--- page 1 ---
(Incorporated in the Cayman Islands with limited liability)
Stock Code: 9885
Sole Sponsor and Sole Overall Coordinator
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Joint Lead Managers
藥師幫股份有限公司
YSB Inc.
藥師幫股份有限公司
YSB Inc.


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IMPORTANT
If you are in any doubt about any of the contents in this document, you should obtain independent professional
advice.
YSB Inc.
ʮ̡
(Incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the Global Offering : 15,808,800 Shares (subject to the Over-allotment
Option)
Number of Hong Kong Offer Shares : 1,581,200 Shares (subject to reallocation)
Number of International Offer Shares : 14,227,600 Shares (subject to reallocation and the
Over-allotment Option)
Maximum Offer Price : HK$23.00 per Offer Share plus brokerage of 1%, SFC
transaction levy of 0.0027%, AFRC transaction levy of
0.00015% and Stock Exchange trading fee of
0.00565% (payable in full on application in Hong
Kong dollars, subject to refund)
Nominal value : US$0.0000025 per Share
Stock code : 9885
Sole Sponsor and Sole Overall Coordinator
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company
Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim
any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.
A copy of this document, having attached thereto the documents specified in “Documents delivered to the Registrar of Companies and
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 ofthe 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 document or any other document referred to above.
The Offer Price is expected to be fixed by agreement between the Sole Overall Coordinator (for itself and on behalf of the Underwriters)
and us on or around Tuesday, 20 June 2023. If, for any reason, the Offer Price is not agreed by Tuesday, 27 June 2023, the Global Offering will
not proceed and will lapse. The Offer Price will be no more than HK$23.00 per Offer Share and is currently expected to be no less than
HK$19.00 per Offer Share unless otherwise announced.
The Sole Overall Coordinator may, with our consent, reduce the number of Offer Shares being offered under the Global
Offering and/or the indicative Offer Price range below that stated in this document at any time on or prior to the morning of the last
day for lodging applications under the Hong Kong Public Offering. See “Structure of the Global Offering” and “How to apply for
Hong Kong Offer Shares” for further details.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Sole
Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. See
“Underwriting—Underwriting arrangements and expenses—Hong Kong Public Offering—Grounds for termination” for further details.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this document,
including the risk factors set out in “Risk factors”.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities Laws of the United States and
may not be offered or sold within or to the United States, or for the account or benefit of U.S. persons (as defined in Regulation S) except in
transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act. The Offer Shares are being offered and sold (i)in
the United States solely to QIBs pursuant to an exemption from registration under Rule 144A or another exemption from, or in a transaction not subject
to, the registration requirements of the U.S. Securities Act and (ii) outsidethe United States in offshore transactions in accordance with Regulation S.
15 June 2023


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IMPORTANT
Your application through the HK eIPO White Form service or the CCASS EIPO service
must be for a minimum of 200 Hong Kong Offer Shares and in one of the numbers set out in the table.
You are required to pay the amount next to the number you select.
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer
Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer
Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
200 4,646.39 4,000 92,927.82 60,000 1,393,917.30 450,000 10,454,379.76
400 9,292.78 5,000 116,159.78 70,000 1,626,236.86 500,000 11,615,977.50
600 13,939.17 6,000 139,391.74 80,000 1,858,556.40 600,000 13,939,173.00
800 18,585.57 7,000 162,623.69 90,000 2,090,875.96 700,000 16,262,368.50
1,000 23,231.95 8,000 185,855.65 100,000 2,323,195.50 790,600
(1) 18,367,183.62
1,200 27,878.35 9,000 209,087.60 150,000 3,484,793.26
1,400 32,524.74 10,000 232,319.56 200,000 4,646,391.00
1,600 37,171.13 20,000 464,639.10 250,000 5,807,988.76
1,800 41,817.52 30,000 696,958.66 300,000 6,969,586.50
2,000 46,463.91 40,000 929,278.20 350,000 8,131,184.26
3,000 69,695.86 50,000 1,161,597.76 400,000 9,292,782.00
Note:
(1) Maximum number of Hong Kong Offer Shares you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered and any
such application is liable to be rejected.


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EXPECTED TIMETABLE
If there is any change in the following expected timetable of the Hong Kong Public
Offering, we will issue an announcement in Hong Kong to be published on the websites of the
Stock Exchange at www.hkexnews.hk and our Company at www.ysbang.cn.
Date(1)
Hong Kong Public Offering commences ..................... 9:00 a.m. on Thursday, 15 June 2023
Latest time for completing electronic applications under the
HK eIPO White Form service through one of the below ways: (2)
(1) the IPO App , which can be downloaded by searching “ IPO
App” in App Store or Google Play or downloaded at
www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp
(2) the designated website www.hkeipo.hk ................... 11:30 a.m. on Tuesday, 20 June 2023
Application lists open (3) .................................. 11:45 a.m. on Tuesday, 20 June 2023
Latest time for (a) completing payment for HK eIPO White Form
applications by effecting internet banking transfer(s) or PPS
payment transfer(s) and (b) giving electronic application
instructions to HKSCC
(4) ................................. 12:00 noon on Tuesday, 20 June 2023
If you are instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian
Participant to give electronic application instructions via CCASS terminals to apply for the 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 Tuesday, 20 June 2023
Expected Price Determination Date (5) ........................ Tuesday, 20 June 2023
Announcement of the Offer Price on the websites of the Company
and the Stock Exchange at www.ysbang.cn(6) and
www.hkexnews.hk on or around (9) ......................... Tuesday, 27 June 2023
Announcement of the level of indication 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 websites of the Company and the Stock Exchange at
www.ysbang.cn and www.hkexnews.hk on or before(9) ........ Tuesday, 27 June 2023
Results of allocations in the Hong Kong Public Offering (with
successful applicants’ identification document numbers, where
appropriate) to be available through a variety of channels as
described in “How to apply for Hong Kong Offer Shares – D.
Publication of Results”, including
(9):
 in the announcement to be posted on our website and the
website of the Stock Exchange at www.ysbang.cn(6) and
www.hkexnews.hk, respectively ........................ Tuesday, 27 June 2023
 from the “IPO Results” function in the IPO App or at
www.tricor.com.hk/ipo/result or www.hkeipo.hk/IPOResult
with a “search by ID” function from .....................
8:00 a.m. on Tuesday,
27 June 2023 to 12:00 midnight
on Monday, 3 July 2023
 from the allocation results telephone enquiry line by calling
+852 3691 8488 between 9:00 a.m. and 6:00 p.m. from ...... Tuesday, 27 June 2023 to Friday,
30 June 2023
Share certificates in respect of wholly or partially successful
applications to be despatched/collected or deposited into CCASS
on or before
(7) .......................................... Tuesday, 27 June 2023
HK eIPO White Form e-Auto Refund payment instructions/
refund cheques in respect of wholly or partially successful
applications (if applicable) or wholly or partially unsuccessful
applications to be despatched/collected on or before
(8) .......... Tuesday, 27 June 2023
Dealings in the Shares on the Stock Exchange expected to
commence ............................................. a t 9:00 a.m. on Wednesday, 28 June 2023
i


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EXPECTED TIMETABLE
Notes:
(1) All times refer to Hong Kong local time, except as otherwise stated.
(2) You will not be permitted to submit your application under the HK eIPO White Form service through the IPO App or the designated
website at www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application
and obtained a payment reference number from the IPO App or the designated website at or before 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 and/or Extreme Conditions in force in
Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, 20 June 2023, the application lists will not open or close on that
day. See “How to apply for Hong Kong Offer Shares—C. Effect of bad weather and/or Extreme Conditions on the opening and closing
of the application lists”.
(4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC via CCASS or instructing
your broker or custodian to apply on your behalf via CCASS should refer to “How to apply for Hong Kong Offer Shares—6. Applying
through the CCASS EIPO service”.
(5) The Price Determination Date is expected to be on or around Tuesday, 20 June 2023 and, in any event, not later than Tuesday, 27 June
2023. If, for any reason, we do not agree with the Sole Overall Coordinator (for itself and on behalf of the Underwriters) on the pricing
of the Offer Shares by Tuesday, 27 June 2023, the Global Offering will not proceed and will lapse.
(6) None of the website or any of the information contained on the website forms part of this document.
(7) No temporary evidence of title will be issued in respect of the Offer Shares. Share certificates will only become valid at 8:00 a.m. on the
Listing Date provided that the Global Offering has become unconditional 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 on the basis of publicly available allocation details or prior to the receipt of Share certificates or the Share certificates
becoming valid do so entirely at their own risk.
(8) e-Auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful applications pursuant to
the Hong Kong Public Offering and also in respect of wholly or partially successful applications in the event that the Offer Price is less
than the price payable per Offer Share on application.
Applicants who have applied through the HK eIPO White Form service and paid their applications monies through single bank
accounts may have refund monies (if any) despatched to the bank account in the form of e-Auto Refund payment instructions. Applicants
who have applied through the HK eIPO White Form service and paid their application monies through multiple bank accounts may
have refund monies (if any) despatched to the address as specified in their application instructions in the form of refund cheques in
favour of the applicant (or, in the case of joint applications, the first-named applicant) by ordinary post at their own risk.
(9) In case a typhoon warning signal no. 8 or above, a black rainstorm warning signal and/or Extreme Conditions between Thursday, 15 June
2023 and Wednesday, 28 June 2023, then the day of (i) announcement of results of allocations in the Hong Kong Public Offering; (ii)
dispatch of Share certificates and refund checks/ HK eIPO White Form e-Auto Refund payment instructions; and (iii) dealings in the
Shares on the Stock Exchange may be postponed and an announcement may be made in such event.
Share certificates for the Hong Kong Offer Shares are expected to be issued on Tuesday,
27 June 2023 but will only become valid evidence of title if the Global Offering has become
unconditional in all respects and neither of the Underwriting Agreements is terminated in
accordance with its terms before 8:00 a.m. on the Listing Date, which is expected to be
Wednesday, 28 June 2023.
The above expected timetable is a summary only. You should see “Structure of the Global
Offering” and “How to apply for Hong Kong Offer Shares” for details of the structure of the Global
Offering, including the conditions of the Global Offering, and the procedures for application for the
Hong Kong Offer Shares.
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, we will make an announcement as soon as
practicable thereafter.
ii


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CONTENTS
IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This document is issued by us solely in connection with the Hong Kong Public Offering
and the Hong Kong Offer Shares 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 document
pursuant to the Hong Kong Public Offering. This document 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
circumstance. 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 document in any jurisdiction other than Hong Kong. The distribution of this
document 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 document 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 document. We have not authorised
anyone to provide you with information that is different from what is contained in this document.
Any information or representations not contained or made in this document must not be relied on
by you as having been authorised by us, the Sole Sponsor, the Sole Overall Coordinator, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries, any of the Underwriters, any of our or their respective directors, officers,
employees, agents or representatives, or any other parties involved in the Global Offering.
Page
Expected timetable ...................................................................... i
Contents .............................................................................. i i i
Summary ............................................................................. 1
Definitions ............................................................................ 3 2
Glossary of technical terms ............................................................... 4 3
Forward-looking statements .............................................................. 4 5
Risk factors ........................................................................... 4 6
Waivers and exemptions ................................................................. 1 0 2
Information about this document and the Global Offering ....................................... 1 0 8
Directors and parties involved in the Global Offering .......................................... 1 1 2
Corporate information ................................................................... 1 1 7
Industry overview ...................................................................... 1 1 9
History, reorganization and corporate structure ............................................... 1 3 3
Business .............................................................................. 1 4 6
Contractual Arrangements ................................................................ 2 1 8
Connected transactions .................................................................. 2 2 9
Directors and senior management .......................................................... 2 3 3
Financial information ................................................................... 2 4 1
iii


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CONTENTS
Page
Regulations ........................................................................... 2 8 0
Substantial shareholders ................................................................. 3 1 2
Cornerstone investor ................................................................... 3 1 3
Share capital .......................................................................... 3 1 6
Future Plans and Use of Proceeds ......................................................... 3 1 9
Underwriting ......................................................................... 3 2 5
Structure of the Global Offering .......................................................... 3 3 5
How to apply for Hong Kong Offer Shares .................................................. 3 4 4
Appendix I Accountants’ report ........................................................... I - 1
Appendix II Unaudited pro forma financial information ........................................ I I - 1
Appendix III Summary of the constitution of our Company and Cayman Islands 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
iv


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SUMMARY
This summary aims to give you an overview of the information contained in this document.
As this is a summary, it does not contain all the information that may be important to you.
Moreover, there are risks associated with any investment. Some of the particular risks of investing
in the Offer Shares are set out in “Risk factors”. You should read the entire document carefully
before you decide to invest in the Offer Shares.
There are risks associated with any investment. Some of the particular risks in investing in
the Offer Shares are set out in “Risk factors”. You should read that section carefully before you
decide to invest in the Offer Shares.
OUR BUSINESS
We are a digital pharmaceutical platform serving businesses outside of hospitals in China. Digital
market as an emerging trend contributed to 28.2% of the RMB639.7 billion outside-of-hospital
pharmaceutical circulation market in China, in terms of gross merchandise value (“GMV”) in 2022. We
recorded a GMV of RMB37.8 billion in 2022, representing a market share of 21.0% in China’s digital
market of outside-of-hospital pharmaceutical circulation services. As an enabler of the digitalisation of
the outside-of-hospital pharmaceutical and medical service market, we have developed technology-
backed solutions to connect and empower the upstream, including pharmaceutical companies,
distributors and vendors, and the downstream, including pharmacies and primary healthcare institutions.
Primary healthcare institutions refer to downstream pharmaceutical retailer that is not a hospital or a
pharmacy, including, but not limited to, a private clinic, township health centre, village clinic, and
community medical institution. We have turned the process of pharmaceutical transaction and service
into a digitalised, standardised and scalable one. Since our inception, we have been committed to
addressing the challenges faced by the players in the outside-of-hospital pharmaceutical market, and have
cultivated capabilities and accumulated invaluable experience from the primary healthcare level. Seizing
on the opportunities in this market, we have built an ecosystem, where we enable the various players
along the pharmaceutical value chain to gather and interact. We create values for these players and the
whole society. Although we face intense competition from other B2B pharmaceutical sales platforms and
traditional pharmaceutical distributors, we strive to establish a safe and efficient transaction and service
platform for businesses along the pharmaceutical value chain.
Leveraging our technological capabilities, we have created and keep enhancing a business
model to meet the growing demand for the digitalisation of the outside-of-hospital pharmaceutical
market. Our business model is centred on our Online Marketplace and Self-operation Business, and is
further complemented by a series of other businesses. Our total GMV reached RMB37.8 billion in
2022, representing a CAGR of 38.6% from that in 2020, both the highest among leading digital
pharmaceutical platforms serving businesses outside of hospitals in China, and a market share of
21.0% in 2022. We serve the largest digital pharmaceutical transaction and service network, including,
among others, around 354,000 downstream pharmacies and around 173,000 primary healthcare
institutions, as of 31 December 2022. Furthermore, we had 308,000 average number of monthly active
buyers (“MAB”) in 2022, the highest among digital pharmaceutical platforms serving businesses
outside of hospitals in China. The average number of monthly available stock keeping units (“SKUs”)
transacted on our platform was around 3.3 million in 2022, the highest among digital pharmaceutical
platforms serving businesses outside of hospitals in China. Our aforesaid industry positioning is
supported by analyses performed by Frost & Sullivan.
1


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SUMMARY
The Upstream Yaoshibang Platform The Downstream
Other
Businesses
ClouDiagnos YSB eLearnwePharmacy SaaS Solutions
Online
Marketplace
General
Self-operation
Business
Targeted
Product Launch
Business
Pharmacies
Primary Healthcare Institutions
Pharmaceutical
Companies
Pharmaceutical
Distributors and
Vendors
Self-operated Warehouse
Data
Analytics
+
Marketing
Solutions
+
Self-operated Warehouse
Notes: (1) For the year ended 31 December 2022; (2) As of 31 December 2022
Self-operation
Business
~354,000
Registered downstream
pharmacies2
RMB37.8bn
Total GMV1
~3.3mm
Average monthly Stock
Keeping Units (SKUs)
~173,000
Registered downstream primary
healthcare institutions2
~6,000
Upstream pharmaceutical
sellers2 on Online Marketplace
~9,100
Upstream pharmaceutical
suppliers2 for Self-operation
Business
1
Online Marketplace . We started with a mobile internet-based Online Marketplace in 2015 to
address the supply and demand mismatch in China’s outside-of-hospital pharmaceutical market. We
created a digital marketplace for registered pharmaceutical sellers and buyers to transact with each
other. We charge sellers a commission, which is based on a certain percentage of their sales on our
Online Marketplace. The average Online Marketplace commission rate we charged, which equals to
commissions we received from third-party sellers divided by the corresponding GMV, was 2.8%, 2.9%
and 3.1% in 2020, 2021 and 2022, respectively. The average number of monthly available SKUs was
around 3.3 million in 2022. The vast selection of SKUs and the quality of the products have made our
Online Marketplace a reliable platform for pharmaceutical transactions.
Our Online Marketplace helps simplify the multi-layer structure in China’s outside-of-hospital
pharmaceutical market and streamline the pharmaceutical transaction process, as digitalisation makes
the steps along the transaction process, such as certificate exchange, product selection and financial
reconciliation, easier to be accomplished as compared with traditional offline transactions. For
example, our digital platform enables our buyers to easily find the products to purchase by using the
search and filter functions, and our platform generates algorithm-based feedback for our sellers to
identify popular products. Transaction records are accessible from each user’s terminal so that our
buyers and sellers can easily track and link their financial records. Our Online Marketplace addresses
the multi-layer problem in the outside-of-hospital pharmaceutical market by providing a well-
connected platform where buyers can directly and freely select and order products from sellers, and
therefore helps reduce transaction costs and improve the overall efficiency of transactions. As of
31 December 2022, we had attracted around 6,000 pharmaceutical sellers and around 527,000 buyers
to transact on our Online Marketplace. The GMV of our Online Marketplace of third-party merchants
was RMB22.6 billion in 2022, representing approximately 59.8% of the total GMV, and growing at a
CAGR of 28.8% from that in 2020.
Self-operation Business . As an ever-increasing number of upstream and downstream
participants are attracted to our platform, we started the Self-operation Business in 2019 to provide
better fulfilment and services to our buyers. We generate revenue from sales of products. In 2022, we
2


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SUMMARY
procured and sold around 278,000 SKUs every month on average, to downstream pharmacies and
primary healthcare institutions. These SKUs are carefully selected based on our analyses of buyers’
transaction preferences and history, after obtaining the consent of relevant parties based on the privacy
policy of our platform. To facilitate high-quality service and fast and reliable delivery, we have
developed a proprietary fulfilment system, integrating procurement, warehousing, delivery and
working capital management into a centrally managed digitalised process. Centralised and digitalised
management has enabled us to effectively control inventory turnover days at 26.5 days in 2022, better
than the industry average level in the pharmaceutical circulation industry. We strategically designed
mapping strategy for our own warehousing networking and had built 20 smart warehouses in 19 cities
as of 31 December 2022. In our smart warehouses, we ensure that an order is processed and completed
for delivery in, on average, 2.85 hours in our warehouses in 2022. In 2022, we have also significantly
reduced delivery time, especially for inter-province delivery, to 41 hours for cities and 51 hours for
towns, outperforming the industry average by approximately 20%. The GMV of our Self-operation
Business was RMB15.2 billion in 2022, representing approximately 40.2% of the total GMV, and
growing at a CAGR of 58.5% from that in 2020.
Targeted Product Launch Business . We started the Targeted Product Launch Business as part
of our Self-operation Business in 2020. We procure from pharmaceutical companies and their selected
master vendors and sell to our buyers and generate revenue from sales of pharmaceutical products
procured. To better leverage our deep industry know-how, we conduct market analyses to help
pharmaceutical companies better comprehend and capture downstream demand, identify products to be
tailored for such demand, and collaborate with pharmaceutical companies to promote their products
through our digital marketing solutions. Through Targeted Product Launch Business, on the one hand,
we bring to pharmaceutical companies incremental demand and the insights we have gained from a
large number of transactions on our platform, and on the other hand, we address the needs of our
buyers and help them secure cost-effective deals. We maintain a healthy relationship with
pharmaceutical companies and are able to procure directly from them and their selected master vendors
at competitive prices. As of 31 December 2022, we were in collaboration with more than 500
pharmaceutical companies to launch the promotion of around 1,100 SKUs. The GMV of our Targeted
Product Launch Business reached RMB1,009 million in 2022, representing a CAGR of 72.8% from
that in 2020 and contributed to 6.6% of the GMV of our Self-operation Business in 2022. The key
differences between our Targeted Product Launch Business and our General Self-operation Business
include that, for upstream participants, suppliers of our Targeted Product Launch Business include
pharmaceutical companies. In terms of product selection, we tend to focus on new products and
existing products with certain characteristics, such as pharmaceuticals of high demand but limited
brand awareness, pharmaceuticals that are sold well in hospitals but not adequately promoted in
pharmacies outside of hospitals, and pharmaceuticals that are well promoted and therefore better
known in one geographic region but are less known in another. We have a specific department
designated for selecting products, managing product performance and reviewing the gross profit
margin of our Targeted Product Launch Business. Products are assigned with a label on our YSB App
indicating to our buyers that these are transacted in our Targeted Product Launch Business. Moreover,
we provide digital marketing solutions to help our suppliers promote their products, so that they are
willing to offer products at reduced procurement prices in return for the digital marketing solutions we
provide to them, so that we tend to enjoy higher gross profit margin.
Other businesses . We developed a series of businesses, to help improve the operating
efficiency of the upstream and the downstream, and to empower pharmacies and primary healthcare
3


--- page 11 ---
SUMMARY
institutions with market insights and professional knowledge to enhance their service capability and
quality. We are therefore able to maintain a healthy, active and self-reinforcing ecosystem.
 ClouDiagnos. We partner with primary healthcare institutions, place testing equipment at
selected primary healthcare institutions, perform the testing and generate testing results.
Our ClouDiagnos services provide strong support to medical professionals at primary
healthcare institutions for them to make more informed medical recommendations, and
improve the diagnostic quality at the primary healthcare level. We collect diagnostic
testing service fees from our services.
 wePharmacy. wePharmacy is a 24-hour access smart unmanned pharmaceutical booth that
connects our wePharmacy buyers and the end customers with pharmacist services. With
the help of wePharmacy, both prescription and over-the-counter (“OTC”) pharmaceuticals
can be offered to the end customers. By design, each wePharmacy booth can hold over
2,000 SKUs. wePharmacy not only can help pharmacies extend the operating hours during
night time, but can also enhance their operating efficiency by improving sales per square
metre or sales per employee. We collect revenue from sales of products, i.e., the
wePharmacy booths, and service fees. We also charge annual service fees for system
upgrade, repairs and maintenance of wePharmacy booths.
 SaaS solutions. As of 31 December 2022, our SaaS solution ePalm had provided inventory
management and sales management services to around 40,000 pharmacies, and our SaaS
solution CloudComm had provided sales management, analyses and forecast services to
over 5,200 pharmaceutical sellers. We offer digital solutions to help our sellers and buyers
manage their operations and sales. We charge a one-time installation fee and annual
subscription fee for our SaaS solutions.
 YSB eLearn. We provide online courses for the preparation of the pharmacist qualification
examinations. Since our inception in 2015 and up until 31 December 2022, we provided
online training courses to, cumulatively, around 220,000 pharmacists and prospective
pharmacists. Most of our courses in YSB eLearn are offered for free.
OUR STRENGTHS
We believe the following strengths have contributed to our success:
 China’s largest and fast-growing digital pharmaceutical platform serving businesses
outside of hospitals, benefiting from strong network effects;
 synergetic integration of and dynamic balance between Online Marketplace and Self-
operation Business, driving continuous growth of business innovations;
 technologies and digital solutions empowering the participants along the value chain;
 smart supply chain management enhancing user experience and operating efficiency;
 rooted in massive outside-of-hospital pharmaceutical circulation industry with tailored
digitally supported business development strategies; and
 visionary management team with internet technology and healthcare service experiences.
4


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SUMMARY
OUR STRATEGIES
We plan to achieve our vision, and ultimately our mission, through the following key strategies:
 systematically growing the scale, comprehensiveness and depth of our pharmaceutical
circulation business;
 enhance our technology capabilities and digital solutions and continue to innovate;
 growing our other businesses online and offline and improve service quality; and
 pursuing strategic partnerships, investments and acquisitions.
KEY OPERATING DATA
The following table sets forth our key operating metrics during the Track Record Period.
For the Year Ended December 31 /
As of December 31
2020 2021 2022
GMV (RMB million)
GMV from Online Marketplace ...................................... 13,638 17,040 22,632
GMV from Self-operation Business .................................. 6,053 10,473 15,201
GMV from General Self-operation Business ........................ 5,715 9,586 14,192
GMV from Targeted Product Launch Business ...................... 3 3 8 8 8 7 1,009
Total GMV ..................................................... 19,691 27,513 37,833
Average Number of Monthly Available SKU (million) (1) .................. 1 . 5 2 . 4 3 . 3
Registered Number of Buyers (thousand) .............................. 3 3 2 4 3 4 5 2 7
Average Number of MAB (thousand) ................................. 2 0 2 2 5 6 3 0 8
Average Number of MPB (thousand) ................................. 1 6 1 2 2 3 2 8 3
Paying Ratio ................................................. 80% 87% 92%
Average Number of Orders per Paying Buyer per Month (2) ................ 12.6 21.7 27.3
Notes:
(1) Average number of monthly available SKU refers to the average of the number of SKUs that are available at the end of a given month
during a given period, without eliminating duplication.
(2) Average number of orders per paying buyer per month refers to number of monthly average orders divided by average number of MPB
in a given period.
See “Business—Our business model and evolution” for further details.
COMPETITIVE LANDSCAPE
The market size of China’s digital market of outside-of-hospital pharmaceutical circulation
services in terms of GMV was RMB180.2 billion in 2022, representing about 28.2% of the overall
outside-of-hospital pharmaceutical circulation market. Digitalised pharmaceutical circulation can be
divided into two business models, namely marketplace model and self-operation model. Under
marketplace model, a platform acts as a marketplace to bridge upstream pharmaceutical sellers and
downstream pharmaceutical buyers and facilitate pharmaceutical transactions online. Under self-
operation model, a player develops and operates a self-owned supply chain, directly supplying
pharmaceuticals to outside-of-hospital terminals in the form of digital commerce transactions on a
platform.
Putting various factors into consideration, such as, the business resources, network and
experiences accumulated, the players in the China’s digital market of outside-of-hospital
pharmaceutical circulation services may choose to focus on marketplace model, self-operation model,
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or a combined mixed model of both. While the players may focus on one model at the beginning, most
of them have accumulated enough resources and experiences after years of business operations, and
they have extended or possessed the capability to extend their business to cover the other model. The
coexistence and interaction between marketplace model and self-operation model is commonly seen
among the players in the China’s digital market of outside-of-hospital pharmaceutical circulation
services.
The following table presents the major players in China’s digital market of outside-of-hospital
pharmaceutical circulation services:
Company
GMV
(RMB
million for
the twelve
months in
2022)
Market
Share
(Calculated
based on
GMV)
Market
Ranking
(Calculated
based on
GMV)
MAB
(Monthly
average for
the twelve
months in
2022)
Market
Ranking
(Calculated
based on
MAB)
Percentage
of GMV in
2022 from
marketplace
model
Percentage
of GMV in
2022 from
self-
operation
model
YSB Inc. 37,833 21.0% 1 308,000 1 59.8% 40.2%
Competitor A 23,000 12.8% 2 120,000 4 99.0% 1.0%
Competitor B 20,000 11.1% 3 230,000 2 100% 0
Competitor C 17,969 10.0% 4 175,000 3 25.4% 74.6%
Competitor D 17,101 9.5% 5 110,000 5 <5% >95%
Source: Frost & Sullivan
We are the largest digital pharmaceutical platform serving businesses outside of hospitals in
China in terms of total GMV (marketplace model and self-operation model combined) in 2022. Our
MAB ranked the highest among these major players in China’s digital market of outside-of-hospital
pharmaceutical circulation services.
We ranked in second place in terms of GMV from marketplace model among these major
players in China’s digital market of outside-of-hospital pharmaceutical circulation services. The
average number of monthly available SKUs transacted on our platform in 2022 was the highest among
digital pharmaceutical platforms serving businesses outside of hospitals in China.
We ranked in second place in terms of GMV from self-operation model among these major
players in China’s digital market of outside-of-hospital pharmaceutical circulation services. In 2022,
we were able to ensure that, on average, an order was processed and completed for delivery much
faster than the industry average level. We maintained inventory turnover days at a level better than the
industry average level in the pharmaceutical circulation industry, in 2022. Our inter-province delivery
time for cities and for towns in 2022 is also much lower than the industry average level.
The aforementioned industry information is supported by analyses performed by Frost &
Sullivan. See “Industry Overview—Overview of China’s digital market of outside-of-hospital
pharmaceutical circulation services” and “—Competitive landscape and entry barriers of China’s
digital market of outside-of-hospital pharmaceutical circulation services” for further details.
OUR FINANCIAL PERFORMANCE
We have a track record of business growth. Our total revenues grew at 66.4% from RMB6.1
billion in 2020 to RMB10.1 billion in 2021, and further by 41.4% from RMB10.1 billion in 2021 to
RMB14.3 billion in 2022. The gross profit margin is 10.0% in 2020, 9.1% in 2021 and 10.1% in 2022.
We recorded a loss of RMB571.7 million in 2020, RMB501.6 million in 2021 and RMB1,500.0
million in 2022. The loss recorded in 2020, 2021 and 2022 was primarily attributable to costs and
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SUMMARY
expenses associated with the expansion of our fast-growing Self-operation Business, the development
of our other businesses and fair value changes of financial liabilities at fair value through profit and
loss in connection with our preferred shares. See “—Summary of Historical Financial Information—
Summary of consolidated statements of profit or loss and other comprehensive income” for more
information on our financial performance.
BUSINESS SUSTAINABILITY
During the Track Record Period, the Company was loss-making and expects to incur net losses
and net operating cash outflow in the foreseeable future. It is primarily attributable to selling and
marketing activities for business expansion and investment in our other businesses. Our Directors are
of the opinion that our business is sustainable because expansion of our business will help us achieve
economies of scale and our adjusted net loss margin, a non-IFRS measure, has been improving during
the Track Record Period.
We experienced strong business growth and financial performance improvement during the
Track Record Period. Based on our capabilities to fulfil the demand from participants in the
outside-of-hospital pharmaceutical circulation market and the growth momentums we have achieved,
our Directors believe that we are able to maintain sustainability and growth of our business. Despite
the net losses, cash outflow from operating activities, net liabilities and net current liabilities we
recorded during the Track Record Period, we were able to maintain sufficient working capital, taking
into account of the facts that: (i) our business growth and economies of scale achieved have led to
narrowing adjusted net loss margin, a non-IFRS measure; (ii) both our net current liabilities and net
liabilities situations were significantly affected by financial liabilities at fair value through profit and
loss, which was not directly related to our operations or did not create any immediate contingency
impact on our liquidity status; and (iii) the strong liquidity and capital resources we maintained during
the Track Record Period. As of 31 December 2022, our total liquidity resources, including the bank
balances and cash, time deposits, restricted bank deposits, and financial assets at fair value through
profit and loss, amounted to RMB2.2 billion. Taking into account the above, as well as based on the
review of the Accountants’ Report, the due diligence conducted on the Group and the discussion with
the Directors, nothing has come to the Sole Sponsor’s attention that would cause the Sole Sponsor to
disagree with the Directors’ view.
Going forward, we plan to achieve profitability primarily by further: (i) expanding our buyer
base and improving buyer engagement; (ii) growing the revenue of both pharmaceutical circulation
business and other businesses; (iii) optimising our overall cost and expense structure and improving
our operating margin; (iv) improving our working capital management; and (v) leveraging our
competitive strengths and advantages. These will allow us to increase our revenue and manage our cost
and expenses to reach profitability and realise positive operating cash flows.
Expanding our buyer base and improving buyer engagement
We expect to further expand our buyer base and improve buyer engagement through the
following initiatives:
 We plan to further expand our coverage and penetration in pharmacies and primary
healthcare institutions. We plan to further recruit more seasoned BD personnel, improve
the professional knowledge of existing BD teams, and strategically enhance our BD efforts
in the space of large chain pharmacies and at the primary level. We also plan to leverage
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our digitalised tools, such as BDPartner, to support our BD teams to improve their service
quality and efficiency. For chain pharmacies, while they tend to directly cooperate with
their designated upstream suppliers to secure stable supply of regular SKUs, they also
have scattered demand on most other SKUs and they do not necessarily have access to
certain SKUs in their own regions. Chain pharmacies may find it inefficient and therefore
they are less motivated to negotiate with massive upstream suppliers one by one to procure
these SKUs. The broad and diversified SKUs offered on our platform, however, can meet
such demand of chain pharmacies in a cost-effective way, supplement their procurement
channels and enable them to improve their profitability. Additionally, chain pharmacies
may not always be able to successfully negotiate a favourable procurement price with
pharmaceutical companies. Moreover, we are willing to offer products in small ticket size
so that pharmacies tend to have more flexibility in determining their SKU selection and
inventory level.
 We plan to continue to enlarge and diversify our SKU pool. We plan to attract and retain
more high quality pharmaceutical sellers on our Online Marketplace and incentivise them
to transact through our platform. We also plan to cooperate with more pharmaceutical
suppliers, especially with well-known pharmaceutical companies directly, to procure more
high-quality products for our Self-operation Business. We have accumulated experience
from years of cooperation with pharmaceutical companies. We were in collaboration with
more than 500 pharmaceutical companies under our Targeted Product Launch Business
and equipped them with unique and valuable insights about market demand. Please refer to
“Business—Our Self-operation Business—Targeted Product Launch Business” for an
example on how we have demonstrated the success of our Targeted Product Launch
Business. We have established collaborating relationships with Top 100 pharmaceutical
companies and plan to build long-term relationships with more Top 100 pharmaceutical
companies in the future and we expect to cooperate with 100 more pharmaceutical
companies in 2023 so that more SKUs will be promoted. We also plan to deepen our
cooperation with our existing pharmaceutical company partners to promote a more
diversified pool of SKUs. In addition, we plan to expand our product offerings from
pharmaceuticals to broader healthcare products, such as medical devices and Chinese
medicines.
 We plan to improve the supply and fulfilment of our self-operated orders. We plan to
continue to expand the network of our self-operated warehouses to extend our reach to our
downstream market. We also plan to further upgrade and digitalise our supply chain
management systems to optimise the delivery plan, shorten the delivery time and control
the delivery costs, thus improve the experience of our buyers. Improved buyer experience
will help retain more buyers and therefore improve buyer engagement of our platform.
 We plan to enhance our buyer engagement and foster brand loyalty. We plan to promote
our other businesses. We also plan to launch more marketing initiatives, such as
livestreaming and group buy, to further incentivise buyers to transact on our platform.
The above initiatives are expected to help us scale up with more diversified product offerings
and improved user experience. We expect to benefit increasingly from the network effect of our
extensive user base, and in the meantime, attract more registered users derived from organic traffic
such as word-of-mouth recommendations and brand recognition. As such, our paying buyer base is
expected to expand, as well as the purchase frequency of our buyers is expected to increase, thus
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leading to the growing GMV on our platform. Moreover, we expect our growth to benefit the
participants in our ecosystem. On the one hand, since our buyers can access the broad and diversified
SKU offerings on our platform, they can then provide diversified products to end customers and
enhance their revenue sources and business performance. On the other hand, since we can attract more
buyers to our ecosystem, we potentially also bring them to our upstream sellers, who will then be able
to improve their sales.
Growing the revenue of both pharmaceutical circulation business and other businesses
With the growing GMV of our platform as a foundation, we expect to further grow our revenue
of pharmaceutical circulation business through the following initiatives.
 We expect to attain stronger bargaining power and set more favourable commission rate as
our business continues to scale up. We also plan to further diversify and optimise the
product portfolio on our marketplace, so that we can improve our overall commission level
and generate more revenue from our Online Marketplace.
 We plan to further grow our Targeted Product Launch Business by broadening and
deepening the cooperation with well-known pharmaceutical companies, diversifying the
SKU pool of Targeted Product Launch Business, and upgrading and customising the
digital marketing services to support relevant SKUs.
We plan to further develop our other businesses and enhance monetisation abilities.
 We plan to further grow our other businesses which benefits our ecosystem participants by
improving their service capabilities and quality. Our other businesses also have strong
synergy with our pharmaceutical circulation business. On the one hand, we can leverage
the large and stable user base of pharmaceutical business to promote our other businesses
with lower costs. On the other hand, our other businesses enable our ecosystem
participants to expand their revenue sources and improve their own business performance.
 We plan to make ClouDiagnos a one-stop solution. Our pharmaceutical circulation
business and diagnostic testing services together will create a self-reinforcing virtuous
circle to fully serve the needs of pharmacies, primary healthcare institutions and their end
customers. Our ClouDiagnos helps primary healthcare institutions expand their service
offerings to end customers, increasing the satisfaction level of end customers and in turn
helping primary healthcare institutions better retain and expand their end customer pool.
These benefits incentivise primary healthcare institutions to make their pharmaceuticals
purchases through our platform, creating a virtuous circle that help us enhance brand
awareness and increase transaction volume.
 We plan to further promote our wePharmacy through the collaboration with more
pharmacies and thus expand the availability of and the channel to access pharmaceuticals,
providing 24-hour access to smart pharmaceutical services to the end customers. Equipped
with the ability to provide flexible access to pharmaceuticals to end customers, pharmacies
using wePharmacy will be able to better serve end customers and increase their sales
volume.
 We plan to continue to provide useful functions, such as SaaS solutions to sellers and
buyers and help them optimise sales and operational management. In the meanwhile,
advanced functions will enable us to further monetise our digital solutions from our
expanding user base.
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Optimising our overall cost and expense structure and improving our operating margin
We expect our overall gross profit margin to steadily increase going forward.
 We plan to increase the contribution from businesses with higher profitability. We plan to
further increase the revenue contribution from other businesses thus to improve our overall
gross profit margin.
 We will drive further economies of scale in our sales and offering of products with
optimised product portfolio structure. As we continue to scale, we plan to bargain with
payment service providers to negotiate a lower transaction processing fee rate going
forward.
 We plan to negotiate with existing suppliers and seek new suppliers with favourable prices
and terms. In addition, we plan to broaden our overall supply channels to achieve lower
procurement costs.
We plan to continue to make improvement in our operating leverage.
 Selling and marketing expenses . First, we plan to increase the efficiency of our BD
personnel by empowering them with better digitalisation support from BDPartner. We also
plan to invest in academic and on-job training to equip our of BD team with professional
knowledge in pharmacology so as to upgrade the overall BD quality. Second, as we
continue to grow our network of sellers and buyers on our platform, we expect that we will
continue to increasingly benefit from the network effect of our extensive userbase, as well
as our brand image. We expect to attract and retain the users more through word-of mouth
effect, while less relying on launching extensive promotion and advertising projects. With
stronger buyer engagement as our business scales up, we plan to gradually lower our
offering of discount coupons to buyers in the future. As such, we expect our marketing and
promotion expenses as a percentage of revenue to gradually decrease. Third, we plan to
control our fulfilment expenses, mainly incurred for our self-operated orders, through
development of our technology, ramping up and increasing the utilisation of our existing
warehouses, and optimising the mapping and logistics network among our warehouses to
direct orders more efficiently depending on routes and warehouse utilisation. For example,
we will further upgrade our delivery management system to optimise the delivery plan,
including the best match of warehouses, generation of optimal routes, and selection of
third-party delivery service providers who offer the most cost-effective solutions. We will
also manage the use of packaging materials to control packaging-related expenses. In
addition, we plan to procure and deploy more advanced machines in our warehouses to
improve the utilisation and operating efficiency.
 General and administrative expenses . We will further enhance our level of centralised
management, streamline our internal workflows, and leveraging technology to drive cost-
efficient management. We expect our general and administrative expenses to decrease as a
percentage of revenue in the future.
 Research and development expenses . We plan to continuously hire more IT staff and
experts and to invest into our IT infrastructure in order to support the strong growth of
both our pharmaceutical circulation business and other businesses. As such, we expect that
our R&D expenses will stay at current level as a percentage of revenue in the future.
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Improving working capital management
To improve our working capital management, we have been working on and will continue to
work on the following aspects.
 We will monitor and control inventory turnover with our technology-driven warehousing
and logistics systems and make procurement decisions based on sales. Our inventory
turnover days in the past two and a half years have stabilised at around 27 days. As Self-
operation Business keeps scaling up and leveraging digitalised supply chain management,
we expect inventory turnover days to remain stable in the foreseeable future.
 We will continue to enhance our fulfilment and delivery efficiency to our buyers so that
we are able to collect payment on time. We will also continue to collect fees from our
sellers on time to ensure a proper level of inflow of funds. Due to increased proportion of
sales from self-operation orders settled online, we expect to significantly shorten our
receivable collection cycle.
 We will continue to optimise our payment cycle, negotiate with our suppliers for better
payment settlement terms and reduce the portion of transactions processed under
prepayment. We expect shorten payable collection cycle in the foreseeable future, as we
plan to expedite our payment cycle for our suppliers. Although it may impose challenge in
our working capital management, we believe there is an important commercial
consideration for us to maintain a good relationship with our suppliers and to retain
high-quality suppliers for our business in the long run.
Leveraging competitive strengths and advantages
We believe that our current competitive strengths and advantages are key for us to achieve
profit and cash breakeven. Our leading position and large scale have become our moat and enable us to
grow and capture the market share in a effective and economical way. Our industry positioning below
is supported by analyses performed by Frost & Sullivan.
 Our total GMV reached RMB37.8 billion in 2022, representing a CAGR of 38.6% from
that in 2020, both the highest among leading digital pharmaceutical platforms serving
businesses outside of hospitals in China. We serve the largest digital pharmaceutical
transaction and service network, including, among others, around 354,000 downstream
pharmacies and around 173,000 primary healthcare institutions, as of 31 December 2022.
We plan to further expand our coverage and penetration in pharmacies and primary
healthcare institutions.
 We are able to maintain an active buyer base which allows us to obtain market insights,
design tailored strategies, and provide advices to our suppliers. We had 308,000 average
number of MAB in 2022, the highest among digital pharmaceutical platforms serving
businesses outside of hospitals in China. We are able to maintain good relationship with
our ecosystem participants. We will further expand our buyer base and improve buyer
engagement.
 Our platform offers comprehensive SKUs. The average number of monthly available
SKUs was around 3.3 million in 2022, the highest among digital pharmaceutical platforms
serving businesses outside of hospitals in China. Buyers are willing to transact with us as
they can easily find what they need. We will continue to enlarge and diversify our SKU
pool.
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 In 2022, our supply chain management enabled us to maintain inventory turnover days at
26.5 days, better than the industry average level in the pharmaceutical circulation industry.
We ensured that an order could be processed and completed for delivery in, on average,
2.85 hours in our warehouses, in 2022, much faster than the industry average level. In
2022, we kept the average inter-province delivery time at 41 hours for cities and 51 hours
for towns, outperforming the industry average by approximately 20%. We are able to
provide time-efficient purchase experience with high-quality product to our buyers, so that
they are willing to continuously transact on our platform. In 2022, we also managed to
keep low logistics expenses at 1.46% of the GMV of our Self-operation Business, much
lower than the industry average rate. We plan to continue to expand the network of our
warehouses and further upgrade and digitalise our supply chain management systems.
 Our platform is well connected to the SaaS solutions and our CertEx certificate exchange
platform we provide to our ecosystem participants, so that they can manage transactions,
operations and certain compliance matters in an integrated way. Few of the players in the
outside-of-hospital pharmaceutical transaction industry provide similar services, specially
from the seller side. We will continue to develop advanced functions to better assist our
ecosystem participants.
 Our BD strategies are carried out by our dedicated BD team and digitalised management
tools. Our BD team members are familiar with the market and are well trained. They have
been an important source for us to quickly understand our downstream needs and we
believe they are important for us to take a significant share of future market expansion. We
plan to continue to train our BD team and provide them with better digital management
tools so that they can help us better serve our buyers.
Based on the above, our Directors are of the view that our business is sustainable.
See “Business—Business sustainability” for further details.
OVERLAPPING PRODUCTS
Since some of the SKUs are sold both by sellers on our Online Marketplace and by us in our
Self-operation Business, potentially there could be competition between these sellers and us. Sellers on
our Online Marketplace are aware of the existence of the potential competition. Buyers have their own
discretion to decide whether to purchase products from sellers on our Online Marketplace or directly
from us. We take a series of measures to ensure fair treatment between the sellers of our Online
Marketplace and us. See “Business—Products and services—Overlapping products” for further details.
RECURRING CUSTOMERS
Customers of our Online Marketplace are mainly sellers on our Online Marketplace. We charge
these sellers commissions. The number of recurring sellers on our Online Marketplace, defined as
sellers who successfully completed at least one transaction on our Online Marketplace in the previous
year of a given year and successfully completed at least one transaction on our Online Marketplace in
the given year, was around 1,800 and 2,500 in 2021 and 2022, respectively. Around 86.2% and 89.7%
of sellers who successfully completed at least one transaction on our Online Marketplace in 2020 and
2021, respectively, successfully completed at least one transaction on our Online Marketplace in 2021
and 2022, respectively. GMV contributed by these recurring sellers was around RMB15.9 billion and
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RMB20.6 billion in 2021 and 2022, respectively. Approximation of revenue from these recurring
sellers is calculated by multiplying GMV contributed by these recurring sellers with an effective rate
(being revenue from our Online Marketplace in a given year divided by GMV from our Online
Marketplace in that year). Approximation of revenue from recurring sellers on our Online Marketplace
as a percentage of revenue from our Online Marketplace was around 93.4% and 91.0% in 2021 and
2022, respectively.
Customers of our Self-operation Business are mainly buyers in our Self-operation Business. We
generate revenue from sales of products to these buyers. The number of recurring buyers in our Self-
operation Business, defined as buyers who placed at least one order in our Self-operation Business in
the previous year of a given year and placed at least one order in our Self-operation Business in the
given year, was around 194,000 and 267,000 in 2021 and 2022, respectively. Around 85.4% and 86.9%
of buyers who placed at least one order in our Self-operation Business in 2020 and 2021, respectively,
placed at least one order in our Self-operation Business in 2021 and 2022, respectively. GMV
contributed by these recurring buyers was around RMB9.2 billion and RMB14.0 billion in 2021 and
2022, respectively. Approximation of revenue from these recurring buyers is calculated by multiplying
GMV contributed by these recurring buyers with an effective rate (being revenue from our Self-
operation Business in a given year divided by GMV from our Self-operation Business in that year).
Approximation of revenue from recurring buyers in our Self-operation Business as a percentage of
revenue from our Self-operation Business was around 87.6% and 91.9% in 2021 and 2022,
respectively.
RISK FACTORS
There are certain risks involved in our business and industries, our corporate structure, our
business operations in China, investing in our Shares, the Listing and the Global Offering, many of
which are beyond our control. For example, these risks include, among others, the following risks
related to our business:
 We are subject to extensive and evolving regulatory requirements.
 Any lack of requisite approvals, licences or permits applicable to our business, or any
non-compliance with relevant laws and regulations, may have a material and adverse
effect on our business, financial condition, results of operations and prospects. For
example, the draft Implementation Rules for the Drug Administration Law of the PRC
(Draft for Comments) stipulate that an enterprise engaged in drug online sales activities
shall be a legally established drug marketing authorisation holder or a licensed drug
distributor, and a third-party platform operator shall not directly participate in online drug
sales activities. If we fail to fully comply with the requirements of the rules when it is
implemented, our business operation, financial condition and results of operation may be
adversely affected.
 Our business, financial condition and results of operations may be materially and
adversely affected if we are unable to compete effectively in the PRC general healthcare
and wellness market, and we may fail to sufficiently and promptly respond to rapid
changes in government regulations, treatment of diseases and market demand.
 We are operating with a limited operating history in an emerging and dynamic digital
market of out-of-hospital pharmaceutical circulation services, and our historical results of
operations and financial performance are not indicative of future performance.
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 We have incurred operating losses in the past, and may not be able to achieve or maintain
profitability in the future.
See “Risk factors” for further details.
CONTRACTUAL ARRANGEMENTS
Due to foreign investment restrictions under PRC Laws, our Company is unable to own or hold
any direct equity interest in our Consolidated Affiliated Entities conducting foreign-investment
prohibited or restricted businesses. Accordingly, we control these entities through Contractual
Arrangements, through which we are able to derive the economic benefits enjoyed by the Registered
Shareholders of the Onshore Holdcos. See “Contractual Arrangements” for further details on our
Contractual Arrangements and “Risk factors—Risks related to our corporate structure” for risks related
to our variable interest entity structure.
The following simplified diagram illustrates the key aspects of the Contractual Arrangements:
WFOE(1)
100%
CompanyOur Company
denotes legal and beneficial ownership
denotes contractual relationship
100%
Registered shareholders(2)
Subsidiaries of Onshore Holdcos(3)
Onshore Holdcos(3)
service fees
services
granting control over Onshore
Holdcos to WFOE
Notes:
(1) WFOE is Guangzhou Sudaoyi Information Technology Co., Ltd. (ʮ̡).
(2) The registered shareholders of Guangzhou Sudao are Mr. Buzhen Zhang (as to 85.92%), Mr. Jiangwei Wang (as to 3.18%), Mr. Jiahao
Shao (as to 0.92%), and Guangzhou Yaodao Information Technology Partnership (Limited Partnership), which is controlled by Mr.
Buzhen Zhang (as to 9.98%). The registered shareholder of Guangzhou Yaobang is Mr. Buzhen Zhang.
(3) The Onshore Holdcos and their subsidiaries are collectively our Consolidated Affiliated Entities. The Onshore Holdcos are Guangzhou
Sudao Information Technology Co., Ltd. (
ʮ̡,“ Guangzhou Sudao ”) and Guangzhou Yaobang Information
Technology Co., Ltd. (ʮ̡,“ Guangzhou Yaobang ”). The subsidiary of Guangzhou Sudao is Henan Subiao
Information Technology Co., Ltd. (ʮ̡,“ Henan Subiao ”). The subsidiaries of Guangzhou Yaobang are
Guangzhou Yuewei Medical Laboratory Co., Ltd. (ʮ̡,“ Guangzhou Yuewei ”) and Guangzhou Spectrum
Health Technology Co., Ltd. (ʮ̡,“ Guangzhou Spectrum ”). See “History, reorganization and corporate
structure—Corporate structure” for further details.
SHAREHOLDER INFORMATION
We completed Seed to Series E-2 rounds of financing. Details of our share capital structure,
including the identities and shareholding percentages of our Pre-IPO Investors are set out in “History,
reorganization and corporate structure”. Details of our substantial shareholders (under the SFO) who
are interested in 5% or more of the voting rights in our Company are set out in “Substantial
shareholders”.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth summary financial data from our consolidated financial
information for the Track Record Period, derived from the Accountant’s Report set out in Appendix I.
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The summary consolidated financial data set forth below should be read together with, the consolidated
financial statements in this document, including the related notes. Our consolidated financial
information was prepared in accordance with IFRS.
Summary of consolidated statements of profit or loss and other comprehensive income
The following table sets forth our consolidated statements of profit or loss and other
comprehensive income with line items in absolute amounts and as percentages of our revenue for the
years indicated:
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Revenue .......................................................... 6,064,907 100.0 10,093,538 100.0 14,274,810 100.0
Cost of sales ....................................................... (5,456,118) (90.0) (9,179,708) (90.9) (12,840,093) (89.9)
Gross profit ....................................................... 608,789 10.0 913,830 9.1 1,434,717 10.1
Selling and marketing expenses ........................................ (726,417) (12.0) (1,063,817) (10.5) (1,325,640) (9.3)
Research and development expenses .................................... (24,724) (0.4) (56,611) (0.6) (79,146) (0.6)
General and administrative expenses .................................... (156,216) (2.6) (207,005) (2.1) (286,787) (2.0)
Changes in fair value of financial liabilities at fair value through profit and
loss ............................................................ (294,331) (4.9) (128,696) (1.3) (1,299,500) (9.1)
Loss before tax .................................................... (576,272) (9.5) (503,074) (5.0) (1,496,867) (10.5)
Income tax credit/(expense) ........................................... 4,561 0.1 1,454 0.0 (3,171) 0.0
Loss for the year .................................................... (571,711) (9.4) (501,620) (5.0) (1,500,038) (10.5)
Loss and total comprehensive expense for the year ...................... (571,711) (9.4) (501,620) (5.0) (1,500,038) (10.5)
Loss and total comprehensive expense for the year attributable to:
Owners of the Company ............................................ ( 571,711) (9.4) (494,041) (4.9) (1,488,688) (10.4)
Non-controlling interests ........................................... — — ( 7,579) (0.1) (11,350) (0.1)
Non-IFRS financial measure
In evaluating our business, we consider and use adjusted net loss and adjusted net loss margin
as supplemental measures to review and assess our operating performance. The presentation of these
non-IFRS financial measures is not intended to be considered in isolation or as substitutes for the
financial information prepared and presented in accordance with IFRS. We define adjusted net loss as
loss for the year adding back (i) changes in fair value of financial liabilities at fair value through profit
and loss, (ii) equity-settled share-based payment expenses, and (iii) listing expenses. We define
adjusted net loss margin as adjusted net loss divided by revenue.
We present these non-IFRS financial measures because they are used by our management to
evaluate our operating performance and formulate business plans. Accordingly, we believe that the use
of these non-IFRS financial measures provide useful information to investors and others in
understanding and evaluating our operating results in the same manner as our management and Board.
These non-IFRS financial measures are not defined under IFRS and are not presented in
accordance with IFRS. These non-IFRS financial measures have limitations as an analytical tool.
Further, these non-IFRS measures may differ from the non-IFRS information used by other companies,
including peer companies, and therefore its comparability may be limited.
These non-IFRS financial measures should not be considered in isolation or construed as
alternatives to profit/(loss) or any other measure of performance. Investors are encouraged to review
our historical non-IFRS financial measures in light of the most directly comparable IFRS measures, as
15


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SUMMARY
shown below. The non-IFRS financial measures presented here may not be comparable to similarly
titled measure presented by other companies. Other companies may calculate similarly titled measures
differently, limiting the usefulness of such measures when analysing our data comparatively. We
encourage you to review our financial information in its entirety and not rely on a single financial
measure.
The following table (i) reconciles adjusted net loss for the years presented to the most directly
comparable financial measure calculated and presented in accordance with IFRS, which is loss for the
year, and (ii) presents adjusted net loss margin for the years presented:
For the Year Ended 31 December
2020 2021 2022
(RMB in thousands, except for
percentages)
Loss for the year ............................................... (571,711) (501,620) (1,500,038)
Add back:
Changes in fair value of financial liabilities at fair value through profit and
loss ......................................................... 294,331 128,696 1,299,500
Equity-settled share-based payment expenses ......................... — 24,362 38,817
Listing expenses ................................................ — 4,354 36,865
Adjusted net loss, a non-IFRS measure ............................ (277,380) (344,208) (124,856)
Adjusted net loss margin, a non-IFRS measure ...................... (4.6)% (3.4)% (0.9)%
Changes in fair value of financial liabilities at fair value through profit and loss are related to
preferred shares issued to investors. Upon the completion of the Listing, this line item will no longer be
recorded in our consolidated financial statements. Equity-settled share-based payment expenses are
non-cash employee related expenses arising from grant of share incentive awards. Listing expenses are
expenses related to the Listing.
We had adjusted net loss during the Track Record Period mainly because we incurred a large
amount of selling and marketing expenses as we were still at the stage of rapid business expansion.
The increase in adjusted net loss from 2020 to 2021 was mainly due to a higher amount of selling and
marketing expenses we incurred in 2021. The decrease in adjusted net loss in 2022 compared to that in
2021 was mainly due to an increase in our gross profit. See “Financial Information—Period-to-period
comparison of results of operations” for more details.
Revenue, gross profit and gross profit margin
The following table sets forth a breakdown of revenue, gross profit and gross profit margin by
business model for the periods indicated:
For the Year Ended 31 December
2020 2021 2022
Revenue
Gross
profit
Gross
profit
margin Revenue
Gross
profit
Gross
profit
margin Revenue
Gross
profit
Gross
profit
margin
(RMB in thousands, except for percentages)
Self-operation Business .............. 5,691,414 290,648 5.1 9,589,512 496,761 5.2 13,519,017 839,540 6.2
Online Marketplace ................. 372,716 317,701 85.2 489,247 409,534 83.7 694,204 570,148 82.1
Other businesses ................... 7 7 7 4 4 0 56.6 14,779 7,535 51.0 61,589 25,029 40.6
Total ............................ 6,064,907 608,789 10.0 10,093,538 913,830 9.1 14,274,810 1,434,717 10.1
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SUMMARY
During the Track Record Period, we realised significant growth of revenue and gross profit
primarily due to the rapid expansion of our three businesses. Our revenue increased consistently from
RMB6.1 billion in 2020 to RMB14.3 billion in 2022, representing a CAGR of 53.4% from 2020 to
2022. Our gross profit increased consistently from RMB608.8 million in 2020 to RMB1,434.7 million
in 2022, representing a CAGR of 53.5% from 2020 to 2022.
Our gross profit margin increased from 9.1% in 2021 to 10.1% in 2022, primarily due to the
expansion of our Self-operation Business, which is the largest contributor to our total revenues, and the
gross profit margin of which increased from 5.2% in 2021 to 6.2% in 2022. Our gross profit margin
declined from 10.0% in 2020 to 9.1% in 2021, primarily due to the expansion of our Self-operation
Business, which generally has a lower gross profit margin than other businesses.
Gross profit margin for our Self-operation Business increased from 5.2% in 2021 to 6.2% in
2022, primarily due to our increasing bargaining power in procurement as the operations of our Self-
operation Business became more mature and our optimization of procurement channels. Gross profit
margin for our Self-operation Business remained relatively stable, from 5.1% in 2020 to 5.2% in 2021,
as we were still at the expansion stage of our Self-operating Business and we balanced the growth of
profitability with the growth of business scale.
Gross profit margin for our Online Marketplace declined from 85.2% in 2020 to 83.7% in 2021
and further to 82.1% in 2022. With the expansion of our Self-operation Business, our Online
Marketplace generated more commissions from our own stores on Online Marketplace, which were
eliminated when reporting the revenue from Online Marketplace on a consolidated basis. Meanwhile,
the transaction processing fees corresponding to the transactions conducted by our own stores on
Online Marketplace were recorded as the costs of sales of Online Marketplace. As such, the reported
gross profit margin decreased during the Track Record Period. In addition, higher average overall
transaction processing fee rate in 2022 also contributed to the decline of gross profit margin. See
“Financial Information—Major Components of Our Results of Operations—Cost of Sales” for more
information regarding higher average overall transaction processing fee rate.
Gross profit margin of our other businesses declined from 56.6% in 2020 to 51.0% in 2021,
primarily because we started to operate ClouDiagnos services in 2021. Gross profit margin for our
other businesses declined from 51.0% in 2021 to 40.6% in 2022, primarily because we started to
generate profit from wePharmacy, which generally has a lower gross profit margin than SaaS Solutions
and ClouDiagnos services. Gross profit margin for SaaS Solutions increased from 94.9% in 2021 to
99.1% in 2022, primarily because we incurred more costs in 2021 for purchasing hardware in the early
stage of development of such business.
Selling and marketing expenses
Our selling and marketing expenses increased by 24.6% from RMB1.1 billion in 2021 to
RMB1.3 billion in 2022, primarily attributable to (i) an increase in salary and welfare expenses as we
hired additional selling and marketing employees to promote our platform and our other businesses to
more pharmacies and primary healthcare institutions, and (ii) an increase in fulfilment expenses along
with the growth of our Self-operation Business.
Our selling and marketing expenses increased by 46.4% from RMB726.4 million in 2020 to
RMB1,063.8 million in 2021, primarily attributable to (i) an increase in salary and welfare expenses as
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SUMMARY
we hired additional selling and marketing employees to promote our business, and (ii) an increase in
fulfilment expenses along with the growth of our Self-operation Business.
We recorded net loss of RMB571.7 million, RMB501.6 million and RMB1,500.0 million in
2020, 2021 and 2022, respectively, mainly because we recorded fair value changes of financial
liabilities at fair value through profit and loss in connection with our preferred shares and incurred a
large amount of selling and marketing expenses along with our rapid business expansion. The increases
in net loss during the Track Record Period were also mainly caused by fluctuations in fair value
changes of financial liabilities at fair value through profit and loss and increases in selling and
marketing expenses. See “Financial Information—Period-to-period comparison of results of
operations” for more details on fluctuations in fair value changes of financial liabilities at fair value
through profit and loss and selling and marketing expenses.
Summary of consolidated statements of financial position
The following table sets forth a summary of consolidated statements of financial position as of
the dates indicated:
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Non-current assets ........................................... 797,876 863,865 423,749
Current assets ............................................... 1,792,858 2,572,700 3,684,991
Current liabilities ............................................ (4,947,815) (6,225,525) (8,375,732)
Net current liabilities ......................................... (3,154,957) (3,652,825) (4,690,741)
Non-current liabilities ........................................ (105,075) (119,529) (102,718)
Net liabilities ............................................... (2,462,156) (2,908,489) (4,369,710)
Deficits attributable to non-controlling interests .................... — ( 7,579) (18,929)
Net current liabilities
Our net current liabilities increased from RMB3,155.0 million as of 31 December 2020 to
RMB3,652.8 million as of 31 December 2021, primarily due to an increase in financial liabilities at fair
value through profit and loss. See “Financial Information—Discussion of certain key items of
consolidated statements of financial position—Financial Liabilities at Fair Value through Profit or
Loss” for reasons of the increase.
Our net current liabilities increased by 28.4% from RMB3,652.8 million as of 31 December
2021 to RMB4,690.7 million as of 31 December 2022, primarily due to an increase in financial
liabilities at fair value through profit and loss. See “Financial Information—Discussion of certain key
items of consolidated statements of financial position—Financial Liabilities at Fair Value through
Profit or Loss” for reasons of the increase. Such increase was partially offset by an overall increase in
time deposits, bank balances and cash, restricted bank deposits and financial assets at fair value
through profit and loss mainly due to (i) our receipt of proceeds of US$55.0 million from Series E-2
financing, and (ii) an increase in our cash position resulted from enhanced management on working
capital.
Net liabilities
Our net liabilities increased from RMB2,462.2 million as of 31 December 2020 to
RMB2,908.5 million as of 31 December 2021 as we generated loss and total comprehensive expense of
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SUMMARY
RMB501.6 million in 2021, which were partially offset by a deemed contribution from a shareholder
of RMB30.9 million and the recognition of equity-settled share-based payments of RMB24.4 million.
Our net liabilities increased from RMB2,908.5 million as of 31 December 2021 to
RMB4,369.7 million as of 31 December 2022 as we generated loss and total comprehensive expense of
RMB1,500.0 million in 2022, which was partially offset by the recognition of equity-settled share-
based payments of RMB38.8 million.
Our net liabilities position and net current liabilities position are significantly affected by
financial liabilities at fair value through profit and loss, which is related to preferred shares we issued
to pre-IPO investors. Upon the completion of the Listing, all of the preferred shares will be
automatically converted into ordinary shares and financial liabilities at fair value through profit and
loss will no longer be recorded on our balance sheet as liabilities, as a result of which our current net
liabilities position would turn into current net assets and our net liabilities would turn into net assets.
Summary of consolidated statements of cash flows
The following table sets forth our cash flows for the years indicated:
For the Year 31 December
2020 2021 2022
(RMB in thousands)
Net cash (used in)/generated from operating activities .................... (124,388) (487,087) 98,200
Net cash (used in)/generated from investing activities .................... (323,673) (352,804) 41,070
Net cash from financing activities .................................... 158,219 1,124,847 261,927
Net (decrease)/increase in cash and cash equivalents ..................... (289,842) 284,956 401,197
Cash and cash equivalents at the beginning of the year ................... 420,368 130,526 415,482
Effect of foreign exchange rate changes ............................... — — 18,715
Cash and cash equivalents at the end of the year ......................... 130,526 415,482 835,394
Net cash generated from/used in operating activities
In 2022, net cash generated from operating activities was RMB98.2 million, which was
primarily attributable to our loss before tax of RMB1,496.9 million, as adjusted by (i) non-cash items,
which primarily comprised changes in fair value of financial liabilities at fair value through profit and
loss of RMB1,299.5 million mainly as a result of change of valuation of our preferred shares; and (ii)
changes in working capital, which primarily resulted from an increase in trade and other payables of
RMB472.3 million mainly as a result of an increase in the amount of procurement and an increase in
deposits received from third-party sellers on our Online Marketplace, partially offset by an increase in
inventories of RMB169.9 million mainly as a result of more pharmaceutical and healthcare products in
stock along with the expansion of our Self-operation Business, and an increase in trade and other
receivables of RMB127.2 million primarily due to an increase in receivables in custodian as 31
December 2022 was not a working day and we were unable to withdraw the prepayments made by
online customers of our Self-operation Business from the settlement system, and an increase in trade
receivables primarily as a result of the increase in commissions charged to third-party sellers on our
Online Marketplace.
In 2021, net cash used in operating activities was RMB487.1 million, which was primarily
attributable to our loss before tax of RMB503.1 million, as adjusted by (i) non-cash items, which
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SUMMARY
primarily comprised changes in fair value of financial liabilities at fair value through profit and loss of
RMB128.7 million mainly as a result of change of valuation of our preferred shares; and (ii) changes in
working capital, which primarily resulted from an increase in inventories of RMB331.4 million mainly
because we had more pharmaceutical and healthcare products in stock along with the expansion of our
Self-operation Business, partially offset by an increase in trade and other payables of RMB97.2 million
primarily due to an increase in the amount of procurement.
In 2020, net cash used in operating activities was RMB124.4 million, which was primarily
attributable to our loss before tax of RMB576.3 million, as adjusted by (i) non-cash items, which
primarily comprised changes in fair value of financial liabilities at fair value through profit and loss of
RMB294.3 million mainly as a result of change of valuation of our preferred shares; and (ii) changes in
working capital, which primarily resulted from an increase in trade and other payables of
RMB584.9 million mainly as a result of increases in trade and note payables related to our
procurement of pharmaceutical products and an increase in deposits received representing sales
proceeds received on behalf of sellers on our Online Marketplace, partially offset by an increase in
trade and other receivables of RMB250.5 million primarily due to the growth of our Online
Marketplace and more payments made by our offline business customers to us through bank
acceptance bills, and an increase in inventories of RMB224.7 million mainly because we had more
pharmaceutical and healthcare products in stock as we expanded our Self-operation Business.
RECENT DEVELOPMENTS
Recent Regulatory Development
Pharmaceutical operation
On 9 May 2022, the NMPA published the draft Implementation Rules for the Drug
Administration Law of the PRC (Draft for Comments)
ૢԷ(ণ
ᅄӋจԈᇃ), or the Consultation Paper, for public comments. Pursuant to such draft rules, an
enterprise engaged in drug online sales activities shall be a legally established drug marketing
authorisation holder or a licensed drug distributor, and a third-party platform operator shall not directly
participate in online drug sales activities.
We currently have different corporate entities within the Group to conduct our Online
Marketplace and Self-operation Business separately (the “ Separate Operation Arrangement ”). Upon
the strictest interpretation of the Consultation Paper, we might only be able to conduct Online
Marketplace or Self-operation Business, but not both, resulting in cessation of one of our businesses. In
the worst-case scenario that the Separation Operation Arrangement would not comply with the
Consultation Paper when it would be formally adopted, we may discontinue one of our businesses.
However, we believe the worst-case scenario is quite remote. As advised by our PRC Legal Adviser,
the Consultation Paper has no express prohibition on the Separate Operation Arrangement and the
main purpose of the above-mentioned rule under the Consultation Paper is to reiterate that third-party
platform shall not directly participate in online drug sales activities while providing the platform
services, for the following reasons:
 First, Interim Provisions on the Examination and Approval of Internet Drug Transaction
Services (
) (the “ Interim Provisions ”) which was
promulgated by the State Food and Drug Administration in September 2005 and became
effective in December 2005 provides a similar requirement that any enterprise providing
services for internet drug trading among drug manufacturers, drug operation enterprises
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SUMMARY
and medical institutions shall not participate in drug production and operation, and shall
not have any relationship of subordination, property right or other economic interest with
administrative authorities, medical institutions, drug manufacturers and drug operation
enterprises. Compared with the Interim Provisions, (i) the Consultation Paper does not
specify that such restrictions apply to “drug production” activities and further limit the
restricted business by the platform provider from “drug operation” to “online drug sales”;
(ii) the Consultation Paper adds a qualifier “directly” to the restrictions; (iii) the
Consultation Paper deletes the broad restriction requirement of “enterprises providing
services for internet drug trade shall not have any relationship of subordination, property
right or other economic interest with drug distributors”, which is in consistent with the
qualifier of “directly” being added as mentioned above. Considering the above
expressions, similar restrictions in the Consultation Paper are less stringent than the
Interim Provisions.
 Second, the Consultation Paper also expressly provides that an enterprise engaged in online
drug sales activities shall be a licensed drug distributor. Therefore, as far as the Self-
operation Business is concerned, the main concern of the regulatory authority is whether the
relevant group companies conducting online drug operations have obtained requisite
licences, including without limitation, the Pharmaceutical Operation License (
຾ᐄ஢̙
ᗇ). As of the date of this document, we have obtained all requisite licences according to
current laws and regulations, including without limitation, the Pharmaceutical Operation
License (
຾ᐄ஢̙ᗇ) for entity engaging in self-operation business, and Qualification
Certificate for Internet Drug Information Services (ࣣfor entity
engaging in platform business, which is accordingly permitted by the relevant authorities to
conduct self-operation business and platform business in different entities.
 Third, on 12 August 2022, our PRC Legal Adviser consulted with Guangdong Medical
Products Administration (“GDMPA”) on named basis and was informed that the Separate
Operation Arrangement is common within the industry and does not directly violate the
restrictions under Interim Provisions and Consultation Paper. Given that the entity
operating platform services business in our Group is located in Guangzhou of Guangdong
Province, the abovementioned consultation was conducted with the officer of Guangzhou
Drug Inspection Office of GDMPA, and such department, as a constituent department of
GDMPA, is authorised by GDMPA for the relevant supervision and administration of
enterprises engaging business in relation to drugs and third-party platforms of
pharmaceutical online trading. In addition, according to the Provisions on the Functions,
Structure and Staffing of the National Medical Products Administration (
္ຖ၍
) issued by the General Office of the Central
Committee of the Communist Party of China and General Office of the State Council on
27 July 2018, provincial drug supervision and administration departments shall be
responsible for the licensing, inspection and punishment in the process of manufacturing
of drugs, medical devices and cosmetics, and the recordation, inspection and punishment
of third-party platforms. Based on this and the consultation responses, our PRC Legal
Adviser is of the view that such department of GDMPA is competent to provide the above
confirmation.
 Fourth, on 27 October 2022 and 28 October 2022, our PRC Legal Adviser made verbal
consultations on named basis with the Department of Policies and Regulations (
஝
̡) and the Department of Drug Supervision and Administration (္ຖ၍ଣ̡)o f
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SUMMARY
NMPA and was informed that: (i) the Consultation Paper was released for public
comments only and has not yet come into force. The final operative provisions and the
anticipated effective date of such draft regulations may be subject to changes with
substantial uncertainty, and the NMPA expressly refuses to give any interpretation to the
Consultation Paper which is not in effect and is in the view that it is unnecessary to over-
interpret the Consultation Paper; (ii) the Separate Operation Arrangement does not violate
the current effective PRC laws and regulations (including the Interim Provisions which is
still in effect); (iii) the NMPA is of the view that the online drug sales and the
corresponding platform service shall be subject to the Supervision and Administration
Measures of Online Pharmaceuticals Sales (
) (the
“Measures for Online Pharmaceuticals Sales”), officially published on 1 September 2022
and became effective on 1 December 2022, which does not prohibit the Group from
conducting the Separate Operation Arrangement and does not stipulate similar restrictions
on third-party platform providers and other entities within the Group engaging in drug
operation or online drug sales as stipulated in the Interim Provision and the Consultation
Paper as mentioned above. The NMPA is of the view that (a) the different subsidiaries
within a same Group are independent legal entities, and therefore, any subsidiary engaged
in online drug sales, is independent of a different subsidiary within the Group operating
the platform; and (b) after the Measures for Online Pharmaceuticals Sales comes into
effect, subject to the compliance with the relevant requirements under the Measures for
Online Pharmaceuticals Sales, the relevant subsidiary, as an independent legal entity, may
carry out online drug sales business on the platform operated by another subsidiary within
the Group; and (iv) the provincial MPA shall be responsible for the supervision of third-
party platforms for online drug sales (including the Yaoshibang platform). The
responsibilities of the Department of Policies and Regulations of NMPA include studying
major policies on the supervision and administration of pharmaceutical products,
organising the drafting of laws, regulations and administration rules, and conducting the
supervision of law enforcement. The responsibilities of Department of Drug Supervision
and Administration include organising the drafting of and guiding the implementation of
the rules for the operation and administration of pharmaceuticals, and organising the
investigation into and punishment of the major illegal acts. Based on this and the
consultation responses, our PRC Legal Adviser is of the view that such departments are
competent to provide the above confirmation.
In addition, to the best knowledge of the Company, as of the date of this documents, the
Company is not aware of any precedent in which an enterprise has been subject to any administrative
penalty as a result of adopting the Separate Operation Arrangement. Taking into account the above,
assuming that the Consultation Paper comes into effect in its current form, and based on the views of
GDMPA and NMPA in the above consultations, our Directors and our PRC Legal Adviser are of the
view that the risk of cessation of either Online Marketplace or Self-operation Business under the
Consultation Paper is remote, and our Directors are of the view that the Consultation Paper will not
have material adverse effect on the Separate Operation Arrangement, our business operation or
financial conditions. Taking into account the above, as well as based on the independent due diligence
conducted by the Sole Sponsor, including discussion with the PRC Legal Advisers of the Company
and the Sole Sponsor regarding their interpretation of the Consultation Paper and their consultation
results with the relevant medical products administration authorities, nothing has come to the Sole
Sponsor’s attention that would cause the Sole Sponsor to disagree with the Directors’ view.
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SUMMARY
Internet pharmaceutical transaction services
On 1 September 2022, SAMR published the Supervision and Administration Measures of
Online Pharmaceuticals Sales () (the “ Measures for Online
Pharmaceuticals Sales ”), which took effect on 1 December 2022, aiming to enhance the supervision
of online pharmaceutical sales and related third-party platform services. See “Regulations—PRC
Regulations—Regulations relating to internet pharmaceutical transaction services”. Our Directors are
of the view that the Measures for Online Pharmaceuticals Sales has no material impact on our business
operation and there are no material impediments for us to comply with the regulations.
As advised by our PRC Legal Adviser, the Measures for Online Pharmaceuticals Sales provide
that, among others, each online drug seller shall (i) operate its business within the approved business
mode and business scope, (ii) file with the local MPA for its information, including company name,
website name, APP name, IP address, network domain name and the information of Pharmaceutical
Operation License or Pharmaceutical Manufacture License, and report any changes in the filed
information to the local MPA within ten working days, (iii) display its Pharmaceutical Operation
License or Pharmaceutical Manufacture License on visible place of its homepage, (iv) retain the
qualification documents of its suppliers and electronic transaction records of its online pharmaceuticals
sales, and (v) take corresponding control and handling measures in accordance with the national
regulations in respect of emergency response, in the event of any public health emergencies or any
other emergency that seriously threatens the public health.
As advised by our PRC Legal Adviser, the Measures for Online Pharmaceuticals Sales also
specify the filing requirements for the platform provider and imposes certain obligations on the
platform provider, including, among others, that each Platform Provider shall (i) establish drug quality
and safety management institutions, and equip pharmaceutical technicians to undertake drug quality
and safety management, (ii) enhance the scrutiny on the required licences and permits of online
pharmaceutical merchants for online pharmaceuticals sales, (iii) file with the provincial MPA for its
information including company name, legal representative, unified social credit code, website name
and network domain name, (iv) enter into agreements with online pharmaceutical merchants to specify
responsibilities for quality and safety of drugs, (v) establish the examination and inspection system for
online pharmaceuticals sales activities, and stop the discovered online pharmaceutical merchants’
illegal acts without delay and immediately report such illegal acts to competent governmental
authorities, and (vi) take corresponding control and handling measures in accordance with the national
regulations in respect of emergency response, in the event of any public health emergencies or any
other emergency that seriously threatens the public health. We had completed the filing of the
information of the Platform Provider of Yaoshibang platform to the MPA of Guangdong Province and
obtained the filing certificate for third-party platform provider for internet drug transaction (
ၣഖʹ
ኯᗇ) on January 7, 2023. Besides, as of the date of this document, most of our
PRC subsidiaries engaging in online drug sales had completed the reporting procedures as online drug
sellers, and only three PRC subsidiaries located in Henan, Jiangxi and Zhejiang provinces had not
completed the reporting procedures for online drug sales due to lack of provincial implementation rules
or requirements on the reporting procedures for online drug sellers.
As advised by our PRC Legal Adviser, the specific procedures and time limit requirement for the
reporting as online drug sellers are not specified in the Measures for Online Pharmaceuticals Sales.
Provincial MPAs are responsible for formulating the specific local reporting procedures for online drug
sellers. If the relevant provincial MPAs have not formulated the local reporting procedures or opened up
23


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SUMMARY
reporting channels for online drug sellers in such provinces to complete the reporting procedures, online
drug sellers in those provinces, such as our releva nt PRC subsidiaries, cannot complete the reporting
procedures accordingly. We were not aware of any rectification request by the competent authorities in
respect of the aforesaid reporting requirements as of the date of this document, and if the relevant
provincial MPAs formulate the specific reporting procedures and open up reporting channels for online
drug sellers to complete the reporting procedures, we will carry out the reporting procedures in
accordance with the laws and regulations in a timely manner. Having carefully discussed with our PRC
Legal Advisor and based on aforementioned analysis, our Directors are of the view that the Group would
be able to fully comply with the requirements set out in the Measures for Online Pharmaceuticals Sales
without any material impediments, as both a platform provider and an online drug seller by taking the
following actions: (i) continuously implementing the relevant measures required by the Measures for
Online Pharmaceuticals Sales. As for the Group Companies conducting online drug sales business, such
measures include but are not limited to displaying the information of Pharmaceutical Operation License
on the homepage of online stores, and retaining qualification documents of suppliers and electronic
transaction records for five years and no less than one year after the expiration date of the drugs. As for
the Group Company providing platform services, the relevant measures contains, including without
limitation, maintaining a drug quality and safety management institution with the pharmaceutical
technicians taking charge of the management, examining the qualification and capability of the online
drug sellers and entering into agreement with such sellers; (ii) procuring relevant subsidiaries to complete
the reporting procedures as an online drug seller once requested by the local competent authorities, (iii)
taking corresponding control and handling measures in accordance with the applicable regulations, and
(iv) closely monitoring the law enforcement practice by the authorities with regard to Measures for
Online Pharmaceuticals Sales. Having carefully discussed with our PRC Legal Adviser, our Directors
have confirmed the effectiveness of the above measures. Based on the independent due diligence
conducted by the Sole Sponsor, nothing has come to the Sole Sponsor’s attention that would cause the
Sole Sponsor to disagree with the Directors’ view.
For the purpose of the implementation of the Drug Administration Law of the People’s
Republic of China (
) and the Measures for Online Pharmaceuticals
Sales, and the safety use of drugs by the public, on 30 November 2022, NMPA published the first
version of Prohibited List of Online Drug Sales (
) (the
“Prohibited List”). The Prohibited List specifies the detailed categories of the drugs prohibited from
selling online (the “Prohibited Pharmaceuticals”), including the following two main categories: (i)
drugs that are prohibited from selling by laws and regulations, including vaccines, blood products,
anaesthetics, psychotropic drugs, toxic drugs for medical use, radiopharmaceuticals, pharmaceutical
precursor chemicals, medicinal preparations of medical institutions and traditional Chinese medicine
granules; and (ii) other drugs that are prohibited from online retailing.
We do not engage in the sales of any Prohibited Pharmaceuticals. Therefore, we believe the
Prohibited List will not have any significant impact on our sales and operation. We have also
established and implemented internal control measures to ensure that the pharmaceuticals marketed or
sold on Our Marketplace and in our Self-operation Business are not any Prohibited Pharmaceuticals.
See “Business—Initiatives and internal control measures for third-party sellers on our Online
Marketplace” for further details.
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SUMMARY
Cybersecurity
On 10 June 2021, the SCNPC promulgated the Data Security Law of the PRC, which took
effect on 1 September 2021. The Data Security Law provides for a data security review procedure for
the data activities that affect or may affect national security. It also imposes data security obligations
on persons and entities conducting data processing activities and requires data processors to take
necessary measures to protect data security. The Data Security Law also requires protection of
Important Data, but the scope of Important Data is still under development and may be further clarified
by various PRC governmental authorities by way of issuing ministry-level measures, regulatory
guidelines and/or national standards.
On 20 August 2021, the SCNPC promulgated the Personal Information Protection Law of the
PRC, which took effect on 1 November 2021. Although it is our policy to only access user information
that is necessary for, and relevant to, the services provided and we update our privacy policies and
practices in accordance with regulatory developments, we may be required to make further adjustments
to our data practices as the Personal Information Protection Law is newly promulgated and the
interpretation of many of its specific requirements remain to be clarified by the governmental
authorities or is otherwise subject to uncertainty.
On 28 December 2021, the CAC and 12 other PRC governmental authorities published an
amendment of the Measures for Cybersecurity Review (
) previously released in
2020, or the Measures for Cybersecurity Review 2022, which took effect on 15 February 2022. The
Measures for Cybersecurity Review 2022 provides that the relevant operators shall apply with the
Cybersecurity Review Office of the CAC for a cybersecurity review under the following
circumstances: (i) internet platform operators holding over one million individuals’ personal
information aiming for foreign listing; (ii) operators of “critical information infrastructure” purchasing
internet products and services that affects or may affect national security; and (iii) internet platform
operators carrying out data processing that affects or may affect national security. However, there is
not any further explanation or interpretation for “foreign listing” or “affect or may affect national
security” under the Measures for Cybersecurity Review 2022. We understand that our proposed listing
in Hong Kong is not likely to fall into the scope of “foreign listing”. However, in light of the Measures
for Cybersecurity Review 2022, there can be no assurance that our data processing activities will not
be found by relevant PRC governmental authorities as “affecting national security” and the PRC
governmental authorities may have wide discretion in the interpretation and enforcement of the laws
and regulations. Furthermore, on 30 July 2021, the PRC State Council published the Regulations on
Security and Protection of Critical Information Infrastructure (
ᚐૢԷ),
which took effect on 1 September 2021. According to the Regulations on Security and Protection of
Critical Information Infrastructure, the competent PRC governmental authorities of important
industries and sectors are responsible for identifying critical information infrastructures in their own
industries and sectors based on the identification rules and informing the operator of the critical
information infrastructure if such infrastructure is identified and designated as critical information
infrastructure in a timely manner. However, as of the Latest Practicable Date, we have not yet been
informed, approached or designated as a critical information infrastructure operator under the
applicable PRC laws and regulations by any PRC governmental authorities. We have not received any
inquiry, notice, warning or sanction regarding cybersecurity from any PRC governmental authorities
nor been involved in any investigations on cybersecurity review made by any PRC governmental
authorities.
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SUMMARY
On 14 November 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 provide that data
processors conducting certain activities must apply for cybersecurity review. See “Regulations—PRC
regulations—Regulations relating to cybersecurity and information security” for more details.
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”. 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. However, our PRC Legal Adviser had a real-name consultation on 24 November 2022 with
China Cybersecurity Review Technology and Certification Center (“CCRC”), which is authorised by
the CAC for receiving and accepting the submission of cybersecurity reviews and answering public
inquiry relating to the cybersecurity review. We respectfully submit that 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. 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” and there is still risk that we may be subject to the cybersecurity review in the future.
Having said that, according to our PRC Legal Adviser’s real-name consultation with the CCRC, if any
competent PRC governmental authorities deem it necessary to conduct a cybersecurity review of a
company, it will proactively notify the company concerned. However, as of the Latest Practicable
Date, we had not received any notice regarding cybersecurity review from any PRC governmental
authorities.
As advised by our PRC Legal Adviser, we are of the view that the Draft Internet Data Security
Regulations, if being implemented in its current form, and the Measures for Cybersecurity Review
2022 will not have any material adverse effect on our business operations or the proposed Listing on
the basis that:
(i) we have implemented comprehensive policies and measures to ensure users’ data privacy
and security and to comply with applicable cybersecurity and data privacy laws and
regulations. See “Business—Risk management and internal control—Information system
risk management” for more details. We did not experience any material data loss, leakage
or non-compliance with the applicable cybersecurity and data privacy laws and regulations
in the PRC during the Track Record Period;
(ii) as of the Latest Practicable Date, we have not received any warning or sanction regarding
cybersecurity from any PRC governmental authorities nor been involved in any
investigations on cybersecurity review made by any PRC governmental authorities;
(iii) during the Track Record Period and up to the Latest Practicable Date, we had not been
subject to any material fines or other material penalties due to non-compliance with
applicable cybersecurity and data privacy laws and regulations;
(iv) we are not subject to cybersecurity review in accordance with Article 5 of the Measures
for Cybersecurity Review 2022 as we had not yet been informed, approached or
designated as an operator of critical information infrastructure under the applicable
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SUMMARY
cybersecurity and data privacy laws and regulations by any PRC governmental authorities
as of the Latest Practicable Date, and our proposed Listing in Hong Kong does not concern
any procurement of network products and services under Article 5 of the Measures for
Cybersecurity Review 2022;
(v) as advised by our PRC Legal Adviser, we had not been involved in any activities that
might give rise to national security risks based on the factors set out in Article 10 of the
Cybersecurity Review 2022 during the Track Record Period and up to the Latest
Practicable Date;
(vi) as advised by our PRC Legal Adviser, and subject to any further official guidance and
implementation rules relating to the Measures for Cybersecurity Review 2022, Article 7 of
the Measures for Cybersecurity Review 2022 requires a cybersecurity review for internet
platform operators possessing personal information of over one million users and pursuing
a foreign listing (
਷̮ɪ̹); and
(vii) we will closely monitor and assess further regulatory developments regarding applicable
cybersecurity and data privacy laws and regulations, including the development on
cybersecurity review, and comply with the latest regulatory requirements.
Taking into account the above, as well as based on the independent due diligence conducted by
the Sole Sponsor, nothing has come to the Sole Sponsor’s attention that would cause the Sole Sponsor
to disagree with the Directors’ view. See “Risk Factors—Our business generates and processes a large
amount of data, and the improper use or disclosure of such data could harm our reputation and have a
material adverse effect on our business and prospects” and “Regulations—PRC regulations—
Regulations relating to cybersecurity and information security” for more details.
Foreign investment and overseas listings
On 17 February 2023, the CSRC promulgated the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies (
ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ༊Б፬
) (the “ Overseas Listing Trial Measures ”), and relevant five guidelines, which came into effect
as of 31 March 2023. According to the Overseas Listing Trial Measures, PRC domestic enterprises that
seek to offer and list securities in overseas markets, either in direct or indirect means (the “ Overseas
Offering and Listing ”), are required to fulfil the filing procedure with the CSRC and submit filing
reports, legal opinions, and other relevant documents. For details, see “Regulations— PRC
regulations—Regulations relating to M&A rules and overseas listings”.
According to the Notice on Arrangements for Record Filing Administration of Overseas
Offering and Listing of Domestic Enterprises (
) and
the relevant replies by the officials from CSRC which are both promulgated with the Overseas Listing
Trial Measures simultaneously, the PRC domestic companies that have already been listed overseas or
meet all of the following conditions shall be deemed as existing issuers (
πඎΆุ) (the “ Existing
Issuers”) : (1) before the effective date of the Overseas Listing Trial Measures (i.e. 31 March 2023),
the PRC domestic enterprise’s application for its indirect Overseas Offering and Listing has been
approved by the relevant overseas regulatory authorities or securities exchanges (for example, a listing
hearing has been passed by the Stock Exchange), and the PRC domestic enterprise does not need to re-
perform the regulatory procedures for offering and listing with the overseas regulatory authorities or
overseas stock exchanges (for example, a new listing hearing is required by the Stock Exchange); and
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SUMMARY
(2) the PRC domestic enterprise completes the Overseas Offering and Listing on or prior to
30 September 2023. The Existing Issuers are not required to complete the filling procedures
immediately, and they shall be required to file with the CSRC when subsequent matters such as
refinancing are involved.
Our PRC Legal Advisor is of the view that this Listing shall be deemed as indirect Overseas
Offering and Listing by PRC domestic enterprise. Therefore, if there is no re-hearing required by the
Stock Exchange after 31 March 2023 and this Listing can be completed on or prior to 30 September
2023, we will not be required to file with the CSRC with respect to this Listing.
Forecast Loss in 2023
We expect that we will possibly continue to be loss-making in 2023 primarily due to the loss
from the fair value change of financial liabilities at fair value through profit or loss and a large amount
of selling and marketing expenses as we are still at the stage of rapid business expansion.
No Material Adverse Change
After performing sufficient due diligence work which our Directors consider appropriate and
after due and careful consideration, the Directors confirm that, up to the date of this document, there
has been no material adverse change in our financial or trading position or prospects since
31 December 2022, which is the end date of the periods reported on in the Accountants’ Report
included in Appendix I to this document, and there is no event since 31 December 2022 that would
materially affect the information as set out in the and the Accountants’ Report included in Appendix I
to this document.
IMPACT OF COVID-19 ON OUR OPERATIONS
The COVID-19 pandemic caused general business disruption in China in the first half of 2020. The
warehouse we leased in Wuhan was shut down at the end of January 2020 and thus caused delays and
suspensions in the delivery and shipping of pharmaceutical products. The warehouse in Wuhan resumed
operations on 8 April 2020. In addition, we also recorded a higher amount of inventory impairment as of
31 December 2020 due to price fluctuations caused by the rapid development of the COVID-19 pandemic.
See “Financial Information—Discussion of certain key items of consolidated statements of financial
position—Inventories” for more information. After the COVID-19 pandemic was contained in the second
half of 2020, different variants of the coronavirus caused regional resurgences of confirmed cases in 2021
and 2022. We have experienced delays in the delivery and shipping of pharmaceutical products due to
travel restrictions imposed by governments. Certain stores we operated on our Online Marketplace and
certain warehouses also experienced temporary shutdown for a period of a few days to over one month in
2022. In particular, starting from mid-October 2022, we have experienced shutdowns of warehouses,
certain employees being quarantined and restrictions on logistics services in several locations, which
negatively affected product shipments. The COVID-19 pandemic also resulted in changes in SKUs on our
platform. The amount of pandemic control related SKUs experienced fluctuations. Inconvenience or
inability to conduct certain business activities offline a lso promoted online transactions, which led to a
positive impact on our business operations. However, such positive impact could be temporary and we
cannot assure you that such positive impact would be sustainable or develop into a reliable driver to the
growth of our business. Temporary shutdowns or delays in warehousing and logistics services also
negatively affected product shipment by certain of our suppliers, which resulted in them generating less
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SUMMARY
cash from their operations, and thus caused liquidity issues for certain of our suppliers. In 2020, we
recorded impairment of prepayments that were previously made to certain suppliers as we believed that it
was more probable than not that we would not be able to receive the corresponding products from the
suppliers due to the liquidity issues. See “Financial Information—Period-to-period comparison of results of
operations—2021 compared to 2020—Other gains and losses” for more information.
China began to modify its zero-COVID policy at the end of 2022, and most of the travel restrictions
and quarantine requirements were lifted in December. There were surges of cases in many cities during this
time, which caused disruption to our and our suppliers’ operations. Demand for medicines that alleviate
COVID symptoms increased significantly in a short period of time, which resulted in supply shortages.
Surges of cases also resulted in delays or suspension of warehousing and logistics services, which led to
additional difficulties in product supply. Many of our employees also contracted COVID during this time,
which also negatively affected our delivery capabilities. As of early January 2023, all of our employees had
resumed working from offices and warehousing and logistics services all resumed normal.
There remains uncertainty as to the future impact of the virus, especially in light of this change
in policy. The extent to which the pandemic impacts our results of operations going forward will
depend on future developments which are highly uncertain and unpredictable, including the frequency,
duration and extent of outbreaks of COVID-19, the appearance of new variants with different
characteristics, the effectiveness of efforts to contain or treat cases, and future actions that may be
taken in response to these developments. Consequently, the COVID 19 pandemic may continue to
materially and adversely affect our business, financial condition and results of operations in the current
and future years. For risks related to COVID-19 pandemic, see “Risk Factors—Risks related to our
Business and Industry—Our business operations and financial performance have been adversely
affected by the COVID-19 outbreak, may in the future continue to be affected by the COVID-19
outbreak, and may be affected by other natural disasters, epidemics and other unforeseeable
catastrophes.”
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the listing of, and permission to deal in: (a) the
Shares in issue and to be issued pursuant to the Global Offering (including any Shares to be issued
under the Over-allotment Option); and (b) the Shares to be issued under the Share Incentive Plans, on
the basis that, among other things, we satisfy the market capitalisation/revenue test under Rule 8.05(3)
of the Listing Rules with reference to: (i) our revenue for the year ended 31 December 2021, being
approximately RMB10,093.5 million, which is over HK$500 million; and (ii) our expected market
capitalisation at the time of Listing, which based on the low-end of the indicative Offer Price range,
exceeds HK$4 billion.
DIVIDEND
We are a holding company incorporated under the Laws of the Cayman Islands. As a result, the
payment and amount of any future dividends will also depend on the availability of dividends received
from our subsidiaries. PRC Laws require that dividends be paid only out of the profit for the year
determined according to PRC accounting principles. PRC Laws also require companies to set aside at
least 10% of its after-tax profits, if any, to fund its statutory reserves, which are not available for
distribution as cash dividends. Dividend distribution to our shareholders is recognised as a liability in
the period in which the dividends are approved by our shareholders or Directors, where appropriate.
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SUMMARY
During the Track Record Period, no dividends were paid or declared by us. As advised by our Cayman
Islands counsel, under Cayman Islands law, a Cayman Islands company may pay a dividend out of
either profits or share premium account. Even if there are accumulated losses, a dividend may be paid
out of the share premium account, provided that the memorandum and articles of association do not
prohibit such payment. In no circumstances may a dividend be declared or paid if this would result in
the company being unable to pay its debts as they fall due in the ordinary course of business.
GLOBAL OFFERING
This document is published in connection with the Hong Kong Public Offering as part of the
Global Offering. The Global Offering comprises of:
(a) the Hong Kong Public Offering of initially 1,581,200 Offer Shares (subject to reallocation)
in Hong Kong as described in “Structure of the Global Offering—The Hong Kong Public
Offering”; and
(b) the International Offering of initially 14,227,600 Offer Shares (subject to reallocation and
the Over-allotment Option) (i) in the United States solely to QIBs in reliance on Rule
144A or another exemption from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act; and (ii) outside the United States (including to
professional and institutional investors within Hong Kong) in offshore transactions in
reliance on Regulation S, as described in “Structure of the Global Offering—The
International Offering”.
The Offer Shares will represent approximately 2.5% of the total Shares in issue immediately
following the Global Offering, assuming the Over-allotment Option is not exercised, each Preferred
Share is converted to one ordinary Share, no additional Shares are issued under the Share Incentive
Plans and the share capital otherwise remains the same between the Latest Practicable Date and
Listing.
If the Over-allotment Option is exercised in full, the Offer Shares will represent approximately
2.9% of the total Shares in issue immediately following the Global Offering, assuming that each
Preferred Share is converted to one ordinary Share, no additional Shares are issued under the Share
Incentive Plans and the share capital otherwise remains the same between the Latest Practicable Date
and Listing.
OFFERING STATISTICS
Based on an Offer Price of
HK$19.00 per Offer Share
Based on an Offer Price of
HK$23.00 per Offer Share
Market capitalisation of our Shares (1) ........... H K $ 12,015 million HK$14,544 million
Unaudited pro forma adjusted consolidated net
tangible assets less liabilities of the Group
attributable to owners of the Company per
Share
(2) ................................. H K $ ( 32.91) HK$(32.48)
Notes:
(1) The calculation of market capitalisation is based on 632,350,052 Shares, consisting of (i) 141,124,984 Shares in issue, assuming the
Share Subdivision and the Global Offering (subject to Assumptions) had been completed on 31 December 2022 and (ii) the conversion
of all preferred shares that were in issue on 31 December 2022 into 491,225,068 Shares (after the effect of Share Subdivision) upon the
completion of Global Offering.
(2) The unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of the Company per
Share as of 31 December 2022 is calculated after making the adjustments referred to in Appendix II to this document and on the basis
30


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SUMMARY
that 141,124,984 Shares are in issue, assuming the Share Subdivision and Global Offering had been completed on 31 December 2022 but
does not include Shares that may be issued under the Over-allotment Option, Share Incentive Plans or any Shares that may be issued or
repurchased by our Company under the general mandates and repurchase mandates or the conversion of all preferred shares existing on
31 December 2022 into ordinary shares of the Company.
Upon completion of the Global Offering, all preferred shares existing on 31 December 2022 will be converted into ordinary shares of our
Company. Had the conversion been taken into account, the unaudited pro forma adjusted consolidated net tangible assets of our Group
attributable to owners of the Company as of 31 December 2022 per Share would have been HK$2.89 (based on an Offer Price of
HK$19.00 per Share) and HK$2.99 (based on an Offer Price of HK$23.00 per Share), respectively. See footnote 5 in Appendix II to this
document for details.
LISTING EXPENSE
Listing expenses represent professional fees, underwriting commissions and other fees incurred
in connection with the Global Offering. Based on the mid-point Offer Price of HK$21.00 (being the
mid-point of the indicative Offer Price range), assuming the Over-allotment Option is not exercised
and no additional Shares are issued pursuant to the Share Incentive Plans, the total estimated listing
expenses in relation to the Global Offering is approximately HK$78.4 million (consisting of (i)
underwriting commission of approximately HK$14.9 million, and (ii) non-underwriting related
expenses of approximately HK$63.5 million, which consist of fees and expenses of legal advisors and
Reporting Accountant of approximately HK$44.1 million and other fees and expenses of
approximately HK$19.4 million). Approximately HK$18.0 million of the total estimated listing
expenses is directly attributable to the offering and listing of our Offer Shares and will be deducted
from equity upon the completion of the Global Offering, and HK$60.4 million is expected to be
expensed in our consolidated statements of profit or loss, of which HK$4.8 million and HK$40.6
million have been charged to our consolidated statements of comprehensive loss for 2021 and 2022,
respectively. The total estimated listing expenses constitute approximately 23.6% of the gross
proceeds.
USE OF PROCEEDS
Assuming the Over-allotment Option is not exercised, after deducting the underwriting
commissions and other estimated offering expenses payable by us in connection with the Global
Offering, and assuming an Offer Price of HK$21.00 per Share (being the mid-point of the Offer Price),
we estimate that we will receive net proceeds of approximately HK$253.6 million from the Global
Offering. We intend to use the net proceeds from the Global Offering for the following purposes:
1. Approximately 45% of the net proceeds, or approximately HK$114.1 million, is expected
to be used for further developing our pharmaceutical circulation business;
2. Approximately 25% of the net proceeds, or approximately HK$63.4 million, is expected to
be used for further developing our other businesses;
3. Approximately 22% of the net proceeds, or approximately HK$55.8 million, is expected to
be used for research and development; and
4. Approximately 8% of the net proceeds, or approximately HK$20.3 million, is expected to
be used for working capital and general corporate purposes.
See “Use of proceeds” for further details.
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DEFINITIONS
In this document, unless the context otherwise requires, the following terms shall have the
following meanings. Certain technical terms are explained in “Glossary of technical terms”.
“2019 Share Incentive Plan” the share incentive plan approved and adopted by our
Company and effective since 1 January 2019 (as amended
from time to time), the principal terms of which are set out
in “Statutory and general information—Share Incentive
Plans” in Appendix IV
“2023 Share Incentive Plan” the share incentive plan approved and adopted by our
Company and effective upon Listing, which constitutes a
share scheme under Chapter 17 of the Listing Rules, the
principal terms of which are set out in “Statutory and
general information—Share Incentive Plans” in Appendix
IV
“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 of Hong
Kong
“Articles” or “Articles of
Association”
the memorandum and articles of association conditionally
adopted by our Company and taking effect upon Listing, as
amended from time to time, a summary of which is set out
in “Summary of the constitution of our Company and
Cayman Islands company law” in Appendix III
“associate(s)” has the meaning ascribed to it under the Listing Rules
“Assumptions” the assumptions that all Preferred Shares are converted to
Ordinary Shares on a one-to-one ratio upon Listing, the
Share Subdivision is completed (unless the context
specifies otherwise), and that no additional Shares are
issued under the Share Incentive Plans and between the
Latest Practicable Date and Listing other than pursuant to
the Global Offering (excluding the Over-allotment Option)
“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
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DEFINITIONS
“CAC” Cyberspace Administration of China (࢕
܃)
Capital Market Intermediaries” the capital market intermediaries as named in “Directors
and parties involved in the Global Offering”
“Cayman Companies Act” the Companies Act, Cap. 22 (Law 3 of 1961, as
consolidated and revised) of the Cayman Islands
“CCASS” the Central Clearing and Settlement System established and
operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct
clearing participant or a general clearing participant
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
“CCASS EIPO” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your or a designated
CCASS Participant’s stock account through causing
HKSCC Nominees to apply on your behalf, including by (i)
instructing your broker or custodian who is a CCASS
Clearing Participant or a CCASS Custodian Participant to
give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your
behalf, or (ii) if you are an existing CCASS Investor
Participant, giving electronic application instructions
through the CCASS Internet System ( https://ip.ccass.com)
or through the CCASS Phone System (using the procedures
in HKSCC’s “An Operating Guide for Investor
Participants” in effect from time to time). HKSCC can also
input electronic application instructions for CCASS
Investor Participants through HKSCC’s Customer Service
Centre by completing an input request
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals or
a corporation
“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian
Participant or a CCASS Investor Participant
“China” or “the PRC” the People’s Republic of China, and for the purposes of this
document only, except where the context requires
otherwise, references to China or the PRC exclude Hong
Kong, the Macau Special Administrative Region of the
PRC and Taiwan
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DEFINITIONS
“Companies Ordinance” the 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”
the 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”, or
“the Company”
YSB Inc. (
ʮ̡) (formerly known as YSB
Capital Limited), a limited liability company incorporated
under the Laws of the Cayman Islands on 27 August 2018.
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
“Consolidated Affiliated Entities” refers to the entities that are controlled by our Company
and consolidated into our Group through the Contractual
Arrangements, as amended or supplemented to from time
to time. See “Contractual Arrangements” for further details
“Contractual Arrangements” the series of contractual arrangements through which we
control and derive economic benefits from our
Consolidated Affiliated Entities. See “Contractual
Arrangements” for further details
“CSRC” China Securities Regulatory Commission (
ʕ਷ᗇՎ္ຖ၍
ึ)
“Director(s)” the director(s) of our Company
“Extreme Conditions” extreme conditions caused by a super typhoon as
announced by the government of Hong Kong
“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a
market research and consulting company, an Independent
Third Party
“Frost & Sullivan Report” the report prepared by Frost & Sullivan
“Global Offering” the Hong Kong Public Offering and the International
Offering
“GREEN Application Form(s)” the application form(s) to be completed by the HK eIPO
White Form Service Provider designated by our Company
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DEFINITIONS
“Group”, “our Group”, “the
Group”, “we”, “us”, or “our”
the Company and its subsidiaries and 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
“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the PRC
“HK eIPO White Form” the application for Hong Kong Offer Shares to be issued in
the applicant’s own name, submitted online through the
IPO App or the designated website at www.hkeipo.hk
“HK eIPO White Form Service
Provider”
the HK eIPO White Form service provider designated by
our Company as specified in the IPO App or on the
designated website at www.hkeipo.hk
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
“Hong Kong dollars” or “HK
dollars” or “HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong Offer Shares” the 1,581,200 Shares being initially offered for subscription
in the Hong Kong Public Offering (subject to reallocation
as described in “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 document, as further described in
“Structure of the Global Offering—The Hong Kong Public
Offering”
“Hong Kong Share Registrar” Tricor Investor Services Limited
“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 14 June 2023, relating to
the Hong Kong Public Offering, entered into by our
Company, China International Capital Corporation Hong
Kong Securities Limited and the Hong Kong Underwriters,
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DEFINITIONS
as further described in “Underwriting—Underwriting
arrangements and expenses—Hong Kong Public
Offering—Hong Kong Underwriting Agreement”
“IFRS” International Financial Reporting Standards, as issued from
time to time by the International Accounting Standards
Board
“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
“International Offer Shares” the 14,227,600 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 “Structure of the
Global Offering”)
“International Offering” the conditional placing of the International Offer Shares at
the Offer Price outside the United States in offshore
transactions in accordance with Regulation S and in the
United States to QIBs only in reliance on Rule 144A or any
other available exemption from the registration
requirements under the U.S. Securities Act, as further
described in “Structure of the Global Offering”
“International Underwriters” the underwriters of the International Offering
“International Underwriting
Agreement”
the international underwriting agreement, expected to be
entered into on or about 20 June 2023, relating to the
International Offering, expected to be entered into by,
among others, our Company, the Sole Sponsor, the Sole
Overall Coordinator and the International Underwriters, as
further described in “Underwriting—International
Offering”
“IPO App” the mobile application for the HK eIPO White Form
service which can be downloaded by searching “ IPO App”
in App Store or Google Play or downloaded at
www.hkeipo.hk/IPOApp or www.tricorglobal.com/
IPOApp
“Joint Global Coordinators”,
“Joint Bookrunners”, “Joint
Lead Managers”
the joint global coordinators, the joint bookrunners, and the
joint lead managers as named in “Directors and parties
involved in the Global Offering”
“Latest Practicable Date” 10 June 2023, being the latest practicable date for
ascertaining certain information in this document before its
publication
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DEFINITIONS
“Laws” all laws, statutes, legislation, ordinances, rules, regulations,
guidelines, opinions, notices, circulars, directives, requests,
orders, judgements, decrees, or rulings of any
governmental authority (including the Stock Exchange and
the SFC) of all relevant jurisdictions
“Listing” the listing of the Shares on the Main Board
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date, expected to be on or about Wednesday, 28 June
2023, 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 the Growth Enterprise Market of
the Stock Exchange
“Memorandum” or
“Memorandum of Association”
the memorandum of association of our Company
conditionally adopted on 3 June 2023, with effect from the
Listing Date, as amended from time to time
“MIIT” Ministry of Industry and Information Technology of the
PRC (
ʷ௅) (formerly known as
the Ministry of Information Industry)
“MOF” Ministry of Finance of the PRC (௅)
“MOFCOM” Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠਕ௅)
“MOHRSS” Ministry of Human Resources and Social Security of the
PRC (ღ௅)
“Mr. Zhang” Mr. Buzhen Zhang ( ੵӉᕄ), the founder, executive
Director, Chairman of the Board and Chief Executive
Officer of our Group
“NDRC” National Development and Reform Commission of the
PRC (
ึ)
“NMPA” National Medical Products Administration of China (࢕
္ຖ၍ଣ҅), the successor of the China Food and Drug
Administration (္ຖ၍ଣᐼ҅), or the CFDA,
the State Food and Drug Administration (္ຖ
၍ଣ҅), or the SFDA, and the State Drug Administration
(္ຖ၍ଣ҅)
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DEFINITIONS
“NPC” National People’s Congress of the PRC ( ʕശɛ͏΍ձ਷Ό
ɽึ)
“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 sold by our Company pursuant to the exercise of the
Over-allotment Option
“Onshore Holdco(s)” refers to the two Consolidated Affiliated Entities identified
in “Contractual Arrangements”
“Over-allotment Option” the option expected to be granted by our Company to the
International Underwriters, exercisable by the Sole Overall
Coordinator on behalf of the International Underwriters for
up to 30 days from the day following the last day for the
lodging of applications under the Hong Kong Public
Offering, to require our Company to allot and issue up to
2,371,200 additional Shares (representing in aggregate
approximately 15% of the initial Offer Shares) to the
International Underwriters 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”
“PBOC” People’s Bank of China (
ʕ਷ɛ͏ვБ)
“PRC Legal Adviser” Fangda Partners, our legal adviser on PRC law
“Preferred Share(s)” the Series Seed Preferred Shares, the Series A Preferred
Shares, Series B Preferred Shares, Series C-1 Preferred
Shares, Series C-2 Preferred Shares, Series D Preferred
Shares, Series E-1 Preferred Shares and the Series E-2
Preferred Shares
“Pre-IPO Investment(s)” the investment(s) in our Company undertaken by the
Pre-IPO Investors prior to this initial public offering, the
details of which are set out in “History, reorganization and
corporate structure”
“Pre-IPO Investor(s)” the investors in our Company prior to our Listing, further
details of which are set out in “History, reorganization and
corporate structure—Pre-IPO Investments”
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DEFINITIONS
“Price Determination Agreement” the agreement to be entered into between our Company and
the Sole Overall Coordinator (for itself and on behalf of the
Underwriters) at or about the Price Determination Date to
record and fix the Offer Price
“Price Determination Date” the date, expected to be on or about Tuesday, 20 June 2023
and in any event no later than Tuesday, 27 June 2023, 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
“Regulation S” Regulation S under the U.S. Securities Act
“RMB” or “Renminbi” Renminbi, the lawful currency of China
“Rule 144A” Rule 144A under the U.S. Securities Act
“SAFE” State Administration of Foreign Exchange of the PRC (
ʕ
̮ි၍ଣ҅)
“SAIC” State Administration of Industry and Commerce of the PRC
(၍ଣᐼ҅), which has now
been merged into the State Administration for Market
Regulation of the PRC (
̹ఙ္ຖ၍ଣ
ᐼ҅)
“SAMR” State Administration for Market Regulation of the PRC ( ʕ
̹ఙ္ຖ၍ଣᐼ҅)
“SAT” State Taxation Administration (೼ਕᐼ҅)
“SCNPC” Standing Committee of the National People’s Congress ( Ό
ึ)
“Series A Preferred Share(s)” the series A preferred share(s) of our Company with a par
value of US$0.00001 each
“Series B Preferred Share(s)” the series B preferred share(s) of our Company with a par
value of US$0.00001 each
“Series C-1 Preferred Share(s)” the series C-1 preferred share(s) of our Company with a par
value of US$0.00001 each
“Series C-2 Preferred Share(s)” the series C-2 preferred share(s) of our Company with a par
value of US$0.00001 each
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DEFINITIONS
“Series D Preferred Share(s)” the series D preferred share(s) of our Company with a par
value of US$0.00001 each
“Series E Preferred Share(s)” the series E preferred share(s) of our Company with a par
value of US$0.00001 each
“Series E-1 Preferred Share(s)” the series E-1 preferred share(s) of our Company with a par
value of US$0.00001 each
“Series E-2 Preferred Share(s)” the series E-2 preferred share(s) of our Company with a par
value of US$0.00001 each
“Series Seed Preferred Share(s)” the series Seed preferred share(s) of our Company with a
par value of US$0.00001 each
“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
“Share Incentive Plans” the 2019 Share Incentive Plan and the 2023 Share Incentive
Plan, the details of which are set out in “Statutory and
general information—Share Incentive Plans” in
Appendix IV
“Share Subdivision” the subdivision of the Shares, which shall take effect
immediately upon Listing, whereby each Share of par value
US$0.00001 will be divided into four Shares of par value
US$0.0000025 each
“Share(s)” share(s) in the share capital our Company currently with a
par value of US$0.00001 each, and following the Share
Subdivision, will have a par value of US$0.0000025 each
“Shareholder(s)” holder(s) of our Share(s)
“Sole Overall Coordinator” the sole overall coordinator as named in “Directors and
Parties involved in the Global Offering”
“Sole Sponsor” or “Sole Sponsor-
Overall Coordinator”
the sole sponsor, and the sole sponsor-overall coordinator
as named in “Directors and parties involved in the Global
Offering”
“Stabilising Manager” China International Capital Corporation Hong Kong
Securities Limited
“State Council” State Council of the PRC (
ʕശɛ͏΍ձ਷਷ਕ৫)
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DEFINITIONS
“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered into
between MIYT Holdings Limited and the Stabilising
Manager on or about the Price Determination Date
“Stock Exchange” or “Hong Kong
Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subsidiary” or “subsidiaries” has the meaning ascribed to it in section 15 of the
Companies Ordinance
“substantial shareholder(s)” unless otherwise specified, has the meaning ascribed to it in
the Listing Rules
“Takeovers Code” Code on Takeovers and Mergers and Share Buy-backs
issued by the SFC, as amended, supplemented or otherwise
modified from time to time
“Track Record Period” the years ended 31 December 2020, 2021 and 2022
“U.S.” or “United States” the United States of America, its territories, its possessions
and all areas subject to its jurisdiction
“U.S. Exchange Act” the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder
“U.S. Securities Act” the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“US dollars”, “U.S. dollars”,
“US$” or “USD”
United States dollars, the lawful currency of the United
States
“VAT” value-added tax
“WFOE” or “Guangzhou Sudaoyi” Guangzhou Sudaoyi Information Technology Co., Ltd. (
ᄿ
ʮ̡), a company established in the
PRC on 18 October 2018, and a wholly-owned subsidiary
of our Company through which we enter into the
Contractual Arrangements
“%” per cent
Unless otherwise expressly stated or the context otherwise requires, all data in this document is
as of the date of this document.
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DEFINITIONS
The English names of PRC entities, PRC laws or regulations, and PRC governmental
authorities referred to in this document are translations from their Chinese names and are for
identification purposes. If there is any inconsistency, the Chinese names shall prevail.
Certain amounts and percentage figures included in this document 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.
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GLOSSARY OF TECHNICAL TERMS
This glossary contains definitions of certain technical terms used in this document in
connection with us and our business. These may not correspond to standard industry definitions,
and may not be comparable to similarly terms adopted by other companies.
“4G” the fourth generation of broadband cellular network
technology
“5G” the fifth generation of broadband cellular network
technology
“AI” artificial intelligence
“average number of MAB” average number of monthly active buyers, which refers to
the average number of registered buyers who logged into
YSB App at least once in a given month during a given
period
“average number of MPB” average number of monthly paying buyers, which refers to
the average number of registered buyers who placed at least
one order in a given month during a given period
“B2B” business to business
“B2C” business to consumer
“BD” business development
“buyer” downstream participants to our businesses; our buyers are
directly registered with us
“CAGR” compound annual growth rate
“COVID-19” coronavirus disease 2019, a disease caused by a novel virus
designated as severe acute respiratory syndrome
coronavirus 2
“ERP” Enterprise Resource Planning
“GMV” gross merchandise value
“GSP” Good Supply Practise Standards for Pharmaceutical
Products
“I/O ports” input/output ports
“ICLs” independent clinical laboratories
“IT” information technology
“OCR” Optical Character Recognition
“OTC” over-the-counter
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GLOSSARY OF TECHNICAL TERMS
“paying ratio” average number of MPB as a percentage of average number
of MAB in a given period
“primary healthcare institution” downstream pharmaceutical retailer that is not a hospital or
a pharmacy, including, but not limited to, a private clinic,
township health centre, village clinic, and community
medical institution
“R&D” research and development
“seller” upstream participants to our Online Marketplace
“SKU” stock keeping unit, offered on our platform. The number of
SKUs does not represent the number of distinct products
offered through our platform. We may assign different
SKUs to the same product if it is offered by different sellers
“supplier” upstream participants to our Self-operation Business
“WDC” warehouse data centre
“WMS” warehouse management systems
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FORWARD-LOOKING STATEMENTS
Certain statements in this document 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, future events, or performance (often, but not
always, through the use of words or phrases such as ‘will’, ‘expect’, ‘anticipate’, ‘estimate’, ‘believe’,
‘going forward’, ‘ought to’, ‘may’, ‘seek’, ‘should’, ‘intend’, ‘plan’, ‘projection’, ‘could’, ‘vision’,
‘goals’, ‘aim’, ‘aspire’, ‘objective’, ‘target’, ‘schedules’, and ‘outlook’) 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 document), 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 business and operating strategies and our ability to implement such strategies;
 our ability to develop and manage our operations and business;
 our ability to control costs and expenses;
 our ability to identify and satisfy user demands and preferences;
 our ability to maintain good relationships with business partners;
 the actions and developments of our competitors;
 changes to regulatory and operating conditions in the industry and geographical markets in
which we operate;
 all other risks and uncertainties described in “Risk factors”.
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 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 document. Any such intentions may
change in light of future developments.
All forward-looking statements in this document are expressly qualified by reference to this
cautionary statement.
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RISK FACTORS
You should carefully consider all of the information in this document, including the risks
and uncertainties described below, before making an investment in our Shares. Our business,
financial condition or results of operations could be materially and adversely affected by any of
these risks. The trading price of our Shares could significantly decrease due to any of these risks,
and you may lose all or part of your investment. You should also pay particular attention to the
fact that we are a PRC company and are governed by a legal and regulatory system which may
differ from what prevails in other countries.
These factors are contingencies that may or may not occur, and we are not in a position to
express a view on the likelihood of any such contingency occurring. The information given is as of
the Latest Practicable Date unless otherwise stated, will not be updated after the date hereof, and
is subject to the cautionary statements in “Forward-looking statements”.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
We are subject to extensive and evolving regulatory requirements, non-compliance with which, or
changes in which, may materially and adversely affect our business and prospects.
Due to the complex nature of our business, we are subject to legal and regulatory requirements
of multiple industries in the PRC. These industries primarily include internet, healthcare,
pharmaceutical and out-of-hospital pharmaceutical circulation industries. Various regulatory
authorities of the PRC government are empowered to promulgate and implement regulations governing
broad aspects of the internet and healthcare industries. In respect of the healthcare industry, in
particular, any violation of the relevant laws, rules and regulations may result in harsh penalties and,
under certain circumstances, lead to criminal prosecution.
Meanwhile, the regulations of both the internet industry and healthcare industry are evolving,
and their interpretation and enforcement involve significant uncertainty. As a result, under certain
circumstances, it may be difficult to determine what actions or omissions would be deemed in violation
of applicable laws and regulations. These uncertainties entail risks that may materially and adversely
affect our business prospects. Due to the uncertainty and complexity of the regulatory environment, we
cannot assure you that future laws and regulations would not render our operations non-compliant or
that we would always be in full compliance with applicable laws and regulations. Compliance with
future laws and regulations may require us to change our business models and practises at an
undeterminable and possibly significant financial cost. These additional monetary expenditures may
increase future overhead, which may, in turn, have a material adverse effect on our business, financial
condition and results of operations.
Furthermore, the introduction of new services and products may require us to comply with
additional, yet undetermined, laws and regulations. Compliance may require obtaining appropriate
permits, licences 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.
The pharmaceutical circulation industry in China is subject to extensive government regulation
and supervision as well as monitoring by various governmental authorities. Certain other laws,
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RISK FACTORS
rules and regulations may affect the pricing, demand and distribution of pharmaceutical products, such
as those relating to procurement, prescription and dispensing of drugs by hospitals and other medical
institutions, retail pharmacy, government funding for private healthcare and medical services, and the
inclusion of products in the drugs catalogues for national basic medical insurance, on-the-job injury
insurance and maternity insurance promulgated by the Ministry of Human Resources and Social
Security of the People’s Republic of China, or the MOHRSS. Any unfavourable regulatory changes in
these industries may increase our compliance burden and materially and adversely affect our business,
profitability and prospects.
Any lack of requisite approvals, licences or permits applicable to our business, or any
non-compliance with relevant laws and regulations, may have a material and adverse effect on our
business, financial condition, results of operations and prospects.
Our business is subject to governmental supervision and regulation by various PRC
governmental authorities, including, but not limited to, the MOFCOM, the MIIT, the National Health
and Family Planning Commission of the People’s Republic of China, or the NHFPC, which was
restructured and integrated into the National Health Commission of the People’s Republic of China, or
the NHC, the NMPA, the SAIC, which was, together with the CFDA, integrated into the SAMR, the
CAC, and the corresponding local regulatory authorities. Such governmental authorities promulgate
and enforce laws and regulations that cover a variety of business activities that our operations concern,
such as provision of internet information, sales and online operation of pharmaceutical products, sales
of food, diagnostic testing services, online training to pharmaceutical professionals, online content
moderation assessment and filing, internet advertisement, payment and settlement, and equipment with
licensed pharmacists, among other things. These regulations in general regulate the entry into, the
permitted scope of, as well as approvals, licences and permits for, the relevant business activities.
In addition to obtaining necessary approvals, licences and permits for conducting our business,
we must comply with relevant laws and regulations. Our businesses, such as Online Marketplace and
Self-operation Business, are subject to various and complex laws and regulations, extensive
government regulations and supervision. For example, the E-Commerce Law of the PRC (
ʕശɛ͏
), which became effective on 1 January 2019, imposes a number of new
requirements and obligations on e-commerce platform operators like us, including to display the
noticeable labels regarding the self-operation products and take liabilities for such products and
services. In addition, in compliance with the Administrative Standard of Pharmaceutical Operating
Quality (
຾ᐄሯඎ၍ଣ஝ᇍ), promulgated on 13 July 2016 by the CFDA, we have hired full-
time licensed pharmacists for Self-operation Business to be responsible for the review of prescriptions
and guidance of the use of drugs. Besides, our ClouDiagnos business is subject to laws and regulations
in relation to medical examination. For example, if the test results of our ClouDiagnos are found to be
defect, we may be given a disciplinary warning and/or imposed a fine of no more than RMB1,000
according to the Interim Administrative Measures for Medical Examination Laboratories (
ᔼኪᏨ᜕
) issued by the Medical Treatment Team of the Joint Prevention and Control
Mechanism of the State Council for COVID-19 Epidemic on 1 August 2020, and the Regulations on
Medical Institutions. However, we may be in violation or non-compliance with such laws and
regulations and may not be fully informed of all and new requirements under relevant laws and
regulations in a timely manner, and even if we become aware of new requirements, due to uncertainties
in their interpretations and implementation, it will be difficult for us to determine what actions or
omissions would be deemed as violations of applicable laws and regulations. We may also not be able
to respond to evolving laws and regulations and take appropriate action in time to adjust our business
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RISK FACTORS
model. For example, we are subject to the rules, regulations and guidelines governing settlement and
payment services published by PBOC or other governmental authorities from time to time. We have
been cooperating with a commercial bank to provide payment settlement services for participants on
our platform since 2021 to professionally and efficiently handle the ever-increasing amount of fund
flow and to better meet the requirements of the relevant PRC laws and regulations. We had never been
subject to any administrative actions, sanctions or penalties from any PRC regulatory authorities before
these measures were taken and although we and the commercial bank we cooperate with proactively
take measures to satisfy the relevant PRC laws and regulations, there is no assurance that we can
timely react to the evolving requirements in this area and ensure full compliance at all times. Besides,
we are subject to scheduled or unscheduled periodic inspections conducted by relevant regulatory
authorities of our facilities to monitor our regulatory compliance. Although we did not encounter any
material issues in passing relevant inspections, we cannot assure you that we will be able to continue to
do so going forward.
In September 1984, the SCNPC promulgated the Drug Administration Law of the PRC (
ʕശ
), 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. According to the Drug Administration Law, no pharmaceutical
operation, including pharmaceutical wholesale and pharmaceutical retail business, is permitted without
obtaining the Pharmaceutical Operation Licence. The Implementation Rules for the Drug
Administration Law of the PRC (
ૢԷ), was promulgated by the
State Council in August 2002 and amended in 2016 and 2019, which emphasised the detailed
implementation rules of drugs administration. The SFDA promulgated the Measures for the
Administration of Pharmaceutical Operation Licence (
) in February 2004
as amended in 2017, which stipulate the procedures for applying the Pharmaceutical Operation Licence
and the requirements and qualifications for pharmaceutical wholesalers or pharmaceutical retailers
with respect to their management system, personnel, facilities and etc. The valid term of the
Pharmaceutical Operation Licence is five years and shall be renewed six months prior to its expiration
date. According to the Measures on Prescription Drugs and OTC Drugs Classification Management
(Trial) (
༊Б) and the Interim Provisions on the Circulation of
Prescription and OTC Drugs (), which were both promulgated
by the State Drug Administration, which was restructured and integrated into the SFDA, 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. OTC drugs, on the other hand, are further divided into Class A and Class B and they both
can be purchased and used without a prescription and promoted in public upon approval by the relevant
governmental authorities. 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 Licence. On 9 May 2022, the
NMPA published the draft Implementation Rules for the Drug Administration Law of the PRC (Draft
for Comments)
ᅄӋจԈᇃ for public comments.
Pursuant to such draft rules, an enterprise engaged in drug online sales activities shall be a legally
established drug marketing authorisation holder or a licensed drug distributor, and a third-party
platform operator shall not directly participate in online drug sales activities. Upon the strictest
interpretation of the draft rules, we might only be able to conduct Online Marketplace or Self-operation
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RISK FACTORS
Business, but not both, resulting in cessation of one of our businesses. However, we believe the worst-
case scenario is quite remote. As of the Latest Practicable Date, there have been no further
clarifications from the PRC governmental authorities as to the standards for determining or interpreting
the direct participation of third-party platforms in online drug sales activities. It is still uncertain when
the final version of such draft rules will be issued and take effect, how they will be enacted, interpreted
or implemented, and whether they will affect us at that time. If we fail to fully comply with the
requirements of the rules when it is implemented, our business operation, financial condition and
results of operation may be adversely affected. See “Summary—Recent developments—Recent
regulatory development—Pharmaceutic operation” for further details.
Besides, we provide online courses for the preparation of the pharmacist qualification
examinations, which may be deemed as online education activities. We might be required to obtain the
School Operation Licence (
፬ኪ஢̙ᗇ), subject to further official guidance and implementation rules
on the requirement for the School Operation Licence. As of the Latest Practicable Date, we had not
been subject to any regulatory notices, fines, penalties or enforcement actions in relation to the
potential licencing requirements for the School Operation Licence. Nevertheless, we cannot guarantee
that the regulatory authorities will not impose any penalties on us or forbid us from performing the
relevant business activities.
We collaborate with a third-party netcasting services provider to provide livestreaming service,
which mainly allows users to introduce sales policies of the medical products to other enterprise users.
On 15 November 2018, the CAC and the Ministry of Public Security published the Provisions on the
Security Assessment for Internet Information Services with Characteristics of Public Opinions or
Capable of Social Mobilisation (
), or
the Provisions on the Security Assessment for Internet Information Services, which took effect on
30 November 2018. According to the Provisions on the Security Assessment for Internet Information
Services, the provision of livestreaming services is considered as “Internet information services with
characteristics of public opinions or capable of social mobilisation” and the relevant service provider
shall carry out security assessment and submit the report through the “National Internet Security
Management Service Platform” to the local office of the CAC and public security organs to complete
the assessment. As of the date of this document, we have completed the assessment with applicable
PRC governmental authorities in accordance with the rules. If we fail to maintain the relevant
assessment or meet the relevant requirements of the PRC governmental authorities from time to time,
the livestreaming services may be ceased and this will affect our business operations and profitability.
Due to the uncertainties in the regulatory environment of the industries in which we operate,
there can be no assurance that we have obtained or applied for all the approvals, permits and licences
required for conducting our business and all activities in the PRC, or that we would be able to maintain
our existing approvals, permits and licences or obtain any new approvals, permits and licences if
required by any future laws or regulations. If we fail to obtain and maintain approvals, licences or
permits required for our business, or to comply with relevant laws and regulations, we could be subject
to liabilities, fines, administrative penalties and operational disruptions, or we could be required to
modify our business model, which could materially and adversely affect our business, financial
condition and results of operations.
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Our business, financial condition and results of operations may be materially and adversely affected
if we are unable to compete effectively in the PRC general healthcare and wellness market, and we
may fail to sufficiently and promptly respond to rapid changes in government regulations, treatment
of diseases and market demand.
The PRC general healthcare and wellness market is highly competitive. Our key competitors
include B2B platforms and traditional pharmaceutical distributors. These companies may have
substantially greater financial, technical, research and development, marketing, distribution and other
resources than we do. They may also have longer operating histories, a larger customer base or broader
and deeper market coverage. Furthermore, when we expand into other markets, we will face
competition from new competitors, domestic or foreign, who may also enter markets where we
currently operate.
In addition, many operators in the healthcare industry have consolidated in recent years to
create larger healthcare enterprises with greater bargaining power, which has resulted in greater pricing
pressures. If this consolidation trend continues, it could give the resulting enterprises even greater
bargaining power, which may lead to further competitive pressure. New partnerships and strategic
alliances in the healthcare industry also can alter market dynamics and adversely impact our businesses
and competitive positioning.
The technologies that we and our competitors employ are evolving rapidly, and new
developments frequently result in price competition, product obsolescence and altered market
landscape. Any significant increase in competition may have a material adverse effect on our revenue
and profitability as well as on our business and prospects. We cannot assure you that we will be able to
continually distinguish our products and services from our competitors’, preserve and improve our
relationships with various participants in the healthcare value chain, or increase or even maintain our
existing market share. We may lose market share, and our financial condition and results of operations
may deteriorate significantly if we fail to compete effectively.
We are operating with a limited operating history in an emerging and dynamic digital market of
outside-of-hospital pharmaceutical circulation services, and our historical results of operations and
financial performance are not indicative of future performance.
We operate in the emerging and dynamic digital market of outside-of-hospital pharmaceutical
circulation services in China. The industry is relatively new and it is uncertain whether such industry
would achieve and sustain high levels of demand and market acceptance. We have experienced
significant growth during the Track Record Period. Our revenues increased from RMB6,064.9 million
in 2020 by 66.4% to RMB10,093.5 million in 2021 and further increased by 41.4% from
RMB10,093.5 million in 2021 to RMB14,274.8 million in 2022. We recorded gross profit of
RMB608.8 million in 2020, RMB913.8 million in 2021 and RMB1,434.7 million in 2022.
Although our business has grown rapidly during the Track Record Period, due to our limited
operating history, our historical growth and past revenues may not be indicative of our future
performance. In addition, we cannot assure you that we can successfully continue to implement our
business model. As the market and our business develop, we may modify our products and services.
These changes may not achieve expected results and may have a material and adverse impact on our
results of operations and financial condition. We cannot assure you that we will be able to achieve
similar results or grow at the same rate as we had in the past or at all. Rather than relying on our
historical operating and financial results to evaluate us, you should consider our business prospects in
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light of the risks and difficulties we may encounter, including, among other things, our ability to attract
and retain industry participants, our ability to create value for industry participants and increase
monetization, our ability to navigate an evolving regulatory environment, our ability to provide high-
quality products and satisfactory services, build up our reputation and promote our brand, and our
ability to anticipate and adapt to changing market conditions. We may not be able to successfully
address these risks and difficulties, which could significantly harm our business, results of operations
and financial condition.
We have incurred operating losses in the past, and may not be able to achieve or maintain
profitability in the future.
During the Track Record Period, our revenues increased by 66.4% from RMB6,064.9 million
in 2020 to RMB10,093.5 million in 2021, and our revenues also increased by 41.4% from
RMB10,093.5 million in 2021 to RMB14,274.8 million in 2022. We recorded gross profit of
RMB608.8 million in 2020, RMB913.8 million in 2021 and RMB1,434.7 million in 2022. Our loss and
total comprehensive expense for the year was RMB571.7 million in 2020, RMB501.6 million in 2021
and RMB1,500.0 million in 2022. We expect our operating costs and expenses to increase in the future
in absolute terms as we expand our operations. We may also incur additional legal, accounting, and
other expenses as a public company. If our revenue does not grow at a greater rate than our expenses,
we will not be able to achieve and maintain profitability. We may incur significant losses in the future
for various reasons, many of which may be beyond our control. Additionally, we may encounter
unforeseen expenses, operating delays, or other unknown factors that may result in losses in the future.
If our cost of sales and expenses continuously exceed our revenue, our business may be materially and
adversely affected and we may not be able to achieve or maintain profitability.
We recorded accumulated losses and total deficits during the Track Record Period. We cannot
assure you that we will not record a total deficit in the future.
As of 31 December 2020, 2021, and 2022, we recorded accumulated losses of RMB2,471.1
million, RMB2,964.8 million and RMB4,449.8 million, respectively, and total deficits of RMB2,462.2
million, RMB2,908.5 million and RMB4,369.7 million, respectively.
However, we cannot assure you that we will not have a total deficit position in the future,
which may limit our working capital for the purpose of operations or capital for our expansion plans
and materially and adversely affect our business, financial condition and results of operations.
We recorded net cash used in operating activities during the Track Record Period. If we record net
cash outflow from operating activities in the future, our liquidity and financial condition may be
materially and adversely affected.
We recorded net cash used in operating activities of RMB124.4 million and RMB487.1 million
in 2020 and 2021, respectively. See “Financial Information—Liquidity and capital resources” for
further details.
In the event that we are unable to generate sufficient cash flow for our operations or otherwise
unable to obtain sufficient funds to finance our business, our liquidity and financial condition may be
materially and adversely affected. We can give no assurance that we will have sufficient cash from
other sources to fund our operations. If we resort to other financing activities to generate additional
cash, we will incur additional financing costs, and we cannot guarantee that we will be able to obtain
the financing on terms acceptable to us, or at all.
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We recorded net current liabilities as of 31 December 2020, 2021 and 2022, respectively, and may
record net current liabilities in the future.
Our net current liabilities increased by 15.8% from RMB3,155.0 million as of 31 December
2020 to RMB3,652.8 million as of 31 December 2021 and increased by 28.4% from RMB3,652.8
million as of 31 December 2021 to RMB4,690.7 million as of 31 December 2022. Such change was
primarily due to an increase in financial liabilities at fair value through profit and loss. See “Financial
information—Discussion of certain key items of consolidated statements of financial position” for
further details. 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, the payment of trade and other payables and repayment of borrowings as and when they
become due 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.
We may not be able to manage the growth of our business and our expansion plans and operations
or implement our business strategies on schedule or within our budget, or at all.
Our business has become increasingly complex in terms of both the type and scale of our
operations. Any expansion may increase the complexity of our operations and place a significant strain
on our managerial, technological, operational, financial and human resources. Leveraging on our
industry know-how, operational experience and technology capabilities, we launched Targeted Product
Launch Business, ClouDiagnos, wePharmacy, CloudComm and various other services, in addition to
our Online Marketplace and Self-operation Business. Our current and planned personnel, systems,
procedures and controls may not be adequate to support our future operations and new initiatives. We
cannot assure you that we will be able to effectively manage our growth or to implement all these
systems, procedures and control measures successfully. If we are not able to manage our growth
effectively, our business and prospects may be materially and adversely affected.
We are also continually executing a number of growth initiatives, strategies and operating plans
designed to enhance our business, including growing the scale, comprehensiveness and depth of our
pharmaceutical circulation business, and investing in research and development in building digitalised
infrastructure. The anticipated benefits from these efforts are based on assumptions that may prove to
be inaccurate. Moreover, we may not be able to successfully complete these growth initiatives,
strategies and operating plans and realise all of the benefits that we expect to achieve or it may be
costlier to do so than we anticipate. If, for any reason, the benefits we realise are less than our
estimates or the implementation of these growth initiatives, strategies and operating plans adversely
affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions
prove inaccurate, our business, financial condition and results of operations may be materially and
adversely affected.
In addition, we may pursue strategic partnerships, investments and acquisitions to explore
synergetic effects, and we may face similar risks and uncertainties as listed above. Failure to properly
address these risks and uncertainties may materially and adversely affect our ability to carry out
acquisitions and other expansion plans, integrate and consolidate newly acquired or newly formed
businesses, and realise all or any of the anticipated benefits of such expansion, which may have a
material adverse effect on our business, financial condition, results of operations and prospects.
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If we are unable to maintain our user base and attract new users, our business, financial condition
and results of operations may be materially and adversely affected.
Our future growth depends on our ability to maintain our existing user base and attract new
users, including upstream pharmaceutical companies and distributors and downstream pharmacies and
primary healthcare institutions, to our platform.
Given the easy accessibility, wide variety of SKUs, and reliable fulfilment capability, we have
attracted thousands of upstream pharmaceutical companies and distributors and downstream
pharmacies and primary healthcare institutions to our platform. In order to retain and expand our user
base, we also offer a set of comprehensive value added services such as diagnostic testing services,
pharmacist training and advanced unmanned pharmaceutical booth to industry participants.
However, we cannot assure you we will be successful in maintaining our existing user base and
attracting new users. Downstream pharmacies and primary healthcare institutions may still prefer
off-line face-to-face transactions and not be willing to procure products online for various reasons. As
a result, we may not be able to effectively maintain and grow our user base, which would result in a
lower volume of transactions on our platform and thus negatively and adversely affect our business,
financial condition and results of operations. Furthermore, public perception that pharmaceutical
products sold on our platform may be counterfeit or substandard, even if factually incorrect or based on
isolated incidents, could damage our reputation and have a negative impact on our ability to attract new
customers or retain existing customers. If we are unable to maintain or increase positive awareness of
our platform and our services, it may be difficult for us to maintain and grow our user base, and our
business, growth prospects, results of operations and financial condition may be materially and
adversely affected.
If we fail to provide satisfactory experience for industry participants and continue to increase our
user base, our business may be materially and adversely affected.
Our business is highly dependent on the receptiveness of industry participants, including both
upstream pharmaceutical companies and distributors and downstream pharmacies and primary
healthcare institutions, to our services and products as well as their willingness to use, and to increase
the frequency and extent of their utilisation of, our services. Their degree of receptiveness to our
services and products depends on a number of factors, including the efficacy of our offerings compared
to those of others, turnaround time, cost-effectiveness, convenience and marketing support. In addition,
negative publicity concerning our solution or the internet healthcare market as a whole could limit
market acceptance of our services. Meanwhile, there can be no assurance that our efforts and ability to
demonstrate the value of our services and the relative benefits of our services and products over those
of our competitors to the industry participants would be successful. If we fail to achieve an adequate
level of acceptance by the industry participants of our services and products, or if our solution does not
drive their engagement, then our business may not develop as expected, or at all, and our business,
financial condition or results of operations may be materially and adversely affected.
We also started to partner with local primary healthcare institutions to provide or facilitate the
end users with diagnostic testing services. Thus, the success of our business also hinges on our ability
to provide satisfactory customer experience to those end users, which depends on our ability to
maintain the quality of our services and products, to source services and products that are responsive to
customer demands. Our failure to provide a high-quality customer experience to the end users may
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adversely affect our local primary healthcare institutions’ receptiveness of, and willingness to utilise
our solution, which may damage our reputation and cause us to lose customers.
Our businesses rely on the buyers on our platform, which mainly consist of small and medium-sized
pharmacies and primary healthcare institutions. A material change in the market demand and
purchasing power of the end customers they serve may materially and adversely affect our business,
financial condition and results of operations.
We served around 354,000 downstream pharmacies and around 173,000 primary healthcare
institutions as of 31 December 2022. The level of market demand and purchasing power of the end
customers in China may affect the business of those downstream pharmacies and primary healthcare
institutions, which may in turn affect our own business, financial condition and results of operations. A
number of factors beyond our control may affect the level of market demand and purchasing power of
the end customers, including, among other things:
 general economic and industry conditions;
 disposable income of end customers;
 unemployment levels;
 minimum wages and personal debt levels of end customers;
 outbreak of viruses or widespread illness, including COVID-19 caused by the novel
coronavirus;
 negative reports and publicity about the healthcare and pharmaceutical industry;
 fluctuations in the financial markets; and
 natural disasters, war, terrorism and other hostilities.
The failure of the sellers to control the quality of products they sell on our Online Marketplace, or to
make timely and accurate delivery of their products sold on our Online Marketplace, may have a
material and adverse effect on our business, financial condition and results of operations.
Under our Online Marketplace, many of the sellers use third-party or their own facilities to
store their products and utilise their own or third-party delivery systems to deliver their products to the
downstream pharmacies and primary healthcare institutions, which makes it difficult for us to ensure
that the downstream pharmacies and primary healthcare institutions would get consistent quality
products and services for all products sold through our platform.
If any seller does not adequately control the quality of the products that it sells or provides on our
Online Marketplace, fails to timely deliver its products to buyers, delivers products that are faulty or
materially different from description, sells products that are counterfeit, sells products without licences or
permits as required by the relevant laws and regulations, sells products that infringe upon the intellectual
property rights of a third party, sells products that lead to serious physical harm or property damage, or
sells substandard products, the reputation of our Online Marketplace and our brand may be materially
and adversely affected. In addition, we could face claims and lawsuits for the losses, and may also be
subject to administrative inquiries, inspections, investigations and proceedings by relevant regulatory and
other governmental agencies for misconduct by any of the sellers. Actions brought against us may result
in settlements, injunctions, fines, penalties or other results adverse to us that could harm our business,
financial condition, results of operations and reputation. Even if we are successful in defending ourselves
against these actions, the costs of such defence may be significant to us.
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Our revenue from Online Marketplace might be adversely impacted if the commission level we
charge declines.
We earn revenues from Online Marketplace by charging the sellers on our Online Marketplace
a commission. Maintaining and growing the commission level depends on a number of factors,
including:
 our ability to deliver superior services;
 our ability to attract downstream pharmacies and primary healthcare institutions, and other
participants in the value chain;
 our ability to implement effective promotion and marketing strategies in response to
market competition;
 our ability to respond to changes in demand and preferences of our users in a timely
manner; and
 the reliability, security and functionality of our platform.
Any failure to adequately and promptly address any of these risks and uncertainties would
materially and adversely affect the commission level we charge, and our business and results of
operations in the end.
We source our pharmaceutical and healthcare products from pharmaceutical companies and
distributors under our Self-operation Business. Our collaboration with these pharmaceutical
companies and distributors are subject to a variety of risks.
Under Self-operation Business, we procure pharmaceutical and healthcare products from
pharmaceutical companies and distributors, and sell to pharmacies and primary healthcare institutions
on the platform. Our business, results of operations, financial condition and prospects could be
materially and adversely impacted if (i) we are unable to continue sourcing sufficient volumes of
quality pharmaceutical and healthcare products from our current suppliers or (ii) our suppliers fail to
supply sufficient quantities of pharmaceutical and healthcare products on time or supply products that
do not meet the relevant quality standards. If we cannot transfer such liabilities to relevant suppliers,
we may be subject to product liabilities and suffer from reputation damages. In addition, as the scale of
our business continues to grow, there can be no assurance that we will be able to expand our sourcing
network to include new suppliers on reasonable terms and prices.
We typically enter into supply framework agreement with our suppliers, some of which allows
pricing and other terms to be adjusted for changing market conditions. We cannot assure you that we
will be able to maintain our existing relationships with these suppliers and continue to be able to source
pharmaceutical and healthcare products in stable quantities and at reasonable prices or at all. A
termination or modification to any of these relationships could adversely affect our product supply and
have a material adverse effect on our businesses, operating results and financial condition. Moreover,
products sold by us may be manufactured with ingredients that are susceptible to supply shortages. In
some cases, we depend upon a single source of supply. Any such supply shortages or loss of any such
single source of supply could adversely affect our reputation, results of our operations and financial
condition.
Some of the pharmaceutical and healthcare products that we sell under our Self-operation
Business are manufactured in whole or in substantial part outside of China. In most cases, the products
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or merchandise are imported by our suppliers and sold to us. As a result, significant changes in tax or
trade policies, tariffs or trade relations between China and other countries or any changes in their local
policies could result in increases in our costs, and have a material adverse effect on our businesses,
operating results and cash flows.
Additionally, our suppliers are primarily Independent Third Parties that are subject to their own
operational and financial risks that are outside our control. If the supply of pharmaceutical and
healthcare products is interrupted for whatever reason, including, but not limited to, supply shortages,
quality issues, production disruption, or closing or bankruptcies of our suppliers, our business,
financial condition, results of operations and prospects may be materially and adversely affected.
Changes in business conditions, force majeure, governmental changes and other factors beyond our
control or that we do not presently anticipate could also affect our suppliers’ ability to deliver
pharmaceutical and healthcare products to us on a timely basis. Any of the foregoing could materially
and adversely affect our business, results of operations, financial condition and prospects.
Failure to maintain optimal inventory levels and assortment of products could increase our
operating costs or lead to unfulfilled orders, either of which could have a material and adverse effect
on our business, financial condition, results of operations and prospects.
We started the Self-operation Business in January 2019. Built on the buyer base brought by the
Online Marketplace and supported by digitalised management, our Self-operation Business covers the
entire supply chain from procurement, warehousing, processing orders, invoicing, payment collection,
to the delivery to downstream pharmacies and primary healthcare institutions. We need to maintain
optimal inventory levels in order to operate our Self-operation Business successfully and to meet the
demands of buyers. We are exposed to inventory risk as a result of rapid changes in product life cycles,
changing consumer preferences, uncertainty of product developments and launches, manufacturer back
orders and other vendor-related problems, as well as the volatile economic environment in China. We
cannot assure you that we will accurately predict these trends and events and avoid over-stocking or
under-stocking of products. Furthermore, demand for products could change significantly between the
time when the products are ordered and the time when they are ready for delivery. When we begin to
sell a new product, it is particularly difficult to forecast product demand accurately.
As our Self-operation Business carry a wide range of products and maintain significant
inventory levels for a substantial portion of our merchandise, we may be unable to sell such inventory
in sufficient quantities or during the relevant sales seasons. Inventory levels in excess of customer
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. For example, we had net write-downs of
our inventories to their net realisable value of RMB10.0 million and RMB1.6 million in 2020 and
2022, respectively.
Conversely, if we underestimate customer demand, or if our suppliers fail to provide products
to us in a timely manner, we may experience inventory shortages, which may, in turn, result in
unfulfilled orders, leading to a negative impact on our customer relationships. We cannot assure you
that we will be able to maintain proper inventory levels for our Self-operation Business, and any such
failure may have a material and adverse effect on our business, financial condition, results of
operations and prospects.
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Some pharmaceutical products offered by us through our Self-operation Business are subject to and
may continue to be subject to price restrictions, price competition and regulations in China, which
could adversely affect our profitability and results of operations.
Historically, pharmaceutical products sold in China were subject to government price controls
in the form of fixed retail prices or retail price ceilings and periodic downward adjustments imposed by
the NDRC, and other authorities. Pursuant to the Notice Regarding the Opinion on Facilitating the
Pharmaceutical Pricing Reform (
) jointly issued by the
NDRC, the National Health and Family Planning Commission of the People’s Republic of China and
five other PRC government agencies in May 2015, the price ceilings imposed by the PRC government
on pharmaceutical products other than narcotic and Class I psychotropic drugs were lifted on 1 June
2015, and these products would be subject to a more market-based pricing system adopted by medical
insurance bureaus and relevant authorities.
Even prior to the lifting of government price controls on pharmaceutical products, the prices of
prescription drugs in China had been determined by the centralised tender process and the prices of
OTC drugs in China had been determined by arm’s-length, commercial negotiation and market factors
such as brand recognition, market competition and consumer demand. There is no assurance that the
application of the more market-based pricing system will result in a higher product pricing compared
to the government-controlled pricing, as competition from other distributors, particularly those offering
the same products but with lower prices, may force us to lower our sales prices. Consequently, our
profitability may suffer, our inventory may be impaired, and our business, financial condition and
results of operations may also be materially and adversely affected.
In addition, the State Council and other relevant authorities issued a series of policies on
deepening the reform of medical and healthcare system since 2019. According to the Notice on
Issuance of the Pilot Plan regarding the Organization of Centralized Procurement and Use of Drugs
and the Implementation Opinions on Region Expansion of the Organization of Centralized
Procurement and Use of Drugs (
), the State
Council planned to organise centralised procurement and use of certain types of pilot drugs to lower
drug price, reduce the burden on patients of drug costs, and lower the transaction costs of
pharmaceutical enterprises. The Guidance on Improving “Internet +” Medical Service Price and
Medical Insurance Payment Policies (
ҁഛ“ʝᑌၣ+”ኬจԈ)
issued by the National Healthcare Security Administration proposed to improve project management,
optimise the pricing mechanism and clarify the payment policy of “Internet +” medical services. The
National Healthcare Security Administration promulgated the Notice on Accelerating the
Implementation of Drug Prices and Bid Invitation and Procurement Credit Assessment System (
׵
), which requires that the provincial medical security
bureaus and centralised procurement institutions shall establish the drug prices and bid invitation and
procurement credit assessment system before the end of 2020. The General Office of the State Council
promulgated the Opinions on Promoting the Systematism and Normalization of Centralized and
Target-quantity Procurement of Drug (
จԈ)i n
January 2021, to guide the regression of drug prices to reasonable level, reduce the burden of using
drugs and promote the healthy development of pharmaceutical industry. Although such policies may
lower the transaction costs of the pharmaceutical enterprises and increase the amount of drugs
purchased, they may also reduce the sales prices of the drugs and increase market competition within
the pharmaceutical industry. There are still uncertainties relating to the actual implementation of such
policies.
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We depend on third-party logistics and delivery companies to fulfil and deliver orders placed on our
platform. If these logistics and delivery companies fail to provide reliable delivery services, our
business and prospects, as well as our financial condition and results of operations, may be
materially and adversely affected.
We leverage our large-scale operations and reputation to enter into contractual arrangements
with a number of third-party delivery companies with good reputation to deliver our products to the
pharmacies and primary healthcare institutions on our platform. Interruptions to or failures in these
third parties’ delivery services could prevent the timely or proper delivery of our products to
pharmacies and primary healthcare institutions. These interruptions may be due to events that are
beyond our control or the control of these delivery companies, such as inclement weather, natural
disasters, transportation disruptions or labour unrest. We may not be able to find alternative delivery
companies to provide delivery services in a timely and reliable manner, or at all. If products are not
delivered in proper condition or on a timely basis, our business and reputation could suffer.
We cannot guarantee that our new business initiatives will be successfully implemented or generate
sustainable revenue or profit.
We continue to execute a number of new business initiatives, strategies and operating plans
designed to diversify our business and unleash the monetization potential of our leading position in
China’s digital market of outside-of-hospital pharmaceutical circulation services.
For example, we introduced ClouDiagnos in 2021 to offer one-stop testing solution to
downstream primary healthcare institutions. In 2021, we also introduced wePharmacy, the first 24-hour
access smart unmanned pharmaceutical booth that connects real-time pharmacist services in the
industry. We also plan to launch auxiliary medical consultation in the near future to help medical and
pharmaceutical professionals provide more informed advice to patients. These business initiatives are
new and evolving, some of which are still at the inception or trial stage and may prove unsuccessful. In
addition, we may not have sufficient experience in executing these new business initiatives effectively.
Our ability to predict the preferences and needs of industry participants and to customise our services
to them may be limited. Further, we may incur increasing research and development spending, sales
and marketing expenditures, personnel expenses and compliance costs as more efforts on product and
service development, brand and service promotion, general administration and legal compliance are
required for our businesses newly launched or to be launched, and no guarantee on the effectiveness of
our efforts can be given. As a result, we cannot assure you that any of these business initiatives will
achieve wide market acceptance, increase the penetration of our addressable market or generate
revenues or profit. If our efforts fail to enhance our monetization abilities, we may not be able to
maintain or increase our revenues or recover any associated costs, and our business and results of
operations may be materially and adversely impacted.
If we fail to adopt new technologies or adapt our platform to changing user requirements or
emerging industry standards, or if our efforts to invest in the development of new technologies are
unsuccessful or ineffective, our business may be materially and adversely affected.
To remain competitive, we must continue to enhance and improve the responsiveness,
functionality and features of our platform. The industries we operate in are characterised by rapid
technological evolution, changes in user requirements and preferences, frequent introductions of new
products and services embodying new technologies and the emergence of new industry standards and
practises, any of which could render our existing technologies and systems obsolete. Our success will
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depend, in part, on our ability to identify, develop, acquire or licence leading technologies useful in our
business, and respond to technological advances and emerging industry standards and practises, such
as mobile internet, in a cost-effective and timely way. In recent years, we invested in the development
of many new technologies and business initiatives, such as AI, big data and cloud. The development of
websites, mobile apps and other proprietary technologies entails significant technical and business
risks. We cannot assure you that we will be able to successfully develop or effectively use new
technologies, recoup the costs of developing new technologies or adapt the websites and mobile apps
that we operate, and our proprietary technologies and systems to meet user requirements or emerging
industry standards. If we are unable to develop technologies successfully or adapt in a cost-effective
and timely manner in response to changing market conditions or user requirements, whether for
technical, legal, financial or other reasons, our business, prospects, financial condition and results of
operations may be materially and adversely affected.
The proper functioning of our technology is essential to our business. Any failure to maintain the
satisfactory performance of our technologies and solutions could materially and adversely affect our
business and reputation.
Technology is our foundation and a key component to our success. We built our core
competency on big data, cloud-based solutions and smart supply chain. However, technology
development 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 information
infrastructure and other aspects of our business where our technologies are applied. If our solution does
not function reliably in terms of performance, we may lose existing, or fail to attract new participants
to our platform, which may damage our reputation and adversely affect our business.
Moreover, data services, supply chain management systems, and other proprietary technologies
we provide to the industry participants are complex and those we offer may develop or contain
undetected defects or errors. Material performance problems, defects or errors in our existing or new
software and applications and services may arise in the future and may result from interface issues
between our systems and data that we did not develop and the function of which is 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 diversion of development resources, harm to our reputation and increased service
and maintenance costs. Defects or errors may discourage existing or potential customers from utilising
our 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 the
pharmacies and primary healthcare institutions, the pharmaceutical companies and other distributors
who rely on our self-developed technologies in the operation of their businesses, which may have a
material adverse effect on our reputation, business, results of operations and prospects.
Our results of operations could be negatively affected by fair value changes of financial assets
measured at fair value through profit or loss.
As of 31 December 2020, 2021 and 2022, we recorded financial assets at FVTPL of RMB344.6
million, RMB512.9 million and RMB711.1 million, respectively. Our financial assets at FVTPL
represented structured deposits, which were non-principal protected deposits placed in banks in China.
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The return of the structured deposits was determined by reference to the return of their underlying
investments. The structured deposit as of 31 December 2020, 2021 and 2022 have no fixed contractual
period, they can be redeemed any time at our discretion. The fair value of these financial products are
measured by our management regularly and we record profit or loss to reflect the fair value changes.
See notes 21 and 34 to Accountants’ Report in Appendix I to this document for more detailed
information. We recorded investment income from financial assets at FVTPL of RMB11.4 million,
RMB17.9 million and RMB20.0 million in 2020, 2021 and 2022, respectively. We expect to continue
to record such investment income and fair value changes, which would affect our results of operations
in the future.
Our results of operations, financial condition and prospects have been adversely affected by fair
value changes of financial liabilities at fair value through profit or loss, in particular, by fair value
changes in our preferred shares. Changes in unobservable inputs and other estimates and
judgements could also materially affect the fair value of our shares with preferred rights, which in
turn may adversely affect our results of operations.
We issued a series of preferred shares prior to and during the Track Record Period. We
recorded these financial instruments as financial liabilities at FVTPL for which no quoted prices in an
active market exist. As of 31 December 2020, 2021, and 2022 our preferred shares had a fair value of
RMB2,931.0 million, RMB4,222.4 million and RMB5,872.0 million, respectively. For further
information regarding the shares with preferred rights, see Note 29 to the Accountants’ Report in
Appendix I to this document. During the Track Record Period, our fair value change on financial
liabilities at FVTPL was RMB294.3 million in 2020, RMB128.7 million in 2021, and RMB1,299.5
million in 2022.
The fair value of the financial instruments is established by using valuation techniques, which
include discounted cash flow and back-solve method involving various parameters and inputs.
Valuation techniques are certified by an independent qualified professional valuer before being
implemented for valuation and are calibrated to ensure that outputs reflect market conditions.
However, it should be noted that some inputs require management estimates and are inherently
uncertain. Management estimates and assumptions are reviewed periodically and are adjusted if
necessary. Changes in these unobservable inputs and other estimates and judgements could materially
affect the fair value of our shares with preferred rights, which in turn may adversely affect our results
of operations. We expect continued fluctuation of the fair value of our preferred shares till the Global
Offering, upon which all the preferred shares will automatically convert into ordinary Shares.
We have a balance of intangible assets and we may incur impairment losses which could materially
impact our financial position.
Our intangible assets primarily consist of licences and franchises, business relationship, and
office software. Our intangible assets amounted to RMB62.7 million, RMB112.6 million and
RMB98.9 million as of 31 December 2020, 2021 and 2022, respectively. At the end of each reporting
period, we review the carrying amount of intangible assets to determine whether there is any indication
that the assets have suffered an impairment loss. In determine whether an asset is impaired, our
management has to exercise judgement and make assumptions. Change of the underlying assumptions
and key inputs could materially affect the estimation. While we did not recognise substantial
impairment loss for intangible assets during the Track Record Period, we cannot assure you that there
will be no such charges in the future. In particular, the failure to generate financial results
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commensurate with our intangible assets estimates may adversely affect the recoverability of such
intangible assets, and in turn result in impairment losses. As we carry a balance of intangible assets,
any significant impairment losses charged against our intangible assets could have a material adverse
effect on our financial position.
If we determine our goodwill to be impaired, our results of operations and financial condition would
be adversely affected.
We recorded goodwill of RMB9.3 million in aggregate in connection with the acquisition of
Guangdong Dihao Pharmaceutical Co., Ltd. and Guangdong Dongjian Pharmaceutical Co., Ltd. The
value of goodwill is based on forecasts, which are in turn based on a number of assumptions. If any of
the assumptions does not materialise, or if the performance of our business is not consistent with such
assumptions, we may be required to have a significant write-off of our goodwill and record an
impairment loss, which could in turn adversely affect our results of operations. We will determine
whether goodwill is impaired at least on an annual basis. However, there are inherent uncertainties
relating to these factors and to our management’s judgement in applying these factors to the
impairment assessment. We could be required to evaluate the impairment prior to the annual
assessment if there are any impairment indicators, including disruptions to business operations and
unexpected significant declines in operating results or a decline in our market capitalisation. While we
did not recognise impairment loss for goodwill during the Track Record Period, we cannot assure you
that there will be no such charges in the future. In addition, our ability to generate cash flow from our
acquired assets will depend on our ability to realise the intended objectives, potential benefits or other
revenue-enhancing opportunities that motivated our acquisitions, as well as our ability to effectively
integrate their business operations with our own. In the event that we are unsuccessful in achieving the
aforementioned, we may have to record impairment losses to our goodwill, which may in turn result in
an adverse effect on our financial position.
We are exposed to credit risk on our trade and other receivables. If we fail to collect trade and other
receivables from the sellers on our Online Marketplace and our customers in a timely manner, our
business operations and financial condition may be materially and adversely affected.
We generally require sellers on our Online Marketplace to make payments to us on or before
15th day of each month for commissions arising from transactions made in the immediately preceding
month. On average, the credit term we grant to sellers is approximately 30 days. With respect to offline
allocation channels business, we generally allow a credit term of 30 to 90 days. Therefore, our
financial position and profitability are dependent on the creditworthiness of the sellers on our Online
Marketplace and our customers. We recorded trade and other receivables of RMB528.4 million,
RMB375.1 million and RMB503.5 million as of 31 December 2020, 2021 and 2022, respectively. In
2020, 2021 and 2022, we recognised credit losses allowance of RMB3.2 million, RMB1.8 million and
RMB2.3 million for trade receivables, respectively. In 2020, 2021 and 2022, our trade receivables
turnover days were 7.0 days, 3.9 days and 3.1 days, respectively. However, we cannot assure you that
we are or will be able to accurately assess the creditworthiness of each of the sellers and customers
before entering into agreements or extending credit terms, neither can we guarantee that each of these
sellers and customers will be able to strictly follow and enforce the payment schedules provided in the
agreements. Any inability of the sellers on our Online Marketplace and our customers to pay us in a
timely manner may result in bad debt and adversely affect our liquidity and cash flows, which in turn
has a material adverse effect on our business operations and financial condition.
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We may not be able to fulfil our obligations in respect of contract liabilities which may in turn
impact our results of operation, liquidity and financial position.
We generally require advance payments from certain of our customers before delivery of goods
or rendering of services. This will give rise to a contract liability at the beginning of a contract, until
the revenue recognised on the relevant contract exceeds the amount received. Our contract liabilities
amounted to RMB40.0 million, RMB9.4 million and RMB24.4 million as of 31 December 2020, 2021,
and 2022, respectively. If we fail to fulfil our obligations or if our customers dispute the products or
services we provided, we may not be able to reclassify the full amount of contract liabilities as
revenue, and we will have to refund all or a portion of the payments made by our customers, which
will adversely affect our results of operations, liquidity and financial position.
We may be subject to allegations, lawsuits and administrative penalties relating to the sale,
distribution, marketing and advertising of counterfeit or substandard products under our Self-
operation Business, which may damage our brand and reputation and have a material adverse effect
on our business, financial condition, results of operations and business prospects.
Certain products distributed or sold in the pharmaceutical markets in China may be
manufactured without proper licences or approvals and/or fraudulently mislabelled with respect to their
content and/or manufacturer. These products are generally referred to as counterfeit or substandard
pharmaceutical products. The current counterfeit and substandard product regulation control and
enforcement system in China is not sufficiently mature to completely eliminate the manufacturing and
sales of counterfeit pharmaceutical products. Counterfeit and substandard pharmaceutical products are
generally sold at lower prices than authentic pharmaceutical products, and, in some cases, are very
similar in appearance to the authentic pharmaceutical products. Therefore, the presence of counterfeit
products of pharmaceuticals distributed or sold by us can quickly erode our sales volumes and revenue
for the relevant products.
Furthermore, counterfeit or substandard products may or may not have the same chemical
composition as the authentic counterparts, which may make them less effective than the authentic ones,
entirely ineffective, or more likely to cause severe adverse side effects. We may not be able to identify
those counterfeit or substandard products we source from our suppliers. Any unintentional and
unknowing sales of counterfeit or substandard products under our Self-operation Business, or sales of
counterfeit and substandard products by third parties illegally using our brand names, may subject us to
negative publicity, fines and other administrative penalties, or even result in litigation relating to the
sale, marketing and advertising of those products. We were subject to litigation and administrative
penalties in relation to sales of counterfeit or substandard products during the Track Record Period. We
cannot assure you that we will be able to timely and accurately identify counterfeit or substandard
products we source from our suppliers in the future, nor can we assure you that we will not be subject
to litigation or administrative penalties in relation to sales of counterfeit or substandard products in the
future. Moreover, the continuing presence of counterfeit and substandard products may reinforce the
negative image of distributors and retail pharmacies among consumers in general, and may severely
harm the reputation and brand names of pharmaceutical companies, including ourselves.
Our delivery, return and exchange policies may materially and adversely affect our results of
operations.
We have adopted shipping policies that do not necessarily pass the full cost of shipping on to
our buyers. We have also adopted policies that permit the return and exchange of our products within
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thirty days 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. 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 buyers may be dissatisfied, which may result in loss of existing buyers or failure to
acquire new buyers at a desirable pace, which may materially and adversely affect our results of
operations.
If we are subject to higher product return rates, our business, financial condition and results of
operations may be materially and adversely affected.
We have established a thirty-day product return policy in certain circumstances for specified
reasons. Although a majority of our products may not be returned or exchanged under the
Administrative Standard of Pharmaceutical Operating Quality (
຾ᐄሯඎ၍ଣ஝ᇍ),
prohibiting returns and exchanges of pharmaceutical products except for quality reasons, if our product
return rates increase or are higher than expected, our revenues and costs can be negatively impacted.
Furthermore, as we cannot 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 fulfilment cost, 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.
Our business generates and processes a large amount of data, and the improper use or disclosure of
such data could harm our reputation and have a material adverse effect on our business and
prospects.
Our business generates and processes a large amount of transaction and behavioural data,
including medical records and other personal information. We face risks inherent in handling large
volumes of data and in securing and protecting such data. In particular, we face a number of data-
related challenges related to our business operations, including:
 protecting the data in and hosted on our system, including against attacks on our system by
external parties or fraudulent behaviour by our employees;
 addressing concerns related to privacy and sharing, safety, security and other factors;
 complying with applicable laws and regulations relating to the collection, use, disclosure
or security of personal information, including any requests from regulatory and
governmental authorities relating to such data; and
 complying with applicable laws and regulations relating to the collection, use, disclosure
or security of Important Data if the applicable laws and regulations change to classify the
large amount of data that our business generates and processes as Important Data.
Therefore, we are subject to cybersecurity and data privacy laws and regulations in China and
other applicable jurisdictions, including, without limitation, the Cybersecurity Law of the PRC (
ʕ
), the Data Security Law of the PRC (), and
the Personal Information Protection Law of the PRC (), pursuant to
which we are required to maintain the confidentiality, integrity, and availability of the information of
our users and customers, which is also essential to maintaining their confidence in our services.
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However, the interpretation and implementation of such laws and regulations in China and elsewhere
are often subject to uncertainty. Concerns about the collection, use, disclosure, or security of personal
information or other privacy-related matters, with or without merit, or failure to comply with the
relevant laws and regulations could subject us to penalties, damage our reputation and brand, cause us
to lose users, or result in increased operating cost and expenses, any of which could materially and
adversely affect our business and results of operations.
In November 2016, the SCNPC promulgated the Cybersecurity Law of the PRC, which took
effect on 1 June 2017, and provides that network operators must meet their cybersecurity obligations
and must take technical measures and other necessary measures to protect the safety and stability of
their networks. The Cybersecurity Law is subject to interpretation by the PRC governmental
authorities. Although we only gain access to user information that is necessary for, and relevant to, the
services provided, the data we obtain and use may include information that is deemed as “personal
information” under the Cybersecurity Law and related data privacy laws and regulations. See
“Regulations—PRC Regulations—Regulations relating to cybersecurity and information security” and
“Regulations—PRC Regulations—Regulations relating to personal information protection” for further
details.
In addition, on 10 June 2021, the SCNPC promulgated the Data Security Law of the PRC,
which took effect on 1 September 2021. The Data Security Law provides for a data security review
procedure for the data activities that affect or may affect national security. It also imposes data security
obligations on persons and entities conducting data processing activities and requires data processors to
take necessary measures to protect data security. The Data Security Law also requires protection of
Important Data, but the scope of Important Data is still under development and may be further clarified
by various PRC governmental authorities by way of issuing ministry-level measures, regulatory
guidelines and/or national standards. As the scope of Important Data may be quite broad and
non-exhaustive, there can be no assurance that we do not process any Important Data in future as and
when the applicable laws and regulations change. If we were found by relevant PRC governmental
authorities as a handler of Important Data, complying with evolving laws and regulations could cause
us to incur substantial costs, or require us to change our business practises or affect our growth
momentum.
On 20 August 2021, the SCNPC promulgated the Personal Information Protection Law of the
PRC, which took effect on 1 November 2021. Although it is our policy to only access user information
that is necessary for, and relevant to, the services provided and we update our privacy policies and
practises in accordance with regulatory developments, we may be required to make further adjustments
to our data practises as the Personal Information Protection Law is newly promulgated and the
interpretation of many of its specific requirements remain to be clarified by the governmental
authorities or is otherwise subject to uncertainty.
On 28 December 2021, the CAC and 12 other PRC governmental authorities published an
amendment of the Measures for Cybersecurity Review (
)previously released in
2020, or the Measures for Cybersecurity Review 2022, which took effect on 15 February 2022. The
Measures for Cybersecurity Review 2022 provides that the relevant operators shall apply with the
Cybersecurity Review Office of the CAC for a cybersecurity review under the following
circumstances: (i) internet platform operators holding over one million individuals’ personal
information aiming for foreign listing; (ii) operators of “critical information infrastructure” purchasing
internet products and services that affects or may affect national security; and (iii) internet platform
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operators carrying out data processing that affects or may affect national security. However, there is
not any further explanation or interpretation for “foreign listing” or “affect or may affect national
security” under the Measures for Cybersecurity Review 2022. We understand that our proposed listing
in Hong Kong is not likely to fall into the scope of “foreign listing”. However, in light of the Measures
for Cybersecurity Review 2022, there can be no assurance that our data processing activities will not
be found by relevant PRC governmental authorities as “affecting national security” and the PRC
governmental authorities may have wide discretion in the interpretation and enforcement of the laws
and regulations. Furthermore, on 30 July 2021, the State Council published the Regulations on Security
Protection of Critical Information Infrastructure (
ᚐૢԷ), which took
effect on 1 September 2021. According to the Regulations on Security and Protection of Critical
Information Infrastructure, the competent PRC governmental authorities of important industries and
sectors are responsible for identifying critical information infrastructures in their own industries and
sectors based on the identification rules and informing the operator of the critical information
infrastructure if such infrastructure is identified and designated as critical information infrastructure in
a timely manner. However, as of the Latest Practicable Date, we have not yet been informed,
approached or designated as a critical information infrastructure operator under the applicable PRC
laws and regulations by any PRC governmental authorities. We have not received any inquiry, notice,
warning or sanction regarding cybersecurity from any PRC governmental authorities nor been involved
in any investigations on cybersecurity review made by any PRC governmental authorities.
We have implemented comprehensive policies and measures to ensure users’ data privacy and
security and to comply with applicable cybersecurity and data privacy laws and regulations. See
“Business—Risk management and internal control—Information system risk management” for more
details. While we take measures to comply with all applicable cybersecurity and data privacy laws and
regulations, we cannot assure the effectiveness of the measures undertaken by us and our business
partners. The activities of third parties, such as suppliers, brands, and other business partners are
beyond our control. If any of these third parties violate the Cybersecurity Law, the Data Security Law,
the Personal Information Protection Law and related laws and regulations, or fail to fully comply with
the service agreements with us, or if any of our employees fails to comply with our control measures
and misuses the information, we may be subject to regulatory actions, disputes and litigations. Any
actual or perceived failure to comply with all applicable cybersecurity and data privacy laws and
regulations, or any actual or perceived failure of our business partners to do so, or any actual or
perceived failure of our employees to comply with our internal control measures, may result in legal
proceedings or regulatory actions against us, and could damage our reputation, discourage current and
potential users and business partners from using our services and subject us to claims, fines, and
damages, which could materially and adversely affect our business and results of operations.
New laws or regulations concerning cybersecurity and data privacy, or the interpretation and
implementation of existing cybersecurity and data privacy laws or regulations may be announced,
published for public consultations, issued, or promulgated from time to time. For example, on
14 November 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 provide that data processors
conducting the following activities must apply for cybersecurity review: (i) merger, reorganisation, 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
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(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”. The period for
which the CAC solicited comments on this draft ended on 13 December 2021, but there is no timetable
as to when these measures will be enacted. As such, 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”.
The Draft Internet Data Security Regulations if enacted as proposed, may materially impact our capital
raising activities. If our proposed Listing in Hong Kong is considered as a listing that affects or may
affect national security, we may be required to go through cybersecurity review, but there can be no
assurance that we are able to obtain approval from the PRC governmental authorities in a timely
manner, or at all. Any failure to obtain such approval or clearance from the PRC governmental
authorities could materially constrain our liquidity and have a material adverse impact on our business
operations and financial results, especially if we need additional capital or financing. Having said that,
as the Draft Internet Data Security Regulations have not yet come into force as of the Latest
Practicable Date, the requirements under the Draft Internet Data Security Regulations will not have
impact on our business operations and our proposed listing in Hong Kong.
The interpretation and application of these PRC cybersecurity and data privacy laws and
regulations are still evolving. It hence remains uncertain whether the future regulatory changes would
impose additional compliance requirements on companies like us. We cannot predict the impact of the
Measures for Cybersecurity Review 2022 or the Draft Internet Data Security Regulations if any, at this
stage, and we will closely monitor and follow any development in the promulgation process. It is
uncertain when the final measures will be issued and take effect, how they will be enacted, interpreted,
or implemented, and whether and how they will affect us. If the Measures for Cybersecurity Review
2022 or the Draft Internet Data Security Regulations mandates clearance of cybersecurity review and
other specific actions on companies like us, we face uncertainties as to whether such clearance can be
timely obtained, or at all. If we are not able to comply with the cybersecurity and data privacy
requirements in a timely manner, or at all, we may be subject to government enforcement actions and
investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app
from the relevant application stores, among other penalties, which could materially and adversely
affect our business and results of operations. See “Regulations—PRC Regulations—Regulations
relating to cybersecurity and information security” for further details.
Complying with evolving laws and regulations could cause us to incur substantial costs or
require us to change our business practises in a manner that can materially increase our operating costs
and expenses or affect our growth momentum, which could materially and adversely affect our
business and results of operations.
In the opinion of our PRC Legal Adviser, we have complied with all applicable cybersecurity
and data privacy laws and regulations of the PRC in all material respects during the Track Record
Period and up to the Latest Practicable Date.
We may become subject to product liability and medical liability claims, which could cause us to
incur significant expenses and be liable for significant damages if not covered by insurance.
We are exposed to risks inherent in marketing, distributing and selling pharmaceutical and
other health and wellness products in China. Claims, customer complaints or administrative penalties
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may arise if any of the products we market and distribute are deemed or proven to be unsafe,
ineffective or defective, or they are found to contain illicit substances. We may also be subject to
allegations of having engaged in practises such as distribution of counterfeit and substandard
medicines, 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 distribute 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 licences. In addition, we may be required to suspend sales or cease sales
of the relevant products.
Any claims made against us that are not fully covered by insurance could be costly to defend
against, result in substantial damage awards against us and divert the attention of our management
from our operations, which could have a material adverse effect on our business, financial condition,
results of operations and reputation.
Failure to renew our current leases or locate desirable alternatives for our facilities could materially
and adversely affect our business.
We lease properties for our offices and warehouses. We may not be able to successfully extend
or renew such leases upon expiration of the current term on commercially reasonable terms or at all,
and may therefore be forced to relocate our affected operations. This could disrupt our operations and
result in significant relocation expenses, which could materially and adversely affect our business,
financial condition and results of operations. In addition, we compete with other businesses for
premises at certain locations or of desirable sizes. As a result, even though we could extend or renew
our leases, rental payments may significantly increase as a result of the high demand for the leased
properties. In addition, we may not be able to locate desirable alternative sites for our facilities as our
business continues to grow and failure in relocating our affected operations could materially and
adversely affect our business and operations.
Our use of some leased properties could be challenged by third parties or governmental authorities,
which may cause interruptions to our business operations.
We rely on our warehouses for the continuing operation of our business. Natural disasters or
other unanticipated catastrophic events, including power interruptions, water shortage, storms, fires,
earthquakes, terrorist attacks and wars, as well as changes in governmental planning for the land
underlying these warehouses, could significantly impair our ability to operate our business and destroy
any inventory located in these warehouses. In addition, we may not be able to replace these
warehouses and equipment in a timely manner, should any of the foregoing occur.
Meanwhile, some of the lessors of our leased properties have not provided us with their
property ownership certificates or relevant authorisation documents proving their rights to lease those
properties to us. If our lessors are not the owners of the properties and they have not obtained consents
from the owners or their lessors, our leases could be invalidated. If this occurs, we may have to
renegotiate the leases with the owners or the parties who have the right to lease the properties, and the
terms of the new leases may be less favourable to us. In addition, a substantial portion of our leasehold
interests in leased properties have not been registered with the relevant PRC governmental authorities
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as required by PRC law, which may expose us to potential fines if we fail to remediate after receiving
any notice from the relevant PRC governmental authorities. The penalty ranges from RMB1,000 to
RMB10,000 for each unregistered lease, at the discretion of the relevant authority. Also, in the event
that the actual use of our leased properties is inconsistent with the use registered on the corresponding
property ownership certificate and/or land use right certificate, the competent authorities may require
the lessors to return the land and impose fines on the lessors, or confiscate the proceeds from the
leasing of the properties and imposed fines on the lessor if such properties are leased without their
consent or handing in such income, as applicable. Therefore, the relevant lease agreements may be
deemed to be in breach of the law and therefore be void. In addition, regulatory and administrative
measures on fire safety in China may vary among different regions, and some internal regulatory
guidance may not be published timely. During the Track Record Period and up to the Latest
Practicable Date, none of the title defects of the leased properties were material to our Company and
there were no material safety issues in relation to such properties.
Furthermore, our Company completed or underwent a series of construction projects regarding
our leased properties in connection with our business operations during the Track Record Period.
During the Track Record Period and as of the Latest Practicable Date, we have not obtained all of the
relevant requisite construction permits or completed relevant construction formalities in connection
with such construction projects as required by applicable PRC laws and regulations. As a result,
according to applicable PRC laws and regulations, we may be ordered to rectify within a specified
period, and may be subject to fines and other administrative penalties imposed by relevant
governmental authorities (including demolishing the construction projects), which may have a negative
impact on the use of leased properties and our business operations. In the event that our use of
properties is successfully challenged by the regulators due to any of the aforementioned
non-compliance in relation to the lack of the requisite construction permits or the completion of the
relevant construction formalities in respect of our construction projects, we may be forced to relocate
from the affected operations.
We are not aware of any material claims or actions being contemplated or initiated by
governmental authorities, property owners or any other third parties with respect to our leasehold
interests in or use of such properties or procedures of construction projects. However, we cannot assure
you that our use of such leased properties will not be challenged in the future. In the event that our use
of properties is successfully challenged, we may be subject to fines and forced to relocate the affected
operations. In addition, we may become involved in disputes with the property owners or third parties
who otherwise have rights to or interests in our leased properties. We cannot assure you that we will be
able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we
will not be subject to material liability resulting from third parties’ challenges on our use of such
properties. As a result, our business, financial condition and results of operations may be materially
and adversely affected.
Security breaches and attacks against our systems and network, and any potential resultant breach
or failure to otherwise protect confidential and proprietary information, could damage our
reputation and adversely affect our business, financial condition and results of operations.
We rely heavily on technology, particularly the internet, to provide high-quality online services.
However, our technology operations are vulnerable to disruptions arising from human error, natural
disasters, power failure, computer viruses, spam attacks, unauthorised access and other similar events.
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Disruptions to, or instability of, our technology or external technology that allows the industry
participants to use our online services and products could materially harm our business and reputation.
Although we have employed significant resources to develop security measures against
breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our
systems, including distributed denial-of-service attacks, viruses, malicious software, break-ins,
phishing attacks, social engineering, misconduct or sabotage by our employees, security breaches or
other attacks and similar disruptions that may jeopardise the security of information stored in and
transmitted by our systems or that we otherwise maintain. Breaches of our cybersecurity measures
could result in unauthorised access to our systems, misappropriation of information or data, deletion or
modification of user information, or a denial-of-service or other interruption to our business operations.
As techniques used to obtain unauthorised access to or sabotage systems change frequently and may
not be known until launched against us, we may be unable to anticipate, or implement adequate
measures to protect against, these attacks. There can be no assurance that we would not in the future be
subject to such attacks that may result in material damages or remediation costs. If we are unable to
avert these attacks and security breaches, we could be subject to significant legal and financial liability,
our reputation would be harmed and we could sustain substantial revenue loss from lost sales and
customer dissatisfaction.
In addition, we may not have the resources or technical sophistication to anticipate or prevent
rapidly evolving types of cyber-attacks. Cyber-attacks may target us, our users or other participants of
our ecosystem, or the information infrastructure on which we depend. Actual or anticipated attacks and
risks may cause us to incur significantly higher costs, including costs to deploy additional personnel
and network protection technologies, train employees, and engage third-party experts and consultants.
Cybersecurity breaches may harm our reputation and business, and materially and adversely affect our
financial condition and results of operations.
We may not be able to conduct our marketing activities effectively, properly, or at reasonable costs,
and we are subject to limitations in promoting our services and products, which will have an impact
on our business operations.
We invest significant resources in a variety of different marketing and brand promotion efforts
designed to enhance our brand recognition and increase sales of our services and products. However,
our brand promotion and marketing activities may not be well received and may not result in the levels
of sales that we anticipate. Meanwhile, marketing approaches and tools in the PRC internet healthcare
market are continually evolving, which may further require us to enhance our marketing approaches
and experiment with new marketing methods to keep pace with industry developments and customer
preferences. Failure to refine our existing marketing approaches or to introduce new marketing
approaches in a cost-effective manner could reduce our market share and materially and adversely
affect our financial condition, results of operations and profitability. In addition, we are subject to
certain limitations in promoting services and products.
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 governmental authorities. We are prohibited from publishing
advertisements of prescription drugs on our website and must ensure that any advertisement of medical
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treatment, drugs or medical devices does not include any assertion or guarantee as to the function and
safety or any statement of curative rate and effectiveness of such medical treatment, drugs or medical
devices. Any violation of advertisement-related laws and regulations may subject us to fine, or even
suspension of our business or revocation of our business licence. See “Regulations—PRC
Regulations—Regulations relating to internet advertising” for further details. Although we have
implemented internal procedures to examine the content of advertisements displayed on our website,
we cannot assure you that all such content meets the requirements under PRC advertising-related laws
and regulations at all times.
There can be no assurance that our existing practises of monitoring our information
dissemination process and publication would continue to be effective and would comply fully with
laws and regulations. Should there be any change in the relevant rules and regulations, or change of
interpretation thereof, we may be regarded as breaching the relevant rules and regulations and may be
subject to regulatory penalties or disciplinary actions, which may materially and adversely affect our
business and reputation.
We may be held liable for information or content displayed on, retrieved from or linked to our
platform or created by us, which may adversely affect our business and results of operations.
China has enacted laws and regulations governing internet access and the distribution of
products, services, news, advertisements, information, audio-video programmes and other content
through the internet. Even though we implement measures to review materials in light of the relevant
laws and regulations as well as our internal guidelines before they are published on our platform, such
measures may not be effective and may still subject us to potential liabilities. Our business, financial
condition and results of operations may suffer as a result. In addition, the internet content providers and
internet publishers are prohibited from posting or displaying over the internet any content that, among
other things, violates PRC laws and regulations, impairs the national dignity of China or the public
interest, or is obscene, superstitious, frightening, gruesome, offensive, fraudulent or defamatory. In
November 2016, the SCNPC promulgated the Cybersecurity Law of the PRC, which came into effect
on 1 June 2017, to protect cyberspace security and order. The Cybersecurity Law tightens control of
cyber security and sets forth various security protection obligations for network operators. If any of our
internet information were deemed by the PRC government to violate any content restrictions, we
would not be able to continue to display such content and could become subject to penalties, including
confiscation of income, fines, suspension of business and revocation of required licences, which could
materially and adversely affect our business, financial condition and results of operations. We may also
be subject to potential liability for any unlawful actions by users of the websites we operate or for
content we distribute that is deemed inappropriate. It may be difficult to determine the type of content
that may result in liability to us, and if we are found to be liable, we may be prevented from operating
these websites in China.
We may not be able to prevent others from unauthorised use of our intellectual property, which
could harm our business and competitive position.
We regard our trademarks, copyrights, patents, domain names, know-how, proprietary
technologies, and similar intellectual property (which we have ownership or legal rights to use) as
critical to our success, and we rely on a combination of intellectual property laws and contractual
arrangements, including confidentiality, invention assignment and non-compete arrangements with our
employees and others, to protect our proprietary rights. Despite these measures, any of our intellectual
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property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual
property may not be sufficient to provide us with competitive advantages. In addition, there can be no
assurance that our patent applications will be approved, that any issued patents will adequately protect
our intellectual property, or that such patents will not be challenged by third parties or found by a
judicial authority to be invalid or unenforceable. Further, because of the rapid pace of technological
change in our industry, parts of our business rely on technologies developed or licenced by third
parties, and we may not be able to obtain or continue to obtain licences and technologies from these
third parties on reasonable terms, or at all.
It is often difficult to register, maintain and enforce intellectual property rights in China.
Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be
applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality,
invention assignment and non-compete agreements may be breached by counterparties, and there may
not be adequate remedies available to us for any such breach. Accordingly, we may not be able to
effectively protect our intellectual property rights or to enforce our contractual rights in China. Policing
any unauthorised use of our intellectual property is difficult and costly and the steps we take may be
inadequate to prevent the infringement or misappropriation of our intellectual property. In the event
that we resort to litigation to enforce our intellectual property rights, such litigation could result in
substantial costs and a diversion of our managerial and financial resources, and could put our
intellectual property at risk of being invalidated or narrowed in scope. We cannot assure you that we
will prevail in such litigation, and even if we do prevail, we may not obtain a meaningful recovery. In
addition, our trade secrets may be leaked or otherwise become available to, or be independently
discovered by, our competitors. Any failure in maintaining, protecting or enforcing our intellectual
property rights could have a material adverse effect on our business, financial condition and results of
operations.
We may be subject to intellectual property infringement claims, which may be expensive to defend
and may disrupt our business and operations.
We cannot be certain that our operations or any aspects of our business do not or will not
infringe upon or otherwise violate patents, copyrights or other intellectual property rights held by third
parties. We have been, and from time to time in the future may be, subject to legal proceedings and
claims relating to the intellectual property rights of others. In addition, there may be other third-party
intellectual property that is infringed by our solutions or services, the solutions or services provided by
third-party merchants on our marketplace, or other aspects of our business. There could also be
existing patents of which we are not aware that our solutions or services may inadvertently infringe.
We cannot assure you that holders of patents purportedly relating to some aspects of our technology
platform or business, if any such holders exist, would not seek to enforce such patents against us in
China, the United States or any other jurisdictions. Further, the application and interpretation of
China’s patent laws and the procedures and standards for granting patents in China are still evolving
and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with
our analysis. If we are found to have violated the intellectual property rights of others, we may be
subject to liability for our infringement activities or may be prohibited from using such intellectual
property, and we may incur licencing fees or be forced to develop alternatives of our own. In addition,
we may incur significant expenses, and may be forced to divert management’s time and other
resources from our business and operations to defend against these third-party infringement claims,
regardless of their merits. Successful infringement or licencing claims made against us may result in
significant monetary liabilities and may materially disrupt our business and operations by restricting or
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prohibiting our use of the intellectual property in question. Finally, we use open source software in
connection with our solutions and services. Companies that incorporate open source software into their
solutions and services have, from time to time, faced claims challenging the ownership of open source
software and compliance with open source licence terms. As a result, we could be subject to suits by
parties claiming ownership of what we believe to be open source software or noncompliance with open
source licencing terms. Some open source software licences may require users who distribute open
source software as part of their software to publicly disclose all or part of the source code to such
software and make available any derivative works of the open source code on unfavourable terms or at
no cost. Any requirement to disclose our source code or pay damages for breach of contract could be
harmful to our business, results of operations and financial condition.
Any damage to the reputation and recognition of our brand names, including negative publicity
against us, may materially and adversely affect our business operations and prospects.
We believe that the recognition and reputation of our brands, such as Yaoshibang (
Ꮝ),
have contributed significantly to the growth and success of our business. Maintaining and enhancing
the recognition and reputation of our brands are critical to our business and competitiveness. However,
we cannot assure you that we will be able to maintain a positive reputation or brand name for all of our
products and services in the future. Our reputation and brand names may be materially and adversely
affected by a number of factors, many of which are beyond our control, including:
 adverse associations with the third party-branded products we sell or which are sold on our
platform, including with respect to their efficacy or side effects;
 lawsuits and regulatory investigations against us or otherwise relating to our products or
the industry in general;
 improper or illegal conduct by our employees or users on our platform, that is not
authorised by us; and
 adverse publicity associated with us, our products or our industry, whether founded or
unfounded.
Any damage to our brand names or reputation as a result of these or other factors may cause our
products to be perceived unfavourably, and our business operations and prospects could be materially
and adversely affected as a result.
Our business may be materially and adversely affected by adverse news, scandals or other incidents
associated with the PRC general health and wellness industry.
Incidents that reflect doubt as to the quality or safety of pharmaceutical products manufactured,
distributed or sold by other participants in the PRC general health and wellness industry, particularly
the internet healthcare industry, including our competitors, have been, and may continue to be, subject
to widespread media attention. Such incidents may damage the reputation of not only the parties
involved, but also the health and wellness industry in general, even if such parties or incidents have no
relation to us, our management, our employees, or our users. Such negative publicity may indirectly
and adversely affect our reputation and business operations. In addition, incidents not related to
product quality or safety, or other negative publicity or scandals implicating us or our employees,
regardless of merit, may also have an adverse impact on us and our reputation and corporate image.
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If our risk management and internal control system is not adequate or effective, and if it fails to
detect potential risks in our business as intended, our business, financial condition and results of
operations could be materially and adversely affected.
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. Our risk management and internal control policies and procedures cover various aspects of
our business operations such as financial reporting, information system, internal control, human
resources and investment management. However, due to the inherent limitations in the design and
implementation of our internal control system, our internal control system may not be sufficiently
effective in identifying, managing and preventing all risks if external circumstances change
substantially or extraordinary events take place.
Furthermore, our new business initiatives may give rise to additional internal control risks that
are currently unknown to us, despite our efforts to anticipate such issues. If our internal control system
fails to detect potential risks in our business as intended or is otherwise exposed to weaknesses and
deficiencies, our business, financial condition and results of operations could be materially and
adversely affected.
Our risk management and internal controls also depend on effective implementation by our
employees. There can be no assurance that such implementation by our employees will always
function as intended or such implementation will not involve any human errors, mistakes or intentional
misconduct. If we fail to implement our policies and procedures in a timely manner, or fail to identify
risks that affect our business with sufficient time to plan for contingencies for such events, our
business, financial condition and results of operations could be materially and adversely affected,
particularly with respect to the maintenance of our relevant approvals and licences granted by
governments.
Our failure to comply with anti-corruption laws and regulations, or effectively manage our
employees and 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 and suppliers that
constitute violations of the anti-corruption laws and regulations. There have been several instances of
corrupt practises 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 vendors 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 or suppliers violate these laws, rules or regulations, we could be subject to fines
and/or other penalties. In the case of our Online Marketplace and Self-operation 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 or suppliers, which may in
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turn have a material adverse effect on our business, financial condition, results of operations and
prospects.
We rely on assumptions and estimates to calculate certain key operating metrics, and inaccuracies
in such metrics may harm our reputation and adversely affect our business.
Certain key operating metrics in this document are calculated using our internal data that have
not been independently verified by third parties. While these numbers are based on what we believe to
be reasonable calculations for the applicable periods of measurement, there are some challenges in
measuring those metrics. In addition, our key operating metrics are derived and calculated based on
different assumptions and estimates, and you should be cautious of such assumptions and estimates
when assessing our operating performance.
Our operating metrics may differ from estimates published by third parties or from similarly
titled metrics used by our competitors due to differences in data availability, sources and methodology.
If third parties do not perceive our user metrics to be accurate representations of our user base or user
engagement, or if we discover material inaccuracies in our operating metrics, our reputation may be
harmed and third parties may be less willing to allocate their resources or spending to us, which could
adversely affect our business and operating results.
Our success depends on the continued efforts of our senior management and key employees. If one
or more of our senior management or key employees were unable or unwilling to continue in their
present positions, our business may be severely disrupted.
Our future success depends heavily upon the continued services of our senior management and
our key employees in various corporate functions, who have contributed significantly to our current
achievements. Accordingly, we believe that our ability to attract and retain key personnel is a critical
factor in our competitiveness. Competition for these individuals could require us to offer higher
compensation and other benefits in order to attract and retain them, which could increase our operating
expenses and, in turn, materially and adversely affect our financial condition and results of operations.
If we are unable to attract or retain the personnel required to achieve our business objectives, our
business could be severely disrupted.
We do not maintain key-person insurance for members of our management team. If we lose the
services of any senior management, we may not be able to identify suitable or qualified replacements,
and may incur additional expenses to recruit and train new personnel, which could severely disrupt our
business and prospects and prolong our expansion strategies and plans. Furthermore, if any of our
executive officers joins a competitor or forms a competing company, we may lose a significant number
of our existing pharmacy users and consumers and potentially lose our substantial research and
development achievements, which could have a material adverse effect on our business, financial
condition, results of operations and prospects.
If we are unable to recruit, train and retain qualified personnel or if we fail to do so in a cost-
efficient manner, our business may be materially and adversely affected.
We intend to hire additional qualified employees to support our business operations and
planned expansion. Our future success depends, to a significant extent, on our ability to recruit, train
and retain qualified personnel, particularly healthcare, technical, fulfilment, marketing and other
operational personnel with experience in the online retail industry and pharmaceutical industry.
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Since our industry is characterised by high demand and intense competition for talent and
labour, we can provide no assurance that we will be able to attract or retain qualified staff or other
highly skilled employees that we will need to achieve our strategic objectives. We have observed an
overall tightening of the labour market and an emerging trend of shortage of labour supply. Failure to
obtain stable and dedicated personnel may lead to underperformance of our operation. Labour costs in
China have increased with China’s economic development, particularly in the large cities where we
operate our business. Therefore, to maintain and enhance our competitiveness, we may from time to
time need to adjust certain elements of our operations in response to evolving economic conditions and
business needs. Any failure to address these risks and uncertainties could materially and adversely
affect our financial performance and prospects of achieving profitability, which could have a material
adverse impact on our business development, financial conditions and results of operations. In
addition, our ability to train and integrate new employees into our operations may also be limited and
may not meet the demand for our business growth on a timely fashion, or at all, and rapid expansion
may impair our ability to maintain our corporate culture.
We may not be able to detect or prevent fraud or other misconduct committed by our employees or
third parties.
Fraud or other misconduct by our employees, such as unauthorised business transactions,
bribery and breach of our internal policies and procedures, unauthorised access to or leakage of the
data of our sellers or buyers, or by third parties, such as breach of law, may be difficult to detect or
prevent. It could subject us to financial loss and sanctions imposed by governmental authorities while
seriously damaging our reputation. This may also impair our ability to effectively attract prospective
users, develop customer loyalty, obtain financing on favourable terms and conduct other business
activities.
In particular, we may face risks with respect to fictitious or other fraudulent activities. There
can be no assurance that the measures we have implemented to detect and reduce the occurrence of
fraudulent activities would be effective in combating fraudulent transactions or improving overall
satisfaction among the industry participants. The sellers on our platform may also engage in fictitious
or “phantom” transactions with themselves or collaborators in order to artificially inflate their ratings,
reputation and search results rankings. This activity may harm other third parties by enabling the
perpetrating sellers to be favoured over legitimate ones, may harm consumers by deceiving them into
believing that a seller is more reliable or trusted than that seller actually is, and result in inflated GMV
from our Online Marketplace.
Our risk management systems, information technology systems and internal control procedures
are designed to monitor our operations and overall compliance. However, we may be unable to identify
non-compliance or suspicious transactions promptly, or at all. Furthermore, it is not always possible to
detect and prevent fraud or other misconduct committed by our employees, ecosystem participants or
other third parties, and the precautions we take to prevent and detect such activities may not be
effective. Therefore, we are subject to the risk that fraud or other misconduct may have previously
occurred but was undetected, or may occur in the future. This may materially and adversely affect our
business, financial condition and results of operations.
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We may from time to time become party to litigation, other legal or administrative disputes and
proceedings that may materially and adversely affect us.
In the course of our ordinary business operations, we may become a party to litigation, legal
proceedings, claims, disputes or arbitration proceedings from time to time. 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 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. 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.
We may not have sufficient insurance to cover our business risks.
We have obtained insurance to cover certain potential risks and liabilities, such as warehouse
insurance and employers liability insurance. However, we may not be able to acquire any insurance for
certain types of risks such as business liability or service disruption insurance for all of our operations
in the PRC, and our coverage may not be adequate to compensate for all losses that may occur,
particularly with respect to loss of business or operations. For example, we do not maintain product
liability insurance, business interruption insurance or key-man life insurance. 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 policies 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.
We have granted and expect to continue to grant share-based awards in the future under our Share
Incentive Plans, which may increase our equity-settled share-based payment expenses, affect our
financial performance and potentially dilute the shareholding of our Shareholders.
In order to attract and retain qualified employees, provide incentives to our directors, officers,
employees and consultants, and promote the success of our business, we adopted the Share Incentive
Plans (namely, the 2019 Share Incentive Plan and 2023 Share Incentive Plan). The scheme limit for
new Shares that may be issued under the 2019 Share Incentive Plan (which is a pre-IPO share scheme
that is not governed by Chapter 17 of the Listing Rules) is 47,772,984 new Shares (following the Share
Subdivision). The scheme limit for new Shares that may be issued under the 2023 Share Incentive Plan
and all other post-IPO share schemes of the Company adopted from time to time (which is a post-IPO
share scheme that is governed by Chapter 17 of the Listing Rules) is 10% of the Shares in issue on the
Listing Date. See “Statutory and general information—Share Incentive Plans” for further details.
We believe the granting of share-based awards is of significant importance to our ability to
attract and retain key personnel and employees, and we may continue to grant share-based awards to
employees in the future subject to compliance with the Listing Rules. As a result, our expenses
associated with equity-settled share-based payment expenses may increase, which may have an adverse
effect on our results of operations.
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We may not be able to obtain additional capital when desired, on favourable 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
industry. 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 favourable to
us, or at all. Any failure to raise needed funds on terms favourable 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.
Our business operations and financial performance have been adversely affected by the COVID-19
outbreak, may in the future continue to be affected by the COVID-19 outbreak, and may be affected
by other natural disasters, epidemics and other unforeseeable catastrophes.
Since the end of December 2019, the outbreak of a novel strain of coronavirus, now named as
COVID-19, has materially and adversely affected the global economy. Although the COVID-19
outbreak has increased demand for certain drugs or medical equipment that we sell, it has caused
disruptions to our business operations and those of our buyers, sellers, and logistics providers, to
varying degrees. We currently lease office space in Guangzhou to support our operations and operate
warehouses in 19 cities as of 31 December 2022. The COVID-19 has caused, and may continue to
cause, companies in China, including us and certain of our buyers and sellers, to implement temporary
adjustment of work schedules and travel plans or to require employees to work from home and
collaborate remotely. The pandemic has also resulted in the temporary disruption of our warehouses
due to government-imposed quarantines.
Many of the quarantine measures within China have been relaxed since 2020. However,
relaxation of restrictions on economic and social activities may also lead to new cases which may
cause restrictions to be imposed again in China. For example, China has experienced upticks in cases
that have prompted selective restrictions in the affected regions at various times in 2021. We cannot
predict whether there will be future disruptions in our operations. As a result, we may experience lower
efficiency and productivity, internally and externally, which may adversely affect our business and
operations. The extent to which the COVID-19 outbreak impacts our results of operations will depend
on future developments, which are highly uncertain and unpredictable, including new information
which may emerge concerning the severity of this outbreak and future actions we take, if any, to
contain this outbreak or treat its impact, among others.
Any deficiencies in China’s fixed telecommunications networks and internet infrastructure, as well
as mobile operating systems and networks, could impair the functioning of our technology system
and the operation of our business.
Our business depends on the performance, reliability and security of the telecommunications
and internet infrastructure in China. Substantially all of our computer hardware and cloud computing
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services are currently located in China. Access to internet in China is maintained through state-owned
telecommunications carriers under administrative control and regulatory supervision, and we obtain
access to end-user networks operated by such telecommunications carriers to give customers access to
our technology platform. We may not have access to alternative networks in the event of disruptions,
failures or other problems with the telecommunication and internet infrastructure in China. The failure
of telecommunication and internet network operators to provide us with the requisite bandwidth could
also interfere with the speed and availability of our technology platform. Any of such occurrences
could delay or prevent our users from accessing our online website and mobile applications, and
frequent interruptions could frustrate users and discourage them from using our services, which could
cause us to lose users and harm our results of operations. In addition, we have limited control over the
service fees charged by telecommunication and internet operators. If the prices we pay for
telecommunications and internet services rise significantly, our results of operations may be materially
and adversely affected.
An occurrence of a natural disaster, widespread health epidemic or other outbreaks could have a
material adverse effect on our business, financial condition and results of operations.
Our business could be materially and adversely affected by natural disasters, such as
snowstorms, earthquakes, fires or floods, the outbreak of a widespread health epidemic or other events,
such as wars, acts of terrorism, environmental accidents, power shortage, labour unrest or
communication interruptions. The occurrence of such a disaster or prolonged outbreak of an epidemic
illness or other adverse public health developments in the PRC or elsewhere could materially disrupt
our business and operations. Such events could also significantly affect our industry and cause a
temporary closure of the warehouses we use for our operations, which would severely disrupt our
operations and have a material adverse effect on our business, financial condition and results of
operations. Our operations could be disrupted if any of our employees were suspected of having any of
the epidemic illnesses, since this could require us to quarantine some or all of such employees or
disinfect the warehouses used for our operations. In addition, our revenue and profitability could be
materially reduced to the extent that a natural disaster, health epidemic or other outbreak harms the
global or PRC economy in general. Our operations could also be severely disrupted if our users or
other participants were affected by such natural disasters, health epidemics or other outbreaks. See also
“—Our business operations and financial performance have been adversely affected by the COVID-19
outbreak, may in the future continue to be affected by the COVID-19 outbreak, and may be affected by
other natural disasters, epidemics and other unforeseeable catastrophes”.
Heightened tensions in international relations, particularly between the United States and China,
may adversely impact our business, financial condition, and results of operations.
Recently there have been heightened tensions in international relations, particularly between
the United States and China, but also as a result of the conflict in Ukraine and sanctions on Russia.
These tensions have affected both diplomatic and economic ties between the two countries. Heightened
tensions could reduce levels of trade, investments, technological exchanges, and other economic
activities between the two major economies. The existing tensions and any further deterioration in the
relationship between the United States and China may have a negative impact on the general,
economic, political, and social conditions in both countries and, given our reliance on the Chinese
market, adversely impact our business, financial condition, and results of operations.
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RISKS RELATED TO OUR CORPORATE STRUCTURE
If the PRC government deems that the Contractual Arrangements in relation to our Consolidated
Affiliated Entities do not comply with PRC regulatory restrictions on foreign investment in the
relevant industries, or if these regulations or the interpretation of existing regulations change in the
future, we could be subject to severe penalties or be forced to relinquish our interests in those
operations.
Foreign ownership of certain of our businesses including value-added telecommunication
services is subject to restrictions under current PRC laws and regulations. For example, foreign
investors are not allowed to own more than 50% of the equity interests in a value-added
telecommunication service provider (excluding e-commerce, domestic multi-party communications,
data collection and transmission services and call centres).
We are a Cayman Islands exempted company and our WFOE is considered as a foreign-
invested enterprise. Accordingly, it is not eligible to provide certain value-added telecommunication
services or provide certain other restricted services related to our businesses. As a result, we will
conduct such business activities through our Consolidated Affiliated Entities in PRC.
We entered into a series of Contractual Arrangements with our Onshore Holdcos and their
shareholders, which enable us to:
 exercise effective control over our Onshore Holdcos;
 receive substantially all of the economic benefits of our Onshore Holdcos; and
 have an exclusive option to purchase all or part of the equity interests in our Onshore
Holdcos when and to the extent permitted by PRC law.
Because of these Contractual Arrangements, we are the primary beneficiary of our Onshore
Holdcos and hence consolidate its financial results as our Consolidated Affiliated Entity. For a detailed
discussion of these Contractual Arrangements, see “History, reorganization and corporate structure”
for further details.
In the opinion of our PRC Legal Adviser, based on its understanding of the relevant PRC laws
and regulations, subject to uncertainties of the enforceability of the dispute resolution provisions of the
Contractual Arrangements, and subject as to enforceability to applicable bankruptcy, insolvency,
moratorium, reorganisation and similar laws affecting creditors’ rights generally, the discretion of
relevant governmental authorities in exercising their authority in connection with the interpretation and
implementation thereof and the application of relevant PRC Laws and policies thereto, and to general
equity principles, each of these Contractual Arrangements is and taken as a whole are, (i) valid and
legally binding on each party thereto, and (ii) enforceable in accordance with the terms thereof.
However, our PRC Legal Adviser has also advised us that there are substantial uncertainties regarding
the interpretation and application of current and future PRC Laws, regulations and rules. Since PRC
laws and regulations governing the validity of these Contractual Arrangements are uncertain and the
relevant governmental authorities have broad discretion in interpreting these laws and regulations, we
cannot assure you or make any prediction that the Contractual Arrangements will not result in any
violation. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion
of our PRC Legal Adviser. It is uncertain whether any other new PRC laws or regulations relating to
consolidated affiliated entity structures will be adopted or if adopted, what they would provide. If we
or our Consolidated Affiliated Entities are found to be in violation of any existing or future PRC Laws,
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rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant
PRC regulatory authorities would have broad discretion to take action in dealing with such violations
or failures, including:
 revoking the business licences of such entity;
 discontinuing or restricting the conduct of any transactions between certain of our PRC
subsidiaries and Consolidated Affiliated Entities;
 imposing fines, confiscating the income from our Consolidated Affiliated Entities, or
imposing other requirements with which we or our Consolidated Affiliated Entities may
not be able to comply;
 requiring us to restructure our ownership structure or operations, including terminating the
Contractual Arrangements with our Consolidated Affiliated Entities and deregistering the
equity pledges of our Consolidated Affiliated Entities, which in turn would affect our
ability to consolidate, derive economic interests from, or exert effective control over our
Consolidated Affiliated Entities; or
 restricting or prohibiting our use of the proceeds of any of our financing outside China to
finance our business and operations in China.
The imposition of any of these penalties would result in a material and adverse effect on our
ability to conduct our business. In addition, it is unclear what impact the PRC government actions
would have on us and on our ability to consolidate the financial results of our Consolidated Affiliated
Entities in our combined financial statements, if the PRC governmental authorities were to find our
legal structure and Contractual Arrangements to be in violation of PRC laws, rules and regulations. If
the imposition of any of these government actions causes us to lose our right to direct the activities of
our Consolidated Affiliated Entities or our right to receive substantially all 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 would no longer be able to consolidate
the financial results of our Consolidated Affiliated Entities in our combined financial statements. Either
of these results, or any other significant penalties that might be imposed on us in this event, would
have a material adverse effect on our financial condition and results of operations.
We rely on Contractual Arrangements with our Onshore Holdcos and their shareholders for a
portion of our business operations, which may not be as effective as direct ownership in providing
operational control.
We have relied and expect to continue to rely on Contractual Arrangements with Onshore
Holdcos and their shareholders to operate value-added telecommunication services or certain other
services subject to foreign ownership restriction under PRC laws and regulations. For a description of
these Contractual Arrangements, see “History, reorganization and corporate structure” for further
details. These Contractual Arrangements may not be as effective as direct ownership in providing us
with control over our Consolidated Affiliated Entities.
If we had direct ownership of our Consolidated Affiliated Entities, we would be able to exercise
our rights as a shareholder to effect changes in the board of directors of such entity, which in turn could
effect changes, subject to any applicable fiduciary obligations, at the management level. However,
under the current Contractual Arrangements, we rely on the performance by our Onshore Holdcos and
their shareholders of their obligations under the contracts to exercise control over our Consolidated
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Affiliated Entities. However, the shareholders of our Onshore Holdcos may not act in the best interests
of our Company or may not perform its obligations under these contracts. Such risks exist throughout
the period in which we intend to operate our business through the Contractual Arrangements with our
Onshore Holdcos. We may replace the shareholders of our Onshore Holdcos at any time pursuant to
our Contractual Arrangements with our Onshore Holdcos and their shareholders. However, if any
dispute relating to these contracts remains unresolved, we will have to enforce our rights under these
contracts through the operations of PRC law and courts and therefore will be subject to uncertainties in
the PRC legal system. See “—Any failure by our Onshore Holdcos or their shareholders to perform
their obligations under our Contractual Arrangements with them would have a material and adverse
effect on our business”. Therefore, our Contractual Arrangements with our Onshore Holdcos may not
be as effective in ensuring our control over the relevant portion of our business operations as direct
ownership would be.
Any failure by our Onshore Holdcos or their shareholders to perform their obligations under our
Contractual Arrangements with them would have a material and adverse effect on our business.
If our Onshore Holdcos 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 claiming damages, which we cannot assure you
will be effective. For example, if the shareholders of our Onshore Holdcos were to refuse to transfer
their equity interest in the Onshore Holdcos to us or our designee when we exercise the purchase
option pursuant to these Contractual Arrangements, or if they were otherwise to act in bad faith toward
us, 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 not as developed as in some other jurisdictions. See
“—Risks Related to Doing Business in China— Uncertainties with respect to the PRC legal system
could adversely affect us”. Meanwhile, there are very few precedents and little formal guidance as to
how contractual arrangements in the context of a consolidated affiliated entity should be interpreted or
enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel would
view such contractual arrangements. As a result, uncertainties in the PRC legal system could limit our
ability to enforce these Contractual Arrangements. Additionally, under PRC law, rulings by arbitrators
are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out
the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the
arbitration awards in PRC courts through arbitration award recognition proceedings, which would
require additional expenses and delay.
Our Consolidated Affiliated Entities hold certain of our important licences and permits,
including, but not limited to, Value-Added Telecommunications Business Operating Licence and
Medical Institution Practicing Licence, to operate our business. In the event we are unable to enforce
our Contractual Arrangements, we may not be able to exert effective control over our Consolidated
Affiliated Entities, and our ability to conduct these businesses may be negatively affected, which may
have a material and adverse effect on our financial condition and results of operations.
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If we exercise the option to acquire equity ownership and assets of Onshore Holdcos, the ownership
or asset transfer may subject us to certain limitations and substantial costs.
Pursuant to the Contractual Arrangements, the WFOE or its designated person(s) has the
exclusive right to purchase all or any part of the equity interests in Onshore Holdcos from their
registered shareholders for a nominal price permissible under PRC Laws.
The equity transfer may be subject to the approvals from and filings with the SAMR and other
competent governmental authorities and/or their local competent branches. In addition, the equity
transfer price may be subject to review and tax adjustment by the relevant tax or commerce authority.
The registered shareholders of Onshore Holdcos will pay the equity transfer price they receive to the
WFOE under the Contractual Arrangements. The amount to be received by the WFOE may also be
subject to enterprise income tax. Such tax amounts could be substantial.
We may lose the ability to use and enjoy assets held by our Onshore Holdcos and their subsidiaries
that are important to our business if our Onshore Holdcos and their subsidiaries declare bankruptcy
or become subject to a dissolution or liquidation proceeding.
Our Onshore Holdcos hold assets that are material to our business operations. Under our
Contractual Arrangements, the shareholders of our Onshore Holdcos may not voluntarily liquidate our
Onshore Holdcos or approve them to engage in any transaction that may materially affect their assets,
liabilities, rights or operations in any manner without our prior consent. However, in the event that the
shareholders breach this obligation and voluntarily liquidate our Onshore Holdcos, or our Onshore
Holdcos declare bankruptcy, or 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 operations, which could materially and
adversely affect our business, financial condition and results of operations. Furthermore, if our
Onshore Holdcos or their subsidiaries undergo a voluntary or involuntary liquidation proceeding, their
shareholders or unrelated third-party creditors may claim rights to some or all of its assets, hindering
our ability to operate our business, which could materially and adversely affect our business, financial
condition and results of operations.
If the chops of our PRC subsidiaries, our Onshore Holdcos and their subsidiaries, are not kept
safely, are stolen or are used by unauthorised persons or for unauthorised purposes, the corporate
governance of these entities could be severely and adversely compromised.
In China, a company chop or seal serves as the legal representation of the company towards
third-parties even when unaccompanied by a signature. Each legally registered company in China is
required to maintain a company chop, which must be registered with the local Public Security Bureau.
In addition to this mandatory company chop, companies may have several other chops which can be
used for specific purposes. The chops of our PRC subsidiaries, our Onshore Holdcos and their
subsidiaries are generally held securely by personnel designated or approved by us in accordance with
our internal control procedures. To the extent those chops are not kept safe, are stolen or are used by
unauthorised persons or for unauthorised purposes, the corporate governance of these entities could be
severely and adversely compromised and those corporate entities may be bound to abide by the terms
of any documents so chopped, even if they were chopped by an individual who lacked the requisite
power and authority to do so.
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The shareholders of our Onshore Holdcos may have potential conflicts of interest with us, which
may materially and adversely affect our business and financial condition.
The shareholders of our Onshore Holdcos may have potential conflicts of interest with us.
These shareholders may breach, or cause our Onshore Holdcos to breach, or refuse to renew, the
existing Contractual Arrangements we have with them and our Onshore Holdcos, which would have a
material and adverse effect on our ability to effectively control our Consolidated Affiliated Entities and
receive substantially all the economic benefits from it. For example, the shareholders may be able to
cause our agreements with our Onshore Holdcos 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 favour.
Currently, we do not have any arrangements to address potential conflicts of interest between
these shareholders and our company, except that we could exercise our purchase option under the
exclusive call option agreements with these shareholders to request them to transfer all of their equity
interests in the Onshore Holdcos to a PRC entity or individual designated by us, to the extent permitted
by PRC law. The shareholders of our Onshore Holdcos have executed powers of attorney to appoint
our WFOE to vote on their behalf and exercise voting rights as shareholders of our Onshore Holdcos.
If we cannot resolve any conflict of interest or dispute between us and the shareholders of our Onshore
Holdcos, 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.
The shareholders of our Onshore Holdcos may be involved in personal disputes with third
parties or other incidents that may have an adverse effect on their respective equity interests in our
Onshore Holdcos and the validity or enforceability of our Contractual Arrangements with our Onshore
Holdcos and their shareholders. For example, in the event that any individual shareholder of our
Onshore Holdcos divorces his or her spouse, the spouse may claim that the equity interest of our
Onshore Holdcos held by such shareholder is part of their community property and should be divided
between such shareholder and his or her spouse. If such claim is supported by the court, the relevant
equity interest may be obtained by the shareholder’s spouse or another third party who is not subject to
obligations under our Contractual Arrangements, which could result in a loss of the effective control
over our Onshore Holdcos by us. Similarly, if any of the equity interests of our Onshore Holdcos is
inherited by a third party with whom the current Contractual Arrangements are not binding, we could
lose our control over our Onshore Holdcos 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.
Although under our current Contractual Arrangements, (i) our Onshore Holdcos’ shareholders’
spouses have executed spousal consent letters under which the spouses agree not to assert any rights
over the equity interest in our Onshore Holdcos held by these shareholders, and (ii) it is expressly
provided that our Onshore Holdcos and their shareholders shall not assign any of their respective rights
or obligations to any third party without the prior written consent of our WFOE, we cannot assure you
that these undertakings and arrangements will be complied with or effectively enforced. In the case any
of them is breached or becomes unenforceable and leads to legal proceedings, it could disrupt our
business, distract our management’s attention and subject us to substantial uncertainties as to the
outcome of any such legal proceedings.
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We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund
any cash and financing requirements we may have, and any limitation on the ability of our PRC
subsidiaries to make payments to us could have a material and adverse effect on our ability to
conduct our business.
We are a holding company, and we may rely on dividends and other distributions on equity
paid by our PRC subsidiaries like our WFOE for our cash and financing requirements, including the
funds necessary to pay dividends and other cash distributions to our shareholders and service any debt
we may incur. If these subsidiaries incur debt on their own behalf in the future, the instruments
governing the debt may restrict their ability to pay dividends or make other distributions to us. In
addition, the PRC tax authorities may require our WFOE or any other relevant PRC subsidiary to
adjust its taxable income under the Contractual Arrangements it currently has in place with our
Onshore Holdcos in a manner that would materially and adversely affect its ability to pay dividends
and other distributions to us. See “—Contractual Arrangements in relation to our Consolidated
Affiliated Entities may be subject to scrutiny by the PRC tax authorities and they may determine that
we or our Consolidated Affiliated Entities owe additional taxes, which could negatively affect our
financial condition and the value of your investment”.
Under PRC laws and regulations, our wholly foreign-owned subsidiaries in China may pay
dividends only out of their respective accumulated profits as determined in accordance with PRC
accounting standards and regulations. In addition, a PRC enterprise is required to set aside at least 10%
of its accumulated after-tax profits each year, if any, to fund certain statutory reserve fund, until the
aggregate amount of such fund reaches 50% of its registered capital.
Any limitation on the ability of our PRC subsidiaries to pay dividends or make other
distributions to us could materially and adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our
business. See also “—Risks Related to Doing Business in China—If we are classified as a PRC
resident enterprise for PRC income tax purposes, such classification could result in unfavourable tax
consequences to us and our non-PRC shareholders”.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and
governmental control of currency conversion may delay or prevent us from making loans to our
PRC subsidiaries and Consolidated Affiliated Entities or making additional capital contributions to
our wholly foreign-owned subsidiaries in China, which could materially and adversely affect our
liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting our operations in China through our PRC
subsidiaries and Consolidated Affiliated Entities. We may make loans to our PRC subsidiaries and
Consolidated Affiliated Entities subject to the approval from governmental authorities and limitation of
amount, or we may make additional capital contributions to our wholly foreign-owned subsidiaries in
China.
Any loans to our wholly foreign-owned subsidiaries in China, which are treated as foreign-
invested enterprises under PRC law, are subject to PRC regulations and foreign exchange loan
registrations. For example, loans by us to our wholly foreign-owned subsidiaries in China to finance
their activities cannot exceed statutory limits, i.e., the difference between its total amount of investment
and its registered capital, or certain amount calculated based on elements including capital or net assets
and the cross-border financing leverage ratio or the Macro-prudential Management Mode, under
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relevant PRC laws and the loans must be registered with the local counterpart of the State
Administration of Foreign Exchange, or SAFE, or filed with SAFE in its information system. We may
also provide loans to our Consolidated Affiliated Entities or other domestic PRC entities under the
Macro-prudential Management Mode. According to the Notice of the PBOC and SAFE Raising the
Macro-prudential Adjustment Parameters for Cross-border Financing (
ɛ͏ვБe̮ි҅ɪሜ༨ྤፄ
༟҃ᝈᄲฐሜືਞᅰ) issued on 25 October 2022, the limit for the total amount of foreign debt under
the Macro-prudential Management Mode is increased from two times to two and a half times of their
respective net assets. Moreover, any medium or long-term loan to be provided by us to our
Consolidated Affiliated Entities or other domestic PRC entities must also be approved by and
registered with the NDRC.
We may also decide to finance our wholly foreign-owned subsidiaries in China by means of
capital contributions. These capital contributions shall go through record-filing procedures from
competent administration for market regulation. SAFE issued the Circular Concerning Reform of the
Administrative Approaches to the Settlement of Foreign Currency Capital of Foreign-Invested
Enterprises (
), or SAFE Circular 19, which
took effect on 1 June 2015. SAFE Circular 19 allows for the use of RMB converted from the foreign
currency-denominated capital for equity investments in the PRC provided that such usage shall fall into
the scope of business of the foreign-invested enterprise, which will be regarded as the reinvestment of
foreign-invested enterprise. In addition, SAFE promulgated the Circular on Further Promoting the
Cross-border Trade and Investment Facilitation (
)o n
23 October 2019, or SAFE Circular 28, pursuant to which all foreign-invested enterprises can make
equity investments in the PRC with their capital funds in accordance with the law. As the relevant
governmental authorities have broad discretion in interpreting the regulation, it is unclear whether
SAFE will permit such capital funds to be used for equity investments in the PRC in actual practise.
Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic
companies, we are not likely to make such loans to the subsidiaries of our wholly foreign-owned
subsidiaries in China and our Consolidated Affiliated Entities, each a PRC domestic company.
Meanwhile, we are not likely to finance the activities of our Consolidated Affiliated Entities by means
of capital contributions given the restrictions on foreign investment in the businesses that are currently
conducted by our Consolidated Affiliated Entities.
In light of the various requirements imposed by PRC regulations on loans to and direct
investment in PRC entities by offshore holding companies, we cannot assure you that we will be able
to complete the necessary government registrations or record-filings on a timely basis, if at all, with
respect to future loans to our PRC subsidiaries or any Consolidated Affiliated Entity or future capital
contributions by us to our wholly foreign-owned subsidiaries in China. As a result, uncertainties exist
as to our ability to provide prompt financial support to our PRC subsidiaries or Consolidated Affiliated
Entities when needed. If we fail to complete such registrations or record-filings, our ability to use
foreign currency, including the proceeds we received from our initial public offering, and to capitalise
or otherwise fund our PRC operations may be negatively affected, which could materially and
adversely affect our liquidity and our ability to fund and expand our business.
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Contractual Arrangements in relation to our Consolidated Affiliated Entities may be subject to
scrutiny by the PRC tax authorities and they may determine that we or our Consolidated Affiliated
Entities owe additional taxes, which could negatively affect our financial condition and the value of
your investment.
Under applicable PRC laws and regulations, transactions among related parties may be subject
to audit or challenge by the PRC tax authorities. If the PRC tax authorities deem the transactions
between the PRC subsidiaries and our Consolidated Affiliated Entities in China, and their respective
shareholders were not entered into on an arm’s-length basis and resulted in deferral or underpayment in
taxes, they are entitled to make special tax adjustments which might result in the increase of the
Consolidated Affiliated Entities’ tax liabilities. If the tax authorities conduct special tax adjustments,
they might impose interest charges for the underpaid taxes. Our financial position could be adversely
affected if our Consolidated Affiliated Entities’ tax liabilities increase or if they are required to pay
interest charge.
Our current corporate structure and business operations may be affected by the Foreign Investment
Law.
On 15 March 2019, the NPC promulgated the Foreign Investment Law of the PRC (
ʕശɛ͏
) or the FIL, which has become effective on 1 January 2020, and replaced the
outgoing laws regulating foreign investment in China, namely the Equity Joint Venture Law of the
PRC (
), the Cooperative Joint Venture Law of the PRC ( ʕ
) and the Wholly Foreign-owned Enterprise Law of the PRC ( ʕ
), as well their implementation rules and ancillary regulations, or the
Outgoing FIE Laws.
Meanwhile, the Implementing Rules of Foreign Investment Law of the PRC ( ʕശɛ͏΍ձ਷
ૢԷ) came into effect as of 1 January 2020, which clarified and elaborated the
relevant provisions of the Foreign Investment Law. However, uncertainties still exist in relation to
interpretation and implementation of the FIL, especially in regard to, including, among other things,
the nature of consolidated affiliated entity contractual arrangements and specific rules regulating the
organisation form of foreign-invested enterprises within the five-year transition period. While FIL does
not define contractual arrangements as a form of foreign investment explicitly, it has a catch-all
provision under definition of “foreign investment” that includes investments made by foreign investors
in the PRC through other means as provided by laws, administrative regulations or the State Council,
we cannot assure you that future laws and regulations will not provide for contractual arrangements as
a form of foreign investment. Therefore, there can be no assurance that our control over our
Consolidated Affiliated Entities through Contractual Arrangements will not be deemed as foreign
investment in the future. In the event that any possible implementing regulations of the FIL, any other
future laws, administrative regulations or provisions deem Contractual Arrangements as a way of
foreign investment, or if any of our operations through Contractual Arrangements is classified in the
“restricted” or “prohibited” industry in the future “negative list” under the FIL, our Contractual
Arrangements may be deemed as invalid and illegal, and we may be required to unwind the
Contractual Arrangements and/or dispose of any affected business. Also, if future laws, administrative
regulations or provisions mandate further actions to be taken 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. Furthermore, under the FIL, foreign investors or the foreign investment
enterprise should be imposed legal liabilities for failing to report investment information in accordance
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with the requirements. In addition, the Administrative Regulations on the Foreign-invested
Telecommunications Enterprises () were recently amended by the State
Council and took effect on May 1, 2022. The amended Administrative Regulations on Foreign-
Invested Telecommunications Enterprises cancelled 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. Given this new regulatory development and any further detailed implementing
rules that may be formulated by the PRC governmental authority, we may need to take further actions
with respect to our Consolidated Affiliated Entities for the purpose of having better operational control
on our Consolidated Affiliated Entities or continuously satisfying applicable requirements of the stock
exchange where we list, which will be subject to a number of uncertainties, including adjusting the
Contractual Arrangements with our Onshore Holdcos, registration of the equity interests change in our
Consolidated Affiliated Entities and their subsidiaries, registration of the new equity pledges, and
obtaining additional operating permits or making amendments to our current operating permits,
including the Value-Added Telecommunications Business Operating Licences. However, we may face
substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.
Failure to take timely and appropriate measures to cope with any of these or similar regulatory
compliance challenges could materially and adversely affect our current corporate structure, corporate
governance, financial condition and business operations.
RISKS RELATED TO DOING BUSINESS IN CHINA
Changes in China’s or global economic, political or social conditions or government policies could
have a material and adverse effect on our business and operations.
Substantially all of our operations are located in China. Accordingly, our business, financial
condition, results of operations and prospects may be influenced to a significant degree by political,
economic and social conditions in China generally and by continued economic growth in China as a
whole.
The Chinese economy differs from the economies of most developed countries in many
respects, including the amount of government involvement, level of development, growth rate, control
of foreign exchange and allocation of resources. The Chinese government continues to play a
significant role in regulating industry development by imposing industrial policies. The Chinese
government also exercises significant control over China’s economic growth through allocating
resources, controlling payment of foreign currency-denominated obligations, setting monetary policy,
and providing preferential treatment to particular industries or companies.
While the Chinese economy has experienced significant growth over the past decades, growth
has been uneven, both geographically and among various sectors of the economy, and the rate of
growth has been slowing. The Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures may benefit the
overall Chinese economy, but may have a negative effect on us.
In addition, the global macroeconomic environment is facing challenges. For example, the
COVID-19 pandemic has caused significant downward pressure for the global economy. In addition,
the impact of the United Kingdom’s withdrawal from the European Union, commonly referred to as
“Brexit”, and the resulting effect on the political and economic future of the U.K. and the European
Union is uncertain. Brexit could adversely affect European and worldwide economic and market
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conditions, and could contribute to instability in global financial and foreign exchange markets. It is
unclear whether these challenges and uncertainties will be contained or resolved, and what effects they
may have on the global political and economic conditions in the long term.
Uncertainties with respect to the PRC legal system could adversely affect us.
We conduct our business primarily through our PRC subsidiaries and Consolidated Affiliated
Entities in China. Our operations in China are governed by PRC laws and regulations. Our PRC
subsidiaries and Consolidated Affiliated Entities in China are subject to laws and regulations
applicable to foreign investment in China. The PRC legal system is a civil law system based on written
statutes. Unlike the common law system, prior court decisions may be cited for reference but have
limited precedential value. The PRC legal system is evolving rapidly, and the enforcement of these
laws, regulations and rules may involve uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce
our legal rights. Any administrative and court proceedings in China may be protracted, resulting in
substantial costs and diversion of resources and management attention. Since PRC administrative and
court authorities have significant discretion in interpreting and implementing statutory and contractual
terms, it may cause difficulty for us to evaluate the outcome of administrative and court proceedings
and the level of legal protection we enjoy. These uncertainties may impede our ability to enforce the
contracts we have entered into and could materially and adversely affect our business and results of
operations. Furthermore, the PRC legal system is based, in part, on government policies and internal
rules, some of which are not published in a timely manner, or at all, but which may have retroactive
effect. As a result, we may not always be aware of any potential violation of these policies and rules.
Such unpredictability towards our contractual, property and procedural rights could adversely affect
our business and impede our ability to continue our operations.
Failure to comply with the PRC Social Insurance Law and the Regulation on the Administration of
Housing Provident Funds may subject us to fines and other legal or administrative sanctions.
Companies operating in China are required to participate in various government sponsored
employee benefit plans, including certain social insurance, housing funds and other welfare-oriented
payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries,
including bonuses and allowances, of our employees up to a maximum amount specified by the local
government from time to time at locations where we operate our businesses. The requirement of
employee benefit plans has not been implemented consistently by the local governments in China
given the different levels of economic development in different locations.
During the Track Record Period, certain of our PRC subsidiaries and Onshore Holdcos failed to
make adequate contributions to social insurance and housing provident fund for certain of our
employees. As a result, we may be required by relevant governmental authorities to make make-up
contributions and be imposed a late payment penalty. See “Regulations — PRC Regulations —
Regulations relating to employment and social welfare” for further details. As of the Latest Practicable
Date, no competent governmental authorities had imposed administrative action, fine or penalty to us
nor had any competent governmental authorities required us to settle the outstanding amount of social
insurance payments and housing provident fund contributions. We have made provision of RMB5.2
million, RMB13.7 million and RMB12.7 million for the shortfall of contribution to social insurance
fund and housing provident fund for the years ended 31 December 2020, 2021, and 2022, respectively.
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Although we are rectifying such non-compliance, we cannot assure you that we will not be subject to
fines and penalties in relation to our failure to make social insurance and housing provident fund
contributions in full for our employees. Our business, reputation and results of operations may be
adversely affected.
During the Track Record Period, our Company and some of our PRC subsidiaries and Onshore
Holdcos engaged third-party human resources agencies to pay social insurance premium and housing
provident funds for certain of our employees. Pursuant to the PRC laws and regulations, we are
required to pay social insurance premium and housing provident funds for our employees under our
own accounts instead of making payments under third-party accounts. The contributions to social
insurance premium and housing provident funds made through third-party accounts may not be viewed
as fully compliance, and as a result, we may be required by competent governmental authorities to pay
the outstanding amount. Pursuant to the agreements entered into between such third-party human
resources agencies and our Company or our relevant PRC subsidiaries or Onshore Holdcos, the third-
party human resources agencies have the obligation to pay social insurance premium and housing
provident funds for our relevant employees. These third-party human resources agencies have
confirmed in writing that they have paid such contributions. As of the Latest Practicable Date, neither
our Company nor our relevant PRC subsidiaries or Onshore Holdcos had received any administrative
penalty or labour arbitration application from employees for its agency arrangement with third-party
human resources agencies. In addition, if such human resource agencies fail to pay the social insurance
premium or housing provident funds for and on behalf of our employees in full as required by
applicable PRC laws and regulations, we may also be subject to additional contribution, late payment
fee and/or penalties imposed by the relevant PRC governmental authorities for failing to discharge our
obligations in relation to payment of social insurance and housing provident funds as an employer or
be ordered to rectify. This in turn may adversely affect our financial condition and results of
operations. Although we plan to comply with requests and requirements, if any, imposed by the
relevant regulatory agencies on us with respect to our engagement of third-party human resources
agencies, we cannot assure you that we would not be required to make additional payments or be
subject to penalties or liabilities in relation to our existing practise.
We may be required to register our operating offices outside of our residence addresses as branch
offices under PRC law.
Under PRC law, a company setting up premises for business operations outside its residence
address must register them as branch offices with the relevant local market regulation bureau at the
place where the premises are located and obtain business licences for them as branch offices. We may
not be able to register branch offices in a timely manner due to complex procedural requirements and
relocation of branch offices from time to time. As of the Latest Practicable Date, we were able to
register branch offices in certain locations where we had significant presence, while we cannot assure
you that we are and we have always been able to register branch offices in all locations where we have
business operations. If the PRC regulatory authorities determine that we are in violation of the relevant
laws and regulations, we may be subject to penalties, including fines, confiscation of income and
suspension of operation. If we become subject to these penalties, our business, results of operations,
financial condition and prospects could be adversely affected.
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Fluctuations in exchange rates could have a material and adverse effect on our results of operations
and the value of your investment.
The conversion of Renminbi into other currencies, including the Hong Kong dollar and U.S.
dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the
U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and
other currencies is affected by changes in China’s political and economic conditions and by China’s
foreign exchange policies, among other things. We cannot assure you that Renminbi will not
appreciate or depreciate significantly in value against the 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.
Governmental control of currency conversion may limit our ability to utilise our revenues effectively
and affect the value of your investment.
The PRC government imposes controls on the convertibility of the RMB into foreign currencies
and, in certain cases, the remittance of currency out of China. We receive substantially all of our
revenues in RMB. Under our current corporate structure, our Company in the Cayman Islands may rely
on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may
have. Under existing PRC foreign exchange regulations, payments of current account items, such as
profit distributions and trade and service-related foreign exchange transactions, can be made in foreign
currencies without prior approval from SAFE by complying with certain procedural requirements.
Therefore, our wholly foreign-owned subsidiaries in China are able to pay dividends in foreign
currencies to us without prior approval from SAFE, subject to the condition that the remittance of such
dividends outside of the PRC complies with certain procedures under PRC foreign exchange
regulation, such as the overseas investment registrations by our shareholders or the ultimate
shareholders of our corporate shareholders who are PRC residents. But approval from or registration
with appropriate governmental authorities or delegated banks is required where RMB is to be
converted into foreign currency and remitted out of China to pay capital expenses such as the
repayment of loans denominated in foreign currencies. The PRC government may also at its discretion
restrict access in the future to foreign currencies for current account transactions. If the foreign
exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign
currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.
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PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign
investors, which could make it more difficult for us to pursue growth through acquisitions in China.
PRC regulations and rules concerning mergers and acquisitions including the Regulations on
Mergers and Acquisitions of Domestic Companies by Foreign Investors (ԻᒅྤʫΆ
), or the M&A Rules, 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 the 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, (ii) such transaction involves factors that have or may have impact on the national
economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise
which holds famous trademarks or PRC time-honoured brands. Moreover, the Anti-Monopoly Law of
the PRC (Amended in 2022) (
ج2022͍)) requires that the anti-trust
governmental authority shall be notified in advance of any concentration of undertaking if certain
thresholds are triggered. In addition, the Provisions for the Implementation of the Security Review
System for Merger and Acquisition of Domestic Enterprises by Foreign Investors
̮਷ҳ
 issued by the MOFCOM that became effective in September
2011 specify that mergers and acquisitions by foreign investors that raise “national defence and
security” concerns and mergers and acquisitions through which foreign investors may acquire de facto
control over domestic enterprises that raise “national security” concerns are subject to strict review by
the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including
by structuring the transaction through a proxy or contractual control arrangement. In the future, we
may grow our business by acquiring complementary businesses. Complying with the requirements of
the above-mentioned regulations and other relevant rules to complete such transactions could be time
consuming, and any required approval processes, including obtaining approval from the MOFCOM or
its local counterparts or other relevant government agencies 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 defence and security” or “national security” concerns. However, the MOFCOM 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 the PRC, including
those by way of entering into contractual control arrangements with target entities, may be closely
scrutinised or prohibited. Our ability to expand our business or maintain or expand our market share
through future acquisitions would as such be materially and adversely affected. Furthermore, the
Security Review Measures for Foreign Investments (
), or the New Security
Review Measures, promulgated by the NDRC and the MOFCOM in 2020, provide that a review
working institution for foreign investment security review will be jointly established by the NDRC and
the MOFCOM, which will be responsible for organising, coordinating and guiding the security review
of foreign investments, and if a proposed foreign investment meets the conditions as stipulated in the
New Security Review Measures, the foreign investor or the relevant domestic party engaged shall
report such case to the review working institution and the proposed foreign investment shall not be
conducted if the review working institution decides to prohibit such investment. However, as the New
Security Review Measures was newly issued, there are still substantial uncertainties as to its
interpretation and implementations in practise.
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We may be subject to the approval or other requirements of the CSRC or other PRC governmental
authorities in connection with future capital raisings activities.
On 6 July 2021, the General Office of the CPC Central Committee and the General Office of
the State Council jointly promulgated Opinions on Strictly Cracking Down on Illegal Securities
Activities (
จԈ), or the July 6 Opinion, which called for the
enhanced administration and supervision of overseas-listed China-based companies, proposed to revise
the relevant regulation governing the overseas issuance and listing of shares by such companies and
clarified the responsibilities of competent domestic industry regulators and governmental authorities.
The July 6 Opinion aims to achieve this by establishing a regulatory system and revising the existing
rules for overseas listings of Chinese entities and affiliates including potential extraterritorial
application of Chinese securities laws. As of the Latest Practicable Date, due to the lack of further
clarifications or detailed rules and regulations, there are still uncertainties regarding the interpretation
and implementation of the July 6 Opinion, including on China-based companies with a VIE structure.
On 17 February 2023, the CSRC promulgated the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies (
ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ༊Б፬
) (the “ Overseas Listing Trial Measures ”), and relevant five guidelines, which came into effect
as of 31 March 2023. According to the Overseas Listing Trial Measures, PRC domestic enterprises that
seek to offer and list securities in overseas markets, either in direct or indirect means (the “ Overseas
Offering and Listing ”), are required to fulfil the filing procedure with the CSRC and submit filing
reports, legal opinions, and other relevant documents. For details, see “Regulations— PRC
regulations—Regulations relating to M&A rules and overseas listings”.
According to the Notice on Arrangements for Record Filing Administration of Overseas
Offering and Listing of Domestic Enterprises (
) and
the relevant replies by the officials from CSRC which are both promulgated with the Overseas Listing
Trial Measures simultaneously, the PRC domestic companies that have already been listed overseas or
meet all of the following conditions shall be deemed as existing issuers (
πඎΆุ) (the “ Existing
Issuers”) : (1) before the effective date of the Overseas Listing Trial Measures (i.e. 31 March 2023),
the PRC domestic enterprise’s application for its indirect Overseas Offering and Listing has been
approved by the relevant overseas regulatory authorities or securities exchanges (for example, a listing
hearing has been passed by the Stock Exchange), and the PRC domestic enterprise does not need to
re-perform the regulatory procedures for offering and listing with the overseas regulatory authorities or
overseas stock exchanges (for example, a new listing hearing is required by the Stock Exchange); and
(2) the PRC domestic enterprise completes the Overseas Offering and Listing on or prior to
30 September 2023. The Existing Issuers are not required to complete the filling procedures
immediately, and they shall be required to file with the CSRC when subsequent matters such as
refinancing are involved.
Our PRC Legal Advisor is of the view that this Listing shall be deemed as indirect Overseas
Offering and Listing by PRC domestic enterprise. Therefore, if there is no re-hearing required by the
Stock Exchange after 31 March 2023 and this Listing can be completed on or prior to 30 September
2023, we will not be required to file with the CSRC with respect to this Listing.
If it is determined that we are subject to any CSRC filing, other governmental authorisation or
requirements for this Listing and future offering activities and reporting obligations, we cannot assure
you that we could complete such filing or meet such requirements in a timely manner or at all. Under
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such circumstance, we, and our personnel directly in charge and other personnel with direct
responsibility, may be warned, fined or subject to other disciplinary measures as set forth in the
Overseas Listing Trial Measures.
Furthermore, given that the Overseas Listing Trial Measures were recently promulgated, there
remains substantial uncertainties as to their interpretation, application, and enforcement and how they
will affect our operations and our future financing.
In addition, we cannot guarantee that new rules or regulations promulgated in the future
pursuant to the July 6 Opinion, the Overseas Listing Trial Measures, the Special Management
Measures (Negative List) for the Access of Foreign Investment (2021 version) (
ɝतй၍
݄(૶ఊ)(2021و)) and any other related PRC Laws, rules and regulations will not impose
any additional requirement on us or otherwise tightening the regulations on companies with a VIE
structure. If it is determined that we are subject to any CSRC approval, filing, other governmental
authorisation or requirements for future capital raising activities, we may fail to obtain such approval
or meet such requirements in a timely manner or at all. Such failure may adversely affect our ability to
finance the development of our business and may have a material adverse effect on our business and
financial conditions. Furthermore, any uncertainty and/or negative publicity regarding such an
approval, filing or other requirements may also have a material adverse effect on the offering of our
Shares.
PRC regulations relating to the establishment of offshore special purpose companies by PRC
residents may subject our PRC resident beneficial owners or our wholly foreign-owned subsidiaries
in China to liability or penalties, limit our ability to inject capital into these subsidiaries, limit these
subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise
adversely affect us.
The Circular on Foreign Exchange Administration for Financing and Round-Trip Investments by
Domestic Residents via Overseas Special Purpose Vehicles (
ʮ̡ፄ༟
), or SAFE Circular 75, requires PRC residents to register with the
relevant local branch of SAFE before establishing or controlling any company outside of China, referred
to as an offshore special purpose company, for the purpose of raising funds from overseas to acquire or
exchange the assets of, or acquiring equity interests in, PRC entities held by such PRC residents and to
update such registration in the event of any significant changes with respect to that offshore company.
SAFE promulgated the Circular on Foreign Exchange Administration of Overseas Investments and
Financing and Round-Trip Investments by Domestic Residents via Special Purpose Vehicles (
ྤʫ
), or SAFE Circular 37, in July
2014, which replaced SAFE Circular 75. SAFE Circular 37 requires PRC residents to register with local
branches of SAFE in connection with their direct establishment or indirect control of an offshore entity,
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, referred to in SAFE Circular 37 as
a “special purpose vehicle.” The term “control” under SAFE Circular 37 is broadly defined as the
operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the
offshore special purpose vehicles or PRC companies by such means as acquisition, trust, proxy, voting
rights, repurchase, convertible bonds or other arrangements. SAFE Circular 37 further requires
amendment to the registration in the event of any changes with respect to the basic information of the
special purpose vehicle, such as changes in a PRC resident individual shareholder, name or operation
period; or any significant changes with respect to the special purpose vehicle, such as increase or
decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other
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material event. If the shareholders of the offshore holding company who are PRC residents do not
complete their registration with the local SAFE branches, the PRC subsidiaries may be prohibited from
distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the
offshore company, and the offshore company may be restricted in its ability to contribute additional
capital to its PRC subsidiaries. Moreover, failure to comply with SAFE registration and amendment
requirements described above could result in liability under PRC law for evasion of applicable foreign
exchange restrictions. In February 2015, SAFE issued the Circular on Further Simplifying and Improving
the Policies for Foreign Exchange Administration for Direct Investment (
ટҳ
), or SAFE Circular 13, which took effect on 1 June 2015. SAFE Circular 13 has
delegated to the qualified banks the authority to register all PRC residents’ investment in “special
purpose vehicle” pursuant to SAFE Circular 37, except that those PRC residents who have failed to
comply with SAFE Circular 37 will remain to fall into the jurisdiction of the local SAFE branch and must
make their supplementary registration application with the local SAFE branch.
We have requested PRC residents who we know hold direct or indirect interest in our Company
to make the necessary applications, filings and amendments as required under SAFE Circular 37 and
other related rules. However, we may not be informed of the identities of all the PRC residents holding
direct or indirect interest in our Company, and we cannot provide any assurance that these PRC
residents will comply with our request to make or obtain any applicable registrations or comply with
other requirements under SAFE Circular 37 or other related rules. The failure or inability of our PRC
resident shareholders to comply with the registration procedures set forth in these regulations may
subject us to fines and legal sanctions, restrict our cross-border investment activities, limit the ability of
our wholly foreign-owned subsidiaries in China to distribute dividends and the proceeds from any
reduction in capital, share transfer or liquidation to us, and we may also be prohibited from injecting
additional capital into these subsidiaries. Moreover, failure to comply with the various foreign
exchange registration requirements described above could result in liability under PRC law for
circumventing applicable foreign exchange restrictions. As a result, our business operations and our
ability to distribute profits to you could be materially and adversely affected.
Any failure to comply with PRC regulations regarding the registration requirements for employee
stock incentive plans may subject the PRC plan participants or us to fines and other legal or
administrative sanctions.
Pursuant to the Circular on Relevant Issues Concerning the Foreign Exchange Administration
over Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed Companies
(
), issued by SAFE in
February 2012, employees, directors, supervisors and other senior management participating in any
stock incentive plan of an overseas publicly listed company who are PRC citizens or who are non-PRC
citizens residing in China for a continuous period of not less than one year, subject to a few exceptions,
are required to register with SAFE through a domestic qualified agent, which could be a PRC
subsidiary of such overseas listed company, and complete certain other procedures. We and our
directors, executive officers and other employees who are PRC citizens or who reside in the PRC for a
continuous period of not less than one year and who have been granted restricted shares, restricted
share units or options are subject to these regulations. Failure to complete the SAFE registrations may
subject them to fines and legal sanctions and may also limit our ability to contribute additional capital
into our wholly foreign-owned subsidiaries in China and limit these subsidiaries’ ability to distribute
dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional
incentive plans for our directors and employees under PRC law.
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Our business benefits from certain financial incentives and discretionary policies granted by local
governments. Expiration of, or changes to, these incentives or policies would have an adverse effect
on our results of operations.
In the past, local governments in China granted certain financial incentives from time to time to
our PRC subsidiaries or Consolidated Affiliated Entities as part of their efforts to encourage the
development of local businesses. The timing, amount and criteria of government financial incentives
are determined within the sole discretion of the local governmental authorities and cannot be predicted
with certainty before we actually receive any financial incentive. We generally do not have the ability
to influence local governments in making these decisions. Local governments may decide to reduce or
eliminate incentives at any time. We cannot assure you of the continued availability of the government
incentives currently enjoyed by our PRC subsidiaries or Consolidated Affiliated Entities. Any
reduction or elimination of incentives would have an adverse effect on our results of operations.
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification
could result in unfavourable tax consequences to us and our non-PRC shareholders.
Under the Enterprise Income Tax Law of the PRC, or the EIT Law, and its implementation
rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is
considered a resident enterprise and will be subject to the enterprise income tax on its global income at
the rate of 25%. The implementation rules define the term “de facto management body” as the body
that exercises full and substantial control and overall management over the business, productions,
personnel, accounts and properties of an enterprise. On 22 April 2009, the SAT issued the Notice
Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax
Resident Enterprises on the Basis of De Facto Management Bodies (
ΆุԱኽ
), known as Circular 82, which provides certain
specific criteria for determining whether the “de facto management body” of a PRC-controlled
enterprise that is incorporated offshore is located in China. According to Circular 82, an offshore
incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a
PRC tax resident by virtue of having its “de facto management body” in China and will be subject to
PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the
primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the
enterprise’s financial and human resource matters are made or are subject to approval by organisations
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.
Although Circular 82 only applies to offshore enterprises controlled by PRC enterprises or PRC
enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the
circular may reflect the SAT’s general position on how the “de facto management body” text should be
applied in determining the tax resident status of all offshore enterprises. If the PRC tax authorities
determine that we should be classified as a PRC resident enterprise for PRC tax purposes, our global
income will be subject to income tax at a uniform rate of 25%, which may have a material adverse
effect on our financial condition and results of operations. Notwithstanding the foregoing provision,
the EIT Law also provides that, if a PRC resident enterprise directly invests in another PRC resident
enterprise, the dividends received by the investing PRC resident enterprise from the invested PRC
resident enterprise are exempted from income tax, subject to certain conditions. However, it remains
unclear how the PRC tax authorities will interpret the PRC tax resident treatment of an offshore
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company with indirect ownership interests in PRC resident enterprises through intermediary holding
companies.
Moreover, if the PRC tax authorities determine that our Company is a PRC resident enterprise
for PRC enterprise income tax purposes, gains realised on the sale or other disposal of our Shares may
be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises, or 20% in the case of
non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains
are deemed to be from PRC sources. Any such tax may reduce the returns on your investment in our
Shares.
We face uncertainties with respect to indirect transfers of equity interests in PRC resident
enterprises by their non-PRC holding companies, and heightened scrutiny over acquisition
transactions by the PRC tax authorities may have a negative impact on potential acquisitions we
may pursue in the future.
The State Administration of Taxation has issued several rules and notices to tighten the scrutiny
over acquisition transactions in recent years, including the Notice on Strengthening Administration of
Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (
͏Άุ
) issued in December 2009, or SAT Circular 698, the Notice on
Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises (੻೼
ʮѓ) promulgated issued in March 2011, or SAT Circular 24, and the Notice on
Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-PRC Resident
Enterprises (
ʮѓ) issued in February 2015, or
SAT Circular 7. Pursuant to these rules and notices, if a non-PRC resident enterprise indirectly
transfers PRC taxable properties, referring to properties of an establishment or a place in the PRC, real
estate properties in the PRC or equity investments in a PRC tax resident enterprise, by disposing of
equity interest in an overseas holding company, such indirect transfer should be deemed as a direct
transfer of PRC taxable properties and gains derived from such indirect transfer may be subject to the
PRC withholding tax at a rate of up to 10%. SAT Circular 7 sets out several factors to be taken into
consideration by tax authorities in determining whether an indirect transfer has a reasonable
commercial purpose. An indirect transfer satisfying all the following criteria will be deemed to lack
reasonable commercial purpose and be taxable under PRC law: (i) 75% or more of the equity value of
the intermediary enterprise being transferred is derived directly or indirectly from the PRC taxable
properties; (ii) at any time during the one-year period before the indirect transfer, 90% or more of the
asset value of the intermediary enterprise (excluding cash) is comprised directly or indirectly of
investments in the PRC, or 90% or more of its income is derived directly or indirectly from the PRC;
(iii) the functions performed and risks assumed by the intermediary enterprise and any of its
subsidiaries that directly or indirectly hold the PRC taxable properties are limited and are insufficient
to prove their economic substance; and (iv) the foreign tax payable on the gain derived from the
indirect transfer of the PRC taxable properties is lower than the potential PRC income tax on the direct
transfer of such assets. Nevertheless, the indirect transfer falling into the safe harbour available under
SAT Circular 7 may not be subject to PRC tax and the scope of the safe harbour includes qualified
group restructuring as specifically set out in SAT Circular 7, public market trading and tax treaty
exemptions.
In October 2017, the SAT released the Public Notice Regarding Issues Concerning the
Withholding of Non-resident Enterprise Income Tax at Source (
ϔᖮϞᗫ
ʮѓ), or SAT Public Notice 37, effective from December 2017. SAT Public Notice 37
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replaced a series of important circulars, including, but not limited to, SAT Circular 698, and revised the
rules governing the administration of withholding tax on China-source income derived by a
non-resident enterprise. SAT Public Notice 37 provides for certain key changes to the current
withholding regime, for example, the withholding obligation for a non-resident enterprise deriving
dividend arises on the date on which the payment is actually made rather than on the date of the
resolution that declared the dividends.
Under SAT Circular 7 and SAT Public Notice 37, the entities or individuals obligated to pay
the transfer price to the transferor are the withholding agents and must withhold the PRC income tax
from the transfer price if the indirect transfer is subject to the PRC enterprise income tax. If the
withholding agent fails to do so, the transferor should report to and pay the tax to the PRC tax
authorities. In the event that neither the withholding agent nor the transferor fulfils their obligations
under SAT Circular 7 and SAT Public Notice 37, according to the applicable law, apart from imposing
penalties such as late payment interest on the transferor, the tax authority may also hold the
withholding agent liable and impose a penalty of 50% to 300% of the unpaid tax on the withholding
agent. The penalty imposed on the withholding agent may be reduced or waived if the withholding
agent has submitted the relevant materials in connection with the indirect transfer to the PRC tax
authorities in accordance with SAT Circular 7.
However, as there is a lack of clear statutory interpretation, we face uncertainties on the
reporting and consequences on future private equity financing transactions, share exchange or other
transactions involving the transfer of shares in our Company by investors that are non-PRC resident
enterprises, or sale or purchase of shares in other non-PRC resident companies or other taxable assets
by us. Our Company and other non-resident enterprises in our group may be subject to filing
obligations or being taxed if our Company and other non-resident enterprises in our group are
transferors in such transactions, and may be subject to withholding obligations if our Company and
other non-resident enterprises in our group are transferees in such transactions. For the transfer of
shares in our Company by investors that are non-PRC resident enterprises, our PRC subsidiaries may
be requested to assist in the filing under the rules and notices. As a result, we may be required to
expend valuable resources to comply with these rules and notices or to request the relevant transferors
from whom we purchase taxable assets to comply, or to establish that our Company and other
non-resident enterprises in our group should not be taxed under these rules and notices, which may
have a material adverse effect on our financial condition and results of operations. There is no
assurance that the tax authorities will not apply the rules and notices to our offshore restructuring
transactions where non-PRC residents were involved if any of such transactions were determined by
the tax authorities to lack reasonable commercial purpose. As a result, we and our non-PRC resident
investors may be at risk of being taxed under these rules and notices and may be required to comply
with or to establish that we should not be taxed under such rules and notices, which may have a
material adverse effect on our financial condition and results of operations or such non-PRC resident
investors’ investments in us. We have conducted acquisition transactions in the past and may conduct
additional acquisition transactions in the future. We cannot assure you that the PRC tax authorities will
not, at their discretion, 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. Heightened
scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on
potential acquisitions we may pursue in the future.
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RISKS RELATED 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 Sole Overall Coordinator (for itself 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.
The trading price of the Shares may be volatile which could result in substantial losses to you.
In addition, 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, including significant price declines after their initial public offerings.
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.
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 substantial 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 substantial shareholders are subject to certain lock-up periods beginning
on the date on which trading in our Shares commences on the Stock Exchange. 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. In addition, certain existing shareholders of our Shares are not subject to
lock-up agreements. Market sale of Shares by such shareholders and the availability of these Shares for
future sale may have negative impact on the market price of our Shares. See “History, reorganization
and corporate structure— Pre-IPO Investments—Principal terms of the Pre-IPO Investments” for
further details of the existing shareholders not subject to lock-up agreements.
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You 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 only pay dividends either out of profits or
share premium account, and provided always that in no circumstances may a dividend be paid if this
would result in our Company being unable to pay its debts at they fall due in the ordinary course of
business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend
may exceed the amount recommended by our board of directors. Even if our board of directors decides
to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on,
among other things, our future results of operations and cash flow, our capital requirements and
surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition,
contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the
return on your investment 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. You may not realise a return on your investment in our Shares and
you may even lose your entire investment in our Shares.
There can be no assurance of the accuracy or completeness of certain facts, forecasts and other
statistics obtained from various government publications, market data providers and other
independent third-party sources, contained in this document.
This document, particularly the section headed “Industry Overview”, contains information and
statistics relating to the healthcare and pharmaceutical market. Certain information and statistics have
been derived from various government publications, other third party reports, either commissioned by
us or publicly accessible, and other publicly available sources. We believe that the sources of the
information are appropriate sources for such information, and we have taken reasonable care in
extracting and reproducing such information. However, the information from official government
sources has not been independently verified by us, the Sole Overall Coordinator, the Joint Global
Coordinators, the Sole Sponsor, the Joint Bookrunners, the Joint Lead Managers, the Underwriters or
any other party 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 practise, which may result in the statistics being inaccurate
or not comparable to statistics produced for other economies. Accordingly, the information from
official government sources contained herein should not be unduly relied upon. In addition, we cannot
assure you that such information is stated or compiled on the same basis or with the same degree of
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RISK FACTORS
accuracy as similar statistics presented elsewhere. In any event, you should consider carefully the
importance placed on such information or statistics.
You 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 document, there has been
press and media coverage regarding us and the Global Offering. Such press and media coverage may
include references to certain information that does not appear in this document, including certain
operating and financial information and projections, valuations and other information. We have not
authorised 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 document, we disclaim
responsibility for it and you should not rely on such information.
There will be a time gap of several business days between pricing and trading of our Shares offered
in the Global Offering. Holders of our Shares are subject to the risk that trading prices of our
Shares could fall during the period before trading of our Shares begins.
The Offer Price of our Shares is expected to be determined on the Price Determination Date.
However, our Shares will not commence trading on the Hong Kong Stock Exchange until they are
delivered, which is expected to be five Hong Kong business days after the pricing date. As a result,
investors may not be able to sell or deal in our Shares during that period. Accordingly, holders of our
Shares are subject to the risk that the price of our Shares could fall before trading begins as a result of
unfavourable market conditions, or other adverse developments, that could occur between the time of
sale and the time trading begins.
You may face difficulties in protecting your interests, and your ability to protect your rights through
Hong Kong courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the Laws of the Cayman Islands. Our
corporate affairs are governed by our Memorandum and Articles of Association, the Companies Act,
and the common law of the Cayman Islands. The rights of shareholders to take action against our
directors, actions by our minority shareholders and the fiduciary duties of our directors owed to us
under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands.
The common law of the Cayman Islands is derived in part from comparatively limited judicial
precedent in the Cayman Islands as well as from the common law of England, the decisions of whose
courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of
our shareholders and the fiduciary duties of our directors owed to us under Cayman Islands law are not
as clearly established as they would be under statutes or judicial precedent in some. In particular, the
Cayman Islands has a less developed body of securities laws than Hong Kong, which has more fully
developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies
may not have the standing to initiate a shareholder derivative action in Hong Kong courts.
Shareholders of Cayman Islands exempted companies like us have no general rights under
Cayman Islands law to inspect corporate records (other than copies of the Memorandum and Articles
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RISK FACTORS
of Association, the register of mortgages and charges and any special resolutions passed by our
shareholders) or to obtain copies of lists of shareholders of these companies. Our directors have
discretion under our Memorandum and Articles of Association that will become effective immediately
prior to completion of this offering to determine whether or not, and under what conditions, our
corporate records may be inspected by our shareholders, but are not obliged to make them available to
our shareholders (save that for so long as any part of the share capital of the Company is listed on the
Stock Exchange, any shareholder may inspect any register of members of the Company maintained in
Hong Kong (except when the register of members of the Company is closed in accordance with the
Hong Kong Companies Ordinance) without charge and require the provision to him of copies or
extracts of such register in all respects as if the Company were incorporated under and were subject to
the Hong Kong Companies Ordinance). This may make it more difficult for you to obtain the
information needed to establish any facts necessary for a shareholder motion or to solicit proxies from
other shareholders in connection with a proxy contest.
As a result of all of the above, our public shareholders may have more difficulty in protecting
their interests in the face of actions taken by management, members of our Board or controlling
shareholders than they would as public shareholders of a company incorporated in Hong Kong. For a
discussion of significant differences between the provisions of the Companies Act of the Cayman
Islands and the laws applicable to companies incorporated in Hong Kong and their shareholders, see
“Summary of the constitution of our Company and Cayman Islands company law” in Appendix III to
this document.
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WAIVERS AND EXEMPTIONS
In preparation for Listing, we have sought the following waivers from strict compliance with
the Listing Rules and exemptions from the Companies (Winding Up and Miscellaneous Provisions)
Ordinance.
WAIVER IN RESPECT OF MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient management
presence in Hong Kong. This will normally mean 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 Rule 8.12 of the Listing Rules.
Our Group’s management headquarters, senior management, business operations and assets are
primarily based outside Hong Kong. The Directors consider that the appointment of two executive
directors who will be ordinarily resident in Hong Kong would not be beneficial to, or appropriate for,
our Group and therefore would not be in the best interests of our Company or the Shareholders as a
whole.
Accordingly, we have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with Rule 8.12 of the Listing Rules.
We will ensure that there is an effective channel of communication between the Stock
Exchange and us by way of the following arrangements:
(a) pursuant to Rule 3.05 of the Listing Rules, we have appointed and will continue to
maintain two authorised representatives who shall act at all times as the principal channel
of communication with the Stock Exchange. Each of our authorised representatives will be
readily contactable by the Stock Exchange by telephone and/or e-mail to deal promptly
with enquiries from the Stock Exchange. Both of our authorised representatives are
authorised to communicate on our behalf with the Stock Exchange. At present, our two
authorised representatives are Mr. Fei Chen (“ Mr. Chen ”) and Ms. Fung Wai Sum
(“Ms. Fung”) (as the designated primary authorised representative).
(b) pursuant to Rule 3.20 of the Listing Rules, each Director has provided their contact
information to the Stock Exchange and to the authorised representatives. This will ensure
that the Stock Exchange and the authorised representatives should have means for
contacting all Directors promptly at all times as and when required;
(c) we will endeavour to ensure that each Director who is not ordinarily resident in Hong
Kong must possess or can apply for valid travel documents to visit Hong Kong and can
meet with the Stock Exchange within a reasonable period; and
(d) pursuant to Rules 3A.19 of the Listing Rules, we have retained the services of Maxa
Capital Limited as compliance adviser, who will act as an additional channel of
communication with the Stock Exchange.
WAIVER IN RESPECT OF JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary of a listed
company must be an individual who, by virtue of their academic or professional qualifications or
relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of
company secretary.
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WAIVERS AND EXEMPTIONS
Pursuant to Note 1 to Rule 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 Institute of Chartered Secretaries;
(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159 of the
Laws of Hong Kong); and
(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 they played;
(b) familiarity with the Listing Rules and other relevant law 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 appointed Mr. Chen and Ms. Fung, as joint company secretaries. See “Directors
and senior management—Company secretaries” for their biographies.
Ms. Fung is a Chartered Secretary, a Chartered Governance Professional and an Associate of
both The Hong Kong Chartered Governance Institute and The Chartered Governance Institute in the
United Kingdom. Ms. Fung obtained her master’s degree in professional accounting and corporate
governance from City University of Hong Kong in November 2008. Ms. Fung therefore meets the
qualification requirements under Rule 3.28 Note 1 of the Listing Rules and is in compliance with Rule
8.17 of the Listing Rules.
As set out in Code Provision C.6 in Part 2 of the Corporate Governance Code under Appendix
14 to the Listing Rules, the company secretary should be an employee of the Company and have
day-to-day knowledge of the Company’s affairs. The Company’s principal business activities are
outside Hong Kong. There are practical difficulties finding persons who possesses Mr. Chen’s
day-to-day knowledge of the Company’s affairs while also having the academic and professional
qualifications required. The Company believes that Mr. Chen, by virtue of his knowledge and past
experience in handling corporate administrative matters of the Company, is capable of discharging the
functions of a joint company secretary. Further, the Company believes that it would be in the best
interests of the Company and the corporate governance of the Group to have as its joint company
secretary a person such as Mr. Chen, who is an employee of the Company and who has day-to-day
knowledge of the Company’s affairs. Mr. Chen has the necessary nexus to the Board and close
working relationship with management of the Company in order to perform the function of a joint
company secretary and to take the necessary actions in the most effective and efficient manner.
Accordingly, while Mr. Chen does not possess the formal qualifications required of a company
secretary, we have applied 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.
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WAIVERS AND EXEMPTIONS
Pursuant to Guidance Letter HKEX-GL108-20 issued by the Stock Exchange, the waiver is
granted on two conditions:
(a) Mr. Chen must be assisted by Ms. Fung, who possesses all the requisite qualifications and
experience required under Rule 3.28 of the Listing Rules and is appointed as a joint
company secretary throughout the three-year waiver period; and
(b) the waiver will be revoked if there are material breaches of the Listing Rules by our
Company.
Prior to the end of the three-year period, the qualifications and experience of Mr. Chen and the
need for on-going assistance of Ms. Fung will be further evaluated by our Company and our Company
will liaise with the Stock Exchange to enable it to assess whether Mr. Chen, having benefited from the
assistance of Ms. Fung for the preceding three years, will have acquired the skills necessary to carry
out the duties of company secretary and the relevant experience within the meaning of Rule 3.28
Note 2 of the Listing Rules so that a further waiver will not be necessary.
WAIVER IN RESPECT OF CONTINUING CONNECTED TRANSACTIONS
We have entered into, and expect to continue, the Contractual Arrangements that will constitute
continuing connected transactions of our Company under the Listing Rules upon Listing. Accordingly,
we have applied to the Stock Exchange for, and the Stock Exchange has granted, waivers from strict
compliance with Chapter 14A of the Listing Rules. See “Connected Transactions” for further details,
including the conditions for the waiver.
WAIVER AND EXEMPTION IN RESPECT OF THE 2019 SHARE INCENTIVE PLAN
The Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
prescribes certain disclosure requirements in relation to the share options granted by our Company:
(a) Rule 17.02(1)(b) of the Listing Rules stipulates that all the terms of a scheme must be
clearly set out in this document. Our Company is also required to disclose in this
document full details of all outstanding shares and their potential dilution effect on the
shareholdings upon listing as well as the impact on the earnings per share arising from the
exercise of such outstanding shares.
(b) Paragraph 27 of Part A of Appendix 1 to the Listing Rules requires our Company to set
out in this document particulars of any capital of any member of our Group that is under
option, or agreed conditionally or unconditionally to be put under option, including the
consideration for which the option was or will be granted and the price and duration of the
option, and the name and address of the grantee.
(c) Paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance requires our Company to set out in this document,
among other things, details of the number, description and amount of any shares in or
debentures of our Company which any person has, or is entitled to be given, an option to
subscribe for, together with the certain particulars of the option, namely the period during
which it is exercisable, the price to be paid for shares or debentures subscribed for under it,
the consideration (if any) given or to be given for it or for the right to it and the names and
addresses of the persons to whom it was given.
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WAIVERS AND EXEMPTIONS
As at the Latest Practicable Date, our Company had granted 20,968,044 outstanding options
under the 2019 Share Incentive Plan to 648 grantees to subscribe for an aggregate of 41,936,088
Shares, representing approximately 6.63% of the total number of Shares in issue immediately
following the Global Offering (subject to the Assumptions). See “Statutory and general information—
Share Incentive Plan” in Appendix IV for further details.
We have applied (i) to the Stock Exchange for a waiver from strict compliance with the
requirements under Rule 17.02(1)(b) of, and paragraph 27 of Appendix 1A to, the Listing Rules (the
“ESOP Waiver ”); and (ii) to the SFC for a certificate of exemption under section 342A of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance exempting the Company from
strict compliance with the disclosure requirements under paragraph 10(d) of Part I of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to the
options granted under the 2019 Share Incentive Plan (the “ ESOP Exemption”), on the ground that the
ESOP Waiver and the ESOP Exemption will not prejudice the interest of the investing public and strict
compliance with the above requirements would be unduly burdensome for our Company for the
following reasons, among others:
(a) as at the Latest Practicable Date, (i) our Company granted options which remain
outstanding under the 2019 Share Incentive Plan to 648 grantees, comprising (i) 4
Director, senior management and other connected persons of our Company, who
collectively have an aggregate interest in 15,556,366 Shares underlying their outstanding
options; and (ii) 644 grantees who are not Directors, members of the senior management
or otherwise connected persons of our Company, who collectively have an aggregate
interest in 26,379,722 Shares underlying their outstanding options;
(b) our Directors consider that it would be unduly burdensome to disclose in this document
full details of all the outstanding options granted by our Company to each of the grantees,
which would significantly increase the cost and time required for information compilation
and preparation for strict compliance with such disclosure requirements. For example, we
would need to collect and verify the addresses of over 600 grantees to meet the disclosure
requirement. Further, the disclosure of the personal details of each grantee, including their
names, addresses and the number of options granted, may require obtaining consent from
the grantees in order to comply with personal data privacy laws and principles and it
would be unduly burdensome for our Company to obtain such consents given the number
of grantees;
(c) the grant and exercise in full of the shares under the 2019 Share Incentive Plan would not
cause any material adverse impact in the financial position of our Company and
non-compliance with all of the disclosure requirements set out above would not prevent
our Company from providing its potential investors with an informed assessment of the
activities, assets, liabilities, financial position, management and prospects of our
Company; and
(d) material information on the options has been disclosed in this document to provide
prospective investors with sufficient information to make an informed assessment of the
potential dilutive effect and impact on earnings per Share of the options in making their
investment decision, and such information includes: (i) a summary of the latest terms of
the 2019 Share Incentive Plan; (ii) the aggregate number of Shares subject to the options
and percentage of our Shares of which such number represents; (iii) the dilutive effect and
the impact on earnings per Share upon full exercise of the options immediately following
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WAIVERS AND EXEMPTIONS
the Global Offering (subject to the Assumptions); (iv) full details of outstanding options
granted to (1) Directors and members of the senior management and connected persons of
our Company (2) consultants; and (3) other grantees holding outstanding options
representing at least 260,000 Shares each, on an individual basis, are disclosed in this
document, and such details include all particulars required under Rule 17.02(1)(b) of, and
paragraph 27 of Appendix 1A to, the Listing Rules and paragraph 10 of Part I of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance; (v) in
respect of the outstanding options granted under the 2019 Share Incentive Plan to grantees
other than those referred to in item (iv) of this paragraph, by bands of (A) options to
subscribe for 1 to 20,000 Shares; (B) options to subscribe for 20,001 to 40,000 Shares;
(C) options to subscribe for 40,001 to 60,000 Shares; (D) options to subscribe for 60,001
to 80,000; and (E) options to subscribe for more than 80,000 Shares, details including
(1) the aggregate number of the grantees and the number of Shares subject to such band;
(2) the consideration paid for the grant of such options; and (3) the exercise period and the
exercise price for such options; and (vi) the particulars of the ESOP Waiver and ESOP
Exemption granted by the Stock Exchange and the SFC, respectively. This disclosure is
consistent with the conditions ordinarily expected by the Stock Exchange in similar
circumstances as set out in Guidance Letter HKEX-GL11-09 issued in July 2009 and
updated in March 2014 by the Stock Exchange.
In light of the above, the Directors are of the view that the grant of the ESOP Waiver and the
ESOP Exemption will not prejudice the interests of the investing public.
The Stock Exchange has granted the ESOP Waiver on the conditions that:
(a) on an individual basis, full details of the outstanding options granted under the 2019 Share
Incentive Plan to each of (i) the Director and the senior management, connected persons of
the Company; and (ii) any grantee who is a consultant; and (iii) any other grantee holding
outstanding options representing at least 260,000 Shares, will be disclosed in “Statutory
and general information—Share Incentive Plan” in Appendix IV as required under Rule
17.02(1)(b) of, and paragraph 27 of Appendix 1A to, the Listing Rules, and paragraph 10
of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous
Provisions) Ordinance;
(b) for outstanding options granted under the 2019 Share Incentive Plan to other grantees
(being other than those set out in (a) above), by bands of (A) options to subscribe for 1 to
20,000 Shares; (B) options to subscribe for 20,001 to 40,000 Shares; (C) options to
subscribe for 40,001 to 60,000 Shares; (D) options to subscribe for 60,001 to 80,000; and
(E) options to subscribe for more than 80,000 Shares, details including (1) the aggregate
number of the grantees and the number of Shares subject to such band; (2) the
consideration paid for the grant of such options; and (3) the exercise period and the
exercise price for such options, will be disclosed in this document;
(c) the aggregate number of Shares underlying outstanding options granted under the 2019
Share Incentive Plan and the percentage of our Company’s total issued share capital
represented by such number of Shares as at the Latest Practicable Date will be disclosed in
this document;
(d) the dilutive effect and impact on earnings per Share upon the full exercise of the options
granted under the 2019 Share Incentive Plan will be disclosed in this document;
(e) a summary of the major terms of the 2019 Share Incentive Plan will be disclosed in this
document;
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WAIVERS AND EXEMPTIONS
(f) the particulars of the waiver will be disclosed in this document;
(g) a full list of the grantees under the 2019 Share Incentive Plan, containing full particulars
required under Rule 17.02(1)(b) and paragraph 27 of Appendix 1A of the Listing Rules
and paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, will be made available for public inspection in
person in accordance with “Documents delivered to the Registrar of Companies and
available on display—Document available for inspection” in Appendix V;
(h) the ESOP Exemption will be granted by the SFC.
The SFC has granted the ESOP Exemption on the conditions that:
(a) on an individual basis, full details of the outstanding options granted under the 2019 Share
Incentive Plan to each of (i) the Directors and the senior management, connected persons
of the Company; and (ii) any grantee who is a consultant; and (iii) any other grantee
holding outstanding options representing at least 260,000 Shares, will be disclosed in
“Statutory and general information—Share Incentive Plans” in Appendix IV as required
under paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance;
(b) for outstanding options granted under the 2019 Share Incentive Plan to other grantees
(being other than those set out in (a) above), by bands of (A) options to subscribe for 1 to
20,000 Shares; (B) options to subscribe for 20,001 to 40,000 Shares; (C) options to
subscribe for 40,001 to 60,000 Shares; (D) options to subscribe for 60,001 to 80,000; and
(E) options to subscribe for more than 80,000 Shares, details including (1) the aggregate
number of the grantees and the number of Shares subject to such band; (2) the
consideration paid for the grant of such options; and (3) the exercise period and the
exercise price for such options, will be disclosed in this document;
(c) the particulars of this exemption will be disclosed in this document and this document will
be issued on or before 15 June 2023; and
(d) a full list of the grantees under the 2019 Share Incentive Plan, containing full particulars
required under Rule 17.02(1)(b) and paragraph 27 of Appendix 1A of the Listing Rules
and paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, will be made available for public inspection in
person in accordance with “Documents delivered to the Registrar of Companies and
available on display—Document available for inspection” in Appendix V.
Further details of the 2019 Share Incentive Plan are set out in “Statutory and general
information—Share Incentive Plans” in Appendix IV.
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS DOCUMENT
This document, for which our Directors (including any proposed director who is named as such
in this document) 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 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 document is accurate and complete in all material respects and not misleading or deceptive, and
that there are no other matters the omission of which would make any statement herein or this
document misleading.
THE LISTING
Application for listing on the Stock Exchange
We have applied to the Listing Committee for approval to list, and permission to deal in, on the
Stock Exchange (a) the Shares in issue (including the Shares on conversion of the Preferred Shares);
(b) the Shares to be issued pursuant to the Global Offering (including the Shares which may be issued
pursuant to the exercise of the Over-allotment Option); and (c) the Shares to be issued pursuant to the
Share Incentive Plans.
Dealings in the Shares on the Stock Exchange are expected to commence on Wednesday,
28 June 2023. Except as otherwise disclosed in this document, no part of our Shares 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. All the Offer Shares will be registered on the Hong Kong register of members
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 the Stock Exchange.
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 Listing Date or on any other date as determined by HKSCC. Settlement of transactions
between participants of the Stock Exchange is required to take place in CCASS on the second business
day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and
CCASS Operational Procedures in effect from time to time. All necessary arrangements have been
made for the Shares to be admitted into CCASS. Investors should seek the advice of their stockbroker
or other professional adviser for details of those settlement arrangements and how such arrangements
will affect their rights and interests.
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
THE HONG KONG PUBLIC OFFERING
Hong Kong Underwriting
This document 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 document
and the GREEN Application Form set out 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 document and the GREEN Application Form, and on the terms and
subject to the conditions set out herein and therein. No person is authorised to give any information in
connection with the Global Offering or to make any representation not contained in this document and
the GREEN Application Form, and any information or representation not contained herein and therein
must not be relied upon as having been authorised by (i) our Company, the Sole Sponsor, the Sole
Overall Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Capital Market Intermediaries and any of the Underwriters, (ii) any of our or their affiliates or any
of our or their respective directors, officers, employees, advisers, agents or representatives, or (iii) any
other party involved in the Global Offering.
The Listing is sponsored by the Sole Sponsor and the Global Offering is managed by the Sole
Overall Coordinator. The Hong Kong Public Offering is fully underwritten by the Hong Kong
Underwriters under the terms of the Hong Kong Underwriting Agreement on a conditional basis. The
International Offering is expected to be fully underwritten by the International Underwriters under the
terms of the International Underwriting Agreement.
See “Underwriting” for further information about the Underwriters and the underwriting
arrangement.
Offer Price
The Offer Price is expected to be fixed between the Sole Overall Coordinator (for itself and on
behalf of the Underwriters) and our Company on the Price Determination Date. The Price
Determination Date is expected to be on or around Tuesday, 20 June 2023 and, in any event, not later
than Tuesday, 27 June 2023 (unless otherwise determined between the Sole Overall Coordinator (for
itself and on behalf of the Underwriters) and our Company). If, for whatever reason, the Offer Price is
not agreed between the Sole Overall Coordinator and our Company on or before Tuesday, 27 June
2023, the Global Offering will not become unconditional and will lapse immediately.
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 document.
Procedures for applying for Hong Kong Offer Shares
The application procedures for the Hong Kong Offer Shares are set forth in the section headed
“How to apply for Hong Kong Offer Shares” in this document and on the GREEN Application Form.
Over-allotment Option and Stabilisation
Details of the arrangements relating to the Over-allotment Option and stabilisation are set out in
the section headed “Structure of the Global Offering”. Assuming that the Over-allotment Option is
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
exercised in full, our Company may be required to allot and issue up to an aggregate of 2,371,200
additional Shares.
Selling restrictions on offer and sale of Shares
Each person acquiring the Offer Shares will be required to, or be deemed by their acquisition of
Offer Shares to, confirm that they are aware of the restrictions on offers of the Offer Shares described
in this document and on the GREEN Application Form.
No action has been taken to permit a public offering of the Offer Shares in any jurisdiction
other than in Hong Kong, or the distribution of this document in any jurisdiction other than Hong
Kong. Accordingly, this document 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
authorised or to any person to whom it is unlawful to make such an offer or invitation. The distribution
of this document and/or the GREEN Application Form and the offering and sale 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 authorisation by the
relevant securities regulatory authorities or an exemption therefrom. In particular, the Offer Shares
have not been publicly offered or sold, directly or indirectly, in the PRC.
OTHER INFORMATION FOR READERS
Professional tax advice recommended
Potential investors in the Global Offering are recommended to consult their professional
advisers if they are in any doubt as to the taxation implications of subscribing for, holding, and dealing
in the Shares or exercising any rights attached to them. It is emphasised that none of us, the Sole
Sponsor, the Sole Overall Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Capital Market Intermediaries, the Underwriters, any of our or their affiliates, or
any of our or their respective directors, officers, employees, advisers, agents or representatives or any
other party involved in the Global Offering accepts responsibility for any tax effects on, or liabilities
of, any person resulting from the subscription, purchase, holding, disposal of or dealing in the Shares
or exercising any rights attached to them.
Share Register and stamp duty
Our principal register of members will be maintained in the Cayman Islands by our Principal
Share Registrar. Our Hong Kong branch register of members will be maintained in Hong Kong by our
Hong Kong Share Registrar.
All Offer Shares issued pursuant to applications made in the Global Offering will be registered
on our Hong Kong branch register of members. Dealings in the Shares registered in our Hong Kong
register of members will be subject to Hong Kong stamp duty. The current ad valorem rate of Hong
Kong stamp duty of 0.13% on the higher of the consideration for or the market value of the Shares and
it is charged to the purchaser on every purchase and to the seller on ever sale of the Shares. In other
words, a total of 0.26% is currently payable on a typical sale and purchase transaction of the Shares.
For further details of Hong Kong stamp duty, please seek professional tax advice.
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
INFORMATION ABOUT THIS DOCUMENT
Exchange rate conversion
Solely for convenience purposes, this document includes translations among certain amounts
denominated in Renminbi, Hong Kong dollars and U.S. dollars. No representation is made that the
Renminbi or Hong Kong dollar amounts can be or could have been at the relevant dates converted into
another currency at the rates indicated, or at all.
Unless otherwise indicated (i) the translation between Renminbi and Hong Kong dollars was
based on the rate of RMB1.00 to HK$1.10177, and (ii) the translation between U.S. dollars and Hong
Kong dollars was based on the rate of US$1.00 to HK$7.83524.
Translation
If there is any inconsistency between the English version of this document and the Chinese
translation of this document, the English version of this document shall prevail unless otherwise stated.
However, the English names of any Laws, governmental authorities, institutions, natural persons or
other entities for which no official English translation exists are unofficial translations for your
reference only and their names in the original language shall prevail.
Rounding
Certain amounts and percentage figures included in this document have been subject to
rounding adjustments, or have been rounded to a set number of decimal places. Accordingly, figures
shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.
Any discrepancies in any table or chart in this document between total and sum of amounts listed
therein are due to rounding.
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
DIRECTORS
Name Address
I.D. issuing
territory
Executive Directors
Mr. Buzhen Zhang Room 301 (duplex unit), No. 26, Huancui
Street, Baiyun District, Guangzhou,
China
China
Mr. Fei Chen Flat F, 15/F, Tower 10, Park Avenue,
18 Hoi Ting Road, Tai Kok Tsui,
Kowloon, Hong Kong
Hong Kong, China
Non-executive Directors
Mr. Frank Lin Room 1001, Tower W2,
Beijing Oriental Plaza, 1 East Chang’an
Avenue, Beijing, China
America
Mr. Ziyang Zhu Building B, East Area,
Huanan Xincheng, Nancun Town,
Panyu District, Guangzhou,
Guangdong, China
Hong Kong, China
Independent non-executive Directors
Ms. Rong Shao No. 58 Jiangjun Road, Jiangning District,
Nanjing, Jiangsu, China
China
Mr. Sam Hanhui Sun No. 64 Donggong Street,
Dongcheng District,
Beijing, China
China
Mr. Hongqiang Zhao Room 1101, Unit 3, Building 3, Yard 3,
Jingda Road, Chaoyang District,
Beijing, China
America
See “Directors and senior management” for further details.
PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor and Sole Overall
Coordinator
China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
Joint Global Coordinators China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Bookrunners China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Fosun International Securities Limited
Suite 2101-2105, 21/F, Champion Tower
3 Garden Road
Central, Hong Kong
Joint Lead Managers China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Fosun International Securities Limited
Suite 2101-2105, 21/F, Champion Tower
3 Garden Road
Central, Hong Kong
Futu Securities International (Hong Kong) Limited
Unit C1-2, 13/F, United Centre
No.95 Queensway
Admiralty
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des Voeux Road Central
Hong Kong
Valuable Capital Limited
Room 2808, 28/F, China Merchants Tower
Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
Capital Market Intermediaries China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
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
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Fosun International Securities Limited
Suite 2101-2105, 21/F, Champion Tower
3 Garden Road
Central, Hong Kong
Futu Securities International (Hong Kong) Limited
Unit C1-2, 13/F, United Centre
No.95 Queensway
Admiralty
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des Voeux Road Central
Hong Kong
Valuable Capital Limited
Room 2808, 28/F, China Merchants Tower
Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
Patrons Securities Limited
Unit 3214, 32/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan, Hong Kong
Legal advisers to our Company As to Hong Kong and U.S. Laws
Skadden, Arps, Slate, Meagher & Flom and affiliates
42/F, Edinburgh Tower, The Landmark
15 Queen’s Road Central
Central, Hong Kong
As to PRC Laws
Fangda Partners
24/F, HKRI Centre Two, HKRI Taikoo Hui
288 Shi Men Yi Road
Shanghai, China
As to Cayman Islands and BVI Laws
Harney Westwood & Riegels
3501 The Centre, 99 Queen’s Road Central,
Central, Hong Kong
Legal advisers to the Sole Sponsor
and the Underwriters
As to Hong Kong and U.S. Laws
Freshfields Bruckhaus Deringer
55/F, One Island East
Taikoo Place
Quarry Bay, Hong Kong
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
As to PRC Laws
Commerce & Finance Law Offices
12-14/F, China World Office 2
No. 1 Jianguomenwai Avenue, Chaoyang District
Beijing, China
Reporting accountant and auditor Deloitte Touche Tohmatsu
Certified Public Accountants
35/F, One Pacific Place
88 Queensway
Hong Kong
Industry consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.
Suite 2504
Wheelock Square
1717 Nanjing West Road
Shanghai, China
Receiving bank Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
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CORPORATE INFORMATION
Headquarters Yaoshibang Building
No. 8 Brand Street
TIT Creative Industry Zone
No. 397 Xingang Middle Road
Guangzhou, China
Principal place of business in Hong
Kong
5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Registered office in the Cayman
Islands
Vistra (Cayman) Limited
P.O. Box 31119 Grand Pavilion, Hibiscus Way
802 WestBay Road
Grand Cayman KY1-1205
Cayman Islands
Company website
www.ysbang.cn
(the information contained on this website does not form
part of this document)
Joint company secretaries /
Authorised representatives Mr. Fei Chen
Yaoshibang Building
No. 8 Brand Street
TIT Creative Industry Zone
No. 397 Xingang Middle Road
Guangzhou, China
Ms. Emily Fung (also known as Ms. Fung Wai Sum)
ACG, HKACG
5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Audit committee Mr. Hongqiang Zhao (Chairman)
Mr. Sam Hanhui Sun
Ms. Rong Shao
Remuneration committee Mr. Sam Hanhui Sun (Chairman)
Mr. Hongqiang Zhao
Ms. Rong Shao
Nomination committee Mr. Buzhen Zhang (Chairman)
Mr. Hongqiang Zhao
Mr. Sam Hanhui Sun
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CORPORATE INFORMATION
Principal share registrar and
transfer office
Tricor Services (Cayman Islands) Limited
Third Floor, Century Yard
Cricket Square, P.O. Box 902
Grand Cayman, KY1-1103
Cayman Islands
Hong Kong Share Registrar Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Compliance adviser Maxa Capital Limited
Unit 1908, Harbour Center
25 Harbour Road
Wanchai, Hong Kong
Principal banks Ping An Bank, Shenzhen Bantian Branch
4/F, Ping An Bank Building
No. 1099 Shennan Middle Road
Shenzhen, China
China Merchants Bank, Guangzhou Branch
No.5 Huasui Road
Zhu Jiang New Town, Tianhe District
Guangzhou, China
Bank Of China, Guangzhou Panyu Branch
No.338 Qing He Dong Road
Panyu District
Guangzhou, China
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INDUSTRY OVERVIEW
Certain information and statistics presented in this section and elsewhere in this document
were derived from official government publications and other publicly available sources as well
as from the Frost & Sullivan Report, a market research report prepared by Frost & Sullivan, an
independent market research and consulting company that was commissioned by us. We believe
that the sources of the information in this section and elsewhere in this document are appropriate
sources for such information and reasonable care has been taken in extracting and reproducing
such information. We have no reason to believe that such information is false or misleading or
that any fact has been omitted that would render such information false or misleading. The
information from official government sources has not been independently verified by us or any
other parties involved in the Global Offering, or any of our or their respective directors, officers,
or representatives, and no representation is given as to its accuracy. For discussions of risks
relating to our industries, see “Risk Factors—Risks Related to Our Business and Industry.” Our
directors confirm, after making reasonable enquires and exercising reasonable care, that there is
no adverse change in the market information since the date of publication of the Frost & Sullivan
Report that would qualify, contradict or have an impact on the information in this section.
SOURCE OF INFORMATION
We commissioned Frost & Sullivan to conduct a detailed research and analysis of the
pharmaceutical market in China. Frost & Sullivan is an independent global market research and
consulting company which was founded in 1961 and is based in the United States. Services provided
by Frost & Sullivan include market assessments, competitive benchmarking, and strategic and market
planning for a variety of industries. We have agreed to pay a fee of RMB850,000 to Frost &Sullivan in
connection with the preparation of the Frost & Sullivan Report. We are of the view that the payment of
such fee does not impair the fairness of the conclusions drawn in the Frost & Sullivan Report. The
commissioned report was prepared by Frost & Sullivan independent of the influence of the Company
and other interested parties. We have extracted certain information from the Frost &Sullivan Report in
this section, as well as in the sections headed “Summary,” “Risk Factors,” “Business,” “Financial
Information” and elsewhere in this document to provide our potential investors with a more
comprehensive presentation of the industry in which we operate. Except as otherwise noted, all of the
data and forecasts contained in this section are derived from the Frost & Sullivan Report.
Frost & Sullivan prepared its report based on its in-house database, independent third party
reports and publicly available data from reputable industry organisations. Where necessary,
Frost &Sullivan contacts companies operating in the industry to gather and synthesise information in
relation to the market, prices and other relevant information. Frost & Sullivan believes that the basic
assumptions used in preparing the Frost & Sullivan Report, including those used to make future
projections, are factual, correct and not misleading. Frost & Sullivan has independently analysed the
information, but the accuracy of the conclusions of its review largely relies on the accuracy of the
information collected. Frost & Sullivan research may be affected by the accuracy of these assumptions
and the choice of these primary and secondary sources.
During the preparation of the Frost & Sullivan Report, Frost & Sullivan performed both
primary and secondary research, and obtained knowledge, statistics, information on and industry
insights into the pharmaceutical markets in which we operate. Primary research involved interviewing
key industry experts and leading industry participants. Secondary research involved analysing data
from various publicly available data sources. The Frost & Sullivan Report was compiled based on the
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INDUSTRY OVERVIEW
following assumptions: (1) the overall social, economic, and political environment in China is expected
to remain stable during the forecast period; (2) relevant key drivers are likely to drive the continued
growth of China’s pharmaceutical market throughout the forecast period; and (3) there is no extreme
force majeure or unforeseen industry regulations in which the industry may be affected in either a
dramatic or fundamental way. All forecasts in relation to market size are based on the general
economic conditions as of the Latest Practicable Date, which would be adjusted if the COVID-19
outbreak persists or escalates and has an unpredicted negative impact on the general economy.
OVERVIEW OF CHINA’S HEALTHCARE INDUSTRY
China has one of the largest healthcare markets in the world. According to Frost & Sullivan, the
total healthcare expenditure in China reached RMB7.6 trillion in 2021, ranked the second highest
globally, and is expected to achieve and maintain a stable growth in the future at a CAGR of 9.5% and
reach RMB13.0 trillion in 2027.
According to Frost & Sullivan, China’s healthcare expenditure is mainly driven by:
 Rising per capita disposable income . Against the backdrop of continuing economic
development and urbanisation, the per capita disposable income in China is expected to
grow at a CAGR of 7.5% from RMB36,883 in 2022 to RMB52,851 in 2027. Rising per
capital disposable income leads to increasing purchasing power of Chinese citizens which
in turn continuously boosts the growth of healthcare-related demand.
 Ageing population . China has become an ageing society with declining birth rates and
increasing life span. Chinese population over 65 years old is estimated to increase from
211.3 million in 2022 to 273.6 million in 2027, approximately 14.9% in 2022 and 19.0%
in 2027 as a percentage of the total population. As the elderly generally have more demand
for disease management and treatment, ageing demographics is expected to create huge
market opportunities in pharmaceutical and healthcare services.
 Prevalence of typical chronic diseases . Chronic diseases, such as diabetes, hepatitis and
chronic nephritis, are closely related to lifestyle and an ageing population and have
become prevalent in China. The percentage of healthcare expenditure in relation to chronic
diseases to total healthcare expenditure in China increased from 57.3% in 2018 to 69.9%
in 2022, and is estimated to further grow to approximately 75.1% in 2027. The prevalence
of typical chronic diseases is boosting the demand for pharmaceutical products and health
management from patients.
 Favourable regulations and policies. China has issued a series of policies to encourage the
development of the healthcare industry. According to the Healthy China 2030 Planning
Outline, promulgated by CPC Central Committee and the State Council and effective in
October 2016, healthcare service capabilities are expected to be improved significantly by
2030 through a combination of favourable policies and implementation, including the
establishment of a high-quality and efficiently integrated healthcare service system and a
comprehensive public health service system, the further enhancement of the health
insurance system, leadership in healthcare technological innovation, and considerable
improvement in the quality of healthcare services. In addition, the Implementation Plan to
Build a Quality and Efficient Healthcare Service System Under the 14th Five-year Plan ,
promulgated by the National Development and Reform Commission and National Health
Commission and effective in June 2021, provides that a high quality and efficiently
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INDUSTRY OVERVIEW
integrated healthcare service system will be established by 2025, leading to a
comprehensive system, reasonable systematic design, clear division of labour,
complementary functions, close collaboration, efficient operation and economic resilience.
The development of the healthcare industry in China has become a focus at the national
level, which has greatly fuelled the sound development of the industry.
OVERVIEW OF CHINA’S PHARMACEUTICAL MARKET
Market size and industry value chain of China’s pharmaceutical market
China’s pharmaceutical market has witnessed a stable growth driven by the diversified
pharmaceutical supply and growing pharmaceutical demand. According to Frost & Sullivan, China’s
pharmaceutical market reached RMB1.9 trillion, in terms of retail sales value, in 2022. The retail sales
value is expected to grow at a CAGR of 4.1% from RMB1.9 trillion in 2022 to RMB2.4 trillion in
2027.
China’s Pharmaceutical Market, by Retail Sales Value (2018-2027E)
RMB in Billion
2018-2022 2022-2027E
CAGR 6.1% 4.1%
1,533.4 1,633.0 1,714.7
1,817.6
1,941.2 2,038.2 2,130.0 2,215.2 2,303.8 2,372.9
20202019 2027E2018 2021 2022 2024E 2023E 2025E 2026E
Source: Frost & Sullivan
China’s pharmaceutical industry value chain mainly consists of three parts, namely
pharmaceutical manufacturing, pharmaceutical circulation, and pharmaceutical retail. Pharmaceutical
manufacturing is the process where pharmaceutical companies purchase raw materials and packing
materials to manufacture pharmaceutical products . Pharmaceutical circulation is the process where
pharmaceutical distributors and vendors procure pharmaceuticals from upstream pharmaceutical
companies, and sell to other pharmaceutical distributors and vendors, downstream hospitals,
pharmacies and other retail terminals. Pharmaceutical retail is the process where end customers
purchase pharmaceuticals from the retail terminals.
The pharmaceutical market can be divided into the in-hospital market and the
outside-of-hospital market, based on the types of retail terminals. In-hospital terminals mainly include
hospitals at various levels, and outside-of-hospital terminals mainly include pharmacies and primary
healthcare institutions. Based on the size and operating model, pharmacies can be further categorised
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INDUSTRY OVERVIEW
into large chain pharmacies (with 500 and more stores), small and medium-sized chain pharmacies
(with less than 500 stores) and monomer pharmacies. Primary healthcare institutions can be further
categorised into health service centres/stations (at street level and township level), village clinics and
private clinics. Given that small and medium-sized chain pharmacies, monomer pharmacies and
primary healthcare institutions are usually located in lower tier cities, remote areas, or uptown areas
and provide services to address the pharmaceutical demand from the primary level, they are
collectively named as outside-of-hospital primary terminals.
Overview of Industry Value Chain of China’s Pharmaceutical Market
Source: Frost & Sullivan
Fragmented Outside-of-hospital Market
Compared with in-hospital terminals, outside-of-hospital terminals, especially the terminals at
the primary healthcare level, are greater in number, smaller in size, and dispersed and fragmented. In
addition, outside-of-hospital terminals can only serve the area within a limited radius, covering end
customers within certain geographical areas. Therefore, pharmaceutical procurement by
outside-of-hospital terminals features high frequency, small ticket size and scattered SKU demand. In
the meantime, limited liquidity, low inventory level and fast turnover of outside-of-hospital terminals
require prompt and in-time delivery. In addition, the capital turnover of outside-of-hospital terminals is
usually higher than that of in-hospital terminals. Such capital turnover of outside-of-hospital terminals
is typically within one month. The chart below demonstrates the main difference between the
in-hospital and the outside-of-hospital market.
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INDUSTRY OVERVIEW
Comparison of In-hospital Market and Outside-of-hospital Market
Source: Frost & Sullivan
On the supply side of the outside-of-hospital market, as of the end of 2022, China had
approximately 14,000 pharmaceutical distributors, with the top three in aggregate representing around
27% market share, far lower than that in the U.S. which is more than 65% market share. According to
Frost & Sullivan, although the number of pharmaceutical distributors in China is not expected to
experience a notable growth in the next five years, the market will continue to stay highly fragmented
for a certain period of time.
On the retail side of the outside-of-hospital market, the main terminals are pharmacies and
primary healthcare institutions. On the pharmacy front, as of the end of 2021, China had a total of
600,000 pharmacies, 21.0% of which were large chain pharmacies and 79.0% of which were small and
medium-sized chain pharmacies and monomer pharmacies. The top 20 pharmacies only account for
approximately 27% market share in 2020, lower than that of 50% in the U.S. For primary healthcare
institutions, as of the end of 2021, China had around 977,790 primary healthcare institutions, largely
located in lower tier cities and remote areas. According to Frost & Sullivan, the number of
outside-of-hospital terminals is expected to maintain a stable growth momentum in the near future,
with the number of pharmacies growing at a CAGR of 7.4% from 2020 to around 928,000 in 2027, and
the number of primary healthcare institutions growing at a CAGR of 1.3% from 2020 to around
1,064,000 in 2026.
Growing pharmaceutical circulation market driven by the outside-of-hospital segment
Following similar trajectory of the retail market, China’s pharmaceutical circulation market
experienced meaningful growth in the past five years from RMB1.3 trillion in 2018 to RMB1.8 trillion
in 2022, representing a CAGR of 6.9%. In the next five years, the pharmaceutical circulation market is
estimated to maintain a stable growth at a CAGR of 4.1% and rise from RMB1.8 trillion in 2022 to
RMB2.1 trillion in 2027.
The outside-of-hospital pharmaceutical circulation market is expected to be an important driver
of the growth in the overall pharmaceutical circulation market. The outside-of-hospital pharmaceutical
circulation market grew from RMB371.6 billion in 2018 to RMB639.7 billion in 2022 at a CAGR of
14.5%, and the corresponding percentage of the overall pharmaceutical circulation market grew from
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INDUSTRY OVERVIEW
27.6% in 2018 to 36.5% in 2022. Over the next five years, the outside-of-hospital pharmaceutical
circulation market will grow further from RMB639.7 billion in 2022 to RMB1.0 trillion 2027 at a
CAGR of 9.6%, increasing the penetration rate of the overall circulation market from 36.5% in 2022 to
47.1% in 2027.
RMB in Billion
China’s Pharmaceutical Circulation Market, by GMV (2018-2027E)
CAGR 2018-2022 2022-2027E
Total 6.9% 4.1%
Outside of Hospitals 14.5% 9.6%
In Hospitals 3.4% 0.4%
973.0 1,040.0 1,066.7 1,097.1 1,113.5 1,120.4 1,119.2 1,121.3 1,132.5 1,135.5
371.6 412.5 474.6 552.2 639.7 724.8 806.8 882.9 951.3 1,011.0
1,344.6 1,452.5 1,541.3 1,649.3 1,753.2 1,845.2 1,926.0 2,004.2 2,083.7 2,146.6
27.6% 28.4%
30.8%
33.5%
36.5%
39.3%
41.9%
44.1% 45.7% 47.1%
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Outside-of-hospital/Total Outside-of-hospital In-hospital
Source: Frost & Sullivan
Key drivers of outside-of-hospital pharmaceutical circulation market
 Favourable policies on the prescription outflow. Sale of pharmaceuticals has historically
been the major revenue model of public hospitals in China. In the past, patients with a
doctor’s prescription could only purchase prescription drugs from the dispensary of a
hospital. In 2014, the Ministry of Commerce, together with the other five ministries and
commissions, jointly published the Notice on the Implementation of the Key Tasks of the
Healthcare Reform of 2014 to Enhance the Service Standards and Efficiency of
Pharmaceutical Circulation (“The Notice”). The Notice requires that retail pharmacies to
take responsibility for services provided by the outpatient dispensary of public hospitals as
well as other professional services. In addition, The Key Tasks for Deepening the Reform
of the Medical and Health System in 2016 , issued by the State Council in 2016, prohibited
hospitals from restricting the outside-of-hospital circulation of prescription drugs,
providing patients with the discretion to purchase prescription drugs from the outpatient
dispensary of a public hospital or from a retail pharmacy. The Key Tasks for Deepening
the Reform of the Medical and Health System in 2017 , issued in 2017, proposed to explore
the interlinkage and real-time sharing of information about prescriptions, medical
insurance settlements and the retail sales of pharmaceuticals among healthcare institutions.
These measures have been driving the outflow of prescription drugs from the in-hospital
market to the outside-of-hospital market, leading to increasing sales of prescription
pharmaceuticals in the outside-of-hospital market.
 Ever-rising threshold for introduction of new drugs to the in-hospital market. The national
government has long been vigorously supporting the R&D and promotion of new drugs,
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INDUSTRY OVERVIEW
and an increasing number of innovative drugs have been added to the National Drug
Reimbursement List . However, pharmaceutical companies are faced with difficulties of
introducing innovative drugs to the in-hospital market. According to Chinese
Pharmaceutical Association, of the innovative drugs for tumour treatment that were added
to the National Drug Reimbursement List in 2018-2019, only 15% to 25% had made their
way into the in-hospital market as of the third quarter of 2020. The rising entry threshold
for new drugs into hospitals is expected to drive those new drugs to flow to the
outside-of-hospital market, leading to a greater selection of SKUs that can be purchased by
end customers through pharmacies.
 Limited incentives to supply pharmaceuticals to the in-hospital market. In 2018, the
National Healthcare Security Administration published the Document on the Centralised
Procurement of Pharmaceuticals in 4+7 Cites , designating 11 cities, including Beijing,
Tianjin and Shanghai, as the first batch of cities to pilot the programme of centralised
pharmaceutical procurement, and the healthcare institutions were required to prioritise
the use of pharmaceuticals that were centralised procured. The first batch of drugs under
the centralised procurement scheme had their prices reduced by 52% on average, with
the sharpest price drop being over 90%. As of February 2022, the national government
had included seven batches of drugs into the “centralised procurement” (
ණʕમᒅ)
scheme, including as many as 290 SKUs. The consensus belief is that the centralised
procurement will become a norm, being implemented at a quickened pace and on a
wider scale. The centralised procurement will shift the business strategy focus of
pharmaceutical companies lean towards the outside-of-hospital market as a new
distribution channel.
 The trend towards medical resources being increasingly allocated to the primary level.
The development of primary healthcare resources has always been of the utmost
importance in China’s medical system reform. The Guiding Principles on the
Implementation of the Building of a Graded Diagnosis and Treatment System , issued by
the General Office of the State Council in 2015, requires to improve the graded diagnosis
and treatment system with a focus at the primary healthcare level. More detailed policies
at both the national level and local level were introduced afterwards. Despite favourable
policies, only about 50% of the patients in China had their diagnostic and treatment
demands fulfilled at primary healthcare institutions in 2022, indicating significant room
for growth at the primary healthcare level. These unmet demand resulted in patients
travelling to better equipped but exceedingly congested tertiary hospitals in higher tier
cities, exacerbating resource mismatch. As an integral part of the outside-of-hospital
market, primary healthcare institutions will play an increasingly important role in
residents’ medical consultations, medicine purchases, medical tests, treatment and other
areas.
 Technologies and new business models that facilitate the development of the
outside-of-hospital market. Advancements in the internet, big data, cloud computing, AI
and other technologies have injected new fuel to the traditional pharmaceutical circulation
industry. Digital pharmaceutical transactions have lifted geographical barriers, and the
management and application of transaction data have enhanced the efficiency of the
pharmaceutical supply chain. Compared with the in-hospital market, which is more
centralised and highly regulated, outside-of-hospital terminals are more flexible in terms
of the application of technologies and business models. Furthermore, outside-of-hospital
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INDUSTRY OVERVIEW
terminals are relatively fragmented and small in scale, meaning that they are in desperate
need of efficiency enhancement mechanisms enabled by technology.
OVERVIEW OF CHINA’S DIGITAL MARKET OF OUTSIDE-OF-HOSPITAL
PHARMACEUTICAL CIRCULATION SERVICES
Overview of China’s digital market of outside-of-hospital pharmaceutical circulation services
Development in the internet and big data has been digitalizing services for businesses
outside-of-hospital. Technologies are applied not only to facilitate online pharmaceutical circulation,
but also to empower the outside-of-hospital market players with digital solutions. Digitalised
pharmaceutical circulation can be divided into two business models, namely the marketplace and the
self-operation. Under the marketplace, a platform acts as a marketplace to bridge upstream
pharmaceutical sellers and downstream pharmaceutical buyers, and facilitate pharmaceutical
transactions online. Under the self-operation, a player develops and operates a self-owned supply
chain, directly supplying pharmaceuticals to outside-of-hospital terminals in the form of digital
commerce transactions on a platform.
Business Model of Digital Market of Outside-of-hospital Pharmaceutical Circulation Services
Marketplace
Provide a platform for distributors
and pharmacies & primary medical
institutions Distributors fulfil orders to buyers
Directly procure from distributors/pharmaceutical companies Out-of-hospital digital pharmaceutical
circulation service platforms
fulfil orders to buyers
Pharmaceutical
Companies
Pharmaceutical
Distributors
Self-operation
Pharmacies &
Primary healthcare
institutions
End customers
Provide digitalized
solutions to upstream
Provide digitalized
solutions to downstream
Digital Service
Platform of Outside-
of-hospital
Pharmaceutical
Circulation
Source: Frost & Sullivan
China’s digital market of outside-of-hospital pharmaceutical circulation services has
experienced rapid growth in recent years. According to Frost & Sullivan, the market size of China’s
digital market of outside-of-hospital pharmaceutical circulation services in terms of GMV grew from
RMB53.5 billion in 2018 to RMB180.2 billion in 2022 at a CAGR of 35.5%. However, the
digitalization of outside-of-hospital pharmaceutical circulation is still at an early stage. The
digitalisation of China’s outside-of-hospital pharmaceutical circulation started in around 2008 to 2010
and was mainly personal computer-based. Mobile-based digitalisation mode started in around 2014 to
2015, along with the sound development of information technology, such as 4G and 5G. As of 2022,
the penetration rate of China’s digital market of outside-of-hospital pharmaceutical circulation services
to the overall outside-of-hospital pharmaceutical circulation market, in terms of GMV, was merely
28.2%, while the percentage for the U.S. during the same period was over 35%, representing a
considerable headroom for further growth. According to Frost & Sullivan, the market size of China’s
digital market of outside-of-hospital pharmaceutical circulation services in terms of GMV is expected
to reach RMB358.3 billion in 2027 at a CAGR of 14.7%, when the penetration rate of China’s digital
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INDUSTRY OVERVIEW
market of outside-of-hospital pharmaceutical circulation services to the overall outside-of-hospital
pharmaceutical circulation market, in terms of GMV, is expected to achieve 35.4%.
RMB in Billion, %
China’s Digital Market of Outside-of-hospital Pharmaceutical Circulation Services, in terms of GMV
China’s Digital Market of Outside-of-hospital Pharmaceutical Circulation Services Penetration Rate
China’s Digital Market of Outside-of-hospital Pharmaceutical Circulation Services, in terms of GMV
(2018-2027E)
2018-2022 2022-2027E
CAGR 35.5% 14.7%
53.5
73.8
108.6
148.5
180.2
213.4
252.0
289.9
325.7
358.3
14.4%
17.9%
22.9%
26.9% 28.2% 29.4%
31.2%
32.8%
34.2% 35.4%
2023E2018 2019 2020 2021 2022 2027E 2024E 2025E 2026E
Source: Frost & Sullivan
Challenges faced by traditional outside-of-hospital pharmaceutical circulation market
There exist challenges in China’s outside-of-hospital pharmaceutical circulation industry,
especially at the primary healthcare level, in particular:
 Fragmented market with supply and demand mismatch. China’s outside-of-hospital
pharmaceutical transaction and service market is fragmented and regionalized. Large
pharmaceutical sellers lack the incentives to serve the demand, especially the long-tailed
SKUs, of the small and scattered buyers. Small pharmaceutical sellers may be unable or
unwilling to meet certain downstream demand due to lack of scale and resources. As a
result, buyers are underserved in many aspects, such as the choice of SKUs, the quantity
and quality of products, complicated procedures leading to slow fulfilment and delivery,
and the lack of pre-sale advices and after-sale services.
 Multi-layered market with high transaction costs and low efficiency. Pharmaceutical
circulation market is multi-layered in China, which is especially true at the primary
healthcare level. The multi-layered structure leads to low efficiency, high transaction costs
and unsatisfactory experience for buyers. Moreover, sellers lack the effective
technological means to quickly identify and locate market demand and thus they could not
always realise potential sales opportunities.
 Opaque pricing and product tracking difficulties. A highly fragmented and multi-layered
market leads to asymmetric information among the industry players, leading to problems
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INDUSTRY OVERVIEW
such as opaque pricing, difficulties in tracking products, unfair competition, etc., and
jeopardising the interests of the participants along the pharmaceutical value chain and the
overall safety of pharmaceutical transactions.
 Lack of digital management tools at the primary healthcare level. Lack of digital
management tools leaves basic management and operational needs, such as supply chain
management, in-store management and skill training, largely unsatisfied at the primary
healthcare level.
Emerging trends of digital service in the outside-of-hospital pharmaceutical circulation market
 Online platforms to overcome geographical barriers and connect businesses upstream and
downstream seamlessly. Online transaction platforms have become the dispensable
solution to address the low efficiency and high costs of traditional pharmaceutical
circulation, caused by the mismatch between supply and demand and the multi-layered
circulation system. Online platforms enable sellers to, at a low cost, reach buyers not
sufficiently covered by traditional models, thus bringing in the incremental sales
opportunities. Meanwhile, the platforms enable downstream small and medium-sized
buyers to procure a more diverse selection of SKUs to satisfy their long-tail demand.
Online platforms replace the traditional multi-layered circulation system and allow buyers
to form a virtual alliance, thus increasing their bargaining power and lowering
procurement costs. Furthermore, certificate exchange platforms have brought the
traditional offline certificate exchange process online, minimising human effort, reducing
the time required for the compliance with regulatory requirements, and improving the
accuracy of the information stored and exchanged.
 Digital solutions to improve the operating efficiency. The application of digitalised tools is
penetrating into every aspect of the operation and management of outside-of-hospital
market players. For pharmacies, SaaS solutions can help them achieve better inventory
management, shelf management, marketing and membership management, GSP
compliance and other aspects of daily operations. For pharmaceutical distributors, the
empowerment brought by technologies can significantly enhance their supply chain
capabilities, enabling them to achieve more precise procurement, more standardised
inventory management and better logistic solutions. This can in turn lower the cost of
products and increase the efficiency in fulfilment, resulting in better experience in
downstream transactions and therefore better buyer engagement.
 Data insights to identify and monetise more business opportunities. The accumulation of
transaction data on online platforms provides foundation for digital marketing. With
sophisticated big data analytic tools, service providers can offer valuable data insights to
upstream players, allowing them to accurately capture downstream demand so that they
can promote their products tailored for such demand. In addition, industry players also
create digital marketing means, such as group buy and livestreaming, allowing upstream
players to access and interact with the target downstream more effectively.
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COMPETITIVE LANDSCAPE AND ENTRY BARRIERS OF CHINA’S DIGITAL MARKET
OF OUTSIDE-OF-HOSPITAL PHARMACEUTICAL CIRCULATION SERVICES
Competitive landscape
The players in China’s digital market of outside-of-hospital pharmaceutical circulation services,
in terms of the business model of digitalised pharmaceutical circulation business, can be divided into
two types. Type one concerns pure online platforms and type two concerns traditional offline
pharmaceutical distributors who establish and operate online platforms. The market is dominated by
type one players, whose business models mainly include online marketplace that matches upstream
supply and downstream demand and charges a commission, and self-operation business that builds and
operates self-owned supply chain and directly sells to the downstream in the form of digital commerce
transactions. The online platforms also provide digital solutions as value-added services to the
upstream and downstream. Such initiative allows the platform to integrate transaction information
among the platform and the terminals, enabling sellers and buyers to transact on the platform more
conveniently and efficiently. In addition, by introducing digital solutions that can help improve
operating efficiency, platforms are able to enhance user engagement and promote brand recognition.
According to Frost & Sullivan, currently the competition in China’s digital market of outside-of-
hospital pharmaceutical circulation services is concentrated, with the five leading major players
accounting for over 63.5% of the market share. The following table presents the major players in
China’s digital market of outside-of-hospital pharmaceutical circulation services:
Company(1)
GMV
(RMB
million for
the twelve
months in
2022)
Market
Share
(Calculated
based on
GMV)
Market
Ranking
(Calculated
based on
GMV)
MAB
(Monthly
average for
the twelve
months in
2022)
Market
Ranking
(Calculated
based on
MAB)
Percentage
of GMV in
2022 from
marketplace
model
Percentage
of GMV in
2022 from
self-
operation
model
YSB Inc. 37,833 21.0% 1 308,000 1 59.8% 40.2%
Competitor A(2) 23,000 12.8% 2 120,000 4 99.0% 1.0%
Competitor B(3) 20,000 11.1% 3 230,000 2 100% 0
Competitor C(4) 17,969 10.0% 4 175,000 3 25.4% 74.6%
Competitor D(5) 17,101 9.5% 5 110,000 5 <5% >95%
Source: Frost & Sullivan
Notes:
(1) Identities of the major players are commercially sensitive information. Disclosure of such information might negatively impact our
operations.
(2) Competitor A is a pharmaceutical wholesale platform officially launched in 2017 and offers the nation-wide pharmaceutical circulation
service to terminals, including pharmacies and primary health institutions. Company A could also provide digital solutions, such as ERP
system, to improve its clients’ business efficiency.
(3) Competitor B is a pharmaceutical services company founded in Wuhan in 2015, primarily providing B2B pharmaceutical circulation
services under marketplace model, with digital medical training services provided as part of its innovated businesses.
(4) Competitor C is a listed pharmaceutical e-commerce company in NYSE, founded in Shanghai in 2013, primarily providing B2B
pharmaceutical circulation services under both marketplace model and self-operation model.
(5) Competitor D is a listed pharmaceutical services company in Shanghai Stock Exchange, founded in Wuhan in 1999, primarily providing
B2B pharmaceutical circulation services in self-operation model, pharmaceutical logistics services, pharmaceutical retailing services and
pharmaceutical manufacturing services.
Entry Barriers
 User base and engagement. The scale and engagement of users are important to online
platforms. The flywheel effect is created when a larger buyer base attracts more sellers to
the platform, while more sellers provide a wider variety of products, which can further
attract more buyers. In addition, comprehensive value-added services provided by
platforms can cultivate the consumption habit of users, further improving the user
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engagement. The first mover advantage of leading platforms allows them to develop a
diverse and loyal user base and thus create high entry barriers for the new entrants. Unless
a large amount of subsidies is provided, users on existing platforms are reluctant to switch.
Furthermore, given the fact that platforms provide users with digital solutions to improve
their working efficiency in daily operation and management, the costs for them to switch
platforms would be high.
 Product quality and brand awareness. Pharmaceutical circulation is highly regulated, and
product quality is particularly important considering the nature of pharmaceuticals.
Therefore, downstream terminals, when choosing a platform, have stringent requirements
on product quality and fulfilment capability. Leading platforms existing in the industry for
years have accumulated important know-how, resources and experience, thus could
cultivate strong brand awareness and trustworthy partnership with users. In contrast, it
would take a long time for new entrants to initiate the relationship, accumulate experience,
create a standardised management system, and ultimately build a trustworthy brand image.
 Data analytical and technological capabilities. Data is core to digitalised transactions.
Data analytical capability is a key competitive edge of a platform. In addition, it is also
crucial for platforms to develop and commercialise advanced technologies. Leading
platforms have accumulated massive transaction data, and have made long-time
investment in acquiring and training information technology talents and improving
technologies. The deep data insights, industry know-how and technological barriers they
have built make it difficult for new entrants to copy and surpass them in the short term.
OVERVIEW OF AND OUTLOOK FOR CHINA’S INDEPENDENT CLINICAL
LABORATORY (ICL) MARKET
Independent clinical laboratories (“ICLs”) are allowed to provide independent clinical testing
or pathological diagnostic services without involving hospitals. Hospitals outsource their tests and
diagnostic tasks to ICLs to achieve meaningful economies of scale. The large-scale operation and
professional division of labour of ICLs have significantly enhanced testing efficiency.
According to the Notice by the State Council on the Issue of the “Thirteenth Five-year Plan”
for the Deepening of the Reform Plan for the Pharmaceutical and Healthcare System launched in
2016, the national government encouraged the establishment of professional medical testing
institutions, and would promote the recognition of the testing results among medical institutions of the
same tier and between medical institutions and ICLs. Later on, the national government introduced a
series of policies to encourage and regulate the orderly development of the ICL industry. According to
Frost & Sullivan, the market size of ICL in China had reached RMB40.6 billion in 2022, having
achieved a strong CAGR of 22.3% over the past five years. Over the next five years, the market is
expected to continue to maintain a stable growth, reaching a market size of RMB57.4 billion in 2027.
The primary healthcare market has a surging demand on independent medical testing and
diagnostic services. Following the implementation of a graded diagnosis and treatment system, the
testing demand of patients will gradually flow downwards to primary healthcare institutions. However,
the primary healthcare market lacks sufficient medical resources, sophisticated technological
capabilities, and especially professionals in pathology and testing. Meanwhile, it is not economically
feasible for most primary healthcare institutions to make one-off investment in testing and diagnostic
equipment. Their IT infrastructure and management capability are also relatively underdeveloped. As a
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result, it is difficult for primary healthcare institutions to cope with the rapidly growing testing demand
from the patients, thus resulting in the deficiency of testing services at the primary healthcare level.
ICL has become the solution to the problems faced by primary healthcare institutions. They can
take over part of the demand on testing services and thus alleviate primary healthcare institutions from
building their own testing capabilities, as well as enhance testing efficiency and service quality.
According to Frost & Sullivan, the penetration rate of ICL market serving for the primary level of the
overall ICL market is expected to grow from 28.8% in 2022 to 33.0% in 2027.
Independent Clinical Laboratories Market Serving for Primary Healthcare Institutions Market in China,
by Revenue (2018-2027E)
2018-2022 2022-2027E
CAGR 28.4% 10.2%
RMB in Billion, %
ICL Market Serving for Primary Healthcare Institutions Market
ICL Market Serving for Primary Healthcare Institutions Market / ICL Market
4.3
5.2
7.7
10.0
11.7
13.4
15.0
16.5
17.8 18.9
23.8%
24.6% 25.1%
26.8%
28.8%
30.5%
31.9%
32.6% 33.0% 33.0%
20192018 2021 2020 2022 2023E 2024E 2025E 2026E 2027E
Source: Frost & Sullivan
OVERVIEW OF AND OUTLOOK FOR CHINA’S SMART UNMANNED
PHARMACEUTICAL BOOTH MARKET
Pharmacies are critical to provide basic healthcare products and services to end customers.
Pharmacies, particularly small and medium-sized ones, have increasing needs to improve their
performance to address the challenges arising out of the stiff competition in the industry, such as low
level of smartization, limited productivity, and expansion of large chain pharmacies.
Smart unmanned pharmaceutical booth is an important hardware in pharmacy smartization,
where companies across industries have been increasingly employing digitalization and smart
technologies to enhance operating efficiency and improve customer experience. Smart unmanned
pharmaceutical booth can provide end customers with convenient pharmaceutical shopping experience
by occupying only seven to eight square metres of ground space. Apart from the convenience of
shopping experience, a smart unmanned pharmaceutical booth can provide 24-hour unmanned and
uninterrupted services, thereby extending the operating hours of pharmacies during night time. Smart
unmanned booths also help enhance operating efficiency, especially in that it improves the sales per
square metre or per employee, during day time. Furthermore, compared with the shopping experience
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at traditional pharmacies, shopping at smart unmanned pharmaceutical booths provides end customers
with a more private setting for carrying out their medication purchases.
China’s smart unmanned pharmaceutical booth market is still at its early development stage.
However, with the optimization of product design, smart unmanned pharmaceutical booth is becoming
a more prevailing option for pharmacies. Apart from the basic functions of pharmaceutical sales, other
functions have been developed to cater to the diversifying demand of end customers, such as online
consultation, and link with health insurance records. According to Frost & Sullivan, the GMV of
transactions carried out through smart unmanned pharmaceutical booth is expected to reach
RMB80 billion to RMB100 billion, and the penetration rate to the overall GMV in the
outside-of-hospital pharmaceutical market is expected to reach over 10% in the next decade. It is
estimated that pharmacies expect to invest RMB170 billion in purchasing smart unmanned
pharmaceutical booths in the next decade.
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
OVERVIEW
Our history can be traced back to 2015, when we first commenced our operation and launched
YSB App. Since then, we have been led by Mr. Buzhen Zhang, our founder, chairman of the Board
and chief executive officer, to address the pain points faced by upstream and downstream participants
in the outside-of-hospital pharmaceutical market. We received multiple series of equity financing to
support our expanding business operations from 2015 to 2021. We were the largest digital
pharmaceutical platform serving businesses outside of hospitals in China in terms of GMV in 2021,
according to Frost & Sullivan. See “Directors and senior management” for Mr. Zhang’s biography.
KEY BUSINESS MILESTONES
The following table sets forth our key business development milestones:
Year Event
2015 We launched YSB App and started operating Online Marketplace.
2016 We were granted a licence from the State Food and Drug Administration for a third-party trading service
platform for Internet drugs.
We were granted High and New-Technology Enterprise (HNTE) status in China for recognition as an
innovative company by the PRC government.
2018 Our Company was incorporated in the Cayman Islands and we carried out the 2018 Internal
Restructuring.
2019 Our annual total GMV achieved RMB10 billion for the first time.
We started operating Self-operation Business.
2020 We started Targeted Product Launch Business.
Our annual total GMV achieved approximately RMB20 billion.
2021 The buyers registered on our Online Marketplace reached 400,000.
We introduced ClouDiagnos and wePharmacy.
2022 Our average number of MAB reached 300,000 in March 2022.
MAJOR SUBSIDIARIES
The principal business activities and date of establishment of each of our Major Subsidiaries
are shown below:
Name of company
Place of incorporation /
establishment
Date of incorporation /
establishment Principal business activities
Guangzhou Leyao
Information Technology
Co., Ltd. (
ࢹڦ
ʮ̡)
PRC 9 January 2019 Holding company of our
Self-operation Business
Guangzhou Sudao
Information Technology
Co., Ltd. (
ࢹڦ
ʮ̡)
PRC 6 June 2012 Operating third party
e-commerce platform,
i.e., Online Marketplace
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
MAJOR SHAREHOLDING CHANGES OF OUR COMPANY AND REORGANIZATION
Incorporation of our Company
Our Company was incorporated as an exempted company with limited liability in the Cayman
Islands on 27 August 2018.
Pre-IPO Investments
From 2015 to 2021, we conducted several rounds of financing. See “—Pre-IPO Investments”
for further information about the Pre-IPO Investments and “—Capitalisation” for the share capital of
our Company as at the Latest Practicable Date and immediately after the Global Offering (subject to
the Assumptions) showing the various rounds of investments and Shares held by each Shareholder
before the Global Offering.
Entry into the Contractual Arrangements
In preparation for Listing and to ensure that the scope of entities and businesses within our
variable interest entity structure would be kept to a minimum, we adjusted our corporate structure
(including our VIE structure) and entered into the Contractual Arrangements. See “Contractual
Arrangements” for further details.
Notable acquisitions and disposals during the Track Record Period
We had not conducted any major acquisition or disposal of note during the Track Record
Period.
Other share capital changes of our Company
For changes in our Company’s share capital within the two years immediately before the date
of this document, see “Statutory and general information—Further information about our Group—
Changes in share capital of our Company”.
For details of outstanding options granted under our Company’s share incentive plans, see
“Statutory and general information—Share Incentive Plans”.
For other changes to our Company’s share capital, including the Share Subdivision that will
take effect upon Listing, see “Share Capital”.
PRE-IPO INVESTMENTS
Series Seed-Series C Financings
Between April 2015 and June 2018, prior to our Company’s incorporation, Guangzhou
Sudao, our predecessor and now one of our Onshore Holdcos, conducted multiple rounds of onshore
financings. In December 2018, soon after our Company was incorporated, and in contemplation of
listing our shares on an internationally recognised exchange, we internally restructured our then-
group, following which certain then-shareholders of Guangzhou Sudao became shareholders of our
Company in exchange for Guangzhou Sudao becoming a subsidiary of our Company (the “ 2018
Internal Restructuring ”). Following this restructuring, the then-shareholders of Guangzhou Sudao
were allotted and issued shares in our Company on a proportionate basis to mirror their respective
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
then-equity holding in Guangzhou Sudao. Accordingly, we issued Seed to Series C-2 Preferred
Shares in our Company to those pre-IPO investors that had initially subscribed for equity interests of
Guangzhou Sudao.
Series D Financing
On 4 December 2018, our Company entered into a share purchase agreement with the
following Pre-IPO Investors, pursuant to which our Company issued, and the Pre-IPO Investors
purchased, certain number of shares of our Company on 7 December 2018, as follows:
Shareholders Class of Shares No. of Shares(1) Consideration
Internet Fund V Pte. Ltd. ............................... Series D 20,000,000 US$80,000,000
H Capital V, L.P. ..................................... Series D 10,000,000 US$40,000,000
DCM Investments (DE 5), L.L.C. ........................ Series D 3,308,086 US$13,232,344
Note:
(1) These Share numbers are before the Share Subdivision and represent a Share of par value US$0.00001 each.
Series E Financing
On 1 February 2021, our Company entered into a share purchase agreement with the following
Pre-IPO Investor, pursuant to which our Company issued, and the Pre-IPO Investor purchased, certain
number of shares of our Company on 1 February 2021, as follows:
Shareholders Class of Shares No. of Shares(2) Consideration
Million Surplus Developments Limited ................... Series E(1) 17,357,824 US$150,000,000
Note:
(1) Such 17,357,824 Series E Preferred Shares were re-designated and re-classified as Series E-1 Preferred Shares on 3 June 2021.
(2) These Share numbers are before the Share Subdivision and represent a Share of par value US$0.00001 each.
On 3 June 2021, our Company entered into a share purchase agreement with the following
Pre-IPO Investor, pursuant to which our Company issued, and the Pre-IPO Investor purchased, certain
number of shares or warrants for subscription of certain number of shares of our Company as follows:
Shareholders Class of Shares No. of Shares(1) Consideration
Baidu (Hong Kong) Limited ............................. Series E-2 3,471,565 US$30,000,000
Note:
(1) These Share numbers are before the Share Subdivision and represent a Share of par value US$0.00001 each.
Warrant holders Class of Shares No. of Shares(3) Consideration
Sunshine Life Insurance Corporation Limited (ٰ
ʮ̡)(1) ...................................... Series E-2 3,471,565 US$30,000,000
Genius II Found Limited (2) .............................. Series E-2 2,670,434 US$23,076,923
௴ุҳ༟ΥྫΆุ(Υྫ) Guangzhou XinXing
Huacheng Venture Capital Partnership (Limited
Partnership)
(1) ...................................... Series E-2 578,594 US$ 5,000,000
Notes:
(1) These warrants were exercised in full and the corresponding number of Shares were issued in full on 15 April 2022. See sub-paragraph
(b) below.
(2) These warrants were exercised by affiliates of Genius II Found Limited pursuant to an amended warrant and on 15 April 2022, we issued
an aggregate of 2,336,419 Series E-2 Preferred Shares to Shanghai Jixu Information Technology Partnership (Limited Partnership) and
Genius V Found Limited. No further Shares may be issued under the original and amended warrants. See sub-paragraph (a) below.
(3) These Share numbers are before the Share Subdivision and represent a Share of par value US$0.00001 each.
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
In April 2022, we completed the following actions with respect to certain Pre-IPO Investors,
following which, our Company had no outstanding warrants:
(a) We entered into an amended warrant with Shanghai Jixu Information Technology
Partnership (Limited Partnership) (ҦΥྫΆุ(Υྫ)) and Genius V
Found Limited to amend and restate the warrant dated 3 June 2021 originally entered into
with Genius II Found Limited. Aside from the subscribing entities and the number of
shares to be issued under the warrant, all other material terms of the amended warrant
remained the same as the original warrant. On 15 April 2022, we issued 1,179,231 Series
E-2 Preferred Shares to Shanghai Jixu Information Technology Partnership (Limited
Partnership) (
ҦΥྫΆุ(Υྫ)) and 1,157,188 Series E-2 Preferred
Shares to Genius V Found Limited pursuant to the amended warrant. For the avoidance of
doubt, these Share numbers are before the Share Subdivision and represent a Share of par
value US$0.00001 each.
(b) On 15 April 2022, we issued 3,471,565 Series E-2 Preferred Shares to Sunshine Life
Insurance Corporation Limited (
ʮ̡) and 578,594 Series E-2
Preferred Shares to Guangzhou Xinxing Huacheng Venture Capital Partnership (Limited
Partnership) (
௴ุҳ༟ΥྫΆุ(Υྫ)) (formerly known as௴ุ
ҳ༟ΥྫΆุ(Υྫ)) pursuant to their respective warrants dated 3 June 2021. For the
avoidance of doubt, these Share numbers are before the Share Subdivision and represent a
Share of par value US$0.00001 each.
Principal terms of the Pre-IPO Investments
The below table summarises the principal terms of the Pre-IPO Investments:
Series
Last completion
date
Approximate amount
raised
Approximate post-
investment valuation(1) Cost per share paid
Discount to the
Offer Price(2)
Series Seed(3) ...... 2 2M a y 2015 RMB16.0 million RMB100.0 million RMB2.15 97.2%
Series A(3) ........ 1 2 September
2016 RMB55.0 million RMB230.0 million RMB3.76 95.1%
Series B(3) ........ 2 April 2018 RMB108.0 million RMB588.0 million RMB7.84 89.7%
Series C-1(3) ...... 2 July 2018 RMB160.0 million RMB1,385.0
million
RMB14.71 and
RMB16.34(4)
80.7% and
78.6%(4)
Series C-2(3) ...... 1 4 September
2018 US$40.8 million US$271.4 million US$2.71 74.7%
Series D .......... 3 0 January
2019 US$133.2 million US$533.2 million US$4.00 62.7%
Series E-1 ........ 5 February
2021 US$150.0 million US$1,350.0 million US$8.64 19.4%
Series E-2 ........ 1 5 April
2022 US$85.2 million US$1,435.2 million US$8.64 19.4%
Notes:
(1) On a fully-diluted basis, and calculated by multiplying the cost per share by the number of shares immediately prior to the completion of
corresponding round of financing, plus the amount raised in the corresponding round of financing.
(2) Calculated based on the mid-point of the indicative Offer Price range and eliminating the impact of the Share Subdivision.
(3) Preferred Shares issued by our Company in exchange for, and in proportion to, the investors’ interest in Guangzhou Sudao under the
2018 Internal Restructuring. See “—Series Seed-Series C financings” in this section for further details. For Series Seed to Series C
financings, “last completion date” corresponds to the date that the investment was settled onshore, and “cost per share paid” equals to the
investment amount raised from respective series of financing or investor divided by corresponding number of shares issued.
(4) For Series C-1 financing, there are two different cost per share paid and discount to the Offer Price, as one of the Series C-1 Pre-IPO
Investors, Shenzhenshi Gaojie Zhihui Equity Investment Fund Partnership (LLP), subscribed Series C-1 Preferred Shares at a 10%
discount (i.e. RMB14.71 per Share).
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
Basis of
consideration
The consideration for the Pre-IPO Investments was determined based on arm’s length
negotiations between our Company and the respective rounds of Pre-IPO Investors after
taking into account the timing of the investments and the status of our business development
and operating entities at the time of entering into the transaction documents.
Use of
Proceeds
from the
Pre-IPO
Investments
The proceeds from the Pre-IPO Investments were used towards our business operations and in
accordance with the business plan and budget approved by the Board. As of the Latest
Practicable Date, we estimate that we had used over 90% of the funds raised from the Pre-IPO
Investments.
Lock-up The Pre-IPO Investors have entered into a lock-up agreement with us, the Sole Sponsor and the
Sole Overall Coordinator pursuant to which they have agreed to lock-up their Shares from the
date of this document for a period of 180 days thereafter except to the extent of any written
consent from the Sole Sponsor and the Sole Overall Coordinator. See “Underwriting” for more
information.
Strategic
benefits of
the pre-IPO
investment
Many of our Pre-IPO Investors are sophisticated investors with a track record of investing in
private and public companies with a focus in the business areas in which we operate. At the
time of entering into the respective Pre-IPO Investments, our Directors were of the view that
the respective investments would be beneficial to our Company for the primary reasons that:
(i) the proceeds generated from those investments could be applied towards our Group’s
operations to further grow and develop our business, and thereby generate greater returns to
our then-shareholders; (ii) our Company would benefit from guidance and insights contributed
by the Pre-IPO Investors, particularly by those who have experience investing in companies
operating in the same industries in which we operate and/or are experienced in guiding and
growing pre-listing companies; and (iii) the investments represented positive market sentiment
that would act as an endorsement of and confidence in our Group by those Pre-IPO Investors
to the market, which would not only serve to validate our business to key stakeholders in our
industry but would also enhance the reputation of our Company and would better position us
for future fundraising opportunities.
Special rights of the Pre-IPO Investors
The Pre-IPO Investors have been granted certain special rights in relation to our Company,
such as redemption rights, director appointment rights, information rights and pre-emptive rights. All
divestment (including redemption) rights have been terminated before our Company’s initial
application for Listing; nevertheless, if the Listing is terminated before or not completed by 31
December 2023, the Company’s listing process will end and the Pre-IPO Investors will be entitled to
divestment rights on the same terms as their original divestment rights. The remaining special rights
will terminate upon Listing in accordance with Guidance Letters HKEX-GL43-12 and HKEX-
GL44-12.
Upon Listing, all Preferred Shares will automatically and immediately convert to ordinary
Shares on a one-to-one basis, resulting in an issue of 491,225,068 additional ordinary Shares (being
those converted from Preferred Shares). See “Share capital” for further details.
Public Float
Upon Listing, the Shares held by certain of our Shareholders who are, or are indirectly
controlled by, our core connected persons, will not be counted towards the public float. Details of these
Shareholders and their controllers are set out below:
(a) MIYT Holdings Limited, which is controlled by MIYT Worldwide Limited, which in turn
is wholly owned by a trust for the benefit of Mr. Buzhen Zhang, our Director.
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
(b) Million Surplus Developments Limited, which will be a substantial shareholder of our
Company upon Listing. See “Substantial shareholders” for further information on the
background of this Shareholder.
(c) Internet Fund V Pte. Ltd., which will be a substantial shareholder of our Company upon
Listing. See “Substantial shareholders” for further information on the background of this
Shareholder.
(d) Genius II Found Limited, Genius V Found Limited and Shanghai Jixu Information
Technology Partnership (Limited Partnership) are part of the Green Pine Capital Partners
group, which is a close associate of a director of our subsidiary.
(e) Rizhao Changchunteng Innovation & Venture Capital Partnership (LLP) is a close
associate of a director of our subsidiary, who is a limited partner (as to more than 30%) in
the general partner that controls the shareholder.
(f) High Mountain Capital Limited is a close associate of a director of our subsidiary, who
wholly owns the shareholder.
(g) Smart Venture Management Limited is a close associate of a director of our subsidiary,
who wholly owns the shareholder.
Other than as described above, immediately following the Global Offering (subject to the
Assumptions) and upon Listing, the remaining Pre-IPO Investors and Shareholders will collectively
hold 271,163,704 Shares (representing 42.88% of the total issued share capital of our Company). To
the best knowledge of our Company, these remaining Shareholders are not core connected persons of
our Company and Shares held by them will count towards public float.
Information on our principal Pre-IPO Investors
Set out below is a description of our Pre-IPO Investors.
(a) Million Surplus Developments Limited (
ʮ̡), a company incorporated under the
Laws of British Virgin Islands, is wholly owned by Meta Group Limited (ʮ̡), a
company incorporated under the Laws of Cayman Islands. Meta Group Limited is ultimately
controlled by Chu Mang Yee (
Ա). Chu Mang Yee is a controlling shareholder of Hopson
Development Holdings Limited, a company listed on the Stock Exchange (stock code: 754) and in
which our non-executive Director, Mr. Ziyang Zhu is the Vice President.
(b) Internet Fund V Pte. Ltd. is a Singapore private limited company and investment company that
focuses on investing in internet, technology and software companies. It is managed by Tiger
Global Singapore Pte. Ltd., which is an affiliate of Tiger Global Management, LLC, a Delaware
limited liability company. All such shares are controlled by Chase Coleman and Scott Shleifer.
The registered address of Internet Fund V Pte. Ltd. is 8 Temasek Boulevard #32-02, Suntec
Tower Three, Singapore 038988.
(c) H Capital V, L.P. is a limited partnership incorporated under the Laws of Cayman Islands. H
Capital V, L.P. is controlled by H Capital V GP, L.P., which is the general partner of H Capital V,
L.P.. H Capital V GP, L.P. is controlled by H Capital V GP, Ltd., which is the general partner of
H Capital V GP, L.P.. H Capital V GP, Ltd. is controlled by Xiaohong Chen, who is the director
of H Capital V GP, Ltd.. H Capital V, L.P. focuses on investment.
(d) Shanghai Fosun Pharmaceutical Development Co., Ltd. (
ʮ̡), a
company established under the Laws of PRC, is wholly owned by Shanghai Fosun
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
Pharmaceutical (Group) Co., Ltd. (ᔼᖹ(ණྠ)ʮ̡), a company listed on the
Stock Exchange (stock code: 2196) and Shanghai Stock Exchange (stock code: 600196).
(e) DCM Investments (DE 5), LLC is a limited liability company formed under the Laws of
Delaware. DCM Investments (DE 5), LLC is ultimately controlled as to one-third or more by
DCM International IX, Ltd., of which Mr. Frank Lin, our non-executive Director, is a director.
(f) Genius II Found Limited (under the Laws of British Virgin Islands), Genius V Found Limited
(under the Laws of British Virgin Islands), and Shanghai Jixu Information Technology
Partnership (Limited Partnership) (
ҦΥྫΆุ(Υྫ)) (a limited partnership
established under PRC Laws) are part of the Green Pine Capital Partners group. Genius II Found
Limited and Shanghai Jixu Information Technology Partnership (Limited Partnership) are
ultimately controlled by Shenzhen Songhe International Capital Management Partnership
(Limited Partnership) (
ͫ਷ყ༟͉၍ଣΥྫΆุ(Υྫ)), the general partner of which
is Fei Luo (࠭.)
g) Rizhao Changchunteng Innovation & Venture Capital Partnership (LLP) (ᖸ௴อ௴ุҳ
༟ΥྫΆุ(Υྫ)) is a limited partnership established under the Laws of PRC, whose general
partner is Qingdao Changchunteng Tengxin Investment Centre (Limited Partnership) (ᖸ
ᖸอҳ༟ʕː(Υྫ)). The general partner of Qingdao Changchunteng Tengxin Investment
Centre (Limited Partnership) is Shanghai Ivy Investment Co., Ltd., which is ultimately controlled
by Jiyi Weng (
ॽΛ່).
(h) Ivy Pacific GX Limited (formerly known as Everpower Global Co., Ltd.) is a BVI business
company incorporated under the Laws of British Virgin Islands, which is wholly owned by
Xiuguo Qi (
ᄁӸ਷).
(i) Shunwei Growth III Limited is a BVI business company incorporated in British Virgin Islands
and is wholly owned by Shunwei China Internet Opportunity Fund II, L.P., which is ultimately
controlled by Tuck Lye KOH.
(j) Baidu (Hong Kong) Limited is a private company incorporated under the Laws of Hong Kong. It
is ultimately wholly owned by Baidu, Inc., a company listed on Nasdaq (stock symbol: BIDU)
and the Stock Exchange (Stock Code: 9888), a leading AI company with a strong Internet
foundation, which was incorporated under the laws of the Cayman Islands.
(k) Sunshine Life Insurance Corporation Limited (
ʮ̡) is a company limited
by shares incorporated in the PRC and is owned as to 99.99% by Sunshine Insurance Group
Company Limited. (
ʮ̡)( “ Sunshine Insurance ”). The Sunshine
Insurance offers a range of insurance products including property insurance, life insurance.
(l) SIG Global China Fund I, LLLP (“ SIG Global ”) is a Delaware limited liability limited
partnership. SIG Asia Investment, LLLP, a Delaware limited liability limited partnership, is the
investment manager for SIG Global. Heights Capital Management, Inc., a Delaware Corporation,
is the investment manager for SIG Asia Investment, LLLP. The only ultimate beneficial owner of
SIG Global is a US citizen.
(m) Shenzhenshi Gaojie Zhihui Equity Investment Fund Partnership (Limited Partnership) (
ଉέ̹৷
Υྫ)( “Gaojie”) is a limited partnership established in the
PRC. The general partner of Gaojie is Ningbo Meishan Free Trade Port Gaojie Huineng
Investment Management Partnership (Limited Partnership), whose general partner is Wuxi Gaojie
Enterprise Management Co., Ltd. (
ʮ̡), which is wholly owned by
Yushan Li (ޙGaojie focuses on venture capital investment and management.
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
(n) High Mountain Capital Limited is a BVI business company incorporated in the British Virgin
Islands and wholly owned by Jiangwei Wang ( ӓᑞၪ). Jiangwei Wang is one of the registered
shareholders of Guangzhou Sudao, see “Contractual Arrangements” for further details.
(o) Smart Venture Management Limited is a BVI business company incorporated in the British
Virgin Islands and wholly owned by Jiahao Shao (ԳႴ). Jiahao Shao is one of the registered
shareholders of Guangzhou Sudao, see “Contractual Arrangements” for further details.
(p) Guangzhou Xinxing Huacheng Venture Capital Partnership (Limited Partnership) (۬ڀ݋
Υྫ) is a limited partnership established in the PRC, the general
partner of which is Guangzhou Emerging Industry Development Fund Management Co., Ltd. ( ᄿ
ʮ̡). Guangzhou Emerging Industry Development Fund
Management Co., Ltd. is wholly owned by Guangzhou Industrial Investment Fund Management
Company Limited (
ʮ̡), which is wholly owned by Guangzhou City
Construction Investment Group Company Limited (ʮ̡), which is
part of the People’s Government of Guangzhou Municipality.
(q) Yue Du is an Independent Third Party.
Other than those Shareholders identified in “—Pre-IPO Investments—Public float”, none of the
other Pre-IPO Investors are connected persons of our Company.
Compliance with Interim Guidance
On the basis that (i) the consideration for the Pre-IPO Investments was settled more than 28
clear days before the date of our first submission of the listing application to the Stock Exchange in
relation to the Listing; and (ii) the special rights granted to the Pre-IPO Investors have terminated or
will terminate before or upon the Listing, the Sole Sponsor has confirmed that the Pre-IPO Investments
are in compliance with the Guidance Letter HKEX-GL43-12 issued by the Stock Exchange in October
2012 and last updated in March 2017 and the Guidance Letter HKEX-GL44-12 issued by the Stock
Exchange in October 2012 and last updated in March 2017.
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CAPITALISATION
The following table sets out our Company’s shareholding structure as at the date of this document and immediately upon completion of the
Global Offering (subject to the Assumptions, but before the Share Subdivision).
Founder
Shares 2018 Internal Restructuring Pre-IPO Investment
Global
Offering
Shareholding
Percentages
Name of Shareholders
Ordinary
Shares(2)
Series
Seed
Preferred
Shares(2)
Series A
Preferred
Shares(2)
Series B
Preferred
Shares(2)
Series C-1
Preferred
Shares(2)
Series C-2
Preferred
Shares(2)
Series D
Preferred
Shares(2)
Series E-1
Preferred
Shares(2)
Series E-2
Preferred
Shares(2)
Ordinary
Shares(2)
Aggregate
number of
Shares as
at the date
of this
document(2)
Aggregate
ownership
percentage
as at the
date of this
document
Aggregate
ownership
percentage
immediately
upon
completion
of the
Global
Offering
Management
MIYT Holdings Limited ................... 31,329,046 — — — — — — — — — 31,329,046 20.33% 19.82%
Substantial shareholders (under the Listing Rules)
Million Surplus Developments Limited (
೯
ʮ̡) ........................... — 100,005 492,259 191,252 — 2,343,306 17,357,824 — — 20,484,646 13.29% 12.96%
Internet Fund V Pte. Ltd. ................... — — — — — — 20,000,000 — — — 20,000,000 12.98% 12.65%
Other shareholders
H Capital V, L.P.
(1) ....................... — 3,259,562 — 1,637,499 — — 10,000,000 — — — 14,897,061 9.66% 9.42%
Shanghai Fosun Pharmaceutical Development
Co., Ltd. (ࠢ
ʮ̡) (1) ............................... — — 9,352,948 4,482,492 — — — — — 13,835,440 8.98% 8.75%
DCM Investments (DE 5), LLC (1) ............ — — — — — 10,022,723 3,308,086 — — — 13,330,809 8.65% 8.43%
Genius II Found Limited ................... — — — 6,629,995 1,836,000 — — — — — 8,465,995 5.49% 5.36%
Genius V Found Limited .................. — — — — — — — — 1,157,188 — 1,157,188 0.75% 0.73%
Shanghai Jixu Information Technology
Partnership (Limited Partnership)ڦ
ҦΥྫΆุ(Υྫ) ............... — — — — — — — — 1,179,231 — 1,179,231 0.77% 0.75%
Rizhao Changchunteng Innovation & Venture
Capital Partnership (LLP) (ᖸ௴อ௴
ุҳ༟ΥྫΆุ(Υྫ) ) ............... — 2,328,260 2,727,386 — — — — — — — 5,055,646 3.28% 3.20%
Ivy Pacific GX Limited (1) ................... — — 3,059,999 — — — — — — — 3,059,999 1.99% 1.94%
Shunwei Growth III Limited (1) ............... — — — — 6,119,997 — — — — — 6,119,997 3.97% 3.87%
Baidu (Hong Kong) Limited (ܓ(ಥ)ʮ
̡) (1) ................................. — — — — — — — — 3,471,565 — 3,471,565 2.25% 2.20%
Sunshine Life Insurance Corporation Limited ( ජ
ʮ̡)(1) ............... — — — — — — — — 3,471,565 — 3,471,565 2.25% 2.20%
141
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE


--- page 149 ---
Founder
Shares 2018 Internal Restructuring Pre-IPO Investment
Global
Offering
Shareholding
Percentages
Name of Shareholders
Ordinary
Shares(2)
Series
Seed
Preferred
Shares(2)
Series A
Preferred
Shares(2)
Series B
Preferred
Shares(2)
Series C-1
Preferred
Shares(2)
Series C-2
Preferred
Shares(2)
Series D
Preferred
Shares(2)
Series E-1
Preferred
Shares(2)
Series E-2
Preferred
Shares(2)
Ordinary
Shares(2)
Aggregate
number
of Shares
as at the
date of
this
document(2)
Aggregate
ownership
percentage
as at the
date of this
document
Aggregate
ownership
percentage
immediately
upon
completion
of the
Global
Offering
SIG Global China Fund I, LLLP (1) ........... — — — — — 2,668,056 — — — — 2,668,056 1.73% 1.69%
Shenzhenshi Gaojie Zhihui Equity Investment
Fund Partnership (LLP) (ᛆ
ΥྫΆุ(Υྫ)) (1) ........... — — — — 2,039,997 — — — — — 2,039,997 1.32% 1.29%
High Mountain Capital Limited ............. — 1,396,957 — 637,499 — — — — — — 2,034,456 1.32% 1.29%
Smart Venture Management Limited ......... — — 399,127 191,252 — — — — — — 590,379 0.38% 0.37%
Guangzhou Xinxing Huacheng Venture Capital
Partnership (Limited Partnership)ڀ݋
௴ุҳ༟ΥྫΆุ(Υྫ)(1) .......... — — — — — — — — 578,594 — 578,594 0.38% 0.37%
Yue DU (1) .............................. — 365,643 — — — — — — — — 365,643 0.24% 0.23%
Shareholders after the date of this document
Shareholders from the Global Offering ....... — — — — — — — — — 3,952,200
(3) — — 2.50%
Total .................................. 31,329,046 7,450,427 16,031,719 13,769,989 9,995,994 15,034,085 33,308,086 17,357,824 9,858,143 3,952,200 (3)154,135,313 100.0% 100.0%
Note:
(1) Shares of these shareholders will contribute towards public float.
(2) These Share numbers are before the Share Subdivision and represent a Share of par value US$0.00001 each.
(3) These Share numbers reflect the Global Offering size before the Share Subdivision and represent a Share of par value US$0.00001 each. After the Sha re Subdivision, these figures will become
15,808,800 shares of par value US$0.0000025 each.
142
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE


--- page 150 ---
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
CORPORATE STRUCTURE
Corporate structure as of the date of this document
The following chart is a simplified depiction of the shareholding and beneficial ownership
structure of our Group as of the date of this document:
MIYT Holdings Limited(1)
100% 100% 100% 100%
100%
100%
100%
100%
70%100%100%100%
100%
100%
70%
100%100%100%
20.33% 53.41%12.98%
Internet Fund V Pte. Ltd.
YSB Investment Limited
(Hong Kong)
Guangzhou Sudaoyi
Information Technology Co.,
Ltd.
Guangzhou
Sudao
Information
Technology Co.,
Ltd.
Henan Subiao
Information
Technology Co.,
Ltd.
Guangzhou
Spectrum Health
Technology Co.,
Ltd.(5)
Guangzhou
Yuewei Medical
Laboratory Co.,
Ltd.
Guangzhou
Yaobang
Information
Technology Co.,
Ltd.
Guangzhou
Sudaoyi Business
Service Co., Ltd.
Guangzhou Linyaohui
Information Technology Co.,
Ltd.
Guangzhou Sudao Business
Consulting Co., Ltd.
Guangzhou
Sudaoyi Project
Management
Consultant Co.,
Ltd.
Guangzhou Leyao Information
Technology Co., Ltd.
Guangzhou
Leyao
Subsidiaries(3)
Guangdong
Jiuzhang
Pharmaceutical
Co., Ltd.
Guangzhou
Xiaoweicang
Smart Drug Store
Technology Co.,
Ltd.(4)
Guangzhou
Sudaoyi Enterprise
Management
Consultant Co.,
Ltd.
Leyou Investment Limited
(Hong Kong)
YSB Health Limited
(Hong Kong)
YSB Technology Limited
(British Virgin Islands)
YSB Technology (Hongkong)
Limited (Hong Kong)
YSB Inc.
(Cayman)
Other Pre-IPO Investors(2)
offshore
onshore
Direct ownership
Contractual Arrangements
13.29%
Million Surplus Developments
Limited
Notes:
(1) MIYT Holdings Limited is controlled by MIYT Worldwide Limited, which in turn is wholly owned by a trust for the benefit of Mr.
Buzhen Zhang, our Director.
(2) See “—Capitalisation” and “—Pre-IPO Investments—Information on our principal Pre-IPO Investors” for more information about other
Pre-IPO Investors and their respective shareholding.
(3) These Guangzhou Leyao Subsidiaries are wholly owned by our Group.
(4) The remaining shareholders of Guangzhou Xiaoweicang Smart Drug Store Technology Co., Ltd. are Luoyan Ran (
̄ᖯዲ) (as to 15%)
and Guangzhou Xiaohuicang Enterprise Management Partnership (Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)) (as to
15%). Luoyan Ran is an Independent Third Party. Guangzhou Xiaohuicang Enterprise Management Partnership (Limited Partnership) is
an employee shareholding platform that holds shares in Guangzhou Xiaoweicang Smart Drug Store Technology Co., Ltd. for the benefit
of participants of this company’s share incentive programmes; the general partner of this employee shareholding platform is Wenhai Lu,
who is an Independent Third Party.
(5) The remaining shareholders of Guangzhou Spectrum Health Technology Co., Ltd. are Guangzhou Spectrum Enterprise Management
Partnership (Limited Partnership) (
ᄿψΈᗅΆุ၍ଣΥྫΆุ(Υྫ)) (as to 25%) and Yan Zhou ( մᘌ) (as to 5%). Yan Zhou is an
Independent Third Party. Guangzhou Spectrum Enterprise Management Partnership (Limited Partnership) is an employee shareholding
platform that holds shares in Guangzhou Spectrum Health Technology Co., Ltd. for the benefit of participants of this company’s share
incentive programmes; the general partner of this employee shareholding platform is Wenhai Lu, who is an Independent Third Party.
143


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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
Corporate structure immediately following the Global Offering
The following chart is a simplified depiction of the shareholding and beneficial ownership
structure of our Group immediately following the Global Offering (subject to the Assumptions):
MIYT Holdings
Limited(1)
19.82% 2.50%12.65%
Internet Fund V Pte. Ltd.
52.07%
Other Pre-IPO Investors(2) Other public Shareholders
12.96%
Million Surplus
Developments Limited
100% 100% 100% 100%
100%
100%
100%
100%
70%100%100%100%
100%
100%
70%
100%100%100%
YSB Investment Limited
(Hong Kong)
Guangzhou Sudaoyi
Information Technology Co.,
Ltd.
Guangzhou
Sudao
Information
Technology Co.,
Ltd.
Henan Subiao
Information
Technology Co.,
Ltd.
Guangzhou
Spectrum Health
Technology Co.,
Ltd.(5)
Guangzhou
Yuewei Medical
Laboratory Co.,
Ltd.
Guangzhou
Yaobang
Information
Technology Co.,
Ltd.
Guangzhou
Sudaoyi Business
Service Co., Ltd.
Guangzhou Linyaohui
Information Technology Co.,
Ltd.
Guangzhou Sudao Business
Consulting Co., Ltd.
Guangzhou
Sudaoyi Project
Management
Consultant Co.,
Ltd.
Guangzhou Leyao Information
Technology Co., Ltd.
Guangzhou
Leyao
Subsidiaries(3)
Guangdong
Jiuzhang
Pharmaceutical
Co., Ltd.
Guangzhou
Xiaoweicang
Smart Drug Store
Technology Co.,
Ltd.(4)
Guangzhou
Sudaoyi Enterprise
Management
Consultant Co.,
Ltd.
Leyou Investment Limited
(Hong Kong)
YSB Health Limited
(Hong Kong)
YSB Technology Limited
(British Virgin Islands)
YSB Technology (Hongkong)
Limited (Hong Kong)
YSB Inc.
(Cayman)
offshore
onshore
Direct ownership
Contractual Arrangements
Notes (1) to (5): Please refer to the details contained in the preceding page.
SAFE REGISTRATION
Pursuant to the Circular on Foreign Exchange Administration of Overseas Investments and
Financing and Round-Trip Investments by Domestic Residents via Special Purpose Vehicles (ྤ
)( “ SAFE Circular 37 ”),
promulgated by SAFE and which became effective on 14 July 2014, (a) a PRC resident must register
with the local SAFE branch before he or she contributes assets or equity interests to an overseas special
purpose vehicle (“ 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 Circular on Further Simplifying and Improving the Policies for Foreign
Exchange Administration for Direct Investment (
ٝ
)( “SAFE Circular 13 ”), promulgated by SAFE and which became effective on 1 June 2015, the
power to accept SAFE registration was delegated from local SAFE to local banks where the assets or
interests in the domestic entity are located.
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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
As advised by our PRC Legal Adviser, Mr. Buzhen Zhang completed the required registration
with the SAFE on 30 September 2018.
M&A RULES
Under the M&A Rules issued on 8 August 2006, which became effective on 8 September 2006
and was amended in June 2009, a foreign investor is required to obtain necessary approvals when it:
(a) acquires the equity of a domestic non-foreign invested enterprise thereby converting the
domestic enterprise into a foreign-invested enterprise;
(b) subscribes for the increased capital of a domestic non-foreign invested enterprise so as to
convert the domestic enterprise into a foreign-invested enterprise;
(c) establishes a foreign-invested enterprise which purchases and operates the assets of a
domestic enterprise; or
(d) purchases the assets of a domestic enterprise and injects those assets to establish a foreign
invested enterprise.
Our PRC Legal Adviser is of the opinion that prior CSRC approval for the Global Offering is
not required because we did not acquire any equity interests or assets of a PRC domestic company
owned by our controlling shareholders or beneficial owners who are PRC companies or individuals, as
defined under the M&A Rules. However, as there has been no official interpretation or clarification of
CSRC approval requirement under the M&A Rules, there is uncertainty as to how the M&A Rules will
be interpreted or implemented and we cannot assure you that relevant PRC governmental authorities,
including CSRC, would reach the same conclusion as our PRC Legal Adviser. Considering the
uncertainties that exist with respect to issuance of new laws, rules and regulations or detailed
implementations and interpretations in any form relating to the M&A Rules, the opinion of our PRC
Legal Adviser as summarised above, is subject to change.
For further information about the risks associated with the CSRC approval, see “Risk factors—
Risks related to doing business in China—We may be subject to the approval or other requirements of
the CSRC or other PRC governmental authorities in connection with future capital raisings activities”.
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BUSINESS
OUR BUSINESS
We are a digital pharmaceutical platform serving businesses outside of hospitals in China.
Digital market as an emerging trend contributed to 28.2% of the RMB639.7 billion outside-of-hospital
pharmaceutical circulation market in China, in terms of gross merchandise value (“GMV”) in 2022.
We recorded a GMV of RMB37.8 billion in 2022, representing a market share of 21.0% in China’s
digital market of outside-of-hospital pharmaceutical circulation services. As an enabler of the
digitalisation of the outside-of-hospital pharmaceutical and medical service market, we have developed
technology-backed solutions to connect and empower the upstream, including pharmaceutical
companies, distributors and vendors, and the downstream, including pharmacies and primary
healthcare institutions. Primary healthcare institutions refer to downstream pharmaceutical retailer that
is not a hospital or a pharmacy, including, but not limited to, a private clinic, township health centre,
village clinic, and community medical institution. We have turned the process of pharmaceutical
transaction and service into a digitalised, standardised and scalable one. Since our inception, we have
been committed to addressing the challenges faced by the players in the outside-of-hospital
pharmaceutical market, and have cultivated capabilities and accumulated invaluable experience from
the primary healthcare level. Seizing on the opportunities in this market, we have built an ecosystem,
where we enable the various players along the pharmaceutical value chain to gather and interact. We
create values for these players and the whole society. Although we face intense competition from other
B2B pharmaceutical sales platforms and traditional pharmaceutical distributors, we strive to establish a
safe and efficient transaction and service platform for businesses along the pharmaceutical value chain.
Leveraging our technological capabilities, we have created and keep enhancing a business
model to meet the growing demand for the digitalisation of the outside-of-hospital pharmaceutical
market. Our business model is centred on our Online Marketplace and Self-operation Business, and is
further complemented by a series of other businesses. Our total GMV reached RMB37.8 billion in
2022, representing a CAGR of 38.6% from that in 2020, both the highest among leading digital
pharmaceutical platforms serving businesses outside of hospitals in China, and a market share of
21.0% in 2022. We serve the largest digital pharmaceutical transaction and service network, including,
among others, around 354,000 downstream pharmacies and around 173,000 primary healthcare
institutions, as of 31 December 2022. Furthermore, we had 308,000 average number of monthly active
buyers (“MAB”) in 2022, the highest among digital pharmaceutical platforms serving businesses
outside of hospitals in China. The average number of monthly available stock keeping units (“SKUs”)
transacted on our platform was around 3.3 million in 2022, the highest among digital pharmaceutical
platforms serving businesses outside of hospitals in China. Our aforesaid industry positioning is
supported by analyses performed by Frost & Sullivan.
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BUSINESS
The Upstream Yaoshibang Platform The Downstream
Other
Businesses
ClouDiagnos YSB eLearnwePharmacy SaaS Solutions
Online
Marketplace
General
Self-operation
Business
Targeted
Product Launch
Business
Pharmacies
Primary Healthcare Institutions
Pharmaceutical
Companies
Pharmaceutical
Distributors and
Vendors
Self-operated Warehouse
Data
Analytics
+
Marketing
Solutions
+
Self-operated Warehouse
Notes: (1) For the year ended 31 December 2022; (2) As of 31 December 2022
Self-operation
Business
~354,000
Registered downstream
pharmacies2
RMB37.8bn
Total GMV1
~3.3mm
Average monthly Stock
Keeping Units (SKUs)
~173,000
Registered downstream primary
healthcare institutions2
~6,000
Upstream pharmaceutical
sellers2 on Online Marketplace
~9,100
Upstream pharmaceutical
suppliers2 for Self-operation
Business
1
Online Marketplace . We started with a mobile internet-based Online Marketplace in 2015 to
address the supply and demand mismatch in China’s outside-of-hospital pharmaceutical market. We
created a digital marketplace for registered pharmaceutical sellers and buyers to transact with each
other. We charge sellers a commission, which is based on a certain percentage of their sales on our
Online Marketplace. The average Online Marketplace commission rate we charged, which equals to
commissions we received from third-party sellers divided by the corresponding GMV, was 2.8%, 2.9%
and 3.1% in 2020, 2021 and 2022, respectively. The average number of monthly available SKUs was
around 3.3 million in 2022. The vast selection of SKUs and the quality of the products have made our
Online Marketplace a reliable platform for pharmaceutical transactions.
Our Online Marketplace helps simplify the multi-layer structure in China’s outside-of-hospital
pharmaceutical market and streamline the pharmaceutical transaction process, as digitalisation makes
the steps along the transaction process, such as certificate exchange, product selection and financial
reconciliation, easier to be accomplished as compared with traditional offline transactions. For
example, our digital platform enables our buyers to easily find the products to purchase by using the
search and filter functions, and our platform generates algorithm-based feedback for our sellers to
identify popular products. Transaction records are accessible from each user’s terminal so that our
buyers and sellers can easily track and link their financial records. Our Online Marketplace addresses
the multi-layer problem in the outside-of-hospital pharmaceutical market by providing a well-
connected platform where buyers can directly and freely select and order products from sellers, and
therefore helps reduce transaction costs and improve the overall efficiency of transactions. As of
31 December 2022, we had attracted around 6,000 pharmaceutical sellers and around 527,000 buyers
to transact on our Online Marketplace. The GMV of our Online Marketplace of third-party merchants
was RMB22.6 billion in 2022, representing approximately 59.8% of the total GMV, and growing at a
CAGR of 28.8% from that in 2020.
Self-operation Business . As an ever-increasing number of upstream and downstream
participants are attracted to our platform, we started the Self-operation Business in 2019 to provide
better fulfilment and services to our buyers. We generate revenue from sales of products. In 2022, we
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BUSINESS
procured and sold around 278,000 SKUs every month on average, to downstream pharmacies and
primary healthcare institutions. These SKUs are carefully selected based on our analyses of buyers’
transaction preferences and history, after obtaining the consent of relevant parties based on the privacy
policy of our platform. To facilitate high-quality service and fast and reliable delivery, we have
developed a proprietary fulfilment system, integrating procurement, warehousing, delivery and
working capital management into a centrally managed digitalised process. Centralised and digitalized
management has enabled us to effectively control inventory turnover days at 26.5 days in 2022, better
than the industry average level in the pharmaceutical circulation industry. We strategically designed
mapping strategy for our own warehousing networking and had built 20 smart warehouses in 19 cities
as of 31 December 2022. In our smart warehouses, we ensure that an order is processed and completed
for delivery in, on average, 2.85 hours in our warehouses in 2022. In 2022, we have also significantly
reduced delivery time, especially for inter-province delivery, to 41 hours for cities and 51 hours for
towns, outperforming the industry average by approximately 20%. The GMV of our Self-operation
Business was RMB15.2 billion in 2022, representing approximately 40.2% of the total GMV, and
growing at a CAGR of 58.5% from that in 2020.
Targeted Product Launch Business . We started the Targeted Product Launch Business as part
of our Self-operation Business in 2020. We procure from pharmaceutical companies and their selected
master vendors and sell to our buyers and generate revenue from sales of pharmaceutical products
procured. To better leverage our deep industry know-how, we conduct market analyses to help
pharmaceutical companies better comprehend and capture downstream demand, identify products to be
tailored for such demand, and collaborate with pharmaceutical companies to promote their products
through our digital marketing solutions. Through Targeted Product Launch Business, on the one hand,
we bring to pharmaceutical companies incremental demand and the insights we have gained from a
large number of transactions on our platform, and on the other hand, we address the needs of our
buyers and help them secure cost-effective deals. We maintain a healthy relationship with
pharmaceutical companies and are able to procure directly from them and their selected master vendors
at competitive prices. As of 31 December 2022, we were in collaboration with more than 500
pharmaceutical companies to launch the promotion of around 1,100 SKUs. The GMV of our Targeted
Product Launch Business reached RMB1,009 million in 2022, representing a CAGR of 72.8% from
that in 2020 and contributed to 6.6% of the GMV of our Self-operation Business in 2022. The key
differences between our Targeted Product Launch Business and our General Self-operation Business
include that, for upstream participants, suppliers of our Targeted Product Launch Business include
pharmaceutical companies. In terms of product selection, we tend to focus on new products and
existing products with certain characteristics, such as pharmaceuticals of high demand but limited
brand awareness, pharmaceuticals that are sold well in hospitals but not adequately promoted in
pharmacies outside of hospitals, and pharmaceuticals that are well promoted and therefore better
known in one geographic region but are less known in another. We have a specific department
designated for selecting products, managing product performance and reviewing the gross profit
margin of our Targeted Product Launch Business. Products are assigned with a label on our YSB App
indicating to our buyers that these are transacted in our Targeted Product Launch Business. Moreover,
we provide digital marketing solutions to help our suppliers promote their products, so that they are
willing to offer products at reduced procurement prices in return for the digital marketing solutions we
provide to them, so that we tend to enjoy higher gross profit margin.
Other businesses . We developed a series of businesses, to help improve the operating
efficiency of the upstream and the downstream, and to empower pharmacies and primary healthcare
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institutions with market insights and professional knowledge to enhance their service capability and
quality. We are therefore able to maintain a healthy, active and self-reinforcing ecosystem.
 ClouDiagnos. We partner with primary healthcare institutions, place testing equipment at
selected primary healthcare institutions, perform the testing and generate testing results.
Our ClouDiagnos services provide strong support to medical professionals at primary
healthcare institutions for them to make more informed medical recommendations, and
improve the diagnostic quality at the primary healthcare level. We collect diagnostic
testing service fees from our services.
 wePharmacy. wePharmacy is a 24-hour access smart unmanned pharmaceutical booth that
connects our wePharmacy buyers and the end customers with pharmacist services. With
the help of wePharmacy, both prescription and over-the-counter (“OTC”) pharmaceuticals
can be offered to the end customers. By design, each wePharmacy booth can hold over
2,000 SKUs. wePharmacy not only can help pharmacies extend the operating hours during
night time, but can also enhance their operating efficiency by improving sales per square
metre or sales per employee. We collect revenue from sales of products, i.e., the
wePharmacy booths, and service fees. We also charge annual service fees for system
upgrade, repairs and maintenance of wePharmacy booths.
 SaaS solutions. As of 31 December 2022, our SaaS solution ePalm had provided inventory
management and sales management services to around 40,000 pharmacies, and our SaaS
solution CloudComm had provided sales management, analyses and forecast services to
over 5,200 pharmaceutical sellers. We offer digital solutions to help our sellers and buyers
manage their operations and sales. We charge a one-time installation fee and annual
subscription fee for our SaaS solutions.
 YSB eLearn. We provide online courses for the preparation of the pharmacist qualification
examinations. Since our inception in 2015 and up until 31 December 2022, we provided
online training courses to, cumulatively, around 220,000 pharmacists and prospective
pharmacists. Most of our courses in YSB eLearn are offered for free.
OUR ECOSYSTEM
Leveraging our technological advantages and unique business model, we connect the following
players in the pharmaceutical value chain and have formed an ecosystem, centred on our Yaoshibang
platform and implemented through pharmaceutical services and solutions. As of 31 December 2022:
 Pharmaceutical companies . We were in collaboration with more than 500 pharmaceutical
companies under our Targeted Product Launch Business and equipped them with unique
and valuable insights about market demand.
 Distributors and vendors . We had dealt with around 8,600 distributors and vendors in our
Self-operation Business. We had offered around 6,000 distributors and vendors a well-
connected platform to distribute their products and receive market feedback on our Online
Marketplace.
 Pharmacies. We had enabled around 354,000 pharmacies, covering over 50% of the total
number of pharmacies, to achieve operational excellence, control procurement and
fulfilment costs, diversify their product offerings and better serve the end customers. As of
31 December 2022, we had attracted around 354,000 pharmacies to transact on our platform.
In addition, according to the report published by Intelligence Research Group, an
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independent industry research and consulting agency in China, among the chain pharmacies,
we have cumulatively, since our inception and up until 31 December 2022, served 55
pharmacy brands that are listed among the Top 100 Chain Pharmacies in China in 2022.
 Primary healthcare institutions . We had helped around 173,000 primary healthcare
institutions, including, among others, private clinics, township health centres, village
clinics, and community medical institutions. We help them better deal with daily
operation, provide some of them testing equipment, and diversify their service offerings to
better serve the end customers. We had covered around 17% of the total number of
primary healthcare institutions in the industry. As of 31 December 2022, we had attracted
around 173,000 primary healthcare institutions to transact on our platform.
 Pharmacists. Since our inception in 2015 and up until 31 December 2022, we helped,
cumulatively, around 220,000 pharmacists and prospective pharmacists prepare for
qualification examinations and provide them with resources to enhance their knowledge
base.
 Medical professionals . We had empowered over 10,000 medical professionals at primary
healthcare institutions to expand their service range and improve their service quality.
OUR MARKET OPPORTUNITIES
China’s pharmaceutical circulation industry consists of in-hospital market and outside-of-hospital
market. Pharmaceutical circulation is the process where pharmaceutical distributors and vendors procure
pharmaceuticals from upstream pharmaceutical companies, and sell to other pharmaceutical distributors and
vendors, downstream hospitals, pharmacies and other retail terminals. According to Frost & Sullivan, in
2021, the market size of China’s outside-of-hospital pharmaceutical circulation industry represents about
35.5% of the market size of the whole pharmaceutical circulation industry. The market size of China’s
outside-of-hospital pharmaceutical circulation industry is expected to grow from RMB639.7 billion in 2022
to RMB1.0 trillion in 2027, representing a CAGR of 9.6%.
Driven by technology advances such as cloud computing and big data, pharmaceutical
transactions and services have been gradually transformed by digital solutions. According to Frost &
Sullivan, in terms of GMV, the market size of China’s digital market of outside-of-hospital
pharmaceutical circulation services grew from RMB53.5 billion in 2018 to RMB180.2 billion in 2022
at a CAGR of 35.5%. However, the digitalization of outside-of-hospital pharmaceutical circulation is
still at an early stage. The digitalisation of China’s outside-of-hospital pharmaceutical circulation
started in around 2008 to 2010 and was mainly personal computer-based. Mobile-based digitalisation
mode started in around 2014 to 2015, along with the sound development of information technology,
such as 4G and 5G. As of 2022, the penetration rate of China’s digital market of outside-of-hospital
pharmaceutical circulation services to the overall outside-of-hospital pharmaceutical circulation
market, in terms of GMV, was merely 28.2%. According to Frost & Sullivan, in terms of GMV, the
market size of China’s digital market of outside-of-hospital pharmaceutical circulation services is
expected to reach RMB358.3 billion in 2027 at a CAGR of 14.7% and its penetration rate to the overall
outside-of-hospital pharmaceutical circulation market is expected to reach 35.4% in 2027.
There exists challenges in China’s outside-of-hospital pharmaceutical circulation industry,
especially at the primary healthcare level, in particular:
 Fragmented market with supply and demand mismatch . China’s outside-of-hospital
pharmaceutical transaction and service market is fragmented and regionalised. Large
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pharmaceutical sellers lack the incentives to serve the demand, especially the long-tailed
SKUs, of the small and scattered buyers. Small pharmaceutical sellers may be unable or
unwilling to meet certain downstream demand due to lack of scale and resources. As a
result, buyers are underserved in many aspects, such as the choice of SKUs, the quantity
and quality of products, complicated procedures leading to slow fulfilment and delivery,
and the lack of pre-sale advice and after-sale services.
 Multi-layered market with high transaction costs and low efficiency. Pharmaceutical
circulation market is multi-layered in China, which is especially true at the primary
healthcare level. The multi-layered structure leads to low efficiency, high transaction costs
and unsatisfactory experience for buyers. Moreover, sellers lack the effective
technological means to quickly identify and locate market demand and thus they could not
always realise potential sales opportunities.
 Opaque pricing and product tracking difficulties . A highly fragmented and multi-layered
market leads to asymmetric information among the industry players, leading to problems
such as opaque pricing, difficulties in tracking products, unfair competition, etc., and
jeopardising the interests of the participants along the pharmaceutical value chain and the
overall safety of pharmaceutical transactions.
 Lack of digital management tools at the primary healthcare level . Lack of digital
management tools leaves basic management and operational needs, such as supply chain
management, in-store management and skill training, largely unsatisfied at the primary
healthcare level.
We understand the challenges in the pharmaceutical circulation industry and ride on the market
trends. Sellers have increasing needs to identify market needs, improve turnover and product tracking.
Buyers have increasing needs to digitalise their management, control costs and expand the retail sales
market. We start from and focus on empowering the players at the primary healthcare level, where
there is an immense potential with abundant market opportunities and where we have deep knowledge
of. We possess the technological capabilities to effectively transform the outside-of-hospital
pharmaceutical transactions and services into an ecosystem that seamlessly connects the players along
the value chain and provides them with ample healthcare solutions. We closely monitor the favourable
changes in policies such as prescription outflow and medical resources being increasingly allocated to
the primary level.
See “Industry Overview” for further details.
COMPETITIVE LANDSCAPE
The market size of China’s digital market of outside-of-hospital pharmaceutical circulation
services in terms of GMV was RMB180.2 billion in 2022, representing about 28.2% of the overall
outside-of-hospital pharmaceutical circulation market. Digitalised pharmaceutical circulation can be
divided into two business models, namely marketplace model and self-operation model. Under
marketplace model, a platform acts as a marketplace to bridge upstream pharmaceutical sellers and
downstream pharmaceutical buyers and facilitate pharmaceutical transactions online. Under self-
operation model, a player develops and operates a self-owned supply chain, directly supplying
pharmaceuticals to outside-of-hospital terminals in the form of digital commerce transactions on a
platform.
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Putting various factors into consideration, such as, the business resources, network and
experiences accumulated, the players in the China’s digital market of outside-of-hospital
pharmaceutical circulation services may choose to focus on marketplace model, self-operation model,
or a combined mixed model of both. While the players may focus on one model at the beginning, most
of them have accumulated enough resources and experiences after years of business operations, and
they have extended or possessed the capability to extend their business to cover the other model. The
coexistence and interaction between marketplace model and self-operation model is commonly seen
among the players in the China’s digital market of outside-of-hospital pharmaceutical circulation
services.
The following table presents the major players in China’s digital market of outside-of-hospital
pharmaceutical circulation services:
Company
GMV
(RMB
million for
the twelve
months in
2022)
Market
Share
(Calculated
based on
GMV)
Market
Ranking
(Calculated
based on
GMV)
MAB
(Monthly
average for
the twelve
months in
2022)
Market
Ranking
(Calculated
based on
MAB)
Percentage
of GMV in
2022 from
marketplace
model
Percentage
of GMV in
2022 from
self-
operation
model
YSB Inc. 37,833 21.0% 1 308,000 1 59.8% 40.2%
Competitor A 23,000 12.8% 2 120,000 4 99.0% 1.0%
Competitor B 20,000 11.1% 3 230,000 2 100% 0
Competitor C 17,969 10.0% 4 175,000 3 25.4% 74.6%
Competitor D 17,101 9.5% 5 110,000 5 <5% >95%
Source: Frost & Sullivan
We are the largest digital pharmaceutical platform serving businesses outside of hospitals in
China in terms of total GMV (marketplace model and self-operation model combined) in 2022. Our
MAB ranked the highest among these major players in China’s digital market of outside-of-hospital
pharmaceutical circulation services.
We ranked in second place in terms of GMV from marketplace model among these major
players in China’s digital market of outside-of-hospital pharmaceutical circulation services. The
average number of monthly available SKUs transacted on our platform in 2022 was the highest among
digital pharmaceutical platforms serving businesses outside of hospitals in China.
We ranked in second place in terms of GMV from self-operation model among these major
players in China’s digital market of outside-of-hospital pharmaceutical circulation services. In 2022,
we were able to ensure that, on average, an order was processed and completed for delivery much
faster than the industry average level. We maintained inventory turnover days at a level better than the
industry average level in the pharmaceutical circulation industry, in 2022. Our inter-province delivery
time for cities and for towns in 2022 is also much lower than the industry average level.
The aforementioned industry information is supported by analyses performed by Frost &
Sullivan. See “Industry Overview—Overview of China’s digital market of outside-of-hospital
pharmaceutical circulation services” and “—Competitive landscape and entry barriers of China’s
digital market of outside-of-hospital pharmaceutical circulation services” for further details.
OUR VALUE PROPOSITIONS
We believe that we offer compelling value propositions for participants in our healthcare
ecosystem. Leveraging our deep knowledge of China’s outside-of-hospital pharmaceutical market,
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technologies and smart supply chain capabilities, we connect the industry players in our ecosystem and
reinforce strong network effect. We have developed a series of technology-backed solutions to connect
and empower our ecosystem participants. We have turned the process of pharmaceutical transactions
and services into a digitalised, standardised and scalable one. We strive to build an ecosystem that
seamlessly connects the players along the pharmaceutical value chain and creates values for them and
the whole society.
Value propositions to the downstream . The experience of buyers is core to our business. We
have improved the accessibility of safe, accommodating and affordable products and services in China,
especially for pharmacies and primary healthcare institutions in areas with limited healthcare resources
historically. We are committed to becoming the go-to platform for the downstream.
 Abundant product offerings . We provide a vast selection of SKUs to our buyers, including
prescription and OTC pharmaceuticals, healthcare products and medical devices. Through
our Online Marketplace, we fulfil the demand of long-tail pharmaceuticals and help
address the problem of inadequate supply at the primary healthcare level. Through our
Self-operation Business, we provide a comprehensive selection of core SKUs that are
among the most frequently sourced SKUs by our buyers.
 Transparent and competitive pricing . We digitally unite our buyers into a virtual alliance
and improve their bargaining power for better prices. We provide them with transparent
pricing. We also simplify the transaction process by reducing or eliminating the multi-
layered structure and thereby minimising unnecessary transaction costs. For our Self-
operation Business, we procure large amounts of products and such economies of scale
allow us to get favourable pricing terms and pass on the savings to our buyers.
 In-time and reliable fulfilment . Our warehousing and delivery system is strategically
designed to provide safe, fast and reliable delivery. We have designed and built a system
that automatically generates an optimal delivery plan for each order. We are capable of
delivering high volumes of small ticket size orders to the primary healthcare level and
remoted areas economically, with our average delivery time outperforming the industry
average level by approximately 20% in 2022.
 Stable supply with high quality . We set strict standards for conducting transactions on our
platform. Our warehousing and delivery management system ensures stable product
supply.
 Technology-backed solutions and services. We empower our downstream players with our
technology-backed initiatives. Our ClouDiagnos provides strong support to medical
professionals at primary healthcare institutions for them to provide reliable and affordable
diagnostic services and make more informed medical recommendations to patients. Our
wePharmacy facilitates pharmacies to provide 24-hour unmanned services to end
customers. Our SaaS solutions help pharmacies streamline inventory management.
Value propositions to the upstream . Our upstream participants are critical in providing a
stable stream of high-quality products to our platform. The hundreds of thousands of buyers, simplified
distribution channels, and improved transparency and allocation of healthcare resources across the
country together attract numerous upstream participants to come to benefit from our ecosystem and to
better serve the market.
 Access to the largest network of buyers . We provide our upstream a time-efficient and
cost-effective way to access a diverse pool of buyers, especially those at the primary level
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and from remote areas. Such buyers are comprised of around 354,000 pharmacies,
including, among other, small and medium-sized chain pharmacies and monomer
pharmacies, and around 173,000 primary healthcare institutions, including, among others,
private clinics, township health centre, village clinic, and community medical institution.
We offer upstream participants a well-connected platform to effectively access
geographically scattered buyers, distribute their products, and increase sales.
 Effective sales and marketing solutions . With direct reach to all the touchpoints of the
healthcare and pharmaceutical value chain, we are able to capture and analyse vast amount
of information. Upstream participants can benefit from our feedback, learn the market
trends, and make strategic decisions to address downstream demand. They can also
monitor sales and promotions, track their products and provide after-sales services. In
particular, we provide pharmaceutical companies insights about market opportunities so
that they can better cater to the downstream needs. We also provide upstream participants
a series of digital solutions for direct marketing, including group buy and livestreaming.
 Digital management solutions . We are one of the first platforms in the outside-of-hospital
pharmaceutical market to offer SaaS solutions to our sellers. These digital solutions help
our sellers manage operations and sales.
 New business opportunities . The solutions we provide to empower our downstream also
revitalise our whole ecosystem. When we attract and retain more active buyers to our
ecosystem, in turn we bring new business opportunities to our upstream.
OUR FINANCIAL PERFORMANCE
We generate revenue primarily from sales of pharmaceutical products through our Self-
operation Business, and commissions from pharmaceutical sellers transacting on our Online
Marketplace. In connection with our other businesses, we collect diagnostic testing service fees from
primary healthcare institutions and SaaS usage fees from pharmacies.
We have a track record of business growth. Our total revenues grew at 66.4% from
RMB6.1 billion in 2020 to RMB10.1 billion in 2021, and further at 41.4% to RMB14.3 billion in 2022.
The gross profit margin is 10.0%, 9.1% and 10.1% in 2020, 2021 and 2022, respectively. In 2020,
2021 and 2022, we recorded a loss of RMB571.7 million, RMB501.6 million and RMB1,500.0
million, respectively. The loss recorded in 2020, 2021 and 2022 was primarily attributable to costs and
expenses associated with the expansion of our fast-growing Self-operation Business, the development
of our other businesses and fair value changes of financial liabilities at fair value through profit and
loss in connection with our preferred shares.
OUR STRENGTHS
We believe that the following competitive strengths contribute to our success and differentiate
us from our competitors.
China’s largest and fast-growing digital pharmaceutical platform serving businesses outside of
hospitals, benefiting from strong network effects
According to Frost & Sullivan, we are the first in the outside-of-hospital pharmaceutical
circulation industry to adopt mobile internet to integrate the pharmaceutical value chain. Our total
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GMV reached RMB37.8 billion in 2022, representing a CAGR of 38.6% from that in 2020, both the
highest among leading digital pharmaceutical platforms serving businesses outside hospitals in China.
As of 31 December 2022, we attracted around 354,000 pharmacies and around 173,000 primary
healthcare institutions to transact on our platform, representing a CAGR of 20.9% and 39.3% from that
in 2020, respectively. As of 31 December 2022, we had around 6,000 sellers on our Online
Marketplace and around 9,100 suppliers in our Self-operation Business. We strive to be the go-to
platform for pharmaceutical transactions.
Buyer engagement is core to our sustainable business development. We are able to maintain
high buyer engagement and keep monetising our large and active buyer base. Our average number of
MAB is the highest among digital pharmaceutical platforms serving businesses outside of hospitals in
China in 2022, according to Frost & Sullivan. We had 202,000, 256,000 and 308,000 average number
of MAB on our platform, during the Track Record Period, among which, the average number of MPB
represents a percentage of 80%, 87% and 92%, respectively. Average number of orders per paying
buyer per month increased from 12.6 in 2020 to 27.3 in 2022, representing a CAGR of 46.8%.
Through the connectivity of our platform bringing together participants along the
pharmaceutical value chain, an ecosystem has emerged and provided us with a powerful set of network
effects. We are able to achieve better industry coverage and higher GMV and generate deeper market
insight. Network effects allow us to grow our user base and monetization opportunities in a cost-
effective manner. The strong network effects will continue to drive our sustainable business growth.
Synergetic integration of and dynamic balance between Online Marketplace and Self-operation
Business, driving continuous growth of business innovations
We operate a scalable synergised business model. The Online Marketplace and Self-operation
Business, mutually complementing and reinforcing, together as a strategic whole, critically support the
overall healthcare ecosystem. We believe that our business model presents the most effective way to
address the supply and demand mismatch problem. In 2022, the GMV of our Self-operation Business
represents about 40.2% of the total GMV. By maintaining a good balance of and exploiting synergies
between the two businesses, we have created a high barrier that prevents our competitors from
successfully copying our business model and achieving scalable operation. The Online Marketplace
and the Self-operation Business are synergised to meet the needs of all buyers. For buyers whose
demand is more certain, frequent and stable, the Self-operation Business provides high-quality
products and fast and reliable fulfilment. For buyers whose demand is long-tail, scattered or
unpredictable, our Online Marketplace can fulfil such demand by offering more comprehensive SKUs
at a good price. We allow buyers to source products seamlessly across the two businesses on our
Yaoshibang platform. As a result, more buyers are attracted to the platform, increasing the GMV of
both our Online Marketplace and Self-operation Business. Moreover, we have been continuously
enhancing the selection of SKUs. The average number of monthly available SKUs transacted on our
platform was around 3.3 million in 2022, the highest among digital pharmaceutical platforms serving
businesses outside of hospitals in China, according to Frost & Sullivan.
While adequately fulfilling the needs of our buyers, we are able to maintain strong synergetic
effects. Our Online Marketplace complements our Self-operation Business, providing scalability
powered by the network effects and an abundant selection of products, and helping establish our brand
and the competitive moat of our Self-operation Business. The valuable experience we gained from
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operating our Online Marketplace also provides important insights for our Self-operation Business
regarding the selection and procurement of SKUs. Our Self-operation Business, on the other way
around, feeds our Online Marketplace with valuable insights in product and service development and
supply chain management from directly transacting with our buyers. These insights help us better
support the sellers on our Online Marketplace to grow sustainably and better serve our buyers.
Leveraging the experience and capabilities we have gained, we continue our business model
innovation and have started the Targeted Product Launch Business since April 2020. Targeted Product
Launch Business is a proven success of the synergetic integration of our business model. We
collaborate with pharmaceutical companies, and bring them effective marketing solutions. We provide
pharmaceutical companies with more access to and closer connection with buyers. Since its inception,
our Targeted Product Launch Business has benefited from the network effects, experienced rapid
growth and adds scale to our overall business. The GMV of Targeted Product Launch Business was
RMB1,009 million in 2022, representing a CAGR of 72.8% from that in 2020. Our experience and
capabilities also enable us to expand into other businesses such as ClouDiagnos and wePharmacy in
2021, so that we are able to provide comprehensive and one-stop services to our customers and their
end customers.
Technologies and digital solutions empowering the participants along the value chain
We are a technology-driven company and place the utmost focus on continuingly improving
our technology to better serve our ecosystem participants. We have developed a series of solutions in
house—including, among others, sales management solutions, inventory manage tools, all-in-one
printing, and digitalised certification exchange—backed by cloud-computing, big data, and advanced
algorithm. We operate our platform to deliver digital solutions to our ecosystem participants to address
the challenges faced by them in various business scenarios and empower them to improve efficiency
and control costs.
We offer our ecosystem participants a series of SaaS solutions. As of 31 December 2022, we
had provided SaaS services to over 5,200 sellers to help them connect our Yaoshibang platform
seamlessly. As of the Latest Practical Date, we are one of the very few in the outside-of-hospital
pharmaceutical circulation industry to provide such services to sellers, according to Frost & Sullivan.
We also offered SaaS services to around 40,000 pharmacies. For example, we provide ePalm to
pharmacies with a full-package of digital management tools, including, among others, smart storage,
membership management, inventory management and account management. Digitalisation helps our
ecosystem participants grow intelligently and creates value to the whole society with comprehensive,
high-quality and affordable healthcare services. It in turn enhances the development of our platform
and the overall sustainability of our ecosystem.
Furthermore, we have accumulated valuable insights from transacting with and serving the
participants along the pharmaceutical value chain and from our ever-evolving analytical capabilities.
Such insights help buyers make informed procurement decisions. We also help the upstream better
understand the downstream demand through data analyses and design customised marketing plans.
Smart supply chain management enhancing user experience and operating efficiency
We have developed our smart supply chain management system in house, which has
significantly contributed to our success and our ever-growing scale. We combine advanced
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technologies and management expertise to integrate the front and back ends of the supply chain,
covering procurement, warehousing and delivery. With the help of our smart supply chain, we have
improved our inventory management and operating efficiency.
Our procurement system tracks the life-cycle of available SKUs, analyses their historical price
fluctuation, and generates smart procurement suggestions for our procurement team to review. We are
able to maintain high inventory turnover.
Our warehousing system is centrally managed and powered by algorithm and the insights we
accumulated from transacting on our Online Marketplace and Self-operation Business. We have
streamlined the process and improved overall efficiency. In 2022, we were able to ensure that, on
average, an order was processed and completed for delivery in 2.85 hours, much faster than the
industry average level. We strategically designed a warehousing mapping and had built 20 smart
warehouses in 19 cities as of 31 December 2022. Leveraging on smart supply chain management, we
maintained inventory turnover days at 26.5 days, better than the industry average level in the
pharmaceutical circulation industry, in 2022.
Our delivery system is digitally managed and provides fast and safe services to our buyers. In
2022, the average inter-province delivery time outside of province was 41 hours for cities and 51 hours
for towns, outperforming the industry average by approximately 20%, with the industry average being
48 to 60 hours for cities and 60 to 72 hours for towns. Fast delivery allows pharmacies to place
frequent orders with smaller ticket size, which in turn helps improve the inventory turnover of
pharmacies. Moreover, we maintained low logistics expenses at 1.46% of the GMV of our Self-
operation Business in 2022, much lower than the industry average rate.
Rooted in massive outside-of-hospital pharmaceutical circulation industry with tailored digitally
supported business development strategies
We strategically commenced our business in the massive outside-of-hospital pharmaceutical
circulation industry, especially at the primary healthcare level, as a start point. The primary healthcare
level is fragmented and layered, leading to problems such as the supply and demand mismatch, high
transaction costs, and low operating efficiency. Buyers are clustered at the primary healthcare level but
are scattered due to geographical limitations. They have little bargaining power against the upstream
on their own. We have brought mobile internet and digital solutions to the market to address the
industry challenges. We have, effectively, built a virtual alliance for the downstream, where the
demand of each and every buyer is equally addressed, regardless of their size or geographical location.
We tailored our business development (“BD”) strategies to best reflect our positioning. Our BD
strategies are built upon our experience, competence and capacity we cultivate and grow from serving
and transacting at the primary healthcare level. We closely monitor the immense potential and
opportunities in the market and track the favourable regulatory development to constantly adjust our
BD strategies and grow with the market. Leveraging our unique business model and market
positioning, we believe we will take a significant share of the market expansion. As of 31 December
2022, our BD team consisted of over 2,800 members and each of our BD member can manage around
130 pharmacies on average.
Visionary management team with internet technology and healthcare service experiences
We are led by an experienced management team, headed by our founder, Mr. Buzhen Zhang.
Mr. Zhang is also the chairman of the board, and has served as chief executive officer since our
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inception. Mr. Zhang is a market pioneer and a renowned entrepreneur who has long-time passion for
the healthcare industry. He has led us since our inception, establishing and developing our vision,
mission and culture, with a clear roadmap of long-term development. Mr. Zhang is a seasoned
entrepreneur with extensive experience for over 20 years in managing internet technology companies
and developing technological solutions for businesses in China. Prior to founding the Company,
Mr. Zhang worked at Fang.com for 15 years, responsible for both technological development and
business management. Through the experience, Mr. Zhang accumulated deep expertise of using
technological means to solve business problems especially for small retail establishments. The insights
derived from such expertise was instrumental in understanding the critical issues faced by China’s
outside-of-hospital pharmaceutical market and subsequently developing effective solutions based on
technologies.
Our management team has combined experience in healthcare services and information
technology, enabling pharmaceutical transactions and services and developing digital supply chain.
They are dedicated to delivering better healthcare services to pharmacies and primary healthcare
institutions and leading the transformation in the China’s outside-of-market pharmaceutical circulation
industry with their clear vision and passion. Our values, along with our employee training, career
development and incentive programmes, have contributed greatly to our talent acquisition and
incubation.
OUR STRATEGIES
To enhance our market share, promote our brand, improve our profitability, and further, to
achieve our long-term goal to establish a safe and efficient transaction network for businesses along the
pharmaceutical and medical value chain, we intend to pursue the following strategies:
Systematically grow the scale, comprehensiveness and depth of our pharmaceutical circulation
business
We will continue to transform the outside-of-hospital pharmaceutical transactions and services
and develop our platform, centred on our Online Marketplace and Self-operation Business, and further
complemented by a series of other businesses. We will grow the scale of our business and enhance the
comprehensiveness and depth of our solutions and services.
Enhance our Online Marketplace . We have established the largest digital pharmaceutical
transaction and service network outside of hospitals in China and we plan to further expand our
coverage and increase our penetration in the outside-of-hospital pharmaceutical market. We plan to
grow our presence in large chain pharmacies. Powered by the strong network effects, we plan to further
promote our brand to attract new sellers and buyers to transact on our Online Marketplace. We will
build in-app links, such as Medical Devices and Chinese Medicine , on our Online Marketplace to
promote healthcare products.
Expand our Self-operation Business . We will continue to broaden and deepen the geographical
reach of the service network of our Self-operation Business, and further integrate online and offline
services to reach, serve and retain more buyers. We will upgrade our smart supply chain and employ
digital solutions to enhance our service quality and fulfilment capability. We plan to expand our smart
supply chain to cover more areas, including the primary healthcare level and remoted areas. In the
meanwhile, we will broaden the scope of our SKU offerings, including, among others, generic drugs,
new drugs and specialty drugs, to fully exploit the benefits of prescription outflow.
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Regarding our Targeted Product Launch Business, as there is a growing awareness among
pharmaceutical companies of the outside-of-hospital pharmaceutical market in China, we will keep
exploiting the network effects and reinforcing the collaboration with our suppliers. We will broaden
and deepen such collaboration and cooperate directly with more well-known pharmaceutical
companies with good reputation. We plan to diversify the SKU pool by assisting pharmaceutical
companies to launch the promotion of more customised products to fulfil market demand. We will also
upgrade our digital marketing services to strengthen the bond between our upstream and downstream
ecosystem participants.
Enhance our technology capabilities and digital solutions and continue to innovate
We will continue to invest in research and development in building digitalised infrastructure
and attract and cultivate more talents, reinforcing our leading position in technological development.
Increase research and development in advanced technologies . We plan to continue investing in
upgrading our algorithm, deep learning capabilities and data analytics. We will keep integrating such
technologies into our digital solutions and services. We plan to apply new technologies into our daily
operations. We will improve the efficiency of data processing and operations, as well as the quality of
our services.
Improve our digital solutions . We will enhance and upgrade the functions of our current SaaS
solutions, promote their use, better respond to the needs of our ecosystem participants, and improve the
monetization of these solutions. We plan to increase penetration of SaaS solutions to serve more
upstream and downstream participants. We plan to create other precisely targeted digital services for
our ecosystem participants to address their specific needs and to improve their engagement, such as
SaaS solutions to provide tailored digital marketing plans for upstream participants and those to help
them enhance the internal efficiency of production, warehousing and delivery.
Further invest in our smart supply chain . We plan to invest in the operation and management of
our smart supply chain for the outside-of-hospital pharmaceutical market, improving its technological
development, data analytics and fulfilment efficiency. We are committed to providing faster delivery at
lower prices to help buyers better serve their end customers. We plan to upgrade our warehouse
management system and optimise its algorithm, so that it will generate more accurate and
comprehensive results. We plan to improve our algorithm and apply other technologies, to handle more
complex requests and better control operating costs. We will, in the future, improve automation in our
smart supply chain management, as a measure to control costs and reduce human errors.
Grow our other businesses online and offline and improve service quality
We plan to increase investment into our other businesses, expand business lines to fulfil the
unmet needs and grow our customer bases. We will continue identifying market potential to diversify
our revenue sources and enhance our monetization capabilities. We will further enhance the overall
service quality and improve the experience of our ecosystem participants, increasing their engagement
to our platform.
Build a one-stop systematic ClouDiagnos solution . We plan to further grow our ClouDiagnos
services, expand its geographical reach, and diversify its coverage to include all types of primary
healthcare institutions. We will provide more portable equipment to these primary healthcare
institutions and improve their diagnostic quality. We will further expand our service offerings. We will
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launch auxiliary medical consultation in the near future to help medical and pharmaceutical
professionals provide more informed advice to patients. With the one-stop solution, our pharmaceutical
circulation business and ClouDiagnos services together will create a self-reinforcing virtuous circle to
fully serve the needs of pharmacies, primary healthcare institutions and their end customers. Our
ClouDiagnos services will be highly synergistic with our pharmaceutical circulation business. The self-
reinforcing virtuous circle will help us enhance brand awareness, reduce customer acquisition costs
and increase purchase volume. It will also create a barrier for other players who have not cultivated a
large base of primary healthcare institution buyers and help us maintain buyer engagement.
Promote wePharmacy. We will further promote our wePharmacy, improve its structural design,
upgrade its functions, and enhance its connectivity with other services. We will continue applying
digital solutions into wePharmacy to realise fully automated management. We plan to seek
collaboration with more pharmacies to promote the popularity of our wePharmacy. We also plan to
leverage the experience we gained from developing wePharmacy to develop and provide more
extensive one-stop unmanned solutions to pharmacies. We will expand the availability of and the
channel to access pharmaceuticals, providing 24-hour access to smart pharmaceutical services to the
end customers.
Pursue strategic partnerships, investments and acquisitions
We plan to selectively and cautiously pursue strategic partnerships, investments and
acquisitions to explore synergetic effects, promote the growth of our business, diversify our product
and service offerings, and improve our digitalised management capabilities. We will enhance our
ecosystem to reinforce our leading position in the outside-of-hospital pharmaceutical transactions and
services. As of the Latest Practicable Date, we had not identified any target for investment or
acquisition.
OUR BUSINESS MODEL AND EVOLUTION
SaaS Solutions
Stage 3 (2020-2021)Stage 1 (2015-2019) Stage 2 (2019-2020) Stage 4 (2021 onwards)
Online
Marketplace
Online
Marketplace
Online
Marketplace
General
Self-operation
Business
General
Self-operation
Business
Targeted Product
Launch Business
Online
Marketplace
General
Self-operation
Business
Targeted Product
Launch Business
ClouDiagnos
& wePharmacy
On
l
ine
Marketplace
p
On
l
ine
Marketplace
p
General
Self
-
f
f
 operatio
n
Busine
s
s
Online Marketplace
 Self-operation Business
 Other Business
We started with a mobile internet based Online Marketplace in 2015 to address the supply and
demand mismatch in China’s pharmaceutical distribution network. A digitalised marketplace can
provide buyers direct and easy access to a vast selection of SKUs. On the one hand, we believe that
technology-backed solution is the key to address the challenge that China’s pharmaceutical distribution
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network is fragmented and multi-layered. We are the first mover in the industry to provide mobile
internet based integrated pharmaceutical services, compared with traditional means. Mobile internet
apps are more effective in cultivating a highly active and sticky user base. Through mobile internet
apps, we make our products and services easily accessible and make pharmaceutical business
convenient to conduct. On the other hand, there are extremely numerous pharmaceutical SKUs with
very scattered and long-tailed demand. Pharmaceutical distributors sometimes find it difficult to carry a
comprehensive selection of products, while pharmacies and primary healthcare institutions find it
difficult and costly to procure all products needed from suitable sellers within their geographical
regions. With a mobile internet based Online Marketplace, we, therefore, are able to bring together
sellers and buyers who otherwise would have no venue to trade in an efficient, secure and scalable
way. By attracting a large and growing base of pharmaceutical sellers and buyers to deal directly on
the Online Marketplace, we have created strong network effects.
We started our Self-operation Business in 2019, in response to the growing procurement and
fulfilment needs from the downstream. Self-operation Business brings us additional benefits. First, the
Self-operation Business gathers aggregate purchasing power from a wide network of buyers, which
increases our bargaining power against suppliers and allows us to pass on the savings to our buyers.
Second, we are able to select, based on our experience in pharmaceutical transactions and services,
commonly used pharmaceuticals with high quality to precisely match the downstream needs. Third, we
are able to exercise full control over warehousing and fulfilment management, thereby improving the
quality and stability of our delivery and after-sale services to buyers. Established upon the buyer base
brought by the Online Marketplace and supported by digitalised management, our Self-operation
Business smoothly connects the entire supply chain from procurement, warehousing, order processing,
invoicing, payment collection, to the delivery to downstream pharmacies and primary healthcare
institutions.
After years of successful operation and achievement in both the Online Marketplace and the
Self-operation Business, we started the Targeted Product Launch Business, under our Self-operation
Business, in April 2020, to enhance the relationship with our suppliers. The deep industry know-how
we accumulated from the downstream helps us earn a meaningful position to negotiate with our
suppliers, including pharmaceutical companies, provide them feedbacks on products, and offer them
digital marketing solutions. We have developed strong capabilities to become a more significant player
and contributor to the B2B pharmaceutical value chain. We also address the needs of the downstream
pharmacies and primary healthcare institutions.
While we gradually develop and improve our pharmaceutical circulation business, we are also
committed to bringing advanced technology and management insights to our ecosystem participants.
We are able to monetise our technological advantage. We started providing SaaS solutions to sellers
and buyers in 2016. The SaaS solutions help sellers and buyers with store management. Our R&D
personnel responsible for developing and updating our SaaS solutions have abundant professional
knowledge of mobile internet information technology, big data computing and artificial intelligence.
They are responsible for analysing market information from the upstream and downstream, and
designing, developing, testing and launching SaaS solutions to accommodate the needs of our sellers
and buyers. Our SaaS solutions are continuously updated to improve the experience of our sellers and
buyers. Apart from the SaaS solutions, our digital pharmaceutical circulation business is further
complemented by a series of other businesses. We empower our ecosystem participants and improve
their engagement. We started providing online training for pharmacists and prospective pharmacists in
2015. In 2021, we stared to partner with primary healthcare institutions to provide the end customers
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with diagnostic testing services. In the same year, we introduced wePharmacy, a 24-hour access smart
unmanned pharmaceutical booth that provides real-time pharmaceutical sales and services.
Our pharmaceutical circulation business and other businesses, together, integrate into a scalable
and synergised business model. Our business model is carefully tailored for meeting the demand from
our ecosystem participants. Our ecosystem participants can seamlessly switch across and access our
products and solutions on our platform. Our Online Marketplace offers a vast selection of SKUs and
price advantage to buyers whose demand is long-tailed, scattered or unpredictable. Our Self-operation
Business provides high-quality products and safe, fast and reliable delivery to buyers whose demand is
more certain, frequent and stable. Our Targeted Product Launch Business responds to the under-tapped
market demand of purchasing products with high quality at affordable prices. Our SaaS solutions help
with daily operation and management. Our other businesses complete the puzzle of transforming the
outside-of-hospital pharmaceutical circulation market into a closed-loop ecosystem.
Our self-enforcing ecosystem, enabled by the quality of our services and powered by the
growth of our ecosystem, provides us steady flows of opportunities and capacity for us to grow our
business. We are able to retain an active base of ecosystem participants. As of 31 December 2022, we
had around 6,000 sellers on our Online Marketplace and around 9,100 suppliers in our Self-operation
Business. We had served around 354,000 pharmacies and 173,000 primary healthcare institutions,
covering approximately 97% of counties and 82% of towns across China. These buyers are
traditionally burdened by regional limitation and by the uneven access to pharmaceuticals and other
healthcare resources. Additionally, we are able to retain an active base of buyers. In 2022, we had
around 308,000 of average number of MAB, respectively. Moreover, we devote ourselves to
maintaining a large profile of SKUs to satisfy the diversified needs of buyers. In 2022, the average
number of monthly available SKUs was around 3.3 million. We believe that our product offerings can
meet all kinds of needs from buyers.
Through our enhancement of our pharmaceutical circulation business and our expansion into
other businesses, we have developed diverse revenue streams. The following table sets forth a
breakdown of our revenue both in absolute amount and as a percentage of our total revenue during the
Track Record Period.
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Self-operation business .......................... 5,691,414 93.8 9,589,512 95.0 13,519,017 94.7
Online marketplace ............................. 372,716 6.2 489,247 4.8 694,204 4.9
Other businesses ................................ 7 7 7 0 . 0 14,779 0.2 61,589 0.4
Total ......................................... 6,064,907 100.0 10,093,538 100.0 14,274,810 100.0
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The following table sets forth our key operating metrics during the Track Record Period.
For the Year Ended December 31 /
As of December 31
2020 2021 2022
GMV (RMB million)
GMV from Online Marketplace ............................................... 13,638 17,040 22,632
GMV from Self-operation Business ............................................ 6,053 10,473 15,201
GMV from General Self-operation Business ................................. 5,715 9,586 14,192
GMV from Targeted Product Launch Business ............................... 3 3 8 8 8 7 1,009
Total GMV ............................................................... 19,691 27,513 37,833
SKU
Average Number of Monthly Available SKU (million) (1) ............................ 1 . 5 2 . 4 3 . 3
Average Number of Monthly Available SKU for Self-operation Business (thousand) ..... 1 5 0 1 9 6 2 7 8
The Upstream
Number of Sellers on Online Marketplace ....................................... 3,599 4,703 6,072
Number of Suppliers of Self-operation Business (2) ................................. 5,063 7,841 9,139
The Downstream
Overall
Registered Number of Buyers (thousand) ...................................... 332 434 527
Registered Number of Pharmacies (thousand) ................................ 2 4 3 3 0 5 3 5 4
Registered Number of Primary Healthcare Institutions (thousand) ................ 8 9 1 3 0 1 7 3
Average Number of MAB (thousand) ........................................... 2 0 2 2 5 6 3 0 8
Average Number of MPB (thousand) ........................................... 1 6 1 2 2 3 2 8 3
Paying Ratio .......................................................... 80% 87% 92%
Average Number of Orders per Paying Buyer per Month (3) ....................... 12.6 21.7 27.3
GMV per Order (RMB) ...................................................... 8 0 6 4 7 4 4 0 9
Online Marketplace
Average Number of MPB for Online Marketplace (thousand) ........................ 1 4 5 2 0 7 2 6 9
Average Number of Orders per Paying Buyer per Month for Online Marketplace (4) ....... 9 . 8 15.8 18.8
GMV per Order for Online Marketplace (RMB) .................................. 7 9 8 4 3 4 3 7 4
Self-operation Business
Average Number of MPB for Self-operation Business (thousand) ..................... 1 0 9 1 8 5 2 3 4
Average Number of Orders per Paying Buyer per Month for Self-operation Business (5) .... 5 . 6 8 . 5 11.4
GMV per Order for Self-operation Business (RMB) ............................... 8 2 1 5 5 9 4 7 5
Online Marketplace subsidy ratio (6) ........................................... 1.2% 0.8% 0.7%
Online Marketplace commission rate (7) ........................................ 2.8% 2.9% 3.1%
Notes:
(1) Average number of monthly available SKU refers to the average of the number of SKUs that are available at the end of a given
month during a given period, without eliminating duplication.
(2) Number of suppliers of Self-operation Business includes, among others, number of suppliers of Targeted Product Launch
Business.
(3)(4)(5) Average number of orders per paying buyer per month refers to number of monthly average orders divided by average number of
MPB in a given period. Overall average number of orders per paying buyer per month does not equal to average number of orders
per paying buyer per month for Online Marketplace plus average number of orders per paying buyer per month for Self-operation
Business because of the existence of overlapping paying buyers of Online Marketplace and Self-operation Business.
(6) Online Marketplace subsidy ratio refers to the amount of subsidies provided to buyers and used on Online Marketplace divided
by GMV from Online Marketplace.
(7) Online Marketplace commission rate refers to the commission fees (before deducting value-added tax) charged to third-party
sellers by Online Marketplace, divided by GMV from Online Marketplace.
OUR ONLINE MARKETPLACE
Our Online Marketplace helps address the supply and demand mismatch and provides cost-
effective access to a vast selection of SKUs to buyers. We believe we have established a leading
position in the industry that is attributable to our ability to connect and empower, on the one hand,
pharmaceutical companies and distributors who look for an efficient approach to sell their products to a
wide range of buyers, and, on the other hand, pharmacies and primary healthcare institutions whose
traditional seller reach is within a limited radius.
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Under the Online Marketplace, the sellers are upstream pharmaceuticals distributors and
vendors, and the buyers are mainly downstream pharmacies and primary healthcare institutions. We
have put in place a rigorous selection process for both pharmaceutical sellers and buyers that wish to
transact on our Online Marketplace. They must obtain and possess the relevant certificates, which are
stored in our CertEx, for their business. We monitor their certificates regularly.
Transaction process from buyer side
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Transaction process from seller side
As of 31 December 2022, the Online Marketplace has a base of around 527,000 registered
buyers, including both pharmacies and primary healthcare institutions. After buyers register on our
platform and have their certificates verified with our CertEx, they can browse our Online Marketplace
and source products with our comprehensive set of searching functions. Our searching function
provides a range of parameters for buyers to view, filter and select products. Our Online Marketplace
recommends products customised for each user on the home page, based on each buyer’s transaction
preference and history. After a buyer places an order, our system will pass the request to the seller of
the products so that the seller can arrange for delivery.
Pharmaceutical distributors and vendors, our customers under Online Marketplace, also register
on our platform. After sellers have their certificates verified with our CertEx, they can upload the
product information to our Online Marketplace and update the information from CloudComm. We
provide sellers with a range of performance feedback, updated daily, for them to better understand
downstream demand and manage the sales. Sellers are responsible for the direct delivery to pharmacies
and primary healthcare institutions and after-sale services.
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Benefits brought by our Online Marketplace are massive. On the one hand, we have drawn a
flow of pharmacies and primary healthcare institutions to pharmaceutical distributors and vendors, our
customers under Online Marketplace. They can learn the downstream demand and track their products
easily. On the other hand, buyers can select among around 3.3 million SKUs in 2022, respectively,
including prescription drugs, OTC drugs and healthcare products, with prescription drugs taking a
percentage of around 50% of all the SKUs on our Online Marketplace. They have essentially formed a
virtual alliance with better bargaining power altogether. Product prices are transparent. Buyers can
order pharmaceuticals at the best price available in the platform and monitor the orders online. As a
result, pharmacies can benefit from our Online Marketplace by being able to attract more end
customers with diversified SKU offerings.
We are not aware of any incidents of inappropriate or illegal advertising or inaccurate product
descriptions in relation to the sellers transacting on our Online Marketplace. We have established and
implemented internal control measures to prevent the occurrence of these incidents. Our agreement
with the sellers provides that product information published by the sellers on our Online Marketplace
should be true and complete, that the description of the product attributes must match the product, and
that no illegal, exaggerated or false descriptions is allowed. Product information shall not violate the
relevant laws and regulations, including Advertising Law, Anti-Unfair Competition Law, among
others. If the sellers violate the laws or regulations or infringe the legal rights, we reserve the right to
delete the relevant information, take restrictive measures against the sellers, or stop providing services
to the sellers.
We charge sellers a commission, which is based on a certain percentage of their sales on our
Online Marketplace. The average Online Marketplace commission rate we charged, which equals to
commissions we received from third-party sellers divided by the corresponding GMV, was 2.8%, 2.9%
and 3.1% in 2020, 2021 and 2022, respectively. For transactions conducted on and payments
proceeded through our Online Marketplace, we have been cooperating with a commercial bank to
provide payment settlement services for participants on our platform since 2021 to professionally and
efficiently handle the ever-increasing amount of fund flow and to better meet the requirements of the
relevant PRC laws and regulations. When transactions are processed, our buyers can choose their
preferred payment methods in our YSB App provided by different licensed payment institutions and
they are then directed to the corresponding payment portals. All payments from our buyers are
transferred to a payment settlement account in the commercial bank (an escrow account managed by
that commercial bank). Once buyers confirm the receipt of goods, payments will be settled by the
commercial bank and transferred to sellers. The relevant commission will be deducted at the same time
or settled monthly, as agreed by sellers and us. In its capacity as a payment settlement service provider,
the commercial bank charges us on cash-out from the commercial bank’s payment settlement account.
Cash-out fees have been accounted towards transaction processing fees under cost of sales in our
statement of profit or loss and other comprehensive income. Our PRC Legal Adviser is of the view that
the relevant companies in our Group are not in violation of any relevant PRC laws or regulations in all
material respects nor involved in any outstanding administrative proceeding in the PRC relating to
electronic fund transfers and payment services.
OUR SELF-OPERATION BUSINESS
The Self-operation Business is an essential component for us to bring high-quality products and
faster services to buyers. It also brings us economies of scale and reduce procurement costs.
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General Self-operation Business
Under Self-operation Business, we procure from pharmaceutical companies, distributors and
vendors, and sell to pharmacies and primary healthcare institutions on the platform.
Our Self-operation Business is conducted on our platform where we operate our own digital
stores online. We are able to make procurement decision based on downstream demand and exercise
higher level of quality control of products on our own. We select SKUs for the direct sale to buyers. In
2022, we procured and sold around 278,000 SKUs every month on average, to downstream pharmacies
and primary healthcare institutions. These SKUs are more frequently purchased and are of high
product quality. They are carefully selected based on the transaction history on the Online Marketplace
and the analyses of buyers’ demand and transaction preference, after obtaining the consent of relevant
parties based on the privacy policy of our platform.
Our Self-operation Business strengthens the entire supply chain and revitalises our ecosystem
from procurement, warehousing, processing orders, invoicing, payment collection, to the delivery to
downstream pharmacies and primary healthcare institutions. Our supply chain management system is
digitalised and tailored for our Self-operation Business. As of 31 December 2022, we had built a
nation-wide network of smart warehouses in 19 cities. We arrange delivery from our warehouses to our
buyers, using third-party carriers with good reputation with respect to time, quality, and flexibility.
20
Wareho uses1
19
Cities1
2.85h
Average time for an
order to be processed
and completed for
delivery2
41h Inter-province for cities2
51h Inter-province for towns2
Notes: (1) As of 31 December 2022; (2) For the year ended 31 December 2022.
Our Self-operation Business has largely enhanced the experience of buyers, our customers
under Self-operation Business. First, the Self-operation Business provides a selection of SKUs of high
quality, each with complete and clear information, to address the daily demand of buyers. Second, the
Self-operation Business provides stable supply and fulfilment through centralised management of
inventory and delivery. Delivery time has been reduced, especially for inter-province delivery. The
average delivery time outside of province is 41 hours for cities and 51 hours for towns. As a result,
pharmacies and primary healthcare institutions can place orders in flexible size and frequency and get
their orders fulfilled on time. We help them avoid overstocking so that they can better manage the shelf
life of the pharmaceuticals they sell to the end customers.
The Self-operation Business also improves upstream performance. Our suppliers receive timely
feedbacks on the downstream demand of products and after-sale services. Our suppliers can direct their
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decision-making according to the feedback we provide them on geographical preference, pharmacy
distribution and the market sales trend. They can monitor pharmaceutical promotion performance,
track their products and respond to market inquiries. They also enjoy the benefits from scalability
provided by us.
We generate revenue from sales of pharmaceutical products. We are able to negotiate directly
with pharmaceutical companies and other sellers to maintain competitive pricing. Revenue from our
Self-operation makes up an important percentage of our total revenue. We sell, through our own stores
on our Online Marketplace, pharmaceutical products we procure as part of our Self-operation Business,
and our Online Marketplace also charges commissions from these stores that we operate as part of our
Self-operation Business. The amount of commissions charged from our stores were
RMB224.7 million, RMB424.1 million and RMB555.9 million in 2020, 2021 and 2022. Additionally,
our Online Marketplace provides subsidies in the form of coupon to our buyers. Buyers may use such
coupons either with third-party merchants or our own stores on our Online Marketplace. When the
coupons are used in our stores, our Self-operation Business receives subsidies from our Online
Marketplace. The amount of subsidies provided to buyers and used in our stores were
RMB99.8 million, RMB155.6 million and RMB202.9 million in 2020, 2021 and 2022.
Targeted Product Launch Business
We collaborate with pharmaceutical companies, in our Targeted Product Launch Business to
converts potential market opportunities into realised sales of products. We bring downstream insights
to our suppliers for them to develop branded products to address the demand of end customers.
Targeted Product Launch Business helped bring boosted sales to our ecosystem participants.
Under the Targeted Product Launch Business, we identify potential demand through market
analyses. Leveraging enormous insights from years of experience in running both Online Marketplace
and Self-operation Business, we are able to identify sales potential for products with certain
characteristics, such as pharmaceuticals of high demand but limited brand awareness, pharmaceuticals
that are sold well in hospitals but not adequately promoted in pharmacies outside of hospitals,
pharmaceuticals that are well promoted and therefore better known in one geographic region but are
less known in another. We then seek to collaborate with our suppliers to assist them in promoting
products tailored for downstream needs to sell in our network. We are able to negotiate with our
suppliers on the price and pass on the savings to buyers. Furthermore, we provide pharmaceutical
companies a series of digital marketing solutions, such as livestreaming, to improve the sales. After
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such products are available for purchase on our platform, we monitor their life cycle and provide
market feedback to our suppliers for them to further improve the products and tailor their marketing
promotions. We do not charge fees in relation to digital marketing solutions we provide to our
suppliers. Instead, our suppliers are willing to offer products to us at reduced procurement prices in
return for the digital marketing solutions we provide to them, so that we tend to enjoy higher gross
profit margin arising from reduction in overall procurement prices. As of 31 December 2022, we were
in collaboration with more than 500 pharmaceutical companies to launch the promotion of around
1,100 SKUs.
Apart from digital marketing solutions we provide to our suppliers and therefore the more
favourable procurement prices for us described above, other key differences between our Targeted
Product Launch Business and our General Self-operation Business include that, for upstream
participants, suppliers of our Targeted Product Launch Business include pharmaceutical companies. In
terms of product selection, we tend to focus on the aforementioned products with sales potential. We
have a specific department designated for selecting products, managing product performance and
reviewing the gross profit margin of our Targeted Product Launch Business. Products are assigned
with a label on our YSB App indicating to our buyers that these are transacted in our Targeted Product
Launch Business.
Our Targeted Product Launch Business revitalises our pharmaceutical circulation business and
enables us to stand out in the outside-of-hospital pharmaceutical circulation market. We benefit from
our ecosystem and network effects established by our Online Marketplace and Self-operation Business.
Insights we learn from enabling pharmaceutical circulation on our platform and our smart supply chain
provide solid ground for our Targeted Product Launch Business to grow. Our Targeted Product Launch
Business helps promote our brand and market awareness of our products and services through the
collaboration with our suppliers, thereby contributing to our overall business growth. With an
enhanced market position, we are able to attract more industry participants to deal with us and secure
better terms from our strategic partners. We are able to, on the one hand, maintain a strong relationship
with our suppliers. They can directly approach buyers through our livestreaming service and get first-
hand knowledge from active interactions. We also provide smart warehousing for our suppliers so that
their burden of inventory management can be partially relieved. On the other hand, we precisely
capture the downstream demand and provide buyers, our customers, products with high quality at
affordable prices.
We have demonstrated the success of the Targeted Product Launch Business. In July 2020, we
collaborated with Company A for the promotion of Orlistat Capsules. We chose Company A because
the brand is popular among buyers and because Company A’s existing Orlistat Capsules production
and sales were not optimised. Before being involved in the Targeted Product Launch Business, the
GMV of Company A’s Orlistat Capsules only represented around 4% of the total GMV of Orlistat
products on the platform. As a response, we analysed the specific buyer requirements of Orlistat
products based on information from downstream sales. We then collaborated with Company A to
co-design marketing strategy and to customise the production. Supported by in-app promotion, such as
livestreaming, product recommendation, and coupons, and offline BD execution, such as BD training,
Company A’s Orlistat Capsules took around 46% of the market share in Orlistat products on the
platform for the month immediately after the start of the Targeted Product Launch Business. The GMV
of the first day reached over RMB400,000. The average monthly GMV were more than 20 times
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greater than that before the launch of the Targeted Product Launch Business. The monthly active
pharmacy number grew from 640 to around 11,000. Total GMV in 2021 is about RMB50 million.
Similar stories have been found in various other cases. For example, the market of Celecoxib
Capsules was largely dominated by a famous company and only until recent years have there been
other pharmaceutical companies entering into this market. We sought to collaborate with a company
whose product is more affordable and catered to increasing demand. Company B obtained the
permission to manufacture Celecoxib Capsules in September 2021 and started to collaborate with us in
November 2021. Since the commencement of the collaboration, we helped Company B increase the
monthly GMV of Celecoxib Capsules from less than RMB0.2 million in November 2021 to more than
RMB0.8 million in September 2022.
For our Targeted Product Launch Business, we generate revenue from sales of products. The
Targeted Product Launch Business has undergone rapid growth and we believe it will become an
important stream of our revenue.
OTHER BUSINESSES
ClouDiagnos
We introduced ClouDiagnos in 2021. ClouDiagnos works hand-in-hand with our
pharmaceutical business to meet the increasing need of primary healthcare institutions. This one-stop
testing solution largely alleviates the problems that can arise in primary healthcare institutions, which
traditionally suffer from the lack of capability to carry out medical tests, low fulfilment efficiency, low
product and service quality and unassured medical safety.
When a patient visits a primary healthcare institution we collaborate with and takes a test,
testing samples will be collected and sent to our lab or a third-party lab. After the testing result is
generated, we will send it to the primary healthcare institution. Doctors can then provide more
informed medical recommendations. The testing covers a wide spectrum of health indicators. The
whole process of result generation, delivery and communication is done online, reducing human efforts
and human errors, and helping save time for medical professionals and their patients. We help primary
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healthcare institutions provide better diagnostic quality and improve the traceability of testing results.
ClouDiagnos also includes laboratory testing services relating to, for example, genes, cells and
molecular genetics, to assist in diagnostic testing and treatment research and development. Please refer
to “Contractual Arrangements—Reasons For Our VIE Structure” for more details. According to the
latest standard medical testing service agreement between primary healthcare institutions and us, we
shall be responsible for the accuracy of the test results and relevant losses arising out of any false test
result.
We help build up diagnostic capabilities at the primary healthcare level and help primary
healthcare institutions expand their service range and improve their service quality. To address the lack
of medical equipment at the primary healthcare level, we place testing equipment, including portable
equipment, such as point-of-care testing equipment for blood tests, in selected primary healthcare
institutions, operate testing checkpoints, and cooperate with third parties to provide testing services.
We do not transfer the title of testing equipment to primary healthcare institutions by placing them at
these primary healthcare institutions, but record them as non-current assets on our statements of
financial position. We currently do not charge testing equipment usage fees.
There is a strong synergy effect between ClouDiagnos and our pharmaceutical business. On the
one hand, effective BD ensures that all 173,000 downstream primary healthcare institutions we serve
can access our ClouDiagnos services, providing a large and stable user base. On the other hand,
ClouDiagnos strengthens the bond between us and downstream primary healthcare institutions, and in
turn promotes pharmaceutical sales on our platform. The synergy creates a barrier for other players
who do not have a large primary healthcare institution buyer base and helps us maintain buyer
engagement.
We collect diagnostic testing service fees from our services. As of 31 December 2022, we had
collaborated with over 10,000 primary healthcare institutions.
wePharmacy
Our wePharmacy, introduced in 2021, is one of the first 24-hour access smart unmanned
pharmaceutical booth that connects real-time pharmacist services in the outside-of-hospital
pharmaceutical market. wePharmacy provides a series of useful functions to help pharmacies better
serve their end customers. Pharmacies that purchase our wePharmacy booths decide what products to
be offered, including prescription pharmaceuticals, OTC pharmaceuticals, among others. It provides
24-hour undisturbed services while no pharmacist or staff is required to present. wePharmacy has
significantly improved the experience of both pharmacies and their end customers, especially those
with urgent needs.
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We developed wePharmacy to enable pharmacies to provide 24-hour easy access of
pharmaceuticals to end customers. wePharmacy can be placed on the roadside, in residential
communities and in schools, to the extent permitted by local regulations and rules. End customers can
either visit wePharmacy by themselves or place a takeout order online. wePharmacy provides a series
of technology-backed functions. wePharmacy generates product recommendations. It connects with
pharmacists remotely so that end customers can seek real-time advice, including prescription review,
when they have trouble deciding what products to purchase. Additionally, wePharmacy can scan and
upload prescriptions and therefore help save the costs and efforts of having medical professionals or
staff on site to process the prescriptions. End customers can bring the prescription to wePharmacy for
scanning and review by a pharmaceutical professional online. Once the prescription is reviewed, end
customers can proceed with the purchase. There is no need to provide prescription again in the later
and continuous purchases of a same product, before such prescription expires. Moreover, wePharmacy
enables voice recognition, which helps end customers search for products quickly.
The process of the online review is illustrated as follows:
 First, end customers should either get electronic prescriptions from an internet hospital or
upload the photocopy of the prescriptions issued by their doctors to the system;
 Second, the electronic prescriptions or the photocopy of the prescriptions will be
transmitted, together with the pharmaceutical purchase orders, to pharmacies and their
pharmaceutical professionals for online review;
 Third, after the pharmaceutical professionals review and confirm that the prescriptions are
consistent with relevant requirements, they will enter their permission in the system for the
sales of such prescription drugs to such end customers; and
 Finally, upon receipt of such permission, wePharmacy booths will complete the sales.
The transaction records are owned by pharmacies who control and manage pharmaceutical
sales and prescription review, and we do not have the right to obtain the transaction records, including
the records where requests to purchase prescription drugs are rejected by pharmaceutical professionals.
However, based on the design of wePharmacy booths and relevant laws and regulations, a hypothetical
situation where the purchase of prescription drugs being rejected could be, when the electronic
prescriptions or the photocopy of the prescriptions are transmitted, together with the pharmaceutical
purchase orders, to pharmacies and their pharmaceutical professionals for online review, prescriptions
with no seals or signatures by doctors, insufficient information or other defects would fail the review.
Pharmaceutical professionals will enter their rejection in the system for the sales of such prescription
drugs. Upon receipt of such rejection, wePharmacy booths will deny the transaction and no
prescription drugs will be dispensed to end customers.
We have incorporated technological solutions into wePharmacy. wePharmacy seamlessly
connects product information and third party Enterprise Resource Planning (“ERPs”), enabled by our
cloud-computing technology. We can therefore provide convenience to end customers. They can easily
read clear and detailed product information from wePharmacy and no longer need to carry product
instruction for use with them all the time. End customers can also freely select payment channels of
their choice. In addition, wePharmacy is backed by our big data and advanced algorithm. It is capable
of automatic inventory management, including, among others, first in, first out, or FIFO, product refill,
the detection and warning of products that are close to their expiration date, and the cleanup of
products that have expired. Products sold through wePharmacy are trackable.
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wePharmacy has helped pharmacies significantly reduce the overall operating costs. Compared
with running a traditional pharmacy with pharmacists and salespersons staffed, wePharmacy requires a
smaller floor space, much lower personnel costs, and fewer resources to support human staff.
End customers can purchase products stored in wePharmacy. wePharmacy can hold over 2,000
SKUs and about 10,000 product units, depending on the size of the products. It has the most diversified
coverage of SKUs, compared with other unmanned pharmaceutical booths in the market, according to
Frost & Sullivan. wePharmacy’s design helps increase operating efficiency to run a full-service
pharmacy. Compared with unmanned pharmaceutical booths with traditional design, wePharmacy has
significantly reduced the marginal cost of carrying an additional SKU. As of 31 December 2022, we
owned nine patents on wePharmacy. The reduced cost can be mostly credited to wePharmacy’s design.
First, wePharmacy requires much fewer input/output ports (“I/O ports”) to support 2,000 SKUs,
compared with other unmanned pharmaceutical booths. The sharp reduction in I/O ports eases
troubleshooting when a dysfunction occurs. Second, wePharmacy features improved track design. It
reserves certain space for fault tolerance to alleviate instalment and repair difficulties. Third,
wePharmacy introduces visual recognition techniques to improve refill accuracy.
With respect to inventory management of wePharmacy booths, we store the parts and
accessories of our wePharmacy booths in our warehouses. Upon receiving a customer order, we then
arrange the assembly of the booths.
We collect revenue from sales of products, i.e., the wePharmacy booths, and such revenue is
recognised upon delivery, assembly and acceptance of booths. We also charge annual service fees from
our customers for services we provide to them, usually settled semiannually across the term of
services, including integration with customers’ ERP system and social security management system,
upgrading booth operating system, maintenance of wePharmacy booths twice a year, and replacement
of parts and accessories due to damages caused in the ordinary course of business. We set the fee rate
according to our estimates of service and maintenance costs, market rate of similar products and target
customer survey.
We have taken comprehensive measures to ensure the compliance in all material respects with
the current PRC laws and regulations and expect to continue to pay close attention to the legislative
and regulatory developments in this regard. As of the Latest Practicable Date, we only engage in the
sales of wePharmacy booths, as well as providing software and maintenance services associated with
the booths. We are not involved in the sales of pharmaceuticals from pharmacies to end customers via
wePharmacy booths. Procurement, inventory management, sales and delivery of pharmaceutical
products are fully controlled by these pharmacies. Pharmacies also fully control the monitoring of the
dispense and purchase of prescription pharmaceuticals by end customers. Additionally, we do not hire
or manage any pharmaceutical professionals and we are not involved in the prescription review by
pharmaceutical professionals. To our best knowledge, these pharmaceutical professionals are hired,
trained, managed and monitored by pharmacies.
As advised by our PRC Legal Adviser, as of the Latest Practicable Date, with respect to the
obligations and responsibilities for the sale of prescription drugs, based on the current effective PRC
laws and regulations, there had been no specific legal obligations and responsibilities imposed on the
providers who sell unmanned pharmaceutical booths hardware. According to the Drug Administration
Law of the People’s Republic of China (Revised in 2019) (
ج2019ࡌ
ࠈ)) and the Measures for the Supervision and Administration of Drug Circulation (ஷ္ຖ
), as advised by our PRC Legal Adviser, the legal obligations for the review of prescription
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dispensing and the legal responsibilities for selling prescription drugs shall be borne by pharmacies as
pharmaceutical retailers, rather than us as a provider of the unmanned pharmaceutical booths.
Therefore, any legal responsibilities arising out of any failure in the end of pharmaceutical
professionals in prescription review should be borne by pharmacies, not us. In addition, pharmaceutical
retailing business in China is a highly regulated and scrutinised business, where severe punishment can
be imposed on pharmaceutical retailers for their illegal sales of prescription drugs. Notwithstanding the
foregoing, in order to protect our interests, we have included certain safeguard clauses in our standard
sale and installation agreement for wePharmacy booths. According to the latest standard sale and
installation agreement, pharmacies shall use wePharmacy booths with particular prudence and in
compliance with relevant laws and regulations, including but not limited to those on sales of
prescription drugs and purchase procedures of prescription drugs. Pharmacies have the sole discretion
to decide whether and how to use certain specific functions of wePharmacy booths, including sales of
prescription drugs and prescription review by pharmaceutical professionals. The latest standard sale
and installation agreement also provides that pharmacies shall be responsible for all risks and losses
arising out of the improper use of wePharmacy booths or from any breach of laws or regulations
associated with such improper use, and they shall indemnify and hold us harmless against any and all
losses, claims, damages or liabilities arising out of such improper use.
SaaS Solutions
We provide a series of SaaS solutions to the industry participants along our value chain. The
SaaS services are enabled by our technological advantage into cloud computing, big data and
algorithm. Our R&D personnel responsible for developing and updating our SaaS solutions have
abundant professional knowledge of mobile internet information technology, big data computing and
artificial intelligence. They are responsible for analysing market information from the upstream and
downstream, and designing, developing, testing and launching SaaS solutions to accommodate the
needs of our sellers and buyers. Our SaaS solutions are continuously updated to improve the
experience of our sellers and buyers.
We offer CloudComm to sellers. CloudComm provides a series of store management solutions
such as seamless connection with our Yaoshibang Platform. CloudComm provides real-time interaction
and information updates on price, inventory, order status, among others. CloudComm also provides
InstaPrint, an all-in-one printing application, for sellers to efficiently print and transmit certification
and qualification together with order information. We charge a one-time installation fee and annual
subscription fee for InstaPrint, CloudComm’s all-in-one printing function.
We offer ePalm to downstream pharmacies. ePalm helps pharmacies with streamlined
inventory management and connection into social security system. ePalm has greatly improved the
capacity of downstream pharmacies, as well as the efficiency of the entire pharmaceutical circulation
process. Traditionally, three to four people are needed to update procurement information. With the
help of ePalm, just one person is enough to process it online. ePalm provides inventory update and
management functions for pharmacies and compatible with more than 400 layout of shipment lists. It is
also connected with information administered by the Social Security Departments to facilitate efficient
message and fund transmission. We charge a one-time installation fee and annual subscription fee for
ePalm.
We currently collect app user fees from CloudComm and ePalm. For more details on our
CloudComm and ePalm, see “Business—Access to Our Digitalized Platform”.
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YSB eLearn
We started providing online training to pharmaceutical professionals in 2015. Since our
inception in 2015 and up until 31 December 2022, YSB eLearn provided online training to,
cumulatively, around 220,000 pharmacists and prospective pharmacists.
YSB eLearn has introduced various programmes to empower pharmacists. It offers online
training sessions to help prospective pharmacists prepare for the Pharmacist Licensure Examination.
We also invite pharmaceutical companies to provide online introductory sessions directly to
pharmacists to help them better understand the pharmaceuticals in use. This programme reinforces the
relationship between us and our pharmacies. We have grown our reputation and raised awareness of us
among pharmacists through the sessions we provide.
Most of our courses in YSB eLearn are offered for free. For those with a fee, we charge
pharmacists by the number of courses they take.
ACCESS TO OUR DIGITALIZED PLATFORM
SaaS for the upstream
 Digitalised platform
 SaaS for the downstream
CloudComm
ePalm
YSB APP
CertEx
YSB Web
YSB App
Our YSB App is the mobile internet portal entrance to offer pharmacies and primary healthcare
institutions easy access to pharmaceutical products and services. In-app links and hyperlinks are
embedded in the user interface to allow the industry participants in our ecosystem to switch seamlessly
to other applications. Our YSB App provides easily accessible and user-friendly stage for us and our
ecosystem participants to purchase and sell.
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YSB App deals with an enormous amount of information of buyers’ evolving purchase
behaviours. Leveraging on our advanced algorithm and data analytics capabilities, YSB App generates
product recommendation and promotion events customised for each buyer on its homepage. YSB App
also develops techniques to provide streamline payment options.
YSB App is a useful data analytics tool and offers pharmacies and primary healthcare
institutions fast and convenient experience. YSB App is capable of dealing with 7,000 transactions per
minute. Its queries per second can reach as high as 10,000 per second.
YSB Web
YSB Web provides our sellers a sales management portal. It offers controllable experience in
managing pharmaceutical supply. The portal is built on our data analytics capabilities. It provides real-
time performance curves, percentile and other feedback to sellers based on approximately 40
parameters. Performance curves, percentile and other feedback are updated every hour or every day,
depending on the parameter. It also generates real-time to-do lists for each seller for them to better
manage their operation and adjust sales strategies.
The portal integrates with seller ERPs so that the information of the product for sale can be
exported directly from seller ERPs. The portal automatically exports and transforms the information to
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make it more compatible with the sales standard for YSB App. Sellers can complete the shelfing
process with one click in their own ERPs. Every hour, YSB Web runs an algorithm-based selection of
SKUs which are offered at best prices within a specified region and are with sufficient inventory
storage, and subsidises the pharmaceutical sellers to offer further discounts on top of existing
promotion events.
CloudComm
CloudComm complements YSB Web to provide pharmaceutical sellers a real-time SaaS
solution that integrates with sellers and enables them to conduct scalable business on our platform.
CloudComm connects sellers through customised SQLs. As of 31 December 2022, CloudComm
connected over 5,200 sellers, worked hand-in-hand with a vast majority of ERPs in the market, and
dealt with around 3.3 million SKUs per month on average in 2022.
Real-time interaction between CloudComm and YSB Web eliminates delay in information
transmission among industry participants along the supply chain and improves order transparency.
When sellers update information such as price information, inventory availability and order status in
CloudComm, buyers can immediately view the information in YSB App.
We developed InstaPrint, which is an embedded function of CloudComm and provides
advanced all-in-one printing application for our sellers. As of 31 December 2022, over 5,200
pharmaceutical sellers had installed InstaPrint. Various certification and qualification documents are
transmitted together with an order for pharmaceutical products through the platform, such as business
information, purchase and sale contracts, pharmaceutical test reports, value-added tax receipts, etc.
Traditionally, the documents are transmitted separately. The burden of confirmation and cross-
referencing on the industry participants is huge. All-in-one printing, however, allows pharmaceutical
sellers to print orders with the required certificates all in the same package.
InstaPrint brings various benefits to the industry participants along the supply chain. First, it has
improved operating efficiency. Using this technology, seven people can process and furnish 10,000
packages in one day. Second, InstaPrint significantly reduces the occurrence of human errors, thereby
increasing order fulfilment accuracy. It has reduced the receipt misplacement rate to lower than five
per 1,000 orders. Third, InstaPrint can help sellers save operational costs.
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ePalm
ePalm is essential for buyers to conduct scalable business on YSB App. As of 31 December
2022, around 40,000 pharmacies in about 410 cities and towns in China had installed ePalm. ePalm
deals with around 3.3 million SKUs in 2022. ePalm is compatible with a vast majority of ERPs
currently used by pharmacies. For pharmacies with their own ERPs in place, we provide a “lite”
version of ePalm to effectively connect our apps with pharmacy ERPs. For pharmacies without their
own ERPs, we provide ePalm Pro as a full-function management ERP.
ePalm helps pharmacies better manage their inventory, with information tracked and shared in
their own ERPs. On the one hand, for products purchased from our platform, we launched the “in-store
by one click” function to update inventory information. When an order is placed on YSB App, it is
simultaneously reflected in the total pharmacy inventory level in ePalm. On the other hand, for
products purchased elsewhere, we use Optical Character Recognition (“OCR”) techniques powered by
ePalm to scan the shipment list. The OCR process efficiently filters information input and accurately
presents the required information such as pharmaceutical product information and the size of a
shipment. ePalm’s OCR capability is compatible with more than 400 layouts of shipment lists. After
the OCR scanning, ePalm helps arrange product storage and signals if inventory shortage occurs for
each SKU to pharmacies.
ePalm Pro is connected with the information administered by the Social Security Departments
in 50 cities. When a purchase is effectuated where ePalm Pro is also connected, the relevant Social
Security Department receives the message and transmits funds into the corresponding social security
account of the pharmacy or primary healthcare institution.
ePalm has greatly improved the capacity of downstream pharmacies, as well as the efficiency of
the entire pharmaceutical circulation process. Traditionally, three to four people are needed to upload and
record all the procurement information. With the help of ePalm, one person is enough to do it online.
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CertEx for certification exchange
We self-developed a certificate exchange platform to securely store and transmit
pharmaceutical and operational certificates of sellers and buyers. As required by regulations, parties to
a pharmaceutical transaction should exchange their certificates, such as business licence, identification,
etc., before they can effectuate a transaction. Traditionally without technological means, it could take
weeks for the parties to mail and review the documents and communicate back and forth.
Our CertEx, supported by advanced algorithm, allows sellers and buyers to save the efforts and
time for certificate authentication.
 With the help of CertEx, sellers and buyers can save the efforts and time for certificate
authentication. After digitalizing the documents, exchange of certificates takes only five
minutes, compared with several weeks traditionally.
 CertEx also provides an electronic official seal function for handling legally binding
documents online.
 CertEx seamlessly integrates with YSB App and the SaaS solutions we provide to the
players along its value chain, so that they can receive and update information and manage
their sales and operation efficiently.
 CertEx grows its database as each additional transaction becomes digitalised. We receive
important feedback from CertEx to improve its function. CertEx has now enabled multi-
source exchange of certificates.
 CertEx presents the historical certificating record of each user so that a subsequent seller
or buyer can make judgement about such user’s authenticity and credibility based on the
records. Eventually CertEx has created a self-enforcing system where the business
opportunities an user can generate from CertEx grow with the number of CertEx users,
and that in turn attracts more users to register with CertEx’s services and to transact
through our platform.
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 After certificates are uploaded and processed through CertEx, we will review them
manually.
 We are not aware of any errors or incidents in relation to certificate authentication which
might have a material adverse effect on our business, financial condition, and results of
operations.
CertEx makes a significant contribution to the industry. It minimises human effort, reduces the
time needed to comply with regulatory requirements, and improves the accuracy of the information
stored and exchanged. Moreover, CertEx addresses the challenge of complying with the requirements
in pharmaceutical circulation. Government regulatory bodies have started to recognise the importance
of digitalizing certificate exchange. CertEx helps governmental authorities streamline the supervision
process over pharmaceutical transactions and services. In particular, CertEx was recognised by
Guangdong Food and Drug Administration as a platform with information system security protection.
SMART SUPPLY CHAIN MANAGEMENT
Our supply chain management system is specifically tailored for our Self-operation Business.
We combine advanced technologies and supply chain optimization techniques to integrate the front and
the back end of the supply chain and optimise our inventory management. Our supply chain enables
inventory on demand and just-in-time delivery. As a result of our advanced supply chain management
system, we have seen tangible improvements in our efficiency levels and those of the pharmacies and
primary healthcare institutions we serve. Our supply chain management system consists of
procurement, warehousing, delivery and working capital management. The system is designed to
comply with the Good Supply Practise Standards for Pharmaceutical Products (“GSP”), and connect
with provincial food and drug administrations for real-time monitoring.
The Galaxy+ procurement management system (“Galaxy+”)
We run a technology-backed procurement system to make efficient procurement decisions that
help us maintain high inventory turnover.
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Effective procurement plays a significant role in effectively facilitating our integrated and
synergised approach. Galaxy+ is supported by digital solutions and monitors the life cycle of around
720,000 SKUs.
 Product recommendation. Galaxy+ analyses the platform’s transaction history and
generates algorithm-based recommendations for the Self-operation Business departments
to make procurement decisions.
 Price adjustment. Galaxy+ calculates an optimised price range for each product based on
the offering price of around 720,000 SKUs from more than 6,800 pharmaceutical sellers.
The Galaxy+ price adjustment algorithm is based on historical market price fluctuation.
Galaxy+ promulgates around 40 price adjustment rules to maintain reasonable SKU price
levels. Galaxy+ also records and regresses the historical price adjustment range to forecast
future price adjustments.
 Procurement volume. Galaxy+ forecasts the optimised volume based on historical
transactions. Galaxy+ enables us to procure in smaller batches but with higher frequency,
effectively maintaining optimal inventory levels, a high turnover rate and efficient use of
working capital.
Galaxy+ enables the procurement process to be completed in seconds. Galaxy+ simplifies the
procurement process and improves efficiency. Moreover, Galaxy+’s procurement recommendation
plays a significant role in maintaining high inventory turnover for us.
The Xentrum system for warehouse management (“Xentrum”)
We have invested significantly to optimise our logistics network and the allocation of
intellectual labour. We had built smart warehouses in 19 cities, as of 31 December 2022, and have
been constantly improving the accuracy of models and efficiency of algorithms. Our warehouses are
managed through our proprietary Xentrum system. Since its launch and up to the Latest Practicable
Date, we had not received any error report of our Xentrum system.
We manage our supply chain through Xentrum, a self-developed nation-wide warehouse
system that integrates online and offline activities. We receive massive number of orders in small
ticket size and with varied frequency. Therefore, we need a tool to effectively group the orders and to
make procurement in bulk to achieve efficiency. Xentrum is particularly developed to address this
issue through proprietary software architecture and algorithm solutions installed to assist with the
entire operational process. Xentrum has a number of key functions.
Xentrum comprises a warehouse data centre (“WDC”) as the central information processing
hub and warehouse management systems (“WMS”) for each warehouse. Information is processed at
the WMS level when warehouse specialists scan and upload order information. The WDC stores
information and runs algorithm and data analytics. The WMS equipped in each warehouse calculates
the most efficient solution for each order based on historical transaction information and the capacity
of warehouse specialists. The WMS then distributes tasks to warehouse specialists for them to process
and handle the orders.
Xentrum’s WMS is reliable and flexible and thus can handle uneven flows of product volume
timely and precisely. Xentrum automatically generates customised furnishing modes, depending on
information such as the buyer group, volume of each order, and the number of orders requesting the
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same SKUs. Each mode is accompanied by customised review. Moreover, Xentrum monitors every
order and assigns a countdown timer to each order to make sure orders are processed as fast as
possible.
Xentrum helps warehouse specialists take products for delivery via the most efficient route
possible. First, Xentrum optimises rack arrangements based on algorithm-based analysis of historical
information. Second, during the furnishing stage, Xentrum is programmed to generate a solution that
maximises processing capacity and minimises the distance of the route.
We run an efficient B2B network of self-operated warehouses in terms of improving fulfilment
speed and accuracy. In 2022, with the help of Xentrum, we ensure that, on average, an order is
processed and completed for delivery in 2.85 hours. We maintained inventory turnover days at 26.5
days in 2022.
The IntelNex system for delivery management (“IntelNex”)
We arrange delivery from our warehouses to pharmacies and primary healthcare institutions,
using delivery services and carriers with good reputation with respect to time, quality, and flexibility.
IntelNex uses transaction records as the base to deduce algorithm-based solutions for future
orders. The delivery database serves as an infrastructure enabling IntelNex to run effectively. The
database is built upon feedback from carriers and information from our historical orders. The database
quickly evolves as every new order immediately generates an input. We analyses information as
far-reaching as the fourth-level administrative division in China.
IntelNex generates an optimised delivery plan for each order. Based on geographical reality and
historical preference, IntelNex makes several rounds of computation in seconds and generates for each
buyer a customised package regarding carriers, payment plans, recommended number of packages,
packaging types, etc.
IntelNex monitors the delivery process. It works hand-in-hand with the ERPs of the carriers to
reconcile accounts and to identify abnormal orders. The feedback helps IntelNex to evolve and to make
better forecasts for future orders.
IntelNex has helped us reduce logistics expenses to as low as 1.46% of the GMV of our Self-
operation Business in 2022, much lower than the industry average level. IntelNex enables fast delivery,
especially for inter-province delivery. In 2022, we are able to reduce average inter-province delivery
time to 41 hours for cities and 51 hours for towns, much lower than the industry average level.
IntelNex also enables broad reach to the fourth-level administrative division in China.
The RealSettle system for working capital management (“RealSettle”)
We developed a working capital management system to improve our liquidity while at the same
time help sellers expand and secure sources of downstream demand. In particular, we directly make
contractual arrangements with certain suppliers, together with a settlement system that directly
connects procurement, transaction management, order tracking and monitoring and funds transmission.
With this system, we empower our suppliers by providing them streamlined and secured transaction
process with certainty.
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We have improved the transaction process with our suppliers by introducing the RealSettle
system. RealSettle improves our liquidity and allows both our suppliers and us to track and monitor the
pharmaceutical transaction processes. Through RealSettle, our suppliers can timely follow the status of
the orders and submit a fund transmission application once they see the exchange of goods and
settlement completed between our buyers and us. Usually, they will receive the corresponding payment
of goods within three business days upon submitted application.
RealSettle’s digitalised connection saves investment on human capital, shortens internal
processing periods, and improves information storage. RealSettle serves as a useful working capital
management tool for us to improve our cash cycle as well as expand sources of sales and improve the
overall transaction experience for our suppliers.
PRODUCTS AND SERVICES
Providing superior products and customer service quality is our high priority. In our ongoing
efforts to maintain customer satisfaction and improve our products, we maintain a dedicated customer
service team. We provide timely and attentive customer service through instant online messaging and
call centres. Our platform service representatives answer customers’ questions with regard to our
platform, products, after-sale services. We train our customer service representatives to answer
inquiries and proactively introduce our products and promotional events to potential customers.
Pricing policy
The commission rates we charge from our sellers on our Online Marketplace are based on
(i) the types of products transacted on our platform, and (ii) whether we have established long-term
cooperation relationship with the sellers. We set the pricing of our products transacted and services
used in our Self-operation Business, wePharmacy, and SaaS solutions based on the relevant costs and
our expected gross profit, as well as the price range of similar products in the market. For the pricing of
diagnostic testing under ClouDiagnos, we take into account of the type of testing services provided and
the price range of similar services in the market.
Product mix
In terms of average number of monthly available SKUs, our prescription pharmaceuticals, OTC
pharmaceuticals and other healthcare products represent 47.2%, 32.8% and 20.0% in 2022,
respectively, of the total amount of products transacted on our YSB App. In particular, for our Self-
operation Business, prescription pharmaceuticals, OTC pharmaceuticals and other healthcare products
represent 54.4%, 37.9% and 7.8% in 2022, respectively, of the total amount of products offered.
Overlapping products
SKUs available in our Self-operation Business are carefully selected based on the transaction
history on our Online Marketplace and the analyses of buyers’ demand and transaction preference. The
average number of monthly available SKUs transacted on our platform was around 3.3 million in 2022.
In our Self-operation Business for the same period, we procured and sold around 278,000 SKUs, every
month on average, to downstream pharmacies and primary healthcare institutions. Given the fact that
the total numbers of pharmaceuticals are limited, around 88.1%, 87.0% and 86.5% of monthly
available SKUs in our Self-operation Business are also offered by sellers on our Online Marketplace in
2020, 2021 and 2022. Besides, as of 31 December 2022, around 3,600 registered sellers on our Online
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Marketplace are also our suppliers of our Self-operation Business. Since some of the SKUs are sold
both by sellers on our Online Marketplace and by us in our Self-operation Business, potentially there
could be competition between these sellers and us. Sellers on our Online Marketplace are aware of the
existence of the potential competition. In fact, we have witnessed improving seller stickiness during
the Track Record Period. Around 86.2% and 89.7% of sellers who successfully completed at least one
transaction on our platform in 2020 and 2021, respectively, successfully completed at least one
transaction on our platform in 2021 and 2022, respectively. Factors such as sellers’ operating strategies
and the competition among sellers themselves may also affect this calculation. Buyers have their own
discretion to decide whether to purchase products from sellers on our Online Marketplace or directly
from us. Various other factors than price may impact buyers’ purchasing decisions, such as product
quality, overall service, time-efficiency of delivery, etc.
We take a series of measures to ensure fair treatment between the sellers of our Online
Marketplace and us, including:
 Rating mechanisms on our platform are applied equally to us and the sellers, and our
buyers rate us and the sellers according to various factors such as product quality, service,
delivery, etc.;
 Platform recommendations are based on factors such as ratings, and we do not give any
additional weight to ourselves for such recommendations;
 We carry out regular reviews through our abnormal pricing alert system to make sure that
our pricing is aligned with the market standard and a reasonable gross profit is maintained.
Our abnormal pricing alert system consists (i) algorithm-driven analyses taking into
account parameters such as market price in a given province (seven-day average
transaction price in a given province), gross profit margin and unavailability of products,
and (ii) daily manual review and discussion of abnormal prices;
 We offer coupons to buyers who can choose among us and the sellers at their own
discretion; and
 Pricing policies are set equally for sellers and us.
Based on the independent due diligence conducted by the Sole Sponsor, including review of
rating mechanisms and platform recommendation policies, examination of the abnormal pricing alert
system, review of coupons use policies and product pricing policies, comparison of pricing between
the sellers of the Online Marketplace and the Company’s Self-operation Business, and review of the
internal control report, nothing has come to the Sole Sponsor’s attention that would cause the Sole
Sponsor to question the effectiveness of the above measures.
The prices of the SKUs available in our Self-operation Business are determined based on the
costs associated with products and procurement and a mark-up. Determination of the mark-up is driven
by market demand, i.e., how much our buyers are willing to pay for the products. In this regard, we
may consider the price range of similar products in the market.
Customer complaints policy
We collect customer feedback through multiple channels. Customers can submit their feedback
through YSB App and customer service hotline. We channel such feedback to different teams and use
the valuable customers insights to guide the improvements and optimization of our products and
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services. We also integrate customer feedback into our decision-making process. Our customer service
personnel promptly responds to customer complaints and suggestions. During the Track Record Period
and up to the Latest Practicable Date, we have not received any material customer complaints.
Product return policy
We strictly abide by the maximum 30-day return policy for our products. Customers can return
the products within 30 days of delivery subject to certain terms and conditions. Customers can rely on
our after-sales services on our platform to submit online application for product exchange. We
promptly process such applications or requests to improve customer satisfaction.
During the Track Record Period, we have experienced some immaterial product complaints and
recalls from time to time. During the Track Record Period and combining our Online Marketplace and
Self-operation Business, the value of products returned or refunded is about RMB70 million, RMB100
million and RMB183 million in 2020, 2021 and 2022, respectively, representing an insignificant
percentage of 0.4%, 0.4% and 0.5% of the total GMV of our platform, respectively. We have
subtracted the returned or refunded portion when we calculate GMV and revenue.
Moreover, we provide a series of guidelines for the sellers on our Online Marketplace. For our
buyers’ refund requests, we require sellers to process the requests within 48 hours if the product in
question has not been placed for delivery and 72 hours if it has. For refund and return requests, we
require sellers to process the requests within 72 hours. We require sellers to provide after-sale services
to our buyers if product defect has been discovered.
Initiatives and internal control measures for third-party sellers on our Online Marketplace
We have been taking a series of initiatives for third-party sellers transacted on our platform to
ensure proper usage and circulation of pharmaceutical products by third-party sellers and prohibit
transactions of restricted drugs on the Online Marketplace, including requesting third-party sellers to
inspect and rectify any prohibited sales and enhance their internal control and reviewing rectification
reports delivered by third-party sellers. We have implemented company-wide risk control policies. For
example, we implement the Platform Sellers Management Measures (
)t o
manage the risk control, qualification review, supervision and inspection during the process of sellers’
registration and onboarding, grading, daily management and exit. In particular, we have implemented a
series of detailed measures for products to be transacted on our platform:
 Products are managed according to different business categories to ensure that the
products listed by sellers are within their business scope;
 For products that are listed as standard products, the standard product information cannot
be modified so that such information is complete and standardised;
 For changes in product information, pictures and other information on YSB App, manual
review by us is required to ensure that product display is compliant; and
 Restricted drugs are subject to strict systematic inspection and manual review by us before
they can be transacted on our platform.
There had been no incident of the sales of restricted drugs on the Online Marketplace during the
Track Record Period.
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Internal control measures against counterfeit or substandard products
During the Track Record Period, we were involved in five administrative penalties in relation
to sales of counterfeit or substandard products, which resulted in fines and confiscation of products
illegally sold and the proceeds from such sales. The total amount of fines for these administrative
penalties is approximately RMB170,000. These fines have been fully paid, and the operation of the
relevant entity has not been affected or interrupted by such administrative penalties.
During the Track Record Period, one of our subsidiaries was sued by a downstream buyer (as
the plaintiff) claiming that the products it procured from such subsidiary were counterfeit. The total
amount being claimed in this litigation is approximately RMB1.8 million. The case was settled in April
2022 on the condition that the subsidiary shall pay approximately RMB920,000 to the plaintiff. The
amount was fully paid to the plaintiff in the same month. To recover the loss from the litigation, our
subsidiary sued the supplier (as the defendant) of the disputed products to bear all damages arising
from the quality of products. As of the Latest Practicable Date, the case had been settled on the
condition that the supplier shall pay by instalments a total of RMB1,100,000 to our subsidiary.
Due to the insignificant amount in administrative fines and the closure of the litigation, our
Directors are of the view that such administrative penalties and litigation, individually and collectively,
will not have any material adverse effect on our business, financial condition and results of operations.
We have established and implemented internal control measures to ensure that the
pharmaceuticals marketed or sold on Our Marketplace and in our Self-operation Business are not
counterfeit or substandard products.
For our Online Marketplace:
 Sellers are not allowed to sell products that are prohibited by laws, regulations and rules.
They are also prohibited from selling products listed in our prohibited product list.
 Sellers are not allowed to publish information about prohibited products in product names,
descriptions or pictures, among others, on the product pages; or in store names,
classification, introduction, announcements or reviews, among others, on the store pages.
 Once we discover that a seller has published prohibited products and information, we have
the right to delete such products and related information.
 If a seller violates any related laws, regulations or rules, or if they sell products on our
prohibited product list, we have the right to request liquidated damages against such seller,
forfeit their deposit for operations, temporarily restrict their access to our platform, or
permanently close their stores.
For each delivery we receive from our suppliers in our Self-operation Business, we inspect the
products. If we find that such products fall below standards, we have the right to reject delivery or
claim product return and refund.
BUSINESS SUSTAINABILITY
We experienced strong business growth and financial performance improvement during the
Track Record Period. Based on our capabilities to fulfil the demand from participants in the
outside-of-hospital pharmaceutical circulation market and the growth momentums we have achieved,
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our Directors believe that we are able to maintain sustainability and growth of our business. Taking
into account the above, as well as based on the review of the accountants’ report, the due diligence
conducted on the Group and the discussion with the Directors, nothing has come to the Sole Sponsor’s
attention that would cause the Sole Sponsor to disagree with the Directors’ view.
Going forward, we plan to achieve profitability primarily by further: (i) expanding our buyer
base and improving buyer engagement; (ii) growing the revenue of both pharmaceutical circulation
business and other businesses; (iii) optimising our overall cost and expense structure and improving
our operating margin; (iv) improving our working capital management; and (v) leveraging our
competitive strengths and advantages. These will allow us to increase our revenue and manage our cost
and expenses to reach profitability and realise positive operating cash flows.
Expanding our buyer base and improving buyer engagement
Expanding our buyer base and improving buyer engagement is crucial to sustainably expanding
our business scale:
 With our commitment to becoming the go-to platform for buyers, we quickly attracted a
large of group of buyers to our platform. We had around 332,000, 434,000 and 527,000
registered pharmacies and primary healthcare institutions on our YSB App as of the end of
2020, 2021 and 2022, respectively, representing a CAGR of 26.0%. As of 31 December
2022, we had around 527,000 registered pharmacies and primary healthcare institutions on
our YSB App.
 After attracting the buyers to our platform, we spent numerous efforts on fostering their
engagement and improving their engagement. We had around 202,000, 256,000 and
308,000 average number of MAB in 2020, 2021 and 2022, respectively, representing a
CAGR of 23.6%.
 By leveraging the strong buyer loyalty, we constantly monetise our large buyer base and
increase the buyers’ wallet share. Buyers’ paying ratio increased from 80% in 2020 to
87% in 2021, and further to 92% in 2022. The average number of orders per paying buyer
per month increased from 12.6 in 2020 to 21.7 in 2021, and further to 27.3 in 2022.
As a result of our growing buyer base and improving buyer engagement, our GMV has quickly
ramped up. Our total GMV reached RMB37.8 billion in 2022, representing a CAGR of 38.6% from
that in 2020, both the highest among leading digital pharmaceutical platforms serving businesses
outside of hospitals in China, according to Frost & Sullivan. We expect to further expand our buyer
base and improve buyer engagement through the following initiatives:
 We plan to further expand our coverage and penetration in pharmacies and primary
healthcare institutions. As of 31 December 2022, we had enabled around 354,000
pharmacies, covering over 50% of the total number of pharmacies. In addition, we have
served around 173,000 primary healthcare institutions, covering around 17% of the total
number of primary healthcare institutions in the industry. As of 31 December 2022, we
had attracted around 354,000 pharmacies and around 173,000 primary healthcare
institutions to transact on our platform. The headroom for further penetration remains
large. We plan to further recruit more seasoned BD personnel, improve the professional
knowledge of existing BD teams, and strategically enhance our BD efforts in the space of
large chain pharmacies and at the primary level. We also plan to leverage our digitalised
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tools, such as BDPartner, to support our BD teams to improve their service quality and
efficiency. For chain pharmacies, while they tend to directly cooperate with their
designated upstream suppliers to secure stable supply of regular SKUs, they also have
scattered demand on most other SKUs and they do not necessarily have access to certain
SKUs in their own regions. Chain pharmacies may find it inefficient and therefore they are
less motivated to negotiate with massive upstream suppliers one by one to procure these
SKUs. The broad and diversified SKUs offered on our platform, however, can meet such
demand of chain pharmacies in a cost-effective way, supplement their procurement
channels and enable them to improve their profitability. Additionally, chain pharmacies
may not always be able to successfully negotiate a favourable procurement price with
pharmaceutical companies. Moreover, we are willing to offer products in small ticket size
so that pharmacies tend to have more flexibility in determining their SKU selection and
inventory level.
 We plan to continue to enlarge and diversify our SKU pool. The number of SKUs
offered on our platform has more than doubled from around 1.5 million in 2020 to
3.3 million in 2022. The vast selection of SKUs always comes to the first priority
when buyers choose a platform to go. We plan to attract and retain more high quality
pharmaceutical sellers on our Online Marketplace and incentivise them to transact
through our platform. We also plan to cooperate with more pharmaceutical suppliers,
especially with well-known pharmaceutical companies directly, to procure more high
quality products for our Self-operation Business. We have accumulated experience
from years of cooperation with pharmaceutical companies. We were in collaboration
with more than 500 pharmaceutical companies under our Targeted Product Launch
Business and equipped them with unique and valuable insights about market demand.
Please refer to “—Our Self-operation Business—Targeted Product Launch Business”
for an example on how we have demonstrated the success of our Targeted Product
Launch Business. We have established collaborating relationships with Top 100
pharmaceutical companies and plan to build long-term relationships with more Top
100 pharmaceutical companies in the future and we expect to cooperate with 100 more
pharmaceutical companies in 2023 so that more SKUs will be promoted. We also plan
to deepen our cooperation with our existing pharmaceutical company partners to
promote a more diversified pool of SKUs. In addition, we plan to expand our product
offerings from pharmaceuticals to broader healthcare products, such as medical
devices and Chinese medicines.
 We plan to improve the supply and fulfilment of our self-operated orders. Since we started
our Self-operation Business in 2019, we have developed strong supply chain capability
supported by our smart supply chain systems. We plan to continue to expand the network
of our self-operated warehouses to extend our reach to our downstream market. We also
plan to further upgrade and digitalise our supply chain management systems to optimise
the delivery plan, shorten the delivery time and control the delivery costs, thus improve the
experience of our buyers. Improved buyer experience will help retain more buyers and
therefore improve buyer engagement of our platform. Our Self-operation Business can
benefit from a more engaged buyer base and continue to scale, which will result in strong
bargaining power and better pricing terms we can get from our suppliers. Additionally, as
we will be able to accumulate more buyer insights from a more engaged buyer base, we
will be able to attract more pharmaceutical companies to collaborate with us to promote
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branded products, which we generally enjoy better profit margins. Both these facts will
help us to improve the profitability of our Self-operation Business.
 We plan to enhance our buyer engagement and foster brand loyalty. We plan to promote
our other businesses. For example, our SaaS solutions seamlessly connect our platform
with buyers’ ERP systems, thus making it operationally and economically impracticable
for them to switch platforms. Our YSB eLearn reinforces the relationship between us and
the pharmacists and we expect to benefit from word-of-mouth referrals and enhanced
brand awareness. We also plan to launch more marketing initiatives, such as livestreaming
and group buy, to further incentivise buyers to transact on our platform.
The above initiatives are expected to help us scale up with more diversified product offerings
and improved user experience. We expect to benefit increasingly from the network effect of our
extensive user base, and in the meantime, attract more registered users derived from organic traffic
such as word-of-mouth recommendations and brand recognition. As such, our paying buyer base is
expected to expand, as well as the purchase frequency of our buyers is expected to increase, thus
leading to the growing GMV on our platform. Moreover, we expect our growth to benefit the
participants in our ecosystem. On the one hand, since our buyers can access the broad and diversified
SKU offerings on our platform, they can then provide diversified products to end customers and
enhance their revenue sources and business performance. On the other hand, since we can attract more
buyers to our ecosystem, we potentially also bring them to our upstream sellers, who will then be able
to improve their sales.
Growing the revenue of both pharmaceutical circulation business and other businesses
We achieved meaningful growth trajectory of revenue over the Track Record Period. Our total
revenues grew at 66.4% from RMB6.1 billion in 2020 to RMB10.1 billion in 2021, and further at
41.4% to RMB14.3 billion in 2022. With the growing GMV of our platform as a foundation, we expect
to further grow our revenue of pharmaceutical circulation business through the following initiatives:
 We expect to attain stronger bargaining power and set more favourable commission rate as
our business continues to scale up. We also plan to further diversify and optimise the
product portfolio on our marketplace, so that we can improve our overall commission level
and generate more revenue from our Online Marketplace.
 We plan to further grow our Targeted Product Launch Business by broadening and
deepening the cooperation with well-known pharmaceutical companies, diversifying the
SKU pool of Targeted Product Launch Business, and upgrading and customising the
digital marketing services to support relevant SKUs.
We plan to further develop our other businesses and enhance monetization abilities:
 We plan to further grow our other businesses which benefits our ecosystem participants by
improving their service capabilities and quality. Our other businesses also have strong
synergy with our pharmaceutical circulation business. On the one hand, we can leverage
the large and stable user base of pharmaceutical business to promote our other businesses
with lower costs. On the other hand, our other businesses enable our ecosystem
participants to expand their revenue sources and improve their own business performance.
 We launched ClouDiagnos in 2021 aiming to solve the challenges and help primary
healthcare institutions to improve their diagnostic capabilities. As of 31 December 2022,
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over 10,000 primary healthcare institutions have used our ClouDiagnos services. We see
strong growth momentum from the positive feedback of our users and will leverage our
strong salesforces to improve the penetration in our existing 173,000 downstream primary
healthcare institution buyers. We plan to make ClouDiagnos a one-stop solution. Our
ClouDiagnos helps primary healthcare institutions expand their service offerings to end
customers, increasing the satisfaction level of end customers and in turn helping primary
healthcare institutions better retain and expand their end customer pool. These benefits
incentivise primary healthcare institutions to make their pharmaceuticals purchases
through our platform. Our pharmaceutical circulation business and diagnostic testing
services together will create a self-reinforcing virtuous circle to fully serve the needs of
pharmacies, primary healthcare institutions and their end customers. The virtuous circle
will help us enhance brand awareness and increase transaction volume.
 We introduced wePharmacy, a 24-hour access smart unmanned pharmaceutical booth that
connects real-time pharmacist services, in 2021. wePharmacy provides 24-hour
undisturbed services while no pharmacists or staff is required to present and thus enables
pharmacies to significantly reduce the overall operating costs. We collect revenue from the
sale of wePharmacy booth. As of 31 December 2022, we had received 100 orders, with
total contract value of RMB10.8 million. We plan to further promote our wePharmacy
through the collaboration with more pharmacies and thus expand the availability of and
the channel to access pharmaceuticals, providing 24-hour access to smart pharmaceutical
services to the end customers. Equipped with the ability to provide flexible access to
pharmaceuticals to end customers, pharmacies using wePharmacy will be able to better
serve end customers and increase their sales volume.
 Our digital solutions serve as an important infrastructure to bond us closely with our users.
As of 31 December 2022, our SaaS solution ePalm had provided inventory management
and sales management services to around 40,000 pharmacies. As of 31 December 2022,
our SaaS solution CloudComm had provided sales management, analyses and forecast
services to over 5,200 pharmaceutical sellers. We plan to continue to provide useful
functions to sellers and buyers and help them optimise sales and operational management.
In the meanwhile, advanced functions will enable us to further monetise our digital
solutions from our expanding user base.
Optimising our overall cost and expense structure and improving our operating margin
Improvement in overall gross margin
Our gross profit experienced significant growth during the track record period. In 2020, 2021
and 2022, our gross profit amounted RMB609 million, RMB914 million and RMB1,435 million,
representing gross margins of 10.0%, 9.1% and 10.1%, respectively. Our gross profit margin declined
from 10.0% in 2020 to 9.1% in 2021, primarily due to the expansion of our Self-operation Business,
which generally has a lower gross profit margin than other businesses. Our gross profit margin
increased from 9.1% in 2021 to 10.1% in 2022, primarily due to the expansion of our Self-operation
Business, which is the largest contributor to our total revenues, and the gross profit margin of which
increased from 5.2% in 2021 to 6.2% in 2022.
We expect our overall gross profit margin to steadily increase going forward:
 We plan to increase the contribution from businesses with higher profitability. For
example, we plan to increase the contribution from Targeted Product Launch Business by
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directly collaborate with more pharmaceutical companies, helping them expand sales
channels for more products and provide them with value-added services. Our GMV of
Targeted Product Launch Business grew from RMB338 million in 2020 to
RMB887 million in 2021, and further to RMB1,009 million in 2022 representing 2.7% of
total GMV in 2022. In addition, other businesses, as a whole, recorded a gross profit
margin of 56.6%, 51.0% and 40.6% in 2020, 2021 and 2022, respectively. We plan to
further increase the revenue contribution from other businesses. As such, we would be
able to improve our overall gross profit margin benefiting from increasing contribution
from these businesses with higher gross margins.
 We will drive further economies of scale in our sales and offering of products with
optimised product portfolio structure. Diversified product offerings and algorithm-
powered product searching enable more choices for our buyers as well as better purchase
experience. That will result in higher buyer engagement and more transactions done with
us. As we continue to scale, we plan to bargain with payment service providers to
negotiate a lower transaction processing fee rate going forward.
 With business scale growing larger giving us stronger bargaining power, we plan to
negotiate with existing suppliers and seek new suppliers with favourable prices and terms.
In addition, we plan to broaden our overall supply channels to achieve lower procurement
costs. As we broaden our supply source and channels, it gives our algorithm-powered
centralised procurement system more data to learn and generate better and more cost-
effective procurement strategies, lowering our cost of revenue.
Improvement in operating leverage
During the Track Record Period, we were able to achieve meaningful operating leverage. While
our operating expenses, including research and development expenses, sales and marketing expenses,
and general and administrative expenses, increased by 46.3% from RMB907.4 million in 2020 to
RMB1,327.4 million in 2021 and increased further by 27.4% to RMB1,691.6 million in 2022.
Benefiting from the economies of scale of our business, operating expenses as a percentage of total
revenues decreased from 15.0% in 2020 to 11.9% in 2022.
Selling and marketing expenses
Selling and marketing expenses as a percentage of total revenues decreased from 12.0% in
2020 to 10.5% in 2021, and further to 9.3% in 2022. We expect selling and marketing expenses to
grow alongside our business growth, while as a percentage of our revenue continue to decline,
primarily because:
 Through years of development, we have established a seasoned and stable BD team. We
plan to increase the efficiency of our BD personnel by empowering them with better
digitalization support from BDPartner. We also plan to invest in academic and on-job
training to equip our of BD team with professional knowledge in pharmacology so as to
upgrade the overall BD quality. Through these efforts, our BD personnel will be able to
gradually increase the number of terminals each personnel can cover in the future, in order
to lower the corresponding salaries and welfare benefits as a percentage of revenue.
 As we continue to grow our network of sellers and buyers on our platform, we expect that
we will continue to increasingly benefit from the network effect of our extensive user
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base, as well as our brand image. We expect to attract and retain the users more through
word-of mouth effect, while less relying on launching extensive promotion and advertising
projects. With more support from our digital tools, our future marketing campaigns are
expected to be more customised and precise, thus to achieve higher marketing efficiency.
In addition, with stronger buyer engagement as our business scales up, we plan to
gradually lower our offering of discount coupons to buyers in the future. As such, we
expect our marketing and promotion expenses as a percentage of revenue to gradually
decrease.
 In addition, we plan to control our fulfilment expenses, mainly incurred for our self-
operated orders, in the future:
(i) We expect to continue to benefit from the development of our technology, including
our self-developed smart supply chain systems (Galaxy+, Xentrum, IntelNex), which
increased our efficiency in fulfilment, as well as expanded our business scale.
(ii) We are in the process of ramping up and increasing the utilisation of our existing
warehouses. As we develop a warehousing network that well covers our target
markets, we expect the rental expenses to stabilise in future. We plan to procure and
deploy more advanced machines in our warehouses to improve the utilisation and
operating efficiency.
(iii) We also plan to further optimise the mapping and logistics network among our
warehouses to direct orders more efficiently depending on routes and warehouse
utilisation, which is expected to manage our logistics expenses at a relatively low
level. We will carefully select third-party delivery service providers who offer the
most cost-effective solutions.
(iv) We will also optimise the selection and usage of packaging materials to control
packaging-related expenses.
 As we do not plan to aggressively establish new warehouses in future, the depreciation and
amortisation expenses in relation to our fulfilment facilities as a percentage of revenue is
also expected to be under control in the future.
General and administrative expenses
General and administrative expenses as a percentage of revenue decreased from 2.6% in 2020
to 2.1% in 2021, and further to 2.0% in 2022. We will further enhance our level of centralised
management, streamline our internal workflows, and leveraging technology to drive cost-efficient
management. We expect our general and administrative expenses to decrease as a percentage of
revenue in the future.
Research and development expenses
Technology is the core to our sustainable business development. Our research and development
expenses increased from RMB25 million in 2020 to RMB79 million in 2022. We plan to continuously
hire more IT staff and experts and to invest into our IT infrastructure in order to support the strong
growth of both our pharmaceutical circulation business and other businesses. As such, we expect that
our R&D expenses will stay at current level as a percentage of revenue in the future.
Our net loss margin narrowed down from negative 9.4% in 2020 to negative 5.0% in 2021, and
increased to negative 10.5% in 2022. After adjusting the equity-settled share-based payment expenses,
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listing expenses and changes in fair value of financial liabilities at FVTPL, our adjusted net loss
margin, a non-IFRS measure, narrowed down from negative 4.6% in 2020 to negative 3.4% in 2021,
and further to negative 0.9% in 2022. Our track record on revenue growth and cost optimisation set the
foundation of our path to profitability. Upon the successful implementation of the foregoing measures,
our Directors are of the view that we have paved the way for long-term sustainable profitability.
Improving working capital management
To improve our working capital management, we have been working on and will continue to
work on the following aspects.
 Our inventories increased by 64.3% from RMB516.1 million as of 31 December 2020, to
RMB847.8 million as of 31 December 2021, primarily due to the expansion of our Self-
operation Business. Our inventories further increased by 19.9% from RMB847.8 million
as of 31 December 2021 to RMB1,016.2 million as of 31 December 2022, primary due to
the growth of our Self-operation Business. Our inventory turnover days remained stable at
27.3 days in 2020, 27.1 days in 2021 and 26.5 days in 2022. We will monitor and control
inventory turnover with our technology-driven warehousing and logistics systems and
make procurement decisions based on sales. As Self-operation Business keeps scaling up
and leveraging digitalised supply chain management, we expect inventory turnover days to
remain stable in the foreseeable future.
 Our trade and other receivables decreased by 29.0% from RMB528.4 million as of
31 December 2020 to RMB375.1 million as of 31 December 2021, primarily because we
enhanced our receivable management and leveraged our bargaining power to encourage
our offline business customers to make payments to us through wire transfer in lieu of
bank acceptance bills. Our trade and other receivables increased by 34.2% from
RMB375.1 million as of 31 December 2021 to RMB503.5 million as of 31 December
2022, primarily due to (i) an increase in receivables in custodian as 31 December 2022
was not a working day and we were unable to withdraw the prepayments made by online
customers of our Self-operation Business from the settlement system, and (ii) an increase
in trade receivables primarily as a result of the increase in commissions charged to third-
party sellers on our Online Marketplace. We will continue to enhance our fulfilment and
delivery efficiency to our buyers so that we are able to collect payment on time. We will
also continue to collect fees from our sellers on time to ensure a proper level of inflow of
funds. Due to increased proportion of sales from self-operation orders settled online, we
expect to significantly shorten our receivable collection cycle.
 Our trade payables increased from RMB1,832.6 million as of 31 December 2020 to
RMB1,929.8 million as of 31 December 2021, primarily attributable to (i) deposits to be
returned to two Series E-2 investors of RMB223.3 million, which represents investment
security deposit we received from the two investors in 2021, and (ii) an overall increase in
trade payables and note payables combined in relation to our purchases of pharmaceutical
products as a result of the growth of our Self-operation Business. The increases were
partially offset by a decrease in deposits received as we have gradually been migrating the
payment system of our Online Marketplace to Shenzhen Ping An Bank, the settlement of
sales proceeds through which does not result in deposits received recorded on our balance
sheet. Our trade and other payables increased from RMB1,929.8 million as of
31 December 2021 to RMB2,398.1 million as of 31 December 2022, primarily due to an
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increase in trade payables mainly as a result of the growth of our Self-operation Business.
We will continue to optimise our payment cycle, negotiate with our suppliers for better
payment settlement terms and reduce the portion of transactions processed under
prepayment. We expect shorten payable collection cycle in the foreseeable future, as we
plan to expedite our payment cycle for our suppliers. Although it may impose challenge in
our working capital management, we believe there is an important commercial
consideration for us to maintain a good relationship with our suppliers and to retain high-
quality suppliers for our business in the long run.
Leveraging competitive strengths and advantages
We believe that our current competitive strengths and advantages are key for us to achieve
profit and cash breakeven. Our leading position and large scale have become our moat and enable us to
grow and capture the market share in a effective and economical way. Our industry positioning below
is supported by analyses performed by Frost & Sullivan.
 Our total GMV reached RMB37.8 billion in 2022, representing a CAGR of 38.6% from
that in 2020, both the highest among leading digital pharmaceutical platforms serving
businesses outside of hospitals in China. We serve the largest digital pharmaceutical
transaction and service network, including, among others, around 354,000 downstream
pharmacies and around 173,000 primary healthcare institutions, as of 31 December 2022.
We plan to further expand our coverage and penetration in pharmacies and primary
healthcare institutions.
 We are able to maintain an active buyer base which allows us to obtain market insights,
design tailored strategies, and provide advices to our suppliers. We had 308,000 average
number of MAB in 2022, the highest among digital pharmaceutical platforms serving
businesses outside of hospitals in China. We are able to maintain good relationship with
our ecosystem participants. We will further expand our buyer base and improve buyer
engagement.
 Our platform offers comprehensive SKUs. The average number of monthly available
SKUs was around 3.3 million in 2022, the highest among digital pharmaceutical platforms
serving businesses outside of hospitals in China. Buyers are willing to transact with us as
they can easily find what they need. We will continue to enlarge and diversify our SKU
pool.
 In 2022, our supply chain management enabled us to maintain inventory turnover days at
26.5 days, better than the industry average level in the pharmaceutical circulation industry.
We ensured that an order could be processed and completed for delivery in, on average,
2.85 hours in our warehouses, in 2022, much faster than the industry average level. In
2022, we kept the average inter-province delivery time at 41 hours for cities and 51 hours
for towns, outperforming the industry average by approximately 20%. We are able to
provide time-efficient purchase experience with high-quality product to our buyers, so that
they are willing to continuously transact on our platform. In 2022, we also managed to
keep low logistics expenses at 1.46% of the GMV of our Self-operation Business, much
lower than the industry average rate. We plan to continue to expand the network of our
warehouses and further upgrade and digitalise our supply chain management systems.
 Our platform is well connected to the SaaS solutions and our CertEx certificate exchange
platform we provide to our ecosystem participants, so that they can manage transactions,
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operations and certain compliance matters in an integrated way. Few of the players in the
outside-of-hospital pharmaceutical transaction industry provide similar services, specially
from the seller side. We will continue to develop advanced functions to better assist our
ecosystem participants.
 Our BD strategies are carried out by our dedicated BD team and digitalised management
tools. Our BD team members are familiar with the market and are well trained. They have
been an important source for us to quickly understand our downstream needs and we
believe they are important for us to take a significant share of future market expansion. We
plan to continue to train our BD team and provide them with better digital management
tools so that they can help us better serve our buyers.
Based on the above, our Directors are of the view that our business is sustainable.
TECHNOLOGY
Technology is our foundation and a key component to our success. We built our core
competency on big data, cloud-based solutions and smart supply chain.
Research and development
Our vision and focus on innovation have fuelled our growth and enabled us to continuously
improve our existing offerings and develop new products and solutions. We believe a strong research
and development capability is crucial to our continued success and ability to develop product offerings
to keep up with rapid development and advances in software technology. We closely attend to the
needs of our customers and respond to their feedback and requests through developing new solutions
or adding advanced or optimised features in existing solutions. Our research and development
activities mainly include constantly improving our algorithm and data analytics capabilities, improving
testing capabilities of ClouDiagnos, designing and upgrading wePharmacy booths, developing and
maintenance of our SaaS solutions, providing technological support to our Online Marketplace,
managing supply chain and warehouses, and assuring data security of the our internal and external
operations. In 2020, 2021 and 2022, we incurred RMB24.7 million, RMB56.6 million and RMB79.1
million of research and development expenses, respectively.
We have established our research and development team in Guangzhou, focusing on
technology innovations and the research and development of our software solutions. As of
31 December 2022, we employed 330 dedicated research and development staff.
Data analytics and advanced algorithm
Our strong buyer behaviour analytics capabilities and advanced algorithm allow us to make
important business decisions and enhance our products and services offering. We analyse transaction
history, price variance and product preference to make important procurement decisions and maintain a
high inventory turnover. Additionally, we analyse product and geographic preference and the
distribution of buyers, to design, develop and maintain our warehousing network, to maximise
warehousing capacity, and to facilitate efficient and punctual delivery. Moreover, we provide feedback
on the popularity of SKUs so that sellers can get valuable product and price recommendations. Data
analytics capabilities also allow us to collaborate with pharmaceutical companies to start the Targeted
Product Launch Business, identifying market opportunities and promoting products digitally.
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Cloud-based solutions
We heavily relied on cloud-based applications. Cloud-based SaaS applications allow us to
connect seamlessly with the upstream and downstream industry participants in the ecosystem. We
design and develop proprietary software and data analytics capabilities that run on cloud to facilitate
interactions and commercial exchange between participants in our digital ecosystem. Specifically, we
have developed YSB Web and CloudComm for sellers and YSB App and ePalm for buyers. Rich and
growing functions and data management tools are embedded in these solutions.
Our innovations allow us to seamlessly integrate with over 5,200 seller ERPs and over 39,000
buyer ERPs, as of 31 December 2022.
Smart supply chain
In relentless pursuit of supply chain efficiency, we have developed a suite of supply chain
related smart systems. They are Galaxy+ for smart sourcing, Xentrum for warehouse workflow
management and data analysis, and IntelNex for automatic delivery solution optimisation. As they are
developed wholly in-house by our talented technology team and tailored in every detail to support our
operations, we do not need to rely on third party providers to enhance our smart supply chain systems
and reserve higher control of our supply chain management.
BUSINESS DEVELOPMENT AND MARKETING
Our business development team: direct sales force
Our sales activities are supported by our offline BD activities. BD is an essential portion of our
business sourcing and the maintenance of downstream relationship. It is where we start to build close
relationship with buyers and introduce them to our business. It also helps upstream pharmaceutical
companies and distributors gain access to a broad coverage of buyers at low cost.
Our BD team is built on well-trained sales force and strong data analytics capabilities, which is
proven to be a highly efficient and cost-effective model to drive user base expansion and maintain
active user engagement. They are responsible for creatively promoting our applications, as well as
products under the Targeted Product Launch Business.
Our BD team is a constant contributor in driving the growth of our business. Our BD team is
made up of members who are familiar with the market and are trained with sales skills and
pharmaceutical knowledge. They dive deep into the buyer level, conduct off-line visits and collect
valuable feedback from buyers through in-person interactions. The feedbacks they collected help us
understand our buyers and identify market expansion opportunities. Our BD team serves as the bond
between our buyers and us. Such intimacy has effectively helped maintain our relationship with our
buyers. As of 31 December 2022, our BD team consisted of over 2,800 members, covering 27
provinces.
Our BD team is centrally and digitally managed. We provide our BD team with real-time buyer
updates, geographical information and sales strategies for our BD team members to quickly respond to
buyer requests. Our centralised and digitalised management has enabled us to maintain a dynamic
balance, retaining a relatively large BD team while controlling customer acquisition costs at the same
time. As of 31 December 2022, each BD team member, on average, can manage around 130
pharmacies.
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BDPartner
We manage our BD activities through our proprietary BDPartner application, which handles
and updates information about the downstream ecosystem and participants and manages thousands of
BD team members. Information digitalization and performance-tracking enable the BD team to better
manage sales activities and to maintain relationship with buyers. Our data analytics capabilities and
advanced high-dimensional algorithm signal new pharmacies and identify existing pharmacies of
which performance can be improved with our assistance.
BDPartner’s advanced algorithm allows it to update real-time information about the
downstream ecosystem and participants whenever a pharmacy buyer places an order on YSB App.
BDPartner analyses the transaction history of the most popular SKUs and their complements and
substitutes to discover potential pharmacy buyers. Additionally, BDPartner studies the existing
pharmacy buyers’ transaction pattern and develops SKU profiles for each geographical location.
BDPartner then generates and distributes tasks to the BD team for them to conduct tracked in-store
visits.
BDPartner provides various benefits. First, BDPartner matches pharmacies and primary
healthcare institutions with BD members according to their geographical location to enable quick
responses to downstream enquiries. BDPartner also pairs the BD members with new pharmacy buyers
quickly to render service. Second, in-app tracking assures the quality of the BD team’s service.
BDPartner includes a progress board that provides real-time sales progress to incentivise the BD
members to optimise their performance. Third, BDPartner generates sales strategies based on
performance feedback and sends specific instructions to the BD members. For example, for pharmacies
that report declining orders, BDPartner would suggest discount strategies to help improve their
performance.
With the help of BDPartner, a BD member can manage around 130 pharmacies on average, as
of 31 December 2022.
Marketing and branding
We believe that the most effective form of marketing is to continue to enhance our user
experience, as user satisfaction engenders word-of-mouth referrals and additional purchases.
Specifically, our sales and marketing strategy is designed to improve our brand recognition, increase
user traffic to our platform, build strong user loyalty, drive repeat purchases, and develop incremental
revenue opportunities. All the services we provide to our ecosystem players help promote and reinforce
our brand in the market. The synergy created by our Online Marketplace and the Self-operation
Business serves as an important source of user acquisition for each other. The two in turn provides a
strong user base as a foundation for us to grow other business such as ClouDiagnos. Our businesses
reinforce among themselves, forming a virtuous cycle and symbiotic ecosystem.
Subsidies
We offer benefits to our buyers to encourage their activities on our platform. We provide
coupon which offer different discount rates to active customers of our platform. We also provide
coupon to newly registered customers. Additionally, we provide direct subsidies to selected product.
Furthermore, we engage in group buy activities, which are discussed in details below. The subsidies
provided to buyers and used on our Online Marketplace as a percentage of GMV from Online
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Marketplace was 1.2%, 0.8% and 0.7% in 2020, 2021 and 2022, respectively. According to Frost &
Sullivan, our practice is consistent with other players in the outside-of-hospital pharmaceutical market.
Group buy
Group buy is a customised response to the situation that pharmacies are increasingly unwilling
to maintain high inventory levels during the Post-Coronavirus Era. Pharmacies that place smaller
orders at a time, however, find it difficult to secure an attractive price from upstream distributors. To
address this issue, we source SKUs that are popular among a large number of pharmacies and
encourages distributors to offer them at a lower price on the platform so that these SKUs are available
from the group buy page. The platform runs algorithm to produce a comprehensive report to
distributors regarding popular SKUs and the recommended offer price and volume. The platform also
helps distributors refill their offerings. In addition, we offer a Tuesday Night Market for
pharmaceuticals with expiration date being less than three months away, with prices as low as less than
30% of the normal product price. Buyers, especially primary healthcare institutions, can procure
according to their inventory turnover. We also hold group buy events during non-peak hours or days to
promote sales for sellers.
The benefits of group buy are two-fold. On the one hand, it enables pharmacies to procure
SKUs according to their real demand and therefore improve their turnover rate, while paying attractive
prices at the same time. On the other hand, distributors profit from a limited amount of very popular
SKUs. Although the unit demand per pharmacy is relatively low, the total demand for the selected
SKUs is large enough for the distributors to achieve a meaningful profit.
Livestreaming digital marketing
We believe some business to consumer (“B2C”) business marketing strategies can be implemented
in a B2B business, for example, livestreaming marketing. Pharmaceutical companies can apply to us to
participate in livestreaming events to promote their products online. Built on the large number of registered
buyers and historical transaction records, algorithm-based analysis allows YSB App to send livestreaming
invites to targeted pharmacies and primary healthcare institutions. The real-time interaction provides
downstream pharmacies and primary healthcare institutions a chance to learn about pharmaceutical
products directly from pharmaceutical companies. It also provides upstream pharmaceutical companies
direct market feedback and allows them to react quickly with additional sales strategies.
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 31 December 2022, we have registered
23 patents in China. We have registered 53 software copyrights with the PRC National Copyright
Administration. We have 20 registered domain names in China, including ysbang.cn and
yaoshibang.cn. As of 31 December 2022, we have registered 119 registered trademarks with the PRC
State Intellectual Property Office.
Despite our efforts to protect our proprietary rights, unauthorised parties may attempt to copy
or otherwise obtain and use our technology. Monitoring unauthorised use of our technology is difficult
and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our
technology. From time to time, we may have to resort to litigation to enforce our intellectual property
rights, which could result in substantial costs and diversion of our resources. In addition, third parties
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may initiate litigation against us alleging infringement of their proprietary rights or declaring their
non-infringement of our intellectual property rights. In the event of a successful claim of infringement
and our failure or inability to develop non-infringing technology or licence the infringed or similar
technology on a timely basis, our business could be harmed. Even if we are able to licence the
infringed or similar technology, licence fees could be substantial and may adversely affect our results
of operations. See “Risk Factors—Risks Related to Our Business and Industry—We may not be able to
prevent others from unauthorised use of our intellectual property, which could harm our business and
competitive position” and “—We may be subject to intellectual property infringement claims, which
may be expensive to defend and may disrupt our business and operations.”
CUSTOMERS AND SUPPLIERS
Customers
We have a broad base of customers, including, primarily, pharmaceutical companies (mainly
domestic) and distributors, pharmacies, and primary healthcare institutions. We have a deconcentrated
customer base. That is because we have a large number of customers, including around 6,000 sellers on
our Online Marketplace as of 31 December 2022 and around 234,000 average number of MPB in our
Self-operation Business in 2022 among others, and we do not significantly rely on any single customer
for its purchases of our products or services. For each of the years ended 31 December 2020, 2021 and
2022, our top five customers accounted for 2.2%, 1.4% and 0.9%, respectively, far less than 30%, of
our total revenue. Revenue from our largest customer alone accounted for less than 1% of our total
revenue during each of the periods.
Suppliers
Our suppliers are primarily pharmaceutical companies and distributors. For each of the years
ended 31 December 2020, 2021 and 2022, our top five suppliers accounted for less than 30% of our
purchases, and purchases from our largest supplier alone accounted for less than 10% of our total
purchases during each of these periods.
We believe we have sufficient alternative suppliers for our business 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 the supply of the
products and services we sourced from our suppliers.
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The following sets forth a summary of material terms of the standard supply framework
agreement we enter into with our suppliers:
Key Terms Description
Term Supply framework agreement typically has a term of one year.
Products We purchase products from our suppliers who typically authorise us to be a sales agent
of a predetermined district. Specific information of products shall be determined by the
orders confirmed by the parties.
Pricing For any given product, price charged to us by our suppliers shall not be higher than
market price or price charged to their other customers. Specific price of products shall
be determined by the orders confirmed by the parties. Suppliers may propose price for
products sold to downstream buyers by us, but we are solely and independently
responsible for determining such price.
Delivery Suppliers shall be responsible for delivering product to our address and unloading the
products. Suppliers shall bear the costs associated with transportation, loading and
unloading, as well as the risk of loss and damage before we receive the products. Upon
receipt of the products, risk of loss and damage is transferred to us.
Payment Settlement Parties may agree on one or more of the following methods: (i) we pay our suppliers in
a given month based on the volume we sold to our downstream and the payment we
received for last month; (ii) payment is due within three days upon receipt and
inspection of products; (iii) monthly payment settlement for products produced last
month; (iv) prepayment to our suppliers by us once order is confirmed; or (v) any other
predetermined payment settlement method.
Product return For transactions carried out under method (a) above, for products that are not sold to
the downstream within 90 days after we receive and inspect them from our suppliers,
we can claim product return and refund within 120 days after such date. Upon receipt
of such products, suppliers shall refund us or eliminate associated outstanding balance
within ten days. For transactions carried out under other methods above, if products
fall below standards, we have the right to claim product return and refund, and
suppliers will bear the costs of the return process; for any other reasons, parties shall
negotiate the details.
Services We provide digital marketing services for products under Targeted Product Launch
Business.
Compliance Parties shall maintain valid certification and qualification during the course of dealing,
and once any certification and qualification expires or is revoked, the holding party
shall promptly inform the other party and take proper measure to manage any ongoing
transactions. If a material certification and qualification that supply framework
agreement relies upon is revoked, such agreement shall automatically terminate.
Parties undertake to provide each other certification, qualification, and other materials
that is related with the transaction to make sure relevant laws, regulation and rules are
complied with. Parties represent that information provided is authentic and valid. If
one party suffers damage due to a material breach of this term, it has the right to
demand compensation from the other party.
Anti-Corruption All commercial bribery and non-business benefit arrangements shall be eliminated. A
party shall not solicit funds, goods and other benefits from the party’s employees.
Overlapping customers and suppliers
During the Track Record Period, to the best knowledge and belief of our Directors, two and one
of our top five customers were also our top five suppliers for the year ended 31 December 2021 and
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2022, respectively. For the year ended 31 December 2021 and 2022, our sales to these companies
accounted for approximately 0.6% and 0.2% of our total revenues, respectively. During the same
periods, our purchases from such companies accounted for approximately 6.9% and 1.1% of our total
purchases, respectively.
According to Frost & Sullivan, it is common to have overlapping customer-supplier
relationship when a marketplace and a self-operation business coexist in a company’s normal business
operations.
Recurring customers
Customers of our Online Marketplace are mainly sellers on our Online Marketplace. We charge
these sellers commissions. The number of recurring sellers on our Online Marketplace, defined as
sellers who successfully completed at least one transaction on our Online Marketplace in the previous
year of a given year and successfully completed at least one transaction on our Online Marketplace in
the given year, was around 1,800 and 2,500 in 2021 and 2022, respectively. Around 86.2% and 89.7%
of sellers who successfully completed at least one transaction on our Online Marketplace in 2020 and
2021, respectively, successfully completed at least one transaction on our Online Marketplace in 2021
and 2022, respectively. GMV contributed by these recurring sellers was around RMB15.9 billion and
RMB20.6 billion in 2021 and 2022, respectively. Approximation of revenue from these recurring
sellers is calculated by multiplying GMV contributed by these recurring sellers with an effective rate
(being revenue from our Online Marketplace in a given year divided by GMV from our Online
Marketplace in that year). Approximation of revenue from recurring sellers on our Online Marketplace
as a percentage of revenue from our Online Marketplace was around 93.4% and 91.0% in 2021 and
2022, respectively.
Customers of our Self-operation Business are mainly buyers in our Self-operation Business. We
generate revenue from sales of products to these buyers. The number of recurring buyers in our Self-
operation Business, defined as buyers who placed at least one order in our Self-operation Business in
the previous year of a given year and placed at least one order in our Self-operation Business in the
given year, was around 194,000 and 267,000 in 2021 and 2022, respectively. Around 85.4% and 86.9%
of buyers who placed at least one order in our Self-operation Business in 2020 and 2021, respectively,
placed at least one order in our Self-operation Business in 2021 and 2022, respectively. GMV
contributed by these recurring buyers was around RMB9.2 billion and RMB14.0 billion in 2021 and
2022, respectively. Approximation of revenue from these recurring buyers is calculated by multiplying
GMV contributed by these recurring buyers with an effective rate (being revenue from our Self-
operation Business in a given year divided by GMV from our Self-operation Business in that year).
Approximation of revenue from recurring buyers in our Self-operation Business as a percentage of
revenue from our Self-operation Business was around 87.6% and 91.9% in 2021 and 2022,
respectively.
OFFLINE ALLOCATION CHANNELS
We sell offline to business customers who purchase our products and then sell to downstream
businesses through their own online platforms or offline channels. Our customers here are business
customers who have the relevant licences and/or permits to sell pharmaceuticals to their downstream
business customers. The transactions are conducted offline. Our sales team negotiates directly with our
customers’ procurement team to confirm product demand and our customers then send their orders
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directly to our sales team. The delivery of the ordered products will be arranged accordingly.
Settlement and financial reconciliation are conducted in accordance with the agreements entered into
by our offline business customers and us.
During the Track Record Period, revenue from our offline business customers represented
5.9%, 4.0% and 2.1% of the revenue of our Self-operation Business for the years ended 31 December
2020, 2021 and 2022, respectively. We record revenue from our offline business customers under our
Self-operation Business. Product revenue is recognised upon business customers’ acceptance of
product delivery, net of discounts and return allowance.
SEASONALITY
Our results of operations are subject to mild seasonal fluctuations. We usually observe an
increase in revenue in the fourth quarter of each calendar year, primarily due to an increase in the
demand of pharmaceutical products during winter. Furthermore, when digital commerce platforms
hold special promotional events during China’s online shopping festivals on 18 June, 11 November
and 12 December we typically observe an increase in sales of our products immediately following
these campaigns. Seasonal fluctuations have not thus far posed material operational and financial
challenges to us. However, the seasonal trends that we have experienced in the past may not apply to,
or be indicative of, our future operating results.
COMPETITION
We believe that our ability to compete effectively depends on many factors, including the
variety of our products, our pricing competitiveness, user experience on our platform, our
technological leadership, effectiveness of our risk management, our ability to partner with primary
healthcare institutions, pharmacies and pharmaceutical sellers to customise medical solutions, our
marketing and selling efforts and the strength and reputation of our brands.
EMPLOYEES
We had a total of 5,916 employees as of 31 December 2022. As of 31 December 2022, all of
our employees were located in China.
The following table sets forth the numbers of our employees categorised by function as of
31 December 2022.
Function
Number of
Employees
General and Administrative ................................................... 7 3 2
Selling and Marketing ....................................................... 2,876
Operations ................................................................ 1,978
Research and Development ................................................... 3 3 0
Total ..................................................................... 5,916
Our success depends on our ability to attract, retain and motivate qualified personnel. As part of
our recruiting and retention strategy, we offer employees competitive salaries, performance-based sales
commissions, performance-based cash bonuses and certain other incentives.
We primarily recruit our employees through recruitment agencies, on-campus job fairs and
online channels, including our corporate website and social networking accounts. We have adopted a
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training programme, pursuant to which employees regularly receive trainings from management,
technology, regulatory and other internal speakers or external consultants.
As required under the PRC regulations, we participate in housing fund and various employee
social security plans that are organised by applicable local municipal and provincial governments,
including housing, pension, medical, maternity, work-related injury and unemployment benefit plans,
under which we make contributions at specified percentages of the salaries of our employees. Bonuses
and sales commissions are generally discretionary and based in part on employee performance and in
part on the overall performance of our business. We have granted and plan to continue to grant share-
based incentive awards to our employees in the future to incentivise their contributions to our growth
and development.
None of our employees are currently represented by labour unions. We believe that we
maintain a good working relationship with our employees and we did not experience any significant
labour disputes or any difficulty in recruiting staff for our operations.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We are committed to promoting corporate social responsibility and sustainable development
and integrating it into all major aspects of our business operations. Corporate social responsibility is
viewed as part of our core growth philosophy that will be pivotal to our ability to create sustainable
value for our Shareholders by embracing diversity and public interests.
We aim to build a sustainable community with our employees, customers and business partners
by supporting local initiatives that aim to create effective and lasting benefits to the local community,
through various initiatives that may include corporate philanthropy, establishing community
partnerships, and mobilising our employees to participate in volunteer work. In addition, we also
endeavour to reduce any negative impacts on the environment through our commitment to energy
saving and sustainable development. We will also focus on embracing diversity within our
organisation and equal and respectful treatment of all of our employees in their hiring, training,
wellness and professional and personal development. While maximising equal career opportunity for
everyone, we will also continue to promote work-life balance and create a happy culture in our
workplace for all of our employees.
We will establish an ESG committee after the Listing, which will have the collective and
overall responsibility for establishing, adopting and reviewing the ESG vision, policy and target of our
Group, and evaluating, determining and addressing our ESG-related risks at least once a year. The ESG
committee will be a Board-level committee. Our Board members have rich experience in overall
business and corporate governance management. They will participate in our ESG training to enhance
their awareness of and capabilities to deal with ESG-related risk identification and internal control
measures as well as general ESG matters.
Our Board will assume the responsibilities to (i) guide and formulate our ESG vision, strategy
and structure and ensure that they are compatible with our needs and the relevant laws, regulations and
standards; (ii) supervise the development and implementation of our ESG vision, strategy and structure
through ESG policies; (iii) review our ESG policies and ensure their applicability and compliance with
the relevant laws, regulations and standards, and (iv) review and approve our ESG reports and other
ESG-related disclosures. Our Board will regularly discuss the material ESG risks that could affect our
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operations and long-term sustainable development, provide views and suggestions to the
implementation groups, and monitor and strengthen our overall ESG system.
When identifying material ESG issues, our Board will consider the relevant laws, regulations
and standards, such as the ESG Reporting Guide provided in the Listing Rules, Sustainable
Development Goals promulgated by the United Nations, Standards published by the Global Reporting
Initiative and the Standards published by Sustainability Accounting Standards Board, as well as current
major economic, social and environmental issues, communicate with various stakeholders (such as our
employees, sellers and buyers), and discuss and analyse the core ESG issues with our management,
including what specific ESG issues to be prioritised. In particular, our Board and our ESG committee
will consider issues of common concern to internal and external stakeholders, impact on our operations
and sustainable business development, and issues arising from recent legal and regulatory
development. Our ESG committee will:
 Analyse legal and regulatory requirements, macro-policies and industry practice, giving
reference to international standards, ESG rating systems and outstanding practices of peer
companies;
 Communicate with internal and external stakeholders to understand their core concerns;
 Conduct materiality assessment through matrix assessment; and
 Classify lists of issues of high-importance, medium-importance issues and low-
importance.
Our ESG committee will monitor and manage matters related to ESG issues and confirm with
our Board regarding the effectiveness of our ESG system. Our Board may assess or engage
Independent Third Parties to evaluate the ESG risks and review our existing strategy, target and
internal controls. Necessary improvement will then be implemented to mitigate the risks. Our ESG
committee will convene meeting and communicates regularly to report and present the implementation
progress and key results. The execution of our ESG policies will involve personnel of key departments,
such as supply chain management, operations, human resources, marking, legal and others. For
examples, to ensure compliance with applicable laws and regulations, from time to time, our human
resources department would, if necessary and after consultation with our legal advisors, adjust our
human resources policies to accommodate material changes to relevant labour and safety laws and
regulations.
Identification, assessment and mitigation of our ESG risks
During the Track Record Period and up to the Latest Practicable Date, we have not been subject
to any fines or other penalties due to non-compliance in relation to environmental, social and
governance related matters, which had materially and adversely affected our financial condition or
business operations.
We have identified the following ESG risks which we consider material and may have an
impact on our business, strategies or financial performance.
Safety issues related to product quality
As an inherent risk in pharmaceutical transactions and services, we may face disputes or legal
actions for health or safety related issues suffered by end customers. Selling pharmaceuticals for
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human consumption involves inherent legal and other risks, and there is increasing governmental
scrutiny and public awareness regarding drug safety. Unexpected side effects caused by products we
sell or we facilitate to sell through our platform by third-party sellers could expose us to product
liability, negligence or other lawsuits. See “Risk Factors—Risks related to our business and industry—
The failure of the sellers to control the quality of products they sell on our Online Marketplace, or to
make timely and accurate delivery of their products sold on our Online Marketplace, may have a
material and adverse effect on our business, financial condition and results of operations” and “—We
may become subject to product liability and medical liability claims, which could cause us to incur
significant expenses and be liable for significant damages if not covered by insurance.”
Set forth below are the various measures that we undertake to manage and mitigate risks related
to product quality and safety:
 We require detailed product quality standards in our suppliers and third-party sellers on
our Online Marketplace, including inspecting their certificates, establishing contractual
obligations, reviewing their product quality records, among others.
 We impose mandatory training to our employees to enable them to exercise proper
inspection of product quality and safety.
Supply chain management
Sound supply chain management are essential for us to ensure reliable product quality and
sustainability along our supply chain. If we are unable to select qualified suppliers, or monitor, audit
and manage different parties in the supply chain, it may expose us to risks of suppliers’ non-
compliance with applicable laws and regulations and unethical practices, which could diminish our
competitiveness and harm our reputation.
We have established a supply chain approval process, through which suppliers must provide
relevant qualifications or certifications, such as their business licences, pharmaceutical production or
transaction licences, operation licences, among others. If the suppliers are not compliant with the
applicable laws and regulations regarding safety and quality or commit misconducts, we may terminate
our contracts with them. We also maintain quality test and control team to ensure the legal and
regulatory compliance of each product.
Environmental protection
We monitor environmental, social and climate-related risks and opportunities that may impact
on our business, strategy and financial performance and evaluate the magnitude of resulting impact
over the short, medium and long-term horizon. We take these issues into account when developing our
business strategy and may adjust our strategy in a particular country, region or city in response to
changing environmental, social and climate-related landscape.
Packaging and delivery
We have established measures to make sure our packaging and delivery process is consistent
with environmental protection. We carefully select packaging boxes for each order, as recommended
by algorithm, to reduce packaging materials to the extent possible. We have also implemented plans to
recycle packaging boxes from our suppliers and damaged boxes and wraps for reuse. Starting in May
2022, we have put in place a plan to incentivise our employees to recycle and reuse packaging
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materials. Pursuant to the plan, our employee will be entitled to a reward of (i) 15% of the packaging
cost savings if the percentage of second-hand packaging boxes used in a given month is no less than
10% of the total packaging boxes used; (ii) 10% if the second-hand packaging boxes usage rate is
between 8% and 10%; and (iii) 5% if the second-hand packaging boxes usage rate is between 5% and
8%.
We collaborate with third-party carriers to deliver products from our Self-operation Business
warehouses to buyers. We do not have specific conservation or recycling requirements of the amount
or type of packaging materials used by third-party carriers, but we tend to partner with those with
sound environmental protection policies. In fact, our main delivery partners are public companies and
they have their own ESG measure regarding green packaging and resource recycling.
Environmental protection
Although our business operations do not directly produce pollutants that directly affect the
environment, we have implemented internal policies to reduce our carbon footprint, such as reducing
the energy consumption through:
 Installing energy efficient lighting and ensuring lights are switched off when out of use
either manually or through automatic sensors;
 Requiring double-sided printing of documents throughout our offices;
 Switching off certain IT equipment or automatic power shutdown for certain systems and
devices; and
 Air conditioning controls, with measures including requirements on lowest temperature,
regular maintenance of air cooling technologies and optimal timing controls.
We have made significant progress in saving water and electricity in our daily operations. Our
water and electricity consumption per order we received in our Self-operation Business was about
RMB1.15, RMB0.52 and RMB0.44 in 2020, 2021 and 2022, respectively, based on our unaudited
management accounts.
Corporate social responsibility
We are committed to corporate social responsibility and meeting the society’s changing needs.
We support and participate in socially responsible projects that align with our core values and mission
and that promote the development of the pharmaceutical circulation industry generally. In particular,
we have taken initiatives in the below areas:
 We help promote the circulation of pharmaceuticals and revitalise the outside-of-hospital
market. We took the lead to digitalise pharmaceutical circulation for businesses and to
address the supply and demand mismatch at the primary healthcare level. We help
improve diagnostic capabilities at the primary healthcare level, which has gradually
become the development focus of the PRC government. We also provide training to
pharmacists.
 We take initiatives to alleviate the COVID-19 outbreak. Our commitment to society is
embodied in our efforts during the COVID-19 outbreak. We proactively supported China’s
nationwide efforts to contain the spread of COVID-19 and launched a variety of initiatives
to combat the pandemic and to support communities. In 2020, we made a donation of
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masks and RMB1 million to Wuhan Benevolent General Association. In 2021, we donated
17,000 masks to Haizhu Cishanhui in Guangzhou. Our employees also participated in
volunteer activities in Guangzhou to help fight the pandemic.
 We actively participate in other charity works. In 2021, we donated RMB600,000 to a
student public fund in Beijing to help school-age children to earn an equitable education
opportunities. We also participated in poverty alleviation initiatives in various counties in
Meizhou, Guangdong Province.
PROPERTIES AND FACILITIES
As of the Latest Practicable Date, we operated our businesses through 79 leased properties in
Guangzhou and various other cities in China. We do not own any properties. Our leased properties in
China serve as our offices and warehouses. These properties are used for non-property activities as
defined under Rule 5.01(2) of the Listing Rules and are principally used as office premises for our
business operations. We believe that there is sufficient supply of properties in China. Furthermore,
even if we experience temporary interruption to our usage of any of our leased office space, we believe
that our employees can continue to perform the material aspects of their duties remotely, given that our
offices do not carry out any production, manufacturing or physical retail activities; and through our
technology infrastructure our offices in other locations can adequately support the functioning of our
business operations in areas where we experience temporary office space interruptions. Therefore, we
do not rely on the existing leases for our business operations, and we do not believe a contingency
relocation plan is required.
As of the Latest Practicable Date, our leased properties had a total gross floor area of
approximately 265,000 square metres, and each leased property ranged from a gross floor area of 20
square metres to 22,000 square metres. The relevant lease agreements have lease expiration dates
ranging from June 2023 to August 2027.
As of the Latest Practicable Date, none of the properties held or leased by us had a carrying
amount of 15% or more of our consolidated total assets. Therefore, 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 (Cap. 32L of the Laws of Hong Kong), this document is exempted from
compliance with the requirements of section 342(1)(b) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance which requires a valuation report with respect to all our interests
in land or buildings.
The following table sets forth the location, approximate size, and primary use(s) of our material
leased properties as of the Latest Practicable Date:
Location
Approximate Size
(Building) in
Square Metres Primary Use(s)
Guangzhou ............................. 43,358 National headquarter, warehouses, R&D
centre, business operations
Wuhan ................................ 22,924 Local office, warehouse
Jinan .................................. 16,065 Local office, warehouse
Chengdu ............................... 15,834 Local office, warehouse
Zhengzhou ............................. 13,291 Local office, warehouse
Changsha .............................. 12,741 Local office, warehouse
Changchun ............................. 12,719 Local office, warehouse
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Location
Approximate Size
(Building) in
Square Metres Primary Use(s)
Shijiazhuang ............................ 12,142 Local office, warehouse
Jinhua ................................. 11,840 Local office, warehouse, dormitory
Xiamen ................................ 11,544 Local office, warehouse
Taiyuan ............................... 11,122 Local office, warehouse
Hefei .................................. 11,081 Local office, warehouse
Suzhou ................................ 10,768 Local office, warehouse
Beijing ................................ 10,666 Local office, warehouse
Xi’an ................................. 10,638 Local office, warehouse
Shenyang .............................. 9,573 Local office, warehouse
Nanchang .............................. 8,714 Local office, warehouse
Chongqing ............................. 8,608 Local office, warehouse
Harbin ................................ 7,804 Local office, warehouse
Hangzhou .............................. 3,276 Local office, warehouse
Nanjing ................................ 1 9 7 Local office
Fuzhou ................................ 1 1 6 Business operations
As of the Latest Practicable Date, the lessors of 26 properties the Group leased in China with an
aggregate gross floor area of approximately 51,000 square metres (accounting for approximately
19.27% of the total leased properties) had not provided us with the property ownership certificates or
relevant authorisation documents proving their rights to lease those properties. Our Directors are of the
view that the title defects of the aforesaid leased properties will not have any material adverse impact
on the overall business operation of us and the Listing, on the basis that (i) based on the advice of the
our PRC Legal Adviser, the lessors of 71 leased properties of us (accounting for approximately 95.38%
of the total leased properties) shall, according to the relevant lease contracts, bear the loss incurred by
us due to such lessor’s inability to provide property ownership certificates or relevant authorisation
documents, (ii) it is the lessors’ responsibility to obtain the property ownership certificates or relevant
authorisation documents proving their rights to lease those properties so as to enter into the leases, and,
as a tenant, we will not be subject to any administrative punishment or penalties in this regard, and
(iii) even in the event that we have to vacate the property, we could find an alternative property to meet
our operational needs.
As of the Latest Practicable Date, we had not obtained lease registration for 72 properties we
leased in China, primarily due to the difficulty of procuring the lessors’ cooperation to register such
leases. Our Directors are of the view that the non-registrations of aforesaid leased properties will not
have any material adverse impact on the overall business operation of us and the Listing, on the basis
that (i) no penalty had been imposed on us for the failure to register and file the relevant lease
agreements during the Track Record Period and up to the Latest Practicable Date, and (ii) as advised
by our PRC Legal Adviser, the maximum penalty for each unregistered lease is RMB10,000.
As of the Latest Practicable Date, the actual use of six properties we leased in China with
aggregate gross floor area of approximately 357 square metres (accounting for approximately 0.13% of
the total leased properties) is not consistent with the use registered on the corresponding property
ownership certificate and/or land use right certificate. Our Directors are of the view that the title
defects of the aforesaid leased properties will not have any material adverse impact on the overall
business operation of us and the Listing, on the basis that (i) the number and gross floor area of the
properties whose actual use is not consistent with their permitted use is insignificant, and (ii) we will
adopt stricter internal control measures and check the property ownership certificates and sublease
authorisations before entering into new lease agreements in the future.
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As of the Latest Practicable Date, (i) we had put into use a total of 20 warehouses and we had
one medical laboratory that had been decorated; (ii) for most of the aforementioned warehouses and
the medical laboratory, we had not filed for corporate investment projects, nor obtained, applied for or
completed some permits, inspection, and acceptance with related to construction project.
Our Directors are of the view that the defective formalities of the aforesaid construction
projects and the maximum administrative penalties that may be imposed on the relevant subsidiaries
under the relevant laws will not have any material adverse impact on the overall business operation of
us and the Listing, taking into account the fact that we would be able to relocate to a different site if
any of the relevant leased properties can not be used anymore due to the aforesaid defective
formalities. In addition, we had not been subject to any administrative actions, fines or penalties during
the Track Record Period and up to the Latest Practicable Date due to such non-compliance and were
not aware of any rectification request by competent authorities as of the Latest Practicable Date, and if
the relevant administrative authorities order us to carry out rectification in respect of the aforesaid
construction projects, we will and will be able to carry out rectification in accordance with the laws and
regulations in a timely manner.
INSURANCE
We maintain property insurance policies covering certain equipment and other property that are
essential to our business operations to safeguard against risks and unexpected events. We also provide
social security insurance including pension, medical insurance, unemployment insurance, maternity
insurance, on-the-job injury insurance, and housing fund plans for our employees. We consider our
insurance coverage to be sufficient for our business operations in China.
In line with general market practise, we do not maintain any product liability insurance,
business interruption insurance or key-man life insurance, which are not mandatory under PRC Laws.
See “Risk Factors—Risks Related to Our Business and Industry—We may not have sufficient
insurance to cover our business risks.” We also do not maintain insurance policies against risks relating
to the Contractual Arrangements. During the Track Record Period, we did not make any material
insurance claims in relation to our business.
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
We are currently not a party to any material legal or administrative proceedings. We may from
time to time be subject to various legal or administrative claims and proceedings arising in the ordinary
course of business. Litigation or any other legal or administrative proceeding, regardless of the
outcome, is likely to result in substantial cost and diversion of our resources, including our
management’s time and attention.
Compliance
During the Track Record Period and up to the Latest Practicable Date, we had not been and
were not involved in any material or systemic non-compliance incidents that have 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, and results of operations.
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RISK MANAGEMENT AND INTERNAL CONTROL
We have devoted ourselves to establishing and maintaining risk management and internal
control systems consisting of policies and procedures that we consider to be appropriate for our
business operations, and we are dedicated to continuously improving these systems.
We have adopted and implemented comprehensive risk management policies in various aspects
of our business operations, such as financial reporting, information system, internal control, human
resources and investment management.
Financial Reporting Risk Management
We have in place a set of accounting policies in connection with our financial reporting risk
management, such as financial reporting management policies, budget management policies, treasury
management policies, financial statements preparation policies and finance department and staff
management policies. We have various procedures and IT systems in place to implement our
accounting policies, and our finance department reviews our management accounts based on such
procedures. We also provide regular training to our finance department employees to ensure that they
understand our financial management and accounting policies and implement them in our daily
operations.
Information System Risk Management
Sufficient maintenance, storage and protection of data and other related information is critical
to our business. We have implemented various internal procedures and controls to ensure that data is
protected and that leakage and loss of such data is avoided.
We believe it is crucial that our sellers and buyers understand how we handle their information
so that they can make informed choices in deciding how such information is used and shared. To this
end, we collect personal information and data from our sellers and buyers only with their prior consent,
and we offer our sellers and buyers opt-out or opt-in options. We have established and implemented a
strict company-wide policy on data collection, usage, disclosure, transfer and storage.
We have implemented a network of process and software controls to protect individual personal
information and privacy. We encrypt data in network transmission. For back-end storage, we also use
various encryption technologies at software and hardware levels to protect sensitive data. To minimise
the risk of data loss or leakage, we conduct regular data backup and data recovery tests.
We collect and process data and narrowly tailor their usage to the extent possible.
 For Online Marketplace, we process data such as corporate documentation,
pharmaceutical and healthcare product information, and basic information of the
pharmacies, etc. For Self-operation Business, the categories of data processed by us
include ERP sales data, PMS procurement data, sales and settlement data, etc. For both
Online Marketplace and Self-operation Business, we also process personal data of
platform users who are employees or representatives of corporate users in the same way.
The categories of personal data involved mainly include the personal data of relevant
individuals of pharmacies and primary healthcare institutions, including name, mobile
phone number, address, national ID card number, corporate bank account information,
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etc. Purpose of processing such data is to provide procurement services of pharmaceuticals
and healthcare products as a platform operator or as a self-operated business.
 For ClouDiagnos, including diagnostic testing services, for healthcare providers, we
process the personal data of relevant individuals of primary healthcare institutions, such as
name, mobile phone number and address; for patients, we process personal data such as
the patients’ basic information and personal health and physiological information,
including the patient’s name, mobile phone number and medical test reports. Purpose of
processing such data is to provide testing services.
 For YSB eLearn, we may process the user’s name, course information, study progress and
practise test records. Purpose of processing such data is to provide online courses and
e-learning services.
 For SaaS solutions, we may collect national identity numbers and mobile phone numbers
of relevant staff at the pharmacies. ePalm assists pharmacies in managing personal data
such as the name, mobile phone number, purchase time, and payment method of the
member that purchases pharmaceutical or healthcare products. It also assists pharmacies in
processing personal data such as the name, mobile phone number, national identity
number, contraindications to medication, and time of onset of illness of patients who apply
for online prescriptions. Purpose of processing such data is to promote the sales of our
SaaS solutions.
 We may also collect personal data of relevant staff of corporate clients, basic
authentication information of corporate clients, as well as the photo-taking and sign-in
data generated during our BD members’ visits to pharmacies. Purpose of processing such
data is to manage sales and inventory and promote our business.
 After wePharmacy booths are sold, these booths are operated by our business customers
and we are not involved in the in-device data processing activities that take place only on
the booths except for the necessary maintenance. Personal information of end customers
collected by the booths will only be owned by business customers and will not be stored
by us.
We prioritise data security and privacy by strictly following our defined policy. We have a
dedicated team to enforce our privacy practises. We have completed the grading and filing for our
primary business information systems under China’s Multiple-level Protection System according to the
Administrative Measures for the Graded Protection of Information Security (
ᚐ၍ଣ፬
). We have established a coordination mechanism with third parties to handle information security
threats in a timely manner. We have established company-wide policies to cover various aspects of
network security and data privacy and protection. We have adopted and implemented various
cybersecurity and data protection policies which set out technical and organisation measures to protect
users’ data privacy and security, including: Guidelines for Personal Information Protection Impact
Assessment (
ˏ), Guidelines for Vendor Data Protection Management (Զ
ˏ), Network and Data Security Management Policy (ܓ
), Emergency Response Plan for Network and Personal Data Security Incidents (τ
), Network Failure Operation Manual (ღ዁Ъ˓̅), Information Security
Operation Protocol (τΌ዁Ъ஝ᇍ), Account Password Management Policy ( ሪ໮ɹ˿၍ଣՓ
), Response Plan for Business System Disaster (), Confidentiality
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Provisions (੗ૢಛ), Confidentiality Grading Management Protocol (੗ʱॴ၍ଣ஝ᇍ)a n d
the requirements on data breach and destruction of important files and data in our YSB Employee
Handbook (
ʈ˓̅). We have also promulgated and issued the Confidentiality and File
Management System for Overseas Securities Offerings and Listings (੗ձᏦ
) and the Guidelines for the Provision of Due Diligence Data for Overseas Listings
Projects (ˏ) to meet the requirements of applicable laws and
regulations, including the Regulations on Stre ngthening Confidentiality and File Management for
Overseas Securities Offerings and Listings of Domestic Enterprises (̋੶ྤʫΆุྤ̮೯БᗇՎձ
). We have an internal team dedicated to formulating data
protection policy and monitoring data security practices, and we hold relevant personnel accountable for
unauthorised access and data breaches. We strictly comply with laws and regulations and do not
distribute or sell personal data for any illegal or unauthorised purpose.
These policies and measures can be enforced to ensure legal and regulatory compliance on the
basis that:
 These policies and measures take into account the key legal requirements under applicable
cybersecurity and data privacy laws and regulations, including the Personal Information
Protection Law (
), the Cybersecurity Law () and the
Data Security Law (), as well as their subordinated laws and regulations.
These policies and measures transform the mandatory legal requirements into our internal
compliance rules.
 We have appointed a dedicated person in charge of cybersecurity and data protection, who
is fully responsible for the implementation of the above policies and measures. The main
responsibilities of the person in charge of cybersecurity include, among others, organising
the formulation of network and data security protection work plans and supervising the
implementation; formulating, issuing, implementing, and regularly updating data and
cybersecurity protection policies and related protocols. In addition, we also require the
persons in charge of each department, as the primary responsible person for data and cyber
security in his or her department, to promote data and cybersecurity management within
the department in accordance with the above-mentioned policies and supervise the internal
personnel under his or her supervision to comply with the above-mentioned policies.
 In order to make our employees better understand and comply with the above-mentioned
policies, we organise data and cybersecurity training, including orientation training,
regular compliance training, internal departmental training, etc. The Legal Department, IT
Department and Human Resources Department will be jointly responsible for organising
the personnel to participate in the training. The training content is coordinated by the
Legal Department and IT Department, which covers relevant national laws and
regulations, our internal policies, typical operational mistakes and risk points. The specific
training contents shall also be determined in conjunction with the department, position
held in our Group and level of the training audience.
 These policies provide disciplinary rules for employees who violate the rules to ensure
effective implementation of these policies. For example, according to the Network and
Data Security Management Policy, if any employee violates the requirements of the
relevant policies, we may, depending on the situation and the damage caused, impose
written warnings, notification of violation, cancellation of promotion qualifications,
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termination of labour contracts and other sanctions on the relevant employee; if any losses
are caused to us, we have the right to require the relevant employee to pay civil
compensations according to law; if any criminal liability may be pursued, we will report to
the public security bureau.
 We regularly inspect, test and evaluate the effectiveness and compliance of the above-
mentioned policies and measures on whether they are compatible with the risks of
cybersecurity and data security, and update such policies and measures in a timely manner
according to the results of inspection, testing and evaluation.
At the enterprise level, we established a systematic and universal account authorisation and
management mechanism based on which we periodically review the status of accounts and the related
authorisation information. We regularly perform security configuration assessment on our databases
and servers and implement procedures for system log management.
We have put in place a series of back-up management procedures. We set the frequency and
time interval of back-up plans. We require that at least one of our back-up plans, such as local server
back-up and offsite back-up, must be followed.
We perform data recovery tests on a regular basis and we retain relevant records. We provide
information security training to our employees and conduct ongoing trainings, and we discuss any issues
or necessary updates from time to time. We also have an emergency response mechanism to evaluate
critical risks, formulate disaster response plans and perform emergency drills on a regular basis.
Our information security department is responsible for ensuring that the usage, maintenance
and protection of data are in compliance with our internal rules and the applicable laws and
regulations.
In the opinion of our PRC Legal Adviser, we have complied with all applicable cybersecurity
and data privacy laws and regulations of the PRC in all material respects during the Track Record
Period and up to the Latest Practicable Date.
Internal Control Risk Management
We have designed and adopted strict internal procedures to ensure the compliance of our
business operations with the relevant rules and regulations. Our internal control team works closely
with our business units to (i) perform risk assessments and give advice on risk management strategies,
(ii) improve business process efficiency and monitor internal control effectiveness, and (iii) promote
risk awareness throughout our Company.
In accordance with our internal procedures, our in-house legal department performs the basic
function of reviewing and updating the form of contracts we enter into with our consumers, merchants
and relevant third parties. Our legal department examines the contract terms and reviews relevant
documents for our business operations, and the necessary underlying due diligence materials, before
we enter into any contract or business arrangements. In addition, our quality control teams under each
business group are also responsible for reviewing the licences and permits of the relevant
counterparties and proposed commercial terms before we enter into any contract or business
arrangements.
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BUSINESS
Our in-house legal department reviews our services for regulatory compliance before they are
made available to the general public. Our in-house legal department and administrative department are
responsible for obtaining any requisite governmental pre-approvals or consents, including preparing
and submitting all necessary documents for filing with relevant government authorities within the
prescribed regulatory timelines.
We continually review the implementation of our risk management policies and measures to
ensure our policies and implementation are effective and sufficient.
Human Resources Risk Management
We provide regular and specialised training tailored to the needs of our employees in different
departments. We have a training centre which regularly organises internal training sessions conducted
by senior employees or outside consultants on topics of interest that employees can vote on. The
training centre schedules regular online and classroom trainings, reviews the content of the trainings,
follows up with employees to evaluate the impact of such training and rewards lecturers for positive
feedback.
We have in place an employee handbook and a code of conduct approved by our management
and have distributed them to all 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. We have in place an anti-bribery and corruption policy to safeguard against any
corruption within our Company. The policy explains potential bribery and corruption conduct and our
anti-bribery and corruption measures. We make our internal reporting channel open and available for
our staff to report any bribery and corruption acts, and our staff can also make anonymous reports to
our anti-fraud department. Our anti-fraud department is responsible for investigating the reported
incidents and taking appropriate measures.
Anti-corruption and Bribery Risk Management
As we and our employees deal with a variety of third parties in our operations, we have
implemented internal procedures with respect to anti-corruption, anti-bribery, and conflict of interest
matters. First, we have adopted a series of internal regulations against corruption, bribery, and
fraudulent activities, which include measures against receiving bribes and kickbacks, and
misappropriation of company assets. Second, our internal control department carefully evaluates risk
events of potential corruption and bribery and conducts investigations when necessary. Third, we have
implemented clear and strict policies and guidelines that prohibit the acceptance of gifts, hospitality
and other offers by interested third parties. Employees are required to acknowledge and accept our
internal code of business conduct and ethics that lists in detail relevant policies and regulations,
including, but not limited to, clear definitions of bribery, corruption, and interested parties. Our internal
control department conducts internal control inspections regularly.
Audit Committee Experience and Qualification and Board Oversight
We have established an audit committee to monitor the implementation of our risk management
policies across our company 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, namely Mr. Hongqiang Zhao, Mr. Sam Hanhui Sun and Ms. Rong Shao, all of
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whom are independent non-executive Directors. Mr. Zhao is the chairman of the audit committee. For the
professional qualifications and experiences of the members of our audit committee, see the section
headed “Directors and Senior Management” in this document. We also maintain an internal audit
department which is responsible for reviewing the effectiveness of internal controls and reporting to the
audit committee and senior management on any issues identified. Our internal audit department members
hold regular meetings with 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 channelled to the committee on a
timely basis. The audit committee then discusses the issues and reports to the Board, if necessary.
Ongoing Measures to Monitor the Implementation of Risk Management Policies
Our audit committee, internal audit department and senior management together monitor the
implementation of our risk management policies on an ongoing basis to ensure our policies and
implementation are effective and sufficient.
LICENCES AND PERMITS
As of the Latest Practicable Date, we had obtained all requisite licences, approvals and permits
from relevant authorities that are material to our operations in China, expect as disclosed in this
document.
The following table sets out a list of material licences and permits currently held by us:
Licence/Permit
Number of
Licence/Permit in
each Category
Held by the
Company
Earliest
Expiration Date
Value-Added Telecommunications Business Operating Licence (ڦ
ุਕ຾ᐄ஢̙ᗇ)
4 21 December
2023
Qualification Certificate for Internet Drug Information Services ( ʝᑌၣᖹ
ࣣ)
7 27 June 2024
Internet Food Transaction Third-Party Platform Filing Certificate (ۜ࠮
ኯᗇ)
1 N/A
Medical Device Internet Transaction and Service Third-Party Platform
Filing Certificate (ኯᗇ)
1 N/A
Pharmaceutical Operation Licence (຾ᐄ஢̙ᗇ) 22 18 April 2024
Food Operation Licence (຾ᐄ஢̙ᗇ) 19 14 February 2024
Food Operation Filing Certificate (Sales of Prepackaged Food) ( සቖਯཫ̍
ࣩ5 N/A
Class 2 Medical Devices Operation Filing Certificate ( ୋɚᗳᔼᐕኜ૛຾ᐄ
ኯᗇ) 23 N/A
Good Supply Practise for Pharmaceutical Products Certificate (຾ᐄሯ
ࣣ6
1 November
2023
Medical Devices Operation Licence ( ᔼᐕኜ૛຾ᐄ஢̙ᗇ) 19 16 March 2025
Medical Institution Practicing Licence ( ᔼᐕዚ࿴ੂุ஢̙ᗇ) 1 12 January 2027
We have been actively seeking for renewals for our licences and permits. As for the Good
Supply Practise for Pharmaceutical Products Certificate (ࣣthe “GSP
Certification”), the Announcement on Matters Concerning the Implementation of the Drug
Administration Law of the PRC (
ʮѓ),
promulgated by the NMPA on 29 November 2019, confirmed that the GSP certification would be
cancelled since 1 December 2019. As for the Food Operation Licence (
຾ᐄ஢̙ᗇ), pursuant to
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BUSINESS
the Food Safety Law of the PRC (), promulgated on 28 February 2009
and latest amended on 29 April 2021, and the Announcement on Matters relating to the Record-filing
for the Sale of Only Prepackaged Food (
ʮѓ), promulgated
by SAMR on 29 November 2021, those who engaging merely in the sale of prepackaged food are not
required to obtain the food operation licences, but need to file a record with the competent authority,
and for those who have obtained food operation licences previously, the record filing procedure is not
required until the expiration of such food operation licences. Our PRC Legal Adviser is of the view
that our business operations will not be impacted by the cessation of the GSP certification.
AWARDS AND RECOGNITION
During the Track Record Period, we have received recognition for the quality and popularity of
our products and services. Some of the significant awards and recognition we or our senior
management have received are set forth below.
Award / Recognition
Award
Year
Awarding Institution /
Authority
Entity /Product
/ Person being
Awarded
China Rising Star (݋2018 Deloitte ( ᅃාʕ਷) YSB
Guangzhou Rising Star (݋2018 Deloitte ( ᅃාʕ਷) YSB
VB100 Future Healthcare Companies ( ͊Ըᔼᐕ100੶) 2018 VCBeat ( ਗএၣ) YSB
Guangzhou Future Unicorns ( ᄿψ͊Ըዹԉᖕ) 2018 Guangzhou Association for
Innovation and Technology
Enterprise (
Ҧ௴อ
Άุ՘ึ), Fast Company
(Ҟʮ̡)
YSB
Best Service Platform Enterprise ( ʕ਷ɽ਄ੰପุ௰ԳΆุ
ਕ̨̻ᆤ) in the China Healthcare Industry Award
Ceremony (ʕ਷ɽ਄ੰପุ཯ᆤՊᓿ)
2019 EqualOcean ( ᄂᆄ) YSB
Outstanding Enterprise ( ʕ਷ɽ਄ੰପุՙ൳Άุᆤ)i nt h e
China Healthcare Industry Award Ceremony ( ʕ਷ɽ਄
ੰପุ཯ᆤՊᓿ)
2019 EqualOcean ( ᄂᆄ) YSB
Digital Innovation Award (ᅰοʷ௴อɽᆤ)i n
International Sci-Tech Innovation Festival (௴ື)
2020 syobserve.com ( ᅰ̯ၣ),
www.gongyidaily.com (ᅰ
̯ʮू)
YSB
Top Ten Technological New Retail Pharmacy Platforms
(อཧਯҦஔ̨̻Ꮠ͜ᆤ) in Massive Health
Industry (Chongqing) Expo ( ɽ਄ੰପุ௹ᚎึ)
2021 China Medical
Pharmaceutical Material
Association (
༟
՘ึ)
YSB
Global Unicorn Index 2021 (2021 Όଢዹԉᖕ࿮) 2021 Hurun Report (ᆗϵబ) YSB
Top Ten Digital Pharma Companies ( ᔼᖹᅰοʷΆุ)i n
the Top 100 China Digital Health Companies ( ʕ਷ᅰο
ᔼᐕΆุϵ੶࿮)
2021 EqualOcean ( ᄂᆄ) YSB
China Digital Health Unicorn List ( ʕ਷ᔼᐕପุዹԉᖕ) 2021 EqualOcean ( ᄂᆄ) YSB
The Evergreen Award: Leading Pharmaceutical
Commercialization Platform of the Year (ՙ
൳ᔼᖹਠุʷ̨̻)
2022 jianmian.com (อၲ) YSB
Healthcare Consumption Enterprises of the Year (ᔼᐕ
ɽ਄ੰऊ൬Άุ)
2022 TMTPOST ( ⌹ద᜗) YSB
Top Ten Internet Healthcare Companies of the Year (ܓ
ʝᑌၣᔼᐕɤɽՊᇍ)
2022 China Times (జ) YSB
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CONTRACTUAL ARRANGEMENTS
BACKGROUND
We operate certain businesses in Mainland China, including hosting and providing services
through our Online Marketplace, and providing genetic testing services, which are subject to foreign
investment restrictions (the “Relevant Businesses”).
As a result of the foreign investment restrictions, we operate our Relevant Businesses through
the Consolidated Affiliated Entities under a variable interest entity structure. We do not directly own
equity interest in the Consolidated Affiliated Entities, which are held by their respective registered
shareholder(s). Instead, we control and consolidate the Consolidated Affiliated Entities through
Contractual Arrangements. Under the Contractual Arrangements, all substantial and material business
decisions of the Consolidated Affiliated Entities will be instructed and supervised by our Group,
through our WFOE, and risks arising from the Consolidated Affiliated Entities’ business are also
effectively borne by our Group as a result of these entities being treated as our controlled subsidiaries;
accordingly, we are entitled to the economic benefits generated by the Consolidated Affiliated Entities
to which the Onshore Holdcos are entitled through the Contractual Arrangements.
During each of the three financial years ended 31 December 2022, the revenue contribution of
our Consolidated Affiliated Entities to our Group accounted for 6.22%, 4.99% and 5.23%,
respectively.
OUR VIE STRUCTURE
The following diagram is a simplified illustration of our variable interest entity structure (the
“VIE Structure”) under the Contractual Arrangements:
WFOE(1)
100%
Our Company
denotes legal and beneficial ownership
denotes contractual relationship
100%
Registered shareholders(2)
Subsidiaries of Onshore Holdcos(3)
Onshore Holdcos(3)
service fees
services
granting control over Onshore
Holdcos to WFOE
Notes:
(1) WFOE is Guangzhou Sudaoyi Information Technology Co., Ltd. (ʮ̡).
(2) The registered shareholders of Guangzhou Sudao are Mr. Buzhen Zhang (as to 85.92%), Mr. Jiangwei Wang (as to 3.18%), Mr. Jiahao
Shao (as to 0.92%), and Guangzhou Yaodao Information Technology Partnership (Limited Partnership), which is controlled by
Mr. Buzhen Zhang (as to 9.98%). The registered shareholder of Guangzhou Yaobang is Mr. Buzhen Zhang. Mr. Wang and Mr. Shao are
former directors of our Company and Pre-IPO Investors, and Mr. Wang is a director of Guangzhou Sudao, with Mr. Wang and Mr. Shao
being interested in 1.32% and 0.38% of our Company’s issued share capital as at the date of this document; see “History, reorganization
and corporate structure” for further details.
(3) The Onshore Holdcos and their subsidiaries are collectively our Consolidated Affiliated Entities. The Onshore Holdcos are Guangzhou
Sudao Information Technology Co., Ltd. (
ʮ̡,“ Guangzhou Sudao ”) and Guangzhou Yaobang Information
Technology Co., Ltd. (ʮ̡,“ Guangzhou Yaobang ”). The subsidiary of Guangzhou Sudao is Henan Subiao
Information Technology Co., Ltd. (ʮ̡,“ Henan Subiao ”). The subsidiaries of Guangzhou Yaobang are
Guangzhou Yuewei Medical Laboratory Co., Ltd. (ʮ̡,“ Guangzhou Yuewei ”) and Guangzhou Spectrum
Health Technology Co., Ltd. (ʮ̡,“ Guangzhou Spectrum ”). See “History, reorganization and corporate
structure—Corporate structure” for further details.
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CONTRACTUAL ARRANGEMENTS
REASONS FOR OUR VIE STRUCTURE
Foreign investment activities in the PRC are mainly governed by Special Management
Measures (Negative List) for the Access of Foreign Investment (2021 Version) (ɝतй
݄(૶ఊ) (2021و)) (the “ Negative List ”) and the Catalogue of Industries for
Encouraging Foreign Investment (2022 Version) ( ོᎸ̮ਠҳ༟ପุͦ፽ (2022و)) (collectively,
the “Investment Restrictions ”), which were promulgated and are amended from time to time jointly
by the MOFCOM and the NDRC. The Investment Restrictions sets out a list of industries in which
foreign investment is restricted or prohibited.
The following table summarises the main Investment Restriction to which the Relevant
Businesses are subject:
Development and
application of
genes diagnosis
and treatment
technologies
Operated by Guangzhou Yuewei
Guangzhou Yuewei operates genetic testing services as part of the ClouDiagnos
business, which fall into the development and application of genes diagnosis and
treatment technologies and is prohibited from foreign investment according to the
Negative List. This prohibited business primarily involves laboratory testing
relating to, for example, genes, cells and molecular genetics, to assist in diagnostic
testing and treatment research and development.
Value-added
telecommunications
services
Operated by Guangzhou Sudao, Henan Subiao, Guangzhou Yaobang and
Guangzhou Spectrum
Guangzhou Sudao operates our Online Marketplace on our Yaoshibang platform,
which involves electronic data interchange and transaction processing (the
“EDI”) services and internet content provider (the “ ICP”) services. The ICP
services require a value-added telecommunication service licence for such
service scope (the “ ICP Licence ”) to operate and the EDI services require a
value-added telecommunication service licence for such service scope (the “ EDI
Licence”) to operate. Guangzhou Sudao holds an EDI Licence and ICP Licence
to operate these services. Henan Subiao, Guangzhou Yaobang and Guangzhou
Spectrum operate our other online platforms, including our ClouDiagnos
platform (
ΈᗅථᏨ), which constitute ICP services; and each of these entities
holds an ICP Licence to operate these services. EDI and ICP services constitute
value-added telecommunications services, which require relevant licences to
operate (including without limitation, ICP Licence and EDI Licence, collectively
“VAT Licences”).
Foreign investment in entities holding an ICP Licence is restricted under the
Negative List and Foreign investment in entities holding an ICP Licence or EDI
Licence is subject to the Administrative Regulations on Foreign-Invested
Telecommunications Enterprises. On 7 April 2022, the State Council officially
promulgated the Decision of the State Council on Revising and Repealing
Certain Administrative Regulations (
䁑
), which amended the Administrative Regulations on Foreign-Invested
Telecommunications Enterprises with the amendments taking effect on 1 May
2022. Under the amended Administrative Regulations on Foreign-Invested
Telecommunications Enterprises, the requirement that foreign investors investing
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CONTRACTUAL ARRANGEMENTS
in entities holding VAT Licences must have a good track record and operational
experience in the value-added telecommunications industry (“ Qualification
Requirements”) was cancelled. Nevertheless, under the amended
Administrative Regulations on Foreign-Invested Telecommunications Enterprise,
whilst foreign investors are able to invest in entities holding an EDI Licence
(without any shareholding percentage limit) and invest in entities holding an ICP
Licence (holding up to 50% equity interest and not more), whether the post-
foreign-invested entity can hold a VAT Licence is still subject to the examination
of substance and merits by MIIT.
On 30 March 2022, our PRC Legal Adviser consulted with MIIT, after we
expressed our listing intention and our wish to consult on questions relating to
the foreign investment restrictions on VAT Licences, and was informed that,
among other things, (i) even if the foreign investor from our Group met the
Qualification Requirements and the relevant members of our Group applied to
hold an EDI or ICP Licence as a foreign-invested enterprise, in practise, such
application by a foreign-invested enterprise would not be currently approved;
and (ii) we are not required to seek their approval for the Contractual
Arrangements, comparable to many other overseas listed companies operating
internet businesses in PRC which had adopted similar contractual arrangements.
On 24 April 2022, our PRC Legal Adviser verbally consulted with MIIT again in
relation to the amended Administrative Regulations on Foreign-Invested
Telecommunications Enterprises, and was informed that the response from MIIT
in the 30 March 2022 consultation remained effective and applicable before the
issuance of detailed examination and approval rules or guidelines for the
amended Administrative Regulations on Foreign-Invested Telecommunications
Enterprises, meaning that currently an application by a foreign-invested
enterprise from our Group to hold an EDI or ICP Licence would not be approved
in practise.
The abovementioned MIIT consultations were conducted with the relevant
department of MIIT. This department of MIIT is responsible for, among others,
researching and analysing the information and communication (including
telecom and internet) industry and relevant regulatory policies for VAT services.
Based on this and the consultation responses, our PRC Legal Adviser is of the
view that such department is competent to provide the above confirmation and
give guidance on whether our Company or its equity-held subsidiaries would be
approved to hold the relevant VAT Licences.
Given that Guangzhou Yuewei operates a foreign-prohibited business and the remaining
Consolidated Affiliated Entities operate foreign-restricted businesses that require VAT Licences and
based on the abovementioned MIIT consultations, our Company or any other subsidiaries our
Company hold equity interests (together with the Company, collectively, the “ Equity-held
Subsidiaries”) would not be approved to hold these VAT Licences, and our Company is not currently
able to hold any equity interest in our Consolidated Affiliated Entities. Based on this and the advice of
our PRC Legal Adviser on the PRC foreign investment restriction policies, we are of the view that the
Contractual Arrangements and our variable interest entity structure as a whole are narrowly tailored.
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CONTRACTUAL ARRANGEMENTS
Our Self-operation Business (namely, procuring pharmaceutical and health-care products and
selling on our Yaoshibang platform) does not fall within the scope of VAT services and is not subject
to foreign-investment prohibitions or restrictions under current PRC laws. By contrast, the operation of
our Yaoshibang platform constitutes a VAT service and is operated by our Consolidated Affiliated
Entities (as explained under the “Value-added communications services” row in the table above).
We will unwind and terminate the Contractual Arrangements wholly or partly once our
businesses are no longer prohibited or restricted from foreign investment and to the extent permissible
under PRC Laws.
CONTRACTUAL ARRANGEMENTS
The Contractual Arrangements provide a mechanism through which: (a) economic benefits of
the Onshore Holdcos are able to be transferred to us through the Business Cooperation Agreement
(defined below); and (b) we are able to control the Onshore Holdcos through the Option Agreements,
Share Pledge Agreements, Entrustment Agreements and Spousal Consent Letters (each defined below).
For the purpose of this section and unless the context specifies otherwise, “us”, “we” and “our”
refer to our Company and/or its Equity-held Subsidiaries.
We set out below a summary of the documents underlying and key features of our Contractual
Arrangements. See “Statutory and general information—Further information about our
business—Summary of material contracts” in Appendix IV for further details on the agreements.
Arrangements that allow us to receive economic benefits from our Consolidated Affiliated
Entities
Business Cooperation Agreements
On 16 May 2022, our WFOE (being Guangzhou Sudaoyi) entered into an exclusive business
cooperation agreement with each of our Onshore Holdcos (being Guangzhou Sudao and Guangzhou
Yaobang) (each an “ Business Cooperation Agreement ”). Under these agreements, WFOE or its
designated parties have exclusive right to provide Onshore Holdcos with, among others, technical
services, consultation services and broadcasting services, retail services, freight transportation services,
value-added telecommunications services, and administrative services, in exchange for service fees.
The amount of service fees may be adjusted by WFOE on the basis of the volume of work performed
and commercial value of the services provided. Without WFOE’s prior written consent, Onshore
Holdcos shall not accept any service covered by the agreement from any third party. WFOE owns the
intellectual property rights arising out of the services performed under these agreements. Each
agreement will remain in force until terminated by written agreement from both parties, by written
notice from WFOE. Unless otherwise required by PRC Laws, Onshore Holdcos shall not unilaterally
terminate their respective agreement.
Arrangements that provide us with effective control over our Consolidated Affiliated Entities
Option Agreements
On 16 May 2022, WFOE entered into exclusive option agreements with the Onshore Holdcos
and their registered shareholder(s) (each an “ Option Agreement ”). Under these agreements, each
registered shareholder granted to WFOE or its designated person an irrevocable and exclusive option to
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CONTRACTUAL ARRANGEMENTS
acquire, at any time, all of their equity interests in or assets of the respective Onshore Holdco at the
minimum price permissible under PRC Laws. The option period under each Option Agreement is from
the agreement date until all registered shareholders under that agreement have transferred all their
equity interests in the respective Onshore Holdco to, or all assets of the respective Onshore Holdco
have been transferred to WFOE or its designated person.
To better manage our Group’s loss exposure, if any:
(a) the registered shareholders undertook to WFOE that, unless with the prior consent of
WFOE or its designated person, the following matters, among others, would not take
place: (i) supplement, modify or amend constitutional documents of the respective
Onshore Holdco; (ii) procure the respective Onshore Holdco to enter into transactions that
would adversely affect the assets, operations, equity interests and other legitimate rights of
that Onshore Holdco; (iii) changing the board or senior management composition of the
respective Onshore Holdco; (iv) approving any dividend or bonus distributions;
(v) disposing of or otherwise encumbering the respective Onshore Holdco’s equity interest
or assets; and (vi) taking any act relating to restructuring (e.g., mergers and acquisitions,
investing in third parties, liquidating or dissolving that Onshore Holdco);
(b) the registered shareholders additionally undertook to, among others: (i) immediately notify
WFOE of any litigation, arbitration or administrative procedure occurring or likely
occurring that is related to or may adversely affect the equity interests of the respective
Onshore Holdco; (ii) comply with the respective Option Agreement and any other
agreement with WFOE and perform their obligations thereunder; (iii) cooperate and take
necessary actions to assist in the performance of the Option Agreement (e.g., make
relevant registrations to reflect any transfer under that agreement); and (iv) ensure that any
proceeds distributed by the respective Onshore Holdco received by the registered
shareholder(s) to that agreement (e.g., as profit or dividend distribution or proceeds from
liquidation) will be gifted in the manner designated by WFOE as permissible under PRC
Laws; and
(c) the respective Onshore Holdco undertook to WFOE that, unless with prior consent of
WFOE or its designated person, the following matters, among others, would not take
place: (i) taking actions that would adversely affect its assets, operations, liabilities, equity
interest and other legitimate rights (e.g., incurring any debts or entering/terminating into
any material contracts) (other than those arising out of the ordinary course of business);
(ii) distributing dividends or bonuses to its shareholders; (iii) disposing of or otherwise
encumbering its equity interest or assets (other than those arising out of the ordinary
course of business); and (iv) amending its constitutional documents, entering into any
merger, or acquiring or investing in third parties.
Share Pledge Agreements
On 16 May 2022, WFOE entered into share pledge agreements with the Onshore Holdcos and
their registered shareholder(s) (each a “ Share Pledge Agreement ”). Under these agreements, each
registered shareholder pledged all of their equity interests in the respective Onshore Holdco, held from
time to time, to guarantee performance under the respective Contractual Arrangements by the
registered shareholder and respective Onshore Holdco. The pledge period for each Share Pledge
Agreement is from the day when any such pledge is registered with the relevant authority until all
contractual obligations are fulfilled or guaranteed debts fully paid off in relation to the parties thereto.
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To preserve the pledged interests, each registered shareholder undertook that, among others:
(i) the pledged interests would not be transferred or encumbered without WFOE’s prior written
consent; and (ii) any rights over the pledged interests enjoyed by WFOE would not be prejudiced by
legal procedures by that registered shareholder or their successor or any other person, and that
registered shareholder would take all necessary and required measures and execute all necessary and
required documents to assist WFOE in realising its rights over the pledged interests.
Entrustment Agreements
On 16 May 2022, WFOE entered into voting entrustment agreements with the registered
shareholder(s) of each Onshore Holdco (each an “ Entrustment Agreement ”). Pursuant to these
agreements, each registered shareholder granted a power of attorney to WFOE or a person designated
by WFOE (“attorney-in-fact”) to irrevocably authorise WFOE to act as its attorney-in-fact to exercise
all of that shareholder’s voting and other rights associated with that shareholder’s equity interest in the
respective Onshore Holdco, including, but not limited to, the right to attend shareholders’ meetings on
behalf of that shareholder, the right to appoint directors and chief executive officers and other senior
management, and the right to sell, transfer, pledge and dispose of all or a portion of the shares held by
that shareholder. Each Entrustment Agreement remains effective until, among other reasons, the
agreement is terminated by the parties in writing. Unless otherwise required by PRC Laws, none of the
Onshore Holdcos or its registered shareholder(s) can unilaterally terminate this agreement.
To minimise any conflicts of interest, under the Entrustment Agreements, none of the registered
shareholders of the Onshore Holdcos or any other person who may give rise to a conflict of interest with
our Company may act as attorney-in-fact in respect of the registered shareholders’ rights and interests in
the respective Onshore Holdco. Other than this, the attorney-in-fact may be a director of our Group (who
does not have a material conflict of interest) and an administrator or liquidator of WFOE.
Spousal Consent Letters
The spouse of each registered shareholder of the Onshore Holdcos has each signed a spousal
consent letter agreeing that the equity interest in the respective Onshore Holdco held by and registered
under the name of the respective shareholder will be disposed of pursuant to the respective Contractual
Arrangements with WFOE. Each spouse agreed not to assert any rights over the equity interest in the
respective Onshore Holdco held by the respective shareholder.
Further information about our Contractual Arrangements
Onshore Holdcos’ subsidiaries
Under the Contractual Arrangements, our Company has control over Onshore Holdcos’
subsidiaries (the “VIE Subsidiaries”) by virtue of: (a) the subsidiaries being controlled by the Onshore
Holdcos, over which we have extensive control of the composition of board and senior management
(under the Option Agreements); (b) both Onshore Holdcos and their Registered Shareholders having
undertaken to WFOE that no actions would be taken that would adversely affect the assets, equity
interests and other legitimate rights of Onshore Holdcos, which includes interest over the VIE
Subsidiaries (under the Option Agreements); and (c) during the service period, both Onshore Holdcos
having undertaken that they would not, and would procure their subsidiaries not, to accept any same or
similar services provided by a third party, and both Onshore Holdcos would not enter into a similar
service agreement with a third party (under the Business Cooperation Agreements).
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To further enhance our Company’s control over the VIE Subsidiaries, on 21 November 2022,
WFOE, each VIE Subsidiary, and its respective Onshore Holdco (or direct shareholder) entered into a
separate full set of VIE agreements, which are on substantially the same terms as the Contractual
Arrangements (as described in “—Arrangements that allow us to receive economic benefits from our
Consolidated Affiliated Entities” and “—Arrangements that provide us with effective control over our
Consolidated Affiliated Entities” above). Through these three sets of VIE agreements, our Company,
through WFOE, has direct control over the VIE Subsidiaries. See “Statutory and general information—
Further information about our business—Ancillary VIE agreements to the Contractual Arrangements”
for a list of the VIE agreements entered into by these VIE Subsidiaries.
Dispute resolution
In the event of any dispute with respect to the interpretation or performance of the provisions,
each of the Business Cooperation Agreements, Option Agreements, Entrustment Agreements and
Share Pledge Agreements stipulates: (i) that the parties shall negotiate in good faith to resolve the
dispute; and (ii) in the event the parties fail to reach an agreement on the resolution of the dispute
within 30 days after the relevant dispute arises, any party may submit the relevant dispute to the
Shenzhen Court of International Arbitration for arbitration, in accordance with the then effective
arbitration rules. The arbitration ruling shall be final and binding on all parties.
Each respective party to the agreements shall have right to apply to courts with competent
jurisdiction to enforce the arbitral awards. The agreements further provide that: (i) the tribunal may
award remedies over shares or assets of the respective Onshore Holdco, award injunctive relief (e.g.,
for the conduct of business or to compel the transfer of assets), or order the winding-up of the
respective Onshore Holdco; and (ii) the courts of Hong Kong, the Cayman Islands (as the place of
incorporation of our Company), Guangzhou, PRC (as the place of establishment of the Onshore
Holdcos) and other jurisdictions where our Company and/or the respective Onshore Holdco’s main
assets are located each have jurisdiction to grant interim remedies and/or enforce an arbitral award or
interim remedies against the shares or properties of the respective Onshore Holdco.
See “Risk factors—Risks related to our corporate structure.”
Conflict of Interests
Under the Entrustment Agreements, none of the registered shareholders of the Onshore
Holdcos or any other person who may give rise to a conflict of interest with our Company may act as
attorney-in-fact in respect of the registered shareholders’ rights and interests in the respective Onshore
Holdco. See “—Arrangements that provide us with effective control over our Consolidated Affiliated
Entities—Entrustment Agreements” for further details.
Loss Sharing
Under current PRC Laws, neither our Company nor WFOE is legally required to share losses
of, or provide financial support to, the Consolidated Affiliated Entities. Further, each Consolidated
Affiliated Entity is a limited liability company that is solely liable for its own debts and losses in
relation to its assets and liabilities.
Notwithstanding this, WFOE intends to provide continuous support and assistance to the
Consolidated Affiliated Entities, as necessary, and their financial performance will be consolidated into
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our Company’s accounts. As such, our operational and financial performance would be materially and
adversely affected if the Consolidated Affiliated Entities suffer loss. To minimise the risk of loss, we
have undertaken a number of measures under the Contractual Arrangements. In particular, see “Option
Agreements” and “Share Pledge Agreements” in the sub-section “—Arrangements that provide us with
effective control over our Consolidated Affiliated Entities” above for further details.
Succession
WFOE’s rights over the Onshore Holdcos may be survived by a liquidator in the event of
winding-up, including through: (i) the administrator or liquidator being appointed the attorney-in-fact
under the Entrustment Agreements and gaining control over the Onshore Holdcos as if they were the
shareholders; and (ii) through the dispute resolution mechanism of the Contractual Arrangements,
which provides the arbitral tribunal with power to, among other things, award remedies over the shares
or assets of the Onshore Holdcos and grant injunctive relief.
In the event that an Onshore Holdco is wound-up, WFOE’s interests in that Onshore Holdco are
protected, including through: (i) the respective registered shareholder(s) undertaking in the respective
Option Agreement that, among other things, proceeds received by them from liquidation would be
gifted to WFOE or its designated person; (ii) the respective registered shareholder(s) undertaking in the
respective Share Pledge Agreement that, among other things, WFOE’s rights over the pledged shares
would not be prejudiced by such registered shareholder(s) or their successors; and (iii) each spouse of
the respective registered shareholder(s) undertaking, among other things, in the event of acquiring any
equity interest in that Onshore Holdco, to enter into a set of contractual arrangements with the same or
comparable terms as the Contractual Arrangements to preserve WFOE’s rights as against such spouse.
See “Entrustment Agreements” and “Option Agreements” in the sub-section “—Arrangements
that provide us with effective control over our Consolidated Affiliated Entities” for further details.
Insurance
We do not maintain an insurance policy to cover the risks relating to the Contractual
Arrangements.
Our confirmation
As of the Latest Practicable Date, we had not encountered any interference or encumbrance
from any PRC governing bodies in operating our businesses through the Consolidated Affiliated
Entities under the Contractual Arrangements.
LEGALITY OF THE CONTRACTUAL ARRANGEMENTS
We believe that the Contractual Arrangements are narrowly tailored to minimise the potential
conflict with relevant PRC Laws.
In addition, our PRC Legal Adviser is of the opinion that:
(a) parties to each of the agreements are entitled to execute the agreements;
(b) the Contractual Arrangements would not fall within the circumstances as stipulated in the
PRC Civil Code which will lead the arrangements as invalid act under the PRC Civil
Code;
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CONTRACTUAL ARRANGEMENTS
(c) none of the Contractual Arrangements violates any provisions of the articles of association
of our Onshore Holdcos or WFOE;
(d) the parties to each of the Contractual Arrangements are not required to obtain any
approvals or authorisations from the PRC governmental authorities, except that:
(i) the exercise of the option by WFOE of its rights under the Option Agreements to
acquire all or part of the equity interests in the respective Onshore Holdco is subject
to the approvals of, consent of, filing with and/or registrations with the PRC
governmental authorities;
(ii) any share pledge contemplated under the Share Pledge Agreements is subject to the
approval of and/or registration with competent administration bureau;
(iii) the arbitration awards/interim remedies provided under the dispute resolution
provision of the Contractual Arrangements shall be recognised by the PRC courts
before compulsory enforcement;
(iv) the transfer and licence of the intellectual properties pursuant to the Business
Cooperation Agreements are subject to the approval of and/or registration with
competent government authorities; and
(e) based on its understanding of the relevant PRC laws and regulations, subject to
uncertainties of the enforceability of the dispute resolution provisions of the Contractual
Arrangements, and subject as to enforceability to applicable bankruptcy, insolvency,
moratorium, reorganisation and similar laws affecting creditors’ rights generally, the
discretion of relevant governmental authorities in exercising their authority in connection
with the interpretation and implementation thereof and the application of relevant PRC
Laws and policies thereto, each of these Contractual Arrangements is and taken as a whole
are, (i) valid and legally binding on each party thereto, and (ii) enforceable in accordance
with the terms thereof.
Our PRC Legal Adviser has also advised us that there are substantial uncertainties regarding
the interpretation and application of current and future PRC laws, regulations and rules. Since PRC
laws and regulations governing the validity of these Contractual Arrangements are uncertain and the
relevant governmental authorities have broad discretion in interpreting these laws and regulations, we
cannot assure you or make any prediction that the Contractual Arrangements will not result in any
violation. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion
of our PRC Legal Adviser. It is uncertain whether any other new PRC laws or regulations relating to
consolidated affiliated entity structures will be adopted or if adopted, what they would provide. If we
or our Consolidated Affiliated Entities are found to be in violation of any existing or future PRC laws,
rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant
PRC regulatory authorities would have broad discretion to take action in dealing with such violations
or failures, including: (a) revoking the business licences of such entity; (b) discontinuing or restricting
the conduct of any transactions between certain of our PRC subsidiaries and Consolidated Affiliated
Entities; (c) imposing fines, confiscating the income from our Consolidated Affiliated Entities, or
imposing other requirements with which we or our Consolidated Affiliated Entities may not be able to
comply; (d) requiring us to restructure our ownership structure or operations, including terminating the
Contractual Arrangements with our Consolidated Affiliated Entities and deregistering the equity
pledges of our Consolidated Affiliated Entities, which in turn would affect our ability to consolidate,
derive economic interests from, or exert effective control over our Consolidated Affiliated Entities; or
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CONTRACTUAL ARRANGEMENTS
(e) restricting or prohibiting our use of the proceeds of any of our financing outside China to finance
our business and operations in China.
See “Risk factors— Risks related to our corporate structure—If the PRC government deems
that the Contractual Arrangements in relation to our Consolidated Affiliated Entities do not comply
with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations
or the interpretation of existing regulations change in the future, we could be subject to severe penalties
or be forced to relinquish our interests in those operations”.
Nevertheless, based on the above analysis and advice from our PRC Legal Adviser, our
Directors are of the view that the adoption of the Contractual Arrangements is unlikely to be deemed
ineffective or invalid under the current applicable PRC Laws.
DEVELOPMENT IN PRC LEGISLATION ON FOREIGN INVESTMENT
Background of the Foreign Investment Law
On 15 March 2019, the National People’s Congress approved the Foreign Investment Law
which became effective on 1 January 2020. On 26 December 2019, the State Council promulgated the
Implementing Rules of the Foreign Investment Law, which came into effect on 1 January 2020. The
Foreign Investment Law stipulates certain forms of foreign investment, but does not explicitly stipulate
contractual arrangements as a form of foreign investment. The Implementing Rules of the Foreign
Investment Law are also silent on whether foreign investment includes contractual arrangements.
The Foreign Investment Law and the Implementing Rules of the Foreign Investment Law do
not explicitly stipulate the contractual arrangements as a form of foreign investment. As advised by our
PRC Legal Adviser, the Foreign Investment Law, as it is interpreted and implemented as of the date of
this document, does not have a material adverse impact on our Contractual Arrangements, including
their legality and validity.
Impact and consequences of the Foreign Investment Law
Conducting operations through contractual arrangements has been adopted by many PRC-based
companies, including our Group. We use Contractual Arrangements to establish control of the
Consolidated Affiliated Entities, by WFOE, through which we operate our business in the PRC.
The Foreign Investment Law stipulates that foreign investment includes “foreign investors
invest in China through any other methods under laws, administrative regulations or provisions
prescribed by the State Council” without elaboration on the meaning of “other methods”. There are
possibilities that future laws, administrative regulations or provisions prescribed by the State Council
may regard 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 foreign investment
access requirements and how the above-mentioned Contractual Arrangements will be handled.
Therefore, there is no guarantee that the Contractual Arrangements and the business of the Onshore
Holdcos will not be materially and adversely affected in the future due to changes in PRC Laws and
regulations.
See “Risk Factors—Risks related to our corporate structure—Our current corporate structure
and business operations may be affected by the Foreign Investment Law.”
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CONTRACTUAL ARRANGEMENTS
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:
(a) 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;
(b) our Board will review the overall performance of and compliance with the Contractual
Arrangements at least once a year;
(c) our Company will disclose the overall performance of and compliance with the
Contractual Arrangements in our annual reports; and
(d) our Company will engage external legal advisers or other professional advisers, if
necessary, to assist the Board to review the implementation of the Contractual
Arrangements, review the legal compliance of WFOE and the Onshore Holdcos to deal
with specific issues or matters arising from the Contractual Arrangements.
ACCOUNTING ASPECTS OF THE CONTRACTUAL ARRANGEMENTS
Under the Business Cooperation Agreements, it was agreed that, in consideration of the
services provided by WFOE, each Onshore Holdco shall pay service fees to WFOE. Additionally,
WFOE has a right to periodically receive or inspect the accounts of the Consolidated Affiliated
Entities.
In addition, under the Option Agreements and Share Pledge Agreements, WFOE has absolute
contractual control over the distribution of dividends or any other amounts to the respective Onshore
Holdco’s registered shareholder(s) given that WFOE’s prior written consent is required before any
distribution can be made. If an Onshore Holdco’s registered shareholder(s) receive any income, profit
distribution or dividend, they shall promptly transfer or pay such income, profit distribution or
dividend to WFOE or its designated person to the extent permissible under PRC Laws.
As a result of the Contractual Arrangements among WFOE, the Onshore Holdcos and its
respective registered shareholder(s), WFOE is able to effectively control, recognise and receive the
economic benefit of the business and operations of the Consolidated Affiliated Entities. Accordingly,
Consolidated Affiliated Entities are treated as controlled entities of our Company and consolidated by
our Company. The basis of consolidating the results of these Consolidated Affiliated Entities is
disclosed in Note 5 to the Accountant’s Report set out in Appendix I to this document.
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CONNECTED TRANSACTIONS
CONNECTED PERSON
The Contractual Arrangements were entered into between our Group and certain persons(s), set
out below, that will become connected persons of our Company upon Listing. Accordingly, the
Contractual Arrangements will become connected transactions of our Company upon the Listing.
Name of connected person Relationship
Mr. Buzhen Zhang .......................... Executive Director, chief executive officer and
substantial shareholder of our Company
SUMMARY OF OUR CONNECTED TRANSACTIONS
Transaction
Proposed annual
caps for the years
ending
31 December
2023 2024 2025
(in RMB million)
Non-exempt Continuing Connected Transaction
Contractual Arrangements
1. Contractual Arrangements .................................................... N / A N / A N / A
CONTRACTUAL ARRANGEMENTS
Background
As disclosed in “Contractual Arrangements”, due to regulatory restrictions on foreign
ownership in the PRC, we conduct a portion of our business in Mainland China through our
Consolidated Affiliated Entities. We do not hold equity interests in these entities. Rather, through the
Contractual Arrangements, we have effective control over our Consolidated Affiliated Entities. See
“Contractual Arrangements” for further detail on the agreements underlying the Contractual
Arrangements.
Listing Rules implications
The transactions contemplated under the Contractual Arrangements and any new transactions,
contracts and agreements or renewal of existing transactions, contracts and agreements to be entered
into by, among others, the Consolidated Affiliated Entities (or any of its subsidiaries in the future) and
any member of our Group (“ New Intergroup Agreements ” and each of them, a “ New Intergroup
Agreement”) technically constitute continuing connected transactions under Chapter 14A of the
Listing Rules, as certain parties to the Contractual Arrangements are connected persons of the
Company.
Reasons for the transactions and the waiver application
The transactions underlying the Contractual Arrangements enable the Consolidated Affiliated
Entities to be consolidated into our Group and allow our Group to obtain the economic benefits
(including profits earned) generated by the Consolidated Affiliated Entities, which are then
consolidated into our Company’s accounts and may be distributed up to our Shareholders. See
“Contractual Arrangements” for further details on how consolidation and economic benefit is achieved.
As a result of the Contractual Arrangements, our Company, through WFOE, effectively has
control over the Consolidated Affiliated Entities and shall be entitled of the distributions made by the
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CONNECTED TRANSACTIONS
Consolidated Affiliated Entities (that do not otherwise remain with the Consolidated Affiliated
Entities). Accordingly, the Consolidated Affiliated Entities are effectively treated as our subsidiaries
(within the meanings ascribed under the Companies Ordinance and the Listing Rules) and form part of
our Group and are no different in substance and effect from those subsidiaries in which we hold equity
interest (“Equity-held Subsidiaries”).
Since the Consolidated Affiliated Entities are part of our Group, transactions under New
Intergroup Agreements would be in the same nature as intragroup transactions typically conducted
between our Company and our Equity-held Subsidiaries or among our Equity-held Subsidiaries, which
would not constitute connected transactions under Chapter 14A of the Listing Rules (except if
considered a connected subsidiary). Transaction fees (if any) and benefits generated under the
Contractual Agreements and the Intergroup Agreements remain within our Group, which means that
benefits received by the Consolidated Affiliated Entities will at the same time equally benefit our
Company and be in the interests of our Shareholders as a whole. As a result of the Contractual
Arrangements, no transaction fee (if any) or benefit received by the Consolidated Affiliated Entities
would flow to the Registered Shareholders.
Given the above, our Directors (including the independent non-executive Directors) are of the
view that the Contractual Arrangements, the New Intergroup Agreements, and the transactions
contemplated thereunder are fundamental to our Group’s legal structure and business and corporate
operations, that such transactions have been and will be entered into in the ordinary and usual course of
business of our Group, are on normal commercial terms or better, and are fair and reasonable and in the
interests of our Company and our Shareholders as a whole.
Additionally, our Directors consider that, given that our Group is placed in an unique situation
with respect to the connected transactions rules in connection with the Contractual Arrangements and
New Intergroup Agreements, it would be unduly burdensome and impracticable, and it would add
unnecessary administrative costs to our Company if such transactions are subject to strict compliance
with the requirements under Chapter 14A of the Listing Rules, including the announcement, annual
reporting, and independent shareholders’ approval (including recommendation from an independent
financial adviser) requirements.
WAIVER
We have applied for, and the Stock Exchange has granted us, in respect of the Contractual
Arrangements and New Intergroup Agreements, (i) a waiver from strict compliance with the
announcement, circular and independent shareholders’ approval (including recommendation from an
independent financial adviser) requirements under Chapter 14A of the Listing Rules; (ii) a waiver from
strict compliance with the requirement to set a term of not exceeding three years under Rule 14A.52 of
the Listing Rules; and (iii) a waiver from strict compliance with the requirements to set monetary
annual caps under Rule 14A.53(1) of the Listing Rules (collectively, the “ Applicable
Requirements”), for so long as our Shares are listed on the Stock Exchange, subject to the following
conditions:
(a)
No change without independent non-executive Directors’ approval. No change to the
Contractual Arrangements (including with respect to any fees payable to WFOE
thereunder) will be made without the approval of the independent non-executive Directors.
(b)
No change without independent Shareholders’ approval. Save as described below, no
material change to the agreements governing the Contractual Arrangements will be made
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CONNECTED TRANSACTIONS
without the approval of our independent Shareholders. Once the independent
Shareholders’ approval of any change has been obtained, no further announcement or
approval by our independent Shareholders, except for those described above, 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 will continue to be applicable.
(c)
Economic benefits and flexibility. The Contractual Arrangements will continue to enable
our Group to receive economic benefits generated by our Consolidated Affiliated Entities
through: (i) our Group’s option (if and when allowed under applicable PRC Laws) to
acquire, all or part of, the entire equity interests in Onshore Holdcos for the minimum
amount of consideration permitted by applicable PRC Laws; (ii) the business structure
under which the profit generated by Onshore Holdcos is substantially retained by our
Group, such that no annual cap shall be set on the amount of service fees payable to
WFOE by Onshore Holdcos under the Business Cooperation Agreements (as defined and
described in “Contractual Arrangements”); and (iii) our Group’s right to control the
management and operation of, as well as, in substance, all of the voting rights of Onshore
Holdcos.
(d)
Renewal and reproduction. On the basis that the Contractual Arrangements provide an
acceptable framework for the relationship between our Company and its subsidiaries in
which our Company has direct shareholding, on the one hand, and our Consolidated
Affiliated Entities, on the other hand, that framework may be renewed and/or reproduced
without being in strict compliance with the Applicable Requirements (including obtaining
the approval of our independence Shareholders): (i) upon the expiry of the existing
arrangements; (ii) in connection with any changes to the registered shareholders of our
Consolidated Affiliated Entities in respect of their respective shareholding in or director(s)
of our Consolidated Affiliated Entities; or (iii) in relation to any existing, newly
established or acquired wholly foreign-owned enterprise (or foreign-controlled joint
venture) or operating company (including branch company), engaging in a similar
business as that of the Consolidated Affiliated Entities. Such renewal and/or reproduction
is justified by business expediency. The directors, chief executive or substantial
shareholders of any existing or new wholly foreign-owned enterprise (or foreign
controlled joint venture) or operating company (including branch company) engaging in a
similar business as that of the Consolidated Affiliated Entities which our Group may
establish will, upon renewal and/or reproduction of the Contractual Arrangements, be
treated as connected persons of our Group and transactions between these connected
persons and our Group other than those under similar the Contractual Arrangements shall
comply with Chapter 14A of the Listing Rules. This condition is subject to relevant PRC
Laws and approvals. Any such renewed or reproduced agreements will be on substantially
the same terms and conditions as the existing Contractual Arrangements.
DIRECTORS’ CONFIRMATION
Our Directors (including independent non-executive Directors) are of the view that: (a) the
Contractual Arrangements have been entered into in our ordinary and usual course of business on
normal commercial terms that are fair and reasonable and in the interests of our Company and our
Shareholders as a whole; and (b) the terms of the Contractual Arrangements are justifiable and in line
with the normal business practise of agreements of this type, and necessary to ensure that our
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CONNECTED TRANSACTIONS
Consolidated Affiliated Entities remain controlled, and their economic interest may be enjoyed, by the
Company on an uninterrupted basis.
SOLE SPONSOR’S CONFIRMATION
Based on the documentation provided by the Company and the Sole Sponsor’s due diligence
and discussions with the Company and the PRC Legal Adviser, the Sole Sponsor is of the view that:
(a) the Contractual Arrangements are fundamental to the Group’s legal structure and business
operations and that the Contractual Arrangements have been entered into in the ordinary and usual
course of business, on normal commercial terms that are fair and reasonable and in the interests of the
Company and the Shareholders as a whole; and (b) the terms of the Contractual Arrangements are
justifiable and in line with the normal business practise of agreements of this type, and necessary to
ensure that our Consolidated Affiliated Entities remain controlled, and their economic interest may be
enjoyed, by the Company on an uninterrupted basis.
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DIRECTORS AND SENIOR MANAGEMENT
DIRECTORS
Our Board consists of seven Directors, comprising two executive Directors, two non-executive
Directors and three independent non-executive Directors. The following table provides certain
information about the Directors:
Name Age Position
Date of
joining our
Group
Date of
appointment
as a Director Roles and responsibilities
Buzhen
Zhang
48 Executive Director,
Chairman of the
Board and Chief
Executive Officer
January
2015
27 August
2018
Responsible for the overall
strategy, business development,
planning and management of
the Company and the Group
Fei Chen 39 Executive Director
and Chief
Financial Officer
April 2022 15 April
2022
Oversight of our Group’s
corporate finance, investment
activities, and legal matters
Frank Lin 58 Non-executive
Director
December
2018
7 December
2018
Providing professional advice,
opinions, and guidance to our
Board
Ziyang Zhu 27 Non-executive
Director
February
2021
1 February
2021
Providing professional advice,
opinions, and guidance to our
Board
Rong Shao 60 Independent
Non-executive
Director
Listing
Date
Listing Date Supervising and providing
independent judgement to the
Board and serving as chairman
and/or members of certain
Board committees
Sam Hanhui
Sun
50 Independent
Non-executive
Director
Listing
Date
Listing Date Supervising and providing
independent judgement to the
Board and serving as chairman
and/or members of certain
Board committees
Hongqiang
Zhao
46 Independent
Non-executive
Director
Listing
Date
Listing Date Supervising and providing
independent judgement to the
Board and serving as chairman
and/or members of certain
Board committees
Save as disclosed below, none of the Directors had held any directorships in listed companies
during the three years immediately prior to the Latest Practicable Date, there is no other information in
respect of the Directors to be disclosed pursuant to Rules 13.51(2)(a) to (v) of the Listing Rules, and
there is no other matter that needs to be brought to the attention of our Shareholders or potential
investors.
Executive Directors
Mr. Buzhen Zhang (
ੵӉᕄ), aged 48, is our executive Director, Chairman of our Board and
Chief Executive Officer. Mr. Zhang co-founded our Group and served as our Chief Executive Officer
since January 2015, and as the Director of our Company since its incorporation in August 2018. Prior
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DIRECTORS AND SENIOR MANAGEMENT
to founding our Group, Mr. Zhang held a number of positions with Fang Holdings Limited, which is
listed on the New York Stock Exchange (stock symbol: SFUN) from April 1999 to October 2014,
including separately as chief technology officer, and vice president of Fang Holdings Limited,
responsible for the technology development and business management. Mr Zhang received a
bachelor’s degree majoring in communication engineering from the Beijing Institute of Electronic
Science and Technology (
Ҧኪ৫) in China in July 1997.
Mr. Fei Chen (࠭)aged 39, is our executive Director and Chief Financial Officer. Mr. Chen
joined our Group in April 2022 and has served as our Director since April 2022 and our Chief
Financial Officer since May 2022. He has also been appointed as one of our joint company secretaries
with effect from May 14, 2022. Prior to joining our Group, Mr. Chen previously worked as an
investment banker with HSBC from July 2008 to May 2010, advising on financings and mergers and
acquisitions for domestic and foreign clients. From May 2010 to May 2018, Mr. Chen worked with
UBS AG Hong Kong Branch, also advising on a broad range of financings and mergers and
acquisitions. From May 2018 to April 2022, Mr. Chen was the chief financial officer and board
secretary at Tubatu Group Co., Ltd. (
ʮ̡), overseeing their financial and
investment activities. Mr. Chen received a bachelor’s degree in finance in July 2006 and a master’s
degree in finance in July 2008 from Peking University (
̏ԯɽኪ) in China. Mr. Chen holds a chartered
financial analyst certificate from the CFA Institute, awarded in September 2012, and a board secretary
certification from the Shenzhen Stock Exchange, awarded in November 2020.
Non-Executive Directors
Mr. Frank Lin (
ͫ), also known as Mr. Frank Hurst Lin, aged 58, is our non-executive
Director. Aside from our Group, Mr. Lin has been the co-founder and general partner of DCM China, a
technology venture capital firm, since 2006. Mr. Lin also holds directorships at various listed
companies, namely QuantaSing Group Limited, a company listed on the Nasdaq (stock symbol: QSG),
since May 2022, Kuaishou Technology, a company listed on the Stock Exchange (stock code: 1024),
since May 2016, China Online Education Group, a company listed on the New York Stock Exchange
(stock symbol: COE) since June 2013, Vipshop Holdings Limited, a company listed on the New York
Stock Exchange (stock symbol: VIPS) since January 2011, Tuniu Corporation, a company listed on
Nasdaq (stock symbol: TOUR) since December 2009, and GigaCloud Technology Inc, a company
listed on the Nasdaq (stock symbol: GCT), since November 2006. Between March 2010 and April
2020, Mr. Lin was a director of 58.com Inc., a company formerly listed on the New York Stock
Exchange until September 2020. Mr. Lin received his bachelor’s degree in engineering from
Dartmouth College in New Hampshire, the United States in June 1988, and his MBA degree from
Stanford University in California, the United States, in June 1993.
Mr. Ziyang Zhu (
ϡ૔ජ), aged 27, is our non-executive Director. Prior to joining our Group,
from July 2017 to May 2020, Mr. Zhu was an assistant to the strategic committee director at Hopson
Development Holdings Limited (
ʮ̡). Since 2020, Mr. Zhu has been the Head of
Chinese Medicine and Smart Healthcare at Guangdong Yuanzhi Technology Group Co., Ltd. (ʩ
ʮ̡). Mr. Zhu is the Vice President, at Hopson Development Holdings Limited, a
company listed on the Stock Exchange (stock code: 754) and a fellow subsidiary of Million Surplus
Developments Limited (i.e., both are controlled corporations of Sounda Properties Limited), since July
2021. Mr. Zhu also serves as the non-executive director, the Chairman of the Risk Control Committee
and the member of the Strategy Committee at Genertec Universal Medical Group Company Limited, a
company listed on the Stock Exchange (stock code: 2666), since July 2021, and the non-executive
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director at Ping An Healthcare and Technology Company Limited, a company listed on the Stock
Exchange (stock code: 1833), since December 2021. Mr. Zhu received his bachelor’s degree majoring
in information management and information systems from the Beijing Institute of Technology (
̏ԯଣ
ʈɽኪ) in China in June 2017.
Independent Non-Executive Directors
Ms. Rong Shao (ႂ), aged 60, will join as our independent non-executive Director upon
Listing. Ms. Shao has been the Executive Dean of the Institute of Drug Regulatory Sciences, China
Pharmaceutical University (National Drug Administration Scientific Research Base), in charge of
regulatory science disciplines and research, since October 2021. Ms. Shao is or has been a director of
several listed corporations, including Jiangsu GDK Biotechnology Co., Ltd. (
΅
ʮ̡), a company listed on the Shanghai Stock Exchange (stock code: 688670), since June 2020,
I-Mab, a company listed on Nasdaq (stock symbol: IMAB) since June 2021, and Changzhou Qianhong
Biopharma Co., Ltd. (
ʮ̡), a company listed on the Shenzhen Stock
Exchange (stock code: 002550), from September 2014 to January 2021. Ms. Shao received her
bachelor’s degree in medicinal chemistry from Nanjing College of Pharmacy (
ԯᖹኪ৫)now
China Pharmaceutical University (ɽኪ)in China in July 1983, her second bachelor’s degree
in law from Nanjing University in China in July 1989, and a PhD in Pharmacy from Shenyang
Pharmaceutical University (
ɽኪ) in China in July 2010. Ms. Shao is a qualified lawyer,
licenced by the Jiangsu Justice Department (ᝂ) in 2009.
Mr. Sam Hanhui Sun (ўฯ), aged 50, will join as our independent non-executive Director
upon Listing. Mr. Sun has been the chairman of VSP Private Fund Management (Zhuhai) Co., Ltd. ( ၪ˰
ʮ̡) since December 2020, and the chairman of VSP Investment Consulting
(Shenzhen) Co., Ltd. (ʮ̡) since August 2021. Mr. Sun assumed various
positions at Qunar Cayman Islands Limited, a mobile and online travel platform listed on Nasdaq until
February 2017. Mr. Sun currently acts as an independent director of various listed companies, namely
Zhihu Inc., a company listed on the Stock Exchange (stock code: 2390) and the New York Stock
Exchange (stock symbol: ZH), iQIYI Inc. a company listed on Nasdaq (stock symbol: IQ) since March
2018, and Yiren Digital Ltd., a company listed on the New York Stock Exchange (stock symbol: YRD)
since December 2015. From August 2014 to July 2021, Mr. Sun acted as an independent non-executive
director of CAR Inc., a company formerly listed on the Stock Exchange until July 2021. From March
2018 to July 2019, Mr. Sun served as an independent director of Sunlands Technology Group (formerly
known as Sunlands Online Education Group), a company listed on the New York Stock Exchange (stock
symbol: STG). From September 2010 to May 2019, Mr. Sun served as an independent director of Fang
Holdings Limited (formerly known as SouFun Holdings Limited), a company listed on the New York
Stock Exchange (stock symbol: SFUN). Mr. Sun received a bachelor’s degree in business administration
from Beijing Institute of Technology in China in July 1993. Mr. Sun was also awarded his PRC certified
public accountant (non-practicing member) certificate from the Beijing Institute of Certified Public
Accountants (
՘ึ).
Mr. Hongqiang Zhao ( Ⴛ҃੶), aged 46, will join as our independent non-executive Director
upon Listing. Mr. Zhao is a director of various listed companies, including executive director and chief
financial officer of Bairong Inc. (
ϵፄථ௴), a company listed on the Stock Exchange (stock code:
6608), since June 2018 until May 2023, independent director of Li Auto Inc. a company listed on
Nasdaq (stock symbol: LI) and the Stock Exchange (stock code: 2015), since July 2020, and HUYA
Inc., a company listed on the New York Stock Exchange (stock symbol: HUYA), since May 2018.
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From August 2013 to October 2014, he was the vice president of finance at Fang Holdings Limited, a
company listed on the New York Stock Exchange (stock symbol: SFUN). Mr. Zhao formerly served as
an assistant Chief Auditor on the Public Company Accounting Oversight Board, in 2009. Mr. Zhao
received his bachelor’s degree in accounting from Tsinghua University (
૶ശɽኪ) in China in July
1999, and his master’s degree in accountancy from George Washington University in Washington
D.C., the United States, in May 2001.
SENIOR MANAGEMENT
The following table provides information about members of the senior management of our
Company (other than our executive Directors):
Name Age Position
Date of
joining
our Group
Date of
appointment
as senior
management Roles and responsibilities
Haodong Xiao 50 Vice President December
2018
December 2018 Oversight of our
Self-operation Business
Zhuoqi Chen 44 Director of
Technology
January
2015
August 2018 Oversight of our Group’s
technical and R&D activities
and developments
Mr. Buzhen Zhang is our executive Director, Chairman of the Board and Chief Executive
Officer. See “—Executive Directors” for Mr. Zhang’s biography.
Mr. Fei Chen is our executive Director and Chief Financial Officer. See “—Executive
Directors” for Mr. Chen’s biography.
Mr. Haodong Xiao (
؇)is our Vice President. Aside from our Group, Mr. Xiao previously
held positions with Xi’an Janssen Pharmaceutical Ltd. (ʮ̡), including as the
Commercial Regional Sales Director, South, responsible for southern region dealers and market
management, from January 1999 to December 2013. From January 2014 to February 2017, Mr. Xiao
has also worked as the general manager of Guangzhou Pharmaceuticals Corporation’s Popular Drug
Sales Branch (
ቖਯʱʮ̡). Following this, from March 2017 to November
2018, Mr. Xiao joined Johnson & Johnson Medical (Shanghai) Ltd. (ʮ̡)
as the Director of Channel Management, responsible for company-wide commercial channels
management.
Mr. Xiao received his certification in culinary and hospitality enterprise management (
Άุ
၍ଣ) from Shenzhen University in China in June 1993 and his MBA in business management from
Hong Kong Baptist University in November 2011.
Mr. Zhuoqi Chen ( ௓⇱Ӄ) is our Director of Technology as well as a director of our
subsidiary Leyou Investment Limited. Following this, from November 2009 to May 2013, Mr. Chen
worked at New Post Telecommunication Equipment Co., Ltd. (
ʮ̡), and from June
2013 to January 2015, as system architect at Vtron Group Co., Ltd. (ʮ̡), a
company listed on the Shenzhen stock exchange (002308) (formerly known as΅
ʮ̡). Mr. Chen received his bachelor of science degree (majoring in applied physics) from the
Southeast University (ɽኪ) in China in June 2001.
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COMPANY SECRETARIES
Mr. Fei Chen is a joint company secretary of our Company. See “—Executive Directors” for
Mr. Chen’s biography.
Ms. Emily Fung ( ඹᅆಌ), also known as Ms. Fung Wai Sum, is a joint company secretary of
our Company. Ms. Fung is a Senior Manager of Corporate Services of Tricor Services Limited, a
global professional services provider specialising in integrated business, corporate and investor
services. Ms. Fung has over 15 years of experience in the corporate secretarial field. She has been
providing professional corporate services to Hong Kong listed companies as well as multinational,
private and offshore companies. Ms. Fung is currently the company secretary/joint company secretary
of various listed companies on the Stock Exchange, namely FriendTimes Inc. (
ʮ̡)
(stock code: 6820), Tongdao Liepin Group ( Ν༸ᓳ໌ණྠ) (stock code: 6100), Greenland Hong Kong
Holdings Limited (ʮ̡) (stock code: 337), Shenzhen Neptunus Interlong
Bio-technique Company Limited (ʮ̡) (stock code: 8329), China
ZhengTong Auto Services Holdings Limited (ʮ̡) (stock code: 1728) and
ClouDr Group Limited (stock code: 9955). Ms. Fung is a Chartered Secretary, a Chartered Governance
Professional and an Associate of both The Hong Kong Chartered Governance Institute and The
Chartered Governance Institute in the United Kingdom. Ms. Fung obtained her master’s degree in
professional accounting and corporate governance from City University of Hong Kong in November
2008.
CORPORATE GOVERNANCE
Audit Committee
We have established an audit committee with written terms of reference in compliance with
Rule 3.21 of the Listing Rules and the Corporate Governance Code set out in Appendix 14 to the
Listing Rules. The primary duties of the audit committee are, among other things, to review and
supervise the financial reporting process and internal controls system of our Group, review and
approve connected transactions and provide advice and comments to the Board. The audit committee
comprises three members, namely Mr. Hongqiang Zhao, Mr. Sam Hanhui Sun and Ms. Rong Shao.
Mr. Zhao, as 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 with written terms of reference in compliance
with Rule 3.25 of the Listing Rules and the Corporate Governance Code set out in Appendix 14 to the
Listing Rules. The primary duties of the remuneration committee are to review and make
recommendations to the Board with respect to remuneration packages, bonuses and other
compensation payable to our Directors and other senior management. The remuneration committee
comprises three members, namely Mr. Sam Hanhui Sun, Mr. Hongqiang Zhao and Ms. Rong Shao,
with Mr. Sun as chairman of the committee.
Nomination Committee
Our nomination committee complies with the requirements in respect of nomination
committees in the Corporate Governance Code set out in Appendix 14 to the Listing Rules .
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The primary duties of the nomination committee are, among other things to develop and
recommend to the Board criteria for Board and committee membership, recommend to the Board the
persons to be nominated for election as Directors and to each of the Board’s committees, and develop
and recommend to the Board a set of corporate governance guidelines.
The nomination committee comprises three members, namely Mr. Buzhen Zhang,
Mr. Hongqiang Zhao and Mr. Sam Hanhui Sun, with Mr. Zhang as chairman of the committee.
Corporate Governance Code
We aim to achieve high standards of corporate governance which are crucial to our
development and safeguard the interests of our Shareholders. In order to accomplish this, save as
disclosed below, we expect to comply with the Corporate Governance Code set out in Appendix 14 of
the Listing Rules after the Listing.
Pursuant to the Corporate Governance Code, companies listed on the Stock Exchange are
expected to comply with, but may choose to deviate from the requirement that the responsibilities
between the chairperson and the chief executive officer should be segregated and should not be
performed by the same individual. We do not have a separate chairman and chief executive officer and
Mr. Buzhen Zhang currently performs these two roles. The Board believes that vesting the roles of
both chairperson and chief executive officer in the same person has the benefit of ensuring consistent
leadership within our Group and enables more effective and efficient overall strategic planning for our
Group. The Board considers that the balance of power and authority for the present arrangement will
not be impaired and this structure will enable our Company to make and implement decisions promptly
and effectively. The Board will continue to review and consider splitting the roles of chairman of the
Board and the chief executive officer of our Company if and when it is appropriate taking into account
the circumstances of our Group as a whole.
Management Presence
According to Rule 8.12 of the Listing Rules, we must have sufficient management presence in
Hong Kong. This normally means that at least two of our executive Directors must be ordinarily
resident in Hong Kong.
Since the principal business operations of our Group are conducted in Mainland China,
members of our senior management are, and are expected to continue to be, based in Mainland China.
Further, as our executive Directors have a vital role in our Group’s operations, it is crucial for them to
remain in close proximity to our Group’s central management located in Mainland China. Our
Company does not and, for the foreseeable future, will not have a sufficient management presence in
Hong Kong. We have applied for, and the Stock Exchange has granted, a waiver from compliance with
Rule 8.12 of the Listing Rules. See “Waivers and Exemptions—Waiver in respect of management
presence in Hong Kong” for further details.
Board Diversity
Our Company has adopted a board diversity policy which sets out the approach to achieve
diversity of the Board. Our Company recognises and embraces the benefits of having a diverse Board
and sees increasing diversity at the Board level, including gender diversity, as an essential element in
maintaining the Company’s competitive advantage and enhancing its ability to attract, retain and
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motivate employees from the widest possible pool of available talent. Pursuant to the board diversity
policy, in reviewing and assessing suitable candidates to serve as a director of the Company, the
nomination committee will consider a number of aspects, including, but not limited to, gender, age,
cultural and educational background, professional qualifications, skills, knowledge, and industry and
regional experience. Pursuant to the board diversity policy, the nomination committee will discuss
periodically and when necessary, agree on the measurable objectives for achieving diversity, including
gender diversity, on the Board and recommend them to the Board for adoption.
DIRECTOR REMUNERATION
Appointment contracts with Directors
Each of our Directors entered into an appointment service contract with our Company on
12 June 2023. Under the contracts, the term of the respective Director’s appointment shall be for an
initial term of three years from the Listing Date or until the third annual general meeting of our
Company after the Listing Date, whichever is sooner (subject to retirement as and when required under
the Articles of Association). Either party may terminate the contract by giving not less than three
months’ written notice.
Remuneration of Directors
(a) None of our Directors has or is proposed to have a service contract with any member of our Group
other than contracts expiring or determinable by the employer within one year without the
payment of compensation (other than statutory compensation).
(b) The aggregate amount of remuneration paid and benefits in kind granted to our Directors by our
Group in respect of the year ended 31 December 2022 was RMB28.6 million.
(c) Under the arrangements currently in force, we estimate that the aggregate remuneration payable
to, and benefits in kind receivable by, our Directors by any member of our Group in respect of the
year ending 31 December 2023 is approximately RMB3.5 million (excluding amounts associated
with share based compensation).
(d) During the Track Record Period, no remuneration was paid to our Directors or the five highest
paid individuals as an inducement to join, or upon joining, our Group during the Track Record
Period. No compensation was paid to, or receivable by, our Directors or past directors for the
Track Record Period for the loss of office as director of any member of our Group or of any other
office in connection with the management of the affairs of any member of our Group. None of our
Directors waived any emoluments during the same period.
See the Accountant’s Report in Appendix I for details on remuneration (including fees, basic
salaries, allowances and benefits in kind, pension scheme contributions) paid to the Directors and, on
an aggregate basis, the five highest paid individuals of our Group during the Track Record Period, and
“Statutory and general information—Share Incentive Plans” in Appendix IV for further details on the
incentive plans of our Company.
Save as disclosed above and in “Financial information”, “Accountant’s Report” in Appendix I
and “Statutory and general information” in Appendix IV, no other payments have been paid or are
payable in respect of the Track Record Period to our Directors by our Group.
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COMPLIANCE ADVISOR
We have appointed Maxa Capital Limited as our compliance advisor (the “ Compliance
Advisor”) pursuant to Rules 3A.19 of the Listing Rules. The Compliance Advisor will provide us with
guidance and advice as to compliance with the requirements under the Listing Rules and applicable
Hong Kong Laws. Pursuant to Rules 3A.23 of the Listing Rules, the Compliance Advisor will advise
our Company, among others, in the following circumstances:
(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 document or where the business activities, development or results of
our Company deviate from any forecast, estimate or other information in this document;
and
(d) where the Stock Exchange makes an inquiry to our 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
end on the date on which our Company distributes to Shareholders the annual report of our financial
results for the first full financial year commencing after the Listing Date and such appointment may be
subject to extension by mutual agreement.
COMPETITION
Each of our Directors confirms that as of the Latest Practicable Date, he/she did not have any
interest in a business that materially competes or is likely to compete, directly or indirectly, with our
business, and requires disclosure under Rule 8.10 of the Listing Rules. From time to time, our
non-executive Directors may serve on the boards of both private and public companies within the
industries in which we operate. However, as these non-executive Directors are neither our controlling
shareholders nor members of our executive management team, we do not believe that their interests in
such companies as directors would render us incapable of carrying on our business independently from
the other companies in which they may hold directorships from time to time.
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FINANCIAL INFORMATION
You should read the following discussion and analysis in conjunction with our audited
consolidated financial information as of and for the years ended 31 December 2020, 2021 and 2022
included in the Accountant’s Report set out in Appendix I to this document, together with the
respective accompanying notes. Our audited consolidated financial information has been prepared
in accordance with International Financial Reporting Standards (“IFRSs”).
The following discussion and analysis contain forward-looking statements that reflect our
current views with respect to future events and financial performance. These statements are based
on our assumptions and analysis in light of our experience and perception of historical trends,
current conditions and expected future developments, as well as other factors we believe are
appropriate under the circumstances. However, whether actual outcomes and developments will
meet our expectations and predictions depends on a number of risks and uncertainties, many of
which we cannot control or foresee. In evaluating our business, you should carefully consider all of
the information provided in this document, including “Risk Factors” and “Business.”
For the purpose of this section, unless the context otherwise requires, references to 2020,
2021 and 2022 refer to our fiscal years ended 31 December of such years. Unless the context
otherwise requires, financial information described in this section is described on a consolidated
basis.
OVERVIEW
We are a digital pharmaceutical platform serving businesses outside of hospitals in China.
Digital market as an emerging trend contributed to 28.2% of the over RMB639.7 billion outside-of-
hospital pharmaceutical circulation market in China, in terms of gross merchandise value (“GMV”) in
2022. We recorded a GMV of RMB37.8 billion in 2022, representing a market share of 21.0% in
China’s digital market of outside-of-hospital pharmaceutical circulation services. As an enabler of the
digitalisation of the outside-of-hospital pharmaceutical and medical service market, we have developed
technology-backed solutions to connect and empower the upstream, including pharmaceutical
companies, distributors and vendors, and the downstream, including pharmacies and primary
healthcare institutions. We have turned the process of pharmaceutical transaction and service into a
digitalised, standardised and scalable one. Since our inception, we have been committed to addressing
the challenges faced by the players in the outside-of-hospital pharmaceutical market, and have
cultivated capabilities and accumulated invaluable experience from the primary healthcare level.
Seizing on the opportunities in this market, we have built an ecosystem, where we enable the various
players along the pharmaceutical value chain to gather and interact. We create values for these players
and the whole society.
Leveraging our technological capabilities, we have created and keep enhancing business model
to meet the growing demand for the digitalisation of the outside-of-hospital pharmaceutical market.
Our business model is centred on our Online Marketplace and Self-operation Business, and is further
complemented by a series of other businesses. Our total GMV reached RMB37.8 billion in 2022,
representing a CAGR of 38.6% from that in 2020, both the highest among leading digital
pharmaceutical platforms serving businesses outside of hospitals in China, according to Frost &
Sullivan. We serve the largest digital pharmaceutical transaction and service network, according to
Frost & Sullivan, including, among others, around 354,000 downstream pharmacies and around
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FINANCIAL INFORMATION
173,000 primary healthcare institutions, as of 31 December 2022. Furthermore, we had 308,000
average number of MAB in 2022, the highest among digital pharmaceutical platforms serving
businesses outside of hospitals in China, according to Frost & Sullivan. The average number of
monthly available SKUs transacted on our platform was around 3.3 million in 2022, the highest among
digital pharmaceutical platforms serving businesses outside of hospitals in China, according to Frost &
Sullivan.
We generate revenue primarily from sales of pharmaceutical products through our Self-
operation Business, and commissions from pharmaceutical sellers transacting on our Online
Marketplace. In connection with our other businesses, we collect diagnostic testing service fees from
primary healthcare institutions and SaaS solution fees from pharmacies. We have a track record of
business growth. Our revenues increased by 66.4% from RMB6,064.9 million in 2020 to
RMB10,093.5 million in 2021 and further increased by 41.4% from RMB10,093.5 million in 2021 to
RMB14,274.8 million in 2022. We recorded gross profit of RMB608.8 million in 2020,
RMB913.8 million in 2021 and RMB1,434.7 million in 2022. Our loss and total comprehensive
expense for the year was RMB571.7 million in 2020, RMB501.6 million in 2021 and RMB1,500.0
million in 2022.
BASIS OF PRESENTATION
The historical financial information presented in this section has been prepared in accordance
with IFRSs issued by the International Accounting Standards Board (“IASB”). The historical financial
information has been prepared under the historical cost convention, as modified by the revaluation of
financial assets at fair value through profit or loss and financial liabilities at fair value through profit or
loss which are carried at fair value.
The preparation of financial statements in conformity with IFRSs requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process of
applying our accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the historical financial information are
disclosed in note 5 to the Accountant’s Report in Appendix I to this document.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have identified certain accounting policies that we believe are most significant to the
preparation of our Consolidated Financial Statements. Some of our accounting policies require us to
apply estimates and assumptions as well as complex judgements relating to accounting items. The
estimates and assumptions we use and the judgements we make in applying our accounting policies
have a significant impact on our financial position and results of operations. Our management
continually evaluates such estimates, assumptions and judgements based on past experience and other
factors, including expectation of future events that are believed to be reasonable under the
circumstances. There has not been any material deviation between our management’s estimates or
assumptions and actual results, and we have not made any material changes to these estimates or
assumptions during the Track Record Period. We do not expect any material changes in these estimates
and assumptions in the foreseeable future.
Our critical accounting policies, estimates and judgements, which are important for an
understanding of our financial condition and results of operations, are set forth in detail in note 4 to the
Accountant’s Report in Appendix I to this document.
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MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our business and operating results are affected by general factors affecting China’s healthcare
and pharmaceutical industry, especially outside-of-hospital pharmaceutical circulation sector and
digital service for outside-of-hospital circulation sector in China, which are in turn driven by increasing
disposable income and healthcare spending, rising awareness of health, an ageing population,
increasing life expectancy, increasing penetration of mobile internet, favourable government policies
and increasing coverage of medical insurance. Unfavourable changes in any of these general industry
conditions could negatively affect demand for our products and services and adversely affect our
results of operations.
We are affected by government policies and regulations that address all aspects of our
operations, including qualifications and licencing requirements for online and offline sales and
distribution of pharmaceutical and other health and wellness products, and online healthcare services,
among other things. See also “Risk Factors—Risks Related to Our Business and Industry—We are
subject to extensive and evolving regulatory requirements, non-compliance with which, or changes in
which, may materially and adversely affect our business and prospects.” We have benefitted from
certain recent favourable regulatory and policy changes in China, especially various policy initiatives
promoting the distribution of pharmaceutical products. We expect that the implementation of these
measures relating to the distribution of pharmaceutical products will also affect market competition
and drive industry consolidation.
While our business is influenced by general factors affecting China’s digital pharmaceutical
platforms, we believe our results of operations are more directly affected by company-specific factors,
including the following major factors.
Our ability to expand healthcare ecosystem participants transacting on our platform as well as
maintain and enhance buyer engagement
Healthcare ecosystem participants transacting on our platform include sellers and buyers of
pharmaceutical products on our Online Marketplace, and suppliers of our Self-operation Business. As a
result, our ability to attract and grow the number of healthcare ecosystem participants on our platform and
to maintain and enhance buyer engagement is fundamental to the success of our business. Our ability to
attract and grow ecosystem participant base and to maintain and enhance buyer engagement depends on,
among other things, our ability to continue to cultivate an efficient ecosystem, offer a wide variety of SKUs,
facilitate fulfilment and fast delivery, and provide high-quality service to industry participants along the
value chain. As of 31 December 2022, we had attracted a large number of buyers, including around 354,000
pharmacies and around 173,000 primary healthcare institutions, to transact on our platform, representing a
CAGR of 20.9% and 39.3% from that in 2020, respectively. The average number of MAB on our platform
was around 202,000 in 2020, 256,000 in 2021 and 308,000 in 2022, among which, the average number of
MPB represents 80%, 87% and 92%, respectively. We are able to maintain high buyer engagement.
Average number of orders per paying buyer per month increased from 12.6 in 2020 to 27.3 in 2022,
representing a CAGR of 46.8%. On the upstream front, the number of suppliers of our Self-operation
Business increased consistently from over 5,000 as of 31 December 2020 to over 9,100 as of 31 December
2022, representing a CAGR of 34.4% from 2020 to 2022. Our suppliers receive timely feedbacks on the
downstream demand of products and after-sale services. Our suppliers can adjust their decision-making
according to the feedback we provide them on geographical preference, pharmacy distribution and the
market sales trend. The number of sellers on our Online Marketplace also increased consistently from
around 3,600 as of 31 December 2020 to over 6,000 as of 31 December 2022, representing a CAGR of
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FINANCIAL INFORMATION
29.9% from 2020 to 2022. Increased ecosystem participant base as well as buyer engagement positively
affected each other and created flywheel effect, leading to a significant growth of GMV on our platform.
During the Track Record Period, the total GMV on our platform increased from RMB19.7 billion in 2020
to RMB27.5 billion in 2021 and further to RMB37.8 billion in 2022.
Our ability to create value for participants in the healthcare ecosystem
We are the largest digital pharmaceutical platform serving businesses outside of hospitals in China
in terms of GMV in 2021, according to Frost & Sullivan. Our results of operations depend on our ability to
create value for various participants in the healthcare ecosystem and increase monetization from these
participants. As a digitalization enabler in the outside-of-hospital pharmaceutical circulation market, we
have developed technology-backed solutions to connect and empower the upstream, including
pharmaceutical companies, distributors and vendors, and the downstream, including pharmacies and
primary healthcare institution. Sellers and buyers are drawn to our Online Marketplace because we offer a
wide selection of competitively priced pharmaceutical and other health and wellness products, as well as
efficient and comprehensive services. Leveraging the large buyer base accumulated on our Online
Marketplace, we started our Self-operation Business in 2019 to fulfil the demand of commonly used
pharmaceuticals with high quality, and provide reliable fulfilment using our self-operated facilities. With
respect to pharmaceutical companies, we are able to create special value for them through our Targeted
Product Launch Business. Under such business, we leverage our deep industry know-how to help
pharmaceutical companies better comprehend and capture downstream demand, identify products to be
tailored for such demand, and collaborate with pharmaceutical companies to promote products with our
digital marketing solutions. In addition, we offer participants in the ecosystem our digital solutions, such as
ePalm and CloudComm. We have also implemented various initiatives and invested significantly to ramp
up our digital solutions and improve our smart supply chain services.
The value we create for industry participants and our attractiveness to them are reflected in the
transaction volume on our platform. Total GMV on our platform increased from RMB19.7 billion in
2020 to RMB27.5 billion in 2021 and further to RMB37.8 billion in 2022. We charge commissions
from sellers on our Online Marketplace based on a certain percentage of their sales to buyers. Our
commission rates also vary by type of sellers and type of SKUs. We also generate revenue from sales
of products under our Self-operation Business. As we further enhance our technologies and IT
infrastructure, we aim to create more value for these participants, increasing their engagement and
connection and deepening our penetration in the healthcare ecosystem, which we anticipate will create
additional monetization avenues for us to drive our revenue growth.
Our ability to manage our mix of product and service offerings
Our results of operations are also affected by the mix of products and services we offer. We
currently derive our revenue primarily from the sale of pharmaceuticals to buyers under our Self-
operation Business. We also earn commissions from sellers on our Online Marketplace. In addition, we
generate revenue by offering other businesses to industry participants such as SaaS solutions and
ClouDiagnos. Different products and services have different cost structures. For example, under our
Self-operation Business, we purchase pharmaceutical products from suppliers and then sell these
products to buyers. The cost of sales of our Self-operation Business mainly represents cost for
purchasing pharmaceutical products. Under Online Marketplace business, we charge commissions
from sellers on transactions completed on our Online Marketplace and the cost of sales of our Online
Marketplace mainly represents transaction processing fees we pay to third-party payment service
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providers. The Self-operation Business generally has a much lower gross profit margin than that of
Online Marketplace. We plan to diversify and optimise the product portfolio on our Online
Marketplace to improve our overall commission level. We also plan to increase the portion of
procurement directly from pharmaceutical companies, which is expected to reduce the length of supply
chain and reduced our procurement costs. With respect to other businesses, we launched ClouDiagnos
and wePharmacy in 2021 and plan to further develop our other businesses to diversify our revenue
sources. Changes in mix of revenue from different sources could have a significant impact on our
profitability. We intend to better manage the mix of our product and service offerings to improve our
profitability.
Our ability to control operating costs and expenses and improve efficiency
Our cost of sales primarily represents the cost of procuring pharmaceuticals from suppliers for
our Self-operation Business. As our business further grows in scale, we expect to obtain more
favourable terms from suppliers, including pricing terms, credit period and volume-based rebates. In
addition, we aim to continue to create value for our suppliers, especially pharmaceutical companies, by
providing an effective and transparent channel for selling large volumes of their products online and by
offering them valuable data insights on market demand, customer preferences and supply chain
information. We believe this value proposition will also help us deepen our relationships with
suppliers, obtain favourable terms and reduce our procurement costs.
Our selling and marketing expenses are a significant component of our operating costs and
expenses, and they primarily consist of salaries and benefits we pay to our sales personnel as well as
fulfilment expenses for our Self-operation Business. In 2020, 2021 and 2022, selling and marketing
expenses accounted for 12.0%, 10.5% and 9.3% of our total revenues, respectively. We expect our
selling and marketing expenses to increase in absolute amounts as we continue to expand our business
operations and invest in our new business initiatives, such as ClouDiagnos and wePharmacy, but the
selling and marketing expenses as a percentage of revenue is expected to decrease, as buyers are
getting more sticky to our platform and thus less subsidies are needed to incentivise them to make
purchases on our Online Marketplace. In addition, we anticipate that our research and development
expenses will increase in absolute amounts in the foreseeable future in light of our anticipated
expansion of our other businesses and further enhancement of our technology capabilities. We also
expect that our general and administrative expenses will increase in absolute amounts in the
foreseeable future along with our business expansion, but the general administrative expenses as a
percentage of revenue is expected to decrease.
IMPACT OF COVID-19 ON OUR OPERATIONS
The COVID-19 pandemic caused general business disruption in China in the first half of 2020.
The warehouse we leased in Wuhan was shut down at the end of January 2020 and thus caused delays
and suspensions in the delivery and shipping of pharmaceutical products. The warehouse in Wuhan
resumed operations on 8 April 2020. In addition, we also recorded a higher amount of inventory
impairment as of 31 December 2020 due to price fluctuations caused by the rapid development of the
COVID-19 pandemic. See “—Discussion of certain key items of consolidated statements of financial
position—Inventories” for more information. After the COVID-19 pandemic was contained in the
second half of 2020, different variants of the coronavirus caused regional resurgences of confirmed
cases in 2021 and 2022. We have experienced delays in the delivery and shipping of pharmaceutical
products due to travel restrictions imposed by governments. Certain stores we operated on our Online
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Marketplace and certain warehouses also experienced temporary shutdown for a period of a few days
to over one month in 2022. In particular, starting from mid-October 2022, we have experienced
shutdowns of warehouses, certain employees being quarantined and restrictions on logistics services in
several locations, which negatively affected product shipments. The COVID-19 pandemic also resulted
in changes in SKUs on our platform. The amount of pandemic control related SKUs experienced
fluctuations. Inconvenience or inability to conduct certain business activities offline also promoted
online transactions, which led to a positive impact on our business operations. However, such positive
impact could be temporary and we cannot assure you that such positive impact would be sustainable or
develop into a reliable driver to the growth of our business. Temporary shutdowns or delays in
warehousing and logistics services also negatively affected product shipment by certain of our
suppliers, which resulted in them generating less cash from their operations, and thus caused liquidity
issues for certain of our suppliers. In 2020, we recorded impairment of prepayments that were
previously made to certain suppliers as we believed that it was more probable than not that we would
not be able to receive the corresponding products from the suppliers due to the liquidity issues. See “—
Period-to-period comparison of results of operations—2021 compared to 2020—Other gains and
losses” for more information.
China began to modify its zero-COVID policy at the end of 2022, and most of the travel restrictions
and quarantine requirements were lifted in December. There were surges of cases in many cities during this
time, which caused disruption to our and our suppliers’ operations. Demand for medicines that alleviate
COVID symptoms increased significantly in a short period of time, which resulted in supply shortages.
Surges of cases also resulted in delays or suspension of warehousing and logistics services, which led to
additional difficulties in product supply. Many of our employees also contracted COVID during this time,
which also negatively affected our delivery capabilities. As of early January 2023, all of our employees had
resumed working from offices and warehousing and logistics services all resumed normal.
There remains uncertainty as to the future impact of the virus, especially in light of this change
in policy. The extent to which the pandemic impacts our results of operations going forward will
depend on future developments which are highly uncertain and unpredictable, including the frequency,
duration and extent of outbreaks of COVID-19, the appearance of new variants with different
characteristics, the effectiveness of efforts to contain or treat cases, and future actions that may be
taken in response to these developments. Consequently, the COVID 19 pandemic may continue to
materially and adversely affect our business, financial condition and results of operations in the current
and future years. For risks related to COVID-19 pandemic, see “Risk Factors—Risks related to our
Business and Industry—Our business operations and financial performance have been adversely
affected by the COVID-19 outbreak, may in the future continue to be affected by the COVID-19
outbreak, and may be affected by other natural disasters, epidemics and other unforeseeable
catastrophes.”
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MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS
The following table sets forth our consolidated statements of profit or loss and other
comprehensive income with line items in absolute amounts and as percentages of our revenue for the
years indicated:
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Revenue ....................................................... 6,064,907 100.0 10,093,538 100.0 14,274,810 100.0
Cost of sales .................................................... (5,456,118) (90.0) (9,179,708) (90.9) (12,840,093) (89.9)
Gross profit .................................................... 608,789 10.0 913,830 9.1 1,434,717 10.1
Other income .................................................... 44,296 0.7 62,465 0.6 88,920 0.6
Other gains and losses ............................................. (14,217) (0.2) (8,623) (0.1) 19,965 0.1
Changes in fair value of financial liabilities at fair value through profit and
loss .......................................................... (294,331) (4.9) (128,696) (1.3) (1,299,500) (9.1)
Impairment losses recognised under expected credit loss model, net ......... (3,151) (0.1) (1,769) (0.0) (2,300) 0.0
Selling and marketing expenses (1) .................................... (726,417) (12.0) (1,063,817) (10.5) (1,325,640) (9.3)
Research and development expenses (1) ................................ (24,724) (0.4) (56,611) (0.6) (79,146) (0.6)
General and administrative expenses (1) ................................ (156,216) (2.6) (207,005) (2.1) (286,787) (2.0)
Finance costs .................................................... (10,301) (0.2) (8,494) (0.1) (10,231) (0.1)
Listing expenses ................................................. — — (4,354) (0.0) (36,865) (0.3)
Loss before tax .................................................. (576,272) (9.5) (503,074) (5.0) (1,496,867) (10.5)
Income tax credit/(expense) ........................................ 4,561 0.1 1,454 0.0 (3,171) 0.0
Loss for the year ................................................. (571,711) (9.4) (501,620) (5.0) (1,500,038) (10.5)
Other comprehensive expense for the year ............................. — — — — — —
Loss and total comprehensive expense for the year .................... (571,711) (9.4) (501,620) (5.0) (1,500,038) (10.5)
Loss and total comprehensive expense for the year attributable to:
Owners of the Company ........................................... ( 571,711) (9.4) (494,041) (4.9) (1,488,688) (10.4)
Non-controlling interests ........................................... — — ( 7,579) (0.1) (11,350) (0.1)
(1) Equity-settled share-based payment expenses were allocated as follows:
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Selling and marketing expenses ......................................... — — 5,770 23.7 7,329 18.9
General and administrative expenses ...................................... — — 16,076 66.0 28,470 73.3
Research and development expenses ...................................... — — 2,516 10.3 3,018 7.8
Total .............................................................. — — 24,362 100.0 38,817 100.0
Non-IFRS Financial Measure
In evaluating our business, we consider and use adjusted net loss and adjusted net loss margin
as supplemental measures to review and assess our operating performance. The presentation of these
non-IFRS financial measures is not intended to be considered in isolation or as substitutes for the
financial information prepared and presented in accordance with IFRS. We define adjusted net loss as
loss for the year adding back (i) changes in fair value of financial liabilities at fair value through profit
and loss, (ii) equity-settled share-based payment expenses, and (iii) listing expenses. We define
adjusted net loss margin as adjusted net loss divided by revenue.
We present these non-IFRS financial measures because they are used by our management to
evaluate our operating performance and formulate business plans. Accordingly, we believe that the use
of these non-IFRS financial measures provide useful information to investors and others in
understanding and evaluating our operating results in the same manner as our management and Board.
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These non-IFRS financial measures are not defined under IFRS and are not presented in
accordance with IFRS. These non-IFRS financial measures have limitations as an analytical tool.
Further, these non-IFRS measures may differ from the non-IFRS information used by other companies,
including peer companies, and therefore its comparability may be limited.
These non-IFRS financial measures should not be considered in isolation or construed as
alternatives to profit/(loss) or any other measure of performance. Investors are encouraged to review
our historical non-IFRS financial measures in light of the most directly comparable IFRS measures, as
shown below. The non-IFRS financial measures presented here may not be comparable to similarly
titled measure presented by other companies. Other companies may calculate similarly titled measures
differently, limiting the usefulness of such measures when analysing our data comparatively. We
encourage you to review our financial information in its entirety and not rely on a single financial
measure.
The following table (i) reconciles adjusted net loss for the years presented to the most directly
comparable financial measure calculated and presented in accordance with IFRS, which is loss for the
year, and (ii) presents adjusted net loss margin for the years presented:
For the Year Ended 31 December
2020 2021 2022
(RMB in thousands, except for
percentages)
Loss for the year ............................................... (571,711) (501,620) (1,500,038)
Add back:
Changes in fair value of financial liabilities at fair value through profit and
loss ......................................................... 294,331 128,696 1,299,500
Equity-settled share-based payment expenses ......................... — 24,362 38,817
Listing expenses ................................................ — 4,354 36,865
Adjusted net loss, a non-IFRS measure ............................ (277,380) (344,208) (124,856)
Adjusted net loss margin, a non-IFRS measure ...................... (4.6)% (3.4)% (0.9)%
Changes in fair value of financial liabilities at fair value through profit and loss are related to
preferred shares issued to investors. Upon the completion of the Listing, this line item will no longer be
recorded in our consolidated financial statements. Equity-settled share-based payment expenses are
non-cash employee related expenses arising from grant of share incentive awards. Listing expenses are
expenses related to the Listing.
Revenue
During the Track Record Period, we generated revenue from our (i) Self-operation Business,
(ii) Online Marketplace, and (iii) other businesses.
We generated a vast majority of our revenue during the Track Record Period from our Self-
operation Business, through which we procure pharmaceutical products from pharmaceutical
companies and distributors and sell to pharmacies and primary healthcare institutions primarily through
our Online Marketplace. Revenue from our Self-operation Business increased significantly during the
Track Record Period. See “—Period-to-Period Comparison of Results of Operations” for reasons of the
significant increases.
Our revenue from Self-operation Business increased significantly during the Track Record
Period primarily due to enlarged buyer base and increased buyer engagement, which improved the
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GMV for our Self-operation Business. The average number of MPB for our Self-operation Business
increased from around 109,000 in 2020 to around 185,000 in 2021 and further to around 234,000 in
2022. Average number of orders per paying buyer per month for our Self-operation Business increased
from 5.6 in 2020 to 8.5 in 2021 and further to 11.4 in 2022. The GMV on our Self-operation Business
increased from RMB6.1 billion in 2020 to RMB10.5 billion in 2021 and further to RMB15.2 billion
2022.
We operate our Online Marketplace where sellers of pharmaceutical products such as
pharmaceutical distributors sell pharmaceutical products to downstream pharmacies and primary
healthcare institutions. We generated revenue from Online Marketplace during the Track Record
Period by charging commissions from sellers, based on a certain percentage of their sales on our
Online Marketplace. See “Business—Our Business—Online Marketplace” for more information on
commission rates.
In addition, we have several other businesses, which mainly include SaaS solutions and
ClouDiagnos services. During the Track Record Period, we generated revenue by offering (i) SaaS
solutions in 2020, 2021 and 2022, (ii) ClouDiagnos services in 2021 and 2022, and (iii) wePharmacy in
2022. We launched wePharmacy in 2021 but did not recognise any revenue in 2021.
The following table sets forth a breakdown of our revenue both in absolute amount and as a
percentage of our total revenue for the periods presented:
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Self-operation Business .......................... 5,691,414 93.8 9,589,512 95.0 13,519,017 94.7
Online Marketplace ............................. 372,716 6.2 489,247 4.8 694,204 4.9
Other businesses ................................ 7 7 7 0 . 0 14,779 0.2 61,589 0.4
Total ......................................... 6,064,907 100.0 10,093,538 100.0 14,274,810 100.0
Cost of Sales
Our cost of sales primarily consists of (i) product procurement costs in connection with our
Self-operation Business, (ii) transaction processing fees paid to third-party payment service providers
in connection with our Online Marketplace, (iii) hardware procurement costs in relation to SaaS
solutions, diagnosis testing service fee paid to third-party testing agencies and costs for reagents and
consumables for ClouDiagnos services, and manufacturing, shipment and installation costs for
wePharmacy. We expect our cost of sales to increase generally along with the expansion of our
business.
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The following table sets forth a breakdown of our cost of sales by revenue source, both in
absolute amount and as a percentage of our total revenue, for the periods presented:
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Self-operation Business(1) ....................... 5,400,766 89.1 9,092,751 90.1 12,679,477 88.8
Online Marketplace(2) .......................... 55,015 0.9 79,713 0.8 124,056 0.9
Other businesses(3) ............................ 3 3 7 0 . 0 7,244 0.1 36,560 0.3
Total ....................................... 5,456,118 90.0 9,179,708 90.9 12,840,093 89.9
Notes:
(1) Cost of sales for Self-operation Business represents product procurement costs.
(2) Cost of sales for Online Marketplace mainly represents transaction processing fees.
(3) Cost of sales for other businesses mainly represents (i) hardware procurement costs in relation to SaaS solutions, (ii) diagnosis testing
service fee paid to third-party testing agencies and costs for reagents and consumables for ClouDiagnos services, and (iii) manufacturing,
shipment and installation costs for wePharmacy.
Based on our unaudited management account, the estimated overall transaction processing fee
rates for all transactions on our Online Marketplace, including transactions conducted under our Self-
Operation Business, during the Track Record Period was 0.28% in 2020, 0.29% in 2021 and 0.31% in
2022. Higher average overall transaction processing fee rate in 2022 was primarily resulted from a
large volume of transactions were conducted in December 2022 as a result of a significant increase in
demand for medicines that alleviate COVID symptoms. Transaction processing fees were charged
when the buyers make the payments, but commissions are not charged until buyers accept the products.
Due to the large-scale outbreak of COVID-19 across China at the end of 2022 after the Chinese
government changed the pandemic response policies, logistics and shipment services were adversely
affected. Delays in product shipment resulted in transaction processing fees for a large amount of
transactions being charged in 2022 but commissions being charged in 2023.
Gross Profit and Gross Profit Margin
The following table sets forth our gross profit and gross profit margin for the periods indicated:
For the Year Ended 31 December
2020 2021 2022
RMB % RMB % RMB %
(RMB in thousands, except for percentages)
Self-operation Business ............................ 290,648 5.1 496,761 5.2 839,540 6.2
Online Marketplace ............................... 317,701 85.2 409,534 83.7 570,148 82.1
Other businesses .................................. 4 4 0 56.6 7,535 51.0 25,029 40.6
Total ........................................... 608,789 10.0 913,830 9.1 1,434,717 10.1
Other Income
Other income mainly consists of bank interest income, government grants, investment income from
financial assets at fair value through profit and loss. Government grants represent the cash received from
government after government approval of the applications that meet the requirements of government’s
policies. There are substantial uncertainties as to whether or not and, if yes, when we will receive government
grants. There is no assurance that we will continue to receive any government grants in the future.
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Other Gains and Losses
Other gains and losses mainly consist of net foreign exchange losses or gains, donation and
losses or gains on disposal of property, plant and equipment. In 2020, we made a cash donation of
RMB1.0 million to Wuhan Charity Federation to support Wuhan in its pandemic response. In 2021, we
also made cash donations of RMB600,000 to a student public fund in Beijing and RMB60,000 to
poverty alleviation projects.
Changes in Fair Value of Financial Liabilities at Fair Value through Profit and Loss
Changes in fair value of financial liabilities at fair value through profit and loss relates to the
changes in the fair value of a series of preferred shares we issued to our pre-IPO investors. See note 29
to Accountant’s Report in Appendix I to this document.
Impairment Losses Recognised under Expected Credit Loss Model, Net
Impairment losses recognised under expected credit loss model, net represents net impairment
losses recognised under expected credit loss model in relation to our trade receivables. See note 34(b)
to Accountant’s Report in Appendix I to this document.
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of salaries and welfare benefits for our
selling and marketing personnel, marketing and promotion expenses, fulfilment expenses, and
depreciation of property, plant and equipment and amortisation of intangible assets. We expect our
selling and marketing expenses to increase in the foreseeable future as we continue to expand our
business operations and invest in new business initiatives, such as ClouDiagnos and wePharmacy, but
the selling and marketing expenses as a percentage of revenue is expected to decrease, as our buyers
are getting more sticky to our platform thus less subsidies are needed to incentivise their purchase on
our Online Marketplace. The following table sets forth a breakdown of our selling and marketing
expenses for the periods presented:
For the Year Ended 31 December
2020 2021 2022
(RMB in thousands)
Salaries and welfare benefits ....................................... 361,104 565,277 729,945
Marketing and promotion expenses .................................. 174,339 186,877 205,728
Fulfilment expenses .............................................. 141,078 237,650 313,005
Logistics expenses ........................................... 91,154 160,973 222,265
Rental expenses ............................................. 38,489 64,322 69,919
Utility expenses ............................................. 11,435 12,355 20,821
Depreciation of property, plant and equipment and amortisation of intangible
assets ........................................................ 20,382 31,657 35,987
Others ......................................................... 29,514 42,355 40,975
Total .......................................................... 726,417 1,063,817 1,325,640
Research and Development Expenses
Our research and development expenses primarily consist of salaries and welfare benefits for
our research and development personnel and depreciation of property, plant and equipment and
amortisation of intangible assets. We expect our research and development expenses to increase as we
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expand our research and development team, enhance our software design and engineering technologies
and big data analytics capabilities, expand the applications of our other businesses, and develop new
features and functionalities on our platform. The following table sets forth a breakdown of our research
and development expenses for the periods presented:
For the Year Ended 31 December
2020 2021 2022
(RMB in thousands)
Salaries and welfare benefits ...................................... 22,959 53,304 73,321
Depreciation of property, plant and equipment and amortisation of
intangible assets .............................................. 1,223 2,220 3,089
Others ....................................................... 5 4 2 1,087 2,736
Total ........................................................ 24,724 56,611 79,146
General and Administrative Expenses
Our general and administrative expenses primarily consist of salaries and welfare benefits for
our general and administrative personnel, general corporate expenses and depreciation of property,
plant and equipment and amortisation of intangible assets. We expect our general and administrative
expenses to increase in the foreseeable future as we grow our business and incur increased costs related
to operating as a public company, but the general and administrative expenses as a percentage of
revenue is expected to decrease, as we improve our management and operating efficiency and enjoy
the economies of scale as our business grows. The following table sets forth a breakdown of our
general and administrative expenses for the periods presented:
For the Year Ended 31 December
2020 2021 2022
(RMB in thousands)
Salaries and welfare benefits .......................................... 93,870 119,730 185,335
General corporate expenses ........................................... 40,906 64,542 66,156
Depreciation of property, plant and equipment and amortisation of intangible
assets ........................................................... 14,042 11,251 19,389
Others ............................................................ 7,398 11,482 15,907
Total ............................................................. 156,216 207,005 286,787
Finance Costs
Our finance costs consist of interest expenses on lease liabilities and bank borrowings. See
“—Indebtedness” for more information related to our lease liabilities and bank borrowings.
Listing Expenses
Listing expenses represent expenses incurred in connection with the Listing. We incurred
listing expenses of RMB4.4 million in 2021 and RMB36.9 million in 2022.
Taxation
Cayman Islands
Under the current Laws of the Cayman Islands, we are not subject to tax on income or capital
gains. Additionally, payments of dividends by us to our shareholders will not be subject to taxation in
the Cayman Islands, and no withholding tax will be imposed on the payment of a dividend to any
holder of our Shares.
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Hong Kong
Our subsidiaries in Hong Kong are subject to the uniform tax rate of 16.5%. Under Hong Kong
tax law, our subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income
and there is no withholding tax in Hong Kong on remittance of dividends. No provision for Hong Kong
profits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits
tax during the Track Record Period.
PRC
Generally, our subsidiaries and consolidated VIEs in China are subject to enterprise income tax
on their taxable income in China at a rate of 25%, except where a special preferential rate applies. The
enterprise income tax is calculated based on the entity’s global income as determined under PRC tax
laws and accounting standards.
Guangzhou Sudao Information Technology Co., Ltd., or Guangzhou Sudao, and Guangzhou
Sudaoyi Information Technology Co., Ltd., or Guangzhou Sudaoyi, have been qualified as a “High and
New Technology Enterprises” (“ HNTE”), and thus Guangzhou Sudao enjoyed a preferential income
tax rate of 15% for three years from 2019 and Guangzhou Sudaoyi enjoys a preferential income tax
rate of 15% for three years from 2021, to the extent these two entities have taxable income under the
EIT Law, as long as they maintain the HNTE qualification and duly conduct relevant EIT filing
procedures with the relevant tax authority. The HNTE certificate is subject to review and renewal
every three years. In addition, Guangzhou Sudao, Guangzhou Sudaoyi, Guangzhou Leyao Information
Technology Co., Ltd., Guangzhou Yuewei Medical Laboratory Co., Ltd., Guangzhou Xiaoweicang
Intelligent Pharmacy Technology Co., Ltd., Guangzhou Guangpu Health Technology Co., Ltd., and
Guangzhou Yaobang Information Technology Co., Ltd. enjoyed a super deduction of 175% and 200%
of qualified research and development expenses as tax deductible expenses for the period from 1
January 2020 to 30 September 2022 and for the period from 1 October 2022 to 31 December 2022,
respectively, pursuant to the relevant laws and regulations promulgated by the State Administration of
Taxation of the PRC.
Certain PRC entities within our Group are qualified as “small- and micro-enterprises” and thus
are able to benefit from a preferential tax rate of 20% under the EIT Law. Accordingly, these entities
enjoyed 75% reduction on annual taxable income on first RMB1,000,000 and 50% reduction between
the annual taxable income of RMB1,000,000 to RMB3,000,000. In 2021 and 2022, these qualified
entities enjoyed 87.5% reduction on annual taxable income on first RMB1,000,000 and 50% reduction
between the annual taxable income of RMB1,000,000 to RMB3,000,000.
If our holding company in the Cayman Islands or any of our subsidiaries outside of China were
deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to
enterprise income tax on its worldwide income at a rate of 25%. See “Risk Factors—Risks Related to
Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax
purposes, such classification could result in unfavourable tax consequences to us and our non-PRC
shareholders.”
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PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS
2022 compared to 2021
Revenue
Our revenue increased by 41.4% from RMB10.1 billion in 2021 to RMB14.3 billion in 2022,
mainly due to an increase in revenue from our Self-operation Business.
Revenue from Self-operation Business. Our revenue from Self-operation Business increased by
41.0% from RMB9.6 billion in 2021 to RMB13.5 billion in 2022, primarily attributable to enlarged
buyer base and increased buyer engagement, which improved the GMV for our Self-operation
Business. The average number of MPB for our Self-operation Business increased from around 185,000
in 2021 to around 234,000 in 2022. Average number of orders per paying buyer per month for our Self-
operation Business also increased from 8.5 in 2021 to 11.4 in 2022. The GMV on our Self-operation
Business increased from RMB10.5 billion in 2021 to RMB15.2 billion in 2022.
Revenue from Online Marketplace . Our revenue from Online Marketplace increased by 41.9%
from RMB489.2 million in 2021 to RMB694.2 million in 2022, primarily attributable to the growth of
GMV on our Online Marketplace, which in turn was driven by, among others, increased seller and
buyer base and number of orders placed. The GMV on our Online Marketplace increased from
RMB17.0 billion in 2021 to RMB22.6 billion in 2022. The number of sellers on our Online
Marketplaces increased from 4,703 as of 31 December 2021 to 6,072 as of 31 December 2022. The
number of average MPB for our Online Marketplace increased from around 207,000 in 2021 to around
269,000 in 2022. Average number of orders per paying buyer per month also increased from 15.8 in
2021 to 18.8 in 2022.
Revenue from other businesses . Our revenue from other businesses increased from RMB14.8
million in 2021 to RMB61.6 million in 2022, mainly due to (i) an increase in revenue from medical
testing services through our ClouDiagnos services, which was launched in June 2021, and (ii) new
revenue source in 2022 derived from wePharmacy, which we launched in the second half of 2021 and
started to generate revenue in 2022. Growth of revenue from SaaS solutions in 2022 also contributed to
the increase in revenue from other businesses.
Cost of sales
Our cost of sales increased by 39.9% from RMB9.2 billion in 2021 to RMB12.8 billion in
2022, primarily due to our revenue growth and rapid business expansion.
Cost of sales of Self-operation Business. Cost of sales of Self-operation Business, which
primarily consist of products procurement costs, increased by 39.4% from RMB9,092.8 million in
2021 to RMB12,679.5 million in 2022, primarily due to the growth of purchase demand from buyers,
as a result of which we increased the procurement of pharmaceutical products accordingly.
Cost of sales of Online Marketplace. Cost of sales of Online Marketplace, which primarily
consists of transaction processing fees, increased by 55.6% from RMB79.7 million in 2021 to
RMB124.1 million in 2022, primarily due to (i) the expansion of transaction volume on our platform,
and (ii) a higher average overall transaction processing fee rate. See “—Major Components of Our
Results of Operations—Cost of Sales” for more information regarding higher average overall
transaction processing fee rate.
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Cost of sales of other businesses. Cost of sales of other businesses increased from RMB7.2
million in 2021 to RMB36.6 million in 2022, primarily due to (i) an increase in cost of sales in relation
to ClouDiagnos services, which was resulted from the growth of such services, and (ii) an increase in
cost of sales in relation to wePharmacy, which we launched in the second half of 2021 and started to
generate revenue in 2022.
Gross profit
As a result of the foregoing, our gross profit increased by 57.0% from RMB913.8 million in
2021 to RMB1,434.7 million in 2022. Our gross profit margin increased from 9.1% to 10.1% during
the same periods, primarily due to the expansion of our Self-operation Business, which is the largest
contributor to our total revenues, and the gross profit margin of which increased from 5.2% in 2021 to
6.2% in 2022.
Gross profit margin for our Self-operation Business increased from 5.2% in 2021 to 6.2% in
2022, primarily due to our increasing bargaining power in procurement as the operations of our Self-
operation Business became more mature and our optimization of procurement channels.
Gross profit margin for our Online Marketplace declined from 83.7% in 2021 to 82.1% in 2022,
primarily because a higher portion of Online Marketplace revenue generated from Self-operation
Business was eliminated when reporting the revenue from Online Marketplace on a consolidated basis.
The higher portion of Online Marketplace revenue being eliminated was primarily due to the overall
growth of our Self-operation Business in 2022. In addition, higher average overall transaction
processing fee rate in 2022 also contributed to the decline of gross profit margin. See “—Major
Components of Our Results of Operations—Cost of Sales” for more information regarding higher
average overall transaction processing fee rate.
Gross profit margin for our other businesses declined from 51.0% in 2021 to 40.6% in 2022,
primarily because we started to generate profit from wePharmacy, which generally has a lower gross
profit margin than Saas Solutions and ClouDiagnos services. Gross profit margin for SaaS Solutions
increased from 94.9% in 2021 to 99.1 % in 2022 primarily because we incurred more costs in 2021 for
purchasing hardware in the early stage of development of such business.
Other income
Our other income increased from RMB62.5 million in 2021 to RMB88.9 million in 2022,
primarily due to (i) an increase in bank interest income mainly resulted from more cash balances in our
bank accounts as enhanced our working capital management and enjoyed higher interest rates for our
demand deposits, and (ii) an increase in government grants we received in 2022 mainly in connection
with increase in foreign investments.
Other gains and losses
We recorded other losses of RMB8.6 million in 2021, compared to other gains of RMB20.0
million in 2022. We recorded other gains in 2022 primarily because we had net foreign exchange gains
of RMB18.7 million in connection with our cash balances in US dollars due to appreciation of US
dollars against RMB in 2022.
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Changes in fair value of financial liabilities at fair value through profit and loss
Changes in fair value of financial liabilities at fair value through profit and loss were
RMB128.7 million in 2021 and RMB1,299.5 million in 2022. The changes were primarily due to an
increase in the value of our preferred shares and appreciation of US dollars against RMB, which led to
an increase in fair value of preferred shares that are denominated in US dollars. See note 29 to
Accountant’s Report in Appendix I to this document.
Impairment losses recognised under expected credit loss model, net
Net impairment losses we recognised under expected credit loss model for our trade receivables
increased from RMB1.8 million in 2021 to RMB2.3 million in 2022, which is consistent with the
growth of our Self-operation Business.
Selling and marketing expenses
Our selling and marketing expenses increased by 24.6% from RMB1.1 billion in 2021 to
RMB1.3 billion in 2022, primarily attributable to (i) an increase in salary and welfare expenses as we
hired additional selling and marketing employees to promote our platform and our other businesses to
more pharmacies and primary healthcare institutions, and (ii) an increase in fulfilment expenses along
with the growth of our Self-operation Business.
Research and development expenses
Our research and development expenses increased by 39.8% from RMB56.6 million in 2021 to
RMB79.1 million in 2022, primarily attributable to an increase in salary and welfare expenses as we
incurred more employees related expenses in our efforts to optimise and upgrade technology systems
for our businesses and develop technology systems for our other businesses.
General and administrative expenses
Our general and administrative expenses increased by 38.5% from RMB207.0 million in 2021
to RMB286.8 million in 2022, primarily attributable to an increase in salary and welfare expenses as
we paid bonuses to our employees, including management personnel, to recognise their performance in
2022.
Finance costs
Our finance costs increased by 20.4% from RMB8.5 million in 2021 to RMB10.2 million in
2022 due to an increase in interest expense on lease liabilities arising from additional office space and
warehouses we leased.
Loss and total comprehensive expense for the year
As a result of foregoing, our loss and total comprehensive expense for year increased by
199.0% from RMB501.6 million in 2021 to RMB1,500.0 million in 2022.
2021 compared to 2020
Revenue
Our revenue increased by 66.4% from RMB6,064.9 million in 2020 to RMB10,093.5 million in
2021, mainly due to an increase in revenue from our Self-operation Business.
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Revenue from Self-operation Business. Our revenue from Self-operation Business increased by
68.5% from RMB5,691.4 million in 2020 to RMB9,589.5 million in 2021, primarily due to enlarged
buyer base and increased buyer engagement, which improved the GMV of our Self-operation Business.
The average number of MPB for our Self-operation Business increased from 109,469 in 2020 to
184,746 in 2021. Average number of orders per paying buyer per month for our Self-operation
Business also increased from 5.6 in 2020 to 8.5 in 2021. The GMV on our Self-operation Business
increased from RMB6.1 billion in 2020 to RMB10.5 billion 2021.
Revenue from Online Marketplace . Our revenue from Online Marketplace increased by 31.3%
from RMB372.7 million in 2020 to RMB489.2 million in 2021, primarily attributable to the growth of
GMV on our Online Marketplace, which in turn was mainly driven by increased seller and buyer base
and number of orders placed. The GMV on our Online Marketplace increased from RMB13.6 billion
in 2020 to RMB17.0 billion 2021. The number of sellers on our Online Marketplace increased from
3,599 as of 31 December 2020 to 4,703 as of 31 December 2021. The average number of MPB for our
Online Marketplace increased from 144,609 in 2020 to 206,844 in 2021. Average number of orders per
paying buyer per month also increased from 9.8 in 2020 to 15.8 in 2021.
Revenue from other businesses . Our revenue from other businesses increased from
RMB0.8 million in 2020 to RMB14.8 million in 2021, mainly due to (i) an increase in revenue from
our SaaS solutions, and (ii) a new revenue source derived from medical testing services through our
ClouDiagnos services in 2021.
Cost of sales
Our cost of sales increased by 68.2% from RMB5,456.1 million in 2020 to
RMB9,179.7 million in 2021, primarily due to our revenue growth and rapid business expansion.
Cost of sales of Self-operation Business. Cost of sales of Self-operation Business, which
primarily consist of products procurement costs, increased by 68.4% from RMB5,400.8 million in
2020 to RMB9,092.8 million in 2021, primarily due to the increase of procurement of pharmaceutical
products as a result of the expansion of our Self-operation Business.
Cost of sales of Online Marketplace. Cost of sales of Online Marketplace, which primarily
consists of transaction processing fees, increased by 44.9% from RMB55.0 million in 2020 to
RMB79.7 million in 2021, primarily due to the expansion of transaction volume on our platform.
Cost of sales of other businesses. Cost of sales of other businesses increased from
RMB0.3 million in 2020 to RMB7.2 million in 2021, primarily because we started to incur medical
testing fees paid to third-party testing agencies for our ClouDiagnos services, which we started to
operate in 2021.
Gross profit
As a result of the foregoing, our gross profit increased by 50.1% from RMB608.8 million in
2020 to RMB913.8 million in 2021. Our gross profit margin declined from 10.0% to 9.1% during the
same periods, primarily due to the expansion of our Self-operation Business, which generally has a
lower gross profit margin than other businesses.
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Gross profit margin for our Self-operation Business remained relatively stable, from 5.1% in
2020 to 5.2% in 2021, as we were still at the expansion stage of our Self-operating Business and we
balanced the growth of profitability with the growth of business scale.
Gross profit margin for our Online Marketplace declined from 85.2% in 2020 to 83.7% in 2021.
With the expansion of our Self-operation Business, our Online Marketplace generated more
commissions from our own stores on Online Marketplace, which were eliminated when reporting the
revenue from Online Marketplace on a consolidated basis. Meanwhile, the transaction processing fees
corresponding to the transactions conducted by our own stores on Online Marketplace were recorded
as the costs of sales of Online Marketplace. As such, the reported gross profit margin decreased from
2020 to 2021.
Gross profit margin of our other businesses declined from 56.6% in 2020 to 51.0% in 2021,
primarily because we started to operate ClouDiagnos services, which had a gross profit margin of
36.2% in 2021. Compared to SaaS solutions, which had a gross profit margin of 94.9% in 2021, the
lower gross profit margin of ClouDiagnos services in 2021 led to the decrease in gross profit margin
for our other business in 2021. Our SaaS solutions had a gross margin of 56.6% in 2020. The
substantial lower gross profit margin of our SaaS solutions in 2020 was mainly because we just started
to generate revenue from SaaS solutions in 2020 and incurred a substantial amount of hardware
procurement costs before we could generate more revenue in subsequent periods from charging annual
subscription fees.
Other income
Our other income increased by 41.0% from RMB44.3 million in 2020 to RMB62.5 million in
2021, primarily due to (i) an increase in government grants we received in 2021, and (ii) an increase in
investment income from financial assets at FVTPL, which represents investment income from wealth
management products we purchased from commercial banks in China. See “—Discussion of certain
key items of consolidated statements of financial position—Financial assets at fair value through profit
or loss—Cash management policy.”
Other gains and losses
We recorded other losses of RMB14.2 million in 2020 and RMB8.6 million in 2021. The
decrease was primarily attributable to a decrease in impairment loss on prepayment to suppliers, which
decreased from RMB12.4 million in 2020 to RMB2.1 million in 2021 primarily because certain
suppliers experienced sudden liquidity issues due to the outbreak of the COVID-19 pandemic in 2020.
In response to suppliers’ liquidity issue, we enhanced our management on suppliers such as
maintaining a blacklist of suppliers and reducing prepayments to suppliers that we do not frequently
cooperate with.
Changes in fair value of financial liabilities at fair value through profit and loss
Changes in fair value of financial liabilities at fair value through profit and loss were
RMB294.3 million in 2020 and RMB128.7 million in 2021. The changes were primarily due to the
change of valuation of our preferred shares. See note 29 to Accountant’s Report in Appendix I to this
document.
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Impairment losses recognised under expected credit loss model, net
Net impairment losses we recognised under expected credit loss model for our trade receivables
decreased from RMB3.2 million in 2020 to RMB1.8 million in 2021, primarily because we enhanced
our management on sales on credit.
Selling and marketing expenses
Our selling and marketing expenses increased by 46.4% from RMB726.4 million in 2020 to
RMB1,063.8 million in 2021, primarily attributable to (i) an increase in salary and welfare expenses as
we hired additional selling and marketing employees to promote our business, and (ii) an increase in
fulfilment expenses along with the growth of our Self-operation Business.
Research and development expenses
Our research and development expenses increased by 129.0% from RMB24.7 million in 2020
to RMB56.6 million in 2021, primarily attributable to an increase in salary and welfare expenses as we
incurred more employees related expenses in 2021 for research and development activities mainly in
relation to our Self-operation Business and other businesses.
General and administrative expenses
Our general and administrative expenses increased by 32.5% from RMB156.2 million in 2020
to RMB207.0 million in 2021, primarily attributable to (i) an increase in salary and welfare expenses as
we hired additional management personnel for the development of our business and professional staff
with expertise in capital markets, and (ii) an increase in general corporate expenses as we leased more
office space.
Finance costs
Our finance costs decreased by 17.5% from RMB10.3 million in 2020 to RMB8.5 million in
2021 due to a decrease in interest expense on bank borrowings as we gradually reduced our acceptance
of bank acceptance bills from our offline business customers, which in turn led to a lower level bills
discounted and interest expense associated therewith.
Loss and total comprehensive expense for the year
As a result of foregoing, our loss and total comprehensive expense for year decreased by 12.3%
from RMB571.7 million in 2020 to RMB501.6 million in 2021.
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DISCUSSION OF CERTAIN KEY ITEMS OF CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
The following table sets forth our current assets and current liabilities as of the dates indicated:
As of 31 December
As of
30 April
2020 2021 2022 2023
(Unaudited)
(RMB in thousands)
Current assets:
Inventories ................................... 516,106 847,840 1,016,168 1,253,224
Trade and other receivables ...................... 528,420 375,118 503,460 415,527
Amount due from a shareholder .................. 38,781222
Financial assets at fair value through profit and loss . . . 344,600 512,882 711,076 757,647
Time deposits ................................. 76,204 243,899 320,487 249,640
Restricted bank deposits ........................ 158,221 209,356 298,404 551,585
Bank balances and cash ......................... 130,526 383,603 835,394 485,176
Total current assets ............................... 1,792,858 2,572,700 3,684,991 3,712,801
Current liabilities:
Trade and other payables ........................ (1,832,620) (1,929,826) (2,398,078) (2,403,601)
Contract liabilities ............................. (39,961) (9,373) (24,434) (12,762)
Lease liabilities ............................... (47,239) (63,945) (81,178) (76,406)
Bank borrowings .............................. (96,983) — — —
Financial liabilities at fair value through profit and
loss ....................................... (2,931,012) (4,222,381) (5,872,042) (7,455,781)
Total current liabilities ............................ (4,974,815) (6,225,525) (8,375,732) (9,948,550)
Net current liabilities .............................. (3,154,957) (3,652,825) (4,690,741) (6,235,749)
Our net current liabilities increased by 15.8% from RMB3,155.0 million as of 31 December
2020 to RMB3,652.8 million as of 31 December 2021, primarily due to an increase in financial
liabilities at fair value through profit and loss. See “—Financial Liabilities at Fair Value through Profit
and Loss” below for reasons of the increase.
Our net current liabilities increased by 28.4% from RMB3,652.8 million as of 31 December
2021 to RMB4,690.7 million as of 31 December 2022, primarily due to an increase in financial
liabilities at fair value through profit and loss. See “—Financial Liabilities at Fair Value through Profit
and Loss” below for reasons of the increase. Such increase was partially offset by an overall increase
in time deposits, bank balances and cash, restricted bank deposits and financial assets at fair value
through profit and loss mainly due to (i) our receipt of proceeds of US$55.0 million from Series E-2
financing, and (ii) an increase in our cash position resulted from enhanced management on working
capital.
Our net current liabilities increased by 32.9% from RMB4,690.7 million as of 31 December
2022 to RMB6,235.7 million as of 30 April 2023, primarily due to an increase in financial liabilities at
fair value through profit and loss as a result of an increase in value of our preferred shares.
Our net current liabilities position is significantly affected by financial liabilities at fair value
through profit and loss, which is related to preferred shares we issued to pre-IPO investors. Upon the
completion of the Listing, all of the preferred shares will be automatically converted into ordinary shares
and financial liabilities at fair value through profit and loss will no longer be recorded on our balance
sheet as liabilities, as a result of which our current net liabilities position would turn into net assets.
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In light of our net current liabilities position as of 31 December 2022, we plan to improve net
current liabilities position by further (i) expanding our buyer base and improving buyer engagement;
(ii) growing the revenue of both pharmaceutical circulation business and other businesses; (iii)
optimising our overall cost and expense structure and improving our operating margin; (iv) improving
our working capital management; and (v) leveraging our competitive strengths and advantages. These
measures will allow us to increase our revenue and manage our cost and expenses to reach profitability
and realise positive operating cash flows. See “Business—Business Sustainability” for more details.
Inventories
Our inventories represent pharmaceutical and healthcare products in stock. The following table
sets forth inventories as of the dates indicated:
As of 31 December
2020 2021 2022
(RMB in thousands)
Inventories:
Pharmaceutical and healthcare products ............................ 529,111 860,547 1,030,451
Less: impairment provision ...................................... (13,005) (12,707) (14,283)
Total ........................................................... 516,106 847,840 1,016,168
Our inventories increased by 64.3% from RMB516.1 million as of 31 December 2020 to
RMB847.8 million as of 31 December 2021, primarily due to the expansion of our Self-operation
Business. Our inventories further increased by 19.9% from RMB847.8 million as of 31 December
2021 to RMB1,016.2 million as of 31 December 2022, primarily due to the growth of our Self-
operation Business.
The products we sell generally have a shelf life ranging from 12 to 60 months. Our impairment
policies on inventories are formulated based on analysis of remaining shelf life of the products at the
end of each year and the corresponding sales data. Based on the analysis, we generally have to sell the
products with a shelf life of shorter than 9 months as of the year end with substantial discounts. As a
result, we generally make impairment provision to inventories for products with a remaining shelf life
of less than nine months as of the end of each year.
The following table sets forth the turnover days of our inventory for the periods indicated:
For the Year Ended
31 December
2020 2021 2022
Inventory turnover days (1) ..................................................... 27.3 27.1 26.5
(1) Inventory turnover days for a period equals the average of the opening and closing inventory balance divided by cost of sales for that
period and multiplied by 365 days for the year ended 31 December.
Our inventory turnover days remained stable at 27.3 days in 2020, 27.1 days in 2021 and 26.5
days in 2022.
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The following table sets forth the ageing analysis of our inventories as of the dates indicated:
As of 31 December
2020 2021 2022
(RMB in thousands)
Within 3 months .................................................. 492,650 795,549 972,515
4 – 6 months ..................................................... 14,329 25,624 26,605
7 – 12 months .................................................... 19,923 32,848 29,768
Over 1 year ...................................................... 2,209 6,526 1,563
Total ........................................................... 529,111 860,547 1,030,451
As of 30 April 2023, RMB985.7 million, or 95.7%, of our inventories as of 31 December 2022
had been sold or utilised.
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are
determined based on specific identification method. Net realisable value represents the estimated
selling price for inventories less costs necessary to make the sales. Costs necessary to make the sales
include incremental costs directly attributable to the sales and non-incremental costs that we must incur
to make the sales. Adjustments are recorded to write down the cost of inventory to the estimated net
realisable value by considering (i) market price and shelf life of inventories recorded during the Track
Record Period, and (ii) slow-moving merchandise and damaged goods, which are dependent on factors
such as historical and forecast consumer demand, and promotional environment. Write-downs are
recorded in cost of sales in the consolidated statements of profit or loss and other comprehensive
income.
We believe that there is no recoverability issue for our inventories, given that (i) the provision
of our inventories has been determined with reference to several factors mentioned above; and (ii) in
addition to the subsequent utilisation of inventories, our inventory turnover days also provided useful
information as to the overall utilisation of inventories during the Track Record Period. Our turnover
days were 27.3 days in 2020, 27.1 days in 2021 and 26.5 days in 2022, indicating that inventories shall
be generally sold or utilised approximately in one month and we maintained effective inventory
management policy.
Trade and Other Receivables
Our trade and other receivables primarily consist of trade receivables, note receivables, advance
to suppliers and other receivables. Note receivables represent receivables to be received in bank
acceptance bills. Our trade receivables and note receivables represent (i) receivables of commissions
we charge to sellers for the sales they made on our Online Marketplace, and (ii) receivables of sales
proceeds from our offline business customers.
We generally require sellers on our Online Marketplace to make payments to us on or before
15th day of each month for commissions arising from transactions made in the immediately preceding
month. On average, the credit term we grant to sellers is approximately 30 days. With respect to offline
allocation channels business, we generally allow a credit term of 30 to 90 days.
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The following table sets forth our trade and other receivables as of the dates indicated:
As of 31 December
2020 2021 2022
(RMB in thousands)
Trade receivables ................................................... 104,285 116,692 139,215
Less: allowance for credit losses ....................................... (4,616) (6,385) (4,657)
Note receivables .................................................... 260,805 11,852 29,163
Total trade and note receivables ........................................ 360,474 122,159 163,721
Advance to suppliers ................................................ 73,159 84,753 112,651
Other tax recoverable ................................................ 15,535 15,298 4,145
Prepaid expense .................................................... 3,643 19,825 12,233
Deferred issue costs ................................................. — 1,451 5,854
Receivables in custodian ............................................. 3,608 35,942 119,945
Other receivables ................................................... 72,001 95,690 84,911
Total trade and other receivables ..................................... 528,420 375,118 503,460
Our trade and other receivables decreased by 29.0% from RMB528.4 million as of
31 December 2020 to RMB375.1 million as of 31 December 2021, primarily because we enhanced our
receivable management and leveraged our bargaining power to encourage our offline business
customers to make payments to us through wire transfer in lieu of bank acceptance bills. The decrease
was partially offset by an increase in receivables in custodian, which represent prepayments made by
online customers of our Self-operation Business in Ping An Bank’s settlement system that are
recognised as receivables after their acceptance of the products we shipped but before our withdrawal
from the settlement system, as a result of our migration of settlement service on our Online
Marketplace to Ping An Bank started in 2020.
Our trade and other receivables increased by 34.2% from RMB375.1 million as of 31 December
2021 to RMB503.5 million as of 31 December 2022, primarily due to (i) an increase in receivables in
custodian as 31 December 2022 was not a working day and we were unable to withdraw the prepayments
made by online customers of our Self-operation Business from the settlement system, and (ii) an increase
in trade receivables primarily as a result of the increase in commissions charged to third-party sellers on
our Online Marketplace.
The following table sets forth the turnover days of our trade receivables for the periods
indicated:
For the Fiscal Year Ended 31 December
2020 2021 2022
Trade receivable turnover days (1) ................................... 7 . 0 3 . 9 3 . 1
(1) Trade receivables turnover days for a period equals the average of the opening and closing trade receivables divided by revenue for that
period and multiplied by 365 days for the year ended 31 December.
Our trade receivable turnover days decreased from 7.0 days in 2020 to 3.9 days in 2021,
primarily because we enhanced the collection of trade receivables. Our trade receivable turnover days
further decreased to 3.1 days in 2022 as we further tightened our policy for granting credit terms to
buyers from offline channels.
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The following table sets forth an ageing analysis of our trade receivables based on the invoice
date as of the dates indicated, respectively:
As of 31 December
2020 2021 2022
(RMB in thousands)
Within 3 months .................................................... 90,373 91,485 127,854
3 to 6 months ...................................................... 5,953 14,519 3,057
6 to 12 months ..................................................... 1,535 4,167 1,182
Over 12 months .................................................... 6,424 6,521 7,122
Total ............................................................. 104,285 116,692 139,215
For note receivables, the average ageing is within two to 12 months based on the received date,
which we believe that no impairment allowance is necessary as there is no significant change in credit
quality and the balances are considered fully recoverable.
We apply the IFRS 9 simplified approach to measure expected credit losses, which uses a
lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk characteristics and the days past due. The
expected loss rates are based on the historical payment profiles and historical loss rates, adjusted to
reflect current and forward-looking information on macroeconomic factors affecting the ability of
customers to settle the receivables. See note 20 to the Accountant’s Report in Appendix I to this
document.
As of 30 April 2023, RMB129.2 million, or 92.8%, of our trade receivables as of 31 December
2022 had been settled.
In order to minimise the credit risk, we have delegated a team responsible for determination of
credit limits, credit approvals and other monitoring procedures to ensure that follow-up actions are
taken to recover overdue debts. We perform impairment assessment on trade receivables, including
balances aged over 90 days under expected credit loss model on a collective basis. Trade receivables
are grouped by internal credit rating based on shared credit risk characteristics by reference to past due
exposure for customers and adjusted by forward-looking information. After the assessment, we believe
that sufficient provision has been made for our trade receivables as of the end of each year/period
during the Track Record Period, including balances aged over 90 days.
Financial Assets at Fair Value through Profit or Loss
Our financial assets at fair value through profit or loss represent wealth management products
we purchased from commercial banks in China. The return of the wealth management products was
determined by reference to the return of their underlying investments. The wealth management
products as of 31 December 2020, 2021 and 2022 had no fixed contractual period and can be redeemed
any time at our discretion.
Our financial assets at fair value through profit or loss increased from RMB344.6 million as of
31 December 2020 to RMB512.9 million as of 31 December 2021 and further increased to RMB711.1
million as of 31 December 2022, primarily because we invested in more wealth management products
with low risks so as to generate some returns from idle fund.
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Fair value measurement
Since the contractual cash flows of structured deposits do not represent solely the payments of
principal and interest on the principal amount outstanding, structured deposits are measured at fair
value through profit or loss. To provide an indication of the reliability of the inputs used in determining
fair value, we have classified our financial instruments into three levels as follows:
 Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
 Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly (Level 2).
 Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (Level 3).
As of 31 December 2020, 2021 and 2022, all of our financial assets at fair value through profit
or loss were classified as Level 2 financial instruments and the fair value was measured by reference to
quoted value from commercial banks. As of 31 December 2022, all of our financial assets at fair value
through profit or loss had no fixed contractual period. The investment in these financial assets after the
Listing will be subject to compliance with Chapter 14 of the Listing Rules.
Cash management policy
We believe we can make better use of our cash by making appropriate investments in short-
term investment products, which generate income without interfering with our business operation or
capital expenditures. Our chief financial officer is responsible for overseeing cash management
activities. Our investment decisions with respect to financial products are made on a case-by-case basis
and after due and careful consideration of a number of factors, including, but not limited to, the market
conditions, the economic developments, the anticipated investment conditions, the investment cost, the
duration of the investment and the expected benefit and potential loss of the investment. We have
established a set of internal control measures which allow us to achieve reasonable returns on our
investments while mitigating our exposure to high investment risks. These policies and measures were
formulated by our senior management.
According to our internal policies, a proposal to invest in financial products must be reviewed
and approved by our treasury management team and the head of our finance department, and
depending on the amount of investment, an approval from our chief financial officer may be required.
Board approval for investing in financial products is required when the total outstanding balance of the
financial products purchased by us exceeds 20% of our total assets. In assessing a proposal to invest in
wealth management products, a number of criteria must be met, including, but not limited to, the
following:
 we should generally invest in short-term wealth management products or long-term time
deposits;
 investments in high-risk wealth management products are prohibited;
 the proposed investment must not interfere with our business operation or capital
expenditures; and
 the wealth management products should be issued by a reputable bank with which we
have a long-term relationship.
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We believe that our internal policies regarding wealth management products and the related
risk management mechanism are adequate. We may continue to purchase wealth management products
that meet the above criteria as part of our treasury management where we believe it is prudent to do so
after the Listing.
Intangible Assets
Intangible assets represent the pharmaceutical operation licence and the medical institution
practicing licence held by the companies we acquired, intangible assets acquired in connection with
our acquisition of the business operations of a third party’s store on our Online Marketplace, business
relationship in relation to a company we acquired, and office software. See note 17 to the Accountants’
Report in Appendix I to this document for more details.
Our intangible assets increased from RMB62.7 million as of 31 December 2020 to RMB112.6
million as of 31 December 2021, primarily because we acquired (i) the right and related assets to
operate a third party’s store on our Online Marketplace, and (ii) a subsidiary that held the medical
institution practicing licence.
Our intangible assets decreased from RMB112.6 million as of 31 December 2021 to RMB98.9
million as of 31 December 2022, primarily due to amortisation of our intangible assets.
Goodwill
Goodwill recorded on our balance sheet was related to our acquisition of Guangdong Dihao
Pharmaceutical Co., Ltd. and Guangdong Dongjian Pharmaceutical Co., Ltd. See note 18 to the
Accountants’ Report in Appendix I to this document for more details. Goodwill remained to be
RMB9.3 million as of 31 December 2020, 2021 and 2022.
Impairment Assessment
Given the continuous losses incurred in our business operations during the Track Record
Period, we concluded that there was an indication for impairment and therefore performed impairment
assessment on our property, plant and equipment, right-of-use assets and intangibles assets. We
identified property, plant and equipment, right-of-use assets and intangibles assets of certain
subsidiaries with impairment indicators at net book value amounted to nil as of 31 December 2020,
RMB80.5 million as of 31 December 2021 and RMB7.3 million as of 31 December 2022.
We estimate the recoverable amount of the cash-generating unit to which the assets belong to
when it is not possible to estimate the recoverable amount individually. Each subsidiary is determined
as a cash-generating unit. In addition to property, plant and equipment, right-of-use assets and
intangible assets, goodwill has been allocated to two individual cash-generating units, comprising two
subsidiaries, Guangdong Dihao Pharmaceutical Co., Ltd. and Guangdong Dongjian Pharmaceutical
Co., Ltd.
The recoverable amount of cash-generating unit has been determined based on a value in use
calculation. That calculation uses cash flow projections based on financial budgets approved by our
management covering the next five years with pre-tax discount rates of 16%, 16% and 16% as of
31 December 2020, 2021 and 2022, respectively. The pre-tax discount rate was derived from capital
asset pricing model by considering different market data and company specific risk. We considered
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that there are no material changes in the market data and company specific risk throughout the Track
Record Period, and thus we applied the same discount rate of 16% throughout the Track Record
Period. The cash flows beyond the five-year period are extrapolated using a 3% growth rate. We
believe that the growth rate does not exceed the average long-term growth rate for the relevant
industry. Another key assumption for the value in use calculated is the budgeted gross margin, which is
determined based on the cash-generating units’ past performance and management expectations for the
market development. The growth rates and discount rate as of 31 December 2020, 2021 and 2022 have
been reassessed taking into consideration of the higher degree of estimation uncertainties due to
uncertainty on how the COVID-19 pandemic may progress and evolve and volatility in financial
markets, including potential disruptions of our wholesales operations.
Based on the result of the assessment, we determined that the recoverable amounts of all cash-
generating units are higher than the corresponding carrying amounts as of 31 December 2020, 2021
and 2022. Therefore, no impairment loss was recognised in 2020, 2021 and 2022. We performed
sensitivity test by increasing 1% of pre-tax discount rate or decreasing 1% of long-term growth rate,
which are the key assumptions for determining the recoverable amount of the cash-generating unit,
with all other variables held constant. Based on the sensitivity test performed, no material impairment
issue was noted throughout the Track record Period. The headroom of each cash-generating unit that
was subject to impairment assessment at the end of each reporting period is not less than 16% during
the Track Record Period. We believe that any reasonably possible change in any of these assumptions
would not cause the carrying amount of a cash-generating unit to exceed the recoverable amount of
that cash-generating unit.
Trade and Other Payables
Our trade payables primarily consist of trade payables, note payables, deposits received, salary
and welfare payables, and other tax payables. Trade payables represent payables to suppliers of
pharmaceutical products. Note payables represent bank acceptance bills paid to suppliers of
pharmaceutical products. The bank acceptance bills were secured and had a maturity period from three
to six months. Deposits received mainly represent sales proceeds received on behalf of sellers from
buyers on our Online Marketplace, which will be released to the sellers upon buyers’ acceptance of
products.
The following table sets forth our trade and other payables as of the dates indicated:
As of 31 December
2020 2021 2022
(RMB in thousands)
Trade payables ................................................. 630,790 782,566 1,433,487
Note payables ................................................. 686,491 568,535 448,797
Salary and welfare payables ...................................... 64,332 101,022 168,824
Other tax payables .............................................. 11,422 8,221 31,227
Other payables ................................................. 137,618 211,017 299,622
Deposits to be returned to investors ................................ — 223,338 —
Deposits received .............................................. 301,967 32,270 1,069
Accrued issued costs and listing expenses ........................... — 2,857 15,052
Total ........................................................ 1,832,620 1,929,826 2,398,078
Our trade and other payables increased from RMB1,832.6 million as of 31 December 2020 to
RMB1,929.8 million as of 31 December 2021, primarily attributable to (i) deposits to be returned to
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two Series E-2 investors of RMB223.3 million, which represents investment security deposit we
received from the two investors in 2021, and (ii) an overall increase in trade payables and note
payables combined in relation to our purchases of pharmaceutical products as a result of the growth of
our Self-operation Business. The increases were partially offset by a decrease in deposits received as
we have gradually been migrating the payment system of our Online Marketplace to Shenzhen PingAn
Bank, the settlement of sales proceeds through which does not result in deposits received recorded on
our balance sheet.
Our trade and other payables increased from RMB1,929.8 million as of 31 December 2021 to
RMB2,398.1 million as of 31 December 2022, primarily attributable to an increase in trade payables
mainly as a result of the growth of our Self-operation Business.
The credit period of our trade payables generally ranges from 30 to 90 days. The following
table sets forth the ageing analysis of the trade payables as of the dates indicated:
As of 31 December
2020 2021 2022
(RMB in thousands)
0-30 days ........................................................ 251,291 347,374 998,860
30-90 days ....................................................... 199,695 249,746 253,227
Over 90 days ..................................................... 179,804 185,446 181,400
Total ........................................................... 630,790 782,566 1,433,487
During the Track Record Period, we did not have any material default on our trade payables.
As of 30 April 2023, RMB1,342.8 million, or 93.7%, of our trade payables as of 31 December
2022 had been settled.
Contract Liabilities
Contract liabilities represent receipts in advance from customers. We generally require advance
payments from certain customers before delivery of goods.
Contract liabilities decreased from RMB40.0 million as of 31 December 2020 to RMB9.4
million as of 31 December 2021, primarily due to our migration of settlement service on our Online
Marketplace to Ping An Bank, customer prepayments settled through which were no longer recorded
on our balance sheet as contract liabilities. This migration started in late 2020 and was completed in
2021.
Contract liabilities increased from RMB9.4 million as of 31 December 2021 to RMB24.4
million as of 31 December 2022, primarily because certain third-party sellers on our Online
Marketplace made prepayments of commissions in December 2022 so that when we charge
commissions from them in January 2023 before the Chinese New Year they would have sufficient
balance on their accounts.
As of 30 April 2023, RMB21.6 million, or 88.4%, of our contract liabilities as of 31 December
2022 had been recognised as revenue.
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Financial Liabilities at Fair Value through Profit or Loss
Financial Liabilities at Fair Value through Profit or Loss represents the fair value of the
preferred shares we issued to investors. See note 29 to the Accountants’ Report in Appendix I to this
document for more details. As of 31 December 2020, 2021 and 2022, our financial liabilities at fair
value through profit or loss were RMB2.9 billion, RMB4.2 billion and RMB5.9 billion. The increase
as of 31 December 2021 was primarily due to our issuance of preferred shares in 2021. The increase as
of 31 December 2022 was primarily due to an increase in the value of our preferred shares and
appreciation of US$ against RMB in 2022.
Fair value measurement
As of 31 December 2020, 2021 and 2022, all of our financial liabilities at fair value through profit
or loss were classified as level 3 financial instrum ents. The fair value of the financial instruments is
established by using valuation techniques, which include back-solve method and equity allocation model
involving various parameters and inputs. Valuatio n techniques are certified by an independent qualified
professional valuer before being implemented for valuation and are calibrated to ensure that outputs
reflect market conditions. See note 29 to the Accountants’ Report in Appendix I to this document for
more details. Our Directors and management have reviewed the fair value measurement of level 3
financial instruments, taking into account significant unobservable inputs and applicable valuation
techniques, and determined that the fair value measurement of level 3 financial instruments is made in
accordance with the applicable IFRSs. In particular, in respect of the valuation of the level 3 financial
instruments, our management carried out independent due diligence procedures including (i) taking all
reasonable steps to verify the accuracy and reasonableness of material information that is likely to affect
the valuation of the financial liabilities, including financial forecasts, business plans and assumptions; (ii)
assessing the need for a valuation by a professional valuer of the financial liabilities; (iii) evaluating the
scope of the valuer’s mandate to ensure that the valuation report would be relevant and useful in aiding
our Directors to determine the valuation exercise for the financial liabilities are fair and reasonable, and
that our Directors can reasonably rely on the valuation; (iv) providing the valuer with all relevant
information that is likely to have an impact on the valuation; and (v) reviewing the valuer’s valuation
analysis and results and making sure to rely on the valuation only if it is reasonable to do so under the
circumstances. Based on these procedures, our management is satisfied that the valuation is considered
reasonable, and our financial statements are properly prepared.
Our Directors and management are satisfied with the valuation exercise for financial liabilities
categorised as level 3 financial instruments in its historical financial information for the purpose of
preparing the consolidated financial statements for the Track Record Period as contained in the
Accountants’ Report set out in Appendix I to this document.
The Reporting Accountant has carried out necessary audit works in accordance with Hong
Kong Standard on Investment Circular Reporting Engagement 200 “Accountants’ Reports on
Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of
Certified Public Accountants for the purpose of expressing an opinion on the Group’s Historical
Financial Information during the Track Record Period as a whole in Appendix I to this document. The
Reporting Accountant’s opinion on the Historical Financial Information of the Group during the Track
Record Period as a whole is set out on page I-2 of Appendix I to this document.
In relation to the valuation of the financial liabilities categorised with level 3 of fair value
measurement, the Sole Sponsor has conducted relevant due diligence work, including but not
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limited to, (i) conducted due diligence with our Company, in particular with the relevant personnel in
charge of finance who is familiar with the valuation of the level 3 financial instruments, to understand (a)
the nature and details of the financial instruments, and the procedures performed for such valuation, (b) the
key factors, valuation methodologies, and key basis and assumptions taken into account by our Company as
advised by the external valuer, and (c) the internal control process undertaken by our Company for
reviewing the relevant valuation; (ii) reviewed the underlying valuation report issued by the external valuer
engaged by us and conducted due diligence with the external valuer to understand, among others, (a) its
work scope, (b) the valuation procedure, and (c) the key factors, valuation methodologies, and key basis and
assumptions taken into account when performing the relevant work; (iii) reviewed the professional
qualification and previous experience of the external valuer through desktop search; (iv) discussed with the
Reporting Accountant to understand the work they have performed in relation to the valuation of level 3
financial liabilities for the purpose of reporting on the Historical Financial Information of our Group as a
whole; and (v) reviewed relevant notes in the Accountants’ Report in Appendix I to this document, which
include the key terms of the preferred shares of our Company. Having considered the work done by the
Directors, the Reporting Accountant and the external valuer and the relevant due diligence done as stated
above, nothing has come to the Sole Sponsor’s attention that would cause the Sole Sponsor to disagree with
the views of the Directors and the Reporting Accountant above.
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period and up to the Latest Practicable Date, we have financed our
operating and investing activities through cash generated from capital contribution from shareholders
and discounts of bank acceptance bills. As of 31 December 2020, 2021 and 2022, our cash and cash
equivalents were RMB130.5 million, RMB415.5 million and RMB835.4 million, respectively.
During the Track Record Period, our principal uses of cash have been for the funding of
required working capital and other recurring expenses to support the expansion of our operations.
Going forward, we believe our liquidity requirements will be satisfied by using funds from a
combination of cash generated from operating activities, external borrowings, proceeds from the
Global Offering and other funds raised from the capital markets from time to time.
Cash Flows
The following table sets forth our cash flows for the years indicated:
For the Year 31 December
2020 2021 2022
(RMB in thousands)
Operating cash flows before movements in working capital ................ (199,584) (275,599) (92,151)
Changes in working capital ......................................... 75,196 (211,488) 190,351
Net cash (used in)/from operating activities ............................ ( 124,388) (487,087) 98,200
Net cash (used in)/from investing activities ............................ ( 323,673) (352,804) 41,070
Net cash from financing activities .................................... 158,219 1,124,847 261,927
Net (decrease)/increase in cash and cash equivalents ..................... ( 289,842) 284,956 401,197
Cash and cash equivalents at the beginning of the year ................... 420,368 130,526 415,482
Effect of foreign exchange rate changes ............................... — — 18,715
Cash and cash equivalents at the end of the year ......................... 130,526 415,482 835,394
Net cash used in/generated from operating activities
In 2022, net cash from operating activities was RMB98.2 million, which was primarily
attributable to our loss before tax of RMB1,496.9 million, as adjusted by (i) non-cash items, which
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primarily comprised changes in fair value of financial liabilities at fair value through profit and loss of
RMB1,299.5 million mainly as a result of change of valuation of our preferred shares; and (ii) changes
in working capital, which primarily resulted from an increase in trade and other payables of RMB472.3
million mainly as a result of an increase in the amount of procurement and an increase in deposits
received from third-party sellers on our Online Marketplace, partially offset by an increase in
inventories of RMB169.9 million mainly as a result of more pharmaceutical and healthcare products in
stock along with the expansion of our Self-operation Business, and an increase in trade and other
receivables of RMB127.2 million primarily due to an increase in receivables in custodian as 31
December 2022 was not a working day and we were unable to withdraw the prepayments made by
online customers of our Self-operation Business from the settlement system, and an increase in trade
receivables primarily as a result of the increase in commissions charged to third-party sellers on our
Online Marketplace.
In 2021, net cash used in operating activities was RMB487.1 million, which was primarily
attributable to our loss before tax of RMB503.1 million, as adjusted by (i) non-cash items, which
primarily comprised changes in fair value of financial liabilities at fair value through profit and loss of
RMB128.7 million mainly as a result of change of valuation of our preferred shares; and (ii) changes in
working capital, which primarily resulted from an increase in inventories of RMB331.4 million mainly
because we had more pharmaceutical and healthcare products in stock along with the expansion of our
Self-operation Business, partially offset by an increase in trade and other payables of RMB97.2 million
primarily due to an increase in the amount of procurement.
In 2020, net cash used in operating activities was RMB124.4 million, which was primarily
attributable to our loss before tax of RMB576.3 million, as adjusted by (i) non-cash items, which
primarily comprised changes in fair value of financial liabilities at fair value through profit and loss of
RMB294.3 million mainly as a result of change of valuation of our preferred shares; and (ii) changes in
working capital, which primarily resulted from an increase in trade and other payables of
RMB584.9 million mainly as a result of increases in trade and note payables related to our
procurement of pharmaceutical products and an increase in deposits received representing sales
proceeds received on behalf of sellers on our Online Marketplace, partially offset by an increase in
trade and other receivables of RMB250.5 million primarily due to the growth of our Online
Marketplace and more payments made by our offline business customers to us through bank
acceptance bills, and an increase in inventories of RMB224.7 million mainly because we had more
pharmaceutical and healthcare products in stock as we expanded our Self-operation Business.
Net cash generated from/used in investing activities
In 2022, net cash generated from investing activities was RMB41.1 million, which was
primarily attributable to proceeds from disposal of financial assets at fair value through profit or loss of
RMB8,765.7 million and withdraw of time deposits of RMB1,291.5 million, partially offset by
purchase of financial assets at fair value through profit or loss of RMB8,964.4 million and placement
of time deposits of RMB986.4 million.
In 2021, net cash used in investing activities was RMB352.8 million, which was mainly
attributable to purchase of financial assets at fair value through profit and loss of RMB8,999.9 million
and placement of time deposits of RMB2,521.1 million, partially offset by proceeds from disposal of
financial assets at fair value through profit and loss of RMB8,837.1 million and withdraw of time
deposits of RMB2,425.7 million.
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In 2020, net cash used in investing activities was RMB323.7 million, which was mainly
attributable to purchase of financial assets at fair value through profit and loss of RMB6,592.1 million
and placement of time deposits of RMB1,599.9 million, partially offset by proceeds from disposal of
financial assets at fair value through profit and loss of RMB6,352.2 million and withdraw of time
deposits of RMB1,506.3 million.
Net cash from financing activities
In 2022, net cash generated from financing activities was RMB261.9 million, which primarily
attributable to proceeds on issuance of preferred shares of RMB350.2 million, partially offset by
repayment of lease liabilities of RMB75.3 million.
In 2021, net cash generated from financing activities was RMB1,124.8 million, which primarily
comprised proceeds on issuance of preferred shares of RMB1,162.7 million, partially offset by
repayment of lease liabilities of RMB53.5 million.
In 2020, net cash generated from financing activities was RMB158.2 million, which primarily
comprised new bank borrowings raised through discounting bills of RMB210.5 million, partially offset
by repayment of lease liabilities of RMB44.6 million.
Working Capital
We intend to continue to finance our working capital with cash generated from our operations,
the net proceeds from the Global Offering and other funds raised from the capital markets from time to
time. We will closely monitor the level of our working capital, particularly in view of our strategy to
continue expanding our business and further enhance our existing operations. Our future working
capital requirements will depend on a number of factors, including, but not limited to, our operating
income, our business expansion plan for our business operations.
Based on our available cash balance, the anticipated cash flow from operations and the net
proceeds from the Global Offering, our Directors are of the view that we will have sufficient funds to
meet our working capital and capital expenditure requirements for at least the next 12 months from the
date of this document.
Based on the review of financial documents and other due diligence documents, discussion
with the Directors and the Directors’ confirmation, the Sole Sponsor concurs with the Directors’ view.
KEY FINANCIAL RATIOS
For the Year Ended 31 December
2020 2021 2022
Gross profit margin (1) ................................................ 10.0% 9.1% 10.1%
Current ratio(2) ...................................................... 36.2% 41.3% 44.0%
Notes:
(1) Gross profit margin is calculated by dividing gross profit by our total revenue for the applicable period.
(2) Current ratio is calculated by dividing current assets by current liabilities as of the end of the period.
See “—Period-to-Period Comparison of Results of Operations” above for the discussion of
changes of our gross profit margin during the Track Record Period.
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The current ratio increased from 36.2% as of 31 December 2020 to 41.3% as of 31 December
2021, primarily due to (i) increases in time deposits and bank balances and cash mainly as we received
pre-IPO investments from investors, and (ii) an increase in inventories mainly as a result of the
expansion of our Self-operation Business.
The current ratio increased from 41.3% as of 31 December 2021 to 44.0% as of 31 December
2022, primarily due to an overall increase in time deposits, bank balances and cash, restricted bank
deposits and financial assets at fair value through profit and loss mainly due to (i) our receipt of
proceeds of US$55.0 million from Series E-2 financing, and (ii) an increase in our cash position
resulted from enhanced management on working capital.
Our current ratio is significantly affected by financial liabilities at fair value through profit and
loss, which is related to preferred shares we issued to pre-IPO investors and will not continue to be
recorded as liabilities on our balance sheet upon the conversion to ordinary shares upon the completion
of the Listing.
INDEBTEDNESS
The following table sets forth the breakdown of our indebtedness as of the dates indicated:
As of 31 December
As of
30 April
2020 2021 2022 2023
(Unaudited)
(RMB in thousands)
Bank borrowings ..................................... 96,983 — — —
Lease liabilities ...................................... 151,882 181,729 180,548 189,840
Convertible redeemable preferred shares .................. 2,931,012 4,222,381 5,872,042 7,455,781
Total .............................................. 3,179,877 4,404,110 6,052,590 7,645,621
Bank Borrowings
The following table sets forth the breakdown of our bank borrowings as of the dates indicated:
As of 31 December
As of
30 April
2020 2021 2022 2023
(Unaudited)
(RMB in thousands)
Bank loan ...................................................... 6,000 — — —
Advance from banks on discounted note receivables with recourse repayable
within one year ................................................ 90,983 — — —
Total .......................................................... 96,983 — — —
The bank loan was unsecured and carried a fixed interest rate of 3.05%. Advance from banks
on discounted note receivables carried interests ranging from 2.05% to 2.50%. All of our bank
borrowings are denominated in RMB.
As of 30 April 2023, our unutilised banking facilities amounted to RMB144.5 million.
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Lease Liabilities
Our lease liabilities are related to properties that we lease primarily for our office premises and
warehouses, which were secured and unguaranteed. The following table sets forth our lease liabilities
as of the dates indicated:
As of 31 December
As of
30 April
2020 2021 2022 2023
(Unaudited)
(RMB in thousands)
Current ................................................. 47,239 63,945 81,178 76,406
Non-current ............................................. 104,643 117,784 99,370 113,434
Total .................................................. 151,882 181,729 180,548 189,840
When recognising lease liabilities for leases, we applied incremental borrowing rates of the
relevant entities in our Group at the leases commencement/modification dates. The weighted average
incremental borrowing rate applied by the relevant entities in our Group is 4.75% per annum.
Convertible Redeemable Preferred Shares
As of 31 December 2020, 2021 and 2022, our convertible redeemable preferred shares had fair
value of RMB2.9 billion, RMB4.2 billion and RMB5.9 billion, respectively. As of 30 April 2023,
being the latest practicable date for our indebtedness statement, our convertible redeemable preferred
shares had fair value of RMB7.5 billion, which were unsecured and unguaranteed. For further
information regarding our convertible redeemable preferred shares and its maturity analysis, see notes
29 and 34(b) to the Accountant’s Report in Appendix I to this document.
Except as discussed above, as of 30 April 2023, 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, or
guarantees or other contingent liabilities.
CONTINGENT LIABILITIES
As of 31 December 2020, 2021 and 2022, we did not have any material contingent liabilities or
guarantees.
CAPITAL EXPENDITURES
Our capital expenditures are primarily incurred for purchases of property and equipment, which
mainly represent refurbishment of warehouses and offices, purchases of warehouse and transportation
equipments as well as office equipments, and intangible assets, which mainly represent software,
franchises, goodwill and licences, i.e. pharmaceutical distribution and health inspection licences and
the medical institution practice licence for the medical testing business that we acquired through
acquiring subsidiaries. The following table sets forth our capital expenditures for the periods indicated:
For the Year Ended 31 December
2020 2021 2022
(RMB in thousands)
Purchase of intangible assets .......................................... 1,413 53,502 4,861
Purchase of property, plant and equipment ............................... 22,354 66,996 38,848
Total ............................................................. 23,767 120,498 43,709
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The increase in 2021 was primarily due to our acquisition of franchise and the medical
institution practice licence for the medical testing business through acquisition of subsidiaries. The
decrease in 2022 was primarily because we established more warehouses across China in 2021 to
support the rapid growth of our Self-operation Business and acquired more franchise and licences in
2021. See note 17 to Accountant’s Report in Appendix I to this document. We expect that our capital
expenditures in 2023 will primarily consist of purchases of property and equipment and intangible
assets. We intend to fund our future capital expenditures and long-term investments with our existing
cash balance and proceeds from the Global Offering. See the section headed “Use of proceeds” for
more details. We may reallocate the fund to be utilised on capital expenditure and long-term
investments based on our ongoing business needs.
CONTRACTUAL OBLIGATIONS
Capital commitments
The following table sets forth our capital commitments as of the dates indicated.
As of 31 December
2020 2021 2022
(RMB in thousands)
Capital expenditure in respect of acquisition of property, plant and equipment
contracted for but not provided in the Historical Financial Information ............ 2,445 8,741 3,788
Lease liabilities
We lease various offices, pharmacies and warehouses under operating leases for a fix term of
two to six years with fixed payments. We have recognised right-of-use assets for these leases, except
for short-term and low-value leases. See note 27 to the Accountant’s Report in Appendix I to this
document for more information. The following table sets forth our lease liabilities payable as of the
dates indicated.
As of 31 December
2020 2021 2022
(RMB in thousands)
Within one year .................................................... 47,239 63,945 81,178
Within a period of more than one year but not more than two years ............ 45,932 65,091 50,711
Within a period of more than two years but not more than five years ........... 57,492 52,693 48,659
More than five years ................................................. 1,219 — —
Total ............................................................. 151,882 181,729 180,548
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet arrangements.
MATERIAL RELATED PARTY TRANSACTIONS
We enter into transactions with our related parties from time to time. For details of our related
party transactions, see notes 22 and 39 to the Accountant’s Report in Appendix I to this document.
Amounts due from a shareholder as of each balance sheet date represent the balance of cash advances
that are interest-free, non-trade related, unsecured and repayable on demand. These balances will be
settled upon the Listing.
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Our Directors believe that our transactions with the related parties during the Track Record
Period were conducted in the normal course of business and on an arm’s length basis, and they did not
distort our results of operations or make our historical results not reflective of our future performance.
FINANCIAL RISK DISCLOSURE
We are exposed to a variety of financial risks, including market risks (currency risk and interest
rate risk), credit risk and liquidity risk. Our overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on our financial
performance. Risk management is carried out by our senior management. See note 34 to the
Accountant’s Report in Appendix I to this document for a detailed description of our financial risk
management.
Currency Risk
Certain bank balances, time deposits and financial liabilities at FVTPL denominated in foreign
currency expose us to foreign currency risk. We currently do not have a foreign currency hedging
policy. However, we monitor foreign exchange exposure and will consider hedging significant foreign
currency exposure if the need to do so arises. See note 34 to the Accountant’s Report in Appendix I to
this document for our exposure to currency risk and a sensitivity analysis.
Interest Rate Risk
We are exposed to fair value interest rate risk in relation to our fixed-rate bank borrowings and
lease liabilities. We are also exposed to cash flow interest rate risk in relation to our variable-rate time
deposits, restricted bank deposits, bank balances and bank borrowings. Our cash flow interest rate risk
is mainly concentrated on the fluctuation of interest rates on time deposits, restricted bank deposits and
bank balances and PRC prime rate arising from our RMB denominated bank borrowings.
We currently do not have an interest rate hedging policy. We manage our interest rate
exposures by assessing the potential impact arising from any interest rate movements based on interest
rate level and future prospects. We will review the proportion of borrowings in fixed and floating rates
and ensure they are within reasonable range.
We consider our exposure of the time deposits, restricted bank deposits, bank balances and
bank borrowings to interest rate risk is insignificant as the fluctuation of market interest rate is not
expected to be significant, no sensitivity analysis is presented accordingly.
Credit Risk
Credit risk refers to the risk that our counterparties default on their contractual obligations
resulting in our financial losses. Our credit risk exposures are primarily attributable to trade and other
receivables, time deposits, restricted bank deposits and bank balances. We do not hold any collateral or
other credit enhancements to cover our credit risks associated with these financial assets.
We perform impairment assessment for financial assets under expected credit loss model. See
note 34(b) to Accountant’s Report in Appendix I to this document for a detailed discussion of our
credit risk management, maximum credit risk exposures and the related impairment assessment, if
applicable.
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Liquidity Risk
In the management of liquidity risk, we monitor and maintain a level of cash and cash
equivalents that we believe adequate to finance our operations and mitigate the effects of fluctuations
in cash flows.
As of 31 December 2020, 2021 and 2022, we had net liabilities of RMB2,462.2 million,
RMB2,908.5 million and RMB4,369.7 million, respectively. Having taken into account what has been
disclosed in note 2 to Accountant’s Report in Appendix I to this document, our Directors consider that
we will have sufficient financial resources to meet in full our working capital requirements and
financial obligations as and when they fall due in the foreseeable future. Accordingly, the Historical
Financial Information has been prepared on a going concern basis.
See note 34(b) to Accountant’s Report in Appendix I to this document for details of remaining
contractual maturity of our financial liabilities based on the agreed repayment terms.
DIVIDEND
We are a holding company incorporated under the Laws of the Cayman Islands. As a result, the
payment and amount of any future dividends will also depend on the availability of dividends received
from our subsidiaries. PRC Laws require that dividends be paid only out of the profit for the year
determined according to PRC accounting principles. PRC Laws also require companies to set aside at
least 10% of its after-tax profits, if any, to fund its statutory reserves, which are not available for
distribution as cash dividends. Dividend distribution to our shareholders is recognised as a liability in
the period in which the dividends are approved by our shareholders or Directors, where appropriate.
During the Track Record Period, no dividends were paid or declared by us. As advised by our Cayman
Islands counsel, under Cayman Islands law, a Cayman Islands company may pay a dividend out of
either profits or share premium account. Even if there are accumulated losses, a dividend may be paid
out of the share premium account, provided that the memorandum and articles of association do not
prohibit such payment. In no circumstances may a dividend be declared or paid if this would result in
the company being unable to pay its debts as they fall due in the ordinary course of business.
DISTRIBUTABLE RESERVES
As of 31 December 2022, we did not have any distributable reserves.
LISTING EXPENSE
Listing expenses represent professional fees, underwriting commissions and other fees incurred
in connection with the Global Offering. Based on the mid-point Offer Price of HK$21.00 (being the
mid-point of the indicative Offer Price range), assuming the Over-allotment Option is not exercised
and no additional Shares are issued pursuant to the Share Incentive Plans, the total estimated listing
expenses in relation to the Global Offering is approximately HK$78.4 million (consisting of (i)
underwriting commission of approximately HK$14.9 million, and (ii) non-underwriting related
expenses of approximately HK$63.5 million, which consist of fees and expenses of legal advisors and
Reporting Accountant of approximately HK$44.1 million and other fees and expenses of
approximately HK$19.4 million). Approximately HK$18.0 million of the total estimated listing
expenses is directly attributable to the offering and listing of our Offer Shares and will be deducted
from equity upon the completion of the Global Offering, and HK$60.4 million is expected to be
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FINANCIAL INFORMATION
expensed in our consolidated statements of profit or loss, of which HK$4.8 million and HK$40.6
million have been charged to our consolidated statements of comprehensive loss for 2021 and 2022,
respectively. The total estimated listing expenses constitute approximately 23.6% of the gross
proceeds.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS LESS LIABILITIES OF THE GROUP ATTRIBUTABLE TO OWNERS
OF OUR COMPANY
The unaudited pro forma statement of adjusted consolidated net tangible assets less liabilities of
the Group attributable to owners of our Company prepared in accordance with Rule 4.29(7) of the
Listing Rules is set out below to illustrate the effect of the Global Offering on our audited consolidated
tangible assets less liabilities of the Group attributable to owners of our Company as of 31 December
2022, as if the Global Offering had taken place on that date.
The unaudited pro forma statement of our adjusted consolidated net tangible assets less
liabilities of the Group attributable to owners of our Company as of 31 December 2022 has been
prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true
picture of the financial position of the Group as of 31 December 2022 or any future dates following the
Global Offering.
The following unaudited pro forma statement of our adjusted consolidated net tangible assets
less liabilities of the Group attributable to owners of our Company is prepared based on our audited
consolidated tangible assets less liabilities of the Group attributable to owners of our Company as of
31 December 2022 as derived from the Accountant’s Report in Appendix I to this document, and
adjusted as described below.
Audited
consolidated
tangible assets
less liabilities of
the Group
attributable to
owners of the
Company as of
31 December
2022
(Note 1)
Estimated net
proceeds from
the Global
Offering
(Note 2)
Unaudited pro
forma
adjusted
consolidated
net tangible
assets less
liabilities of
the Group
attributable to
owners of the
Company as
of
31 December
2022
Unaudited pro
forma adjusted consolidated
net tangible assets
less liabilities of the
Group attributable
to owners of the
Company as of
31 December 2022
per Share
(Note 3) (Note 4)
RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price of HK$19 per Offer
Share ............................... ( 4,458,936) 243,986 (4,214,950) (29.87) (32.91)
Based on an Offer Price of HK$23 per Offer
Share ............................... ( 4,458,936) 298,793 (4,160,143) (29.48) (32.48)
Notes:
(1) The audited consolidated tangible assets less liabilities of the Group attributable to owners of our Company as of 31 December 2022 is
arrived at after deducting intangible assets of RMB98,903,000 and goodwill of RMB9,252,000 from the audited consolidated net
liabilities attributable to owners of our Company of RMB4,350,781,000 from the consolidated statements of financial position set out in
Appendix I to this document.
(2) The estimated net proceeds from the Global Offering are based on 15,808,800 new shares to be issued at the Offer Price of HK$19 and
HK$23 per offer share, being the low-end and high-end of the stated offer price range, respectively, after deduction of the estimated
underwriting fees and commission and other related expenses paid/payable by the Group (excluding listing expenses charged to profit or
loss up to 31 December 2022). It does not take into account any shares which may be allotted and issued pursuant to the exercise of the
Over-allotment Option or options which may be granted under the Share Option Scheme or any shares which may be
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FINANCIAL INFORMATION
issued or repurchased by our Company pursuant to our Company’s general mandate or the conversion of all preferred shares existing on
31 December 2022 into ordinary shares of our Company.
For the purpose of the estimated net proceeds from the Global Offering, the amount denominated in HK$ has been converted into RMB
at the rate of HK$1 to RMB0.90763, which was the exchange rate prevailing on 10 June 2023 with reference to the rate published by the
People’s Bank of China. No representation is made that the HK$ denominated amounts have been, could have been or may be converted
to RMB, or vice versa, at that rate or any other rates or at all.
(3) The unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of our Company per
share is arrived at on the basis of 141,124,984 shares were in issue, assuming that the Share Subdivision and Global Offering had been
completed on 31 December 2022. It does not take into account any shares which may be allotted and issued pursuant to the exercise of
the Overallotment Option or options which may be granted under the Share Option Scheme or any shares which may be issued or
repurchased by our Company pursuant to our Company’s general mandate or the conversion of all preferred shares existing on
31 December 2022 into ordinary shares of our Company.
(4) For the purpose of unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of our
Company per share, the amount denominated in RMB has been converted into HK$ at the rate of RMB1 to HK$1.10177, which was the
exchange rate prevailing on 10 June 2023 with reference to the rate published by the People’s Bank of China. No representation is made
that the RMB denominated amounts have been, would have been or may be converted to HK$, or vice versa, at that rate or at any other
rates or at all.
(5) No adjustment has been made to the unaudited pro forma adjusted consolidated tangible assets less liabilities of the Group attributable to
owners of our Company as of 31 December 2022 to reflect any trading results or other transactions of the Group entered into subsequent
to 31 December 2022. In particular, the unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group
attributable to owners of our Company as shown on Page II-1 have not been adjusted to illustrate the effect of the following:
Upon completion of the Global Offering, the conversion of all preferred shares existing on 31 December 2022 would have reclassified
the carrying amount of all preferred shares existing on 31 December 2022 of RMB5,872,042,000, assuming no further changes in fair
values of all preferred shares existing on 31 December 2022 upon Global Offering, to ordinary shares under equity. The conversion of all
preferred shares existing on 31 December 2022 would have increased the total number of shares in issue assumption stated in Note 3 by
491,225,068 shares (after the effect of Share Subdivision) and would have adjusted the unaudited pro forma adjusted consolidated net
tangible assets less liabilities of the Group attributable to owners of our Company as of 31 December 2022 by RMB5,872,042,000.
The effect of the conversion of preferred shares into ordinary shares of our Company (the “ Subsequent Transactions ”) would have
adjusted the unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of our
Company as of 31 December 2022 by RMB5,872,042,000 to unaudited pro forma adjusted consolidated net tangible assets of the Group
attributable to owners of our Company of RMB1,657,092,000 based on an Offer Price of HK$19 per Share and unaudited pro forma
adjusted consolidated net tangible assets of the Group attributable to owners of our Company of RMB1,711,899,000 based on an Offer
Price of HK$23 per Share and would have increased the total Shares in issue by 491,225,068 Shares to a total of 632,350,052 Shares in
issue. Had the Subsequent Transactions been taken into account, the unaudited pro forma adjusted consolidated net tangible assets of the
Group attributable to owners of our Company as of 31 December 2022 per Share would be RMB2.62 (equivalent to HK$2.89) based on
an Offer Price of HK$19 per Share and RMB2.71 (equivalent to HK$2.99) based on an Offer Price of HK$23 per Share, respectively.
For the purpose of unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of our
Company per share, the amount denominated in RMB has been converted into HK$ at the rate of RMB1 to HK$1.10177, which was the
exchange rate prevailing on 10 June 2023 with reference to the rate published by the People’s Bank of China. No representation is made
that the RMB denominated amounts have been, could have been or may be converted to HK$, or vice versa, at that rate or any other rates
or at all.
NO MATERIAL ADVERSE CHANGE
After performing sufficient due diligence work, which our Directors consider appropriate and
after due and careful consideration, our Directors confirm that, up to the date of this document, save for
the recent developments as described in “Summary—Recent Developments”, there has been no
material adverse change in our financial or trading position or prospects since 31 December 2022,
which is the end date of the periods reported on in the Accountant’s Report included in Appendix I to
this document, and there has been no event since 31 December 2022 that would materially affect the
information as set out in the Accountant’s Report included in Appendix I to this document.
DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, there was no circumstance that
would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.
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REGULATIONS
PRC REGULATIONS
Regulations Relating to Foreign Investment
The establishment, operation and management of companies in the PRC are mainly governed
by the Company Law of the PRC () (the “ Company Law ”), which was
issued by the SCNPC and was last amended in October 2018. The Company Law applies to both PRC
domestic companies and foreign-invested companies. The investment activities in the PRC of foreign
investors are also governed by the Foreign Investment Law of the PRC (
ج
(the “Foreign Investment Law ”), which was approved by the National People’s Congress of China
in March 2019 and took effect on 1 January 2020. Along with the Foreign Investment Law, the
Implementing Rules of Foreign Investment Law of the PRC (
ૢԷ)
promulgated by the State Council and the Interpretation of the Supreme People’s Court on Several
Issues Concerning the Application of the Foreign Investment Law
ቇ͜ʕശɛ͏
༆ᙑpromulgated by the Supreme People’s Court became effective
on 1 January 2020. Pursuant to the Foreign Investment Law, the term “foreign investments” refers to
any direct or indirect investment activities conducted by any foreign investor in the PRC, including
foreign individuals, enterprises or organisations; such investment includes any of the following
circumstances: (i) any foreign investor establishing foreign-invested enterprises in the PRC solely or
jointly with other investors, (ii) any foreign investor acquiring shares, equity interests, property
portions or other similar rights and interests thereof within the PRC, (iii) any foreign investor investing
in new projects in the PRC solely or jointly with other investors, and (iv) other forms of investments as
defined by laws, regulations, or as otherwise stipulated by the State Council.
Pursuant to the Foreign Investment Law, the State Council shall promulgate or approve a list of
special administrative measures for access of foreign investments. The Foreign Investment Law grants
treatment to foreign investors and their investments at the market access stage which is no less
favourable than that given to domestic investors and their investments, except for the investments of
foreign investors in industries deemed to be either “restricted” or “prohibited”. The list of industries in
these two categories is sometimes referred to as the “negative list”. The Foreign Investment Law
provides that foreign investors may not invest in the prohibited industries and must meet such
requirements as stipulated for making investment in restricted industries. The most recent list of
restricted and prohibited industries can be found in the Special Management Measures (Negative List)
for the Access of Foreign Investment (2021 version) (
݄(૶ఊ) (2021ϋ
و)) (the “2021 Negative List ”), which was promulgated by the NDRC and the MOFCOM and took
effect from 1 January 2022. Industries that are not restricted or prohibited are generally open for
foreign investments unless specifically restricted by other PRC Laws. Compared with the Special
Management Measures (Negative List) for the Access of Foreign Investment (2020 Version) (
̮ਠҳ
݄(૶ఊ)(2020و)), or the 2020 Negative List, the main changes under the
2021 Negative List include, among other things, the overseas securities offering and listing of a
domestic enterprise shall be subject to the review and approval by the relevant regulatory authorities, if
such domestic enterprise engages in the business area prohibited from foreign investment under the
2021 Negative List. Article 6 of the Interpretation Note of the 2021 Negative List (the “ Article 6 of
the 2021 Negative List ”), which is newly promulgated, provides that, if a domestic company conducts
business in the prohibited areas from foreign investment under the 2021 Negative List seeks to issue
and list its shares overseas, (i) it shall complete the examination process and obtain approval by the
relevant competent authorities; (ii) foreign investors shall not participate in the operation and
management of such company; and (iii) foreign investors’ shareholding percentage shall be subject to
the relevant provisions on the administration or regulation of domestic securities investment by foreign
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REGULATIONS
investors. In a press conference held by the NDRC on 18 January 2022, a spokesperson made it clear
that Article 6 of the 2021 Negative list shall only apply to the situations where a domestic enterprise
seeks a direct overseas securities offering and listing. Therefore, our Directors and our PRC Legal
Adviser are of the view that the requirements stipulated in Article 6 of the 2021 Negative list are
currently not applicable to the overseas listing by an overseas company with a VIE structure. Taking
into account the above, as well as based on the independent due diligence conducted by the Sole
Sponsor, nothing has come to the Sole Sponsor’s attention that would cause the Sole Sponsor to
disagree with the Directors’ view.
The Foreign Investment Law and its implementing rules also provide several protective rules
and principles for foreign investors and their investments in the PRC, including, among others, local
governments shall abide by their commitments to the foreign investors; foreign-invested enterprises are
allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory
procedures shall be followed and fair and reasonable compensation shall be made in a timely manner;
expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology
transfer is prohibited; and the capital contributions, profits, capital gains, proceeds out of asset
disposal, licencing fees of intellectual property rights, indemnity or compensation legally obtained, or
proceeds received upon settlement by foreign investors within the PRC, may be freely remitted inward
and outward in RMB or a foreign currency. Also, foreign investors or the foreign investment enterprise
will have legal liabilities imposed for failing to report investment information in accordance with the
requirements. Furthermore, the Foreign Investment Law provides that foreign-invested enterprises
established prior to the effectiveness of the Foreign Investment Law may maintain their legal form and
structure of corporate governance within five years after 1 January 2020.
Pursuant to the Foreign Investment Law and the implementing rules, and the Information
Reporting Measures for Foreign Investment (
) jointly promulgated by the
MOFCOM and the SAMR, which took effect on 1 January 2020, a foreign investment information
reporting system shall be established and foreign investors or foreign-invested enterprises shall report
investment information to competent commerce departments of the government through the enterprise
registration system and the enterprise credit information publicity system, and the administration for
market regulation shall forward the above investment information to the competent commerce
departments in a timely manner.
On 19 December 2020, the NDRC and the MOFCOM promulgated the Security Review
Measures for Foreign Investments (
), which took effect on 18 January 2021.
Under the Foreign Investment Security Review Measures, foreign investments in military, national
defence-related areas or in locations in proximity to military facilities, or foreign investments that
would result in acquiring the actual control of assets in certain key sectors, including cultural products
and services, IT, Internet products and services, financial services and technology sectors etc., are
required to obtain approval from designated governmental authorities in advance. Although the term
“actual control” is not clearly defined under the Foreign Investment Security Review Measures, it is
possible that control through contractual arrangement may be regarded as a form of actual control and
therefore requires approval from the competent governmental authority. As the Foreign Investment
Security Review Measures were recently promulgated, there are great uncertainties with respect to its
interpretation and implementation. Accordingly, there are substantial uncertainties as to whether our
Contractual Arrangements may be deemed as a method of foreign investment in the future.
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REGULATIONS
Regulations Relating to Value-Added Telecommunications Services
The Telecommunications Regulations of the PRC (ૢԷ), promulgated
on 25 September 2000 by the State Council and last amended in February 2016, provides the
regulatory framework for telecommunications service providers in China. Under the
Telecommunications Regulations, a telecommunications service provider is required to procure
operating licences from the MIIT, or its provincial counterparts, prior to the commencement of its
operations, otherwise such operator might be subject to sanctions, including corrective orders and
warnings from the competent administration authority, fines and confiscation of illegal gains. In the
case of serious violations, the operator’s websites may be ordered to be closed.
The Telecommunications Regulations categorise the telecommunication services in the PRC as
either basic telecommunications services or value-added telecommunications services, and value-
added telecommunications services are defined as telecommunications and information services
provided through public network infrastructures. The Administrative Measures for
Telecommunications Business Operating Licence (
), promulgated by
the MIIT in July 2017, set forth more specific provisions regarding the types of licences required to
operate value-added telecommunications services (the “ VAT Licence ”), the qualifications and
procedures for obtaining the licences, and the administration and supervision of these licences. A
commercial operator of value-added telecommunication services must first obtain a VAT Licence.
There are two varieties of VAT Licence, one for services within a single province and one for services
across multiple provinces. Furthermore, any telecommunication services operator may only conduct a
telecommunication business of the type and within the scope of business as specified in its VAT
Licence.
Pursuant to a catalogue that was issued as an appendix to the Telecommunications Regulations
(
ุਕʱᗳͦ፽), as last amended by the MIIT in June 2019, the first category of value-added
telecommunications services is divided into four subcategories: the Internet Data Centre Services, the
Content Delivery Network Services, the Domestic Internet Protocol Virtual Private Network Services
and the Internet Access Services. The second category of value-added telecommunications services
includes, among others, the online data processing and transaction processing services and internet
information services. Telecommunication services operators engaged in different categories of value-
added telecommunications services must obtain the corresponding VATS Licences.
In addition, the Administrative Measures on Internet Information Services (
ਕ၍
) (the “ Internet Measures ”), which were promulgated by the State Council in September
2000 and amended in January 2011, classify internet information services into commercial internet
information services, which refers to the provision, with charge of payment, of information or website
production or other service activities to online users via the internet, and non-commercial internet
information services, which refers to the provision, free of charge, of information that is in the public
domain and openly accessible to online users via the internet. The measures require that a provider of
commercial internet information services shall obtain a VAT Licence for internet information services,
often referred to as an ICP Licence, and a provider of non-commercial internet information services
shall carry out record-filing procedures with the provincial level counterparts of the MIIT.
According to the 2021 Negative List and the Administrative Regulations on the Foreign-
invested Telecommunications Enterprises (
), which were most recently
amended by the State Council on 29 March 2022, officially promulgated on 7 April 2022, and took
effect from May 1, 2022, as for the value-added telecommunications business types which fall within
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REGULATIONS
PRC’s commitment to the WTO, the ultimate capital contribution percentage by foreign investor(s) in
a foreign-invested value-added telecommunications enterprise shall not exceed 50%, except as
otherwise stipulated by the state. In particular, from May 1, 2022, the amended Administrative
Regulations on Foreign-Invested Telecommunications Enterprises cancelled 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.
In addition, the provision of commercial internet information services on mobile internet
applications is regulated by the Administrative Provisions on Information Services of Mobile Internet
Applications (
) , which was promulgated by the CAC on
28 June 2016 and amended on 1 August 2022. The information service providers of mobile internet
applications are subject to requirements under these provisions, including acquiring the qualifications
required by laws and regulations and being responsible for information security.
Regulations Relating to Pharmaceutical Operation
In September 1984, the SCNPC promulgated the Drug Administration Law of the PRC (
ʕശ
) (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. According to the Drug
Administration Law, no pharmaceutical operation, including pharmaceutical whole sale and
pharmaceutical retail business, is permitted without obtaining the Pharmaceutical Operation Licence. If
the trading of drugs is conducted without a Pharmaceutical Operation Licence, the illegal incomes by
selling drugs shall be confiscated and the local Food and Drug Administration (the “ FDA”, which is
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 of the PRC (
݄
ૢԷ), was promulgated by the State Council in August 2002 and amended in 2016 and 2019, which
emphasised the detailed implementation rules of drugs administration. The SFDA promulgated the
Measures for the Administration of Pharmaceutical Operation Licence (
)
in February 2004 as amended in 2017, which stipulates the procedures for applying the Pharmaceutical
Operation Licence and the requirements and qualifications for pharmaceutical wholesalers or
pharmaceutical retailers with respect to their management system, personnel, facilities and etc. The
valid term of the Pharmaceutical Operation Licence is five years and shall be renewed through
application six months prior to its expiration date. On 9 May 2022, the NMPA published the draft
Implementation Rules for the Drug Administration Law of the PRC (Draft for Comments)
ʕശɛ͏
ᅄӋจԈᇃfor public comments. Pursuant to such draft
rules, an enterprise engaged in drug online sales activities be a legally established drug marketing
authorisation holder or a licensed drug distributor, and a third-party platform operator shall not directly
participate in online drug sales activities. As of the Latest Practicable Date, there have been no further
clarifications from the PRC governmental authorities as to the standards for determining or interpreting
the direct participation of third-party platforms in online drug sales activities. It is still uncertain when
the final version of such draft rules will be issued and take effect, how they will be enacted, interpreted
or implemented, and whether they will affect us at that time.
According to the Measures on Prescription Drugs and OTC Drugs Classification Management
(Trial) (
ج(༊Б)) and the Interim Provisions on the Circulation of
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REGULATIONS
Prescription and OTC Drugs (), which were both promulgated
by the State Drug Administration, which was restructured and integrated into the SFDA, 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. OTC drugs, on the other hand, are further divided into Class A and Class B and they both
can be purchased and used without a prescription and promoted in public upon approval by the relevant
governmental authorities. 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 Licence.
According to the Administrative Measures for the Supervision and Administration of
Circulation of Pharmaceuticals (
), promulgated by the SFDA in January
2007 and effective in May 2007, pharmaceutical manufacture and operation enterprises and medical
institutions shall be responsible for the quality of pharmaceuticals they manufacture, provide or use.
The operation of prescription drugs is highly regulated under these rules. Prescription drugs may not be
sold by pharmaceutical retail enterprises without valid prescriptions and an enterprise in violation of
such restriction will be instructed to rectify any violation, given a disciplinary warning, and/or imposed
a fine of no more than RMB1,000.
On 26 December 2016, eight government departments (including the CFDA) issued the Notice
on Opinions on the Implementation of the “Two Invoice System” in Drug Procurement by Public
Medical Institutions (Trial) (
મᒅʕપБ“ՇୃՓ”จԈ(༊Б)) (the
“Two Invoice System Notice ”). On 24 January 2017, the General Office of the State Council further
promulgated the Several Opinions on Further Reform and Improvement in Policies of Drug
Production, Circulation and Use (
ʍจԈ).
According to these rules, a two-invoice system is encouraged to be gradually and fully adopted for
drug procurement by 2018. 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.
Furthermore, On 5 March 2018, the National Health and Family Planning Commission and five other
government organisations promulgated the Notice on Consolidating the Achievements of Cancelling
Drug Markups and Deepening Comprehensive Reforms in Public Hospitals (
ቩոॎৰ˸ᖹ໾ᔼ
). On 19 July 2019, the General Office of the State Council
further promulgated the Reform Plan for the Control of High-value Medical Consumables (࠽
). According to these rules, the two-invoice system is encouraged to be gradually
adopted for high-value medical consumables to promote openness and transparency of purchases and
sales. Currently, the “two-invoice system” in China is strictly implemented and followed for the sales
of drugs to public medical institutions at a national level; however, a clear, nation-wide implementation
of the “two-invoice system” for medical devices and other medical consumables has not been
established, and the application of the policy for these products differs among provinces in China. In
particular, “two-invoice system” for medical devices and consumables has not been implemented in
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some provinces, and in those provinces that have implemented it, some only apply to sales of high-
value medical consumables to public medical institutions, while a limited number of provinces more
generally regulate sales of medical consumables to public medical institutions. Our business mainly
focuses on the outside-of-hospital pharmaceutical circulation market and the sales of pharmaceuticals
and medical devices to non-public medical institutions or pharmacies is not subject to the “Two
Invoice System”. Our public primary healthcare institution customers represent a small percentage of
total registered customers on Yaoshibang platform, and according to Frost & Sullivan, the
implementation of the “Two Invoice System” focuses on the procurement by the public medical
institutions of in-hospital market rather than the procurement by primary healthcare institutions of
outside-of-hospital market. As advised by our PRC Legal Adviser, there had been no specific legal
obligations and responsibilities imposed on the pharmaceutical platform operator under the current
effective PRC laws and regulations, and therefore, any non-compliance relating to the “Two Invoice
System” by the pharmaceutical sellers or public primary healthcare institution will not subject us to
any legal liabilities. Since we are not subject to specific legal obligations and responsibilities under the
regulations relating to the Two Invoice System Notice, we have not put in place any internal control
measures with respect to the “Two Invoice System”. As of the date of this document, we have not
received any warning or sanction from any PRC governmental authorities nor been involved in any
investigations made by any PRC governmental authorities in relation to the compliance with the “Two
Invoice System”, and we will closely monitor and assess any new regulatory requirements with respect
to the “Two Invoice System”.
Regulations relating to Pharmacists
On 18 June 2021, the NMPA promulgated the Administrative Measures for the Registration of
Licenced Pharmacists (
) (the “ Licenced Pharmacists Administrative
Measures”), which came into effect since 18 June 2021, and repealed the Interim Administrative
Measures for the Registration of Licenced Pharmacists () issued by the
former State Drug Administration, the Supplementary Opinions on the Interim Administrative
Measures for the Registration of Licenced Pharmacists (
໾̂จ
Ԉ) and several other regulations issued by the SFDA. The Licenced Pharmacists Administrative
Measures shall apply to the registration of licenced pharmacists and related supervision and
administration, pursuant to which, a person may practise as a licenced pharmacist only after being
registered and having obtained a Licenced Pharmacist Registration Certificate of the PRC. Licenced
pharmacists shall be responsible for drug administration, prescription verification and dispensing,
guidance on rational drug use, and other work in accordance with the Licenced Pharmacists
Administrative Measures.
Regulations Relating to Internet Pharmaceutical Transaction Services
According to Interim Provisions on the Examination and Approval of Internet Drug Transaction
Services (
), promulgated by SFDA on 29 September 2005 and
effective since 1 December 2005, the enterprises engaging in the Internet pharmaceutical transaction
service shall be subject to examination and acceptance, and obtain the Qualification Certificate for
Providing Internet Pharmaceutical Dealing Services. The Qualification Certificate for Providing
Internet Pharmaceutical Dealing Services shall be valid for five years. The SFDA 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
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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. After obtaining the Qualification
Certificate for Providing Internet Pharmaceutical Dealing Services 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 Cancellation of the Third Batch of Items Subject to
Administrative Permission by Local Governments Designated by the Central Government (
਷ਕ৫ᗫ
), promulgated by the State Council on
12 January 2017, except for the third-party platform, all the examination and approval of Internet drug
trading service company implemented by the CFDA or provincial FDAs are cancelled. According to
the Decision on the Cancellation of Various Items Subject to Administrative Permission (
׵
) by the State Council, on 22 September 2017, the CFDA shall no
longer accept applications for examination and approval of Internet drug transaction service enterprises
engaging the business as the third-party platform. After the approval is cancelled, the CFDA shall
strengthen interim and ex-post supervision by taking the following measures: (i) developing the
relevant administrative provisions, requiring local FDA to include platforms and websites into the
scope of supervision and inspection, specifying that those engaging in activities through platforms
must be enterprises and medical institutions which have obtained the Pharmaceutical Operation
Licence or Pharmaceutical Manufacture Licence and ensuring that platforms effectively perform their
primary responsibility; (ii) establishing a monitoring mechanism for online drug trading, keeping
channels for filing complaints and tip-offs unimpeded, and establishing a blacklist system; and(iii)
intensifying supervision and inspection, strengthening the regulation of online drug trading, and
severely punishing illegal online drug trading.
According to the Drug Administration Law amended in 2019, third-party platform provider for
internet drug transaction, (the “ Platform Provider”), shall file with the provincial MPA for the record
subject to provisions of NMPA. The Platform Provider shall review and check the qualifications of
drug marketing licence holders and pharmaceutical operation enterprises that apply to do business on
the platform, ensure that the applicants meet the statutory requirements and manage the pharmaceutical
operation activities carried out on the platform. If the Platform Provider discovers that a drug
marketing licence holder or a pharmaceutical operation enterprise on the platform involves any
violation of the Drug Administration Law, the Platform Provider shall promptly stop the violator’s
behaviour, immediately report the situation to the competent local MPA and further stop providing the
online trading platform services to those involving serious violations of the Drug Administration Law.
The Platform Provider in violations of such provisions will be instructed to rectify any violation,
confiscated of illegal gains, concurrently imposed a fine of no more than RMB 2,000,000 in normal
cases and ordered to suspend business for rectification, concurrently imposed with a fine of no more
than RMB 5,000,000 in serious cases.
On 1 September 2022, SAMR published the Supervision and Administration Measures of
Online Pharmaceuticals Sales (
) (the “ Measures for Online
Pharmaceuticals Sales ”), which took effect on 1 December 2022, aiming to enhance the supervision
of online pharmaceutical sales and related third-party platform services. The Measures for Online
Pharmaceuticals Sales provide that, among others, each online drug seller shall (i) operate its business
within the approved business mode and business scope, (ii) file with the local MPA for its information
including company name, website name, APP name, IP address, network domain name and the
information of Pharmaceutical Operation License or Pharmaceutical Manufacture License, and report
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any changes in the filed information to the local MPA within ten working days, (iii) display its
Pharmaceutical Operation License or Pharmaceutical Manufacture License on visible place of its
homepage, (iv) retain the qualification documents of its suppliers and electronic transaction records of
its online pharmaceuticals sales, and (v) take corresponding control and handling measures in
accordance with the national regulations in respect of emergency response, in the event of any public
health emergencies or any other emergency that seriously threatens the public health. The Measures for
Online Pharmaceuticals Sales also specify the filing requirements for the Platform Provider and
imposes certain obligations on the Platform Provider, including, among others, that each Platform
Provider shall (i) establish drug quality and safety management institutions, and equip pharmaceutical
technicians to undertake drug quality and safety management, (ii) enhance the scrutiny on the required
licences and permits of online pharmaceutical merchants for online pharmaceuticals sales, (iii) file with
the provincial MPA for its information including company name, legal representative, unified social
credit code, website name and network domain name, (iv) enter into agreements with online
pharmaceutical merchants to specify responsibilities for quality and safety of drugs, (v) establish the
examination and inspection system for online pharmaceuticals sales activities and stop the discovered
online pharmaceutical merchants’ illegal acts without delay and immediately report to competent
governmental authorities, and (vi) take corresponding control and handling measures in accordance
with the national regulations in respect of emergency response, in the event of any public health
emergencies or any other emergency that seriously threatens the public health.
For the purpose of the implementation of the Drug Administration Law and the Measures for
Online Pharmaceuticals Sales, and the safety use of drugs by the public, on 30 November 2022, NMPA
published the first version of Prohibited List of Online Drug Sales (
ၣഖቖਯຫ˟૶ఊ(ୋɓ
و)) (the “Prohibited List”). The Prohibited List specifies the detailed categories of the drugs
prohibited from selling online (the “Prohibited Pharmaceuticals”), including the following two main
categories: (i) drugs that are prohibited from selling by laws and regulations, including vaccines, blood
products, anaesthetics, psychotropic drugs, toxic drugs for medical use, radiopharmaceuticals,
pharmaceutical precursor chemicals, medicinal preparations of medical institutions and traditional
Chinese medicine granules; and (ii) other drugs that are prohibited from online retailing.
Regulations Relating to Online Drug Information Services
According to the Measures Regarding the Administration of Drug Information Service over the
Internet (
), promulgated by SFDA on 8 July 2004 and amended on
17 November 2017, the Internet drug information service refers to the activities of providing medical
information (including medical devices) and other services to Internet users through the Internet, and
where any website intends to provide Internet drug information services, it 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 a Qualification
Certificate for Internet Drug Information Services is five years and may be renewed at least six months
prior to its expiration date upon a re-examination by the relevant authority. Pursuant to the Measures
Regarding the Administration of Drug Information Service over the Internet, the Internet drug
information services are classified into two categories, namely, profit-making services and non-profit
making services. Profit-making services refer to that of providing Internet users with drug information
in return for service fees whilst non-profit-making services refers to that of providing Internet users
with drug information which is shared and accessible by the public through the Internet free of charge.
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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 CFDA or its
competent branches, and shall specify the approval document number.
Regulations Relating to Medical Devices Operation
The Measures on the Supervision and Administration of the Business Operations of Medical
Devices (
) (the “ Measures on Medical Devices ”), which was
promulgated by SAMR on 10 March 2022 and took effect on 1 May 2022, applies to any business
activities of medical devices as well as the supervision and administration thereof conducted within the
territory of the PRC. Pursuant to the Measures on Medical Devices, NMPA shall be responsible for the
supervision and administration of nationwide business operations concerning medical devices. Medical
devices are divided into three classes depending on the degree of risks of medical devices. Entities
engaged in distribution of Class III medical devices shall obtain a medical device operating licence and
entities engaged in distribution of Class II medical devices shall complete filings with the competent
local MPA, while entities engaged in distribution of medical devices of Class I are not required to
conduct any filing or obtain any licence. In addition, in accordance with Regulations on Supervision
and Administration of Medical Devices (
ᔼᐕኜ૛္ຖ၍ଣૢԷ), promulgated by the State
Council on 9 February 2021 and effective as of 1 June 2021, Class II and Class III medical devices
shall be registered with the NMPA or its local branches, while Class I medical devices shall be filed
with the competent local MPA. In the event that the business operator in distribution of Class III
medical devices without a medical device operating licence or the business operator in distribution of
Class II or Class III medical devices that are not registered with the NMPA or its local branches, the
business operator may be imposed fine or be shut down by the authorities.
Regulations Relating to Online Sales of Medical Device
On 20 December 2017, the CFDA promulgated the Administration and Supervision Measures
of Online Sales of Medical Devices (
) (the “ Online Medical
Devices Sales Measures ”), which became effective on 1 March 2018. According to the Online
Medical Devices Sales Measures, enterprises engaged in online sales of medical devices must be
medical device manufacture and operation enterprises with medical devices production licences or
operation licences or being filed for record in accordance with laws and regulations, unless such
licences or record-filing is not required by laws and regulations. Pursuant to the Online Medical
Devices Sales Measures, an enterprise engaging in online sales of medical devices shall carry out
online sale of medical devices through its own website or a third-party platform for online trading
services for medical devices. An enterprise engaging in online sale of medical devices through its own
website shall obtain a Qualification Licence for Internet Drug Information Services. Either enterprises
engaging in online sales of medical devices or enterprises to provide a third-party platform for
provision of medical devices online transaction services shall take technical measures to ensure the
data and materials of medical devices online sales are authentic, completed and retrospective, for
example, the records of sale information of medical devices shall be kept for two years after the valid
period of the medical devices, and for no less than five years in case of no valid period, or be kept
permanently in case of implanted medical devices. For the enterprises engaging in online sales of
medical devices, such enterprises shall display its medical device production and operation licence or
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record-filing certificate on visible place of its homepage, and the information of the medical devices
published on the website shall be consistent with the related contents registered or filed for record; in
addition, the business scope shall not exceed the scope of its production and operation licence or the
scope filed for record. For the enterprises to provide a third-party platform for provision of medical
devices online transaction services, such enterprises shall be filed for record with the local provincial
FDA, and shall verify the materials submitted by any enterprise applying for entering the platform.
Regulations Relating to Healthcare Services
According to the Administrative Regulations on Medical Institutions (
ᔼᐕዚ࿴၍ଣૢԷ)
(the “ Regulations on Medical Institutions ”) , promulgated by the State Council, effective on
1 September 1994, and revised on 6 February 2016 and 29 March 2022 and took effect from 1 May
2022, hospitals, health centres, 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 on Medical Institutions, the practise of medical institutions shall complete
the registration and obtain Practicing Licences for Medical Institution.
Regulations Relating to Online Private Education
The principal laws and regulations governing the private education industry in the PRC are the
Law for Promoting Private Education of the PRC (
), promulgated
by the SCNPC, on 28 December 2002, last amended and became effective on 29 December 2018, and
the Implementation Rules for the Law for Promoting Private Education of the PRC (
ʕശɛ͏΍ձ਷
ૢԷ), promulgated by the State Council on 5 March 2004, last amended on
7 April 2021 and became effective on 1 September 2021, or collectively, the Private Education Law
and Implementation Rules. Under the Private Education Law and Implementation Rules, “private
schools” are schools established by non-governmental organisations or individuals using
non-government funds. Private schools providing certifications, pre-school education, self-study aid
and other academic education are subject to approval by the education authorities, while private
schools engaging in vocational qualification training and vocational skill training are subject to
approval by the authorities in charge of labour and social welfare. Private schools have the same status
as public schools, though private schools are prohibited from providing military, police, political and
other kinds of education that are of a special nature. In addition, online education activities using
internet technology are encouraged by the regulatory authorities and shall comply with the laws and
regulations related to internet management. A private school engaging in online education activities
using internet technology shall obtain the relevant operating permits. It shall also establish and
implement internet security management systems and take technical security measures. Upon
discovery of any information whose release or transmission is prohibited by applicable laws or
regulations, the private school shall immediately cease the transmission of that information and take
further remedial actions, such as deleting that information, to prevent it from spreading. Records
pertaining to the situation shall be kept and reported to the appropriate authorities.
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Regulations Relating to Human Genetic Resources
The Regulation for the Administration of Human Genetic Resources of the PRC ( ʕശɛ͏΍
ձ਷ɛᗳ፲ෂ༟๕၍ଣૢԷ) (the “HGR Regulation”), promulgated by the State Council on May 28,
2019, and effective from 1 July 2019, regulates entities engaging in collection, preservation, utilisation
and outbound provision of human genetic resources. Human genetic resources include (i) human
genetic resources materials, such as organs, tissues and cells that contain hereditary substances such as
human genomes genes, and (ii) human genetic resources information, such as data generated from
human genetic resources.
Pursuant to the HGR Regulation, collection and preservation of human substances such as
organs, tissues and cells and carrying out related activities for the purposes of clinical diagnosis and
treatment, blood collection and supply services, crime investigation, doping detection and funeral and
interment shall be subject to other applicable laws and regulations.
According to the 2021 Negative List, foreign investment is prohibited in the development and
application of human stem cells and genes diagnosis and treatment technologies.
Regulations relating to Product Quality and Consumer Protection
The Product Quality Law of the PRC (
), which was
promulgated by SCNPC on 22 February 1993 and most recently amended on 29 December 2018,
applies to all production and sale activities in China. Pursuant to this law, products offered for sale
must satisfy relevant quality and safety standards. Enterprises may not produce or sell counterfeit
products in any fashion, including forging brand labels or giving false information regarding a
product’s manufacturer. Violations of state or industrial standards for health and safety and any other
related violations may result in civil liabilities and administrative penalties, such as compensation for
damages, fines, suspension or shutdown of business, as well as confiscation of products illegally
produced and sold and the proceeds from such sales. Severe violations may subject the responsible
individual or enterprise to criminal liabilities. Where a defective product causes physical injury to a
person or damage to another person’s property, the victim may claim compensation from the
manufacturer or from the seller of the product. If the seller pays compensation and it is the
manufacturer that should bear the liability, the seller has a right of recourse against the manufacturer.
Similarly, if the manufacturer pays compensation and it is the seller that should bear the liability, the
manufacturer has a right of recourse against the seller.
Pursuant to the Civil Code of the PRC (
Պ) (the “ Civil Code ”), which
was promulgated on 28 May 2020, and became effective on 1 January 2021, the infringed party may
claim for compensation from the manufacturer or the seller of the relevant product in which the defects
have caused damage. Where the product defects are caused by the producers, the sellers shall have the
right to recover the same from the producers after paying compensation. If the products are defective
due to the fault of the seller, the producer may, after paying compensation, claim the same from the
seller.
Regulations Relating to Cybersecurity and Information Security
The Decision Regarding the Protection of Internet Security (
),
enacted by the SCNPC, on 28 December 2000 and amended on 27 August 2009, provides, among
other things, that the following activities conducted through the internet, if constituting a crime under
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PRC laws, are subject to criminal punishment: (i) hacking into a computer or system of strategic
importance; (ii) intentionally inventing and spreading destructive programmes such as computer
viruses to attack computer systems and communications networks, thus damaging the computer
systems and the communications networks; (iii) in violation of national regulations, discontinuing
computer network or the communications service without authorisation; (iv) disseminating politically
disruptive information or leaking state secrets; (v) spreading false commercial information; or
(vi) infringing intellectual property rights.
On 1 July 2015, the SCNPC issued the National Security Law of the PRC (
ʕശɛ͏΍ձ਷਷
), which came into effect on the same day. The National Security Law provides that the
state shall safeguard the sovereignty, security and cyber security development interests of the state, and
that the state shall establish a national security review and supervision system to review, among other
things, foreign investment, key technologies, internet and information technology products and
services, and other important activities that are likely to impact the national security of the PRC.
On 7 November 2016, the SCNPC issued the Cybersecurity Law of the PRC (
ʕശɛ͏΍ձ਷
), which came into effect on 1 June 2017. The Cybersecurity Law provides that network
operators must set up internal security management systems that meet the requirements of a multi-level
protection system for cyber security, including appointing dedicated cyber security personnel, taking
technical measures to prevent computer viruses, network attacks and intrusions, taking technical
measures to monitor and record network operation status and cyber security incidents, and taking data
security measures such as data classification, backups and encryption. The Cybersecurity Law also
imposes a relatively vague but broad obligation to provide technical support and assistance to the
public and state security authorities in connection with criminal investigations or for reasons of
national security. The Cybersecurity Law also requires network operators that provide network access
or domain name registration services, landline or mobile phone network access, or that provide users
with information publication or instant messaging services, to require users to provide a real identity
when they sign up. The Cybersecurity Law sets high requirements for the operational security of
facilities deemed to be part of the PRC’s “critical information infrastructure”. These requirements
include data localisation, i.e., storing personal information and important data in the PRC, and national
security review requirements for any network products or services that may impact national security.
Among other factors, “critical information infrastructure” is defined as information infrastructure, that
will, in the event of destruction, loss of function or data leak, result in serious damage to national
security, the national economy and people’s livelihoods, or the public interest. Specific reference is
made to key sectors such as public communication and information services, energy, transportation,
water-resources, finance, public services and e-government.
On 13 March 2019, the CAC and the SAMR jointly issued the Notice on the Implementation of
App Security Certification (
࢝Appʮѓ), which encourages mobile
application operators to voluntarily obtain app security certification, and search engines and app stores
are encouraged to recommend certified applications to users. The institution designated for this
certification is the China Cybersecurity Review Technology and Certification Centre. The China
Cybersecurity Review Technology and Certification Centre has the right to appoint testing agencies to
inspect technical capabilities and business operations for the certification.
On 13 April 2020, the CAC and certain other PRC governmental authorities jointly
promulgated the Measures for Cybersecurity Review (
), effective from 1 June
2020, which provide that a critical information infrastructure operator, when purchasing network
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products and services, shall prejudge the national security risks that may arise after the products and
services are put into use, and shall apply for the cybersecurity review to the cybersecurity review office
if such products and services will or may affect national security. On 28 December 2021, the CAC,
together with certain other PRC governmental authorities, promulgated the revised Measures for
Cybersecurity Review (
), or the Measures for Cybersecurity Review 2022,
which replaced the previous version and took effect from 15 February 2022. Pursuant to these
measures, the purchase of network products and services by an operator of critical information
infrastructure or the data processing activities of a network platform operator that affect or may affect
national security will be subject to a cybersecurity review. In addition, any network platform operator
possessing over one million users’ individual information must apply for a cybersecurity review before
listing abroad. The competent governmental authorities may also initiate a cybersecurity review against
the operators if the authorities believe that the network product or service or data processing activities
of such operators affect or may affect national security.
Article 10 of the Measures for Cybersecurity Review 2022 also set out certain general factors
which would be the focus in assessing the national security risk during a cybersecurity review,
including (i) risks of critical information infrastructure being illegally controlled or subject to
interference or destruction; (ii) the harm caused by the disruption of the supply of the product or
service to the business continuity of critical information infrastructure; (iii) the security, openness,
transparency and diversity of sources of the product or service, the reliability of supply channels, and
risks of supply disruption due to political, diplomatic, trade and other factors; (iv) compliance with
PRC Laws, administrative regulations and departmental rules by the provider of the product or service;
(v) the risk of core data, important data or a large amount of personal information being stolen, leaked,
damaged, illegally used, or illegally transmitted overseas; (vi) the risk that critical information
infrastructure, core data, important data or a large amount of personal information being affected,
controlled, and maliciously used by foreign governments for a listing, as well as network information
security risks; and (vii) other factors that may endanger the security of critical information
infrastructure, cybersecurity and data security.
On 10 June 2021, the SCNPC promulgated the Data Security Law of PRC (
ʕശɛ͏΍ձ਷ᅰ
), which took effect on 1 September 2021. The Data Security Law provides for data security
obligations on entities and individuals carrying out data activities. The Data Security Law also
introduces a data classification and hierarchical protection system based on the importance of data in
economic and social development, as well as the degree of harm it will cause to national security,
public interests, or legitimate rights and interests of individuals or organisations when such data is
tampered with, destroyed, leaked, or illegally acquired or used. The appropriate level of protection
measures is required to be taken for each respective category of data. For example, a processor of
important data shall designate the personnel and the management body responsible for data security,
carry out risk assessments for its data processing activities and file the risk assessment reports with the
competent authorities. In addition, the Data Security Law provides a national security review
procedure for those data activities which may affect national security and imposes export restrictions
on certain data and information.
On 30 July 2021, the State Council promulgated the Regulations on Security Protection of
Critical Information Infrastructure (
ᚐૢԷ), which took effect on
1 September 2021. According to the Regulations on Security Protection of Critical Information
Infrastructure, a “critical information infrastructure” refers to an important network facility and
information system in important industries such as, among others, public communications and
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information services, as well as other important network facilities and information systems that may
seriously endanger national security, the national economy, the people’s livelihood, or the public
interests in the event of damage, loss of function, or data leakage. The competent governmental
authorities of the aforementioned important industries will be responsible for (i) organising the
identification of critical information infrastructures in their respective industries in accordance with
certain identification rules, and (ii) promptly notifying the identified operators and the public security
department of the State Council of the identification results.
The Administrative Provisions on Security Vulnerability of Network Products (
τΌ
) were jointly promulgated by the MIIT, the CAC and the Ministry of Public Security
(the “ MPS”) on 12 July 2021 and took effect on 1 September 2021. Network product providers,
network operators as well as organisations or individuals engaging in the discovery, collection, release
and other activities of network product security vulnerability are subject to these provisions and shall
establish channels to receive information of security vulnerability of their respective network products
and shall examine and fix such security vulnerability in a timely manner. Network product providers
are required to report relevant information of security vulnerability of network products with the MIIT
within two days and to provide technical support for network product users. Network operators shall
take measures to examine and fix security vulnerability after discovering or acknowledging that their
networks, information systems or equipment have security loopholes. According to these provisions,
the breaching parties may be subject to administrative penalty as regulated in accordance with the
Cybersecurity Law.
On 14 November 2021, the CAC published a draft of the Administrative Regulations for
Internet Data Security (
ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)) (the “ Draft Internet Data Security
Regulations”), for public comment until 13 December 2021, which provides that data processors
conducting the following activities shall apply for cybersecurity review: (i) merger, reorganisation or
division of internet platform operators that have acquired a large number of data resources related to
national security, economic development or public interests affects or may affect national security;
(ii) listing abroad of data processors processing over one million users’ personal information;
(iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing
activities that affect or may affect national security. The draft regulations also provide that operators of
large internet platforms that set up headquarters, operation centres or R&D centres overseas shall
report to the national cyberspace administration and competent authorities. In addition, the Draft
Internet Data Security Regulations also require that data processors processing important data or going
public overseas shall conduct an annual data security self-assessment or entrust a data security service
institution to do so, and submit the data security assessment report of the previous year to the local
branch of the CAC before January 31 each year. As of the Latest Practicable Date, this draft has not
been formally adopted, and substantial uncertainties exist with respect to the enactment timetable, final
content, interpretation and implementation. We believe there is no material impediment for us to
comply with the Draft Internet Data Security Regulations, if being implemented in its current form, in
all material respects on the basis that: (i) we have implemented comprehensive policies and measures
to ensure users’ data privacy and security and to comply with applicable cybersecurity and data privacy
laws and regulations; (ii) during the Track Record Period, we had not been subject to any pending
inquiry, notice, warning or sanction regarding cybersecurity from any PRC governmental authorities
nor been involved in any investigations on cybersecurity review made by any PRC governmental
authorities; (iii) during the Track Record Period, we had not been subject to any material fines or other
material penalties due to non-compliance with applicable cybersecurity and data privacy laws and
regulations; (iv) we do not possess over one million users’ personal information; and (v) we will
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closely monitor and assess further regulatory developments regarding applicable cybersecurity and
data privacy laws and regulations, including the development on cybersecurity review, and comply
with the latest regulatory requirements. Considering that (i) we have implemented comprehensive
policies and measures to ensure users’ data privacy and security and to comply with applicable
cybersecurity and data privacy laws and regulations; (ii) we had not experienced any data breach or
violation of applicable cybersecurity and data privacy laws and regulations that has a material adverse
effect on business operations; (iii) we have never been designated by any PRC governmental
authorities as an operator of critical information infrastructure; (iv) we do not process any data that
falls into the scope of important data or core data under the effective cybersecurity and data privacy
laws and regulations that are applicable to us; and (v) we had not received any inquiry or notice from
any PRC governmental authorities that the Group engages in any data processing activities that affect
or may affect national security nor been involved in any investigations on cybersecurity review made
by any PRC governmental authorities, our PRC Legal Adviser is of the view that we had not been
involved in any activities that might give rise to national security risks based on the factors set out in
Article 10 of the Measures for Cybersecurity Review 2022, during the Track Record Period and up to
the Latest Practicable Date. However, it is noted that there is still uncertainty about the meaning of
“affect or may affect the national security” and the PRC government authorities have the discretion to
determine the scope of “national security”, and we will closely monitor and assess further regulatory
developments to comply with the latest regulatory requirements.
In the meantime, the governmental authorities have also enhanced the supervision and
regulation on cross-border data transfer. For example, on 7 July 2022, the Measures for the Security
Assessment of Cross-border Data Transfer (
) (the “ Measures for Cross-
border Data Transfer ”) were issued by the CAC, which require that any data processor providing
important data collected and generated during operations within the PRC or personal information that
should be subject to security assessment according to law to an overseas recipient shall conduct
security assessment. The Measures for Cross-border Data Transfer provide four circumstances, under
any of which data processors shall, through the local cyberspace administration at the provincial level,
apply to the national cyberspace administration for security assessment of data cross-border transfer.
These circumstances include: (i) where a data processor transfers important data across the border;
(ii) where an operator of critical information infrastructure and a personal information processor that
processes personal information of more than one million individuals transfer personal information
across the border; (iii) where a data processor that has transferred personal information of more than
100,000 individuals or sensitive personal information of more than 10,000 individuals cumulatively as
of January 1 of the previous year transfers personal information across the border; or (iv) other
circumstances under which security assessment of cross-border data transfer is required as prescribed
by the CAC. The Measures for Cross-border Data Transfer has come into force on 1 September 2022.
Based on the Company’s confirmation and as advised by our PRC Legal Adviser, we do not fall under
any of the four circumstances of the Measures for Cross-border Data Transfer and is not subject to
security assessment of cross-border data transfer as (i) we have not been designated by any PRC
governmental authorities as an operator of critical information infrastructure; (ii) the information
systems used by us are all deployed on servers within the PRC; (iii) we do not provide any users
outside of the PRC with remote access to the personal information stored within the PRC and therefore
our business does not involve the cross-border transfer of personal information; and (iv) the Group
does not fall into other circumstances as prescribed by the CAC which the CAC has not yet made
further rules or guidance outside of the Measures for Cross-border Data Transfer. Another example is
that, on 24 February 2023, the Measures for the Prescribed Agreement on Cross-border Transfer of
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Personal Information () (the “ Measures for Prescribed Agreement ”)
were released by the CAC, which came into force on 1 June 2023. The Measures for Prescribed
Agreement attach the prescribed agreement template that could be used to satisfy one of the conditions
for cross-border transfer of personal information under Article 38 of the Personal Information
Protection Law. Based on the Company’s confirmation and as advised by our PRC Legal Adviser, we
are not subject to the Measures for Prescribed Agreement as our business does not involve the cross-
border transfer of personal information.
Regulations Relating to Personal Information Protection
In recent years, the PRC government authorities have enacted laws and regulations to protect
personal information from any illegal use and unauthorised disclosure. The Cybersecurity Law
imposes certain data protection obligations on network operators, including that network operators may
not disclose, tamper with, or damage users’ personal information that they have collected, or provide
users’ personal information to others without consent. Moreover, network operators are obligated to
delete unlawfully collected information and to amend incorrect information.
The Several Provisions on Regulating the Market Order of Internet Information Services (
஝
), which was issued by the MIIT on 29 December 2011 and took
effect on 15 March 2012, stipulate that internet information service providers may not collect any user
personal information or provide any such information to third parties without the consent of a user,
unless otherwise stipulated by laws and administrative regulations. “User personal information” is
defined as information relevant to the users that can lead to the recognition of the identity of the users
independently or in combination with other information. An internet information service provider must
expressly inform the users of the method, content and purpose of the collection and processing of such
user personal information and may only collect such information as necessary for the provision of its
services. An internet information service provider is also required to properly store user personal
information, and in case of any leak or likely leak of the user personal information, the internet
information service provider must take immediate remedial measures and, in severe circumstances,
make an immediate report to the telecommunications regulatory authority.
The Decision on Strengthening the Protection of Online Information (
ᚐ
), which was issued by the SCNPC on 28 December 2012 and took effect on the same day,
and the Order for the Protection of Telecommunication and Internet User Personal Information (ڦ
), which was issued by the MIIT on 16 July 2013 and take effect on
1 September 2013, stipulate that any collection and use of user personal information must be subject to
the consent of the user, abide by the principles of legality, rationality and necessity and be within the
specified purposes, methods and scope. An internet information service provider must also keep such
information strictly confidential, and is further prohibited from divulging, tampering with or destroying
any such information, or selling or illegally providing such information to other parties. An internet
information service provider is required to take technical and other measures to prevent the collected
personal information from any unauthorised disclosure, damage or loss. Any violation of the above
decision or order may subject the internet information service provider to warnings, fines, confiscation
of illegal gains, revocation of licences, cancellation of filings, closedown of websites or even criminal
liabilities.
With respect to the security of information collected and used by mobile apps, pursuant to the
Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal
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Information by Apps (࢝Appʮѓ), which was issued
by the CAC, the MIIT, the MPS, and the SAMR on 23 January 2019, app operators shall collect and
use personal information in compliance with the Cybersecurity Law and shall be responsible for the
security of personal information obtained from users and take effective measures to strengthen
personal information protection. Furthermore, app operators shall not force their users to make
authorisation by means of default settings, bundling, suspending installation or use of the app or other
similar means and shall not collect personal information in violation of laws, regulations or breach of
user agreements. Such regulatory requirements were emphasised by the Notice on the Special
Rectification of Apps Infringing upon User’s Personal Rights and Interests (
࢝APP͜˒ᛆ
), which was issued by MIIT on 31 October 2019. On 28 November 2019, the
CAC, the MIIT, the MPS and the SAMR jointly issued the Methods of Identifying Illegal Acts of Apps
to Collect and Use Personal Information (
App). This
regulation further illustrates certain commonly seen illegal practises of app operators in terms of
personal information protection and specifies acts of app operators that will be considered as
“collection and use of personal information without users’ consent”.
Pursuant to the Civil Code, the personal information of a natural person shall be protected by
the law. Any organisation 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 disclose personal
information of others.
On 20 August 2021, the SCNPC promulgated the Personal Information Protection Law of the
PRC (
), which took effect on 1 November 2021. Pursuant to the
Personal Information Protection Law, “personal information” refers to any kind of information related
to an identified or identifiable individual as electronically or otherwise recorded but excluding the
anonymised information. The processing of personal information includes the collection, storage, use,
processing, transmission, provision, disclosure and deletion of personal information. The Personal
Information Protection Law applies to the processing of personal information of individuals within the
territory of the PRC, as well as personal information processing activities outside the territory of PRC,
for the purpose of providing products or services to natural persons located within China, for analysing
or evaluating the behaviours of natural persons located within China, or for other circumstances as
prescribed by laws and administrative regulations. A personal information processor may process the
personal information of this individual only under the following circumstances: (i) where consent is
obtained from the individual; (ii) where it is necessary for the execution or performance of a contract to
which the individual is a party, or where it is necessary for carrying out human resource management
pursuant to employment rules legally adopted or a collective contract legally concluded; (iii) where it
is necessary for performing a statutory responsibility or statutory obligation; (iv) where it is necessary
in response to a public health emergency, or for protecting the life, health or property safety of a
natural person in the case of an emergency; (v) where the personal information is processed within a
reasonable scope to carry out any news reporting, supervision by public opinions or any other activity
for public interest purposes; (vi) where the personal information, which has already been disclosed by
an individual or otherwise legally disclosed, is processed within a reasonable scope; or (vii) any other
circumstance as provided by laws or administrative regulations. In principle, the consent of an
individual must be obtained for the processing of his or her personal information, except under the
circumstances of the aforementioned items (ii) to (vii). Where personal information is to be processed
based on the consent of an individual, such consent shall be a voluntary and explicit indication of
intent given by such individual on a fully informed basis. If laws or administrative regulations provide
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that the processing of personal information shall be subject to the separate consent or written consent
of the individual concerned, such provisions shall prevail. In addition, the processing of the personal
information of a minor under 14 years old must obtain the consent by a parent or a guardian of such
minor and the personal information processors must adopt special rules for processing personal
information of minors under 14 years old.
Furthermore, the Personal Information Protection Law stipulates the rules for cross-border
transfer of personal information. Any cross-border transfer of personal information is subject to the
condition that it is necessary to provide the personal information to a recipient outside the territory of
the PRC due to any business need or any other need, as well as the satisfaction of at least one of the
following conditions: (i) where a security assessment organised by the national cyberspace
administration has been passed; (ii) where a certification of personal information protection has been
passed from a professional institution in accordance with the provisions issued by the national
cyberspace administration; (iii) where a standard contract formulated by the national cyberspace
administration has been entered into with the overseas recipient; or (iv) any other condition prescribed
by laws, administrative regulations or any other requirements by the national cyberspace
administration. Critical information infrastructure operators and personal information processors who
have processed personal information in an amount reaching a threshold prescribed by the national
cyberspace administration, must store in the territory of the PRC the personal information collected or
generated within the territory of the PRC. If it is necessary to provide such information to an overseas
recipient, a security assessment organised by the national cyberspace administration must be passed.
Regulations Relating to Online Trading
The MOFCOM promulgated the Provisions on the Procedures for Formulating Transaction
Rules of Third-Party Online Retail Platforms (Trial) (
೻ҏ஝
֛(༊Б)) in December 2014, which became effective in April 2015, to guide and regulate the
formulation, revision and enforcement of transaction rules by online retail third-party platforms
operators.
In August 2018, the SCNPC promulgated the E-Commerce Law of the PRC (
ʕശɛ͏΍ձ਷
), effective on 1 January 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 platform
operator shall (i) collect, verify and register the truthful information submitted by the third-party
merchants that apply to sell products or provide services on its platform, including the identities,
addresses, contacts and licences, establish registration archives and update such information on a
regular basis; (ii) submit the identification information of the third-party merchants on its platform to
market regulatory administrative department as required and remind the third-party merchants to
complete the registration with market regulatory administrative department; (iii) submit identification
information and tax-related information to tax authorities as required in accordance with the laws and
regulations regarding the administration of tax collection and remind the individual third-party
merchants to complete the tax registration; (iv) record and retain the information of the products and
services and the transaction information for no less than three years; (v) display the platform service
agreement and the transaction rules or links to such information on the homepage of the platform;
(vi) display the noticeable labels regarding the self-operation products, and take liabilities for such
products and services; (vii) establish a credit evaluation system, display the credit evaluation rules,
provide consumers with accesses to make comments on the products and services provided on its
platform, and restrain from deleting such comments; and (viii) establish intellectual property protection
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rules, and take necessary measures when any intellectual property holder notify the platform operator
that his intellectual property rights have been infringed. An e-commerce platform operator shall take
joint liabilities with the relevant third-party merchants on its platform and may be subject to warnings
and fines up to RMB2,000,000 where (i) it fails to take necessary measures when it knows or should
have known that the products or services provided by the third-party merchants on its platform do not
meet the personal or property safety requirements or such third-party merchants’ other acts may
infringe on the lawful rights and interests of the consumers; or (ii) it fails to take necessary measures,
such as deleting and blocking information, disconnecting, terminating transactions and services, when
it knows or should have known that the third-party merchants on its platform infringe any intellectual
property rights of any other third party. With respect to products or services affecting the consumers’
life and health, if an e-commerce platform operator fails to verify the third-party merchants’
qualification or fails to fulfil its obligations to safeguard the safety of consumers, which results in
damages to the consumers, it shall take corresponding liabilities and may be subject to warnings and
fines up to RMB2,000,000.
In March 2021, the SAMR promulgated the Measures for the Supervision and Administration
of Online Trading (
), effective on 1 May 2021, which aims to regulate
business activities involving the sale of commodities or provision of services through Internet and
other information networks. Pursuant to the Measures for the Supervision and Administration of
Online Trading, an online trading business shall continuously publicise the information of business
entities or a link to such information in a prominent position on the homepage of its website or the
main page of its business activities. An online trading business is encouraged to link to the electronic
business licence display system of the SAMR and publicise its business licence information. An online
trading platform operator shall require a business that applies for selling commodities or providing
services on the platform to submit true information on its identity, address, contact information, and
administrative licencing, among others, conduct verification and registration, establish registration
archives, and verify and update relevant information once at least every six months.
Regulations Relating to Internet Advertising
The SCNPC released the Advertising Law of the PRC (
)o n
27 October 1994 and latest amended on 29 April 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 (
ج
) (the “ Interim Internet Advertising Measures ”), regulating the Internet-based advertising
activities, were adopted by the SAIC on 4 July 2016. According to the Interim 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. On
24 March 2023, the State Administration for Market Regulation promulgated the Measures for
Administration of Internet Advertising (
) (the “Internet Advertising
Measures”), which replaced the Interim Internet Advertising Measures, and came into effect as of 1
May 2023. Pursuant to the Internet Advertising Measures, Internet advertisers are prohibited from
publishing advertisements of prescription drugs on the Internet. Besides, Internet advertisers are
prohibited from publishing advertisements for medical treatment, drugs, medical devices, health food
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and formula food for special medical purposes in disguised form by way of introducing knowledge on
health or health maintenance. When introducing knowledge on health or health maintenance, the
address, contact information, shopping links and other contents of sellers or service providers of
relevant medical treatment, drugs, medical devices, health food, or formula food for special medical
purposes shall not be presented on the same page or together with other contents.
Pursuant to the Interim Administrative Measures for Censorship of Advertisements for Drugs,
Medical Devices, Dietary Supplements and Foods for Special Medical Purpose (
eᔼᐕኜ૛e
), which were promulgated by the State
Administration for Market Regulation on 24 December 2019, effective on 1 March 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
licence of the product, whichever is the shortest. Where no validity period is set forth in the registration
certificate, record-filing certificate or the production licence 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 Relating to Food Safety
In accordance with the Food Safety Law of the PRC (
) (the
“Food Safety Law ”), promulgated on 28 February 2009 and latest amended on 29 April 2021, and the
Implementation Regulations of the Food Safety Law’ of the PRC (ૢ
Է), issued on 20 July 2009 and latest amended on 11 October 2019 and effective on 1 December
2019, with the purpose of guaranteeing food safety and safe guarding the health and life safety of the
public, the PRC sets up a system of the supervision, monitoring and appraisal on the food safety risks,
compulsory adoption of food safety standards. To engage in food production, sale or catering services,
the business operators shall obtain a licence in accordance with the laws and regulations. Furthermore,
the State Council implements strict supervision and administration for special categories of foods such
as healthcare food, special formula foods for medical purposes and infant formula.
Administrative Measures for Food Operation Licencing (
)
promulgated by CFDA on 31 August 2015 and amended on 17 November 2017, regulates the food
operation licencing activities, strengthens supervision and management of food operation, and ensures
food safety. Food operation operators shall obtain the food operation licence for each business venue
where they engage in food operation activities. The food operation licence is valid for five years.
Regulations Relating to Anti-Monopoly
The Anti-Monopoly Law of the PRC (
), as promulgated by the
SCNPC in 2007, prohibits monopolistic conduct such as entering into monopoly agreements, abuse of
dominant market position and concentration of undertakings that have the effect of eliminating or
restricting competition. On 24 June 2022, the SCNPC promulgated the Anti-monopoly Law of the PRC
(Amended in 2022) (
ج2022͍) ) (the “ Amended Anti-monopoly
Law”), which took effect on 1 August 2022.
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Pursuant to the Amended Anti-Monopoly Law, competing business operators may not enter
into monopoly agreements that eliminate or restrict competition, such as by boycotting transactions,
fixing or changing the price of commodities, limiting the output of commodities, or fixing the price of
commodities for resale to third parties, among other actions, unless the agreement will satisfy the
exemptions under the Amended Anti-monopoly Law, such as improving technologies, increasing the
efficiency and competitiveness of small and medium-sized undertakings, or safeguarding legitimate
interests in cross-border trade and economic cooperation with foreign counterparts. Violations of the
Amended Anti-Monopoly Law may be subject to an order to cease the relevant activities, and
confiscation of illegal gains and fines ranging from 1% to 10% of sales revenues for the previous year,
if the monopoly agreement has been concluded and performed, or fines of up to RMB3,000,000, if the
intended monopoly agreement has not been performed, and the legal representative, person chiefly in
charge and directly liable personnel who are personally accountable for conclusion of the monopoly
agreement may be subject to a fine of up to RMB1,000,000. On 26 June 2019, the State Administration
for Market Regulation further issued the Interim Provisions on the Prohibitions of Monopoly
Agreements (
) which took effect on 1 September 2019 and was last
amended on 24 March 2022, superseding certain anti-monopoly rules and regulations. On 10 March
2023, the State Administration for Market Regulation issued the Provisions on the Prohibitions of
Monopoly Agreements (
), which came into effect on 15 April 2023, to get those
provisions aligned with the Amended Anti-Monopoly Law.
In addition, as required by the Amended Anti-Monopoly Law, a business operator with a
dominant market position may not abuse its dominant market position to conduct acts, such as selling
commodities at unfairly high prices or buying commodities at unfairly low prices, selling products at
prices below cost without any justifiable cause, and refusing to trade with a trading party without any
justifiable cause. Sanctions for violation of the prohibition on the abuse of dominant market position
include an order to cease the relevant activities, confiscation of the illegal gains and fines (from 1% to
10% of sales revenues from the previous year). On 26 June 2019, the State Administration for Market
Regulation issued the Interim Provisions on the Prohibitions of Acts of Abuse of Dominant Market
Positions (
), which took effect on 1 September 2019 and was
last amended on 24 March 2022, to further prevent and prohibit the abuse of dominant market
positions. On 10 March 2023, the State Administration for Market Regulation issued the Provisions on
the Prohibitions of Acts of Abuse of Dominant Market Positions (
),
which came into effect on 15 April 2023, to get those provisions aligned with the Amended Anti-
Monopoly Law.
Furthermore, where a concentration of undertakings reaches the declaration threshold stipulated
by the State Council, a declaration must be approved by the anti-monopoly authority before the parties
implement the concentration. Concentration refers to (i) a merger of undertakings; (ii) acquiring
control over other undertakings by acquiring equities or assets; or (iii) acquisition of control over, or
the possibility of exercising decisive influence on, an undertaking by contract or by any other means. If
business operators fail to comply with the mandatory declaration requirement, the anti-monopoly
authority is empowered to terminate and/or unwind the transaction, dispose of relevant assets and
shares or businesses within certain periods, and impose fines up to 10% of sales revenues for the
previous year, if the concentration has or may have the effect of eliminating or restricting competition,
or fines of up to RMB5,000,000, if the concentration has no effect of eliminating or restricting
competition.
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On 11 September 2020, the Anti-Monopoly Commission of the State Council issued Anti-
Monopoly Compliance Guideline for Operators (), which requires operators
to establish anti-monopoly compliance management systems under the Amended Anti-Monopoly Law
to manage anti-monopoly compliance risks. On 7 February 2021, the Anti-Monopoly Committee of the
State Council promulgated the Anti-Monopoly Guidelines for the Internet Platform Economy Sector
(
), aiming to provide guidelines for supervising
and prohibiting monopolistic conduct in connection with the internet platform business operations and
further elaborate on the factors for recognising such monopolistic conduct in the internet platform
industry as well as concentration filing procedures for business operators, including those involving
variable interest entities. Pursuant to these guidelines, the methods of an internet platform collecting or
using the privacy information of internet users may also be one of the factors to be considered for
analysing and recognising monopolistic conducts in the internet platform industry. For example,
whether the relevant business operator compulsorily collects unnecessary user information may be
considered to analyse whether there is a bundled sale or additional unreasonable trading condition,
which is one of the behaviours constituting abuse of dominant market position. In addition, factors
including, among others, providing differentiated transaction prices or other transaction conditions for
consumers with different payment ability based on consumption preferences and usage habits analysed
using big data and algorithms is also one of the behaviours constituting abuse of dominant market
position. Furthermore, whether the relevant business operators are required to “choose one” among the
internet platform and its competitive platforms may be considered to analyse whether such internet
platform operator with dominant market position abuses its dominant market position and excludes or
restricts market competition. As these guidelines were only issued recently, there are still substantial
uncertainties as to their interpretation and implementation in practise. Our PRC Legal Adviser is of the
view that, as of the Latest Practicable Date, there have not been any material non-compliance incidents
occurring on us discovered in relation to the business operation in all material respects under the PRC
Anti-Monopoly laws, including the Anti-Monopoly Guidelines for the Internet Platform Economy
Sector promulgated by the Anti-Monopoly Committee of the State Council (
׵
). In light of the foregoing, our Directors are of the view that the
guidelines do not have impact on our business operation in material respects. Taking into account the
above, as well as based on the independent due diligence conducted by the Sole Sponsor, nothing has
come to the Sole Sponsor’s attention that would cause the Sole Sponsor to disagree with the Directors’
view.
Regulations Relating to Anti-Unfair Competition
According to the Anti-Unfair Competition Law of the PRC (
جن
) promulgated by the SCNPC on 2 September 1993 and most recently amended on 23 April 2019,
operators are prohibited from engaging in unfair competition activities including market confusion,
commercial bribery, misleading false publicity, infringement on trade secrets, illegitimate premium
sales, etc. Any operator in violation of the Anti-Unfair Competition Law may be ordered to cease
illegal activities, eliminate the adverse effect thereof or compensate for the damages caused to any
other party. The competent authorities may also confiscate any illegal gains or impose fines on these
operators.
On 17 August 2021, the State Administration for Market Regulation issued a discussion draft of
Provisions on the Prohibition of Unfair Competition on the Internet (
֛(ʮ
කᅄӋจԈᇃ)), under which business operators should not hijack traffic by using data or algorithms
or influencing users’ choices, or use technical means to illegally capture or use other business
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operators’ data. Furthermore, business operators are not allowed to (i) fabricate or spread misleading
information to damage the reputation of competitors, or (ii) employ marketing practises such as fake
reviews or use coupons or “red envelopes” to entice positive ratings.
Regulations Relating to Algorithms
On 17 September 2021, the CAC, together with certain other governmental authorities, jointly
issued the Guidelines on Strengthening the Comprehensive Regulation of Algorithm for Internet
Information Services (
ኬจԈ), which provide that, daily
monitoring of data use, application scenarios and effects of algorithms shall be carried out by the
relevant regulators, and security assessments of algorithm shall be conducted by the relevant
regulators, and an algorithm filing system shall be established and classified security management of
algorithms shall be promoted.
On 31 December 2021, the CAC and certain other PRC governmental authorities promulgated
the Provisions on the Administration of Algorithm Recommendation for Internet Information Services
(
), which took effect on 1 March 2022. These provisions require
that algorithmic recommendation service providers shall inform users in a conspicuous manner of their
provision of algorithmic recommendation services, and publicise the basic principles, purposes, and
main operating mechanisms of algorithmic recommendation services in an appropriate manner. Where
algorithm recommendation service providers sell goods or provide services to consumers, they shall
protect consumers’ rights to fair transactions, and shall not use algorithms to implement unreasonably
differential treatment in transaction prices and other transaction conditions based on consumers’
preferences, transaction habits, and other characteristics and other illegal acts.
Regulations Relating to Intellectual Property
Patent
Patents in the PRC are principally protected under the Patent Law of the PRC (
ʕശɛ͏΍ձ
). The Chinese patent system adopts a first-to-file principle. To be patentable, an invention
or a utility model must meet three criteria: novelty, inventiveness and practicability. The duration of a
patent right is either 10 years, 15 years or 20 years from the date of application, depending on the type
of patent right.
Copyright
Copyrights in the PRC, including software copyrights, are principally protected under the
Copyright Law of the PRC (
) and related rules and regulations. Under the
Copyright Law of the PRC, the term of protection for software copyrights is 50 years. The Regulation
on the Protection of the Right to Communicate Works to the Public over Information Networks (
ࢹڦ
ᚐૢԷ), as last amended on 30 January 2013, provides specific rules on fair use,
statutory licence, and a safe harbour for use of copyrights and copyright management technology and
specifies the liabilities of various entities for violations, including copyright holders, libraries and
internet service providers.
The Computer Software Copyright Registration Measures (
),
promulgated by the National Copyright Administration on 20 February 2002, regulate registrations of
software copyrights, exclusive licencing contracts for software copyrights and assignment agreements.
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The National Copyright Administration administers software copyright registration and the Copyright
Protection Centre of China is designated as the software registration authority. The Copyright
Protection Centre of China grants registration certificates to the computer software copyrights
applicants which meet the relevant requirements.
Trademark
Registered trademarks are protected under the Trademark Law of the PRC (
ʕശɛ͏΍ձ਷
) and related rules and regulations. Trademarks are registered with the Trademark office of
National Intellectual Property Administration under the State Administration for Market Regulation,
formerly the Trademark Office of the State Administration of Industry and Commerce. Where
registration is sought for a trademark that is identical or similar to another trademark which has already
been registered or given preliminary examination and approval for use in the same or similar category
of commodities or services, the application for registration of this trademark may be rejected.
Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked.
Domain Name
Domain names are protected under the Administrative Measures on Internet Domain Names (

) promulgated by the MIIT on 24 August 2017 and effective as of 1 November
2017. Domain name registrations are handled through domain name service agencies established under
the relevant regulations, and applicants become domain name holders upon successful registration.
Regulations Relating to Employment and Social Welfare
Pursuant to the Labour Law of the PRC (
) and the Labour Contract
Law of the PRC (), employers must execute written labour contracts
with full-time employees. All employers must comply with local minimum wage standards. Violations
of the Labour Contract Law of the PRC and the Labour Law of the PRC may result in the imposition of
fines and other administrative and criminal liability in the case of serious violations.
Enterprises in China are required by PRC laws and regulations to participate in certain
employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance
plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance
plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain
percentages of salaries, including bonuses and allowances, of the employees as specified by the local
government from time to time at locations where they operate their businesses or where they are
located. According to the Social Insurance Law of the PRC (
) which
was promulgated by the SCNPC on 28 October 2010 and became effective on 1 July 2011 and as
amended on 29 December 2018, an employer that fails to make social insurance contributions may be
ordered to pay the required contributions within a stipulated time limit and be subject to a daily 0.05%
late fee since the payment is due. If the employer still fails to rectify the failure to make social
insurance contributions within the stipulated deadline, it may be subject to a fine ranging from one to
three times of the amount overdue. In accordance with the Interim Regulations on Collection and
Payment of Social Insurance Premiums (
ᎈ൬ᅄᖮᅲБૢԷ) promulgated by the State
Council on 22 January 1999, and amended on 24 March 2019, social insurance premiums that should
be paid by employees will be withheld and paid by the employer. An employer that fails to withhold
and pay the social insurance premiums may be ordered to withhold and pay the required contributions
within a prescribed time limit and be subject to a daily 0.2% late fee since the payment is due.
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According to the Regulations on Management of Housing Fund (၍ଣૢԷ)
which was promulgated by the State Council on 3 April 1999 and became effective on 3 April 1999
and as amended on 24 March 2019, an employer that fails to make housing fund contributions may be
ordered to rectify the noncompliance and pay the required contributions within a stipulated time limit;
otherwise, an application may be made to a local court for compulsory enforcement.
Regulations relating to Leasing
Pursuant to the Law of the PRC on Administration of Urban Real Estate (
۬
), when leasing premises, the lessor and lessee are required to enter into a written
lease contract, containing such provisions as the leasing term, use of the premises, rental and repair
liabilities, and other rights and obligations of both parties. Both lessor and lessee are also required to
register the lease with the real estate administration department. If the lessor and lessee fail to go
through the registration procedures, both lessor and lessee may be subject to fines.
According to the Civil Code, the lessee may sublease the leased premises to a third party,
subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between
the lessee and the lessor remains valid. The lessor is entitled to terminate the lease contract if the lessee
subleases the premises without the consent of the lessor. In addition, if the lessor transfers the
premises, the lease contract between the lessee and the lessor will still remain valid. Where the
mortgaged property has been leased and the possession thereof has been transferred before the creation
of mortgage, the original lease relations shall not be affected by the mortgage.
Regulations Relating to Foreign Exchange and Dividend Distribution
Regulations Relating to Foreign Currency Exchange
The principal regulations governing foreign currency exchange in the PRC are the Foreign
Exchange Administration Regulations of the PRC (
ʕശɛ͏΍ձ਷̮ි၍ଣૢԷ), which was last
amended in 2008. Under PRC foreign exchange regulations, payments of current account items, such
as profit distributions, interest payments and trade and service-related foreign exchange transactions,
can be made in foreign currencies without prior approval from SAFE by complying with certain
procedural requirements. By contrast, approval from or registration with appropriate government
authorities is required where Renminbi is to be converted into foreign currency and remitted out of the
PRC to pay capital account items, such as direct investments, repayment of foreign currency-
denominated loans, repatriation of investments and investments in securities outside of the PRC.
In 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign
Exchange Administration Policies on Foreign Direct Investment (
ટҳ༟̮
), which substantially amends and simplifies the foreign exchange procedure.
Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as
pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the
reinvestment of Renminbi proceeds derived by foreign investors in the PRC, and remittance of foreign
exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer
require the approval or verification of SAFE, and multiple capital accounts for the same entity may be
opened in different provinces, which was not possible previously. In 2013, SAFE specified that the
administration by SAFE or its local branches over direct investment by foreign investors in the PRC
must be conducted by way of registration and banks must process foreign exchange business relating to
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the direct investment in the PRC based on the registration information provided by SAFE and its
branches. In February 2015, SAFE issued the Circular on Further Simplifying and Improving the
Policies for Foreign Exchange Administration for Direct Investment (
ટҳ༟
)(the “ SAFE Circular 13 ”), which took effect on 1 June 2015. Instead of
applying for approvals regarding foreign exchange registrations of foreign direct investment and
overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange
registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly
review the applications and conduct the registration.
In March 2015, SAFE promulgated the Circular Concerning Reform of the Administrative
Approaches to the Settlement of Foreign Capital of Foreign-invested Enterprises (
̮ਠҳ༟
)(the “SAFE Circular 19 ”), which expands a pilot reform of the
administration of the settlement of the foreign exchange capitals of foreign-invested enterprises
nationwide. SAFE Circular 19 replaced both the Circular on Issues Relating to the Improvement of
Business Operations with Respect to the Administration of Foreign Exchange Capital Payment and
Settlement of Foreign-invested Enterprises (
˕˹ഐි၍ଣϞᗫุਕ
)(the “SAFE Circular 142 ”), and the Circular on Issues concerning the Pilot Reform
of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of
Foreign-invested Enterprises in Certain Areas (
ഐි၍ଣ
). SAFE Circular 19 allows all foreign-invested enterprises established
in the PRC to settle their foreign exchange capital on a discretionary basis according to the actual
needs of their business operation, provides the procedures for foreign invested companies to use
Renminbi converted from foreign currency-denominated capital for equity investments and removes
certain other restrictions that had been provided in SAFE Circular 142. However, SAFE Circular 19
continues to prohibit foreign-invested enterprises from, among other things, using Renminbi funds
converted from their foreign exchange capital for expenditure beyond their business scope and
providing entrusted loans or repaying loans between non-financial enterprises. SAFE promulgated the
Circular on Reforming and Standardising the Foreign Exchange Settlement Management Policy of
Capital Account (
)( the “ SAFE Circular 16 ”)
effective in June 2016, which reiterates some of the rules set forth in SAFE Circular 19. SAFE Circular
16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign
debt offering proceeds and remitted foreign listing proceeds, and the corresponding Renminbi capital
converted from foreign exchange may be used to extend loans to related parties or repay inter-company
loans (including advances by third parties). However, there are substantial uncertainties with respect to
SAFE Circular 16’s interpretation and implementation in practise.
In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign
Exchange Administration and Optimising Genuineness and Compliance Verification (
ආɓӉપ
)(the “ SAFE Circular 3 ”), which stipulates several
capital control measures with respect to the outbound remittance of profits from domestic entities to
offshore entities, including (i) banks must check whether the transaction is genuine by reviewing board
resolutions regarding profit distribution, original copies of tax filing records and audited financial
statements, and (ii) domestic entities must retain income to account for previous years’ losses before
remitting any profits. Moreover, pursuant to SAFE Circular 3, domestic entities must explain in detail
the sources of capital and how the capital will be used, and provide board resolutions, contracts and
other proof as a part of the registration procedure for outbound investment.
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On 23 October 2019, SAFE promulgated the Circular on Further Promoting the Cross-border
Trade and Investment Facilitation (), which permits
non-investment foreign-invested enterprises to use their capital funds to make equity investments in the
PRC, with genuine investment projects and in compliance with effective foreign investment
restrictions and other applicable laws. However, there are still substantial uncertainties as to its
interpretation and implementations in practise.
According to the Circular on Optimising Foreign Exchange Administration to Support the
Development of Foreign-related Business (
)
promulgated and effective on 10 April 2020 by the SAFE, the reform of facilitating the payments of
incomes under the capital accounts shall be promoted nationwide. Under the prerequisite of ensuring
true and compliant use of funds and compliance and complying with the prevailing administrative
provisions on use of income from capital projects, enterprises which satisfy the criteria are allowed to
use income under the capital account, such as capital funds, foreign debt and overseas listing, etc., for
domestic payment, without the need to provide proof materials for veracity to the bank beforehand for
each transaction.
Regulations Relating to Dividend Distribution
The principal regulations governing distribution of dividends of foreign-invested enterprises is
the Company Law. Under this laws and its regulations, foreign-invested enterprises in China may pay
dividends only out of their accumulated after-tax profits, if any, determined in accordance with China’s
accounting standards and regulations. In addition, a PRC company, including a foreign- invested
enterprise in China, is required to allocate at least 10% of its accumulated profits each year, if any, to
fund certain reserve funds until these reserves have reached 50% of the registered capital of the
enterprise. A PRC company may, at its discretion, allocate a portion of its after-tax profits based on
China accounting standards to staff welfare and bonus funds. These reserves are not distributable as
cash dividends.
Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents
In 2014, SAFE issued the Circular on Foreign Exchange Administration of Overseas
Investments and Financing and Round-Trip Investments by Domestic Residents via Special Purpose
Vehicles (
) (the
“SAFE Circular 37 ”). SAFE Circular 37 regulates foreign exchange matters in relation to the use of
special purpose vehicles by PRC residents or entities to seek offshore investment and financing or
conduct round trip investment in the PRC. Under SAFE Circular 37, a “special purpose vehicle” refers
to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the
purpose of seeking offshore financing or making offshore investment, using legitimate onshore or
offshore assets or interests, while “round trip investment” refers to direct investment in the PRC by
PRC residents or entities through special purpose vehicles, namely, establishing foreign-invested
enterprises to obtain ownership, control rights and management rights. SAFE Circular 37 provides that,
before making a contribution into a special purpose vehicle, PRC residents or entities are required to
complete foreign exchange registration with SAFE or its local branch.
In 2015, SAFE Circular 13 amended SAFE Circular 37 by requiring PRC residents or entities
to register with qualified banks rather than SAFE or its local branch in connection with their
establishment or control of an offshore entity established for the purpose of overseas investment or
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REGULATIONS
financing. PRC residents or entities who had contributed legitimate onshore or offshore interests or
assets to special purpose vehicles but had not registered as required before the implementation of
SAFE Circular 37 must register their ownership interests or control in the special purpose vehicles with
qualified banks. An amendment to the registration is required if there is a material change with respect
to the special purpose vehicle registered, such as any change of basic information (including change of
the PRC residents, name and operation term), increases or decreases in investment amount, transfers or
exchanges of shares, and mergers or divisions. Failure to comply with SAFE registration requirements
described above, or making misrepresentations or failing to disclose the control of the foreign-invested
enterprise that is established through round-trip investment, may result in restrictions being imposed on
the foreign exchange activities of the relevant foreign- invested enterprise, including payment of
dividends and other distributions, such as proceeds from any reduction in capital, share transfer or
liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may
also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration
regulations.
Regulation Relating to Stock Incentive Plans
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange
Administration over Involvement of Domestic Individuals in Equity Incentive Plans of Overseas Listed
Companies (
) in February
2012. Pursuant to this circular and other relevant rules and regulations, PRC residents who participate
in a stock incentive plan in an overseas publicly listed company are required to register with SAFE or
its local branches and complete certain other procedures. Participants in a stock incentive plan who are
PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas
publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the
SAFE registration and other procedures with respect to the stock incentive plan on behalf of the
participants.
In addition, the PRC agent is required to amend the SAFE registration with respect to the stock
incentive plan if there is any material change to the stock incentive plan or the PRC agent or any other
material changes. The PRC agent must apply to SAFE or its local branches on behalf of the PRC
residents who have the right to exercise the employee share options for an annual quota for the
payment of foreign currencies in connection with the PRC residents’ exercise of the employee share
options. The foreign exchange proceeds received by the PRC residents from the sale of shares under
the stock incentive plans granted and dividends distributed by the overseas listed companies must be
remitted into the bank accounts in the PRC opened by the PRC agents before distribution to such PRC
residents.
Regulations Relating to Taxation
Enterprise Income Tax
Pursuant to the Enterprise Income Tax Law of the PRC (
),
which was promulgated by the National People’s Congress on 16 March 2007, took effect on 1 January
2008 and was last amended on 29 December 2018, and its implementing rules, enterprises are
classified into resident enterprises and non-resident enterprises. PRC resident enterprises typically pay
an enterprise income tax at the rate of 25% while non-PRC resident enterprises without any branches in
the PRC should pay an enterprise income tax in connection with their income from the PRC at the tax
rate of 10%. The Enterprise Income Tax Law and its implementation rules permit certain High and
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New Technologies Enterprises to enjoy a reduced 15% enterprise income tax rate subject to these
enterprises meeting certain qualification criteria.
The Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated
Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies (ྤ
) promulgated by the State
Administration of Taxation, on 22 April 2009, taking effect on 1 January 2008, and last amended on
29 December 2017, sets out the standards and procedures for determining whether the “de facto
management body” of an enterprise registered outside of mainland China and controlled by mainland
Chinese enterprises or mainland Chinese enterprise groups is located within mainland China. On
27 July 2011, the State Administration of Taxation issued a trial version of the Administrative
Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident
Enterprises (
ج( ༊Б)), which took effect on 1 September
2011 and was last amended in June 2018, to clarify certain issues in the areas of resident status
determination, post-determination administration and competent tax authorities’ procedures. The PRC
Enterprise Income Tax Law and the implementation rules provide that an income tax rate of 10% will
normally be applicable to dividends payable to investors that are “non-resident enterprises,” and gains
derived by such investors, which (a) do not have an establishment or place of business in the PRC or
(b) have an establishment or place of business in the PRC, but the relevant income is not effectively
connected with the establishment or place of business to the extent such dividends and gains are
derived from sources within the PRC. Such income tax on the dividends may be reduced pursuant to a
tax treaty between the PRC and other jurisdictions. Pursuant to the Arrangement Between the
Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double
Taxation and Tax Evasion on Income (
ᅄ೼ձԣ˟ਊဍ೼
τર), promulgated by the State Administration of Taxation on 21 August 2006, and other
applicable PRC Laws, if a Hong Kong resident enterprise is the beneficial owner of the dividends and
is determined by the competent PRC tax authority to have satisfied the relevant conditions and
requirements, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives
from a PRC resident enterprise may be reduced to 5% upon receiving approval from in-charge tax
authority. However, based on the Notice on Certain Issues with Respect to the Enforcement of
Dividend Provisions in Tax Treaties (
) promulgated by
the State Administration of Taxation and taking effect on 20 February 2009, 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, such PRC tax authorities may adjust the
preferential tax treatment. The State Administration of Taxation promulgated the Notice on Issues
Concerning “Beneficial Owners” in Tax Treaties (
ʕ“Ϟɛ”Ϟᗫਪ
ʮѓ) in February 2018, which took effect in April 2018 and provided that in determining
whether a non-resident enterprise has the status as a beneficial owner, comprehensive analysis shall be
conducted based on the factors listed therein and the actual circumstances of the specific case shall be
taken into consideration.
Value-added Tax
According to the Provisional Regulations on Value-added Tax (
೼ᅲБૢԷ)
promulgated by the State Council on 13 December 1993 and last amended on 19 November 2017, and
the Implementing Rules of the Provisional Regulations on Value-added Tax (
୚
) promulgated by the Ministry of Finance on 25 December 1993 and last amended on 28 October
2011, all taxpayers selling goods, providing processing, repairing or replacement services or importing
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goods within the PRC shall pay VAT. On 4 April 2018, the Ministry of Finance and the State
Administration of Taxation issued the Circular on Adjustment of VAT Rates (೼೼ଟ
), which took effect on 1 May 2018. According to the abovementioned circular, the taxable
goods previously subject to VAT rates of 17% and 11% respectively became subject to lower VAT
rates of 16% and 10% respectively starting from 1 May 2018. Furthermore, according to the
Announcement on Relevant Policies for Deepening VAT Reform (
ʮ
ѓ) jointly promulgated by the Ministry of Finance, the State Administration of Taxation and the
General Administration of Customs, which took effect on 1 April 2019, the taxable goods previously
subject to VAT rates of 16% and 10% respectively became subject to lower VAT rates of 13% and 9%
respectively starting from 1 April 2019.
Regulations Relating to M&A Rules and Overseas Listings
On 8 August 2006, six PRC regulatory agencies including the MOFCOM and the CSRC
adopted the M&A Rules, which took effect on 8 September 2006 and were amended on 22 June 2009.
Pursuant to the M&A Rules, the approval of the MOFCOM must be obtained if overseas companies
established or controlled by PRC enterprises or residents acquire domestic companies affiliated with
such PRC enterprises or residents. In addition, the M&A Rules require offshore special purpose
vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and
controlled by PRC enterprises or residents to obtain the approval of the CSRC prior to publicly listing
their securities on an overseas stock exchange.
Furthermore, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on
Illegal Securities Activities (
จԈ), which were available to the
public on 6 July 2021 and emphasised the need to strengthen the administration over illegal securities
activities and the supervision on overseas listings by 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 domestic industry competent authorities and
regulatory authorities will be clarified.
On 17 February 2023, the CSRC promulgated the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies (
ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ༊Б፬
) (the “ Overseas Listing Trial Measures ”), and relevant five guidelines, which came into effect
as of 31 March 2023. According to the Overseas Listing Trial Measures, PRC domestic enterprises that
seek to offer and list securities in overseas markets, either in direct or indirect means (the “ Overseas
Offering and Listing ”), are required to fulfil the filing procedure with the CSRC and submit filing
reports, legal opinions, and other relevant documents.
Under the Overseas Listing Trial Measures, a filing-based regulatory regime shall be applied to
both “direct overseas offering and listing” and “indirect overseas offering and listing” of PRC domestic
companies. The “indirect overseas offering and listing” of PRC domestic companies refers to such
securities offering and listing in an overseas market made in the name of an offshore entity, but based
on the underlying equity, assets, earnings or other similar rights of a domestic company which operates
its main business domestically. If the issuer meets the following conditions, the offering and listing
shall be determined as an indirect overseas offering and listing by a PRC domestic company: (i) the
total assets, net assets, revenues or profits of the domestic operating entity or entities of the issuer in
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the most recent accounting year account for more than 50% of the corresponding figure in the issuer’s
audited consolidated financial statements for the same period; (ii) most of the senior managers in
charge of business operation and management of the issuer are Chinese citizens or have domicile in
China, and its main places of business are located in China or main business activities are conducted in
China. Domestic companies that seek to offer and list securities in overseas markets shall fulfil the
filing procedure with the CSRC, and, among others, shall strictly comply with laws and regulations and
relevant provisions concerning national security in spheres of foreign investment, cybersecurity, and
data security, and earnestly fulfil their obligations to protect national security.
The Overseas Listing Trial Measures provide that an overseas offering and listing is prohibited
under any of the following circumstances: (i) if the intended securities offering and listing falls under
specific clauses in national laws and regulations and relevant provisions prohibiting such financing
activities; (ii) if the intended securities offering and listing in overseas market may constitute a threat to
or endanger national security as reviewed and determined by competent authorities under the State
Council in accordance with law; (iii) if, in recent three years, the domestic company or its controlling
shareholders and actual controllers have committed corruption, bribery, embezzlement,
misappropriation of property, or other criminal offences disruptive to the order of the socialist market
economy; (iv) if the domestic company is currently under judicial investigations for suspicion of
criminal offences or under investigations for suspicion of major violations; or (v) if there are material
ownership disputes over the equities of the domestic company held by the domestic company’s
controlling shareholders or the shareholders whose actions are controlled by the controlling
shareholders or actual controllers.
The Overseas Listing Trial Measures and relevant five guidelines require that where an issuer
makes an application for initial public offering and listing in an overseas market, the filing entity shall
submit to the CSRC filing documents, which include but are not limited to those specified below,
within three working days after such application is submitted: (i) filing reports and associated
undertakings; (ii) regulatory opinions, filings or approval and related documents issued by competent
industry authorities (where applicable); (iii) opinions issued by competent authorities under the State
Council on security assessment and review of the issuer (where applicable); (iv) legal opinions
provided by a domestic law firm; and (v) a prospectus or listing documents. For violations of these
provisions or measures thereof, the CSRC and other competent authorities under the State Council may
impose administrative regulatory measures on the issuer and securities companies, securities service
institutions and relevant practitioners providing corresponding services in China, such as order for
correction, regulatory talks and warning letters, proportionate to the severity of the violations.
The Overseas Listing Trial Measures also set forth the issuer’s reporting obligations in the
event of occurrence of material events (the “ Material Events ”) after the Overseas Offering and
Listing. In the event of the occurrence of any of the following Material Events, the issuer shall make a
detailed report to the CSRC within three working days after the occurrence and public announcement
of the relevant event: (i) change in controlling rights; (ii) being subject to investigation, punishment or
other measures by overseas securities regulatory authorities or the relevant authorities; (iii) changing
listing status or changing the listing board; or (iv) voluntary or compulsory termination of listing.
Besides, if any material change in the principal business and operation of the issuer after its Overseas
Offering and Listing makes the issuer no longer within the scope of record-filing, the issuer shall
submit a special report and a legal opinion issued by a PRC domestic law firm to the CSRC within
three working days after the occurrence of the relevant change to provide an explanation of the relevant
situation.
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According to the Notice on Arrangements for Record Filing Administration of Overseas
Offering and Listing of Domestic Enterprises () and
the relevant replies by the officials from CSRC which are both promulgated with the Overseas Listing
Trial Measures simultaneously, the PRC domestic companies that have already been listed overseas or
meet all of the following conditions shall be deemed as existing issuers (
πඎΆุ) (the “ Existing
Issuers”) : (1) before the effective date of the Overseas Listing Trial Measures (i.e. 31 March 2023),
the PRC domestic company’s application for its indirect Overseas Offering and Listing has been
approved by the relevant overseas regulatory authorities or securities exchanges (for example, a listing
hearing has been passed by the Stock Exchange) and do not need to re-obtain the approval from the
relevant overseas regulatory authorities or securities exchanges for their indirect overseas offering and
listing prior to the effective date of the Overseas Listing Trial Measures (i.e. 31 March 2023) and do
not need to re-perform the regulatory procedures for offering and listing with the overseas regulatory
authorities or overseas stock exchanges (for example, a new listing hearing is required by the Stock
Exchange); and (2) the PRC domestic enterprise completes the Overseas Offering and Listing on or
prior to 30 September 2023. The Existing Issuers are not required to complete the filling procedures
immediately, and they shall be required to file with the CSRC when subsequent matters such as
refinancing are involved.
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SUBSTANTIAL SHAREHOLDERS
The following table (together with its notes) sets out, so far as our Directors are aware, persons
who will have interests and/or short positions (as applicable) in the Shares or underlying Shares which
would fall to be disclosed to our Company and the Stock Exchange 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 issued voting shares of our Company:
Name of substantial shareholders
Capacity/
Nature of Interest
Number of
Shares(1)
Approximate
percentage of
interest our
Company
immediately
upon the
Listing
(1)
MIYT Holdings Limited(2) ........................... Beneficial interest 125,316,184 19.82%
Buzhen Zhang(2) ................................... Interest in controlled corporations 125,316,184 19.82%
Interest in options 4,800,000 0.76%
Million Surplus Developments Limited (3) ............... Beneficial interest 81,938,584 12.96%
Internet Fund V Pte. Ltd. (4) .......................... Beneficial interest 80,000,000 12.65%
H Capital V, L.P. (5) ................................. Beneficial interest 59,588,244 9.42%
Shanghai Fosun Pharmaceutical Development Co., Ltd. (6) . . Beneficial interest 55,341,760 8.75%
DCM Investments (DE 5), LLC (7) ..................... Beneficial interest 53,323,236 8.43%
Green Pine Capital Partners (8) ........................ Interest in controlled corporations 43,209,656 6.83%
Notes:
(1) The figures above are subject to the Assumptions.
(2) MIYT Holdings Limited is controlled by MIYT Worldwide Limited, which in turn is wholly owned by a trust for the benefit of Mr.
Buzhen Zhang, our Director. Under the SFO, Mr. Buzhen Zhang is deemed to be interested in all of the interests in our Company held by
MIYT Holdings Limited. Additionally, Mr. Zhang is deemed to be interested in 1,200,000 Shares underlying options granted under the
2019 Share Incentive Plan; see “Statutory and general information—Further information about our Directors—Disclosure of interests” in
Appendix IV for further information.
(3) Million Surplus Developments Limited is wholly owned by Meta Group Limited, which is ultimately controlled as to one-third or more
by Mr. Chu Mang Yee though his controlled corporations (as defined under the SFO), which include among others, Sounda Properties
Limited and Sounda Hopson Investment Holdings Limited. Under the SFO, each of Mr. Chu Mang Yee and the controlled corporations
through which Mr. Chu Mang Yee controls Million Surplus Developments Limited is deemed to be interested in all of the interests in our
Company held by Million Surplus Developments Limited.
(4) Internet Fund V Pte. Ltd. is managed by Tiger Global Singapore Pte. Ltd., which is an affiliate of Tiger Global Management, LLC, a
Delaware limited liability company. All such shares are controlled by Chase Coleman and Scott Shleifer.
(5) H Capital V, L.P. is a limited partnership, the general partner of which is ultimately controlled by Ms. Xiaohong Chen through her
controlled corporations (as defined under the SFO), H Capital V GP, Ltd. and H Capital V GP, L.P. Under the SFO, each of
Ms. Xiaohong Chen and her controlled corporations through which Ms. Xiaohong Chen controls H Capital V, L.P. is deemed to be
interested in all of the interests in our Company held by H Capital V, L.P..
(6) Shanghai Fosun Pharmaceutical Development Co., Ltd. is a wholly owned subsidiary of Shanghai Fosun Pharmaceutical (Group) Co.,
Ltd., a company listed on the Stock Exchange (stock code: 2196) and Shanghai Stock Exchange (stock code: 600196). Under the SFO,
Shanghai Fosun Pharmaceutical (Group) Co., Ltd. is deemed to be interested in all of the interests in our Company held by Shanghai
Fosun Pharmaceutical Development Co., Ltd.
(7) DCM Investments (DE 5), LLC is ultimately controlled as to one-third or more by DCM International IX, Ltd. Under the SFO, each of
DCM International IX, Ltd. and its controlled corporations (as defined under the SFO) through which it controls DCM Investments (DE
5), LLC is deemed to be interested in all of the interests in our Company held by DCM Investments (DE 5), LLC.
(8) Represents (i) 8,465,995 ordinary shares held by Genius II Found Limited; (ii) 1,157,188 ordinary shares held by Genius V Found
Limited; and (iii) 1,179,231 ordinary shares held by Shanghai Jixu Information Technology Partnership (Limited Partnership). These
shareholders are part of the Green Pine Capital Partners group. Genius II Found Limited and Shanghai Jixu Information Technology
Partnership are ultimately controlled by Shenzhen Songhe International Capital Management Partnership (Limited Partnership) (
ଉέ̹
ͫ਷ყ༟͉၍ଣΥྫΆุ(Υྫ)), the general partner of which is Fei Luo (࠭Under the SFO, Fei Luo and his controlled
corporations (as defined under the SFO) through which they control, and any other person that controls, Genius II Found Limited and
Shanghai Jixu Information Technology Partnership (Limited Partnership), on an aggregated basis, are deemed to be interested in all of
the interests in our Company held by these shareholders.
Save as disclosed above and in “Statutory and general information—Further information about
our Directors—Disclosure of interests” in Appendix IV, our Directors are not aware of any other
person who will, immediately upon Listing (subject to the Assumptions), have any interest and/or short
positions in our Shares or underlying Shares which would fall to be disclosed to us pursuant to the
provisions of Divisions 2 and 3 of Part XV of the SFO.
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CORNERSTONE INVESTOR
OVERVIEW
We have entered into a cornerstone investment agreement (“ Cornerstone Investment
Agreement”) with the cornerstone investor set out below (“ Cornerstone Investor ”), pursuant to
which the Cornerstone Investor has agreed to (subject to certain conditions) subscribe, or cause its
designated entities to subscribe, for such number of Offer Shares (rounded down to the nearest whole
board lot of 200 Shares) that may be purchased at the Offer Price of an aggregate amount of up to
approximately US$12.8 million (approximately HK$100.3 million) (exclusive of brokerage, SFC
transaction levy, AFRC transaction levy and Stock Exchange trading fee) (“ Cornerstone Investment”
or “Cornerstone Placing”).
The Cornerstone Placing will form part of the International Offering, and Cornerstone Investor
will not acquire any Offer Shares under the Global Offering (other than pursuant to the Cornerstone
Investment Agreement). The Offer Shares to be acquired by the Cornerstone Investor will rank pari
passu in all respects with the fully paid Shares in issue and will be counted towards the public float of
our Company under Rule 8.24 of the Listing Rules.
Other than a guaranteed allocation of the relevant Offer Shares at the final Offer Price, the
Cornerstone Investor does not have any preferential rights under the Cornerstone Investment
Agreement, as compared with other public Shareholders. There are no side arrangements between us
and the Cornerstone Investor or any benefit, direct or indirect, conferred on the Cornerstone Investor
by virtue of or in relation to the Cornerstone Placing, other than a guaranteed allocation of the relevant
Offer Shares at the final Offer Price.
The Offer Shares to be subscribed by the Cornerstone Investor may be affected by reallocation
in the event of over-subscription under the Hong Kong Public Offering, as described in “Structure of
the Global Offering—The Hong Kong Public Offering—Reallocation”. Details of the actual number of
Offer Shares to be allocated to the Cornerstone Investor will be disclosed in the allotment results
announcement to be issued by us on or around 27 June 2023.
There will be no delayed delivery or delayed settlement of the Offer Shares to be subscribed by
the Cornerstone Investor.
THE CORNERSTONE INVESTOR
As confirmed by the Cornerstone Investor, its subscription under the Cornerstone Placing
would be financed by its own internal financial resources and/or the financial resources of its
shareholders, and that all necessary approvals have been obtained with respect to its Cornerstone
Investment, and that no specific approval from any stock exchange (if relevant) or its shareholders is
required for its Cornerstone Investment.
Set out below is a description of the Cornerstone Investor:
1. ZGC INTERNATIONAL LIMITED
ZGC International Limited is a company incorporated under the laws of the British Virgin
Islands, principally engaged in investment and asset management, and is wholly-owned by ZGC
International Holding Limited. ZGC International Holding Limited is a wholly-owned subsidiary of
Zhongguancun Development Group Co., Ltd. (
ʮ̡)( “ZGC Group ”) which
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CORNERSTONE INVESTOR
acts as an overseas investment and financing and global innovation network construction coordinating
platform. ZGC Group is a state-owned enterprise established by the Beijing municipal government
which is principally engaged in a wide range of innovative integration services including equity
investment, debt financing, technology services, industrial park operation, local and international
collaboration and committed to becoming the premier global integrated innovation service provider.
Immediately following the Global Offering, the Cornerstone Investor will not constitute a
substantial shareholder of our Company nor will it has any Board representation in our Company.
To our Company’s best knowledge, the Cornerstone Investor is: (i) an Independent Third Party
and is not connected person; (ii) not accustomed to take instructions from us, our Directors, chief
executive, substantial shareholders, existing Shareholders or any of its subsidiaries or their respective
close associates in relation to the acquisition, disposal, voting or other disposition of the Shares
registered in their name or otherwise held by them; and (iii) not financed by us, our Directors, chief
executive, substantial shareholders, existing Shareholders or any of its subsidiaries or their respective
close associates.
CORNERSTONE PLACING
The table below sets out details of the Cornerstone Placing:
Assuming a final Offer Price of HK$19.00 per Share
(being the low-end of the indicative Offer Price range)
Cornerstone Investor
Subscription
amount
Number of
Offer
Shares to be
acquired(1)
Assuming the Over-Allotment
Option is not exercised
Assuming the Over-Allotment
Option is fully exercised
(US$ in
millions)
Approximately
% of the Offer
Shares
Approximately
% of the
issued share
capital(2)
Approximately
% of the Offer
Shares
Approximately
% of the
issued share
capital(2)
ZGC International Limited ..... 12.8 5,278,400 33.39% 0.83% 29.03% 0.83%
Total ...................... 12.8 5,278,400 33.39% 0.83% 29.03% 0.83%
Assuming a final Offer Price of HK$21.00 per Share
(being the mid-point of the indicative Offer Price range)
Cornerstone Investor
Subscription
amount
Number of
Offer
Shares to be
acquired(1)
Assuming the Over-Allotment
Option is not exercised
Assuming the Over-Allotment
Option is fully exercised
(US$ in
millions)
Approximately
% of the Offer
Shares
Approximately
% of the
issued share
capital(2)
Approximately
% of the Offer
Shares
Approximately
% of the
issued share
capital(2)
ZGC International Limited ..... 12.8 4,775,600 30.21% 0.76% 26.27% 0.75%
Total ...................... 12.8 4,775,600 30.21% 0.76% 26.27% 0.75%
Assuming a final Offer Price of HK$23.00 per Share
(being the high-end of the indicative Offer Price range)
Cornerstone Investor
Subscription
amount
Number of
Offer
Shares to be
acquired(1)
Assuming the Over-Allotment
Option is not exercised
Assuming the Over-Allotment
Option is fully exercised
(US$ in
millions)
Approximately
% of the Offer
Shares
Approximately
% of the
issued share
capital(2)
Approximately
% of the Offer
Shares
Approximately
% of the
issued share
capital(2)
ZGC International Limited ..... 12.8 4,360,400 27.58% 0.69% 23.98% 0.69%
Total ...................... 12.8 4,360,400 27.58% 0.69% 23.98% 0.69%
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CORNERSTONE INVESTOR
Notes:
(1) Rounded down to the nearest whole board lot of 200 Shares. Calculated based on the exchange rate set out in “Information about this
document and the Global Offering—Information about this document—Exchange rate conversion”.
(2) Immediately following the Global Offering, subject to the Assumptions.
CLOSING CONDITIONS
The subscription obligation of the Cornerstone Investor under its Cornerstone Investment
Agreement is subject to, among other things, the following closing conditions:
(a) the Underwriting Agreements being entered into and having become effective and
unconditional (in accordance with their respective original terms or as subsequently
waived or varied by agreement of the parties thereto) by no later than the time and date as
specified in the Underwriting Agreements, and neither of the aforesaid Underwriting
Agreements having been terminated;
(b) the Offer Price having been agreed upon between our Company and the Overall
Coordinator (on behalf of the underwriters of the Global Offering);
(c) the Listing Committee of the Stock Exchange having granted the listing of, and permission
to deal in, the Shares (including the Shares subscribed for by the Cornerstone Investor) as
well as other applicable waivers and approvals, and such approval, permission or waiver
having not been revoked prior to the commencement of dealings in the Shares on the
Stock Exchange;
(d) no Laws shall have been enacted or promulgated by any governmental authority which
prohibits the consummation of the transactions contemplated in the Global Offering or in
the Cornerstone Investment Agreement and there shall be no orders or injunctions from a
court of competent jurisdiction in effect precluding or prohibiting consummation of such
transactions; and
(e) the representations, warranties, undertakings and confirmations of such Cornerstone
Investor under the Cornerstone Investment Agreement are accurate and true in all material
respects and not misleading and that there is no material breach of such Cornerstone
Investment Agreement on the part of such Cornerstone Investor.
RESTRICTIONS ON DISPOSALS BY THE CORNERSTONE INVESTOR
The Cornerstone Investor has agreed that it will not, whether directly or indirectly, at any time
during the period of six months following the Listing Date (the “ Lock-up Period”), dispose of any of
the Offer Shares it has purchased pursuant to the relevant Cornerstone Investor Agreement, save for in
certain limited circumstances, such as transfers to any of its wholly-owned subsidiaries who will be
bound by the same obligations of such Cornerstone Investor, including the Lock-up Period restriction.
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SHARE CAPITAL
AUTHORISED AND ISSUED SHARE CAPITAL
The two tables below provides a description of the authorised and issued share capital of our
Company immediately following the Global Offering and upon Listing (subject to the Assumptions,
including following the Share Subdivision):
Authorised share capital
Number of Shares Description of Shares
Aggregate nominal
value of Shares
20,000,000,000 ....... Ordinary shares of a par value of US$0.0000025 each US$50,000
Issued share capital
Number of Shares Description of Shares
Aggregate nominal
value of Shares
616,541,252 .......... Shares of a par value of US$0.0000025 each in issue as at
the date of this document US$1,541.35
15,808,800........... Shares of a par value of US$0.0000025 each to be issued
pursuant to the Global Offering US$39.52
632,350,052.......... Shares in issue immediately following the Global Offering
and upon Listing US$1,580.88
CONVERSION OF PREFERRED SHARES UPON LISTING
As at the date of this document and prior to Listing, our issued share capital comprised
491,225,068 Preferred Shares and 125,316,184 ordinary Shares (for the avoidance of doubt, these
Share numbers are after the Share Subdivision and represent a Share of par value US$0.0000025 each).
See “History, reorganization and corporate structure—Capitalisation” for further details. Pursuant to
the shareholders’ agreement currently in effect and which shall terminate upon Listing, and our
Company’s articles of association currently in effect and which shall be replaced in its entirety with the
Articles of Association upon Listing, all Preferred Shares shall be automatically and immediately
converted into ordinary shares on a one-to-one basis. Following this conversion, our Company will
have in issue 491,225,068 additional ordinary Shares (being those converted from Preferred Shares),
representing approximately 79.7% of the total number of issued Shares immediately before the Global
Offering and approximately 77.7% of the total number of issued Shares immediately following the
Global Offering (subject to the Assumptions).
RANKING
The Offer Shares are ordinary shares and will rank pari passu in all respects with all Shares
currently in issue or to be issued as mentioned in this document, 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 document. Upon Listing, our Company will have one class of issued Shares and
each issued Share shall entitle its holder to one vote at a general meeting of our Company.
POTENTIAL CHANGES TO SHARE CAPITAL
Circumstances under which general meetings and class meetings are required
Pursuant to the Cayman Companies Act and the terms of the Articles of Association, our
Company may from time to time by ordinary resolution of shareholders (i) increase its share capital by
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SHARE CAPITAL
the creation of new shares; (ii) consolidate and divide its capital into shares of larger amount than its
existing shares; (iii) subdivide its shares into shares of smaller amount; and (iv) cancel any shares
which at the date of the passing of the resolution have not been taken or agreed to be taken by any
person. 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 “Summary of the constitution of our Company and Cayman Islands company law—Summary of
the constitution of our Company—Articles of Association—1. Shares—(c) Alteration of capital” in
Appendix III for further details.
If at any time the share capital of our Company is divided into different classes of shares, all or
any of the rights attached to any class of shares for the time being issued (unless otherwise provided
for in the terms of issue of the shares of that class) may, subject to the provisions of the Cayman
Companies Act, be materially adversely varied only with (in addition to a special resolution to amend
the Memorandum or the Articles) the consent in writing of the holders of all of the issued shares of that
class or with the sanction of a special resolution passed at a separate meeting of the holders of the
shares of that class. See “Summary of the constitution of our Company and Cayman Islands company
law—Summary of the constitution of our Company—Articles of Association—1. Shares—
(b) Variation of rights of existing shares or classes of shares” 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 mandate to allot, issue and deal with Shares or securities convertible into Shares of not more
than the sum of:
(a) 20% of the total number of the Shares in issue immediately following the completion of
the Global Offering (subject to the Assumptions); and
(b) the total number of Shares repurchased by our Company under the authority referred to in
“—General mandate to repurchase Shares”.
This general mandate to issue Shares will remain in effect until the earliest of:
(a) 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
(b) the expiration of the period within which our Company’s next annual general meeting is
required by the Memorandum and Articles of Association or any other applicable Laws of
the Cayman Islands to be held; or
(c) the date on which it is varied or revoked by an ordinary resolution of our Shareholders in
general meeting.
See “Statutory and general information—Further information about our Group—Resolutions of
our Shareholders dated 3 June 2023” in Appendix IV for further details of this general mandate.
General mandate to repurchase Shares
Subject to the Global Offering becoming unconditional, our Directors have been granted a
general mandate to exercise all the powers of our Company to repurchase our own securities of up to
10% of the total number of our Shares in issue immediately following the completion of the Global
Offering (subject to the Assumptions).
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SHARE CAPITAL
This repurchase mandate only relates to repurchases made on the Stock Exchange, or on any
other stock exchange on which the securities of our Company may be listed (and which is recognised
by the SFC and the Stock Exchange for this purpose), and which are in accordance with the Listing
Rules or equivalent rules or regulations of any other stock exchange as amended from time to time.
This general mandate to repurchase Shares will remain in effect until the earliest of:
(a) 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
(b) the expiration of the period within which our Company’s next annual general meeting is
required by the Memorandum and Articles of Association or any other applicable Laws of
the Cayman Islands to be held; or
(c) the date on which it is varied or revoked by an ordinary resolution of our Shareholders
passed in a general meeting.
See “Statutory and general information—Further information about our Group—Explanatory
statement on repurchase of our own securities” in Appendix IV for further details of this repurchase
mandate.
Share Incentive Plans
We have adopted the Share Incentive Plans, pursuant to which further Shares may be issued.
See “Statutory and general information—Share Incentive Plans” in Appendix IV for further details.
Share Subdivision
Our Shareholders have approved the Share Subdivision. See “Statutory and general
information—Further information about our Group—Changes in share capital of our Company” in
Appendix IV for further details.
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FUTURE PLANS AND USE OF PROCEEDS
FUTURE PLANS
See “Business — Our Strategies” in this prospectus for a detailed description of our future
plans.
USE OF PROCEEDS
Assuming the Over-allotment Option is not exercised, after deducting the underwriting
commissions and other estimated offering expenses payable by us in connection with the Global
Offering, and assuming an Offer Price of HK$21.00 per Share (being the mid-point of the Offer Price),
we estimate that we will receive net proceeds of approximately HK$253.6 million from the Global
Offering. We intend to use the net proceeds from the Global Offering for the following purposes:
1. Approximately 45% of the net proceeds, or approximately HK$114.1 million, is expected
to be used for further developing our pharmaceutical circulation business, including:
 20%, or approximately HK$50.7 million, for leveraging market insights accumulated
through our platform to engage more qualified upstream participants and diversify
our SKU offerings, making our platform a more attractive go-to platform for our
buyers. Specifically, we plan to (i) engage more sellers who sell and promote the new
categories of products, such as medical devices and Chinese medicine, through
increased resources for sales and marketing forces and more marketing campaigns to
attract sellers to join our platform, in order to further diversify and optimise the
offerings on our Online Marketplace; (ii) establish cooperative partnerships with
more suppliers, especially the pharmaceutical companies, to expand our sourcing
channels and options, and guarantee the diversity and the adequacy of high-quality
SKUs, connect our suppliers with our wide network of buyers and provide them with
digital marketing solutions; and (iii) invest in marketing and promotion of products
sold through our Targeted Product Launch Business;
 20%, or approximately HK$50.7 million, for improving our BD capabilities and
efficiencies with our dedicated digital tools. Specifically, we plan to (i) advance our
centralised and digitalised BD management system to expand our information
database and improve our feedback system in terms of cycle time and quality of
recommendations; (ii) invest into the academic and on-the-job training of BD team to
equip BD personnel with latest professional knowledge in pharmacology and industry
best-practise in order to upgrade the overall quality of our BD teams; (iii) attract and
retain, through providing competitive compensation with effective incentive
structures, seasoned BD executives to manage, lead and coach regional BD teams;
and (iv) strategically expand the BD team to align with our expansion plan, including
our strategy to increase our coverage of large-chain pharmacies; and
 5%, or approximately HK$12.7 million, for strengthening our supply chain capability
to make it smarter, more digitalised and more efficient. Specifically, we plan to
(i) enhance the automation of facilities and machinery to improve the efficiency of
our self-operated supply chain. For example, we plan to procure and upgrade our
automated sorting equipment to help us sort through a vast range of SKUs more
quickly and effectively; (ii) selectively open more self-operated warehouses in areas
currently not covered by our warehousing network to expand our sales reach into new
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FUTURE PLANS AND USE OF PROCEEDS
markets, or in areas currently covered by our warehousing network in order to further
penetrate existing markets.
2. Approximately 25% of the net proceeds, or approximately HK$63.4 million, is expected to
be used for further developing our other businesses, including:
 15%, or approximately HK$38.0 million, expanding the geographical coverage of our
ClouDiagnos services to cover more primary healthcare institutions, especially in the
Southern, Eastern and Central regions of China. We plan to procure more equipment
to be provided to primary healthcare institutions to improve their diagnostic quality,
and invest into optimising an integrated end-to-end process of diagnostic testing
services and improving efficiency and service quality of ClouDiagnos;
 10%, or approximately HK$25.4 million, promoting market awareness and popularity
of our wePharmacy, including educating downstream pharmacies on the benefits of
wePharmacy and launching marketing campaigns. We plan to further penetrate our
extensive network of pharmacies and help them extend operation hours as well as
enhance operating efficiencies.
3. Approximately 22% of the net proceeds, or approximately HK$55.8 million, is expected to
be used for research and development, primarily by recruiting and retaining high quality
software engineers, data scientists, AI experts and other R&D talents with competitive
remunerations. The R&D talents will dedicate to elevating our technological capability
and digitalising the experience of our ecosystem participants, from the perspective of:
 upgrading our platform’s overall technology and infrastructure as well as data
analytics capabilities and improving our smart recommendations for the sellers and
buyers on our Online Marketplace;
 advancing our smart supply chain capabilities with digital solutions. Specifically, we
plan to improve the machine intelligence of our warehouse management systems, and
optimise algorithms, in order to optimise the costs of internal supply chain processes,
increase the efficiency of storage, quality control and fulfilment, and improve the
overall experience of our buyers;
 enhancing the functionality of our SaaS solutions, creating more user-friendly and
effective functions to satisfy the evolving needs of our ecosystem participants,
increasing the monetisation potential of our overall SaaS offering;
 improving the design, functions and connectivity of our wePharmacy booths, by
continuously investing into algorithm optimisation and virtual recognition techniques,
to help increase the store management efficiency of downstream pharmacies and
improve their service quality towards end customers;
 optimising the service quality and capabilities of ClouDiagnos, by continuously
improving the traceability of testing results, expanding the disease categories
coverage and enhancing the analytical quality of our ClouDiagnos report, to help
medical professionals at primary healthcare institutions make informed
recommendations and improve their diagnostic quality.
4. Approximately 8% of the net proceeds, or approximately HK$20.3 million, is expected to
be used for working capital and general corporate purposes.
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FUTURE PLANS AND USE OF PROCEEDS
The following table sets forth the implementation plans, expected timeframe and the amount
and percentage of net proceeds in respect of our developing of pharmaceutical circulation business,
developing of other businesses and research and development.
A Further developing our pharmaceutical circulation business
Amount and percentage of
net proceeds
(approximately
HK$114.1 million)
Implementation plan Implementation plan
(i) We will intensify our marketing efforts such as
marketing and promotion campaigns and coupons
offering to grow our brand equity and raise our
brand awareness among sellers and buyers, thus
attracting more of them to join our platform and
expand our network. Our marketing events and
discounts/coupons would be designed to encourage
repeat purchase, build strong user loyalty, and
develop incremental revenue opportunities. We will
also invest in digital promotion campaigns for
products sold through our Targeted Product Launch
Business. In addition, we will spend efforts on
launching and promoting the in-app links, such as
Medical Devices and Chinese Medicine, to further
diversify the SKUs offered on our platform. For
Chinese medicines, we plan to actively expand the
network with upstream sellers by leveraging our
deep-dive experience and well-established brand
image, with the goal of more than doubling the
number of active sellers of Chinese medicines on
our Online Marketplace to achieve 400 in the next
three years. For medical devices, they are currently
mainly distributed by third-party merchants on our
Online Marketplace. We plan to spend more efforts
in the future on developing medical device-related
SKUs under our Self-operation Business, in
particular, expanding this category into Targeted
Product Launch Business. In addition, we also plan
to further diversify the SKUs offered under the
Medical Devices, including but not limited to dental
devices, aesthetic devices, and physical therapy
equipment. We will take relevant measures to avoid
potential reputational and noncompliance risks
when expanding our product categories.
Before December 2025
20% of net proceeds, or approximately HK$50.7
million
(ii) We will additionally hire approximately 150 to
200 in-house business development staff, with
experience in sales function and/or in the
pharmaceutical industry to be dedicated to the
expansion of our buyer base. We are dedicated
to achieve a nationwide buyer network with
consistent service standard across China. We
will continue to adopt a performance-based
rewarding mechanism including commission,
Before December 2025
20% of net proceeds, or approximately
HK$50.7 million
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FUTURE PLANS AND USE OF PROCEEDS
A Further developing our pharmaceutical circulation business
Amount and percentage of
net proceeds
(approximately
HK$114.1 million)
bonuses and annual increment plan to attract
and retain more high-performance sales staff,
who are experienced in originating new
accounts, coaching and leading regional BD
teams. As some of our newly hired business
development staff will focus on developing
large-chained pharmacies clients, we expect
junior BD staff to have sales experience in
pharmaceutical, internet or consumer and retail
industries and senior BD staff to own bachelor
degree and sales experience at mature internet
companies with O2O (online to offline) local
services business. We also plan to establish
dedicated and professional business
development staff to onboard more primary
healthcare institutions in lower-tiered cities.
We will also provide them with constant
trainings to improve their sales skills and
pharmaceutical knowledge, so they can better
address the needs of large-chained pharmacies
and primary healthcare institutions with the
most up-to-date knowledge. We also will
constantly upgrade our in-house digital BD
management tools for our BD team to
effectuate their sales efforts.
(iii) We will open six more new smart warehouses,
with an average of two warehouses in a year
since 2023 and expected initial investment of
RMB15 million for each warehouse, in
Eastern, Southern and Northern regions of
China, where we already have brand awareness
and strong business growth momentum. We
also plan to upgrade our existing warehouse
facilities including process automation and
equipment renewal. This can further optimise
our supply chain network and capabilities to
expand our services and improve our service
quality for buyers.
Before December 2025
5% of net proceeds, or approximately HK$12.7
million
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FUTURE PLANS AND USE OF PROCEEDS
B Further developing our other businesses
Amount and percentage of
net proceeds
(approximately
HK$63.4 million)
Implementation plan Implementation plan
(i) We will procure testing equipment such as
point-of-care testing equipment for blood tests
and selectively place them at the primary
healthcare institutions we are serving and
working with, across China. We will hire
approximately 40-60 dedicated business
development staff and testing equipment
technicians to expand and operate our
ClouDiagnos business. We will also invest into
marketing campaigns and workshops to
promote our ClouDiagnos services and expand
the geographical coverage and increase the
awareness of such services.
Before December 2025
15% of net proceeds, or approximately
HK$38.0 million
(ii) We will invest into marketing campaigns and
educational seminars and workshops to
promote market awareness and the use of
unmanned pharmaceutical booths for our
wePharmacy business. We will also hire
approximately 20-30 dedicated business
development staff and booth technicians to
promote and operate our wePharmacy business.
Before December 2025
10% of net proceeds, or approximately
HK$25.4 million
C Research and development
Amount and percentage of
net proceeds
(approximately
HK$55.8 million)
Implementation plan Implementation plan
(i) We will hire approximately 200 to 250
in-house research and development personnel,
including software developers, software
engineers, data scientists and AI experts
dedicated to improve our platform’s overall
technological capabilities, upgrade the
e-Commerce platform, intelligentise supply
chain capabilities including design and
functions of warehouse logistics, payment and
security, optimise SaaS functionalities and
digitalization of all our other businesses. We
plan to offer competitive compensation
packages to attract and retain top-notch
research and development personnel.
Before December 2025
22% of net proceeds, or approximately
HK$55.8 million
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FUTURE PLANS AND USE OF PROCEEDS
In the event that 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$30.2 million, respectively. If we make an upward or downward Offer Price
adjustment to set the final Offer Price to be above or below the mid-point of the Offer Price range, we
will increase or decrease the allocation of the net proceeds to the above purposes on a pro rata basis.
The net proceeds that we would receive if the Over-allotment Option were exercised in full would be
(i) HK$335.9 million (assuming an Offer Price of HK$23.00 per Share, being the maximum Offer
Price), (ii) HK$301.1 million (assuming an Offer Price of HK$21.00 per Share, being the mid-point of
the Offer Price range) and (iii) HK$266.4 million (assuming an Offer Price of HK$19.00 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.
To the extent that the net proceeds of the Global Offering are not immediately required for the above
purposes or if we are unable to put into effect any part of our plan as intended, the net proceeds which
are not immediately applied will only be deposited into short-term demand deposits with licensed
banks or authorised financial institutions primarily located in Hong Kong (as defined under the
Securities and Futures Ordinance), as well as other licensed banks or authorised financial institutions in
Guangdong province where we have accounts with (as defined under applicable laws in the PRC).
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UNDERWRITING
HONG KONG UNDERWRITERS
China International Capital Corporation Hong Kong Securities Limited
CMB International Capital Limited
ICBC International Securities Limited
ABCI Securities Company Limited
Fosun International Securities Limited
Futu Securities International (Hong Kong) Limited
Tiger Brokers (HK) Global Limited
Valuable Capital Limited
Patrons Securities Limited
UNDERWRITING
This document 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 Company expects the International Offering to be fully underwritten by the International
Underwriters. If, for any reason, the Offer Price is not agreed between the Sole Overall Coordinator
(for itself and on behalf of the Underwriters) and the Company, the Global Offering will not proceed
and will lapse.
The Global Offering comprises the Hong Kong Public Offering of initially 1,581,200 Hong
Kong Offer Shares and the International Offering of initially 14,227,600 International Offer Shares,
subject, in each case, to reallocation on the basis as described in the section headed “Structure of the
Global Offering” in this document as well as to the Over-allotment Option (in the case of the
International Offering).
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, the Company is offering the Hong Kong
Offer Shares for subscription on the terms and conditions set out in this document, the GREEN
Application Form and the Hong Kong Underwriting Agreement at the Offer Price.
Subject to (a) the Stock Exchange granting approval for the listing of, and permission to deal in,
the Shares in issue and to be issued as mentioned in this document, on the Main Board of the Stock
Exchange and such approval not having been withdrawn and (b) certain other conditions set out in the
Hong Kong Underwriting Agreement, the Hong Kong Underwriters have agreed severally but not
jointly to procure subscribers for, or themselves to subscribe 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 document, the GREEN Application Form
and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on, among other things, the
International Underwriting Agreement having been executed and becoming unconditional and not
having been terminated in accordance with its terms.
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Grounds for Termination
The Sole Sponsor and the Sole Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters), in its sole and absolute discretion, shall have the right by giving a notice to the
Company at any time prior to 8:00 a.m. on the Listing Date to terminate the Hong Kong Underwriting
Agreement with immediate effect if any of the following events shall occur:
(a) there shall develop, occur, exist or come into force:
(i) any event, or series of events, in the nature of force majeure (including, without
limitation, any acts of government, declaration of a local, national, regional or
international emergency or war, calamity, crisis, epidemic, pandemic, outbreaks,
escalation, adverse mutation or aggravation of diseases (including, without limitation,
COVID-19, Severe Acute Respiratory Syndrome (SARS), swine or avian flu, H5N1,
H1N1, H7N9, Ebola virus, Middle East respiratory syndrome and such related/
mutated forms), comprehensive sanctions, strikes, lock-outs, other industrial actions,
fire, explosion, flooding, earthquake, tsunami, volcanic eruption, civil commotion,
rebellion, riots, public disorder, acts of war, outbreak or escalation of hostilities
(whether or not war is declared), acts of God, acts of terrorism (whether or not
responsibility has been claimed), paralysis in government operations, interruptions or
delay in transportation) in or affecting the Cayman Island, Hong Kong, the PRC, the
United States, the United Kingdom, the European Union (or any member thereof) or
any other jurisdiction relevant to the Group (each a “ Relevant Jurisdiction ” and
collectively, the “Relevant Jurisdictions”);
(ii) any change or development involving a prospective change, or any event or
circumstances or series of events likely to result in any change or development
involving a prospective change, in any local, national, regional or international
financial, economic, political, military, industrial, legal, fiscal, regulatory, currency,
credit or market matters or conditions, equity securities or exchange control or any
monetary or trading settlement system or other financial markets (including, without
limitation, conditions in the stock and bond markets, money and foreign exchange
markets, interbank markets and credit markets), in or affecting any of the Relevant
Jurisdictions;
(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 York
Stock Exchange, the NASDAQ Global Market, the London Stock Exchange, the
Shanghai Stock Exchange, the Shenzhen Stock Exchange, the Tokyo Stock Exchange
or the Singapore Stock Exchange;
(iv) any general moratorium on commercial banking activities in the PRC (imposed by
the People’s Bank of China), Hong Kong (imposed by the Financial Secretary or the
Hong Kong Monetary Authority or other competent authority), New York (imposed
at the U.S. Federal or New York State level or by any other competent authority),
London, the European Union (or any member thereof) or any of the other Relevant
Jurisdictions (declared by any relevant competent authority) or any disruption in
commercial banking or foreign exchange trading or securities settlement or clearance
services, procedures or matters in or affecting any of the Relevant Jurisdictions;
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(v) any new law or regulation or any change or development involving a prospective
change in existing laws or regulations or any change or development involving a
prospective change in the interpretation or application thereof by any court or any
competent governmental authority in or affecting any of the Relevant Jurisdictions;
(vi) the imposition of comprehensive sanctions under any sanctions laws or regulations
in, or the withdrawal of trading privileges which existed on the date of the Hong
Kong Underwriting Agreement, in whatever form, directly or indirectly, by, or for
any of the Relevant Jurisdictions;
(vii) any change or development involving a prospective change or amendment in or
affecting taxation or foreign exchange control, currency exchange rates or foreign
investment regulations (including, without limitation, a devaluation of the United
States dollar, the Hong Kong dollar or RMB against any foreign currencies, a change
in the system under which the value of the Hong Kong dollar is linked to that of the
United States dollar or RMB is linked to any foreign currency or currencies), or the
implementation of any exchange control, in any of the Relevant Jurisdictions or
affecting an investment in the Offer Shares;
(viii) other than with the prior written consent of the Sole Sponsor and the Sole Overall
Coordinator, the issue or requirement to issue by the Company of a supplement or
amendment to this document, the GREEN Application Form, the offering circular or
other documents in connection with the offer and sale of the Offer Shares pursuant to
the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the Listing
Rules or upon any requirement or request of the Stock Exchange and/or the SFC;
(ix) a demand by any creditor for repayment or payment of any of the indebtedness of any
member of the Group or in respect of which that member of the Group is liable prior
to its stated maturity, or any loss or damage sustained by that member of the Group
(howsoever caused and whether or not the subject of any insurance or claim against
any person);
(x) the Chief Executive Officer, the Chief Financial Officer, any Director or any member
of the senior management of the Company is vacating his or her office;
(xi) any Director or member of the senior management of the Company being charged
with an indictable offence or prohibited by operation of law or otherwise disqualified
from taking part in the management of a company or taking a directorship of a
company or the commencement by any government, political, regulatory body or
organisation of any investigation or other action against any member of the Group or
any Director or member of the senior management of the Company in his or her
capacity as such or an announcement by any governmental, political or regulatory
body that it intends to commence any such investigation or take any such action;
(xii) any litigation, dispute, proceeding, legal action or claim or regulatory investigation or
action being threatened, instigated or announced against any member of the Group,
any Director or any member of the senior management of the Company;
(xiii) any contravention by any member of the Group, any Director or any member of the
senior management of the Company of any applicable laws and regulations, including
the Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Listing Rules; or
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(xiv) any non-compliance of this document and the GREEN Application Form (or any
other documents used in connection with the contemplated subscription and sale of
the Offer Shares) or any aspect of the Global Offering with the Listing Rules or any
other applicable laws and regulations,
which, individually or in the aggregate, in the sole and absolute opinion of the Sole
Sponsor and/or the Sole Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters):
(1) constitutes or will constitute or is likely to constitute a material adverse change in or
have a material adverse effect on, or any development involving a prospective
material adverse change in, or have a material adverse effect on, or affecting the
assets, liabilities, business, general affairs, management, shareholders’ equity, profits,
losses, results of operations, position or condition, financial or otherwise, earnings,
prospects or performance of the Group, taken as a whole;
(2) has or will have or is likely to have a material adverse effect on the success of the
Global Offering;
(3) makes or will make or is likely to make it inadvisable, inexpedient, impracticable or
incapable for the Hong Kong Public Offering and/or the International Offering to
proceed or the delivery or distribution of the Offer Shares on the terms and in the
manner contemplated by the offering documents; or
(4) has or will have or is likely to have the effect of making any part of the Hong Kong
Underwriting Agreement (including underwriting the Hong Kong Public Offering)
incapable or impracticable of being performed 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 the Sole Sponsor and/or the Sole Overall Coordinator that:
(i) any statement contained in any of this document, the GREEN Application Form, the
preliminary offering circular, the final offering circular, the formal notice and/or any
notices, announcements, advertisements, communications or other documents
(including any announcement, document or other communication pursuant to the
Hong Kong Underwriting Agreement) issued or used by or on behalf of the Company
in connection with the Global Offering (including any supplement or amendment
thereto but excluding names and addresses and logos of the Underwriters) (the “ Offer
Related Documents ”) was, when it was issued, or has become, untrue, incorrect,
inaccurate or incomplete in any material respects or misleading or deceptive, or that
any estimate, forecast, expression of opinion, intention or expectation contained in
any of the Offer Related Documents is not fair and honest and based on reasonable
grounds or, where appropriate, based on reasonable assumptions with reference to the
facts and circumstances then subsisting;
(ii) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this document, constitute a material
misstatement in, or material omission from any of the Offer Related Documents;
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UNDERWRITING
(iii) there is a material breach of, or any event or circumstance rendering untrue, incorrect
or incomplete in any material respect or misleading, any of the representations or
warranties given by the Company in the Hong Kong Underwriting Agreement or the
International Underwriting Agreement (including any supplement or amendment
thereto), as applicable;
(iv) there is a material breach of any of the obligations imposed upon the Company under
the Hong Kong Underwriting Agreement or the International Underwriting
Agreement (including any supplement or amendment thereto), as applicable;
(v) there is an event, act or omission which gives or is likely to give rise to any material
liability of the Company pursuant to the indemnities given by it under the Hong Kong
Underwriting Agreement or the International Underwriting Agreement (including any
supplement or amendment thereto), as applicable;
(vi) the approval of the Stock Exchange of the listing of, and permission to deal in, the
Shares in issue and to be issued pursuant to the Global Offering (including pursuant
to any exercise of the Over-allotment Option), other than subject to customary
conditions, is refused or not granted on or before the date of the Listing, or if granted,
the approval is subsequently withdrawn, qualified (other than by customary
conditions), revoked or withheld;
(vii) any person (other than the Sole Sponsor) has withdrawn its consent to being named as
an expert in this document or to the issue of this document with the inclusion of its
reports, letters and/or legal opinions (as the case may be) and references to its name
included in the form and context in which it respectively appears;
(viii) the Company withdraws this document, the GREEN Application Form (and/or any
other documents issued or used in connection with the Global Offering) or the Global
Offering;
(ix) there is a prohibition on the Company for whatever reason from offering, allotting,
issuing or selling any of the Offer Shares (including pursuant to any exercise of the
Over-allotment Option) pursuant to the terms of the Global Offering; or
(x) an order or petition for the winding up or liquidation of any member of the Group or
any composition or arrangement made by any member of the Group with its creditors
or a scheme of arrangement entered into by any member of the Group or any
resolution for the winding-up of any member of the Group or the appointment of a
provisional liquidator, receiver or manager over all or part of the assets or
undertaking of any member of the Group or anything analogous thereto occurring in
respect of any member of the Group.
Undertakings to the Stock Exchange pursuant to the Listing Rules
Undertakings by the Company
Pursuant to Rule 10.08 of the Listing Rules, the Company has undertaken to the Stock
Exchange that it will not exercise its power to issue any further Shares, or securities convertible into
Shares (whether or not of a class already listed) or enter into any agreement to such an issue within six
months from the Listing Date (whether or not such issue of Shares or securities will be completed
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UNDERWRITING
within six months from the Listing Date), except (a) pursuant to the Global Offering (including the
Over-allotment Option); or (b) under any of the circumstances provided under Rule 10.08 of the
Listing Rules.
Undertakings pursuant to the Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, the Company has undertaken to each of
the Sole Sponsor, the Sole Overall Coordinator, the Joint Global Coordinators, the Joint Bookrunners,
the Joint Lead Managers, the Capital Market Intermediaries and the Hong Kong Underwriters that,
except for the issue, offer or sale of the Offer Shares by the Company pursuant to the Global Offering
(including pursuant to any exercise of the Over-Allotment Option), the Company will not, without the
prior written consent of the Sole Sponsor and the Sole Overall Coordinator (for itself and on behalf of
the Hong Kong Underwriters) and unless in compliance with or permitted under the Listing Rules (and
in particular, permitted under Rule 10.08 of the Listing Rules), at any time during the period
commencing on the date of this 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, grant, agree to grant or sell any option, warrant, contract or right to
subscribe for or purchase, grant, agree to grant or purchase any option, warrant, contract or
right to allot, issue or sell, or otherwise transfer or dispose of, or agree to transfer or
dispose of, either directly or indirectly, conditionally or unconditionally, any Shares or
other securities of the Company or any interest in any of the foregoing (including, but not
limited to, any securities that are 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), or deposit any Shares or other securities of the Company
with a depositary in connection with the 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 subscription or ownership (legal or beneficial) of any
Shares or other securities of the Company, or any interest therein (including, without
limitation, any securities of which are convertible into or exchangeable or exercisable for,
or represent the right to receive, or any warrants or other rights to purchase, any Shares or
other securities of the Company); or
(iii) enter into any transaction with the same economic effect as any transaction described in
paragraphs (i) or (ii) above; or
(iv) offer to or contract to or agree to announce, or publicly disclose that the Company will or
may enter into any such transaction described in paragraphs (i), (ii) or (iii) above,
in each case, whether any of the transactions described in paragraphs (i) to (iv) above is to be settled by
delivery of any Shares or other securities of the Company, in cash or otherwise (whether or not the
issue of such Shares or other securities of the Company will be completed within the First Six-Month
Period).
In addition, the Company has further undertaken to the Sole Sponsor, the Sole Overall
Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Capital Market Intermediaries and the Hong Kong Underwriters, in the event that, at any time during
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UNDERWRITING
the period of six months immediately following the expiry of the First Six-Month Period (the “ Second
Six-Month Period”), the Company enters into any such transactions or offers or agrees or contracts to,
or announces, or publicly discloses, any intention to, enter into any such transactions described in
paragraphs (i), (ii) or (iii) above, the Company shall take all reasonable steps to ensure that it will not
create a disorderly or false market in the Shares or any other securities of the Company.
Undertakings by the Existing Shareholders
Each existing Shareholder has agreed that, without the prior written consent of the Sole
Sponsor and the Sole Overall Coordinator (for itself and on behalf of the Underwriters), he/she/it will
not, during the period commencing on the date of this document and ending on one hundred eighty
(180) days following the date of this document, (i) lend, offer, pledge, hypothecate, hedge, sell, make
any short sale of, loan, contract to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any Shares (other than those disclosed in this document) or any securities
convertible into or exchangeable or exercisable for or that represent the right to receive any Shares, (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 such Shares or any securities convertible into or exchangeable
or exercisable for or that represent the right to receive any Shares, (iii) engage into any transaction with
the same economic effect as any transaction described in clause (i) or (ii) above; or (iv) publicly
disclose the intention to enter into any transaction described in clause (i), (ii) or (iii) above, whether
any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of Shares or
such other securities, in cash or otherwise; provided that, among others, the lock-up arrangement shall
permit a Shareholder to transfer its Shares to its affiliates so long as the transferees enter into the same
lock-up agreement containing similar terms and conditions as those contained herein.
Hong Kong Underwriters’ Interests in the Company
Save for their respective obligations under the Hong Kong Underwriting Agreement, and, if
applicable, the Stock Borrowing Agreement, as at 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 the 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 the 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, the Company expects to enter into the
International Underwriting Agreement with, among others, the Sole Sponsor, the Sole Overall
Coordinator and the International Underwriters on or around 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 for, or themselves to subscribe for, their respective applicable proportions of the
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UNDERWRITING
International Offer Shares initially 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, the Global Offering will not proceed. See the section
headed “Structure of the Global Offering—The International Offering” in this document.
Over-allotment Option
The Company is expected to grant to the International Underwriters the Over-allotment Option,
exercisable by the Sole Overall Coordinator (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 (being Thursday, 20 July 2023), pursuant to which the Company may be required to
issue up to an aggregate of 2,371,200 Shares, representing not more than 15% of the number of Offer
Shares initially available under the Global Offering, at the Offer Price, to cover over-allocations in the
International Offering, if any. See the section headed “Structure of the Global Offering — Over-
allotment Option” in this document.
Commissions and Expenses
The Underwriters and the Capital Market Intermediaries will receive an underwriting
commission equal to 3.5% of the aggregate Offer Price of all the Offer Shares, including Offer Shares
to be issued pursuant to the Over-allotment Option (the “ Fixed Fees”). Our Company may, at our sole
and absolute discretion, pay to one or more Underwriters or Capital Market Intermediaries an incentive
fee up to 1.0% of the aggregate Offer Price of all the Offer Shares (including Offer Shares to be issued
pursuant to the Over-allotment Option) (the “ Discretionary Fees ”). The ratio of Fixed Fees and
Discretionary Fees payable to all Underwriters is therefore approximately 78:22.
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering, the
underwriting commission will not be paid to the Hong Kong Underwriters but will instead be paid, at
the rate applicable to the International Offering, to the relevant International Underwriters.
The aggregate underwriting commissions payable to the Underwriters in relation to the Global
Offering (assuming an indicative Offer Price of HK$21.00 per Offer Share (which is the mid-point of
the Offer Price range as stated in this document), the full payment of the discretionary incentive fee
and the exercise of the Over-allotment Option in full) will be up to approximately HK$17.2 million.
The aggregate underwriting commissions and fees together with the Stock Exchange listing
fees, the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy, legal
and other professional fees and printing and all other expenses relating to the Global Offering are
estimated to be up to approximately HK$80.6 million (assuming an indicative Offer Price of HK$21.00
per Offer Share (which is the mid-point of the Offer Price range as stated in this document), the full
payment of the discretionary incentive fee and the exercise of the Over-allotment Option in full) and
will be paid by the Company.
Indemnity
The Company has agreed to indemnify the Hong Kong Underwriters for certain losses which
they may suffer or incur, including losses arising from their performance of their obligations under the
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UNDERWRITING
Hong Kong Underwriting Agreement and any material breach by the Company of the Hong Kong
Underwriting Agreement.
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 stabilising 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 our assets, securities and/or
instruments and/or persons and entities with relationships with us and may also include swaps and
other financial instruments entered into for hedging purposes in connection with our loans and other
debt.
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 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, and this 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 stabilising period described in
the section headed “Structure of the Global Offering” in this document. 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:
 the Syndicate Members (other than the Stabilising Manager or any person acting for it)
must 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 stabilising 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
 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 certain of 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 the Offer Shares in the Global Offering.
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STRUCTURE OF THE GLOBAL OFFERING
THE GLOBAL OFFERING
This document is published in connection with the Hong Kong Public Offering as part of the
Global Offering.
The listing of the Shares on the Main Board of the Stock Exchange is sponsored by the Sole
Sponsor. The Sole Sponsor has made an application on behalf of the Company to the Stock Exchange
for the listing of, and permission to deal in, the Shares in issue and to be issued as mentioned in this
document.
15,808,800 Offer Shares will initially be made available under the Global Offering comprising:
 the Hong Kong Public Offering of initially 1,581,200 Offer Shares (subject to reallocation)
in Hong Kong as described in “—The Hong Kong Public Offering” below; and
 the International Offering of initially 14,227,600 Offer Shares (subject to reallocation and
the Over-allotment Option) (i) in the United States solely to QIBs in reliance on Rule
144A or another exemption from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act and (ii) outside the United States (including to
professional and institutional investors within Hong Kong) in offshore transactions in
reliance on Regulation S, as described in “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 2.5% of the total Shares in issue 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 2.9% of
the total Shares in issue immediately following the completion of the Global Offering.
References in this document to applications, GREEN Application Form, application monies or
the procedure for applications relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
The Company is initially offering 1,581,200 Offer Shares for subscription by the public in
Hong Kong at the Offer Price, representing approximately 10.0% of the total number of Offer Shares
initially available under the Global Offering. The number of 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 0.3% of the total Shares in
issue immediately following the completion of the Global Offering (assuming 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
institutional and professional 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.
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STRUCTURE OF THE GLOBAL OFFERING
Completion of the Hong Kong Public Offering is subject to the conditions set out in
“—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: 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, the Stock Exchange trading fee and AFRC transaction levy 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, the Stock Exchange trading fee and AFRC transaction levy payable) and up to
the total value in pool B.
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 unsubscribed 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 790,600 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. Paragraph 4.2 of Practise Note 18 of the Hong Kong Listing Rules
requires a clawback mechanism to be put in place which would have the effect of increasing the
number of Offer Shares under the Hong Kong Public Offering to a certain percentage of the total
number of Offer Shares offered under the Global Offering if the International Offering is fully
subscribed or oversubscribed and certain prescribed total demand levels under the Hong Kong Public
Offering are reached.
If the number of Offer Shares validly applied for under the Hong Kong Public Offering
represents (a) 15 times or more but less than 50 times, (b) 50 times or more but less than 100 times and
(c) 100 times or more of the total 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
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STRUCTURE OF THE GLOBAL OFFERING
International Offering. As a result of such reallocation, the total number of Offer Shares available
under the Hong Kong Public Offering will be increased to 4,742,800 Offer Shares (in the case of (a)),
6,323,600 Offer Shares (in the case of (b)) and 7,904,400 Offer Shares (in the case of (c)), representing
approximately 30%, approximately 40% and 50% of the total number of Offer Shares initially
available under the Global Offering, respectively (before any exercise of the Over-allotment Option).
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be
allocated between pool A and pool B and the number of Offer Shares allocated to the International
Offering will be correspondingly reduced in such manner as the Sole Overall Coordinator deems
appropriate.
In addition, the Sole Overall Coordinator may, at its discretion, reallocate Offer Shares initially
allocated for the International Offering to the Hong Kong Public Offering to satisfy valid applications
in pool A and pool B under the Hong Kong Public Offering. In accordance with the Guidance Letter
HKEX-GL91-18 issued by the Stock Exchange, if such reallocation is done other than pursuant to
Practise Note 18 of the Hong Kong Listing Rules, the maximum total number of Offer Shares that may
be reallocated to the Hong Kong Public Offering following such reallocation shall be not more than
double the initial allocation to the Hong Kong Public Offering (i.e. 3,162,400 Offer Shares), and the
final Offer Price shall be fixed at the bottom end of the indicative Offer Price range (i.e. HK$19.00 per
Offer Share).
If the Hong Kong Public Offering is not fully subscribed, the Sole Overall Coordinator may
reallocate all or any unsubscribed Hong Kong Offer Shares to the International Offering, in such
proportions as the Sole Overall Coordinator deems appropriate.
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 Hong Kong Public
Offering, which is expected to be published on Tuesday, 27 June 2023.
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 that he/she and any person(s) for whose
benefit he/she 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 has been or will be placed
or allocated International Offer Shares under the International Offering.
Applicants under the Hong Kong Public Offering are required to pay, on application, the
maximum Offer Price in addition to the brokerage, the SFC transaction levy, the Stock Exchange
trading fee and AFRC transaction levy payable on each Offer Share, amounting to a total of
HK$4,646.39 for one board lot of 200 Shares. If the Offer Price, as finally determined in the manner
described in “— Pricing and Allocation” below, is less than the maximum Offer Price, appropriate
refund payments (including the brokerage, the SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy attributable to the surplus application monies) will be made to successful
applicants, without interest. Further details are set out in the section headed “How to Apply for Hong
Kong Offer Shares” in this document.
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THE INTERNATIONAL OFFERING
Number of Offer Shares initially offered
The International Offering will consist of an initial offering of 14,227,600 Offer Shares offered
by us (subject to reallocation and the Over-allotment Option), representing approximately 90.0% of the
total number of 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 2.2% of
the total Shares in issue 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 as well as institutional and professional 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 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 section 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 Shares and/or hold or sell its Shares after the Listing. Such allocation is intended to
result in a distribution of the Shares on a basis which would lead to the establishment of a solid
professional and institutional shareholder base to the benefit of the Group and the Shareholders as a
whole.
The Sole Overall Coordinator (for itself 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 Sole Overall
Coordinator 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 pursuant to the International Offering may
change as a result of the clawback arrangement described in the section headed “—The Hong Kong
Public Offering—Reallocation” above, the exercise of the Over-allotment Option in whole or in part
and/or any reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public
Offering.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, the Company is expected to grant the Over-allotment
Option to the International Underwriters, exercisable by the Sole Overall Coordinator (on behalf of the
International Underwriters).
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Pursuant to the Over-allotment Option, the International Underwriters will have the right,
exercisable by the Sole Overall Coordinator (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 (being Thursday, 20 July 2023), to require us to allot and issue up to an aggregate of
2,371,200 Offer Shares, representing not more than 15.0% of the total number of Offer Shares initially
available under the Global Offering, at the Offer Price under the International Offering to 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 0.4% of the total Shares in issue immediately following
the completion of the Global Offering. If the Over-allotment Option is exercised, an announcement
will be made.
STABILISATION
Stabilisation is a practise used by underwriters in some markets to facilitate the distribution of
securities. To stabilise, 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 initial
public market price of the securities below the offer price. Such transactions may be effected in all
jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and
regulatory requirements, including those of Hong Kong. In Hong Kong, the price at which stabilisation
is effected is not permitted to exceed the offer price.
In connection with the Global Offering, the Stabilising Manager (or any person acting for it),
on behalf of the Underwriters, may over-allocate or effect transactions with a view to stabilising 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. However, there is no obligation on the Stabilising Manager (or
any person acting for it) to conduct any such stabilising action. Such stabilising action, if taken, (a) will
be conducted at the absolute discretion of the Stabilising Manager (or any person acting for it) and in
what the Stabilising Manager reasonably regards as the best interest of the Company, (b) may be
discontinued at any time and (c) is required to be brought to an end within 30 days after the last day for
lodging applications under the Hong Kong Public Offering.
Stabilisation action permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilising) Rules of the SFO includes (a) over-allocating for the purpose of preventing or minimising
any reduction in the market price of the Shares, (b) selling or agreeing to sell the Shares so as to
establish a short position in them for the purpose of preventing or minimising any reduction in the
market price of the Shares, (c) purchasing, or agreeing to purchase, the Shares pursuant to the Over-
allotment Option in order to close out any position established under paragraph (a) or (b) above,
(d) purchasing, or agreeing to purchase, any of the Shares for the sole purpose of preventing or
minimising any reduction in the market price of the Shares, (e) selling or agreeing to sell any Shares in
order to liquidate any position established as a result of those purchases and (f) offering or attempting
to do anything as described in clauses (b), (c), (d) or (e) above.
Specifically, prospective applicants for and investors in the Offer Shares should note that:
 the Stabilising Manager (or any person acting for it) may, in connection with the
stabilising action, maintain a long position in the Shares;
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 there is no certainty as to the extent to which and the time or period for which the
Stabilising Manager (or any person acting for it) will maintain such a long position;
 liquidation of any such long position by the Stabilising 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 stabilising action can be taken to support the price of the Shares for longer than the
stabilisation period, which will begin on the Listing Date, and is expected to expire on
Thursday, 20 July 2023, being the 30th day after the last day for lodging applications
under the Hong Kong Public Offering. After this date, when no further stabilising 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 stabilising action; and
 stabilising bids or transactions effected in the course of the stabilising 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.
The Company will ensure that an announcement in compliance with the Securities and Futures
(Price Stabilising) Rules of the SFO will be made within seven days of the expiration of the
stabilisation period.
Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the Stabilising
Manager (or any person acting for it) may cover such over-allocations by exercising the Over-
allotment Option in full or in part, using Shares purchased by the Stabilising 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 as detailed below or a combination of these means.
STOCK BORROWING AGREEMENT
To cover any over-allocation of Shares in connection with the Global Offering, the Stabilising
Manager (or any person acting for it) may choose to borrow up to 2,371,200 Shares (being the
maximum number of Shares which may be issued pursuant to the exercise of the Over-allotment
Option) from MIYT Holdings Limited pursuant to the Stock Borrowing Agreement, which is expected
to be entered into between the Stabilising Manager (or its affiliates or any person acting for it) and
MIYT Holdings Limited on or about Tuesday, 20 June 2023. Such stock borrowing will be conducted
as follows:
(a) such stock borrowing arrangement with MIYT Holdings Limited will only be effected by
the Stabilising Manager for settlement of over-allocations in the International Offering and
covering any short position prior to the exercise of the Over-allotment Option;
(b) the maximum number of Shares borrowed from MIYT Holdings Limited under the Stock
Borrowing Agreement will be limited to the maximum number of Shares which may be
issued upon full exercise of the Over-allotment Option;
(c) the same number of Shares so borrowed must be returned to MIYT Holdings Limited or
its nominees, as the case may be, on or before the third business day following the earlier
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STRUCTURE OF THE GLOBAL OFFERING
of (i) the last day on which the Over-allotment Option may be exercised and (ii) the day on
which the Over-allotment Option is exercised in full, or such time as may be otherwise
agreed by the parties;
(d) the stock borrowing arrangement under the Stock Borrowing Agreement will be effected
in compliance with all applicable laws, listing rules and regulatory requirements; and
(e) no payment will be made to MIYT Holdings Limited by the Stabilising Manager or its
authorised agents in relation to such stock borrowing arrangement.
PRICING AND ALLOCATION
Determining the Pricing of the Offer Shares
Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering
will be determined on the Price Determination Date, which is expected to be on or about Tuesday,
20 June 2023 and, in any event, no later than Tuesday, 27 June 2023, by agreement between the Sole
Overall Coordinator (for itself and on behalf of the Underwriters) and the 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$23.00 per Offer Share and is expected to be not less
than HK$19.00 per Offer Share, unless otherwise announced, as further explained below. Applicants
under the Hong Kong Public Offering must pay, on application, the maximum Offer Price plus
brokerage of 1.0%, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565% and
AFRC transaction levy of 0.00015%, amounting to a total of HK$4,646.39 for one board lot of 200
Shares. Prospective investors should be aware that the Offer Price to be determined on the Price
Determination Date may be, but is not expected to be, lower than the minimum Offer Price
stated in this document .
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 Sole Overall Coordinator (for itself and on behalf of the Underwriters) may, where it deems
appropriate, based on the level of interest expressed by prospective investors during the book-building
process in respect of the International Offering, and with the consent of the Company, reduce the number
of Offer Shares offered below and/or the Offer Price range as stated in this document at any time on or
prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In
such a case, we 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 websites of the Company and the Stock Exchange at
www.ysbang.cn and www.hkexnews.hk, respectively, notices of the reduction. The Company will also,
as soon as practicable following the decision to make such change, issue a supplemental prospectus
updating investors of the change in the number of Offer Shares being offered under the Global Offering
and/or the Offer Price, extend the period under which the Hong Kong Public Offering was opened for
acceptance to allow potential investors sufficient time to consider their subscriptions or reconsider their
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STRUCTURE OF THE GLOBAL OFFERING
submitted subscriptions, and require investors who had applied for the Hong Kong Offer Shares to
positively confirm their applications for Offer Shares in light of the change in the number of Offer Shares
and/or the Offer Price. Upon the issue of such a notice and supplemental prospectus, the revised number
of Offer Shares and/or the Offer Price range will be final and conclusive and the Offer Price, if agreed
upon by the Sole Overall Coordinator (on behalf of the Underwriters) and the Company, will be fixed
within such revised Offer Price range.
Before submitting applications for the Hong Kong Offer Shares, applicants should have regard
to the possibility that any announcement of a reduction in the number of Offer Shares and/or Offer
Price range may not be made until the last day for lodging applications under the Hong Kong Public
Offering. Such notice will also include confirmation or revision, as appropriate, of the working capital
statement and the Global Offering statistics as currently set out in this document, and any other
financial information which may change as a result of any such reduction. In the absence of any such
notice so published, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed
upon by the Sole Overall Coordinator (on behalf of the Underwriters) and the Company, will under no
circumstances be set outside the Offer Price range as stated in this document.
Announcement of Final Pricing of the Offer Shares
The final pricing of the Offer Shares, the level of indications of interest in the International
Offering, the level of applications in the Hong Kong Public Offering, the basis of allocations of the
Hong Kong Offer Shares and the results of allocations in the Hong Kong Public Offering are expected
to be made available through a variety of channels in the manner described in the section headed “How
to Apply for Hong Kong Offer Shares—D. Publication of results” in this document.
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 subject to, among other
things, the Sole Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) and the
Company agreeing on the Offer Price.
The Company expects to enter into the International Underwriting Agreement relating to the
International Offering on or around the Price Determination Date.
These underwriting arrangements, including the Underwriting Agreements, are summarised in
the section headed “Underwriting” in this document.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares will be conditional on:
 the Stock Exchange granting approval for the listing of, and permission to deal in, the
Offer Shares being offered pursuant to the Global Offering (including any additional
Shares which may be issued pursuant to the exercise of the Over-allotment Option), and
such listing and permission not subsequently having been revoked prior to the
commencement of dealings in the Shares on the Stock Exchange;
 the pricing of the Offer Shares having been agreed between the Sole Overall Coordinator
(for itself and on behalf of the Underwriters) and the Company;
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STRUCTURE OF THE GLOBAL OFFERING
 the execution and delivery of the International Underwriting Agreement on or around the
Price Determination Date; and
 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 document.
If, for any reason, the Offer Price is not agreed between the Sole Overall Coordinator (for itself
and on behalf of the Underwriters) and the Company on or before Tuesday, 27 June 2023, 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 by the Company on the websites of the Company
and the Stock Exchange at www.ysbang.cn and www.hkexnews.hk respectively, 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 the section headed “How to Apply for Hong Kong Offer Shares — F. Refund of
application monies” in this document. 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 licenced under the Banking
Ordinance (Chapter 155 of the Laws of Hong Kong).
Share certificates for the Offer Shares will only become valid at 8:00 a.m. on Wednesday,
28 June 2023; provided that the Global Offering has become unconditional in all respects at or before
that time.
DEALINGS IN THE SHARES
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in
Hong Kong on Wednesday, 28 June 2023, it is expected that dealings in the Shares on the Stock
Exchange will commence at 9:00 a.m. on Wednesday, 28 June 2023.
The Shares will be traded in board lots of 200 Shares each and the stock code of the Shares will
be 9885.
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HOW TO APPLY FOR HONG KONG OFFER SHARES
NOTICE TO INVESTORS
FULLY ELECTRONIC APPLICATION PROCESS
The Hong Kong Public Offering is being conducted in a fully electronic manner and no
printed copies of this document or any copies of any application forms for use by the public
will be provided by the Company in accordance with the Hong Kong Listing Rules.
This document is available at the website of Stock Exchange at www.hkexnews.hk under the
“HKEXnews > New Listings > New Listing Information ” section, and the Company’s website at
www.ysbang.cn. If you require a printed copy of this document, you may download and print from
the website addresses above. If you are an intermediary, broker or agent, please remind your
customers, clients or principals, as applicable, that this document is available online at the website
addresses above.
Set out below are procedures through which you can apply for the Hong Kong Offer Shares
electronically. No physical channels to accept any application for the Hong Kong Offer Shares by
the public will be provided by the Company in accordance with the Listing Rules.
A. APPLICATIONS FOR HONG KONG OFFER SHARES
1. How to Apply
To apply for Hong Kong Offer Shares, you may:
(1) apply online through the HK eIPO White Form service in the IPO App (which can be
downloaded by searching “ IPO App ” in App Store or Google Play or downloaded at
www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp)o ra t www.hkeipo.hk;o r
(2) apply through the CCASS EIPO service to electronically cause HKSCC Nominees to
apply on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via
CCASS terminals to apply for Hong Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant) giving electronic application
instructions through the CCASS Internet System ( https://ip.ccass.com) or through
the CCASS Phone System by calling +852 2979 7888 (using the procedures in
HKSCC’s “An Operating Guide for Investor Participants” in effect from time to
time). HKSCC can also input electronic application instructions for CCASS
Investor Participants through HKSCC’s Customer Service Centre at 1/F, One & Two
Exchange Square, 8 Connaught Place, Central, Hong Kong by completing an input
request form.
If you apply through channel (1) above, the Hong Kong Offer Shares successfully applied for
will be issued in your own name.
If you apply through channels (2)(i) or (2)(ii) above, the Hong Kong Offer Shares successfully
applied for will be issued in the name of HKSCC Nominees and deposited directly into CCASS to be
credited to your or a designated CCASS Participant’s stock account.
None of you or your joint applicant(s) may make more than one application, except where you
are a nominee and provide the required information in your application.
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The Company, the Sole Sponsor, the Sole Overall Coordinator, the HK eIPO White Form
Service Provider and their respective agents may reject or accept any application, in full or in part, for
any reason at their discretion.
2. Who Can Apply
Eligibility for the Application
You can apply for Hong Kong Offer Shares if you or any person(s) for whose benefit you are applying:
 are 18 years of age or older; and
 are outside the United States (within the meaning of Regulation S) or are a person
described in paragraph (h)(3) of Rule 902 of Regulation S.
The number of joint applicants may not exceed four.
If you are a firm, the application must be in the individual members’ names.
Unless permitted by the Hong Kong Listing Rules, you cannot apply for any Hong Kong Offer
Shares if you are:
 an existing beneficial owner of Shares in the Company and/or any of its subsidiaries;
 a Director or chief executive officer of the Company and/or any member of the Group;
 a close associate (as defined in the Hong Kong Listing Rules) of any of the above persons;
and
 have been allocated or have applied for any International Offer Shares or otherwise
participate in the International Offering.
Items Required for the Application
If you apply for Hong Kong Offer Shares online through the HK eIPO White Form service,
you must:
 have a valid Hong Kong identity card number/passport number (for individual applicant)
or Hong Kong business registration number/certificate of incorporation number (for body
corporate applicant);
 have a Hong Kong address; and
 provide a valid email address and a contact telephone number.
If you are applying for the Hong Kong Offer Shares online by instructing your broker or
custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic
application instructions via CCASS terminals, please contact them for the items required for the
application.
3. Terms and Conditions of an Application
By applying through the application channels specified in this document, you:
 undertake to execute all relevant documents and instruct and authorise the Company, the
Sole Sponsor and/or the Sole Overall Coordinator (or their agents or nominees), as the
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Company’s 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;
 agree to comply with the Articles of Association, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance and the Cayman Companies Act;
 confirm that you have read the terms and conditions and application procedures set out in
this document and agree to be bound by them;
 confirm that you have received and read this document and have relied only on the
information and representations in this document in making your application and will not
rely on any other information or representations, except those in any supplement to this
document;
 confirm that you are aware of the restrictions on the Global Offering set out in this
document;
 agree that none of the Company, the Sole Sponsor, the Sole Overall Coordinator, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries, the Underwriters, the HK eIPO White Form Service Provider, their
respective directors, officers, employees, partners, agents, advisers and any other parties
involved in the Global Offering (the Relevant Persons ), is or will be liable for any
information and representations not in this document (and any supplement to this
document);
 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 for, and will not apply
for or take up, or indicate an interest for, any International Offer Shares nor participated in
the International Offering;
 agree to disclose to the Company, the Hong Kong Share Registrar, the receiving bank and
the Relevant Persons any personal data which the Company or any of them may require
about you and the person(s) for whose benefit you have made the application;
 if the laws of any place outside Hong Kong apply to your application, agree and warrant
that you have complied with all such laws and neither the Company nor the Relevant
Persons will breach any laws 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 in this document;
 agree that once your application has been accepted, you may not rescind it because of an
innocent misrepresentation;
 agree that your application will be governed by the Laws of Hong Kong;
 represent, warrant and undertake that (i) you understand that the Hong Kong Offer Shares
have not been and will not be registered under the U.S. Securities Act; and (ii) you and
any person for whose benefit you are applying for the Hong Kong Offer Shares are outside
the United States (within the meaning of Regulation S) or are a person described in
paragraph (h)(3) of Rule 902 of Regulation S;
 warrant that the information you have provided is true and accurate;
 agree to accept the Hong Kong Offer Shares applied for or any lesser number allocated to
you under the application;
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 authorise (i) the Company to place your name(s) or the name of HKSCC Nominees on the
Company’s register of members as the holder(s) of any Hong Kong Offer Shares allocated
to you and such other registers as required under the Articles of Association and (ii) the
Company and/or the Company’s agents to send any Share certificate(s) and/or any e-Auto
Refund payment instructions and/or any refund cheque(s) to you or the first-named
applicant for joint applications by ordinary post at your own risk to the address stated on
the application, unless you have fulfilled the criteria mentioned in “—G. Despatch/
collection of Share certificates/e-Auto Refund payment instructions/refund cheques—
Personal Collection” below to collect the Share certificate(s) and/or refund cheque(s) in
person;
 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;
 understand that the Company, the Directors, the Sole Sponsor and the Sole Overall
Coordinator will rely on your declarations and representations in deciding whether or not
to allocate any of the Hong Kong Offer Shares to you and that you may be prosecuted for
making a false declaration;
 (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 electronic application instructions to HKSCC
directly or indirectly or through the HK eIPO White Form service by you or by any one
as your agent or by any other person; and
 (if you are making the application as an agent for the benefit of another person) warrant
that (i) 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
electronic application instructions to HKSCC or to the HK eIPO White Form Service
Provider and (ii) you have due authority to give electronic application instructions on
behalf of that other person as its agent.
For the avoidance of doubt, the Company and all other parties involved in the preparation of
this document acknowledge that each applicant and CCASS Participant who gives or causes to give
electronic application instructions is a person who may be entitled to compensation under Section 40 of
the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of
the Companies (Winding Up and Miscellaneous Provisions) Ordinance).
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4. Minimum Application Amount and Permitted Numbers
Your application through the HK eIPO White Form service or the CCASS EIPO service
must be for a minimum of 200 Hong Kong Offer Shares and in one of the numbers set out in the table.
You are required to pay the amount next to the number you select.
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
200 4,646.39 4,000 92,927.82 60,000 1,393,917.30 450,000 10,454,379.76
400 9,292.78 5,000 116,159.78 70,000 1,626,236.86 500,000 11,615,977.50
600 13,939.17 6,000 139,391.74 80,000 1,858,556.40 600,000 13,939,173.00
800 18,585.57 7,000 162,623.69 90,000 2,090,875.96 700,000 16,262,368.50
1,000 23,231.95 8,000 185,855.65 100,000 2,323,195.50 790,600
(1) 18,367,183.62
1,200 27,878.35 9,000 209,087.60 150,000 3,484,793.26
1,400 32,524.74 10,000 232,319.56 200,000 4,646,391.00
1,600 37,171.13 20,000 464,639.10 250,000 5,807,988.76
1,800 41,817.52 30,000 696,958.66 300,000 6,969,586.50
2,000 46,463.91 40,000 929,278.20 350,000 8,131,184.26
3,000 69,695.86 50,000 1,161,597.76 400,000 9,292,782.00
(1) Maximum number of Hong Kong Offer Shares you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered and any
such application is liable to be rejected.
5. Applying Through the HK eIPO White Form Service
General
Applicants who meet the criteria in “Who Can Apply” above may apply through the HK eIPO
White Form service for the Offer Shares to be allocated and registered in their own names through the
IPO App or the designated website at www.hkeipo.hk.
Detailed instructions for application through the HK eIPO White Form service are set out in
the IPO App or on the designated website. If you do not follow the instructions, your application may
be rejected and may not be submitted to the Company. If you apply through the IPO App or the
designated website, you authorise the HK eIPO White Form Service Provider to apply on the terms
and conditions in this document, as supplemented and amended by the terms and conditions of the HK
eIPO White Form service.
Time for Submitting Applications under the HK eIPO White Form Service
You may submit your application through the HK eIPO White Form service through the IPO
App or the designated website at www.hkeipo.hk (24 hours daily, except on the last day for
applications) from 9:00 a.m. on Thursday, 15 June 2023 until 11:30 a.m. on Tuesday, 20 June 2023
and the latest time for completing full payment of application monies in respect of such applications
will be 12:00 noon on Tuesday, 20 June 2023, the last day for applications, or such later time as
described in “— C. Effect of Bad Weather and/or Extreme Conditions on the Opening and Closing of
the Application Lists” below.
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6. Applying Through The CCASS EIPO Service
For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your or a designated CCASS Participant’s stock account,
electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you.
General
CCASS Participants may give electronic application instructions to apply for the Hong Kong
Offer Shares and to arrange payment of the money due on application and payment of refunds under
their participant agreements with HKSCC and the General Rules of CCASS and the CCASS
Operational Procedures.
If you are a CCASS Investor Participant , you may give these electronic application
instructions through the CCASS Internet System ( https://ip.ccass.com) or through the CCASS Phone
System by calling +852 2979 7888 (using the procedures in HKSCC’s “An Operating Guide for
Investor Participants” in effect from time to time). HKSCC can also input electronic application
instructions for CCASS Investor Participants though HKSCC’s Customer Service Centre at 1/F,
One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong by completing an input
request.
If you are not a CCASS Investor Participant , you may instruct your broker or custodian who
is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application
instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf.
You will be deemed to have authorised HKSCC and/or HKSCC Nominees to transfer the
details of your application to the Company, the Sole Sponsor, the Sole Overall Coordinator and the
Hong Kong Share Registrar.
Applying through the CCASS EIPO service
Where you have applied through the CCASS EIPO service (either indirectly through a broker
or custodian or directly) and an application is made by HKSCC Nominees on your behalf:
 HKSCC Nominees will only be acting as a nominee for you and is not liable for any
breach of the terms and conditions of this document; and
 HKSCC Nominees will do the following things on your behalf:
 agree that the Hong Kong Offer Shares to be allocated shall be registered in the name
of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS
Participant’s stock account on your behalf or your CCASS Investor Participant’s
stock account;
 agree to accept the Hong Kong Offer Shares applied for or any lesser number
allocated;
 undertake and confirm that you have 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 nor participated in the International Offering;
 (if the electronic application instructions are given for your benefit) declare that
only one set of electronic application instructions has been given for your benefit;
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 (if you are an agent for another person) declare that you have only given one set of
electronic application instructions for the other person’s benefit and are duly
authorised to give those instructions as its agent;
 confirm that you understand that the Company, the Directors, the Sole Sponsor and
the Sole Overall Coordinator will rely on your declarations and representations in
deciding whether or not to allocate any of the Hong Kong Offer Shares to you and
that you may be prosecuted for making a false declaration;
 authorise the Company to place HKSCC Nominees’ name on the Company’s register
of members as the holder of the Hong Kong Offer Shares allocated to you, and
despatch Share certificate(s) and/or refund monies in accordance with the
arrangements separately agreed between the Company and HKSCC;
 confirm that you have read the terms and conditions and application procedures set
out in this document and agree to be bound by them;
 confirm that you have received and read a copy of this document and have relied only
on the information and representations in this document in causing the application to
be made and will not rely on any other information or representations, except those in
any supplement to this document;
 agree that neither the Company nor any of the Relevant Persons is or will be liable for
any information and representations not in this document (and any supplement to this
document);
 agree to disclose to the Company, the Hong Kong Share Registrar, the receiving bank
and the Relevant Persons any personal data which the Company or they may require
about you;
 agree (without prejudice to any other rights which you may have) that once HKSCC
Nominees’ application has been accepted, it cannot be rescinded for innocent
misrepresentation;
 agree that any application made by HKSCC Nominees on your behalf is irrevocable
on or before the fifth day after the time of opening of the application lists (excluding
any days which is Saturday, Sunday or public holiday in Hong Kong), such
agreement to take effect as a collateral contract with the Company, and to become
binding when you give the instructions and such collateral contract to be in
consideration of the Company’s agreeing that the Company will not offer any Hong
Kong Offer Shares to any person on or before the fifth day after the time of opening
of the application lists (excluding any days which is Saturday, Sunday or public
holiday in Hong Kong) except by means of one of the procedures referred to in this
document. However, HKSCC Nominees may revoke the application on or before the
fifth day after the time of opening of the application lists (excluding any days which
is Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this
document under Section 40 of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up
and Miscellaneous Provisions) Ordinance) gives a public notice under that section on
or before the fifth day after the time of the opening of the application lists (excluding
any day which is a Saturday, Sunday or public holiday in Hong Kong) which
excludes or limits that person’s responsibility for this document;
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 agree that once HKSCC Nominees’ application is accepted, neither that application
nor your electronic application instructions can be revoked, and that acceptance of
that application will be evidenced by the announcement of the results of the Hong
Kong Public Offering by the Company;
 agree to the arrangements, undertakings and warranties under the participant
agreement between you and HKSCC, read with the General Rules of CCASS and the
CCASS Operational Procedures, for giving electronic application instructions to
apply for Hong Kong Offer Shares;
 agree with the Company, for itself and for the benefit of each Shareholder (and so
that the Company will be deemed by its acceptance in whole or in part of the
application by HKSCC Nominees to have agreed, for the Company and on behalf of
each Shareholder, with each CCASS Participant giving electronic application
instructions) to observe and comply with the Articles of Association, the Companies
(Winding Up and Miscellaneous Provisions) Ordinance the Cayman Companies Act;
and
 agree that your application, any acceptance of it and the resulting contract will be
governed by, and construed in accordance with the Laws of Hong Kong.
Effect of Applying through the CCASS EIPO Service
By applying through the CCASS EIPO service, you (and, if you are joint applicants, each of
you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC
Nominees will be liable to the Company or any other person in respect of the things mentioned below:
 instructed and authorised HKSCC to cause HKSCC Nominees (acting as nominee for the
relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf;
 instructed and authorised HKSCC to arrange payment of the maximum Offer Price,
brokerage, SFC transaction levy, Stock Exchange trading fee and AFRC transaction levy
by debiting your designated bank account and, in the case of a wholly or partially
unsuccessful application and/or if the Offer Price is less than the maximum Offer Price
initially paid on application, refund of the application monies (including brokerage, SFC
transaction levy, Stock Exchange trading fee and AFRC transaction levy) by crediting
your designated bank account; and
 instructed and authorised HKSCC to cause HKSCC Nominees to do on your behalf all the
things stated in this document.
Time for Inputting Electronic Application Instructions
1
CCASS Clearing/Custodian Participants can input electronic application instructions at the
following times on the following dates and times:
Thursday, 15 June 2023 — 9:00 a.m. to 8:30 p.m.
Friday, 16 June 2023 — 8:00 a.m. to 8:30 p.m.
Monday, 19 June 2023 — 8:00 a.m. to 8:30 p.m.
Tuesday, 20 June 2023 — 8:00 a.m. to 12:00 noon
1 The times in this subsection are subject to change as HKSCC may determine from time to time with prior notification to CCASS
Clearing Participants, CCASS Custodian Participants and/or CCASS Investor Participants.
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CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on
Thursday, 15 June 2023 until 12:00 noon on Tuesday, 20 June 2023 (24 hours daily, except on
Tuesday, 20 June 2023, the last day for applications).
The latest time for inputting your electronic application instructions will be 12:00 noon on
Tuesday, 20 June 2023, the last day for applications, or such later time as described in “—C. Effect of
Bad Weather and/or Extreme Conditions on the Opening and Closing of the Application Lists” below.
If you are instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS terminals to
apply for the 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.
No Multiple Applications
If you are suspected of having made multiple applications or if more than one application is
made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will
be automatically reduced by the number of Hong Kong Offer Shares for which you have given such
instructions and/or for which such instructions have been given for your benefit. Any electronic
application instructions to make an application for the Hong Kong Offer Shares given by you or for
your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering
whether multiple applications have been made.
Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
For the avoidance of doubt, the Company and all other parties involved in the preparation of
this document acknowledge that each CCASS Participant who gives or causes to give electronic
application instructions is a person who may be entitled to compensation under Section 40 of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance).
Personal Data
The following Personal Information Collection Statement applies to any personal data 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. By
applying through the CCASS EIPO service, you agree to all of the terms of the Personal Information
Collection Statement below.
Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder of, the Hong
Kong Offer Shares, of the policies and practises 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).
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Reasons for the collection of your personal data
It is necessary for applicants and registered holders of the Hong Kong Offer Shares to supply
correct personal data to the Company or the Company’s agents and the Hong Kong Share Registrar
when applying for the Hong Kong Offer Shares or transferring the 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 may result in your application for the Hong Kong Offer
Shares being rejected, or in delay or the inability of the Company or the Hong Kong Share Registrar to
effect transfers or otherwise render their services. It may also prevent or delay registration or transfers
of the Hong Kong Offer Shares which you have successfully applied for and/or the despatch of Share
certificate(s) to which you are entitled.
It is important that the holders of the Hong Kong Offer Shares inform the Company and the
Hong Kong Share Registrar immediately of any inaccuracies in the personal data supplied.
Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means) for the
following purposes:
 processing your application and refund cheque, where applicable, verification of
compliance with the terms and application procedures set out in this document and
announcing results of allocation of the 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 Register of Members;
 verifying identities of the holders of the Shares;
 establishing benefit entitlements of holders of the Shares, such as dividends, rights issues,
bonus issues, etc.;
 distributing communications from the Company and other member of the Group;
 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 holders of
the Shares and/or regulators and/or any other purposes to which the securities’ holders
may from time to time agree.
Transfer of personal data
Personal data held by the Company and the Hong Kong Share Registrar relating to the holders
of the 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 advisers, receiving bankers and
overseas principal share registrar;
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 where applicants for the Hong Kong Offer Shares request a deposit into CCASS, HKSCC
or HKSCC Nominees, who will use the personal data for the purposes of operating
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 operation;
 the Stock Exchange, the SFC and any other statutory regulatory or governmental bodies or
otherwise as required by laws, rules or regulations; and
 any persons or institutions with which the holders of the Hong Kong Offer Shares have or
propose to have dealings, such as their bankers, solicitors, accountants or stockbrokers,
etc.
Retention of personal data
The Company and the Hong Kong Share Registrar will keep the personal data of the applicants
and holders of the 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.
Access to and correction of personal data
Holders of the 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 secretary, or the Hong Kong
Share Registrar for the attention of the privacy compliance officer.
7. Warning for Electronic Applications
The application for the Hong Kong Offer Shares by the CCASS EIPO service (directly or
indirectly through your broker or custodian) is only a facility provided to CCASS Participants.
Similarly, the application for the Hong Kong Offer Shares through the HK eIPO White Form service
is only a facility provided by the HK eIPO White Form Service Provider to public investors. Such
facilities are subject to capacity limitations and potential service interruptions and you are advised not
to wait until the last day for applications to make your electronic application. The Company, the
Directors, the Relevant Persons and the HK eIPO White Form Service Provider take no responsibility
for such applications and provide no assurance that any CCASS Participant applying through the
CCASS EIPO service or person applying through the HK eIPO White Form service will be allocated
any Hong Kong Offer Shares.
To ensure that CCASS Investor Participants can give their electronic application instructions ,
they are advised not to wait until the last minute to input their instructions to the systems.
In the event that CCASS Investor Participants have problems in the connection to CCASS
Phone System/CCASS Internet System for submission of electronic application instructions , they
should go to HKSCC’s Customer Service Centre to complete an input request form for electronic
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application instructions before 12:00 noon on Tuesday, 20 June 2023, the last day for applications, or
such later time as described in “— C. Effect of Bad Weather and/or Extreme Conditions on the
Opening and Closing of the Application Lists” below.
8. How Many Applications You Can Make
Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees. If
you are a nominee and apply through the HK eIPO White Form service, in the box marked “For
Nominees,” you must include an account number or some other identification code for each beneficial
owner or, in the case of joint beneficial owners, for each joint beneficial owner when you fill in the
application details. If you do not include this information, the application will be treated as being made
for your own benefit.
All of your applications will be rejected if more than one application through the CCASS
EIPO service (directly or indirectly through your broker or custodian) or through the HK eIPO White
Form service is made for your benefit (including the part of the application made by HKSCC
Nominees acting on electronic application instructions ), and the number of Hong Kong Offer Shares
applied by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer
Shares for which you have given such instructions and/or for which such instructions have been given
for your behalf. If you are suspected of submitting more than one application through the HK eIPO
White Form service or by any other means, all of your applications are liable to be rejected.
For the avoidance of doubt, giving an electronic application instruction under the HK eIPO
White Form service more than once and obtaining different payment reference numbers without
effecting full payment in respect of a particular reference number will not constitute an actual
application. However, any electronic application instructions to make an application for the Hong
Kong Offer Shares given by you or for your behalf to HKSCC will be deemed to be an actual
application for the purposes of considering whether multiple applications have been made.
The Hong Kong Share Registrar would record all applications into its system and identify
suspected multiple applications with identical names, identification document numbers and reference
numbers according to the Best Practice Note on Treatment of Multiple / Suspected Multiple
Applications (“Best Practice Note ”) issued by the Federation of Share Registrars Limited.
With regard to the announcement of results of allocations under the section headed “Results of
Applications Made by Giving Electronic Application Instructions to HKSCC via CCASS”, the list of
identification document number(s) may not be a complete list of successful applicants, only successful
applicants whose identification document numbers are provided to HKSCC by CCASS Participants are
disclosed. Applicants who applied for the Offer Shares through their brokers can consult their brokers
to enquire about their application results.
Since applications are subject to personal information collection statements, beneficial owner
identification codes displayed are redacted. Applicants with beneficial names only but not
identification document numbers are not disclosed due to personal privacy issue.
If an application is made by an unlisted company and:
 the principal business of that company is dealing in securities; and
 you exercise statutory control over that company,
then the application will be treated as being made for your benefit.
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Unlisted company means a company with no equity securities listed on the 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).
B. HOW MUCH THE HONG KONG OFFER SHARES ARE
The maximum Offer Price is HK$23.00 per Offer Share. You must also pay brokerage of 1.0%,
SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565% and AFRC transaction levy
of 0.00015%. This means that for one board lot of 200 Shares, you will pay HK$4,646.39.
You must pay the maximum Offer Price, together with brokerage, SFC transaction levy, Stock
Exchange trading fee and AFRC transaction levy, in full upon application for Hong Kong Offer
Shares.
You may submit an application through the HK eIPO White Form service or the CCASS
EIPO service in respect of a minimum of 200 Hong Kong Offer Shares. If you make an electronic
application instruction for more than 200 Hong Kong Offer Shares, the number of Hong Kong Offer
Shares you apply for must be in one of the specified numbers set out in the section “— A. Applications
for Hong Kong Offer Shares — 4. Minimum Application Amount and Permitted Numbers”, or as
otherwise, specified in the IPO App or on the designated website at www.hkeipo.hk.
If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules), and the SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy will be paid to the Stock Exchange (in the case of the SFC transaction levy, collected
by the Stock Exchange on behalf of the SFC, and in the case of AFRC transaction levy, collected by
the Stock Exchange on behalf of the AFRC).
For further details on the Offer Price, see the section headed “Structure of the Global
Offering—Pricing and allocation” in this document.
C. EFFECT OF BAD WEATHER AND/OR EXTREME CONDITIONS ON THE
OPENING AND CLOSING OF THE APPLICATION LISTS
The application lists will not open or close if there is/are:
 a tropical cyclone warning signal number 8 or above;
 a “black” rainstorm warning; and/or
 Extreme Conditions,
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, 20 June 2023.
Instead, they will open between 11:45 a.m. and 12:00 noon on the next business day which does not
have any of those warnings and/or Extreme Conditions in force in Hong Kong at any time between
9:00 a.m. and 12:00 noon.
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If the application lists do not open and close on Tuesday, 20 June 2023 or 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 that may affect the dates mentioned in “Expected Timetable,” an
announcement will be made on the Company’s website at www.ysbang.cn and the website of Stock
Exchange at www.hkexnews.hk.
D. PUBLICATION OF RESULTS
The Company expects 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
allocations of the Hong Kong Offer Shares on Tuesday, 27 June 2023 on its website at
www.ysbang.cn and the website of Stock Exchange at www.hkexnews.hk.
The results of allocations and the Hong Kong identity card/passport/Hong Kong business
registration/certificate of incorporation numbers of successful applicants under the Hong Kong Public
Offering (if provided) will be available at the times and dates and in the manner set out below:
 in the announcement to be posted on the Company’s website and the website of Stock
Exchange at www.ysbang.cn and www.hkexnews.hk, respectively, by no later than 9:00
a.m. on Tuesday, 27 June 2023;
 from “IPO Results” function in the IPO App or the designated results of allocations
website at www.tricor.com.hk/ipo/result or www.hkeipo.hk/IPOResult with a “search
by ID function” on a 24 hour basis from 8:00 a.m. on Tuesday, 27 June 2023 to 12:00
midnight on Monday, 3 July 2023; and
 from the allocation results telephone enquiry line by calling +852 3691 8488 between 9:00
a.m. and 6:00 p.m. from Tuesday, 27 June 2023 to Friday, 30 June 2023.
If the Company accept your offer to purchase (in whole or in part), which it may do by
announcing the basis of allocations and/or making available the results of allocations publicly, there
will be a binding contract under which you will be required to purchase the Hong Kong Offer Shares if
the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated.
Further details are set out in the section headed “Structure of the Global Offering” in this document.
You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at
any time after acceptance of your application. This does not affect any other right you may have.
E. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
You should note the following situations in which the Hong Kong Offer Shares will not be
allocated to you:
If your application is revoked:
By applying through the CCASS EIPO service or through the HK eIPO White Form service,
you agree that your application or the application made by HKSCC Nominees on your behalf cannot be
revoked on or before the fifth day after the time of opening of the application lists (excluding any days
which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a
collateral contract with the Company.
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HOW TO APPLY FOR HONG KONG OFFER SHARES
Your application or the application made by HKSCC Nominees on your behalf may only be
revoked on or before the fifth day after the time of opening of the application lists (excluding any days
which is Saturday, Sunday or public holiday in Hong Kong) in the following circumstances:
 if a person responsible for this document under Section 40 of the Companies (Winding Up
and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that
section on or before the fifth day after the time of the opening of the application lists
(excluding any day which is a Saturday, Sunday or public holiday in Hong Kong) which
excludes or limits that person’s responsibility for this document; or
 if any supplement to this document is issued, in which case applicants who have already
submitted an application will be notified that they are required to confirm their
applications. If applicants have been so notified but have not confirmed their applications
in accordance with the procedure to be notified, all unconfirmed applications will be
deemed revoked.
If your application or the application made by HKSCC Nominees on your behalf has been
accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will
be constituted by notification in the press of the results of allocation, and where such basis of
allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be
subject to the satisfaction of such conditions or results of the ballot, respectively.
If the Company or its agents exercise discretion to reject your application:
The Company, the Sole Sponsor, the Sole Overall Coordinator, the HK eIPO White Form
Service Provider and their respective agents or nominees have full discretion to reject or accept any
application, or to accept only part of any application, without giving any reasons.
If the allotment of Hong Kong Offer Shares is void:
The allotment 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 the Company of
that longer period within three weeks of the closing date of the application lists.
If:
 you make multiple applications or are suspected of making multiple applications;
 you or the person for whose benefit you apply for, have applied for or taken up, or
indicated an interest for, or have been or will be placed or allocated (including
conditionally and/or provisionally) Hong Kong Offer Shares and International Offer
Shares;
 your payment is not made correctly;
 your electronic application instructions through the HK eIPO White Form service are not
completed in accordance with the instructions, terms and conditions in the IPO App or on
the designated website at www.hkeipo.hk;
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HOW TO APPLY FOR HONG KONG OFFER SHARES
 you apply for more than 790,600 Hong Kong Offer Shares, being 50% of the 1,581,200
Hong Kong Offer Shares initially available under the Hong Kong Public Offering;
 the Company, the Sole Sponsor or the Sole Overall Coordinator believe that by accepting
your application, a violation of applicable securities or other laws, rules or regulations
would result; or
 the Underwriting Agreements do not become unconditional or are terminated.
F. REFUND OF APPLICATION MONIES
If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally
determined is less than the maximum Offer Price per Offer Share (excluding brokerage, SFC
transaction levy, Stock Exchange trading fee and AFRC transaction levy payable thereon) paid on
application, or if the conditions of the Global Offering as set out in “Structure of the Global Offering—
Conditions of the Global Offering” are not satisfied or if any application is revoked, the application
monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy,
Stock Exchange trading fee and AFRC transaction levy, will be refunded, without interest.
Any refund of your application monies will be made on or before Tuesday, 27 June 2023.
G. DESPATCH/COLLECTION OF SHARE CERTIFICATES/e-AUTO REFUND
PAYMENT INSTRUCTIONS/REFUND CHEQUES
You will receive one Share certificate for all Hong Kong Offer Shares allocated to you under
the Hong Kong Public Offering (except pursuant to applications made through the CCASS EIPO
service where the Share certificates will be deposited into CCASS as described below).
The Company will not issue any temporary evidence of title in respect of the Offer Shares. The
Company will not issue receipt for sums paid on application.
Subject to arrangement on despatch/collection of Share certificates and refund cheques as
mentioned below, any refund cheques and Share certificate(s) are expected to be posted on or before
Tuesday, 27 June 2023. The right is reserved to retain any Share certificate(s) and any surplus
application monies pending clearance of cheque(s) or banker’s cashier order(s).
Share certificates will only become valid at 8:00 a.m. on Wednesday, 28 June 2023, provided
that the Global Offering has become unconditional in all respects and neither of the Underwriting
Agreements has been terminated in accordance with their respective terms at or before that time.
Investors who trade Shares on the basis of publicly available allocation details or prior to the receipt of
the Share certificates or prior to the Share certificates becoming valid do so entirely at their own risk.
Personal collection
 If you apply through the HK eIPO White Form service:
 If you apply for 500,000 Hong Kong Offer Shares or more through the HK eIPO White
Form service and your application is wholly or partially successful, you may collect your
Share certificate(s) (where applicable) in person from the Hong Kong Share Registrar,
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HOW TO APPLY FOR HONG KONG OFFER SHARES
Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road,
Hong Kong, from 9:00 a.m. to 1:00 p.m. on Tuesday, 27 June 2023, or any other place or
date notified by the Company. If you are an individual who is eligible for personal
collection, you must not authorise any other person to collect for you.
 If you are a corporate applicant which is eligible for personal collection, your authorised
representative must bear a letter of authorisation from your corporation stamped with your
corporation’s chop. Both individuals and authorised representatives must produce, at the
time of collection, evidence of identity acceptable to the Hong Kong Share Registrar.
 If you do not personally collect your Share certificate(s) within the time specified for
collection, they will be sent to the address specified in your application instructions by
ordinary post and at your own risk.
 If you apply for less than 500,000 Hong Kong Offer Shares through the HK eIPO White
Form service, your Share certificate(s) (where applicable) will be sent to the address
specified in your application instructions on or before Tuesday, 27 June 2023 by ordinary
post and at your own risk.
 If you apply and pay the application monies from a single bank account, any refund
monies will be despatched to that bank account in the form of e-Auto Refund payment
instructions. If you apply and pay the application monies from multiple bank accounts, any
refund monies will be despatched to the address specified in your application instructions
in the form of refund cheque(s) in your name (or, in the case of joint applications, the first-
named applicant) by ordinary post and at your own risk.
 If you apply through the CCASS EIPO service:
Allocation of Hong Kong Offer Shares
 For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be
treated as an applicant. Instead, each CCASS Participant who gives electronic application
instructions or each person for whose benefit instructions are given will be treated as an
applicant.
Deposit of Share Certificates into CCASS and Refund of Application Monies
 If your application is wholly or partially successful, your Share certificate(s) will be issued
in the name of HKSCC Nominees and deposited into CCASS for the credit of your
designated CCASS Participant’s stock account or your CCASS Investor Participant stock
account on Tuesday, 27 June 2023 or on any other date determined by HKSCC or HKSCC
Nominees.
 The Company expects to publish the application results of CCASS Participants (and where
the CCASS Participant is a broker or custodian, the Company will include information
relating to the relevant beneficial owner), your Hong Kong identity card/passport/Hong
Kong business registration number or other identification code (Hong Kong business
registration number for corporations) and the basis of allocations of the Hong Kong Offer
Shares in the manner as described in “Publication of Results” above on Tuesday, 27 June
2023. You should check the announcement published by the Company and report any
discrepancies to HKSCC before 5:00 p.m. on Tuesday, 27 June 2023 or such other date as
determined by HKSCC or HKSCC Nominees.
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HOW TO APPLY FOR HONG KONG OFFER SHARES
 If you have instructed your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf, you can also check the
number of the Hong Kong Offer Shares allocated to you and the amount of refund monies
(if any) payable to you with that broker or custodian.
 If you have applied as a CCASS Investor Participant, you can also check the number of
Hong Kong Offer Shares allocated to you and the amount of refund monies (if any)
payable to you via the CCASS Phone System and the CCASS Internet System (under the
procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in
effect from time to time) on Tuesday, 27 June 2023. Immediately following the credit of
the Hong Kong Offer Shares to your stock account and the credit of the refund monies to
your bank account, HKSCC will also make available to you an activity statement showing
the number of Hong Kong Offer Shares credited to your CCASS Investor Participant stock
account and the amount of refund monies (if any) credited to your designated bank
account.
 Refund of your application monies (if any) in respect of wholly and partially unsuccessful
applications and/or difference between the Offer Price and the maximum Offer Price per
Offer Share initially paid on application (including brokerage, SFC transaction levy, Stock
Exchange trading fee and AFRC transaction levy but without interest) will be credited to
your designated bank account or the designated bank account of your broker or custodian
on Tuesday, 27 June 2023.
H. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares and the
Company complies 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 (as defined in the Listing Rules) 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 CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional adviser for details of
the settlement arrangements as such arrangements may affect their rights and interests.
All necessary arrangements have been made to enable the Shares to be admitted into CCASS.
361


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APPENDIX I ACCOUNTANTS’ REPORT
The following is the text of a report set out on pages I-1 to I-87, received from the
Company’s reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants,
Hong Kong, for the purpose of incorporation in this prospectus.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF YSB INC. AND CHINA INTERNATIONAL CAPITAL CORPORATION
HONG KONG SECURITIES LIMITED
Introduction
We report on the historical financial information of YSB Inc. (the “Company”) and its subsidiaries
(together, the “Group”) set out on pages I-3 to I-87, which comprises the consolidated statements of
financial position of the Group as at 31 December 2020, 2021 and 2022, the statements of financial position
of the Company as at 31 December 2020, 2021 and 2022, and 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 each of the three years ended 31 December 2022 (the “Track
Record Period”) and a summary of significant accounting policies and other explanatory information
(together, the “Historical Financial Information”). The Historical Financial Information set out on pages I-3
to I-87 forms an integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated 15 June 2023 (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 (the “Stock Exchange”).
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 set out in Note 2
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 (the
“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.
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 Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out in Note 2
I-1


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APPENDIX I ACCOUNTANTS’ REPORT
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 of the Company, 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 purposes of the accountants’
report, a true and fair view of the Group’s financial position as at 31 December 2020, 2021 and 2022,
of the Company’s financial position as at 31 December 2020, 2021 and 2022 and of the Group’s
financial performance and cash flows for the Track Record Period in accordance with the basis of
preparation set out in Note 2 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on the Stock Exchange
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-3 have been made.
Dividends
We refer to Note 13 to the Historical Financial Information which states that no dividend was
declared or paid by the Company or its subsidiaries in respect of the Track Record Period.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
15 June 2023
I-2


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APPENDIX I ACCOUNTANTS’ REPORT
HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of 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 Track Record Period, on which the
Historical Financial Information is based, have been prepared in accordance with the accounting
policies which conform with International Financial Reporting Standards (“IFRSs”) issued by
International Accounting Standards Board (the “IASB”) and were audited by us in accordance with
Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all values are
rounded to the nearest thousand (RMB’000) except when otherwise indicated.
I-3


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APPENDIX I ACCOUNTANTS’ REPORT
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Year ended 31 December
Notes 2020 2021 2022
RMB’000 RMB’000 RMB’000
Revenue ............................................. 6 6,064,907 10,093,538 14,274,810
Cost of sales ......................................... ( 5 , 456,118) (9,179,708) (12,840,093)
Gross profit ......................................... 608,789 913,830 1,434,717
Other income ......................................... 7 44,296 62,465 88,920
Other gains and losses .................................. 8 (14,217) (8,623) 19,965
Changes in fair value of financial liabilities at fair value through
profit or loss (“FVTPL”) .............................. 2 9 ( 294,331) (128,696) (1,299,500)
Impairment losses recognised under expected credit loss model,
n e t ............................................... 3 4 ( 3 , 151) (1,769) (2,300)
Selling and marketing expenses .......................... (726,417) (1,063,817) (1,325,640)
Research and development expenses ...................... (24,724) (56,611) (79,146)
General and administrative expenses ...................... ( 1 5 6,216) (207,005) (286,787)
Finance costs ......................................... 9 (10,301) (8,494) (10,231)
Listing expenses ...................................... — ( 4,354) (36,865)
Loss before tax ....................................... ( 576,272) (503,074) (1,496,867)
Income tax credit (expense) ............................. 1 0 a 4,561 1,454 (3,171)
Loss for the year ...................................... (571,711) (501,620) (1,500,038)
Other comprehensive expense for the year .................. — — —
Loss and total comprehensive expense for the year ......... 1 1 ( 5 71,711) (501,620) (1,500,038)
Loss and total comprehensive expense for the year attributable
to:
Owners of the Company ................................ ( 571,711) (494,041) (1,488,688)
Non-controlling interests ............................... — ( 7,579) (11,350)
(571,711) (501,620) (1,500,038)
Loss per share
Basic and diluted (RMB) ............................. 1 4 ( 4.56) (3.94) (11.88)
I-4


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APPENDIX I ACCOUNTANTS’ REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at 31 December
Notes 2020 2021 2022
RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment, net ......................... 1 5 78,691 107,125 98,261
Right-of-use assets ..................................... 1 6 141,514 168,216 165,749
Intangible assets ....................................... 1 7 62,684 112,567 98,903
Goodwill ............................................. 1 8 9,252 9,252 9,252
Deferred tax assets ..................................... 1 0 b 1,775 3,152 1,584
Time deposits ......................................... 2 3 503,960 463,553 50,000
797,876 863,865 423,749
Current assets
Inventories ........................................... 1 9 516,106 847,840 1,016,168
Trade and other receivables .............................. 2 0 528,420 375,118 503,460
Amount due from a shareholder ........................... 2 2 38,781 2 2
Financial assets at FVTPL ............................... 2 1 344,600 512,882 711,076
Time deposits ......................................... 2 3 76,204 243,899 320,487
Restricted bank deposits ................................. 2 4 158,221 209,356 298,404
Bank balances and cash ................................. 2 4 130,526 383,603 835,394
1,792,858 2,572,700 3,684,991
Current liabilities
Trade and other payables ................................ 2 5 (1,832,620) (1,929,826) (2,398,078)
Contract liabilities ..................................... 2 6 (39,961) (9,373) (24,434)
Lease liabilities ........................................ 2 7 (47,239) (63,945) (81,178)
Bank borrowings ...................................... 2 8 (96,983) — —
Financial liabilities at FVTPL ............................ 2 9 (2,931,012) (4,222,381) (5,872,042)
(4,947,815) (6,225,525) (8,375,732)
Net current liabilities ................................... (3,154,957) (3,652,825) (4,690,741)
Total assets less current liabilities ......................... (2,357,081) (2,788,960) (4,266,992)
Non-current liabilities
Lease liabilities ........................................ 2 7 (104,643) (117,784) (99,370)
Deferred tax liabilities .................................. 1 0 b (432) (1,745) (3,348)
(105,075) (119,529) (102,718)
Net liabilities ......................................... (2,462,156) (2,908,489) (4,369,710)
Capital and deficits
Share capital .......................................... 3 0 2 2 2
Deficits .............................................. (2,462,158) (2,900,912) (4,350,783)
Deficits attributable to owners of the Company ............ (2,462,156) (2,900,910) (4,350,781)
Non-controlling interests ................................ — ( 7,579) (18,929)
Total deficits ......................................... (2,462,156) (2,908,489) (4,369,710)
I-5


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APPENDIX I ACCOUNTANTS’ REPORT
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
As at 31 December
Notes 2020 2021 2022
RMB’000 RMB’000 RMB’000
Non-current asset
Investments in subsidiaries ............................... 4 0 1,525,650 2,444,719 2,950,495
Current assets
Other receivables ....................................... 2 0 — 1,485 6,421
Amount due from a shareholder ........................... 2 2 2 2 2
Financial assets at FVTPL ................................ 2 1 — 242,276 60,654
Time deposits .......................................... 2 3 16,312 — —
Bank balances and cash .................................. 2 4 7 3 0 3,593 6,904
17,044 247,356 73,981
Current liabilities
Other payables ......................................... 2 5 — ( 2,857) (15,455)
Financial liabilities at FVTPL ............................. 2 9 (2,931,012) (4,222,381) (5,872,042)
(2,931,012) (4,225,238) (5,887,497)
Net current liabilities .................................... (2,913,968) (3,977,882) (5,813,516)
Net liabilities .......................................... ( 1 , 388,318) (1,533,163) (2,863,021)
Capital and deficits
Share capital .......................................... 3 0 2 2 2
Deficits ............................................... 4 1 ( 1 , 388,320) (1,533,165) (2,863,023)
Total deficits .......................................... ( 1 , 388,318) (1,533,163) (2,863,021)
I-6


--- page 375 ---
APPENDIX I ACCOUNTANTS’ REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attribute to the owners of the Company
Share
capital
Capital
reserves
Share-
based
payments
reserve
Accumulated
losses Subtotal
Non-
controlling
interests
Total
deficits
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 1 January 2020 .............. 2 8,965 — (1,899,412) (1,890,445) — (1,890,445)
Loss and total comprehensive expense
for the year .................... — — — (571,711) (571,711) — (571,711)
As at 31 December 2020 ........... 2 8,965 — (2,471,123) (2,462,156) — (2,462,156)
Loss and total comprehensive expense
for the year .................... — — — (494,041) (494,041) (7,579) (501,620)
Deemed contribution from a
shareholder (Note) .............. — 30,925 — — 30,925 — 30,925
Recognition of equity-settled share-
based payments (Note 31) ........ — — 24,362 — 24,362 — 24,362
Transfer forfeited equity-settled share-
based payments to accumulated
losses (Note 31) ................ — — (322) 322 — — —
As at 31 December 2021 ........... 2 39,890 24,040 (2,964,842) (2,900,910) (7,579) (2,908,489)
Loss and total comprehensive expense
for the year .................... — — — (1,488,688) (1,488,688) (11,350) (1,500,038)
Recognition of equity-settled share-
based payments (Note 31) ........ — — 38,817 — 38,817 — 38,817
Transfer forfeited equity-settled share-
based payments to accumulated
losses (Note 31) ................ — — (3,683) 3,683 — — —
As at 31 December 2022 ........... 2 39,890 59,174 (4,449,847) (4,350,781) (18,929) (4,369,710)
Note: As at 31 December 2021, a shareholder waived the amount of approximately RMB30,925,000 due from the Group and is accounted
for as deemed contribution from a shareholder in the year ended 31 December 2021.
I-7


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APPENDIX I ACCOUNTANTS’ REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
OPERATING ACTIVITIES
Loss before tax ................................................. ( 576,272) (503,074) (1,496,867)
Adjustments for:
Finance costs .................................................. 10,301 8,494 10,231
Bank interest income ............................................ (25,307) (27,900) (42,657)
Investment income from financial assets at FVTPL .................... (11,372) (17,870) (19,981)
Gain on disposal of subsidiaries ................................... — — (1,344)
Depreciation of property, plant and equipment ........................ 27,838 35,951 43,429
Depreciation of right-of-use assets ................................. 46,753 57,131 76,562
Amortisation of intangible assets ................................... 7,809 9,177 15,036
Write down (reversal of write down) for obsolete inventories ............ 9,967 (298) 1,576
Changes in fair value of financial liabilities at FVTPL .................. 294,331 128,696 1,299,500
Impairment losses recognised under expected credit loss model, net ....... 3,151 1,769 2,300
Share-based payment expense ..................................... — 24,362 38,817
Impairment loss on prepayment to suppliers .......................... 12,376 2,075 —
Losses (gains) on disposal of property, plant and equipment ............. 9 9 (12) (38)
Net foreign exchange losses (gains) ................................ 7 4 2 5,900 (18,715)
Operating cash flows before movements in working capital .............. ( 199,584) (275,599) (92,151)
Increase in inventories ........................................... (224,653) (331,435) (169,904)
(Increase) decrease in trade and other receivables ...................... (250,548) 53,336 (127,188)
Increase in trade and other payables ................................ 584,914 97,199 472,349
(Decrease) increase in contract liabilities ............................ (34,517) (30,588) 15,094
Cash (used in) from operations .................................... (124,388) (487,087) 98,200
Income taxes paid ............................................... — — —
NET CASH (USED IN) FROM OPERATING ACTIVITIES ............ (124,388) (487,087) 98,200
I-8


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APPENDIX I ACCOUNTANTS’ REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS—continued
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
INVESTING ACTIVITIES
Purchase of property, plant and equipment ........................ (22,354) (66,996) (38,848)
Proceeds on disposal of property, plant and equipment .............. 6 4 5 3,445 3,686
Net cash inflow on disposal of subsidiaries ........................ — — 1,141
Purchase of intangible assets ................................... (1,413) (53,502) (4,861)
Placement of time deposits .................................... ( 1,599,854) (2,521,121) (986,419)
Withdraw of time deposits ..................................... 1,506,251 2,425,703 1,291,505
Purchase of financial assets at FVTPL ........................... (6,592,119) (8,999,900) (8,964,437)
Proceeds from disposal of financial assets at FVTPL ................ 6,352,249 8,837,118 8,765,713
Payments for rental deposits ................................... (1,841) (475) —
Investment income received from financial assets at FVTPL .......... 11,372 17,870 19,981
Bank interest income received .................................. 25,307 27,900 42,657
Proceeds on disposal of intangible assets ......................... 2 0 4 — —
Repayment from a shareholder ................................. — 38,779 —
Net cash outflow on acquisition of subsidiaries .................... — (10,490) —
Advance to a shareholder ...................................... (1,022) — —
Cash outflow on acquisition of assets ............................ (5,130) — —
Placement of restricted bank deposits ............................ (888,734) (498,492) (558,822)
Withdraw of restricted bank deposits ............................ 892,766 447,357 469,774
NET CASH (USED IN) FROM INVESTING ACTIVITIES .......... ( 323,673) (352,804) 41,070
FINANCING ACTIVITIES
Advance from a shareholder ................................... — 30,925 —
Repayment of lease liabilities .................................. (44,586) (53,511) (75,276)
New bank borrowings raised ................................... 210,516 — 4,448
Repayment of bank borrowings ................................. — (6,000) (4,448)
Interest paid ................................................ (7,711) (8,494) (10,231)
Proceeds on issue of preferred shares ............................ — 1,162,673 350,161
Share issue cost paid ......................................... — (746) (2,727)
NET CASH FROM FINANCING ACTIVITIES ................... 158,219 1,124,847 261,927
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS .......................................... ( 289,842) 284,956 401,197
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
YEAR ................................................... 420,368 130,526 415,482
Effect of foreign exchange rate changes .......................... — — 18,715
CASH AND CASH EQUIVALENTS AT END OF THE YEAR ....... 130,526 415,482 835,394
Represented by
Bank balances and cash ....................................... 130,526 383,603 835,394
Time deposits with original maturity of three months or less .......... — 31,879 —
130,526 415,482 835,394
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. GENERAL
The Company was incorporated as an exempted company in the Cayman Islands with limited
liability on 27 August 2018 under the Company laws of the Cayman Islands. Its immediate holding
company is MIYT Holdings Limited, a company incorporated in the British Virgin Islands (the
“BVI”).
The addresses of the registered office and principal place of business of the Company are set
out in “Corporate Information” of the Prospectus.
The Company is an investment holding company. The Group mainly operates online platform
that provide wholesale and retail of pharmaceutical and healthcare products and online marketplace
service to the pharmaceutical and healthcare manufacturers. The Group’s principal operations and
geographic markets are in the People’s Republic of China (the “PRC”).
The Historical Financial Information is presented in RMB, which is also the functional
currency of the Company.
2. BASIS OF PREPARATION OF THE HISTORICAL FINANCIAL INFORMATION
The Historical Financial Information has been prepared based on the accounting policies set out
in the Note 4 which conform with IFRSs issued by the IASB.
As at 31 December 2022, the Group was in net liabilities position of RMB4,369,710,000 and
net current liabilities position of RMB4,690,741,000 in which the balances consist of financial
liabilities at FVTPL of RMB5,872,042,000 that are originally redeemable at the request of the
shareholders of preferred shares. In April 2022, the Group passed a shareholder’s resolution to
terminate all shareholders’ redemption or divestment rights (including the shareholders of preferred
shares) against and with respect to the Company, and such terminated redemption or divestment right
shall automatically revert and be reinstated in full should a qualified IPO not close on or before
31 December 2023 (the “Maturity Date”) or the shareholders unanimously decide to terminate the
application of a qualified IPO, whichever is earlier. In November 2022, the Group passed a
shareholder’s resolution to extend the above Maturity Date to 31 December 2024. The directors of the
Company believe there would be no material cash flow impact of the preferred shares before
31 December 2023. After taking into account the above and the Group’s cashflow projection and the
expected working capital requirements, the directors of the Company are satisfied that the Group is
able to meet in full its financial obligations as they fall due for a period of twelve months from
31 December 2022 and it is appropriate to prepare the Historical Financial Information on a going
concern basis.
3. APPLICATION OF NEW AND AMENDMENTS TO IFRSs
For the purpose of preparing and presenting the Historical Financial Information for the Track
Record Period, the Group has consistently applied IFRSs, International Accounting Standards
(“IASs”), amendments and interpretations issued by the IASB that are effective for the accounting
period beginning on 1 January 2022 throughout the Track Record Period.
At the date of this report, IASB has issued the following new and amendments to IFRSs that are
not yet effective. The Group has not early adopted these new and amendments to IFRSs.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
3. APPLICATION OF NEW AND AMENDMENTS TO IFRSs—continued
New and amendments to IFRSs in issue but not yet effective
The Group has not early applied the following new and amendments to IFRSs that have been
issued but are not yet effective:
IFRS 17 Insurance Contracts 1
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate
or Joint Veuture 3
Amendments to IFRS 16 Lease liability in a Sale and Leaseback 4
Amendments to IAS 1 Classification of Liabilities as Current or Non-current 4
Amendments to IAS 1 Non-current Liabilities with Covenants 4
Amendments to IAS 1 and IFRS
Practice Statement 2 Disclosure of Accounting Policies 1
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements 4
Amendments to IAS 8 Definition of Accounting Estimates 1
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single
Transaction1
Amendments to IAS 12 International Tax Reform—Pillar Two Model Rules 2
1 Effective for annual periods beginning on or after 1 January 2023.
2 Effective for annual periods beginning on or after 1 January 2023 (except for paragraphs 4A and 88A of IAS 12 which are immediately
effective upon issue of the amendments).
3 Effective for annual periods beginning on or after a date to be determined.
4 Effective for annual periods beginning on or after 1 January 2024.
The management of the Group considers that the application of all the new and amendments to
IFRSs will have no material impact on the Group’s financial position and performance as well as
disclosure in foreseeable future.
4. SIGNIFICANT ACCOUNTING POLICIES
The Historical Financial Information has been prepared in accordance with accounting policies
which conform with IFRSs issued by IASB. In addition, the Historical Financial Information includes
applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange
of Hong Kong Limited and by the Hong Kong Companies Ordinance.
The Historical Financial Information has been prepared on the historical cost basis, except for
certain financial instruments that are measured at fair values at the end of each reporting period, as
explained in the accounting policies set out below.
Historical cost is generally based on the fair value of the consideration given in exchange for
goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether that price
is directly observable or estimated using another v aluation technique. In estimating the fair value of an
asset or a liability, the Group takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial
statements is determined on such a basis, except for share-based payment transactions that are within the
scope of IFRS 2 Share-based Payment, leasing transactions that are accounted for in accordance with
IFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value, such as
net realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
For financial instruments which are transacted at fair value and a valuation technique that
unobservable inputs are to be used to measure fair value in subsequent periods, the valuation technique is
calibrated so that at initial recognition the results of the valuation technique equals the transaction price.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2
or 3 based on the degree to which the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its entirety, which are described as follows:
 Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
 Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
 Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below.
Basis of consolidation
The Historical Financial Information incorporates the financial statements of the Company and
entities (including the Consolidated Affiliated Entities) controlled by the Company and its subsidiaries.
Control is achieved when the Company:
 has power over the investee;
 is exposed, or has rights, to variable returns from its involvement with the investee; and
 has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and
ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated statements of profit
or loss and other comprehensive income from the date the Group gains control until the date when the
Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed
to the owners of the Company and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with the Group’s accounting policies. All intragroup assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Basis of consolidation—continued
Non-controlling interests in subsidiaries are presented separately from the Group’s equity
therein, which represent present ownership interests entitling their holders to a proportionate share of
net assets of the relevant subsidiaries upon liquidation.
Changes in the Group’s interests in existing subsidiaries
When the Group loses control of a subsidiary, the assets and liabilities of that subsidiary and
non-controlling interests (if any) are derecognised. A gain or loss is recognised in profit or loss and is
calculated as the difference between (i) the aggregate of the fair value of the consideration received and
the fair value of any retained interest and (ii) the carrying amount of the assets (including goodwill),
and liabilities of the subsidiary attributable to the owners of the Company. All amounts previously
recognised in other comprehensive income in relation to that subsidiary are accounted for as if the
Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to
profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs).
Business combinations or asset acquisitions
Optional concentration test
The Group can elect to apply an optional concentration test, on a transaction-by-transaction
basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a
business. The Group has applied the optional concentration test for acquisitions occurred since
1 January 2019. The concentration test is met if substantially all of the fair value of the gross assets
acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross
assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting
from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets
is determined not to be a business and no further assessment is needed.
Asset acquisitions
When the Group acquires a group of assets and liabilities that do not constitute a business, the
Group identifies and recognises the individual identifiable assets acquired and liabilities assumed by
allocating the purchase price first to financial assets / financial liabilities at the respective fair values,
the remaining balance of the purchase price is then allocated to the other identifiable assets and
liabilities on the basis of their relative fair values at the date of purchase. Such a transaction does not
give rise to goodwill or bargain purchase gain.
Business combinations
A business is an integrated set of activities and assets which includes an input and a substantive
process that together significantly contribute to the ability to create outputs. The acquired processes are
considered substantive if they are critical to the ability to continue producing outputs, including an
organised workforce with the necessary skills, knowledge, or experience to perform the related
processes or they significantly contribute to the ability to continue producing outputs and are
considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability
to continue producing outputs.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Business combinations or asset acquisitions—continued
Business combinations—continued
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the
acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to
the former owners of the acquiree and the equity interests issued by the Group in exchange for control
of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
For business combination in which the acquisition date is on or after 1 January 2022, the
identifiable assets acquired and liabilities assumed must meet the definitions of an asset and a liability
in the Conceptual Framework for Financial Reporting issued by International Accounting Standards
Board in March 2018 (the “Conceptual Framework”) except for transactions and events within the
scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, in which
the Group applies IAS 37 or IFRIC 21 instead of the Conceptual Framework to identify the liabilities it
has assumed in a business combination. Contingent assets are not recognised.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are
recognised at their fair value, except that:
 deferred tax assets or liabilities, and liabilities or assets related to employee benefit
arrangements are recognised and measured in accordance with IAS 12 Income Taxes and
IAS 19 Employee Benefits respectively;
 liabilities or equity instruments related to share-based payment arrangement of the
acquiree or share-based payment arrangement of the Group entered into to replace share-
based payment arrangements of the acquiree are measured in accordance with IFRS 2 at
the acquisition date (see accounting policy below);
 assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations are measured in
accordance with that standard; and
 lease liabilities are recognised and measured at the present value of the remaining lease
payments (as defined in IFRS 16) as if the acquired leases were new leases at the
acquisition date, except for leases for which (a) the lease term ends within 12 months of
the acquisition date; or (b) the underlying asset is of low value. Right-of-use assets are
recognised and measured at the same amount as the relevant lease liabilities, adjusted to
reflect favourable or unfavourable terms of the lease when compared with market terms.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of
any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net amount of the identifiable assets acquired and the liabilities
assumed as at acquisition date. If, after re-assessment, the net amount of the identifiable assets
acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in
the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
I-14


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of
acquisition of the business (see the accounting policy above) less accumulated impairment losses, if
any.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-
generating units (or groups of cash-generating units) that is expected to benefit from the synergies of
the combination, which represent the lowest level at which the goodwill is monitored for internal
management purposes and not larger than an operating segment.
A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated
is tested for impairment annually or more frequently when there is indication that the unit may be
impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit (or
group of cash-generating units) to which goodwill has been allocated is tested for impairment before
the end of that reporting period. If the recoverable amount is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill and then to the other
assets on a pro-rata basis based on the carrying amount of each asset in the unit (or group of cash-
generating units).
Investments in subsidiaries
Investments in subsidiaries are stated in the statements of financial position of the Company at
cost less identified impairment loss, if any.
Revenue from contracts with customers
The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when
control of the goods or services underlying the particular performance obligation is transferred to the
customers.
A performance obligation represents a good or service (or a bundle of goods or services) that is
distinct or a series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the
progress towards complete satisfaction of the relevant performance obligation if one of the following
criteria is met:
 the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs;
 the Group’s performance creates or enhances an asset that the customer controls as the
Group performs; or
 the Group’s performance does not create an asset with an alternative use to the Group and
the Group has an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the
distinct good or service.
I-15


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Revenue from contracts with customers—continued
The Group mainly engaged in wholesales of pharmaceutical and healthcare products offline or
online through its online platform. The Group also engaged in retail of pharmaceutical and healthcare
products through its retail shops. In addition, the Group operates online platform that enable the
pharmaceutical distributors and vendors to sell their own pharmaceutical and healthcare products using
the Group’s online platform.
The Group evaluates whether it is appropriate to record the gross amounts of product sales or
services provided and related costs, or the net amount earned as commissions. When the Group is a
principal, that the Group obtains control of the specified goods or services before they are transferred
to the customers, the revenue should be recognised in the gross amount of consideration to which it
expects to be entitled in exchange for the specified goods or services transferred. When the Group is an
agent and its obligation is to facilitate third parties in fulfilling their performance obligation for
specified goods or services, in which case the Group does not control the specified goods or services
provided by third parties before those goods or services are transferred to the customer, the revenue
should be recognised in the net amount for the amount of commission which the Group earns in
exchange for arranging for the specified goods or services to be provided by other parties.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for
which the Group has received consideration (or an amount of consideration is due) from the customer.
Timing of revenue recognition may differ from the timing of invoicing to customers. Trade
receivables represent amounts invoiced and revenue recognised prior to invoicing when the Group has
satisfied the Group’s performance obligation and has the unconditional right to payment.
For a sale of products with a right of return/exchange for dissimilar products, the Group
recognises all of the following:
(a) revenue for the transferred products in the amount of consideration to which the Group
expects to be entitled (therefore, revenue would not be recognised for the products
expected to be returned/exchanged);
(b) a refund liability/contract liability; and
(c) an asset (and corresponding adjustment to cost of sales) for its right to recover products
from customers and are presented as right to returned goods asset.
Contracts with multiple performance obligations (including allocation of transaction price)
For contracts that contain more than one performance obligations (i.e. contracts related to the
software and service), the Group allocates the transaction price to each performance obligation on a
relative stand-alone selling price basis.
The stand-alone selling price of the distinct good or service underlying each performance
obligation is determined at contract inception. It represents the price at which the Group would sell a
promised good or service separately to a customer. If a stand-alone selling price is not directly
observable, the Group estimates it using appropriate t echniques such that the transaction price ultimately
I-16


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Revenue from contracts with customers—continued
Contracts with multiple performance obligations (including allocation of transaction
price)—continued
allocated to any performance obligation reflects the amount of consideration to which the Group expects
to be entitled in exchange for transferring the promised goods or services to the customer.
Specifically, revenue is recognised as follows:
Product Revenue
The Group mainly engaged in wholesales of pharmaceutical and healthcare products offline or
online through its online platform. The Group also engaged in retail of pharmaceutical and healthcare
products through its retail shops. The Group recognises product revenue on a gross basis as the Group is
acting as a principal in these transactions and is responsible for fulfilling the promise to provide the
specified goods. Product revenue is recognised upon customers’ acceptance of product delivery, net of
discounts and return allowances. Transportation and handling activities that occur before customers obtain
control are considered as fulfilment activities.
The Group also sells smart unmanned pharmaceutical booth to third-party pharmacies and the
revenue is recognised upon customers’ acceptance of product delivery and installation.
Service Revenue
The service revenue primarily consists of i) commission fees charged to pharmaceutical
distributors and vendors participating on the online marketplace through the Group’s online platform;
ii) service revenue received from third-party pharmacies for the access right granted to them for use of
the Group’s software; iii) service revenue received from provision of medical testing services to
primary healthcare institutions; and iv) service revenue from third-party pharmacies for provision of
maintenance and technical support services in relation to the smart unmanned pharmaceutical booth.
As for the commission charged related to the online platform, the Group generally is acting as
an agent and its performance obligation is to arrange for the provision of the specified goods or
services by those pharmaceutical distributors and vendors. Upon successful sales, the Group charges
the pharmaceutical distributors and vendors commission fee revenue based on a certain percentage of
sales, net of discounts and return allowances. Commission fee revenue is recognised upon end
customers’ acceptance of product delivery on a net basis.
As for the service revenue charged related to the one-time usage fee and service fee for the
inventory management related SaaS solution provided to the downstream pharmacies, the Group is
acting as a principal and its performance obligation is to provide the access right to pharmacies to use
the Group’s software. Since the pharmacies simultaneously receives and consumes the benefits
provided by the Group’s performance as the Group performs, revenue from the software services
therefore are recognised over time on the straight-line base during the service period which less than
one year.
As for the service revenue charged related to the medical testing services, the Group is acting as
a principal and its performance obligation is to perform the testing and generate testing results to the
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Revenue from contracts with customers—continued
Service Revenue—continued
primary healthcare institutions. The Group recognises revenue at a point in time when the Group
delivers the testing results to the primary healthcare institutions.
As for the service revenue charged related to the provision of maintenance and technical
support services in relation to the smart unmanned pharmaceutical booth, the Group is acting as a
principal and its performance obligation is to provide technical support service. Since the pharmacies
simultaneously receives and consumes the benefits provided by the Group’s performance as the Group
performs, revenue are recongised over time on the straight-line base during the service period.
Cost of sales
Cost of sales consists primarily of purchase price of products, transaction processing fees and
write-downs of inventories.
The Group periodically receives considerations from certain vendors, representing rebates for
products purchased. The rebates are not sufficiently separable from the Group’s purchase of the
vendors’ products and they do not represent a reimbursement of costs incurred by the Group to sell
vendors’ products. The Group accounts for the rebates received from its vendors as a reduction to the
prices it pays for the products purchased and therefore the Group records such amounts as a reduction
of carrying value of the inventories for inventories still held by the Group at the end of each reporting
period or as a reduction of cost of sales for inventories sold before the end of each reporting period.
Leases
Definition of 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.
For contracts entered into or modified on or after the date of initial application of IFRS 16 or
arising from business combinations, the Group assesses whether a contract is or contains a lease based
on the definition under IFRS 16 at inception, modification date or acquisition date, as appropriate.
Such contract will not be reassessed unless the terms and conditions of the contract are subsequently
changed.
The Group as a lessee
Short-term leases
The Group applies the short-term lease recognition exemption to leases that have a lease term
of 12 months or less from the commencement date and do not contain a purchase option. Lease
payments on short-term leases are recognised as expense on a straight-line basis over the lease term.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Leases—continued
The Group as a lessee—continued
Right-of-use assets
The cost of right-of-use assets includes:
 the amount of the initial measurement of the lease liability;
 any lease payments made at or before the commencement date, less any lease incentives received;
 any initial direct costs incurred by the Group; and
 an estimate of costs to be incurred by the Group in dismantling and removing the underlying
assets, restoring the site on which it is located or restoring the underlying asset to the condition
required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities.
Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated
useful life and the lease term.
The Group presents right-of-use assets as a separate line item on the consolidated statements of
financial position.
Refundable rental deposits
Refundable rental deposits paid are accounted under IFRS 9 Financial Instruments and initially
measured at fair value. Adjustments to fair value at initial recognition are considered as additional
lease payments and included in the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, the Group recognises and measures the lease liability at
the present value of lease payments that are unpaid at that date. In calculating the present value of lease
payments, the Group uses the incremental borrowing rate at the lease commencement date if the
interest rate implicit in the lease is not readily determinable.
The lease payments include:
 fixed payments (including in-substance fixed payments) less any lease incentives
receivable; and
 payments of penalties for terminating a lease, if the lease term reflects the Group
exercising an option to terminate the lease.
After the commencement date, lease liabilities are adjusted by interest accretion and lease
payments. The Group remeasures lease liabilities (and makes a corresponding adjustment to the related
right-of-use assets) whenever:
 the lease term has changed or there is a change in the assessment of exercise of a purchase
option, in which case the related lease liability is remeasured by discounting the revised
lease payments using a revised discount rate at the date of reassessment;
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Leases—continued
The Group as a lessee—continued
Lease liabilities—continued
 the lease payments change due to changes in market rental rates following a market rent
review, in which cases the related lease liability is remeasured by discounting the revised
lease payments using the initial discount rate.
The Group presents lease liabilities as a separate line item on the consolidated statements of
financial position.
Lease modifications
The Group accounts for a lease modification as a separate lease if:
 the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
 the consideration for the leases increases by an amount commensurate with the stand-
alone price for the increase in scope and any appropriate adjustments to that stand-alone
price to reflect the circumstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures the
lease liabilities, less any lease incentives receivable, based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification.
The Group accounts for the remeasurement of lease liabilities by making corresponding
adjustments to the relevant right-of-use assets.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies
other than the functional currency of that entity (foreign currencies) are recognised at the rates of
exchanges prevailing on the dates of the transactions. At the end of each reporting period, monetary
items denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of
monetary items, are recognised in profit or loss in the period in which they arise.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended
use or sale, are added to the cost of those assets until such time as the assets are substantially ready for
their intended use or sale.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Borrowing costs—continued
All other borrowing costs are recognised in profit or loss in the period in which they are
incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will
comply with the conditions attaching to them and that the grants will be received.
Government grants related to income that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate financial support to the Group with no future
related costs are recognised in profit or loss in the period in which they become receivable. Such grants
are presented under “other income”.
Retirement benefits costs
Payments to state-managed retirement benefit schemes are recognised as an expense when
employees have rendered service entitling them to the contributions.
Termination benefits
A liability for a termination benefit is recognised at the earlier of when the Group entity can no
longer withdraw the offer of the termination benefit and when it recognises any related restructuring
costs.
Short-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits
expected to be paid as and when employees rendered the services. All short-term employee benefits are
recognised as an expense unless another IFRS requires or permits the inclusion of the benefit in the
cost of an asset.
A liability is recognised for benefits accruing to employees (such as wages and salaries, annual
leave and sick leave) after deducting any amount already paid.
Share-based payments
Equity-settled share-based payments transactions
Share options granted to employees
Equity-settled share-based payments to employees and others providing similar services are
measured at the fair value of the equity instruments at the grant date.
The fair value of the equity-settled share-based payments determined at the grant date without
taking into consideration all non-market vesting conditions is expensed using graded vesting method
over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest,
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Share-based payments—continued
Equity-settled share-based payments transactions—continued
Share options granted to employees—continued
with a corresponding increase in equity (share-based payments reserve). At the end of each reporting
period, the Group revises its estimate of the number of equity instruments expected to vest based on
assessment of all relevant non-market vesting conditions. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to share-based payments reserve. For share options that vest
immediately at the date of grant, the fair value of the share options granted is expensed immediately to
profit or loss.
When share options are exercised, the amount previously recognised in share-based payments
reserve will continue to be held in share-based payments reserve. When the share options are forfeited
after the vesting date or are still not exercised at the expiry date, the amount previously recognised in
share-based payments reserve will be transferred to accumulated losses.
When shares granted are vested, the amount previously recognised in share-based payments
reserves will continue to be held in share-based payments reserve.
Modification to the terms and conditions of the share-based payment arrangements
When the terms and conditions of an equity-settled share-based payment arrangement are
modified, the Group recognises, as a minimum, the services received measured at the grant date fair
value of the equity instruments granted, unless those equity instruments do not vest because of failure
to satisfy a vesting condition (other than a market condition) that was specified at grant date. In
addition, if the Group modifies the vesting conditions (other than a market condition) in a manner that
is beneficial to the employees, for example, by reducing the vesting period, the Group takes the
modified vesting conditions into consideration over the remaining vesting period.
The incremental fair value granted, if any, is the difference between the fair value of the
modified equity instruments and that of the original equity instruments, both estimated as at the date of
modification.
If the modification occurs during the vesting period, the incremental fair value granted is
included in the measurement of the amount recognised for services received over the period from
modification date until the date when the modified equity instruments are vested, in addition to the
amount based on the grant date fair value of the original equity instruments, which is recognised over
the remainder of the original vesting period.
If the modification reduces the total fair value of the share-based arrangement, or is not
otherwise beneficial to the employee, the Group continues to account for the original equity
instruments granted as if that modification had not occurred.
Taxation
Income tax expense represents the sum of the current tax and deferred tax.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Taxation—continued
The current tax is based on taxable profit for the year. Taxable profit differs from loss before
tax because of income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of each reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets
and liabilities in the Historical Financial Information and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are generally recognised for all deductible temporary differences to the
extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary
difference arises from the initial recognition (other than in a business combination) of assets and
liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition,
deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition
of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with
investments in subsidiaries, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments are
only recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have
been enacted or substantively enacted by the end of each reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of each reporting period, to recover or
settle the carrying amount of its assets and liabilities.
For the purposes of measuring deferred tax for leasing transactions in which the Group
recognises the right-of-use assets and the related lease liabilities, the Group first determines whether
the tax deductions are attributable to the right-of-use assets or the lease liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the
Group applies IAS 12 requirements to the leasing transaction as a whole. Temporary differences
relating to right-of-use assets and lease liabilities are assessed on a net basis. Excess of depreciation on
right-of-use assets over the lease payments for the principal portion of lease liabilities results in net
deductible temporary differences.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Taxation—continued
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied to the same
taxable entity by the same taxation authority.
Current and deferred tax are recognised in profit or loss.
Property, plant and equipment
Property, plant and equipment are tangible assets that are held for use in the production or
supply of goods or services, or for administrative purposes (other than construction in progress).
Property, plant and equipment are stated in the consolidated statements of financial position at cost less
subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.
Property, plant and equipment in the course of construction for production, supply or
administrative purposes are carried at cost, less any recognised impairment loss. Costs include any
costs directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management, including costs of testing whether the
related assets is functioning properly. Such properties are classified to the appropriate categories of
property, plant and equipment when completed and ready for intended use. Depreciation of these
assets, on the same basis as other property assets, commences when the assets are ready for their
intended use.
Depreciation is recognised so as to write off the cost of assets (other than construction in
progress) less their residual values over their estimated useful lives (as below), using the straight-line
method. The estimated useful lives, residual values and depreciation method are reviewed at the end of
each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Useful lives
Leasehold improvement Over the term of the lease
Plant and machinery 5 to 10 years
Motor vehicles 5 years
Office equipment 3 to 5 years
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are carried at costs less
accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets
with finite useful lives is recognised on a straight-line basis over their estimated useful lives (as
below).
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Intangible assets—continued
Intangible assets acquired separately—continued
The estimated useful life and amortisation method are reviewed at the end of each reporting period,
with the effect of any changes in estimate being accounted for on a prospective basis.
Useful lives
Licences and franchise 10 years
Business relationship 10 years
Office software 3 to 10 years
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill
and are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination with
finite useful lives are reported at costs less accumulated amortisation and any accumulated impairment
losses, on the same basis as intangible assets that are acquired separately.
An intangible asset is derecognised on disposal, or when no future economic benefits are
expected from use or disposal. Gains and losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds and the carrying amount of the asset, are
recognised in profit or loss when the asset is derecognised.
Internally-generated intangible assets—research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is
incurred.
An internally-generated intangible asset arising from development activities (or from the
development phase of an internal project) is recognised if, and only if, all of the following have been
demonstrated:
 the technical feasibility of completing the intangible asset so that it will be available for
use or sale;
 the intention to complete the intangible asset and use or sell it;
 the ability to use or sell the intangible asset;
 how the intangible asset will generate probable future economic benefits;
 the availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
 the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
The amount initially recognised for internally-generated intangible asset is the sum of the
expenditure incurred from the date when the intangible asset first meets the recognition criteria listed
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Intangible assets—continued
Internally-generated intangible assets—research and development expenditure—
continued
above. Where no internally-generated intangible asset can be recognised, development expenditure is
recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible
assets that are acquired separately.
Impairment on property, plant and equipment, right-of-use assets and intangible assets other
than goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its property,
plant and equipment, right-of-use assets and intangible assets with finite useful lives to determine
whether there is any indication that these assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the relevant asset is estimated in order to determine the
extent of the impairment loss (if any).
The recoverable amount of property, plant and equipment, right-of-use assets, and intangible
assets are estimated individually. When it is not possible to estimate the recoverable amount individually,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment, corporate assets are allocated to the relevant
cash-generating unit when a reasonable and consistent basis of allocation can be established, or
otherwise they are allocated to the smallest group of cash generating units for which a reasonable and
consistent allocation basis can be established. The recoverable amount is determined for the cash-
generating unit or group of cash-generating units to which the corporate asset belongs, and is compared
with the carrying amount of the relevant cash-generating unit or group of cash-generating units.
Recoverable amount is the higher of 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 (or a cash-generating unit) for which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its
recoverable amount. For corporate assets or portion of corporate assets which cannot be allocated on a
reasonable and consistent basis to a cash-generating unit, the Group compares the carrying amount of a
group of cash-generating units, including the carrying amounts of the corporate assets or portion of
corporate assets allocated to that group of cash-generating units, with the recoverable amount of the
group of cash-generating units. In allocating the impairment loss, the impairment loss is allocated first
to reduce the carrying amount of any goodwill (if applicable) and then to the other assets on a pro-rata
basis based on the carrying amount of each asset in the unit or the group of cash-generating units. The
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Impairment on property, plant and equipment, right-of-use assets and intangible assets other
than goodwill—continued
carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if
measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would
otherwise have been allocated to the asset is allocated pro rata to the other assets of the unit or the
group of cash-generating units. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-
generating unit or a group of cash-generating units) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (or a cash-
generating unit or a group of cash-generating units) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are
determined on specific identification method. Net realisable value represents the estimated selling price
for inventories less costs necessary to make the sales. Costs necessary to make the sale include
incremental costs directly attributable to the sale and non-incremental costs which the Group must
incur to make the sale.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group will be required to settle that obligation, and a
reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle
the present obligation at the end of each reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated
to settle the present obligation, its carrying amount is the present value of those cash flows (where the
effect of the time value of money is material).
Financial instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to
the contractual provisions of the instrument. All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of assets within the time frame established by regulation
or convention in the market place.
Financial assets and financial liabilities are initially measured at fair value except for trade
receivables arising from contracts with customers which are initially measured in accordance with
IFRS 15 Revenue from Contracts with Customers . Transaction costs that are directly attributable to the
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
acquisition or issue of financial assets and financial liabilities (other than financial assets or financial
liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or
loss.
The effective interest method is a method of calculating the amortised cost of a financial asset
or financial liability and of allocating interest income and interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments
(including all fees and points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the financial asset or
financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised
cost:
 the financial asset is held within a business model whose objective is to collect contractual
cash flows; and
 the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at fair value
through other comprehensive income (“FVTOCI”):
 the financial asset is held within a business model whose objective is achieved by both
selling and collecting contractual cash flows; and
 the contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
All other financial assets are subsequently measured at FVTPL.
A financial asset is held for trading if:
 it has been acquired principally for the purpose of selling in the near term; or
 on initial recognition it is a part of a portfolio of identified financial instruments that the
Group manages together and has a recent actual pattern of short-term profit-taking; or
 it is a derivative that is not designated and effective as a hedging instrument.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
Financial assets—continued
Classification and subsequent measurement of financial assets—continued
(i) Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to
the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired (see below). For financial assets that have subsequently become credit-
impaired, interest income is recognised by applying the effective interest rate to the amortised cost of
the financial asset from the next reporting period. If the credit risk on the credit-impaired financial
instrument improves so that the financial asset is no longer credit-impaired, interest income is
recognised by applying the effective interest rate to the gross carrying amount of the financial asset
from the beginning of each reporting period following the determination that the asset is no longer
credit-impaired.
(ii) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI
or designated as FVTOCI are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or
loss excludes any dividend or interest earned on the financial asset and is included in “other income”
line item.
Impairment of financial assets subject to impairment assessment under IFRS 9
The Group performs impairment assessment under expected credit loss (“ECL”) model on
financial assets (including trade and other receivables, amount due from a shareholder, time deposits,
restricted bank deposits and bank balances), which are subject to impairment under IFRS 9. The
amount of ECL is updated at each reporting date to reflect changes in credit risk since initial
recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the
expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the
portion of lifetime ECL that is expected to result from default events that are possible within 12
months after the reporting date. Assessment is done based on the Group’s historical credit loss
experience, adjusted for factors that are specific to the debtors, general economic conditions and an
assessment of both the current conditions at the reporting date as well as the forecast of future
conditions.
The Group always recognises lifetime ECL for trade receivables.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless
when there has been a significant increase in credit risk since initial recognition, in which case the
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
Financial assets—continued
Impairment of financial assets subject to impairment assessment under IFRS 9—continued
Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is
based on significant increases in the likelihood or risk of a default occurring since initial recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the
Group compares the risk of a default occurring on the financial instrument as of the reporting date with
the risk of a default occurring on the financial instrument as of the date of initial recognition. In
making this assessment, 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.
In particular, the following information is taken into account when assessing whether credit risk
has increased significantly:
 an actual or expected significant deterioration in the financial instrument’s external (if
available) or internal credit rating;
 significant deterioration in external market indicators of credit risk, e.g. a significant
increase in the credit spread, the credit default swap prices for the debtor;
 existing or forecast adverse changes in business, financial or economic conditions that are
expected to cause a significant decrease in the debtor’s ability to meet its debt obligations;
 an actual or expected significant deterioration in the operating results of the debtor;
 an actual or expected significant adverse change in the regulatory, economic, or
technological environment of the debtor that results in a significant decrease in the
debtor’s ability to meet its debt obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk
has increased significantly since initial recognition when contractual payments are more than 30 days
past due, unless the Group has reasonable and supportable information that demonstrates otherwise.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has
been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are
capable of identifying significant increase in credit risk before the amount becomes past due.
(ii) Definition of default
For internal credit risk management, the Group considers an event of default occurs when
information developed internally or obtained from external sources indicates that the debtor is unlikely
to pay its creditors, including the Group, in full (without taking into account any collaterals held by the
Group).
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
Financial assets—continued
Impairment of financial assets subject to impairment assessment under IFRS 9—continued
(ii) Definition of default—continued
Irrespective of the above, the Group considers that default has occurred when a financial asset
is more than 90 days past due unless the Group has reasonable and supportable information to
demonstrate that a more lagging default criterion is more appropriate.
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on
the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is
credit-impaired includes observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender of the borrower, for economic or contractual reasons relating to the borrower’s
financial difficulty, having granted to the borrower a concession(s) that the lender(s)
would not otherwise consider; or
(d) it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty
is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the
counterparty has been placed under liquidation or has entered into bankruptcy proceedings, or in the
case of trade receivables, when the amounts are over two years past due, whichever occurs sooner.
Financial assets written off may still be subject to enforcement activities under the Group’s recovery
procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition
event. Any subsequent recoveries are recognised in profit or loss.
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the
probability of default and loss given default is based on historical data adjusted by forward-looking
information. Estimation of ECL reflects an unbiased and probability-weighted amount that is
determined with the respective risks of default occurring as the weights.
Generally, the ECL is the difference between all contractual cash flows that are due to the
Group in accordance with the contract and the cash flows that the Group expects to receive, discounted
at the effective interest rate determined at initial recognition.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
Financial assets—continued
Impairment of financial assets subject to impairment assessment under IFRS 9—continued
(v) Measurement and recognition of ECL—continued
Lifetime ECL for trade and note receivables are considered on a collective basis taking into
consideration past due information and relevant credit information such as forward looking
macroeconomic information.
For collective assessment, the Group takes into consideration the following characteristics
when formulating the grouping:
 Past-due status;
 Nature, size and industry of debtors; and
 External credit ratings where available.
The grouping is regularly reviewed by the directors of the Company to ensure the constituents
of each group continue to share similar credit risk characteristics.
Interest income 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 amortised
cost of the financial asset.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments
by adjusting their carrying amount, with the exception of trade and note receivables where the
corresponding adjustment is recognised through a loss allowance account.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows
from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards
of ownership of the asset to another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the
asset’s carrying amount and the sum of the consideration received and receivable is recognised in
profit or loss.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
Financial liabilities and equity—continued
Classification as debt or equity—continued
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity
after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the
proceeds received, net of direct issue costs.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest
method or at FVTPL.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or
it is designated as at FVTPL.
A financial liability is held for trading if:
 it has been acquired principally for the purpose of repurchasing it in the near term; or
 on initial recognition it is part of a portfolio of identified financial instruments that the
Group manages together and has a recent actual pattern of short-term profit-taking; or
 it is a derivative, except for a derivative that is a financial guarantee contract or a
designated and effective hedging instrument.
A financial liability other than a financial liability held for trading or contingent consideration
of an acquirer in a business combination may be designated as at FVTPL upon initial recognition if:
 such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
 the financial liability forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with the Group’s documented risk management or investment strategy, and
information about the grouping is provided internally on that basis; or
 it forms part of a contract containing one or more embedded derivatives, and IFRS 9
permits the entire combined contract to be designated as at FVTPL.
The convertible preferred shares contain redemption features and/or other embedded
derivatives, are designated as financial liabilities at FVTPL.
For financial liabilities that are designated as at FVTPL, the amount of change in the fair value
of the financial liability that is attributable to changes in the credit risk of that liability is recognised in
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
4. SIGNIFICANT ACCOUNTING POLICIES—continued
Financial instruments—continued
Financial liabilities and equity—continued
Classification as debt or equity—continued
Financial liabilities at FVTPL—continued
other comprehensive income, unless the recognition of the effects of changes in the liability’s credit
risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss.
For financial liabilities that contain embedded derivatives, such as convertible preferred shares, the
changes in fair value of the embedded derivatives are excluded in determining the amount to be
presented in other comprehensive income. Changes in fair value attributable to a financial liability’s
credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit
or loss; instead, they are transferred to accumulated losses upon derecognition of the financial liability.
Fair value is determined in the manner described in Note 29.
Financial liabilities at amortised cost
Financial liabilities including trade and other payables and bank borrowings are subsequently
measured at amortised cost, using the effective interest method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or have expired. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is recognised in profit or loss.
Offsetting a financial asset and a financial liability
A financial asset and a financial liability are offset and the net amount presented in the
consolidated statement of financial position when, and only when, the Group currently has a legally
enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 4, the
management of the Group are required to make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources. The
estimates and underlying assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to
accounting estimates are recognised 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.
I-34


--- page 403 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY—continued
Critical judgement in applying accounting policies
The following are the critical judgements, apart from those involving estimations (see below),
that the directors of the Company have made in the process of applying the Group’s accounting
policies and that have the most significant effect on the amounts recognised in the Historical Financial
Information.
Consolidation of affiliated entities
The Group obtained control over PRC domestic companies, Guangzhou Sudao Information
Technology Co., Ltd. (“Guangzhou Sudao”) and Guangzhou Yaobang Information Technology Co., Ltd.
(“Guangzhou Yaobang”), by entering into a series of the contractual arrangements with the PRC
domestic companies and their respective Nominee Shareholders (collectively, the “Contractual
Arrangements”). Nevertheless, the Contractual Arrangements and other measures may not be as effective
as direct legal ownership in providing the Group with direct control over the PRC domestic companies
and uncertainties presented by the PRC legal system could impede the Group’s beneficiary rights of the
results, assets and liabilities of the PRC domestic companies. The directors of the Company, based on the
advice of its legal counsel, consider that the Contractual Arrangements among PRC domestic companies
and their respective Nominee Shareholders are in compliance with the relevant PRC Laws and are legally
enforceable.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of each reporting period that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next twelve months
from each reporting date.
Impairment of property, plant and equipment, right-of-use assets and intangible assets
Property, plant and equipment, right-of-use assets and intangible assets are carried at cost less
accumulated depreciation and impairment, if any. In determining whether an asset is impaired or the
event previously causing the impairment no longer exists, the management of the Group has to
exercise judgement and make assumptions, particularly when assessing: (1) whether an event has
occurred or any indicators that may affect the asset value; (2) whether the carrying value of an asset
can be supported by the recoverable amount, in the case of value in use, the net present value of future
cash flows which are estimated based upon the continued use of the asset; and (3) the appropriate key
assumptions to be applied in estimating the value in use included in the cash flow projections and an
appropriate discount rate. When it is not possible to estimate the recoverable amount of an individual
asset (including right-of-use assets), the Group estimates the recoverable amount of the cash-
generating-unit to which the assets belong, including allocation of corporate assets when a reasonable
and consistent basis of allocation can be established, otherwise recoverable amount is determined at the
smallest group of cash generating units, for which the relevant corporate assets have been allocated.
Changing the underlying assumptions and key inputs, including but not limited to the forecasted
revenue, gross profit margins and discount rates, in the cash flow projections, could materially affect
the estimated recoverable amounts.
I-35


--- page 404 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY—continued
Key sources of estimation uncertainty—continued
Impairment of property, plant and equipment, right-of-use assets and intangible assets—
continued
Determining whether property, plant and equipment, right-of-use assets and intangible assets
are impaired requires an estimation of the recoverable amount of the cash-generating unit (or group of
cash-generating units) to which property, plant and equipment, right-of-use assets and intangible assets
have been allocated, which is the higher of the value in use or fair value less costs of disposal. The
value in use calculation requires the Group to estimate the future cash flows expected to arise from the
cash-generating unit (or a group of cash-generating units) and a suitable discount rate in order to
calculate the present value. Where the actual future cash flows are less than expected, or change in
facts and circumstances which results in downward revision of future cash flows or upward revision of
discount rate, a material impairment loss or further impairment loss may arise. Furthermore, the
estimated cash flows and discount rate are subject to higher degree of estimation uncertainties due to
uncertainty on how the Covid-19 pandemic may progress and evolve.
During the Track Record Period, no impairment loss was recognsied for property, plant and
equipment, right-of-use assets and intangible assets. As at 31 December 2020, 2021 and 2022, the
aggregate carrying amounts of property, plant and equipment, right-of-use assets and intangible assets are
approximately RMB282,889,000, RMB387,908,000 and RMB362,913,000. Details of the recoverable
amount calculation are disclosed in Note 15.
Fair value of financial liabilities at FVTPL
The Group has issued a series of preferred shares to certain investors prior to and during the
Track Record Period as set out in Note 29. The Group recognised the preferred shares as financial
liabilities at FVTPL and the fair value is determined based on significant unobservable inputs using
valuation techniques. The fair value of the financial instruments is established by using valuation
techniques, which include back-solve method and equity allocation based on the Black-Scholes Option
Pricing Model (“OPM”) involving various parameters and inputs. Valuation techniques are certified by
an independent qualified professional valuer before being implemented for valuation and are calibrated
to ensure that outputs reflect market conditions. Valuation models established by the valuer make the
maximum use of market inputs and rely as little as possible on the Group’s specific data. However, it
should be noted that some inputs, such as fair value of the ordinary shares of the Company,
possibilities under different scenarios, such as qualified initial public offering (“IPO”), redemption,
liquidation and other inputs, such as time to liquidation or redemption, risk-free interest rate, expected
volatility value and dividend yield, require management estimates. Management estimates and
assumptions are reviewed periodically and are adjusted if necessary.
Should any of the estimates and assumptions change, it may lead to material adjustments in the
fair value of financial liabilities at FVTPL. The fair value of the financial liabilities at FVTPL of the
Group as at 31 December 2020, 2021 and 2022 are approximately RMB2,931,012,000,
RMB4,222,381,000 and RMB5,872,042,000, respectively.
I-36


--- page 405 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
6. REVENUE AND SEGMENT INFORMATION
The Group engaged in i) wholesales of pharmaceutical and healthcare products offline or online
through its online platform; ii) retail of pharmaceutical and healthcare products through its retail shops;
iii) operating online platform that enable the pharmaceutical distributors and vendors to sell their own
pharmaceutical and healthcare products using the Group’s online platform; iv) providing SaaS solution
to downstream pharmacies to streamline their inventory management; v) providing medical testing
services to primary healthcare institutions; vi) selling smart unmanned pharmaceutical booth to third-
party pharmacies; and vii) providing maintenance and technical support services in relation to the
smart unmanned pharmaceutical booth to third-party pharmacies.
(a) Disaggregation of revenue from contracts with customers
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Type of goods or services:
Self-operation business (Note (i)) ................................ 5,691,414 9,589,512 13,519,017
Online marketplace services (Note (ii)) ........................... 372,716 489,247 694,204
Others (Note (iii)) ............................................ 7 7 7 14,779 61,589
Total ...................................................... 6,064,907 10,093,538 14,274,810
Timing of revenue recognition:
At a point in time ............................................. 6,064,130 10,089,821 14,268,376
Over-time .................................................. 7 7 7 3,717 6,434
Total ...................................................... 6,064,907 10,093,538 14,274,810
Notes:
i) The Group sells pharmaceutical and healthcare products mainly to pharmacies and primary healthcare institutions.
ii) The marketplace services revenue represents the commission received by the Group from distributors and vendors using the Group’s
online platform, which is recognised upon end customers’ acceptance and is charged based on a certain percentage of sales, net of
discounts and return allowances made by the distributors and vendors through the Group’s online platform.
iii) Others includes -
1) The Group collects one-time usage fee and service fee for the inventory management related to the SaaS solution provided to the
downstream pharmacies, which helps pharmacies to streamline their inventory management.
2) The Group provides diagnostic testing services and generates testing results to primary healthcare institutions.
3) The Group sells smart unmanned pharmaceutical booth to third-party pharmacies and also provides maintenance and technical
support services in relation to the smart unmanned pharmaceutical booth to them.
(b) Transaction price allocated to the remaining performance obligation for contracts with
customers
All contracts with customers are for period of one year or less. As permitted by IFRS 15, the
transaction price allocated to these unsatisfied contracts is not disclosed.
(c) Segment information
Information is reported to the executive directors of the Company, being the chief operating
decision maker (“CODM”), for the purposes of resource allocation and performance assessment. The
accounting policies are the same as the Group’s accounting policies described in Note 4. No other
analysis of the Group’s results nor assets and liabilities is regularly provided to the CODM for review
and the CODM reviews the overall results and financial position of the Group as a whole. Accordingly,
I-37


--- page 406 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
6. REVENUE AND SEGMENT INFORMATION—continued
(c) Segment information—continued
the CODM has identified one operating segment and only entity-wide disclosures, major customers
and geographical information are presented in accordance with IFRS 8 Operating Segments.
(d) Geographic information
The Group principally operates in the PRC, which is also the place of domicile. The Group’s
revenue is all derived from operations in the PRC during the Track Record Period and the Group’s
non-current assets are all located in the PRC.
(e) Information about major customers
During the Track Record Period, there was no revenue derived from transactions with a single
external customer which amounted to 10% or more of the Group’s revenue.
7. OTHER INCOME
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Government grants (Note) ............................................ 4,302 14,043 23,171
Bank interest income ................................................ 25,307 27,900 42,657
Investment income from financial assets at FVTPL ........................ 11,372 17,870 19,981
Others ........................................................... 3,315 2,652 3,111
44,296 62,465 88,920
Note: It represented cash received from local government to encourage the business operations in the PRC. Unconditional government grants
are recognised in profit and loss when received while conditional government grants are recognised in profit or loss when the Group
fulfilled the conditions.
8. OTHER GAINS AND LOSSES
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
(Losses) gains on disposal of property, plant and equipment ................. (99) 12 38
Gain on disposal of subsidiaries (Note 40) ............................... — — 1,344
Donations (Note) ................................................... (1,000) (660) (132)
Net foreign exchange (losses) gains .................................... (742) (5,900) 18,715
Impairment loss on prepayment to suppliers ............................. (12,376) (2,075) —
(14,217) (8,623) 19,965
Note: During the year ended 31 December 2020 and 2021, the Group made a cash donation of RMB1,000,000 to the Wuhan Charity
Federation, RMB600,000 to a student public fund in Beijing and RMB60,000 to poverty alleviation projects, respectively.
I-38


--- page 407 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
9. FINANCE COSTS
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Interest expense on lease liabilities ..................................... 7,499 8,068 9,710
Interest expense on bank borrowings ................................... 2,802 426 521
10,301 8,494 10,231
10a. INCOME TAX CREDIT (EXPENSE)
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
PRC Enterprise Income Tax (“EIT”):
Current tax .................................................... — — —
Deferred tax (Note 10b) ......................................... (4,561) (1,454) 3,171
(4,561) (1,454) 3,171
The Company was incorporated in the Cayman Islands as an exempted company with limited
liability under the Companies Law of the Cayman Islands and is exempted from the Cayman Islands
income tax.
No provision for Hong Kong Profits Tax has been made in the Historical Financial Information
as the Group had no assessable profit subject to Hong Kong Profits Tax for the Track Record Period.
Under the Law of the PRC on EIT (the “EIT Law”) and Implementation Regulation of the EIT
Law, the PRC EIT rate of subsidiaries of the Group operating in the PRC was 25% for the Track
Record Period.
Certain PRC subsidiaries of the Group are subject to “small and thin-profit enterprises” will
benefit from a preferential tax rate of 20% under the EIT Law. Accordingly, the qualifying group
entities enjoyed 75% reduction on annual taxable income on first RMB1,000,000 and 50% reduction
between the annual taxable income of RMB1,000,000 to RMB3,000,000. For the years ended
31 December 2021 and 2022, the qualifying group entities enjoyed 87.5% reduction on annual taxable
income on first RMB1,000,000 and 50% and 75% reduction between the annual taxable income of
RMB1,000,000 to RMB3,000,000, respectively. As a result, such PRC subsidiaries were eligible for a
preferential enterprise income tax rate for their respective tax holiday.
Certified high and new technology enterprises (“HNTE”) are entitled to a preferential tax rate
of 15%. Guangzhou Sudao and Guangzhou Sudaoyi Information Technology Co., Ltd. (“Guangzhou
Sudaoyi”) have been qualified as a HNTE and enjoyed a preferential income tax rate of 15% since
2019 and 2021, respectively, which is subject to review and renewal every three years. The HNTE
Certificate of Guangzhou Sudao remains valid for 3 years from 2019 to 2021 and expired in 2022. The
HNTE Certificate of Guangzhou Sudaoyi remains valid for 3 years from 2021 to 2023 and will be
expired in 2024. In addition, Guangzhou Sudao, Guangzhou Sudaoyi, Guangzhou Leyao Information
Technology Co., Ltd., Guangzhou Yuewei Medical Laboratory Co., Ltd. (“Guangzhou Yuewei”),
Guangzhou Xiaoweicang Intelligent Pharmacy Technology Co., Ltd., Guangzhou Guangpu Health
I-39


--- page 408 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
10a. INCOME TAX CREDIT (EXPENSE)—continued
Technology Co., Ltd. and Guangzhou Yaobang enjoyed super deduction of 175% and 200% of
qualifying research and development expenses as tax deductible expenses for the period from 1
January 2020 to 30 September 2022 and for the period from 1 October 2022 to 31 December 2022,
respectively, pursuant to the relevant laws and regulations promulgated by the State Administration of
Taxation of the PRC.
Income tax credit (expense) for the Track Record Period can be reconciled to the loss before tax
per the consolidated statements of profit or loss and other comprehensive income as follows:
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Loss before tax ................................................. ( 576,272) (503,074) (1,496,867)
Tax at PRC EIT rate of 25% ....................................... ( 1 44,068) (125,769) (374,217)
Tax effect of super deduction for research and development expenses
(Note a) ..................................................... (3,970) (9,470) (16,721)
Tax effect of expenses not deductible for tax purpose (Note b) ............ 84,332 48,271 353,160
Tax effect of tax losses not recognised ............................... 63,977 114,337 122,466
Utilisation of tax losses previously not recognised ...................... (4,986) (25,634) (81,534)
Effect on different tax rate of a subsidiary operating in other jurisdiction .... (196) (522) —
Others ........................................................ 3 5 0 ( 2,667) 17
Income tax credit (expense) for the year .............................. (4,561) (1,454) 3,171
Note:
(a) The eligible expenditures represent research and development costs incurred in the PRC and
charged to profit or loss, which is subject to an additional 75% and 100% tax deduction in the
calculation of income tax expense for the Track Record Period.
(b) The non-deductible expenses mainly represent changes in fair value of financial liabilities at
FVTPL.
I-40


--- page 409 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
10a. INCOME TAX CREDIT (EXPENSE)—continued
As at 31 December 2020, 2021 and 2022, the Group had unused tax losses of approximately
RMB1,058,188,000, RMB1,366,795,000 and RMB1,510,546,000, respectively, available for offset
against future profits. Due to the unpredictability of future profit streams, no deferred tax asset had
been recognised for these unused tax losses. Included in the unrecognised tax losses are losses of
approximately RMB1,058,188,000, RMB1,366,795,000 and RMB1,510,546,000 as at 31 December
2020, 2021 and 2022 with expiry dates as disclosed in the following table. With effect from 1 January
2018, unused tax losses occurred five years prior to the year in which the entity becomes qualified as
an HNTE shall be allowed to be carried forward to subsequent years, and the maximum carry-forward
period of such tax losses shall be extended from 5 years to 10 years.
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
2021 ......................................................... 8,412 — —
2022 ......................................................... 10,261 10,261 —
2023 ......................................................... 16,614 16,537 16,537
2024 ......................................................... 203,093 202,649 188,318
2025 ......................................................... 281,656 234,825 175,671
2026 ......................................................... 45,775 422,873 330,319
2027 ......................................................... 72,051 31,684 488,568
2028 ......................................................... 157,673 157,673 —
2029 ......................................................... 262,653 262,653 136,361
2030 ......................................................... — 27,640 85,535
2031 ......................................................... — — 89,237
1,058,188 1,366,795 1,510,546
10b. DEFERRED TAXATION
For the purpose of presentation in the consolidated statements of financial position, certain
deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax
balances for financial reporting purposes:
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Deferred tax assets ................................................. 1,775 3,152 1,584
Deferred tax liabilities ............................................... (432) (1,745) (3,348)
1,343 1,407 (1,764)
I-41


--- page 410 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
10b. DEFERRED TAXATION—continued
The following are the major deferred tax liabilities and assets recognised and movements
thereon during the Track Record Period:
Fair value
adjustment
in business
combination
ECL
provision
Inventory
provision Total
RMB’000 RMB’000 RMB’000 RMB’000
At 31 January 2020 ...................................... (4,165) 366 581 (3,218)
Credit to profit or loss .................................... 4 6 9 3,882 210 4,561
At 31 December 2020 .................................... (3,696) 4,248 791 1,343
Credit to profit or loss .................................... 4 9 3 9 6 1 — 1,454
Acquisition of a subsidiary (Note 36) ........................ (1,390) — — (1,390)
At 31 December 2021 .................................... (4,593) 5,209 791 1,407
Credit (charge) to profit or loss ............................. 6 0 9 ( 4,174) 394 (3,171)
At 31 December 2022 .................................... ( 3,984) 1,035 1,185 (1,764)
11. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging:
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Cost of inventories recognised as an expense ........................ 5,390,897 9,093,049 12,677,901
Depreciation of property, plant and equipment ....................... 27,838 35,951 43,429
Depreciation of right-of-use assets ................................ 46,753 57,131 76,562
Amortisation of intangible assets ................................. 7,809 9,177 15,036
Write down (reversal of write down) for obsolete inventories ........... 9,967 (298) 1,576
Auditors’ remunerations ........................................ 8 6 9 5 1 0 1
Listing expenses .............................................. — 4,354 36,865
Staff costs:
Directors’ emoluments (Note 12) ................................. 1,182 10,790 28,639
Other staff costs
—Salaries and other allowances .............................. 473,054 670,361 897,841
—Contributions to retirement benefits scheme ................... 3,697 40,005 45,500
—Equity-settled share-based expense .......................... — 17,155 16,620
Total staff costs ............................................... 477,933 738,311 988,600
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
12. DIRECTORS’ AND CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS
Directors’ and chief executive’s emoluments
Details of the emoluments paid or payable to the directors of the Company (including
emoluments for services as employees/directors of group entities comprising the Group prior to
becoming the directors of the Company) by entities comprising the Group during the Track Record
Period are as follows:
For the year ended 31 December 2020
Name Fee
Salaries
and
allowances
Performance
related
bonus
Retirement
benefits
scheme
contributions Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Mr. Buzhen Zhang (Note i) ...................... — 3 5 9 1 4 4 5 5 0 8
Ms. Xiaoye Xu (Note ii) ......................... — 4 7 3 2 0 0 1 6 7 4
Ms. Xiaohong Chen (Note iii) .................... — — — — —
Mr. Frank Lin (Note vii) ........................ — — — — —
Mr. Lei Fu (Note iii) ............................ — — — — —
Mr. Fei Luo (Note iii) ........................... — — — — —
Mr. Jiahao Shao (Note iv) ....................... — — — — —
Mr. Jiangwei Wang (Note iii) .................... — — — — —
Mr. Pengfei Wang (Note iii) ..................... — — — — —
Mr. Tian Cheng (Note iv) ........................ — — — — —
— 832 344 6 1,182
For the year ended 31 December 2021
Name Fee
Salaries
and
allowances
Performance
related
bonus
Retirement
benefits
scheme
contributions
Equity-
settled
share-based
payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Mr. Buzhen Zhang (Note i) ............ — 5 9 8 1 5 0 1 7 — 7 6 5
Ms. Xiaoye Xu (Note ii) .............. — 8 2 6 4 0 0 1 7 5,239 6,482
Ms. Yanhua Hu (Note v) .............. — 1,221 350 4 1,968 3,543
Ms. Xiaohong Chen (Note iii) ......... — — — — — —
Mr. Frank Lin (Note vii) .............. — — — — — —
Mr. Lei Fu (Note iii) ................. — — — — — —
Mr. Fei Luo (Note iii) ................ — — — — — —
Mr. Jiahao Shao (Note iv) ............. — — — — — —
Mr. Jiangwei Wang (Note iii) .......... — — — — — —
Mr. Pengfei Wang (Note iii) ........... — — — — — —
Mr. Tian Cheng (Note iv) ............. — — — — — —
Mr. Ziyang Zhu (Note vi) ............. — — — — — —
— 2,645 900 38 7,207 10,790
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--- page 412 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
12. DIRECTORS’ AND CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS—
continued
Directors’ and chief executive’s emoluments—continued
For the year ended 31 December 2022
Name Fee
Salaries
and
allowances
Performance
related
bonus
Retirement
benefits
scheme
contributions
Equity-
settled
share-based
payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Mr. Buzhen Zhang (Note i) ............ — 6 3 0 1,006 34 — 1,670
Ms. Xiaoye Xu (Note ii) .............. — 9 6 8 1,000 23 4,684 6,675
Mr. Fei Chen(Note viii) .............. — 1,604 900 — 15,299 17,803
Ms. Xiaohong Chen (Note iii) ......... — — — — — —
Ms. Yanhua Hu (Note v) .............. — 2 7 5 — 2 2,214 2,491
Mr. Frank Lin (Note vii) .............. — — — — — —
Mr. Lei Fu (Note iii) ................. — — — — — —
Mr. Fei Luo (Note iii) ................ — — — — — —
Mr. Jiangwei Wang (Note iii) .......... — — — — — —
Mr. Pengfei Wang (Note iii) ........... — — — — — —
Mr. Ziyang Zhu (Note vi) ............. — — — — — —
— 3,477 2,906 59 22,197 28,639
The directors’ emoluments shown above were for their services in connection with the
management affairs of the Group.
Notes:
(i) Mr. Buzhen Zhang acts as chief executive of the Company throughout the Track Record Period and his emoluments disclosed above
included those for services rendered by him as the chief executive in management of the affairs of the group entities. Mr. Buzhen
Zhang has been redesignated as executive director of the Company on 15 April 2022.
(ii) Ms. Xiaoye Xu has been resigned from the director of the Company on 15 April 2022.
(iii) Ms. Xiaohong Chen, Mr. Lei Fu, Mr. Fei Luo, Mr. Jiangwei Wang and Mr. Pengfei Wang have been resigned from the directors of the
Company on 15 April 2022.
(iv) Mr. Jiahao Shao and Mr. Tian Cheng have been resigned from the directors of the Company on 23 November 2021 and 1 February
2021, respectively.
(v) Ms. Yanhua Hu was appointed as the director of the Company on 23 November 2021 and has been resigned from the director of the
Company on 15 April 2022.
(vi) Mr. Ziyang Zhu was appointed as the director of the Company on 1 February 2021 and has been redesignated as non-executive
director of the Company on 15 April 2022.
(vii) Mr. Frank Lin has been redesignated as non-executive director of the Company on 15 April 2022.
(viii) Mr. Fei Chen was appointed as the executive director of the Company on 15 April 2022.
Ms. Rong Shao, Mr. Sam Hanhui Sun, and Mr. Hongqiang Zhao were appointed as the
independent non-executive directors of the Company on 15 April 2022, with their appointments
becoming effective upon the listing of the shares of the Company on the Stock Exchange (the
“Listing”).
The performance related bonus is determined by reference to the duties and responsibilities of
the relevant individual within the Group and the Group’s performance.
None of the directors nor chief executive waived or agreed to waive any emoluments during the
Track Record Period.
Employees’ emoluments
The five highest paid individuals of the Group included nil, two, and three directors whose
emoluments are included in the disclosures above for each of the years ended 31 December 2020, 2021
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
12. DIRECTORS’ AND CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS—
continued
Employees’ emoluments—continued
and 2022. The emoluments of the remaining five, three, and two individuals for each of the years
ended 31 December 2020, 2021 and 2022, respectively, are as follows:
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Salaries and allowances .............................................. 2,617 2,057 2,201
Performance related bonus ........................................... 2,383 808 1,600
Contributions to retirement benefits scheme .............................. 9 5 1 4 2
Equity-settled share-based expense ..................................... — 6,451 2,255
5,009 9,367 6,098
The performance related bonus is determined by reference to the duties and responsibilities of
the relevant individual within the Group and the Group’s performance.
The emoluments of the five highest paid individuals, other than directors, were within the
following bands:
Number of employees
Year ended
31 December
2020 2021 2022
Nil to HK$1,000,000 ....................................................... 3 — —
HK$1,000,001 to HK$1,500,000 .............................................. 1 — —
HK$1,500,001 to HK$2,000,000 .............................................. — 1 —
HK$2,000,001 to HK$2,500,000 .............................................. 1 — —
HK$2,500,001 to HK$3,000,000 .............................................. — — 1
HK$3,000,001 to HK$3,500,000 .............................................. — 1 —
HK$4,000,001 to HK$4,500,000 .............................................. — — 1
HK$6,000,001 to HK$6,500,000 .............................................. — 1 —
53 2
During the Track Record Period, no emoluments were paid by the Group to the directors of the
Company or the five highest paid individuals of the Group as an inducement to join or upon joining the
Group or as compensation for loss of office.
13. DIVIDENDS
No dividends had been paid or declared by the Company or its subsidiaries during the Track
Record Period.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
14. LOSS PER SHARE
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Loss for the year attributable to the owners of the Company for the
purpose of calculating basic and diluted loss per share ......... ( 571,711) (494,041) (1,488,688)
No. of shares
2020 2021 2022
Weighted average number of ordinary shares for the purpose of
calculating basic and diluted loss per share .................. 125,316,184 125,316,184 125,316,184
The weighted average number of ordinary shares for the purpose of calculating basic and
diluted loss per share has been determined on the assumption that the Share Subdivision (as defined
and detailed in note 43) had been effected since 1 January 2020.
The computation of diluted loss per share for the years ended 31 December 2020, 2021 and
2022 does not assume conversion of the convertible preferred shares or the exercise of share options
since their assumed conversion or exercise would result in a decrease in loss per share.
15. PROPERTY, PLANT AND EQUIPMENT, NET
Leasehold
improvement
Plant and
machinery
Motor
vehicles
Office
equipment
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST
At 1 January 2020 .......................... 69,248 11,990 1,632 17,133 1,948 101,951
Additions ................................ 12,285 5,991 203 3,481 394 22,354
Transfer .................................. 2,311 31 — — (2,342) —
Disposals ................................. — (74) (134) (831) — (1,039)
At 31 December 2020 ....................... 83,844 17,938 1,701 19,783 — 123,266
Additions 37,718 16,288 533 11,358 1,099 66,996
Acquired on acquisition of a subsidiary (Note 36) — — — 239 583 822
Transfer 1,334 348 — — (1,682) —
Disposals — (3,741) (184) (2,570) — (6,495)
At 31 December 2021 122,896 30,833 2,050 28,810 — 184,589
Additions ................................ 12,925 14,941 2,776 5,592 2,614 38,848
Transfer 1,266 — — — (1,266) —
Disposals ................................. ( 4,286) (1,675) (657) (3,813) — (10,431)
Disposed on disposal of subsidiaries ........... (715) (3) — — — (718)
At 31 December 2022 ....................... 132,086 44,096 4,169 30,589 1,348 212,288
ACCUMULATED DEPRECIATION
At 1 January 2020 .......................... (10,937) (976) (162) (4,957) — (17,032)
Provided for the year ....................... (19,100) (4,237) (236) (4,265) — (27,838)
Eliminated on disposals ..................... — 8 2 2 8 5 — 2 9 5
At 31 December 2020 ....................... (30,037) (5,205) (396) (8,937) — (44,575)
Provided for the year (22,786) (5,912) (687) (6,566) — (35,951)
Eliminated on disposals — 1,638 140 1,284 — 3,062
At 31 December 2021 (52,823) (9,479) (943) (14,219) — (77,464)
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
15. PROPERTY, PLANT AND EQUIPMENT, NET—continued
Leasehold
improvement
Plant and
machinery
Motor
vehicles
Office
equipment
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Provided for the year ....................... (25,515) (9,314) (1,186) (7,414) — (43,429)
Eliminated on disposals ..................... 2,692 1,101 621 2,369 — 6,783
Eliminated on disposal of subsidiaries ......... 8 3 — — — — 8 3
At 31 December 2022 ...................... ( 75,563) (17,692) (1,508) (19,264) — (114,027)
CARRYING VALUES
At 31 December 2020 ...................... 53,807 12,733 1,305 10,846 — 78,691
At 31 December 2021 ...................... 70,073 21,354 1,107 14,591 — 107,125
At 31 December 2022 ...................... 56,523 26,404 2,661 11,325 1,348 98,261
Impairment assessment
Giving the continuous losses incurred in the Group’s operation during the Track Record Period,
the management concluded there was indication for impairment and performed impairment assessment
on its property, plant and equipment, right-of-use assets and intangibles assets. As at 31 December
2020, 2021 and 2022, management identified property, plant and equipment, right-of-use assets and
intangibles assets of certain subsidiaries with impairment indicators at net book value amounted to
approximately RMBnil, RMB80,475,000 and RMB7,287,000, respectively.
The Group estimates the recoverable amount of the cash-generating unit to which the assets
belong to when it is not possible to estimate the recoverable amount individually. Each subsidiary is
determined as a cash-generating unit. In addition to property, plant and equipment, right-of-use assets
and intangible assets, goodwill as set out in Note 18 have been allocated to two individual cash-
generating units, comprising two subsidiaries, Guangdong Dihao Pharmaceutical Co., Ltd.
(“Guangdong Dihao”) and Guangdong Dongjian Pharmaceutical Co., Ltd. (“Guangdong Dongjian”).
The recoverable amount of cash-generating unit has been determined based on a value in use
calculation. That calculation uses cash flow projections based on financial budgets approved by the
management of the Group covering the following 5 years with pre-tax discount rates of 16%, 16% and
16% as at 31 December 2020, 2021 and 2022, respectively. The pre-tax discount rate was derived from
capital asset pricing model by considering different market data and company specific risk. The Group
considered that there are no material changes in the market data and company specific risk throughout
the Track Record Period, the same discount rate of 16% was used by the Group throughout the Track
Record Period. The cash flows beyond the five-year period are extrapolated using 3% growth rate.
Management believes that the growth rate does not exceed the average long-term growth rate for the
relevant industry. Another key assumption for the value in use calculated is the budgeted gross margin,
which is determined based on the cash-generating units’ past performance and management
expectations for the market development. The growth rates and discount rate as at 31 December 2020,
2021 and 2022 have been reassessed taking into consideration of the higher degree of estimation
uncertainties in due to uncertainty on how the Covid-19 pandemic may progress and evolving and
volatility in financial markets, including potential disruptions of the Group’s wholesales operations.
Based on the result of the assessment, management of the Group determined that the
recoverable amounts of all cash-generating units are higher than the corresponding carrying amounts as
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
15. PROPERTY, PLANT AND EQUIPMENT, NET—continued
Impairment assessment—continued
at 31 December 2020, 2021 and 2022. Therefore, no impairment loss was recognised for each of the
years ended 31 December 2020, 2021 and 2022.
The Group performed sensitivity test by increasing 1% of pre-tax discount rate or decreasing
1% of long-term growth rate, which are the key assumptions determine the recoverable amount of the
cash-generating unit, with all other variables held constant. Based on the sensitivity test performed, no
material impairment issue was noted for the Track record Period. The headroom of each cash-
generating unit that was subject to impairment assessment at the end of each reporting period is not
less than 16% for the Track Record Period.
Management believes that any reasonably possible change in any of these assumptions would
not cause the carrying amount of a cash-generating unit to exceed the recoverable amount of that cash-
generating unit.
16. RIGHT-OF-USE ASSETS
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Carrying amounts:
Leased properties ................................................... 141,514 168,216 165,749
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Depreciation recognised in profit or loss:
Leased properties ................................................... 46,753 57,131 76,562
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Expense relating to short-term leases ................................... 1,605 3,237 5,418
Total cash outflow for leases .......................................... 53,690 64,816 90,404
Additions to right-of-use assets ........................................ 40,594 83,358 74,095
The Group leases various warehouses, offices and offline pharmacies for its operation. Lease
contracts are entered into fixed term of 2 to 6 years with fixed payments. The Group does not have the
option to purchase leased properties for a nominal amount at the end of the relevant lease terms or any
extension/termination options that are solely at the Group’s discretion. The Group determines the lease
period to be the non-cancellable period based on the contractual terms of the contract.
In addition, the Group also entered into short-term leases for warehouses and office workplace.
As at 31 December 2020, 2021 and 2022, the portfolio of short-term leases is similar to the portfolio of
short-term leases to which the short-term lease expense disclosed above.
The lease agreements do not impose any covenants other than the security interests in the leased
assets that are held by the lessor. The leased assets may not be used as security for borrowing purpose.
I-48


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
17. INTANGIBLE ASSETS
Licences and
franchise
Business
relationship
Office
software Total
RMB’000 RMB’000 RMB’000 RMB’000
(Note (i)) (Note (ii)) (Note (iii))
COST
At 1 January 2020 .................................. 52,759 9,340 5,259 67,358
Additions ......................................... — — 1,413 1,413
Acquired on acquisition of assets (Note 36) .............. 7,470 — — 7,470
Disposals ......................................... — — (230) (230)
At 31 December 2020 ............................... 60,229 9,340 6,442 76,011
Additions ......................................... 51,532 — 1,970 53,502
Acquired on acquisition of a subsidiary (Note 36) ......... 5,558 — — 5,558
At 31 December 2021 ............................... 117,319 9,340 8,412 135,071
Additions ......................................... — — 4,861 4,861
Disposed on disposal of a subsidiary .................... (5,300) — — (5,300)
At 31 December 2022 ............................... 112,019 9,340 13,273 134,632
AMORTISATION
At 1 January 2020 .................................. ( 3 , 843) (1,083) (618) (5,544)
Charge for the year ................................. ( 5,222) (1,300) (1,287) (7,809)
Eliminated on disposals .............................. — — 2 6 2 6
At 31 December 2020 ............................... ( 9,065) (2,383) (1,879) (13,327)
Charge for the year ................................. (6,543) (1,300) (1,334) (9,177)
At 31 December 2021 ............................... (15,608) (3,683) (3,213) (22,504)
Charge for the year ................................. ( 11,208) (1,300) (2,528) (15,036)
Eliminated on disposal of a subsidiary .................. 1,811 — — 1,811
At 31 December 2022 ............................... ( 2 5,005) (4,983) (5,741) (35,729)
CARRYING VALUES
At 31 December 2020 .......................... 51,164 6,957 4,563 62,684
At 31 December 2021 .......................... 101,711 5,657 5,199 112,567
At 31 December 2022 .......................... 87,014 4,357 7,532 98,903
Notes:
i The licences acquired by the Group from the independent third parties from 2018 to 2021 are for pharmaceutical distribution and health
inspection. The licence acquired by the Group from the independent third parties in 2021 is for the medical institution practice licence for
the medical testing business. The directors of the Company determined the useful life of 10 years of the licences and franchise with
reference to the comparable transactions in the open market.
ii The business relationship was acquired through acquisition of a subsidiary, Guangdong Dongjian on 27 February 2019. With reference to
experience in the industry, historical customer retention rate and the useful life of business relationships used by industry peers, the
directors of the Company assumed 10 years useful life of the business relationship.
iii The directors of the Company determined the useful life of office software with reference to the term of outstanding contract.
I-49


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
18. GOODWILL
Acquisition
of Guangdong
Dihao
Acquisition
of Guangdong
Dongjian Total
RMB’000 RMB’000 RMB’000
COST
At 31 December 2020, 2021 and 2022 ..................... 3,924 5,328 9,252
CARRYING VALUES
At 31 December 2020, 2021 and 2022 ..................... 3,924 5,328 9,252
For the purposes of impairment testing, goodwill have been allocated to two individual cash-
generating units, comprising two subsidiaries, Guangdong Dihao and Guangdong Dongjian. The
carrying amounts of goodwill allocated to these two subsidiaries as follows:
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Guangdong Dihao ........................................... 3,924 3,924 3,924
Guangdong Dongjian ......................................... 5,328 5,328 5,328
9,252 9,252 9,252
In addition to goodwill above, property, plant and equipment, intangible assets and right-of-use
assets (including allocation of corporate assets) that generate cash flows together with the related
goodwill are also included in the respective cash-generating unit for the purpose of impairment
assessment. Details of the recoverable amount calculation are disclosed in Note 15.
19. INVENTORIES
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Pharmaceutical and healthcare products ......................... 529,111 860,547 1,030,451
Less: impairment provision ................................... (13,005) (12,707) (14,283)
516,106 847,840 1,016,168
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
20. TRADE AND OTHER RECEIVABLES
The Group
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Trade receivables ............................................ 104,285 116,692 139,215
Less: allowance for credit losses ................................ (4,616) (6,385) (4,657)
99,669 110,307 134,558
Note receivables ............................................. 260,805 11,852 29,163
Total trade and note receivables ................................ 360,474 122,159 163,721
Advance to suppliers ......................................... 73,159 84,753 112,651
Other tax recoverable ......................................... 15,535 15,298 4,145
Prepaid expense ............................................. 3,643 19,825 12,233
Deferred issue costs .......................................... — 1,451 5,854
Receivables in custodian (Note) ................................ 3,608 35,942 119,945
Other receivables ............................................ 72,001 95,690 84,911
Total trade and other receivables ................................ 528,420 375,118 503,460
Note: The amounts represented the payments received from online customers of Self-operation business which would deposit in
escrow account and subsequently withdraw by the Group upon the customers’ acceptance of product delivery.
The Company
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Deferred issue costs .......................................... — 1,451 5,854
Others ..................................................... — 3 4 5 6 7
— 1,485 6,421
Trade receivables
The Group applies the simplified approach under IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the assets. Collective assessment is performed by
grouping debtors based on the Group’s internal credit ratings and is adjusted for forward-looking
estimates. At every reporting date the historical observed default rates are updated and changes in the
forward-looking estimates are analysed.
As at 1 January 2020, trade and note receivables from contracts with customers amounted to
approximately RMB369,695,000.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
20. TRADE AND OTHER RECEIVABLES—continued
Trade receivables—continued
The Group requires full payment in advance for its online product sales, certain offline product
sales and retail sales. For other customers, the Group primarily allows a credit period from 15 to 30
days. Trade receivables are settled in accordance with the terms of the respective contracts. Ageing
analysis of trade receivables based on invoice date is as follows:
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Within 3 months ............................................. 90,373 91,485 127,854
3 to 6 months ............................................... 5,953 14,519 3,057
6 to 12 months .............................................. 1,535 4,167 1,182
Over 12 months ............................................. 6,424 6,521 7,122
104,285 116,692 139,215
Less: allowance for credit losses ................................ (4,616) (6,385) (4,657)
99,669 110,307 134,558
Note receivables are trade receivables supported by bank acceptance notes and the average
ageing is within 2 to 12 months based on the received date and have a maturity period of less than one
year, which management believes that no impairment allowance is necessary as there is no significant
change in credit quality and the balances are considered fully recoverable. As at 31 December 2020,
2021 and 2022, the amounts of RMB159,924,000, RMB10,355,000 and RMB28,209,000 note
receivables were endorsed to settle trade payables and the amount of RMB90,983,000, nil and nil were
discounted to bank respectively, which were not derecognised until the maturity date of the endorsed
and discounted notes.
As at 31 December 2020, 2021 and 2022, included in the Group’s trade receivables balance are
debtors with an aggregate carrying amount of RMB18,989,000, RMB41,742,000 and RMB19,519,000
which are past due as at the reporting date. Out of the past due balances approximately RMB8,248,000,
RMB24,889,000 and RMB8,646,000 have been past due over 90 days or more and are not considered
as in default as there has not been a significant change in credit quality and amounts are still
considered as recoverable based on historical experience. The Group does not hold any collateral over
these balances.
Details of impairment assessment are set out in Note 34.
21. FINANCIAL ASSETS AT FVTPL
As at 31 December 2020, 2021 and 2022, the Group and the Company’s financial assets at
FVTPL represented structured deposits of approximately RMB344,600,000, RMB512,882,000 and
RMB711,076,000 and nil, RMB242,276,000 and RMB60,654,000, respectively, which were
non-principal protected deposits placed in banks in the PRC. The return of the structured deposits was
determined by reference to the return of their underlying investments. The structured deposit as at
31 December 2020, 2021 and 2022 have no fixed contractual period, they can be redeemed any time at
the Group and the Company’s discretion.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
21. FINANCIAL ASSETS AT FVTPL—continued
Since the contractual cash flows of structured deposits do not represent solely the payments of
principal and interest on the principal amount outstanding, structured deposits are measured at FVTPL.
Details of the fair value measurement over the structured deposits are disclosed in Note 34.
22. AMOUNT DUE FROM A SHAREHOLDER
The balances are interest-free, non-trade related, unsecured and repayable on demand. In the
opinion of directors of the Company, the balance is expected to be fully settled prior to the Listing.
Details of impairment assessment are set out in Note 34.
23. TIME DEPOSITS
The Group
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Time deposits with original maturity of three months or less .......... — 31,879 —
Time deposits with original maturity of more than three months ....... 580,164 675,573 370,487
580,164 707,452 370,487
Presented as:
Current ................................................ 76,204 243,899 320,487
Non-current ............................................ 503,960 463,553 50,000
580,164 707,452 370,487
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Time deposits denominated in foreign currency:
U S $................................................... 16,312 31,879 —
The Company
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Time deposits with maturity of more than three months but less than one
year ..................................................... 16,312 — —
Time deposits denominated in foreign currency:
U S $ .................................................. 16,312 — —
As at 31 December 2020, 2021 and 2022, the Group’s time deposits of approximately
RMB513,892,000, RMB399,773,000 and RMB290,487,000 were held in designated bank accounts for
issuance of bank acceptance notes.
The Group and the Company’s time deposits are bank deposits and redeemable on maturity.
The weight-average interest rates of the time deposits were 3.89%, 3.85% and 4.01% per annum as at
31 December 2020, 2021 and 2022, respectively.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
23. TIME DEPOSITS—continued
Details of impairment assessment are set out in Note 34.
24. RESTRICTED BANK DEPOSITS/BANK BALANCES AND CASH
Restricted bank deposits represents deposits held in designated bank accounts for issuance of
bank acceptance notes. The restricted bank deposits carry interest rate ranging from 1% to 2.5%, 1% to
2.5% and 0.25% to 2.5% per annum as at 31 December 2020, 2021 and 2022, respectively.
Bank balances and cash consists of balance with banks and cash on hand. Bank balances carry
interest at prevailing market rates.
Details of impairment assessment are set out in Note 34.
25. TRADE AND OTHER PAYABLES
The Group
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Trade payables ................................................. 630,790 782,566 1,433,487
Note payables ................................................. 686,491 568,535 448,797
Salary and welfare payables ...................................... 64,332 101,022 168,824
Other tax payables .............................................. 11,422 8,221 31,227
Other payables ................................................. 137,618 211,017 299,622
Deposits to be returned to investors (Note b) ......................... — 223,338 —
Deposits received (Note a) ....................................... 301,967 32,270 1,069
Accrued issued costs and listing expenses ........................... — 2,857 15,052
1,832,620 1,929,826 2,398,078
Notes:
(a) Deposits received mainly represented the collection of sales proceeds on behalf of the pharmaceutical distributors and vendors from
third parties pharmacies for the online marketplace business and to be refunded to the respective pharmaceutical distributors and
vendors.
(b) Balance represented deposits received from two investors of Series E-2 Preferred Shares as defined in Note 29, which will be returned
to the investors after they make a full payment for the number of Series E-2 Preferred Shares subscribed. The subscription payment
has been received by the Company in April 2022 and the related deposits have been returned to the investors accordingly.
The Company
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Accrued issued costs and listing expenses ............................... — 2,857 15,052
Others ........................................................... — — 4 0 3
— 2,857 15,455
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
25. TRADE AND OTHER PAYABLES—continued
Trade payables
The credit period of trade payables is ranging from 30 to 90 days. An ageing analysis of the
trade payables based on the invoice date at the end of each reporting period is as follows:
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
0-30 days ........................................................ 251,291 347,374 998,860
30-90 days ....................................................... 199,695 249,746 253,227
Over 90 days ..................................................... 179,804 185,446 181,400
630,790 782,566 1,433,487
26. CONTRACT LIABILITIES
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Receipts in advances from customers ................................... 39,961 9,373 24,434
As at 1 January 2020, contract liabilities amounted to approximately RMB74,478,000.
The Group generally requires advance payments from certain of its customers before delivery
of goods. This will give rise to a contract liability at the beginning of a contract, until the revenue
recognised on the relevant contract exceeds the amount received.
The following table shows how much of the revenue recognised for the years ended
31 December 2020, 2021 and 2022 relates to the contract liabilities at the beginning of the year:
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Revenue recognised during the year .................................... 74,478 39,961 9,373
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--- page 424 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
27. LEASE LIABILITIES
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Lease liabilities payable:
Within one year .................................................... 47,239 63,945 81,178
Within a period of more than one year but not more than two years ........... 45,932 65,091 50,711
Within a period of more than two years but not more than five years .......... 57,492 52,693 48,659
More than five years ................................................ 1,219 — —
151,882 181,729 180,548
Less: Amount due for settlement within 12 months shown under current
liabilities ....................................................... (47,239) (63,945) (81,178)
Amount due for settlement after 12 months shown under non-current
liabilities ....................................................... 104,643 117,784 99,370
When recognising the lease liabilities for leases, the Group has applied incremental borrowing
rates of the relevant group entities at the leases commencement/modification dates. The weighted
average incremental borrowing rates applied by the relevant group entities are 4.75% per annum.
28. BANK BORROWINGS
As at 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Bank loan .................................................... 6,000 — —
Advance from banks on discounted note receivables with recourse
repayable within one year ...................................... 90,983 — —
96,983 — —
Analysed as:
Unsecured .................................................... 96,983 — —
96,983 — —
Carrying amounts repayable within one year and shown under current
liabilities ................................................... 96,983 — —
The ranges of effective interest rates (which are also equal to contracted interest rates) on the
Group’s borrowings are as follows:
Year ended 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Effective interest rate:
Unsecured bank loan carried interest at fixed rate ....................... 3.05% N/A N/A
Advance from banks on discounted note receivables with recourse ......... 2.05%-2.50% N/A N/A
All of the borrowings are denominated in RMB which is the same as the functional currency of
the corresponding group entities.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL
Preferred Shares
Before the completion of group reorganisation, Guangzhou Sudao is authorised to issue
9,553,770 preferred shares (“Preferred Shares”) for different preferred shares series, of which
1,142,857, 2,459,183, 2,112,245, 1,533,334, and 2,306,151 authorised Preferred Shares were
designated as Series Seeds Preferred Shares, Series A Preferred Shares, Series B Preferred Shares,
Series C1 Preferred Shares, and Series C2 Preferred Shares respectively. Upon the completion of the
group reorganisation and Contractual Arrangement on 7 December 2018, the existing Series Seeds to
C-2 Preferred Shares of Guangzhou Sudao subscribe in the same proportions, on an as-converted basis,
as the percentage of equity interest held in Guangzhou Sudao to effectively mirror shareholding and
rights of the Series Seeds to C-2 Preferred Shares of Guangzhou Sudao to the Company.
As at 7 December 2018, the Company is authorised to issue 95,590,300 preferred shares of
US$0.00001 par value per share, of which 7,450,427, 16,031,719, 13,769,989, 9,995,994, 15,034,085
and 33,308,086 authorised Preferred Shares were designated as Series Seeds Preferred Shares, Series A
Preferred Shares, Series B Preferred Shares, Series C1 Preferred Shares, Series C2 Preferred Shares
and Series D Preferred Shares, respectively. Total 5,520,607 preferred shares in Guangzhou Sudao
were succeeded by the preference shares of the Company in 2019 with the total original consideration
of RMB5,521,000. The Company is authorised to issue 31,021,547 preferred shares of US$0.00001 par
value per share designed as Series E Preferred Shares in 2021. During the year ended 31 December
2021, 20,829,389 Series E Preferred Shares were issued by the Company with consideration of
RMB1,162,673,000. During the year ended 31 December 2022, 6,386,578 Series E Preferred Shares
were issued by the Company with consideration of RMB350,161,000.
Preferred Shares issued in Guangzhou Sudao:
Preferred Shares Currency
Year of
issue
Number of
investor(s)
Total number
of Preferred
Shares issued
Average
subscription
price per
Preferred
Share
Total
Consideration
RMB RMB
Series Seeds ...................... R M B 2015 4 1,142,857 14.00 16,000,000
Series A ......................... R M B 2016 6 2,459,183 23.59 58,000,000
Series B ......................... R M B 2016 7 2,112,245 51.13 108,000,000
Series C
—Tranche 1 ...................... R M B 2018 2 594,558 100.92 60,000,000
—Tranche 1 ...................... U S $ 2018 1 938,776 106.52 100,000,000
—Tranche 2 ...................... U S $ 2018 2 2,306,151 121.19 279,480,000
9,553,770 621,480,000
I-57


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL—continued
Preferred Shares—continued
Preferred Shares of Guangzhou Sudao succeeded by the preference shares of the Company for
Series Seeds to Series C and Preferred Shares issued by the Company for Series D and Series E:
Preferred Shares Currency
Year of
transfer
or issue
Number of
investor(s)
Total number
of Preferred
Shares issued
Average
subscription
price per
Preferred
Share
Total
Consideration
RMB RMB
Series Seeds ................... R M B 2018 2 1,862,605 2.15 4,000,000
Series Seeds (Note) ............. R M B 2019 2 5,587,822 2.15 12,000,000
7,450,427 16,000,000
Series A ...................... R M B 2018 4 3,951,385 3.76 14,850,000
Series A (Note) ................. R M B 2019 2 12,080,334 3.57 43,150,000
16,031,719 58,000,000
Series B ....................... R M B 2018 4 1,020,003 7.84 8,000,000
Series B (Note) ................. R M B 2019 3 12,749,986 7.84 100,000,000
13,769,989 108,000,000
Series C
- Tranche 1 (Note) .............. R M B 2019 2 3,875,997 15.48 60,000,000
- Tranche 1 .................... U S $ 2018 1 6,119,997 16.34 100,000,000
- Tranche 2 .................... U S $ 2018 2 15,034,085 18.59 279,480,000
25,030,079 439,480,000
Series D ...................... U S $ 2018 3 33,308,086 27.40 915,306,203
Series E .......................
- Tranche 1 .................... U S $ 2021 1 17,357,824 55.91 970,440,000
- Tranche 2 .................... U S $ 2021 1 3,471,565 55.37 192,233,000
- Tranche 2 (Note) .............. U S $ 2022 4 6,386,578 54.65 350,161,000
27,215,967 1,512,834,000
122,806,267 3,049,620,203
Note: Overseas direct investment (the “ODI”) into foreign entities by certain investors located in the
PRC (the “Series Seeds, A, B and C Chinese Investors”) is not allowed until an approval for
ODI is obtained from the applicable authorities in the PRC, including Chinese National
Development and Reform Commission, Chinese Ministry of Commerce, and State
Administration of Foreign Exchange. As part of the group reorganisation, the Company issued
warrants to certain investors of Series Seeds, A, B and C-1 who were not allowed to hold
direct investments in foreign entities to complete the transfer of preferred shares from
Guangzhou Sudao to the Company. During the year ended 31 December 2019, the investors
have obtained the ODI approval, exercised their warrants and converted the warrants into
preferred shares of the Company. During the year ended 31 December 2021, the Company
issued warrants to certain investors of Series E-2 who have not obtained the ODI approval, all
the warrants have been exercised in April 2022. In April 2022, 6,386,578 Series E-2 Preferred
Shares were issued by the Company with consideration of RMB350,161,000.
I-58


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL—continued
Preferred Shares—continued
The key terms of the Series Seeds, A, B, C, D and E Preferred Shares of the Company are as
follows:
a) Voting Right
Subject to the provisions of the Memorandum and these Articles, at all general meetings of the
Company: (a) the holder of each Ordinary Share issued and outstanding shall have one vote in respect
of each Ordinary Share held, and (b) the holder of a Preferred Share shall be entitled to such number of
votes as equals the whole number of Ordinary Shares into which such holder’s collective Preferred
Shares are convertible immediately after the close of business on the record date of the determination
of the Company’s Members entitled to vote or, if no such record date is established, at the date such
vote is taken or any written consent of the Company’s Members is first solicited. Fractional votes shall
not, however, be permitted and any fractional voting rights available on an as converted basis (after
aggregating all shares into which the Preferred Shares held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward). To the extent that the
Statute or the Articles allow the Series E Preferred Shares, the Series D Preferred Shares, the Series
C-2 Preferred Shares, the Series C-1 Preferred Shares, the Series B Preferred Shares, the Series A
Preferred Shares and the Series Seed Preferred Shares to vote separately as a class or series with
respect to any matters, such Series E Preferred Shares, Series D Preferred Shares, Series C-2 Preferred
Shares, Series C-1 Preferred Shares, Series B Preferred Shares, and Series A Preferred Shares shall
have the right to vote separately as a class or series with respect to such matters.
b) Dividends
When, as and if declared by the board of directors of the Company or Guangzhou Sudao
(before completion of group reorganisation), outstanding Series E Preferred Shares are entitled to a
noncumulative dividend in preference to any dividend on other Preferred Shares and ordinary shares at
the rate per annum of the greater of (i) dividends at a simple rate of ten percent (10%) of the respective
Series E Issue Price per annum since the Series E Issue Date, and (ii) dividends distributed pari passu
on a pro rata basis to the Preferred Shares and Ordinary Shares on an as converted basis. After payment
in full on Series E-1/2 Preferred Shares, outstanding Series D Preferred Shares are entitled to a
non-cumulative dividend in preference to any dividend on other Preferred Shares and ordinary shares
at the greater of (i) dividends at a simple rate of ten percent (10%) of the respective Series D Issue
Price per annum since the Series D Issue Date, and (ii) dividends distributed pari passu on a pro rata
basis to the Preferred Shares and Ordinary Shares on an as converted basis. After payment in full on
Series D and E-1/2 Preferred Shares, outstanding Series C-1/2 Preferred Shares are entitled to a
non-cumulative dividend in preference to any dividend on other Preferred Shares and ordinary shares
at the greater of (i) dividends at a simple rate of ten percent (10%) of the respective Series C-1/2
Deemed Issue Price per annum since the Series C-1/2 Issue Date, and (ii) dividends distributed pari
passu on a pro rata basis to the Preferred Shares and Ordinary Shares on an as converted basis. After
payment in full on Series C-1/2, D and E-1/2 Preferred Shares, outstanding Series B Preferred Shares
are entitled to a non-cumulative dividend in preference to any dividend on other Preferred Shares and
ordinary shares at the greater of (i) dividends at a simple rate of ten percent (10%) of the respective
Series B Deemed Issue Price per annum since the Series B Issue Date, and (ii) dividends distributed
I-59


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL—continued
Preferred Shares—continued
b) Dividends—continued
pari passu on a pro rata basis to the Preferred Shares and Ordinary Shares on an as converted basis.
After payment in full on Series B,C-1/2, D and E-1/2 Preferred Shares, outstanding Series A Preferred
Shares are entitled to a non-cumulative dividend in preference to any dividend on other Preferred
Shares and ordinary shares at the greater of (i) dividends at a simple rate of ten percent (10%) of the
respective Series A Deemed Issue Price per annum since the Series A Issue Date, and (ii) dividends
distributed pari passu on a pro rata basis to the Preferred Shares and Ordinary Shares on an as
converted basis. After payment in full on Series A,B,C-1/2, D and E-1/2 Preferred Shares, outstanding
Series Seeds Preferred Shares are entitled to a non-cumulative dividend in preference to any dividend
on other Preferred Shares and ordinary shares at the greater of (i) dividends at a simple rate of ten
percent (10%) of the respective Series Seeds Deemed Issue Price per annum since the Series Seeds
Issue Date, and (ii) dividends distributed pari passu on a pro rata basis to the Preferred Shares and
Ordinary Shares on an as converted basis. A dividend is payable only when funds are legally available
and only when, as and if declared by the Board of Directors. During the Track Record Period, the
Board of Directors has not declared any dividends.
c) Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company or Guangzhou Sudao
(before completion of group reorganisation), whether voluntary or involuntary, all assets and funds of
the Company legally available for distribution to the Members (after satisfaction of all creditors’
claims and claims that may be preferred by law) shall be distributed to the Members of the Company
as follows:
The holders of the Series E Preferred Shares shall be entitled to receive for each Series E
Preferred Share held by such holder, on parity with each other and prior and in preference to any
distribution of any of the assets or funds of the Company to the holders of the Series D Preferred
Shares, the Series C-2 Preferred Shares, the Series C-1 Preferred Shares, the Series B Preferred Shares,
the Series A Preferred Shares, the Series Seed Preferred Shares and the Ordinary Shares by reason of
their ownership of such shares, the amount (the “Series E Preference Amount”) equal to the one
hundred percent (100%) of the Series E Issue Price, deducted all accrued or declared and paid
dividends on such Series E Preferred Share. If the assets and funds thus distributed among the holders
of the Series E Preferred Shares shall be insufficient to permit the payment to such holders of the full
Series E Preference Amount, then the entire assets and funds of the Company legally available for
distribution to the Series E Preferred Shares shall be distributed ratably among the holders of the Series
E Preferred Shares in proportion to the aggregate Series E Preference Amount each such holder is
otherwise entitled to receive pursuant to this clause. (Same with other series shares)
d) Optional Conversion
Subject to the Statute and these Articles, any Preferred Share may, at the option of the holder
thereof, be converted at any time after the date of issuance of such shares, without the payment of any
additional consideration, into fully-paid and non-assessable Ordinary Shares based on the then-
effective applicable conversion price.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL—continued
Preferred Shares—continued
e) Conversion Price / Anti-Dilution Protection
The conversion price for each series of Preferred Shares shall be adjusted and readjusted from
time to time as provided below: (i) Adjustment for share splits and combinations; (ii) Adjustment for
ordinary share dividends and distributions; (iii) Adjustments for other dividends; (iv) Adjustments for
Reorganisation, Mergers, Consolidations, Reclassifications, Exchanges, Substitutions; (v) Adjustments to
conversion price for dilutive issuance; (vi) Other dilutive events.
f) Conversion
Each Preferred Share shall automatically be converted, based on the then-effective applicable
Conversion Price, without the payment of any additional consideration, into fully-paid and
non-assessable Ordinary Shares upon the earlier of (i) the closing of Qualified IPO, or (ii) the date
specified by written consent or agreement of the Series E Holder (with respect to the Series E Preferred
Shares), the date specified by written consent or agreement of the Series D Holders (with respect to the
Series D Preferred Shares), the date specified by written consent or agreement of the Series C-2
Holders (with respect to the Series C-2 Preferred Shares), the date specified by written consent or
agreement of the Series C-1 Holders (with respect to the Series C-1 Preferred Shares), the date
specified by written consent or agreement of the Series B Holders (with respect to the Series B
Preferred Shares), the date specified by written consent or agreement of the Series A Holders (with
respect to the Series A Preferred Shares) or Series Seed Holders (with respect to the Series Seed
Preferred Shares).
g) Redemption for Series Seeds/Series A/Series B/Series C/Series D/Series E Preferred
Shares
At any time after the earlier of the occurrence of the following event: (i) the Qualified IPO has
not been closed before 31 December 2023, (ii) any material breach of the Transaction Documents by
any Group Company, any Founder Holding Company, or any Founder , and the Group Company, the
Founder Holding Company, or the Founder fails to take remedial measures within ten (10) business
days after receiving the written notice by the holders of the Preferred Shares, (iii) the application of
IPO has been denied by the competent securities regulatory governmental authority, (iv) any material
breach of the loyal and fiduciary duty by the Founder and/or any other material integrity issues
attributable to the Founder, including but not limited to any income not accounted in the Company’s
financial book and record , or any material risk of internal control due to the willfully misconduct and
gross negligence by the Founder, and such issues have not been properly disclosed to the holders of the
Preferred Shares, (v) the failure of the IPO due to the failure of issuance of the unreserved audit report
by any Auditor, (vi) the Group Companies are not able to be engaged in the business thereof, and
(vii) the holders of any Preferred Shares having requested a redemption of such shares, the Company
or Guangzhou Sudao may be required to redeem the outstanding Series Seeds, A B, C, D and E
Preferred Shares at a price per share calculated in the formulae as stipulated in the Memorandum of
Association of the Company or restated certificate of incorporation, in three annual instalments
commencing on or before 60th day after the Company’s or Guangzhou Sudao’s receipt from holders of
a majority of outstanding Series Seeds, A, B, C, D and E Preferred Shares, of written notice requesting
redemption of all Series Seeds, A, B, C, D and E Preferred Shares.
I-61


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL—continued
Preferred Shares—continued
g) Redemption for Series Seeds/Series A/Series B/Series C/Series D/Series E Preferred
Shares—continued
In conjunction with the issuance of Series D Preferred Shares, the Company modified the terms
of Series Seeds Preferred Shares to Series C Preferred Shares, on 7 December 2018, to extend the date
of mandatory redemption from 31 December 2021 to 31 December 2023. Subsequent to this
modification, except for priority of the liquidation and redemption terms, Series D Preferred Shares,
Series C Preferred Shares, Series B Preferred Shares, Series A Preferred Shares and Series Seeds
Preferred Shares contain the same terms. Series E Preferred Shares have priority over Series D
Preferred Shares, Series D Preferred Shares have priority over Series C Preferred Shares, Series C
preferred shares have priority over Series B Preferred Shares, Series B Preferred Shares have priority
over Series A Preferred Shares while Series A Preferred Shares have priority over Series Seeds
Preferred Shares. All the Preferred Shares have priority over ordinary shares.
In April 2022, the Group passed a shareholder’s resolution to terminate all shareholders’
redemption or divestment rights (including the shareholders of preferred shares) against and with
respect to the Company, and such terminated redemption or divestment right shall automatically revert
and be reinstated in full should a qualified IPO not close on or before the Maturity Date or the
shareholders unanimously decide to terminate the application of a qualified IPO, whichever is earlier.
In November 2022, the Group passed a shareholder’s resolution to extend the above Maturity Date to
31 December 2024.
Presentation and Classification
The directors of the Company considered that the Preferred Shares issued by the Company or
Guangzhou Sudao are accounted for as financial liabilities measured at FVTPL.
The directors of the Company also considered that the changes in the fair value of the Preferred
Shares attributable to the change in credit risk of these financial liabilities are minimal. Changes in fair
value of the Preferred Shares not attributable to the change in credit risk of the financial liabilities are
charged to profit or loss and presented as “changes in fair value of financial liabilities at FVTPL”.
The Preferred Shares were valued by the directors of the Company with reference to valuation
reports carried out by an independent qualified professional valuer, Avista Valuation Advisory Limited
(“Avista Valuation”), which has appropriate qualifications and experiences in valuation of similar
instruments. The address of Avista Valuation is Suites 2401-06, 24/F, Everbright Centre, No.108
Gloucester Road, Wan Chai, Hong Kong.
The directors of the Company used the back-solve method to determine the underlying share
value of the Company and performed an equity allocation based on OPM to arrive the fair value of the
Preferred Shares at the end of each reporting period.
I-62


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
29. FINANCIAL LIABILITIES AT FVTPL—continued
Presentation and Classification—continued
In addition to the underlying share value of the determined by back-solve method, other key
valuation assumptions used in OPM to determine the fair value of Preferred Shares are as follows:
At
1 January
At
31 December
At
31 December
At
31 December
2020 2020 2021 2022
Time to liquidation or redemption ...................... 4 years 3 years 2 years 2 years
Risk-free interest ................................... 1.70% 0.18% 0.73% 4.42%
Expected volatility .................................. 51.73% 49.19% 53.32% 60.28%
Dividend yield ..................................... 0 % 0 % 0 % 0 %
Possibilities under liquidation scenario .................. 3 5 % 3 0 % 27.5% 20%
Possibilities under redemption scenario ................. 3 5 % 3 0 % 27.5% 20%
Possibilities under IPO scenario ....................... 3 0 % 4 0 % 4 5 % 6 0 %
The directors of the Company estimated the risk-free interest rate based on the yield of the
United States Treasury Bonds with a maturity life close to period from the respective valuation
dates to the expected redemption dates. Expected volatility value was estimated on each valuation
date based on average of historical volatilities of the comparable companies in the same industry
for a period from the respective valuation dates to expected redemption dates. Dividend yield,
possibilities under different scenario are estimated based on management estimation at the
valuation dates.
The Group and the Company
Preferred
Shares
RMB’000
At 1 January 2020 .................................................................. 2,636,681
Unrealised changes in fair value ....................................................... 294,331
At 31 December 2020 ............................................................... 2,931,012
Issued during the year ............................................................... 1,162,673
Unrealised changes in fair value ....................................................... 128,696
At 31 December 2021 ............................................................... 4,222,381
Issued during the year ............................................................... 350,161
Unrealised changes in fair value ....................................................... 1,299,500
At 31 December 2022 ............................................................... 5,872,042
30. SHARE CAPITAL
The Group and the Company
The Company was incorporated in the Cayman Islands as an exempted company registered
under the laws of the Cayman Islands on 27 August 2018 with an authorised share capital of US$0.02
divided into 1,800 shares of a par value of US$0.00001 each. Upon incorporation of the Company,
I-63


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
30. SHARE CAPITAL—continued
The Group and the Company—continued
1,800 shares was issued at par value of US$0.00001, equivalent to approximately RMB0.12. On
7 December 2018, an additional of 31,328,046 shares were allotted and authorised while 800 shares
were repurchased by the Company upon group reorganisation.
Number of
shares
Share
capital
Presented
as
US$ RMB’000
Ordinary shares of US$0.00001 each
Authorised, issued and fully paid
At 1 January 2020, 31 December 2020, 2021 and 2022 .................... 31,329,046 313 2
31. SHARE-BASED PAYMENT RESERVES
Equity-settled share option scheme of the Group
2017 Stock Incentive Plan
Effective on 2 February 2017, Guangzhou Sudao adopted the “2017 Stock Incentive Plan”
pursuant to which the Group was authorised to grant stock options, stock appreciation rights and
restricted stock to directors, officers and employees of Guangzhou Sudao. Under the 2017 Stock
Incentive Plan, a maximum number of 980,000 shares of ordinary shares of Guangzhou Sudao will be
issued. Stock options were granted with an exercise price not less than the fair market value of the
Guangzhou Sudao’s ordinary shares at the date of grant, and have exercise terms of up to 10 years with
vesting periods determined at the discretion of the Board of Directors of Guangzhou Sudao, and are
subject to a continued service relationship. Effective on 1 January 2019, the Group terminated the 2017
Stock Incentive Plan, meaning that, while no additional awards of stock options, stock appreciation
rights, or restricted stock were permitted thereunder, all outstanding awards continued to be governed
by their existing terms.
2019 Stock Incentive Plan
Effective on 27 February 2019, the Company adopted the “2019 Stock Incentive Plan” pursuant
to which the Company is authorised to grant stock options, stock appreciation rights and restricted
stock to directors, officers and employees who provide services to the Company and its affiliates.
Under the 2019 Stock Incentive Plan, a maximum number of 6,388,742 ordinary shares of the
Company will be issued. Stock options are to be granted with an exercise price not less than the fair
market value of the Company’s ordinary shares at the date of grant, and have exercise terms of up to 10
years with vesting periods determined at the discretion of the board of directors of the Company, and
are subject generally to a continued service relationship.
Substitution of ordinary shares of Guangzhou Sudao to the Company’s ordinary shares
under 2017 Stock incentive Plan
As part of the share exchange arrangement, Guangzhou Sudao would i) substitute 1 share of
ordinary share of Guangzhou Sudao under the 2017 Stock incentive Plan and ii) assume on the same
terms and conditions as the 2017 Stock incentive Plan, stock appreciation rights, and restricted stock
I-64


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
31. SHARE-BASED PAYMENT RESERVES—continued
Equity-settled share option scheme of the Group—continued
Substitution of ordinary shares of Guangzhou Sudao to the Company’s ordinary shares
under 2017 Stock incentive Plan—continued
under the 2019 Stock Incentive Plan as defined and detailed below. The directors of the Company
considered that the modification of terms of 2017 Stock Incentive Plan have no material change in fair
value of the share options at the date of modification.
The following table discloses movements of share options held by directors and employees
during the Track Record Period under 2017 Stock Incentive Plan:
Options Grant year
Vesting
Period
Expiry
year
Exercise
price
At 1 January
2020
Granted
during
the year
At
31 December
2020
Granted
during
the year
At
31 December
2021
Granted
during
the year
Forfeited
during
the year
At
31 December
2022
US$
Directors and employees
Tranche 2017-7 ........... 2017 4 years 2027 0.3 1,808,394 — 1,808,394 — 1,808,394 — (11,952) 1,796,442
Tranche 2017-7 ........... 2017 4 years 2027 0.3 185,261 — 185,261 — 185,261 — — 185,261
Tranche 2018-1 ........... 2018 4 years 2028 0.3 179,286 — 179,286 — 179,286 — — 179,286
Tranche 2018-2 ........... 2018 4 years 2028 0.3 555,982 — 555,982 — 555,982 — — 555,982
Tranche 2018-12 .......... 2018 4 years 2028 1.05 847,659 — 847,659 — 847,659 — — 847,659
3,576,582 3,576,582 3,576,582 (11,952) 3,564,630
Exercisable at the end of the
year .................. — — — —
Weighted average exercise
price .................. 0.48 0.48 0.48 0.3 0.48
Except for the forfeited options disclosed above, no other options were exercised, forfeited or
expired during the Track Record Period.
The following table discloses movements of share options held by directors, senior managers
and employees during the Track Record Period under 2019 Stock Incentive Plan:
Options
Grant
year
Vesting
Period
Expiry
year
Exercise
price
At 1
January
2020
Granted
during
the year
At
31 December
2020
Granted
during
the year
Forfeited
during
the year
At
31 December
2021
Granted
during
the year
Forfeited
during
the year
At
31 December
2022
US$
Directors and employees
Tranche 2019-3 ............ 2019 4 years 2029 1.05 65,000 — 65,000 — — 65,000 — — 65,000
Tranche 2019-4 ............ 2019 4 years 2029 1.05 40,000 — 40,000 — — 40,000 — — 40,000
Tranche 2019-10 ........... 2019 4 years 2029 0.94 2,294,000 — 2,294,000 — (43,000) 2,251,000 — (25,000) 2,226,000
Tranche 2019-11 ........... 2019 4 years 2029 2.00 50,000 — 50,000 — — 50,000 — — 50,000
Tranche 2020-1 ............ 2020 4 years 2030 1.05 — 120,000 120,000 — — 120,000 — — 120,000
Tranche 2020-4 ............ 2020 4 years 2030 1.05 — 283,000 283,000 — (13,000) 270,000 — (25,000) 245,000
Tranche 2021-1 ............ 2021 4 years 2031 1.60 — — — 1,066,465 — 1,066,465 — (799,849) 266,616
Tranche 2021-2 ............ 2021 4 years 2031 2.00 — — — 1,072,000 (70,500) 1,001,500 — (81,750) 919,750
Tranche 2021-7 .............. 2021 4 years 2031 2.00 — — — 30,000 — 30,000 — (30,000) —
Tranche 2021-11 ............. 2021 4 years 2031 2.00 — — — 5,230,071 (10,000) 5,220,071 — (507,071) 4,713,000
Tranche 2021-12 ............. 2021 4 years 2031 2.00 — — — 450,000 — 450,000 — — 450,000
Tranche 2022-2 .............. 2022 4 years 2032 2.00 1,099,000 (132,000) 967,000
Tranche 2022-5-1 ............ 2022 4 years 2032 2.00 20,000 — 20,000
Tranche 2022-5-2 ............ 2022 4 years 2032 0.8 2,660,000 — 2,660,000
Tranche 2022-5-3 ............ 2022 Immediate
after IPO
(Note) 2032 0.8 1,330,000 — 1,330,000
Tranche 2022-7-1 ............ 2022 4 years 2032 2.00 — — — — — — 740,000 (80,000) 660,000
2,449,000 403,000 2,852,000 7,848,536 (136,500) 10,564,036 5,849,000 (1,680,670) 14,732,366
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
31. SHARE-BASED PAYMENT RESERVES—continued
Equity-settled share option scheme of the Group—continued
The following table discloses movements of share options held by directors, senior managers
and employees during the Track Record Period under 2019 Stock Incentive Plan:—continued
Options
Grant
year
Vesting
Period
Expiry
year
Exercise
price
At 1
January
2020
Granted
during
the year
At
31 December
2020
Granted
during
the year
Forfeited
during
the year
At
31 December
2021
Granted
during
the year
Forfeited
during
the year
At
31 December
2022
US$
Exercisable at the end of the year ....... —— — —
Weighted average exercise price ....... 0.97 1.05 0.98 1.95 1.58 1.69 1.18 1.78 1.48
Note: In May 2022, the Company granted 1,330,000 share options to Mr. Fei Chen, an executive director of the Company. These options are
vested on the day when the Company’s shares are listed on the Stock Exchange.
Except for the forfeited options disclosed above, no other options were exercised, forfeited or
expired during the Track Record Period.
Milestone-based share options are exercisable upon the completion of Listing.
These fair values were calculated using the binomial method. The variables and assumptions
used in computing the fair value of the share options are based on the directors’ best estimate with
reference to valuation reports carried out by Avista Valuation. The value of an option varies with
different variables of certain subjective assumptions. The inputs into the model were as follows:
2020 2021 2022
Weighted average share price ..................... U S $ 1.81 US$1.87 - US$2.11 US$2.10 - US$2.40
Exercise price .................................. U S $ 1.05 US$ 1.60 - 2.00 US$0.80 - US$2.00
Expected volatility .............................. 59.37% 59.70% - 60.38% 60.22% - 61.47%
Expected life (years) ............................ 1 0 1 0 1 0
Risk-free rate .................................. 1.09% 1.24% - 1.65% 1.96% - 3.14%
Expected dividend yield .......................... 0 % 0 % 0 %
Expected volatility was determined by using the historical volatility of the share prices of
comparable companies over the previous 10 years. The expected life used in the model has been
adjusted, based on the directors’ best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
During the Track Record Period, the Group recognised the total expense of approximately nil,
RMB24,362,000, and RMB38,817,000 in relation to share options granted by the Group.
32. RETIREMENT BENEFIT PLAN
The eligible employees of the Company’s subsidiaries in PRC are members of pension schemes
operated by local government of the PRC. The subsidiaries in the PRC are required to contribute a
certain percentage of the relevant cost of payroll of these employees to the pension schemes to fund the
benefits.
The contributions to the retirement benefits schemes for employees of the Group and directors
of the Company during the Track Record Period are disclosed in Notes 11 and 12, respectively.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
33. CAPITAL MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a
going concern while maximising the return to stakeholders through the optimisation of the debt and
equity balance. The Group’s overall strategy remains unchanged throughout the Track Record Period.
The capital structure of the Group consists of net debts, which include lease liabilities as
disclosed in Note 27 and bank borrowings as disclosed in Note 28, net of bank balances and cash, and
time deposits with original maturity of three months or less and equity attributable to owners of the
Company, comprising issued share capital and deficits.
The management of the Group reviews the capital structure on a regular basis. As a part of this
review, the management considers the cost of capital and the risks associated with each class of items
in the context of capital structure, and takes appropriate actions to adjust the Group’s capital structure.
Based on recommendations of the management, the Group will balance its overall capital structure
through the repayment of existing debts and continuity of funding of cash flows from operating
activities and new shares issue.
34. FINANCIAL INSTRUMENTS
(a) Categories of financial instruments
The Group
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Financial assets
Time deposits ................................................. 580,164 707,452 370,487
Restricted bank deposits ......................................... 158,221 209,356 298,404
Bank balances and cash .......................................... 130,526 383,603 835,394
Trade and other receivables ....................................... 436,083 253,791 368,577
Amount due from a shareholder ................................... 38,781 2 2
Financial assets at amortised cost .................................. 1,343,775 1,554,204 1,872,864
Financial assets at FVTPL ........................................ 344,600 512,882 711,076
Financial liabilities
Trade and other payables ......................................... 1,811,063 1,894,960 2,323,375
Bank borrowings ............................................... 96,983 — —
Financial liabilities at amortised cost ............................... 1,908,046 1,894,960 2,323,375
Financial liabilities at FVTPL ..................................... 2,931,012 4,222,381 5,872,042
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(a) Categories of financial instruments—continued
The Company
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Financial assets
Amount due from a shareholder .................................. .222
Time deposits ................................................. 16,312 — —
Bank balances and cash .......................................... 7 3 0 3,593 6,904
Financial assets at amortised cost .................................. 17,044 3,595 6,906
Financial assets at FVTPL ........................................ — 242,276 60,654
Financial liabilities
Financial liabilities at FVTPL ..................................... 2,931,012 4,222,381 5,872,042
(b) Financial risk management objectives and policies
The Group’s and the Company’s financial instruments include trade and other receivables,
financial assets at FVTPL, time deposits, restricted bank deposits, bank balances and cash, trade and
other payables, bank borrowings, financial liabilities at FVTPL, lease liabilities and amount due from a
shareholder. Details of these financial instruments are disclosed in respective notes. The risks
associated with these financial instruments include market risk (currency risk and interest rate risk),
credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The
management of the Group manages and monitors these exposures to ensure appropriate measures are
implemented on a timely and effective manner.
Market risk
Currency risk
Certain bank balances, time deposits and financial liabilities at FVTPL denominated in foreign
currency of respective group entities expose the Group and the Company to foreign currency risk. The
Group and the Company currently does not have a foreign currency hedging policy. However, the
management monitors foreign exchange exposure and will consider hedging significant foreign
currency exposure should the need arise. The carrying amounts of the Group’s and the Company’s
foreign currency denominated monetary assets and liabilities at the end of each reporting period are
mainly as follows:
The Group
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Assets
U S $ ......................................................... 17,912 92,864 87,471
Liabilities
U S $ ......................................................... 1,891,256 3,059,684 4,164,994
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Market risk—continued
Currency risk—continued
The Group—Continued
Sensitivity analysis
The following details the Group’s sensitivity to a 5% increase and decrease in RMB against
US$. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management
personnel and represents management’s assessment of the reasonably possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the end of each reporting period for a 5% change in
foreign currency rates. For a 5% weakening/strengthening of RMB against US$, the Group’s post-tax
loss for the years ended 31 December 2020, 2021 and 2022 would increase/decrease by approximately
RMB70,250,000, RMB111,256,000 and RMB152,907,000, respectively.
The Company
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Assets
U S $ ......................................................... 17,018 — 67,558
Liabilities
U S $ ......................................................... 1,891,256 3,059,684 4,164,994
Sensitivity analysis
The following details the Company’s sensitivity to a 5% increase and decrease in RMB against
US$. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management
personnel and represents management’s assessment of the reasonably possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the end of each reporting period for a 5% change in
foreign currency rates. For a 5% weakening/strengthening of RMB against US$, the Company’s
post-tax loss for the years ended 31 December 2020, 2021 and 2022 would increase/decrease by
approximately RMB70,284,000, RMB114,738,000 and RMB153,654,000, respectively.
Interest rate risk
The Group is exposed to fair value interest rate risk in relation to fixed-rate bank borrowings
and lease liabilities as disclosed in Notes 28 and 27, respectively.
The Group is also exposed to cash flow interest rate risk in relation to variable-rate time
deposits, restricted bank deposits, bank balances and bank borrowings as disclosed in Notes 23, 24 and
28, respectively. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of
interest rates on time deposits, restricted bank deposits and bank balances and PRC prime rate arising
from the Group’s RMB denominated bank borrowings.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Market risk—continued
Interest rate risk—continued
The Group currently does not have an interest rate hedging policy. The Group manages its
interest rate exposures by assessing the potential impact arising from any interest rate movements
based on interest rate level and outlook. The management will review the proportion of borrowings in
fixed and floating rates and ensure they are within reasonable range.
The management of the Group consider the Group’s and the Company’s exposure of the time
deposits, restricted bank deposits, bank balances and bank borrowings to interest rate risk is
insignificant as the fluctuation of market interest rate and PRC prime rate is not expected to be
significant, no sensitivity analysis is presented accordingly.
Credit risk and impairment assessment
Credit risk refers to the risk that the Group’s counterparties default on their contractual
obligations resulting in financial losses to the Group. The Group’s credit risk exposures are primarily
attributable to trade and other receivable, time deposits, restricted bank deposits, bank balances and
amount due from a shareholder. The Group does not hold any collateral or other credit enhancements
to cover its credit risks associated with its financial assets.
The Group performed impairment assessment for financial assets under ECL model.
Information about the Group’s credit risk management, maximum credit risk exposures and the related
impairment assessment, if applicable, are summarised as below:
Trade and note receivables arising from contracts with customers
In order to minimise the credit risk, the management of the Group has delegated a team
responsible for determination of credit limits, credit approvals and other monitoring procedures to
ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the
recoverable amount of each individual significant trade debt at the end of each reporting period to
ensure that adequate impairment loss is recognised for irrecoverable amount. In this regard, the
directors of the Company consider that the Group’s credit risk is significantly reduced.
In addition, the Group performs impairment assessment under ECL model on a collective basis.
Trade and note receivables are grouped by internal credit rating based on shared credit risk
characteristics by reference to past due exposure for the customers. During the years ended
31 December 2020, 2021 and 2022, the Group recognised credit loss allowance of approximately
RMB3,151,000, RMB1,769,000, and RMB2,300,000 for trade receivables based on collective
assessment. Impairment allowance for note receivables as at 31 December 2020, 2021 and 2022 was
not material.
The Group’s concentration of credit risk by geographical locations is mainly in the PRC, which
accounted for 100% of the total trade receivables as at 31 December 2020, 2021 and 2022.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Credit risk and impairment assessment—continued
Other receivables and amount due from a shareholder
The Group assessed the loss allowance for other receivables and amount due from a
shareholder on 12m ECL basis as the Group has considered that credit risks on these financial assets
have not increased significantly since initial recognition. In determining the ECL, the Group has taken
into account the historical default experience and forward looking information as appropriate. The
Group has considered the consistently low historical default rate in connection with payments and the
Group also actively monitors the outstanding amounts owed by each debtor and identifies any credit
risks in a timely manner in order to reduce the risk of a credit related loss. For the years ended
31 December 2020, 2021 and 2022, management of the Group assessed the ECL for other receivables
and amount due from a shareholder was insignificant and thus no loss allowance was recognised.
Time deposits, restricted bank deposits and bank balances
The credit risks on time deposits, restricted bank deposits and bank balances are limited
because the counterparties are authorised banks in the PRC with high credit ratings assigned by
external credit-rating agencies.
Other than the concentration of credit risk on liquid funds which are placed with several banks,
the Group does not have any other significant concentration of credit risk.
The Group assessed 12m ECL for time deposits, restricted bank deposits and bank balances by
reference to information relating to probability of default and loss given default of the respective credit
rating grades published by external credit rating agencies. Based on the average loss rates, the 12m
ECL on time deposits, restricted bank deposits and bank balances is considered to be insignificant and
therefore no loss allowance was recognised.
The Group’s internal credit risk grading assessment comprises the following categories:
Internal credit rating Description Trade receivables Other financial assets
Low risk The counterparty has a low risk of
default and does not have material past-
due amounts
Lifetime ECL - not
credit-impaired
12m ECL
Watch list Debtor frequently repays after due date
but usually settle in full
Lifetime ECL - not
credit-impaired
12m ECL
Doubtful There have been significant increases in
credit risk since initial recognition
through information developed
internally or external resources
Lifetime ECL - not
credit-impaired
Lifetime ECL - not
credit-impaired
Loss There is evidence indicating the asset is
credit-impaired
Lifetime ECL -
credit-impaired
Lifetime ECL -
credit-impaired
Write-off There is evidence indicating that the
debtor is in severe financial difficulty
and the Group and the Company has no
realistic prospect of recovery
Amount is written off Amount is written off
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Credit risk and impairment assessment—continued
The table below details the credit risk exposures of the Group’s financial assets, which are
subject to ECL assessment:
Gross carrying amount
Notes
Internal
credit rating
12m or
lifetime ECL
At
31 December
2020
At
31 December
2021
At
31 December
2022
RMB’000 RMB’000 RMB’000
Financial assets at amortised
cost
Trade receivables ........... 2 0 (Note 1) Lifetime ECL - not
credit-impaired
(collective
assessment)
104,285 116,692 139,215
Note receivables ............ 2 0 (Note 1) Lifetime ECL - not
credit-impaired
(collective
assessment)
260,805 11,852 29,163
Other receivables ........... 2 0 (Note 2) 12m ECL 75,609 131,632 204,856
Amount due from a
shareholder .............. 2 2 (Note 2) 12m ECL 38,781 2 2
Time deposits .............. 2 3 (Note 2) 12m ECL 580,164 707,452 370,487
Restricted bank deposits ...... 2 4 (Note 2) 12m ECL 158,221 209,356 298,404
Bank balances .............. 2 4 (Note 2) 12m ECL 130,526 383,603 835,394
1,348,391 1,560,589 1,877,521
Notes:
1. For not credit-impaired trade and note receivables, the Group has applied the simplified approach in IFRS 9 to measure the loss
allowance at lifetime ECL. The Group determines the ECL on a collective basis, grouped by internal credit rating and past due status of
respective receivable.
Internal credit rating
As part of the Group’s credit risk management, the Group applies internal credit rating for its customers. The following table
provides information about the exposure to credit risk for trade receivables which are assessed collectively as at 31 December 2020, 2021
and 2022 within lifetime ECL (not credit-impaired). Impairment allowance for note receivables as at 31 December 2020, 2021 and 2022
was not material as the notes receivables are issued by authorised banks in the PRC with high credit ratings assigned by external credit-
rating agencies.
Gross carrying amount
As at 31 December
2020 2021 2022
Average
loss
rate
Trade
receivables
Average
loss
rate
Trade
receivables
Average
loss
rate
Trade
receivables
RMB’000 RMB’000 RMB’000
Low risk ..................................... 4.4% 104,285 5.4% 116,692 3.3% 139,215
I-72


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Credit risk and impairment assessment—continued
The estimated loss rates are estimated based on historical observed default rates over the expected life of the debtors and are
adjusted for forward-looking information that is available without undue cost or effort. The grouping is regularly reviewed by
management to ensure relevant information about specific debtors is updated.
During the years ended 31 December 2020, 2021 and 2022, the Group recognised credit losses allowance of approximately
RMB3,151,000, RMB1,769,000 and RMB2,300,000 for trade receivables, respectively.
The following tables show the movement in lifetime ECL that has been recognised for trade receivables under the simplified
approach:
Trade receivables
Lifetime ECL -
collective assessment
(not credit-impaired)
RMB’000
As at 1 January 2020 1,465
—impairment losses recognised 3,151
As at 31 December 2020 4,616
—impairment losses recognised 1,769
As at 31 December 2021 6,385
—impairment losses recognised 2,300
—Write-offs (4,028)
As at 31 December 2022 4,657
The Group writes off trade and note receivables when there is information indicating that the debtor is in severe financial difficulty
and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy
proceedings, or when the trade and note receivables are over two years past due, whichever occurs earlier. None of the trade and note
receivables that have been written off and is subject to enforcement activities.
2. For the purposes of internal credit risk management, the Group has applied the general approach in IFRS 9 to measure the loss allowance
at 12m ECL as there is no significant increase in credit risk since initial recognition. The Group determines the expected credit losses for
other receivables, amount due from a shareholder, time deposits, restricted bank deposits and bank balances by assessment of probability
of default. During the years ended 31 December 2020, 2021 and 2022, in view of the nature of the balance and historical default rate and
forward looking information, the Group considers the provision of impairment allowance for these balances are insignificant.
Liquidity risk
In the management of liquidity risk, the Group’s management monitors and maintains a level of
cash and cash equivalents deemed adequate by the management to finance the Group’s operations and
mitigate the effects of fluctuations in cash flows.
As at 31 December 2020, 2021 and 2022, the Group had net liabilities of approximately
RMB2,462,156,000, RMB2,908,489,000 and RMB4,369,710,000. Having taken into account as
disclosed in Note 2, the directors consider that the Group will have sufficient financial resources to
meet in full its working capital requirements and financial obligations as and when they fall due in the
foreseeable future. Accordingly, the Historical Financial Information has been prepared on a going
concern basis.
The following tables detail the Group’s remaining contractual maturity for its financial
liabilities based on the agreed repayment terms. The tables have been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Liquidity risk—continued
required to pay. The table includes both interest and principal cash flows. To the extent that interest
flows are at variable rate, the undiscounted amount is derived from interest rate at the end of each
reporting period.
The Group
Weighted
average
interest rate
Carrying
amount
On demand
or less than
1 year
Between
1 and 2
years
Between
2 and 5 years
Over
5 years Total
% RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2020
Trade and other payables ...... N / A 1,811,063 1,811,063 — — — 1,811,063
Bank borrowings ............ 2.30 96,983 96,983 — — — 96,983
Financial liabilities at FVTPL . . N/A 2,931,012 2,931,012 — — — 2,931,012
Lease liabilities .............. 4.75 151,882 53,461 47,139 69,363 814 170,777
4,990,940 4,892,519 47,139 69,363 814 5,009,835
As at 31 December 2021
Trade and other payables N/A 1,894,960 1,894,960 — — — 1,894,960
Financial liabilities at FVTPL N/A 4,222,381 4,222,381 — — — 4,222,381
Lease liabilities 4.75 181,729 70,672 69,919 54,218 — 194,809
6,299,070 6,188,013 69,919 54,218 — 6,312,150
As at 31 December 2022
Trade and other payables N/A 2,323,375 2,323,375 — — — 2,323,375
Financial liabilities at FVTPL N/A 5,872,042 5,872,042 — — — 5,872,042
Lease liabilities 4.75 180,548 87,829 54,096 50,660 — 192,585
8,375,965 8,283,246 54,096 50,660 — 8,388,002
The Company
Weighted
average
interest rate
Carrying
amount
On demand
or less than
1 year
Between
1 and 2
years
Between
2 and 5
years
Over
5 years Total
% RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2020
Financial liabilities at FVTPL . . . N/A 2,931,012 2,931,012 — — — 2,931,012
As at 31 December 2021
Financial liabilities at FVTPL N/A 4,222,381 4,222,381 — — — 4,222,381
As at 31 December 2022
Financial liabilities at FVTPL . . . N/A 5,872,042 5,872,042 — — — 5,872,042I-74


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Fair value measurement of financial instruments
Fair values of the Group’s financial assets and financial liabilities that are measured at fair
value on a recurring basis
Certain of the Group’s financial assets and financial liabilities are measured at fair value at the end
of each reporting period. The following table gives information about how the fair values of these financial
assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used), as
well as the level of the fair value hierarchy into whichthe fair value measurements are categorised (levels 1
to 3) based on the degree to which the inputs to the fair value measurements is observable.
As at 31 December Fair value
hierarchy
Valuation technique and
key input2020 2021 2022
RMB’000 RMB’000 RMB’000
Financial assets
Financial assets at FVTPL ...... 344,600 512,882 711,076 Level 2
Quoted value from bank
based on expected return
with reference to
underlying investment
Financial liabilities
Financial liabilities at FVTPL . . . 2,931,012 4,222,381 5,872,042 Level 3 Back-solve method (Note)
Note:
A 5% increase/decrease in the fair value of the total equity value of the Company, while all
other variables keep constant, would increase the carrying amount as at 31 December 2020, 2021
and 2022 by approximately RMB136,793,000, RMB196,754,000 and RMB281,541,000,
respectively or decrease the carrying amount of financial liabilities at FVTPL as at 31 December
2020, 2021 and 2022 by approximately RMB136,956,000, RMB197,096,000 and RMB281,742,000,
respectively.
A 5% increase/decrease in the probability of an IPO, while all other variables keep constant,
would increase/decrease the carrying amount of financial liabilities at FVTPL as at 31 December
2020, 2021 and 2022 by approximately RMB5,961,000, RMB11,038,000 and RMB16,681,000,
respectively.
There were no transfer between Level 1 and 2 during the Track Record Period.
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
34. FINANCIAL INSTRUMENTS—continued
(b) Financial risk management objectives and policies—continued
Fair value measurement of financial instruments—continued
Fair values of the Group’s financial assets and financial liabilities that are measured at fair
value on a recurring basis—continued
Reconciliation of Level 3 fair value measurements
Financial
liabilities at
FVTPL
RMB’000
As at 1 January 2020 ......................................................... 2,636,681
—total losses in profit or loss .............................................. 294,331
As at 31 December 2020 ...................................................... 2,931,012
—issued during the year .................................................. 1,162,673
—total losses in profit or loss .............................................. 128,696
As at 31 December 2021 ...................................................... 4,222,381
—issued during the year .................................................. 350,161
—total losses in profit or loss .............................................. 1,299,500
As at 31 December 2022 ...................................................... 5,872,042
Fair values of the Group’s financial assets and financial liabilities that are not measured at
fair value on a recurring basis
The fair value of financial assets and financial liabilities is determined in accordance with
generally accepted pricing model based on discounted cash flow analysis.
The management of the Group considers that the carrying amounts of financial assets and
financial liabilities recorded at amortised cost in the Historical Financial Information approximate to
their fair values.
35. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Convertible
preferred shares
Lease
liabilities
Bank
borrowings
Amount
due to
a
shareholder
Accrued
issue cost Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2020 .............. 2,636,681 155,874 146,725 — — 2,939,280
Financing cash flows ............ — (52,085) 210,304 — — 158,219
New leases entered ............. — 40,594 — — — 40,594
Fair value change ............... 294,331 — — — — 294,331
Finance costs .................. — 7,499 2,802 — — 10,301
Offset with note receivables
(Note) ...................... — — (262,848) — — (262,848)
At 31 December 2020 ........... 2,931,012 151,882 96,983 — — 3,179,877
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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
35. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES—
continued
Convertible
preferred shares
Lease
liabilities
Bank
borrowings
Amount
due to
a
shareholder
Accrued
issue cost Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Financing cash flows ............ 1,162,673 (61,579) (6,426) 30,925 (746) 1,124,847
New leases entered ............. — 83,358 — — — 83,358
Issue cost accruals .............. — — — — 1,451 1,451
Fair value change ............... 128,696 — — — — 128,696
Finance costs .................. — 8,068 426 — — 8,494
Offset with note receivables
(Note) ...................... — — (90,983) — — (90,983)
Deemed contribution from a
shareholder .................. — — — (30,925) — (30,925)
At 31 December 2021 ........... 4,222,381 181,729 — — 705 4,404,815
Financing cash flow ............. 350,161 (84,986) (521) — (2,727) 261,927
New leases entered ............. — 74,095 — — — 74,095
Issue cost accruals .............. — — — — 4,403 4,403
Fair value change ............... 1,299,500 — — — — 1,299,500
Finance costs .................. — 9,710 521 — — 10,231
Offset with note receivables
(Note) ...................... — — — — — —
As at 31 December 2022 ......... 5,872,042 180,548 — — 2,381 6,054,971
Note: Amounts represented bank borrowings derecognised when the related discounted note
receivables were matured.
36. ACQUSITION OF SUBSIDIARIES
Business combination
For the year ended 31 December 2021
On 13 October 2021, the Group acquired 100% interest in Guangzhou Yuewei. Guangzhou
Yuewei is principally engaged in medical testing business and was acquired with the objective of
improving the Group’s other businesses. The acquisition has been accounted for as acquisition of
business using the acquisition method.
Assets acquired and liabilities recognised at the date of acquisition
RMB’000
Property, plant and equipment .......................................................... 8 2 2
Intangible assets ..................................................................... 5,558
Financial assets at FVTPL ............................................................. 5,500
Bank balances and cash ............................................................... 1,510
Deferred tax liabilities ................................................................ (1,390)
Total .............................................................................. 12,000
I-77


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
36. ACQUSITION OF SUBSIDIARIES—continued
Business combination—continued
For the year ended 31 December 2021—continued
Consideration transferred
RMB’000
Cash .............................................................................. 12,000
No goodwill was arising from this acquisition.
Net cash outflow on acquisition of Guangzhou Yuewei:
RMB’000
Cash consideration paid ............................................................... 12,000
Less: cash and cash equivalents balances acquired .......................................... (1,510)
10,490
Included in the loss for the year ended 31 December 2021 is profit of RMB372,839 attributable
to the additional business generated by Guangzhou Yuewei. Revenue for the year ended 31 December
2021 includes RMB6,449,000 generated from Guangzhou Yuewei.
Had the acquisition of Guangzhou Yuewei been completed on 1 January 2021, revenue for the
year ended 31 December 2021 of the Group would have been RMB10,098,758,000 and loss for the
year would have been RMB501,526,000. The pro forma information is for illustrative purposes only
and is not necessarily an indication of revenue and results of operations of the Group that actually
would have been achieved had the acquisition been completed on 1 January 2021, nor is it intended to
be a projection of future results. In determining the ‘pro-forma’ revenue and profit of the Group had
Guangzhou Yuewei been acquired on 1 January 2021, the directors of the Company calculated
depreciation and amortisation of property, plant and equipment based on the recognised amounts of
property, plant and equipment at the date of the acquisition.
Assets acquisition
During the Track Record Period, the Group acquired 100% equity interests in two subsidiaries
in 2020 that are accounted for as asset acquisition.
I-78


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
36. ACQUSITION OF SUBSIDIARIES—continued
Assets acquisition—continued
For the year ended 31 December 2020
Assets and liabilities recognised at the date of acquisition
Xi’an
Leying Liaoning Lexing Total
RMB’000 RMB’000 RMB’000
(Note 1) (Note 2)
Intangible assets ............................................... 3,500 3,970 7,470
Trade and other payables ........................................ — (2,340) (2,340)
3,500 1,630 5,130
Net cash outflows arising on acquisition
Consideration paid in cash ....................................... 3,500 1,630 5,130
Notes:
(1) On 26 Auguest 2020, the Group acquired 100% equity interest in Xi’an Leying Zhongkang Pharmaceutical Chain Co., Ltd. (“Xi’an
Leying) at a cash consideration of approximately RMB3,500,000.
(2) On 1 June 2020, the Group acquired 100% equity interest in Liaoning lexing Pharmaceutical Co., Ltd. (“Liaoning Lexing”) at a cash
consideration of approximately RMB1,630,000.
37. TRANSFER OF FINANCIAL ASSETS
The following were the Group’s financial assets as at 31 December 2020, 2021 and 2022 that
were transferred to banks or suppliers by discounting or endorsing those note receivables on a full
recourse basis. As the Group has not transferred the significant risks and rewards relating to these
receivables, it continues to recognise the full carrying amount of the note receivables and has
recognised the cash received on the transfer as a bank borrowing (see Note 28) for discounted note
receivables or it continues to recognise the full carrying amount of the note receivables and the full
carrying amount of the trade payables (see Note 25) for endorsed notes receivables. These financial
assets are carried at amortised cost in the Group’s consolidated statements of financial position.
As at 31 December 2020
Note receivables
discounted to
banks with
full recourse
Note receivables
endorsed to
suppliers with
full recourse Total
RMB’000 RMB’000 RMB’000
Carrying amount of transferred financial assets .................. 90,983 159,924 250,907
Carrying amount of associated liabilities ....................... (90,983) (159,924) (250,907)
—— —
I-79


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APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
37. TRANSFER OF FINANCIAL ASSETS—continued
As at 31 December 2021
Note receivables
discounted to
banks with
full recourse
Note receivables
endorsed to
suppliers with
full recourse Total
RMB’000 RMB’000 RMB’000
Carrying amount of transferred financial assets .................. — 10,355 10,355
Carrying amount of associated liabilities ....................... — (10,355) (10,355)
—— —
As at 31 December 2022
Note receivables
discounted to
banks with
full recourse
Note receivables
endorsed to
suppliers with
full recourse Total
RMB’000 RMB’000 RMB’000
Carrying amount of transferred financial assets .................. — 28,209 28,209
Carrying amount of associated liabilities ....................... — 28,209 28,209
—— —
38. CAPITAL COMMITMENTS
As of 31 December
2020 2021 2022
RMB’000 RMB’000 RMB’000
Capital expenditure in respect of acquisition of property, plant and
equipment contracted for but not provided in the Historical Financial
Information ................................................. 2,445 8,741 3,788
39. RELATED PARTY TRANSACTIONS
Details of the balances with a shareholder are disclosed in the consolidated statements of
financial position on page I-6 and Note 22.
Compensation of key management personnel
The remuneration of directors who are also the key management personnel during the Track
Record Period is set out in Note 12.
I-80


--- page 449 ---
APPENDIX I ACCOUNTANTS’ REPORTNOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES
Details of the principal subsidiaries directly and indirectly held by the Company are set out below:
Name of subsidiaries
Place of
incorporation
/registration
/operations
Paid up/
issued capital
Registered
capital
Proportion ownership interest
attributable by the Company
Date of
the report Principal activities
As at 31 December
2020 2021 2022
Guangzhou Leyao Information Technology Co., Ltd. (Note d)
ʮ̡
The PRC USD256,000,000 USD256,000,000 100% 100% 100% 100% Investment holding
Guangdong Dihao (Note c)
ʮ̡
The PRC RMB105,000,000 RMB105,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Hubei Chengweishang Pharmaceutical Co., Ltd. (Note c & d)
ʮ̡
The PRC RMB43,500,000 RMB43,500,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Chengdu Beilebang Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB81,000,000 RMB81,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Jiangsu Jinshi Pharmaceutical Co., Ltd. (Note d)
ʮ̡
(formerly known as Taizhou Xinsiwei Pharmaceutical Co., Ltd.)
ʮ̡
The PRC RMB91,000,000 RMB91,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Guangdong Dongjian (Note c)
ʮ̡
The PRC RMB146,000,000 RMB146,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Anhui Leyao Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB76,000,000 RMB76,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Guangdong Jiuzhang Pharmaceutical Co., Ltd. (Note c)
ʮ̡
The PRC RMB10,000,000 RMB10,000,000 100% 100% 100% 100% Retail of pharmaceutical and
healthcare products
Chongqing Yangtuo Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB55,000,000 RMB55,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Shandong Leyao Pharmaceutical Co., Ltd. (Note d & f)
ʮ̡
The PRC RMB6,000,000 RMB6,000,000 100% 100% 0% 0% Wholesale of pharmaceutical
and healthcare products
Donghua Yutai Pharmaceutical Co., Ltd. (Note d)
ശρइ(ܔ)ʮ̡
The PRC RMB56,000,000 RMB56,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Jilin Zhongxin Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB50,000,000 RMB60,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
I-81


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APPENDIX I ACCOUNTANTS’ REPORTNOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES—continued
Name of subsidiaries
Place of
incorporation
/registration
/operations
Paid up/
issued capital Registered capital
Proportion ownership interest
attributable by the Company
Date of
the report Principal activities
As at 31 December
2020 2021 2022
Beijing Huisheng Pharmaceutical Co., Ltd. (Note d)
ப΂ʮ̡
The PRC RMB42,800,000 RMB42,800,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Jinan Gonghao Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB26,000,000 RMB41,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Heilongjiang Changle Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB47,000,000 RMB57,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Zhejiang Kangchen Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB52,000,000 RMB52,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Shaanxi Leying Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB28,000,000 RMB28,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Shanxi Lejin Pharmaceutical Co., Ltd (Note d)
ʮ̡
The PRC RMB23,000,000 RMB23,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Liaoning Lexing (Note d)
ʮ̡
The PRC RMB31,000,000 RMB31,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
Guangzhou Junhe Huilian Supply Chain Management Co., Ltd.
(Note d)
ʮ̡
The PRC RMB473,398,631 RMB494,000,000 100% 100% 100% 100% Investment holding
Xi’an Leying Zhongkang pharmaceutical chain Co., Ltd. (Note d)
ʮ̡
(formerly known as Shaanxi Yiyi Pharmaceutical Co., Ltd.)
ʮ̡
The PRC RMB28,000,000 RMB28,000,000 100% 100% 100% 100% Wholesale of pharmaceutical
and healthcare products
YSB Investment Limited (Note a)
ʮ̡
Hong Kong USD166,299,980 N/A 100% 100% 100% 100% Investment holding
Guangzhou Sudaoyi (Note c)
ʮ̡
The PRC RMB1,120,246,702 RMB1,122,890,000 100% 100% 100% 100% Platform and software
service
I-82


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APPENDIX I ACCOUNTANTS’ REPORTNOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES—continued
Name of subsidiaries
Place of
incorporation
/registration
/operations
Paid up/
issued capital
Registered
capital
Proportion ownership interest
attributable by the Company
Date of
the report Principal activities
As at 31 December
2020 2021 2022
Guangzhou Sudaoyi Business Service Co., Ltd. (Note c)
ʮ̡
The PRC nil RMB1,000,000 100% 100% 100% 100% Platform and software
service
Guangzhou Yaoshibang Network Technology Co., Ltd. (Notes d & f)
ʮ̡
The PRC RMB2,000,000 RMB2,000,000 100% 100% 0% 0% Platform and software
service
Hainan Yaoshibang Information Technology Co., Ltd. (Notes d & e)
ʮ̡
The PRC nil RMB1,000,000 100% 100% 0% 0% Platform and software
service
Beijing Yaoshibang Network Technology Co., Ltd. (Notes d & f)
ʮ̡
The PRC nil RMB100,000 100% 100% 0% 0% Platform and software
service
Henan Subiao Information Technology Co., Ltd. (Note d)
ʮ̡
The PRC nil RMB1,000,000 100% 100% 100% 100% Platform and software
service
Hainan Sudao Information Technology Co., Ltd. (Notes d & e)
ʮ̡
The PRC nil RMB1,000,000 100% 100% 0% 0% Platform and software
service
Leyou Investment Limited (Note a) Hong Kong USD204,830,000 N/A 100% 100% 100% 100% Investment holding
Guangzhou Yaobang* (Note d)
ʮ̡
The PRC nil RMB1,000,000 0% 0% 0% 0% Platform and software
service
Guangzhou Sudao* (Note c)
ʮ̡
The PRC RMB9,818,877 RMB9,818,877 0% 0% 0% 0% Platform and software
service
Dongguan Dalingshan Jianhui Comprehensive Clinic Co., Ltd.
(Notes d & f)
ʮ̡
The PRC nil RMB1,000,000 N/A 100% 0% 0% Healthy inspection
* The Group obtained control over these entities through Contractual Arrangements as set out in Note 5.
I-83


--- page 452 ---
APPENDIX I ACCOUNTANTS’ REPORTNOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES—continued
Name of subsidiaries
Place of
incorporation
/registration
/operations
Paid up/
issued capital
Registered
capital
Proportion ownership interest
attributable by the Company
Date of
the report Principal activities
As at 31 December
2020 2021 2022
Hebei Zeyi Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB15,000,000 RMB15,000,000 N/A 100% 100% 100% Wholesale of
pharmaceutical and
healthcare products
Zhejiang Leyao Pharmaceutical Co., Ltd. (Note c & d)
ʮ̡
The PRC RMB45,000,000 RMB45,000,000 N/A 100% 100% 100% Wholesale of
pharmaceutical and
healthcare products
Hunan Leyao Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB25,000,000 RMB25,000,000 N/A 100% 100% 100% Wholesale of
pharmaceutical and
healthcare products
Henan Huiying Pharmaceutical Co., Ltd. (Note c & d)
ʮ̡
The PRC RMB70,000,000 RMB70,000,000 N/A 100% 100% 100% Wholesale of
pharmaceutical and
healthcare products
YSB Technology Limited (Note b) The British
Virgin
Islands
nil N/A N/A 100% 100% 100% Investment holding
YSB Technology (Hong Kong) Limited (Note a) Hong Kong nil N/A N/A 100% 100% 100% Investment holding
YSB Health Limited (Note a) Hong Kong nil N/A N/A 100% 100% 100% Investment holding
Guangzhou Yuewei (Note d)
ʮ̡
The PRC RMB7,000,000 RMB10,000,000 N/A 100% 100% 100% Medical testing services
Tianjin Yaoshibang Comprehensive Clinic Co., Ltd. (Notes d & f)
ʮ̡
The PRC nil RMB5,000,000 N/A 100% 0% 0% Medical testing services
Guangzhou Xiaoweicang Smart Drug Store Technology Co., Ltd. (Note d)
ʮ̡
The PRC nil RMB1,000,000 N/A 70% 70% 70% Intelligent Pharmacy
services
Guangzhou Linyaohui Information Technology Co., Ltd. (Note d)
ʮ̡
The PRC nil USD1,000,000 N/A 100% 100% 100% Investment holding
Guangzhou Guangpu Health Technology Co., Ltd. (Note d)
ʮ̡
The PRC nil RMB1,000,000 N/A 70% 70% 70% Medical testing services
I-84


--- page 453 ---
APPENDIX I ACCOUNTANTS’ REPORTNOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES—continued
Name of subsidiaries
Place of
incorporation
/registration
/operations
Paid up/
issued capital
Registered
capital
Proportion ownership interest
attributable by the Company
Date of
the report Principal activities
As at 31 December
2020 2021 2022
Guangzhou Sudaoyi Project Management Consulting Co., Ltd.
(Note d)
ʮ̡
The PRC nil RMB100,000 N/A 100% 100% 100% Investment holding
Guangzhou Sudaoyi Enterprise Management Consulting Co, Ltd.
(Note d)
ʮ̡
The PRC nil RMB100,000 N/A 100% 100% 100% Investment holding
Guangzhou Sudao Buiness Conculting Co., Ltd.
(Note d)
ʮ̡
The PRC nil USD50,000 N/A 100% 100% 100% Investment holding
Jiangxi Leyao Pharmaceutical Co., Ltd. (Note d)
ʮ̡
The PRC RMB10,000,000 RMB10,000,000 N/A N/A 100% 100% Wholesale of
pharmaceutical and
healthcare products
I-85


--- page 454 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED
AFFILIATED ENTITIES—continued
Notes:
(a) No statutory audited financial statements for these companies have been prepared since their incorporation.
(b) No statutory financial statements have been prepared for this company as it was not subject to statutory audit requirements under the
relevant rules and regulations for the jurisdiction of incorporation and establishment.
(c) The statutory financial statements of these subsidiaries established in the PRC were prepared in accordance with the relevant accounting
principles and regulation in the PRC. The statutory financial statements for the years ended 31 December 2020, 2021 and 2022 were
audited by the following certified public accountants registered in the PRC:
Subsidiaries
Year ended 31 December 2020
Hubei Chengweishang Pharmaceutical Co., Ltd.ʮ̡
Guangdong Dongjianה
Guangdong Jiuzhangה
Guangzhou Sudaoyiה
Guangzhou Sudaoה
Guangzhou Sudaoyi Business Service Co., Ltd.ה
Zhejiang Leyao Pharmaceutical Co., Ltd.౷ஷΥྫ
Subsidiaries Year ended 31 December 2021
Guangdong Dongjianה
Guangdong Dihaoה
Henan Huiying Pharmaceutical Co., Ltd.౷ஷΥྫ
Guangdong Jiuzhang Pharmaceutical Co., Ltd.ה
Guangzhou Sudaoyi Business Service Co., Ltd.ה
Guangzhou Sudaoה
Guangzhou Sudaoyiה
Subsidiaries Year ended 31 December 2022
Guangdong Dongjianה
Guangdong Dihaoה
Guangzhou Sudaoyi Business Service Co., Ltd.ה
Guangzhou Sudaoה
Guangzhou Sudaoyiה
d) No audited statutory financial statements have been prepared for the subsidiaries incorporated in the PRC listed above, since there are no
statutory audit requirement.
(e) Hainan Yaoshibang Information Technology Co., Ltd. and Hainan Sudao Information Technology Co., Ltd. have been liquidated on 24
February 2022 and 22 February 2022, respectively.
(f) Guangzhou Yaoshibang Network Technology Co., Ltd., Beijing Yaoshibang Network Technology Co., Ltd., Dongguan Dalingshan
Jianhui Comprehensive Clinic Co., Ltd., Tianjin Yaoshibang Comprehensive Clinic Co., Ltd. and Shandong Leyao Pharmaceutical Co.,
Ltd. have been disposed to an independent third party with a total gain of RMB1,344,000 on 8 April 2022, 6 April 2022, 28 March 2022,
1 April 2022 and 9 October 2022, respectively.
The above table lists the subsidiaries and consolidated affiliated entities of the Company that
the directors of the Company believe to principally affect the results or assets of the Group. In the
opinion of the directors of the Company, to give details of other subsidiaries would, result in
particulars of excessive length.
The voting power of the subsidiaries and consolidated affiliated entities held by the Company
are same with the ownership interest held by the Company.
None of the subsidiaries and consolidated affiliated entities had issued any debt securities
during the Track Record Period.
I-86


--- page 455 ---
APPENDIX I ACCOUNTANTS’ REPORT
NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued
41. DEFICITS OF THE COMPANY
Share-
based
payments
reserve
Accumulated
losses Total
RMB’000 RMB’000 RMB’000
At 1 January 2020 ....................................... — ( 1 , 093,623) (1,093,623)
Loss and other comprehensive expense for the year ............. — ( 294,697) (294,697)
At 31 December 2020 .................................... — ( 1 , 388,320) (1,388,320)
Loss and other comprehensive expense for the year — (169,207) (169,207)
Recognition of equity-settled share-based payments ............ 24,362 — 24,362
Transfer forfeited equity-settled share based payments to
accumulated losses .................................... (322) 322 —
At 31 December 2021 .................................... 24,040 (1,557,205) (1,533,165)
Loss and other comprehensive expense for the year ............. — ( 1,368,675) (1,368,675)
Recognition of equity-settled share-based payments ............ 38,817 — 38,817
Transfer forfeited equity-settled share-based payments to
accumulated losses .................................... (3,683) 3,683 —
At 31 December 2022 .................................... 59,174 (2,922,197) (2,863,023)
42. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements of the Group, the Company or any of its subsidiaries have been
prepared in respect of any period subsequent to 31 December 2022.
43. SUBSEQUENT EVENTS
On 3 June 2023, the shareholders of the Company passed set of resolutions to approve the
below matter set out in the paragraph headed “Resolutions of our Shareholders dated 3 June 2023” in
Appendix IV to the Prospectus. It was resolved, among other things, immediately following the share
subdivision, each of the 5,000,000,000 authorised (whether issued or unissued) shares of par value of
US$0.00001 each be subdivided into four shares with a par value of US$0.0000025 each (“Share
Subdivision”).
Save as disclosed above, there have been no other material subsequent events identified
subsequent to 31 December 2022.
I-87


--- page 456 ---
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
The information set out below does not form part of the Accountants’ Report received from the
Company’s reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong
Kong as set out in Appendix I to this prospectus, and is included in this prospectus for information
purposes only.
The unaudited pro forma financial information should be read in conjunction with the section
headed “Financial Information” of this prospectus and the Accountants’ Report as set out in Appendix
I to this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE
ASSETS LESS LIABILITIES OF THE GROUP ATTRIBUTABLE TO OWNERS OF THE
COMPNAY
The unaudited pro forma statement of adjusted consolidated net tangible assets less liabilities of
the Group attributable to owners of the Company prepared in accordance with Rule 4.29 of the Listing
Rules is set out below to illustrate the effect of the Global Offering on the audited consolidated
tangible assets less liabilities of the Group attributable to owners of the Company as at 31 December
2022 as if the Global Offering had taken place on that date.
The unaudited pro forma statement of adjusted consolidated net tangible assets less liabilities of
the Group attributable to owners of the Company as at 31 December 2022 has been prepared for
illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the
consolidated net tangible assets less liabilities of the Group attributable to owners of the Company as at
31 December 2022 or any future dates following the Global Offering.
The following unaudited pro forma statement of adjusted consolidated net tangible assets less
liabilities of the Group attributable to owners of the Company is prepared based on the audited
consolidated tangible assets less liabilities of the Group attributable to owners of the Company as at
31 December 2022 as derived from the Accountants’ Report as set out in Appendix I to this
prospectus, and adjusted as follows:
Audited
consolidated
tangible assets
less liabilities of
the Group
attributable to
owners of the
Company as at
31 December
2022
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
consolidated net
tangible assets
less liabilities of
the Group
attributable to
owners of the
Company as at
31 December
2022
Unaudited pro
forma adjusted
consolidated net
tangible assets
less liabilities of
the Group
attributable to
owners of the
Company as at
31 December
2022 per Share
RMB’000 RMB’000 RMB’000 RMB HK$
Note 1 Note 2 Note 3 Note 4
Based on an Offer Price of HK$19 per Offer
Share ................................ ( 4,458,936) 243,986 (4,214,950) (29.87) (32.91)
Based on an Offer Price of HK$23 per Offer
Share ................................ ( 4,458,936) 298,793 (4,160,143) (29.48) (32.48)
Notes:
(1) The audited consolidated tangible assets less liabilities of the Group attributable to owners of the Company as at 31 December 2022 is
arrived at after deducting intangible assets of RMB98,903,000 and goodwill of RMB9,252,000 from the audited consolidated net
liabilities attributable to owners of the Company of RMB4,350,781,000 from the Accountants’ Report set out in Appendix I to this
prospectus.
(2) The estimated net proceeds from the Global Offering are based on 15,808,800 new shares to be issued at the Offer Price of HK$19 and
HK$23 per offer share, being the low-end and high-end of the stated offer price range, respectively, after deduction of the estimated
underwriting fees and commission and other related expenses paid/payable by the Group (excluding listing expenses charged to profit or
loss up to 31 December 2022). It does not take into account any shares which may be allotted and issued pursuant to the
II-1


--- page 457 ---
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
exercise of the Over-allotment Option or options which may be granted under the Share Option Scheme or any shares which may be
issued or repurchased by the Company pursuant to the Company’s general mandate or the conversion of all preferred shares existing on
31 December 2022 into ordinary shares of the Company.
For the purpose of the estimated net proceeds from the Global Offering, the amount denominated in HK$ has been converted into RMB
at the rate of HK$1 to RMB0.90763, which was the exchange rate prevailing on 10 June 2023 with reference to the rate published by the
People’s Bank of China. No representation is made that the HK$ denominated amounts have been, could have been or may be converted
to RMB, or vice versa, at that rate or any other rates or at all.
(3) The unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of the Company per
share is arrived at on the basis of 141,124,984 shares were in issue, assuming that the Share Subdivision and Global Offering had been
completed on 31 December 2022. It does not take into account any shares which may be allotted and issued pursuant to the exercise of
the Over-allotment Option or options which may be granted under the Share Option Scheme or any shares which may be issued or
repurchased by the Company pursuant to the Company’s general mandate or the conversion of all preferred shares existing on
31 December 2022 into ordinary shares of the Company.
(4) For the purpose of unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of the
Company per share, the amount denominated in RMB has been converted into HK$ at the rate of RMB1 to HK$1.10177, which was the
exchange rate prevailing on 10 June 2023 with reference to the rate published by the People’s Bank of China. No representation is made
that the RMB denominated amounts have been, would have been or may be converted to HK$, or vice versa, at that rate or at any other
rates or at all.
(5) No adjustment has been made to the unaudited pro forma adjusted consolidated tangible assets less liabilities of the Group attributable to
owners of the Company as at 31 December 2022 to reflect any trading results or other transactions of the Group entered into subsequent
to 31 December 2022. In particular, the unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group
attributable to owners of the Company as shown on Page II-1 have not been adjusted to illustrate the effect of the following:
Upon completion of the Global Offering, the conversion of all preferred shares existing on 31 December 2022 would have reclassified
the carrying amount of all preferred shares existing on 31 December 2022 of RMB5,872,042,000, assuming no further changes in fair
values of all preferred shares existing on 31 December 2022 upon Global Offering, to ordinary shares under equity. The conversion of all
preferred shares existing on 31 December 2022 would have increased the total number of shares in issue assumption stated in Note 3 by
491,225,068 shares (after the effect of Share Subdivision) and would have adjusted the unaudited pro forma adjusted consolidated net
tangible assets less liabilities of the Group attributable to owners of the Company as at 31 December 2022 by RMB5,872,042,000.
The effect of the conversion of preferred shares into ordinary shares of the Company (the “Subsequent Transactions”) would have
adjusted the unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of the
Company as at 31 December 2022 by RMB5,872,042,000 to unaudited pro forma adjusted consolidated net tangible assets of the Group
attributable to owners of the Company of RMB1,657,092,000 based on an Offer Price of HK$19 per Offer Share and unaudited pro
forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company of RMB1,711,899,000 based on an
Offer Price of HK$23 per Offer Share and would have increased the total Shares in issue by 491,225,068 Shares to a total of 632,350,052
Shares in issue. Had the Subsequent Transactions been taken into account, the unaudited pro forma adjusted consolidated net tangible
assets of the Group attributable to owners of the Company as at 31 December 2022 per Share would be RMB2.62 (equivalent to
HK$2.89) based on an Offer Price of HK$19 per Offer Share and RMB2.71 (equivalent to HK$2.99) based on an Offer Price of HK$23
per Offer Share, respectively.
For the purpose of unaudited pro forma adjusted consolidated net tangible assets less liabilities of the Group attributable to owners of the
Company per share, the amount denominated in RMB has been converted into HK$ at the rate of RMB1 to HK$1.10177, which was the
exchange rate prevailing on 10 June 2023 with reference to the rate published by the People’s Bank of China. No representation is made
that the RMB denominated amounts have been, could have been or may be converted to HK$, or vice versa, at that rate or any other rates
or at all.
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of the independent reporting accountants’ assurance report received
from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public
Accountants, Hong Kong, in respect of the Group’s unaudited pro forma financial information
prepared for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of YSB Inc.
We have completed our assurance engagement to report on the compilation of unaudited pro
forma financial information of YSB Inc. (the “Company”) and its subsidiaries (hereinafter collectively
referred to as 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 consolidated net tangible assets less liabilities as at 31 December 2022 and related notes as set
out on pages II-1 to II-2 of Appendix II to the prospectus issued by the Company dated 15 June 2023
(the “Prospectus”). The applicable criteria on the basis of which the Directors have compiled the
unaudited pro forma financial information are described on pages II-1 to II-2 of Appendix II to the
Prospectus.
The unaudited pro forma financial information has been compiled by the Directors to illustrate
the impact of the proposed Global Offering (as defined in the Prospectus) on the Group’s financial
position as at 31 December 2022 as if the Global Offering had taken place at 31 December 2022. As
part of this process, information about the Group’s financial position has been extracted by the
Directors from the Group’s historical financial information for each of the three years ended
31 December 2022, on which an accountants’ report set out in Appendix I to the Prospectus has been
published.
Directors’ Responsibilities for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the unaudited 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 (the “HKICPA”).
Our Independence and Quality Control
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.
Our firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms that
Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services
Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
control including documented policies and 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 unaudited 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 unaudited 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 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 unaudited 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 purposes of this engagement, we are not responsible for updating or reissuing any reports or
opinions on any historical financial information used in compiling the unaudited 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 unaudited pro forma financial information.
The purpose of unaudited 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 the event or transaction at 31 December 2022 would have been as presented.
A reasonable assurance engagement to report on whether the unaudited 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
unaudited 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 unaudited pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
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 unaudited pro forma financial information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro forma
financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
Opinion
In our opinion:
(a) the unaudited 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 unaudited pro forma financial
information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
15 June 2023
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
Set out below is a summary of certain provisions of the constitution of the Company and certain
aspects of the company laws of the Cayman Islands.
The Company was incorporated in the Cayman Islands as an exempted company with limited
liability on 27 August 2018 under the Companies Act. The Company’s constitutional documents
consist of the Memorandum of Association and the Articles of Association.
SUMMARY OF THE CONSTITUTION OF OUR COMPANY
Memorandum of Association
The Memorandum provides, inter alia , that the liability of the members of the Company is
limited, that the objects for which the Company is established are unrestricted (and therefore include
acting as an investment holding company) and that the Company shall have full power and authority to
carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands.
Articles of Association
The Articles were conditionally adopted on 3 June 2023 and will become effective on the
Listing Date. A summary of certain provisions of the Articles is set out below.
1. Shares
(a) Classes of Shares
The share capital of the Company consists of a single class of ordinary shares.
(b) Variation of Rights of Existing Shares or Classes of Shares
If at any time the share capital of the Company is divided into different classes of Shares,
all or any of the rights attached to any class of Shares for the time being issued (unless
otherwise provided by the terms of issue of the Shares of that class) may, whether or not
the Company is being wound up, be varied with the consent in writing of the holders of at
least three-fourths of the issued Shares of that class, or with the approval of a resolution
passed by at least three-fourths of the votes cast by the holders of the Shares of that class
present and voting in person or by proxy at a separate meeting of such holders. The
provisions of the Articles relating to general meetings shall apply mutatis mutandis to
every such separate meeting, except that the necessary quorum shall be two persons
together holding (or, in the case of a member being a corporation, by its duly authorised
representative), or representing by proxy, at least one-third of the issued Shares of that
class. Every holder of Shares of the class shall be entitled on a poll to one vote for every
such Share held by him, and any holder of Shares of the class present in person or by
proxy may demand a poll.
For the purposes of a separate class meeting, the Board may treat two or more classes of
Shares as forming one class of Shares if the Board considers that such classes of Shares
would be affected in the same way by the proposals under consideration, but in any other
case shall treat them as separate classes of Shares.
Any rights conferred upon the holders of Shares of any class shall not, unless otherwise
expressly provided in the rights attaching to the terms of issue of the Shares of that class,
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
be deemed to be varied by the creation or issue of further Shares ranking pari passu
therewith.
(c) Alteration of Capital
The Company may by ordinary resolution:
(i) increase its share capital by the creation of new Shares of such amount and with such
rights, priorities and privileges attached to such Shares as it may determine;
(ii) consolidate and divide all or any of its share capital into Shares of a larger amount
than its existing Shares. On any consolidation of fully paid Shares and division into
Shares of a larger amount, the Board may settle any difficulty which may arise as it
thinks expedient and, in particular (but without prejudice to the generality of the
foregoing), may as between the holders of Shares to be consolidated determine which
particular Shares are to be consolidated into a consolidated Share, and if it shall
happen that any person shall become entitled to fractions of a consolidated Share or
Shares, such fractions may be sold by some person appointed by the Board for that
purpose and the person so appointed may transfer the Shares so sold to the
purchaser(s) thereof and the validity of such transfer shall not be questioned, and the
net proceeds of such sale (after deduction of the expenses of such sale) may either be
distributed among the persons who would otherwise be entitled to a fraction or
fractions of a consolidated Share or Shares rateably in accordance with their rights
and interests or may be paid to the Company for the Company’s benefit;
(iii) sub-divide its Shares or any of them into Shares of an amount smaller than that fixed
by the Memorandum; and
(iv) cancel any Shares which, as at the date of passing of the resolution, have not been
taken or agreed to be taken by any person and diminish the amount of its share capital
by the amount of the Shares so cancelled.
The Company may by special resolution reduce its share capital or any undistributable
reserve, subject to the provisions of the Companies Act.
(d) Transfer of Shares
Subject to the terms of the Articles, any member of the Company may transfer all or any
of his Shares by an instrument of transfer. If the Shares in question were issued in
conjunction with rights, options, warrants or units issued pursuant to the Articles on terms
that one cannot be transferred without the other, the Board shall refuse to register the
transfer of any such Share without evidence satisfactory to it of the like transfer of such
right, option, warrant or unit.
Subject to the Articles and the requirements of the Stock Exchange, all transfers of Shares
shall be effected by an instrument of transfer in the usual or common form or in such other
form as the Board may approve and may be under hand or, if the transferor or transferee is
a recognised clearing house or its nominee(s), under hand or by machine imprinted
signature, or by such other manner of execution as the Board may approve from time to
time.
Execution of the instrument of transfer shall be by or on behalf of the transferor and the
transferee, provided that the Board may dispense with the execution of the instrument of
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
transfer by the transferor or transferee or accept mechanically executed transfers. The
transferor shall be deemed to remain the holder of a Share until the name of the transferee
is entered in the register of members of the Company in respect of that Share.
Subject to the provisions of the Companies Act, if the Board considers it necessary or
appropriate, the Company may establish and maintain a branch register or registers of
members at such location or locations within or outside the Cayman Islands as the Board
thinks fit. The Board may, in its absolute discretion, at any time transfer any Share on 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, in its absolute discretion, decline to register a transfer of any Share (not
being a fully paid Share) to a person of whom it does not approve or on which the
Company has a lien, or a transfer of any Share issued under any share option scheme upon
which a restriction on transfer subsists or a transfer of any Share to more than four joint
holders. It may also decline to recognise any instrument of transfer if the proposed transfer
does not comply with the Articles or any requirements of the Listing Rules.
The Board may decline to recognise any instrument of transfer unless a certain fee, up to
such maximum sum as the Stock Exchange may determine to be payable, is paid to the
Company, the instrument of transfer is properly stamped (if applicable), is in respect of
only one class of Share and is lodged at the relevant registration office or the place at
which the principal register is located accompanied by the relevant share certificate(s) and
such other evidence as the Board may reasonably require is provided 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 register of members may, subject to the Listing Rules and the relevant section of the
Companies Ordinance, be closed at such time or for such period not exceeding in the
whole 30 days in each year as the Board may determine (or such longer period as the
members of the Company may by ordinary resolution determine, provided that such period
shall not be extended beyond 60 days in any year).
Fully paid Shares shall be free from any restriction on transfer (except when permitted by
the Stock Exchange) and shall also be free from all liens.
(e) Redemption of Shares
Subject to the provisions of the Companies Act, the Listing Rules and any rights conferred
on the holders of any Shares or attaching to any class of Shares, the Company may issue
Shares that are to be redeemed or are liable to be redeemed at the option of the members or
the Company. The redemption of such Shares shall be effected in such manner and upon
such other terms as the Company may by special resolution determine before the issue of
such Shares.
(f) Power of the Company to Purchase its own Shares
Subject to the Companies Act, or any other law or so far as not prohibited by any law and
subject to any rights conferred on the holders of any class of Shares, the Company shall
have the power to purchase or otherwise acquire all or any of its own Shares (which
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
includes redeemable Shares), provided that the manner and terms of purchase have first
been authorised by ordinary resolution and that any such purchase shall only be made in
accordance with the relevant code, rules or regulations issued from time to time by the
Stock Exchange and/or the Securities and Futures Commission of Hong Kong from time
to time in force.
(g) Power of any Subsidiary of the Company to own Shares in the Company
There are no provisions in the Articles relating to the ownership of Shares in the Company
by a subsidiary.
(h) Calls on Shares and Forfeiture of Shares
Subject to the terms of allotment and issue of any Shares (if any), the Board may, from
time to time, make such calls as it thinks fit upon the members in respect of any monies
unpaid on the Shares held by them (whether in respect of par value or share premium). A
member who is the subject of the call shall (subject to receiving at least 14 clear days’
notice specifying the time or times for payment) pay to the Company at the time or times
so specified the amount called on his Shares. A call may be made payable either in one
sum or by instalments, and shall be deemed to have been made at the time when the
resolution of the Board authorising such call was passed. The joint holders of a Share shall
be severally as well as jointly liable for the payment of all calls and instalments due in
respect of such Share.
If a call remains unpaid after it has become due and payable, the member from whom the
sum is due shall pay interest on the unpaid amount at such rate as the Board shall
determine (together with any expenses incurred by the Company as a result of such
non-payment) from the day it became due and payable until it is paid, but the Board may
waive payment of such interest or expenses in whole or in part.
If a member fails to pay any call or instalment of a call after it has become due and
payable, the Board may, for so long as any part of the call or instalment remains unpaid,
give to such member not less than 14 clear days’ notice requiring payment of the unpaid
amount together with any interest which may have accrued and which may still accrue up
to the date of payment (together with any expenses incurred by the Company as a result of
such non-payment). The notice shall specify a further day on or before which the payment
required by the notice is to be made. The notice shall also state that, in the event of
non-payment at or before the appointed time, the Shares in respect of which the call was
made will be liable to be forfeited.
If such notice is not complied with, any Share in respect of which the notice was given
may, before the payment required by the notice has been made, be forfeited by a resolution
of the Board. Such forfeiture shall include all dividends, other distributions and other
monies payable in respect of the forfeited Share and not paid before the forfeiture.
A person whose Shares have been forfeited shall cease to be a member in respect of the
forfeited Shares, shall surrender to the Company for cancellation the certificate(s) for the
Shares forfeited and shall remain liable to pay to the Company all monies which, as at the
date of forfeiture, were payable by him to the Company in respect of the Shares together
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
with (if the Board shall in its discretion so require) interest thereon from the date of
forfeiture until the date of payment as the Board may determine and any expenses incurred
by the Company as a result of such non-payment.
2. Directors
(a) Appointment, Retirement and Removal
The Company may by ordinary resolution of the members elect any person to be a
Director. The Board may also appoint any person to be a Director at any time, either to fill
a casual vacancy or as an additional Director subject to any maximum number fixed by the
members in general meeting or the Articles. 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 at such meeting. Any Director so appointed by the Board
shall not be taken into account in determining the Directors or the number of Directors
who are to retire by rotation at an annual general meeting.
There is no shareholding qualification for Directors nor is there any specified age limit for
Directors.
The members may by ordinary resolution remove any Director (including a managing or
executive Director) before the expiration of his term of office, notwithstanding anything in
the Articles or any agreement between the Company and such Director, and may by
ordinary resolution elect another person in his stead. Nothing shall be taken as depriving a
Director so removed of any compensation or damages payable to such Director in respect
of the termination of his appointment as Director or of any other appointment or office as a
result of the termination of his appointment as Director.
The office of a Director shall be vacated if:
(i) the Director gives notice in writing to the Company that he resigns from his office as
Director;
(ii) the Director is absent, without being represented by proxy or an alternate Director
appointed by him, for a continuous period of 12 months without special leave of
absence from the Board, and the Board passes a resolution that he has by reason of
such absence vacated his office;
(iii) the Director becomes bankrupt or has a receiving order made against him or suspends
payment or compounds with his creditors generally;
(iv) the Director dies or an order is made by any competent court or official on the
grounds that he is or may be suffering from mental disorder or is otherwise incapable
of managing his affairs and the Board resolves that his office be vacated;
(v) the Director is prohibited from being or ceases to be a Director by operation of law;
(vi) the Director has been required by the Stock Exchange to cease to be a Director or no
longer qualifies to be a Director pursuant to the Listing Rules; or
(vii) the Director is removed from office by notice in writing served upon him signed by
not less than three-fourths in number (or, if that is not a round number, the nearest
lower round number) of the Directors (including himself) then in office.
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
At each annual general meeting, one-third of the Directors for the time being shall retire
from office by rotation. If the number of Directors is not a multiple of three, then the
number nearest to but not less than one-third shall be the number of retiring Directors,
provided that every Director shall be subject to retirement by rotation at least once every
three years. The Directors to retire at each annual general meeting shall be those who have
been in office longest since their last re-election or appointment and, as between persons
who became or were last re-elected Directors on the same day, those to retire shall (unless
they otherwise agree among themselves) be determined by lot.
(b) Power to Allot and Issue Shares and other Securities
Subject to the provisions of the Companies Act, the Memorandum and Articles and, where
applicable, the Listing Rules, and without prejudice to any rights or restrictions for the
time being attached to any Shares, the Board may allot, issue, grant options over or
otherwise dispose of Shares with or without preferred, deferred or other rights or
restrictions, whether with regard to dividend, voting, return of capital or otherwise, to such
persons, at such times, for such consideration and on such terms and conditions as it in its
absolute discretion thinks fit, provided that no Shares shall be issued at a discount to their
par value.
The Company may issue rights, options, warrants or convertible securities or securities of
a similar nature conferring the right upon the holders thereof to subscribe for, purchase or
receive any class of Shares or other securities in the Company on such terms as the Board
may from time to time determine.
Neither the Company nor the Board shall be 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 whose registered addresses
are in any particular territory or territories where, in the absence of a registration statement
or other special formalities, this is or may, in the opinion of the Board, be unlawful or
impracticable. However, no member affected as a result of the foregoing shall be, or be
deemed to be, a separate class of members for any purpose whatsoever.
(c) Power to Dispose of the Assets of the Company or any of its Subsidiaries
Subject to the provisions of the Companies Act, the Memorandum and Articles and any
directions given by special resolution of the Company, the Board may exercise all powers
and do all acts and things which may be exercised or done by the Company to dispose of
the assets of the Company or any of its subsidiaries. No alteration to the Memorandum or
Articles and no direction given by special resolution of the Company shall invalidate any
prior act of the Board which would have been valid if such alteration or direction had not
been made or given.
(d) Borrowing Powers
The Board may exercise all the powers of the Company to raise or borrow money, secure
the payment of any sum or sums of money for the purposes of the Company, mortgage or
charge all or any part of its undertaking, property and uncalled capital of the Company,
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
and, subject to the Companies Act, issue debentures, debenture stock, bonds and other
securities, whether outright or as collateral security for any debt, liability or obligation of
the Company or of any third party.
(e) Remuneration
A Director shall be entitled to receive such sums as shall from time to time be determined
by the Board or the Company in general meetings. The Directors shall also be entitled to
be repaid all expenses reasonably incurred by them in connection with attendance at
meetings of the Board or committees of the Board, or general meetings of the Company or
separate meetings of the holders of any class of Shares or debentures of the Company, or
otherwise in connection with the business of the Company and the discharge of their
duties as Directors, and/or to receive fixed allowances in respect thereof as may be
determined by the Board.
The Board or the Company in general meetings may also approve additional remuneration
to any Director for any services which in the opinion of the Board or the Company in
general meetings go beyond such Director’s ordinary routine work as a Director.
(f) Compensation or Payments for Loss of Office
There are no provisions in the Articles relating to compensation or payment for loss of
office.
(g) Loans to Directors
There are no provisions in the Articles relating to making of loans to Directors.
(h) Disclosure of Interest in Contracts with the Company or any of its Subsidiaries
With the exception of the office of auditor of the Company, a Director may hold any other
office or place of profit with 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 for that other office or place of profit, in whatever form, in addition to any
remuneration provided for by or pursuant to the Articles. A Director may be or become a
director, officer or member of 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 or other benefits received by him as a director, officer or member of such
other company.
No person shall be disqualified from the office of Director or alternate Director or
prevented by such office from contracting with the Company, nor shall any such contract
or any other contract or transaction entered into by or on behalf of the Company in which
any Director or alternate Director is in any way interested be or be liable to be avoided,
nor shall any Director or alternate Director so contracting or being so interested be liable
to account to the Company for any profit realised by or arising in connection with any
such contract or transaction by reason of such Director or alternate Director holding such
office or of the fiduciary relationship established by it, provided that the nature of interest
of any Director or alternate Director in any such contract or transaction shall be disclosed
by such Director or alternate Director at or prior to the consideration and vote thereon.
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
A Director shall not vote on (or be counted in the quorum in relation to) any resolution of
the Board in respect of any contract or arrangement or other proposal in which he or any
of his close associate(s) has a material interest, and if he shall do so his vote shall not be
counted and he shall not be counted in the quorum for such resolution. This prohibition
shall not apply to any of the following matters:
(i) the giving of any security or indemnity 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;
(ii) the giving of any security or indemnity 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/have himself/themselves assumed responsibility in whole or in
part whether alone or jointly under a guarantee or indemnity or by the giving of
security;
(iii) any proposal concerning an offer of Shares, 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;
(iv) any proposal or arrangement concerning the benefit of employees of the Company or
any of its subsidiaries, including the adoption, modification or operation of (A) any
employees’ share scheme or any share incentive or share option scheme under which
the Director or his close associate(s) may benefit or (B) any pension fund or
retirement, death or disability benefits scheme which relates to the Director, his close
associates and employees of the Company or any of its subsidiaries and does not
provide in respect of any Director or his close associate(s) any privilege or advantage
not generally accorded to the class of persons to which such scheme or fund relates;
and
(v) 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, debentures or other
securities of the Company by virtue only of his/their interest in those Shares,
debentures or other securities.
3. Proceedings of the Board
The Board may meet anywhere in the world for the despatch of business and may adjourn and
otherwise regulate its meetings as it thinks fit. Unless otherwise determined, two Directors shall be a
quorum. 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 a second or casting vote.
4. Alterations to the Constitutional Documents and the Company’s Name
The Memorandum and Articles may only be altered or amended, and the name of the Company
may only be changed, by special resolution of the Company.
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5. Meetings of Members
(a) Special and Ordinary resolutions
A special resolution must be passed by a majority of not less than two-thirds (other than in
relation to any resolution approving changes to the Company’s constitutional documents
or a voluntary winding up of the Company, in which case a special resolution must be
passed by a majority of not less than three-fourths) of the voting rights held by such
members as, being entitled so to do, vote in person or by proxy or, in the case of any
members which is a corporation, by its duly authorised representative(s) or by proxy, at a
general meeting of which notice specifying the intention to propose the resolution as a
special resolution has been duly given. A special resolution may also be approved in
writing by all the members entitled to vote at a general meeting in one or more instruments
each signed by one or more of such members.
An ordinary resolution, in contrast, is a resolution passed by a simple majority of the
voting rights held by such members as, being entitled to do so, vote in person or by proxy
or, in the case of any member which is a corporation, by its duly authorised
representative(s) or by proxy, at a general meeting. An ordinary resolution may also be
approved in writing by all the members entitled to vote at a general meeting in one or
more instruments each signed by one or more of such members.
The provisions of special resolutions and ordinary resolutions shall apply mutatis mutandis
to any resolutions passed by the holders of any class of shares.
(b) Voting Rights and Right to Demand a Poll
Subject to any rights, restrictions or privileges as to voting for the time being attached to
any class or classes of Shares, at any general meeting: (a) on a poll every member present
in person (or, in the case of a member being a corporation, by its duly authorised
representative) or by proxy shall have one vote for every Share and (b) on a show of hands
every member who is present in person (or, in the case of a member being a corporation,
by its duly authorised representative) or by proxy shall have one vote.
In the case of joint holders, the vote of the senior holder who tenders a vote, whether in
person or by proxy shall be accepted to the exclusion of the votes of the other join holders,
and seniority shall be determined by the order in which the names of the holders stand in
the register of members of the Company.
No person shall be counted in a quorum or be entitled to vote at any general meeting
unless he is registered as a member on the record date for such meeting, nor unless all
calls or other monies then payable by him in respect of the relevant Shares have been paid.
At any general meeting a resolution put to the vote of the meeting shall be decided by way
of poll save that the chairman of the meeting may, pursuant to the Listing Rules, allow a
resolution which relates purely to a procedural or administrative matter to be voted on by a
show of hands.
Any corporation or other non-natural person which is a member of the Company may in
accordance with its constitutional documents, or in the absence of such provision by
resolution of its directors or other governing body or by power of attorney, authorise such
person as it thinks fit to act as its representative at any meeting of the Company or of any
class of members, and the person so authorised shall be entitled to exercise the same
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powers as the corporation or other non-natural person could exercise as if it were a natural
person member of the Company.
If a recognised clearing house or its nominee(s) is a member of the Company, it may
appoint proxies or authorise such person or persons as it thinks fit to act as its
representative(s), who enjoy rights equivalent to the rights of other members, at any
meeting of the Company (including but not limited to general meetings and creditors
meetings) 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 so authorised
shall be entitled to exercise the same rights and powers on behalf of the recognised
clearing house or its nominee(s) as if such person were a natural person member of the
Company, including the right to speak and vote individually on a show of hands or on a
poll.
All members of the Company (including a member which is a recognised clearing house
(or its nominee(s))) shall have the right to (i) speak at a general meeting and (ii) and vote
at a general meeting except where a member is required by the Listing Rules to abstain
from voting to approve the matter under consideration. Where any member is, under the
Listing Rules, required to abstain from voting on any particular resolution or restricted to
voting only for or only against any particular resolution, any votes cast by or on behalf of
such member in contravention of such requirement or restriction shall not be counted.
(c) Annual General Meetings and Extraordinary General Meetings
The Company must hold a general meeting as its annual general meeting for each financial
year. Such meeting shall be specified as such in the notices calling it, and must be held
within six months after the end of the Company’s financial year. A meeting of the
members or any class thereof may be held by telephone, tele-conferencing or other
electronic means, provided that all participants are able to communicate
contemporaneously with one another, and participation in a meeting in such manner shall
constitute presence at such meetings.
The Board may convene an extraordinary general meeting whenever it thinks fit. In
addition, one or more members holding, as at the date of deposit of the requisition, in
aggregate not less than one-tenth of the voting rights (on a one vote per Share basis) in the
share capital of the Company may make a requisition to convene an extraordinary general
meeting and/or add resolutions to the agenda of a general meeting. Such requisition, which
must state the objects and the resolutions to be added to the agenda of the meeting and
must be signed by the requisitionists, shall be deposited at the principal place of business
of the Company in Hong Kong or, in the event the Company ceases to have such a
principal place of business, the registered office of the Company. If the Board does not
within 21 days from the date of deposit of such requisition duly proceed to convene a
general meeting to be held within the following 21 days, the requisitionists or any of them
representing more than one-half of the total voting rights of all the requisitionists may
themselves convene a general meeting, but any such meeting so convened shall be held no
later than the day falling three months after the expiration of the said 21-day period. A
general meeting convened by requisitionists shall be convened in the same manner as
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nearly as possible as that in which general meetings are to be convened by the Board, and
all reasonable expenses incurred by the requisitionists shall be reimbursed to the
requisitionists by the Company.
(d) Notices of Meetings and Business to be Conducted
An annual general meeting of the Company shall be called by at least 21 days’ notice in
writing, and any other general meeting of the Company shall be called by at least 14 days’
notice in writing. The notice shall be 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 the date, time, place and
agenda of the meeting, the particulars of the resolution(s) to be considered at the meeting
and the general nature of the business to be considered at the meeting.
Except where otherwise expressly stated, any notice or document (including a share
certificate) to be given or issued under the Articles shall be in writing, and may be served
by the Company on any member personally, by post to such member’s registered address,
(to the extent permitted by the Listing Rules and all applicable laws and regulations) by
electronic means or (in the case of a notice) by advertisement published in the manner
prescribed under the Listing Rules.
Notwithstanding that a meeting of the Company is called by shorter notice than as
specified above, if permitted by the Listing Rules, such meeting may be deemed to have
been duly called if it is so agreed:
(i) in the case of an annual general meeting, by all members of the Company entitled to
attend and vote thereat; and
(ii) in the case of an extraordinary general meeting, by a majority in number of the
members having a right to attend and vote at the meeting holding not less than 95%
of the total voting rights held by such members.
If, after the notice of a general meeting has been sent but before the meeting is held, or
after the adjournment of a general meeting but before the adjourned meeting is held
(whether or not notice of the adjourned meeting is required), the Board in its absolute
discretion consider that it is impractical or unreasonable for any reason to hold a general
meeting on the date or at the time and place specified in the notice calling such meeting, it
may change or postpone the meeting to another date, time and place.
The Board also has the power to provide in every notice calling a general meeting that in
the event of a gale warning, a black rainstorm warning or extreme conditions is/are in
force at any time on the day of the general meeting (unless such warning is cancelled at
least a minimum period of time prior to the general meeting as the Board may specify in
the relevant notice), the meeting shall be postponed without further notice to be
reconvened on a later date.
Where a general meeting is postponed:
(A) the Company shall endeavour to cause a notice of such postponement, which shall set
out the reason for the postponement in accordance with the Listing Rules, to be
placed on the Company’s website and published on the Stock Exchange’s website as
soon as practicable, provided that failure to place or publish such notice shall not
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affect the automatic postponement of a general meeting due to a gale warning, a
black rainstorm warning or extreme conditions being in force on the day of the
general meeting;
(B) the Board shall fix the date, time and place for the reconvened meeting and at least
seven clear days’ notice shall be given for the reconvened meeting. Such notice shall
specify the date, time and place at which the postponed meeting will be reconvened
and the date and time by which proxies shall be submitted in order to be valid at such
reconvened meeting (provided that any proxy submitted for the original meeting shall
continue to be valid for the reconvened meeting unless revoked or replaced by a new
proxy); and
(C) only the business set out in the notice of the original meeting shall be considered at
the reconvened meeting, and notice given for the reconvened meeting does not need
to specify the business to be considered at the reconvened meeting, nor shall any
accompanying documents be required to be recirculated. Where any new business is
to be considered at such reconvened meeting, the Company shall give a fresh notice
for such reconvened meeting in accordance with the Articles.
(e) Quorum for Meetings and Separate Class Meetings
No business shall be considered at any general meeting unless a quorum is present when
the meeting proceeds to business, and continues to be present until the conclusion of the
meeting.
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 and
entitled to vote. In respect of a separate class meeting (other than an adjourned meeting)
convened to approve the variation of class rights, the necessary quorum shall be two
persons holding or representing by proxy not less than one-third of the issued Shares of
that class.
(f) Proxies
Any member of the Company (including a member which is a recognised clearing house
(or its nominee(s))) entitled to attend and vote at a meeting of the Company is entitled to
appoint another person (being a natural person) as his proxy to attend and vote in his
place. 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 shall be entitled to
exercise the same powers on behalf of a member who is a natural person and for whom he
acts as proxy as such member could exercise. In addition, a proxy shall be 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 a natural person member present
in person at any general meeting. On a poll or on a show of hands, votes may be given
either personally (or, in the case of a member being a corporation, by its duly authorised
representative) or by proxy.
The instrument appointing a proxy shall be in writing and executed under the hand of the
appointor or of his attorney duly authorised in writing, or if the appointor is a corporation
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or other non-natural person, either under its seal or under the hand of a duly authorised
representative.
The Board shall, in the notice convening any meeting or adjourned meeting, or in an
instrument of proxy sent out by the Company, specify the manner by which the instrument
appointing a proxy shall be deposited and the place and time (being no later than the time
appointed for the commencement of the meeting or adjourned meeting to which the
instrument of proxy relates) at which such instrument shall be deposited.
Every instrument of proxy, whether for a specified meeting or otherwise, shall be in such
form that complies with the Listing Rules as the Board may from time to time approve.
Any form issued to a member for appointing a proxy to attend and vote at a general
meeting at which any business is to be considered shall be such as to enable the member,
according to his intentions, to instruct the proxy to vote in favour of or against (or, in
default of instructions, to exercise the discretion of the proxy in respect of) each resolution
dealing with any such business.
6. Accounts and Audit
The Board shall cause to be kept such books of account as are necessary to give a true and fair
view of the state of the Company’s affairs and to explain its transactions in accordance with the
Companies Act.
The books of accounts of the Company shall be kept at the principal place of business of the
Company in Hong Kong or, subject to the provisions of the Companies Act, at such other place or
places as the Board thinks fit and shall always be open to inspection by any Director. No member (not
being a Director) or other person shall have any right to inspect any account, book or document of the
Company except as conferred by the Companies Act or ordered by a court of competent jurisdiction or
as authorised by the Board or the Company in general meeting.
The Board shall cause to be prepared and laid before the Company at every annual general
meeting a profit and loss account for the period since the preceding account, together with a balance
sheet as at the date to which the profit and loss account is made up, a Directors’ report with respect to
the profit or loss of the Company for the period covered by the profit and loss account and the state of
the Company’s affairs as at the end of such period, an auditors’ report on such accounts and such other
reports and accounts as may be required by law and the Listing Rules.
The members shall at each annual general meeting appoint auditor(s) to hold office by ordinary
resolution of the members until the conclusion of the next annual general meeting on such terms and
with such duties as may be agreed with the Board. The auditors’ remuneration shall be fixed by the
members at the annual general meeting at which they are appointed by ordinary resolution of the
members or in any other manner as specified in such ordinary resolution. The members may, at any
general meeting convened and held in accordance with the Articles, remove the auditors by ordinary
resolution at any time before the expiration of the term of office and shall, by ordinary resolution, at
that meeting appoint new auditors in their place for the remainder of the term.
The accounts of the Company shall be prepared and audited based on the generally accepted
accounting principles of Hong Kong, the International Accounting Standards or such other standards as
may be permitted by the Stock Exchange.
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7. Dividends and other Methods of Distribution
Subject to the Companies Act and the Articles, the Company may by ordinary resolution
resolve to declare dividends and other distributions on Shares in issue in any currency and authorise
payment of the dividends or distributions out of the funds of the Company lawfully available therefor,
provided that (i) no dividends shall exceed the amount recommended by the Board, and (ii) no
dividends or distributions shall be paid except out of the realised or unrealised profits of the Company,
out of the share premium account or as otherwise permitted by law.
The Board may from time to time pay to the members of the Company such interim dividends
as appear to the Board to be justified by the financial conditions and the profits of the Company. In
addition, the Board may from time to time declare and pay special dividends on Shares of such
amounts and on such dates as it thinks fit.
Except as otherwise provided by the rights attached to any Shares, all dividends and other
distributions shall be paid according to the amounts paid up on the Shares that a member holds during
the period in respect of which the dividends and distributions are paid. No amount paid up on a Share
in advance of calls shall for this purpose be treated as paid up on the Share.
The Board may deduct from any dividends or other distributions payable to any member of the
Company all sums of money (if any) then payable by him to the Company on account of calls or
otherwise. The Board may retain any dividends or distributions payable on or in respect of a Share
upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts,
liabilities or engagements in respect of which the lien exists.
No dividends or other distributions payable by the Company on or in respect of any Share shall
carry interest against the Company.
Where the Board or the Company in general meeting has resolved that a dividend should be
paid or declared, the Board may further resolve:
(a) that such dividend be satisfied in whole or in part in the form of an allotment of Shares
credited as fully paid on the basis that the Shares so allotted shall be of the same class as
the class already held by the allottee, 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 the members entitled to such dividend will be entitled to elect to receive an allotment
of Shares credited as fully paid in lieu of the whole or such part of the dividend as the
Board may think fit on the basis that the Shares so allotted shall be of the same class as the
class already held by the allottee.
Upon the recommendation of the Board, the Company may by ordinary resolution resolve in
respect of any one particular dividend of the Company determine that notwithstanding the foregoing, a
dividend may be satisfied wholly in the form of an allotment of Shares credited as fully paid without
offering any right to members to elect to receive such dividend in cash in lieu of such allotment.
Any dividends, distributions or other monies payable in cash in respect of Shares may be paid
by wire transfer to the holder of such Shares or by cheque or warrant sent by post to the registered
address of such holder, or in the case of joint holders, to the registered address of the holder who is first
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named on the register of members of the Company, or to such person and to such address as the holder
or joint holders may in writing direct. Any one of two or more joint holders may give effectual receipts
for any dividends, distributions or other monies payable in respect of the Shares held by them as 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 in whole or in part by the
distribution of specific assets of any kind.
Any dividends or other distributions which remain unclaimed for six years from the date on
which such dividends or distributions become payable shall be forfeited and shall revert to the
Company.
8. Inspection of Corporate Records
For so long as any part of the share capital of the Company is listed on the Stock Exchange, any
member may inspect any register of members of the Company maintained in Hong Kong (except when
the register of members is closed in accordance with the Companies Ordinance) without charge and
require the provision to him of copies or extracts of such register in all respects as if the Company were
incorporated under and were subject to the Companies Ordinance.
9. Rights of Minorities in relation to Fraud or Oppression
There are no provisions in the Articles concerning the rights of minority members in relation to
fraud or oppression. However, certain remedies may be available to members of the Company under
the Cayman Islands laws, as summarised in paragraph 3.6 below.
10. Procedures on Liquidation
Subject to the Companies Act, the members of the Company may by special resolution resolve
to wind up the Company voluntarily or by the court.
Subject to any 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:
(a) if the assets available for distribution among the members of the Company are more than
sufficient to repay the whole of the Company’s paid up capital at the commencement of
the winding up, the surplus shall be distributed pari passu among such members in
proportion to the amount paid up on the Shares held by them at the commencement of the
winding up; and
(b) if the assets available for distribution among the members of the Company are insufficient
to repay the whole of the Company’s 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 ought to be paid up, on the Shares held by them at the commencement
of the winding up.
If the Company is wound up (whether the liquidation is voluntary or compelled by the court),
the liquidator may, with the approval of a special resolution and any other approval required by the
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Companies Act, divide among the members in kind the whole or any part of the assets of the
Company, whether the assets consist of property of one kind or 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 so divided and may determine how such division shall be carried out as between the members or
different classes of members and the members within each class. The liquidator may, with the like
approval, vest any part of the assets in trustees upon such trusts for the benefit of the members as the
liquidator thinks fit, provided that no member shall be compelled to accept any shares or other property
upon which there is a liability.
COMPANY LAWS OF THE CAYMAN ISLANDS
The Company was incorporated in the Cayman Islands as an exempted company on 27 August
2018 subject to the Companies Act. Certain provisions of the company laws of the Cayman Islands are
set out below but this section does not purport to contain all applicable qualifications and exceptions or
to be a complete review of all matters of the company laws of the Cayman Islands, which may differ
from equivalent provisions in jurisdictions with which interested parties may be more familiar.
1. Company Operations
An exempted company such as the Company must conduct its operations mainly outside the
Cayman Islands. An exempted company is also 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.
2. Share Capital
Under the Companies Act, a Cayman Islands company may issue ordinary, preference or
redeemable shares or any combination thereof. Where a company issues shares at a premium, whether
for cash or otherwise, a sum equal to the aggregate amount or value of the premium 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 premium on shares of that company allotted pursuant to any
arrangements in consideration of the acquisition or cancellation of shares in any other company and
issued at a premium. The share premium account may be applied by the company subject to the
provisions, if any, of its memorandum and articles of association, in such manner as the company may
from time to time determine including, but without limitation, the following:
(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) any manner provided in 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.
Notwithstanding the foregoing, 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.
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Subject to confirmation by the court, a company limited by shares or a company limited by
guarantee and having a share capital may, if authorised to do so by its articles of association, by special
resolution reduce its share capital in any way.
3. Financial Assistance to Purchase Shares of a Company or its Holding Company
There are no statutory prohibitions in the Cayman Islands on the granting of financial assistance
by a company to another person for the purchase of, or subscription for, its own, its holding company’s
or a subsidiary’s shares. Therefore, a company may provide financial assistance provided the directors
of the company, when proposing to grant such financial assistance, discharge their duties of care and
act in good faith, for a proper purpose and in the interests of the company. Such assistance should be
on an arm’s-length basis.
4. 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 member and, for the avoidance of doubt, 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; an ordinary resolution of the company approving the manner
and terms of the purchase will be required if the articles of association do not authorise the manner and
terms of such purchase. A company may not redeem or purchase its shares unless they are fully paid.
Furthermore, 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. In addition, 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 that have been purchased or redeemed by a company or surrendered to the company
shall not be treated as cancelled but shall be classified as treasury shares if held in compliance with the
requirements of section 37A(1) of the Companies Act. Any such shares shall continue to be classified
as treasury shares until such shares are either cancelled or transferred pursuant to the Companies Act.
A Cayman Islands company may be able to purchase its own warrants subject to and in
accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is
no requirement under the Cayman Islands laws that a company’s memorandum or articles of
association contain a specific provision enabling such purchases. The directors of a company may
under the general power contained in its memorandum of association be able to buy, sell and deal in
personal property of all kinds.
A subsidiary may hold shares in its holding company and, in certain circumstances, may
acquire such shares.
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5. Dividends and Distributions
Subject to a solvency test, as prescribed in the Companies Act, and the provisions, if any, of the
company’s memorandum and articles of association, a company may pay dividends and distributions
out of its share premium account. In addition, based upon English case law which is likely to be
persuasive in the Cayman Islands, dividends may be paid out of profits.
For so long as a company holds treasury shares, 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, in respect of a treasury share.
6. Protection of Minorities and Shareholders’ Suits
It can be expected that the Cayman Islands courts will ordinarily follow English case law
precedents (particularly the rule in the case of Foss vs. Harbottle and the exceptions to that rule) which
permit a minority member to commence a representative action against or derivative actions in the
name of the company to challenge acts which are ultra vires, illegal, fraudulent (and performed by
those in control of the Company) against the minority, or represent an irregularity in the passing of a
resolution which requires a qualified (or special) majority which has not been obtained.
Where a company (not being a bank) is one which has 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 the affairs of the company and, at the direction of the court, to
report on such affairs. In addition, any member 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.
In general, claims against a company by its members must be based on the general laws of
contract or tort applicable in the Cayman Islands or be based on potential violation of their individual
rights as members as established by a company’s memorandum and articles of association.
7. Disposal of Assets
There are no specific restrictions on the power of directors to dispose of assets of a company,
however, the directors are expected to exercise certain duties of care, diligence and skill to the standard
that a reasonably prudent person would exercise in comparable circumstances, in addition to fiduciary
duties to act in good faith, for proper purpose and in the best interests of the company under English
common law (which the Cayman Islands courts will ordinarily follow).
8. Accounting and Auditing Requirements
A company must cause proper records of accounts to be kept with respect to: (i) all sums of
money received and expended by it; (ii) all sales and purchases of goods by it; and (iii) its assets and
liabilities.
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.
If a company keeps its books of account at any place other than at its registered office or any
other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax
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Information Authority pursuant to the Tax Information Authority Act (2021 Revision) of the Cayman
Islands, make available, in electronic form or any other medium, at its registered office copies of its
books of account, or any part or parts thereof, as are specified in such order or notice.
9. Exchange Control
There are no exchange control regulations or currency restrictions in effect in the Cayman
Islands.
10. Taxation
Pursuant to section 6 of the Tax Concessions Act (2018 Revision) of the Cayman Islands, the
Company has obtained an undertaking from the Governor-in-Cabinet that:
(a) no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or
income or gains or appreciations shall apply to the Company or its operations; and
(b) no tax be levied on profits, income, gains or appreciations or which is in the nature of
estate duty or inheritance tax shall be payable by the Company:
(i) on or in respect of the shares, debentures or other obligations of the Company; or
(ii) by way of withholding in whole or in part of any relevant payment as defined in
section 6(3) of the Tax Concessions Act (2018 Revision).
The undertaking for the Company is for a period of 20 years from 7 June 2022.
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.
11. Stamp Duty on Transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies save for those which hold interests in land in the Cayman Islands.
12. Loans to Directors
There is no express provision prohibiting the making of loans by a company to any of its
directors. However, the company’s articles of association may provide for the prohibition of such loans
under specific circumstances.
13. Inspection of Corporate Records
The members of a company have no general right 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 of association.
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14. Register of Members
A Cayman Islands exempted company may maintain its principal register of members and any
branch registers in any country or territory, whether within or outside the Cayman Islands, as the
company may determine from time to time. There is no requirement for an exempted company to make
any returns of members to the Registrar of Companies in 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
member, 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 (2021 Revision) of the Cayman Islands.
15. Register of Directors and Officers
Pursuant to the Companies Act, the Company is required to maintain at its registered office a
register of directors, alternate directors and officers. The Registrar of Companies shall make available
the list of the names of the current directors of the Company (and, where applicable, the current
alternate directors of the Company) for inspection by any person upon payment of a fee by such
person. A copy of the register of directors and officers must be filed with the Registrar of Companies
in the Cayman Islands, and any change must be notified to the Registrar of Companies within 30 days
of any change in such directors or officers, including a change of the name of such directors or officers.
16. Winding up
A Cayman Islands company may be wound up by: (i) an order of the court; (ii) voluntarily by
its members; or (iii) under the supervision of the court.
The court has authority to order winding up in a number of specified circumstances including
where, in the opinion of the court, it is just and equitable that such company be so wound up.
A voluntary winding up of a company (other than a limited duration company, for which
specific rules apply) occurs where the company resolves by special resolution that it be wound up
voluntarily or where the company in general meeting resolves that it be wound up voluntarily because
it is unable to pay its debt as they fall due. In the case of a voluntary winding up, the company is
obliged to cease to carry on its business from the commencement of its winding up except so far as it
may be beneficial for its winding up. Upon appointment of a voluntary liquidator, all the powers of the
directors cease, except so far as the company in general meeting or the liquidator sanctions their
continuance.
In the case of a members’ voluntary winding up of a company, one or more liquidators are
appointed for the purpose of winding up the affairs of the company and distributing its assets.
As soon as the affairs of a 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 the property of the
company disposed of, and call a general meeting of the company for the purposes of laying before it
the account and giving an explanation of that account.
When a resolution has been passed by a company to wind up voluntarily, the liquidator or any
contributory or creditor may apply to the court for an order for the continuation of the winding up
under the supervision of the court, on the grounds that: (i) the company is or is likely to become
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
insolvent; or (ii) the supervision of the court will facilitate a more effective, economic or expeditious
liquidation of the company in the interests of the contributories and creditors. A supervision order takes
effect for all purposes as if it was an order that the company be wound up by the court except that a
commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and
binding upon the company and its official liquidator.
For the purpose of conducting the proceedings in winding up a company and assisting the court,
one or more persons may be appointed to be called an official liquidator(s).The court may appoint to
such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more than
one person is appointed to such office, the court shall 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.
17. Mergers and consolidations
The Companies Act permits mergers and consolidations between Cayman Islands companies
and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a)
“merger” means the merging of two or more constituent companies and the vesting of their
undertaking, property and liabilities in one of such companies as the surviving company, and (b)
“consolidation” means the combination of two or more constituent companies into a consolidated
company and the vesting of the undertaking, property and liabilities of such companies to the
consolidated company. In order to effect such a merger or consolidation, the directors of each
constituent company must approve a written plan of merger or consolidation, which must then be
authorised by (a) a special resolution of each constituent company and (b) such other authorisation, if
any, as may be specified in such constituent company’s articles of association. The written plan of
merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together
with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and
liabilities of each constituent company and an undertaking that a copy of the certificate of merger or
consolidation will be given to the members and creditors of each constituent company and that
notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting
members have the right to be paid the fair value of their shares (which, if not agreed between the
parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject
to certain exceptions. Court approval is not required for a merger or consolidation which is effected in
compliance with these statutory procedures.
18. Mergers and Consolidations involving a Foreign Company
Where the merger or consolidation involves a foreign company, the procedure is similar, save
that with respect to the foreign company, the directors of the Cayman Islands exempted company are
required to make a declaration to the effect that, having made due enquiry, they are of the opinion that
the requirements set out below have been met: (i) that the merger or consolidation is permitted or not
prohibited by the constitutional documents of the foreign company and by the laws of the jurisdiction
in which the foreign company is incorporated, and that those laws and any requirements of those
constitutional documents have been or will be complied with; (ii) that no petition or other similar
proceeding has been filed and remains outstanding or order made or resolution adopted to wind up or
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
liquidate the foreign company in any jurisdictions; (iii) that no receiver, trustee, administrator or other
similar person has been appointed in any jurisdiction and is acting in respect of the foreign company,
its affairs or its property or any part thereof; (iv) that no scheme, order, compromise or other similar
arrangement has been entered into or made in any jurisdiction whereby the rights of creditors of the
foreign company are and continue to be suspended or restricted.
Where the surviving company is the Cayman Islands exempted company, the directors of the
Cayman Islands exempted company are further required to make a declaration to the effect that, having
made due enquiry, they are of the opinion that the requirements set out below have been met: (i) that
the foreign company is able to pay its debts as they fall due and that the merger or consolidated is bona
fide and not intended to defraud unsecured creditors of the foreign company; (ii) that in respect of the
transfer of any security interest granted by the foreign company to the surviving or consolidated
company (a) consent or approval to the transfer has been obtained, released or waived; (b) the transfer
is permitted by and has been approved in accordance with the constitutional documents of the foreign
company; and (c) the laws of the jurisdiction of the foreign company with respect to the transfer have
been or will be complied with; (iii) that the foreign company will, upon the merger or consolidation
becoming effective, cease to be incorporated, registered or exist under the laws of the relevant foreign
jurisdiction; and (iv) that there is no other reason why it would be against the public interest to permit
the merger or consolidation.
19. Reconstructions and Amalgamations
Reconstructions and amalgamations may be approved by (i) 75% in value of the members or
class of members or (ii) a majority in number representing 75% in value of the creditors or class of
creditors, in each case depending on the circumstances, as are present at a meeting called for such
purpose and thereafter sanctioned by the Grand Court of the Cayman Islands. Whilst a dissenting
member has the right to express to the court his view that the transaction for which approval is being
sought would not provide the members with a fair value for their shares, it can be expected that the
court would approve the transaction if it is satisfied that (i) the company is not proposing to act
illegally or beyond the scope of our corporate authority and the statutory provisions as to majority vote
have been complied with, (ii) the members have been fairly represented at the meeting in question,
(iii) the transaction is such as a businessman would reasonable approve and (iv) the transaction is not
one that would more properly be sanctioned under some other provisions of the Companies Act or that
would amount to a “fraud on the minority”.
If the transaction is approved, no dissenting member would have any rights comparable to the
appraisal rights (namely the right to receive payment in cash for the judicially determined value of his
shares), which may be available to dissenting members of corporations in other jurisdictions.
20. Takeovers
Where an offer is made by a company for the shares of another company and, within four
months of the offer, the holders of not less than 90% of the shares which are the subject of the offer
accept, the offeror may, at any time within two months after the expiration of that four-month period,
by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting
member may apply to the Cayman Islands courts within one month of the notice objecting to the
transfer. The burden is on the dissenting member to show that the court should exercise its discretion,
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APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
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 members.
21. Indemnification
The Cayman Islands laws do not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, save to the extent any such provision may be
held by the court to be contrary to public policy, for example, where a provision purports to provide
indemnification against the consequences of committing a crime.
22. Economic Substance
The Cayman Islands enacted the International Tax Co-operation (Economic Substance) Act
(2021 Revision) together with the Guidance Notes published by the Cayman Islands Tax Information
Authority from time to time. The Company is required to comply with the economic substance
requirements from 1 July 2019 and make an annual report in the Cayman Islands as to whether or not it
is carrying on any relevant activities and if it is, it must satisfy an economic substance test.
GENERAL
Harney Westwood & Riegels, the Company’s legal adviser on Cayman Islands laws, has sent to
the Company a letter of advice summarising the aspects of the Companies Act set out in “—Company
laws of the Cayman Islands”. This letter, together with copies of the Companies Act, the Memorandum
and the Articles, will be available on display on the websites of the Stock Exchange and the Company
as referred to in “Documents delivered to the Registrar of Companies and available on display” in
Appendix V. Any person wishing to have a detailed summary of the Companies Act 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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APPENDIX IV STATUTORY AND GENERAL INFORMATION
FURTHER INFORMATION ABOUT OUR GROUP
Incorporation
Our Company was incorporated under the laws of the Cayman Islands on 27 August 2018 as an
exempted company with limited liability. Our registered office address is at Vistra (Cayman) Limited,
P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman KYI-1205,
Cayman Islands. Our Company’s corporate structure and Memorandum and Articles of Association are
subject to relevant laws of the Cayman Islands. A summary of our Memorandum and Articles of
Association is set out in Appendix III.
Our registered place of business in Hong Kong is at 5/F, Manulife Place, 348 Kwun Tong
Road, Kowloon, Hong Kong. We were registered as a non-Hong Kong company under Part 16 of the
Companies Ordinance on 31 May 2022 with the Registrar of Companies in Hong Kong. Ms. Ella Wai
Yee Wong (
රᅆՅ) and Ms. Emily Fung have been appointed as the authorised representatives of our
Company for the acceptance of service of process in Hong Kong. The address for service of process is
the same as our registered place of business in Hong Kong.
Changes in share capital of our Company
The following sets out the changes in our Company’s issued share capital within the two years
immediately preceding the date of this document:
(a) In 2021, we issued the following fully paid-up shares with a par value of US$0.00001 each
as follows:
Shareholders Number of Shares Class of Shares
Issuance
Date
Baidu (Hong Kong) Limited 3,471,565 Series
E-2
Preferred
Shares
3 June
2021
(b) In 2022, we issued the following fully-paid Shares with a par value of US$0.00001 each as
follows:
Shareholders Number of Shares Class of Shares Issuance Date
Shanghai Jixu Information Technology Partnership
(Limited Partnership)
1,179,231 Series E-2 Preferred
Shares
15 April 2022
Genius V Found Limited 1,157,188 Series E-2 Preferred
Shares
15 April 2022
Sunshine Life Insurance Corporation Limited 3,471,565 Series E-2 Preferred
Shares
15 April 2022
Guangzhou Xinxing Huacheng Venture Capital
Partnership (Limited Partnership)
578,594 Series E-2 Preferred
Shares
15 April 2022
See “History, reorganization and corporate structure—Pre-IPO Investments” for further details.
(c) Share Subdivision.
Prior to Listing, our Shareholders approved the Share Subdivision, pursuant to which each
Share with a current par value of US$0.00001 before Listing will be divided into four shares of par
value US$0.0000025 each. The Share Subdivision will take effect immediately upon Listing.


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APPENDIX IV STATUTORY AND GENERAL INFORMATION
Save as disclosed above and in “—Resolutions of our Shareholders dated 3 June 2023” below,
there has been no alteration in the share capital of our Company within the two years immediately
preceding the date of this document.
Changes in the share capital of members of our Group
A summary of the corporate information and the particulars of our subsidiaries are set out in
Note 40 to the Accountant’s Report as set out in Appendix I.
The following sets out the changes in the share or registered capital of members of our Group
within the two years immediately preceding the date of this document:
Entity Change Position After Change Date of Change
(a) Guangzhou Sudaoyi Information
Technology Co., Ltd. increased RMB 1,122.89 million 16 July 2021
(b) Guangzhou Leyao Information
Technology Co., Ltd. increased USD 256 million 30 December 2021
(c) Guangdong Dongjian Pharmaceutical
Co., Ltd. increased RMB 103 million 14 July 2021
increased RMB 146 million 24 February 2022
(d) Anhui Leyao Pharmaceutical Co., Ltd. increased RMB 33 million 16 June 2021
increased RMB 76 million 25 February 2022
(e) Guangzhou Junhe Huilian Supply Chain
Management Co., Ltd. increased RMB 200 million 18 August 2021
increased RMB 494 million 24 February 2022
increased RMB 524 million 20 February 2023
(f) Jiangsu Jinshi Pharmaceutical Co., Ltd. increased RMB 91 million 25 February 2022
(g) Chongqing Yangtuo Pharmaceutical
Co., Ltd. increased RMB 25 million 24 June 2021
increased RMB 55 million 4 March 2022
(h) Donghua Yutai (Fujian) Pharmaceutical
Co., Ltd. increased RMB 27.5 million 29 June 2021
increased RMB 37.5 million 19 July 2021
increased RMB 56 million 28 February 2022
(i) Shanxi Lejin Pharmaceutical Co., Ltd. increased RMB 9 million 24 June 2021
increased RMB 23 million 28 February 2022
(j) Heilongjiang Changle Pharmaceutical
Co., Ltd. increased RMB 57 million 24 February 2022
(k) Beijing Huisheng Pharmaceutical
Co., Ltd. increased RMB 42.8 million 28 February 2022
(l) Jilin Zhongxin Pharmaceutical Co., Ltd. increased RMB 60 million 1 March 2022
(m) Liaoning Lexing Pharmaceutical
Co., Ltd. increased RMB 17 million 21 July 2021
increased RMB 31 million 21 February 2022
increased RMB 61 million 29 January 2023
(n) Henan Huiying Pharmaceutical Co., Ltd. increased RMB 70 million 21 February 2022
(o) Xi’an Leying Zhongkang
Pharmaceutical Chain Co., Ltd. increased RMB 10 million 30 June 2021
increased RMB 28 million 15 March 2022
(p) Shaanxi Leying Pharmaceutical
Co., Ltd. increased RMB 28 million 11 March 2022


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IV-3
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Entity Change Position After Change Date of Change
(q) Zhejiang Kangchen Pharmaceutical
Co., Ltd. increased RMB 52 million 23 June 2021
(r) Guangdong Dihao Pharmaceutical
Co., Ltd. increased RMB 105 million 2 December 2021
(s) Chengdu Beilebang Pharmaceutical Co.,
Ltd. increased RMB 81 million 14 March 2022
(t) Hebei Zeyi Pharmaceutical Co., Ltd. increased RMB 15 million 1 March 2022
increased RMB 40 million 17 February 2023
(u) Hunan Leyao Pharmaceutical Co., Ltd. increased RMB 25 million 29 December 2021
(v) Jinan Gonghao Medicine Co., Ltd. increased RMB 41 million 28 February 2022
(w) Guangzhou Spectrum Health
Technology Co., Ltd. increased RMB 1 million 6 July 2021
(x) Zhejiang Leyao Pharmaceutical Co.,
Ltd. increased RMB 45 million 27 June 2022
Save as disclosed above, there has been no alteration in the share capital of any member of our
Group within the two years immediately preceding the date of this document.
Resolutions of our Shareholders dated 3 June 2023
On 3 June 2023, our Shareholders passed a set of resolutions. A summary of the key matters
passed by our Shareholders in these resolutions are set out below, which are conditional upon Listing:
(a) immediately following the Share Subdivision, each of the 5,000,000,000 authorised
(whether issued or unissued) shares of par value of US$0.00001 each be subdivided into
four shares with a par value of US$0.0000025 each;
(b) the Memorandum and the Articles were approved and adopted conditional on and effective
upon Listing;
(c) the Global Offering, Listing and Over-allotment Option were approved, and our Directors
were authorised to negotiate and agree the Offer Price and to allot and issue the Offer
Shares (including pursuant to the Over-allotment Option);
(d) a general mandate (the “ Sale Mandate ”) was granted to our Directors to allot, issue and
deal with any Shares or securities convertible into Shares and to make or grant offers,
agreements or options which would or might require Shares to be allotted, issued or dealt
with, provided that the number of Shares so allotted, issued or dealt with or agreed to be
allotted, issued or dealt with by our Directors, shall not exceed 20% of the total number of
Shares in issue immediately following the completion of Global Offering;
(e) a general mandate (the “ Repurchase Mandate ”) was granted to our Directors 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 recognised by the SFC
and the Stock Exchange for this purpose, such number of Shares as will represent up to
10% of the total number of Shares in issue immediately following completion of the
Global Offering; and
(f) the Sale Mandate was extended by the addition to the total number of 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 total number of the Shares purchased by
our Company pursuant to the Repurchase Mandate, provided that such extended amount


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APPENDIX IV STATUTORY AND GENERAL INFORMATION
shall not exceed 10% of the total number of the Shares in issue immediately following
completion of the Global Offering.
Each of the general mandates referred to above will remain in effect until the earliest of:
(a) the conclusion of the next annual general meeting of our Company unless, by ordinary
resolution passed at that meeting, the authority is renewed, either unconditionally or
subject to condition;
(b) the expiration of the period within which the next annual general meeting of our Company
is required to be held under any applicable laws of the Cayman Islands or the
Memorandum and Articles of Association; and
(c) the passing of an ordinary resolution by our Shareholders in a general meeting revoking or
varying the authority.
Explanatory statement on repurchase of our own securities
The following summarises restrictions imposed by the Listing Rules on share repurchases by a
company listed on the Stock Exchange and provides further information about the repurchase of our
own securities.
Shareholders’ approval
A listed company whose primary listing is on the Stock Exchange may only purchase its shares
on the Stock Exchange, either directly or indirectly, if: (i) the shares proposed to be purchased are fully
paid up, and (ii) its shareholders have given a specific approval or general mandate by way of an
ordinary resolution of shareholders.
Size of mandate
The exercise in full of the Repurchase Mandate, on the basis of 632,350,052 Shares in issue
immediately following completion of the Global Offering (subject to the Assumptions), could
accordingly result in up to approximately 63,235,005 Shares being repurchased by our Company.
The total number of shares which a listed company may repurchase on the Stock Exchange may
not exceed 10% of the number of issued shares as at the date of the shareholder approval.
Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and Shareholders for our
Directors to have 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.
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 of the Cayman Islands.


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APPENDIX IV STATUTORY AND GENERAL INFORMATION
Our Company shall not purchase its own 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 from time to time.
Any purchases by our Company may be made out of profits or out of an issue of new shares
made for the purpose of the purchase or, if authorised by the Memorandum and Articles of Association
and subject to the Companies Ordinance, out of capital, and, in the case of any premium payable on the
purchase out of profits or from sums standing to the credit of our share premium account or, if
authorised by the Memorandum and Articles of Association and subject to the Companies Ordinance,
out of capital.
Suspension of repurchase
A listed company shall not repurchase its shares on the Stock Exchange at any time after inside
information has come to its knowledge until the information is made publicly available. In particular,
during the period of one month immediately preceding the earlier of: (i) 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 the company’s results for any year, half-year, quarterly or any other interim period
(whether or not required under the Listing Rules); and (ii) the deadline for the issuer to announce its
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), until the date of the results announcement, the
company may not repurchase its shares on the Stock Exchange unless there are exceptional
circumstances.
Trading restrictions
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.
A listed company may not repurchase its shares if that 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.
Status of repurchased shares
The listing of all repurchased shares (whether through the Stock Exchange or otherwise) shall
be automatically cancelled and the relevant evidence of title must be cancelled and destroyed as soon
as reasonably practicable.
Close associates and core connected persons
None of our Directors or, to the best of their knowledge having made all reasonable enquiries,
any of their close associates have a present intention, in the event the Repurchase Mandate is approved,
to sell any Shares to our Company.
No core connected person of our Company has notified our Company that they have a present
intention to sell Shares to our Company, or have undertaken to do so, if the Repurchase Mandate is
approved.


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APPENDIX IV STATUTORY AND GENERAL INFORMATION
A listed company shall not knowingly purchase its shares on the Stock Exchange from a core
connected person (namely a director, chief executive or substantial shareholder of the company or any
of its subsidiaries, or a close associate of any of them), and a core connected person shall not
knowingly sell their interest in shares of the company to it.
Takeover implications
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.
General
If the Repurchase Mandate were to be carried out in full at any time, there may be a material
adverse impact on our working capital or gearing position (as compared with the position disclosed in
our most recent published audited accounts). However, our Directors do not propose to exercise the
Repurchase Mandate to such an extent as would have a material adverse effect on our working capital
or gearing position.
Our Directors have undertaken to the Stock Exchange to will exercise the Repurchase Mandate
in accordance with the Listing Rules and the applicable Laws in the Cayman Islands.
We have not made any repurchases of our Shares in the previous six months.
FURTHER INFORMATION ABOUT OUR BUSINESS
Summary of material contracts
The following are contracts (not being contracts entered into in the ordinary course of business)
entered into by any member of our Group within the two years immediately preceding the date of this
document that are or may be material:
Contractual arrangements with respect to Guangzhou Sudao
(a) an exclusive business cooperation agreement (
ุਕΥЪ՘ᙄ) dated 16 May 2022
entered into between Guangzhou Sudaoyi Information Technology Co., Ltd. (׸
ʮ̡)( “WFOE”) and Guangzhou Sudao Information Technology Co., Ltd.
(ʮ̡)( “Guangzhou Sudao”), pursuant to which Guangzhou Sudao
agreed to engage WFOE as the exclusive provider of, among other things, comprehensive
business support, technical services and consulting services in return for service fees;
(b) an exclusive option agreement (
ᒅ൯ᛆΥΝ) dated 16 May 2022 entered into among
WFOE, Guangzhou Sudao and its registered shareholders, Zhang Buzhen ( ੵӉᕄ)
(“Mr. Zhang ”), Wang Jiangwei ( ӓᑞၪ)( “ Mr. Wang ” ) ,S h a oJ i a h a o(ԳႴ)
(“Mr. Shao ”), and Guangzhou Yaodao Information Technology Partnership (Limited
Partnership) (ҦΥྫΆุ(Υྫ)) (“Guangzhou Yaodao”) (collectively,
the “ Guangzhou Sudao Shareholders ”), pursuant to which the Guangzhou Sudao
Shareholders, individually and collectively, granted (i) an irrevocable and exclusive option
for WFOE (or one or more persons designated by it ) to purchase in one or multiple times


--- page 490 ---
IV-7
APPENDIX IV STATUTORY AND GENERAL INFORMATION
and at any time all current and future equity interests in Guangzhou Sudao from the
Guangzhou Sudao Shareholders at the lowest price permissible under PRC laws; and (ii) an
irrevocable and exclusive option for WFOE (or one or more persons designated by it) to
purchase in one or multiple times and at any time any or part of the assets of Guangzhou
Sudao at the lowest price permissible under PRC laws;
(c) a share pledge agreement (
ΥΝ) dated 16 May 2022 entered into among WFOE,
Guangzhou Sudao and the Guangzhou Sudao Shareholders, pursuant to which the
Guangzhou Sudao Shareholders, individually and collectively, agreed to pledge to WFOE
the pledged interests in Guangzhou Sudao that the respective Guangzhou Sudao
Shareholder legally owns and over which they have a right of disposal;
(d) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 16 May 2022 entered into among
WFOE, Guangzhou Sudao and Mr. Zhang, pursuant to which Mr. Zhang undertook that, at
WFOE’s request, Mr. Zhang would sign a power of attorney to authorise a person
designated by WFOE at such time as attorney-in-fact to exercise all the rights of
Mr. Zhang from time to time as shareholder of Guangzhou Sudao;
(e) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 16 May 2022 entered into among
WFOE, Guangzhou Sudao and Mr. Wang, pursuant to which Mr. Wang undertook that, at
WFOE’s request, Mr. Wang would sign a power of attorney to authorise a person
designated by WFOE at such time as attorney-in-fact to exercise all the rights of
Mr. Wang from time to time as shareholder of Guangzhou Sudao;
(f) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 16 May 2022 entered into among
WFOE, Guangzhou Sudao and Mr. Shao, pursuant to which Mr. Shao undertook that, at
WFOE’s request, Mr. Shao would sign a power of attorney to authorise a person
designated by WFOE at such time as attorney-in-fact to exercise all the rights of Mr. Shao
from time to time as shareholder of Guangzhou Sudao;
(g) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 16 May 2022 entered into among
WFOE, Guangzhou Sudao and Guangzhou Yaodao, pursuant to which Guangzhou
Yaodao undertook that, at WFOE’s request, Guangzhou Yaodao would sign a power of
attorney to authorise a person designated by WFOE at such time as attorney-in-fact to
exercise all the rights of Guangzhou Yaodao from time to time as shareholder of
Guangzhou Sudao;
Contractual arrangements with respect to Guangzhou Yaobang
(h) an exclusive business cooperation agreement (
ุਕΥЪ՘ᙄ) dated 16 May 2022
entered into between WFOE and Guangzhou Yaobang Information Technology Co., Ltd.
(
ʮ̡)( “ Guangzhou Yaobang ”), pursuant to which Guangzhou
Yaobang agreed to engage WFOE as the exclusive provider of, among other things,
comprehensive business support, technical services and consulting services in return for
service fees;
(i) an exclusive option agreement (
ᒅ൯ᛆΥΝ) dated 16 May 2022 entered into among
WFOE, Guangzhou Yaobang and its registered shareholder, Mr. Zhang, pursuant to which
Mr. Zhang granted (i) an irrevocable and exclusive option for WFOE (or one or more
persons designated by it) to purchase in one or multiple times and at any time all current
and future equity interests in Guangzhou Yaobang from Mr. Zhang at the lowest price
permissible under PRC laws; and (ii) an irrevocable and exclusive option for WFOE (or
one or more persons designated by it) to purchase in one or multiple times and at any time


--- page 491 ---
IV-8
APPENDIX IV STATUTORY AND GENERAL INFORMATION
any or part of the assets of Guangzhou Yaobang at the lowest price permissible under PRC
laws;
(j) a share pledge agreement (ΥΝ) dated 16 May 2022 entered into among WFOE,
Guangzhou Yaobang and Mr. Zhang, pursuant to which Mr. Zhang agreed to pledge to
WFOE the pledged interests in Guangzhou Yaobang that Mr. Zhang legally owns and over
which he has a right of disposal;
(k) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 16 May 2022 entered into among
WFOE, Guangzhou Yaobang and Mr. Zhang, pursuant to which Mr. Zhang undertook
that, at WFOE’s request, Mr. Zhang would sign a power of attorney to authorise a person
designated by WFOE at such time as attorney-in-fact to exercise all the rights of
Mr. Zhang from time to time as shareholder of Guangzhou Yaobang;
Other material contracts
(l) a cornerstone investment agreement (
ਿͩҳ༟՘ᙄ) dated 13 June 2023 entered into
among our Company, ZGC International Limited, China International Capital Corporation
Hong Kong Securities Limited (
ʮ̡) pursuant to which ZGC
International Limited agreed to subscribe for Offer Shares at the Offer Price in the amount
of US$12,800,000; and
(m) the Hong Kong Underwriting Agreement.
Ancillary VIE agreements to the Contractual Arrangements
Below is a list of the three sets of VIE agreements entered into with respect to the subsidiaries
of Onshore Holdcos. These VIE agreements are ancillary, and provide further support, to the
Contractual Arrangements and are further detailed in “Contractual Arrangements—Contractual
Arrangements—Further information about our Contractual Arrangements”. The VIE agreements are
not considered material to the Group and do not constitute material contracts.
VIE agreements with respect to Henan Subiao
(a) an exclusive business cooperation agreement (
ุਕΥЪ՘ᙄ) dated 21 November
2022 entered into between WFOE and Henan Subiao Information Technology Co., Ltd.
(
ʮ̡)( “ Henan Subiao ”), the direct wholly-owned subsidiary of
Guangzhou Sudao, pursuant to which Henan Subiao agreed to engage WFOE as the
exclusive provider of, among other things, comprehensive business support, technical
services and consulting services in return for service fees;
(b) an exclusive option agreement (
ᒅ൯ᛆΥΝ) dated 21 November 2022 entered into
among WFOE, Henan Subiao and its registered shareholder, Guangzhou Sudao, pursuant
to which Guangzhou Sudao granted (i) an irrevocable and exclusive option for WFOE (or
one or more persons designated by it) to purchase in one or multiple times and at any time
all current and future equity interests in Henan Subiao from the Guangzhou Sudao at the
lowest price permissible under PRC laws; and (ii) an irrevocable and exclusive option for
WFOE (or one or more persons designated by it) to purchase in one or multiple times and
at any time any or part of the assets of Henan Subiao at the lowest price permissible under
PRC laws;


--- page 492 ---
IV-9
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(c) a share pledge agreement (ΥΝ) dated 21 November 2022 entered into among
WFOE, Henan Subiao and its registered shareholder, Guangzhou Sudao, pursuant to
which Guangzhou Sudao agreed to pledge to WFOE the pledged interests in Henan Subiao
that Guangzhou Sudao legally owns and over which it has a right of disposal;
(d) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 21 November 2022 entered into
among WFOE, Henan Subiao and its registered shareholder, Guangzhou Sudao, pursuant
to which Guangzhou Sudao undertook that, at WFOE’s request, Guangzhou Sudao would
sign a power of attorney to authorise a person designated by WFOE at such time as
attorney-in-fact to exercise all the rights of Guangzhou Sudao from time to time as
shareholder of Henan Subiao;
VIE agreements with respect to Guangzhou Spectrum
(e) an exclusive business cooperation agreement (
ุਕΥЪ՘ᙄ) dated 21 November
2022 entered into between WFOE and Guangzhou Spectrum Health Technology Co., Ltd.
(
ʮ̡)( “Guangzhou Spectrum”), the direct 70%-owned subsidiary
of Guangzhou Yaobang, pursuant to which Guangzhou Spectrum agreed to engage WFOE
as the exclusive provider of, among other things, comprehensive business support,
technical services and consulting services in return for service fees;
(f) an exclusive option agreement (
ᒅ൯ᛆΥΝ) dated 21 November 2022 entered into
among WFOE, Guangzhou Spectrum and its registered shareholder, Guangzhou Yaobang,
pursuant to which Guangzhou Yaobang granted (i) an irrevocable and exclusive option for
WFOE (or one or more persons designated by it) to purchase in one or multiple times and
at any time all current and future equity interests in Guangzhou Spectrum from the
Guangzhou Yaobang at the lowest price permissible under PRC laws; and (ii) an
irrevocable and exclusive option for WFOE (or one or more persons designated by it) to
purchase in one or multiple times and at any time any or part of the assets of Guangzhou
Spectrum at the lowest price permissible under PRC laws;
(g) a share pledge agreement (
ΥΝ) dated 21 November 2022 entered into among
WFOE, Guangzhou Spectrum and its registered shareholder, Guangzhou Yaobang,
pursuant to which Guangzhou Yaobang agreed to pledge to WFOE the pledged interests in
Guangzhou Spectrum that Guangzhou Yaobang legally owns and over which it has a right
of disposal;
(h) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 21 November 2022 entered into
among WFOE, Guangzhou Spectrum and its registered shareholder, Guangzhou Yaobang,
pursuant to which Guangzhou Yaobang undertook that, at WFOE’s request, Guangzhou
Yaobang would sign a power of attorney to authorise a person designated by WFOE at
such time as attorney-in-fact to exercise all the rights of Guangzhou Yaobang from time to
time as shareholder of Guangzhou Spectrum;
VIE agreements with respect to Guangzhou Yuewei
(i) an exclusive business cooperation agreement (
ุਕΥЪ՘ᙄ) dated 21 November
2022 entered into between WFOE and Guangzhou Yuewei Medical Laboratory Co., Ltd.
(
ʮ̡)( “ Guangzhou Yuewei ”), the direct wholly-owned
subsidiary of Guangzhou Spectrum and an indirect 70%-interested subsidiary of


--- page 493 ---
IV-10
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Guangzhou Yaobang; the percentage of all current and future equity interests held by
Guangzhou Yaobang in Guangzhou Spectrum in the total equity interest of Guangzhou
Spectrum is referred to as the “Yaobang Interest Percentage”.), pursuant to which
Guangzhou Yuewei agreed to engage WFOE as the exclusive provider of, among other
things, comprehensive business support, technical services and consulting services in
return for service fees;
(j) an exclusive option agreement (
ᒅ൯ᛆΥΝ) dated 21 November 2022 entered into
among WFOE, Guangzhou Yuewei and its registered shareholder, Guangzhou Spectrum,
pursuant to which Guangzhou Spectrum granted (i) an irrevocable and exclusive option for
WFOE (or one or more persons designated by it) to purchase in one or multiple times and
at any time the current and future equity interests in Guangzhou Yuewei multiplied by the
Yaobang Interest Percentage from the Guangzhou Spectrum at the lowest price
permissible under PRC laws; and (ii) an irrevocable and exclusive option for WFOE (or
one or more persons designated by it) to purchase in one or multiple times and at any time
any or part of the assets of Guangzhou Yuewei (up to an amount representing the value of
Guangzhou Yuewei’s total assets multiplied by the Yaobang Interest Percentage) at the
lowest price permissible under PRC laws;
(k) a share pledge agreement (
ΥΝ) dated 21 November 2022 entered into among
WFOE, Guangzhou Yuewei and its registered shareholder, Guangzhou Spectrum, pursuant
to which Guangzhou Spectrum agreed to pledge to WFOE the pledged interests in
Guangzhou Yuewei, representing 70% of Guangzhou Yuewei that Guangzhou Spectrum
legally owns and over which it has a right of disposal;
(l) a voting entrustment agreement (
બᛆ։ৄ՘ᙄ) dated 21 November 2022 entered into
among WFOE, Guangzhou Yuewei and its registered shareholder, Guangzhou Spectrum,
pursuant to which Guangzhou Spectrum undertook that, at WFOE’s request, Guangzhou
Spectrum would sign a power of attorney to authorise a person designated by WFOE at
such time as attorney-in-fact to exercise 70% of the voting rights held by Guangzhou
Spectrum in Guangzhou Yuewei from time to time as shareholder of Guangzhou Yuewei;
Intellectual property rights
Save as disclosed below, as of the Latest Practicable Date, there were no other trademarks,
service marks, patents, intellectual property rights, or industrial property rights which are or may be
material in relation to our business.
Trademarks
As at the Latest Practicable Date, we had registered the following trademarks which we
consider to be or may be material to our business:
No. Trademark Place of Registration
(a)
 PRC
(b)
 PRC
(c)
 PRC


--- page 494 ---
IV-11
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Trademark Place of Registration
(d)
 PRC
(e)
 PRC
(f)
 PRC
(g)
 PRC
(h)
 PRC
(i)
 PRC
(j)
 PRC
(k)
 PRC
(l)
 PRC
(m)
 PRC
(n)
 PRC
(o)
 PRC
(p)
 PRC
(q)
 PRC
(r)
 PRC
(s)
 PRC
(t)
 PRC
(u)
 PRC
(v)
 PRC
(w)
 PRC
(x)
 PRC
(y)
 PRC
(z)
 Hong Kong
Patents
As at the Latest Practicable Date, we had registered the following patents which we consider to
be or may be material to our business:
No. Patent
Jurisdiction of
Registration
(a)ༀໄ PRC
(b)ᚐༀໄ PRC
(c)ԣᚐༀໄ PRC
(d)ᙳόᔼ͜ኜ૛Ꮇπᇌ PRC
(e)Ꮇண௪ PRC
(f)ਯᖹዚண௪ PRC


--- page 495 ---
IV-12
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent
Jurisdiction of
Registration
(g)Іпਯᖹዚ PRC
(h) ε̌ঐਯᖹዚІпਯᖹeɛʈ՟ᖹഐ࿴ PRC
(i)ਯᖹዚண௪ɪ஬ਜഐ࿴ PRC
(j)ݖPRC
(k)Ꮇӻ୕ PRC
(l)Іпਯᖹዚ PRC
(m)Ꮇਜഐ࿴ PRC
(n)મණண௪ PRC
(o)ІቇᏐҞ஺τༀഐ࿴ PRC
(p) ౽ঐਯᖹዚ (XWC—TG01) PRC
Copyrights
As at the Latest Practicable Date, we had registered the following copyrights which we
consider to be or may be material to our business:
No. Copyright Place of Registration
(a) ᆀᖹණྠLeyo pharm PRC
(b)Ꮝ PRC
(c)ӻ୕ழ΁ PRC
(d)೐ӻ୕ழ΁ PRC
(e)ਗӻ୕ழ΁ PRC
(f)પᄿӻ୕ழ΁ PRC
(g)ӻ୕ழ΁ PRC
(h)Ꮝҭᒅ̍ඉӻ୕ழ΁ PRC
(i)ʷપᑥӻ୕ழ΁ PRC
(j) ᖹྫМios዁Ъӻ୕ழ΁ PRC
(k) ᖹྫМAndroid዁Ъӻ୕ழ΁ PRC
(l)ྠ౽પӻ୕ PRC
(m)༶ᐄӻ୕ PRC
(n)ʱᄴ၍ଣӻ୕ PRC
(o)๖ஷӻ୕ PRC
(p)ᏍஹᕁᎴ፯౽ঐમᒅӻ୕ PRC
(q)౽ঐӻ୕ PRC
(r)ᅧӻ୕ழ΁ PRC
(s)༟ሯ౽ঐɪෂӻ୕ PRC
(t)׸ֳPRO዁Ъӻ୕ழ΁ PRC
(u)୅ਗϗვӻ୕ழ΁ PRC
(v)ఊІਗӔഄӻ୕ழ΁ PRC
(w)Ꮝᔼᖹਖ਼ุ੃৅̨̻ழ΁ PRC
(x)પ৔̨̻ழ΁ PRC
(y)ӻ୕ழ΁ PRC
(z)ᏍiOS዁Ъӻ୕ழ΁ PRC
(aa)وAndroid዁Ъӻ୕ழ΁ PRC
(bb)ᏍAndroid዁Ъӻ୕ழ΁ PRC
(cc)وiOS዁Ъӻ୕ழ΁ PRC
(dd)ᏍPCમᒅ዁Ъӻ୕ழ΁ PRC


--- page 496 ---
IV-13
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Copyright Place of Registration
(ee)ᏍԶᏐਠ၍ଣ̨̻዁Ъӻ୕ழ΁ PRC
(ff)ᘒ዁Ъӻ୕ழ΁ PRC
(gg)Ꮝථਠஷ዁Ъӻ୕ழ΁ PRC
(hh)ʹ౬̨̻ PRC
(ii)ᏍԶᏐਠ၍ଣ̨̻዁Ъӻ୕ழ΁ PRC
(jj)Ꮝ౽ঐථΝӉ዁Ъӻ୕ழ΁ PRC
(kk)وݴيandroid዁Ъӻ୕ழ΁ PRC
(ll)Ꮝุਕ၍ଣ̨̻዁Ъӻ୕ழ΁ PRC
(mm)ၽ዁Ъӻ୕ழ΁ PRC
(nn)ᏍPCમᒅ዁Ъӻ୕ழ΁ PRC
(oo)وiOS዁Ъӻ୕ழ΁ PRC
(pp)وandroid዁Ъӻ୕ழ΁ PRC
(qq)ᏍiOS዁Ъӻ୕ழ΁ PRC
(rr)Ꮝandroid዁Ъӻ୕ழ΁ PRC
(ss) ஺༸ίᇞᔖุ઺ԃழ΁ PRC
(tt) ᆀᖹᒅAndroid዁Ъӻ୕ழ΁ PRC
(uu)׸ֳAndroid዁Ъӻ୕ழ΁ PRC
(vv)׸ֳiOS዁Ъӻ୕ழ΁ PRC
(ww)༶ၪʕːӻ୕ PRC
(xx)ਕ̨̻ PRC
(yy)˒၌၍ଣӻ୕ PRC
(zz)ε̌ঐਯᖹዚӻ୕ PRC
(aaa) ΈᗅථᏨBD၌appழ΁ PRC
(bbb)ථᏨAPPழ΁ PRC
Domain names
As at 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
(a) ysbang.cn Guangzhou Sudao Information Technology
Co., Ltd.
(b) yaoshibang.cn Guangzhou Yaobang Information Technology
Co., Ltd.
FURTHER INFORMATION ABOUT OUR DIRECTORS
Director contracts and remunerations
See “Directors and senior management—Director remuneration” for further details on Director
service contracts and remuneration.
Disclosure of interests
Interests and short positions of our Directors in the share capital of our Company or our associated
corporations upon Listing
The table below set out the interests or short positions, immediately upon Listing (subject to the
Assumptions), of our Directors and chief executives in the shares, underlying shares and debentures of


--- page 497 ---
IV-14
APPENDIX IV STATUTORY AND GENERAL INFORMATION
our Company or our associated corporations (within the meaning of Part XV of the SFO), (a) which
would need to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of
Part XV of the SFO (including interests and short positions which he/she is taken or deemed to have
under such provisions of the SFO); (b) which would be required, pursuant to section 352 of the SFO, to
be entered in the register; or (c) which will be required, pursuant to the ‘Model Code for Securities
Transactions by Directors of Listed Issuers’ contained in the Listing Rules, to be notified to our
Company and the Stock Exchange, once our Company’s Shares are listed on the Stock Exchange:
Our Company
Name Interest
Number and Type of
Underlying Shares
Approximate % in
Respective Class of
Shares upon
Listing
Mr. Buzhen Zhang (1) Interest in a controlled
corporation 125,316,184 Shares 19.82%
Interest in options 4,800,000 Shares 0.76%
Mr. Fei Chen
(2) Interest in options 7,980,000 Shares 1.26%
Notes:
(1) Represents (i) 125,316,184 Shares held by MIYT Holdings Limited, a company controlled by MIYT Worldwide Limited, which in turn
is wholly owned by a trust for the benefit of Mr. Buzhen Zhang, our Director; and (ii) 4,800,000 Shares underlying options granted under
the 2019 Share Incentive Plan to Ms. Xiaoye Xu, the spouse of Mr. Zhang. Under the SFO, Mr. Zhang is deemed to be interested in the
entire interests of MIYT Holdings Limited and Ms. Xu in our Company.
(2) Represents 7,980,000 Shares underlying options granted under the 2019 Share Incentive Plan to Mr. Chen pursuant to the exercise of
options granted to Mr. Chen under the 2019 Share Incentive Plan.
Save as disclosed above, there are no other interests or short positions of our Directors and
chief executives immediately upon Listing (subject to the Assumptions) that would need to be
disclosed, including any interests in our associated corporations.
Substantial shareholders of our subsidiaries
The following table (together with its notes) sets out, so far as our Directors are aware, persons
who will be, directly or indirectly, interested in 10% or more of the issued voting shares of our
subsidiaries:
Member of our Group
(being associated
corporations) Name of substantial shareholder Interest
Approximate% held
by the substantial shareholder
Guangzhou Xiaoweicang
Smart Drug Store
Technology Co., Ltd.
Guangzhou Xiaohuicang
Enterprise Management
Partnership (Limited
Partnership)
(1)
Beneficial interest 15%
Ms. Luoyan Ran (2) Beneficial interest 15%
Guangzhou Spectrum Health
Technology Co., Ltd.
Guangzhou Spectrum
Enterprise Management
Partnership (Limited
Partnership)
(1)
Beneficial interest 25%
Notes:
(1) These two limited partnerships are employee shareholding platforms that hold shares for the employees of the respective associated
corporation. The general partner of these two employee shareholding platforms is Wenhai Lu, who is an Independent Third Party.
(2) Ms. Luoyan Ran is an Independent Third Party.


--- page 498 ---
IV-15
APPENDIX IV STATUTORY AND GENERAL INFORMATION
SHARE INCENTIVE PLANS
2019 Share Incentive Plan
Our Company adopted a share incentive plan in 2019 and as amended from time to time. This
plan is not subject to Chapter 17 of the Listing Rules and will not involve the grant of Awards
(including options and share units) by our Company upon and after Listing. The material terms of this
plan are summarised below.
Purpose
The purpose of this plan is to attract and retain valuable personnel for positions of substantial
responsibility, to provide incentives to the participants and to promote the success of our business by
offering the participants an opportunity to acquire a proprietary interest in our Company or to increase
their interest by permitting them to acquire units of our Company.
Participants
Participants of this plan are eligible for awards. Participants include employees, director or
consultant (collectively, “service providers”), or trusts or companies established in connection with an
employee benefit plan of our Company (including this plan) for the benefit of a service provider.
Employees and directors refer to our Group, our parent or an affiliate of our Company. Consultant
refers to an entity that is engaged by our Group or our parent to provide and is compensated for
providing consulting or advisory services.
Scheme limit
A maximum of 47,772,984 Shares (following the Share Subdivision) may be issued under this
plan, with each Share represented by two share award or option units (i.e., each unit represents two
Shares). If an award is cancelled, becomes unexercisable or is otherwise terminated before it is
exercised/settled, the units previously reserved for the unexercised/unsettled portion will return to the
pool and be available for future grants under this plan. Once a unit is exercised/settled in full, that unit
will no longer be available for future distribution.
Administration
The chief executive officer of our Company is appointed as administrator with the ability to
delegate his/her duties to specified officers of our Company. The administrator has power to, among
others: (a) select the grantees and awards; (b) approve the award agreements; (c) modify outstanding
awards or implement a programme under which outstanding awards may be surrendered, cancelled or
replaced; (d) interpret this plan; and (e) make any other determination or take any action that the
administrator deems necessary or desirable for the administration of this plan.
Grant of Awards
This plan provides for both direct awards or sale of units and grant of options to purchase units.
Awards means an option, unit purchase right, or unit award. Terms and conditions of a grant, including
performance targets, vesting schedule, and other key terms are specified in an award agreement with
the grantee.


--- page 499 ---
IV-16
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Upon and after Listing, no new Awards will be granted by our Company under this plan.
Sale/pledge of units in satisfaction of exercise price
To the extent provided by the award agreement, after Listing, payment may be made all or in
part by delivery (on a form prescribed by our Company) of an irrevocable direction to a securities
broker approved by our Company to sell or pledge as security for a loan the units and to deliver all or
part of the sales or loan proceeds to our Company in payment of all or part of the exercise price and
any withholding taxes. Other payment options to satisfy the purchase price may be permitted at the
discretion of the administrator and to the extent provided in the award agreement.
Limitations on awards
Unless otherwise determined by the administrator and provided in the award agreement, no
award shall be sold, pledged, assigned, hypothecated, transferred, or otherwise disposed other than
(i) for successorship, or (ii) by a trust or company established in connection with any employee benefit
plan of our Company (including this plan) for the benefit of a service provider.
Until the units are issued (as evidenced by the appropriate entry on our Company’s register of
members), no right to vote or receive dividends or any other rights as a member shall exist with respect
to the units.
Amendments and terminations
This plan may be amended, suspended or terminated by the Board, provided that such
amendment, suspension or termination does not materially and adversely impair the rights of any
grantee with respect to an unexercised/unsettled award unless it is mutually agreed as between the
grantee and the administrator in writing.
Term of this plan
Unless terminated earlier, this plan shall continue for a term of ten years from the earlier of
approval of its adoption by the Board or our Shareholders.
Details of outstanding options granted under this plan and dilutive effect
As at the Latest Practicable Date, we had granted outstanding options under this plan to 648
grantees, who hold an aggregate of 20,968,044 outstanding options, which may be converted to an
aggregate of 41,936,088 Shares (i.e., each outstanding option entitles the holder to purchase one unit,
which represents two Shares) (assuming the Share Subdivision is completed).
As our Group incurred losses for the year ended 31 December 2022, the dilutive potential of the
ordinary shares arising from the exercise of any options under this plan are not included in the
calculation of diluted loss per share as their inclusion would be anti-dilutive. Accordingly, diluted loss
per share for the year ended 31 December 2022 was the same as basic loss per share for the
corresponding period. As at the Latest Practicable Date, 47,772,984 Shares (assuming the Share
Subdivision is completed) remain to be issued under this plan (representing granted and ungranted
awards), which, if fully issued, would increase our total issued share capital by 7.75% to 664,314,236
Shares (assuming the Share Subdivision is completed).


--- page 500 ---
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Details of outstanding options held by Directors, senior management and other connected persons
The table below sets out the details of the outstanding options granted to the Directors, senior
management and other connected persons of our Company. No other outstanding options that remain
outstanding were granted to any other senior management or connected persons of our Company.
Name Role Address Options(2)
Date of
grant Vesting period(3)
Exercise
price (US$)
Number of
Shares
underlying
the
outstanding
options
granted(1)
Approximate
percentage of
issued shares
immediately
after
completion
of the Global
Offering(2)
Directors
Fei Chen Executive
Director and
Chief
Financial
Officer
Flat F, 15/F,
Block 10, Park
Avenue, 18
Hoi Ting Road,
Tai Kok Tsui,
Kowloon,
Hong Kong
3,990,000 May 2022 Two-third of
the outstanding
options will be
vested within 4
years, and
one-third of the
outstanding
options will be
vested upon the
completion of
the core
projects
0.80 7,980,000 1.26%
Senior managers (excluding Directors)
Haodong Xiao Vice President Yaoshibang
Building, No. 8
Brand Street,
TIT Creative
Industry Zone,
No. 397
Xingang
Middle Road,
Guangzhou,
China
1,207,659 December
2018 -
January
2023
4 years 1.05 - 2.00 2,415,318 0.38%
Zhuoqi Chen Director of
Technology
Yaoshibang
Building, No. 8
Brand Street,
TIT Creative
Industry Zone,
No. 397
Xingang
Middle Road,
Guangzhou,
China
180,524 July 2017
- June
2023
4 years 0.30 - 2.00 361,048 0.06%
Other connected persons
Xiaoye Xu
(4) Chief
Operation
Officer of the
Online
Marketplace
Yaoshibang
Building, No. 8
Brand Street,
TIT Creative
Industry Zone,
No. 397
Xingang
Middle Road,
Guangzhou,
China
2,400,000 October
2019 –
November
2021
4 years 1.05 –
2.00
4,800,000 0.76%
Total: 15,556,366
Notes:
(1) The calculation is made assuming the Share Subdivision is completed and each option is adjusted accordingly.
(2) The calculation is made assuming the Share Subdivision is completed and percentages are subject to the Assumptions. Each option
entitles the holder to purchase one unit, with each unit representing two Shares.
(3) The exercise period of these options commences from the vesting date of the relevant options and end on the tenth anniversary of the
grant date thereof, subject to the terms of the 2019 Share Incentive Plan and the share option agreement signed by the grantee. No
consideration was paid by the grantees for these outstanding options.
(4) Ms. Xu is a close associate of Mr. Buzhen Zhang, our Director and a former director of our Company.
IV-17


--- page 501 ---
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Details of outstanding options granted to other grantees
The table below sets out the details of the outstanding options granted to the remaining 631
grantees under this plan, as of the Latest Practicable Date, who are not (i) Directors, members of the
senior management or connected persons of our Company; (ii) consultants; or (iii) other grantees
holding outstanding options representing at least 260,000 Shares each:
Range of Shares
Underlying
outstanding
Options(1)
Total
number
of
grantees Date of grant
Vesting
period(3)
Exercise
price (US$)
Number of
Shares
underlying
the
outstanding
options
granted(1)
Approximate
percentage of issued
shares immediately
after completion of
the Global Offering(2)
1 – 20,000 374 July 2017 –June 2023 4 years 0.30 – 2.00 4,730,386 0.75%
20,001 – 40,000 133 July 2017 –June 2023 4 years 0.30 – 2.00 3,887,750 0.61%
40,001 – 60,000 39 July 2017 –June 2023 4 years 0.30 – 2.00 2,124,952 0.34%
60,001 – 80,000 21 July 2017 – June 2023 4 years 0.30 – 2.00 1,575,714 0.25%
> 80,000 64 July 2017 –June 2023 4 years 0 – 2.00 8,535,914 1.35%
Total: 631 20,854,716 3.30%
Notes:
(1) The calculation is made assuming the Share Subdivision is completed and each option is adjusted accordingly.
(2) The calculation is made assuming the Share Subdivision is completed and percentages are subject to the Assumptions. Each option
entitles the holder to purchase one unit, with each unit representing two Shares.
(3) The exercise period of these options commences from the vesting date of the relevant options and end on the tenth anniversary of the
grant date thereof, subject to the terms of the 2019 Share Incentive Plan and the share option agreement signed by the grantee. No
consideration was paid by the grantees for these outstanding options.
The table below sets out the details of 3 grantees who are consultants and 8 grantees that have
been granted options representing at least 260,000 Shares each under the 2019 Share Incentive Plan,
who are not Directors, members of the senior management or connected persons of our Company:
Name Address Role Options(2) Date of grant
Vesting
period(3)
Exercise
price
(US$)
Number of
Shares
under the
outstanding
option
granted(1)
Approximate
percentage
of issued
shares
immediately
after
completion
of the Global
Offering(2)
Enchao Cai
(൴)
Room 701, No. 131
Shanzhang Road, Jinsha
Street, Jinping District,
Shantou City, Guangdong
Province, PRC
Business
Development
Officer of
our Group
735,268 1 January 2018
– 7 February
2018
4 years 0.30 1,470,536 0.23%
Saiqi Lu
(
ѐᒄփ)
4th Floor, No. 8 Brand Street,
No. 397 Xingang Middle
Road, Haizhu District,
Guangzhou, Guangdong
Province, PRC
Industry
Researcher of
our Company
450,000 1 December
2021
4 years 2.00 900,000 0.14%
Yanhua Hu
(
䝙ശ)
4-7-6B Xinghai Famous City,
Qianhai Road, Nanshan
District, Shenzhen City,
Guangdong Province, PRC
Former Chief
Financial
Officer of a
subsidiary of
our Group
266,616 1 January 2021 1 year 1.60 533,232 0.08%
Junping Fu
(
̻)
Floor 2, No. 8 Brand Street,
No. 397 Xingang Middle
Road, Haizhu District,
Guangzhou City, Guangdong
Province, PRC
Human
Resources
Director of
our Group
170,000 1 October 2019
– 10 June 2023
4 years 0.28 –
2.00
340,000 0.05%
IV-18


--- page 502 ---
IV-19
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Name Address Role Options(2) Date of grant
Vesting
period(3)
Exercise
price
(US$)
Number of
Shares
under the
outstanding
option
granted(1)
Approximate
percentage
of issued
shares
immediately
after
completion
of the Global
Offering(2)
Yuming
Zhou
(
׼)
Floor 2, No. 53 (B3), No. 397
Xingang Middle Road, Haizhu
District, Guangzhou City,
Guangdong Province, PRC
Business
Director of
our Group
150,619 1 July 2017 –
10 June 2023
4 years 0.30 –
2.00
301,238 0.05%
Yuchao
Peng
(
ుρ൴)
Unit 01, Floor 8, Building A,
Hejing Kesheng Plaza, No. 68
Spiral Avenue, Guangzhou
International Biological Island,
Huangpu District, Guangzhou,
Guangdong Province, PRC
Business
Development
Officer of
our Group
150,000 1 February 2021
– 10 June 2023
4 years 2.00 300,000 0.05%
Peng
Zhang
(
ੵᘄ)
Floor 1, No. 53 (B3), No. 397
Xingang Middle Road, Haizhu
District, Guangzhou City,
Guangdong Province, PRC
Business
Development
Officer of
our Group
150,000 1 October 2019
– 10 June 2023
4 years 1.05 –
2.00
300,000 0.05%
Yong Wu
(
ۇ)
Unit 02, Floor 8, Building A,
Hejing Kesheng Plaza, No. 68
Spiral Avenue, Guangzhou
International Biological Island,
Huangpu District, Guangzhou,
Guangdong Province, PRC
Product
Director of
our Group
150,000 1 February 2021
– 10 June 2023
4 years 2 300,000 0.05%
Tao Zhang
(
ੵᏹ)
Unit 1501, a five-story
building, No. 96 Banhe Road,
Huangpu District, Guangzhou
City, Guangdong Province,
PRC
Business
Development
Officer of
our Group
130,000 23 April 2019 –
10 June 2023
4 years 1.05 –
2.00
260,000 0.04%
Ruiwen Li
(
ҽቚ˖)
3rd Floor, No. 8 Brand Street,
No. 397 Xingang Middle
Road, Haizhu District,
Guangzhou, Guangdong
Province, PRC
Business
Development
Officer of
our Group
130,000 6 January 2020
– 10 June 2023
4 years 1.05 –
2.00
260,000 0.04%
Jiahui
Zhuo
(
ՙԳᅆ)
No. 401, Unit 2, Building 3,
No. 2 West Ring Road, Liunan
District, Liuzhou, Guangxi,
PRC
Consultant of
our Group
(4)
100,000 1 January 2023 4 years 0.00 200,000 0.03%
Hongyan
Wang
(
ᝣ)
Room 904, Building 24,
Ninghai Erli, Jimei District,
Xiamen, Fujian Province, PRC
Consultant of
our Group
(4)
90,000 1 January 2023 4 years 0.00 180,000 0.03%
Ping Zhang
(ੵ̻)
Room 712, Floor 4,
Building 3, Xinghu Jiajing,
Zhuchi Street, Longhu
District, Shantou City,
Guangdong Province, PRC
Consultant of
our Group
(4)
90,000 1 January 2023 4 years 0.00 180,000 0.03%
Notes:
(1) The calculation is made assuming the Share Subdivision is completed and each option is adjusted accordingly.
(2) The calculation is made assuming the Share Subdivision is completed and percentages are subject to the Assumptions. Each option
entitles the holder to purchase one unit, with each unit representing two Shares.
(3) The exercise period of these options commences from the vesting date of the relevant options and end on the tenth anniversary of the
grant date thereof, subject to the terms of the 2019 Share Incentive Plan and the share option agreement signed by the grantee. No
consideration was paid by the grantees for these outstanding options.
(4) The consultants are independent third parties to the Company.
2023 Share Incentive Plan
Overview
The following is a summary of the principal terms of the 2023 Share Incentive Plan approved
by our Company on 12 June 2023, which will be adopted immediately prior to Listing. This plan will


--- page 503 ---
IV-20
APPENDIX IV STATUTORY AND GENERAL INFORMATION
constitute a share scheme governed by the amended Chapter 17 of the Listing Rules that came into
effect on 1 January 2023 (“ Chapter 17”).
Purpose
The purpose of this plan is to: (a) provide our Company with a flexible means of attracting,
remunerating, incentivising, retaining, rewarding, compensating and/or providing benefits to Eligible
Participants (defined below); (b) align the interests of Eligible Participants with those of our Company
and Shareholders by providing such Eligible Participants with the opportunity to acquire proprietary
interests in our Company and become Shareholders; and (c) encourage Eligible Participants to
contribute to the long-term growth, performance and profits of the Company and to enhance the value
of our Company and our Shares for the benefit of our Company and Shareholders as a whole.
Eligibility
The following participants are eligible to participate in this plan (“ Eligible Participants”):
For awards over New Shares
Employee
Participants
A director, officer or employee of our Group on the grant date.
Related Entity
Participant
A director, officer or employee of: (i) our holding company (if any); (ii)
subsidiaries of our holding company other than our Group (if any); and
(iii) associate companies of our Company.
Service Provider
Participant
Persons providing services to our Group on a continuing basis in its ordinary
and usual course of business that are in the interests of the long term growth
of our Group, as determined by the scheme administrator (defined below),
pursuant to the criteria set out in this plan, and:
(a) includes consultants, suppliers and service providers, in the industries of
healthcare, biomedicine and health sciences, pharmaceutical services,
technology, e-commerce or other business industries in which our Group
operates from time to time, that is, or is anticipated to be going forward,
a significant business partner or otherwise significant to our business,
with reference to, among other metrics, consulting and advisory services
and contribution, research and development, technical contribution,
manufacturing or sourcing or distribution of products provided by the
Group, or financial or business significance, based on qualitative and
quantitative performance indicators to be determined by the scheme
administrator (defined below) on a case-by-case basis; but
(b) does not include: (i) placing agents or financial advisors providing
advisory services for fundraising, mergers or acquisitions; or
(ii) professional service providers such as auditors or valuers who
provide assurance or are required to perform their services with
impartiality and objectivity.
In assessing whether the Service Provider Participant provides services to our
Group on a continuing and recurring basis, the scheme administrator will take
into account factors such as: (i) length and type of services provided or will be
provided to our Group, recurrence and regularity of such services; (ii) how the


--- page 504 ---
IV-21
APPENDIX IV STATUTORY AND GENERAL INFORMATION
selection metrics benchmark against comparable metrics used to determine
other eligible participants who have been granted awards under our
Company’s share incentive plans; (iii) our objectives in engaging the Service
Provider Participant and how granting awards to such participant would align
with the purpose of this plan or benefit our Group; and (iv) remuneration
packages of comparable listed peers with respect to similar service providers,
if any, based on available industry information.
For Awards over Existing Shares
Eligible Participants who are eligible to receive awards over Existing Shares are any person
who the scheme administrator determines eligible to be granted awards over Existing Shares (the
“Non-diluting Participants ”), and which may include, but is not limited to, Employee Participants,
Related Entity Participants and Service Provider Participants.
Our Board (including the independent non-executive Directors) considers the scope and
eligibility criteria of Related Entity Participants and Service Provider Participants are consistent with
the purpose of this plan. In particular, our Board (including the independent non-executive Directors)
believes that this scope and criteria would enable our Group to preserve our cash resources, and
instead, use share incentives to attract persons of talent outside of our Group, whilst also aligning their
interests with that of our Group and our Shareholders through them owning a proprietary interest in our
Company and being our future Shareholders. Furthermore, our Board (including the independent
non-executive Directors) considers that:
(a) granting awards to Related Entity Participants would enhance and consolidate our
relationship with these persons/entities that have a sufficiently close relationship with our
Group and that would likely be in a position to influence our Group’s business, reputation,
operations and performance; and
(b) granting awards to Service Provider Participants would help strengthen the strategic
alliance relationship with these service providers and provide incentives to both existing
and future service providers on a long term basis, which will enhance the long term
business performance of our Group and benefit our Group as a whole.
In light of the above, the Board (including the independent non-executive Directors) is of the
view that granting awards to the Eligible Participants (including Related Entity Participants and
Service Provider Participants) under the 2023 Plan is in the interests of the long term growth of our
Group.
Awards and Scheme Limits
Award types
We may grant share options and share awards (collectively, “ awards”), which may take the
form of (i) Shares to be alloted and issued by the Company and that are already recorded on the
register of members of the Company as at the date of this document (the “ New Shares”); or (ii) Shares
that have already been allotted and issued by the Company at an earlier date and are already recorded
on the register of members of the Company (the “ Existing Shares”), or an equivalent value determined
at the prevailing market rate, under this plan.


--- page 505 ---
IV-22
APPENDIX IV STATUTORY AND GENERAL INFORMATION
For awards over New Shares
Scheme limits
The 2023 Share Incentive Plan shall have the following scheme limits:
Scheme Limit The total number of New Shares which may be issued pursuant to all awards
to be granted under this plan and under any other share schemes of our
Company is up to 10% of the Shares in issue on the Listing Date (being
63,235,005 Shares, subject to the Assumptions). For the avoidance of doubt,
awards already granted before Listing under the 2019 Share Incentive Plan
will not affect this scheme limit, which relates to awards to be granted after
this scheme becomes effective (being the Listing Date).
Service Provider
Sublimit
The total number of New Shares which may be issued pursuant to all awards
to be granted to Service Provider Participants under this plan is up to
1,264,700 Shares, representing approximately 2% of the total scheme limit,
subject to the Assumptions.
Our Directors (including our independent non-executive Directors) are of the view that this
Service Provider Sublimit is appropriate and reasonable given the nature of the industry and our
Group’s current and future business needs, and taking into account the rationale behind the scope and
criteria of Service Provider Participants, detailed above.
Refreshing scheme limits
The above Scheme Limit and Service Provider Limit may be refreshed by Shareholders at
general meeting in accordance with Rule 17.03C of Chapter 17.
For awards over Existing Shares
The award shares underlying awards over Existing Shares that may be granted under this plan
shall not exceed 2% of the Shares in issue on the Listing Date, provided that this percentage shall
automatically refresh on 1 January of each year to equal 2% of the Shares in issue on 31 December of
the previous year (the “ Non-diluting Scheme Mandate Limit ”). The Board may adjust the Non-
diluting Scheme Mandate Limit at any time and from time to time.
For awards over New Shares
Individual grant limits and additional approvals
Additionally, each Eligible Participant receiving awards over New Shares shall be subject to an
individual grant limit and additional approval requirements, (a) with respect to a Director, chief
executive or substantial shareholder of our Company, or their respective associates, as specified in
Rule 17.04 of Chapter 17; and (b) with respect to any Eligible Participant, as specified in Rule 17.03D
of Chapter 17.
Ranking of award shares
Shares issued pursuant to settlement of a share option or share award under this plan, if settled
by New Shares, shall be identical to all other Existing Shares and rank pari passu with all other fully


--- page 506 ---
IV-23
APPENDIX IV STATUTORY AND GENERAL INFORMATION
paid Shares in issue on the date the name of the grantee is registered on the register of members of our
Company, save that the grantee shall not have any voting rights, or rights to participate in any
dividends or distributions (including those arising on a liquidation of our Company) declared or
recommended or resolved to be paid to the Shareholders on the register on a date prior to such
registration.
Administration of this Plan
This plan shall be administered by our Board, which may establish a committee and appoint
person(s) to administer and implement this plan (collectively, the “ scheme administrator ”). The
scheme administrator will be responsible for administering and implementing this plan, including
making grants, determining conditions attachment to awards, acting on behalf of our Company to settle
awards. Our Company may establish a trust and appoint a trustee to hold Shares and other trust
property under the trust for the purpose of implementing and administering this plan, and unless
otherwise agreed between our Company and the trustee, the trustee shall be instructed by the scheme
administrator and the trustee holding unvested shares do not have voting rights with respect to those
unvested shares.
Notwithstanding these powers, the administration and implementation of this plan shall comply
with all applicable shareholder approval, announcement, circular, and reporting requirements imposed
by the Listing Rules (as amended from time to time) and shall be subject to applicable laws, rules and
regulations.
Granting awards
Making grants
Grants of awards shall be determined by the scheme administrator and shall be made to Eligible
Participants only.
No awards over New Shares shall be made in contravention of the Model Code set out in
Appendix 10 to the Listing Rules and where our Company is in possession of inside information and
until (and including) one full trading day after the date that such information is announced, including
within the one month prior to the earlier of our Board approving any annual, half-year or quarterly
results, or the deadline for our Company announcing such results under the Listing Rules.
Accepting grants
The scheme administrator shall determine the period within which a grant may be valid for
acceptance by the grantee, and the method of and purchase price (if any) payable with acceptance,
which shall be set out in the award letter. However, if not otherwise specified in the award letter, a
grantee shall have 10 business days from the grant date to accept the award. Any awards not accepted
by the grantee within the acceptance period (in the manner specified) shall be deemed as declined and
automatically lapse.


--- page 507 ---
IV-24
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Conditions on awards
Vesting period
The scheme administrator may set a vesting period and specify this in the award letter.
However, the vesting period may not be for a period less than 12 months from the grant date, except
for awards over New Shares granted to Employee Participants in the following circumstances:
(a) grants of “make whole” awards over New Shares to a new Employee Participant to replace
award shares that the Employee Participant forfeited when leaving their previous
employers;
(b) grants to an Employee Participant whose employment is terminated due to death or
disability or event of force majeure;
(c) grants of awards over New Shares with performance-based vesting conditions in lieu of
time-based vesting criteria;
(d) grants of awards over New Shares that are made in batches during a year for
administrative and compliance reasons (including awards that should have been granted
earlier but had to wait for a subsequent batch, in which case, the vesting periods may be
shorter to reflect the time from which an award would have been granted);
(e) grants of awards over New Shares with a mixed vesting schedule such that the awards vest
evenly over a period of 12 months; or
(f) grants of awards over New Shares with a total vesting and holding period of more than 12
months.
The Board (and the remuneration committee to the Board) believes that it is in the best interests
of the Company to retain the flexibility to impose appropriate conditions in light of the particular
circumstances of each grant, which would act as a more meaningful reward for the unique Employee
Participant in that Employee Participant’s unique circumstances. By having the flexibility of having a
shorter vesting period than 12 months in appropriate circumstances, the Board (and the remuneration
committee to the Board) considers that the Group will be in a better position to attract and retain
suitable Employee Participants to continue serving the Group whilst at the same time providing them
with incentives towards achieving the business/financial goals of the Group, and thereby towards
achieving, and aligned with achieving, the purpose of the 2023 Plan.
Performance targets and other conditions for vesting
The scheme administrator may set vesting conditions on awards, which shall be specified in the
award letter. These include performance targets, criteria or conditions to be satisfied in order for the
relevant award to vest and be settled by the Company, and may be based on, among other criteria,
performance appraisals within a specified period, business/financial/transactional/performance
milestones, current and anticipated future contribution to our Group and business, minimum service
period, upon reaching other specified targets.
The Board believes that imposing performance targets and other conditions, on case-by-case
basis in the award letters of individual Eligible Participants, not only provides the Company with
flexibility to set specific conditions that are relevant to that individual Eligible Participant and in light
of the goals that the Company would like that individual Eligible Participant to achieve to benefit the
Group, but also provides Eligible Participants with tailored and specific identifiable targets/metrics that


--- page 508 ---
IV-25
APPENDIX IV STATUTORY AND GENERAL INFORMATION
they can work towards that would directly tie into and benefit the Group once achieved, which is in
line with the purpose of this plan.
Where awards are granted to Directors or members of the senior management of the Company
with a vesting period shorter than 12 months, the views of the remuneration committee to the Board on
why a shorter vesting period is appropriate, and where such awards are without performance targets,
the views of that remuneration committee on why performance targets are not necessary and how the
grants align with the purpose of this plan, will be included in the announcement to be issued upon any
grant of awards as required by the Listing Rules.
For awards over New Shares
Exercise price and issue price
The scheme administrator shall determine the exercise price for a share option over New Shares
and issue price for a share award over New Shares, which shall be specified in the award agreement,
provided that:
(a) the exercise price shall be the higher of: (i) closing price of the Shares as stated in the daily
quotations sheet issued by the Stock Exchange on the grant date; and (ii) the average
closing price of the Shares as stated in the daily quotations sheets issued by the Stock
Exchange for the five business days immediately preceding the grant date; and
(b) the scheme administrator has absolute discretion to determine the issue price for the
exercise of each share award, which may be for nil consideration or such other number
specified in the award agreement.
For Awards over Existing Shares
For awards over Existing Shares, whether taking the form of share awards or share options, the
issue price or exercise price, as the case may be, for the exercise of such awards shall be such price
determined by the scheme administrator in their absolute discretion and notified to the grantee in the
award letter. For the avoidance of doubt, the scheme administrator may determine the issue price or the
exercise price, as the case may be, to be nil.
For awards over New Shares
Exercise period
The exercise period for a share option and a share award over New Shares shall be determined
by the scheme administrator in their absolute discretion and specified in the award agreement. In
particular:
(a) the exercise period for a share option over New Shares being the period within which the
grantee may exercise a vested share option granted to them) shall not be longer than 10
years from the grant date; and
(b) the exercise period for a share award over New Shares (being the period within which the
grantee may request a vested share award granted to them to be settled and satisfied by or
on behalf of our Company) shall be such period determined by the scheme administrator,
and for the avoid of doubt, may be determined by the share administrator to be not
applicable (in which case, the underlying award shares shall fall to be settled upon the
vesting date without further action by the grantee).


--- page 509 ---
IV-26
APPENDIX IV STATUTORY AND GENERAL INFORMATION
For Awards over Existing Shares
The exercise period for any grant of awards over Existing Shares, whether taking the form of
share options or share awards, shall be such period determined by the scheme administrator in their
absolute discretion and notified to the Eligible Participant in the award letter. For the avoidance of
doubt, the scheme administrator may determine the exercise period of an award to be not applicable
and determine that the award shares shall fall to be settled upon the vesting date without further action
by the grantee.
Voting and dividend rights
Awards do not carry any right to vote at general meetings of our Company, nor any right to
dividends, transfer or other rights. No grantee shall enjoy any of the rights of a Shareholder by virtue of
being granted an award unless and until the Shares underlying an award are delivered to the grantee
pursuant to the vesting and exercise of such award.
For awards over New Shares
Transferability
Awards over New Shares are personal to the grantee and shall not be assignable or
transferrable, except where a waiver has been granted by the Stock Exchange with respect to the
proposed transfer, and such transfer has been made in compliance with the Listing Rules and with the
consent of our Company. Following such transfer, the transferee shall be bound by the plan rules and
award letter as if the transferee were the grantee.
Clawback
Where certain events specified in the plan arise, our Board may determine that, with respect to
a grantee, awards granted but not yet exercised shall immediately lapse, and with respect to any Shares
delivered or amount paid to the grantee, the grantee be required to transfer the same value, whether in
Shares and/or cash, back to our Company (or nominee). These circumstances are:
(a) the grantee ceasing to be an Eligible Participant by reason of termination for cause or
without notice, or the result of being charged/penalised/convicted of an offence involving
the grantee’s integrity or honesty;
(b) the grantee commits a serious misconduct or breach, including with respect to a policy or
code of or other agreement with our Group, which is considered to be material; or
(c) the award is no longer determined to be appropriate and aligned with the purpose of this
plan.
The Board believes that making grants that are subject to a clawback mechanism allows the
Company to retain the flexibility to re-evaluate and re-assess the circumstances of each grantee from
time to time after the grant is made in order to determine whether it would still be appropriate to grant
awards (or allow the grantee to be entitled to award shares) under this plan in circumstances that
suggest the grant (or entitlement to award shares) would no longer be aligned with the purpose of this
plan or where it may be regarded as inequitable for the awards (or award shares) to be retained by the
grantee.


--- page 510 ---
IV-27
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Alterations in the share capital of our Company
In the event of any alteration in the capital structure of our Company by way of capitalisation of
profits or reserves, rights issue, subdivision or consolidation of Shares or reduction of the share capital
of our Company (other than any alteration in the capital structure of our Company as a result of an
issue of Shares as consideration in a transaction to which our Company is a party) after the adoption
date of this scheme, the scheme administrator shall make such corresponding adjustments, if any, as
they in its discretion may deem appropriate to reflect such change with respect to:
(a) (in the event of subdivision or consolidation of Shares only) the number of Shares
comprising the Scheme Mandate Limit or Service Provider Sublimit, provided that in the
event of any Share subdivision or consolidation, the Scheme Mandate Limit and Service
Provider Sublimit as a percentage of the total issued Shares of our Company at the date
immediately before any consolidation or subdivision shall be the same on the date
immediately after such consolidation or subdivision;
(b) the number of Shares comprised in each award to the extent any award has not been
exercised;
(c) the exercise price of any share option or issue price of any share award,
or any combination thereof, as the auditor or a financial advisor engaged by our Company for such
purpose have certified satisfy the relevant requirements of the Listing Rules and are, in their opinion,
fair and reasonable either generally or as regards any particular grantee, provided always that: (i) any
such adjustments should give each grantee the same proportion of the equity capital of our Company,
rounded to the nearest whole Share, as that to which that grantee was previously entitled prior to such
adjustments; and (ii) no such adjustments shall be made which would result in a Share being issued at
less than its nominal value. The capacity of the auditor or financial advisor (as the case may be) of our
Company is that of experts and not of arbitrators and their certification shall, in the absence of manifest
error, be final and binding on our Company and the grantees.
Change in control
If there is an event of change in control of our Company as the result of a merger, scheme of
arrangement or general offer, or in the event of a dissolution or liquidation of our Company, the
scheme administrator shall at its sole discretion determine whether the vesting date of any awards will
be accelerated (for the avoidance of doubt, only Employee Participants may have the vesting of their
awards accelerated to a period of less than 12 months from the date of grant) and/or the vesting
conditions or criteria of any awards will be amended or waived, and notify the relevant grantee
accordingly.
Lapsed and cancelled awards
The scheme administrator may cancel an award with the prior consent of the grantee. Award
shares over New Shares underlying cancelled awards shall be treated in the manner required under the
Listing Rules. In particular, where our Company cancels an award over New Shares granted to a
participant and subsequently makes a new grant over New Shares to that same participant, such new
grant may only be made under this plan where there is available Scheme Mandate Limit, and awards
cancelled will be regarded as utilised for the purpose of calculating the Scheme Mandate limit (and the
Service Provider Sublimit).


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APPENDIX IV STATUTORY AND GENERAL INFORMATION
Awards shall automatically lapse upon the following events. Lapsed awards shall not be
counted for the purpose of calculating the Scheme Mandate limit (and the Service Provider Sublimit).
(a) the award has not been accepted by the grantee (in the manner specified) within the
acceptance period;
(b) expiry of the exercise price;
(c) the clawback mechanism being triggered;
(d) following the grantee’s death or permanent incapacity, bankruptcy, or where the grantee
ceases to be an Eligible Participant or terminates their employment or contractual
engagement with our Group for reasons other than as already provided for in this plan, or
where the grantee’s employment or contractual engagement has been suspended, or the
grantee’s position in or with respect to our Group has been vacated, for more than six
months;
(e) forfeiture of the award by the grantee; or
(f) the grantee transfers the award in breach of the transferability provisions specified in the
plan.
Term of this plan and termination
Subject to any early termination as determined by our Board, this plan shall have a plan life of
10 years from the adoption date.
No grants may be made after termination of this plan. Notwithstanding termination of this plan,
this plan and its rules shall continue to be valid and effective to the extent necessary to give effect to
the vesting and exercise of awards granted prior to termination, and the termination shall not affect any
subsisting rights already granted to a grantee. For the avoidance of doubt, awards granted during the
plan life but that remain unexercised or unexpired prior to the termination shall continue to be valid
and exercisable in accordance with this plan and the relevant award letter.
Amendment and termination
The scheme administrator may, in their sole discretion, amend this plan or an award provided
that:
(a) the amendments, and the amended plan or award, shall comply with the relevant
requirements under Chapter 17;
(b) Shareholders’ approval at general meeting is required for the following:
(i) any amendment or alteration to the terms of the plan that is of a material nature or
any amendment or alteration to those provisions that relate to the matters set out in
Rule 17.03 of the Listing Rules to the advantage of Eligible Participants;
(ii) any change to the authority of the Board or the scheme administrator to alter the
terms of this plan; and
(c) any amendment or alteration to the terms of an award the grant of which was subject to the
approval of a particular body shall be subject to approval by that same body, provided that
this requirement does not apply where the relevant alteration takes effect automatically
under existing terms of this plan.


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IV-29
APPENDIX IV STATUTORY AND GENERAL INFORMATION
OTHER INFORMATION
Estate duty
Our Directors have been advised that no material liability for estate duty is likely to fall upon
any member of our Group.
Litigation
Save as disclosed in this document, no member of our Group is engaged in any litigation,
arbitration or claim of material importance, and no litigation, arbitration or claim of material
importance is known to our Directors to be pending or threatened by or against our Company that
would have a material adverse effect on our Company’s results of operations or financial condition.
Sole Sponsor
China International Capital Corporation Hong Kong Securities Limited satisfies the
independence criteria applicable to sponsor set out in Rule 3A.07 of the Listing Rules.
The Sole Sponsor will receive an aggregate of US$0.5 million for acting as our Company’s
sponsor for the Listing.
Consent of experts
This document contains statements made by the following experts:
Name Qualification
China International Capital
Corporation Hong Kong
Securities Limited
A licenced corporation under the SFO for Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type 4 (advising
on securities), Type 5 (advising on futures contracts) and Type 6
(advising on corporate finance) of the regulated activities as
defined under the SFO.
Fangda Partners Qualified PRC lawyers
Harney Westwood & Riegels Cayman Islands attorneys-at-law
Deloitte Touche Tohmatsu Certified Public Accountants under Professional Accountants
Ordinance (Chapter 50 of the Laws of Hong Kong)
Registered Public Interest Entity Auditor under Accounting and
Financial Reporting Council Ordinance (Chapter 588 of the Laws
of Hong Kong)
Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
Industry consultant
As at the Latest Practicable Date, none of the experts named above has any shareholding in any
member of our Group 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.
Each of the experts named above have given and have not withdrawn their respective written
consent to the issue of this document 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.


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IV-30
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Binding effect
This document 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 (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.
Bilingual document
The English language and Chinese language versions of this document 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).
The English version of this document is the official version, and where are inconsistencies
between the English version and translations thereof, the English version of this document shall
prevail.
Preliminary expenses
We have not incurred any material preliminary expenses in relation to the incorporation of our
Company.
Disclaimers
(a) Save as disclosed in this document and in “Underwriting”, within the two years
immediately preceding the date of this document:
(i) there are no commissions for subscribing or agreeing to subscribe, or procuring or
agreeing to procure subscriptions, for any shares in or debentures of our Company; and
(ii) there are no commissions, discounts, brokerages or other special terms granted in
connection with the issue or sale of any capital of any member of our Group, and no
Directors, promoters or experts named in the part headed “—Other information—
Consent of experts” received any such payment or benefit.
(b) Save as disclosed in this document:
(i) there are no founder, management or deferred shares in our Company or any member
of our Group;
(ii) we do not have any promoter and no cash, securities or other benefit has been paid,
allotted or given within the two years immediately preceding the date of this
document, or are proposed to be paid, allotted or given to any promoters;
(iii) none of the Directors or the experts named in “—Other information—Consent of
experts” above has any interest, direct or indirect, in the promotion of, or in any
assets which have been, within the two years immediately preceding the date of this
document, 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; and
(iv) there are no bank overdrafts or other similar indebtedness by our Company or any
member of our Group;


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IV-31
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(v) there are no hire purchase commitments, guarantees or other material contingent
liabilities of our Company or any member of our Group;
(vi) there are no outstanding debentures of our Company or any member of our Group;
(vii) there are no other stock exchange on which any part of the equity or debt securities of
our Company is listed or dealt in or on which listing or permission to deal is being or
is proposed to be sought;
(viii) there are no arrangements under which future dividends are waived or agreed to be
waived;
(ix) there were no significant interruptions in the business of our Group which may have
or have had a significant effect on our financial position in the last 12 months;
(x) no capital of any member of our Group is under option, or is agreed conditionally or
unconditionally to be put under option;
(xi) there are no restrictions affecting the remittance of profits or repatriation of capital
into Hong Kong and from outside Hong Kong;
(xii) there are no contracts or arrangements subsisting at the date of this document in
which a Director is materially interested or which is significant in relation to the
business of our Group.


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APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this document delivered to the Registrar of Companies
in Hong Kong for registration were, among other documents,:
(a) a copy of the GREEN Application Form;
(b) the written consents referred to in “Statutory and general information—Other
information—Consent of experts” in Appendix IV; and
(c) copies of the material contracts referred to in “Statutory and general information—Further
information about our business—Summary of material contracts” in Appendix IV.
DOCUMENTS AVAILABLE ON DISPLAY
Copies of the following documents will be available on display on the Company’s website
(www.ysbang.cn) and the Stock Exchange’s website ( https://www.hkexnews.hk) up to and including
the date which is 14 days from the date of this document:
(a) the Memorandum and the Articles;
(b) the material contracts referred to in “Statutory and general information—Further
information about our business—Summary of material contracts” in Appendix IV;
(c) the service contracts and the letters of appointment with our Directors referred to in
“Statutory and general information—Further information about our Directors—Director
contracts and remunerations” in Appendix IV;
(d) the Frost & Sullivan Report, a summary of which is set forth in “Industry overview”;
(e) the PRC legal opinion issued by Fangda Partners in respect of certain general corporate
matters in the PRC of our Group;
(f) the Accountant’s Report and the report on the unaudited pro forma financial information
of our Group prepared by Deloitte Touche Tohmatsu, the texts of which are set out in
Appendices I and II;
(g) the audited consolidated financial statements of our Group for the financial years ended
31 December 2020, 2021 and 2022;
(h) the letter of advice prepared by Harney Westwood & Riegels summarising certain aspects
of Cayman company law referred to in Appendix III;
(i) the Cayman Companies Act;
(j) the written consents referred to in “Statutory and general information—Other
information—Consent of experts” in Appendix IV;
(k) the terms of the 2019 Share Incentive Plan; and
(l) the terms of the 2023 Share Incentive Plan.
DOCUMENT AVAILABLE FOR INSPECTION
A full list of the grantees under the 2019 Share Incentive Plan will be available for inspection in
person at the offices of Skadden, Arps, Slate, Meagher & Flom at 42/F, Edinburgh Tower, The
Landmark, 15 Queen’s Road Central, Hong Kong, during normal business hours and with prior
appointment for a period up to and including the date which is 14 days from the date of this document.
V-1


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(Incorporated in the Cayman Islands with limited liability)
Stock Code: 9885
Sole Sponsor and Sole Overall Coordinator
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Joint Lead Managers
藥師幫股份有限公司
YSB Inc.
藥師幫股份有限公司
YSB Inc.
