022 86 22,684 (329,539) (9) 3,348 (128,599) (432,029)
Changes in equity for 2022:
Loss and total comprehensive
i n c o m e f o r t h e y e a r ––––– (255,250) (255,250)
Equity settled share-based
transactions –––– 1 3,648 – 13,648
Shares vested under the RSU
Incentive Plan – 7,391 – 1 (7,392) – –
Balance at December 31, 2022
and January 1, 2023 86 30,075 (329,539) (8) 9,604 (383,849) (673,631)
Changes in equity for 2023:
Loss and total comprehensive
i n c o m e f o r t h e y e a r ––––– (203,413) (203,413)
Equity settled share-based
transactions –––– 5,233 – 5,233
Shares vested under the RSU
Incentive Plan – 6,918 – * (6,918) – *
Balance at December 31, 2023 86 36,993 (329,539) (8) 7,919 (587,262) (871,811)
* Less than RMB1,000
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Authorized share capital
The authorized share capital of the Company was USD50,000 divided into 500,000,000 shares of a nominal
value of USD0.0001 each.
On August 9, 2021, the Company conducted a shares split pursuant to which each share in then issued and
unissued share capital was subdivided into five shares of the corresponding class with nominal value of USD0.00002
each.
At the end of each reporting period during the Relevant Periods, the Company’s authorized shares including
shares held for RSU Incentive Plan, was as follows:
As at December 31, 2021 As at December 31, 2022 As at December 31, 2023
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
USD USD USD
Class A Ordinary Shares 1,494,896,580 29,897 1,478,144,936 29,562 1,478,144,936 29,562
Class B Ordinary Shares (Note 26(c)) 450,192,125 9,004 450,192,125 9,004 450,192,125 9,004
Series A Preferred Shares (Note 25) 115,165,045 2,303 115,165,045 2,303 115,165,045 2,303
Series A-1 Preferred Shares (Note 25) 86,828,195 1,737 86,828,195 1,737 86,828,195 1,737
Series B Preferred Shares (Note 25) 197,737,720 3,955 197,737,720 3,955 197,737,720 3,955
Series C Preferred Shares (Note 25) 155,180,335 3,104 155,180,335 3,104 155,180,335 3,104
Series D Preferred Shares (Note 25) – – 8,664,773 173 8,664,773 173
Series D+ Preferred Shares (Note 25) – – 8,086,871 162 8,086,871 162
Total 2,500,000,000 50,000 2,500,000,000 50,000 2,500,000,000 50,000
(c) Issued share
On September 26, 2019, the Company allotted and issued 60,000,000 ordinary shares to Fangrong Management
Limited and 40,000,000 ordinary shares to Celaeno Group Limited on the same day.
On December 14, 2020, the Company repurchased 7,042,781 and 2,918,794 ordinary shares from Fangrong
Management Limited and Celaeno Group Limited, respectively, and the balance of the ordinary shares registered in
the names of Fangrong Management Limited and Celaeno Group Limited were re-designated as Class B Ordinary
Shares.
On December 14, 2020, the Company allotted and issued an aggregate of 33,474,043 Class A Ordinary Shares
of nominal value of USD0.0001 each.
The Company adopted a dual-class share structure effective immediately prior to the completion of Global
Offering. Holders of the Class A Ordinary Shares and Class B Ordinary Shares will have the same rights except for
voting rights. In respect of matters requiring the votes of shareholders, the holders of Class B Ordinary Shares are
entitled to twenty votes per share, while the holders of Class A Ordinary Shares are entitled to one vote per share.
Each preferred share entitles the holder to exercise such number of votes as equals the whole number of Ordinary
Shares into which such holder’s collective preferred shares are convertible immediately prior to the Global Offering,
respectively, on any resolution tabled at the Company’s general meetings. The weighted voting rights structure will
be cancelled upon Listing.
APPENDIX I ACCOUNTANTS’ REPORT
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At the end of each reporting period during the Relevant Periods, the number of issued ordinary shares of the
Company was as follows:
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Class A Ordinary Shares 167,370,215 167,370,215 167,370,215
Class B Ordinary Shares 450,192,125 450,192,125 450,192,125
617,562,340 617,562,340 617,562,340
Details of the changes in the Company’s issued ordinary shares:
Number of
ordinary
shares
Nominal value
of ordinary
shares
Nominal of
ordinary
shares
USD’000 RMB’000
Ordinary shares, Issued
At January 1, 2021 123,512,468 12 86
Effect of shares split 494,049,872 – –
At December 31, 2021, January 1, 2022,
December 31, 2022, January 1, 2023 and
December 31, 2023 617,562,340 12 86
In addition, the Preferred Shares disclosed in note 26(b) above were fully issued and accounted for as financial
liabilities at the respective balance sheet dates (see note 25).
(d) Shares held for the RSU Incentive Plan
As at December 14, 2020, the Company issued 22,284,494 ordinary shares to Arkasia (S) Pte. Ltd., Televest
Singapore Pte. Ltd. and Asia Tech Investments Ltd., (the “Special Purpose V ehicles”) in total. The Special Purpose
V ehicles are platforms for RSU Incentive Plan. The Company entered into nominee agreement arrangements with the
Special Purpose V ehicles, respectively.
The Company has power to govern the relevant activities of the Special Purpose V ehicles and can derive
benefits from the contributions of the eligible employees who are awarded with the shares under RSU Incentive Plan,
the Directors of the Company consider that it is appropriate to regard the Special Purpose V ehicles as branches of
the Company. The 22,284,494 ordinary shares of the Company issued to the Special Purpose V ehicles in 2020 was
presented as shares held for the RSU Incentive Plan in equity until such time as they are vested.
As at December 31, 2021, 2022 and 2023, 72,276,282 shares, 64,377,482 shares and 57,428,719 shares were
held by the Special Purpose V ehicles on behalf of the Company, which was equivalent to RMB9,000, RMB8,400 and
RMB7,500 respectively.
(e) Dividends
During the Relevant Periods, the entities comprising the Group did not declare nor pay dividends to the equity
shareholders.
APPENDIX I ACCOUNTANTS’ REPORT
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(f) Nature and purposes of reserves
(i) Share premium
The share premium represents the difference between the par value of the shares of the Company and
the fair value of vested shares of the Company in equity settled share-based transactions.
(ii) Other reserves
The balance of other reserves mainly represent the reserve of deemed distribution.
The amount of deemed distribution of RMB2,303,000 represented the consideration paid by the
Company for acquiring the subsidiaries now comprising the Group from the Controlling Shareholder upon the
Reorganization as disclosed in note 1.2.1.
(iii) Share-based payments reserve
The share-based payments reserve represents the portion of the grant date fair value of shares granted
to the eligible persons of the Group that has been recognized in accordance with the accounting policy adopted
for share-based payments in note 2(p)(ii).
(g) Capital management
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern, so that it can continue to provide returns for equity shareholders and benefits for other stakeholders,
by pricing products and services commensurately with the level of risk and by securing access to finance at a
reasonable cost.
The Group actively and regularly reviews and manages its capital structure to maintain a balance between the
higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security
afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic
conditions.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
27 FINANCIAL RISK MANAGEMENT AND FAIR V ALUES
Exposure to credit, liquidity, interest rate and currency risks arise in the normal course of the Group’s business.
The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to
manage these risks are described below:
(a) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a
financial loss to the Group. The Group’s credit risk is primarily attributable to trade and other receivables, guarantees
and amounts due from related parties. The Group’s exposure to credit risk arising from cash and cash equivalents,
restricted bank deposits and bills receivable is limited because the counterparties are banks and financial institutions
or enterprises with high-credit-quality, for which the Group considers to have low credit risk.
APPENDIX I ACCOUNTANTS’ REPORT
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Trade receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer rather than the industry or country in which the customers operate and therefore significant
concentrations of credit risk primarily arise when the Group has significant exposure to individual customers.
As at December 31, 2021, 2022 and 2023, 84%, 39% and 41% of the total trade debtors was due from the
Group’s top five largest customers respectively.
Individual credit evaluations are performed focusing on the customer’s past history of making payments
when due and current ability to pay, and take into account information specific to the customer as well as
pertaining to the economic environment in which the customer operates. Trade debtors are due within 120 days
from the date of billing. Debtors with balances that over the credit terms granted are requested to settle all
outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from
customers.
The following table provides information about the Group’s exposure to credit risk and ECLs for trade
receivables as at December 31, 2021, 2022 and 2023:
As at December 31, 2021
Expected loss rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Within 6 months (inclusive) 0.38% 7,591 (30)
Over 6 months but within 1 year
(inclusive) 0.45% 8 –*
7,599 (30)
As at December 31, 2022
Expected loss rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Within 6 months (inclusive) 0.50% 26,871 (134)
Over 6 months but within 1 year
(inclusive) 0.70% 1,663 (12)
28,534 (146)
As at December 31, 2023
Expected loss rate
Gross carrying
amount Loss allowance
% RMB’000 RMB’000
Within 6 months (inclusive) 0.57% 22,299 (127)
Over 6 months but within 1 year
(inclusive) 0.80% 1,347 (11)
Over 1 year (inclusive) 10.00% 653 (65)
24,299 (203)
* Less than RMB1,000
APPENDIX I ACCOUNTANTS’ REPORT
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ECL rates are based on actual loss experience over the past 12 months. These rates are adjusted to reflect
differences between economic conditions during the period over which the historic data has been collected,
current conditions and the Group’s view of economic conditions over the expected lives of the receivables.
Movement in the loss allowance account in respect of trade debtors during the Relevant Periods is as
follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Balance at January 1 5 30 146
Amounts recognized during the year (note 6(c)) 310 173 140
Amounts written-off during the year (285) (57) (83)
Balance at December 31 30 146 203
Other receivables
Other receivables mainly included deposits and rebate from suppliers. As at December 31, 2021, 2022
and 2023 there were neither significant increase of credit risk nor credit impaired for the balance of other
receivables. The Group considered the receivables to be low credit risk since the counterparties have strong
financial capacity to meet their contractual cash flow obligations in the near term. The expected credit losses
on other receivables are not significant.
Amount due from related parties
We have concentration of credit risk on amounts due from related parties as of December 31, 2021 and
2022 with details set out in note 28(c). The Directors have made periodic assessments as well as individual
assessment on recoverability based on historical settlement records and adjust for forward-looking
information. In view of the financial capability of these related parties, our Directors consider risk of default
was low, and accordingly, the expected credit losses on the amounts due from related parties are not significant.
(b) Liquidity risk
Management of the Group reviews the liquidity position of the Group on an ongoing basis, including review
of the expected cash inflows and outflows in order to monitor the Group’s liquidity requirements in the short and
longer terms. The Group’s policy is to regularly monitor its liquidity position and its compliance with loan covenants,
to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial
institutions to meet its liquidity requirements in the short and longer term.
APPENDIX I ACCOUNTANTS’ REPORT
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The following tables show the remaining contractual maturities at the end of each reporting period during
Relevant Periods of the Group’s financial liabilities (excluding contract liabilities), which are based on contractual
undiscounted cash flows and the earliest date the Group can be required to pay.
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years Total
Carrying
amount at
December 31,
2021
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and other
payables 282,049 – – 282,049 282,049
Lease liabilities 10,703 6,861 1,665 19,229 18,273
292,752 6,861 1,665 301,278 300,322
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years Total
Carrying
amount at
December 31,
2022
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and other
payables 356,217 – – 356,217 356,217
Bank loans 10,221 – – 10,221 10,154
Lease liabilities 13,858 7,483 7,266 28,607 26,654
380,296 7,483 7,266 395,045 393,025
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years Total
Carrying
amount at
December 31,
2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade and other
payables 440,451 – – 440,451 440,451
Bank loans 5,006 – – 5,006 5,005
Lease liabilities 16,770 11,136 20,057 47,963 44,714
462,227 11,136 20,057 493,420 490,170
APPENDIX I ACCOUNTANTS’ REPORT
– I-60 –


--- page 534 ---
In addition to the above, the Group was also exposed to liquidity risk arising from the redemption feature of
convertible redeemable preferred shares at December 31, 2021, 2022 and 2023, which are further disclosed in note
25.
(c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Group’s interest-bearing financial assets and financial liabilities are
at fixed interest rates at the end of the Relevant Periods, including restricted bank deposits, bank loans, lease
liabilities and convertible redeemable preferred shares, and the change of market interest rate does not expose the
Group to interest rate risk. Overall, the Group’s exposure to interest rate risk is not significant.
(d) Currency risk
The Group is exposed to currency risk primarily give rise to cash balances and financial liabilities that are
denominated in a foreign currency, i.e. a currency other than the functional currency of the operations to which the
transactions relate. The currencies giving rise to this risk are primarily United States Dollars (“USD”).
(i) Exposure to currency risk
The following table details the Group’s exposure at the end of each reporting period during the Relevant
Periods to currency risk arising from recognized assets or liabilities denominated in a currency other than the
functional currency of the entity to which they relate. For presentation purposes, the amounts of the exposure
are shown in RMB translated using the spot rate at the end of each reporting period during the Relevant
Periods.
Exposure to foreign currencies
As at December 31,
2021 2022 2023
USD USD USD
RMB’000 RMB’000 RMB’000
Cash and cash equivalents 34,940 86,662 55,918
Convertible redeemable preferred shares (1,368,767) (1,737,882) (1,911,521)
Net exposure arising from recognized
assets and liabilities (1,333,827) (1,651,220) (1,855,603)
(ii) Sensitivity analysis
As at December 31, 2021, it is estimated that a general increase/decrease of 100 basis points in foreign
exchange rates, with all other variables held constant, would have increased/decreased the Group’s loss after
tax and accumulated losses of RMB13,338,000.
As at December 31, 2022 and 2023, it is estimated that a general increase/decrease of 500 basis points
in foreign exchange rates, with all other variables held constant, would have increased/decreased the Group’s
loss after tax and accumulated losses of RMB82,561,000 and RMB92,780,000 respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-61 –


--- page 535 ---
The sensitivity analysis assumes that the change in foreign exchange rates had been applied to
re-measure those financial instruments which expose the Group to foreign currency risk at the end of each
reporting period. The analysis is performed on the same basis during the Relevant Periods.
(e) Fair value measurement
The carrying amounts of the Group’s financial instruments carried at amortized cost are not materially different
from their fair values as at December 31, 2021, 2022 and 2023.
28 MATERIAL RELATED PARTY TRANSACTIONS
Names and relationships of the related parties that had other material transactions with the Group during the
Relevant Periods:
Name of related parties
(i) Entities over which Mr. Xie Fangmin has significant influence
Guangdong Jianke Medicine Co., Ltd. (ʮ̡)*
Guangzhou Jianke Pharmaceutical Co., Ltd. (ʮ̡)*
Guangzhou Starfields Information Technology Co., Ltd. (ʮ̡)*
Dongguan Xingyu Information Technology Co., Ltd. (ʮ̡)*
Beijing Y unyihuiyao Information Technology Co., Ltd. (ʮ̡)*
Wuhan Y unyihuiyao Pharmaceuticals Co., Ltd. (ʮ̡)*
Wuhan Jianke Pharmaceuticals Co., Ltd. (ʮ̡)*
(ii) Entities controlled by Mr. Xie Fangmin
Shanghai Zhouzhi Pharmaceuticals Technology Co., Ltd. (ʮ̡)*
(iii) Entities controlled by the Controlling Shareholders
Y unyi Limited
(iv) Directors of the Company
Mr. Xie Fangmin
Mr. Zhou Feng
Mr. Zou Y uming
* The English translation of these companies’ names are for reference only. The official names of these
companies are in Chinese.
APPENDIX I ACCOUNTANTS’ REPORT
– I-62 –


--- page 536 ---
(a) Key management personnel remuneration
Remuneration for key management personnel of the Group, including amounts paid to the Company’s
Directors as disclosed in note 8 and certain of the highest paid employees as disclosed in note 9, is as follows:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Salaries, wages and other benefits 5,018 10,583 12,441
Discretionary bonuses 1,487 120 3,316
Retirement scheme contributions 62 133 187
Equity settled share-based transactions 1,714 1,281 434
8,281 12,117 16,378
Total remuneration is included in “staff costs” (see note 6(b)).
(b) Related parties transactions
During the Relevant Periods, the Group entered into the following material related party transactions:
Y ear ended December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Purchase of goods 4,659 – –
Advance of borrowings to related parties 36,814 – –
Repayments of borrowings by related
parties 46,006 21,596 12,032
(c) Balance with related parties
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Amounts due from related parties:
Current:
Non-trade related:
– Other receivables 33,628 12,032 –
29 SUBSEQUENT EVENTS AFTER DECEMBER 31, 2023
In May 2024, the Company allotted and issued 5,453,428, 33,268,750, 32,900,000, 32,120,000, 3,500,000 and
20,000,000 Class A Ordinary Shares of par value of US$0.00002 each to Asia Tech Investments Ltd., Endeavor Cloud
Limited, Gaoxin Thrive Limited, FAST GOAL INTERNA TIONAL LIMITED, Mr. ZOU Y uming and Torano
Investments Limited, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-63 –


--- page 537 ---
30 INVESTMENT IN A SUBSIDIARY AND AMOUNT DUE FROM A SUBSIDIARY IN THE COMPANY’S
STATEMENT OF FINANCIAL POSITION
(a) Investment in a subsidiary
As at December 31,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Investment in a subsidiary 658,722 658,722 658,722
Deemed investments arising from share-based
transactions 5,418 16,901 21,372
Total 664,140 675,623 680,094
(b) Amount due from a subsidiary
The balance of amount due from a subsidiary mainly represented the borrowings to Fangzhou Limited, which
was unsecured, interest free and have no fixed repayment terms.
31 CONTINGENT LIABILITIES
During the Relevant Periods, the Group paid service fees to physicians who are engaged by the Group to
provide medical consultation services. According to the relevant tax rules and regulations, the Group might be
responsible to withhold and report individual income tax for the engaged physicians in relation to their services
rendered in the Group’s platform. Should the relevant tax authority finds the engaged physicians’ relevant individual
income tax paid is improper or insufficient, the Group may be required to procure the engaged physicians to file and
pay up the underpaid tax liabilities and be subject to penalties calculated at 50% ~ 300% of the underpaid tax. The
Directors assessed and considered that no provision is required to be made in the Historical Financial Information
in this regard.
32 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED
BUT NOT YET EFFECTIVE FOR THE RELEV ANT PERIODS
Up to the date of this report, the HKICPA has issued a number of amendments, and a new standard, which have
not been adopted in the Historical Financial Information. These include the following:
Effective for
accounting
periods beginning
on or after
Amendments to HKAS 1, Classification of Liabilities as Current or Non-current January 1, 2024
Amendments to HKAS 1, Non-current Liabilities with Covenants January 1, 2024
Amendments to HKAS 7 and HKFRS 7, Supplier Finance Arrangements January 1, 2024
Amendments to HKFRS 16, Lease Liability in a Sale and Leaseback January 1, 2024
Amendments to HKAS 21, Lack of exchangeability January 1, 2025
Amendments to HKFRS 10 and HKAS 28, Sale or contribution of assets between an
investor and its associate or joint venture
Will be determined
at a future date
APPENDIX I ACCOUNTANTS’ REPORT
– I-64 –


--- page 538 ---
The Group is in the process of making an assessment of what the impact of these amendments and new
standards is expected to be in the period of initial application. So far the Group has concluded that the adoption of
them is unlikely to have a significant impact on the Historical Financial Information.
Subsequent financial statements
No audited financial statements have been prepared by the Company and its subsidiaries comprising the Group
in respect of any period subsequent to December 31, 2023.
APPENDIX I ACCOUNTANTS’ REPORT
– I-65 –


--- page 539 ---
The information set forth in this appendix does not form part of the Accountants’ Report
from the reporting accountants of our Company, KPMG, Certified Public Accountants, Hong
Kong, as set out in Appendix I to this prospectus, and is included herein for illustrative purpose
only.
The unaudited pro forma financial information should be read in conjunction with the
section headed “Financial Information” in this prospectus and our historical financial
information included in the Accountants’ Report set forth in Appendix I to this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE
ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of the Group
prepared in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the
Global Offering on the net tangible liabilities of the Group as if the Global Offering had been
completed on December 31, 2023. The unaudited pro forma statement of adjusted net tangible
assets has been prepared for illustrative purpose only and because of its hypothetical nature,
it may not give a true picture of the net tangible assets of the Group had the Global Offering
been completed as at December 31, 2023 or any future date.
Consolidated net
tangible liabilities
of the Group as of
December 31, 2023
Estimated net
proceeds from the
Global Offering
Automatic
conversion of
convertible
redeemable
preferred shares
into ordinary
shares upon the
completion of
the Global
Offering as of
December 31, 2023
Unaudited pro
forma adjusted
net tangible assets
of the Group
Unaudited pro
forma adjusted net
tangible assets of
the Group per
Share as of
December 31, 2023
RMB’000(1) RMB’000(2)(5) RMB’000(3) RMB’000 RMB (4) HK$(5)
Based on an Offer Price of
HK$7.60 per Share (1,903,738) 111,360 1,911,521 119,143 0.10 0.11
Based on an Offer Price of
HK$8.36 per Share (1,903,738) 125,314 1,911,521 133,097 0.11 0.12
Notes:
(1) The consolidated net tangible liabilities of the Group as at December 31, 2023 is arrived at after deducting
intangible assets of RMB2,275,000 from the consolidated total deficit of the Group of RMB1,901,463,000 as
at December 31, 2023, as extracted from the financial information included in the Accountants’ Report set out
in Appendix I to the prospectus.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 540 ---
(2) The estimated net proceeds from the Global Offering are based on the estimated Offer Prices of HK$7.6 per
Share and HK$8.36 per Share, being the lower end price and higher end price of the estimated Offer Price
range respectively, and the expected issuance of 23,800,000 Shares, after deduction of the estimated
underwriting fees and other related listing expenses related to the Global Offering paid or payable by the Group
(excluding RMB60,821,000.00 of the listing expense that have been charged to profit or loss up to December
31, 2023), and does not take into account of any Shares which may be issued upon the exercise of the
Over-allotment Option.
(3) As at December 31, 2023, the aggregate carrying amount of convertible redeemable preferred shares was
RMB1,911,521,000. Upon the completion of the Global Offering, the convertible redeemable preferred shares
will be automatically converted into ordinary shares of the Company and will be reclassified from liabilities
to equity. Accordingly, for the purpose of the unaudited pro forma financial information, these liabilities are
assumed to have been reclassified to equity on December 31, 2023.
(4) The unaudited pro forma adjusted net tangible assets of the Group per Share is arrived at after the adjustments
as described in the preceding paragraphs and on the basis that a total of 1,213,025,279 Shares (which is
calculated based on 1,189,225,279 Shares at December 31, 2023 and adjusted for 23,800,000 Shares newly
issued upon the Global Offering but exclude 127,242,178 Class A Ordinary Shares issued to Asia Tech
Investments Ltd., Endeavor Cloud Limited, FAST GOAL INTERNA TIONAL LIMITED, Gaoxin Thrive
Limited, Mr. ZOU Y uming and Torano Investments Limited in May 2024) were in issue immediately following
the completion of the Global Offering assuming the Over-allotment Option is not exercised.
(5) The estimated net proceeds from the Global Offering and the unaudited pro forma adjusted net tangible assets
of the Group per Share are converted from or into Hong Kong dollars at an exchange rate of RMB1.00 to
HK$1.0965 being the exchange rate set by PBOC prevailing on June 20, 2024. No representation is made that
Hong Kong dollars amounts have been, could have been or may be converted into RMB, or vice versa, at that
rate or at any other rate.
(6) No adjustment has been made to the unaudited pro forma adjusted net tangible assets of the Group to reflect
any trading results or other transactions of the Group entered into subsequent to December 31, 2023, including
127,242,178 Shares that were issued to Asia Tech Investments Ltd., Endeavor Cloud Limited, FAST GOAL
INTERNA TIONAL LIMITED, Gaoxin Thrive Limited, Mr. ZOU Y uming and Torano Investments Limited in
May 2024.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 541 ---
B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of a report received from the reporting accountants, KPMG,
Certified Public Accountants, Hong Kong, in respect of the Group’ s pro forma financial
information for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
TO THE DIRECTORS OF FANGZHOU INC.
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Fangzhou Inc. (the “Company”) and its subsidiaries (collectively the
“Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The
unaudited pro forma financial information consists of the unaudited pro forma statement of
adjusted net tangible assets as at December 31, 2023 and related notes as set out in Part A of
Appendix II to the prospectus dated June 28, 2024 (the “Prospectus”) issued by the Company.
The applicable criteria on the basis of which the Directors have compiled the pro forma
financial information are described in Part A of Appendix II to the Prospectus.
The pro forma financial information has been compiled by the Directors to illustrate the
impact of the proposed offering of the ordinary shares of the Company (the “Global Offering”)
on the Group’s financial position as at December 31, 2023 as if the Global Offering had taken
place at December 31, 2023. As part of this process, information about the Group’s financial
position as at December 31, 2023 has been extracted by the Directors from the Group’s
historical financial information included in the Accountants’ Report as set out in Appendix I
to the Prospectus.
Directors’ Responsibilities for the Pro Forma Financial Information
The Directors are responsible for compiling the pro forma financial information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting
Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”).
Our Independence and Quality Control Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 542 ---
The firm applies Hong Kong Standard on Quality Management 1 “Quality Management
for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or
Related Services Engagements”, which requires the firm to design, implement and operate a
system of quality management including policies or procedures regarding compliance with
ethical requirements, professional standards and applicable legal and regulatory requirements.
Reporting Accountants’ Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the pro forma financial information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any financial
information used in the compilation of the pro forma financial information beyond that owed
to those to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro
Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard
requires that the reporting accountants plan and perform procedures to obtain reasonable
assurance about whether the Directors have compiled the pro forma financial information in
accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the
HKICPA.
For purpose of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the pro forma
financial information, nor have we, in the course of this engagement, performed an audit or
review of the financial information used in compiling the pro forma financial information.
The purpose of pro forma financial information included in an investment circular is
solely to illustrate the impact of a significant event or transaction on unadjusted financial
information of the Group as if the event had occurred or the transaction had been undertaken
at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any
assurance that the actual outcome of events or transactions as at December 31, 2023 would
have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial
information has been properly compiled on the basis of the applicable criteria involves
performing procedures to assess whether the applicable criteria used by the Directors in the
compilation of the pro forma financial information provide a reasonable basis for presenting
the significant effects directly attributable to the event or transaction, and to obtain sufficient
appropriate evidence about whether:
 the related pro forma adjustments give appropriate effect to those criteria; and
 the pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 543 ---
The procedures selected depend on the reporting accountants’ judgement, having regard
to the reporting accountants’ understanding of the nature of the Group, the event or transaction
in respect of which the pro forma financial information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the pro forma
financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our procedures on the pro forma financial information have not been carried out in
accordance with attestation standards or other standards and practices generally accepted in the
United States of America, auditing standards of the Public Company Accounting Oversight
Board (United States) or any overseas standards and accordingly should not be relied upon as
if they had been carried out in accordance with those standards and practices.
We make no comments regarding the reasonableness of the amount of net proceeds from
the issuance of the Company’s shares, the application of those net proceeds, or whether such
use will actually take place as described in the section headed “Future Plans and Use of
Proceeds” in the Prospectus.
Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group, and
(c) the adjustments are appropriate for the purposes of the pro forma financial
information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
KPMG
Certified Public Accountants
Hong Kong
June 28, 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 544 ---
Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of the Company and of certain aspects of Cayman company law.
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 26 September 2019 under the Companies Act (As Revised) of the Cayman
Islands (the “Companies Act”). The Company’s constitutional documents consist of its
Memorandum and Articles of Association.
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum states, inter alia, that the liability of members of the Company is
limited to the amount, if any, for the time being unpaid on the shares respectively held
by them and that the objects for which the Company is established are unrestricted
(including acting as an investment company), and that the Company shall have and be
capable of exercising all the functions of a natural person of full capacity irrespective of
any question of corporate benefit, as provided in section 27(2) of the Companies Act and
in view of the fact that the Company is an exempted company that the Company will 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.
(b) The Company may by special resolution alter its Memorandum with respect to any
objects, powers or other matters specified therein.
2. ARTICLES OF ASSOCIATION
The Memorandum and Articles of Association were conditionally adopted on June 14,
2024 with effect from the Listing Date. The following is a summary of certain provisions of
the Articles:
(a) Shares
(i) Classes of shares
The share capital of the Company consists of ordinary shares.
(ii) V ariation of rights of existing shares or classes of shares
Subject to the Companies Act, if at any time the share capital of the Company is
divided into different classes of shares, all or any of the special rights attached to the
shares or any class of shares may (unless otherwise provided for by the terms of issue of
that class) be varied, modified or abrogated either with the consent in writing of the
holders of not less than three-fourths in nominal value of the issued shares of that class
or with the sanction of a special resolution passed at a separate general meeting of the
holders of the shares of that class. To every such separate general meeting the provisions
of the Articles relating to general meetings will mutatis mutandis apply, but so that the
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN COMPANY LA W
– III-1 –


--- page 545 ---
necessary quorum (including at an adjourned or postponed meeting) shall be two persons
holding or representing by proxy not less than one-third in nominal value of the issued
shares of that class. Every holder of shares of the class shall be entitled to one vote for
every such share held by him.
Any special rights conferred upon the holders of any shares or class of shares shall
not, unless otherwise expressly provided in the rights attaching to the terms of issue of
such shares, be deemed to be varied by the creation or issue of further shares ranking pari
passu therewith.
(iii) Alteration of capital
The Company may by ordinary resolution of its members:
(i) increase its share capital by the creation of new shares;
(ii) consolidate all or any of its capital into shares of larger amount than its
existing shares;
(iii) divide its shares into several classes and attach to such shares any preferential,
deferred, qualified or special rights, privileges, conditions or restrictions as the
Company in general meeting or as the directors may determine;
(iv) subdivide its shares or any of them into shares of smaller amount than is fixed
by the Memorandum; or
(v) cancel any shares which, at the date of passing of the resolution, have not been
taken and diminish the amount of its capital by the amount of the shares so
cancelled.
The Company may reduce its share capital or any capital redemption reserve or other
undistributable reserve in any way by special resolution.
(iv) Transfer of shares
All transfers of shares may be effected by an instrument of transfer in the usual or
common form or in a form prescribed by The Stock Exchange of Hong Kong Limited (the
“Stock Exchange ”) or in such other form as the board may approve and which may be
under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand
or by machine imprinted signature or by such other manner of execution as the board may
approve from time to time.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN COMPANY LA W
– III-2 –


--- page 546 ---
Notwithstanding the foregoing, for so long as any shares are listed on the Stock
Exchange, titles to such listed shares may be evidenced and transferred in accordance
with the laws applicable to and the rules and regulations of the Stock Exchange that are
or shall be applicable to such listed shares. The register of members in respect of its listed
shares (whether the principal register or a branch register) may be kept by recording the
particulars required by Section 40 of the Companies Act in a form otherwise than legible
if such recording otherwise complies with the laws applicable to and the rules and
regulations of the Stock Exchange that are or shall be applicable to such listed shares.
The instrument of transfer shall be executed by or on behalf of the transferor and the
transferee provided that the board may dispense with the execution of the instrument of
transfer by the transferee. The transferor shall be deemed to remain the holder of the share
until the name of the transferee is entered in the register of members in respect of that
share.
The board may, in its absolute discretion, at any time transfer any share upon the
principal register to any branch register or any share on any branch register to the
principal register or any other branch register.
The board may decline to recognise any instrument of transfer unless a fee (not
exceeding the maximum sum as the Stock Exchange may determine to be payable)
determined by the Directors is paid to the Company, the instrument of transfer is properly
stamped (if applicable), it is in respect of only one class of share and is lodged at the
relevant registration office or registered office or such other place at which the principal
register is kept accompanied by the relevant share certificate(s) and such other evidence
as the board may reasonably require to show the right of the transferor to make the
transfer (and if the instrument of transfer is executed by some other person on his behalf,
the authority of that person so to do).
The registration of transfers may be suspended and the register closed on giving
notice by announcement or by electronic communication or by advertisement in any
newspaper or by any other means in accordance with the requirements of the Stock
Exchange, at such times and for such periods as the board may determine. The register
of members must not be closed for periods exceeding in the whole thirty (30) days in any
year. The period of thirty (30) days may be extended for a further period or periods not
exceeding thirty (30) days in respect of any year if approved by members by ordinary
resolution.
Subject to the above, fully paid shares are free from any restriction on transfer and
free of all liens in favour of the Company.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN COMPANY LA W
– III-3 –


--- page 547 ---
(v) Power of the Company to purchase its own shares
The Company is empowered by the Companies Act and the Articles to purchase its
own shares subject to certain restrictions and the board may only exercise this power on
behalf of the Company subject to any applicable requirements imposed from time to time
by the Stock Exchange.
The board may accept the surrender for no consideration of any fully paid share.
(vi) Power of any subsidiary of the Company to own shares in the Company
There are no provisions in the Articles relating to ownership of shares in the
Company by a subsidiary.
(vii) Calls on shares and forfeiture of shares
The board may from time to time make such calls upon the members in respect of
any monies unpaid on the shares held by them respectively (whether on account of the
nominal value of the shares or by way of premium). A call may be made payable either
in one lump sum or by installments. If the sum payable in respect of any call or instalment
is not paid on or before the day appointed for payment thereof, the person or persons from
whom the sum is due shall pay interest on the same at such rate not exceeding twenty per
cent. (20%) per annum as the board may agree to accept from the day appointed for the
payment thereof to the time of actual payment, but the board may waive payment of such
interest wholly or in part. The board may, if it thinks fit, receive from any member willing
to advance the same, either in money or money’s worth, all or any part of the monies
uncalled and unpaid or installments payable upon any shares held by him, and upon all
or any of the monies so advanced the Company may pay interest at such rate (if any) as
the board may decide.
If a member fails to pay any call on the day appointed for payment thereof, the board
may serve not less than fourteen (14) clear days’ notice on him requiring payment of so
much of the call as is unpaid, together with any interest which may have accrued and
which may still accrue up to the date of actual payment and stating 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.
If the requirements of any such notice 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 the notice has been made, be forfeited by a resolution of the board to that
effect. Such forfeiture will include all dividends and bonuses declared in respect of the
forfeited share and not actually paid before the forfeiture.
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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
monies which, at the date of forfeiture, were payable by him to the Company in respect
of the shares, together with (if the board shall in its discretion so require) interest thereon
from the date of forfeiture until the date of actual payment at such rate not exceeding
twenty per cent. (20%) per annum as the board determines.
(b) Directors
(i) Appointment, retirement and removal
At each annual general meeting, one third of the Directors for the time being (or if
their number is not a multiple of three, then the number nearest to but not less than one
third) shall retire from office by rotation provided that every Director shall be subject to
retirement at an annual general meeting at least once every three years. The Directors to
retire by rotation shall include any Director who wishes to retire and not offer himself for
re-election. Any further Directors so to retire shall be those who have been longest in
office since their last re-election or appointment but as between persons who became or
were last re-elected Directors on the same day those to retire will (unless they otherwise
agree among themselves) be determined by lot.
Neither a Director nor an alternate Director is required to hold any shares in the
Company by way of qualification. Further, there are no provisions in the Articles relating
to retirement of Directors upon reaching any age limit.
The Directors have the power to appoint any person as a Director either to fill a
casual vacancy on the board or as an addition to the existing board. Any Director so
appointed shall hold office only until the first annual general meeting of the Company
after his appointment and shall then be eligible for re-election.
A Director (including a managing or other executive Director) may be removed by
an ordinary resolution of the Company before the expiration of his term of office (but
without prejudice to any claim which such Director may have for damages for any breach
of any contract between him and the Company) and members of the Company may by
ordinary resolution appoint another in his place. Unless otherwise determined by the
Company in general meeting, the number of Directors shall not be less than two. There
is no maximum number of Directors.
The office of director shall be vacated if:
(aa) he resigns by notice in writing delivered to the Company;
(bb) he becomes of unsound mind or dies;
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(cc) without special leave, he is absent from meetings of the board for six (6)
consecutive months, and the board resolves that his office is vacated;
(dd) he becomes bankrupt or has a receiving order made against him or suspends
payment or compounds with his creditors;
(ee) he is prohibited from being a director by law; or
(ff) he ceases to be a director by virtue of any provision of law or is removed from
office pursuant to the Articles.
The board may appoint one or more of its body to be managing director, joint
managing director, or deputy managing director or to hold any other employment or
executive office with the Company for such period and upon such terms as the board may
determine and the board may revoke or terminate any of such appointments. The board
may delegate any of its powers, authorities and discretions to committees consisting of
such Director or Directors and other persons as the board thinks fit, and it may from time
to time revoke such delegation or revoke the appointment of and discharge any such
committees either wholly or in part, and either as to persons or purposes, but every
committee so formed must, in the exercise of the powers, authorities and discretions so
delegated, conform to any regulations that may from time to time be imposed upon it by
the board.
(ii) Power to allot and issue shares and warrants
Subject to the provisions of the Companies Act and the Memorandum and Articles
and to any special rights conferred on the holders of any shares or class of shares, any
share may be issued (a) with or have attached thereto such rights, or such restrictions,
whether with regard to dividend, voting, return of capital, or otherwise, as the Directors
may determine, or (b) on terms that, at the option of the Company or the holder thereof,
it is liable to be redeemed.
The board may issue warrants or convertible securities or securities of similar nature
conferring the right upon the holders thereof to subscribe for any class of shares or
securities in the capital of the Company on such terms as it may determine.
Subject to the provisions of the Companies Act and the Articles and, where
applicable, the rules of the Stock Exchange and without prejudice to any special rights or
restrictions for the time being attached to any shares or any class of shares, all unissued
shares in the Company are at the disposal of the board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times, for such
consideration and on such terms and conditions as it in its absolute discretion thinks fit,
but so that no shares shall be issued at a discount to their nominal value.
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Neither the Company nor the board is obliged, when making or granting any
allotment of, offer of, option over or disposal of shares, to make, or make available, any
such allotment, offer, option or shares to members or others with registered addresses in
any particular territory or territories being a territory or territories where, in the absence
of a registration statement or other special formalities, this would or might, in the opinion
of the board, be unlawful or impracticable. Members affected as a result of the foregoing
sentence shall not be, or be deemed to be, a separate class of members for any purpose
whatsoever.
(iii) Power to dispose of the assets of the Company or any of its subsidiaries
There are no specific provisions in the Articles relating to the disposal of the assets
of the Company or any of its subsidiaries. The Directors may, however, exercise all
powers and do all acts and things which may be exercised or done or approved by the
Company and which are not required by the Articles or the Companies Act to be exercised
or done by the Company in general meeting.
(iv) Borrowing powers
The board may exercise all the powers of the Company to raise or borrow money,
to mortgage or charge all or any part of the undertaking, property and assets and uncalled
capital of the Company and, subject to the Companies Act, to issue debentures, bonds and
other securities of the Company, whether outright or as collateral security for any debt,
liability or obligation of the Company or of any third party.
(v) Remuneration
The ordinary remuneration of the Directors is to be determined by the Company in
general meeting, such sum (unless otherwise directed by the resolution by which it is
voted) to be divided amongst the Directors in such proportions and in such manner as the
board may agree or, failing agreement, equally, except that any Director holding office for
part only of the period in respect of which the remuneration is payable shall only rank in
such division in proportion to the time during such period for which he held office. The
Directors are also entitled to be prepaid or repaid all travelling, hotel and incidental
expenses reasonably expected to be incurred or incurred by them in attending any board
meetings, committee meetings or general meetings or separate meetings of any class of
shares or of debentures of the Company or otherwise in connection with the discharge of
their duties as Directors.
Any Director who, by request, goes or resides abroad for any purpose of the
Company or who performs services which in the opinion of the board go beyond the
ordinary duties of a Director may be paid such extra remuneration as the board may
determine and such extra remuneration shall be in addition to or in substitution for any
ordinary remuneration as a Director. An executive Director appointed to be a managing
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director, joint managing director, deputy managing director or other executive officer
shall receive such remuneration and such other benefits and allowances as the board may
from time to time decide. Such remuneration may be either in addition to or in lieu of his
remuneration as a Director.
The board may establish or concur or join with other companies (being subsidiary
companies of the Company or companies with which it is associated in business) in
establishing and making contributions out of the Company’s monies to any schemes or
funds for providing pensions, sickness or compassionate allowances, life assurance or
other benefits for employees (which expression as used in this and the following
paragraph shall include any Director or past Director who may hold or have held any
executive office or any office of profit with the Company or any of its subsidiaries) and
ex-employees of the Company and their dependents or any class or classes of such
persons.
The board may pay, enter into agreements to pay or make grants of revocable or
irrevocable, and either subject or not subject to any terms or conditions, pensions or other
benefits to employees and ex-employees and their dependents, or to any of such persons,
including pensions or benefits additional to those, if any, to which such employees or
ex-employees or their dependents are or may become entitled under any such scheme or
fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the
board considers desirable, be granted to an employee either before and in anticipation of,
or upon or at any time after, his actual retirement.
The board may resolve to capitalise all or any part of any amount for the time being
standing to the credit of any reserve or fund (including a share premium account and the
profit and loss account) whether or not the same is available for distribution by applying
such sum in paying up unissued shares to be allotted to (i) employees (including directors)
of the Company and/or its affiliates (meaning any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other entity (other
than the Company) that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, the Company) upon exercise
or vesting of any options or awards granted under any share incentive scheme or
employee benefit scheme or other arrangement which relates to such persons that has
been adopted or approved by the members in general meeting, or (ii) any trustee of any
trust to whom shares are to be allotted and issued by the Company in connection with the
operation of any share incentive scheme or employee benefit scheme or other
arrangement which relates to such persons that has been adopted or approved by the
members in general meeting.
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(vi) Compensation or payments for loss of office
Pursuant to the Articles, payments to any Director or past Director of any sum by
way of compensation for loss of office or as consideration for or in connection with his
retirement from office (not being a payment to which the Director is contractually
entitled) must be approved by the Company in general meeting.
(vii) Loans and provision of security for loans to Directors
The Company must not make any loan, directly or indirectly, to a Director or his
close associate(s) if and to the extent it would be prohibited by the Companies Ordinance
(Chapter 622 of the laws of Hong Kong) as if the Company were a company incorporated
in Hong Kong.
(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries
A Director may hold any other office or place of profit with the Company (except
that of the auditor of the Company) in conjunction with his office of Director for such
period and upon such terms as the board may determine, and may be paid such extra
remuneration therefor in addition to any remuneration provided for by or pursuant to the
Articles. A Director may be or become a director or other officer of, or otherwise
interested in, any company promoted by the Company or any other company in which the
Company may be interested, and shall not be liable to account to the Company or the
members for any remuneration, profits or other benefits received by him as a director,
officer or member of, or from his interest in, such other company. The board may also
cause the voting power conferred by the shares in any other company held or owned by
the Company to be exercised in such manner in all respects as it thinks fit, including the
exercise thereof in favour of any resolution appointing the Directors or any of them to be
directors or officers of such other company, or voting or providing for the payment of
remuneration to the directors or officers of such other company.
No Director or proposed or intended Director shall be disqualified by his office from
contracting with the Company, either with regard to his tenure of any office or place of
profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such
contract or any other contract or arrangement 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 or the members for any remuneration,
profit or other benefits realised by any such contract or arrangement by reason of such
Director holding that office or the fiduciary relationship thereby established. A Director
who to his knowledge is in any way, whether directly or indirectly, interested in a contract
or arrangement or proposed contract or arrangement with the Company must declare the
nature of his interest at the meeting of the board at which the question of entering into
the contract or arrangement is first taken into consideration, if he knows his interest then
exists, or in any other case, at the first meeting of the board after he knows that he is or
has become so interested.
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A Director shall not vote (nor be counted in the quorum) on any resolution of the
board approving any contract or arrangement or other proposal in which he or any of his
close associates is materially interested, but this prohibition does not apply to any of the
following matters, namely:
(aa) the giving of any security or indemnity either:
(aaa) to the Director or his close associate(s) in respect of money lent or
obligations incurred or undertaken by him or any of them at the request
of or for the benefit of the Company or any of its subsidiaries; or
(bbb) to a third party in respect of a debt or obligation of the Company or any
of its subsidiaries for which the Director or his close associate(s) has
himself/themselves assumed responsibility in whole or in part and
whether alone or jointly under a guarantee or indemnity or by the giving
of security;
(bb) any proposal concerning an offer of shares or debentures or other securities of
or by the Company or any other company which the Company may promote or
be interested in for subscription or purchase where the Director or his close
associate(s) is/are or is/are to be interested as a participant in the underwriting
or sub-underwriting of the offer;
(cc) any proposal or arrangement concerning the benefit of employees of the
Company or its subsidiaries including:
(aaa) the adoption, modification or operation of any employees’ share scheme
or any share incentive or share option scheme under which the Director
or his close associate(s) may benefit; or
(bbb) the adoption, modification or operation of a pension fund or retirement,
death or disability benefits scheme which relates to the Directors, his
close associate(s) and employee(s) of the Company or any of its
subsidiaries and does not provide in respect of any Director, or his close
associate(s), as such any privilege or advantage not generally accorded to
the class of persons to which such scheme or fund relates;
(dd) any contract or arrangement in which the Director or his close associate(s)
is/are interested in the same manner as other holders of shares or debentures or
other securities of the Company by virtue only of his/their interest in shares or
debentures or other securities of the Company.
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(c) Proceedings of the Board
The board may meet for the despatch of business, adjourn or postpone and otherwise
regulate its meetings as it considers appropriate. Questions arising at any meeting shall be
determined by a majority of votes. In the case of an equality of votes, the chairman of the
meeting shall have an additional or casting vote.
(d) Alterations to constitutional documents and the Company’s name
The Articles may be rescinded, altered or amended by the Company in general meeting
by special resolution. The Articles state that a special resolution shall be required to alter the
provisions of the Memorandum, to amend the Articles or to change the name of the Company.
(e) Meetings of members
(i) Special and ordinary resolutions
A special resolution of the Company must be passed by a majority of not less than
three-fourths of the votes cast by such members as, being entitled so to do, vote in person
or, in the case of such members as are corporations, by their duly authorised
representatives or, where proxies are allowed, by proxy at a general meeting of which
notice has been duly given in accordance with the Articles.
Under the Companies Act, a copy of any special resolution must be forwarded to the
Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.
An ordinary resolution is defined in the Articles to mean a resolution passed by a
simple majority of the votes of such members of the Company as, being entitled to do so,
vote in person or, in the case of corporations, by their duly authorised representatives or,
where proxies are allowed, by proxy at a general meeting of which notice has been duly
given in accordance with the Articles.
(ii) V oting rights and right to demand a poll
Subject to any special rights or restrictions as to voting for the time being attached
to any shares, at any general meeting on a poll every member present in person or by
proxy or, in the case of a member being a corporation, by its duly authorised
representative shall have one vote for every fully paid share of which he is the holder but
so that no amount paid up or credited as paid up on a share in advance of calls or
installments is treated for the foregoing purposes as paid up on the share. A member
entitled to more than one vote need not use all his votes or cast all the votes he uses in
the same way.
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At any general meeting a resolution put to the vote of the meeting is to be decided
by way of a poll save that in the case of a physical meeting the chairman of the meeting
may in good faith, allow a resolution which relates purely to a procedural or
administrative matter to be voted on by a show of hands in which case every member
present in person (or being a corporation, is present by a duly authorised representative),
or by proxy(ies) shall have one vote provided that where more than one proxy is
appointed by a member which is a clearing house (or its nominee(s)), each such proxy
shall have one vote on a show of hands. V otes (whether on a show of hands or by way
of poll) may be cast by such means, electronic or otherwise, as the Directors or the
chairman of the meeting may determine.
Any corporation which is a member may by resolution of its directors or other
governing body authorise such person as it thinks fit to act as its representative at any
general meeting of the Company or at any meeting of any class of members.
The person so authorised shall be entitled to exercise the same powers on behalf of
such corporation as the corporation could exercise if it were an individual member and
such corporation shall for the purposes of the Articles be deemed to be present in person
at any such meeting if a person so authorised is present thereat.
If a recognised clearing house (or its nominee(s)) is a member of the Company it
may authorise such person or persons as it thinks fit to act as its representative(s) at any
meeting of the Company or at any meeting of any class of members of the Company
provided that, if more than one person is so authorised, the authorisation shall specify the
number and class of shares in respect of which each such person is so authorised. A person
authorised pursuant to this provision shall be deemed to have been duly authorised
without further evidence of the facts and be entitled to exercise the same powers on behalf
of the recognised clearing house (or its nominee(s)) as if such person was the registered
holder of the shares of the Company held by that clearing house (or its nominee(s))
including, the right to speak and to vote, and where a show of hands is allowed, the right
to vote individually on a show of hands.
All members have the right to speak and vote at a general meeting except where a
member is required, by the rules of the Stock Exchange, to abstain from voting to approve
the matter under consideration.
Where the Company has any knowledge that any member is, under the rules of the
Stock Exchange, required to abstain from voting on any particular resolution of the
Company or restricted to voting only for or only against any particular resolution of the
Company, any votes cast by or on behalf of such member in contravention of such
requirement or restriction shall not be counted.
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(iii) Annual general meetings and extraordinary general meetings
The Company must hold an annual general meeting of the Company for each
financial year and such general meeting must be held within six (6) months after the end
of the Company’s financial year unless a longer period would not infringe the rules of the
Stock Exchange.
Extraordinary general meetings may be convened on the requisition of one or more
members holding, at the date of deposit of the requisition, not less than one-tenth of the
paid up capital of the Company having the right of voting at general meetings, on a one
vote per share basis. Such requisition shall be made in writing to the board or the
secretary for the purpose of requiring an extraordinary general meeting to be called by the
board for the transaction of any business or resolution specified in such requisition. Such
meeting shall be held within 2 months after the deposit of such requisition. If within 21
days of such deposit, the board fails to proceed to convene such meeting, the
requisitionist(s) himself/herself (themselves) may convene a physical meeting at only one
location which will be the Principal Meeting Place (as defined below) and all reasonable
expenses incurred by the requisitionist(s) as a result of the failure of the board shall be
reimbursed to the requisitionist(s) by the Company.
Notwithstanding any provisions in the Articles, any general meeting or any class
meeting may be held by means of such telephone, electronic or other communication
facilities as to permit all persons participating in the meeting to communicate with each
other, and participation in such a meeting shall constitute presence at such meeting.
(iv) Notices of meetings and business to be conducted
An annual general meeting must be called by notice of not less than twenty-one (21)
clear days. All other general meetings must be called by notice of at least fourteen (14)
clear days. The notice is exclusive of the day on which it is served or deemed to be served
and of the day for which it is given, and must specify (a) the time and date of the meeting,
(b) save for an electronic meeting, the place of the meeting and if there is more than one
meeting location as determined by the Board pursuant to the Articles, the principal place
of the meeting (the “Principal Meeting Place”), (c) if the general meeting is to be a hybrid
meeting or an electronic meeting, the notice shall include a statement to that effect and
with details of the electronic facilities for attendance and participation by electronic
means at the meeting or where such details will be made available by the Company prior
to the meeting, and (d) particulars of resolutions to be considered at the meeting.
In addition, notice of every general meeting must be given to all members of the
Company other than to such members as, under the provisions of the Articles or the terms
of issue of the shares they hold, are not entitled to receive such notices from the Company,
and also to, among others, the auditors for the time being of the Company.
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Any notice to be given to or by any person pursuant to the Articles may be served
on or delivered to any member of the Company personally, by post to such member’s
registered address or by advertisement in newspapers in accordance with the requirements
of the Stock Exchange. Subject to compliance with Cayman Islands law and the rules of
the Stock Exchange, notice may also be served or delivered by the Company to any
member by electronic means.
All business that is transacted at an extraordinary general meeting and at an annual
general meeting is deemed special, save that in the case of an annual general meeting,
each of the following business is deemed an ordinary business:
(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and the auditors;
(cc) the election of directors in place of those retiring;
(dd) the appointment of auditors and other officers; and
(ee) the fixing of the remuneration of the directors and of the auditors.
(v) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present
when the meeting proceeds to business, but the absence of a quorum shall not preclude
the appointment of a chairman.
The quorum for a general meeting shall be two members present in person (or, in the
case of a member being a corporation, by its duly authorised representative) or by proxy
or, for quorum purposes only, two persons appointed by the clearing house as authorized
representative or proxy, and entitled to vote. In respect of a separate class meeting
(including an adjourned meeting) convened to sanction the modification of class rights
the necessary quorum shall be two persons holding or representing by proxy not less than
one-third in nominal value of the issued shares of that class.
(vi) Proxies
Any member of the Company entitled to attend and vote at a meeting of the
Company is entitled to appoint another person as his proxy to attend and vote instead of
him. A member who is the holder of two or more shares may appoint more than one proxy
to represent him and vote on his behalf at a general meeting of the Company or at a class
meeting. A proxy need not be a member of the Company and is entitled to exercise the
same powers on behalf of a member who is an individual and for whom he acts as proxy
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as such member could exercise. In addition, a proxy is entitled to exercise the same
powers on behalf of a member which is a corporation and for which he acts as proxy as
such member could exercise as if it were an individual member. V otes may be given either
personally (or, in the case of a member being a corporation, by its duly authorised
representative) or by proxy.
(f) Accounts and audit
The board shall cause true accounts to be kept of the sums of money received and
expended by the Company, and the matters in respect of which such receipt and expenditure
take place, and of the property, assets, credits and liabilities of the Company and of all other
matters required by the Companies Act or necessary to give a true and fair view of the
Company’s affairs and to explain its transactions.
The accounting records must be kept at the registered office or at such other place or
places as the board decides and shall always be open to inspection by any Director. No member
(other than a Director) shall have any right to inspect any accounting record or book or
document of the Company except as conferred by law or authorised by the board or the
Company in general meeting. However, an exempted company must make available at its
registered office in electronic form or any other medium, copies of its books of account or parts
thereof as may be required of it upon service of an order or notice by the Tax Information
Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
A copy of every balance sheet and profit and loss account (including every document
required by law to be annexed thereto) which is to be laid before the Company at its general
meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report,
shall not less than twenty-one (21) days before the date of the meeting and at the same time
as the notice of annual general meeting be sent to every person entitled to receive notices of
general meetings of the Company under the provisions of the Articles; however, subject to
compliance with all applicable laws, including the rules of the Stock Exchange, the Company
may send to such persons summarised financial statements derived from the Company’s annual
accounts and the directors’ report instead provided that any such person may by notice in
writing served on the Company, demand that the Company sends to him, in addition to
summarised financial statements, a complete printed copy of the Company’s annual financial
statement and the directors’ report thereon.
At the annual general meeting or at a subsequent extraordinary general meeting in each
year, the members shall by ordinary resolution appoint an auditor to audit the accounts of the
Company and such auditor shall hold office until the next annual general meeting. Moreover,
the members may, at any general meeting, by ordinary resolution remove the auditor at any
time before the expiration of his terms of office and shall by ordinary resolution at that meeting
appoint another auditor for the remainder of his term. The remuneration of the auditors shall
be fixed and approved by the Company by an ordinary resolution passed at a general meeting
or in such manner as the members may by ordinary resolution determine.
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The financial statements of the Company shall be audited by the auditor in accordance
with generally accepted auditing standards which may be those of a country or jurisdiction
other than the Cayman Islands. The auditor shall make a written report thereon in accordance
with generally accepted auditing standards and the report of the auditor must be submitted to
the members in general meeting.
(g) Dividends and other methods of distribution
The Company in general meeting may declare dividends in any currency to be paid to the
members but no dividend shall be declared in excess of the amount recommended by the board.
The Articles provide dividends may be declared and paid out of the profits of the
Company, realised or unrealised, or from any reserve set aside from profits which the directors
determine is no longer needed. With the sanction of an ordinary resolution dividends may also
be declared and paid out of share premium account or any other fund or account which can be
authorised for this purpose in accordance with the Companies Act.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid
up on the shares in respect whereof the dividend is paid but no amount paid up on a share in
advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends
shall be apportioned and paid pro rata according to the amount paid up on the shares during
any portion or portions of the period in respect of which the dividend is paid. The Directors
may deduct from any dividend or other monies payable to any member or in respect of any
shares all sums of money (if any) presently payable by him to the Company on account of calls
or otherwise.
Whenever the board or the Company in general meeting has resolved that a dividend be
paid or declared on the share capital of the Company, the board may further resolve either (a)
that such dividend be satisfied wholly or in part in the form of an allotment of shares credited
as fully paid up, provided that the members entitled thereto will be entitled to elect to receive
such dividend (or part thereof) in cash in lieu of such allotment, or (b) that members entitled
to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid
up in lieu of the whole or such part of the dividend as the board may think fit.
The Company may also upon the recommendation of the board by an ordinary resolution
resolve in respect of any one particular dividend of the Company that it may be satisfied wholly
in the form of an allotment of shares credited as fully paid up without offering any right to
members to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be paid
by cheque or warrant sent through the post addressed to the holder at his registered address,
or in the case of joint holders, addressed to the holder whose name stands first in the register
of the Company in respect of the shares at his address as appearing in the register or addressed
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to such person and at such addresses as the holder or joint holders may in writing direct. Every
such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made
payable to the order of the holder or, in the case of joint holders, to the order of the holder
whose name stands first on the register in respect of such shares, and shall be sent at his or their
risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute
a good discharge to the Company. Any one of two or more joint holders may give effectual
receipts for any dividends or other moneys payable or property distributable in respect of the
shares held by such joint holders.
Whenever the board or the Company in general meeting has resolved that a dividend be
paid or declared the board may further resolve that such dividend be satisfied wholly or in part
by the distribution of specific assets of any kind.
All dividends or bonuses unclaimed for one year after having been declared may be
invested or otherwise made use of by the board for the benefit of the Company until claimed
and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses
unclaimed for six years after having been declared may be forfeited by the board and shall
revert to the Company.
No dividend or other monies payable by the Company on or in respect of any share shall
bear interest against the Company.
(h) Inspection of corporate records
Pursuant to the Articles, the register and branch register of members maintained in Hong
Kong shall be open to inspection for at least two (2) hours during business hours by members
without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser
sum specified by the board, at the registered office or such other place at which the register is
kept in accordance with the Companies Act or, upon a maximum payment of HK$1.00 or such
lesser sum specified by the board, at the office where the branch register of members is kept,
unless the register is closed in accordance with the Articles.
(i) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles relating to rights of minority shareholders in
relation to fraud or oppression. However, certain remedies are available to member of the
Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.
(j) Procedures on liquidation
Unless otherwise provided by the Companies Act, a resolution that the Company be
wound up by the court or be wound up voluntarily shall be a special resolution.
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Subject to any special rights, privileges or restrictions as to the distribution of available
surplus assets on liquidation for the time being attached to any class or classes of shares:
(i) if the Company is wound up and the assets available for distribution amongst the
members of the Company 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 pari passu amongst such members in proportion to the amount paid up
on the shares held by them respectively; and
(ii) if the Company is wound up and the assets available for distribution amongst 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 the Company is wound up (whether the liquidation is voluntary or by the court) the
liquidator may, with the authority of a special resolution and any other sanction required by the
Companies Act divide among the members in specie or kind the whole or any part of the assets
of the Company whether the assets shall consist of property of one kind or shall consist of
properties of different kinds and the liquidator may, for such purpose, set such value as he
deems fair upon any one or more class or classes of 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 authority, vest any part of the assets in trustees
upon such trusts for the benefit of members as the liquidator, with the like authority, shall think
fit, but so that no contributory shall be compelled to accept any shares or other property in
respect of which there is a liability.
(k) Subscription rights reserve
The Articles provide that to the extent that it is not prohibited by and is in compliance
with the Companies Act, if warrants to subscribe for shares have been issued by the Company
and the Company does any act or engages in any transaction which would result in the
subscription price of such warrants being reduced below the par value of a share, a subscription
rights reserve shall be established and applied in paying up the difference between the
subscription price and the par value of a share on any exercise of the warrants.
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3. CAYMAN ISLANDS COMPANY LA W
The Company is incorporated in the Cayman Islands subject to the Companies Act and,
therefore, operates subject to Cayman Islands law. Set out below is a summary of certain
provisions of Cayman company law, although this does not purport to contain all applicable
qualifications and exceptions or to be a complete review of all matters of Cayman company law
and taxation, which may differ from equivalent provisions in jurisdictions with which
interested parties may be more familiar:
(a) Company operations
As an exempted company, the Company’s operations must be conducted mainly outside
the Cayman Islands. The Company is required to file an annual return each year with the
Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of
its authorised share capital.
(b) Share capital
The Companies Act provides that where a company issues shares at a premium, whether
for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on
those shares shall be transferred to an account, to be called the “share premium account”. At
the option of a company, these provisions may not apply to premiums on shares of that
company allotted pursuant to any arrangement in consideration of the acquisition or
cancellation of shares in any other company and issued at a premium.
The Companies Act provides that the share premium account may be applied by the
company subject to the provisions, if any, of its memorandum and articles of association in (a)
paying distributions or dividends to members; (b) paying up unissued shares of the company
to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares
(subject to the provisions of section 37 of the Companies Act); (d) writing-off the preliminary
expenses of the company; and (e) writing-off the expenses of, or the commission paid or
discount allowed on, any issue of shares or debentures of the company.
No distribution or dividend may be paid to members out of the share premium account
unless immediately following the date on which the distribution or dividend is proposed to be
paid, the company will be able to pay its debts as they fall due in the ordinary course of
business.
The Companies Act provides that, subject to confirmation by the Grand Court of the
Cayman Islands (the “ Court ”), a company limited by shares or a company limited by guarantee
and having a share capital may, if so authorised by its articles of association, by special
resolution reduce its share capital in any way.
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(c) Financial assistance to purchase shares of a company or its holding company
There is no statutory restriction in the Cayman Islands on the provision of financial
assistance by a company to another person for the purchase of, or subscription for, its own or
its holding company’s shares. Accordingly, a company may provide financial assistance if the
directors of the company consider, in discharging their duties of care and acting in good faith,
for a proper purpose and in the interests of the company, that such assistance can properly be
given. Such assistance should be on an arm’s-length basis.
(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a share
capital may, if so authorised by its articles of association, issue shares which are to be
redeemed or are liable to be redeemed at the option of the company or a shareholder and the
Companies Act expressly provides that it shall be lawful for the rights attaching to any shares
to be varied, subject to the provisions of the company’s articles of association, so as to provide
that such shares are to be or are liable to be so redeemed. In addition, such a company may,
if authorised to do so by its articles of association, purchase its own shares, including any
redeemable shares. However, if the articles of association do not authorise the manner and
terms of purchase, a company cannot purchase any of its own shares unless the manner and
terms of purchase have first been authorised by an ordinary resolution of the company. At no
time may a company redeem or purchase its shares unless they are fully paid. A company may
not redeem or purchase any of its shares if, as a result of the redemption or purchase, there
would no longer be any issued shares of the company other than shares held as treasury shares.
A payment out of capital by a company for the redemption or purchase of its own shares is not
lawful unless immediately following the date on which the payment is proposed to be made,
the company shall be able to pay its debts as they fall due in the ordinary course of business.
Shares purchased by a company is to be treated as cancelled unless, subject to the
memorandum and articles of association of the company, the directors of the company resolve
to hold such shares in the name of the company as treasury shares prior to the purchase. Where
shares of a company are held as treasury shares, the company shall be entered in the register
of members as holding those shares, however, notwithstanding the foregoing, the company is
not to be treated as a member for any purpose and must not exercise any right in respect of the
treasury shares, and any purported exercise of such a right shall be void, and a treasury share
must not be voted, directly or indirectly, at any meeting of the company and must not be
counted in determining the total number of issued shares at any given time, whether for the
purposes of the company’s articles of association or the Companies Act.
A company is not prohibited from purchasing and may purchase its own warrants subject
to and in accordance with the terms and conditions of the relevant warrant instrument or
certificate. There is no requirement under Cayman Islands law that a company’s memorandum
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or articles of association contain a specific provision enabling such purchases and the directors
of a company may rely upon the general power contained in its memorandum of association to
buy and sell and deal in personal property of all kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in
certain circumstances, may acquire such shares.
(e) Dividends and distributions
The Companies Act permits, subject to a solvency test and the provisions, if any, of the
company’s memorandum and articles of association, the payment of dividends and
distributions out of the share premium account. With the exception of the foregoing, there are
no statutory provisions relating to the payment of dividends. Based upon English case law,
which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of
profits.
No dividend may be declared or paid, and no other distribution (whether in cash or
otherwise) of the company’s assets (including any distribution of assets to members on a
winding up) may be made to the company, in respect of a treasury share.
(f) Protection of minorities and shareholders’ suits
The Courts ordinarily would be expected to follow English case law precedents which
permit a minority shareholder to commence a representative action against or derivative
actions in the name of the company to challenge (a) an act which is ultra vires the company
or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company, and (c) an irregularity in the passing of a resolution
which requires a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into shares,
the Court may, on the application of members holding not less than one fifth of the shares of
the company in issue, appoint an inspector to examine into the affairs of the company and to
report thereon in such manner as the Court shall direct.
Any shareholder of a company may petition the Court which may make a winding up
order if the Court is of the opinion that it is just and equitable that the company should be
wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of the
company’s affairs in the future, (b) an order requiring the company to refrain from doing or
continuing an act complained of by the shareholder petitioner or to do an act which the
shareholder petitioner has complained it has omitted to do, (c) an order authorising civil
proceedings to be brought in the name and on behalf of the company by the shareholder
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--- page 565 ---
petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of
the shares of any shareholders of the company by other shareholders or by the company itself
and, in the case of a purchase by the company itself, a reduction of the company’s capital
accordingly.
Generally claims against a company by its shareholders must be based on the general laws
of contract or tort applicable in the Cayman Islands or their individual rights as shareholders
as established by the company’s memorandum and articles of association.
(g) Disposal of assets
The Companies Act contains no specific restrictions on the power of directors to dispose
of assets of a company. However, as a matter of general law, every officer of a company, which
includes a director, managing director and secretary, in exercising his powers and discharging
his duties must do so honestly and in good faith with a view to the best interests of the company
and exercise the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
(h) Accounting and auditing requirements
A company must cause proper books of account to be kept with respect to (i) all sums of
money received and expended by the company and the matters in respect of which the receipt
and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the
assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books
as are necessary to give a true and fair view of the state of the company’s affairs and to explain
its transactions.
An exempted company must make available at its registered office in electronic form or
any other medium, copies of its books of account or parts thereof as may be required of it upon
service of an order or notice by the Tax Information Authority pursuant to the Tax Information
Authority Act of the Cayman Islands.
(i) Exchange control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
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(j) Taxation
Pursuant to the Tax Concessions Act of the Cayman Islands, the Company has obtained
an undertaking:
(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied
on profits, income, gains or appreciation shall apply to the Company or its
operations; and
(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall
not be payable on or in respect of the shares, debentures or other obligations of the
Company.
The undertaking for the Company is for a period of twenty years from March 20, 2023.
The Cayman Islands currently levy no taxes on individuals or corporations based upon
profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax
or estate duty. There are no other taxes likely to be material to the Company levied by the
Government of the Cayman Islands save for certain stamp duties which may be applicable,
from time to time, on certain instruments executed in or brought within the jurisdiction of the
Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the
United Kingdom in 2010 but otherwise is not party to any double tax treaties.
(k) Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
(l) Loans to directors
There is no express provision in the Companies Act prohibiting the making of loans by
a company to any of its directors.
(m) Inspection of corporate records
The notice of registered office is a matter of public record. A list of the names of the
current directors and alternate directors (if applicable) is made available by the Registrar of
Companies for inspection by any person on payment of a fee. The register of mortgages is open
to inspection by creditors and members.
Members of the Company have no general right under the Companies Act to inspect or
obtain copies of the register of members or corporate records of the Company. They will,
however, have such rights as may be set out in the Company’s Articles.
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(n) Register of members
An exempted company may maintain its principal register of members and any branch
registers at such locations, whether within or without the Cayman Islands, as the directors may,
from time to time, think fit. The register of members shall contain such particulars as required
by Section 40 of the Companies Act. A branch register must be kept in the same manner in
which a principal register is by the Companies Act required or permitted to be kept. The
company shall cause to be kept at the place where the company’s principal register is kept a
duplicate of any branch register duly entered up from time to time.
There is no requirement under the Companies Act for an exempted company to make any
returns of members to the Registrar of Companies of the Cayman Islands. The names and
addresses of the members are, accordingly, not a matter of public record and are not available
for public inspection. However, an exempted company shall make available at its registered
office, in electronic form or any other medium, such register of members, including any branch
register of members, as may be required of it upon service of an order or notice by the Tax
Information Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
(o) Register of Directors and Officers
The Company is required to maintain at its registered office a register of directors and
officers which is not available for inspection by the public. A copy of such register must be
filed with the Registrar of Companies in the Cayman Islands and any change must be notified
to the Registrar within thirty (30) days of any change in such directors or officers.
(p) Beneficial Ownership Register
An exempted company is required to maintain a beneficial ownership register at its
registered office that records details of the persons who ultimately own or control, directly or
indirectly, 25% or more of the equity interests or voting rights of the company or have rights
to appoint or remove a majority of the directors of the company. The beneficial ownership
register is not a public document and is only accessible by a designated competent authority
of the Cayman Islands. Such requirement does not, however, apply to an exempted company
with its shares listed on an approved stock exchange, which includes the Stock Exchange.
Accordingly, for so long as the shares of the Company are listed on the Stock Exchange, the
Company is not required to maintain a beneficial ownership register.
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(q) Winding up
A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily, or
(c) under the supervision of the Court.
The Court has authority to order winding up in a number of specified circumstances
including where the members of the company have passed a special resolution requiring the
company to be wound up by the Court, or where the company is unable to pay its debts, or
where it is, in the opinion of the Court, just and equitable to do so. Where a petition is
presented by members of the company as contributories on the ground that it is just and
equitable that the company should be wound up, the Court has the jurisdiction to make certain
other orders as an alternative to a winding-up order, such as making an order regulating the
conduct of the company’s affairs in the future, making an order authorising civil proceedings
to be brought in the name and on behalf of the company by the petitioner on such terms as the
Court may direct, or making an order providing for the purchase of the shares of any of the
members of the company by other members or by the company itself.
A company (save with respect to a limited duration company) may be wound up
voluntarily when the company so resolves by special resolution or when the company in
general meeting resolves by ordinary resolution that it be wound up voluntarily because it is
unable to pay its debts. In the case of a voluntary winding up, such company is obliged to cease
to carry on its business (except so far as it may be beneficial for its winding up) from the time
of passing the resolution for voluntary winding up or upon the expiry of the period or the
occurrence of the event referred to above.
For the purpose of conducting the proceedings in winding up a company and assisting the
Court therein, there may be appointed an official liquidator or official liquidators; and the court
may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and
if more persons than one are appointed to such office, the Court must declare whether any act
required or authorised to be done by the official liquidator is to be done by all or any one or
more of such persons. The Court may also determine whether any and what security is to be
given by an official liquidator on his appointment; if no official liquidator is appointed, or
during any vacancy in such office, all the property of the company shall be in the custody of
the Court.
As soon as the affairs of the company are fully wound up, the liquidator must make a
report and an account of the winding up, showing how the winding up has been conducted and
how the property of the company has been disposed of, and thereupon call a general meeting
of the company for the purposes of laying before it the account and giving an explanation
thereof. This final general meeting must be called by at least 21 days’ notice to each
contributory in any manner authorised by the company’s articles of association and published
in the Gazette.
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(r) Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations
approved by (i) a majority in number representing seventy-five per cent. (75%) in value of
creditors, or (ii) seventy-five per cent. (75%) in value of shareholders or class of shareholders,
as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned
by the Court. Whilst a dissenting shareholder would have the right to express to the Court his
view that the transaction for which approval is sought would not provide the shareholders with
a fair value for their shares, the Court is unlikely to disapprove the transaction on that ground
alone in the absence of evidence of fraud or bad faith on behalf of management.
The Companies Act also contains statutory provisions which provide that a company may
present a petition to the Court for the appointment of a restructuring officer on the grounds that
the company (a) is or is likely to become unable to pay its debts within the meaning of section
93 of the Companies Act; and (b) intends to present a compromise or arrangement to its
creditors (or classes thereof) either, pursuant to the Companies Act, the law of a foreign
country or by way of a consensual restructuring. The petition may be presented by a company
acting by its directors, without a resolution of its shareholders or an express power in its
articles of association. On hearing such a petition, the Court may, among other things, make
an order appointing a restructuring officer or make any other order as the Court thinks fit.
(s) Take-overs
Where an offer is made by a company for the shares of another company and, within four
(4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which
are the subject of the offer accept, the offeror may at any time within two (2) months after the
expiration of the said four (4) months, by notice in the prescribed manner require the dissenting
shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may
apply to the Court within one (1) month of the notice objecting to the transfer. The burden is
on the dissenting shareholder to show that the Court should exercise its discretion, which it will
be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the
offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing
out minority shareholders.
(t) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the Court to be contrary to public policy (e.g. for purporting to
provide indemnification against the consequences of committing a crime).
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(u) Economic Substance Requirements
Pursuant to the International Tax Cooperation (Economic Substance) Act of the Cayman
Islands (“ES Act”) that came into force on 1 January 2019, 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 the Company; however, it does
not include an entity that is tax resident outside the Cayman Islands. Accordingly, for so long
as the Company is a tax resident outside the Cayman Islands, including in Hong Kong, it is not
required to satisfy the economic substance test set out in the ES Act.
4. GENERAL
Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law,
have sent to the Company a letter of advice summarising certain aspects of Cayman Islands
company law. This letter, together with a copy of the Companies Act, is available for inspection
as referred to in the paragraph headed “Documents Available on Display” in Appendix V to this
prospectus. Any person wishing to have a detailed summary of Cayman Islands company law
or advice on the differences between it and the laws of any jurisdiction with which he is more
familiar is recommended to seek independent legal advice.
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A. FURTHER INFORMATION ABOUT OUR COMPANY AND OUR SUBSIDIARIES
AND CONSOLIDATED AFFILIATED ENTITIES
1. Incorporation
Our Company was incorporated in the Cayman Islands on September 26, 2019 as an
exempted company with limited liability. Our registered office address is at the offices of
Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681,
Grand Cayman KY1- 1111, Cayman Islands. Accordingly, our Company’s corporate structure
and Memorandum and Articles of Association are subject to the relevant laws of the Cayman
Islands. A summary of our Memorandum and Articles of Association is set out in Appendix IV .
Our registered place of business in Hong Kong is at 31/F, Tower Two, Times Square, 1
Matheson Street, Causeway Bay, Hong Kong. We were registered as a non-Hong Kong
company under Part 16 of the Companies Ordinance on June 7, 2021 with the Registrar of
Companies in Hong Kong. FUNG Po Ting has been appointed as the authorized representative
of our Company in Hong Kong under Part 16 of the Companies Ordinance (Chapter 622 of the
Laws of Hong Kong) to accept service of process and any notices on behalf of the Company.
The address for service of process is 31/F, Tower Two, Times Square, 1 Matheson Street,
Causeway Bay, Hong Kong.
As at the date of this prospectus, our Company’s head office was located at Floor 1-2,
4th Street, Building S, Kehui Jingu, No. 99, Science Avenue, Luogang Science City, Huangpu
District, Guangzhou, Guangdong Province, China.
2. Changes in share capital of our Company
Our Company was incorporated with an authorized share capital of US$50,000 divided
into 500,000,000 shares of par value US$0.0001 each.
The following sets out the changes in the Company’s issued share capital during the two
years immediately preceding the date of this prospectus:
(1) On May 1, 2022, the Company allotted and issued 5,415,483 and 3,249,290 Series
D Preferred Shares of par value of US$0.00002 each to CTCB Holdings Limited and
A TI Opportunities (Nevis) Ltd, respectively.
(2) On December 30, 2022, the Company allotted and issued 6,582,337, 752,267 and
752,267 Series D+ Preferred Shares of par value of US$0.00002 each to Prime
Orient Holdings Ltd., Fangrong Management Limited and Celaeno Group Limited,
respectively.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-1 –


--- page 572 ---
(3) In May 2024, the Company allotted and issued 5,453,428, 33,268,750, 32,900,000,
32,120,000, 3,500,000 and 20,000,000 Class A Ordinary Shares of par value of
US$0.00002 each to Asia Tech Investments Ltd., Endeavor Cloud Limited, Gaoxin
Thrive Limited, FAST GOAL INTERNA TIONAL LIMITED, Mr. ZOU Y uming and
Torano Investments Limited, respectively.
Save as disclosed above, there has been no alteration in the share capital of our Company
during the two years immediately preceding the date of this prospectus.
3. Changes in the share capital of our subsidiaries and Consolidated Affiliated Entities
A summary of the corporate information and the particulars of our subsidiaries are set out
in note 1 to the Accountants’ Report as set out in Appendix I.
The following sets out the changes in the share capital of our subsidiaries and
Consolidated Affiliated Entities during the two years immediately preceding the date of this
prospectus. For details of our major subsidiary and Consolidated Affiliated Entity, please see
the section headed “History, Reorganization and Corporate Structure—Major Subsidiary and
Consolidated Affiliated Entity.”
Chengdu Fangyixing Information Technology Co., Ltd. (
ʮ̡)
On April 17, 2023, Chengdu Fangyixing Information Technology Co., Ltd. was
established as a limited liability company in the PRC with a registered capital of RMB10.0
million.
Ruishi Hospital
On June 7, 2023, Ruishi Hospital was established as a limited liability company in the
PRC with a registered capital of RMB10.0 million.
Save as disclosed above, there has been no alteration in the share capital of any of the
subsidiaries or Consolidated Affiliated Entities of our Company within the two years
immediately preceding the date of this prospectus.
4. Reorganization
The companies comprising our Group underwent restructuring in preparation for the
Listing. See “History, Reorganization and Corporate Structure” for details.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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5. Resolutions of the Shareholders of Our Company dated June 14, 2024
Written resolutions of our Shareholders were passed on June 14, 2024, pursuant to which,
among others:
(1) conditional on (i) the Listing Committee granting listing of, and permission to deal
in, the Shares in issue and to be issued as to be stated in this prospectus and such
listing and permission not subsequently having been revoked prior to the
commencement of dealing in the Shares on the Stock Exchange; (ii) the Offer Price
having been determined; (iii) the obligations of the Underwriters and the Capital
Market Intermediaries under the Underwriting Agreements becoming unconditional
and not being terminated in accordance with the terms of the Underwriting
Agreements or otherwise, in each case on or before such dates as may be specified
in the Underwriting Agreements; and (iv) the Underwriting Agreements having been
duly executed by the Underwriters and the Company:
(a) all the issued and unissued Class A Ordinary Shares and all the issued and
unissued Class B Ordinary Shares be re-designated and reclassified as
Ordinary Shares of par value of US$0.00002 each on a one to one basis, each
having the rights and restrictions as set out in the Memorandum and the
Articles;
(b) all the issued and unissued Preferred Shares be re-designated and re-classified
as Ordinary Shares of par value of US$0.00002 each on a one to one basis, each
having the rights and restrictions as set out in the Memorandum and the
Articles;
(c) the Global Offering (including the Over-allotment Option) was approved, and
the proposed allotment and issue of the Offer Shares under the Global Offering
were approved, and the Directors were authorized to determine the Offer Price
for, and to allot and issue the Offer Shares;
(d) a general unconditional mandate was given to our Directors to exercise all
powers of our Company to allot, issue and deal with Shares or securities
convertible into Shares and to make or grant offers, agreements or options
(including any warrants, bonds, notes and debentures conferring any rights to
subscribe for or otherwise receive Shares) which might require Shares to be
allotted and issued or dealt with subject to the requirement that the aggregate
nominal value of the Shares so allotted and issued or agreed conditionally or
unconditionally to be allotted and issued, otherwise than by way of the Global
Offering, rights issue or pursuant to the exercise of any subscription rights
attaching to any warrants which may be allotted and issued by the Company
from time to time or, pursuant to the exercise of any options which may be
granted or the allotment and issue of Shares in lieu of the whole or part of a
dividend on Shares in accordance with the Articles of Association on a specific
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-3 –


--- page 574 ---
authority granted by our Shareholders in general meeting, shall not exceed (i)
20% of the aggregate nominal value of the Shares in issue immediately
following the completion of the Global Offering excluding any Shares to be
issued pursuant to the exercise of the Over-allotment Option; and (ii) the
aggregate nominal amount of the share capital of the Company purchased by
the Company pursuant to the authority granted to the Directors as referred to
in (1)(e) below;
(e) a general unconditional mandate (the “ Repurchase Mandate ”) was given to
our Directors to exercise all powers of our Company to repurchase our own
shares on the Stock Exchange or on any other stock exchange on which the
securities of our Company may be listed and which is recognized by the SFC
and the Stock Exchange for this purpose, such number of Shares as will
represent up to 10% of the aggregate nominal value of the Shares in issue
immediately following the completion of the Global Offering, excluding any
Shares to be issued pursuant to the exercise of the Over-allotment Option; and
(f) the general unconditional mandate as mentioned in paragraph (d) above was
extended by the addition to the aggregate nominal value of the Shares which
may be allotted and issued or agreed to be allotted and issued by our Directors
pursuant to such general mandate of an amount representing the aggregate
nominal value of the Shares purchased by our Company pursuant to the
mandate to purchase Shares referred to in paragraph (e) above (up to 10% of
the aggregate nominal value of the Shares in issue immediately following the
completion of the Global Offering, excluding any Shares to be issued pursuant
to the exercise of the Over-allotment Option; and
(2) our Company conditionally approved and adopted the Memorandum and Articles of
Association with effect from the Listing Date.
Each of the general mandates referred to in paragraphs (l)(d), (l)(e) and (l)(f) above will
remain in effect until whichever is the earliest of (i) the conclusion of the next annual general
meeting of our Company; (ii) the expiration of the period within which the next annual general
meeting of our Company is required to be held by any applicable law or the Articles of
Association; or (iii) the time when such mandate is revoked or varied by an ordinary resolution
of the Shareholders in general meeting.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-4 –


--- page 575 ---
6. Repurchase of our own securities
The following paragraphs include, among others, certain information required by the
Stock Exchange to be included in this prospectus concerning the repurchase of our own
securities.
(a) Provision of the Listing Rules
The Listing Rules permit companies with a primary listing on the Stock Exchange
to repurchase their own securities on the Stock Exchange subject to certain restrictions,
the most important of which are summarized below:
(i) Shareholders’ Approval
All proposed repurchases of securities (which must be fully paid up in the case
of shares) by a company with a primary listing on the Stock Exchange must be
approved in advance by an ordinary resolution of the shareholders in general
meeting, either by way of general mandate or by specific approval of a particular
transaction.
Pursuant to a resolution passed by our Shareholders on June 14, 2024, the
Repurchase Mandate was given to our Directors authorizing them to exercise all
powers of our Company to repurchase Shares on the Stock Exchange, or on any
other stock exchange on which the securities of our Company may be listed and
which is recognized by the SFC and the Stock Exchange for this purpose, with a
total nominal value up to 10% of the aggregate nominal value of our Shares in issue
immediately following the completion of the Global Offering (excluding any Shares
to be issued pursuant to the exercise of the Over-allotment Option), with such
mandate to expire at the earliest of (i) the conclusion of the next annual general
meeting of our Company (unless renewed by an ordinary resolution of our
Shareholders in a general meeting, either unconditionally or subject to conditions),
(ii) the expiration of the period within which our Company’s next annual general
meeting is required by the Articles of Association or any other applicable laws to be
held, and (iii) the date when it is varied or revoked by an ordinary resolution of our
Shareholders in general meeting.
(ii) Source of Funds
Purchases must be funded out of funds legally available for the purpose in
accordance with the Memorandum and Articles of Association and the applicable
laws and regulations of Hong Kong and the Cayman Islands. A listed company may
not purchase its own securities on the Stock Exchange for a consideration other than
cash or for settlement otherwise than in accordance with the trading rules of the
Stock Exchange from time to time. As a matter of Cayman Islands law, any
purchases by the Company may be made out of profits or out of the proceeds of a
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-5 –


--- page 576 ---
new issue of shares made for the purpose of the purchase or from sums standing to
the credit of our share premium account or, if so authorized by the Articles of
Association and subject to the Cayman Companies Act, out of capital. Any premium
payable on the purchase over the par value of the shares to be purchased must be
provided for out of profits or from sums standing to the credit of our share premium
account or, if so authorized by the Articles of Association and subject to the Cayman
Companies Act, out of capital.
(iii) Trading Restrictions
The total number of shares which a listed company may repurchase on the
Stock Exchange is the number of shares representing up to a maximum of 10% of
the aggregate number of shares in issue. A company may not issue or announce a
proposed issue of new securities for a period of 30 days immediately following a
repurchase (other than an issue of securities pursuant to an exercise of warrants,
share options or similar instruments requiring the company to issue securities which
were outstanding prior to such repurchase) without the prior approval of the Stock
Exchange. In addition, a listed company is prohibited from repurchasing its shares
on the Stock Exchange if the purchase price is 5% or more than the average closing
market price for the five preceding trading days on which its shares were traded on
the Stock Exchange.
The Listing Rules also prohibit a listed company from repurchasing its
securities if the repurchase would result in the number of listed securities which are
in the hands of the public falling below the relevant prescribed minimum percentage
as required by the Stock Exchange. A company is required to procure that the broker
appointed by it to effect a repurchase of securities discloses to the Stock Exchange
such information with respect to the repurchase as the Stock Exchange may require.
(iv) Status of Repurchased Shares
The listing of all purchased securities (whether on the Stock Exchange or,
otherwise) is automatically cancelled and the relative certificates must be canceled
and destroyed. Under the laws of the Cayman Islands, unless, prior to the purchase
the directors of the Company resolve to hold the shares purchased by the Company
as treasury shares, shares purchased by the Company shall be treated as canceled and
the amount of the Company’s issued share capital shall be diminished by the
nominal value of those shares. However, the purchase of shares will not be taken as
reducing the amount of the authorized share capital under Cayman Islands law.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-6 –


--- page 577 ---
(v) Suspension of Repurchase
A listed company may not make any repurchase of securities after a price
sensitive development has occurred or has been the subject of a decision until such
time as the price sensitive information has been made publicly available. In
particular, during the period of one month immediately preceding the earlier of (a)
the date of the Board meeting (as such date is first notified to the Stock Exchange
in accordance with the Listing Rules) for the approval of a listed company’s results
for any year, half-year, quarterly or any other interim period (whether or not
required under the Listing Rules) and (b) the deadline for publication of an
announcement of a listed company’s results for any year or half-year under the
Listing Rules, or quarterly or any other interim period (whether or not required
under the Listing Rules), the listed company may not repurchase its shares on the
Stock Exchange other than in exceptional circumstances. In addition, the Stock
Exchange may prohibit a repurchase of securities on the Stock Exchange if a listed
company has breached the Listing Rules.
(vi) Reporting Requirements
Certain information relating to repurchases of securities on the Stock Exchange
or otherwise must be reported to the Stock Exchange not later than 30 minutes
before the earlier of the commencement of the morning trading session or any
pre-opening session on the following business day. In addition, a listed company’s
annual report is required to disclose details regarding repurchases of securities made
during the year, including a monthly analysis of the number of securities
repurchased, the purchase price per share or the highest and lowest price paid for all
such repurchases, where relevant, and the aggregate prices paid.
(vii) Core Connected Persons
The Listing Rules prohibit a company from knowingly purchasing securities on
the Stock Exchange from a “core connected person”, that is, a director, chief
executive or substantial shareholder of the company or any of its subsidiaries or a
close associate of any of them (as defined in the Listing Rules) and a core connected
person shall not knowingly sell his securities to the company.
(b) Reasons for Repurchases
Our Directors believe that it is in the best interests of our Company and
Shareholders for our Directors to have a general authority from the Shareholders to enable
our Company to repurchase Shares in the market. Such repurchases may, depending on
market conditions and funding arrangements at the time, lead to an enhancement of the
net asset value per Share and/or earnings per Share and will only be made where our
Directors believe that such repurchases will benefit our Company and Shareholders.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-7 –


--- page 578 ---
(c) Funding of Repurchases
Repurchase of the Shares must be funded out of funds legally available for such
purpose in accordance with the Articles of Association and the applicable laws of the
Cayman Islands. Our Directors may not repurchase the Shares on the Stock Exchange for
a consideration other than cash or for settlement otherwise than in accordance with the
trading rules of the Stock Exchange. Subject to the foregoing, our Directors may make
repurchases with profits of the Company or out of the proceed of a new issuance of shares
made for the purpose of the repurchase or from sums standing to the credit in the share
premium account of the Company or, if authorized by the Articles of Association and
subject to the Cayman Companies Act, out of capital and, in the case of any premium
payable on the repurchase, out of profits of the Company or from sums standing to the
credit of the share premium account of the Company or, if authorized by the Articles of
Association and subject to the Cayman Companies Act, out of capital.
However, our Directors do not propose to exercise the general mandate to such an
extent as would, in the circumstances, have a material adverse effect on the working
capital requirements of the Company or its gearing levels which, in the opinion of the
Directors, are from time to time appropriate for the Company.
(d) General
The exercise in full of the Repurchase Mandate, on the basis of 1,340,267,457
Shares in issue immediately following the completion of the Global Offering, but
excluding any Shares to be issued pursuant to the exercise of the Over-allotment Option,
could accordingly result in up to approximately 134,026,500 Shares being repurchased by
our Company during the period prior to the earliest of: (i) the conclusion of the next
annual general meeting of our Company unless renewed by an ordinary resolution of our
Shareholders in a general meeting, either unconditionally or subject to conditions; (ii) the
expiration of the period within which our Company’s next annual general meeting is
required by the Articles of Association or any other applicable laws to be held; or (iii) the
date when it is varied or revoked by an ordinary resolution of our Shareholders in general
meeting.
None of our Directors nor, to the best of their knowledge having made all reasonable
enquiries, any of their associates currently intends to sell any Shares to our Company.
Our Directors will exercise the powers of our Company to make purchases pursuant
to the Repurchase Mandate in accordance with the Listing Rules and the applicable laws
in the Cayman Islands. Our Directors confirm that neither the above nor the proposed
share repurchase contemplated hereunder has any unusual features.
If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in
the voting rights of our Company increases, such increase will be treated as an acquisition
for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of
Shareholders acting in concert could obtain or consolidate control of our Company and
become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers
Code. Save as aforesaid, our Directors are not aware of any consequences which would
arise under the Takeovers Code as a consequence of any repurchases pursuant to the
Repurchase Mandate.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-8 –


--- page 579 ---
Any repurchase of Shares that results in the number of Shares held by the public
being reduced to less than 25% of the Shares then in issue could only be implemented if
the Stock Exchange agreed to waive the Listing Rules requirements regarding the public
shareholding referred to above. It is believed that a waiver of this provision would not
normally be given other than in exceptional circumstances.
No core connected person of our Company has notified our Company that he or she
has a present intention to sell Shares to our Company, or has undertaken not to do so, if
the Repurchase Mandate is exercised.
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of
business) have been entered into by members of our Group within two years preceding the date
of this Prospectus and are or may be material, as well as contracts required to be disclosed
pursuant to paragraph 17 of Chapter 4.1 of the Guide For New Listing Applicants issued by the
Stock Exchange:
(1) the exclusive consultancy and service agreement (ਕ՘ᙄ) dated June
19, 2020, entered into between New WFOE and Guangzhou Guanghuikang;
(2) the exclusive option agreement (ᒅ൯ᛆ՘ᙄ) dated June 19, 2020, entered into
among New WFOE, Fangzhou Y unkang Registered Shareholders and Guangzhou
Guanghuikang;
(3) a power of attorney (ࣣdated June 19, 2020 executed by
Guangzhou Fangming Investment Enterprise (Limited Partnership) (ҳ
༟Άุ(Υྫ)), pursuant to which Guangzhou Fangming Investment Enterprise
(Limited Partnership) (ҳ༟Άุ(Υྫ)) agreed to, among other
things, exclusively authorize New WFOE (or other designated persons specified
therein) to exercise all of its rights as a shareholder of Guangzhou Guanghuikang;
(4) a power of attorney (ࣣdated June 19, 2020 executed by Shenzhen
Kaichuang Lianyu Technology Consultancy Co., Ltd. (Ҧፔ༔Ϟ
ʮ̡), pursuant to which Shenzhen Kaichuang Lianyu Technology Consultancy
Co., Ltd. (ʮ̡) agreed to, among other things,
exclusively authorize New WFOE (or other designated persons specified therein) to
exercise all of its rights as a shareholder of Guangzhou Guanghuikang;
(5) a power of attorney (ࣣdated June 19, 2020 executed by Beijing
Yiershan Technology Co., Ltd. (ʮ̡), pursuant to which
Beijing Yiershan Technology Co., Ltd. (ʮ̡) agreed to, among
other things, exclusively authorize New WFOE (or other designated persons
specified therein) to exercise all of its rights as a shareholder of Guangzhou
Guanghuikang;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-9 –


--- page 580 ---
(6) the equity pledge agreement (՘ᙄ) dated June 19, 2020, entered into
among New WFOE, Guangzhou Guanghuikang and Fangzhou Y unkang Registered
Shareholders;
(7) a spouse undertaking ( ৣਅΝจՌ) dated June 19, 2020 executed by HE Honghua
(ڀߎthe spouse of Mr. Xie;
(8) a spouse undertaking ( ৣਅΝจՌ) dated June 19, 2020 executed by ZHANG
Wenwen ( ੵතත), the spouse of W ANG Wenchao ( ӓၲ൴);
(9) a spouse undertaking ( ৣਅΝจՌ) dated June 19, 2020 executed by ZHOU
Fengjiang ( մჾϪ), the spouse of Y ANG Jinghua ( เหശ); and
(10) the Hong Kong Underwriting Agreement.
2. Intellectual Property Rights
(a) Trademarks
As of the Latest Practicable Date, we had registered the following trademarks that
we consider to be or may be material to our business:
No. Trademark Category
Registered
Owner
Place of
Registration
Registration
No. Expiry Date
1.
 1-2; 4; 6-8; 11;
13-15; 17-24;
26-27; 29; 31-32;
34; 37-40; 43; 45
Fangfeng
Technology
PRC 22367608A September 13,
2028
2.
35 Fangfeng
Technology
PRC 12303887 August 27,
2024
3.
 44 Fangfeng
Technology
PRC 19081005 March 13,
2027
4.
 3; 5; 10; 28; 35-36;
41-42; 44
Fangfeng
Technology
PRC 23529354 July 13, 2028
5.
 35 Fangfeng
Technology
PRC 16517444 May 6, 2026
6.
 9 Fangfeng
Technology
PRC 19080720 March 13,
2027
7.
 44 Fangfeng
Technology
PRC 19529696 May 20, 2027
8.
 42 Fangfeng
Technology
PRC 10427374 May 20, 2033
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 581 ---
No. Trademark Category
Registered
Owner
Place of
Registration
Registration
No. Expiry Date
9.
 9 Fangfeng
Technology
PRC 22910851 February 27,
2029
10.
 35 Fangfeng
Technology
PRC 22905093 March 6, 2029
11.
 35 Fangfeng
Technology
PRC 44512099 November 13,
2030
12.
 1; 2; 4; 6; 7; 8; 11;
13; 14; 15; 17; 18;
19; 20; 21; 22; 23;
24; 26; 27; 29; 31;
32; 34; 37; 38; 39;
40; 43; 45
Fangfeng
Technology
PRC 22367609 September 13,
2028
13.
1; 2; 4; 6; 7; 8; 11;
13; 14; 15; 17; 18;
19; 20; 21; 22; 23;
24; 26; 27; 29; 31;
32; 34; 37; 38; 39;
40; 43; 45
Fangfeng
Technology
PRC 22367610 September 13,
2028
14.
45 Fangfeng
Technology
PRC 58236232 February 6,
2032
15.
 5 Fangfeng
Technology
PRC 58235881 February 6,
2032
16.
 10 Fangfeng
Technology
PRC 56725595A March 6, 2032
17.
 5 Fangfeng
Technology
PRC 55915450 November 20,
2031
18.
 38 Fangfeng
Technology
PRC 55907345 November 20,
2031
19.
 44 Fangfeng
Technology
PRC 52184702 January 27,
2032
20.
 5 Fangfeng
Technology
PRC 52168280 October 20,
2031
21.
 45 Fangfeng
Technology
PRC 52166057 August 13,
2031
22.
 38 Fangfeng
Technology
PRC 52166035 August 20,
2031
23.
 38 Fangfeng
Technology
PRC 51029234 August 6, 2031
24.
 5 Fangfeng
Technology
PRC 51025404 July 6, 2031
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-11 –


--- page 582 ---
No. Trademark Category
Registered
Owner
Place of
Registration
Registration
No. Expiry Date
25.
 5; 9; 10; 35; 44 Fangzhou
Medicine
PRC 42126399A December 6,
2030
26.
 38 Fangzhou
Medicine
PRC 46331316 February 20,
2031
27.
 5 Fangzhou
Medicine
PRC 46331661 April 20, 2031
28.
 44 Fangzhou
Medicine
PRC 46337774 April 20, 2031
29.
 35 Fangzhou
Medicine
PRC 46355628 April 6, 2031
30.
 35 Fangfeng
Technology
PRC 63324861 September 13,
2032
31.
 42 Fangfeng
Technology
PRC 14423391 May 27, 2026
32.
 5 Fangfeng
Technology
PRC 59854561A June 6, 2032
33.
 44 Fangfeng
Technology
PRC 57321194 August 13,
2032
34.
 45 Fangfeng
Technology
PRC 57317666 August 20,
2032
35.
 35 Fangfeng
Technology
PRC 62730987 August 20,
2032
36.
 44 Fangfeng
Technology
PRC 62731085 August 20,
2032
37.
 3, 5, 10, 35, 38, 44 The Company Hong Kong 305689991 July 18, 2031
38.
 3, 5, 10, 38, 44 The Company Hong Kong 305689982 July 18, 2031
39.
 3, 5, 10, 38, 44 The Company Hong Kong 305689973 July 18, 2031
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 583 ---
(b) Patents
As of the Latest Practicable Date, we had applied for the registration of the
following patents that we consider to be or may be material to our business:
No. Patent Type
Place of
Registration Application No. Applicant
Application
Date
1. A smart supply and procurement
method and system for
standardised drugs ( ɓ၇ᅺ๟
ʿӻ୕)
G16H 40/20 PRC 202 1111290597 Fangzhou
Information
September 26,
2021
2. A new online consultation
system and method based on
Internet hospitals (ʝ
ίᇞਪൢӻ୕
ج)
G16H 80/00 PRC 2021110263164 Fangzhou
Information
September 2,
2021
3. A workflow framework driven
by business events (׵
ݖ࣪ݴ)
G06F 8/30 PRC 2021109818928 Fangzhou
Information
August 25,
2021
4. A method and system for
intelligent identification of
prescription pictures based on
internet hospitals (ʝ
ஈ˙ྡ˪౽ঐᗆй
ʿӻ୕)
G06V 30/418 PRC 2021108360081 Fangzhou
Information
July 23, 2021
5. A method and apparatus for
screening continuously
captured images, and an
electronic device (ש
ʿༀໄeཥ
ɿண௪)
H04N 23/60 PRC 202210319687X Fangzhou
Information
March 29,
2022
6. Drug information pushing
method, device, server and
computer readable storage
medium (e
ၑዚ̙ᛘπ
Ꮇʧሯ)
G16H 50/70 PRC 2022102318460 Fangzhou
Information
March 9, 2022
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 584 ---
(c) Copyrights
As of the Latest Practicable Date, we had registered the following copyrights that we
consider to be or may be material to our business:
Software ( ழ΁)
No. Copyright Registered owner
Registration
No.
Registration
Date
1. Jianke doctor application
software V5.7.3 (ᔼ
͛Ꮠ͜ழ΁V5.7.3)
Fangzhou
Medicine
2020SR1110642 September 16,
2020
2. Jianke hospital application
software V1.9.2 (ᔼ
৫Ꮠ͜ழ΁V1.9.2)
Fangzhou
Medicine
2020SR 1111150 September 16,
2020
3. Jianke online pharmacy
APP software V5.0.0
(ֳAPPழ΁
V5.0.0)
Fangzhou
Medicine
2020SR 1111443 September 16,
2020
4. Fangzhou Order
Performance System
V1.1 (ʕː
ӻ୕V1.1)
Fangzhou
Medicine
2021SR0392351 March 15,
2021
5. Fangzhou Health Member
Service System V1.1
(ਕӻ୕
V1.1)
Fangzhou
Medicine
2021SR0392350 March 15,
2021
6. Fangzhou Da Jian Xiao
Kang CS System V1.1
(ӻ୕
V1.1)
Fangzhou
Medicine
2021SR0392369 March 15,
2021
7. Fangzhou Jianke online
pharmacy application
software (ၣɪ
Ꮠ͜ழ΁ V5.0.0)
Fangzhou
Medicine
2022SR0355553 March 17,
2022
8. Fangzhou Jianke
application software
V2.0 (Ꮠ͜ழ΁
V2.0)
Fangzhou
Medicine
2022SR0402173 March 28,
2022
9. Blockchain-based
Fangzhou Drug
Authentication Tracing
System V1.0 (ਜ෯
๑๕
ӻ୕V1.0)
Fangzhou
Information
2020SR1008159 August 28,
2020
10. Fangzhou Supply Chain
Scheduling Management
System V1.0 ( ˙ЋԶᏐ
၍ଣӻ୕V1.0)
Fangzhou
Information
2021SR0392155 March 15,
2021
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 585 ---
No. Copyright Registered owner
Registration
No.
Registration
Date
11. Fangzhou Warehousing
and Logistics
Management System ( ˙
၍ଣӻ୕
V1.0)
Fangzhou
Information
2021SR0392145 March 15,
2021
12. Fangzhou Chain Pharmacy
Management System
V2.0 (၍ଣ
ӻ୕V2.0)
Fangzhou
Information
2021SR0396025 March 16,
2021
13. Fangzhou Jianke
E-Prescription
Management System
V1.0 (ཥɿஈ˙
၍ଣӻ୕V1.0)
Fangzhou
Information
2021SR0739823 May 21, 2021
14. Fangzhou Internet
Hospital Multimedia
Business Management
System V1.0 ( ˙Ћʝᑌ
ၣᔼ৫εద᜗ุਕ၍ଣ
ӻ୕V1.0)
Fangzhou
Information
2021SR0739999 May 21, 2021
15. Fangzhou Internet
Hospital Management
System V1.0 ( ˙Ћʝᑌ
ၣᔼ৫၍ଣӻ୕V1.0)
Fangzhou
Information
2021SR0739870 May 21, 2021
16. Fangzhou Internet
Hospital Information
Management System
V1.0 ( ˙Ћʝᑌၣᔼ৫༟
ৃ၍ଣӻ୕V1.0)
Fangzhou
Information
2021SR0739835 May 21, 2021
17. Fangzhou Y oucai
Management System
V1.0 ( ˙ЋᎴમ၍ଣӻ୕
V1.0)
Fangzhou
Information
2021SR0739994 May 21, 2021
18. Jianke doctor application
software V6.1.8 (ᔼ
͛Ꮠ͜ழ΁V6.1.8)
Qishi Hospital 2023SR0426378 March 31,
2023
19. Jianke hospital application
software V2.4.3 (ᔼ
৫Ꮠ͜ழ΁V2.4.3)
Qishi Hospital 2023SR0416272 March 31,
2023
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 586 ---
(d) Domain names
As of the Latest Practicable Date, we owned the following domain names which we
consider to be or may be material to our business:
No. Domain Name
Registered
Owner Expiry Date
1. jianke.com Fangzhou
Medicine
January 23, 2030
2. yunyihuiyao.com Beijing
Fangyixing
July 6, 2028
3. jkyisheng.com Beijing
Fangyixing
September 4, 2028
4. jiankehospital.com Beijing
Fangyixing
September 4, 2028
5. jianke-inc.com Fangzhou
Medicine
June 1, 2028
6. jkyyg.com Fangzhou
Medicine
February 10, 2028
7. fangzhou-inf.com Fangzhou
Information
October 23, 2028
8. fzjianke.com Fangzhou
Y unkang
March 18, 2028
9. fangzhou.cn Fangzhou
Medicine
June 6, 2028
Save as aforesaid, as of the Latest Practicable Date, there were no other intellectual
property rights which were material to our business.
C. FURTHER INFORMATION ABOUT OUR DIRECTORS
1. Particulars of Directors’ service contracts and appointment letters
(a) Executive Directors
Each of the executive Directors has entered into a service contract with our
Company. The initial term of their service contracts shall commence from the date of his
or her appointment and continue for a period of three years after or until the third annual
general meeting of the Company since the Listing Date, whichever is earlier (subject
always to re-election as and when required under the Articles of Association), until
terminated in accordance with the terms and conditions of the service contract or by either
party giving to the other not less than one month’s prior notice in writing.
No annual director’s fees are payable to the executive Directors under the current
arrangement.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 587 ---
(b) Non-executive Directors and independent non-executive Directors
Each of the non-executive Directors has entered into an appointment letter with our
Company. The initial term for their appointment letters shall commence from the date of
their appointments and shall continue for three years after or until the third annual general
meeting of the Company since the Listing Date, whichever is sooner, (subject always to
re-election as and when required under the Articles of Association) until terminated in
accordance with the terms and conditions of the appointment letter or by either party
giving to the other not less than one month’s prior notice in writing. No annual director’s
fees are payable to the non-executive Directors under the current arrangement.
Each of the independent non-executive Directors has entered into an appointment
letter with our Company. The initial term for their appointment letters shall be three years
from the date of their appointments or until the third annual general meeting of the
Company since the Listing Date, whichever is sooner, (subject always to re-election as
and when required under the Articles of Association) until terminated in accordance with
the terms and conditions of the appointment letter or by either party giving to the other
not less than three month’s prior notice in writing. Under these appointment letters, each
of the independent non-executive Directors will receive an annual director’s fee of
HK$100,000.
2. Remuneration of Directors
(1) Remuneration and benefits in kind of RMB5.8 million, RMB8.7 million and
RMB12.7 million, respectively, were paid and granted by our Group to our Directors
in respect of the years ended December 31, 2021, 2022 and 2023.
(2) Under the arrangements currently in force, our Directors will be entitled to receive
remuneration and benefits in kind which, for the year ending December 31, 2024, is
expected to be RMB59.5 million.
(3) None of our Directors has or is proposed to have a service contract with the
Company other than contracts expiring or determinable by the employer within one
year without the payment of compensation (other than statutory compensation).
3. Disclosure of interests
(a) Interests and short positions of our Directors in the share capital of our Company
and its associated corporations following completion of the Global Offering
Immediately following completion of the Global Offering (assuming the weighted
voting rights structure is cancelled and the Over-allotment Option is not exercised), the
interests and/or short positions (as applicable) of our Directors and chief executives in the
shares, underlying shares and debentures of our Company and its associated corporations,
within the meaning of Part XV of the SFO, which will have to be notified to our Company
and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 588 ---
interests and/or short positions (as applicable) which he/she is taken or deemed to have
under such provisions of the SFO), or which will be required, pursuant to section 352 of
the SFO, to be recorded in the register referred to therein, or which will be required to
be notified to our Company and the Stock Exchange pursuant to the Model Code for
Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, will
be as follows:
(i) Interest in Shares of the Company
Name Nature of interest
Number of
Shares (1)
Approximate
percentage of
shareholding
of Shares in
our
Company (1)
Mr. XIE Fangmin Interest in controlled
corporations (2)
276,605,527 20.64%
Interest of a party to an
agreement (3)
236,624,057 17.65%
Interest of a party to an
agreement (6)
138,430,610 10.33%
Interest in a controlled
corporation (7)
116,875,898 8.72%
Mr. ZHOU Feng Interest in controlled
corporations (4)
236,624,057 17.65%
Interest of a party to an
agreement (3)
276,605,527 20.64%
Interest of a party to an
agreement (6)
138,430,610 10.33%
Interest in a controlled
corporation (7)
116,875,898 8.72%
Mr. ZOU Y uming Beneficial Owner (8) 3,500,000 0.26%
Interest in a controlled
incorporation (8)
20,000,000 1.49%
Mr. David McKee HAND Interest in controlled
corporations (5)
437,443,815 32.64%
Notes:
(1) The table above assumes the weighted voting rights structure is cancelled and the
Over-allotment Option is not exercised, each Class A Ordinary Share, Class B Ordinary
Share and Preferred Share will be automatically converted into one Share upon the Global
Offering becoming unconditional.
(2) Fangrong Management Limited is wholly-owned by Mr. Xie. Each of Fangzhan Holdings
L.P . and Xingyu Holdings L.P . is controlled by Mr. Xie. Therefore, Mr. Xie is deemed to
be interested in the 265,538,362, 5,481,985 and 5,585,180 Shares held by Fangrong
Management Limited, Fangzhan Holdings L.P . and Xingyu Holdings L.P ., respectively,
under the SFO.
(3) Mr. Xie and Mr. Zhou are parties to the Concert Deed, according to which Mr. Xie and Mr.
Zhou confirmed and agreed that they have acted and will continue to act in concert and
collectively for all material management affairs and the arrival and/or execution of all
commercial decisions, including but not limited to financial and operational matters, of our
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 589 ---
Group since date of the Concert Deed, and they have casted and will continue to cast
unanimous vote collectively for or against all resolutions in all Board and Shareholders’
meetings and discussions of the Group. Therefore, Mr. Xie and Mr. Zhou are deemed to be
jointly interested in the aggregate number of Shares held by each other.
(4) Each of Celaeno Group Limited and Silica Brothers Corp. is controlled by Mr. Zhou.
Therefore, Mr. Zhou is deemed to be interested in the 186,158,297 and 50,465,760 Shares
held by Celaeno Group Limited and Silica Brothers Corp., respectively, under the SFO.
(5) Each of Crescent Point V ehicles is advised by Crescent Point, which is ultimately
controlled by David McKee Hand.
(6) Effective immediately before the Listing, Mr. Xie and Mr. Zhou will be entitled to exercise
the voting rights attached to 138,430,610 Shares, representing approximately 10.33% of
shareholding in the Company immediately following the completion of the Global
Offering, held by Tech-Med Investments (S) Pte. Ltd. pursuant to the deed of voting proxy
executed by Tech-Med Investments (S) Pte. Ltd. on June 12, 2024. For details, see
“History, Reorganization and Corporate Structure—Deed of V oting Proxy.”
(7) Asia Tech Investments Ltd. is a platform holding the underlying incentive shares granted
to our Directors and senior management in the total amount of 116,875,898 Class A
Ordinary Shares under the RSU Scheme. Approximately 51.34% and 48.41% of interest in
Asia Tech Investments Ltd. were held by Mr. Xie and Mr. Zhou, respectively. Therefore,
each of Mr. Xie and Mr. Zhou is deemed to be interested in the Shares of the Company held
by Asia Tech Investments Ltd. in accordance with SFO.
(8) In May 2024, 3,500,000 and 20,000,000 Shares underlying the RSUs were allotted and
issued to Mr. ZOU Y uming and Torano Investments Limited (a company wholly owned by
Mr. Zou to hold certain Shares underlying the RSUs granted to him), respectively, pursuant
to the RSU Scheme.
(b) Interests and short positions discloseable under Divisions 2 and 3 of Part XV of
the SFO
For information on the persons who will, immediately following the completion of
the Global Offering, have or be deemed or taken to have beneficial interests or short
position in our Shares or underlying shares which would fall to be disclosed to our
Company under the provisions of 2 and 3 of Part XV of the SFO, or directly or indirectly
be interested in 10% or more of the nominal value of any class of share capital carrying
rights to vote in all circumstances at general meetings of any other member of our Group,
please see the section headed “Substantial Shareholders”.
Save as set out above, as of the Latest Practicable Date, our Directors were not
aware of any persons who would, immediately following the completion of the Global
Offering, be interested, directly or indirectly, in 10% or more of the nominal of any class
of share capital carrying rights to vote in all circumstances at general meetings of any
member of our Group or had option in respect of such capital.
4. Disclaimers
Save as disclosed in this prospectus:
(1) there are no existing or proposed service contracts (excluding contracts expiring or
determinable by the employer within one year without payment of compensation
(other than statutory compensation)) between the Directors and any member of the
Group;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 590 ---
(2) none of the Directors or the experts named in the section headed “—E. Other
Information—4. Consents of Experts” below has any direct or indirect interest in the
promotion of, or in any assets which have been, within the two years immediately
preceding the date of this prospectus, acquired or disposed of by or leased to any
member of the Group, or are proposed to be acquired or disposed of by or leased to
any member of the Group;
(3) no commissions, discounts, brokerages or other special terms have been granted in
connection with the issue or sale of any Shares in or debentures of the Company
within the two years ended on the date of this prospectus;
(4) none of the Directors is materially interested in any contract or arrangement
subsisting at the date of this prospectus which is significant in relation to the
business of the Group taken as a whole;
(5) taking no account of any Shares which may be taken up under the Global Offering,
so far as is known to any Director or chief executive of the Company, no other
person (other than a Director or chief executive of the Company) will, immediately
following completion of the Global Offering, have interests or short positions in the
Shares and underlying Shares which would fall to be disclosed to the Company and
the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO
or (not being a member of the Group), be interested, directly or indirectly, in 10%
or more of the nominal value of any class of share capital carrying rights to vote in
all circumstances at general meetings of any member of the Group; and
(6) none of the Directors or chief executive of the Company has any interests or short
positions in the Shares, underlying shares or debentures of the Company or its
associated corporations (within the meaning of Part XV of the SFO) which will have
to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and
8 of Part XV of the SFO (including interests and short positions which he is taken
or deemed to have under such provisions of the SFO) or which will be required,
pursuant to section 352 of the SFO, to be entered into the register referred to therein,
or will be required, pursuant to the Model Code for Securities Transaction by
Directors of Listed Issuers, to be notified to the Company and the Stock Exchange
once the Shares are listed thereon.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 591 ---
D. RSU SCHEME
Summary of the Principal Terms
The following is a summary of the principal terms of the RSU Scheme approved and
adopted by the Board on January 1, 2020 (the “ Adoption Date ”). The terms of the RSU
Scheme will not be subject to the provisions of Chapter 17 of the Listing Rules upon Listing.
(a) Purpose of the RSU Scheme
The purpose of RSU Scheme is to attract, retain and motivate our senior
management, employees, advisors and such other participants through the grant of awards
(“Awards ”) for their contribution to the growth and profits of the Group, and to allow
such senior management, employees, advisors and other persons to participate in the
growth and profitability of the Group.
(b) Administration
The RSU Scheme shall be subject to the administration of the Board. The Board
shall have the right to (i) interpret, construe and amend the provisions of the RSU Scheme
and (ii) determine the persons who will be offered Awards under the RSU Scheme, the
number and subscription price of Shares and other terms in relation to such Awards.
(c) Who May Join
The participant of the RSU Scheme is any person belong to any of (1) senior
management of the Group; (2) employees of the Group; (3) advisors of the Group; and
(4) other persons as approved by the Board or the authorized administrator of the RSU
Scheme.
(d) Grant of Restricted Share Units
After the Board determines that it will grant RSUs, it will advise the grantee in an
Restricted Share Units (“ RSUs ”) award notice (“ Award Notice ”) of the terms, conditions,
and restrictions related to the grant, including the number and subscription price of RSUs.
(e) V esting Criteria and Other Terms
The RSUs shall be vested to the relevant participant upon (1) expiration of the
vesting period; (2) payment of the relevant subscription price; and (3) the participant has
obtained relevant approval and completed relevant registration as required under PRC law
(including but not limited to SAFE registration). The vesting period shall be determined
by the Board and the authorized administrator of the RSU Scheme in accordance with the
specific circumstances of the participant at the time of granting.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 592 ---
(f) Subscription Price
The subscription price shall be nil or any other price as approved by the Board.
(g) Cancellation and Forfeiture of Awards
The Company shall have the right to cancel or repurchase the unvested RSUs for
free if the grantee left the Company for any reason.
(h) Maximum number of Shares Available for Subscription
The Shares which may be transferred or paid-out in settlement of all Awards to be
granted under the RSU Scheme of the Company shall not exceed 238,664,648 Shares (on
an as-converted and fully-diluted basis) being the aggregate of Shares issued to the
platforms holding the underlying incentive shares which are to be granted under the RSU
Scheme as approved by the Shareholders general meeting of the Company.
(i) Limited Transferability of Awards
Unless approved by the Board, any transfer of an Award by the grantees prior to the
Listing shall be void.
(j) Share Capital
The Awards do not carry any right to vote in the general meetings of the Company,
or any right to dividend, or any other economic rights.
(k) Alteration of the RSU Scheme
The Board shall have the right to amend any of the provisions of the RSU Scheme.
(l) Term and Termination
The RSU Scheme became effective upon the Adoption Date, and will continue in
effect for a term of five (5) years from the Adoption Date.
(m) Shareholders Rights
The grantees shall not have any rights with respect to the Shares underlying the
RSUs granted pursuant to the respective Award Agreement (including, without limitation,
voting or dividend rights) prior to the settlement and delivery of the Shares as specified
therein.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 593 ---
Awards Granted under the RSU Scheme
In May 2024, (i) a total of 98,288,750 Shares were allotted and issued to Endeavor Cloud
Limited, FAST GOAL INTERNA TIONAL LIMITED and Gaoxin Thrive Limited to hold the
Shares underlying the RSUs granted to the grantees who are neither Directors nor other core
connected persons of our Company pursuant to the RSU Scheme; (ii) 5,453,428 Shares were
allotted and issued to Asia Tech Investments Ltd.
(1) to hold the Shares underlying the RSUs
granted to certain Directors pursuant to the RSU Scheme; and (iii) 3,500,000 and 20,000,000
Shares underlying the RSUs were allotted and issued to Mr. ZOU Y uming and Torano
Investments Limited (a company wholly owned by Mr. Zou to hold certain Shares underlying
the RSUs granted to him), respectively, pursuant to the RSU Scheme. As of the Latest
Practicable Date, RSUs in respect of an aggregate of 238,664,648 Shares had been granted to
six members of our Directors and senior management and other 164 employees and business
consultants who made contributions to our Group pursuant to the RSU Scheme. No further
Awards will be granted under the RSU Scheme after the Listing.
Based on the number of Shares in issue immediately upon completion of the Global
Offering, assuming the RSUs granted under the RSU Scheme have been vested in full, there
will not be any dilution effect on the shareholdings of the Shareholders nor any impact on the
earnings per Share arising from the vesting of the outstanding RSUs.
The following table summarizes the number of the RSUs granted to the Directors and
senior management of the Company under the RSU Scheme as of the date of this prospectus.
Name Address Position
Number of
Shares
underlying the
RSUs granted
Approximate
percentage of issued
Shares immediately
after completion of
the Global Offering
(assuming that the
Over-allotment
Option is not
exercised) (Note)
Mr. XIE
Fangmin
Flat 1102
215 Huangpu Avenue
Central
Tianhe District,
Guangzhou
Guangdong Province
the PRC
Chairman of the Board,
executive Director
and chief executive
officer
60,000,000 4.48%
(1) On December 14, 2020, the Company allotted and issued 3,874,586, 9,204,954 and 9,204,954 class A ordinary
shares with a par value of US$0.0001 each to Asia Tech Investments Ltd., Arkasia (S) Pte. Ltd. and Televest
Singapore Pte. Ltd., which were then subsequently sub-divided into 19,372,930, 46,024,770 and 46,024,770
Class A Ordinary Shares with a par value of US$0.00002 on August 9, 2021, respectively. Subsequently, on
May 31, 2024, Arkasia (S) Pte. Ltd. and Televest Singapore Pte. Ltd. each transferred 46,024,770 Class A
Ordinary Shares to Asia Tech Investments Ltd..
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-23 –


--- page 594 ---
Name Address Position
Number of
Shares
underlying the
RSUs granted
Approximate
percentage of issued
Shares immediately
after completion of
the Global Offering
(assuming that the
Over-allotment
Option is not
exercised) (Note)
Mr. ZHOU Feng 151 Stevens Rd
#07-08
Singapore 257872
Executive Director and
chief strategy officer
56,575,898 4.22%
Mr. ZOU
Y uming
Flat C, 10F, Block 2 20
Shan Kwong Rd
Happy V alley
Hong Kong
Executive Director and
chief financial officer
23,500,000 1.75%
Ms. KANG Wei Room 202, Unit 2
Building 8 88 North
East 4th Ring Road
Chaoyang District
Beijing the PRC
Independent non-
executive Director
100,000 0.01%
Mr. ZHU Xiaolu Flat 1001, Unit 2 Block
2 9th Court
Naoshikou Avenue
Xicheng District
Beijing the PRC
Independent non-
executive Director
100,000 0.01%
Dr. W ANG
Haizhong
2201, No. 1 Manlvyuan
Sixth Street Zhucun
Street Zengcheng
District Guangzhou
Guangdong Province
the PRC
Independent non-
executive Director
100,000 0.01%
Note:
(1) The calculation is based on the total number of 1,340,267,457 Shares in issue immediately after
completion of the Global Offering (assuming the Over-allotment Option is not exercised).
E. OTHER INFORMATION
1. Estate Duty
Our Directors have been advised that no material liability for estate duty is likely to fall
on our Company or any of our subsidiaries.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-24 –


--- page 595 ---
2. Litigation
Save as disclosed in this prospectus and so far as our Directors are aware, no litigation
or claim of material importance is pending or threatened against any member of our Group.
3. Joint Sponsors
The Joint Sponsors have made an application on our behalf to the Listing Committee for
the listing of, and permission to deal in, the Shares in issue (including the Shares to be
converted from the Class A Ordinary Shares, Class B Ordinary Shares and Preferred Shares),
the Shares to be issued pursuant to the Global Offering (including the additional Shares which
may fall to be issued pursuant to any exercise of the Over-allotment Option).
As of the Latest Practicable Date, the Joint Sponsors satisfied the independence criteria
applicable to sponsors set out in Rule 3A.07 of the Listing Rules. The Joint Sponsors will
receive an aggregate fee of US$0.7 million for acting as the sponsors for the Listing.
4. Consents of Experts
The following experts have each given and have not withdrawn their respective written
consents to the issue of this prospectus with copies of their reports, letters, opinions or
summaries of opinions (as the case may be) and the references to their names included herein
in the form and context in which they are respectively included.
Name Qualification
Citigroup Global Markets
Asia Limited
Licensed corporation under the SFO to conduct Type 1
(dealing in securities), Type 2 (dealing in futures
contracts), Type 4 (advising on securities), Type 5
(advising on futures contracts), Type 6 (advising on
corporate finance) and Type 7 (providing automated
trading services) of the regulated activities under the SFO
ABCI Capital Limited Licensed corporation under the SFO to conduct Type 1
(dealing in securities) and Type 6 (advising on corporate
finance) regulated activities as defined under the SFO
Conyers Dill & Pearman Legal advisors as to Cayman Islands laws
Lincoln Cheung Barrister-at-law in Hong Kong
Zhong Lun Law Firm Legal advisors as to PRC law
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-25 –


--- page 596 ---
Name Qualification
KPMG Certified Public Accountants
Public Interest Entity Auditor registered in accordance
with the Accounting and Financial Reporting Council
Ordinance
China Insights Industry
Consultancy Limited
Independent industry consultant
As of the Latest Practicable Date, none of the experts named above had any shareholding
interest in our Company or any of our subsidiaries or the right (whether legally enforceable or
not) to subscribe for or to nominate persons to subscribe for securities in any member of our
Group.
5. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance hereof, of
rendering all persons concerned bound by all the provisions (other than the penal provisions)
of sections 44A and 44B of the Companies Ordinance so far as applicable.
6. Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately in reliance upon the exemption provided by section 4 of the Companies
(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice
(Chapter 32L of the Laws of Hong Kong).
7. Preliminary Expenses
The Company did not incur any material preliminary expenses.
8. Other Disclaimers
(1) Save as disclosed in this prospectus, within the two years immediately preceding the
date of this prospectus:
(i) no share or loan capital or debenture of our Company or any of our subsidiaries
has been issued or agreed to be issued or is proposed to be issued for cash or
as fully or partly paid other than in cash or otherwise;
(ii) no share or loan capital of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option; and
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-26 –


--- page 597 ---
(iii) no commissions, discounts, brokerages or other special terms have been
granted or agreed to be granted in connection with the issue or sale of any share
or loan capital of our Company or any of our subsidiaries.
(2) Save as disclosed in this prospectus:
(i) there are no founder, management or deferred shares nor any debentures in our
Company or any of our subsidiaries;
(ii) no share or loan capital or debenture of our Company of any of our subsidiaries
is under option or is agreed conditionally or unconditionally to be put under
option; and
(iii) no commissions, discounts, brokerages or other special terms have been
granted in connection with the issue or sale of any share or loan capital of our
Company or any of its subsidiaries by our Company for subscribing or
agreeing to subscribe, or procuring or agreeing to procure subscriptions, for
any shares in or debentures of our Company or any of our subsidiaries.
(3) Save as disclosed in the paragraph headed “B. Further Information about our
Business—1. Summary of Material Contracts” in this section, none of our Directors
or proposed Directors or experts (as named in this prospectus), have any interest,
direct or indirect, in any assets which have been, within the two years immediately
preceding the date of this prospectus, acquired or disposed of by or leased to, any
member of our Group, or are proposed to be acquired or disposed of by or leased to
any member of our Group.
(4) We do not have any promoter. No cash, securities or other benefit has been paid,
allotted or given nor are any proposed to be paid, allotted or given to any promoters
in connection with the Global Offering and the related transactions described in this
prospectus within the two years immediately preceding the date of this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-27 –


--- page 598 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were, among other documents:
(a) the written consents referred to under “Statutory and General Information—E. Other
Information—4. Consents of Experts” in Appendix IV; and
(b) a copy of each of the material contracts referred to in “Statutory and General
Information—B. Further Information about Our Business—1. Summary of Material
Contracts” in Appendix IV .
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the Stock Exchange’s
website at www.hkexnews.hk and our Company’s website at investors.jianke.com during a
period of 14 days from the date of this prospectus:
(a) the Memorandum and the Articles;
(b) the Accountants’ Report and the report on the unaudited pro forma financial
information of our Group from KPMG, the texts of which are set out in Appendices
I and II;
(c) the audited consolidated financial statements of our Company for the financial years
ended December 31, 2021, 2022 and 2023;
(d) the legal opinion issued by Zhong Lun Law Firm, our PRC Legal Advisor in respect
of general matters and property interests of our Group in the PRC;
(e) the letter of advice prepared by Conyers Dill & Pearman, our legal advisor on
Cayman Islands law, summarizing certain aspects of Cayman Islands company law
referred to in Appendix III;
(f) the Cayman Companies Act;
(g) the industry report issued by China Insights Industry Consultancy Limited, the
summary of which is set forth in the section headed “Industry Overview;”
(h) the written consents referred to under “Statutory and General Information—E. Other
Information—4. Consents of Experts” in Appendix IV;
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
AND A V AILABLE ON DISPLAY
– V-1 –


--- page 599 ---
(i) the material contracts referred to in “Statutory and General Information—B. Further
Information about Our Business—1. Summary of Material Contracts” in Appendix
IV;
(j) the service contracts and the letters of appointment with our Directors referred to in
“Statutory and General Information—C. Further Information about Our
Directors—1. Particulars of Directors’ service contracts and appointment letters” in
Appendix IV;
(k) the rules of the RSU Scheme;
(l) an ad hoc Hong Kong legal opinion prepared by Lincoln Cheung, Barrister-at-law;
(m) an ad hoc Cayman Islands legal memorandum prepared by Conyers Dill & Pearman;
and
(n) an ad hoc PRC legal memorandum prepared by Zhong Lun Law Firm.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
AND A V AILABLE ON DISPLAY
– V-2 –


--- page 600 ---
方舟云康控股有限公司
Fangzhou Inc.
