F-1/A: InsurTech Innovator Navigates Default Amidst Strategic Expansion and Regulatory Hurdles

A leading digital insurance brokerage firm in China, Zhibao Technology Inc., is navigating an event of default on its convertible notes while simultaneously pursuing strategic acquisitions and global expansion, all under the shadow of evolving Chinese regulatory oversight.

Summary

• Zhibao Technology Inc. is a Cayman Islands holding company that conducts substantially all of its operations through its PRC Subsidiaries, Zhibao China Group, specializing in digital insurance brokerage and managing general underwriting (MGU) services in China.
• The company pioneered the 2B2C (to-business-to-customer) digital embedded insurance model in China and has developed over 40 proprietary digital insurance solutions.
• As of the prospectus date, the company has cooperated with more than 2,000 B channels and secured over 20 million end customers, partnering with over 100 insurance companies.
• Revenue for the fiscal year ended June 30, 2024, was approximately RMB 183.7 million (US$25.2 million), representing a 29% increase from RMB 142.1 million (US$19.5 million) in the previous fiscal year.
• The company reported a net income of approximately RMB 13.3 million (US$1.8 million) for FYE June 30, 2024, a significant improvement from a net loss of RMB 43.1 million (US$5.9 million) in FYE June 30, 2023 (which would have been a net income of RMB 11.6 million or US$1.6 million excluding one-off share-based compensation expenses).
• For the six months ended December 31, 2024, revenue increased by 74% to RMB 146.4 million (US$20.1 million), with a net loss of approximately RMB 0.6 million (US$0.1 million).
• An event of default occurred as of July 2, 2025, on the Second Tranche Note because the resale registration statement was not declared effective by the SEC within the specified timeframe, triggering a 10% per annum interest rate on outstanding notes and a mandatory payment of 120% of the outstanding principal.
• The company recently entered into an agreement on July 2, 2025, to acquire 51% of Zhonglian Jinan Insurance Brokers Co., Ltd. for a total purchase price of RMB 25.5 million (approximately US$3.5 million), expanding its national presence with 58 branches.
• Zhibao also secured a new equity line of credit facility with Hudson Global Ventures, LLC on June 22, 2025, for up to $15 million over a two-year period.
• The company's auditor, Marcum Asia CPAs LLP, is subject to PCAOB inspection, but uncertainties remain regarding future PRC regulations on auditing work for Chinese companies listed on U.S. exchanges.
• The company operates under a dual-class share structure, with CEO Botao Ma holding approximately 95.5% of the total voting power.

Sentiment

Score: 4

Explanation: While the company demonstrates strong revenue growth and strategic expansion initiatives (acquisition, global plans), the immediate 'Event of Default' on a convertible note, the termination of a significant financing facility, and ongoing regulatory uncertainties in China present substantial financial and operational risks that currently outweigh the positive indicators. The concentrated voting power also adds to investor risk.

Positives

• Pioneering 2B2C embedded insurance model in China, enabling low-cost customer acquisition and market leadership.
• Strong growth in revenue, with a 29% increase in FY2024 and a 74% increase in the first six months of FY2025.
• Achieved net income in FY2024 and would have in FY2023 excluding a one-off share-based compensation expense.
• Extensive network with over 2,000 B channels and 20 million end customers, demonstrating strong market penetration.
• Partnerships with over 100 insurance companies, indicating broad industry collaboration.
• Experienced management team with deep expertise in the insurance industry and digital technology.
• Strategic acquisition of 51% of Zhonglian Jinan Insurance Brokers Co., Ltd., expanding national reach and business segments with 58 branches.
• Successful completion of cybersecurity review for its initial public offering, addressing a key regulatory concern.
• Secured a new $15 million equity line of credit facility with Hudson Global Ventures, LLC, providing potential future capital.
• Incorporated Zhibao Labuan Reinsurance and received license approval, aiming to support brokerage and MGU services.
• Exploring global expansion opportunities, including a Memorandum of Understanding (MOU) in Singapore and assessment of U.S. and European markets.

Negatives

• An event of default occurred on the Second Tranche Note as of July 2, 2025, due to the resale registration statement not being declared effective timely, triggering a 10% annual interest rate and a mandatory payment of 120% of the outstanding principal.
• The company terminated a $50 million share subscription facility with GEM Global Yield LLC SCS on March 11, 2025, after issuing warrants, indicating a failure to secure that financing.
• The third closing of the Second Tranche financing ($1.5 million face value) is unlikely to be consummated due to unmet stock price conditions.
• Identified two material weaknesses in internal controls over financial reporting as of June 30, 2024: insufficient personnel with U.S. GAAP knowledge and inadequate IT control related to logical access security.
• Significant influence of CEO Botao Ma, who holds approximately 95.5% of the total voting power, potentially misaligning interests with other shareholders.
• Reliance on dividends from PRC Subsidiaries, which are subject to PRC foreign exchange controls and restrictions on dividend payments.
• Uncertainties in the interpretation and enforcement of evolving PRC laws and regulations, particularly regarding data security, overseas listings (New Overseas Listing Rules), and foreign investment.
• Potential delisting risk under the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB is unable to inspect the company's auditor for two consecutive years, despite the current auditor being subject to inspection.
• The company's Class A ordinary shares are traded on Nasdaq Capital Market, but the trading market is new and may not be consistently robust or liquid.
• The company is dependent on key insurance companies and B channels, and the loss of these relationships could adversely affect business.
• The acquisition of Zhonglian is subject to payment installments and a revenue target, with penalties for failure to pay on time.
• No expectation of paying dividends in the foreseeable future, requiring investors to rely solely on price appreciation.

Risks

• Class A ordinary shares may be delisted under the HFCA Act if the PRC adopts positions that prevent the PCAOB from inspecting accounting firms in mainland China or Hong Kong for two consecutive years.
• Changes in the political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect business, financial condition, and results of operations.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to the company and investors.
• The PRC government exerts substantial influence over the company's business activities and may intervene or influence operations and offerings at any time, potentially causing a material change in operations or a decline in share value.
• The company processes a significant quantity of personal information (over 20 million end customers), and failure to protect this data or improper handling could have a material adverse effect due to evolving cybersecurity and data protection laws in China.
• PRC regulations on loans to, and direct investment in, PRC Subsidiaries by offshore holding companies and governmental control in currency conversion may delay or prevent the use of future offering proceeds.
• The New Overseas Listing Rules (effective March 31, 2023) require CSRC filing for post-listing follow-on offerings, and uncertainties in their interpretation and enforcement could adversely affect future financings and issuances.
• Substantial uncertainties exist regarding the requirements of the National Financial Regulatory Administration (NFRA) and their potential impact on the viability of the current corporate structure and operations.
• Failure to make adequate contributions to various employee benefit plans and withhold individual income tax on employees' salaries as required by PRC regulations may subject the company to penalties.
• Dependence on key insurance companies for the supply of insurance products; the loss of any key insurer could adversely affect business.
• Dependence on B channels to reach end customers; failure to acquire new or retain existing B channels cost-effectively could materially and adversely affect business.
• Significant reliance on a third-party MGU Partner to conduct MGU services, with risks of non-compliance with relevant laws and regulations.
• The innovative insurance technology and infrastructure require continuous developments and upgrades, with no assurance that they will fully support the business or remain competitive.
• Uncertainty regarding the requirement for a company to make a filing on internet information service in China, potentially leading to violations and penalties.
• Inability to attract, incentivize, and retain talented professionals could adversely affect business, financial condition, and results of operations.
• Business, financial condition, and results of operations may be adversely affected by an economic downturn.
• Identified two material weaknesses in internal controls over financial reporting (insufficient U.S. GAAP knowledge and inadequate IT control), which if not remediated, could affect financial reporting accuracy and investor confidence.
• The company may need additional capital but may not be able to obtain it on favorable terms or at all, leading to liquidity issues or significant dilution.
• Business operations are located in China, rendering the company sensitive to local conditions and changes, such as laws, economic/political environments, force majeure events, natural disasters, or mass civil movements.
• Reliance on dividends paid by PRC Subsidiaries for cash needs, which are subject to PRC restrictions on dividend payments and currency conversion.
• An active, liquid trading market for Class A ordinary shares may not develop or be sustained, limiting the ability to sell securities.
• Nasdaq may apply additional and more stringent criteria for continued listing due to the small public offering and large insider holdings.
• The Chairman and CEO, Mr. Botao Ma, beneficially owns approximately 95.5% of the total voting power, giving him significant influence over corporate matters, potentially misaligned with other shareholders' interests.
• Failure to meet Nasdaq continued listing standards (e.g., minimum bid price) could result in delisting, adversely affecting liquidity and share price.
• The trading price of Class A ordinary shares may be volatile, leading to substantial losses for investors.
• The issuance of Class A ordinary shares upon exercise of outstanding warrants and convertible notes could have a significant dilutive impact on shareholders.
• An event of default under the Second Tranche Note has occurred, allowing the Investor to exercise prefunded warrants, accrue 10% interest, demand 120% of outstanding principal, or convert at an Alternative Conversion Price, which could have material adverse effects.
• No dividends are expected in the foreseeable future, requiring investors to rely on price appreciation for return on investment.
• Reliance on management judgment for the use of net proceeds from future financings, which may not produce income or increase share price.
• Investment in the company may involve adverse United States federal income tax consequences if classified as a passive foreign investment company (PFIC).
• Anti-takeover provisions in the amended and restated memorandum and articles of association could have a material adverse effect on the rights of Class A ordinary shareholders.
• Difficulties in protecting interests and enforcing rights through U.S. courts may be limited due to Cayman Islands incorporation and PRC operations.
• Tension in international trade and rising political tension, particularly between the U.S. and China, may adversely impact business.
• No assurance that the Zhonglian Acquisition will be consummated timely or at all, potentially leading to negative market reactions and incurred costs.
• Part of services could be disrupted by network interruptions, leading to delays, data loss, and reputational damage.
• Risk of intellectual property infringement claims from third parties or loss of intellectual property rights, which may be expensive to defend and disrupt business.
• Inability to manage growth or execute strategies effectively could materially and adversely affect business and prospects.
• Exposure to third-party payment processing-related risks, including fraud and compliance issues.

Future Outlook

The company plans to accelerate the expansion of its B channels, increase its sales force, and drive additional conversions for existing end customers to strengthen its 2C business. It intends to continuously upgrade and enrich its digital insurance solutions and enhance its PaaS platform by investing in R&D, AI, and business intelligence functionalities. The company also aims to expand its MGU business by increasing partners and product lines, and support its services through its new reinsurance subsidiary in Labuan, Malaysia. Furthermore, it seeks new strategic partnerships and cooperation, including potential M&A targets, and plans to expand its business footprint globally, with initial steps taken in Singapore and assessments for U.S. and European markets.

Industry Context

The company operates in China's emerging, rapidly evolving, and competitive digital insurance brokerage service industry. It positions itself as a pioneer and market leader in the 2B2C embedded insurance business, which is still at an early stage of development but is believed to be the future of the industry. The regulatory framework in China is also developing, with recent heightened scrutiny over data security and overseas listings, impacting all China-based companies. The company's expansion into MGU services and global markets reflects a broader trend of diversification and internationalization within the InsurTech sector.

Comparison to Industry Standards

• The company's 2B2C digital embedded insurance model is highlighted as a pioneering approach in China, enabling customer acquisition at minimal cost and higher efficiency compared to industry peers who rely on direct-to-consumer advertisement.
• The company's proprietary PaaS (Platform as a Service) is noted as the first in China's digital insurance brokerage market, providing a competitive advantage in building and delivering insurance solutions efficiently.
• The company's MGU business model is also described as pioneered in China, suggesting an early mover advantage in this specialized insurance brokerage service.
• The company's auditor, Marcum Asia CPAs LLP, is headquartered in New York and is subject to PCAOB inspection, which is a more stringent standard compared to auditors in mainland China or Hong Kong that were previously not fully inspectable by the PCAOB.

Management Changes

Corporate Governance

Legal Proceedings

• The company may be involved in legal disputes or regulatory and other proceedings in the ordinary course of business, including contractual disputes, product liability claims, and employee claims.
• Uncertainties exist regarding the interpretation and enforcement of PRC laws and regulations, which could lead to administrative and court proceedings.
• Potential for investigations by competent PRC regulators, fines, or penalties if the company fails to comply with new regulatory requirements, particularly related to overseas listings and data security.
• Risk of being subject to liability if private information is not secure or if privacy laws and regulations are violated, potentially leading to governmental enforcement actions, litigation, or negative publicity.

Related Party Transactions

• Shanghai Anyi was originally 100% controlled by Shanghai Xinhui Investment Consulting Co., Ltd., a related party controlled by CEO Mr. Botao Ma, before its equity was transferred to Zhibao China on July 12, 2016.
• The document refers to Item 7. Major Shareholders and Related Party Transactions B. Related Party Transactions in the 2024 Annual Report for a full description, indicating that related party dealings are disclosed in other filings.

Stakeholder Impact

• Shareholders: Potential for significant dilution from the conversion of notes and exercise of warrants, volatility in share price, limited protection under Cayman Islands law, and the concentrated voting power of the CEO.
• Employees: Potential for increased labor costs and penalties if the company fails to comply with PRC regulations on employee benefit plans and income tax withholding.
• Customers/B channels: Continued dependence on B channels for customer acquisition and the need to meet evolving customer needs; data security breaches could damage relationships and reputation.
• Creditors (L1 Capital Global Opportunities Master Fund): The event of default on the Second Tranche Note triggers immediate payment obligations (120% of outstanding principal) and allows the investor to convert notes at a potentially lower Alternative Conversion Price, impacting the company's financial obligations.
• Suppliers/Partners: The company's dependence on key insurance companies and third-party MGU partners means that adverse changes in these relationships could negatively impact business operations.

Next Steps

• Accelerate the expansion of B channels to penetrate new markets and increase market share.
• Expand the sales force by increasing sales teams and developing more independent sales partners.
• Drive additional conversions for existing end customers to strengthen the 2C business.
• Upgrade and enrich digital insurance solutions to meet evolving customer preferences and emerging demands.
• Invest in research and development (R&D) to upgrade and enhance the PaaS platform, introducing new AI and business intelligence (BI) functionalities.
• Expand the scale of the MGU business by increasing the number of MGU partners from 10 to 15 and aiming for 50% MGU online business by the end of June 2026.
• Support brokerage and MGU services through the newly incorporated Zhibao Labuan Reinsurance company in Labuan, Malaysia.
• Seek new strategic partnerships and cooperation, including potential mergers and acquisitions (M&A) targets, especially those bringing new B channel resources.
• Expand the business globally, with current efforts including an MOU in Singapore and assessment of opportunities in the U.S. and European markets.
• Remediate identified material weaknesses in internal controls over financial reporting by hiring qualified accounting personnel, setting up a financial and system control framework, implementing formal access and change controls to IT systems, and improving governance.
• Complete the Zhonglian Acquisition and its required registration with relevant PRC governmental authorities.
• Submit a final consolidated report to the CSRC upon the completion of all tranches and closings contemplated under the A&R Securities Purchase Agreement.
• File the Resale Registration Statement with the SEC for the Hudson ELOC within 180 calendar days following June 22, 2025, and use commercially reasonable efforts to have it declared effective within 210 calendar days.

Key Dates

Recommendation

Keywords

InsurTech, Digital Insurance Brokerage, China, SEC Filing, F-1/A, Convertible Notes, Warrants, Capital Raise, Acquisition, Zhonglian, PRC Regulation, Cybersecurity, Data Privacy, PCAOB, HFCA Act, Nasdaq Listing, Corporate Governance, Dual-Class Shares, Risk Management, Financial Performance, Emerging Growth Company, Foreign Private Issuer, PaaS, MGU Services, 2B2C Model, Hudson ELOC, L1 Capital