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111, Inc.

111, Inc.YI決算レポート

Nasdaq

111, Inc. is a leading China-based digital healthcare provider offering online pharmacy, telehealth consultations, chronic disease management, and medical supply chain solutions. It serves individual consumers and institutional clients nationwide, focusing on expanding access to affordable quality healthcare in underserved regional markets.

What changed in 111, Inc.'s 20-F — 2022 vs 2023

Top changes in 111, Inc.'s 2023 20-F

518 paragraphs added · 571 removed · 420 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

144 edited+36 added−60 removed628 unchanged
If 1 Pharmacy Technology’s proposed listing plan is not successful, our ability to strengthen our market position and operations in the PRC could be materially impaired.
If 1 Pharmacy Technology’s proposed listing plan is not successful, our ability to strengthen our market position and operations in the PRC could be materially impaired.
On the same day, the CSRC also published a series of guidance rules and Q&As in connection with the implementation of the Overseas Offering and Listing Measures. The Overseas Offering and Listing Measures establishes a new filing-based regime to regulate overseas offerings and listings by PRC domestic companies.
On the same day, the CSRC also published a series of guidance rules and Q&As in connection with the implementation of the Overseas Offering and Listing Measures. The Overseas Offering and Listing Measures establishes a new filing-based regime to regulate overseas offerings and listings by PRC domestic companies.
The Revised Cybersecurity Review Measures provide that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any public listing in a foreign country.
The Revised Cybersecurity Review Measures provide that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any public listing in a foreign country.
As of the date of this annual report, no detailed interpretation or implementation rules of the Revised Cybersecurity Review Measures have been issued by any authority and it remains unclear as to whether the relevant requirements will be applicable to companies that are already listed in the United States, including us.
As of the date of this annual report, no detailed interpretation or implementation rules of the Revised Cybersecurity Review Measures have been issued by any authority and it remains unclear as to whether the relevant requirements will be applicable to companies that are already listed in the United States, including us.
The Revised Cybersecurity Review Measures further provide that “critical information infrastructure operators” that procure internet products and services must be subject to the cybersecurity review if their activities affect or may affect national security, and relevant governmental authorities in the PRC may initiate cybersecurity review if they determine that an operator’s network products or services or data processing activities affect or may affect national security.
The Revised Cybersecurity Review Measures further provide that “critical information infrastructure operators” that procure internet products and services must be subject to the cybersecurity review if their activities affect or may affect national security, and relevant governmental authorities in the PRC may initiate cybersecurity review if they determine that an operator’s network products or services or data processing activities affect or may affect national security.
As of the date of this annual report, we have not been informed that we are a critical information infrastructure operator by any government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws.
As of the date of this annual report, we have not been informed that we are a critical information infrastructure operator by any government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws.
Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator under PRC law. If we are deemed to be a critical information infrastructure operator under the PRC cybersecurity laws and regulations, we may be subject to obligations in addition to what we have performed under the PRC cybersecurity laws and regulations.
Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator under PRC law. If we are deemed to be a critical information infrastructure operator under the PRC cybersecurity laws and regulations, we may be subject to obligations in addition to what we have performed under the PRC cybersecurity laws and regulations.
We cannot predict the impact of the Revised Cybersecurity Review Measures at this stage, and we will closely monitor and assess any development in the rule-making process.
We cannot predict the impact of the Revised Cybersecurity Review Measures at this stage, and we will closely monitor and assess any development in the rule-making process.
However, our PRC legal counsel has further advised us that there remains some uncertainty as to how relevant rules published by the CSRC and the CAC will be interpreted or implemented, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form.
However, our PRC legal counsel has further advised us that there remains some uncertainty as to how relevant rules published by the CSRC and the CAC will be interpreted or implemented, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form.
We cannot assure you that relevant PRC governmental authorities, including the CSRC and the CAC, would reach the same conclusion as our PRC legal counsel, and hence, we may face regulatory actions or other sanctions from them.
We cannot assure you that relevant PRC governmental authorities, including the CSRC and the CAC, would reach the same conclusion as our PRC legal counsel, and hence, we may face regulatory actions or other sanctions from them.
In addition, we believe, to the best of our knowledge, that our operations do not violate PRC laws and regulations, including regulations or policies that have been issued by the CAC, currently in force in all material aspects.
In addition, we believe, to the best of our knowledge, that our operations do not violate PRC laws and regulations, including regulations or policies that have been issued by the CAC, currently in force in all material aspects.
Furthermore, as the Overseas Offering and Listing Measures are relatively new, substantial uncertainties remain as to the interpretation and implementation of these new requirements, we may be unable to complete the filings and fully comply with the relevant new rules in a timely manner, or at all.
Furthermore, as the Overseas Offering and Listing Measures are relatively new, substantial uncertainties remain as to the interpretation and implementation of these new requirements, we may be unable to complete the filings and fully comply with the relevant new rules in a timely manner, or at all.
Any such circumstance could significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. In addition, implementation of industry-wide regulations affecting our operations could limit our ability to attract new customers and/or users and cause the value of our securities to significantly decline.
Any such circumstance could significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. In addition, implementation of industry-wide regulations affecting our operations could limit our ability to attract new customers and/or users and cause the value of our securities to significantly decline.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs.
We may be subject to late fees and fines in relation to the underpaid employee benefits and under-withheld individual income tax, our financial condition and results of operations may be adversely affected.
We may be subject to late fees and fines in relation to the underpaid employee benefits and under-withheld individual income tax, and our financial condition and results of operations may be adversely affected.
Judgment of United States courts will not be directly enforced in Hong Kong as there are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States.
Judgment of United States courts will not be directly enforced in Hong Kong as there are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States.
However, subject to certain conditions, including but not limited to when the judgment is for a fixed sum in a civil matter and not in respect of taxes, fines, penalties or similar charges, the judgment is final and conclusive upon the merits of the claim and has not been stayed or satisfied in full, the proceedings in which the judgment was obtained were not contrary to natural justice, were not procured by fraud and the enforcement of the judgment is not contrary to public policy of Hong Kong, Hong Kong courts may accept such judgment obtained from a United States court as a debt due under the rules of common law enforcement.
However, subject to certain conditions, including but not limited to when the judgment is for a fixed sum in a civil matter and not in respect of taxes, fines, penalties or similar charges, the judgment is final and conclusive upon the merits of the claim and has not been stayed or satisfied in full, the proceedings in which the judgment was obtained were not contrary to natural justice, were not procured by fraud and the enforcement of the judgment is not contrary to public policy of Hong Kong, Hong Kong courts may accept such judgment obtained from a United States court as a debt due under the rules of common law enforcement.
On October 27, 2022, our board of directors resolved, effective December 31, 2022, the exercise price per share of each option that was outstanding and not exercised, canceled, forfeited, or surrendered immediately prior to December 31, 2022, whether vested or unvested, shall be amended to USD0.01 per Share and all other terms of the share options granted remain unchanged.
On October 27, 2022, our board of directors resolved, effective December 31, 2022, that the exercise price per share of each option that was outstanding and not exercised, canceled, forfeited, or surrendered immediately prior to December 31, 2022, whether vested or unvested, shall be amended to USD0.01 per Share and all other terms of the share options granted remain unchanged.
If we were a PFIC for any taxable year during which a U.S. taxpayer holds ADSs or ordinary shares, the U.S. taxpayer generally would be subject to adverse U.S. federal income tax consequences, including increased tax liability on disposition gains and “excess distributions,” and additional reporting requirements. See “Item 10. Additional Information—10.E. Taxation—Material U.S.
If we were a PFIC for any taxable year during which a U.S. taxpayer holds ADSs or ordinary shares, the U.S. taxpayer generally would be subject to adverse U.S. federal income tax consequences, including increased tax liability on disposition gains and “excess distributions,” and additional reporting requirements. See “Item 10. Additional Information—E. Taxation—Material U.S.
In addition to the above factors, the price and trading volume of the ADSs may be highly volatile due to multiple factors, including the following: ● regulatory developments affecting us, our consumers or our industry; ● conditions in the online healthcare industry and the public perception of the legitimacy and ethics of certain business practices of our competitors or other market players within the industry; ● announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors; ● changes in the economic performance or market valuations of other online healthcare platforms; ● actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; ● changes in financial estimates by securities research analysts; ● announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments; ● additions to or departures of our senior management; ● detrimental negative publicity about us, our management or our industry; 50 ​ Table of Contents ● the potential delisting pursuant to the HFCAA; ● fluctuations of exchange rates between the Renminbi and the U.S. dollar; ● allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes; inadequate corporate governance policies, or allegations of fraud, among other things, involving China-based issuers; ● release or expiry of any transfer restrictions on our outstanding ordinary shares or the ADSs; and ● sales or perceived potential sales of additional ordinary shares or ADSs.
In addition to the above factors, the price and trading volume of the ADSs may be highly volatile due to multiple factors, including the following: ● regulatory developments affecting us, our consumers or our industry; ● conditions in the online healthcare industry and the public perception of the legitimacy and ethics of certain business practices of our competitors or other market players within the industry; ● announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors; ● changes in the economic performance or market valuations of other online healthcare platforms; ● actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; ● changes in financial estimates by securities research analysts; ● announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments; ● additions to or departures of our senior management; 49 ​ Table of Contents ● detrimental negative publicity about us, our management or our industry; ● the potential delisting pursuant to the HFCAA; ● fluctuations of exchange rates between the Renminbi and the U.S. dollar; ● allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes; inadequate corporate governance policies, or allegations of fraud, among other things, involving China-based issuers; ● release or expiry of any transfer restrictions on our outstanding ordinary shares or the ADSs; and ● sales or perceived potential sales of additional ordinary shares or ADSs.
Risk Factors—Risks Related to Our Business and Industry—We are subject to extensive and evolving regulatory requirements, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects” in this annual report. ● Our business, financial condition and results of operations may be materially and adversely affected if we are unable to compete effectively in the PRC general health and wellness market, and we may fail to sufficiently and promptly respond to rapid changes in government regulations, treatment of diseases and customer preferences.
Risk Factors—Risks Related to Our Business and Industry—We are subject to evolving regulatory requirements, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects” in this annual report. ● Our business, financial condition and results of operations may be materially and adversely affected if we are unable to compete effectively in the PRC general health and wellness market, and we may fail to sufficiently and promptly respond to rapid changes in government regulations, treatment of diseases and customer preferences.
We face various legal and operational risks and uncertainties as a company based in and primarily operating in China. The PRC government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept foreign investments or be listed on a U.S. stock exchange.
We face various legal and operational risks as a company based in and primarily operating in China. The PRC government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept foreign investments or be listed on a U.S. stock exchange.
Such government authorities promulgate and enforce laws and regulations that cover a variety of business activities that our operations concern, such as provision of internet information, online medical services, online and offline retail, sales and online operation of pharmaceutical products and medical devices, sales of food, and internet advertisement, among other things.
Such government authorities promulgate and enforce laws and regulations that cover a variety of business activities that our operations concern, such as provision of internet information, online and offline retail, sales and online operation of pharmaceutical products and medical devices, sales of food, and internet advertisement, among other things.
See also “—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our initial public offering to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
See also “—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” Regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental supervision of currency conversion may delay or prevent us from using the proceeds of our initial public offering to make loans to or make additional capital contributions to our subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Risks Related to Our Business and Industry We are subject to extensive and evolving regulatory requirements, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects. Due to the complex nature of our business, we are subject to legal and regulatory requirements of multiple industries in the PRC.
Risks Related to Our Business and Industry We are subject to evolving regulatory requirements, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects. Due to the complex nature of our business, we are subject to legal and regulatory requirements of multiple industries in the PRC.
We are a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur.
We are a holding company, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur.
Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in the ADSs could be greatly reduced or even rendered worthless. 51 ​ Table of Contents Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and any investment in the ADSs could be greatly reduced or even rendered worthless. 50 ​ Table of Contents Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
We are subject to certain risks in our pharmaceutical retail and wholesale businesses, including: ● inability to successfully execute effective advertising, marketing and promotional programs necessary to maintain and increase awareness of our brands, products and services; ● failure to implement effective pricing and other strategies in response to market competition; ● inability to respond to changes in demand and preferences of pharmacy customers and consumers in a timely manner; ● inability to stock an adequate supply of pharmaceutical and other health and wellness products that meet the demand of our pharmacy customers and consumers; ● overall consumer spending on healthcare in China; ● inability to obtain and maintain regulatory or governmental permits, approvals and clearances, or to pass PRC government inspections or audits; and 18 ​ Table of Contents ● the risk of, and resulting liability from, any contamination, injury or other harm caused by any use, misuse or misdiagnosis involving products distributed by us.
We are subject to certain risks in our pharmaceutical retail and wholesale businesses, including: ● inability to successfully execute effective advertising, marketing and promotional programs necessary to maintain and increase awareness of our brands, products and services; ● failure to implement effective pricing and other strategies in response to market competition; ● inability to respond to changes in demand and preferences of pharmacy customers and consumers in a timely manner; ● inability to stock an adequate supply of pharmaceutical and other health and wellness products that meet the demand of our pharmacy customers and consumers; ● overall consumer spending on healthcare in China; ● inability to obtain and maintain regulatory or governmental permits, approvals and clearances, or to pass PRC government inspections or audits; and ● the risk of, and resulting liability from, any contamination, injury or other harm caused by any use, misuse or misdiagnosis involving products distributed by us.
(4) The shareholders of Wuhan Central China Drug Trading Co., Ltd. include 1 Pharmacy Technology (70%) and Wuhan Zall Venture Capital Co., Ltd. (30%). (5) The shareholders of Gansu Yihaoyun Pharmacy Co., Ltd. include Chongqing Yihao Pharmacy Co., Ltd. (51%) and Gansu Rongkang Pharmaceutical Logistics Co., Ltd. (49%).
(4) The shareholders of Wuhan Central China Drug Trading Co., Ltd. include 1 Pharmacy Technology (70%) and Wuhan Zall Venture Capital Co., Ltd. (30%). (5) The shareholders of Gansu Yihaoyun Pharmacy Co., Ltd. include Chongqing Yihao Pharmacy Co., Ltd. (51%) and Gansu Rongkang Pharmaceutical Logistics Co., Ltd.
In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. 55 ​ Table of Contents Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than copies of our memorandum and articles of association, register of mortgages and charges, and any special resolutions passed by our shareholders) or to obtain copies of lists of shareholders of these companies.
In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. 54 ​ Table of Contents Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than copies of our memorandum and articles of association, register of mortgages and charges, and any special resolutions passed by our shareholders) or to obtain copies of lists of shareholders of these companies.
Risk Factors—Risks Related to Doing Business in China—We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business” in this annual report. 15 ​ Table of Contents ● Our ADSs may be delisted and our ADSs and Class A ordinary shares may be prohibited from trading in the over-the-counter market under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or fully investigate auditors located in China for two consecutive years.
Risk Factors—Risks Related to Doing Business in China—We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business” in this annual report. ● Our ADSs may be delisted and our ADSs and Class A ordinary shares may be prohibited from trading in the over-the-counter market under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or fully investigate auditors located in China for two consecutive years.
Regulatory requirements regarding the protection of such data are constantly evolving and can be subject to significant change, making the extent of our responsibility in that regard uncertain.
Regulatory requirements regarding the protection of such data are constantly evolving and can be subject to change, making the extent of our responsibility in that regard uncertain.
Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business. The PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D.
Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business. The PRC government has previously indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D.
For the years ended December 31, 2020, 2021 and 2022, the dividends that 111, Inc. received from its subsidiaries amounted to nil, nil and nil, respectively. 111, Inc. has not previously declared or paid any cash dividend or dividend in kind, and has no plan to declare or pay any dividends to investors in the near future on our shares or the ADSs representing our Class A ordinary shares.
For the years ended December 31, 2021, 2022 and 2023, the dividends that 111, Inc. received from its subsidiaries amounted to nil, nil and nil, respectively. 111, Inc. has not previously declared or paid any cash dividend or dividend in kind, and has no plan to declare or pay any dividends to investors in the near future on our shares or the ADSs representing our Class A ordinary shares.
Junling Liu, being two of its three partners Tianjin Yaocheng Business Management Partnership (LP) ​ Approximately 1.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaosheng Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaopeng Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaohua Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoming Business Management Partnership (LP) ​ Approximately 0.15% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaotian Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company 11 ​ Table of Contents Tianjin Yaoding Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yao Cheng Business Management Partnership (LP) ​ Approximately 0.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaojun Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaowei Business Management Partnership (LP) ​ Approximately 0.08% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoan Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaogong Business Management Partnership (LP) ​ Approximately 0.37% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company SAIF Partners (Nanjing) Equity Investment Fund (LP) ​ Approximately 0.95% ​ Unaffiliated third-party investor SAIF Partners (Huangshan) Tourist Culture Industrial Development Fund (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor SAIF Partners (Nanjing) Hengzhun Venture Capital Fund (LP) ​ Approximately 0.19% ​ Unaffiliated third-party investor Jiaxing Tengyuan Investment Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Shenli Business Management Partnership (LP) ​ Approximately 0.76% ​ Unaffiliated third-party investor Huasai Zhikang (Shanghai) Equity Investment Fund Partnership (LP) ​ Approximately 0.48% ​ Unaffiliated third-party investor Shanghai Zhangjiang Torch Venture Capital Co., Ltd. ​ Approximately 0.43% ​ Unaffiliated third-party investor 12 ​ Table of Contents Shanghai Zhilin Yiqu Venture Capital Partnership (LP) ​ Approximately 0.38% ​ Unaffiliated third-party investor Shanghai Technology Venture Capital Co., Ltd. ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Pudong Renmin Zhaoyin Cultural Industry Equity Investment Fund Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Gongqingcheng Ideate Investment Management Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Zhangjiang Technology Venture Capital Co., Ltd. ​ Approximately 0.19% ​ Unaffiliated third-party investor Hangzhou Hengqin Investment Management Partnership (LP) ​ Approximately 0.10% ​ Unaffiliated third-party investor ​ (3) Guangdong Yihao Pharmacy Co., Ltd., Guangdong Yihao Pharmaceutical Chain Co., Ltd. and Shanghai Yaowang E-Commerce Co., Ltd. were the former VIEs prior to the termination of the contractual arrangements and transfer of equity interests in February 2022, at which time these entities became our directly owned subsidiaries.
Junling Liu, and a PRC subsidiary of the Company, being three of its four partners Tianjin Yaocheng Business Management Partnership (LP) ​ Approximately 1.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaosheng Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaopeng Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaohua Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoming Business Management Partnership (LP) ​ Approximately 0.15% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaotian Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoding Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yao Cheng Business Management Partnership (LP) ​ Approximately 0.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaojun Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company 11 ​ Table of Contents Tianjin Yaowei Business Management Partnership (LP) ​ Approximately 0.08% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoan Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaogong Business Management Partnership (LP) ​ Approximately 0.37% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company SAIF Partners (Nanjing) Equity Investment Fund (LP) ​ Approximately 0.95% ​ Unaffiliated third-party investor SAIF Partners (Huangshan) Tourist Culture Industrial Development Fund (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor SAIF Partners (Nanjing) Hengzhun Venture Capital Fund (LP) ​ Approximately 0.19% ​ Unaffiliated third-party investor Jiaxing Tengyuan Investment Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Shenli Business Management Partnership (LP) ​ Approximately 0.76% ​ Unaffiliated third-party investor Huasai Zhikang (Shanghai) Equity Investment Fund Partnership (LP) ​ Approximately 0.48% ​ Unaffiliated third-party investor Shanghai Zhangjiang Torch Venture Capital Co., Ltd. ​ Approximately 0.43% ​ Unaffiliated third-party investor Shanghai Zhilin Yiqu Venture Capital Partnership (LP) ​ Approximately 0.38% ​ Unaffiliated third-party investor Shanghai Technology Venture Capital Co., Ltd. ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Pudong Renmin Zhaoyin Cultural Industry Equity Investment Fund Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Gongqingcheng Ideate Investment Management Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Zhangjiang Technology Venture Capital Co., Ltd. ​ Approximately 0.19% ​ Unaffiliated third-party investor Hangzhou Hengqin Investment Management Partnership (LP) ​ Approximately 0.10% ​ Unaffiliated third-party investor ​ (3) Guangdong Yihao Pharmacy Co., Ltd. and Guangdong Yihao Pharmaceutical Chain Co., Ltd. were the former VIEs prior to the termination of the contractual arrangements and transfer of equity interests in February 2022, at which time these entities became our directly owned subsidiaries.
Our businesses, such as online and offline pharmaceutical retail and wholesale distribution and online healthcare services, are subject to various and complex laws and regulations, extensive government regulations and supervision.
Our businesses, such as online and offline pharmaceutical retail and wholesale distribution and online healthcare services, are subject to various and complex laws and regulations, government regulations and supervision.
The PRC government has significant authority to intervene with or exert influence on the ability of a China-based company, like us, to conduct its business and may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our securities.
The PRC government has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business and may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our securities.
Risk Factors—Risks Related to Our Business and Industry—Any lack of requisite approvals, licenses or permits applicable to our business, or any non-compliance with relevant laws and regulations, may have a material and adverse effect on our business, financial condition, results of operations and prospects” in this annual report. 14 ​ Table of Contents ● We may become subject to product liability and medical liability claims, which could cause us to incur significant expenses and be liable for significant damages if not covered by insurance.
Risk Factors—Risks Related to Our Business and Industry—Any lack of requisite approvals, licenses or permits applicable to our business, or any non-compliance with relevant laws and regulations, may have a material and adverse effect on our business, financial condition, results of operations and prospects” in this annual report. ● We may become subject to product liability and medical liability claims, which could cause us to incur significant expenses and be liable for significant damages if not covered by insurance.
Risks Related to American Depositary Shares The trading price for the ADSs may be volatile. Since the ADSs became listed on Nasdaq on September 12, 2018, the trading price of the ADSs has ranged from US$1.37 to US$45.88. The trading prices of the ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control.
Risks Related to American Depositary Shares The trading price for the ADSs may be volatile. Since the ADSs became listed on Nasdaq on September 12, 2018, the trading price of the ADSs has ranged from US$1.19 to US$45.88. The trading prices of the ADSs are likely to be volatile and could fluctuate widely due to factors beyond our control.
In particular, we face a number of data-related challenges related to our business operations, including: ● protecting the data in and hosted on our system, including against attacks on our system by external parties or fraudulent behavior by our employees; ● addressing concerns related to privacy and sharing, safety, security and other factors; and ● complying with applicable laws, rules and regulations relating to the collection, storage, use, processing, transmission, provision, disclosure , deletion or security of personal information, including any requests from regulatory and government authorities relating to such data.
In particular, we face a number of data-related challenges related to our business operations, including: ● protecting the data in and hosted on our system, including against attacks on our system by external parties or fraudulent behavior by our employees; ● addressing concerns related to privacy and sharing, safety, security and other factors; and 18 ​ Table of Contents ● complying with applicable laws, rules and regulations relating to the collection, storage, use, processing, transmission, provision, disclosure , deletion or security of personal information, including any requests from regulatory and government authorities relating to such data.
The pharmaceutical retail and wholesale industry in China is subject to extensive government regulation and supervision as well as monitoring by various government authorities.
The pharmaceutical retail and wholesale industry in China is subject to government regulation and supervision as well as monitoring by various government authorities.
Risk Factors—Risks Related to American Depositary Shares—Techniques employed by short sellers may drive down the trading price of the ADSs” in this annual report. ● Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Risk Factors—Risks Related to American Depositary Shares—Techniques employed by short sellers may drive down the trading price of the ADSs” in this annual report. 15 ​ Table of Contents ● Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
The laws and regulations related to medical and healthcare services and internet-related business are evolving rapidly, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
The laws and regulations related to medical and healthcare services and internet-related business are evolving, and their interpretation and enforcement involve uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
Liang Wang, a current employee of 1 Pharmacy Technology, as its general partner 10 ​ Table of Contents Shanghai Yaoshu Business Management Partnership (LP) ​ Approximately 0.10% ​ A limited partnership formed by certain current and former employees of 1 Pharmacy Technology and other PRC subsidiaries of the Company, with Mr.
Liang Wang, a current employee of 1 Pharmacy Technology, as its general partner Shanghai Yaoshu Business Management Partnership (LP) ​ Approximately 0.10% ​ A limited partnership formed by certain current and former employees of 1 Pharmacy Technology and other PRC subsidiaries of the Company, with Mr.
We cannot assure you that we will be able to maintain proper inventory levels for our pharmaceutical retail and wholesale operations, and any such failure may have a material and adverse effect on our business, financial condition, results of operations and prospects. We closely monitor the inventory levels of other products of which our marketplace sellers manage inventories.
We cannot assure you that we will be able to maintain proper inventory levels for our pharmaceutical retail and wholesale operations, and any such failure may have a material and adverse effect on our business, financial condition, results of operations and prospects. 23 ​ Table of Contents We closely monitor the inventory levels of other products of which our marketplace sellers manage inventories.
Based on the composition of our income and assets and the estimated value of our assets, including goodwill, which is based on the price of our ADSs, we believe that we were not a PFIC for our taxable year ended on December 31, 2022.
Based on the composition of our income and assets and the estimated value of our assets, including goodwill, which is based on the price of our ADSs, we believe that we were not a PFIC for our taxable year ended on December 31, 2023.
Under the deposit agreement for the ADSs, if (i) we timely instruct the depositary to solicit your voting instructions, the depositary does not receive your instructions by the specified date and (ii) we confirm to the depositary that: ● we wish a discretionary proxy to be given; ● we reasonably believe there is no substantial opposition as to a matter to be voted on at the meeting; and ● a matter to be voted on at the meeting would not have a material adverse impact on shareholders, then the depositary will give us a proxy to vote the shares represented by your ADSs.
Under the deposit agreement for the ADSs, if (i) we timely instruct the depositary to solicit your voting instructions, the depositary does not receive your instructions by the specified date and (ii) we confirm to the depositary that: ● we wish a discretionary proxy to be given; ● we reasonably believe there is no substantial opposition as to a matter to be voted on at the meeting; and 52 ​ Table of Contents ● a matter to be voted on at the meeting would not have a material adverse impact on shareholders, then the depositary will give us a proxy to vote the shares represented by your ADSs.
Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” Our independent registered public accounting firm has issued an attestation report, which has concluded that our internal control over financial reporting is effective as of December 31, 2022. 30 ​ Table of Contents However, any failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our consolidated financial statements, which in turn could harm our business and negatively impact the trading price of the ADSs.
Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” Our independent registered public accounting firm has issued an attestation report, which has concluded that our internal control over financial reporting was effective as of December 31, 2023. 30 ​ Table of Contents However, any failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our consolidated financial statements, which in turn could harm our business and negatively impact the trading price of the ADSs.
Risk Factors—Risks Related to Our Business and Industry—We may not be able to manage the growth of our business and our expansion plans and operations or implement our business strategies on schedule or within our budget, or at all” in this annual report. ● We have incurred operating losses in the past, and may not be able to achieve or maintain profitability in the future.
Risk Factors—Risks Related to Our Business and Industry—We may not be able to manage the growth of our business and our expansion plans and operations or implement our business strategies on schedule or within our budget, or at all” in this annual report. 13 ​ Table of Contents ● We have incurred operating losses in the past, and may not be able to achieve or maintain profitability in the future.
In July 2014, the SAFE issued a circular on foreign exchange administration involved in overseas investment, financing and roundtrip investment conducted by PRC residents via offshore special purpose vehicles, or Circular 37, which replaced Circular 75 and further requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing by either onshore or offshore assets or equity legally held by such PRC residents.
In July 2014, the SAFE issued a circular on foreign exchange administration involved in overseas investment, financing and roundtrip investment conducted by PRC residents via offshore special purpose vehicles, or Circular 37, which replaced Circular 75 and further requires PRC resident individuals or PRC institutions to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing by either onshore or offshore assets or equity legally held by such PRC residents.
Directors, Senior Management and Employees—E. Share Ownership.” 56 ​ Table of Contents We have granted, and may continue to grant, share incentive awards, which may result in increased share-based compensation expenses.
Directors, Senior Management and Employees—E. Share Ownership.” 55 ​ Table of Contents We have granted, and may continue to grant, share incentive awards, which may result in increased share-based compensation expenses.
Our failure to maintain proper inventory levels for our retail and wholesale businesses may have a material and adverse effect on our business, financial condition, results of operations and prospects. ​ 23 ​ Table of Contents Third-party logistics and delivery companies are used to fulfill and deliver orders placed on our platform.
Our failure to maintain proper inventory levels for our retail and wholesale businesses may have a material and adverse effect on our business, financial condition, results of operations and prospects. Third-party logistics and delivery companies are used to fulfill and deliver orders placed on our platform.
We may lose market share, and our financial condition and results of operations may deteriorate significantly if we fail to compete effectively. 17 ​ Table of Contents We may not be able to manage the growth of our business and our expansion plans and operations or implement our business strategies on schedule or within our budget, or at all.
We may lose market share, and our financial condition and results of operations may deteriorate significantly if we fail to compete effectively. We may not be able to manage the growth of our business and our expansion plans and operations or implement our business strategies on schedule or within our budget, or at all.
Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.” Our business could be disrupted by network interruptions. Our business depends on the efficient and uninterrupted operation of our computer and communications systems and our entire information infrastructure is located in China.
Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.” 35 ​ Table of Contents Our business could be disrupted by network interruptions. Our business depends on the efficient and uninterrupted operation of our computer and communications systems and our entire information infrastructure is located in China.
Business Overview— Regulations— Relating to Foreign Exchange and Dividend Distributions.” Under PRC laws and regulations, our PRC subsidiaries may pay dividends only out of their accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations.
Business Overview— Regulations— Relating to Foreign Exchange and Dividend Distributions.” 40 ​ Table of Contents Under PRC laws and regulations, our PRC subsidiaries may pay dividends only out of their accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations.
As of March 31, 2023, our founders, Dr. Gang Yu and Mr. Junling Liu, beneficially own all of our issued and outstanding Class B ordinary shares.
As of March 31, 2024, our founders, Dr. Gang Yu and Mr. Junling Liu, beneficially own all of our issued and outstanding Class B ordinary shares.
You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs. Substantial future sales or perceived potential sales of ADSs in the public market could cause the price of the ADSs to decline.
You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs. 51 ​ Table of Contents Substantial future sales or perceived potential sales of ADSs in the public market could cause the price of the ADSs to decline.
For example, we face risks associated with regulatory approvals of offshore securities offerings, anti-monopoly regulatory investigations and actions, cybersecurity and data privacy compliance. The PRC government may also intervene with or influence our operations as it deems appropriate to further regulatory, political and societal goals.
For example, we face risks associated with regulatory approvals of offshore securities offerings, anti-monopoly regulatory investigations and actions, cybersecurity and data privacy compliance. The PRC government may also exert influence on our operations as it deems appropriate to further regulatory, political and societal goals.
In respect of the healthcare industry, in particular, any violation of the relevant laws, rules and regulations may result in harsh penalties and, under certain circumstances, lead to criminal prosecution. ​ 16 ​ Table of Contents Meanwhile, the regulations of both the internet industry and its internet healthcare sector are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty.
In respect of the healthcare industry, in particular, any violation of the relevant laws, rules and regulations may result in harsh penalties and, under certain circumstances, lead to criminal prosecution. Meanwhile, the regulations of both the internet industry and its internet healthcare sector are relatively new and evolving, and their interpretation and enforcement involve uncertainty.
Our management has concluded that our internal control over financial reporting was effective as of December 31, 2022. See “Item 15.
Our management has concluded that our internal control over financial reporting was effective as of December 31, 2023. See “Item 15.
As of March 31, 2023, our directors and executive officers collectively owned an aggregate of 92.6% of the total voting power of our outstanding ordinary shares. As a result, they have substantial influence over our business, including significant corporate actions such as mergers, consolidations, election of directors and other significant corporate actions.
As of March 31, 2024, our directors and executive officers collectively owned an aggregate of 92.3% of the total voting power of our outstanding ordinary shares. As a result, they have substantial influence over our business, including significant corporate actions such as mergers, consolidations, election of directors and other significant corporate actions.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. 42 ​ Table of Contents Governmental control of currency conversion may limit our ability to utilize our operating revenue effectively and affect the value of your investment.
In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. 42 ​ Table of Contents Government regulation on currency conversion may limit our ability to utilize our operating revenue effectively and affect the value of your investment.
The PRC government imposes restrictive foreign exchange policies and scrutiny of major outbound capital movement. More restrictions and substantial vetting processes have been put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access to foreign currencies in the future for current account transactions.
The PRC government imposes restrictive foreign exchange policies and scrutiny of major outbound capital movement. More restrictions and vetting processes have been put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further tighten its regulation over access to foreign currencies in the future for current account transactions.
Therefore, our PRC subsidiary, 1 Pharmacy Technology, is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the certain procedures under PRC foreign exchange regulation.
Therefore, our PRC subsidiary, 1 Pharmacy Technology, can pay dividends in foreign currencies to us without prior approval from SAFE, subject to the certain procedures under PRC foreign exchange regulation.
We rely on dividends and other distributions on equity paid by our PRC or Hong Kong subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC or Hong Kong subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
We rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
Unless otherwise indicated, all the legal and operational risks associated with being based in and having operations in the PRC also apply to operations in Hong Kong. 13 ​ Table of Contents Risks Related to Our Business and Industry ● We are subject to extensive and evolving regulatory requirements, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects.
Unless otherwise indicated, all the legal and operational risks associated with being based in and having operations in the PRC also apply to operations in Hong Kong. Risks Related to Our Business and Industry ● We are subject to evolving regulatory requirements, non-compliance with which, or changes in which, may materially and adversely affect our business and prospects.
For the years ended December 31, 2020 and 2021, the payment of service fees from the former VIEs to 1 Pharmacy Technology amounted to RMB112.6 million and RMB728.5 million, respectively. There were no other assets transferred between the former VIEs, on one hand, and 111, Inc. and its subsidiaries, on the other hand, in 2020, 2021 and 2022.
For the years ended December 31, 2021 and 2022, the payment of service fees from the former VIEs to 1 Pharmacy Technology amounted to RMB728.5 million and nil, respectively. There were no other assets transferred between the former VIEs, on one hand, and 111, Inc. and its subsidiaries, on the other hand, in 2021, 2022 and 2023.
In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures.
Several shareholder advisory firms have announced their opposition to the use of multiple class structures.
Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.
Substantially all of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.
As of the date of this annual report, options to purchase 7,211,037 Class A ordinary shares and 60,000 restricted share units are granted and outstanding under the 2013 Policy, the 2014 Policy and the 2016 Plan, and options to purchase 2,182,198 Class A ordinary shares and 4,380,272 restricted share units are granted and outstanding under the 2018 Plan.
As of the date of this annual report, options to purchase 7,211,037 Class A ordinary shares and 60,000 restricted share units are granted and outstanding under the 2013 Policy, the 2014 Policy and the 2016 Plan, and options to purchase 2,182,198 Class A ordinary shares and 7,951,912 restricted share units are granted and outstanding under the 2018 Plan.
Business Overview— Regulations— Regulations relating to Internet Information Security and Privacy Protection.” As of the date of this annual report, we have not been identified as a CIIO by the relevant regulatory authority. 19 ​ Table of Contents The Personal Information Protection Law took effect in November 2021, integrates the various rules with respect to personal information rights and privacy protection.
Information on the Company—B. Business Overview— Regulations— Regulations relating to Internet Information Security and Privacy Protection.” As of the date of this annual report, we have not been identified as a CIIO by the relevant regulatory authority. The Personal Information Protection Law took effect in November 2021, integrates the various rules with respect to personal information rights and privacy protection.
We have been advised by our counsel as to PRC law that (i) it would be highly unlikely that the courts of the PRC would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state in the United States, and (ii) there is uncertainty as to whether the courts of the PRC would entertain original actions brought in the PRC against us or our directors or officers that are predicated upon the federal securities laws of the United States or the securities laws of any state in the United States.
We have been advised by our counsel as to PRC law that, as there are usually difficulties in the recognition and enforcement of foreign judgments among different jurisdictions, (i) it would be highly unlikely that the courts of the PRC would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers that are predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state in the United States, and (ii) there is uncertainty as to whether the courts of the PRC would entertain original actions brought in the PRC against us or our directors or officers that are predicated upon the federal securities laws of the United States or the securities laws of any state in the United States.
Yang Chen, a current employee of 1 Pharmacy Technology, as its general partner Xinjiang Junying Hongyin Investment Management Partnership (LP) ​ Approximately 0.05% ​ Unaffiliated third-party investor Tianjin Gangling Business Management Partnership (LP) ​ Approximately 1.81% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform, with the Company’s founders, Dr. Gang Yu and Mr.
Yang Chen, a current employee of 1 Pharmacy Technology, as its general partner Xinjiang Junying Hongyin Investment Management Partnership (LP) ​ Approximately 0.05% ​ Unaffiliated third-party investor 10 ​ Table of Contents Tianjin Gangling Business Management Partnership (LP) ​ Approximately 1.81% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform, with the Company’s founders, Dr.
In addition, Chinese entities are required to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of their registered capital.
In addition, Chinese entities are required to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of their registered capital. These reserve funds are not distributable as cash dividends.
As of the date of this annual report, we have not been involved in any investigations or become subject to a cybersecurity review initiated by the CAC based on the Cybersecurity Review Measures, and we have not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our listing status from the CAC. 7 ​ Table of Contents On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities.
As of the date of this annual report, we have not been involved in any investigations or become subject to a cybersecurity review initiated by the CAC based on the Cybersecurity Review Measures that have a material and adverse effect on our business, financial condition, results of operations and prospects, and we have not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our listing status from the CAC. 7 ​ Table of Contents On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities.
As there currently exists no bilateral treaty, international convention or other form of reciprocity between China and the United States governing the recognition of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, it would be highly unlikely that a PRC court would enforce judgments rendered by U.S. courts.
As there currently exists no bilateral treaty, international convention or other form of reciprocity between China and the United States governing the recognition of judgments, including those predicated upon the liability provisions of the U.S. federal securities laws, a situation similar to other jurisdictions without such treaties or other form of reciprocity with the U.S., it would be highly unlikely that a PRC court would enforce judgments rendered by U.S. courts.
Directors and Executive Officers” currently reside within the PRC As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce judgments obtained in U.S. courts against us or them, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
These Class B ordinary shares constitute approximately 43.1% of our total outstanding share capital and 91.9% of the aggregate voting power of our total outstanding share capital due to the disparate voting powers associated with our dual-class share structure. See “Item 6. Directors, Senior Management and Employees—E.
These Class B ordinary shares constitute approximately 42.02% of our total outstanding share capital and 91.58% of the aggregate voting power of our total outstanding share capital due to the disparate voting powers associated with our dual-class share structure. See “Item 6. Directors, Senior Management and Employees—E.
For more information, see “Item 3. Key Information—Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors” and “Item 4. Information on the Company—B.
Key Information—Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors” and “Item 4. Information on the Company—B.
We had net write-downs of our inventories to their net realizable value of RMB24.2 million, RMB46.0 million and RMB28.5 million (US$4.1 million) in 2020, 2021 and 2022, respectively. Inventory levels in excess of customer demand may result in inventory write-downs, expiration of products or an increase in inventory holding costs and a potential negative effect on our liquidity.
We had net write-downs of our inventories to their net realizable value of RMB46.0 million, RMB28.5 million and RMB19.9 million (US$2.8 million) in 2021, 2022 and 2023, respectively. Inventory levels in excess of customer demand may result in inventory write-downs, expiration of products or an increase in inventory holding costs and a potential negative effect on our liquidity.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and complying with evolving laws and regulations regarding cybersecurity, information security, privacy and data protection and other related laws and requirements may be expensive and may force us to make adverse changes to our business.
Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and complying with evolving laws and regulations regarding cybersecurity, information security, privacy and data protection and other related laws and requirements may be expensive and may force us to make adverse changes to our business.
The Measures for Supervision and Administration of Online Drug Sales, or the Online Drug Sales Measures were promulgated by the SAMR in August 2022 and took effect since December 1, 2022.
The Measures for Supervision and Administration of Online Drug Sales, or the Online Drug Sales Measures were promulgated by the SAMR in August 2022 and took effect since December 1, 2022.
According to the Online Drug Sales Measures, the online drug sellers and the online drug transaction platform service providers shall take effective measures to ensure that the information in the whole process of the trading is authentic, accurate, complete and traceable, and shall comply with relevant regulations of the State on personal information protection.
According to the Online Drug Sales Measures, the online drug sellers and the online drug transaction platform service providers shall take effective measures to ensure that the information in the whole process of the trading is authentic, accurate, complete and traceable, and shall comply with relevant regulations of the State on personal information protection.
Online drug retailers shall provide comprehensive risk warning to consumers before selling prescription drugs, and shall not, in violation of the provisions, give prescription drugs or class A over-the-counter drugs to individual for free in return for purchasing drugs or commodities.
Online drug retailers shall provide comprehensive risk warning to consumers before selling prescription drugs, and shall not, in violation of the provisions, give prescription drugs or class A over-the-counter drugs to individual for free in return for purchasing drugs or commodities.
The online drug sellers and third-party platforms shall perform their respective obligations to ensure the quality and safety of online drug selling, and shall report or file their relevant information to competent drug supervision and administration department.
The online drug sellers and third-party platforms shall perform their respective obligations to ensure the quality and safety of online drug selling, and shall report or file their relevant information to competent drug supervision and administration department.
In the event that 1 Pharmacy Technology’s proposed listing on the STAR Market is not completed before June 30, 2023 or the date otherwise agreed by 1 Pharmacy Technology and the investors in writing, such investors may choose to exercise their options to require the controlling shareholder of 1 Pharmacy Technology, Yao Wang, to redeem all or part of the equity interests then owned by such investors plus an annual interest rate of 6%.
In the event that 1 Pharmacy Technology’s proposed listing on the STAR Market is not completed before June 30, 2023 or another date otherwise agreed by 1 Pharmacy Technology and the investors in writing, such investors may choose to exercise their options to require the controlling shareholder of 1 Pharmacy Technology, Yao Wang, to redeem all or part of the equity interests then owned by such investors plus an annual interest rate of 6%.
However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested enterprise, and certain requirements specified by PRC tax authorities are satisfied. 93 ​ Table of Contents Regulations Relating to Stock Incentive Plans According to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company, or the Share Incentive Rules, which was issued by the SAFE in February 2012 and other regulations, directors, supervisors, senior management and other employees participating in any share incentive plan of an overseas publicly-listed company who are PRC citizens or non-PRC citizens residing in China for a continuous period of not less than one year, subject to certain exceptions, are required to register with the SAFE.
However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested enterprise, and certain requirements specified by PRC tax authorities are satisfied. 90 ​ Table of Contents Regulations Relating to Stock Incentive Plans According to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company, or the Share Incentive Rules, which was issued by the SAFE in February 2012 and other regulations, directors, supervisors, senior management and other employees participating in any share incentive plan of an overseas publicly-listed company who are PRC citizens or non-PRC citizens residing in China for a continuous period of not less than one year, subject to certain exceptions, are required to register with the SAFE.
We and Beilin Pharmaceutical will work together to capitalize on the digital, intelligent and efficient capabilities of the Internet to expand the market coverage of high-quality Chinese patent medicines and enhance their accessibility to benefit more users. On March 14, 2022, 111, we signed a strategic cooperation agreement with Shenzhen BGI Genomics Co., Ltd.
We and Beilin Pharmaceutical will work together to capitalize on the digital, intelligent and efficient capabilities of the Internet to expand the market coverage of high-quality Chinese patent medicines and enhance their accessibility to benefit more users. On March 14, 2022, we signed a strategic cooperation agreement with Shenzhen BGI Genomics Co., Ltd.
We reconstruct the value chain of the healthcare industry with digital technology and modern supply chain, reconstructs the distribution system of the traditional pharmaceutical distribution industry constituted by provincial, municipal and county companies, with digital technology and business intelligence + self-operated central warehouse + third-party distribution, improves the efficiency of drug distribution, and enhances the transparency and quality of drug distribution.
We reconstruct the value chain of the healthcare industry with digital technology and modern supply chain, reconstructs the distribution system of the traditional pharmaceutical distribution industry constituted by provincial, municipal and county companies, with combination of digital technology, business intelligence, self-operated central warehouse and third-party distribution, improves the efficiency of drug distribution, and enhances the transparency and quality of drug distribution.
Share Ownership.” ​ 96 ​ Table of Contents (2) The following table illustrates the details of the shareholders of 1 Pharmacy Technology: ​ Name of Shareholders Shareholding Percentage Affiliation with the Company Yao Wang Corporation Limited ​ 86.23% ​ Hong Kong subsidiary of the Company Ningbo Youkai Venture Capital Partnership (LP) ​ Approximately 1.55% ​ Unaffiliated third-party investor Shanghai SOE Reform & Development Equity Investment Fund Partnership (LP) ​ Approximately 1.03% ​ Unaffiliated third-party investor Ningbo Liangji Industrial Co., Ltd. ​ Approximately 0.72% ​ Unaffiliated third-party investor Zhenjiang Huixin Equity Investment Partnership (LP) ​ Approximately 0.57% ​ Unaffiliated third-party investor Hezhou Hongshi Equity Investment Partnership (LP) ​ Approximately 0.16% ​ Unaffiliated third-party investor Shanghai Yaoxing Business Management Partnership (LP) ​ Approximately 0.15% ​ A limited partnership formed by certain current and former employees of 1 Pharmacy Technology and other PRC subsidiaries of the Company, with Mr.
Share Ownership.” ​ 93 ​ Table of Contents (2) The following table illustrates the details of the shareholders of 1 Pharmacy Technology: ​ Name of Shareholders Shareholding Percentage Affiliation with the Company Yao Wang Corporation Limited ​ 86.23% ​ Hong Kong subsidiary of the Company Ningbo Youkai Venture Capital Partnership (LP) ​ Approximately 1.55% ​ Unaffiliated third-party investor Shanghai SOE Reform & Development Equity Investment Fund Partnership (LP) ​ Approximately 1.03% ​ Unaffiliated third-party investor Ningbo Liangji Industrial Co., Ltd. ​ Approximately 0.72% ​ Unaffiliated third-party investor Zhenjiang Huixin Equity Investment Partnership (LP) ​ Approximately 0.57% ​ Unaffiliated third-party investor Hezhou Hongshi Equity Investment Partnership (LP) ​ Approximately 0.16% ​ Unaffiliated third-party investor Shanghai Yaoxing Business Management Partnership (LP) ​ Approximately 0.15% ​ A limited partnership formed by certain current and former employees of 1 Pharmacy Technology and other PRC subsidiaries of the Company, with Mr.
Stabilizing the terminal price of drugs through intelligent supply chain and digital patient education capabilities, we make the medicines needed by the public accessible nationwide, helps patients fully understand and correctly use innovative drugs, reduces the cost of medication, improves the cost-effectiveness ratio of patients, and helps the country solve the current situation that it is difficult for the public to see a doctor and purchase costly medicines. 63 ​ Table of Contents Our Ecosystem To digitize the healthcare industry, we connect pharmaceutical companies, pharmacies, medical professionals, insurance companies and consumers in our ecosystem, and we improve the efficiency and transparency of the pharmaceutical value chain.
Stabilizing the terminal price of drugs through intelligent supply chain and digital patient education capabilities, we make the medicines needed by the public accessible nationwide, helps patients fully understand and correctly use innovative drugs, reduces the cost of medication, improves the cost-effectiveness ratio of patients, and helps the country solve the current situation that it is difficult for the public to see a doctor and purchase costly medicines. ​ 62 ​ Table of Contents Our Ecosystem To digitize the healthcare industry, we connect pharmaceutical companies, pharmacies, medical professionals, insurance companies and consumers in our ecosystem, and we improve the efficiency and transparency of the pharmaceutical value chain.
On September 15, 2018, our ADSs commenced trading on Nasdaq under the symbol “YI.” We raised from our initial public offering approximately US$ 101.2 million in net proceeds (including the net proceeds generated from the offering of additional 809,555 ADSs upon the underwriters’ partial exercise of their over-allotment option), after deducting underwriting commissions and the offering expenses payable by us. 59 ​ Table of Contents On August 17, 2020, 1 Pharmacy Technology completed the capital injection from new investors with an aggregate of RMB419.82 million (approximately US$60.49 million).
On September 15, 2018, our ADSs commenced trading on Nasdaq under the symbol “YI.” We raised from our initial public offering approximately US$ 101.2 million in net proceeds (including the net proceeds generated from the offering of additional 809,555 ADSs upon the underwriters’ partial exercise of their over-allotment option), after deducting underwriting commissions and the offering expenses payable by us. ​ 58 ​ Table of Contents On August 17, 2020, 1 Pharmacy Technology completed the capital injection from new investors with an aggregate of RMB419.82 million (approximately US$60.49 million).
Failure to comply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the local social insurance and housing fund regulatory authorities. 94 ​ Table of Contents Regulation Relating to Taxation Enterprise Income Tax Pursuant to the EIT Law promulgated by the National People’s Congress on March 16, 2007, which became effective from January 1, 2008 and was amended in 2017 and 2018, the income tax rate for both domestic and foreign-invested enterprises incorporated in the PRC is 25% commencing from January 1, 2008.
Failure to comply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the local social insurance and housing fund regulatory authorities. 91 ​ Table of Contents Regulation Relating to Taxation Enterprise Income Tax Pursuant to the EIT Law promulgated by the National People’s Congress on March 16, 2007, which became effective from January 1, 2008 and was amended in 2017 and 2018, the income tax rate for both domestic and foreign-invested enterprises incorporated in the PRC is 25% commencing from January 1, 2008.
Patent According to the Patent Law of the People’s Republic of China promulgated by the SCNPC in 1984 and amended in 1992, 2000 and 2008, respectively, a patentable invention or a utility model must meet three criteria: novelty, inventiveness and practicability.
Patent According to the Patent Law of the People’s Republic of China promulgated by the SCNPC in 1984 and amended in 1992, 2000, 2008 and 2020, respectively, a patentable invention or a utility model must meet three criteria: novelty, inventiveness and practicability.
Value-Added Tax Pursuant to the Provisional Regulation of the PRC on Value-Added Tax, which was promulgated by the State Council on December 13, 1993 and amended in 2008, 2016 and 2017 and its implementation rules, entities or individuals engaging in the sale of goods, the provision of processing services, repairs and replacement services, sale of services, intangible assets or real property, or the importation of goods within the territory of the PRC must pay value-added tax. 95 ​ Table of Contents C.
Value-Added Tax Pursuant to the Provisional Regulation of the PRC on Value-Added Tax, which was promulgated by the State Council on December 13, 1993 and amended in 2008, 2016 and 2017 and its implementation rules, entities or individuals engaging in the sale of goods, the provision of processing services, repairs and replacement services, sale of services, intangible assets or real property, or the importation of goods within the territory of the PRC must pay value-added tax. 92 ​ Table of Contents C.
Junling Liu, being two of its three partners Tianjin Yaocheng Business Management Partnership (LP) ​ Approximately 1.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaosheng Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaopeng Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaohua Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company 97 ​ Table of Contents Tianjin Yaoming Business Management Partnership (LP) ​ Approximately 0.15% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaotian Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoding Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yao Cheng Business Management Partnership (LP) ​ Approximately 0.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaojun Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaowei Business Management Partnership (LP) ​ Approximately 0.08% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoan Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaogong Business Management Partnership (LP) ​ Approximately 0.37% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company SAIF Partners (Nanjing) Equity Investment Fund (LP) ​ Approximately 0.95% ​ Unaffiliated third-party investor SAIF Partners (Huangshan) Tourist Culture Industrial Development Fund (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor SAIF Partners (Nanjing) Hengzhun Venture Capital Fund (LP) ​ Approximately 0.19% ​ Unaffiliated third-party investor Jiaxing Tengyuan Investment Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor 98 ​ Table of Contents Shanghai Shenli Business Management Partnership (LP) ​ Approximately 0.76% ​ Unaffiliated third-party investor Huasai Zhikang (Shanghai) Equity Investment Fund Partnership (LP) ​ Approximately 0.48% ​ Unaffiliated third-party investor Shanghai Zhangjiang Torch Venture Capital Co., Ltd. ​ Approximately 0.43% ​ Unaffiliated third-party investor Shanghai Zhilin Yiqu Venture Capital Partnership (LP) ​ Approximately 0.38% ​ Unaffiliated third-party investor Shanghai Technology Venture Capital Co., Ltd. ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Pudong Renmin Zhaoyin Cultural Industry Equity Investment Fund Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Gongqingcheng Ideate Investment Management Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Zhangjiang Technology Venture Capital Co., Ltd. ​ Approximately 0.19% ​ Unaffiliated third-party investor Hangzhou Hengqin Investment Management Partnership (LP) ​ Approximately 0.10% ​ Unaffiliated third-party investor ​ (3) Guangdong Yihao Pharmacy Co., Ltd., Guangdong Yihao Pharmaceutical Chain Co., Ltd. and Shanghai Yaowang E-Commerce Co., Ltd. were the former VIEs prior to the termination of the contractual arrangements and transfer of equity interests in February 2022, at which time these entities became our directly owned subsidiaries.
Junling Liu, and other PRC subsidiary of the Company, being three of its four partners Tianjin Yaocheng Business Management Partnership (LP) ​ Approximately 1.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaosheng Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaopeng Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company 94 ​ Table of Contents Tianjin Yaohua Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoming Business Management Partnership (LP) ​ Approximately 0.15% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaotian Business Management Partnership (LP) ​ Approximately 0.12% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoding Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yao Cheng Business Management Partnership (LP) ​ Approximately 0.11% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaojun Business Management Partnership (LP) ​ Approximately 0.13% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaowei Business Management Partnership (LP) ​ Approximately 0.08% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaoan Business Management Partnership (LP) ​ Approximately 0.14% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company Tianjin Yaogong Business Management Partnership (LP) ​ Approximately 0.37% ​ A limited partnership formed as 1 Pharmacy Technology’s employee equity incentive platform; its partners consist mainly of employees who are managers or above of 1 Pharmacy Technology and other PRC subsidiaries of the Company SAIF Partners (Nanjing) Equity Investment Fund (LP) ​ Approximately 0.95% ​ Unaffiliated third-party investor SAIF Partners (Huangshan) Tourist Culture Industrial Development Fund (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor 95 ​ Table of Contents SAIF Partners (Nanjing) Hengzhun Venture Capital Fund (LP) ​ Approximately 0.19% ​ Unaffiliated third-party investor Jiaxing Tengyuan Investment Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Shenli Business Management Partnership (LP) ​ Approximately 0.76% ​ Unaffiliated third-party investor Huasai Zhikang (Shanghai) Equity Investment Fund Partnership (LP) ​ Approximately 0.48% ​ Unaffiliated third-party investor Shanghai Zhangjiang Torch Venture Capital Co., Ltd. ​ Approximately 0.43% ​ Unaffiliated third-party investor Shanghai Zhilin Yiqu Venture Capital Partnership (LP) ​ Approximately 0.38% ​ Unaffiliated third-party investor Shanghai Technology Venture Capital Co., Ltd. ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Pudong Renmin Zhaoyin Cultural Industry Equity Investment Fund Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Gongqingcheng Ideate Investment Management Partnership (LP) ​ Approximately 0.29% ​ Unaffiliated third-party investor Shanghai Zhangjiang Technology Venture Capital Co., Ltd. ​ Approximately 0.19% ​ Unaffiliated third-party investor Hangzhou Hengqin Investment Management Partnership (LP) ​ Approximately 0.10% ​ Unaffiliated third-party investor (3) Guangdong Yihao Pharmacy Co., Ltd., Guangdong Yihao Pharmaceutical Chain Co., Ltd. and Shanghai Yaowang E-Commerce Co., Ltd. were the former VIEs prior to the termination of the contractual arrangements and transfer of equity interests in February 2022, at which time these entities became our directly owned subsidiaries.
(6) The shareholders of Henan Yihao Pharmacy Co., Ltd. include Chongqing Yihao Pharmacy Co., Ltd. (51%) and Henan Derkang Logistics Co., Ltd. (49%). (7) The shareholders of Yunan Yaofang Pharmacy Co., Ltd. include Chongqing Yihao Pharmacy Co., Ltd. (51%) and Yunnan Minsheng Pharmacy Co., Ltd. (49%). D.
(6) The shareholders of Henan Yihao Pharmacy Co., Ltd. include Chongqing Yihao Pharmacy Co., Ltd. (51%) and Henan Derkang Logistics Co., Ltd. (49%). (7) The shareholders of Yunan Yaofang Pharmacy Co., Ltd. include Chongqing Yihao Pharmacy Co., Ltd. (51%) and Yunnan Minsheng Pharmacy Co., Ltd. (49%).
As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection from the CSRC in this regard. 62 ​ Table of Contents B. Business Overview In 2010, our founders launched 1 Medicine Marketplace (1 药网 ), one of the first online retail pharmacies in China.
As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection from the CSRC in this regard. 61 ​ Table of Contents B. Business Overview In 2010, our founders launched 1 Medicine Marketplace (1 药网 ), one of the first online retail pharmacies in China.
Intelligent supply chain services 1. The company ‘s user-oriented intelligent procurement system uses the company’s drug sales data precipitation to compare prices across the whole platform (including self-operated and third-party merchants) for a purchased commodity to help users find the lowest price and reduce user procurement costs; 2.
Intelligent supply chain services 1. The company‘s user-oriented intelligent procurement system uses the company’s drug sales data precipitation to compare prices across the whole platform (including self-operated and third-party merchants) for a purchased commodity to help users find the lowest price and reduce user procurement costs. 2.
Many of these laws and regulations are subject to changes and uncertain interpretations, and any failure to comply with these laws and regulations could result in negative publicity, legal proceedings, suspension or disruption of operations, increased cost of operations, or otherwise harm our business.” Potential CSRC Approval and Filing Required for the Listing of Our ADSs On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities.
Many of these laws and regulations are subject to changes and uncertain interpretations, and any failure to comply with these laws and regulations could result in negative publicity, legal proceedings, suspension or disruption of operations, increased cost of operations, or otherwise harm our business.” 60 ​ Table of Contents Potential CSRC Approval and Filing Required for the Listing of Our ADSs On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities.
In December 2021, the CAC promulgated the Administrative Provisions on Internet Information Service Algorithm Recommendation, which became effective in March 2022 and implements classification and hierarchical management for algorithm recommendation service providers based on various criteria, and stipulates that algorithm recommendation service providers with public opinion attributes or social mobilization capabilities shall file with the CAC within ten business days from the date of providing such services.
In December 2021, the CAC and other governmental authorities promulgated the Administrative Provisions on Internet Information Service Algorithm Recommendation, which became effective in March 2022 and implements classification and hierarchical management for algorithm recommendation service providers based on various criteria, and stipulates that algorithm recommendation service providers with public opinion attributes or social mobilization capabilities shall file with the CAC within ten business days from the date of providing such services.
As pharmacy customers gradually increase the use of our services, we believe that we can accumulate data to optimize our own supply chain management, while providing better solutions to both pharmacies and upstream suppliers with more relevant service offerings. 68 ​ Table of Contents Our Automated Salesforce Tool Hawkeye is an automated tool that we provide to our on-the-ground sales team to better serve customers.
As pharmacy customers gradually increase the use of our services, we believe that we can accumulate data to optimize our own supply chain management, while providing better solutions to both pharmacies and upstream suppliers with more relevant service offerings. Our Automated Salesforce Tool Hawkeye is an automated tool that we provide to our on-the-ground sales team to better serve customers.
Small and medium-sized drugstores are often limited by the scale of procurement, lack the ability to negotiate with upstream suppliers, and can not obtain good resource support. Company set up virtual drugstore to collect members’ procurement needs in real time and accurately, forming a large-scale effect to help them integrate procurement from upstream suppliers and obtain better prices and services.
Small and medium-sized drugstores are often limited by the scale of procurement, lack the ability to negotiate with upstream suppliers, and cannot obtain good resource support. Company set up virtual drugstore to collect members’ procurement needs in real time and accurately, forming a large-scale effect to help them integrate procurement from upstream suppliers and obtain better prices and services.
This service covers a wide range of conditions and cases, with a primary focus on common and chronic illnesses. For conditions that require in person or further examination or laboratory testing, we generally refer our consumers to hospitals. Consumers access our online consultations primarily through photo and text consultations, phone calls and video consultations.
This service covers a wide range of conditions and cases, with a primary focus on common and chronic illnesses. For conditions that require in person or further examination or laboratory testing, we generally refer our consumers to hospitals. 69 ​ Table of Contents Consumers access our online consultations primarily through photo and text consultations, phone calls and video consultations.
Pursuant to the Telecommunications Regulations and the Telecom Catalogue, an e-commerce operator shall obtain a license for value-added telecommunications services with the specification of online data processing and transaction processing business (e-commerce only) (the “EDI License”) from appropriate telecommunications authorities. Wuhan Central China and Yihao Pharmaceutical Chain have obtained the EDI License to operate e-commerce business.
Pursuant to the Telecommunications Regulations and the Telecom Catalogue, an e-commerce operator shall obtain a license for value-added telecommunications services with the specification of online data processing and transaction processing business (e-commerce only) (the “EDI License”) from appropriate telecommunications authorities. Wuhan Central China and Guangzhou Yihao have obtained the EDI License to operate e-commerce business.
Two batches of the Cross-Border E-Commerce Goods Inventory and the Cross-Border E-Commerce Goods Inventory (2018 Edition) issued in April 2016 and November 2018 have been replaced by the Cross-Border E-Commerce Goods Inventory (2019 Edition) issued in December 2019 and the Notice of Relevant Matters on Implementation of New Cross-Border E-Commerce Retail Importation Supervision and Administration Requirements has been issued by the GAC in May 2016 to further implement the rules.
Two batches of the Cross-Border E-Commerce Goods Inventory and the Cross-Border E-Commerce Goods Inventory (2018 Edition) issued in April 2016 and November 2018 have been replaced by the Cross-Border E-Commerce Goods Inventory (2019 Edition) issued in December 2019, which has been further adjusted in 2022, and the Notice of Relevant Matters on Implementation of New Cross-Border E-Commerce Retail Importation Supervision and Administration Requirements has been issued by the GAC in May 2016 to further implement the rules.
We have anti-corruption and anti-bribery clauses in a majority of our major business contracts, and we require our suppliers and other third parties who cooperate with us to comply with relevant laws and regulations. 76 ​ Table of Contents Data Privacy and Protection We are committed to protecting information and privacy of our consumers and other participants on our platform.
We have anti-corruption and anti-bribery clauses in a majority of our major business contracts, and we require our suppliers and other third parties who cooperate with us to comply with relevant laws and regulations. Data Privacy and Protection We are committed to protecting information and privacy of our consumers and other participants on our platform.
The pharmacy customers we serve include small and medium-sized retail pharmacy chains, independent pharmacies and in-house pharmacies within clinics and private hospitals, spanning across 31provinces in China. Our Online Wholesale Pharmacy We provide comprehensive, intelligent and integrated distribution solutions through our online wholesale pharmacy, 1 Pharmacy, available both through our 1 Pharmacy app and website.
The pharmacy customers we serve include small and medium-sized retail pharmacy chains, independent pharmacies and in-house pharmacies within clinics and private hospitals, spanning across 31 provinces in China. Our Online Wholesale Pharmacy We provide comprehensive, intelligent and integrated distribution solutions through our online wholesale pharmacy, 1 Pharmacy, available both through our 1 Pharmacy app and website.
This tool enables our sales team to identify the purchase intent of pharmacies more intuitively and to offer more customized recommendations. As a result, our on-the-ground sales coverage efficiency improved threefold. Customer Experience We are committed to optimizing and achieving satisfaction of our pharmacy customers.
This tool enables our sales team to identify the purchase intent of pharmacies more intuitively and to offer more customized recommendations. As a result, our on-the-ground sales coverage efficiency improved threefold. 67 ​ Table of Contents Customer Experience We are committed to optimizing and achieving satisfaction of our pharmacy customers.
In September 1990, the SCNPC promulgated the Copyright Law of the People’s Republic of China, effective in June 1991 and amended in 2001, 2010 and 2020 respectively and the latest amendment will take effect on June 1, 2021. The amended Copyright Law extends copyright protection to internet activities, products disseminated over the internet and software products.
In September 1990, the SCNPC promulgated the Copyright Law of the People’s Republic of China, effective in June 1991 and amended in 2001, 2010 and 2020 respectively and the latest amendment takes effect on June 1, 2021. The amended Copyright Law extends copyright protection to internet activities, products disseminated over the internet and software products.
Our risk management and internal control policies and procedures cover various aspects of our business operations such as product safety, healthcare quality and safety, regulatory risk management, government affairs and regulatory compliance. 75 ​ Table of Contents Product Quality and Safety We place strong emphasis on quality and safety of the products we sell on our platform.
Our risk management and internal control policies and procedures cover various aspects of our business operations such as product safety, healthcare quality and safety, regulatory risk management, government affairs and regulatory compliance. Product Quality and Safety We place strong emphasis on quality and safety of the products we sell on our platform.
New product development decisions: more effective product development insight is made based on market feedback on products ​ Digital marketing services The company has built a strong professional medicine marketing team, with the help from information advantages and management efficiency of digital technology, company can provide more focused drug marketing services, to achieve a more comprehensive, in-depth and accurate understanding of drugs in downstream pharmacies, and then help upstream companies to achieve incremental sales of drugs, hence benefits consumers, drugstores, pharmaceutical companies and other partners ​ Our Products and Services to Pharmacies We have enabled more than 435,000 offline pharmacies, as of December 31, 2022, to better serve their consumers.
New product development decisions: more effective product development insight is made based on market feedback on products ​ Digital marketing services The company has built a strong professional medicine marketing team, with the help from information advantages and management efficiency of digital technology, company can provide more focused drug marketing services, to achieve a more comprehensive, in-depth and accurate understanding of drugs in downstream pharmacies, and then help upstream companies to achieve incremental sales of drugs, hence benefits consumers, drugstores, pharmaceutical companies and other partners ​ ​ 64 ​ Table of Contents Our Products and Services to Pharmacies We have enabled more than 497,000 offline pharmacies, as of December 31, 2023, to better serve their consumers.
As of the date of this annual report, the draft has yet to come into effect. 90 ​ Table of Contents In addition, the PRC Data Security Law took effect in September 2021. The Data Security Law establishes a tiered system for data protection in terms of their importance.
As of the date of this annual report, the draft has yet to come into effect. In addition, the PRC Data Security Law took effect in September 2021. The Data Security Law establishes a tiered system for data protection in terms of their importance.
As of December 31, 2020 and 2021, the total assets of the variable interest entities, excluding amounts due from other companies in the Group, equaled to 29.4% and 31.8% of our consolidated total assets, respectively. In February 2022, we terminated the contractual arrangements between 1 Pharmacy Technology and the VIEs, and Mr. Yue Xuan and Ms.
As of December 31, 2021, the total assets of the variable interest entities, excluding amounts due from other companies in the Group, equaled to 31.8% of our consolidated total assets. In February 2022, we terminated the contractual arrangements between 1 Pharmacy Technology and the VIEs, and Mr. Yue Xuan and Ms.
Besides, if a high and new technology enterprise has changed its name or has undergone any major change concerning the recognition conditions (such as a division, merger, reorganization or change of business), it shall report the change within three months and recognition institution will review whether it continues to be qualified as high and new technology enterprise. 1 Pharmacy Technology has obtained the certificate of high and new technology enterprise on December 6, 2019.
Besides, if a high and new technology enterprise has changed its name or has undergone any major change concerning the recognition conditions (such as a division, merger, reorganization or change of business), it shall report the change within three months and recognition institution will review whether it continues to be qualified as high and new technology enterprise. 1 Pharmacy Technology has obtained the certificate of high and new technology enterprise on December 6, 2019 which was renewed on December 14, 2022.
In June 2017, the Cyber Security Law of the People’s Republic of China, or the Cyber Security Law, promulgated by SCNPC took effect, which is formulated to maintain the network security, safeguard the cyberspace sovereignty, national security and public interests, protect the lawful rights and interests of citizens, legal persons and other organizations, and requires that a network operator, which includes, among others, internet information services providers, take technical measures and other necessary measures to safeguard the safe and stable operation of the networks, effectively respond to the network security incidents, prevent illegal and criminal activities, and maintain the integrity, confidentiality and availability of network data.
Internet information in China is regulated and restricted from a national security standpoint. 86 ​ Table of Contents In June 2017, the Cyber Security Law of the People’s Republic of China, or the Cyber Security Law, promulgated by SCNPC took effect, which is formulated to maintain the network security, safeguard the cyberspace sovereignty, national security and public interests, protect the lawful rights and interests of citizens, legal persons and other organizations, and requires that a network operator, which includes, among others, internet information services providers, take technical measures and other necessary measures to safeguard the safe and stable operation of the networks, effectively respond to the network security incidents, prevent illegal and criminal activities, and maintain the integrity, confidentiality and availability of network data.
We also use our pricing intelligence system to provide data services to pharmaceutical companies. See “—Our Services to Pharmaceutical Companies.” 72 ​ Table of Contents Our IT Infrastructure We are committed to maintaining a secure online platform. We have built a firewall that monitors and controls incoming and outgoing traffic on our platform 24/7.
We also use our pricing intelligence system to provide data services to pharmaceutical companies. See “—Our Services to Pharmaceutical Companies.” Our IT Infrastructure We are committed to maintaining a secure online platform. We have built a firewall that monitors and controls incoming and outgoing traffic on our platform 24/7.
In December 2018, Yihao Pharmacy transferred 100% equity interests in Chongqing Yihao Pharmacy Co., Ltd. to 1 Pharmacy Technology. In June 2018, Tianjin Yihao Pharmacy Co., Ltd. was established as a wholly owned subsidiary of Yihao Pharmacy in the PRC.
In December 2018, Yihao Pharmacy transferred 100% equity interests in Chongqing Yihao Pharmacy Co., Ltd. to 1 Pharmacy Technology. In June 2018, Tianjin Yihao Pharmacy Co., Ltd. was established as a wholly owned subsidiary of Yihao Pharmacy in the PRC. In July 2018, Kunshan Yifang Pharmacy Co., Ltd. was established as a wholly owned subsidiary of Yihao Pharmacy.
Many of these laws and regulations are subject to changes and uncertain interpretations, and any failure to comply with these laws and regulations could result in negative publicity, legal proceedings, suspension or disruption of operations, increased cost of operations, or otherwise harm our business.” As of the date of this annual report, we have not been involved in any investigations or become subject to a cybersecurity review initiated by the CAC based on the Cybersecurity Review Measures, and we have not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our listing status from the CAC.
Many of these laws and regulations are subject to changes and uncertain interpretations, and any failure to comply with these laws and regulations could result in negative publicity, legal proceedings, suspension or disruption of operations, increased cost of operations, or otherwise harm our business.” As of the date of this annual report, we have not been involved in any investigations or become subject to a cybersecurity review initiated by the CAC based on the Cybersecurity Review Measures that have a material and adverse effect on our business, financial condition, results of operations and prospects, and we have not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our listing status from the CAC.
In February 2022, we obtained direct equity ownership in all of our previous variable interest entities through terminating such contractual arrangements, the details of which are described in the paragraphs below. In May 2018, Chongqing Yihao Pharmacy Co., Ltd. was established as a wholly owned subsidiary of Yihao Pharmacy in the PRC.
In February 2022, we obtained direct equity ownership in all of our previous variable interest entities through terminating such contractual arrangements, the details of which are described in the paragraphs below. Shang Yaowang was dissolved in April 2024. In May 2018, Chongqing Yihao Pharmacy Co., Ltd. was established as a wholly owned subsidiary of Yihao Pharmacy in the PRC.
For fulfillment and delivery options, please see “—Supply Chain Management—Fulfillment and Delivery.” 70 ​ Table of Contents Our Online Consultation and E-prescription Services We strive to provide our consumers with convenient access not only to pharmaceutical products, but also to medical services.
For fulfillment and delivery options, please see “—Supply Chain Management—Fulfillment and Delivery.” Our Online Consultation and E-prescription Services We strive to provide our consumers with convenient access not only to pharmaceutical products, but also to medical services.
We are generally able to deliver to 890 counties and cities within 24 hours, and nationwide within 72 hours. Risk Management and Internal Control We have adopted and implemented various policies and procedures to ensure rigorous risk management and internal control, and we are dedicated to continually improving these policies and procedures.
We are generally able to deliver to 23 provinces and cities within 24 hours, and nationwide within 72 hours. Risk Management and Internal Control We have adopted and implemented various policies and procedures to ensure rigorous risk management and internal control, and we are dedicated to continually improving these policies and procedures.
For the same product, the price from a pharmaceutical company is generally lower than from a distributor. We aim for qualification by major pharmaceutical companies as a “tier one” distributor so as to directly source from them. As of December 31, 2022, we have obtained such qualifications from 500+ pharmaceutical companies and directly source from them.
For the same product, the price from a pharmaceutical company is generally lower than from a distributor. We aim for qualification by major pharmaceutical companies as a “tier one” distributor so as to directly source from them. As of December 31, 2023, we had obtained such qualifications and directly source from approximately 500 pharmaceutical companies.
The whole process is time-saving, efficient and error-free, which reduces the complexity and errors of manual recording and greatly improves the operational efficiency of pharmacies.
The whole process is timesaving, efficient and error-free, which reduces the complexity and errors of manual recording and greatly improves the operational efficiency of pharmacies.
Supply Chain Finance Service We offer convenient online loan application services to the clients of 1 Pharmacy, including pharmacies and wholesalers, when they purchase drugs on 1 Pharmacy.
Supply Chain Finance Service and Other Structured Payment Arrangements We offer convenient online loan application services to the clients of 1 Pharmacy, including pharmacies and wholesalers, when they purchase drugs on 1 Pharmacy.
An entity engaging in the operation of medical devices shall meet certain requirements with respect to its management system, personnel, facilities etc., and shall apply for approval to operate Class III medical devices and make record-filing with relevant governmental authority to operate Class II medical devices.
An entity engaging in the operation of medical devices shall meet certain requirements with respect to its management system, personnel, facilities etc., and shall apply for approval to operate Class III medical devices and make record-filing with relevant governmental authority to operate Class II medical devices. The valid term of medical devices operation permit is five years.
During the term of such contractual arrangements, we were able to consolidate the financial results of the former VIEs in our consolidated financial statements in accordance with U.S. GAAP. In 2019, 2020 and 2021, the amount of revenues generated by the former VIEs accounted for 83.6%, 55.1% and 40.6%, respectively, of our total net revenues.
During the term of such contractual arrangements, we were able to consolidate the financial results of the former VIEs in our consolidated financial statements in accordance with U.S. GAAP. In 2021, the amount of revenues generated by the former VIEs accounted for 40.6% of our total net revenues.
The valid term of medical devices operation permit is five years. 82 ​ Table of Contents Regulations Relating to Online Operation of Drugs and Medical Devices Internet Drug Information Service The Administrative Measures on Internet Drug Information Service, or Internet Drug Measures, was promulgated by the CFDA in July 2004 and amended in 2017, pursuant to which the internet drug information services is to provide drug (including medical device) information services to online users, which is divided into commercial internet drug information services and non-commercial internet drug information services.
Regulations Relating to Online Operation of Drugs and Medical Devices Internet Drug Information Service The Administrative Measures on Internet Drug Information Service, or Internet Drug Measures, was promulgated by the CFDA in July 2004 and amended in 2017, pursuant to which the internet drug information services is to provide drug (including medical device) information services to online users, which is divided into commercial internet drug information services and non-commercial internet drug information services.
We provide order processing services for all orders on our online marketplace. 69 ​ Table of Contents Our Offline Retail Pharmacy We also operate a network of offline retail pharmacies branded as “Yi Hao Pharmacy,” mainly in Guangdong province, which enables us, as required by the relevant laws and regulations, to operate our online pharmaceutical retail businesses. we had 13 offline retail pharmacies in Guangzhou, Tianjin, Kunshan and Wuhan.
We provide order processing services for all orders on our online marketplace. Our Offline Retail Pharmacy We also operate a network of offline retail pharmacies branded as “Yi Hao Pharmacy,” mainly in Guangdong province, which enables us, as required by the relevant laws and regulations, to operate our online pharmaceutical retail businesses.
The inventory on demand and just-in-time delivery offer significant benefits to our pharmacy customers. Instead of bulk purchases and maintaining large inventory, pharmacies procure their inventory with more precision, reducing their working capital needs and enabling them to quickly respond to market demand. As a result, we are able to improve the inventory turnover of our pharmacy customers.
Instead of bulk purchases and maintaining large inventory, pharmacies procure their inventory with more precision, reducing their working capital needs and enabling them to quickly respond to market demand. As a result, we are able to improve the inventory turnover of our pharmacy customers.
In addition, a pharmaceutical manufacture or operation enterprise shall not sell prescription drugs directly to the public by post or over internet, and the enterprise in violation of such restriction shall be instructed to rectify, given a disciplinary warning, and fined the lesser of (i) two times the value of the pharmaceuticals sold and (ii) RMB 30,000.
In addition, according to the Administrative Measures for the Supervision and Administration of Circulation of Pharmaceuticals, a pharmaceutical manufacture or operation enterprise shall not sell prescription drugs directly to the public by post or over internet, and the enterprise in violation of such restriction shall be instructed to rectify, given a disciplinary warning, and fined the lesser of (i) two times the value of the pharmaceuticals sold and (ii) RMB30,000.
With respect to our fulfillment centers, we leased these facilities with a total area of approximately 203,396.2 square meters in Kunshan, Tianjin, Chongqing, Wuhan, Kunming, Xi’an, Shenyang and Zhaoqing as of December 31, 2022. We lease our premises from unrelated third parties under operating lease agreements. ​ Item 4A. Unresolved Staff Comments None. ​ 99 ​ Table of Contents
With respect to our fulfillment centers, we leased these facilities with a total area of approximately 186,152.56 square meters in Kunshan, Tianjin, Chongqing, Wuhan, Xi’an, Shenyang and Zhaoqing as of December 31, 2023. We lease our premises from unrelated third parties under operating lease agreements. ​ Item 4A. Unresolved Staff Comments None. ​ 96 ​ Table of Contents
In March 2023, the SAMR promulgated the Measures for Administration of Internet Advertising, or the Internet Advertising Measures, which will take effect on May 1, 2023 and replace the Interim Internet Advertising Measures. The Internet Advertising Measures provide with the obligations of the advertiser, advertising operator, advertisement publisher and internet platform operator regarding internet advertising.
In February 2023, the SAMR promulgated the Measures for Administration of Internet Advertising, or the Internet Advertising Measures, which took effect on May 1, 2023 and replaced the Interim Internet Advertising Measures. The Internet Advertising Measures provide with the obligations of the advertiser, advertising operator, advertisement publisher and internet platform operator regarding internet advertising.
Our inventory management allows our retail and wholesale businesses to access and share all of our inventory resources. We continually seek to improve our inventory control and minimize inventory risk. We analyze historical sales data and days in inventory to establish inventory management plans.
Our inventory, fulfillment and delivery services are centrally managed from our headquarters. Our inventory management allows our retail and wholesale businesses to access and share all of our inventory resources. We continually seek to improve our inventory control and minimize inventory risk. We analyze historical sales data and days in inventory to establish inventory management plans.
Our PIS also provides clients with pricing data intelligence generated from our collection and analysis of products and prices on the market, useful in our clients’ product procurement and pricing processes. Inventory Management We manage our inventory, both retail and wholesale, in an integrated manner. Our inventory, fulfillment and delivery services are centrally managed from our headquarters.
Our PIS also provides clients with pricing data intelligence generated from our collection and analysis of products and prices on the market, useful in our clients’ product procurement and pricing processes. 73 ​ Table of Contents Inventory Management We manage our inventory, both retail and wholesale, in an integrated manner.
We intend to help pharmaceutical companies expand their end user base by leveraging our network of pharmacies. We also provide them with customized channel management services, as well as data flow, operational support, marketing, user data analysis and other value-added services. Together with pharmaceutical companies, we work to develop medical know-how including academic content and product trainings.
We intend to help pharmaceutical companies expand their end user base by leveraging our network of pharmacies. We also provide them with customized channel management services, as well as data flow, operational support, marketing, user data analysis and other value - added services.
Under the direct sales model, prices are set by us with reference to major online and offline competitors, taking into account our overall pricing strategy for different categories. We believe our prices are generally lower than those of offline pharmacy chains and independent pharmacies. We constantly monitor the prices of products offered by our competitors through our pricing intelligence system.
Pricing and Payment of Products We offer competitive pricing to attract and retain consumers. Under the direct sales model, prices are set by us with reference to major online and offline competitors, taking into account our overall pricing strategy for different categories. We believe our prices are generally lower than those of offline pharmacy chains and independent pharmacies.
We conduct frequent evaluations of our in-house doctors, pharmacists and medical assistants. For external doctors, we generally require them to provide us with their qualifications and licenses and to strictly adhere to the work scope and quality requirements specified in their service agreements in compliance with applicable legal and regulatory requirements.
For external doctors, we generally require them to provide us with their qualifications and licenses and to strictly adhere to the work scope and quality requirements specified in their service agreements in compliance with applicable legal and regulatory requirements.
History and Development of the Company.” As of December 31, 2022, we had over 12,000 participating pharmacy stores. ​ 66 ​ Table of Contents By joining the “1 Health ® ” drugstore alliance, drugstore users can enjoy a number of exclusive rights and interests, including: Right and Interest Content of rights and interests Centralized drug procurement services The company provides users with centralized procurement services, that is, to purchase platform best-selling products at a lower cost and enjoy the preferred exclusive products.
History and Development of the Company.” As of December 31, 2023, more than 12,000 participating pharmacy stores have participated in our 1 Health Membership program. 65 ​ Table of Contents By joining the “1 Health ® ” drugstore alliance, drugstore users can enjoy a number of exclusive rights and interests, including: Right and Interest Content of rights and interests Centralized drug procurement services The company provides users with centralized procurement services, that is, to purchase platform best-selling products at a lower cost and enjoy the preferred exclusive products.
See “—Risk Management and Internal Control—Healthcare Service Quality and Safety.” We offer e-prescription services to consumers as an integral part of the online consultation process, subject to our stringent compliance procedures. Each of our prescriptions is issued by qualified doctors. The e-prescription services is also available when a consumer needs to purchase a prescription drug through the offline pharmacy network.
See “ - Risk Management and Internal Control - Healthcare Service Quality and Safety.” We offer e-prescription services to consumers as an integral part of the online consultation process, subject to our stringent compliance procedures. Each of our prescriptions is issued by qualified doctors.
In October 2020 and November 2020, Shanxi Yihao Yaofang Pharmacy Co., Ltd. and Liaoning Yihao Pharmacy Co., Ltd. were established as wholly owned subsidiaries of Chongqing Yihao Pharmacy Co., Ltd. in the PRC.
In August 2019, Chongqing Yihao Pharmacy Co., Ltd. purchased 100% of the equity interests in Hubei Yihao Pharmacy Co., Ltd. In October 2020 and November 2020, Shanxi Yihao Yaofang Pharmacy Co., Ltd. and Liaoning Yihao Pharmacy Co., Ltd. were established as wholly owned subsidiaries of Chongqing Yihao Pharmacy Co., Ltd. in the PRC.
Regulations relating to Internet Information Security and Privacy Protection PRC government authorities have enacted laws and regulations with respect to internet information security and protection of personal information from any abuse or unauthorized disclosure. Internet information in China is regulated and restricted from a national security standpoint.
Regulations relating to Internet Information Security and Privacy Protection PRC government authorities have enacted laws and regulations with respect to internet information security and protection of personal information from any abuse or unauthorized disclosure.
The valid term of the Pharmaceutical Operation License is five years and shall be renewed six months prior to its expiration date.
The valid term of the Pharmaceutical Operation License is five years and shall be renewed six months prior to its expiration date. The operation of prescription drugs is highly regulated under these rules.
Fulfillment and Delivery As of December 31, 2022, our fulfillment network consists of eight regional fulfillment centers strategically located in Guangzhou in Guangdong Province in Southern China, Kunshan in Jiangsu Province in Eastern China (which is within close proximity of Shanghai), Tianjin in Northern China, Chongqing in Western China, Wuhan in Central China, Xi’an and Gangsu in northwest China and Shenyang in northeast China.
Fulfillment and Delivery As of December 31, 2023, our fulfillment network consisted of 11 regional fulfillment centers strategically located in Guangdong in Southern China, Kunshan in Jiangsu Province in Eastern China (which is within close proximity of Shanghai), Tianjin and Inner Mongolia in Northern China, Chongqing and Yunnan in Western China, Hubei and Henan in Central China, Xi’an and Gangsu in northwest China and Shenyang in northeast China.
The Drug Administration Law abolishes the restriction on online sale of prescription drugs and adopts the principle of keeping online and offline sales consistent, which allows the qualified pharmaceutical enterprise to conduct online sale of drugs (including prescription drugs, but not certain special controlled drugs).
The Drug Administration Law and the Administrative Measures for the Supervision and Administration of Operation and Use of Pharmaceuticals abolish the restriction on online sale of prescription drugs and adopts the principle of keeping online and offline sales consistent, which allow the qualified pharmaceutical enterprise to conduct online sale of drugs (including prescription drugs, but not certain special controlled drugs).
According to the Measures on Prescription Drugs and OTC Drugs Classification Management and the Interim Provisions on the Circulation of Prescription and OTC Drugs (Trial), which were both promulgated by the State Drug Administration, which was restructured and integrated into the CFDA, in 1999 and became effective in January 2000, drugs are divided into prescription drugs and over-the-counter drugs, or OTC drugs.
The Implementation Rules for the Drug Administration Law, was promulgated by the State Council in August 2002 and amended in 2016 and 2019, which emphasized the detailed implementation rules of drugs administration. 79 ​ Table of Contents According to the Measures on Prescription Drugs and OTC Drugs Classification Management (Trial) and the Interim Provisions on the Circulation of Prescription and OTC Drugs, which were both promulgated by the State Drug Administration, which was restructured and integrated into the CFDA, in 1999 and became effective in January 2000, drugs are divided into prescription drugs and over-the-counter drugs, or OTC drugs.
As of December 31, 2022, we had 291 registered trademarks, including our “1 药网 ” trademark. As of the same date, we had 19 authorized patents in the areas of digital health, big data analytics, and SMART supply chain technology with the China National Intellectual Property Administration.
We have 28 registered domain names, including 111.com.cn and yaoex.com. As of December 31, 2023, we had 327 registered trademarks, including our “1 药网 ” trademark. As of the same date, we had 23 authorized patents in the areas of digital health, big data analytics, and SMART supply chain technology with the China National Intellectual Property Administration.
It also provides us with flexible pricing and promotions to satisfy our customers’ needs. Our order management system enhances our visibility into our customers’ preferences, merchandise and supply chain, resulting in improved customer service, improved operational efficiency, enhanced management analytics and increased inventory synergies. Price Intelligence System (PIS) .
Our order management system enhances our visibility into our customers’ preferences, merchandise and supply chain, resulting in improved customer service, improved operational efficiency, enhanced management analytics and increased inventory synergies. Price Intelligence System (PIS) .
In March 2022, the NMPA promulgated the Supervision and Management Measures on Medical Devices Operation, according to which online medical devices sellers shall comply with relevant provisions of laws, regulations and rules. 84 ​ Table of Contents Regulations Relating to Online Trading The Measures for the Supervision and Administration of Online Trading promulgated by the SAMR in March 2021, or the Online Trading Measures, which became effective since May 2021 and replaced the Administrative Measures for Online Trading, or Online Trading Measures promulgated by the SAIC in January 2014, stipulates the obligations of online trading operators, including the online trading platform operators, operators within the platform, self-built website operators and online trading operators that carry out online trading activities through other network services.
Regulations Relating to Online Trading The Measures for the Supervision and Administration of Online Trading promulgated by the SAMR in March 2021, or the Online Trading Measures, which became effective since May 2021 and replaced the Administrative Measures for Online Trading promulgated by the SAIC in January 2014, stipulates the obligations of online trading operators, including the online trading platform operators, operators within the platform, self-built website operators and online trading operators that carry out online trading activities through other network services.
We require external doctors to register with us and to agree to our terms of use, pursuant to which they must comply with both our specified work scope and quality requirements, and the applicable rules and regulations.
We contract services from external doctors who practice at reputable hospitals with significant experience and appropriate credentials. We require external doctors to register with us and to agree to our terms of use, pursuant to which they must comply with both our specified work scope and quality requirements, and the applicable rules and regulations.
Moreover, if business operators deceive consumers or knowingly sell substandard or defective products, they should not only compensate consumers for their losses, but also pay additional damages equal to three times the price of the goods or services. 88 ​ Table of Contents In January 2017, the SAIC issued the Interim Measures for No Reason Return of Online Purchased Products within Seven Days, which became effective in March 2017 and was amended in October 2020, further clarifying the scope of consumers’ rights to make returns without a reason, including exceptions, return procedures and online trading platform operators’ responsibility to formulate seven-day no-reason return rules and related consumer protection systems, continuously display such rules and systems on a notable location of the homepage, and ensure that consumers are able to read and download them conveniently and completely, and supervise the merchants for compliance with these rules.
In January 2017, the SAIC issued the Interim Measures for No Reason Return of Online Purchased Products within Seven Days, which became effective in March 2017 and was amended in October 2020, further clarifying the scope of consumers’ rights to make returns without a reason, including exceptions, return procedures and online trading platform operators’ responsibility to formulate seven-day no-reason return rules and related consumer protection systems, continuously display such rules and systems on a notable location of the homepage, and ensure that consumers are able to read and download them conveniently and completely, and supervise the merchants for compliance with these rules.
We are committed to supporting and participating in socially responsible projects that align with our core values and mission, and to extend the benefits of our products and services through our technology-driven platform to the community at large.
We are committed to supporting and participating in socially responsible projects that align with our core values and mission, and to extend the benefits of our products and services through our technology-driven platform to the community at large. 75 ​ Table of Contents In May 2023, we entered the Tibetan area for the prevention and control of hydatid disease.
Furthermore, the foreign party investing in e-commerce business, as a type of value-added telecommunication services, has been allowed to hold up to 100% of the equity interests of the FITE based on the Notice of the Ministry of Industry and Information Technology on Removing the Restrictions on Foreign Equity Ratios in Online Data Processing and Transaction Processing (Operating E-commerce) Business issued on in June 2015 and the current effective Telecom Catalogue.
Furthermore, the foreign party investing in e-commerce business, as a type of value-added telecommunication services, has been allowed to hold up to 100% of the equity interests of the FITE based on the Notice of the Ministry of Industry and Information Technology on Removing the Restrictions on Foreign Equity Ratios in Online Data Processing and Transaction Processing (Operating E-commerce) Business issued on in June 2015 and the current effective Telecom Catalogue. 78 ​ Table of Contents In July 2006, the Ministry of Information Industry, which was restructured and integrated into the MIIT, promulgated the Notice of the Ministry of Information Industry on Intensifying the Administration of Foreign Investment in Value-added Telecommunications Services, or the MII Notice, which reiterates certain requirements of the FITE Regulations and strengthens the administration by the MII.
Purchases by these customers are primarily made based on historical experience, and their inventory turnover days are generally long due to a lack of detailed, precise planning and bulk purchase patterns. In addition, their inventory level is subject to fluctuations as a result of seasonal or other factors beyond their control.
Purchases by these customers are primarily made based on historical experience, and their inventory turnover days are generally long due to a lack of detailed, precise planning and bulk purchase patterns.
We have adopted stringent hiring procedures for doctors, pharmacists and medical assistants, which involve in-person interviews and assessments of technical knowledge. Our in-house medical team receives regular training on relevant safety policies, standards, protocols and procedures and is required to strictly comply with them in all aspects of our operations.
Our in-house medical team receives regular training on relevant safety policies, standards, protocols and procedures and is required to strictly comply with them in all aspects of our operations. We conduct frequent evaluations of our in-house doctors, pharmacists and medical assistants.
In November 2017 the General Office of the CFDA promulgated a Notice on Strengthening the Administration and Supervision of Internet Drug and Medical Devices Transaction, which specify the approval to conduct internet drug transaction service as the third-party platform is cancelled, but enterprises carrying out internet drug (including medical) transaction services shall establish a comprehensive supervision system in general and also request local counterparts of CFDA to implement day-to-day supervision and examination with respect to qualification access examination, products inspection, storage of transaction data and legal liabilities etc. 83 ​ Table of Contents Online Sales of Drugs and Medical Device Under PRC laws and regulations, the drugs and medical devices are allowed to be sold online in general except the prescription drugs that cannot be sold by pharmaceutical manufacture and operating enterprise or medical institution directly to the public by post or via internet.
In November 2017 the General Office of the CFDA promulgated a Notice on Strengthening the Administration and Supervision of Internet Drug and Medical Devices Transaction, which specify the approval to conduct internet drug transaction service as the third-party platform is cancelled, but enterprises carrying out internet drug (including medical) transaction services shall establish a comprehensive supervision system in general and also request local counterparts of CFDA to implement day-to-day supervision and examination with respect to qualification access examination, products inspection, storage of transaction data and legal liabilities etc.
In May 2021, Yijianyikang Medical Technology (Shanghai) Co., Ltd. (“Yijianyikang”), a wholly owned subsidiary of 1 Pharmacy Technology, initiated the 1 Health Membership program to reward and nurture relationships with the pharmacies that purchase products from us.
(“Yijianyikang”), a wholly owned subsidiary of 1 Pharmacy Technology, initiated the 1 Health Membership program to reward and nurture relationships with the pharmacies that purchase products from us. Since May 2021, Yijianyikang and 1 Pharmacy Technology have entered into multiple cooperation agreements with pharmacies that enrolled in the program and those pharmacies’ shareholders.
Our 1 Health Membership program is a membership model that effectively connects pharmaceutical companies with pharmacies and patients to empower small-to-mid size pharmacy chains, while promoting incremental products sales for pharmaceutical companies.
Our 1 Health Membership program is a membership model that effectively connects pharmaceutical companies with pharmacies and patients to empower small-to-mid size pharmacy chains, while promoting incremental products sales for pharmaceutical companies. This program allows pharmaceutical companies to identify market opportunities through data integration, and leverage on 1 Health’s sales power execute sales promotion strategy.
E-medical Record and Patient Management We create and maintain, in secured electronic storage, a copy of electronic medical records for certain consumers. These e-medical records allow consumers to access past consultation history and communicate with doctors for follow-up or new consultations. Our cloud-based platform and e-medical record services also enable more efficient patient management by doctors.
These e-medical records allow consumers to access past consultation history and communicate with doctors for follow-up or new consultations. Our cloud-based platform and e-medical record services also enable more efficient patient management by doctors. Doctors use our system for reviewing e-medical records with the patient’s consent.
Supply Chain Management We combine advanced technologies and supply chain optimization techniques to integrate the front and the back end of the supply chain and optimize our inventory management. Our unique integrated retail and wholesale supply chain and inventory management allow us to share inventories among 1 Medicine Marketplace, 1 Pharmacy, and Yi Hao Pharmacy, significantly increasing our operational efficiency.
Our unique integrated retail and wholesale supply chain and inventory management allow us to share inventories among 1 Medicine Marketplace, 1 Pharmacy, and Yi Hao Pharmacy, significantly increasing our operational efficiency.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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According to a series of announcements published by the MOF and the STA, the value-added tax rate applicable to the small-scale taxpayers is reduced to 1% from March 1, 2020 to March 31, 2022, except for small-scale taxpayers in Hubei province that were exempted from paying value-added tax until March 31, 2021.
Value-Added Tax . According to a series of announcements published by the MOF and the STA, the value-added tax rate applicable to the small-scale taxpayers is reduced to 1% from March 1, 2020 to March 31, 2022, except for small-scale taxpayers in Hubei province that were exempted from paying value-added tax until March 31, 2021.
The increases in accounts payable and inventory were primarily due to an increase in our inventory storage level to meet increased demands.
The increases in accounts payable and inventory were primarily due to an increase in our inventory storage level to meet increased demands.
Investing Activities Net cash used in investing activities in 2022 was RMB47.2 million (US$6.8 million), consisting primarily of purchases of short-term investments of RMB1,268.9 million (US$184.0 million), partially offset by proceeds from sale or maturity of short-term investments of RMB1,254.5 million (US$181.9 million).
Net cash used in investing activities in 2022 was RMB47.2 million (US$6.8 million), consisting primarily of purchases of short-term investments of RMB1,268.9 million (US$184.0 million), partially offset by proceeds from sale or maturity of short-term investments of RMB1,254.5 million (US$181.9 million).
Financing Activities Net cash provided by financing activities in 2022 was RMB22.7 million (US$3.3 million), consisting of proceeds from short-term bank borrowings of RMB788.2 million, partially offset by repayment of short-term bank borrowings of RMB868.8 million (US$126.0 million) and proceeds from other financing arrangement of RMB646.4 million (US$93.7 million), partially offset by repayment under other financing arrangement of RMB543.3 million (US$78.8 million).
Net cash provided by financing activities in 2022 was RMB22.7 million (US$3.3 million), consisting of proceeds from short-term bank borrowings of RMB788.2 million, partially offset by repayment of short-term bank borrowings of RMB868.8 million (US$126.0 million) and proceeds from other financing arrangement of RMB646.4 million (US$93.7 million), partially offset by repayment under other financing arrangement of RMB543.3 million (US$78.8 million).
As we further enhance our technologies and IT infrastructure, we aim to create more value for these participants, increasing their engagement and connection and deepening our penetration in the healthcare ecosystem, which we anticipate will create additional monetization venues for us to drive our revenue growth. 101 ​ Table of Contents Our Ability to Manage Our Mix of Product and Service Offerings Our results of operations are also affected by the mix of products and services we offer.
As we further enhance our technologies and IT infrastructure, we aim to create more value for these participants, increasing their engagement and connection and deepening our penetration in the healthcare ecosystem, which we anticipate will create additional monetization venues for us to drive our revenue growth. 98 ​ Table of Contents Our Ability to Manage Our Mix of Product and Service Offerings Our results of operations are also affected by the mix of products and services we offer.
Unfavorable changes in any of these general industry conditions could negatively affect demand for our products and services and negatively and materially affect our results of operations. 100 ​ Table of Contents We are affected by government policies and regulations that address all aspects of our operations, including qualifications and licensing requirements for online and offline sales and distribution of pharmaceutical and other health and wellness products, online healthcare services and online hospitals, among other things.
Unfavorable changes in any of these general industry conditions could negatively affect demand for our products and services and negatively and materially affect our results of operations. 97 ​ Table of Contents We are affected by government policies and regulations that address all aspects of our operations, including qualifications and licensing requirements for online and offline sales and distribution of pharmaceutical and other health and wellness products, online healthcare services and online hospitals, among other things.
We may also need additional cash if 1 Pharmacy Technology’s proposed listing is not completed before June 30, 2023 or the date otherwise agreed, under which circumstance certain investors who are non-controlling shareholders of 1 Pharmacy Technology may require the controlling shareholder of 1 Pharmacy Technology, Yao Wang, to redeem all or part of the equity interests then owned by such investors.
We may also need additional cash if 1 Pharmacy Technology’s proposed listing is not completed before June 30, 2024 or the date otherwise agreed, under which circumstance certain investors who are non-controlling shareholders of 1 Pharmacy Technology may require the controlling shareholder of 1 Pharmacy Technology, Yao Wang, to redeem all or part of the equity interests then owned by such investors.
We also generate product revenues from the B2B segment through the sale of pharmaceutical products to pharmacies on 1 Pharmacy. 102 ​ Table of Contents Our product revenues, in particular, those from B2B segment, have grown significantly and we expect continued growth as we attract more pharmacies as customers.
We also generate product revenues from the B2B segment through the sale of pharmaceutical products to pharmacies on 1 Pharmacy. 99 ​ Table of Contents Our product revenues, in particular, those from B2B segment, have grown significantly and we expect continued growth as we attract more pharmacies as customers.
Selling and marketing expenses accounted for 3.4% of net revenue in 2022 as compared to 4.1% last year. General and Administrative Expenses . Our general and administrative expenses decreased by 0.7% from RMB 207.0 million in 2021 to RMB205.6 million (US$29.8 million) in 2022. The decrease was primarily due to decreases of cost in managerial staff.
Selling and marketing expenses accounted for 3.4% of net revenue in 2022 as compared to 4.1% last year. General and Administrative Expenses . Our general and administrative expenses decreased by 0.7% from RMB207.0 million in 2021 to RMB205.6 million (US$29.8 million) in 2022. The decrease was primarily due to decreases of cost in managerial staff.
Other than those as discussed below, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022. We did not have future minimum capital commitments as of December 31, 2020, 2021 and 2022.
Other than those as discussed below, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2023. We did not have future minimum capital commitments as of December 31, 2021, 2022 and 2023.
Risk Factors—Risks Related to Our Business and Our Industry —We have incurred operating losses in the past, and may not be able to achieve or maintain profitability in the future.” We expect that substantially all of our future net revenues will be denominated in Renminbi.
Risk Factors—Risks Related to Our Business and Our Industry —We have incurred operating losses in the past, and may not be able to achieve or maintain profitability in the future.” 107 ​ Table of Contents We expect that substantially all of our future net revenues will be denominated in Renminbi.
Product revenues from the B2B segment contributed 91.3%, 95.3% and 96.1% to our total net revenues in 2020, 2021 and 2022, respectively. We rely on a diverse array of online marketing channels to attract consumers, including using social media such as WeChat and Weibo and paid placement on major online search engines in China.
Product revenues from the B2B segment contributed 95.3%, 96.1% and 96.9% to our total net revenues in 2021, 2022 and 2023, respectively. We rely on a diverse array of online marketing channels to attract consumers, including using social media such as WeChat and Weibo and paid placement on major online search engines in China.
The borrowing was guaranteed by Yihao Pharmacy. 1 Pharmacy Technology repaid RMB40,000 in 2021 with no balance outstanding as of December 31, 2021 and 2022. 1 Pharmacy Technology also borrowed RMB10,000 from China Construction Bank (CCB) in 2020 and paid back in 2021.
The borrowing was guaranteed by Yihao Pharmacy. 1 Pharmacy Technology repaid RMB40.0 million in 2021 with no balance outstanding as of December 31, 2021 and 2022. 1 Pharmacy Technology also borrowed RMB10.0 million from China Construction Bank (CCB) in 2020 and paid back in 2021.
Our net loss as a percentage of net revenues decreased from 5.7% in 2020 to 5.0% in 2021 and further to 2.8% in 2022. Key Factors Affecting Our Results of Operations Our results of operations are affected by general factors driving China’s general health and wellness industry, especially pharmaceutical retail and wholesale distribution and internet healthcare industries in China.
Our net loss as a percentage of net revenues decreased from 5.0% in 2021 to 2.8% in 2022 and further to 2.4% in 2023. Key Factors Affecting Our Results of Operations Our results of operations are affected by general factors driving China’s general health and wellness industry, especially pharmaceutical retail and wholesale distribution and internet healthcare industries in China.
Our selling and marketing expenses are a significant contributor to our operating costs and expenses, and they primary consist of payroll, bonus and employee benefits of sales and marketing staff, advertising costs, agency fees and costs for promotional materials. In 2020, 2021 and 2022, selling and marketing expenses amounted to 4.9%, 4.1% and 3.4% of our total net revenues, respectively.
Our selling and marketing expenses are a significant contributor to our operating costs and expenses, and they primary consist of payroll, bonus and employee benefits of sales and marketing staff, advertising costs, agency fees and costs for promotional materials. In 2021, 2022 and 2023, selling and marketing expenses amounted to 4.1%, 3.4% and 3.0% of our total net revenues, respectively.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions. 113 ​ Table of Contents E.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
General and administrative expenses accounted for 1.5% of net revenue in 2022 as compared to 1.7% last year. Technology Expenses . Our technology expenses decreased by 26.3% from RMB189.3 million in 2021 to RMB139.5 million (US$20.2 million) in 2022, mainly due to our increased efficiency in technology solutions and infrastructure and decreased cost in technology staff.
Our technology expenses decreased by 26.3% from RMB189.3 million in 2021 to RMB139.5 million (US$20.2 million) in 2022, mainly due to our increased efficiency in technology solutions and infrastructure and decreased cost in technology staff. Technology expenses accounted for 1.0% of net revenue in 2022 as compared to 1.5% last year.
Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People’s Bank of China minus 0.35%. In June 2021, the credit agreement was renewed and allows 1 Pharmacy Technology to borrow up to RMB 200,000 for working capital purpose in seven months.
Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People’s Bank of China minus 0.35%. In June 2021, the credit agreement was renewed and allows 1 Pharmacy Technology to borrow up to RMB200.0 million for working capital purpose in seven months.
Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People’s Bank of China plus 0.78%. In November 2022, the credit agreement was renewed and allows 1 Pharmacy Technology to borrow up to RMB 200,000 for working capital purpose in seven months.
Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People’s Bank of China plus 0.78%. In November 2022, the credit agreement was renewed and allows 1 Pharmacy Technology to borrow up to RMB200.0 million for working capital purpose in seven months.
Since April 1, 2022 to December 31, 2022, small-scale taxpayers are exempted from paying value-added tax. The MOF and the STA announced updates to these policies in January 2023. From January 1, 2023 to December 31, 2023, the value-added tax rate applicable to the small-scale taxpayers is reduced to 1%.
Since April 1, 2022 to December 31, 2022, small-scale taxpayers are exempted from paying value-added tax. The MOF and the STA announced updates to these policies in January 2023.
The interest rate range for the borrowings in 2021 and 2022 were from 3.50% to 4.63 % per annum. 1 Pharmacy Technology obtained loan of RMB40,000 from Shanghai Pudong Technology Financial Service Co., Ltd. with annual interest rate of 8.5% in May 2020.
The interest rate range for the borrowings in 2021 and 2022 were from 4.63 % to 4.10 % per annum. 1 Pharmacy Technology obtained loan of RMB40.0 million from Shanghai Pudong Technology Financial Service Co., Ltd. with annual interest rate of 8.5% in May 2020.
Our revenue was RMB8.2 billion in 2020, RMB12.4 billion in 2021 and RMB13.5 billion (US$2.0 billion) in 2022, of which product revenues from the B2B segment were RMB7.5 billion, RMB11.8 billion and RMB13.0 billion (US$1.9 billion), respectively.
Our revenue was RMB12.4 billion in 2021, RMB13.5 billion in 2022 and RMB14.9 billion (US$2.1 billion) in 2023, of which product revenues from the B2B segment were RMB11.8 billion, RMB13.0 billion and RMB14.5 billion (US$2.0 billion), respectively.
Remittance of dividends by a foreign invested company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiary, 1 Pharmacy Technology, has not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. C. Research and Development, Patents and Licenses, etc.
Remittance of dividends by a foreign invested company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiary, 1 Pharmacy Technology, has not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. 110 ​ Table of Contents C.
Our lease expenses for the years ended December 31, 2020, 2021 and 2022 were RMB41.9 million, RMB73.8 million and RMB75.8 million (US$11.0 million), respectively. Off-Balance Sheet Commitments and Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Our lease expenses for the years ended December 31, 2021, 2022 and 2023 were RMB73.8 million, RMB75.8 million and RMB62.6 million (US$8.8 million), respectively. Off-Balance Sheet Commitments and Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
The Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 ​ Net Revenues Our net revenues increased by 51.5% from RMB8.2 billion in 2020 to RMB12.4 billion (US$2.0 billion) in 2021. This increase was primarily due to the increase in product revenues from B2B segment.
The Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Net Revenues Our net revenues increased by 8.8% from RMB12.4 billion in 2021 to RMB13.5 billion (US$2.0 billion) in 2022. This increase was primarily due to the increase in product revenues from B2B segment.
Our net revenues experienced consistent monthly growth and are significantly impacted by the annual and mid-year e-commerce festivals. Product Revenues by Segment . Product revenues increased by 51.2% from RMB8.2 billion in 2020 to RMB12.3 billion (US$1.9 billion) in 2021, due to an increase in the number of offline customers through which more products were sold.
Our net revenues experienced consistent monthly growth and are significantly impacted by the annual and mid-year e-commerce festivals. Product Revenues by Segment . Product revenues increased by 8.7% from RMB12.3 billion in 2021 to RMB13.4 billion (US$1.9 billion) in 2022, due to an increase in the number of offline customers through which more products were sold.
We expect our fulfillment expenses as a percentage of our total net revenues to decrease because larger B2B orders reduce our cost as a percentage as a result of the way pricing is undertaken by the logistics business. In addition, we have implemented more cost-saving initiatives and continue to expand our fulfillment network to leverage our scale.
We expect our fulfillment expenses as a percentage of our total net revenues to decrease because larger B2B orders reduce our cost as a percentage as a result of the way pricing is undertaken by the logistics business. In addition, we have implemented more cost-saving initiatives to reduce the expense. Selling and marketing expenses .
Not only do we serve consumers directly through our online retail pharmacy, we also enable more than 12 offline pharmacies to better serve their consumers as of December 31, 2022. Our online wholesale pharmacy, 1 Pharmacy, serves as a one-stop shop for pharmacies to source a vast selection of pharmaceutical products.
Not only did we serve consumers directly through our online retail pharmacy, we also enabled more than 10 offline pharmacies to better serve their consumers as of December 31, 2023. Our online wholesale pharmacy, 1 Pharmacy, serves as a one-stop shop for pharmacies to source a vast selection of pharmaceutical products.
The interest rate range for the borrowings in 2021 and 2022 were from 3.95% to 4.55 % per annum. In June 2020, 1 Pharmacy Technology entered into a credit agreement with Industrial Bank (IB) which provides a revolving credit facility that allows 1 Pharmacy Technology to borrow up to RMB 100,000 for working capital purpose in one year.
The interest rate range for the borrowings in 2022 and 2023 were from 3.60% to 4.55 % per annum. In June 2020, 1 Pharmacy Technology entered into a credit agreement with Industrial Bank (IB) which provides a revolving credit facility that allows 1 Pharmacy Technology to borrow up to RMB100.0 million for working capital purpose in one year.
We have thus far accumulated considerable offline pharmacy resources, which contributed to the increase of product revenues from the B2B segment to RMB13.0 billion (US$1.9 billion) in 2022. We expect to further expand our offline pharmacy market and to develop this revenue stream.
We have thus far accumulated considerable offline pharmacy resources, which contributed to the increase of product revenues from the B2B segment to RMB14.5 billion (US$2.0 billion) in 2023. We expect to further expand our offline pharmacy market and to develop this revenue stream.
If change in various factors constituting the estimate of revenue result in 5 percentage point increase/decrease in the overall estimate revenue, it would result in an increase/decrease of total compensation cost of RMB2.1/2.1million. ​
If change in various factors constituting the estimate of revenue result in 5 percentage point increase/decrease in the overall estimate revenue, it would result in an increase/decrease of total compensation cost of RMB1.8/1.8 million. ​
In November 2022, we renewed the factoring agreement with an updated annual rate of 9%.
In November 2022, we renewed the factoring agreement with an updated annual rate of 9%. In June 2023, we renewed the factoring agreement with an updated annual rate of 10.5%.
See “Item 4. Information on the Company—B. Business Overview—Technology and IT Infrastructure” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.
Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Technology and IT Infrastructure” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.
Product revenues increased by 8.7% from RMB12.3 billion in 2021 to RMB13.4 billion (US$1.9 billion) in 2022, due to an increase in the number of offline customers through which more products were sold. We experienced an increase in product revenues from B2B segment, which increased by 9.8% to RMB13.0 billion (US$1.9 billion) from RMB11.8 billion last year.
Product revenues increased by 10.7% from RMB13.4 billion in 2022 to RMB14.8 billion (US$2.1 billion) in 2023, due to an increase in the number of offline customers through which more products were sold. We experienced an increase in product revenues from B2B segment, which increased by 11.5% to RMB14.5 billion (US$2.0 billion) from RMB13.0 billion last year.
We experienced an increase in product revenues from B2B segment, which increased by 58.1% to RMB11.8 billion (US$1.9 billion) from RMB7.5 billion last year. Product revenues from B2C segment decreased by 26.2% to RMB491.9 million (US$77.2 million) from RMB666.2 million last year mainly attributable to a shift of resources to our B2B segment. Service revenues .
We experienced an increase in product revenues from B2B segment, which increased by 9.8% to RMB13.0 billion (US$1.9 billion) from RMB11.8 billion last year. Product revenues from B2C segment decreased by 17.0% to RMB408.3 million (US$59.2 million) from RMB491.9 million last year mainly attributable to a shift of resources to our B2B segment. Service revenues .
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
Product revenues from B2C segment decreased by 17.0% to RMB408.3 million (US$59.2 million) from RMB491.9 million last year mainly attributable to a shift of resources to our B2B segment. Service revenues .
Product revenues from B2C segment decreased by 12.3% to RMB358.0 million (US$50.4 million) from RMB408.3 million last year mainly attributable to a shift of resources to our B2B segment. Service revenues .
As of December 31, 2020, 2021 and 2022, we had RMB1.2 billion, RMB661.4 million and RMB673.7 million (US$97.7 million), respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash on hand and demand deposits.
As of December 31, 2021, 2022 and 2023, we had RMB661.4 million, RMB673.7 million and RMB603.5 million (US$85.0 million), respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash on hand and demand deposits.
Technology expenses accounted for 1.0% of net revenue in 2022 as compared to 1.5% last year. 105 ​ Table of Contents Net Loss As a result of the foregoing, we recorded a net loss of RMB376.1 million (US$54.5 million) in 2022 as compared to a net loss of RMB621.0 million in 2021.
Technology expenses accounted for 0.8% of net revenue in 2023 as compared to 1.0% last year. 102 ​ Table of Contents Net Loss As a result of the foregoing, we recorded a net loss of RMB353.4 million (US$49.8 million) in 2023 as compared to a net loss of RMB376.1 million in 2022.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the end of each reporting period, and (3) the reported amounts of revenues and expenses during each reporting period.
GAAP, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of assets and liabilities, (2) disclosure of contingent assets and liabilities at the end of each reporting period, and (3) the reported amounts of revenues and expenses during each reporting period.
In addition, as of December 31, 2020, 2021 and 2022, we had RMB300.2 million, RMB182.6 million and RMB205.9 million (US$29.8 million), respectively, in short-term investments.
In addition, as of December 31, 2021, 2022 and 2023, we had RMB182.6 million, RMB205.9 million and RMB50.1 million (US$7.1 million), respectively, in short-term investments.
During the years ended December 31, 2021 and 2022, RMB3,000 and RMB30,000 were drawn on this credit facility, RMB9,850 and RMB30,000 were repaid in 2021 and 2022, with the balance of RMB30,000 and RMB30,000 outstanding as of December 31, 2021and 2022, respectively.
During the years ended December 31, 2022 and 2023, RMB30.0 million and RMB20.0 million were drawn on this credit facility, RMB30.0 million and RMB30.0 million were repaid in 2022 and 2023, with the balance of RMB30.0 million and RMB20.0 million outstanding as of December 31, 2022 and 2023, respectively.
Although management believes the Company’s forecast is reasonable, no assurance can be given, especially when the Company is still in a loss making position. The discounted cash flows are sensitive due to changes in key forecast assumptions, including mainly revenue.
Although management believes the Company’s forecast is reasonable, no assurance can be given, especially when the Company is still in a loss-making position. The discounted cash flows are sensitive due to changes in key forecast assumptions, including mainly revenue. The fair value of the shares granted during 2023 under Employee ownership plan of 1 Pharmacy Technology is RMB36.4 million.
Net cash provided by financing activities in 2021 was RMB74.3 million (US$11.7 million), consisting of proceeds from short-term bank borrowings of RMB406.8 million (US$63.8 million), partially offset by repayment of short-term bank borrowings of RMB376.4 million (US$59.1 million ), and proceeds from reverse factoring arrangement of RMB61.9 million (US$9.7 million), partially offset by repayment under reverse factoring arrangement of RMB15.0 million (US$2.4 million).
Net cash provided by financing activities in 2021 was RMB74.3 million (US$11.7 million), consisting of proceeds from short-term bank borrowings of RMB406.8 million (US$63.8 million), partially offset by repayment of short-term bank borrowings of RMB376.4 million (US$59.1 million), and proceeds from reverse factoring arrangement of RMB61.9 million (US$9.7 million), partially offset by repayment under reverse factoring arrangement of RMB15.0 million (US$2.4 million). 109 ​ Table of Contents Material Cash Requirements Our material cash requirements as of December 31, 2023 and any subsequent interim period primarily include our capital expenditures and operating lease commitments.
We generated net loss of RMB621.0 million and RMB376.1 million (US$54.5 million) in 2021 and 2022, respectively. We recorded net cash operating outflows of RMB688.8 million and RMB23.2 million (US$3.4 million) in 2021 and 2022, respectively.
We generated net loss of RMB376.1 million and RMB353.4 million (US$49.8 million) in 2022 and 2023, respectively. We recorded net cash operating outflows of RMB23.2 million and RMB447.2 million (US$63.0 million) in 2022 and 2023, respectively.
Technology expenses accounted for 1.5% of net revenue in 2021 as compared to 1.1% last year. Net Loss As a result of the foregoing, we recorded a net loss of RMB621.0 million (US$97.5 million) in 2021 as compared to a net loss of RMB467.1 million in 2020. Taxation Cayman Islands We are incorporated in the Cayman Islands.
Net Loss As a result of the foregoing, we recorded a net loss of RMB376.1 million (US$54.5 million) in 2022 as compared to a net loss of RMB621.0 million in 2021. Taxation Cayman Islands We are incorporated in the Cayman Islands.
Operating costs and expenses The following table sets forth the components of our operating costs and expenses by amounts and percentages of total operating costs and expenses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating costs and expenses: Cost of products sold (7,837,325) 90.3 (11,804,807) 90.3 (12,676,722) (1,837,952) 91.3 Fulfillment expenses (226,930) 2.6 (355,836) 2.7 (401,414) (58,200) 2.9 Selling and marketing expenses (399,610) 4.6 (513,146) 3.9 (457,880) (66,386) 3.3 General and administrative expenses (128,226) 1.5 (206,981) 1.6 (205,623) (29,813) 1.5 Technology expenses (92,080) 1.1 (189,284) 1.4 (139,504) (20,226) 1.0 Other operating (expenses) income, net 7,703 (0.1) 2,012 0.1 (6,556) (951) 0.0 Total (8,676,468) 100.0 (13,068,042) 100.0 (13,887,699) (2,013,528) 100.0 ​ Cost of products sold .
Operating costs and expenses The following table sets forth the components of our operating costs and expenses by amounts and percentages of total operating costs and expenses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating costs and expenses: Cost of products sold (11,804,807) 90.3 (12,676,722) 91.3 (14,099,151) (1,985,824) 92.2 Fulfillment expenses (355,836) 2.7 (401,414) 2.9 (400,538) (56,415) 2.6 Selling and marketing expenses (513,146) 3.9 (457,880) 3.3 (448,387) (63,154) 2.9 General and administrative expenses (206,981) 1.6 (205,623) 1.5 (224,202) (31,578) 1.5 Technology expenses (189,284) 1.4 (139,504) 1.0 (124,341) (17,513) 0.8 Other operating (expenses) income, net 2,012 0.1 (6,556) 0.0 (1,607) (226) 0.0 Total (13,068,042) 100.0 (13,887,699) 100.0 (15,298,226) (2,154,710) 100.0 ​ Cost of products sold .
Our segment profit from our B2B segment increased by 125.8% from RMB226.6 million in 2020 to RMB511.7 million (US$80.3 million) in 2021 mainly due to the optimization of our product mix, and such increase is also in line with the increase in our revenues from the B2B segment.
Our segment profit from our B2B segment increased by 3.5% from RMB743.5 million in 2022 to RMB769.6 million (US$108.4 million) in 2023 mainly due to the optimization of our product mix, and such increase is also in line with the increase in our revenues from the B2B segment.
In addition, we entered into several agreements with financial institutions to further enhance our liquidity and capital resources. Since 2021, we have maintained a structured payment arrangement with a bank. Pursuant to such agreement, certain suppliers of us were able to put their receivables from us to the bank for early payment.
Since 2021, we have maintained a structured payment arrangement with a bank. Pursuant to such agreement, certain suppliers of us were able to put their receivables from us to the bank for early payment.
Segment Profit/Loss As a result of the foregoing, our segment profit from our B2C segment decreased by 21.4% from RMB139.3 million in 2020 to RMB109.4 million (US$17.2 million) in 2021 because of the decrease in our revenues from the B2C segment.
Segment Profit/Loss As a result of the foregoing, our segment profit from our B2C segment decreased by 17.7% from RMB96.5 million in 2022 to RMB79.4 million (US$11.2 million) in 2023 because of the decrease in our revenues from the B2C segment.
Operating Costs and Expenses Our operating costs and expenses increased by 50.6% from RMB8.7 billion in 2020 to RMB13.1 billion (US$2.1 billion) in 2021, with increases in the following categories of operating expenses. Cost of Products Sold .
Operating Costs and Expenses Our operating costs and expenses increased by 10.2% from RMB13.9 billion in 2022 to RMB15.3 billion (US$2.2 billion) in 2023, with increases in the following categories of operating expenses. Cost of Products Sold .
If the loans are approved by the bank, the proceeds, which represent the total order amount, are remitted to us by way of the customers’ entrustment. The term of the loan is typically three months.
Since 2022, we have cooperated with a bank to provide facilities to our customers, who applied for loans directly with the bank. If the loans are approved by the bank, the proceeds, which represent the total order amount, are remitted to us by way of the customers’ entrustment. The term of the loan is typically three months.
Our service revenues increased significantly by 20.2% from RMB94.2 million in 2021 to RMB113.3 million (US$16.4 million) in 2022, which was primarily attributable to an increase of RMB15.4 million (US$2.2 million) in B2B MP service revenues. We also generate service revenues by providing other ancillary services, mainly online medical consultation services for patients and digital marketing services for pharmaceutical companies.
Our service revenues decreased by 6.2% from RMB113.3 million in 2022 to RMB106.2 million (US$15.0 million) in 2023, which was primarily attributable to the decrease of our B2C digital marketing service revenues. We also generate service revenues by providing other ancillary services, mainly online medical consultation services for patients and digital marketing services for pharmaceutical companies.
Key Information—Transfer of Funds and Other Assets through Our Organization.” Cash Flows The following table sets forth a summary of our cash flows for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flow Data: Net cash used in operating activities (116,777) (688,837) (23,152) (3,356) Net cash provided by (used in) investing activities (324,669) 60,138 (47,173) (6,840) Net cash provided by financing activities 1,070,407 74,339 22,735 3,296 Net decrease (increase) in cash and cash equivalents, and restricted cash 620,812 (557,862) (43,881) (6,362) Cash and cash equivalents, and restricted cash at the beginning of period 697,722 1,318,534 760,672 110,287 Cash and cash equivalents, and restricted cash at the end of period 1,318,534 760,672 716,791 103,925 ​ Operating Activities Net cash used in operating activities in 2022 was RMB23.2 million (US$3.4 million) and primarily consisted of our net loss of RMB376.1 million (US$54.5 million), as adjusted for non-cash items and the effects of changes in operating assets and liabilities.
Key Information—Transfer of Funds and Other Assets through Our Organization.” Cash Flows The following table sets forth a summary of our cash flows for the years presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) Summary Consolidated Cash Flow Data: Net cash used in operating activities (688,837) (23,152) (447,244) (62,993) Net cash provided by (used in) investing activities 60,138 (47,173) 151,743 21,372 Net cash provided by financing activities 74,339 22,735 205,978 29,011 Net decrease (increase) in cash and cash equivalents, and restricted cash (557,862) (43,881) (93,243) (13,134) Cash and cash equivalents, and restricted cash at the beginning of period 1,318,534 760,672 716,791 100,958 Cash and cash equivalents, and restricted cash at the end of period 760,672 716,791 623,548 87,824 ​ Operating Activities Net cash used in operating activities in 2023 was RMB447.2 million (US$63.0 million) and primarily consisted of our net loss of RMB353.4 million (US$49.8 million), as adjusted for non-cash items and the effects of changes in operating assets and liabilities.
Key Components of Results of Operations Net Revenues The following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Product revenues B2C 666,223 8.1 491,855 3.9 408,305 59,198 3.0 B2B 7,490,449 91.3 11,839,850 95.3 12,995,131 1,884,117 96.2 Sub total 8,156,672 99.4 12,331,705 99.2 13,403,436 1,943,315 99.2 Service revenues 46,485 0.6 94,197 0.8 113,262 16,421 0.8 Total 8,203,157 100.0 12,425,902 100.0 13,516,698 1,959,736 100.0 ​ Product revenues .
Key Components of Results of Operations Net Revenues The following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Product revenues B2C 491,855 3.9 408,305 3.0 357,975 50,420 2.4 B2B 11,839,850 95.3 12,995,131 96.2 14,483,935 2,040,019 96.9 Sub total 12,331,705 99.2 13,403,436 99.2 14,841,910 2,090,439 99.3 Service revenues 94,197 0.8 113,262 0.8 106,219 14,960 0.7 Total 12,425,902 100.0 13,516,698 100.0 14,948,129 2,105,399 100.0 ​ Product revenues .
Our product revenue from the B2B business segment in 2022 was RMB13.0 billion (US$1.9 billion), representing a 9.8% increase from 2021, and our product revenue from the B2C business segment in 2022 was RMB408.3 million (US$59.2 million), representing a 17.0% decrease from 2021. Service revenues .
Our product revenue from the B2B business segment in 2023 was RMB14.5 billion (US$2.0 billion), representing a 11.5% increase from 2022, and our product revenue from the B2C business segment in 2023 was RMB358.0 million (US$50.4 million), representing a 12.3% decrease from 2022. Service revenues .
Therefore, if such Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to withholding tax at a rate of 10%. 107 ​ Table of Contents Value-Added Tax .
However, the PRC tax authorities will review preferential tax treatment under the “substance over form” principle and grant such treatment on a case-by-case basis. Therefore, if such Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to withholding tax at a rate of 10%.
This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands) Net Revenues: Product revenues 8,156,672 99.4 12,331,705 99.2 13,403,436 1,943,315 99.2 Service revenues 46,485 0.6 94,197 0.8 113,262 16,421 0.8 Total net revenues 8,203,157 100.0 12,425,902 100.0 13,516,698 1,959,736 100.0 Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ Cost of products sold (7,837,325) (95.5) (11,804,807) (95.0) (12,676,722) (1,837,952) (93.8) Fulfillment expenses (226,930) (2.8) (355,836) (2.9) (401,414) (58,200) (3.0) Selling and marketing expenses(1) (399,610) (4.9) (513,146) (4.1) (457,880) (66,386) (3.4) General and administrative expenses(1) (128,226) (1.6) (206,981) (1.7) (205,623) (29,813) (1.5) Technology expenses(1) (92,080) (1.1) (189,284) (1.5) (139,504) (20,226) (1.0) Other operating (expenses) income, net 7,703 0.1 2,012 — (6,556) (951) — Total operating costs and expenses (8,676,468) (105.8) (13,068,042) (105.2) (13,887,699) (2,013,528) (102.7) Loss from operations (473,311) (5.8) (642,140) (5.2) (371,001) (53,792) (2.7) Interest income 6,312 0.1 9,776 0.1 8,118 1,177 0.1 Interest expense (8,817) (0.1) (5,488) — (13,443) (1,949) (0.1) Foreign exchange (loss) gain 5,547 0.1 1,937 — (7,875) (1,142) (0.1) Other income, net 3,161 — 14,890 0.1 8,132 1,179 0.1 Loss before income taxes (467,108) (5.7) (621,025) (5.0) (376,069) (54,527) (2.8) Income tax expense — — — — — — — Net loss (467,108) (5.7) (621,025) (5.0) (376,069) (54,527) (2.8) (1) Share-based compensation expenses are allocated to operating expense line items as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ ​ ​ (in thousands) General and administrative expenses 22,727 69,718 86,992 12,613 Selling and marketing expenses 40,562 50,532 50,110 7,265 Technology expenses 12,406 25,343 20,282 2,941 Total 75,695 145,593 157,384 22,819 ​ 104 ​ Table of Contents The Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Net Revenues Our net revenues increased by 8.8% from RMB12.4 billion in 2021 to RMB13.5 billion (US$2.0 billion) in 2022.
This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands) Net Revenues: Product revenues 12,331,705 99.2 13,403,436 99.2 14,841,910 2,090,439 99.3 Service revenues 94,197 0.8 113,262 0.8 106,219 14,960 0.7 Total net revenues 12,425,902 100.0 13,516,698 100.0 14,948,129 2,105,399 100.0 Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ Cost of products sold (11,804,807) (95.0) (12,676,722) (93.8) (14,099,151) (1,985,824) (94.3) Fulfillment expenses (355,836) (2.9) (401,414) (3.0) (400,538) (56,415) (2.7) Selling and marketing expenses(1) (513,146) (4.1) (457,880) (3.4) (448,387) (63,154) (3.0) General and administrative expenses(1) (206,981) (1.7) (205,623) (1.5) (224,202) (31,578) (1.5) Technology expenses(1) (189,284) (1.5) (139,504) (1.0) (124,341) (17,513) (0.8) Other operating (expenses) income, net 2,012 — (6,556) — (1,607) (226) — Total operating costs and expenses (13,068,042) (105.2) (13,887,699) (102.7) (15,298,226) (2,154,710) (102.3) Loss from operations (642,140) (5.2) (371,001) (2.7) (350,097) (49,311) (2.3) Interest income 9,776 0.1 8,118 0.1 8,834 1,244 0.1 Interest expense (5,488) — (13,443) (0.1) (20,141) (2,837) (0.1) Foreign exchange (loss) gain 1,937 — (7,875) (0.1) 610 86 — Other income, net 14,890 0.1 8,132 0.1 7,612 1,072 0.1 Loss before income taxes (621,025) (5.0) (376,069) (2.8) (353,182) (49,746) (2.4) Income tax expense — — — — (251) (35) — Net loss (621,025) (5.0) (376,069) (2.8) (353,433) (49,781) (2.4) (1) Share-based compensation expenses are allocated to operating expense line items as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) General and administrative expenses 69,718 86,992 113,536 15,991 Selling and marketing expenses 50,532 50,110 76,976 10,842 Technology expenses 25,343 20,282 35,658 5,022 Total 145,593 157,384 226,170 31,855 ​ 101 ​ Table of Contents The Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Net Revenues Our net revenues increased by 10.6% from RMB13.5 billion in 2022 to RMB14.9 billion (US$2.1 billion) in 2023.
Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future. B. Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated by the issuance of preferred shares in private placements and our initial public offering in 2018.
Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated by the issuance of preferred shares in private placements and our initial public offering in 2018 and pre-IPO financing in 2020.
The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. 110 ​ Table of Contents The following table sets forth material amounts of cash and short-term investments disaggregated by currency denomination as of December 31, 2022 in each jurisdiction in which our affiliated entities are domiciled: ​ ​ ​ ​ ​ ​ ​ ​ PRC Hong Kong Cayman Islands ​ ​ (RMB in thousands) Cash and short-term investments in RMB 700,649 94,517 — Cash and short-term investments in US$ 3,566 20,171 60,627 ​ We have adopted cash management policies to govern transfers of funds among 111, Inc. and its subsidiaries.
The following table sets forth material amounts of cash and short-term investments disaggregated by currency denomination as of December 31, 2023 in each jurisdiction in which our affiliated entities are domiciled: ​ ​ ​ ​ ​ ​ ​ ​ PRC Hong Kong Cayman Islands ​ ​ (RMB in thousands) Cash and short-term investments in RMB 483,839 123 130,499 Cash and short-term investments in US$ 1,457 1,306 36,443 ​ We have adopted cash management policies to govern transfers of funds among 111, Inc. and its subsidiaries.
Adjustment for non-cash items primarily included RMB75.7 million of share-based compensation, RMB24.2 million of inventory write-down and RMB39.3 million of noncash lease expense, partially offset by an increase in exchange loss of RMB5.5 million.
Adjustment for non-cash items primarily included RMB226.7 million (US$31.9 million) of share-based compensation, RMB19.9 million (US$2.8 million) of inventory write-down and RMB62.6 million (US$8.8 million) of noncash lease expense, partially offset by an increase in investment income of RMB4.0 million (US$0.6 million).
Cash deposits or notes receivable are required to be pledged for any draw down of borrowings and notes payables from CZB. No loan with China Zheshang Bank (CZB) was entered in 2021 and 2022. We also obtained loans from several other financial institutions.
In December 2022, the credit facility was renewed and allow us to borrow up to RMB500.0 million for another two years. Cash deposits or notes receivable are required to be pledged for any draw down of borrowings and notes payables from CZB. No loan with China Zheshang Bank (CZB) was entered in 2021 and 2022.
Inflation To date, inflation in China has not materially affected our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for 2020, 2021 and 2022 were increases of 2.5%, 0.9% and 2.0%, respectively.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for 2021, 2022 and 2023 were increases of 0.9%, 2.0% and 1.4%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future. B.
Selling and marketing expenses . Selling and marketing expenses primarily consist of payroll, bonus and employee benefits for sales and marketing staff, advertising costs, agency fees and costs for promotional materials.
Selling and marketing expenses primarily consist of payroll, bonus and employee benefits for sales and marketing staff, advertising costs, agency fees and costs for promotional materials. We expect our selling and marketing expenses to remain substantial in absolute terms in acquiring and retaining customers and enhancing our brand awareness. General and administrative expenses .
Steady and continued growth of our consumer base and their stickiness to our platform allows us to maintain a solid foundation for our business to continue to expand. ● Pharmacies .
Steady and continued growth of our consumer base and their stickiness to our platform allows us to maintain a solid foundation for our business to continue to expand. ● Pharmacies. Since we launched our online wholesale pharmacy, 1 Pharmacy, in May 2017, we have significantly increased the scale of our B2B business through the sale of pharmaceutical products to pharmacies.
Net cash used in investing activities in 2020 was RMB324.7 million, consisting primarily of purchases of short-term investments of RMB500.0 million, partially offset by proceeds from sale or maturity of short-term investments of RMB201.0 million.
Investing Activities Net cash provided by investing activities in 2023 was RMB151.7 million (US$21.4 million), consisting primarily of purchases of short-term investments of RMB914.3 million (US$128.8 million), partially offset by proceeds from sale or maturity of short-term investments of RMB1,074.2 million (US$151.3 million).
Segment Cost of Products Sold Cost of products sold increased by 50.6% from RMB7,837.3 million in 2020 to RMB11,804.8 million (US$1,852.4 million) in 2021, in line with our overall revenue growth, which is primarily attributable to the growth of sales in the B2B segment.
Segment Cost of Products Sold Cost of products sold increased by 11.2% from RMB12.7 billion in 2022 to RMB14.1 billion (US$2.0 billion) in 2023, in line with our overall revenue growth, which is primarily attributable to the growth of sales in the B2B segment.
General and administrative expenses primarily consist of payroll, bonus and employee benefit costs for corporate employees, legal, finance, rental expenses, and other corporate overhead costs.
General and administrative expenses primarily consist of payroll, bonus and employee benefit costs for corporate employees, legal, finance, rental expenses, and other corporate overhead costs. We expect our general and administrative expenses to decrease as a percentage of our total net revenues as we leverage the scale of our business. 100 ​ Table of Contents Technology expenses .
Customers repay the loan principal directly to the bank and we pay loan interests at an annual interest rate, which is no more than 5.5%, within the shorter of borrowing period and 45 days.
Customers repay the loan principal directly to the bank and we pay loan interests at an annual interest rate, which is no more than 5.5%, within the shorter of borrowing period and 45 days. 106 ​ Table of Contents In August and December 2020, 1 Pharmacy Technology issued its ordinary shares to certain private placement investors at fair value evaluated by the third-party valuer, representing 9.2% of the outstanding shares of 1 Pharmacy Technology.
In October 2020, November 2021 and December 2022, 1 Pharmacy Technology renewed the credit agreement that allowed 1 Pharmacy Technology to borrow up to RMB 300,000 for working capital purposes for another one year. Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People’s Bank of China plus 0.30%.
In October 2020, November 2021, December 2022 and December 2023, 1 Pharmacy Technology renewed the credit agreement that allowed 1 Pharmacy Technology to borrow up to RMB200.0 million for working capital purposes for another one year.
The loan agreement with CCB includes covenants that Debt to Asset Ratio of 1 Pharmacy Technology should be no more than 70%, and the Liquidity Ratio should be no less than 1.0. 1 Pharmacy Technology was in compliance with the covenants as of payment due date in 2021.
The loan agreement with CCB includes covenants that Debt to Asset Ratio of 1 Pharmacy Technology should be no more than 70%, and the Liquidity Ratio should be no less than 1.0. 1 Pharmacy Technology was in compliance with the covenants as of payment due date in 2021. 105 ​ Table of Contents We entered into a revolving credit facility with China Zheshang Bank (CZB) that allows us to borrow up to RMB500.0 million for working capital purpose since December 2018 and renewed in December 2020 which will expire in two years.
Our cost of products sold increased by 50.6% from RMB7.8 billion in 2020 to RMB11.8 billion (US$1.9 billion) in 2021, primarily due to the revenue growth in B2B business. Fulfillment Expenses .
Our cost of products sold increased by 11.2% from RMB12.7 billion in 2022 to RMB14.1 billion (US$2.0 billion) in 2023, primarily due to the revenue growth in B2B business. Fulfillment Expenses . Our fulfillment expenses decreased by 0.2% from RMB401.4 million in 2022 to RMB400.5 million (US$56.4 million) in 2023.
As of December 31, 2022, the outstanding borrowings from such arrangement was RMB 64,120, which is repayable within one year. Total proceeds obtained for settlement for the year ended December 31, 2022 was RMB266,770 and was typically repayable within 90 days of issuance. Total repayments for the year ended December 31, 2022 was RMB249,550.
Total proceeds obtained for settlement for the year ended December 31, 2022 and 2023 were RMB266.8 million and RMB303.8 million respectively and were typically repayable within 90 days of issuance. Total repayments for the year ended December 31, 2022 and 2023 were RMB249.6 million and RMB269.8 million respectively.
We believe that our supply chain and effective inventory management, which have resulted in reduced inventory turnover days, support the growing scale of our business, free our valuable working capital and improve our liquidity. 108 ​ Table of Contents In September 2019, 1 Pharmacy Technology entered into a credit agreement with China Merchant Bank (CMB) which provides a revolving credit facility that allows 1 Pharmacy Technology to borrow up to RMB 100,000 for working capital purpose in one year.
In September 2019, 1 Pharmacy Technology entered into a credit agreement with China Merchant Bank (CMB) which provides a revolving credit facility that allows 1 Pharmacy Technology to borrow up to RMB100.0 million for working capital purpose in one year.
In these periods, our capital expenditures were primarily used for purchases of property, equipment and software to establish more fulfillment centers to meet the expected growth of our business. 112 ​ Table of Contents Operating lease commitments The following table sets forth our operating lease commitments as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 1 ​ ​ ​ More than 5 ​ ​ Total ​ year ​ 1-3 years ​ 3-5 years ​ years ​ ​ (in RMB thousands) Operating lease commitments 175,139 70,251 98,054 6,834 — Total 175,139 70,251 98,054 6,834 — ​ Our operating lease commitments relate to our leases of certain offices and fulfillment centers.
Operating lease commitments The following table sets forth our operating lease commitments as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 1 ​ ​ ​ More than 5 ​ ​ Total ​ year ​ 1-3 years ​ 3-5 years ​ years ​ ​ (in RMB thousands) Operating lease commitments 111,085 45,999 55,438 9,648 — Total 111,085 45,999 55,438 9,648 — ​ Our operating lease commitments relate to our leases of certain offices and fulfillment centers.
Selling and marketing expenses accounted for 4.1% of net revenue in 2021 as compared to 4.9% last year. General and Administrative Expenses . Our general and administrative expenses increased by 61.4% from RMB128.2 million in 2020 to RMB207.0 million (US$32.5 million) in 2021. The increase was primarily due to increases in managerial staff and professional service fees.
The decrease was primarily attributable to a decrease in the lease expenses of our warehouse. Fulfillment expenses accounted for 2.7% of net revenue in 2023 as compared to 3.0% last year. Selling and Marketing Expenses . Our selling and marketing expenses decreased by 2.1% from RMB457.9 million in 2022 to RMB448.4 million (US$63.2 million) in 2023.
General and administrative expenses accounted for 1.7% of net revenue in 2021 as compared to 1.6% last year. 106 ​ Table of Contents Technology Expenses . Our technology expenses increased by 105.6% from RMB92.1 million in 2020 to RMB189.3 million (US$29.7 million) in 2021, mainly due to our increased investments in technology solutions and infrastructure.
General and administrative expenses accounted for 1.5% of net revenue in 2022 as compared to 1.7% last year. 103 ​ Table of Contents Technology Expenses .
This amount has been recorded as redeemable non-controlling interests of RMB1,057 million as of December 31, 2022, including accrued interest. As of the date of this annual report, we were negotiating with the investors of 1 Pharmacy Technology regarding the contingently redeemable non-controlling interest in 1 Pharmacy Technology.
As of the date of this annual report, we were negotiating with the investors of 1 Pharmacy Technology to extend the deadline for redeeming the contingently redeemable non-controlling interest in 1 Pharmacy Technology. As of the same date, certain holders, with a carrying amount of RMB384 million as of December 31, 2023, have signed share repurchase agreements to facilitate repayments.
In August and December 2020, 1 Pharmacy Technology issued its ordinary shares to certain private placement investors at fair value evaluated by the third-party valuer, representing 9.2% of the outstanding shares of 1 Pharmacy Technology. Under the agreements, 1 Pharmacy Technology and the new investors agreed to facilitate 1 Pharmacy Technology's proposed STAR Listing prior to June 30, 2023.
Under the agreements, 1 Pharmacy Technology and the new investors agreed to facilitate 1 Pharmacy Technology’s proposed STAR Listing prior to June 30, 2023.
The increases in accounts payable and inventory were primarily due to an increase in our inventory storage level to meet increased demands. 111 ​ Table of Contents Net cash used in operating activities in 2020 was RMB116.8 million and primarily consisted of our net loss of RMB467.1 million, as adjusted for non-cash items and the effects of changes in operating assets and liabilities.
The decrease in accrued expense and other current liabilities account was primarily due to the decrease in advance from customers. 108 ​ Table of Contents Net cash used in operating activities in 2022 was RMB23.2 million (US$3.4 million) and primarily consisted of our net loss of RMB376.1 million (US$54.5 million), as adjusted for non-cash items and the effects of changes in operating assets and liabilities.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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ClearVue Partners Ltd. is the general partner of ClearVue Partners GP, L.P. and may be deemed to beneficially own Class A Ordinary Shares represented by ADSs directly held by ClearVue Partners, L.P. and Class A Ordinary Shares represented by ADSs directly held by ClearVue YW Holdings, Ltd.
ClearVue Partners GP, L.P. is the general partner of ClearVue Partners, L.P. and may be deemed to beneficially own Class A Ordinary Shares represented by ADSs directly held by ClearVue Partners, L.P. and Class A Ordinary Shares represented by ADSs directly held by ClearVue YW Holdings, Ltd..
The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; and ● reporting regularly to the board. 120 ​ Table of Contents Compensation Committee Our compensation committee consists of Gang Yu, Nee Chuan Teo and Jian Sun, and is chaired by Gang Yu.
The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; and ● reporting regularly to the board. 117 ​ Table of Contents Compensation Committee Our compensation committee consists of Gang Yu, Nee Chuan Teo and Jian Sun, and is chaired by Gang Yu.
Jun Luo, the business address of our directors and executive officers is 3-5/F, No. 295 ZuChongZhi Road, Pudong New Area, Shanghai, the People’s Republic of China. ​ ** Less than 1% of our total outstanding shares. ​ † For each person or group included in this column, percentage of aggregate voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
Jun Luo, the business address of our directors and executive officers is 3-4/F, No. 295 ZuChongZhi Road, Pudong New Area, Shanghai, the People’s Republic of China. ​ ** Less than 1% of our total outstanding shares. ​ † For each person or group included in this column, percentage of aggregate voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
Lian Yong Chen has the right to obtain within 60 days following March 31, 2023, upon the conversion of 15,000 RSUs as of March 31, 2023, at a ratio of one Class A ordinary share for each RSU. 6 Dimensions Capital GP, LLC is the general partner of both 6 Dimensions Capital, L.P. and 6 Dimensions Affiliates Fund, L.P. Dr.
Lian Yong Chen has the right to obtain within 60 days following March 31, 2023, upon the conversion of 20,000 RSUs as of March 31, 2023, at a ratio of one Class A ordinary share for each RSU. 6 Dimensions Capital GP, LLC is the general partner of both 6 Dimensions Capital, L.P. and 6 Dimensions Affiliates Fund, L.P. Dr.
Sun has served as an independent director and a member of the compensation committee of Leju Holdings Limited (NYSE: LEJU), a leading online-to-offline real estate services provider in China. Mr. Sun holds a bachelor’s degree from Shanghai Medical University in China. 115 ​ Table of Contents Mr. Jun Luo has served as our independent director since September 2018. Mr.
Sun has served as an independent director and a member of the compensation committee of Leju Holdings Limited (NYSE: LEJU), a leading online-to-offline real estate services provider in China. Mr. Sun holds a bachelor’s degree from Shanghai Medical University in China. 112 ​ Table of Contents Mr. Jun Luo has served as our independent director since September 2018. Mr.
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days after March 31, 2023, including through the exercise of any option, warrant or other right or the conversion of any other security.
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days after March 31, 2024, including through the exercise of any option, warrant or other right or the conversion of any other security.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our shares as of March 31, 2023 by: ● each of our current directors and executive officers; and ● each person known to us to own beneficially more than 5% of our shares.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our shares as of March 31, 2024 by: ● each of our current directors and executive officers; and ● each person known to us to own beneficially more than 5% of our shares.
Subject to the foregoing, our officers are elected by and serve at the discretion of our board of directors. 121 ​ Table of Contents Employment Agreements and Indemnification Agreements We have entered into employment agreements with our senior executive officers.
Subject to the foregoing, our officers are elected by and serve at the discretion of our board of directors. 118 ​ Table of Contents Employment Agreements and Indemnification Agreements We have entered into employment agreements with our senior executive officers.
Options and other awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each grant, which may include the term of the award and the provisions applicable in the event the grantee’s employment or service terminates. Exercise Price .
Options and other awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each grant, which may include the term of the award and the provisions applicable in the event the grantee’s employment or service terminates. ​ 114 ​ Table of Contents Exercise Price .
Board Diversity Matrix (As of March 31, 2023) Country of Principal Executive Offices: People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 6 ​ Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 6 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 1 LGBTQ+ 0 Did Not Disclose Demographic Background 0 ​ 122 ​ Table of Contents D.
Board Diversity Matrix (As of March 31, 2024) Country of Principal Executive Offices: People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 6 ​ Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 6 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 1 LGBTQ+ 0 Did Not Disclose Demographic Background 0 ​ 119 ​ Table of Contents D.
The plan administrator may determine, at the time of grant or thereafter, that an award will become vested and exercisable, in full or in part, in the event that a change in control of our company occurs. 116 ​ Table of Contents Transfer Restrictions .
The plan administrator may determine, at the time of grant or thereafter, that an award will become vested and exercisable, in full or in part, in the event that a change in control of our company occurs. Transfer Restrictions .
ClearVue Partners, L.P. owns 100% of the equity interest in ClearVue YW Holdings, Ltd. and may be deemed to beneficially own Class A Ordinary Shares represented by ADSs directly held by ClearVue YW Holdings, Ltd. ClearVue Partners GP, L.P. is the general partner of ClearVue Partners, L.P.
ClearVue Partners, L.P. owns 100% of the equity interest in ClearVue YW Holdings, Ltd. and may be deemed to beneficially own Class A Ordinary Shares represented by ADSs directly held by ClearVue YW Holdings, Ltd.
He also held numerous executive positions at internationally renowned technology companies such as Avaya China, Openwave Systems and Lucent Technologies Asia. Since January 2015, he has been an independent director of Autohome Inc. (NYSE: ATHM), the leading online destination for automobile consumers. Mr. Liu also serves as an independent director of Hua Medicine (02552.HK). Mr.
He also held numerous executive positions at internationally renowned technology companies such as Avaya China, Openwave Systems and Lucent Technologies Asia. Since January 2015, he has been an independent director of Autohome Inc. (NYSE: ATHM), the leading online destination for automobile consumers. Mr.
In general, the plan administration committee determines the vesting schedule, which is specified in the relevant award agreement. ​ 117 ​ Table of Contents Acceleration of Awards upon Change in Control .
In general, the plan administration committee determines the vesting schedule, which is specified in the relevant award agreement. Acceleration of Awards upon Change in Control .
For more details, see Notes 11 and 12 to our consolidated financial statements included elsewhere in this annual report. 118 ​ Table of Contents The following table summarizes, as of the date of this annual report, the outstanding share incentive awards we have granted to our directors and executive officers under the 2013 Policy, the 2014 Policy, the 2016 Plan and the 2018 Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary ​ ​ ​ ​ ​ Shares ​ ​ ​ ​ ​ ​ ​ ​ Underlying ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ ​ ​ ​ ​ Share ​ Exercise ​ ​ ​ ​ ​ ​ Incentive ​ Price ​ ​ ​ Expiration Name ​ Awards ​ ($/Share) ​ Grant Date ​ Date ​ ​ ​ ​ ​ ​ 4/13/2020 ​ 4/12/2030 ​ ​ ​ ​ ​ ​ 5/13/2020 ​ 5/12/2030 ​ ​ ​ ​ ​ ​ 6/13/2020 ​ 6/12/2030 ​ ​ ​ ​ ​ ​ 7/13/2020 ​ 7/12/2030 ​ ​ ​ 1/1/2021 12/31/2030 ​ ​ ​ ​ ​ ​ 1/1/2022 ​ 12/31/2031 ​ ​ ​ ​ ​ ​ 5/13/2022 ​ 5/12/2032 ​ ​ ​ ​ ​ ​ 6/13/2022 ​ 6/12/2032 ​ ​ ​ ​ ​ ​ 7/13/2022 ​ 7/12/2032 ​ ​ ​ ​ ​ ​ 8/13/2022 and ​ 8/12/2032 Gang Yu ​ * † ​ 1/1/2023 ​ 12/31/2032 ​ ​ ​ ​ 4/13/2020 4/12/2030 ​ ​ ​ ​ 5/13/2020 5/12/2030 ​ ​ ​ ​ 6/13/2020 6/12/2030 ​ ​ ​ ​ 7/13/2020 7/12/2030 ​ ​ ​ ​ 5/13/2022 5/12/2032 ​ ​ ​ ​ 6/13/2022 6/12/2032 ​ ​ ​ ​ 7/13/2022 and 7/12/2032 Junling Liu ​ * ​ † 8/13/2022 8/12/2032 Lian Yong Chen ​ * ​ † 6/1/2019 5/31/2029 Nee Chuan Teo ​ * ​ † ​ 9/12/2018 ​ 9/11/2028 Jian Sun ​ * ​ † 9/12/2018 9/11/2028 Jun Luo ​ * ​ † ​ 9/12/2018 ​ 9/11/2028 All directors and executive officers as a group ​ 227,618 ​ ​ ​ * Less than one percent of our total outstanding shares. ​ † Restricted share units. 119 ​ Table of Contents C.
For more details, see Notes 11 and 12 to our consolidated financial statements included elsewhere in this annual report. 115 ​ Table of Contents The following table summarizes, as of the date of this annual report, the outstanding share incentive awards we have granted to our directors and executive officers under the 2013 Policy, the 2014 Policy, the 2016 Plan and the 2018 Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary ​ ​ ​ ​ ​ Shares ​ ​ ​ ​ ​ ​ ​ ​ Underlying ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ ​ ​ ​ ​ Share ​ Exercise ​ ​ ​ ​ ​ ​ Incentive ​ Price ​ ​ ​ Expiration Name ​ Awards ​ ($/Share) ​ Grant Date ​ Date ​ ​ ​ ​ ​ ​ 4/13/2020 ​ 4/12/2030 ​ ​ ​ ​ ​ ​ 5/13/2020 ​ 5/12/2030 ​ ​ ​ ​ ​ ​ 6/13/2020 ​ 6/12/2030 ​ ​ ​ ​ ​ ​ 7/13/2020 ​ 7/12/2030 ​ ​ ​ 1/1/2021 12/31/2030 ​ ​ ​ ​ ​ ​ 1/1/2022 ​ 12/31/2031 ​ ​ ​ ​ ​ ​ 5/13/2022 ​ 5/12/2032 ​ ​ ​ ​ ​ ​ 6/13/2022 ​ 6/12/2032 ​ ​ ​ ​ ​ ​ 7/13/2022 ​ 7/12/2032 ​ ​ ​ ​ ​ ​ 8/13/2022 ​ 8/12/2032 ​ ​ ​ ​ ​ ​ 1/1/2023 ​ 12/31/2032 ​ ​ ​ ​ ​ ​ 5/12/2023 ​ 5/11/2033 ​ ​ ​ ​ ​ ​ 6/13/2023 ​ 6/12/2033 ​ ​ ​ ​ ​ ​ 7/13/2023 ​ 7/12/2033 ​ ​ ​ ​ ​ ​ 8/11/2023 ​ 8/10/2033 ​ ​ ​ ​ ​ ​ 9/13/2023 ​ 9/12/2033 Gang Yu ​ * † ​ 10/13/2023 ​ 10/12/2033 ​ ​ ​ ​ ​ ​ 11/13/2023 ​ 11/12/2033 ​ ​ ​ ​ ​ ​ 12/13/2023 ​ 12/12/2033 ​ ​ ​ ​ ​ ​ 1/12/2024 ​ 1/11/2034 ​ ​ ​ ​ ​ ​ 2/7/2024 ​ 2/6/2034 ​ ​ ​ ​ 3/13/2024 3/12/2034 ​ ​ ​ ​ 4/12/2024 and 4/11/2034 ​ ​ ​ ​ 5/13/2024 5/12/2034 ​ ​ ​ ​ 4/13/2020 4/12/2030 ​ ​ ​ ​ 5/13/2020 5/12/2030 ​ ​ ​ ​ 6/13/2020 6/12/2030 ​ ​ ​ ​ 7/13/2020 7/12/2030 ​ ​ ​ ​ ​ 5/13/2022 5/12/2032 ​ ​ ​ ​ ​ ​ 6/13/2022 ​ 6/12/2032 ​ ​ ​ ​ ​ ​ 7/13/2022 ​ 7/12/2032 ​ ​ ​ ​ ​ ​ 8/13/2022 ​ 8/12/2032 ​ ​ ​ ​ ​ ​ 5/12/2023 ​ 5/11/2033 Junling Liu ​ * ​ † ​ 6/13/2023 ​ 6/12/2033 ​ ​ ​ ​ ​ ​ 7/13/2023 ​ 7/12/2033 ​ ​ ​ ​ ​ ​ 8/11/2023 ​ 8/10/2033 ​ ​ ​ ​ ​ ​ 9/13/2023 ​ 9/12/2033 ​ ​ ​ ​ ​ ​ 10/13/2023 ​ 10/12/2033 ​ ​ ​ ​ ​ ​ 11/13/2023 ​ 11/12/2033 ​ ​ ​ ​ ​ ​ 12/13/2023 ​ 12/12/2033 ​ ​ ​ ​ ​ ​ 1/12/2024 ​ 1/11/2034 ​ ​ ​ ​ ​ ​ 2/7/2024 ​ 2/6/2034 ​ ​ ​ ​ ​ ​ 3/13/2024 ​ 3/12/2034 ​ ​ ​ ​ ​ ​ 4/12/2024 and ​ 4/11/2034 ​ ​ ​ ​ ​ ​ 5/13/2024 ​ 5/12/2034 Lian Yong Chen ​ * ​ † 6/1/2019 5/31/2029 Nee Chuan Teo ​ * ​ † ​ 9/12/2018 ​ 9/11/2028 Jian Sun ​ * ​ † 9/12/2018 9/11/2028 Jun Luo ​ * ​ † ​ 9/12/2018 ​ 9/11/2028 All directors and executive officers as a group ​ 459,610 ​ ​ ​ * Less than one percent of our total outstanding shares. ​ † Restricted share units. 116 ​ Table of Contents C.
In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement. Acceleration of Awards upon Change in Control .
In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement. ​ 113 ​ Table of Contents Acceleration of Awards upon Change in Control .
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage ​ ​ ​ ​ ​ ​ ​ of total ​ ​ ​ ​ ​ ​ ​ ​ ordinary ​ Percentage ​ ​ Class A ​ Class B ​ shares on an ​ of aggregate ​ ​ Ordinary ​ Ordinary ​ as-converted ​ voting ​ ​ Shares ​ Shares ​ basis ​ power† Directors and Executive Officers:* Gang Yu (1)(9) ** 36,000,000 21.4 45.9 Junling Liu (2)(7) 1,115,414 36,000,000 22.1 46.1 Lian Yong Chen (3) 7,260,894 ​ — 4.3 0.6 Nee Chuan Teo (4) ** ​ — ** ** Jian Sun (5) ** ​ — ** ** Jun Luo (6) ** ​ — ** ** All directors and executive officers as a group 8,458,309 ​ 72,000,000 47.9 92.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Shareholders: ​ ​ ​ ​ ​ Sunny Bay Global Limited (7) — ​ 36,000,000 21.4 45.9 ClearVue Partners, L.P.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage ​ ​ ​ ​ ​ ​ ​ of total ​ ​ ​ ​ ​ ​ ​ ​ ordinary ​ Percentage ​ ​ Class A ​ Class B ​ shares on an ​ of aggregate ​ ​ Ordinary ​ Ordinary ​ as-converted ​ voting ​ ​ Shares ​ Shares ​ basis ​ power† Directors and Executive Officers:* Gang Yu (1)(9) ** 36,000,000 21.0 45.8 Junling Liu (2)(7) 1,131,134 36,000,000 21.7 45.9 Lian Yong Chen (3) 7,265,894 ​ — 4.2 0.6 Nee Chuan Teo (4) ** ​ — ** ** Jian Sun (5) ** ​ — ** ** Jun Luo (6) ** ​ — ** ** All directors and executive officers as a group 8,512,168 ​ 72,000,000 47.0 92.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal Shareholders: ​ ​ ​ ​ ​ Sunny Bay Global Limited (7) — ​ 36,000,000 21.0 45.8 ClearVue Partners, L.P.
Luo received his bachelor’s degree in accounting from Shanghai University of Finance and Economics in 1994 and master’s degree in software engineering from Beihang University in China in 2010. B. Compensation For the year ended December 31, 2022, we paid an aggregate of approximately RMB8.98 million (US$1.15 million) in cash and other benefits to our directors and executive officers.
Luo received his bachelor’s degree in accounting from Shanghai University of Finance and Economics in 1994 and master’s degree in software engineering from Beihang University in China in 2010. B. Compensation For the year ended December 31, 2023, we paid an aggregate of approximately RMB7.44 million (US$1.05 million) in cash and other benefits to our directors and executive officers.
As of the date of this annual report, options to purchase a total of 2,182,198 Class A ordinary shares and 4,380,272 restricted share units were granted and outstanding under the 2018 Plan. The following paragraphs summarize the terms of the 2018 Plan: Plan Administration .
As of the date of this annual report, options to purchase a total of 2,182,198 Class A ordinary shares and 7,951,912 restricted share units were granted and outstanding under the 2018 Plan. The following paragraphs summarize the terms of the 2018 Plan: Plan Administration .
Prior to joining bioduro-sundia, Mr. Teo served as chief financial officer of Huazhu Group Limited (formerly China Lodging Group Limited, Nasdaq: HTHT), a leading fast-growing multi-brand hotel group in China from 2015 to 2021.
Teo served as chief financial officer of Huazhu Group Limited (formerly China Lodging Group Limited, Nasdaq: HTHT), a leading fast-growing multi-brand hotel group in China from 2015 to 2021.
The information contained in this paragraph is based on the Schedule 13D/A filed by First Pharmacia International and certain other filers named therein on October 29, 2022. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares.
The information contained in this paragraph is based on the Schedule 13D/A filed by First Pharmacia International and certain other filers named therein on February 27, 2024. ​ Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares.
The information contained in this paragraph is based on the Schedule 13D/A filed by 6 Dimensions Capital GP, LLC and certain other filers named therein on October 29, 2022. (4) The business address of Mr. Nee Chuan Teo is 2201, Block 31, 388 Furongjiang Road, Shanghai, China. (5) The business address of Mr.
The information contained in this paragraph is based on the Schedule 13D/A filed by 6 Dimensions Capital GP, LLC and certain other filers named therein on February 27, 2024. 121 ​ Table of Contents (4) The business address of Mr. Nee Chuan Teo is 2201, Block 31, 388 Furongjiang Road, Shanghai, China. (5) The business address of Mr.
Holders of our Class B ordinary shares may choose to convert their Class B ordinary shares into the same number of Class A ordinary shares at any time.
Holders of our Class B ordinary shares may choose to convert their Class B ordinary shares into the same number of Class A ordinary shares at any time. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance.
Dr. Yu co-founded and served as chairman of YHD.com, a leading e-commerce company in China. Dr. Yu currently serves as a director of Midea Group Co., Ltd. (SZSE: 000333), LightInTheBox Holding Co., Ltd. (NYSE: LITB) and Chindata Group Holdings Limited (NASDAQ: CD), and as the co-chairman of the board of Zall Group (02098.HK). Prior to founding YHD.com, Dr.
Dr. Yu co-founded and served as chairman of YHD.com, a leading e-commerce company in China. Dr. Yu currently serves as a director of Midea Group Co., Ltd. (SZSE: 000333), and as the co-chairman of the board of Zall Group (02098.HK). Prior to founding YHD.com, Dr.
Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ Directors and Executive Officers Age Position/Title Gang Yu 63 Co-founder and Co-Chairman Junling Liu 58 Co-founder, Co-Chairman and Chief Executive Officer Lian Yong Chen 60 Director Nee Chuan Teo 52 Independent Director Jian Sun 58 Independent Director Jun Luo 55 Independent Director ​ 114 ​ Table of Contents Dr.
Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ ​ ​ ​ Directors and Executive Officers Age Position/Title Gang Yu 64 Co-founder and Co-Chairman Junling Liu 59 Co-founder, Co-Chairman and Chief Executive Officer Lian Yong Chen 61 Director Nee Chuan Teo 53 Independent Director Jian Sun 59 Independent Director Jun Luo 56 Independent Director ​ 111 ​ Table of Contents Dr.
(8) 15,848,264 ​ — 9.5 1.3 Infinity Cosmo Limited (9) — 11,494,252 6.9 14.7 First Pharmacia International (10) 8,690,562 — 5.2 0.7 Notes: ​ * Except for Dr. Lian Yong Chen, Mr. Nee Chuan Teo, Mr. Jian Sun and Mr.
(8) 15,848,264 ​ — 9.3 1.3 First Pharmacia International (10) 8,690,562 — 5.1 0.7 Notes: ​ * Except for Dr. Lian Yong Chen, Mr. Nee Chuan Teo, Mr. Jian Sun and Mr.
Employees The following table sets forth the numbers of our employees categorized by function as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ Number % of Total Functions: Wholesale pharmacy business 799 48.2 Retail pharmacy business 206 12.4 Supply chain 155 9.4 Procurement 233 14.1 Research and development and IT 165 10.0 General and administrative 99 6.0 Total 1,657 100.0 ​ As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments including, among other things, pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan.
Employees The following table sets forth the numbers of our employees categorized by function as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ Number % of Total ​ Functions: ​ Wholesale pharmacy business 662 44 % Retail pharmacy business 162 11 % Supply chain 143 9 % Procurement 274 18 % Research and development and IT 178 12 % General and administrative 101 7 % Total 1,520 100.0 ​ ​ As required by laws and regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments including, among other things, pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan.
The calculations in the table below are based on 167,986,482 ordinary shares outstanding as of March 31, 2023, comprising of (i) 95,986,482 Class A ordinary shares, and (ii) 72,000,000 Class B ordinary shares. 123 ​ Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The calculations in the table below are based on 171,328,644 ordinary shares outstanding as of March 31, 2024, comprising of (i) 99,328,644 Class A ordinary shares, and (ii) 72,000,000 Class B ordinary shares. 120 ​ Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
He obtained his Bachelor of Science degree in Chemistry from Peking University in June 1984. Mr. Nee Chuan Teo has served as our independent director since September 2018. Mr. Teo is the chief financial officer of bioduro-sundia, a famous company providing its biopharma customers a single end-to-end solution from early stage drug discovery to late stage manufacturing.
Nee Chuan Teo has served as our independent director since September 2018. Mr. Teo is the chief financial officer of bioduro-sundia, a famous company providing its biopharma customers a single end-to-end solution from early stage drug discovery to late stage manufacturing. Prior to joining bioduro-sundia, Mr.
Since January 2015 to March 2022, he has served as a non-executive Director at Hua Medicine, a company listed on the main board of the Stock Exchange (stock code: 2552). He served as a director of Shanghai Hile Bio-Pharmaceutical Co. Ltd., a company listed on the Shanghai Stock Exchange (stock code: 603718) since December 2014 to May 2021.
He served as a director of Shanghai Hile Bio-Pharmaceutical Co. Ltd., a company listed on the Shanghai Stock Exchange (stock code: 603718) since December 2014 to May 2021. Since August 2019, he has been a non-executive director and chairman of the board of Cutia Therapeutics, a company listed on the main board of the Stock Exchange (stock code: 2487).
Chen has been an executive director and the chairman of the board of Ocumension Therapeutics since May 2018, a company listed on the Stock Exchange (stock code: 1477). Since August 2018 to July 2021, he has served as a director at CStone Pharmaceuticals, a company listed on the main board of the Stock Exchange (stock code: 2616).
Chen has been an executive director and the chairman of the board of Ocumension Therapeutics since May 2018 (being re-designed from executive Director to non-executive Director on July 20, 2021), a company listed on the Stock Exchange (stock code: 1477).
BVCF Realization Fund GP, Ltd is the general partner of BVCF Realization Fund, L.P. and may be deemed to beneficially own Class A Ordinary Shares represented by ADSs directly held by First Pharmacia International. The registered office address of First Pharmacia International is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman, KY1-9008, Cayman Islands.
First Pharmacia International is the wholly-owned subsidiary of BVCF Realization Fund, L.P. BVCF Realization Fund GP, Ltd is the general partner of BVCF Realization Fund, L.P. and may be deemed to beneficially own Class A Ordinary Shares represented by ADSs directly held by First Pharmacia International.
Infinity Cosmo Limited is controlled by Gang Yu Irrevocable Trust. (2) Represents (i) 1,091,050 Class A ordinary shares held by Mr. Junling Liu, (ii) 36,000,000 Class B ordinary shares held by Sunny Bay Global Limited, a company incorporated in the British Virgin Islands. Sunny Bay Global Limited is wholly owned by Mr.
Junling Liu, (ii) 36,000,000 Class B ordinary shares held by Sunny Bay Global Limited, a company incorporated in the British Virgin Islands. Sunny Bay Global Limited is wholly owned by Mr. Liu, and (iii) 9,535 Class A ordinary shares that Mr.
Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance. 125 ​ Table of Contents To our knowledge, as of March 31, 2023, a total of 120,492,224 ordinary shares, representing approximately 71.7% of our total outstanding ordinary shares, were held by two record shareholders in the United States, including The Bank of New York Mellon, the depositary of our ADS program.
To our knowledge, as of March 31, 2024, a total of 135,328,638 ordinary shares, representing approximately 78.99% of our total outstanding ordinary shares, were held by two record shareholders in the United States, including The Bank of New York Mellon, the depositary of our ADS program.
Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis. ​ (1) Represents (i) 24,505,748 Class B ordinary shares held by Dr. Gang Yu, and (ii) 11,494,252 Class B ordinary shares held by Infinity Cosmo Limited, a company incorporated in the British Virgin Islands.
Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis. ​ (1) Represents (i) 58,424 Class A shares held by Dr. Gang Yu, (ii) 36,000,000 Class B ordinary shares held by Dr. Gang Yu, and (iii) 9,535 Class A ordinary shares that Dr.
Save as disclosed above, Dr. Lian Yong Chen is not and has not been a director of any other listed companies in the past three years. Dr. Lian Yong Chen conducted postdoctoral research at the Massachusetts Institute of Technology after obtaining his Ph.D. degree in Chemistry (with top honor) from the University of Louvain, Louvain-La-Neuve in Belgium in July 1991.
Lian Yong Chen conducted postdoctoral research at the Massachusetts Institute of Technology after obtaining his Ph.D. degree in Chemistry (with top honor) from the University of Louvain, Louvain-La-Neuve in Belgium in July 1991. He obtained his Bachelor of Science degree in Chemistry from Peking University in June 1984. Mr.
Gang Yu, Infinity Cosmo Limited and certain other filers named therein on October 29, 2022. ​ (10) Represents 8,690,562 Class A ordinary shares represented by 4,345,281 ADSs directly held by First Pharmacia International, a Cayman Islands exempted company. First Pharmacia International is the wholly-owned subsidiary of BVCF Realization Fund, L.P.
The information contained in this paragraph is based on the Schedule 13D/A filed by ClearVue Partners, L.P. and certain other filers named therein on February 27, 2024 . (9) Represents 8,690,562 Class A ordinary shares represented by 4,345,281 ADSs directly held by First Pharmacia International, a Cayman Islands exempted company.
Junling Liu has the right to obtain within 60 days following March 31, 2023, upon the conversion of 24,364 RSUs as of March 31, 2023, at a ratio of one Class A ordinary share for each RSU. 124 ​ Table of Contents (3) Represents (i) 6,883,600 Class A Ordinary Shares represented by 3,441,800 ADSs directly held by 6 Dimensions Capital, L.P., (ii) 362,294 Class A Ordinary Shares represented by 181,147 ADSs directly held by 6 Dimensions Affiliates Fund, L.P., and (iii) 15,000 Class A ordinary shares that Dr.
(3) Represents (i) 6,883,600 Class A Ordinary Shares represented by 3,441,800 ADSs directly held by 6 Dimensions Capital, L.P., (ii) 362,294 Class A Ordinary Shares represented by 181,147 ADSs directly held by 6 Dimensions Affiliates Fund, L.P., and (iii) 20,000 Class A ordinary shares that Dr.
Removed
Liu, and (iii) 24,364 Class A ordinary shares that Mr.
Added
Since August 2018 to July 2021, he has served as a non-executive director at CStone Pharmaceuticals, a company listed on the main board of the Stock Exchange (stock code: 2616). Since January 2015 to March 2022, he has served as a non-executive Director at Hua Medicine, a company listed on the main board of the Stock Exchange (stock code: 2552).
Removed
The information contained in this paragraph is based on the Schedule 13D/A filed by ClearVue Partners, L.P. and certain other filers named therein on October 29, 2022 . (9) Represents 11,494,252 Class B ordinary shares held by Infinity Cosmo Limited, a company incorporated in the British Virgin Islands.
Added
Since December 2019, he has been a non-executive Director of Neusoft Xikang Holdings Inc, a company listed on the main board of the Stock Exchange (stock code: 9686). Save as disclosed above, Dr. Lian Yong Chen is not and has not been a director of any other listed companies in the past three years. Dr.
Removed
Infinity Cosmo Limited is controlled by Gang Yu Irrevocable Trust, a trust managed by Zedra Asia Limited, as the trustee. Dr. Gang Yu is the settlor of the Gang Yu Irrevocable Trust, and Dr. Yu’s family members are the trust’s beneficiaries.
Added
Gang Yu has the right to obtain within 60 days following March 31, 2024, upon the conversion of 9,535 vested RSUs as of March 31, 2024, at a ratio of one Class A ordinary share for each RSU. (2) Represents (i) 1,131,134 Class A ordinary shares held by Mr.
Removed
Under the terms of this trust, a family member of Gang Yu has the power to direct the trustee with respect to the disposal of, and the exercise of any voting and other rights attached to, the shares held by Infinity Cosmo Limited in our company. The registered office address of Infinity Cosmo Limited is Sertus Chambers, P.O.
Added
Junling Liu has the right to obtain within 60 days following March 31, 2024, upon the conversion of 9,535 RSUs as of March 31, 2024, at a ratio of one Class A ordinary share for each RSU.
Removed
Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands. The information contained in this paragraph is based on the Schedule 13D/A filed by Dr.
Added
The registered office address of First Pharmacia International is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman, KY1-9008, Cayman Islands.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

4 edited+0 added−14 removed2 unchanged
Jing Liu, who were the shareholders of Yihao Pharmacy, (2) a termination agreement with Yihao Pharmaceutical Chain and Yihao Pharmacy, (3) a termination agreement with Shanghai Yaowang and Yihao Pharmaceutical Chain. Yihao Pharmacy, Yihao Pharmaceutical Chain and Shanghai Yaowang were all the former VIEs that were subject to the contractual arrangements.
Yue Xuan and Ms. Jing Liu, who were the shareholders of Yihao Pharmacy, (2) a termination agreement with Yihao Pharmaceutical Chain and Yihao Pharmacy, (3) a termination agreement with Shanghai Yaowang and Yihao Pharmaceutical Chain. Yihao Pharmacy, Yihao Pharmaceutical Chain and Shanghai Yaowang were all the former VIEs that were subject to the contractual arrangements.
Employment Agreements and Indemnification Agreements See “ Item 6—Directors, Senior Management and Employees—C. Board Practices” Share Incentive Plans See “ Item 6. Directors, Senior Management and Employees—B. Compensation” C. Interests of Experts and Counsel Not applicable. ​
Board Practices” Share Incentive Plans See “ Item 6. Directors, Senior Management and Employees—B. Compensation” C. Interests of Experts and Counsel Not applicable. ​
Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B. Related Party Transactions Termination of Contractual Arrangements with Variable Interest Entities On January 27, 2022, 1 Pharmacy Technology entered into (1) a termination agreement with Yihao Pharmacy, Mr. Yue Xuan and Ms.
Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 122 ​ Table of Contents B. Related Party Transactions Termination of Contractual Arrangements with Variable Interest Entities On January 27, 2022, 1 Pharmacy Technology entered into (1) a termination agreement with Yihao Pharmacy, Mr.
The shareholders agreement also provides for certain information and inspection rights, board observer rights, preferential rights, including right of participation, right of first refusal, co-sale rights and redemption rights. All information and inspection rights and preferential rights terminated upon our initial public offering. Registration Rights Pursuant to our current shareholders agreement, we have granted certain registration rights to our shareholders.
The shareholders agreement also provides for certain information and inspection rights, board observer rights, preferential rights, including right of participation, right of first refusal, co-sale rights and redemption rights. All information and inspection rights and preferential rights terminated upon our initial public offering. Employment Agreements and Indemnification Agreements See “ Item 6—Directors, Senior Management and Employees—C.
Removed
Set forth below is a description of the registration rights granted under the agreement. Demand Registration Rights .
Removed
At any time after six months following a QIPO as defined in the shareholders agreement, holders of at least 25% of our registrable securities have the right to demand in writing that we file a registration statement covering the registration of their registrable securities.
Removed
We have the right to defer filing of a registration statement for a period of not more than 90 days if our board of directors determines in good faith that filing of a registration statement in the near future will be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once during any twelve-month period.
Removed
We are not obligated to effect more than two demand registrations.
Removed
Further, if the registrable securities are offered by means of an underwritten offering, and the underwriters advise us in writing that marketing factors require a limitation of the number of share to be underwritten, the underwriters may reduce as required and allocate the shares to be included in the registration statement among holders of our registrable securities on a pro rata basis, subject to certain limitations. 126 ​ Table of Contents Piggyback Registration Rights .
Removed
If we propose to file a registration statement for a public offering of our securities, we must offer holders of our registrable securities an opportunity to be included in such registration.
Removed
If the underwriters determine in good faith that marketing factors require a limitation of the number of shares to be underwritten, the registrable securities shall allocate first to us, second, to each holder of our registrable securities requesting inclusion of their registrable securities pursuant to the piggyback registration, on a pro rata basis, and third, to other holders of our securities.
Removed
Form F-3 or Form S-3 Registration Rights . After our initial public offering, we shall use our best efforts to qualify for registration on Form F-3 or Form S-3.
Removed
Holders of 10% or more of our registrable securities may request us in writing to file a registration statement on Form F-3 or Form S-3 if we qualify for registration on such forms, subject to certain limitations.
Removed
We have the right to defer filing for a period of not more than 60 days if our board of directors determines in good faith that effecting registration at such time would be materially detrimental to us and our shareholders, but we cannot exercise the deferral right more than once during any twelve-month period, and we may not register any of our other shares during such 60-day period.
Removed
The holders of our registrable securities are entitled to an unlimited number of registrations on Form F-3 or Form S-3. We, however, are not obligated to effect such registration if we have effected two such registrations within any twelve-month period. Expenses of Registration .
Removed
We will bear all registration expenses, other than underwriting discounts and selling commissions applicable to the sale of registrable securities, incurred in connection with registrations, filings or qualification pursuant to the shareholders agreement.
Removed
We will not be required to pay for any expenses of any registration proceeding begun pursuant to demand registration rights, unless subject to certain exception, if the registration request is subsequently withdrawn at the request of a majority of the holders of the registrable securities to be registered. Termination of Obligations .
Removed
We have no obligation to effect any demand, piggyback or Form F-3 or Form S-3 registration upon the earlier of (i) the fifth anniversary from the date of closing of a QIPO, (ii) a Trade Sale as defined in the shareholders agreement, and (iii) with respect to any holder of our registrable securities, the date following a QIPO on which such holder holds less than 1% of our total outstanding share capital.

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