20-F: Zhibao Technology Reports FY2025 Net Loss Amid Expansion

Zhibao Technology Inc. reported a net loss of RMB 62.0 million for fiscal year 2025, despite a 51% revenue increase, raising substantial doubt about its ability to continue as a going concern.

Summary

• Zhibao Technology Inc. is a Cayman Islands exempted holding company operating primarily in China through its PRC Subsidiaries, focusing on digital insurance brokerage and MGU services.
• Revenue increased by 51% to RMB 276.9 million (US$38.7 million) for the fiscal year ended June 30, 2025, up from RMB 183.7 million in FY2024.
• The company incurred a net loss of RMB 62.0 million (US$8.7 million) for FY2025, a significant decline from a net income of RMB 13.3 million in FY2024.
• Operating cash outflows increased to RMB 20.7 million (US$2.9 million) in FY2025, compared to RMB 3.8 million in FY2024.
• The company identified two material weaknesses in its internal controls over financial reporting as of June 30, 2025: lack of sufficient U.S. GAAP and SEC reporting personnel, and inadequate formal risk assessment and IT general controls.
• Management has expressed substantial doubt about the company's ability to continue as a going concern due to accumulated deficits of RMB 193.9 million (US$27.1 million) and recurring net losses and operating cash outflows.
• Zhibao China acquired 51% equity interest in Zhonglian Jinan Insurance Brokers Co., Ltd. for RMB 25.5 million (approximately $3.5 million) on September 30, 2025.
• Zhibao China also agreed to acquire 51% of the equity interest in Shanghai Zhibao Yingshi Health Technology Co., Ltd. on September 1, 2025.
• The company closed an initial public offering (IPO) in April 2024, raising $6.0 million, and issued additional shares in May 2024 for $95,060.
• Multiple financing arrangements were entered into with L1 Capital Global Opportunities Master Fund (L1), including convertible notes up to $8.0 million and warrants to purchase Class A ordinary shares.
• An Equity Purchase Agreement (Hudson EPA) was signed with Hudson Global Ventures, LLC, for an equity line of credit (ELOC) of up to $15.0 million over two years, commencing June 22, 2025.
• The company dismissed Marcum Asia CPAs LLP and appointed HYYH CPA. LLC as its independent registered public accounting firm, effective November 24, 2025.

Sentiment

Score: 3

Explanation: The company experienced significant financial deterioration in FY2025, moving from profitability to a substantial net loss and increased operating cash outflows. The 'going concern' doubt, material weaknesses in internal controls, and high selling/G&A expenses are major concerns, despite strong revenue growth and strategic acquisitions. While management is addressing issues and pursuing financing, the current financial health is weak.

Positives

• Revenue increased by 51% to RMB 276.9 million (US$38.7 million) for FY2025, demonstrating strong top-line growth.
• Digital insurance brokerage fees, the primary business line, increased by 57% to RMB 273.8 million (US$38.2 million) in FY2025.
• Gross written premiums (GWP) for digital insurance brokerage increased from RMB 1.19 billion in FY2024 to RMB 1.57 billion (US$0.22 billion) in FY2025.
• The company expanded its B channel base to over 2,400 and secured more than 24 million end customers.
• Strategic acquisitions of 51% equity in Zhonglian Jinan Insurance Brokers Co., Ltd. and Shanghai Zhibao Yingshi Health Technology Co., Ltd. are expected to expand business operations.
• The company successfully completed a cybersecurity review for its IPO, indicating compliance with PRC data security regulations.
• Management is actively implementing remedial measures for identified internal control weaknesses, including hiring qualified personnel and establishing a financial and system control framework.
• The company has secured a revolving credit facility with China Merchant Bank for up to RMB 30 million through October 2026, collateralized by the CEO's personal property, and entered into an equity line of credit with Hudson Global Ventures for up to $15.0 million.

Negatives

• The company reported a net loss of RMB 62.0 million (US$8.7 million) for FY2025, a significant reversal from a net income of RMB 13.3 million in FY2024.
• Operating cash outflows increased substantially to RMB 20.7 million (US$2.9 million) in FY2025 from RMB 3.8 million in FY2024.
• Accumulated deficits reached RMB 193.9 million (US$27.1 million) as of June 30, 2025.
• Selling expenses increased by 255% to RMB 112.2 million (US$15.7 million) in FY2025, primarily due to higher marketing service fees.
• General and administrative expenses increased by 145% to RMB 44.0 million (US$6.1 million) in FY2025, driven by increased provision for credit losses and professional service fees.
• MGU Service Fees decreased by 66% to RMB 3.5 million (US$0.5 million) in FY2025, mainly due to the abrupt closure of business by a reinsurance partner.
• The company recognized a loss on extinguishment of convertible notes of RMB 7.2 million (US$1.0 million) in FY2025.
• A remeasurement loss of RMB 1.0 million (US$0.1 million) was recognized from changes in the fair value of derivative liabilities in FY2025.
• The company has identified two material weaknesses in its internal controls over financial reporting as of June 30, 2025, indicating potential risks in financial reporting accuracy and timeliness.
• There is substantial doubt about the company's ability to continue as a going concern, as stated by management and the independent auditor.

Risks

• Class A ordinary shares may be delisted under the HFCA Act if the PCAOB cannot inspect the company's auditor for two consecutive years, potentially affecting investment value.
• Changes in PRC government policies or U.S.-China relations could materially and adversely affect business, financial condition, and growth strategies.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit legal protections.
• The PRC government exerts substantial influence over business activities and may intervene at any time, potentially causing Class A ordinary shares to decline in value or become worthless.
• Failure to protect private or sensitive customer information or improper handling of such information could have a material adverse effect on the business due to evolving cybersecurity and data protection laws in China.
• PRC regulations on loans and direct investment by offshore holding companies may delay or prevent the use of offering proceeds in PRC Subsidiaries, affecting liquidity and business expansion.
• Substantial uncertainties exist regarding National Financial Regulatory Administration (NFRA) requirements, potentially impacting the viability of the corporate structure and operations.
• Failure to make adequate contributions to employee benefit plans or comply with employment practices may subject the company to penalties.
• Dependence on key insurance companies for product supply means loss of these relationships could adversely affect business.
• Dependence on B channels to reach end customers means failure to acquire or retain them cost-effectively could materially affect business.
• Significant reliance on a third-party MGU Partner means non-compliance with regulations could adversely affect MGU services.
• The innovative insurance technology and infrastructure require continuous development and upgrades, with no assurance they will fully support the business.
• Uncertainty in the interpretation of internet information service filing requirements in China could lead to violations and harm digital insurance broker services.
• Inability to attract, incentivize, and retain talented professionals could adversely affect business.
• The company has identified two material weaknesses in internal controls over financial reporting, which, if not remediated, could affect financial reporting accuracy and investor confidence.
• Substantial doubt exists about the company's ability to continue as a going concern.
• An active, liquid trading market for Class A ordinary shares may not develop or be sustained.
• Nasdaq may apply additional and more stringent criteria for continued listing due to the small public offering and large insider holdings.
• Mr. Botao Ma, CEO and Chairman, beneficially owns approximately 94.0% of the voting power, giving him significant influence over corporate matters.
• Failure to meet Nasdaq continued listing standards could result in delisting, adversely affecting liquidity and market price.
• The trading price of Class A ordinary shares may be volatile, potentially leading to substantial losses for investors.
• Certain IPOs of companies with comparable public floats have experienced extreme volatility, which may make it difficult to assess the value of Class A ordinary shares.
• No expected dividends in the foreseeable future means investors must rely on price appreciation for returns.
• Classification as a passive foreign investment company (PFIC) could result in adverse U.S. federal income tax consequences for U.S. taxpayers.
• Anti-takeover provisions in the amended and restated memorandum and articles of association could adversely affect shareholder rights.
• As a controlled company under Nasdaq rules, the company may rely on exemptions from certain corporate governance requirements.
• Difficulties may arise in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against the company or management.
• Tension in international trade and rising political tension, particularly between the U.S. and China, may adversely impact business.
• Risks relating to leased properties of PRC Subsidiaries, including unregistered leases and lack of ownership certificates, could lead to fines or operational interruptions.
• Enhanced scrutiny over acquisition transactions by PRC tax authorities may negatively impact future acquisitions.
• Dividends payable to foreign investors and gains on share sales may be subject to PRC tax.
• Restrictions on currency exchange may limit the ability to utilize revenues or make foreign currency payments effectively.
• Difficulties for overseas shareholders and regulators to conduct investigations or collect evidence within China.
• The M&A Rules and other PRC regulations establish complex procedures for acquisitions, making growth through acquisitions more difficult.
• Cash or assets in mainland China or Hong Kong may not be available for use outside due to PRC government restrictions.
• Part of services could be disrupted by network interruptions, natural disasters, or cyberattacks.
• Infringement or loss of intellectual property rights may materially and adversely affect business.
• Subject to intellectual property infringement claims from third parties, which may be expensive to defend.
• Inability to manage growth or execute strategies effectively could materially and adversely affect business.
• Acceptance of various payment methods subjects the company to third-party payment processing-related risks.
• Dependence on the continued service and performance of the core management team and other key personnel.
• Competition for highly skilled employees is intense.
• Adverse effects from an economic downturn.
• Increased costs and management time due to public company reporting requirements, especially after ceasing to qualify as an emerging growth company.
• Potential delisting from Nasdaq could limit investor ability to transact in securities and subject the company to additional trading restrictions.
• Uncertainty regarding the actual number of Class A ordinary shares to be sold under the Hudson EPA and resulting gross proceeds.
• Dilution to existing securityholders from the sale and issuance of Class A ordinary shares to Hudson, and potential price fall from resales.

Future Outlook

The company plans to accelerate the expansion of its 2B2C business by broadening its B channel base through enhanced collaborations with insurance companies, other insurance brokerage companies, and technology firms. It also intends to strengthen its 2C business by converting existing end customers into direct customers through personalized consultations and targeted services. Further investment in R&D is planned to upgrade and enhance its PaaS, including new AI and business intelligence functionalities, and to expand the scale of its MGU business by increasing MGU partners and product lines. The company also aims to support brokerage and MGU services through its Labuan Reinsurance subsidiary and seek new strategic partnerships and global expansion opportunities, including assessing markets in the U.S. and Europe.

Management Comments

• Our success greatly depends on our ability to attract, incentivize and retain talented professionals.
• We will continually strive to improve and expand, upgrade and update our insurance solutions through our research and development and technology innovations in order to deliver innovative and comprehensive new, updated or upgraded insurance solutions to meet the evolving needs of our B channels and end customers.
• We believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect.
• We believe that embedded insurance brokerage is still at an early stage of development in China, we believe it is the future of insurance brokerage industry.
• We believe that as the first mover, we are well positioned to capitalize on Chinas fast-growing insurance market opportunity for our future business growth with our ever-upgrading technology, brand recognition, and sales and marketing resources.

Industry Context

The company operates in China's emerging, rapidly evolving, and fiercely competitive digital insurance brokerage service industry. It positions itself as a pioneer and market leader in the 2B2C embedded insurance business, aiming for higher efficiency and lower customer acquisition costs compared to traditional direct-to-consumer models. The industry is subject to significant regulatory oversight from the National Financial Regulatory Administration (NFRA), with evolving laws on data security and foreign investment. The company's MGU services focus on high-end medical insurance, a growing market segment. The company views smaller, niche 2B2C insurance brokerage firms as potential M&A targets and in-house brokerage firms of internet companies as potential partners for its PaaS and digital insurance solutions.

Comparison to Industry Standards

• The company ranks number one in the 2B2C digital insurance brokerage service market in terms of revenue and market share in China, according to the Frost & Sullivan Report, indicating a leading position in its niche.
• The company's 2B2C model is highlighted as achieving higher efficiency and minimal customer acquisition costs compared to industry peers who rely on capital-intensive direct-to-consumer advertising.
• The company has established the first digital insurance brokerage platform powered by its proprietary PaaS in China, suggesting a technological advantage over many competitors.
• The company's MGU services focus on high-end medical insurance, a relatively small but rapidly expanding market, allowing it to enter niche segments with minimal upfront investment compared to traditional insurers.

Management Changes

Corporate Governance

Legal Proceedings

• Zhibao China vs. Taiping General Insurance Company Limited: Zhibao China filed a lawsuit for RMB 11,053,754.69 in unpaid management service fees and penalties. The Shenzhen Futian District Peoples Court ruled in favor of Zhibao China on November 10, 2025, ordering Taiping Insurance to pay the requested amounts plus overdue interest.
• Shanghai Chenxi Technology Group Co., Ltd. vs. Sunshine Insurance Brokers (Shanghai) Co., Ltd. & Zhibao China: Shanghai Chenxi sued for RMB 14,216,437.05 in unpaid promotion service fees and penalties. Mediation agreements were reached on December 5, 2024, and February 26, 2025, where Sunshine Insurance Brokers agreed to pay RMB 13,257,049 plus fees. Majority of payments made, with approximately RMB 1.2 million outstanding.
• Guangdong Zhongkang Yongdao Insurance Brokerage Co., Ltd. vs. Sunshine Insurance Brokers & Zhibao China: Guangdong Zhongkang sued for RMB 1,418,192.63 in joint brokerage commission fees and penalties. Sunshine Insurance Brokers filed a counterclaim for RMB 4,476,900.00. A mediation record on May 29, 2025, resulted in Guangdong Zhongkang paying Sunshine Insurance Brokers RMB 38,280.60 plus fees. All obligations under the mediation record have been fulfilled.
• Beijing Tiantan Puhua International Hospital vs. Taiping Property Insurance Co., Ltd. Shanghai Branch, Shanghai Jibeiji Enterprise Management Consulting Co., Ltd. & Zhibao China: Tiantan Puhua sued for RMB 1,389,590.94 in medical expenses and interests based on subrogation rights. The case is still pending as of the date of this annual report.
• Changzhou Anzhuo Logistics Co., Ltd vs. Yang Xiurong, Sunshine Insurance Brokers & Shanghai Asia Pacific Insurance Brokerage Co., Ltd: Anzhuo Logistics sued for RMB 500,000 plus interest, alleging arrangement of insurance through unlicensed individuals and misleading practices. The case was transferred to Shanghai Pudong New Area Peoples Court and is pending a hearing scheduled for December 3, 2025.
• Zhonglian vs. Hangzhou Fuxiaoyun Technology Co., Ltd.: Zhonglian filed a lawsuit for RMB 695,633.11 in losses plus interest and attorney fees, alleging breach of a recommendation and consulting service agreement. The case remains pending as of the date of this annual report.

Related Party Transactions

• Purchases of services from Shanghai GBG Enterprise Management Consulting Co., Ltd. (an affiliate of CEO Botao Ma) amounted to RMB 0.4 million (US$49,300) in FY2025.
• Borrowed RMB 9.5 million from Shanghai Xinhui Investment Consulting Co., Ltd. (controlled by CEO Botao Ma) in FY2025, and repaid RMB 8.8 million.
• Outstanding balance due from Shanghai GBG was RMB 18.2 million as of June 30, 2025, with an allowance for credit losses of RMB 9.0 million recorded.
• Outstanding balance due to Shanghai Xinhui was RMB 2.8 million as of June 30, 2025, including a borrowing of RMB 838,016 and outstanding liabilities for payments made on behalf of the company.
• Outstanding balance due to Mr. Botao Ma was RMB 299,224 as of June 30, 2025, representing operating expenses paid on behalf of the company.
• The CEO, Mr. Botao Ma, pledged his own property with a carrying value of approximately RMB 120 million as collateral for the company's revolving credit facility with China Merchant Bank.

Stakeholder Impact

• Shareholders face significant dilution risk from the issuance of Class A ordinary shares under convertible notes, warrants, and the Hudson ELOC, potentially depressing share price.
• Shareholders are exposed to substantial doubt about the company's ability to continue as a going concern, which could lead to a loss of investment.
• Shareholders' voting power is highly concentrated with CEO Botao Ma due to the dual-class share structure, limiting the influence of other shareholders.
• Employees may be impacted by operational efficiency optimization, leading to headcount reductions in sales & marketing (21%) and R&D (30.8%) departments in FY2025.
• Customers (end customers and B channels) benefit from the company's innovative 2B2C embedded insurance model and advanced technology platform, offering customized solutions and efficient services.
• Insurance companies benefit from the company's brokerage and MGU services, expanding their reach to end customers.
• Creditors face increased risk due to the company's accumulated deficits, net losses, and operating cash outflows, although new financing arrangements are in place.
• Regulatory authorities are actively involved in overseeing the company's operations, particularly regarding data security, foreign investment, and internal controls, which could lead to penalties or operational restrictions if non-compliance occurs.

Next Steps

• Continue to take additional measures to remediate material weaknesses in internal control over financial reporting, including hiring more qualified accounting personnel, setting up a financial and system control framework, implementing formal access and change controls to systems, and improving governance.
• Implement regular and continuous U.S. GAAP accounting and financial reporting training programs for accounting and financial reporting personnel.
• Appoint a third independent director.
• Establish more robust processes supporting internal control over financial reporting.
• Seek an extension of terms for bank loans and corresponding interest payments.
• Focus on improving operation efficiency, implementing strict cost control and budget, and enhancing internal controls.
• Seek cash proceeds from equity sales under the Hudson ELOC.
• Seek more private and public equity offerings in 2026.
• Complete the initial accounting for the Zhonglian acquisition before March 31, 2026.
• Expand the number of B channels, with a key focus on cooperating with more insurance companies.
• Increase the number of sales teams and develop more independent sales partners.
• Strengthen the 2C business by targeting existing customer base with personalized insurance consultations and targeted consulting services.
• Refine and upgrade existing digital insurance solutions and develop new ones across various economic sectors.
• Invest in R&D to upgrade and enhance the PaaS, including new AI and business intelligence functionalities, and strengthening data security and governance.
• Expand the scale of the MGU business by increasing MGU partners from 10 to 15 and the proportion of MGU online business to 50% of total MGU business by June 2026, and expanding product lines.
• Support brokerage and MGU services through Zhibao Labuan Reinsurance.
• Seek new strategic partnerships and cooperation, especially with smaller-scale firms that can bring new B channel resources.
• Expand business globally, including assessing opportunities in the U.S. and European markets.

Key Dates

Recommendation

The company's financial performance for FY2025 is concerning, marked by a significant net loss of RMB 62.0 million and increased operating cash outflows, leading to substantial doubt about its ability to continue as a going concern. While revenue growth is strong, it is overshadowed by rapidly escalating selling and general & administrative expenses. The identified material weaknesses in internal controls further compound the risk profile. Although the company has secured new financing and is implementing remedial measures, the fundamental financial health is precarious. The high concentration of voting power with the CEO and potential for significant shareholder dilution from ongoing capital raises add to the investment uncertainty. Given these severe financial and operational challenges, a seasoned investor would likely recommend a strong sell.

Keywords

InsurTech, Digital Insurance Brokerage, MGU Services, China, 2B2C Embedded Insurance, Financial Results, Net Loss, Going Concern, SEC Filing, Nasdaq, Convertible Notes, Warrants, Equity Line of Credit, Acquisition, Internal Controls, Cybersecurity, PRC Regulations, Data Protection, Shareholder Voting, Capital Raise