{"url_path":"/sec/bq/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-07-13","source_url":"https://www.sec.gov/Archives/edgar/data/1815021/0001213900-26-077593-index.html","accession_number":"0001213900-26-077593","cik":"0001815021","ticker":"BQ","issuer_name":"Boqii Holding Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1815021/0001213900-26-077593-index.html","primary_entity_key":"0001815021","primary_entity_name":"Boqii Holding Ltd"},"word_count":7874,"has_tables":true,"body_markdown":"**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\nYou should read the following\ndiscussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion\nmay contain forward-looking statements about our business and operations. Our actual results may differ materially from those we currently\nanticipate as a result of many factors, including those we describe under “*Item 3. Key Information-3.D. Risk Factors*”\nand elsewhere in this annual report. For the impact of foreign currency fluctuations on the company, and the extent to which foreign currency\nnet investments are hedged by currency borrowing and other hedging instruments, please refer to, “*Item 11. Quantitative and Qualitative\nDisclosures about Market Risk-Foreign exchange risk*.”\n\n \n\n**5.A. Operating Results**\n\n** **\n\n**General Factors Affecting Our Results of Operations**\n\n \n\nOur business and operating results are affected\nby a number of general factors in China’s pet industry, including:\n\n \n\n \n●\nChina’s overall economic growth, level of urbanization and level of per capita disposable income;\n\n \n\n \n●\nChina’s demographic shift in terms of rising numbers of no-kid families and aging population;\n\n \n\n \n●\nDevelopment of China’s online retail market, such as the growing number of online shoppers, improved logistics infrastructure and increasing adoption of mobile payment;\n\n \n\n \n●\nSeasonality of China’s online retail market with increasing sales during the fourth quarter of each year;\n\n \n\n \n●\nGrowing population of pets and pet parents and demand for quality pet products and services;\n\n \n\n \n●\nIncrease in pet parents’ expenditure on pets, pet products and pet services; and\n\n \n\n \n●\nMarket competition.\n\n \n\nUnfavorable changes in any of these general factors\ncould materially and adversely affect our business and our results of operations.\n\n \n\n**Specific Factors Affecting Our Results of Operations**\n\n** **\n\n**Our ability to diversify product offerings and promote private\nlabel products**\n\n \n\nWe will continue to diversify\nour product offerings and optimize our product mix catering to customers’ demands and drive profitability. For the year ended March\n31, 2026, our GMV from sales of (i) pet staple food, (ii) snacks and wet food, (iii) supplies and (iv) heath care products accounted for\n71.4%, 7.6%, 16.5% and 4.4% of our total GMV, compared to 47.2%, 9.1%, 15.9% and 27.7% for the year ended March 31, 2025. Through\ndiversifying our product source, we will continue to support the growth of emerging brands with attractive margin profiles, providing\nthem with access to our broad user base and reliable fulfillment infrastructure. At the same time, we tend to have greater pricing power\nover these emerging brands compared to more established brands. During the three years ended March 31, 2024, 2025 and 2026, we connected\na total of approximately 578 brand partners with pet parents in China, and realized a GMV of approximately RMB 770.3 million from\nsales of branded products for the year ended March 31, 2026.\n\n \n\n101\n\n \n\n \n\nIn addition to third-party\nbrands, we will further promote private label products and expand our product portfolio, from which we can realize higher gross margin\ncompared to third-party brands. We have launched a number of private labels, including Yoken, Mocare, and two “D-cat” labels,\nand will continue to accumulate data insights on customer behavior and tailor our private label product offerings accordingly. As of March\n31, 2026, approximately 4,484 SKUs of private label products were offered, accounting for approximately 19.6% of our total SKUs, compared\nto approximately 4,231 private label SKUs, accounting for approximately 20.0% of our total SKUs on March 31, 2025. For the year ended\nMarch 31, 2026, we realized a GMV of RMB169.8 million from sales of our private label products, accounting for 22.0% of our total GMV,\ncompared to a GMV of RMB 240.9 million from sales of our private label products, accounting for 24.0% of our total GMV for the year ended\nMarch 31, 2025. Through working closely with our manufacturing partners, we expect to further improve the profitability of our private\nlabel products.\n\n** **\n\n**Our ability to expand and engage our user base**\n\n \n\nWe will continue to expand\nour user base and strengthen user engagement to achieve sustainable growth. We aim to attract more users and maintain our vibrant community\nwith rich and informative content offerings, intelligent content recommendation, and superior user experience. For example, we continuously\nattract more KOLs and produce more professionally generated pet-related content to diversify our content offerings. In addition, our users\nmay interact with one another with the support of our platform’s wide array of innovative and appealing social functions. Such real-time\ninteractions on our platform cultivate a strong sense of belonging, which we believe effectively increases our user stickiness. A large,\nengaging and loyal user base not only contributes to our diverse content offerings, but also brings us more business opportunities. Through\ndiverse and informative content and interesting social interactions, we are able to incentivize more users to shop on our online sales\nplatforms.\n\n** **\n\n**Our ability to use content to drive sales**\n\n \n\nWe focus on developing our\nuser-centric content-driven “discover and buy” model, and our results of operations in part depend on our ability to educate\nour users and convert users to buyers. With the help of social media tools and advanced data analytics, we are able to identify user preferences,\nnew trends, unmet demands, and emerging brands, and create curated content accordingly. We then make customized product recommendations\nby linking the curated content to the relevant product page. We believe this content-driven approach will allow us to drive buyer engagement\nand recurring purchases.\n\n** **\n\n**Our ability to diversify our service offerings through strategic\nacquisitions and investments**\n\n \n\nWe envision fostering a\npet ecosystem around online sales platforms and expanding offline network and have made strategic acquisitions and investments to expand\nour product and service offerings. Through our acquisition of Xingmu, a veterinary drug distributor in China, we have entered into China’s\npet healthcare industry. In 2019, we invested in PetDog, a large pet store franchise in China, to expand the outreach of professional\npet service trainings to offline stores to improve the of their services. The business or financial performance of the companies we have\nacquired or invested in as well as our ability to successfully integrate these acquired businesses or investments with our existing business\nwould impact our results of operations and financial conditions. See “*Item 3. Key Information—3.D. Risk Factors—Risks\nRelated to Our Business and Industry—We have and may continue to invest in or acquire complementary assets, technologies and businesses,\nor enter into strategic alliances. Such efforts may fail and have in the past, and may continue to, result in equity or earnings dilution\nand materially and adversely affect our results of operations and financial condition*.”\n\n \n\n**Key Components of Results of Operations**\n\n** **\n\n**Net revenues**\n\n \n\nThe following table sets\nforth a breakdown of our net revenues, in absolute amounts and as percentages of total net revenues, for the periods indicated.\n\n \n\n  \nFor the Year Ended March 31, \n\n  \n2024  \n2025  \n2026 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nNet revenues: \n   \n   \n   \n   \n   \n   \n  \n\nProduct sales \n 680,143  \n 95.9  \n 431,294  \n 92.0  \n 381,208  \n 55,264  \n 90.7%\n\nOnline marketing and information services and other revenue \n 29,209  \n 4.1  \n 37,600  \n 8.0  \n 39,259  \n 5,691  \n 9.3%\n\nTotal net revenues \n 709,352  \n 100.0  \n 468,894  \n 100.0  \n 420,467  \n 60,955  \n 100.0 \n\n* *\n\n102\n\n \n\n* *\n\n*Product sales.*We\noffer a diverse selection of branded and private label pet food and other pet products. Net revenues from product sales are recognized\nupon customers’ receipt of the products. We generate a substantial majority of product sales revenues from sales of branded products.\nWe also generate product sales revenues from sales of our private label products, including Yoken, Mocare, Dokete and D-cat. We generated\na substantial majority of our product sales revenues from sales to retail customers. As we continued to expand our offline network, we\nalso generated an increasing portion of our total product sales revenues from sales to offline pet stores and pet hospitals.\n\n* *\n\n*Online marketing and information\nservices and other revenue.*We generate net revenues of online marketing and information and other services through the provision\nof online marketing and information and other services to brand owners. We help brand owners place advertisements and organize online\nand offline marketing campaigns featuring KOLs. We primarily charge our brand owners service fees for our online marketing and information\nservices. Net revenues from online marketing and information services are recognized over the service period.\n\n** **\n\n**Cost of revenue**\n\n \n\nOur cost of revenue consists\nof cost of product sales and cost of services. Cost of product sales comprises the purchase price of products, vendor rebates and inventory\nwrite-downs, which together accounted for 98.5%, 97.8% and 96.6 % of our total cost of revenue for the years ended March 31, 2024,\n2025 and 2026, respectively. Cost of services consists of the advertising and promotion costs, employee wages and benefits in connection\nwith our provision of marketing and information services including the fees that we paid to third party for advertising and promotion\non various online and offline channels.\n\n** **\n\n**Gross profit and gross margin**\n\n \n\nWe recorded gross profit\nof RMB140.7 million, RMB100.7 million RMB110.4 million (US$16.0 million) for the years ended March 31, 2024, 2025 and 2026,\nrespectively.\n\n \n\nIn the years ended March\n31, 2024, 2025 and 2026, our overall gross margin was 19.8%, 21.5% and 26.3%, respectively. During the same period, the gross margin of\nproduct sales was 17.6%, 16.5% and 21.4%, and the gross margin of online marketing and information services was 71.0%,78.2 % and 73.4%,\nrespectively.\n\n \n\nWe have endeavored to diversify\nour product offerings and promote private label products, which we believe generally had higher gross margin compared to that of branded\nproducts. Moreover, we plan to further improve the gross margin of private label products as our private label brands become more established.\nWe are gradually making strategic adjustments to our product mix by reducing sales of certain products with high fulfillment expenses,\nsuch as the branded ones, to improve our net profit margin, and have offered private label products at discount to promote brand awareness\nand cultivate customer loyalty. Last but not least, as we continue to expand our pet-based ecosystem by driving sales to small and medium\npet businesses, our gross margin may experience a short-term downward pressure as sales to such businesses typically carry a bigger ticket\nsize per order and a lower gross margin profile.\n\n \n\n103\n\n \n\n \n\n**Operating expenses**\n\n \n\nThe following table sets\nforth a breakdown of our operating expenses, in absolute amounts and as percentages of our total operating expenses and as percentages\nof our total net revenues, for the periods indicated.\n\n \n\n  \nFor the Year Ended March 31, \n\n  \n2024  \n2025  \n2026 \n\n  \nRMB  \n%\n\nof total\noperating\nexpenses  \n%\n\nof total\nrevenue  \nRMB  \n%\n\nof total\noperating\nexpenses  \n% of total\nrevenue  \nRMB  \nUS$  \n%\n\nof total\noperating\nexpenses  \n%\n\nof total\nrevenue \n\n  \n(in thousands, except for percentages) \n\nOperating expenses: \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nFulfillment expenses \n 59,506  \n 29.2  \n 8.4  \n 35,571  \n 22.1  \n 7.6  \n 23,251  \n 3,371  \n 16.5  \n 5.5 \n\nSales and marketing expenses \n 85,091  \n 41.7  \n 12.0  \n 74,531  \n 46.4  \n 15.9  \n 81,638  \n 11,835  \n 58.0  \n 19.4 \n\nGeneral and administrative expenses \n 59,265  \n 29.1  \n 8.4  \n 50,609  \n 31.5  \n 10.8  \n 35,915  \n 5,207  \n 25.5  \n 8.5 \n\nTotal operating expenses \n 203,862  \n 100.0  \n 28.8  \n 160,711  \n 100.0  \n 34.3  \n 140,804  \n 20,413  \n 100.0  \n 33.4 \n\n \n\n*Fulfillment expenses.*Our fulfillment expenses consist primarily of warehousing, shipping and handling expenses for dispatching and delivering products\nto consumers, employee wages and benefits for the relevant personnel, customs clearance expenses and other related transaction costs.\nWe will continue to improve our fulfillment and warehousing capabilities and reduce sales of certain products with high fulfillment expenses\nto improve our net profit margin. Moreover, with our increasing scale, we are able to gain more bargaining power with our brand partners,\nwarehouse fulfillment centers, and delivery service providers, which will further improve the cost efficiency of our fulfillment process.\n\n \n\n*Sales and marketing expenses.*Our sales and marketing expenses consist primarily of advertising expenses, third-party platforms commission fee, employee wages,\nrental expenses and benefits for sales and marketing staff, depreciation expenses and other daily expenses which are related to the sales\nand marketing functions. We expect to explore and leverage new cost-effective sales and marketing channels with high conversion rate,\nsuch as *Red*and *Douyin*.\n\n \n\n*General and administrative\nexpenses.*Our general and administrative expenses consist primarily of employee wages and benefits for corporate employees and other\nexpenses which are related to the general corporate functions. We are incurring and expect to continue to incur additional costs as a\nresult of operating as a public company.\n\n \n\n**Taxation**\n\n** **\n\n**Cayman Islands**\n\n \n\nThe Cayman Islands currently\nlevies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature\nof inheritance tax or estate duty.\n\n \n\nThere are no other taxes\nlikely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments\nexecuted in, or after execution brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose\nwithholding tax on dividend payments.\n\n** **\n\n**British Virgin Islands**\n\n \n\nUnder the current laws of\nthe British Virgin Islands, entities incorporated in the British Virgin Islands are exempted from income tax on their foreign-derived\nincomes in the British Virgin Islands. There are no withholding taxes in the British Virgin Islands.\n\n \n\n104\n\n \n\n \n\n**Hong Kong**\n\n \n\nUnder the current Hong Kong\nInland Revenue Ordinance, our subsidiaries incorporated in Hong Kong are subject to a two-tiered profits tax rate of 8.25% and 16.5% on\nits taxable income generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong\nKong to us are not subject to any income tax.\n\n \n\n**PRC**\n\n \n\nGenerally, our PRC subsidiaries,\nthe VIEs and their subsidiaries are subject to enterprise income tax on their taxable income in the PRC at a rate of 25%. The enterprise\nincome tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. Boqii (Shanghai)\nInformation Technology Co., Ltd. obtained High and New Technology Enterprises, or HNTE, status in 2019 and is thus eligible to enjoy a\npreferential tax rate of 15% from 2019 to 2022, to the extent it has taxable income under the Enterprise Income Tax Law of the PRC, or\nEIT Law. On July 25, 2018, Boqii (Shanghai) Information Technology Co., Ltd. (“Shanghai Boqii”) was entitled to be “Software\nEnterprises.” According to the Enterprise Income Tax (“EIT”) Law and relevant regulations in the PRC, from the year\nof 2018, Shanghai Boqii could enjoy a tax holiday of 2-year EIT exemption and subsequently 3-year 12.5% preferential tax rate and the\ncertificate expired until October 2023. For the years ended March 31, 2024, 2025 and 2026, Shanghai Boqii was subject to EIT rate at 25%,25%\nand 25%, respectively.\n\n \n\nSince April 1, 2019,\nour pet product sales revenues have been subject to value-added tax at a rate of 13% and our pet foods sales revenues have been subject\nto value-added tax at a rate of 9%. Our services revenues are subject to value-added tax at a rate of 6%.\n\n \n\nUnder the EIT Law and its\nimplementation rules, subject to any applicable tax treaty or similar arrangement between the PRC and the jurisdiction where the shareholders\nof our PRC subsidiaries reside that provides for a different income tax arrangement, PRC withholding tax at the rate of 10% is normally\napplicable to dividends from PRC sources payable to shareholders that are non-PRC resident enterprises, which do not have an establishment\nor place of business in the PRC, or which have such establishment or place of business if the relevant income is not effectively connected\nwith the establishment or place of business. Under the PRC Individual Income Tax Law and its implementation rules, dividends from sources\nwithin the PRC paid to foreign individual shareholders who are not PRC residents are generally subject to a PRC withholding tax at a rate\nof 20%, subject to any reduction or exemption set forth in applicable tax treaties and PRC laws. Although majority of our business operations\nare based in the PRC, it is unclear whether dividends we pay with respect to our ordinary shares would be treated as income derived from\nsources within the PRC and as a result be subject to PRC income tax if we were considered a PRC resident enterprise, as described below.\nSee “*Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China—If we are classified\nas a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences\nto us and our non-PRC shareholders*.”\n\n \n\nIf we or any of our subsidiaries\noutside of the PRC was deemed to be a “resident enterprise” under the EIT Law, it would be subject to enterprise income tax\non its worldwide income at a rate of 25%. See “*Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business\nin China—If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result\nin unfavorable tax consequences to us and our non-PRC shareholders*.”\n\n \n\n105\n\n \n\n \n\n**Results of Operations**\n\n \n\nThe following table summarizes our consolidated\nresults of operations both in absolute amounts and as percentages of our total net revenues for the periods presented. The operating results\nin any historical period are not necessarily indicative of the results that may be expected for any future period.\n\n \n\n  \nFor the Year Ended March 31, \n\n  \n2024  \n2025  \n2026 \n\n  \nRMB  \n%\nof total\nnet revenues  \nRMB  \n%\nof total\nnet revenues  \nRMB  \nUS$  \n%\nof total\nnet revenues \n\n  \n(in thousands, except for share and per share data) \n\nNet revenues: \n   \n   \n   \n   \n   \n   \n  \n\nProduct sales \n 680,143  \n 95.9  \n 431,294  \n 92.0  \n 381,208  \n 55,264  \n 90.7 \n\nOnline marketing and information services and other revenue \n 29,209  \n 4.1  \n 37,600  \n 8.0  \n 39,259  \n 5,691  \n 9.3 \n\nTotal net revenues \n 709,352  \n 100.0  \n 468,894  \n 100  \n 420,467  \n 60,955  \n 100.0 \n\nTotal cost of revenues \n (568,615) \n (80.2) \n (368,240) \n (78.5) \n (310,028) \n (44,945) \n (73.7)\n\nGross profit \n 140,737  \n 19.8  \n 100,654  \n 21.5  \n 110,439  \n 16,010  \n 26.3 \n\nOperating expenses: \n    \n    \n    \n    \n    \n    \n   \n\nFulfillment expenses \n (59,506) \n (8.4) \n (35,571) \n (7.6) \n (23,251) \n (3,371) \n (5.5)\n\nSales and marketing expenses \n (85,091) \n (12.0) \n (74,531) \n (15.9) \n (81,638) \n (11,835) \n (19.4)\n\nGeneral and administrative expenses \n (59,265) \n (8.4) \n (50,609) \n (10.8) \n (35,915) \n (5,207) \n (8.5)\n\nImpairment of goodwill \n    \n —  \n —  \n —  \n    \n    \n   \n\nOther income, net \n 2,966  \n 0.4  \n 736  \n 0.2  \n 399  \n 58  \n 0.1 \n\nLoss from operations \n (60,159) \n (8.5) \n (59,321) \n (12.6) \n (29,966) \n (4,345) \n (7.1)\n\n  \n    \n    \n    \n    \n    \n    \n   \n\nInterest income \n 2,638  \n 0.4  \n 972  \n 0.2  \n 431  \n 63  \n 0.1 \n\nInterest expense \n (7,326) \n (1.0) \n (6,506) \n (1.4) \n (825) \n (120) \n (0.2)\n\nOther gains/(loss), net \n (3,994) \n (0.6) \n (236) \n (0.1) \n 29,503  \n 4,277  \n 7 \n\nFair value change of derivative liabilities \n (1,034) \n (0.1) \n 5,716  \n 1.2  \n 5  \n 1  \n 0.0 \n\nLoss before income tax expenses \n (69,875) \n (9.8) \n (59,375) \n (12.7) \n (852) \n (124) \n (0.2)\n\nIncome tax benefit \n 927  \n 0.1  \n 801  \n 0.2  \n (1,274) \n (185) \n (0.3)\n\nShare of results of equity investee \n 50  \n 0.0  \n (22) \n 0.0  \n 242  \n 35  \n 0.1 \n\nNet loss \n (68,898) \n (9.7) \n (58,596) \n (12.5) \n (1,884) \n (274) \n (0.4)\n\nLess: Net loss attributable to the non-controlling interest shareholders \n (5,234) \n (0.7) \n (4,471) \n (1.0) \n 3,194  \n 464  \n 0.8 \n\nNet loss attributable to Boqii Holding Limited \n (63,664) \n (9.0) \n (54,125) \n (11.5) \n (5,078) \n (738) \n (1.2)\n\nAccretion on redeemable non-controlling interests to redemption value \n (766) \n (0.1) \n (841) \n (0.2) \n (509) \n (74) \n (0.1)\n\nNet loss attributable to Boqii Holding Limited’s ordinary shareholders \n (64,430) \n (9.1) \n (54,966) \n (11.7) \n (5,587) \n (812) \n (1.3)\n\nNet loss per share attributable to Boqii Holding Limited’s ordinary shareholders \n    \n    \n    \n    \n    \n    \n   \n\nBasic \n (102.4) \n    \n (45.6) \n    \n (1.47) \n (0.21) \n   \n\nDiluted \n (102.4) \n    \n (45.6) \n    \n (1.47) \n (0.21) \n   \n\nWeighted average number of ordinary shares \n    \n    \n    \n    \n    \n    \n   \n\nBasic \n 628,986  \n    \n 1,205,493  \n    \n 3,790,573  \n 3,790,573  \n   \n\nDiluted \n 628,986  \n    \n 1,205,493  \n    \n 3,790,573  \n 3,790,573  \n   \n\n \n\n106\n\n \n\n** **\n\n**Year Ended March 31, 2026 Compared to Year Ended March 31, 2025**\n\n** **\n\n**Net revenues**\n\n \n\nOur net revenues decreased\nby 10.3% from RMB468.9 million for the year ended March 31, 2025 to RMB RMB420.5 million (US$61.0 million) for the year ended March 31,\n2026. Net revenues generated from product sales decreased by 11.6% from RMB431.3 million for the year ended March 31, 2025 to RMB381.2\nmillion (US$55.3 million) for the year ended March 31, 2026. Net revenues generated from our online marketing and information services\nincreased by 4.4% from RMB37.6 million for the year ended March 31, 2025 to RMB39.3 million (US$5.7 million) for the year ended March\n31, 2026. The decrease in net revenues for product sales was a result of our business strategy to focus more on increasing profitability\ninstead of volume of sales. The increase in net revenues from online marketing and information services and other was due to expansion\nof services to existing customers and addition of new customers.\n\n** **\n\n**Cost of revenue**\n\n \n\nOur cost of revenue was RMB310.0\nmillion (US$44.9 million) for the year ended March 31, 2026, representing a decrease of 15.8% from RMB368.2 million for the year ended\nMarch 31, 2025, in line with our decreased revenue.\n\n** **\n\n**Gross profit**\n\n \n\nOur overall gross profit increased by 9.7% from RMB100.7\nmillion for the year ended March 31, 2025 to RMB110.4 million (US$16.0 million) for the year ended March 31, 2026. Our overall gross margin\nincreased from 21.5 % for the year ended March 31, 2025 to 26.3 % for the year ended March 31, 2026. The increase in gross margin was\nprimarily attributed to the improvement in the margin of our private label products that carry higher gross margin, which rose from 36.0%\nto 48.4% over the same period.\n\n \n\n**Operating expenses**\n\n \n\nOur operating expenses decreased\nby 12.4% from RMB160.7 million for the year ended March 31, 2025 to RMB140.8 million (US$20.4 million) for the year ended March 31, 2026,\nfor the following reasons:\n\n* *\n\n*Fulfillment expenses*\n\n \n\nOur fulfillment\nexpenses decreased by 34.6 % from RMB35.6 million for the year ended March 31, 2025 to RMB23.3 million (US$ 3.4 million) for the\nyear ended March 31, 2026. Fulfillment expenses as a percentage of total revenues were 5.5%, down from 7.6% in the year ended March\n31, 2025, which is primarily due to the decrease in shipping and warehousing expenses, resulting from more utilization of\nfulfillment centers.\n\n* *\n\n*Sales and marketing expenses*\n\n \n\nOur sales and marketing expenses\nincreased by 9.5% from RMB74.5 million for the year ended March 31, 2025 to RMB81.6 million (US$11.8 million) for the year ended March\n31, 2026. The increase was primarily due to (i) the increase in advertising expenses of RMB16.3 million attributable to the expansion\nof promotional activities on third-party e-commerce platforms, such as Pinduoduo and Douyin, partially offset by (ii) the decrease in\nthird-party platform commission fees of RMB2.0 million due to decrease in revenues, and (iii) the decrease in salary and benefits of RMB6.4\nmillion due to employee layoffs;\n\n \n\n*General and administrative expenses*\n\n \n\nOur general and administrative\nexpenses were RMB35.9 million (US$5.2 million), decreased by 29.0%, as compared to RMB50.6 million in the fiscal year 2025. The decrease\nwas primarily due to (i) the decrease in salary and benefits of RMB6.2 million due to employee layoffs; (ii) the decrease of RMB 3.2\nmillion in office rental expenses attributable to the relocation of Shanghai office, and (iii) the decrease of RMB3.9 million in professional\nfees, resulting from less financial activities in fiscal year 2026.\n\n \n\n**Other income, net**\n\n \n\nWe had other income, net\nof RMB0.7 million and RMB0.4 million (US$0.1 million) for the year ended March 31, 2025 and 2026, respectively, which was mainly attributable\nto government subsidies received in the respective periods.\n\n** **\n\n**Loss from operations**\n\n \n\nAs a result of the foregoing,\nour loss from operations decreased by 49.5% from RMB59.3 million for the year ended March 31, 2025 to RMB30.0 million (US$4.3 million)\nfor the year ended March 31, 2026.\n\n** **\n\n107\n\n \n\n** **\n\n**Interest income**\n\n \n\nOur interest income was RMB0.4\nmillion (US$0.1 million) for the year ended March 31, 2026, compared to RMB1.0 million for the year ended March 31, 2025. The decrease\nwas primarily attributable to a lower balance of bank deposits.\n\n** **\n\n**Interest expense**\n\n \n\nOur interest expense was\nRMB0.8 million (US$0.1 million) for the year ended March 31, 2026, compared to RMB6.5 million for the year ended March 31, 2025. The decrease\nwas primarily attributable to the redemption of the Yoken Series A-1 Warrants in November 2025, pursuant to which the related loan agreements\nwere terminated and interest no longer accrued as of the date thereof for the year ended March 31, 2026.\n\n** **\n\n**Other gains, net**\n\n \n\nWe recorded other gains, net of RMB29.5 million (US$4.3 million) for\nthe year ended March 31, 2026, compared to other losses, net of RMB0.2 million for the year ended March 31, 2025. The increase was primarily\nattributable to the following events during the year ended March 31, 2026: (i) an investment gain of RMB13.0 million recognized upon the\nrepurchase of Nanjing Xingmu by its founders, and (ii) other gain of RMB10.4 million recognized in connection with the redemption of the\nYoken Series A-1 Warrants in November 2025.\n\n** **\n\n**Net loss**\n\n \n\nAs a result of the foregoing, our net loss decreased by 96.8% from\nRMB58.6 million for the year ended March 31, 2025 to RMB1.9 million (US$0.3 million) for the year ended March 31, 2026.\n\n** **\n\n**Year Ended March 31, 2025 Compared to Year Ended March 31,\n2024**\n\n \n\nFor a detailed description\nof the comparison of our operating results for the year ended March 31, 2025 to the year ended March 31, 2024, see “*Item 5. Operating\nand Financial Review and Prospects—5.A. Operating Results—Year ended March 31, 2024 Compared to Year ended March 31,\n2023*” on the Amendment No. 1 to our annual report on Form 20-F for the year ended March 31, 2025 initially filed with the SEC\non October 29, 2024 (File No. 001-39547).\n\n** **\n\n**5.B Liquidity and Capital Resources**\n\n \n\n**Cash flows and working capital**\n\n \n\nThe following table sets forth a summary of our\ncash flows for the periods indicated:\n\n \n\n  \nFor the Year Ended March 31, \n\n  \n2024  \n2025  \n2026 \n\n  \nRMB  \nRMB  \nRMB  \nUS$ \n\n  \n(in thousands) \n\nNet cash used in operating activities \n (25,428) \n (66,832) \n (29,292) \n (4,244)\n\nNet cash generated from investing activities \n 47,814  \n 24,599  \n 23,726  \n 3,438 \n\nNet cash generated from/(used in) financing activities \n (33,132) \n 8,150  \n 16,334  \n 2,367 \n\nNet (decrease)/increase in cash and cash equivalents \n (10,746) \n (34,083) \n 10,768  \n 1,561 \n\nCash and cash equivalents at beginning of the year \n 89,850  \n 72,722  \n 38,659  \n 5,604 \n\nEffects of foreign exchange rate changes on cash and cash equivalents \n (6,382) \n 20  \n —  \n — \n\nCash and cash equivalents at the end of the year \n 72,722  \n 38,659  \n 49,427  \n 7,165 \n\n \n\nHistorically, we have not\nbeen profitable or generated positive operating cash flows. Our principal source of liquidity has been cash generated from financing activities.\nAs of March 31, 2024, 2025, and 2026, we had RMB72.7 million, RMB38.7 million, and RMB49.4 million (US$7.2 million) in\ncash and cash equivalents, respectively. Our cash and cash equivalents consist primarily of cash on hand and demand deposits placed with\nbanks and third-party payment processors, which are unrestricted as to withdrawal or use, have original maturities of three months or\nless at the time of purchase and are readily convertible to known amounts of cash. Our cash and cash equivalents are primarily denominated\nin Renminbi.\n\n \n\n108\n\n \n\n \n\n** **We had a positive working capital, representing the difference between\ntotal current assets and total current liabilities, of RMB206.2 million, RMB 176.5 million and RMB 134.1 million (US$19.4 million) as\nof March 31, 2024, 2025 and 2026, respectively. As of March 31, 2026, our total current liabilities were RMB59.5 million (US$8.6\nmillion), which primarily included short-term borrowings, accounts payable, accrued liabilities and other current liabilities. We recorded\nRMB16.0 million (US$2.3 million) in short-term borrowings as of March 31, 2026. RMB5.0 million in short-term borrowings outstanding as\nof March 31, 2026, has been settled as of the date of this report. We recorded RMB8.2 million (US$1.2 million) in accounts payable as\nof March 31, 2026. A substantial majority of our accounts payable is due to brand partners, with a credit period between 30 to 60 days.\nWe recorded RMB31.4 million (US$4.5 million) in accrued liabilities and other current liabilities as of March 31, 2026, which primarily\nincluded logistics expenses payable, refund obligation of sales returns, advances from customers, payable for investment, loan for Yoken\nSeries A-1 Warrant and bonds payable-preferred shares. We recorded Nil in derivative liabilities as of March 31, 2026 because\nof the redemption of the Yoken Series A-1 Warrants in November 2025.\n\n \n\nDespite the fact that we\nhad a positive working capital as of March 31, 2026, working capital constraints have in the past limited, and may continue to limit,\nour ability to grow revenues, especially with emerging brands that generally require larger inventory investments during their early commercial\ndevelopment. Working capital deficits will restrict our liquidity position and have a negative impact on our ability to repay current\nliabilities. Our inability to take actions that address our working capital deficit in a timely and efficient manner, including prudently\nmanaging our working capital, or raising additional equity or debt financing on terms that are acceptable to us when necessary, could\nmaterially adversely affect our liquidity, results of operations, financial condition and ability to operate. We believe that our current\ncash, cash equivalents and short-term investments and borrowings will be sufficient to meet our anticipated cash needs, including our\ncash needs for working capital and capital expenditures, for at least the next 12 months.\n\n \n\nWe may, however, require\nadditional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide\nto pursue. If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional\ncredit facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional\nequity securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash\nfor working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict\nour operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as\nrequired, our business operations and prospects may suffer.\n\n \n\n**Operating activities**\n\n \n\nNet cash used in operating activities was RMB29.3 million (US$4.2\nmillion) for the year ended March 31, 2026. The difference between our net loss of RMB1.9 million (US$0.3 million) and the net cash\nused in operating activities for the year ended March 31, 2026 was primarily attributable to (i) a decrease in accounts payable of RMB11.3\nmillion (US$1.6 million), (ii) gain on disposal of other debts amounting to RMB10.4 million (US$1.5 million), and (iii) gain from disposal\nof Nanjing Xingmu, a subsidiary, amounting to RMB13.0 million (US$1.9 million) in the year ended March 31, 2026.\n\n \n\nNet cash used in operating\nactivities was RMB66.8 million (US$9.2 million) for the year ended March 31, 2025. The difference between our net loss of RMB58.6 million\n(US$8.1 million) and the net cash used in operating activities for the year ended March 31, 2025 was primarily attributable to (i) an\nincrease in prepayments and other current assets of RMB26.7 million (US$3.7 million),(ii) an increase in due from related parties of RMB13.3\nmillion (US$1.8 million) and (iii) a decrease in operating lease liabilities of RMB10.1 million (US$1.4 million), partially offset by\n(i) a decrease in inventories of RMB15.1 million (US$2.1 million), (ii) a decrease in accounts receivable of RMB21.3 million (US$2.9 million),\nand (iv) amortization of right-of-use assets of RMB9.5 million (US$1.3 million) in the year ended March 31, 2025.\n\n \n\nNet cash used in operating\nactivities was RMB25.4 million (US$3.5 million) for the year ended March 31, 2024. The difference between our net loss of RMB68.9 million\n(US$9.5 million) and the net cash used in operating activities for the year ended March 31, 2024 was primarily attributable to (i) a decrease\nin accounts payable of RMB31.5 million (US$4.4 million), and (ii) a decrease in operating lease liabilities of RMB18.0 million (US$2.5\nmillion), partially offset by (i) a decrease in prepayments and other current assets of RMB11.5 million (US$1.6 million), (ii) a decrease\nin accounts receivable of RMB27.2 million (US$3.8 million), (iii) a decrease in inventories of RMB26.5 million (US$3.7 million), and (iv)\namortization of right-of-use assets of RMB17.9 million (US$2.5 million) in the year ended March 31, 2024.\n\n \n\n109\n\n \n\n \n\n**Investing activities**\n\n \n\nNet cash generated from investing activities was RMB23.7 million\n(US$3.4 million) for the year ended March 31, 2026, which was primarily attributable to proceeds from disposal of subsidiaries of RMB10.2\nmillion (US$1.5 million) and disposal of long-term investments of RMB15.7 million (US$2.3 million), partially offset by purchases of fixed\nassets of RMB1.1 million (US$0.2 million) in connection with the relocation of the Company’s headquarters.\n\n \n\nNet cash generated from investing\nactivities was RMB24.6 million (US$3.4 million) for the year ended March 31, 2025, which was primarily attributable to an increase\nin short-term investments of RMB4.0 million (US$0.6 million), partially offset by recovery of deposits used in connection with future\nacquisitions of RMB29.1 million (US$4.0 million).\n\n \n\nNet cash generated from investing\nactivities was RMB47.8 million (US$6.6 million) for the year ended March 31, 2024, which was primarily attributable to a decrease\nin short-term investments of RMB69.8 million (US$9.7 million), partially offset by deposits to be used in connection with future acquisitions\nof RMB29.1 million (US$4.0 million).\n\n \n\n**Financing activities**\n\n \n\nNet cash generated from financing\nactivities was RMB16.3 million (US$2.4 million) for the year ended March 31, 2026, which was primarily attributable to (i) proceeds from short-term and long-term borrowings of RMB19.0 million\n(US$2.8 million) and (ii) proceeds from issuance of ordinary shares, net of issuance costs of RMB24.3 million (US$3.5 million) partially\noffset by (i) repayments\nof short-term and long-term borrowings of RMB12.0 million (US$1.7 million), and(ii) repayments of other debts of RMB15.0 million (US$2.2\nmillion).\n\n \n\nNet cash generated from financing\nactivities was RMB8.2 million (US$1.1 million) for the year ended March 31, 2025, which was primarily attributable to (i) repayments\nof short-term and long-term borrowings of RMB37.7 million (US$5.2 million), and(ii) repayments of other debts of RMB10.0 million (US$1.4\nmillion), partially offset by (i) proceeds from short-term and long-term borrowings of RMB31.5 million (US$4.3 million), (ii) proceeds\nfrom issuance of other debts of RMB9.8 million (US$1.4 million), and (iii) proceeds from issuance of ADSs and ordinary shares, net of\nissuance costs of RMB14.5 million (US$2.0 million).\n\n \n\nNet cash used in financing\nactivities was RMB33.1 million (US$4.6 million) for the year ended March 31, 2024, which was primarily attributable to repayments\nof short-term and long-term borrowings of RMB86.0 million (US$11.9 million), partially offset by proceeds from issuance of ADSs and ordinary\nshares, net of issuance costs of RMB35.9 million (US$5.0 million).\n\n \n\n**Material Cash Requirements**\n\n \n\nOther than the ordinary cash\nrequirements for our operations, our material cash requirements as of March 31, 2026 and any subsequent interim period primarily include\nour capital expenditures and contractual obligations.\n\n** **\n\n**Capital Expenditures**\n\n \n\nOur capital expenditures\nare incurred primarily in connection with purchase of fixed assets, including electronic equipment, office equipment and vehicles, and\nintangible assets. Our capital expenditures were RMB0.6 million, RMB3.3 million and RMB1.1 million (US$0.2 million) for\nthe years ended March 31, 2024, 2025 and 2026, respectively. We intend to fund our future capital expenditures with our existing\ncash balance and proceeds from our bank loans and equity or debt offerings.\n\n** **\n\n110\n\n \n\n** **\n\n**Contractual Obligations**\n\n \n\nAs of March 31, 2026, we\nhad borrowings of RMB16.0 million (US$2.3 million), interest payable of RMB0.22 million (US$0.03 million), which are to be paid within\none year. The borrowings and interest payable represent our borrowings from commercial banks or other financial institutions for our working\ncapital and the corresponding interests payable.\n\n \n\nAs of the same date, we also\nhad operating lease commitments of RMB1.4 million (US$0.2 million) and RMB2.4 million (US$0.3 million), which are to be paid within\none year and between one to three years, respectively. Our operating lease commitments relate to our leases of offices and warehouses.\n\n \n\nWe intend to fund our existing\nand future material cash requirements with our existing cash balance and other financing alternatives. We will continue to make cash commitments,\nincluding capital expenditures to support the short-term and/or long-term growth of our business.\n\n** **\n\n**Holding Company Structure**\n\n \n\nBoqii is a holding company\nwith no material operations of its own. We conduct our operations primarily through our subsidiaries and the VIEs and their subsidiaries\nin the PRC. For the year ended March 31, 2024, 2025, and 2026, the amount of revenues generated by the VIEs accounted for 71.2%,\n55.3%, and 33.2%, respectively, of our total net revenues.\n\n \n\nWe are permitted under PRC\nlaws and regulations to provide funding to our PRC subsidiaries in China through capital contributions or loans, subject to the approval\nof government authorities and limits on the amount of capital contributions and loans. In addition, our subsidiaries in China may provide\nRenminbi funding to the VIEs only through loans. As a result, there is uncertainty with respect to our ability to provide prompt financial\nsupport to our PRC subsidiaries and VIEs when needed. See “*Item 3. Key Information—3.D. Risk Factors—Risks Related\nto Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental\ncontrol of currency conversion may delay us from using the proceeds of our initial public offering to make loans or additional capital\ncontributions to our PRC subsidiaries and to make loans to the VIEs, which could materially and adversely affect our liquidity and our\nability to fund and expand our business*.” Notwithstanding the foregoing, our PRC subsidiaries may use their own retained earnings\n(rather than Renminbi converted from foreign currency-denominated capital) to provide financial support to the VIEs either through loans\nfrom our PRC subsidiaries or direct loans to the VIEs’ nominee shareholders, which would be contributed to the VIEs as capital injections.\nSuch direct loans to the nominee shareholders of the VIEs would be eliminated in our consolidated financial statements against such VIEs’\nshare capital. For more information, see “*Item 3. Key Information—Condensed Consolidating Schedule*” and consolidated\nfinancial statements included elsewhere in this annual report.\n\n \n\nOur ability to pay dividends\ndepends upon dividends paid by our subsidiaries which, in turn, depends on the payment of the service fees to our PRC subsidiaries by\nthe VIEs in the PRC pursuant to certain contractual arrangements among our PRC subsidiaries, the VIEs and the VIEs’ shareholders.\nConsidering the future operating and cash flow needs of the VIEs, for the years ended March 31, 2024, 2025, and 2026, no service fees\nwere charged to the VIEs by the WFOEs, and no payments were made by the VIEs. The ability of our subsidiaries in China to make dividends\nor other cash payments to us is subject to various restrictions under PRC laws and regulations. Our subsidiaries in China are permitted\nto pay dividends to us only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business\nEnterprise as promulgated by the Ministry of Finance of the PRC, or PRC GAAP. In accordance with PRC company laws and the Foreign Investment\nLaw, the VIEs and subsidiaries in China must make appropriations from their after-tax profit to non-distributable reserve funds\nincluding (i) the statutory surplus fund and (ii) the discretionary surplus fund. The appropriation to the statutory surplus\nfund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if\nthe statutory surplus fund has reached 50% of the registered capital of the VIEs. Appropriation to the discretionary surplus fund is made\nat the discretion of the VIEs. For associated risks, see “*Item 3. Key Information—3.D. Risk Factors—Risks Related\nto Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash\nand financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a\nmaterial and adverse effect on our ability to conduct our business*.” Additionally, if our subsidiaries or any newly formed subsidiaries\nincur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.\n\n \n\n111\n\n \n\n \n\n**5.C. Research and Development**\n\n \n\nWe have been focusing on\nand will continue to invest in and enhance our technology systems, which support all key aspects of our online platforms and are designed\nto optimize for scalability and flexibility. We believe strong technology and data capabilities help achieve our long-term strategic goals.\nTherefore, we conduct our research and development according to our strategic objectives, market trends, and customer needs.\n\n \n\nOur research and development\nactivities primarily focus on enhancing the performance of our online platforms, making them more efficient, user-friendly, and responsive.\nIn March 2022, we integrated a payment and collection system for our sales on WeChat mini program to fulfill our business needs. \nAdditionally, we have developed new features and integrated with multiple payment platforms for our online platforms to further enhance\nuser convenience. We aim to enhance our platforms that not only meet current needs of pet parents and provide them with the best possible\nexperience, but also have the ability to adapt and expand as we grow.\n\n \n\nOur strong technology and\ndata capabilities enable us to deliver superior user experience and increase our operational efficiency. See “*Item 4. Information\non the Company-4.B. Business Overview-Our Technology*.”\n\n** **\n\n**5.D. Trend Information**\n\n \n\nOther than as disclosed elsewhere\nin this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended March 31, 2026\nthat are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources,\nor that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial\ncondition.\n\n** **\n\n**5.E. Critical Accounting Estimates**\n\n \n\nOur consolidated financial\nstatements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the\nreported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated\nfinancial statements and accompanying notes.\n\n \n\nOur estimates are based on\nhistorical experience and various assumptions that we believe to be reasonable under the circumstances. Given that changes in circumstances,\nfacts and experience may cause us to revise our estimates, actual results could differ materially from those estimates. Our critical accounting\nestimates are described below.\n\n** **\n\n**Allowance for expected credit losses**\n\n \n\nPrior to April 1, 2023, the\nCompany monitors the collection of its receivables and records allowance for specifically identified non-recoverable amounts, If the economic\nsituation and the financial condition of a customer deteriorate resulting in an impairment of the customer’s ability to make payments,\nadditional allowances might be required. Receivable balances are written off when they are determined to be uncollectible.\n\n \n\nStarting from April 1, 2023,\nthe Company adopted ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses on Financial\nInstruments” (“ASC Topic 326”), which creates an impairment model that is based on expected losses rather than incurred\nlosses. To estimate the allowance for current expected credit losses (“CECL”). the Company has identified the relevant risk\ncharacteristics of its customers and the related receivables and other receivables which include but are not limited to geographic region\nand industry. Receivables with similar risk characteristics have been grouped into pools. For each pool, the Company considers the past\ncollection history, future forecasts and macroeconomic factors. Other key factors that influence the CECL, analysis include industry-specific\nfactors and certain qualitative adjustments that could impact the Company’s receivables. This is assessed at each period end based\non the Company’s specific facts and circumstances.\n\n \n\n**Inventories**\n\n \n\nInventories are stated at\nthe lower of cost and net realizable value. Cost elements of our inventories comprise the purchase price of products, vendor rebates,\nshipping charges to receive products from the suppliers when they are embedded in the purchase price. Cost is determined using the first-in\nfirst-out method. Provisions are made for excessive, slow moving, expired and obsolete inventories as well as for inventories with carrying\nvalues in excess of market. Certain factors could impact the realizable value of inventory, so we continually evaluate the recoverability\nbased on assumptions about customer demand and market conditions. The evaluation may take into consideration historical usage, inventory\naging, expiration date, expected demand, anticipated sales price, new product development schedules, the effect new products might have\non the sale of existing products, product obsolescence, customer concentrations, and other factors. The reserve or write-down is equal\nto the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and\nmarket conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or\nwrite-downs may be required that could negatively impact our gross margin and operating results. If actual market conditions are more\nfavorable, we may have higher gross margin when products that have been previously reserved or written down are eventually sold.\n\n \n\n112\n\n \n\n \n\n**Impairment of long-lived assets other than\ngoodwill**\n\n \n\nLong-lived assets (including\nproperty and equipment and amortizable intangible assets) are evaluated for impairment whenever events or changes in circumstances (such\nas a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount\nmay not be fully recoverable or that the useful life is shorter than we had originally estimated. When these events occur, we evaluate\nthe impairment by comparing carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from\nthe use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying\nvalue of the assets, we recognize an impairment loss based on the excess of the carrying value of the assets over the fair value of the\nassets. No impairment charges were recognized for the years ended March 31, 2024, 2025 and 2026.\n\n \n\n**Long-term investments**\n\n \n\nOur investments include equity\nmethod investments, equity securities with readily determinable fair values and available-for-sale securities.\n\n \n\nWe apply the equity method\nof accounting to account for an equity investment, in common stock or in-substance common stock, according to ASC 323 “Investment-Equity\nMethod and Joint Ventures,” over which it has significant influence but does not own a majority equity interest or otherwise control.\nUnder the equity method, our share of the post-acquisition profits or losses of the equity investees are recorded in share of results\nof equity investees in the consolidated statements of comprehensive loss. The excess of the carrying amount of the investment over the\nunderlying equity in net assets of the equity investee, if any, represents goodwill and intangible assets acquired. When our share of\nlosses in the equity investee equals or exceeds its interest in the equity investee, we don’t recognize further losses, unless we\nhave incurred obligations or made payments or guarantees on behalf of the equity investee.\n\n \n\nEquity securities with readily\ndeterminable fair values are measured and recorded at fair value on a recurring basis with changes in fair value, whether realized or\nunrealized, recorded through the income statement.\n\n \n\nDebt securities that we have the intent to hold\nthe security for an indefinite period or may sell the security in response to the changes in economic conditions are classified as available-for-sale\nsecurities and reported at fair value. Unrealized gains and losses (other than impairment losses) are reported, net of the related tax\neffect, in other comprehensive income. Upon sale, realized gains and losses are reported in net income.\n\n \n\nWe continually review our\ninvestments to determine whether a decline in fair value to below the carrying value is other-than-temporary. The primary factors we consider\nin our determination are the duration and severity of the decline in fair value; the financial condition, operating performance and the\nprospects of the equity investee; and other company specific information such as recent financing rounds. If the decline in fair value\nis deemed to be other-than-temporary, the carrying value of the investment is written down to fair value."}