{"url_path":"/sec/pom/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 INFORMATION ON THE COMPANY","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1877971/0001213900-26-056576-index.html","accession_number":"0001213900-26-056576","cik":"0001877971","ticker":"POM","issuer_name":"POMDOCTOR Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1877971/0001213900-26-056576-index.html","primary_entity_key":"0001877971","primary_entity_name":"POMDOCTOR Ltd"},"word_count":23650,"has_tables":true,"body_markdown":"ITEM 4.INFORMATION ON THE COMPANY\n\n \n\n4.A.\nHistory and Development of the Company\n\n \n\nWe commenced our business operations\nin January 2010 through Guangzhou Qilekang Pharmaceutical Chain Co., Ltd., a PRC limited liability company. To facilitate the growth\nof our business, we incorporated or acquired various PRC operating entities including Guangzhou Qilekang Modern Pharmaceutical Logistics\nCo., Ltd. and Hangzhou Qilekang Pharmaceutical Co., Ltd. With the growth of our business and in order to facilitate international capital\ninvestment in us, we started a reorganization as described below involving new offshore and onshore entities in March 2021.\n\n \n\nIn February 2021, we incorporated\nPOMDOCTOR LIMITED as our proposed listing entity in the Cayman Islands. Further, POMEGRANATE CLOUD MEDICAL LIMITED was established in\nHong Kong in March 2021 and Guangzhou Pomegranate Cloud Medical Health Medical Technology Co., Ltd. was established in the PRC\nin April 2021. In May 2021, Guangzhou Qilekang Pharmaceutical Chain Co., Ltd. was renamed as Guangzhou Qilekang Digital Health\nMedical Technology Co., Ltd., or Qilekang Digital Health.\n\n \n\nIn August 2021, Guangzhou WFOE\nentered into a series of agreements with Qilekang Digital Health and the shareholders of Qilekang Digital Health (except for Zhongke Baiyun).\nIn October 2023, we terminated the contractual arrangements with General Technology Group Investment Management Co., Ltd., or General\nTechnology. In the same month, we terminated the relevant agreements with Mr. Zhenyang Shi and Ms. Li Xu, with Guangzhou WFOE entering\ninto a new series of agreements with Qilekang Digital Health and each of Mr. Zhenyang Shi and Ms. Li Xu, Guangzhou Jin Pin, Guangzhou\nJin Shang, Guangzhou Jin Yue, and Guangzhou Jin Qiu. The agreements enable us to obtain control over Qilekang Digital Health through Guangzhou\nWFOE. As a result of the VIE Arrangements, the VIE is not our majority owned subsidiary, but we still are and will be the primary beneficiary\nof the VIE for accounting purpose only, and only to the extent that we satisfy the conditions required for consolidation of the VIE under\nU.S. GAAP. We treated the VIE and its subsidiaries as our consolidated affiliated entities under generally accepted accounting principles\nin the United States, or U.S. GAAP for the years ended December 31, 2023, 2024 and 2025. We consolidated the financial results of\nthe VIE and its subsidiaries in our financial statements in accordance with U.S. GAAP for the same periods. We are a Cayman Islands exempted\ncompany and primarily conduct our operations through the VIE and its subsidiaries in China. Investors are not buying shares of a VIE but\ninstead are buying ADS representing shares of an offshore holding company issuer that maintains service agreements with the VIE.\n\n \n\nIn October 2025, our\nADSs commenced trading on the Nasdaq Global Market under the symbol “POM.” We raised, from our initial public offering and\nfrom the underwriter’s full exercise of option to purchase additional ADSs, approximately US$20.0 million\nin net proceeds after deducting underwriting commissions and the offering expenses payable by us.\n\n \n\nOur principal executive offices are located at Yongxu Industrial Park,\nNo.19-23, Hejing Road, Dongsha Street, Liwan District, Guangzhou 510000, People’s Republic of China. Our telephone number at this\naddress is +86 020-6231 2277. Our registered office in the Cayman Islands is located at the offices of Appleby Global Services (Cayman)\nLimited, PO Box 500, Suite 210, 2nd Floor, Windward III, Regatta Office Park George Town, Grand Cayman, KY1-1106, Cayman Islands, KY1-1106.\nOur agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY\n10168.\n\n \n\n4.B.\nBusiness Overview\n\n** **\n\n**Who We Are**\n\n** **\n\nWe are a leading online medical\nservices platform for chronic diseases in China, ranking sixth on China’s Internet hospital market measured by the number of contracted\ndoctors in 2022, according to Frost & Sullivan. As of December 31, 2023, 2024 and 2025, the cumulative number of contracted\ndoctors stabilized at over 210,000, while the transacting patients increased from 654,817 as of December 31, 2023 to 699,338 as\nof December 31, 2024, further to 753,635 as of December 31, 2025. As of December 31, 2025, our contracted doctors issued approximately\n3.4 million prescriptions.\n\n \n\nWith focuses on chronic disease\nmanagement and pharmaceutical services, our business model forms a one-stop platform for medical services, which organically connects\npatients to doctors and pharmaceutical products. Our experience in tackling chronic diseases can be traced back to the launch of our platform\non mobile devices in 2015. We strategically chose to focus on this field because chronic diseases last at least one year by definition,\nand they are hard to cure, prone to complications and require ongoing medical attention. As such, patients with chronic diseases have\na great and relatively inelastic demand for frequent and repeat follow-up visits and of drug purchases, which gives a competitive advantage\nto platforms that are able to maintain long-term, stable doctor-patient relationships.\n\n \n\n58\n\n \n\n \n\nWe believe that doctors are\nthe most important resource in the medical services industry. Hence, we have established an open Internet** **hospital\nbusiness model that focuses on serving them. In this model, our smart online medical service platform offers a range of services and tools\nto facilitate online consultation and prescription, which include a WeChat official account that facilitates doctor-patient communications,\nand *Pom Doctor*, a doctor-end patient management portal. These online consultations and prescriptions are carried out during one-to-one\ngraphic consultation sessions where the patients send texts and pictures to the doctors for diagnoses, and we plan to gradually launch\nphone and video consultation. Our platform only provides services for follow-up patients who already have prescriptions from separate,\noffline services. See “—Internet Hospital Business—Online consultation and prescription renewal.”\n\n \n\nAt the same time, our platform\nenables patients to conveniently connect with our doctors and obtain one-stop medical services, which include online consultations and\nonline prescriptions anywhere, anytime. Because our patients were mainly sourced by doctors via existing offline patient-doctor relationships,\ntheir mutual trust is also transferred online, which translates into greater user stickiness on both ends and allows for great monetization\npotential from our treatment and prevention solutions. In 2023, 2024 and 2025, we achieved a retention rate for mature doctors of 99.9%,\n99.4% and 98.9%, respectively. In addition, we recorded a 90-day patient repurchase rate, representing the average turnover period of\nthe prescription drug usage, of 63.7%, 66.2% and 62.1% in 2023, 2024 and 2025, respectively. As chronic diseases last more than one year\nby definition and requires ongoing medical attention, such high 90-day patient repurchase rates encourage the patients to continue using\nour platform for its ease of use during the long course of their disease management and also motivates doctors to stay on the platform\nand serve the patients that they have become familiar with in the same period, which benefits our chronic disease management business.\n\n \n\nLeveraging our mature doctors’\nresource, we have achieved a particularly high repeat purchase rate of patients in our hepatopathy department of 72.7%, 73.9% and 73.5%\nin 2023, 2024 and 2025, respectively. We have also achieved an average revenue per paying patient on our platform of RMB911 in 2025 and\nRMB766 in 2024, which increased as compared with RMB714 in 2023.** **Eventually, our seasoned supply chain carries out\nthe fulfillment of the patients’ orders, which both helps alleviate or eliminate their suffering and opens the door to future consultations.\n\n \n\n**Industry Challenges and Market Opportunities**\n\n** **\n\nA series of barriers and inefficiencies\nexist in China’s current chronic disease management system, which leave many needs of chronic disease patients unfulfilled. Complementing\nexisting offline solutions, Internet chronic disease management, or CDM, platforms form an important part of the solution because of their\nability to alleviate the situation by improving customer experience and streamlining the distribution of medical resources. Leveraging\nour platform and our services, we believe that we are capable of solving those problems by seizing multiple significant opportunities,\nwhich include:\n\n \n\n*Improved Medical Information Technology: *With\nthe establishment of hospital information systems and the development of Internet platform technology, the infrastructure required for\nInternet CDM will become more and more completed, which allows the Internet CDM market to rapidly expand*.*\n\n \n\n*Collaborative CDM System: *The\ndevelopment of the Internet hospital industry gave birth to collaborative CDM systems, which harness frontline data and management experience\nto cover the whole lifecycle of chronic disease patients by inviting doctors, patients and related medical enterprises and institutions\nto participate in the process. As a step-up from traditional hospital-based CDM systems, collaborative CDM system’ ability to both\nindividualize and standardize chronic disease management before, during and after consultation caters to unmet needs and promises huge\nmarket potential.\n\n \n\n*Increased Awareness of Health Management. *The\noutbreak of COVID-19 improved general health management awareness, which has increased the popularity of Internet CDM. In addition,\ncharacterized by its ability to effectively increase the provision of medical resources despite epidemics, alleviate front-line pressure,\navoid cross-infection, and improve prevention and control efficiency, Internet CDM is expected to ride significant tailwind in the post-COVID-19\nworld.\n\n \n\n59\n\n \n\n \n\n*Unequal Distribution of Medical Resources. *Most\ntertiary hospitals, which possess high-quality medical resources, are concentrated in more urbanized regions of China. Consequently, rural\npatients’ access to such resources through off-line channels is significantly limited. Therefore, the underserved patients may turn\nto Internet CDM platforms, which are capable of solving this problem by streamlining diagnosis and treatment and optimizing service processes.\n\n \n\nIn addition, we believe that\nour business will benefit from the state-promulgated policies to strengthen the prevention and treatment of chronic diseases, as well\nas the development of China’s digital healthcare industry. According to Frost & Sullivan, the market size of China’s\ndigital healthcare industry will grow from approximately RMB540.7 billion in 2022 to approximately RMB1,525.9 billion in 2027,\nrepresenting a CAGR of approximately 23.1%.\n\n \n\n**Our Value Proposition**\n\n** **\n\nLeveraging our online medical\nservices platform, we have broken through traditional process limitations, integrated offline resources and narrowed healthcare disparities\nbetween regions within China. We believe that our one-stop online medical services platform that can offer a full range of value propositions\nfor all participants in the healthcare industry:\n\n \n\n*●**For patients: *Our platform\nreduces the time spent on commuting to hospitals, lining up for appointments, and filling prescriptions. It helps patients connect with\ntheir original attending doctors from offline hospitals who are more familiar with their conditions through one-on-one consultation and\noffers more convenient access to medicine and delivery, especially in areas where local hospitals have limited drug supplies. With the\nhelp of our platform, one patient from Kashgar, Xinjiang is able to consult his original attending doctor in Chongqing, approximately\n4,138 kilometers away, at least three times annually.\n\n \n\n●*For doctors: *Our platform’s\ncapability to break physical barriers fosters convenient doctor-patient interactions and encourages multi-institution practice, which\nin turn enables continuous personal brand accumulation, optimizes the allocation of medical resources, and increases their income. Equipped\nwith assisted consultation, complete medical records of patients and online prescription capabilities of our platform, our doctors are\nliberated from menial and repetitive tasks so that they can diagnose and treat patients with improved efficiency and easily refer to\nthese electronic materials for their academic research.\n\n \n\n●*For pharmaceutical companies: *Our\nplatform is able to provide extensive key clinical data, including patient conditions, consultation frequencies, and medications, to\npharmaceutical companies. This helps optimize drug clinical trials, increase the efficiency of new drugs and perform accurate online\ntargeted advertising, which benefits pharmaceutical research and marketing.\n\n \n\n \n\n60\n\n \n\n \n\n**Our Business Model**\n\n** **\n\n \n\nOur business primarily consists\nof Internet** **hospital and pharmaceutical supply chain, connecting users, pharmacies, suppliers, medical professionals,\nand other healthcare participants and aiming to improve the efficiency and transparency of the healthcare value chain.\n\n \n\nLeveraging our technology infrastructure\nand capabilities, we connect doctors to build an Internet CDM platform and provide digitalized smart healthcare solutions. Our Internet** **hospital\nservices primarily include online consultation and prescription renewal and CDM service. Our pharmaceutical supply chain primarily provides\nother pharmaceutical platforms with supply chain management and platform operation services.\n\n \n\nOur Internet** **hospital\nand pharmaceutical supply chain complement each other to create a synergistic loop business model in the healthcare value chain.\n\n \n\n61\n\n \n\n \n\n**Internet Hospital Business**\n\n** **\n\nWe established a whole-industry-chain,\none-stop comprehensive online medical services platform focusing on chronic disease medical treatments in China, which was built with\npatients and doctors as the center. Our Internet** **hospital services platform connects doctors with patients to achieve\na streamlined and affordable experience. It can be accessed through the mobile app and WeChat official account that we operate. The following\nscreenshots illustrate the interface of our Internet** **hospital services platform.\n\n  \n\n \n\nWhen we launched our Internet** **hospital\nservices, we mainly targeted to fulfill users’ need to purchase prescription drugs online by offering online prescription renewal\nservice. Gradually, we have expanded our Internet** **hospital services to include online consultation and prescription\nrenewal.\n\n \n\n**Online consultation and prescription renewal**\n\n** **\n\nOur online consultation and\nprescription renewal service encompass a wide range of conditions and cases, with a focus on chronic diseases. Our online consultation\nand prescription renewal service is staffed by our contracted doctors. For details on our medical team, see “—Medical team\non our platform.”\n\n \n\nWe have developed a seamless,\nmulti-step online consultation process to better suit the specific nature of our Internet** **hospital services. Patients\nwho use our online consultation and prescription renewal service receive our personalized consultation service offerings through one-to-one\ngraphic consultation. We will also gradually launch phone and video consultation. When a patient contacts a doctor offline for the first\ntime, he/she can establish a connection with the doctor through our platform by scanning the doctor’s exclusive QR code. When the\npatient needs a follow-up consultation, he can do away with visiting a hospital or an outpatient clinic and directly make an appointment\nwith the doctor for an online follow-up consultation through our platform. The patient can freely send his inquiries to the doctor selected\nby him in the formats of text, picture or live chats. Depending on the availability of the specific doctor, the type of consultation service\nand the urgency of the consultation needs, the patient would receive a response from as soon as one minute to an average of two hours.\nAfter the follow-up consultation, the doctor will provide prescription renewal based on the patient’s situation.\n\n \n\n62\n\n \n\n \n\nThe screenshots below illustrate\nthe process of establishing doctor-patient connections through the Mobile App for doctors:\n\n \n\n \n\nThe screenshots below illustrate\nthe process of renewing prescriptions:\n\n \n\n \n\nIn addition, patients can also\nconsult doctors on some simple medical issues through our platform. Patients could first describe their symptoms via text or picture.\nOur smart routing system will automatically generate a list of doctors for patients to choose based on the description of symptoms and\ntheir medical records. Patients can also browse our doctor bank by department and select a doctor of their own choice. Each doctor has\na profile page that shows the doctor’s main experience, professional fields, and user feedback. Each medical consultation lasts\nup to 24 hours by system default and can be terminated by the doctor upon its conclusion. Based on a patient’s responses during\nthe consultation, the doctor provides medical recommendations or advises the patient to conduct detailed examinations at hospitals and\nupload the results to our system for follow-up consultations.\n\n \n\n63\n\n \n\n \n\n \n\n \n\n**Chronic disease management**\n\n** **\n\nWe provide an Internet CDM\nplatform, which consists of a patient management portal in a mobile app form for doctors and other multiple channels for patient-doctor\ncommunications, e.g. WeChat official account. In addition to enabling seamless patient-doctor matches via QR codes and SNS invitation\nlinks, our platform also allows doctors to organize patients into different groups, view their profiles, and prioritize patients with\nspecial needs or in a particular treatment stage so that they can more efficiently follow up with and manage their patients. For example,\nour doctors are able to review the purchase records of a specific patient who has received an online prescription and follow up if they\nhave not purchased the medication. Our platform also saves and provides convenient access to frequently prescribed medications according\nto each doctor’s preference and allows one-click prescription renewal. Furthermore, our platform provides a series of specialist\nservice tools that allows doctors to conduct research through their consistent and convenient communication with their patients. In this\nway, our platform improves treatment efficiency, streamlines patient management and enables doctors to reach and dedicate to a broader\npatient base. As a cloud-based system, its current focus is hepatology and andrology, and we plan to gradually expand its service offerings\nto other chronic diseases in the future. Leveraging our supply chain capabilities, the platform integrates with our retail pharmacy business,\ngiving doctors and patients seamless access to our product offerings.\n\n \n\n64\n\n \n\n \n\n**Medical team on our platform**\n\n** **\n\nOur Internet** **hospital\nservices are staffed by our contracted doctors who provide patients with services of fast turnaround times. Our contracted doctors are\npivotal to our on-demand healthcare services. As of December 31, 2025, our contracted doctors had on average over 9.4 years\nof experience as medical professionals, and our doctors issuing prescriptions and mature doctors had on average over 9.3 years and\n9.1 years of experience as medical professionals, respectively. All of our contracted doctors are graded as resident doctors and\nabove.\n\n \n\nOur sales team approaches doctors\nthrough ground promotion. We have put in place a stringent selection process for in-house doctors who wish to participate in our Internet** **hospital\nservices, which involves on-line background checks, qualification verification and in-role trial evaluations. In specific, we require\nthese doctors to provide relevant professional certifications, including Physician Qualification Certificate, Physician Practice Certificate\nand Title Certificate. After passing online authentication, the doctor will sign an electronic agreement, and become a contracted doctor\non our platform, and only then could they provide diagnosis and issue prescriptions on our platform.\n\n \n\nWe provide ongoing training\nand professional development programs to our contracted doctors. These trainings generally encompass rules on platform use, general and\nspecialized medical knowledge, case studies, corporate culture and IT skills, which are designed to enhance their professional knowledge\nand management skills.\n\n \n\n**Online drug sales**\n\n** **\n\n*Prescription drugs ordering*\n\n* *\n\nOur contracted doctors who\nhave completed their multi-institution registration offer online prescription renewal services. After a patient receives a prescription,\na shopping cart list corresponding to the prescription will be generated in his/her account. Our pharmacist verification system ensures\nthat doctors’ prescriptions comply with the relevant rules and regulations. After receiving prescriptions from doctors, our pharmacists\nwill verify the prescriptions according to the Drug Administration Law. If the pharmacists find any prescription to be in any potential\nviolation of the Drug Administration Law, they will return the prescriptions to the doctors, who must then adjust the prescriptions accordingly\nto ensure compliance. Otherwise, our pharmacists can deny further processing of the prescription. However, given that our platform only\nissues prescriptions for patient’s follow-up visits and the patients would have already possessed verified prescriptions from offline\nchannels before consulting our platform, the frequency of the aforementioned prescription return is negligible. In addition, we have set\nupper limits for prescription drug dosage pursuant to the relevant rules and regulations. Only after pharmacist verification may the patient\nconfirm the shopping cart list and make payment. The online prescriptions will be transferred to our pharmacy center to be further reviewed\nby our pharmacists. Eventually, the drugs will be delivered to the designated address of the patient.\n\n \n\n*Pricing*\n\n* *\n\nWe offer competitive pricing\nto attract and retain customers. We seek to optimize our cost structure and create incentives for our suppliers to provide us with competitive\nprices. Prices are set by us with reference to those on other major online retailers in the PRC and general market trends and industry\ndynamics.\n\n \n\n*Payment*\n\n* *\n\nCustomers may pay online at\nthe time that they place the order, using WeChat Pay and other WeChat-related payment methods.\n\n \n\n65\n\n \n\n \n\nThe pharmaceutical and healthcare\nproducts or online healthcare services purchased on our platform are generally not covered by China’s medical insurance programs.\nWith the promulgation of the Guiding Opinions on Promoting Medical Insurance Payment for “Internet+” Medical Services (Yi\nBao Fa (2020) 45) of the National Healthcare Security Administration in 2020, which clarifies online prescription drug expenses generated\nfrom qualified “Internet+” medical services can be paid by online medical insurance, patients’ online medical service\nand prescription drug expenses will be covered by national medical insurance programs. Guangzhou City of Guangdong Province has started\nto implement online medical insurance payment for chronic diseases. We have obtained the online medical insurance payment qualification\ngranted by the Guangzhou Municipal Medical Security Bureau, and will gradually offer payment methods for online medical insurance reimbursement\nto patients in Guangzhou. We believe that in the next few years, as the Chinese government goes on exploring the possibility of integrating\nthe medical system with online medical services platforms, we will have clearer access to the national health insurance system in other\nareas. Therefore, we will offer medical insurance payment method and other diversified payment methods in the future.\n\n \n\n*Customer service*\n\n* *\n\nProviding satisfactory customer\nservices has been one of our top priorities. Customers can ask questions and leave complaints in writing with pictures through our platform\nby initiating an IM conversation with our customer service representatives, or they can call our service representatives.\n\n \n\nWe generally allow customers\nto modify or cancel an order any time through our online system or customer service center before the warehouse prints out the order for\npicking and packing.\n\n \n\nIn accordance with relevant\nlaws and regulations for food and drugs in the PRC, we do not accept return or exchange requests for drugs except for product quality\nreasons. For other products under direct sales, we generally allow customers to return unused goods within seven days and to exchange\ndefective goods. In respect of products of which we manage inventories, we are generally responsible for the shipping fees of defective\nproducts for return or exchange from the customers, provided that the return or exchange is requested within seven days of receipt\nof the item.\n\n \n\n**Pharmaceutical Distribution Business**\n\n** **\n\nRelying on our established\nsupply chain capabilities, our professional team distributes pharmaceutical products to leading third-party pharmaceutical platforms,\noffline pharmacies, and pharmaceutical wholesale companies in China. We typically enter into an order and sales contract with downstream\ncustomers and subsequently employ nationally recognized third-party logistics services providers to deliver drugs on time in accordance\nwith the planned order volume and other contractual terms. Leveraging the demand from our Internet hospital business, we are able to secure\nfavorable terms for our cooperation with pharmaceutical companies and suppliers, which lowers our procurement cost and in turn increases\nour profit margin.\n\n \n\n**Recent Developments**\n\n** **\n\nIn connection with the growth\nof our internet hospital business, through our subsidiaries, we have entered into sales and purchase agreements with several domestic\npharmaceutical companies, including Jiangsu Haosoh Pharmaceutical Group Co., Ltd., Xiamen Amoytop Biotech Co., Ltd., Shenyang Sinqi Pharmaceutical\nCo., Ltd. and Eddingpharm (Suzhou) Co., Ltd. These arrangements enable us to offer certain pharmaceutical products, including innovative\nand patented drugs, through our internet hospital platforms. Under these agreements, we may be entitled to purchase discounts, rebates\nand sales incentives upon the satisfaction of agreed conditions, including specified sales targets.\n\n \n\nWe are also expanding the integration\nof our platform with China’s national and local coordinated medical insurance systems in selected cities. We have integrated our\nplatform services with local online medical insurance payment systems in certain cities, including Guangzhou, where we have supported\nmedical insurance settlements for chronic and special disease outpatients for more than two years. We plan to further expand such integration\ninto other cities in the Greater Bay Area and certain other major cities in China. We believe such integration may improve user convenience\nand enhance the service capabilities of our platform, although the timing and scope of such expansion remain subject to regulatory developments,\nlocal implementation progress and other uncertainties.\n\n \n\n66\n\n \n\n \n\nIn addition, we are advancing\na strategic upgrade focused on the integration of artificial intelligence, or AI, and medical-grade smart wearable devices for full-cycle\nchronic disease management. We plan to invest in related technology research and development and scenario-based implementation, with the\ngoal of developing a chronic disease management ecosystem that integrates hardware, data, algorithms and services. Our current areas of\nfocus include the development of medical-grade smart wearable devices, AI-enabled chronic disease management tools and a closed-loop service\nsystem integrating such technologies with our existing internet hospital platform, pharmaceutical supply chain and chronic disease service\ninfrastructure. The timing, scope and effectiveness of these initiatives remain subject to technological development, regulatory requirements,\ncapital availability and market acceptance.\n\n \n\n**Offline Presence**\n\n** **\n\nWe also maintain offline brick-and-mortar\npharmacies to ensure compliance with relevant PRC laws and regulations. See “—Regulation—Regulations relating to Pharmaceutical Operation.” In addition, we also partner with third-party\noffline pharmacies to serve a broader customer base. As of December 31, 2025, our one self-owned pharmacies and 27 third-party pharmacies\ncover seven first-tier and second-tier cities in China.\n\n \n\n**Drug Sourcing**\n\n** **\n\nAs of December 31, 2025,\nwe collaborated with 703 suppliers offering 46,912 SKUs. For the years ended December 31, 2023, 2024 and 2025, our top five\nsuppliers accounted for 63.1%, 66.5% and 79.7% of our total purchases in 2023, 2024 and 2025, respectively. For the year ended December 31,\n2023, two suppliers, namely Dongguan Chaoyang Pharmaceutical Co., Ltd. and Guangzhou Suize Pharmaceutical Co., Ltd., collectively accounted\nfor 44.0% of our total purchases. For the year ended December 31, 2024, one supplier, namely Dongguan Chaoyang Pharmaceutical Co.,\nLtd., accounted for 39.1% of our total purchases. For the year ended December 31, 2025, two suppliers, namely Dongguan Chaoyang Pharmaceutical\nCo., Ltd. and Guangzhou Guoying Pharmaceutical Co., Ltd., collectively accounted for 63.4% of our total purchases. We are currently expanding\nour supplier base to further enhance the coverage of our product offering.\n\n \n\nWe select suppliers primarily\nbased on qualification, quality, brand, reliability and volume. We perform background checks on suppliers and the products they provide\nbefore we enter into any agreement. We examine their business licenses and the relevant licenses and certificates for their products.\nWe evaluate their brand recognition and make inquiries about the market acceptance of their products among players in the same industry.\n\n \n\nWe have established a team\ndedicated to the management of our suppliers with respect to product quality, logistics and after-sales customer services. We monitor\non a daily basis data relating to logistics and customer services on our platform, and communicate with the relevant suppliers when issues\narise.\n\n \n\n**User Experience**\n\n** **\n\nIn the past several years,\nwe have accumulated a massive targeted user base and formed a multi-level and full-cycle user management strategy. With superior user\nexperience and effective user management, we effectively improve user engagement and have also obtained user insights from our platform.\nMeanwhile, with a focus on strengthening professional services, we are committed to enhancing users’ trust in us and our brand influence\nthrough trustworthy and reliable services and unparalleled user experience.\n\n \n\nBased on our own experience\nin the healthcare industry, we are committed to optimizing user experience and achieving user satisfaction for the products and services\nwe provide on our platform. In addition to our relentless focus on providing authentic and high-quality products, we also focus on several\naspects, namely, compelling online experience, competitive pricing, superior customer service, timely and reliable fulfillment and delivery,\nand convenient payment options.\n\n \n\n**Technology**\n\n** **\n\nThe sustainability of our ecosystem\ndepends on our technological competence and the stability of our information infrastructure. We develop various platforms to enable our\nusers to access the full range of our services. Resulting from the scale and complexity of our businesses, our large-scale, multi-scenario\nenvironment has enabled us to obtain enormous valuable data assets and constantly apply our technology across our business lines, thereby\ngenerating knowledge and innovations that drive further technological development. To ensure the performance, reliability, and scalability\nof our technology systems, we also adopted system isolation and service separation.\n\n \n\n67\n\n \n\n \n\nWe assembled our research and\ndevelopment team in 2015. They are primarily engaged in building our technology infrastructure and developing our proprietary technologies.\nSuch infrastructures include cloud computing, big data visualization, big data real-time computing, intelligent scheduling, advertising\nsystems, and pharmaceutical ground data systems. In addition, their expertise also helped us leverage our expertise and insights in the\nhealthcare and pharmaceutical industries to develop know-how in areas such as digital intelligent chronic disease management medical platform\nsolutions and pharmaceutical intelligence supply chains.\n\n \n\nOur current research and development\nefforts focus primarily on further improving our four automated digital management systems, which will further digitalize and intelligize\nthe updates of our CDM platform, the improvements in artificial intelligence and big data analytics capabilities, and supply chain management\nsystems. Currently, our order fulfillment center (OFC) forms the core of our business system by connecting our front-end e-commerce system,\ndoctor-patient system, back-end central warehouse, and supply chain system, which helps with our order processing and marketing. We also\ndeveloped a data management system in accordance with national pharmaceutical business quality management standards to streamline our\ndrug price maintenance, initial code establishment, warehousing quality inspection, and replacement of expired drug approvals. To efficiently\nmanage inventory, our AI-assisted central inventory management system selects the optimal warehouse for dispatching by analyzing multiple\ncriteria including location and supply status, which lowers logistics costs and improve customer satisfaction. An order is then tracked\nby our delivery management system, which enables both our customers and ourselves to accurately locate the package and obtain its records\nby obtaining information from all the reputable logistics service providers that we use.\n\n \n\nIn the future, we will continue\nto enhance our research and development by recruiting more talents in the fields of software engineering, data science and artificial\nintelligence. By enhancing our medical big data analysis capabilities and implementing AI-assisted medical applications, we will be better\nequipped to further translate our expertise in the healthcare and pharmaceutical industries into increases in our doctors’ diagnosis\nefficiency and streamlining of our medical services. Additionally, equipped with improved intelligence, our supply chain can respond more\nquickly to market changes while increase cost efficiency.\n\n \n\n**Data Security and Protection**\n\n** **\n\nWe have established a comprehensive\nsecurity system, supported by our network situational awareness and risk management system, which spans from the individual end users\nacross our entire network, covering our platforms, data and services. Our back-end security system is capable of handling malicious attacks\nto safeguard the security of our platform and to protect the privacy of our buyers and merchants.\n\n \n\nWe have a data security team\nof technicians dedicated to protecting the security of our data. We have also adopted strict data protection policy to ensure the security\nof our proprietary data. We collect anonymized, non-confidential user behavior and pattern data based on their interactions with our platform\nthrough our social networks partners, which have been pre-processed to exclude user identity or other sensitive information. We encrypt\nconfidential personal information we gather from our own platform. To ensure data security and avoid data leakage, we have established\nstringent internal protocols under which we grant classified access to confidential personal data only to limited employees with strictly\ndefined and layered access authority. We strictly control and manage the use of data within our various departments and do not share data\nwith external third parties, nor do we cooperate with third-party vendors in data analytics efforts.\n\n \n\n**Intellectual Property**\n\n** **\n\nWe rely on a combination of\npatent, copyright, trademark, domain names, patents and trade secret laws and restrictions on disclosure to protect our intellectual property\nrights. As of December 31, 2025, we had seven patents and one patent application, 277 registered trademarks, 77 registered software\ncopyrights, and 17 domain names.\n\n \n\n**Competition**\n\n** **\n\nWe have achieved a strong competitive\nposition in China’s digital healthcare industry. We face competition in certain aspects of our business. We compete against other\ndigital health companies, primary those in the area of digital medical service provision. For example, Medlinker, Hao Daifu and Ping An\nGood Doctor compete with us in the Internet hospital market.\n\n \n\n68\n\n \n\n \n\nWe believe that our ability\nto compete effectively depends on many factors, including our technological and operational capabilities, our ability to enable direct\nsettlement by health and social insurance, our pricing competitiveness, the breadth and depth of our service offerings, user experience\non our platform, our supply chain capabilities, our marketing efforts and the strength and reputation of our brand.\n\n \n\nFurthermore, as our business\ncontinues to grow rapidly, we face significant competition for highly skilled personnel, including management, engineers and operation\nmanagement personnel. For example, our doctors may choose to practice on other internet hospital platforms while serving us. Despite that,\nour mature doctors registered a top-level retention rate of 99.9%, 99.4% and 98.9% in 2023, 2024 and 2025 among the industry, as\nour platform serves as an established consultation channel for these doctors and their patients. The success of our growth strategy depends\nin part on our ability to retain existing personnel and attract additional highly skilled employees.\n\n \n\n**Insurance**\n\n** **\n\nWe maintain standard benefit\nplans required by PRC laws and regulations, including pension insurance, medical insurance, workplace injury insurance, unemployment insurance,\nand maternity insurance. We do not maintain business insurances covering damages to our properties and IT infrastructures, and in line\nwith general market practice, we do not maintain any business interruption insurance or key man life insurance, which are not mandatory\nunder the applicable laws. For a discussion of risks related to our insurance coverage, see “Item 3. Key Information—3.D.\nRisk Factors—Risks Related to Our Business and Industry—We may not have sufficient insurance coverage to cover our business\nrisks, which could expose us to significant costs and business disruptions.”\n\n \n\nWe believe that our insurance\ncoverage is sufficient for its present purposes and is consistent with the insurance coverage of other healthcare online platforms in\nChina. We periodically review our insurance coverage to ensure that it remains to be sufficient.\n\n \n\nRegulation\n\n \n\nThis\nsection sets forth a summary of the most significant rules and regulations that affect our business activities in China or the rights\nof our shareholders to receive dividends and other distributions from us.\n\n \n\n**Regulations relating to Healthcare Services**\n\n** **\n\n**General Policies**\n\n** **\n\nAccording to the Guiding Opinions\non Vigorously Advancing the “Internet Plus” Action, the Opinions issued by the State Council on July 1, 2015, Internet\nenterprises are encouraged to cooperate with medical institutions in establishing online medical information platforms, strengthen the\nintegration of regional health care service resources, and make full use of the Internet, Big Data and other means to improve the capability\nto prevent and control major diseases and unexpected public health incidents.\n\n \n\nThe General Office of the State\nCouncil issued the Opinions on Promoting the Development of “Internet Plus Health Care” on April 25, 2018, which encouraged\nmedical institutions to apply the internet and other information technologies to expand the space and content of medical services, and\ndevelop an online-offline integrated medical service model covering stages before, during and after diagnosis. The development of Internet\nhospitals depending on medical institutions shall be permitted. Medical institutions may use Internet hospital as the second name and,\nbased on physical hospitals, use Internet technology to provide safe and appropriate medical services, allowing online re-diagnosis for\nsome common diseases and chronic diseases. After reviewing documents of the medical records and profiles of patients, doctors shall be\nallowed to prescribe online for some common diseases and chronic diseases.\n\n \n\n69\n\n \n\n \n\nPursuant to the 13th\nFive-year Plan for Health and Wellness, or the Plan, which was promulgated by the State Council on December 27, 2016, it is proposed\nto strengthen the informatization of the population health and fully implement “Internet Plus” medical and healthcare people-benefiting\nservice. The Plan also encourages the establishment of regional telemedicine platform and enhances the flow of high-quality healthcare\nresources to the Midwest and the primary level. On July 17, 2018, the National Health Commission, or the NHC, and the National Administration\nof Traditional Chinese Medicine jointly promulgated three documents, including the Administrative Measures for Internet Diagnosis and\nTreatment (for Trial Implementation), the Measures for the Administration of Internet Hospitals (for Trial Implementation) (and the Specifications\nfor the Administration of Remote Medical Services (for Trial Implementation). Pursuant to the Measures for the Administration of Internet\nHospitals (for Trial Implementation), “internet hospitals” include: (a) internet hospitals as the second name of physical\nmedical institutions, and (b) internet hospitals that are independently established on the support of physical medical institutions.\n\n \n\n**Internet Hospital**\n\n** **\n\nAccording to the Measures for\nthe Administration of Internet Hospitals (for Trial Implementation), the state implements access management for internet hospitals pursuant\nto the Administrative Regulations on Medical Institutions and the Implementation Measures of the Administrative Regulations on Medical\nInstitutions. Before implementing access for internet hospitals, provincial health administrative departments shall establish provincial\ninternet medical service supervision platforms to connect with information platforms of internet hospitals to achieve real-time supervision.\nEstablishing an internet hospital is governed by the administrative approval process as stipulated in the Measures for the Administration\nof Internet Hospitals (for Trial Implementation). According to the Measures for the Administration of Internet Hospitals (for Trial Implementation),\napplying for establishing an internet hospital is required to submit an application to the practice registration authority of its supported\nphysical medical institution, and submit the application form, the feasibility research report on the establishment, the address of the\nsupported physical medical institution, and the agreement jointly signed by the applicant and the supported physical medical institution\nin relation to establishing an internet hospital through cooperation. If a physical medical institution intends to establish an internet\nhospital information platform through cooperation with a third-party institution, the relevant cooperation agreement should be submitted.\nFor an internet hospital sets up through cooperation, if the cooperation partner changes or other circumstance occurs that will invalidate\nthe cooperation agreement, reapplication for establishing an internet hospital shall be required.\n\n \n\nThe health administrative department\nand the competent departments of traditional Chinese medicine of the State Council shall be responsible for the supervision and administration\nof the Internet hospitals across China. The local health administrative departments at all levels (including the competent departments\nof traditional Chinese medicine) shall be responsible for the supervision and management of Internet hospitals within their respective\njurisdictions.\n\n \n\nIn terms of practicing rules\non internet hospitals, the Measures for the Administration of Internet Hospitals (for Trial Implementation) provides that where a third-party\ninstitution jointly establishes an internet hospital on the support of its physical medical institution, it shall provide the physical\nmedical institution with professional services such as physicians and pharmacists, and information technology support services, and clarify\nthe responsibilities and rights of all parties in respect of medical services, information security, and privacy protection through agreements\nand contracts. In terms of supervision and management of internet hospitals, the Measures for the Administration of Internet Hospitals\n(for Trial Implementation) clarifies that provincial health administrative departments and the registration authorities for internet hospitals\njointly implement supervision on internet hospitals through the provincial internet medical service supervision platform, focusing on\nthe supervision on internet hospitals’ personnel, prescriptions, diagnosis and treatment behaviors, patients’ privacy protection\nand information security. Internet hospitals shall adopt information security protection measures for Level 3 information system in accordance\nwith relevant information security laws and regulations. Doctors can only provide follow-up diagnosis services through internet hospitals\nfor patients that have been diagnosed with certain common diseases or chronic diseases, unless the patients are in physical hospitals\nand the doctors in the physical hospital invites other doctors to provide diagnosis services through internet hospital. The Administrative\nRegulations on Medical Institutions and the Implementation Measures of the Administrative Regulations on Medical Institutions set out\nthe regulatory framework for the management and operation of the medical institutions, and the operation of Internet hospitals shall comply\nwith the Administrative Regulations on Medical Institutions and the Implementation Measures of the Administrative Regulations on Medical\nInstitutions as well. Additionally, the Basic Standards for Internet Hospitals (for Trial Implementation) as attached to the Measures\nfor the Administration of Internet Hospitals (for Trial Implementation) sets forth specific requirements for diagnosis and treatment items,\ndepartments, personnel, buildings and device and equipment, and rules and regulations of internet hospitals.\n\n \n\n70\n\n \n\n \n\n**Medical Institutions**\n\n** **\n\nAccording to the Administrative\nRegulations on Medical Institutions (Revised in 2022), or the Medical Institutions Regulations, promulgated by the State Council, effective\non September 1, 1994, and revised on February 6, 2016 and March 29, 2022, hospitals, health centers, sanatoriums, out-patient\ndepartments, clinics, health clinics, health posts (rooms) and first aid stations are medical institutions. The health administrative\ndepartments of the local people’s governments at or above the county level shall be responsible for the supervision and administration\nof the medical institutions within their respective administrative regions. The establishment of medical institutions by entities or individuals\nshall be subject to the examination and approval of the health administrative department of the local people’s governments at or\nabove the county level and obtain the written approval for the establishment of medical institutions. Furthermore, according to the Medical\nInstitutions Regulations, the practice of medical institutions shall complete the registration and obtain Practicing License for Medical\nInstitution. Where the practicing is without authorization or obtaining the Practicing License for Medical Institution, the health administrative\ndepartment of the people’s government at or above the county level must cease its practicing activities and confiscate the illegal\nincomes, medicines and medical devices in accordance with the law, and it can be imposed fines not less than five times but not more than\n20 times the illegal gains; where the illegal gains are less than RMB10,000, it shall be counted as RMB10,000. Medical institutions must\nconduct medical diagnosis and treatment activities in accordance with registered and approved subjects and shall not employ non-medical\ntechnical personnel in medical and health technical work.\n\n \n\n**Patient Diagnosis Service**\n\n** **\n\nAccording to the Measures for\nthe Administration of Internet Diagnosis and Treatment (for Trial Implementation), Internet diagnosis and treatment activities shall be\nprovided by the medical institutions that have obtained a “Practicing License for Medical Institution,” and the Internet-based\ndiagnosis services provided by a medical institution shall be consistent with its diagnosis and treatment subjects. Physicians and nurses\ncarrying out Internet diagnosis and treatment activities shall be recorded and registered in the national electronic registration system\nof physicians and nurses. A medical institution shall conduct electronic real-name verification for the medical staff members carrying\nout Internet diagnosis and treatment activities.\n\n \n\nAccording to the Measures for\nthe Administration of Internet Hospitals (for Trial Implementation), Internet hospitals must inform the patients of the risks and obtain\ntheir consents. When a patient receives medical treatment in a physical medical institution and the physician receiving such patient invites\nother physicians to hold group consultation of physicians through the Internet hospital, the physicians attending the group consultation\nmay issue diagnosis opinions and a prescription; and when a patient does not receive medical treatment in a physical medical institution,\na physician may only provide re-diagnosis for a patient of some common diseases and chronic diseases through the Internet hospital. Internet\nhospitals may provide contract signing service for family doctors. When a patient’s condition changes or there are other circumstances\nunder which online diagnosis and treatment services are inappropriate, the physician shall direct the patient to receive medical treatment\nin a physical medical institution. Internet diagnosis and treatment activities shall not be carried out for any patient receiving initial\ndiagnosis.\n\n \n\nOn February 8, 2022, the\nNHC promulgated the Rules for Regulation of Internet Medical Treatment (Trial), or the NHC Paper, which further clarifies the boundaries\nand rules of internet medical treatment from multiple dimensions. According to the NHC Paper, medical institutions conducting internet\nmedical treatment activities should actively interface with and accept supervision of the provincial supervision platforms, and set up\na special department and establish the corresponding management system to manage matters such as medical quality and medical safety. The\nmedical practitioners carrying out internet medical treatment activities are required to undergo real-name authentication, and no person,\nartificial intelligence software, etc. other than the physician himself or herself may impersonate or replace the physician in carrying\nout medical treatment activities. If the medical practitioners conduct internet consultation activities at an Internet hospital other\nthan their main place of practice, they should register or record their practice in accordance with the relevant requirements for the\nfiling of multi-institution practice in the location of that Internet hospital. Patients are required to provide medical records with\na clear diagnosis and the receiving physician will determine whether they meet the conditions for follow-up consultation. The entire process\nof internet medical treatment should be traceable, and the data interface should be open to the provincial supervision platform. Furthermore,\nthe relevant data should be kept for no less than 15 years. In addition, if medical institutions carry out drug distribution independently\nor entrust a third party, the relevant agreements and prescription flow information should be traceable, and the data interface should\nbe open to the provincial supervision platform.\n\n \n\n71\n\n \n\n \n\n**Medical Practitioners**\n\n** **\n\nOn August 20, 2021, the\nSCNPC promulgated the Law on Physicians of the People’s Republic of China, or the Physicians Law, which became effective on March 1,\n2022. According to the Physicians Law, when taking medical, preventive or healthcare measures and when signing relevant medical certificate,\nthe physicians shall conduct diagnosis and investigation personally and fill out the medical files without delay as required. No physicians\nmay conceal, forge or destroy any medical files or the relevant data.\n\n \n\nOn November 5, 2014, the\nNational Health and Family Planning Commission of the PRC or the NHFPC (currently known as the NHC), the National Development and Reform\nCommission or the NDRC, the Ministry of Human Resources and Social Security, the State Administration of Traditional Chinese Medicine,\nand the China Insurance Regulatory Commission (currently known as the China Banking and Insurance Regulatory Commission), jointly issued\nSeveral Opinions on Promoting and Standardizing multi-institution Practice of Physicians, which puts forward to simplify the registration\nprocedure of the multi-institution practice and proposes the feasibility of exploring the “record management.” According to\nAdministrative Measures for the Registration of Medical Practitioners, promulgated by the NHFPC on February 28, 2017, effective on\nApril 1, 2017, medical practitioners shall obtain the Practice Certificate for Medical Practitioners to practice upon registration.\nPerson who fails to obtain the Practice Certificate for Medical Practitioners shall not engage in medical treatment, prevention and healthcare\nactivities. A medical practitioner who practices for multiple institutions at the same place of practice shall determine one institution\nas the main practicing institution where he or she practices, and apply for registration to the administrative department of health and\nfamily planning approving the practice of such institution; and, for other institutions where the medical practitioner is to practice,\nrespectively apply for recordation to the administrative health and family planning authority approving the practice of such institution,\nand indicate the names of the institutions where he or she is to practice. Any medical practitioner who adds practicing institutions located\nin other places of practice shall apply for additional registration with the health and family planning administrative authorities competent\nfor approving the operation of the institutions.\n\n \n\n**Prescription Management**\n\n** **\n\nFor the purpose of regulating\nthe administration of prescriptions, the Measures for the Administration of Prescriptions was released by the Ministry of Health (currently\nknown as the NHC) on February 14, 2007 and as effective from May 1, 2007. Under the Measures for the Administration of Prescriptions,\na certified medical practitioner shall obtain the corresponding prescription right at the registered practice place and the certified\nmedical practitioner shall issue prescriptions according to the requirements of medical treatment, disease prevention, healthcare, norms\nof treatment and diagnosis, and indication of the instructions on such aspects as intended use, pharmacological mechanism, usage, dosage,\nside effects and precautions. Under any of the following circumstances, the health administrative department at or above the county level\nshall request the medical institutions to make corrections within a grace period, and may impose the fine no more than RMB5,000; and under\nserious circumstances, Practicing License for Medical Institution shall be revoked: (1) prescribing by a pharmacist who has not obtained\nthe right to prescribe or whose prescription right has been cancelled; (2) prescribing narcotic drugs and the psychotropic drugs\nof category I by pharmacists who have not obtained the prescription right for such narcotic drugs and psychotropic drugs; (3) employing\nperson without the technical title of pharmacology to undertake prescription preparation. If the medical practitioners issue prescriptions\nwithout the prescription rights or deprived of the prescription rights, they will be given a warning or be ordered to suspend their practicing\nactivities for a period of not less than six months but not more than one year and under the serious circumstances, their Practice\nCertificates for Medical Practitioners will be revoked.\n\n \n\n**Regulations relating to Pharmaceutical Operation**\n\n** **\n\nIn September 1984, the\nSCNPC promulgated the Drug Administration Law of the PRC, which was amended in 2001, 2013, 2015 and 2019 respectively to regulate all\nentities or individuals engaging in research, manufacture, operation, use, supervision and management of drugs within the PRC. According\nto the Drug Administration Law, no pharmaceutical operation, including pharmaceutical wholesale and pharmaceutical retail business, is\npermitted without obtaining the Pharmaceutical Operation License. Where the trading of drugs is conducted without a Pharmaceutical Operation\nLicense, the illegal incomes by selling drugs shall be confiscated and shall be imposed a fine ranging from 15 to 30 times of the value\nof the illegally sold drugs (including sold or unsold drugs). The Implementation Rules for the Drug Administration Law was promulgated\nby the State Council in August 2002 and lastly amended on January 16, 2026, which emphasized the detailed implementation rules of\ndrugs administration. The China Food and Drug Administration or the CFDA (currently known as the National Medical Products Administration,\nor the NMPA) promulgated the Measures for the Administration of Pharmaceutical Operation License in February 2004 as amended in 2017,\nwhich stipulates the procedures for applying the Pharmaceutical Operation License and the requirements and qualifications for pharmaceutical\nwholesalers or pharmaceutical retailers with respect to their management system, personnel, facilities and etc. The valid term of the\nPharmaceutical Operation License is five years and shall be renewed through application six months prior to its expiration date.\n\n \n\n72\n\n \n\n \n\nAccording to the Measures on\nPrescription Drugs and OTC Drugs Classification Management (for Trial Implementation) and the Interim Provisions on the Circulation of\nPrescription and OTC Drugs, which were both promulgated by the State Drug Administration, which was restructured and integrated into the\nCFDA, in 1999 and became effective in January 2000, drugs are divided into prescription drugs and over-the-counter drugs, or OTC\ndrugs. For prescription drugs, the dispensing, purchase and use can only be based on the prescription issued by the certified medical\npractitioner or certified medical assistant practitioner. In addition, the prescription drugs can only be advertised and promoted in professional\nmedical magazines. OTC drugs, on the other hand, are further divided into Class A and Class B and they both can be purchased\nand used without a prescription and promoted in public upon approval by the relevant governmental authorities. The pharmaceutical wholesale\nenterprises distributing prescription drugs and/or OTC drugs, as well as pharmaceutical retail enterprises selling prescription drugs\nand/or Class A OTC drugs are required to obtain the Pharmaceutical Operation License.\n\n \n\nAccording to the Administrative\nMeasures for the Supervision and Administration of Circulation of Pharmaceuticals, promulgated by the CFDA in January 2007 and effective\nin May 2007, pharmaceutical manufacture and operation enterprises and medical institutions shall be responsible for the quality of\npharmaceuticals they manufacture, provide or use. The operation of prescription drugs is highly regulated under these rules. Prescription\ndrugs may not be sold by pharmaceutical retail enterprises without valid prescriptions and an enterprise in violation of such restriction\nwill be instructed to rectify any violation, given a disciplinary warning, and/or imposed a fine of no more than RMB1,000. In addition,\na pharmaceutical manufacture or operation enterprise shall not sell prescription drugs directly to the public by post or over internet,\nand the enterprise in violation of such restriction shall be instructed to rectify, given a disciplinary warning, and imposed a fine of\nnot more than two times the value of the pharmaceuticals sold, but not more than RMB30,000. The newly revised Drug Administration Law\nin 2019 abolishes the restriction on online sale of prescription drugs and adopts the principle of keeping online and offline sales consistent.\nFurthermore, according to the Administrative Standard of Pharmaceutical Operating Quality, promulgated by the CFDA in April 2000\nand latest amended in July 2016, the pharmaceutical operation enterprises shall take effective quality control measures over the\nprocess of procurement, storage, transportation and sale of drugs in order to ensure their quality. On April 7, 2021, the General\nOffice of the State Council issued the Opinions on Serving the “Six Stables” and “Six Safeguards” and Further\nDoing a Good Job in the Reform of “Delegating Power, Delegating Regulation and Serving Service” which allows online sales\nprescription drugs other than those under special state control on the premise of ensuring the authenticity and reliability of the electronic\nprescription sources.\n\n \n\nOn October 24, 2022, the\nNMPA promulgated The Administrative Measures on Drug Recalls, effective on November 1, 2022, requires that drug manufacturers, drug\ndistributors and drug users shall actively assist the drug marketing authorization holder, or the holder, in investigating and evaluating\nthe drugs with possible quality problems or other potential safety hazards, take the initiative to cooperate with the holder in fulfilling\nthe obligation of recalls, timely transmit and give feedback of the information on drug recalls according to the recall plan, control\nand recall the drugs with quality problems or other potential safety hazards. Where a drug manufacturer, drug distributor or drug user\nfinds that the drugs manufactured, sold or used by it may have quality problems or other potential safety hazards, it shall notify the\nholder in a timely manner, suspend the production, release, sale and use of the drugs when necessary, and report to the drug regulatory\ndepartment of the government of the province, autonomous region or centrally-administered municipality where it is located. The information\nin the notice and report shall be authentic. The holder, drug manufacturer, drug distributor and drug user shall establish and implement\na drug traceability system as required, keep complete purchase and sale records, and ensure the traceability of the drugs on the market.\nDrug manufacturers, drug distributors and drug users shall cooperate with the holder in the investigation of the quality problems or other\npotential safety hazards of the drugs concerned, and provide relevant materials.\n\n \n\nOn September 27, 2023,\nthe SAMR promulgated the Administrative Measures for the Supervision and Administration of Drug Quality in Operation and Usage, which\nfurther stipulates the procedures for applying for a Pharmaceutical Operation License, the management of the drug operation, and the quality\nmanagement of the drug usage. The aforementioned Measures took effect on January 1, 2024, and simultaneously replaced the Measures\nfor the Administration of Pharmaceutical Operation License and the Administrative Measures for the Supervision and Administration of Circulation\nof Pharmaceuticals.\n\n \n\n73\n\n \n\n \n\n**Regulations relating to Internet Pharmaceutical\nTransaction Services**\n\n** **\n\nAccording to Interim Provisions\non the Examination and Approval of Internet Drug Transaction Services, promulgated by CFDA on September 29, 2005 and effective since\nDecember 1, 2005, the enterprises engaging in the internet pharmaceutical transaction service shall be subject to examination and\nacceptance, and obtain the Qualification Certificate for Providing Internet Pharmaceutical Dealing Services. The Qualification Certificate\nfor Providing Internet Pharmaceutical Dealing Services shall be valid for five years. The NMPA is in charge of examination and approval\nof the enterprises engaging in services provided for Internet pharmaceutical transactions between pharmaceutical production enterprises,\npharmaceutical marketing enterprises and medical institutions, and (Food) Drug administrative departments of all provinces, autonomous\nregions and municipalities directly under the Central Government examine and approve the drug manufacturers and drug wholesalers which\nconduct online drug transactions with the enterprises other than their own members in the respective administrative region through their\nown websites and enterprises that provide online drug transaction services for individual consumers. The Interim Provisions on the Examination\nand Approval of Internet Drug Transaction Services further stipulates that any enterprise engaging in online pharmaceutical product trading\nservices to individual consumers shall be established in the form of a pharmaceutical retail chain enterprise. According to the Drug\nAdministration Law and the Administrative Standard of Pharmaceutical Operating Quality, the operation of pharmaceutical retail chain\nenterprise shall be in compliance with the acceptance standards provided by regulations and the NMPA. After obtaining the Qualification\nCertificate for Providing Internet Pharmaceutical Dealing Services issued by the competent food and drug supervision and administration\nauthority, the applicant shall obtain the permit for operation of telecommunications services as required by the Administrative Measures\non Internet Information Services or the Internet Measures, or go through the formalities for record-filing. According to the Decision\non the Cancelation of the Third Batch of Items Subject to Administrative Permission by Local Governments Designated by the Central Government\npromulgated by the State Council on January 12, 2017, except for the third party platform, all the examination and approval of Internet\ndrug trading service company implemented by FDAs of provincial level are cancelled. According to the Decision on the Cancelation of Various\nItems Subject to Administrative Permission by the State Council on September 22, 2017, the NMPA shall no longer accept applications\nfor examination and approval of Internet drug transaction service enterprises engaging the business as the third party platform.\n\n \n\nOn August 3, 2022, the\nState Administration on Market Regulation, or the SAMR, promulgated the Measures for Supervision and Administration of Online Pharmaceuticals\nSales, or the Measures, effective on December 1, 2022. The Measures provides specific and explicit rules for the online sales of\nprescription drugs, which is perceived to be more conducive online prescription drug sellers including us. The Measures provides that,\namong others, online prescription drug sellers shall (1) ensure the accuracy and reliability of the source of prescription, (2) keep\nrecords of any prescription for at least five years and no less than one year after the expiration date of the prescription drugs,\nand (3) disclose safety warnings including “prescription drugs should only be purchased and used with prescriptions and guidance\nof licensed pharmacists” when displaying information of prescription drugs. The Measures also imposes certain obligations on platform\nservice providers for online pharmaceutical sales, including, among others, that platform service providers should (1) enhance the\nscrutiny on the required licenses and permits of online pharmaceutical merchants for online pharmaceuticals sales, (2) establish\nthe examination and inspection system for online pharmaceutical sales activities, and (3) promptly stop any illegal behavior upon\ndiscovery and report it to the relevant local governmental authorities.\n\n \n\n**Regulations relating to Online Drug Information\nServices**\n\n** **\n\nAccording to the Measures\nRegarding the Administration of Drug Information Service over the Internet, promulgated by CFDA on July 8, 2004 and amended on November 17,\n2017, the operational Internet drug information service refers to the activities of providing medical information (including medical\ndevices) and other services to Internet users through the Internet, and where any website intends to provide Internet drug information\nservices, it shall, prior to applying for an operation permit or record-filing from the State Council’s department in charge of\ninformation industry or the telecom administrative authority at the provincial level, file an application with the provincial FDA, and\nshall be subject to the examination and approval thereof for obtaining the qualifications for providing Internet drug information services.\nThe validity term for a Qualification Certificate for Internet Drug Information Services is five years and may be renewed at least\nsix months prior to its expiration date upon a re-examination by the relevant authority. Pursuant to the Measures Regarding the\nAdministration of Drug Information Service over the Internet, the Internet drug information services are classified into two categories,\nnamely, profit-making services and non-profit- making services. Profit-making services refers to that of providing Internet users with\ndrug information in return for service fees whilst non-profit-making services refers to that of providing Internet users with drug information\nwhich is shared and accessible by the public through the Internet free of charge. Furthermore, the information relating to drugs shall\nbe accurate and scientific in nature, and its provision shall comply with the relevant laws and regulations. No product information of\nstupefacient, psychotropic drugs, medicinal toxic drugs, radiopharmaceutical, detoxification drugs and pharmaceutics made by medical\ninstitutes shall be distributed on the website. In addition, advertisements relating to drugs (including medical devices) shall be approved\nby the NMPA or its competent branches, and shall specify the approval document number.\n\n \n\n74\n\n \n\n \n\n**Regulations relating to Medical Devices Operation**\n\n** **\n\nThe Measures on the Supervision\nand Administration of the Business Operations of Medical Devices or the Measures on Medical Devices, which was promulgated by CFDA on\nJuly 30, 2014 and last amended on March 10, 2022, applies to any business activities of medical devices as well as the supervision\nand administration thereof conducted within the territory of the PRC. Pursuant to the Measures on Medical Devices, NMPA shall be\nresponsible for the supervision and administration of nationwide business operations concerning medical devices. Medical devices are\ndivided into three classes depending on the degree of risks of medical devices. Entities engaged in distribution of Class III medical\ndevices shall obtain a medical device operating license and entities engaged in distribution of Class II medical devices shall complete\nfilings with the competent local FDA, while entities engaged in distribution of medical devices of Class I are not required to conduct\nany filing or obtain any license. In addition, in accordance with Regulations on Supervision and Administration of Medical Devices, promulgated\nby the State Council on January 4, 2000 and amended on March 7, 2014, May 4, 2017, June 1, 2021 and December 6,\n2024 respectively, Class II and Class III medical devices shall be registered with the NMPA or its local branches, while Class I\nmedical devices shall be filed with the food and drug administrator of the city with districts at its locality. In the event that the\nbusiness operator in distribution of Class III medical devices without a medical device operating license or the business operator\nin distribution of Class II or Class III medical devices that are not registered with the NMPA or its local branches, the business\noperator may be imposed fine or be shut down by the authorities.\n\n \n\n**Regulations relating to Online Sales of Medical\nDevice**\n\n** **\n\nOn December 20, 2017,\nthe CFDA promulgated the Administration and Supervision Measures of Online Sales of Medical Devices or the Online Medical Devices Sales\nMeasures, which became effective on March 1, 2018. According to the Online Medical Devices Sales Measures, enterprises engaged in\nonline sales of medical devices must be medical device manufacture and operation enterprises with medical devices production licenses\nor operation licenses or being filed for record in accordance with laws and regulations, unless such licenses or record-filing is not\nrequired by laws and regulations. Pursuant to the Online Medical Devices Sales Measures, the enterprises engaging in online sales of\nmedical devices through its own website, and the third-party platform for provision of online medical devices transaction services shall\nobtain an Internet Drug Information Services Qualification License. Either enterprises engaging in online sales of medical devices or\nenterprises to provide a third-party platform for provision of medical devices online transaction services shall take technical measures\nto ensure the data and materials of medical devices online sales are authentic, completed and retrospective, for example the records\nof sale information of medical devices shall be kept for two years after the valid period of the medical devices, and for no less\nthan five years in case of no valid period, or be kept permanently in case of implanted medical devices. For the enterprises engaging\nin online sales of medical devices, such enterprises shall display its medical device production and operation license or record-filing\ncertificate on visible place of its homepage, and the information of the medical devices published on the website shall be consistent\nwith the related contents registered or filed for record; in addition, the business scope shall not exceed the scope of its production\nand operation license or the scope filed for record. For the enterprises to provide a third-party platform for provision of medical devices\nonline transaction services, such enterprises shall be filed for record with the local provincial NMPA, and shall verify the materials\nsubmitted by any enterprise applying for entering the platform.\n\n \n\n75\n\n \n\n \n\n**Regulations relating to Internet Security**\n\n** **\n\nInternet information in China\nis regulated and restricted from a national security standpoint. The SCNPC, has enacted the Decisions on Maintaining Internet Security\non December 28, 2000, amended on August 27, 2009, which may subject violators to criminal punishment in China for any effort\nto: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information;\n(iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights, etc.\nThe Ministry of Public Security of the PRC has promulgated the Administration Measures on the Security Protection of Computer Information\nNetwork with International Connections on December 16, 1997 and the State Council of the PRC has amended it on January 8, 2011\nto prohibit use of the Internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing\ncontent. If an internet information service provider violates these measures, the Ministry of Public Security and the local security\nbureaus may, when necessary, suggest the issuing or approving government agency to revoke its operating license and shut down its websites.\n\n \n\nOn November 7, 2016,\nthe SCNPC promulgated the Cyber Security Law of the PRC, or the Cyber Security Law, which was amended on October 28, 2025 and took effect\non January 1, 2026. The Cyber Security Law requires network operators to comply with laws and regulations and fulfil their obligations\nto safeguard security of the network when conducting business and providing services. The Cyber Security Law further requires network\noperators to take all necessary measures in accordance with applicable laws, regulations and compulsory national requirements to safeguard\nthe safe and stable operation of the networks, respond to cyber security incidents effectively, prevent illegal and criminal activities,\nand maintain the integrity, confidentiality and usability of network data.\n\n \n\nOn December 28, 2021,\nthe CAC, NDRC, MIIT and other ten PRC regulatory authorities jointly issued the Cybersecurity Review Measures, effective on February 15,\n2022.The Cybersecurity Review Measures require that, (i) any procurement of network products and services by critical information\ninfrastructure operators, which affects or may affect national security, or (ii) any data processing activities by network platform\noperators, which affects or may affect national security, including that any network platform operators which has personal information\nof more than one million users and is going to be listed abroad, shall be subject to cybersecurity review. Since the measures were recently\npromulgated, there exists uncertainties with respect to their interpretation and implementation.\n\n \n\nOn August 8, 2022, the\nNational Health Commission, the National Administration of Traditional Chinese Medicine, and the National Bureau of Disease Control and\nPrevention promulgated the Administrative Measures for the Cybersecurity of Medical and Healthcare Institution, or the measures, which\nbecame effective on the same day. The measures require all the medical and health institutions to set up data life-cycle management\nsystems and user participation-based cybersecurity management systems, including but not limited to strengthening system construction,\nimplementing daily network maintenance and monitoring, conducting annual self-inspection and rectification, and classifying and grading\ndata assets. Where personal information and data are leaked or major cybersecurity incidents occur in violation of the measures, the\ncase shall be handled in accordance with the Cybersecurity Law, the Cryptography Law, Promotion Law on Basic Medical and Healthcare,\nthe Personal Information Protection Law, the Regulations for the Security Protection of Critical Information Infrastructure, cybersecurity\nclassified protection system and other laws and regulations.\n\n \n\n**Regulations relating to Personal Information\nor Data Protection**\n\n** **\n\nIn December 2011, the\nMinistry of Industry and Information Technology or the MIIT issued Several Provisions on Regulating the Market Order of Internet Information\nServices, which provides that an internet information service provider may not collect any user’s personal information or provide\nany such information to third parties without such user’s consent. Pursuant to the Several Provisions on Regulating the Market\nOrder of Internet Information Services, internet information service providers are required to, among others, (i) expressly inform\nthe users of the method, content and purpose of the collection and processing of such users’ personal information and may only\ncollect such information necessary for the provision of its services; and (ii) properly maintain the users’ personal information,\nand in case of any leak or possible leak of a user’s personal information, online information service providers must take immediate\nremedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority.\n\n \n\nPursuant to the Decision on\nStrengthening the Protection of Online Information, issued by the SCNPC in December 2012, and the Order for the Protection of Telecommunication\nand Internet User Personal Information, issued by the MIIT in July 2013, any collection and use of any user personal information\nmust be subject to the consent of the user, and abide to the applicable law, rationality and necessity of the business and fall within\nthe specified purposes, methods and scopes in the applicable laws.\n\n \n\n76\n\n \n\n \n\nIn addition, pursuant to the\nCyber Security Law, the “personal information” refers to all kinds of information recorded by electronic or otherwise that\ncan be used to independently identify or be combined with other information to identify individuals’ personal information including\nbut not limited to: individuals’ names, dates of birth, ID numbers, biologically identified personal information, addresses and\ntelephone numbers, etc. The Cyber Security Law also provides that: (i) to collect and use personal information, network operators\nshall follow the principles of legitimacy, rightfulness and necessity, disclose rules of data collection and use, clearly express the\npurposes, means and scope of collecting and using the information, and obtain the consent of the persons whose data is gathered; (ii) network\noperators shall neither gather personal information unrelated to the services they provide, nor gather or use personal information in\nviolation of the provisions of laws and administrative regulations or the scopes of consent given by the persons whose data is gathered;\nand shall dispose of personal information they have saved in accordance with the provisions of laws and administrative regulations and\nagreements reached with users; (iii) network operators shall not divulge, tamper with or damage the personal information they have\ncollected, and shall not provide the personal information to others without the consent of the persons whose data is collected. However,\nif the information has been processed and cannot be recovered and thus it is impossible to match such information with specific persons,\nsuch circumstance is an exception. Furthermore, under the Cyber Security Law, network operators of key information infrastructure generally\nshall, during their operations in the PRC, store the personal information and important data collected and produced within the territory\nof the PRC. On August 22, 2019, the Cyberspace Administration of China or the CAC issued the Provisions on the Cyber Protection\nof Children’s Personal Information, which became effective on October 1, 2019 and apply to the collection, storage, use, transfer\nand disclosure of the personal information of the minors under the age of 14, or the Children, via the Internet.\n\n \n\nPursuant to the Ninth Amendment\nto the Criminal Law, issued by the SCNPC in August 2015, which became effective in November 2015, any Internet service provider\nthat fails to fulfill its obligations related to Internet information security administration as required under applicable laws and refuses\nto rectify upon orders shall be subject to criminal penalty. In addition, Interpretations of the Supreme People’s Court and the\nSupreme People’s Procuratorate on Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving\nInfringement of Personal Information, issued on May 8, 2017 and effective as of June 1, 2017, clarified certain standards for\nthe conviction and sentencing of the criminals in relation to personal information infringement. In addition, on May 28, 2020, the\nNational People’s Congress adopted the Civil Code of the PRC or the Civil Code, which has come into effect on January 1, 2021.\nPursuant to the Civil Code, the personal information of a natural person shall be protected by the law. Any organization or individual\nshall legally obtain such personal information of others when necessary and ensure the safety of such information, and shall not illegally\ncollect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information\nof others.\n\n \n\nPursuant to the Regulations\nfor Medical Institutions on Medical Records Management released on November 20, 2013, and effective from January 1, 2014, the\nmedical institutions and medical practitioners shall strictly protect the privacy information of patients, and any leakage of patients’\nmedical records for non-medical, non-teaching or non-research purposes is prohibited. The NHFPC released the Measures for Administration\nof Population Health Information (for Trial Implementation) on May 5, 2014, which refers the medical health service information\nas the population healthcare information, and emphasizes that such information cannot be stored in offshore servers, and the offshore\nservers shall not be hosted or leased. Pursuant to the Management Measures of Standards, Safety and Service of National Health and Medical\nBig Data (for Trial Implementation), promulgated by the NHC on July 12, 2018, the medical institutions should establish relevant\nsafety management systems, operation instructions and technical specifications to safeguard the safety of healthcare big data generated\nin the process of health management service or prevention and cure service of diseases. And it also stipulates that such healthcare big\ndata should be stored in onshore servers and shall not be provided overseas without safety assessment.\n\n \n\nOn June 10, 2021, the\nSCNPC promulgated the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law sets forth the data security\nprotection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data\nby stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits.\n\n \n\n77\n\n \n\n \n\nIn August 2021, the SCNPC\nenacted the Personal Information Protection Law, which took effect on November 1, 2021. The Personal Information Protection Law\nintegrates provisions from several rules with respect to personal information rights and privacy protection. According to the Personal\nInformation Protection Law, personal information refers to information related to identified or identifiable natural persons which is\nrecorded by electronic or other means (excluding the anonymized information). The Personal Information Protection Law provides the circumstances\nunder which a personal information processor could process personal information, such as where the consent of the individual concerned\nis obtained and where it is necessary for the conclusion or performance of a contract to which such individual is a party to such contract.\nIt also stipulates certain specific provisions with respect to the obligations of a personal information processor. In addition, it imposes\nfurther obligations on a personal information processor that provides for basic internet platform services, has large amount of users,\nhas complicated business activities, including formulating of an independent institution mainly comprising of outside members to supervise\npersonal information processing activities, termination of provision of services for product or service providers on the platform whose\npersonal information processing activities are in material violation of laws and regulations, and issuing personal information protection\nsocial responsibilities reports regularly.\n\n \n\nOn July 7, 2022, the\nCAC promulgated Measures for the Security Assessment of Outbound Data Transfers, effective on September 1, 2022, provides that a\ndata processor is required to apply for security assessment for cross-border data transfer in any of the following circumstances:(i) where\na data processor provides critical data to offshore entities and individuals; (ii) where a critical information infrastructure operator\nor a data processor which processes personal information of more than one million individuals provides personal information to offshore\nentities and individuals; (iii) where a data processor has provided personal information in the aggregate of more than 100,000 individuals\nor sensitive personal information of more than 10,000 individuals in total to offshore entities and individuals since January 1\nof the previous year; or (iv) other circumstances prescribed by the CAC for which application for security assessment for cross-border\ntransfer of data is required.\n\n \n\nOn February 22, 2023,\nthe CAC promulgated the Measures for the Standard Contract for Outbound Transfer of Personal Information, effective on June 1, 2023\nand amended on March 22, 2024 provides the basic principles and requirements on the outbound transfer of personal information outside\nthe PRC under the standard contract provided by the CAC. Pursuant to the Measures for the Standard Contract for Outbound Transfer\nof Personal Information, any personal information handler transferring personal information abroad by entering into the standard contract\nshall meet all of the following conditions and conduct a personal information protection impact assessment: (i) it is not a critical\ninformation infrastructure operator; (ii) it processes the personal information of less than 1 million individuals; (iii) it\nhas cumulatively transferred abroad the personal information of less than 100,000 individuals since January 1 of the previous year;\nand (iv) it has cumulatively transferred abroad the sensitive personal information of less than 10,000 individuals since January 1\nof the previous year. The Measures also provides that the personal information handler shall not carry out the outbound transfer until\nthe standard contract enters into force, and shall file a record with the cyberspace authority at the provincial level within 10 working days\nfrom the effective date of the standard contract executed.\n\n \n\nOn March 22, 2024, the\nCAC promulgated the Provisions on Promoting and Regulating Cross-border Data Flow, or the Provisions, which takes effect on the same\nday. According to the Provisions, a data processor is required to apply for security assessment for cross-border data transfer in any\nof the following circumstances: (i) where a critical information infrastructure operator provides personal information or critical data\nto offshore entities and individuals; (ii) where any data processor other than a critical information infrastructure operator provides\ncritical data to offshore entities and individuals, or provides personal information (excluding sensitive personal information) of not\nless than one million individuals or sensitive personal information of not less than 10,000 individuals in aggregate to offshore entities\nand individuals since January 1 of the current year. The Provisions also provides certain exceptions where a data processor is not required\nto apply for security assessment for cross-border data transfer, conclude standard contract for cross-border transfer of personal information\nor pass authentication for personal information protection. In case of any discrepancy between the Provisions and the relevant provisions\nsuch as Measures for the Security Assessment of Outbound Data Transfer promulgated on July 7, 2022 and the Measures for the Standard\nContract for Outbound Transfer of Personal Information promulgated on February 22, 2023, the Provisions shall prevail.\n\n \n\nOn September 24, 2024,\nthe State Counsil issued the Regulations on the Network Internet Data Administration, which came into effective on January 1, 2025.\nThe Regulations on the Network Internet Data Administration builds on the foundations set by the Personal Information Protection Law,\nthe Data Security Law, and the Cybersecurity Law, and establish a comprehensive set of regulations to implement the protection of personal\ninformation and “important data” protection provisions set out in those laws.\n\n \n\n78\n\n \n\n \n\n**Regulations relating to Foreign Investment**\n\n** **\n\nInvestment activities in the\nPRC by foreign investors are principally governed by the Catalog of Industries for Encouraging Foreign Investment or the Encouraging\nCatalog, and the Special Management Measures (Negative List) for the Access of Foreign Investment or the Negative List, which were promulgated\nand are amended from time to time by the Ministry of Commerce of the PRC or the MOFCOM and the NDRC. The Encouraging Catalog and\nthe Negative List lay out the basic framework for foreign investment in the PRC, classifying businesses into three categories with regard\nto foreign investment: “encouraged,” “restricted” and “prohibited.” Industries not listed in the\nEncouraging Catalog and the Negative List are generally deemed as falling into a fourth category “permitted.” The NDRC and\nMOFCOM promulgated the Catalog of Industries for Encouraging Foreign Investment (2025 Version), and the Special Management Measures (Negative\nList) for the Access of Foreign Investment (2024 Version) or the 2024 Negative List, on September 6, 2024, to replace the previous\nencouraging catalog and negative list thereunder. According to the 2024 Negative List, the value-added telecommunications services (excluding\ne-commerce business, domestic multi-party communications, store-and-forward and call centers) fall into the “restricted”\ncategory.\n\n \n\nOn March 15, 2019, the\nNPC, promulgated the Foreign Investment Law of the PRC, which has come into effect on January 1, 2020 and replaced the trio of laws\nregulating foreign investment in the PRC, namely, the PRC Equity Joint Venture Law, the Wholly Foreign-Owned Enterprise Law and the PRC\nCooperative Joint Venture Law. Its implementation of regulations promulgated by the State Council in December 2019 also came into\neffect on January 1, 2020. The Foreign Investment Law, by means of legislation, establishes the basic framework for the access,\npromotion, protection and administration of foreign investment in view of investment protection and fair competition.\n\n \n\nAccording to the Foreign Investment\nLaw, foreign investment shall enjoy pre-entry national treatment, except for those foreign invested entities that operate in industries\ndeemed to be either “restricted” or “prohibited” in the “negative list.” The Foreign Investment Law\nprovides that foreign invested entities operating in foreign “restricted” or “prohibited” industries will require\nentry clearance and other approvals. The Foreign Investment Law does not comment on the concept of “de facto control” or\ncontractual arrangements with VIE, however, it has a catch-all provision under definition of “foreign investment” to include\ninvestments made by foreign investors in China through means stipulated by laws or administrative regulations or other methods prescribed\nby the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions to provide for contractual\narrangements as a form of foreign investment. In addition, a foreign investment information reporting system shall be established and\nforeign investors or foreign-funded enterprises shall submit the investment information to competent departments for commerce through\nthe enterprise registration system and the enterprise credit information publicity system. Furthermore, the Foreign Investment Law provides\nthat foreign invested enterprises established according to the PRC Equity Joint Venture Law, the Wholly Foreign-Owned Enterprise Law\nand the PRC Cooperative Joint Venture Law may maintain their structure and corporate governance within five years after the implementing\nof the Foreign Investment Law, which means that foreign invested enterprises may be required to adjust the structure and corporate governance\nin accordance with the current PRC Company Law and other laws and regulations governing the corporate governance.\n\n \n\nOn December 26, 2019,\nthe State Council promulgated the Implementation Rules to the PRC Foreign Investment Law, which became effective on January 1, 2020.\nThe implementation rules further clarified that the state encourages and promotes foreign investment, protects the lawful rights and\ninterests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and\nadvances a higher-level opening.\n\n \n\n**Regulations relating to Value-added Telecommunication\nServices**\n\n** **\n\n**License for Value-added Telecommunications\nServices**\n\n** **\n\nThe Telecommunications Regulations\nof the PRC or the Telecommunications Regulations, promulgated by the State Council on September 25, 2000 and amended on July 29,\n2014 and February 6, 2016, provide a regulatory framework for telecommunications services providers in the PRC. The Telecommunications\nRegulations require telecommunications services providers to obtain an operating license prior to the commencement of their operations.\nThe Telecommunications Regulations categorize telecommunications services into basic telecommunications services and value-added telecommunications\nservices. According to the Catalog of Telecommunications Business, attached to the Telecommunications Regulations, which was promulgated\nby the MIIT on December 28, 2015 and amended on June 6, 2019, the Internet information services and the online data processing\nand transaction processing services fall within the value-added telecommunications services.\n\n \n\nThe Administrative Measures\non Telecommunications Business Operating Licenses, which was promulgated by the MIIT on March 1, 2009 and amended on July 3,\n2017, sets forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services,\nthe qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses. The Internet Measures,\npromulgated by the State Council on September 25, 2000 and amended on January 8, 2011 and December 6, 2024, requires that\na commercial operator of Internet content provision services must obtain a value-added telecommunications business operating license\nfor the provision of Internet information services from the appropriate telecommunications authorities.\n\n \n\n79\n\n \n\n \n\n**Foreign Investment in Valued-Added Telecommunications\nBusiness**\n\n** **\n\nForeign direct investment\nin telecommunications companies in China is governed by the Regulations for the Administration of Foreign-Invested Telecommunications\nEnterprises, which was promulgated by the State Council on December 11, 2001 and amended on September 10, 2008, February 6,\n2016 and March 29, 2022. The Regulations for the Administration of Foreign-Invested Telecommunications Enterprises requires foreign-invested\nvalue-added telecommunications enterprises in China to be established as sino-foreign equity joint ventures, which the foreign investors\nmay acquire up to 50% of the equity interests of such enterprise. In addition, the main foreign investor who invests in a foreign-invested\nvalue-added telecommunications enterprise operating the value-added telecommunications business in China must demonstrate a good track\nrecord and experience in operating a value-added telecommunications business. In July 2006, the MII (currently known as the MIIT)\nreleased the Notice on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business\nor the MII Notice, pursuant to which, domestic telecommunications enterprises are prohibited to rent, transfer or sell a telecommunications\nbusiness operation license to foreign investors in any form, or provide any resources, premises, facilities and other assistance in any\nform to foreign investors for their illegal operation of any telecommunications business in China. In addition, under the MII Notice,\nthe Internet domain names and registered trademarks used by a foreign-invested value-added telecommunication service operator shall be\nlegally owned by that operator (or its shareholders).\n\n \n\n**Regulations Relating to Online Trading**\n\n** **\n\nIn January 2014, the\nState Administration for Industry & Commerce or the SAIC (currently known as the State Administration for Market Regulation,\nor the SAMR) promulgated the Administrative Measures for Online Trading, which became effective in March 2014 and superseded by\nthe Measures for the Supervision and Administration of Online Trading, or Online Trading Measures, effective on May 1, 2021 and\nlastly amended on May 1, 2025. The Online Trading Measures regulates all operating activities for products sale and services provision\nvia the internet (including mobile internet). It stipulates the obligations of online products operators and services providers and certain\nspecial requirements applicable to third-party platform operators. The MOFCOM promulgated the Provisions on the Procedures for Formulating\nTransaction Rules of Third Party Online Retail Platforms (for Trial Implementation) in December 2014, which became effective in\nApril 2015, to guide and regulate the formulation, revision and enforcement of transaction rules by online retail third-party platforms\noperators. These measures impose more stringent requirements and obligations on third-party platform operators. For example, online business\noperators are required to issue invoices to consumers for online products and services. Consumers are generally entitled to return products\npurchased from online business operators within seven days upon receipt, without giving any reason. Online business operators and\nthird-party online marketplace operators are prohibited from collecting any information on consumers and business operators, or disclosing,\nselling or providing any such information to any third party, or sending commercial electronic messages to consumers, without their consent.\nFictitious transactions, deletion of adverse comments and technical attacks on competitors’ websites are prohibited as well. In\naddition, third-party online marketplace operators are required to examine and verify the identifications of the online business operators\nand set up and keep relevant records for at least two years. Moreover, any third-party online marketplace operator that simultaneously\nengages in online trading for products and services should clearly distinguish itself from other online business operators on the marketplace\nplatform.\n\n \n\nThe relevant governmental\nauthorities have issued a number of guidelines and implementing rules aimed at adding greater specificity to these regulations and continues\nto consider and issue guidelines and implementing rules in this industry. For example, the Ministry of Finance of the PRC or the MOF,\nGeneral Administration of Customs and the State Taxation Administration of the PRC or SAT issued the Circular on Tax Policies for Cross-Border\nE-commerce Retail Imports in March 2016. Pursuant to this circular, goods imported through the cross-border e-commerce retail are\nsubject to tariff, import value-added tax, or VAT, and consumption tax based on the types of goods. Individuals purchasing any goods\nimported through cross-border e-commerce retail are taxpayers, and e-commerce companies, companies operating e-commerce transaction platforms\nor logistic companies are required to withhold the taxes.\n\n \n\n80\n\n \n\n \n\nIn August 2018, the SCNPC\npromulgated the E-Commerce Law of the PRC, effective on January 1, 2019, which aims to regulate the e-commerce activities conducted\nwithin the territory of the PRC. Pursuant to the E-Commerce Law, an e-commerce platform operator shall (i) collect, verify\nand register the truthful information submitted by the third-party merchants that apply to sell products or provide services on its platform,\nincluding the identities, addresses, contacts and licenses, establish registration archives and update such information on a regular\nbasis; (ii) submit the identification information of the third-party merchants on its platform to market regulatory administrative\ndepartment as required and remind the third-party merchants to complete the registration with market regulatory administrative department;\n(iii) submit identification information and tax-related information to tax authorities as required in accordance with the laws and\nregulations regarding the administration of tax collection and remind the individual third-party merchants to complete the tax registration;\n(iv) record and retain the information of the products and services and the transaction information for no less than 3 years;\n(v) display the platform service agreement and the transaction rules or links to such information on the homepage of the platform;\n(vi) display the noticeable labels regarding the products or services provided by the platform operator itself on its platform,\nand take liabilities for such products and services; (vii) establish a credit evaluation system, display the credit evaluation rules,\nprovide consumers with accesses to make comments on the products and services provided on its platform, and restrain from deleting such\ncomments; and (viii) establish intellectual property protection rules, and take necessary measures when any intellectual property\nholder notify the platform operator that his intellectual property rights have been infringed. An e-commerce platform operator shall\ntake joint liabilities with the relevant third-party merchants on its platform and may be subject to orders to make correction within\na stipulated period and fines up to RMB2,000,000 where (i) it fails to take necessary measures when it knows or should have known\nthat the products or services provided by the third-party merchants on its platform do not meet the personal or property safety requirements\nor such third-party merchants’ other acts may infringe on the lawful rights and interests of the consumers; or (ii) it fails\nto take necessary measures, such as deleting and blocking information, disconnecting, terminating transactions and services, when it\nknows or should have known that the third-party merchants on its platform infringe any intellectual property rights of any other third\nparty. With respect to products or services affecting the consumers’ life and health, if an e-commerce platform operator fails\nto verify the third-party merchants’ qualification or fails to fulfill its obligations to safeguard the safety of consumers, which\nresults in damages to the consumers, it shall take corresponding liabilities and may be subject to orders to make correction within a\nstipulated period and fines up to RMB2,000,000.\n\n \n\n**Regulations relating to Internet Advertising**\n\n** **\n\nThe SCNPC released the Advertising\nLaw of the People’s Republic of China on October 27, 1994 and latest amended on April 29, 2021, which provides that the\nInternet information service providers shall not publish medical, drugs, medical machinery or health food advertisements in disguised\nform of introduction of healthcare and wellness knowledge.\n\n \n\nPursuant to the Interim Administrative\nMeasures for Censorship of Advertisements for Drugs, Medical Devices, Dietary Supplements and Foods for Special Medical Purpose, which\nwere promulgated by the State Administration for Market Regulation on December 24, 2019, effective on March 1, 2020, an enterprise\nseeking to advertise its drugs, medical devices, dietary supplement or food for special medical purpose must apply for an advertisement\napproval number. The validity period of the advertisement approval number concerning a drug, medical device, dietary supplement or food\nfor special medical purpose shall be consistent with that of the registration certificate or record-filing certificate or the production\nlicense of the product, whichever is the shortest. Where no validity period is set forth in the registration certificate, record-filing\ncertificate or the production license of the product, the advertisement approval number shall be valid for two years. The content\nof an approved advertisement may not be altered without prior approval. Where any alteration to the advertisement is needed, a new advertisement\napproval shall be obtained.\n\n \n\nThe Administrative Measures\nfor Internet Advertisement, which was promulgated by the State Administration of Market Regulation on February 25, 2023, effective on\nMay 1, 2023, provides that internet advertisement must be identifiable and can make consumers recognize it as an advertisement.\nFor goods or services ranked according to bidding, advertisement publishers shall indicate the word “advertisement” prominently\nin order to make a clear distinction with the natural search results. No entity and individual may publish any advertisement of prescription\npharmaceuticals by means of the internet unless otherwise provided by laws and regulations. No advertisement of any medical treatment,\npharmaceuticals, medical devices, pesticides, veterinary medicines, dietary supplements, foods for special medical purpose or other advertisements\nwhich are subject to review by advertisement review authorities as required by laws and regulations may be released unless it has passed\nsuch review. Internet advertisements which are subject to review shall be released strictly in accordance with the contents which have\npassed such review, and shall not be edited, spliced or modified. Where the contents of advertisements which have passed review need\nto be modified, a new application for advertisement review shall be submitted.\n\n \n\n81\n\n \n\n \n\n**Regulations relating to Mobile Internet Applications\nInformation Services**\n\n** **\n\nMobile Internet applications\nor the APPs, and the Internet application store or the APP Store are especially regulated by the Administrative Provisions on Mobile\nInternet Applications Information Services, which became effective on August 1, 2016 and lastly amended on June 14, 2022. Such\nAdministrative Provisions on Mobile Internet Applications Information Services regulate the APP information service providers and the\nAPP Store service providers, while the CAC and local offices of cyberspace administration shall be responsible for the supervision and\nadministration of nationwide or local APP information respectively. The APP information service providers shall acquire relevant qualifications\nrequired by laws and regulations and implement the information security management responsibilities strictly and fulfill their obligations\nprovided by the Administrative Provisions on Mobile Internet Applications Information Services.\n\n \n\n**Regulations relating to Food Safety**\n\n** **\n\nIn accordance with the Food\nSafety Law of the PRC or the Food Safety Law, promulgated on February 28, 2009 and latest amended on September 12, 2025, and the\nImplementation Regulations of the Food Safety Law of the PRC, or the Implementation Regulations, issued on July 20, 2009 and latest\namended on October 11, 2019 and effective on December 1, 2019, with the purpose of guaranteeing food safety and safe guarding\nthe health and life safety of the public, the PRC sets up a system of the supervision, monitoring and appraisal on the food safety risks,\ncompulsory adoption of food safety standards. To engage in food production, sale or catering services, the business operators shall obtain\na license in accordance with the laws and regulations. Furthermore, the State implements strict supervision and administration for special\ncategories of foods such as healthcare food, special formula foods for medical purposes and infant formula.\n\n \n\nAdministrative Measures for\nFood Operation Licensing and Filing promulgated by SAMR on June 15, 2023 and effective on December 1, 2023, regulates the food\noperation licensing activities, strengthens supervision and management of food operation, and ensures food safety. Food operators shall\nobtain the food operation license for each business venue where they engage in food operation activities. The food operation license\nis valid for five years.\n\n \n\n**Regulations relating to Consumer Protection\nand Product Quality**\n\n** **\n\n**Consumers Protection**\n\n** **\n\nLaw of the PRC on the Protection\nof Rights and Interests of Consumers promulgated by SCNPC, which was latest amended on October 25, 2013 and effective on March 15,\n2014, sets out the obligations of business operators and the rights and interests of the consumers in China. Pursuant to this law, business\noperators must guarantee that the commodities they sell satisfy the requirements for personal or property safety, provide consumers with\nauthentic information about the commodities, and guarantee the quality, function, usage and term of validity of the commodities. Failure\nto comply with the Consumer Protection Law may subject business operators to not only administrative penalties, but also civil liabilities\nsuch as refunding purchase prices, replacement of commodities, repairing, ceasing damages, compensation, and restoring reputation, and\neven subject the business operators to criminal penalties. Where the operators of the online trading platforms are unable to provide\nthe real names, addresses and valid contact details of the sellers or service providers, the consumers may also claim damages to the\nproviders of the online trading platforms. Operators of online trading platforms that clearly knew or should have known that sellers\nor service providers use their platforms to infringe upon the legitimate rights and interests of consumers but fail to take necessary\nmeasures must bear joint and several liabilities with the sellers or service providers. Moreover, if business operators deceive consumers,\nthey should not only compensate consumers for their losses, but also pay additional damages equal to three times the price of the goods\nor services.\n\n \n\n82\n\n \n\n \n\n**Product Quality**\n\n** **\n\nThe Product Quality Law of\nthe PRC, which was promulgated by SCNPC on February 22, 1993 and amended on July 8, 2000, August 27, 2009 and December 29,\n2018 respectively, applies to all production and sale activities in China. Pursuant to this law, products offered for sale must satisfy\nrelevant quality and safety standards. Enterprises may not produce or sell counterfeit products in any fashion, including forging brand\nlabels or giving false information regarding a product’s manufacturer. Violations of state or industrial standards for health and\nsafety and any other related violations may result in civil liabilities and administrative penalties, such as compensation for damages,\nfines, suspension or shutdown of business, as well as confiscation of products illegally produced and sold and the proceeds from such\nsales. Severe violations may subject the responsible individual or enterprise to criminal liabilities. Where a defective product causes\nphysical injury or damage of property, the victim may claim compensation from the manufacturer or from the seller of the product. If\nthe seller pays compensation and it is the manufacturer that should bear the liability, the seller has a right of recourse against the\nmanufacturer. Similarly, if the manufacturer pays compensation and it is the seller that should bear the liability, the manufacturer\nhas a right of recourse against the seller.\n\n \n\n**Regulations Relating to Anti-Monopoly in China**\n\n** **\n\nThe PRC Anti-monopoly Law\nwhich took effect on August 1, 2008 and last amended on June 24, 2022, prohibits monopolistic conduct such as entering into\nmonopoly agreements, abuse of dominant market position and concentration of undertakings that have the effect of eliminating or restricting\ncompetition.\n\n \n\nA business operator with a\ndominant market position may not abuse its dominant market position to conduct acts such as selling commodities at unfairly high prices\nor buying commodities at unfairly low prices, selling products at prices below cost without any justifiable cause, and refusing to trade\nwith a trading party without any justifiable cause. Sanctions for the violations of the prohibition on the abuse of dominant market position\ninclude an order to cease the relevant activities, confiscation of the illegal gains and fines (from 1% to 10% of sales revenue from\nthe previous year). On June 26, 2019, the SAMR issued the Interim Provisions on the Prohibitions of Acts of Abuse of Dominant Market\nPositions, which took effect on September 1, 2019. On March 10, 2023, the Provisions on the Prohibitions of Acts of Abuse of Dominant\nMarket Positions was promulgated and took effect on April 15, 2023, and the Interim Provisions on the Prohibitions of Acts of Abuse of\nDominant Market Positions was repealed.\n\n \n\nIn addition, on February 7,\n2021, the Anti-Monopoly Guidelines for Platform Economy, which became effective on the same day, aiming at enhancing anti-monopoly\nadministration on businesses that operate under the platform model and the overall platform economy. The Anti-Monopoly Guidelines for\nPlatform Economy intend to regulate abuse of a dominant position and other anti-competitive practices by online platform operators and\nthe related merchants and service providers on online platforms, i.e. unfairly locking in exclusive agreements with merchants and targeting\nspecific customers with unreasonable big-data driven tailored pricing through their online behavior to eliminate or limit market competition.\nAs of the date of this annual report, we have not been subject to any regulatory actions or investigations in connection with anti-monopoly.\nHowever, as the Anti-Monopoly Guidelines for Platform Economy are newly enacted, there remains uncertainties as to how the Anti-Monopoly\nGuidelines for Platform Economy will be implemented, and we cannot assure you that the governmental authorities will not take an opposite\nopinion. Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for Platform Economy and other anti-monopoly\nlaws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have\nan adverse effect on our business, financial condition and results of operations.\n\n \n\n**Regulations relating to Taxation**\n\n** **\n\n**Enterprise Income Tax**\n\n** **\n\nOn March 16, 2007, the\nSCNPC promulgated the Enterprise Income Tax Law of the PRC which was latest amended on December 29, 2018, and the State Council\nenacted the Regulations for the Implementation of the Law on Enterprise Income Tax of the PRC which were latest amended on December 6,\n2024 (collectively, the “EIT Law”). According to the EIT Law, taxpayers consist of resident enterprises and non-resident\nenterprises. Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established\nin accordance with the laws of foreign countries or region but whose actual or de facto control is administered from within the PRC. Non-resident\nenterprises are defined as enterprises that are set up in accordance with the laws of foreign countries or region and whose actual administration\nis conducted outside the PRC, but have established institutions or premises in the PRC, or have no such established institutions or premises\nbut have income generated from inside the PRC. Under the EIT Law and relevant implementing regulations, a uniform corporate income\ntax rate of 25% is applicable. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC,\nor if they have formed permanent establishment institutions or premises in the PRC but there is no actual relationship between the relevant\nincome derived in the PRC and the established institutions or premises set up by them, the enterprise income tax is, in that case, set\nat the rate of 10% for their income sourced from inside the PRC.\n\n \n\n83\n\n \n\n \n\n**Value-Added Tax**\n\n** **\n\nPursuant to the Provisional\nRegulations of the PRC on Value-Added Tax, which was promulgated by the State Council on December 13, 1993 and latest amended on\nNovember 19, 2017, and the Implementation Rules for the Implementation of the Provisional Regulations of the PRC on Value-Added\nTax, which was promulgated by the MOF on December 25, 1993 and latest as amended on October 28, 2011, and became effective\non November 1, 2011, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement\nservices or importation of goods within the territory of the PRC shall pay value-added tax or the VAT.\n\n \n\nOn March 20, 2019, the\nMOF, the SAT and the General Administration of Customs jointly issued the Announcement on Policies for Deepening the VAT Reform, or Announcement 39,\nto further slash value-added tax rates. According to the Announcement 39, (i) for general VAT payers’ sales activities\nor imports that are subject to VAT at an existing applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or 9% respectively;\n(ii) for the agricultural products purchased by taxpayers to which an existing 10% deduction rate is applicable, the deduction rate\nis adjusted to 9%; (iii) for the agricultural products purchased by taxpayers for production or commissioned processing, which are\nsubject to VAT at 13%, the input VAT will be calculated at a 10% deduction rate; (iv) for the exportation of goods or labor services\nthat are subject to VAT at 16%, with the applicable export refund at the same rate, the export refund rate is adjusted to 13%; and (v) for\nthe exportation of goods or cross-border taxable activities that are subject to VAT at 10%, with the export refund at the same rate,\nthe export refund rate is adjusted to 9%. The Announcement 39 came into effect on April 1, 2019 and shall prevail in case of any\nconflict with existing provisions.\n\n \n\nOn December 25, 2024,\nthe SCNPC promulgated the Value-Added Tax Law of the PRC, or the VAT Law, which will become effective on January 1, 2026, and replace\nthe Provisional Regulations of the PRC on Value-Added Tax.\n\n \n\n**Dividend Withholding Tax**\n\n** **\n\nPursuant to the Enterprise\nIncome Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC,\nor has set up an organization or establishment but the income derived has no actual connection with such organization or establishment,\nit will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Chinese mainland\nand the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding\ntax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate\nof 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise.\n\n \n\nPursuant to the Notice of\nthe State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81,\nif the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to\na structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. Furthermore,\nthe Administrative Measures for Non-Resident Taxpayer to Enjoy Treatments under Tax Treaties, or SAT Circular 60, which became effective\nin November 2015, require that non-resident enterprises which satisfy the criteria for entitlement to tax treaty benefits may, at\nthe time of tax declaration or withholding declaration through a withholding agent, enjoy the tax treaty benefits, and be subject to\nongoing administration by the tax authorities. In the case where the non-resident enterprises do not apply to the withholding agent to\nclaim the tax treaty benefits, or the materials and the information stated in the relevant reports and statements provided to the withholding\nagent do not satisfy the criteria for entitlement to tax treaty benefits, the withholding agent should withhold tax pursuant to the provisions\nof the PRC tax laws. The SAT issued the Announcement of State Taxation Administration on Promulgation of the Administrative Measures\non Non-resident Taxpayers Enjoying Treaty Benefits, the SAT Circular 35, on October 14, 2019, which became effective on January 1,\n2020. The SAT Circular 35 further simplified the procedures for enjoying treaty benefits and replaced the SAT Circular 60. According\nto the SAT Circular 35, no approvals from the tax authorities are required for a non-resident taxpayer to enjoy treaty benefits,\nwhere a non-resident taxpayer self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty\nbenefits at the time of tax declaration or at the time of withholding through the withholding agent, but it shall gather and retain the\nrelevant materials as required for future inspection, and accept follow-up administration by the tax authorities. There are also other\nconditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. According to the Circular\non Several Issues regarding the “Beneficial Owner” in Tax Treaties, or Circular 9, which was issued on February 3,\n2018 by the SAT, effective as of April 1, 2018, when determining the applicant’s status of the “beneficial owner”\nregarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without\nlimitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to residents in third country\nor region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country\nor region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate,\nwill be taken into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further\nprovides that applicants who intend to prove his or her status of the “beneficial owner” shall submit the relevant documents\nto the relevant tax bureau according to SAT Circular 60.\n\n \n\n84\n\n \n\n \n\n**Regulations relating to Intellectual Property\nRights**\n\n** **\n\nThe PRC has adopted comprehensive\nlegislation governing intellectual property rights, including copyrights, patents, trademarks and domain names.\n\n \n\n**Copyright.**Copyright\nin the PRC is principally protected under the Copyright Law of the PRC and its implementation rules. Reproducing, distributing, performing,\nprojecting, broadcasting or compiling a work or communicating the same to the public via an information network without permission from\nthe owner of the copyright therein, unless otherwise provided in the Copyright Law of the PRC and related rules and regulations, shall\nconstitute infringements of copyrights. The infringer shall, according to the circumstances of the case, undertake to cease the infringement,\neliminate impacts, publicly apologize, and pay damages, etc. In addition, the Regulations on the Protection of Rights to Information\nNetwork Communication promulgated by the State Council on May 18, 2006 as amended in 2013, provides specific rules on fair use,\nstatutory license, and a safe harbor for use of copyrights and copyright management technology and specifies the liabilities of various\nentities for violations, including copyright holders, libraries and internet service providers.\n\n \n\n**Patent.**The\nPatent Law of the PRC provides for three types of patents, “invention,” “utility model” and “design.”\nTo be patentable, invention or utility models must meet three criteria: novelty, inventiveness and practicability. The National Intellectual\nProperty Administration is responsible for examining and approving patent applications.\n\n \n\n**Trademark.**The\nTrademark Law of the PRC and its implementation rules protect registered trademarks. The Trademark Office of National Intellectual Property\nAdministration is responsible for the registration and administration of trademarks throughout the PRC. The Trademark Law has adopted\na “first-to-file” principle with respect to trademark registration.\n\n \n\n**Domain Name.**Domain\nnames are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT. The MIIT is responsible\nfor supervising and administering nationwide domain name services, under supervision of which the China Internet Network Information\nCenter is responsible for the routine administration of the “.CN” and the. “中国”\ndomain names. In principle, domain name registration services are subject to the rule of “first come, first served.” In November 2017,\nthe MIIT promulgated the Notice of the Ministry of Industry and Information Technology on Regulating the Use of Domain Names in Providing\nInternet-based Information Services, which became effective on January 1, 2018. Pursuant to the notice, the domain name used by\nan internet-based information service provider in providing internet-based information services must be registered and owned by such\nprovider in accordance with the law. If the internet-based information service provider is an entity, the domain name registrant must\nbe the entity (or any of the entity’s shareholders), or the entity’s principal or senior manager.\n\n \n\n**Regulations relating to Foreign Exchange**\n\n** **\n\nThe principal regulation governing\nforeign currency exchange in China is the Foreign Exchange Administration Regulations of the PRC which was promulgated by the State Council\non January 29, 1996 and was latest amended on August 5, 2008. Pursuant to this regulation and other PRC rules and regulations\non currency conversion, Renminbi is freely convertible for payments of current account items, such as trade and service-related foreign\nexchange transactions and dividend payments, but not freely convertible for capital account items, such as direct investment, loan or\ninvestment in securities outside China unless prior approval of the State Administration of Foreign Exchange or the SAFE, or its local\ncounterpart is obtained.\n\n \n\n85\n\n \n\n \n\nOn March 30, 2015, SAFE\npromulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise\nor the Circular 19. According to Circular 19, the foreign exchange capital of foreign-invested enterprises shall be subject to the\nDiscretionary Foreign Exchange Settlement, which means that the foreign exchange capital in the capital account of a foreign-invested\nenterprise for which the rights and interests of monetary contribution have been confirmed by the local foreign exchange bureau (or the\nbook-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the\nforeign-invested enterprise, and if a foreign-invested enterprise needs to make further payment from such account, it still needs to\nprovide supporting documents and proceed with the review process with the banks. Furthermore, Circular 19 stipulates that the use of\ncapital by foreign-invested enterprises shall follow the principles of authenticity and self-use within the business scope of enterprises.\nThe capital of a foreign-invested enterprise and capital in Renminbi obtained by the foreign-invested enterprise from foreign exchange\nsettlement shall not be used for the following purposes: (i) directly or indirectly used for payments beyond the business scope\nof the enterprises or payments as prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in\nsecurities unless otherwise provided by the relevant laws and regulations; (iii) directly or indirectly used for granting entrust\nloans in Renminbi (unless permitted by the scope of business), repaying inter- enterprise borrowings (including advances by the third-party)\nor repaying the bank loans in Renminbi that have been sub-lent to third parties; or (iv) directly or indirectly used for expenses\nrelated to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).\n\n \n\nThe Circular of Further Simplifying\nand Improving the Direct Investment-related Foreign Exchange Administration Policies or SAFE Circular 13, which became effective\non June 1, 2015 and was amended on December 30, 2019, according to which, entities and individuals may apply for such foreign\nexchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications\nand conduct the registration. SAFE Circular 13 cancels the administrative approvals of foreign exchange registration of direct domestic\ninvestment and direct overseas investment and simplifies the procedure of foreign exchange-related registration. Pursuant to SAFE Circular 13,\ninvestors should register with banks for direct domestic investment and direct overseas investment.\n\n \n\nThe Circular on Reforming\nand Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or the Circular 16, was promulgated by SAFE\non June 9, 2016 and most recently amended on December 4, 2023. Pursuant to Circular 16, enterprises registered in the\nPRC may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. Circular 16 reiterates the\nprinciple that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes\nbeyond its business scope or prohibited by PRC Laws, while such converted Renminbi shall not be provided as loans to its non-affiliated\nentities.\n\n \n\nOn January 26, 2017,\nSAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance\nVerification, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities\nto offshore entities, including: (i) banks should check board resolutions regarding profit distribution, the original version of\ntax filing records, and audited financial statements pursuant to the principle of genuine transactions; and (ii) domestic entities\nshould hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to this circular,\ndomestic entities should make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions,\ncontracts, and other proof when completing the registration procedures in connection with an outbound investment.\n\n \n\nOn October 23, 2019,\nthe SAFE promulgated the Notice for Further Advancing the Facilitation of Cross-border Trade and Investment, which was replaced by the\nCircular on Further Deepening Reform and Promoting Facilitation of Cross-border Trade and Investment on December 4, 2023, or the Circular 28.\nThe Circular 28 allows all FIEs to use Renminbi converted from foreign currency-denominated capital for equity investments in China,\nas long as the equity investment is genuine, does not violate applicable laws, and complies with the negative list on foreign investment.\n\n \n\n86\n\n \n\n \n\nAccording to the Circular\nof SAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business or the SAFE Circular 8 promulgated\nand effective on April 10, 2020 by the SAFE, the reform of facilitating the payments of incomes under the capital accounts shall\nbe promoted nationwide. Under the prerequisite of ensuring true and compliant use of funds and compliance and complying with the prevailing\nadministrative provisions on use of income from capital projects, enterprises which satisfy the criteria are allowed to use income under\nthe capital account, such as capital funds, foreign debt and overseas listing, etc., for domestic payment, without the need to provide\nproof materials for veracity to the bank beforehand for each transaction.\n\n \n\n**Regulations relating to Dividend Distribution**\n\n** **\n\nThe principal regulations\ngoverning distribution of dividends of FIEs include the PRC Foreign Investment Law, the Implementation Rules of the PRC Foreign Investment\nLaw, and the Company Law which was issued on December 29, 1993 and most recently amended on December 29, 2023.\n\n \n\nUnder these laws and regulations,\nWFOEs in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting\nstandards and regulations. In addition, WFOEs in China are required to allocate at least 10% of their respective accumulated profits\neach year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises.\nThese reserves are not distributable as cash dividends. A PRC company is not permitted to distribute any profits until any losses from\nprior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable\nprofits from the current fiscal year.\n\n \n\n**Regulations relating to Labor**\n\n** **\n\nThe Labor Contract Law of\nthe PRC as promulgated by the SCNPC on June 29, 2007 and amended on December 28, 2012 and effective as from July 1, 2013,\nand its implementation rules provide requirements concerning employment contracts between an employer and its employees. According to\nthe Labor Contract Law, a written employment contract shall be concluded for the establishment of employment relationship. Where an employer\nfails to conclude a written employment contract with an employee within the period of more than one month but less than one year from\nthe date of commencement of work, the employer shall pay the employee double wages each month, and if such period exceeds one year, the\nemployer and the employee are deemed to have entered into an employment contract with unfixed term. The Labor Contract Law and its implementation\nrules also require compensation to be paid upon certain terminations, which significantly affects the cost of reducing workforce for\nemployers. In addition, if an employer intends to enforce a non-compete provision with an employee in an employment contract or non-competition\nagreement, it has to compensate the employee on a monthly basis during the term of the restriction period after the termination or ending\nof the employment contract. Employers in most cases are also required to provide a severance payment to their employees after their employment\nrelationships are terminated.\n\n \n\nEnterprises in China are required\nby PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan,\na medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a\nhousing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and\nallowances, of the employees as specified by the local government from time to time at locations where they operate their businesses\nor where they are located. According to the Social Insurance Law of the PRC which was promulgated by the SCNPC on October 28, 2010\nand became effective on July 1, 2011 and as amended on December 29, 2018, an employer that fails to make social insurance contributions\nmay be ordered to pay the required contributions within a stipulated time limit and be subject to a late fee. If the employer still fails\nto rectify the failure to make social insurance contributions within the stipulated deadline, it may be subject to a fine ranging from\none to three times the amount overdue. According to the Regulations on Management of Housing Provident Fund which was promulgated by\nthe State Council on April 3, 1999 and became effective on April 3, 1999 and as latest amended on March 24, 2019, an enterprise\nthat fails to make housing provident fund contributions may be ordered to rectify the noncompliance and pay the required contributions\nwithin a stipulated time limit; otherwise, an application may be made to a local court for compulsory enforcement.\n\n \n\n**Regulations relating to Leasing**\n\n** **\n\nPursuant to the Law on Administration\nof Urban Real Estate of the PRC, when leasing premises, the lessor and lessee are required to enter into a written lease contract, containing\nsuch provisions as the leasing term, use of the premises, price of the lease, repair liabilities, and other rights and obligations of\nboth parties. Both lessor and lessee are also required to register the lease with the real estate administration department for the record.\nIf the lessor and lessee fail to go through the registration procedures, both lessor and lessee may be subject to fines pursuant to the\nAdministrative Measures on Leasing of Commodity Housing.\n\n \n\n87\n\n \n\n \n\nAccording to the Civil Code,\nthe lessee may sublease the leased premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises,\nthe lease contract between the lessee and the lessor remains valid. The lessor is entitled to terminate the lease contract if the lessee\nsubleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between\nthe lessee and the lessor will still remain valid.\n\n \n\nPursuant to the Civil Code,\nwhere the mortgaged property has been leased and assigned for possession prior to the establishment of the mortgage, the original leasehold\nrelation shall not be affected by such mortgage.\n\n \n\n**Regulations relating to M&A Rules and\nOverseas Listings**\n\n** **\n\nSix PRC regulatory agencies,\nincluding the CSRC, adopted the Regulations on Mergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became\neffective on September 8, 2006 and was last amended on June 22, 2009. Foreign investors shall comply with the M&A Rules\nwhen they purchase equity interests in a domestic company or subscribe the increased capital of a domestic company, and thus changing\nthe nature of the domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise\nin China, and purchase the assets of a domestic company and operate the assets; or when the foreign investors purchase the asset of a\ndomestic company, and establish a foreign-invested enterprise by injecting such assets and operate the assets. The M&A Rules purport,\namong other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of Chinese\ndomestic companies and controlled by Chinese companies or individuals, to obtain the approval of the CSRC prior to publicly listing their\nsecurities on an overseas stock exchange. However, the Foreign Investment Law has partly replaced the M&A Rules in terms of its rules\non equity or assets acquisition of a non-related domestic company by a foreign investor. The equity and assets acquisition of a related\ndomestic company by a foreign investor shall still be subject to the M&A Rules.\n\n \n\nOn July 6, 2021, General\nOffice the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions\non Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen\nthe supervision over overseas listings by China-based companies and proposed to take effective measures, such us promoting the establishment\nof relevant regulatory systems to deal with the risks and incidents faced by China-based overseas listed companies. As these opinions\nare recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions\nremains unclear at this stage. We cannot assure you that these opinions and any related implementing rules to be promulgated in the future\nwill not impose additional requirements on us.\n\n \n\nOn February 17, 2023,\nthe CSRC issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises, or the Trial Measures,\nwhich became effective on March 31, 2023. On the same date, the CSRC circulated Supporting Guidance Rules No. 1 through No. 5,\nNotes on the Trial Measures, Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises and relevant\nCSRC Answers to Reporter Questions, or collectively, the Guidance Rules and Notice, on CSRC’s official website. Under the Trial\nMeasures and the Guidance Rules and Notice, domestic enterprises conducting overseas securities offering and listing, either directly\nor indirectly, shall complete filings with the CSRC pursuant to the Trial Measures’ requirements within three working days\nfollowing the submission of an application for initial public offering or listing. Starting from March 31, 2023, enterprises that\nhave been listed overseas or satisfy all of the following conditions shall be deemed as “Grandfathered Issuers” and are not\nrequired to complete the overseas listing filing immediately, but shall complete filings as required if they conduct refinancing or are\ninvolved in other circumstances that require filing with the CSRC: (i) the application for indirect overseas offering or listing\nshall have been approved by the relevant overseas regulatory authority or stock exchange prior to March 31, 2023 (as the SEC does\nnot approve or disapprove of an offering, this requirement is interpreted to be the SEC’s declaration of the registration statement\nto be effective with respect to this offering), (ii) the enterprise is not required to reapply for the approval of the relevant\noverseas regulatory authority or stock exchange, and (iii) such overseas securities offering or listing shall be completed before\nSeptember 30, 2023. Starting from March 31, 2023, domestic enterprises that have submitted valid applications for overseas\nofferings and listing but have not obtained the approval from relevant overseas regulatory authority or overseas stock exchange shall\ncomplete filings with the CSRC prior to their overseas offering and listings.\n\n \n\n88\n\n \n\n \n\nOn February 24, 2023,\nthe CSRC, jointly with other relevant governmental authorities, promulgated the revised Provisions on Strengthening Confidentiality and\nArchives Management of Overseas Securities Issuance and Listing by Domestic Enterprises, or the Confidentiality and Archives Management\nProvisions, and upon becoming effective on March 31, 2023, such provisions will supersede the currently effective Provisions on\nStrengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing. According to the Confidentiality\nand Archives Management Provisions, domestic companies, whether offering and listing securities overseas directly or indirectly, shall\nstrictly abide by the applicable laws and regulations, enhance the sense of confidentiality, improve the archives management system,\nand take necessary measures to implement the confidentiality and archives management responsibilities when providing or publicly disclosing,\neither directly or through their overseas listed entities, documents and materials to securities services providers such as securities\ncompanies and accounting firms or overseas regulators in the process of their overseas offering and listing. In the event that such documents\nor materials contain any information related to state secrets or government authorities work secrets, domestic companies shall obtain\nthe approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department\nat the same level with the approving governmental authority; and in the event that such documents or materials, if divulged, will jeopardize\nnational security or public interest, domestic companies shall strictly fulfill relevant procedures stipulated by applicable laws and\nregulations. Furthermore, domestic companies shall also provide a written statement about whether they have completed the approval or\nfiling procedures as above when providing documents and materials to securities companies and securities service providers, and the securities\ncompanies and securities service providers shall properly retain such written statements for inspection.\n\n \n\n4.C.\nOrganizational Structure\n\n \n\nThe following diagram illustrates our corporate\nstructure, including our principal subsidiaries as of the date of this annual report.\n\n \n\n \n\n \n\nContractual Arrangements with The VIE and Its\nShareholders\n\n \n\nCurrent PRC laws and regulations\nimpose certain restrictions or prohibitions on foreign ownership of companies that engage in value-added telecommunication services and\ncertain other businesses. POMDOCTOR LIMITED is an exempted company with limited liability established in the Cayman Islands. Guangzhou\nWFOE is a PRC subsidiary and a foreign-invested enterprise under the PRC law. To comply with PRC laws and regulations, we conduct certain\nof our businesses in China through Qilekang Digital Health, the VIE, based on a series of Contractual Arrangements by and among Guangzhou\nWFOE, the VIE, and its shareholders (except for Zhongke Baiyun and General Technology).\n\n \n\n89\n\n \n\n \n\nOur Contractual Arrangements\nwith the VIE and its shareholders (except for Zhongke Baiyun and General Technology) allow us to (i) exercise effective control\nover the VIE, (ii) receive substantially all of the economic benefits of the VIE, and (iii) have an exclusive option to purchase\nall or part of the equity interests in the VIE when and to the extent permitted by the PRC law.\n\n \n\nZhongke Baiyun, which holds\n2.87% of the equity interest of the VIE, has irrevocably confirmed and undertaken that it would not enter into contractual arrangements\nwith Guangzhou WFOE and the VIE, authorize Guangzhou WFOE to act on its behalf as proxy attorney, or pledge its equity interest of the\nVIE, and it has given up its right of first refusal or any other preferential rights in respect of Guangzhou WFOE’s exclusive option\nunder the Exclusive Option Agreements.\n\n \n\nIn October 2023, we terminated\nthe contractual arrangements with General Technology. General Technology, which holds 2.27% of the equity interest of the VIE, has irrevocably\nconfirmed and undertaken that it would not re-enter into contractual arrangements with Guangzhou WFOE and the VIE, authorize Guangzhou\nWFOE to act on its behalf as proxy attorney, or pledge its equity interest of the VIE, and it has given up its right of first refusal\nor any other preferential rights in respect of Guangzhou WFOE’s exclusive option under the Exclusive Option Agreements.\n\n \n\nAs a result of our direct\nownership in Guangzhou WFOE and the Contractual Arrangements with the VIE, we are regarded as the primary beneficiary of the VIE, and\nwe treat the VIE and its subsidiaries as our consolidated entities under U.S. GAAP, but the VIE is not our majority owned subsidiary. We\nhave consolidated the financial results of the VIE and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.\n\n \n\nThe following is a summary\nof the currently effective Contractual Arrangements by and among Guangzhou WFOE, the VIE, and its respective shareholders (except for\nZhongke Baiyun and General Technology).\n\n \n\n**Agreements that provide us with effective\ncontrol over the VIE**\n\n** **\n\n*Power of Attorneys. *Pursuant\nto each of the Power of Attorneys dated August 10, 2021 and October 24, 2023 by and among Guangzhou WFOE, Qilekang Digital\nHealth, and each of the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology), the shareholders\nof Qilekang Digital Health (except for Zhongke Baiyun and General Technology) irrevocably authorized Guangzhou WFOE to act on their respective\nbehalf as proxy attorney, to exercise the voting and management rights of shareholders concerning all the equity interests held by each\nof them in Qilekang Digital Health, including but not limited to right to convene and attend shareholders’ meetings, the right\nto vote and all other rights as shareholders under the articles of association of Qilekang Digital Health and under the laws of China.\nWithout the prior written consent of Guangzhou WFOE, the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General\nTechnology) have no right to increase, decrease, transfer, pledge, or by any other manner to dispose of or change all or a portion of\nthe equity interest held by such shareholders. The Power of Attorneys shall be irrevocable and remain effective as long as such shareholders\nremain as Qilekang Digital Health’s shareholders.\n\n \n\n*Equity Interest Pledge\nAgreements. *Pursuant to each of the Equity Interest Pledge Agreements dated August 10, 2021 and October 24,\n2023 by and between Guangzhou WFOE, Qilekang Digital Health and each of the shareholders of Qilekang Digital Health (except for Zhongke\nBaiyun and General Technology), the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have agreed\nto pledge 94.86% of equity interests in Qilekang Digital Health to Guangzhou WFOE to guarantee the performance by such shareholders of\ntheir obligations under the Exclusive Option Agreements, the Power of Attorneys, and the Exclusive Business Cooperation Agreement, as\nwell as the performance by Qilekang Digital Health of its obligations under the Exclusive Option Agreements, the Power of Attorneys,\nand the Exclusive Business Cooperation Agreement. In the event of a breach by Qilekang Digital Health or any shareholder of contractual\nobligations under the Equity Interest Pledge Agreements, Guangzhou WFOE, as pledgee, will have the right to dispose of the pledged equity\ninterests in Qilekang Digital Health and will have priority in receiving the proceeds from such disposal. The shareholders of Qilekang\nDigital Health (except for Zhongke Baiyun and General Technology) also have undertaken that, without prior written consent of Guangzhou\nWFOE, they will not dispose of, place, or permit any encumbrance on the pledged equity interests.\n\n \n\n90\n\n \n\n \n\nWe have completed the registration\nof the equity interest pledge contemplated under the Equity Interest Pledge Agreements relating to Qilekang Digital Health, with the\ncompetent office of the SAMR in accordance with the PRC Civil Code, as of the date of this annual report.\n\n \n\n**Agreements that allow us to receive economic\nbenefits from the VIE**\n\n** **\n\n*Exclusive Business Cooperation\nAgreement. *Pursuant to an Exclusive Business Cooperation Agreement dated August 10, 2021 by and between\nGuangzhou WFOE and Qilekang Digital Health, Guangzhou WFOE has the exclusive right to provide or designate any third party to provide\ncomprehensive technical support, consulting services and other related services to Qilekang Digital Health. In exchange, Qilekang Digital\nHealth agrees to pay an agreed service fees to Guangzhou WFOE on annual basis or at any other agreed time. Without the prior written\nconsent of Guangzhou WFOE, Qilekang Digital Health cannot accept same or similar services provided by, or establish same or similar cooperation\nrelationship with, any third party. This Exclusive Business Cooperation Agreement will remain effective for 30 years unless earlier\nterminated in accordance with provisions of this agreement or other agreements separately executed between Guangzhou WFOE and Qilekang\nDigital Health, and will automatically be extended for another 30 years unless agreed by Guangzhou WFOE on this agreement’s\ntermination upon expiration of its term.\n\n \n\n**Agreement that provides us with the option\nto purchase the equity interests in and assets of the VIE**\n\n** **\n\n*Exclusive Option Agreements. *Pursuant\nto each of the Exclusive Option Agreements dated August 10, 2021 and October 24, 2023 by and between Guangzhou WFOE, Qilekang\nDigital Health, and each of the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology), such shareholders\nof Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have irrevocably granted Guangzhou WFOE or its designated\nperson, to the extent permitted by PRC laws, an exclusive option to purchase all or part of their equity interests in Qilekang Digital\nHealth. Guangzhou WFOE or its designated person may exercise such option to purchase all of equity interests at the price based on registered\ncapital contributed by the shareholders (except for Zhongke Baiyun and General Technology) or the price as agreed in a separate equity\ntransfer agreement. Qilekang Digital Health has undertaken that, without Guangzhou WFOE’s prior written consent, it will not, among\nother things, (i) change its registered capital, (ii) merge with any other entity, (iii) sell, transfer, mortgage, or\ndispose of its material assets, or (iv) amend its articles of association. The shareholders of Qilekang Digital Health (except for\nZhongke Baiyun and General Technology) have undertaken that, without Guangzhou WFOE’s prior written consent, they will not sell,\ntransfer, mortgage or dispose of equity interest in Qilekang Digital Health. The Exclusive Option Agreements will remain effective until\nall equity interest held by the shareholders of Qilekang Digital Health in Qilekang Digital Health (except for Zhongke Baiyun and General\nTechnology) have been transferred or assigned to Guangzhou WFOE or any other person designated by Guangzhou WFOE.\n\n \n\n*Spousal Consent Letters. *Spouses\nof two shareholders of Qilekang Digital Health, Mr. Zhenyang Shi and Ms. Li Xu, who collectively hold 13.97% of equity interests\nin Qilekang Digital Health, have each signed a spousal consent letter on October 24, 2023. Each signing spouse of the relevant shareholder\nunconditionally and irrevocably agreed that the equity interest in Qilekang Digital Health held by and registered in the name of such\nshareholder be disposed of in accordance with the Equity Interest Pledge Agreement, the Exclusive Option Agreement, and the Power of\nAttorney, and that such shareholder may perform, amend or terminate such agreements without any additional consent of his spouse. Additionally,\nthe signing spouses agreed not to assert any rights over the equity interest in Qilekang Digital Health held by the shareholders. In\naddition, in the event that the signing spouses obtain any equity interest in Qilekang Digital Health held by the shareholders for any\nreason, they agree to be bound by and sign a series of written documents in substantially the same format and content as the Contractual\nArrangements described above and the Exclusive Business Cooperation Agreement, as may be amended from time to time.\n\n \n\nIn the opinion of Han Kun\nLaw Offices, our PRC legal counsel:\n\n \n\n(i)the ownership structures\nof the VIE and Guangzhou WFOE in China do not and will not in violation of mandatory provisions\nof applicable PRC laws and regulations currently in effect; and\n\n \n\n(ii)the Contractual Arrangements\namong Guangzhou WFOE, the VIE, and its shareholders (except for Zhongke Baiyun and General\nTechnology) governed by PRC laws are valid and binding upon each party to such arrangements,\nand enforceable against each party thereto in accordance with their terms and applicable\nPRC laws and regulations currently in effect, and will not result in any violation of applicable\nPRC laws currently in effect.\n\n \n\n91\n\n \n\n \n\nHowever, our PRC legal counsel\nhas also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws,\nregulations, and rules. Accordingly, the PRC regulatory authorities may take a view that is contrary to or otherwise different from the\nopinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to the VIE structures will be adopted\nor if adopted, what they would provide. If we or the VIE are found to be in violation of any existing or future PRC laws or regulations,\nor fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion\nto take action in dealing with such violations or failures. In addition, the VIE structure may be less effective than direct ownership\nin providing us with operational control over the VIE or its subsidiaries and we may incur substantial costs to enforce the terms of\nthe arrangements. For instance, the VIE and its shareholders could breach their Contractual Arrangements with us by, among other things,\nfailing to conduct the operations of the VIE in an acceptable manner or taking other actions that are detrimental to our interests. If\nwe had direct ownership of the VIE in China, we would be able to exercise our rights as a shareholder to effect changes in the board\nof directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management level.\nHowever, under the current Contractual Arrangements, we rely on the performance by the VIE and its shareholders of their obligations\nunder the contracts to direct the VIE’s activities. The shareholders of the VIE may not act in the best interests of our company\nor may not perform their obligations under these contracts. If any dispute relating to these contracts remains unresolved, we will have\nto enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings\nand therefore will be subject to requirements under the PRC legal system. See “Item 3. Key Information—3.D. Risk Factors—Risks\nRelated to Our Corporate Structure—If the PRC government deems that the Contractual Arrangements in relation to the VIE do not\ncomply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation\nof existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those\noperations,” “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Corporate Structure—We rely\non Contractual Arrangements with the VIE and its shareholders for a portion of our business operations, which may not be as effective\nas direct ownership in providing operational control,” “Item 3. Key Information—3.D. Risk Factors—Risks Related\nto Our Corporate Structure—Our current corporate structure and business operations may be affected by the Foreign Investment Law,”\nand “Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect\nto the enforcement of laws and changes in laws and regulations in China could adversely affect us.”\n\n \n\n4.D.\nProperty, Plant and Equipment\n\n \n\nOur principal place of business\nis located in Guangzhou, China. As of December 31, 2025, we leased two properties with an aggregate gross floor area of over 4,256 square\nmeters. These leases vary in duration from one to three years."}