20-F: U-BX Technology Reports Significant Losses Amid Revenue Decline

U-BX Technology Ltd. reported a substantial net loss of $2.7 million for fiscal year 2025, a significant decline from previous periods, driven by decreased customer demand and an overall economic downturn.

Summary

• U-BX Technology Ltd. (UBXG) is a Cayman Islands holding company operating through PRC entities, providing AI-driven value-added services to the insurance industry in mainland China.
• The company's services include digital promotion, risk assessment (using its 'Magic Mirror' algorithm for auto insurance), and value-added bundled benefits (e.g., car wash, maintenance, parking notifications).
• Total revenue for the fiscal year ended June 30, 2025, decreased by 42% to $29.7 million from $51.6 million in 2024, following a 45% decrease from $94.3 million in 2023.
• Net loss for fiscal year 2025 was $2,718,517, compared to a net loss of $748,542 in 2024 and a net income of $205,911 in 2023.
• Gross profit decreased by 64% to $0.3 million in 2025 from $0.7 million in 2024, with the gross profit margin falling to 0.9% from 1.4%.
• General and administrative expenses increased by 114% to $3.3 million in 2025, primarily due to a $2.2 million share-based compensation expense from the 2024 Equity Incentive Plan.
• The company completed a one-for-sixteen reverse stock split on November 27, 2024, to regain compliance with Nasdaq's minimum bid price requirement.
• A private placement (PIPE Offering) closed on November 28, 2024, raising $5.7 million gross proceeds through the issuance of 1,425,000 ordinary shares and 4,275,000 warrants.
• Warrants from the PIPE offering were fully exercised in March and April 2025, resulting in the issuance of 17,398,535 additional ordinary shares.
• The company identified material weaknesses in its internal control over financial reporting, specifically a lack of sufficient skilled staff with U.S. GAAP knowledge and a formal accounting policies manual.
• Several PRC operating entities (Jiangsu Jingmo, Jiangsu YJYC, RDYJ, Jiangsu YCHB) were dissolved between March 2022 and July 2025 as part of administrative realignments.
• As of June 30, 2025, cash on hand was $11,182,783.

Sentiment

Score: 3

Explanation: The company's financial performance shows significant deterioration with substantial revenue declines and increasing net losses. While there are strategic growth plans and a recent capital raise, the underlying operational and financial trends are strongly negative, compounded by identified internal control weaknesses and high customer/supplier concentration risks. The positive aspects are overshadowed by the severe financial downturn.

Positives

• Successfully regained compliance with Nasdaq's minimum bid price requirement following a reverse stock split.
• Completed a private placement (PIPE Offering) raising $5.7 million, demonstrating investor confidence and providing capital for operations and expansion.
• All warrants from the PIPE offering were fully exercised, indicating further capital infusion and commitment from investors.
• Maintains a diverse client base of over 300 city-level property and auto insurance carriers in China, including major corporations.
• Proprietary 'Magic Mirror' AI algorithm for risk assessment and the 'Wowobaodian' mini-program for insurance information provide competitive technological advantages.
• Management team possesses extensive experience in both the insurance and internet industries.

Negatives

• Experienced a significant net loss of $2,718,517 in fiscal year 2025, a substantial increase from the $748,542 net loss in 2024, and a reversal from a net income of $205,911 in 2023.
• Total revenue decreased by 42% in 2025 and 45% in 2024, primarily due to decreased customer demand and an overall economic downturn in China.
• Gross profit margin declined to 0.9% in 2025 from 1.4% in 2024 and 1.7% in 2023, indicating reduced profitability from core services.
• Operating activities consistently used cash, with $2,821,147 used in 2025, $1,353,154 in 2024, and $283,159 in 2023.
• General and administrative expenses significantly increased by 114% in 2025, partly due to share-based compensation.
• Reliance on a small number of customers for a large portion of revenues (one customer accounted for 37.9% of total revenues in 2025).
• Reliance on a limited number of suppliers for a significant portion of purchases (three suppliers accounted for 25.4%, 18.3%, and 11.5% of total purchases in 2025).
• Identified material weaknesses in internal control over financial reporting due to insufficient skilled staff with U.S. GAAP knowledge and lack of a formal accounting policies manual.
• The company has a history of net losses and negative cash flows from operating activities, which may continue.
• Several subsidiaries were dissolved, indicating a restructuring or scaling back of certain operations.

Risks

• Corporate structure and business operations may be substantially affected by China's Foreign Investment Law, with uncertainties in interpretation and implementation.
• Some shareholders are not in compliance with PRC regulations (Circular 37) relating to offshore investment activities by PRC residents, potentially leading to penalties or restrictions on capital injection/profit distribution.
• The Chinese government exerts substantial influence over business activities, and interventions could materially change operations or stock value.
• Ordinary Shares may be prohibited from trading on a national exchange under the HFCA Act if the PCAOB is unable to inspect auditors for two consecutive years, leading to potential delisting.
• Reliance on dividends from subsidiaries for cash needs, which are subject to PRC laws and regulations (e.g., 10% statutory surplus reserves, 10% withholding tax on dividends to HK).
• Uncertainties in the PRC legal system, including enforcement of laws and sudden changes, could limit legal protections.
• Potential exposure to new PRC laws and regulations regarding privacy, data security, and cybersecurity, which could lead to delisting, fines, or business disruption.
• Difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against the company or its management.
• Uncertainties regarding indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies, potentially leading to additional tax liabilities.
• The M&A Rules and other PRC regulations may make it more difficult to pursue growth through acquisitions.
• Failure to fully comply with PRC labor-related laws may expose the company to potential penalties.
• Limited operating history and evolving business model make it difficult to evaluate business and future prospects.
• Revenues and future growth depend on the development of the automotive industry in the PRC, which is subject to numerous uncertainties.
• Inability to retain and attract customers or loss of existing customer base due to lack of market acceptance for services.
• Regulatory actions, legal proceedings, and customer complaints could harm reputation and business.
• Disruption to technology systems and resulting interruptions in service availability.
• Failure to protect intellectual property rights, including rejected trademark applications and potential infringement claims.
• Failure to make necessary or desirable strategic alliances, acquisitions, or investments, or inability to achieve expected benefits from them.
• Dependence on the continuing efforts of senior management and key employees, with risks of losing their service.
• Inability to recruit, train, and retain talent.
• Inability to raise additional capital when desired, on favorable terms, or at all.
• Extreme stock price volatility, potentially unrelated to operating performance, making it difficult for investors to assess value.
• Lack of dividends in the foreseeable future, requiring reliance on price appreciation for investment return.
• Anti-takeover provisions in the Third Amended and Restated Memorandum of Association.
• Difficulties in protecting interests and limited ability to protect rights through U.S. courts due to incorporation under Cayman Islands law.
• Certain judgments obtained against the company by shareholders may not be enforceable.
• Potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, leading to adverse tax consequences for U.S. holders.
• Current tension in international trade, particularly U.S. and China trade policies, may adversely impact business.
• The Hong Kong legal system embodies uncertainties which could limit legal protections available to the Company.
• Hong Kong regulatory requirement of prior approval for transfer of shares in excess of certain threshold may restrict future takeovers and other transactions.

Future Outlook

The company anticipates retaining earnings to support operations and finance business growth, thus not expecting to pay cash dividends in the foreseeable future. It plans to enhance digital promotion services, improve content quality of its 'Wowobaodian' mini-program, strengthen partnerships with insurance carriers, increase technology capabilities, and expand service scope into life and health insurance. The company also intends to develop overseas markets, starting with Vietnam and Indonesia next year, aiming for profitability in those regions within two years.

Management Comments

• We believe the future digitization of the insurance industry will create more interest among insurance carriers in using the technology and promotion channels we offer.
• We expect our general and administrative expenses to decrease modestly in the near future, as we have imposed cost control.
• We believe that our current levels of cash and cash flows from operations, combined with the net proceeds from this proposed offering, will be sufficient to meet our anticipated cash needs for our operations and expansion plans for at least the next 12 months from the date of this annual report.
• We do not expect to pay cash dividends in the foreseeable future, as we anticipate retaining any earnings to support operations and to finance the growth and development of our business.
• We believe that our advanced technology, products and content, and operating model should make us competitive in many overseas markets as well as domestic markets.
• Our plan is to initiate our operations in Vietnam and Indonesia next year and we anticipate achieving profitability in those regions in two years.

Industry Context

The company operates in the rapidly digitizing Chinese insurance industry, focusing on leveraging AI and online promotion methods. While the industry is moving towards digital solutions, the company's performance is currently impacted by an overall economic downturn in China, which has led to reduced business activities and transaction volumes among its institutional clients. The company aims to capitalize on the digitization trend by expanding its technology solutions and market reach, including into new insurance sectors and international markets like Southeast Asia, where fast industry growth is observed.

Comparison to Industry Standards

• The company's gross profit margin of 0.9% in 2025 is significantly lower than typical software or technology companies, which often have gross margins above 50%, and even lower than many traditional service industries, indicating intense competition or high cost of revenue.
• The substantial decline in revenue (42% in 2025, 45% in 2024) and shift from net income to significant net losses contrasts sharply with growth trends seen in many successful insurance technology (insurtech) companies globally, which are often expanding rapidly.
• The reliance on a single customer for 37.9% of total revenues in 2025 indicates a high customer concentration risk, which is generally considered unfavorable compared to industry best practices for diversified revenue streams.
• The identified material weaknesses in internal control over financial reporting, particularly regarding U.S. GAAP knowledge, suggest a gap in financial reporting maturity compared to established public companies in the U.S. or other developed markets.
• The company's strategy to expand into Southeast Asia, targeting Vietnam and Indonesia, aligns with broader industry trends of technology companies seeking growth in emerging markets with high digital adoption potential, similar to strategies employed by larger tech firms.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this annual report, the company has not been involved in any legal or administrative litigation that may have a material adverse effect on its business, balance sheet, operating performance, and cash flow.

Related Party Transactions

• Jian Chen, the Chief Executive Officer and Director, participated in the PIPE Offering on November 28, 2024, purchasing 525,000 ordinary shares and 1,575,000 warrants at the offering price. This transaction was negotiated on an arms-length basis and approved by shareholders and the Board.
• Amounts due to Jian Chen (current) were $457,772 as of June 30, 2024, and nil as of June 30, 2025.
• Amounts due to Jian Chen (non-current) were nil as of June 30, 2024, and $490,662 as of June 30, 2025. These balances mainly represent expenses paid on behalf of the company for daily operations.

Stakeholder Impact

• **Shareholders**: Face significant dilution from the reverse stock split and subsequent warrant exercises. The substantial net losses and revenue decline negatively impact investment value. Risks related to PRC regulations and potential delisting pose further threats to investment security and liquidity. The lack of expected dividends means returns depend solely on stock price appreciation.
• **Employees**: The adoption of the 2024 and 2025 Equity Incentive Plans aims to align employee interests with the company's success, potentially boosting morale and retention. However, the overall financial downturn and operational challenges could create job insecurity or impact future compensation.
• **Customers (Insurance Carriers/Brokers)**: The company's focus on enhancing digital promotion, improving risk assessment (Magic Mirror), and expanding service offerings aims to provide better value and attract more clients. However, the company's financial instability and reliance on a few major clients could pose risks to service continuity or quality.
• **Suppliers**: The company's reliance on a limited number of suppliers, particularly for promotion traffic and vehicle maintenance services, creates interdependence. Financial difficulties or changes in supplier relationships could impact the company's ability to deliver services.
• **Regulatory Bodies**: The company is subject to ongoing scrutiny from U.S. (SEC, Nasdaq, PCAOB) and PRC (CSRC, CAC, SAFE) regulatory authorities, particularly concerning financial reporting, data security, and foreign investment. Non-compliance could lead to penalties, delisting, or operational restrictions.

Next Steps

• Enhance the marketing team and hire more well-connected marketing managers to reach institutional clients for digital promotion services.
• Diversify internet marketing channels by expanding to online and offline platforms, including cooperation with vehicle manufacturers and sellers, and partnerships with popular social media platforms (Tik-Tok, Weibo, Baidu, Kuaishou).
• Upgrade 'Wowobaodian' by enriching content with more video-based materials and interactive features to grow the user base and enhance user experience.
• Recruit more talent in the insurance actuarial field to perfect the AI calculation within the 'Magic Mirror' system for more accurate pricing formulas.
• Expand current service scope into the life insurance and health insurance industry, starting with short-term health insurance.
• Establish a separate department focusing on health insurance clients in the future.
• Develop overseas markets, with plans to initiate operations in Vietnam and Indonesia next year and anticipate achieving profitability in those regions in two years.
• Recruit new graduates familiar with Southeast Asian languages and business cultures to build an international business development team.
• Continue to implement measures to remediate material weaknesses in internal control over financial reporting, including engaging financial consultants and providing U.S. GAAP training.

Key Dates

Recommendation

The company exhibits severe financial distress, marked by a drastic 42% revenue decline in fiscal year 2025 and a significant net loss of $2.7 million, following a prior year's loss. The gross profit margin is critically low at 0.9%, indicating fundamental issues with profitability from core operations. While a capital raise occurred, it appears insufficient to offset the substantial cash burn from operating activities. The identified material weaknesses in internal controls raise serious concerns about financial reporting reliability. Furthermore, the high customer and supplier concentration, coupled with significant regulatory risks associated with operating in China (HFCA Act, data security, foreign investment laws), create an exceptionally high-risk investment profile. The reverse stock split, while addressing Nasdaq compliance, does not resolve the underlying business challenges. Given the deteriorating financial performance, operational vulnerabilities, and regulatory uncertainties, a seasoned investor would likely recommend selling to mitigate further losses.

Keywords

Insurance Technology, AI-driven services, Digital Promotion, Risk Assessment, Value-added Benefits, China Insurance Market, SEC Filing, Form 20-F, UBXG, Nasdaq Compliance, Reverse Stock Split, Private Placement, Corporate Governance, PRC Regulations, Cybersecurity, Data Security, Financial Performance, Net Loss, Revenue Decline, Share-based Compensation, Internal Controls, Cayman Islands Company