Filed pursuant to Rule 424(b)(5)
Registration No. 333-267919

PROSPECTUS SUPPLEMENT

(To prospectus dated November 15, 2022)

 

Boqii Holding Limited

 

 

Up to $8,040,000 of American Depositary Shares

 

 

This prospectus supplement relates to the issuance and sale of (i) up to $8,000,000 of our American depositary shares (the “ADSs”), each ADS representing 4.5 Class A ordinary shares, par value $0.001 per share, of the Company (the “Purchase Shares”) that we may sell to VG Master Fund SPC (“VG”), from time to time pursuant to a purchase agreement, dated July 28, 2023 (the “Purchase Agreement”), that we have entered into with VG, and (ii) an additional $40,000 of our ADSs being issued to VG as commitment shares under the Purchase Agreement. See “VG Transaction” for a description of the Purchase Agreement and additional information regarding VG. VG is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”).

The purchase price for the Purchase Shares will be based upon formulas set forth in the Purchase Agreement. We will pay the expenses incurred in registering the ADSs sold under the Purchase Agreement, including legal and accounting fees. See “Plan of Distribution” for more information.

Our ADSs are currently listed on the NYSE under the symbol “BQ.” On July 27, 2023, the last reported sale price of our ADSs on The NYSE was $1.47 per ADS. Pursuant to General Instruction I.B.5 of Form F-3, in no event will we sell the securities covered hereby in a public primary offering with a value exceeding more than one-third of the aggregate market value of our voting and non-voting common equity held by non-affiliates in any 12-month period so long as the aggregate market value of our outstanding voting and non-voting common equity held by non-affiliates remains below US$75,000,000. The aggregate market value of our issued and outstanding Class A ordinary shares held by non-affiliates, or public float, was approximately US$21.31 million, which was calculated based on 47,005,394 Class A ordinary shares issued and outstanding held by non-affiliates and a per ADS closing price of US$2.04 as reported on the NYSE on June 22, 2023. During the 12 calendar months prior to and including the date of this prospectus, we have not offered or sold any securities pursuant to General Instruction I.B.5 of Form F-3.

Investing in our securities involves risks. Before buying any securities, you should carefully consider the risks that we have described in “Supplemental Risk Factors” beginning on page S-17 of this prospectus supplement, as well as those described in our filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Boqii Holding Limited is a Cayman Islands holding company with no business operations. Our corporate structure involves unique risks to investors in the ADSs. The Company conducts its operations in China through its PRC subsidiaries and the consolidated variable interest entities, or the “VIEs”, and the VIEs’ subsidiaries. The Company, its shareholders who are non-PRC residents and its subsidiaries do not and are not legally permitted to have any equity interests in the VIEs as current PRC laws and regulations restrict foreign investment in companies that engage in value-added telecommunication services and certain other restricted services related to our businesses. As a result, the Company operates relevant businesses in China through certain contractual arrangements by and among its PRC subsidiaries (namely Nanjing Xinmu Information Technology Co., Ltd., Xincheng (Shanghai) Information Technology Co., Ltd. and Shanghai Meiyizhi Supply Chain Co., Ltd., or collectively, the “WFOEs”), the VIEs and the respective shareholders of the VIEs. This structure allows the WFOEs to direct the activities of the VIEs, and be considered the primary beneficiary of the VIEs for accounting purposes, which serves the purpose of consolidating the VIEs’ operating results in the Company’s financial statements under the accounting principles generally accepted in the United States, or U.S. GAAP. This structure also provides contractual exposure to foreign investment in such companies. Investors in the Company’s ADSs are purchasing equity securities of a Cayman Islands holding company rather than equity securities issued by the Company’s subsidiaries and the VIEs. The securities offered in this prospectus are securities of our Cayman Islands holding company, not of its operating subsidiaries or the VIEs. Investors of the Company’s ADSs may never hold equity interests in our PRC operating subsidiaries or the VIEs. As used in this prospectus, “Boqii,” “we,” “us,” “our company,” “the Company,” “the Group” and “our” refer to Boqii Holding Limited, a Cayman Islands exempted company and its subsidiaries and, in the context of describing our operations and consolidated financial information, its VIEs and their respective subsidiaries, unless specific reference is made to an entity. “VIEs” refers to the consolidated PRC variable interest entities, including Suzhou Taicheng Supply Chain Co., Ltd., Guangcheng (Shanghai) Information Technology Co., Ltd., Nanjing Xingmu Biotechnology Co., Ltd. and Suzhou Xingyun Yueming Supply Chain Co., Ltd.

As of the date of this prospectus, to the best knowledge of our Company, our directors and management, the VIE agreements have not been tested in a court of law in the PRC. However, if new laws and regulations specify that the VIE agreements are in violation of relevant PRC laws and regulations and the PRC government accordingly deems that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, we could be subject to material penalties or be forced to relinquish our interests in those operations or otherwise significantly change our corporate structure. Our ADSs may decline in value or become worthless, if we are unable to claim our contractual control rights over the assets of the VIEs that conduct substantially all of our operations in China. For a detailed description of the risks associated with our corporate structure, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Corporate Structure and Contractual Arrangements” in our annual report on Form 20-F for the fiscal year ended March 31, 2023, originally filed with U.S. Securities and Exchange Commission (the “SEC”) on July 25, 2023 (the “FY 2023 Form 20-F”) and “Supplemental Risk Factors—Risks Related to Our Corporate Structure and Contractual Arrangements” in this prospectus supplement.

Further, having the majority of our operations in China demands us of complying with applicable PRC laws and regulations. Any failure to comply with applicable PRC laws and regulations would adversely affect our operations in China and may hinder our ability to offer or continue to offer our securities to investors, which could cause the value of your securities. Recently, the PRC government initiated a series of laws and regulations to regulate business operations in the PRC, including cracking down on illegal activities in the securities market, regulating PRC-based companies listed overseas, adopting measures to regulate the scope of cybersecurity reviews, and strengthening anti-monopoly enforcement. On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. Any future offering pursuant to a prospectus supplement to this prospectus will be subject to

the Overseas Listing Trial Measures, and we are required to file for record through our major operating entity incorporated in the PRC with the CSRC within three business days after the completion of the initial offering pursuant to this prospectus supplement and make a summary report to the CSRC after the completion of offerings under this prospectus. There can be no assurance that we can complete the filing procedures, or complete required procedures or other requirements in a timely manner, or at all. Any failure of us to fully comply with the regulatory requirements may subject us to regulatory actions, such as warnings and fines, which may limit our operating in China, delay or restrict the repatriation of the proceeds from offshore fund-raising activities into the PRC or take other actions that could materially adversely affect our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. As of the date of this prospectus supplement, we are in the process of preparing the required filling materials in relation to this offering and plan to submit such filing materials within three business days after the initial closing of the sales of ADSs in this offering in according with the Overseas Listing Trial Measures. For a detailed description of risks related to doing business in China, see “Item 3. Key Information—3.D. Risk Factor—Risks Related to Doing Business in China” in our FY 2022 Form 20-F and “Supplemental Risk Factors—Risks Related to Doing Business in China—The approval of and the filing with the CSRC or other PRC government authorities are be required in connection with this offshore offering under PRC law, and we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” and “Supplemental Risk Factors—Risks Related to Our Corporate Structure and Contractual Arrangements” in this prospectus supplement.

Furthermore, as more stringent criteria have been imposed by the SEC and the Public Company Accounting Oversight Board (the “PCAOB”) recently, our ADSs may be prohibited from trading if our auditor cannot be fully inspected. On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in the PRC or Hong Kong. This first list included all PCAOB-registered firms in China, including our auditor, PricewaterhouseCoopers Zhong Tian LLP. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should the PCAOB have not such access in the future, the PCAOB Board will consider the need to issue a new determination. In the event PCAOB later determines that it is unable to inspect or investigate completely our auditor, then such lack of inspection could cause our ADSs to be delisted from the stock exchange. See “Supplemental Risk Factors—Risks Related to Doing Business in China—The ADSs may be delisted from a U.S. exchange and prohibited from being traded over-the-counter in the United States under the HFCAA if the PCAOB determines in the future that it is unable to fully inspect or investigate our auditor. The delisting and cease of trading of the ADSs, or the threat of their being delisted or prohibited from being traded, may materially and adversely affect the value of your investment” in this prospectus supplement.

We currently do not have cash management policies that dictate how funds are transferred between us, our subsidiaries and the VIEs. In practice, we estimate and allocate funds to our WFOE and the VIEs based on their respective available cash balances and forecasted cash requirements. For details, see “Prospectus Supplemental Summary —Cash Flows through Our Organization” included below in this prospectus supplement. As of March 31, 2023, Boqii Holding Limited had made cumulative capital contributions of approximately RMB1,151.1 million to its PRC subsidiaries through intermediate holding companies, and were accounted as long-term investments of Boqii Holding Limited. Furthermore, funds equivalent to approximately RMB9.8 million, RMB31.4 million and nil were provided to the PRC subsidiaries as loans for the fiscal years ended March 31, 2021, 2022 and 2023, respectively, which were accounted as intra-Group payables due to the Group’s entities. These funds have been used by the PRC subsidiaries for their operations. The VIEs may transfer cash to the relevant WFOEs by paying service fees according to the exclusive business cooperation agreements. Pursuant to these agreements between each of the VIEs and its corresponding WFOEs, each of the VIEs agrees to pay the relevant WFOE for services related to design and maintenance of the E-Commerce platform, consulting services, technical training, research, planning and development of the market and customer support at an amount based on 100% of the balance of the gross consolidated profits of each VIE after offsetting the accumulated losses for the preceding financial years and deducting the working capital, expenses, taxes and other statutory contributions required for any financial year, or the amount determined by the WFOE in accordance with the terms of the agreements. Considering the future operating and cash flow needs of the VIEs, for the fiscal years ended March 31, 2021,2022 and 2023, no service fees were charged to the VIEs by the WFOEs, and no payments were made by the VIEs under these agreements. As of March 31, 2023, the VIEs have not distributed earnings or settled any amounts owed to us under the VIE agreements. However, if there is any amount payable to relevant WFOEs under the VIE agreements, the VIEs plan to settle the amount accordingly. For more information, see “Item 3. Key Information—Contractual Arrangements with the VIEs and Their Respective Shareholders” and “Item 3. Key Information—Condensed Consolidating Schedule” and the consolidated financial statements in our FY 2023 Form 20-F and the condensed consolidating schedule included elsewhere in this prospectus. There are limitations on our ability to transfer cash between the Company, its subsidiaries and the VIEs, and there is no assurance that we are able to comply with all restrictions on the cash transfer provided by laws and regulations of the PRC. For more information, see “Item 3. Key Information—Holding Company Structure ” and “Item 3. Key Information—Cash Flows through Our Organization” in our FY 2023 Form 20-F and “Prospectus Supplemental Summary—Cash Flows through Our Organization” in this prospectus supplement.

As of the date of this prospectus supplement, we have not declared or paid any cash dividend, dividend in kind or distributions, and have no plan to declare or pay any dividends or distributions in the near future on our shares or the ADSs representing our Class A ordinary shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. For details regarding the payments between Boqii Holding Limited, its subsidiaries and the VIEs, see “Prospectus Supplement Summary—Cash Flows through Our Organization” in this prospectus supplement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is July 28, 2023

Table of Contents

PROSPECTUS SUPPLEMENT

 

ABOUT THIS PROSPECTUS SUPPLEMENT			S-i
PROSPECTUS SUPPLEMENT SUMMARY			S-1
THE OFFERING			S-16
SUPPLEMENTAL RISK FACTORS			S-17
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			S-32
USE OF PROCEEDS			S-33
DILUTION			S-34
VG TRANSACTION			S-35
PLAN OF DISTRIBUTION			S-37
TAXATION			S-38
LEGAL MATTERS			S-43
EXPERTS			S-43
INCORPORATION OF DOCUMENTS BY REFERENCE			S-45
WHERE YOU CAN FIND MORE INFORMATION			S-46

PROSPECTUS

 

		Page
ABOUT THIS PROSPECTUS			1
INCORPORATION OF DOCUMENTS BY REFERENCE			3
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS			4
PROSPECTUS SUMMARY			6
RISK FACTORS			34
USE OF PROCEEDS			49
DESCRIPTION OF SHARE CAPITAL			50
DESCRIPTION OF AMERICAN DEPOSITARY SHARES			61
DESCRIPTION OF WARRANTS			69
DESCRIPTION OF UNITS			70
PLAN OF DISTRIBUTION			71
TAXATION			74
ENFORCEABILITY OF CIVIL LIABILITIES			75
LEGAL MATTERS			77
EXPERTS			78
WHERE YOU CAN FIND MORE INFORMATION ABOUT US			79

About This Prospectus Supplement

This prospectus supplement and the accompanying prospectus relate to the offering of our ADSs. Before buying any of the ADSs that we are offering, we urge you to carefully read this prospectus supplement and the accompanying prospectus, together with the information incorporated by reference as described under the headings “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference” in this prospectus supplement. These documents contain important information that you should consider when making your investment decision.

This prospectus supplement and the accompanying prospectus describes the terms of this offering of our ADSs and also adds to and updates information contained in the documents incorporated by reference into this prospectus supplement and the accompanying prospectus. To the extent there is a conflict between the information contained in this prospectus supplement and the accompanying prospectus, on the one hand, and the information contained in any document incorporated by reference into this prospectus supplement and the accompanying prospectus that was filed with the SEC before the date of this prospectus supplement and the accompanying prospectus, on the other hand, you should rely on the information in this prospectus supplement and the accompanying prospectus. If any statement in one of these documents is inconsistent with a statement in another document having a later date (for example, a document incorporated by reference into this prospectus supplement and the accompanying prospectus), the statement in the document having the later date modifies or supersedes the earlier statement.

You should rely only on the information contained in or incorporated by reference in this prospectus supplement, the accompanying prospectus and in any free writing prospectus that we have authorized for use in connection with this offering. We have not, and VG has not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and VG is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus, the documents incorporated by reference in this prospectus supplement, the accompanying prospectus, and in any free writing prospectus that we have authorized for use in connection with this offering, is accurate only as of the date of those respective documents. Our business, financial condition, results of operations and prospects may have changed since those dates. You should read this prospectus supplement and the accompanying prospectus, the documents incorporated by reference in this prospectus supplement, the accompanying prospectus, and any free writing prospectus that we have authorized for use in connection with this offering, in their entirety before making an investment decision.

A registration statement on Form F-3 (File No. 333-267919) utilizing a shelf registration process relating to the securities described in this prospectus supplement was initially filed with the SEC, and declared effective on November 23, 2022. Under this shelf registration process, of which this offering is a part, we may, from time to time, sell up to an aggregate of $260 million of our securities. This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of our ADSs, and also adds, updates and changes information contained in the accompanying prospectus and the documents incorporated herein and therein by reference. The second part is the accompanying prospectus, which gives more general information, some of which may not apply to this offering. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus or any document filed prior to the date of this prospectus supplement and incorporated herein by reference, such as the FY 2023 Form 20-F, the information in this prospectus supplement will control. In addition, this prospectus supplement and the accompanying prospectus do not contain all of the information provided in the registration statement that we filed with the SEC. For further information about us, you should refer to that registration statement, which you can obtain from the SEC as described elsewhere in this prospectus supplement under “Where You Can Find Additional Information” and “Incorporation of Certain Documents by Reference.” You may obtain a copy of this prospectus supplement, the accompanying prospectus and any of the documents incorporated by reference without charge by requesting it from us in writing or by telephone at the following address and telephone number: Building 9, No. 388, Shengrong Road, Pudong New District, Shanghai 201210, the People’s Republic of China. Our telephone number at this address is +86-21-68826799.

 

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All references in this prospectus supplement to our financial statements include, unless the context indicates otherwise, the related notes. The industry and market data and other statistical information contained in the documents we incorporate by reference are based on management’s own estimates, independent publications, government publications, reports by market research firms or other published independent sources, and, in each case, are believed by management to be reasonable estimates. Although we believe these sources are reliable, we have not independently verified the information.

The information contained in this prospectus supplement or the accompanying prospectus is accurate only as of the date of this prospectus supplement or the accompanying prospectus, regardless of the time of delivery of this prospectus supplement, the accompanying prospectus or of any sale of the shares. We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference in this prospectus supplement or the accompanying prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

In this prospectus supplement, unless otherwise indicated or unless the context otherwise requires:

 

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“ADSs” refers to the American depositary shares, each representing 4.5 Class A ordinary shares;

 

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“Boqii,” “we,” “us,” “our company,” “the Company,” “the Group” and “our” refer to Boqii Holding Limited, a Cayman Islands exempted company and its subsidiaries and, in the context of describing our operations and consolidated financial information, its VIEs and their respective subsidiaries;

 

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“brand owner” refers to a company engaging in the production and sale of branded pet goods;

 

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“brand partner” refers to a specific brand owner whose products are sold via our online sales platforms and offline network;

 

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“Class A ordinary shares” refers to our Class A ordinary shares, par value US$0.001 per share;

 

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“Class B ordinary shares” refers to our Class B ordinary shares, par value US$0.001 per share;

 

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“China” or “the PRC” refers to the People’s Republic of China, including Hong Kong and Macau and, only for the purpose of this prospectus, excluding Taiwan; the only instances in which “China” or “the PRC” do not include Hong Kong or Macau are when used in the case of laws and regulations, including, among others, tax matters, adopted by the People’s Republic of China; the legal and operational risks associated with operating in China also apply to our operations in Hong Kong;

 

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“online platforms” refers to our online sales platforms and our content platform;

 

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“online sales platforms” refer to Boqii Mall, our flagship stores on third-party e-commerce platforms and our proprietary SaaS system;

 

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“Meiyizhi WFOE” refers to Shanghai Meiyizhi Supply Chain Co., Ltd.;

 

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“Purchase Agreement” refers to the purchase agreement, dated July 28, 2023, entered by and between Boqii Holding Limited and VG Master Fund SPC;

 

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“RMB” or “Renminbi” refers to the legal currency of the People’s Republic of China;

 

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“Shanghai Guangcheng” refers to Guangcheng (Shanghai) Information Technology Co., Ltd.;

 

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“Shanghai Xincheng” refers to Xincheng (Shanghai) Information Technology Co., Ltd.;

 

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“shares” or “ordinary shares” refers to our Class A ordinary shares and Class B ordinary shares, par value US$0.001 per share;

 

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“Suzhou Taicheng” refers to Suzhou Taicheng Supply Chain Co., Ltd.;

 

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“Suzhou Xingyun” refers to Suzhou Xingyun Yueming Supply Chain Co., Ltd.;

 

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“US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States;

 

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“variable interest entities,” or “VIEs,” refers to the PRC entities of which we have power to control the management, and financial and operating policies and have the right to recognize and receive substantially all the economic benefits and in which we have an exclusive option to purchase all or part of the equity interests at the minimum price possible to the extent permitted by PRC law;

 

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“VG” refers to VG Master Fund SPC;

 

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“Xingmu” or “Nanjing Xingmu” refers to Nanjing Xingmu Biotechnology Co., Ltd.;

 

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“Xingmu WFOE” refers to Nanjing Xinmu Information Technology Co., Ltd.; and

 

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“Yoken WFOE” refers to Chengdu Chongaita Information Technology Co., Ltd.

 

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Supplemental Risk Factors

Investing in our securities involves a high degree of risk. Before investing in our securities, you should carefully consider the risks described below, together with all of the other information contained in this prospectus supplement and the accompanying prospectus and incorporated by reference herein and therein, including from our most recent Annual Report on Form 20-F and subsequent filings. Some of these factors relate principally to our business and the industry in which we operate. Other factors relate principally to your investment in our securities. The risks and uncertainties described therein and below are not the only risks facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially and adversely affect our business and operations. If any of the matters included in the following risks were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially and adversely affected. In such case, you may lose all or part of your investment.

Risks Related to this Offering

The sale or issuance of our ADSs to VG may cause dilution and the sale of the ADSs acquired by VG, or the perception that such sales may occur, could cause the price of our ADSs to fall.

On July 28, 2023, we entered into the Purchase Agreement with VG, pursuant to which VG has committed to purchase up to $8,000,000 of our ADSs. As a fee for VG’s commitment to purchase ADSs under the Purchase Agreement, (i) after the closing of the purchase and sale of the ADSs pursuant to the first purchase notice provided by us pursuant to the Purchase Agreement, we will be issuing $10,000 of ADSs to VG; and (ii) after the receipt by us of aggregate gross proceeds of at least $4,000,000, we will be issuing $30,000 of ADSs to VG (provided, however, in the event that the aggregate gross proceeds received by us under the Purchase Agreement are less than $4,000,000, the number of Commitment Shares issuable to VG shall be adjusted proportionately based on the ratio the aggregate gross proceeds received by us bears to the amount of the Commitment Shares). The remaining ADSs that may be issued under the Purchase Agreement may be sold by us to VG at our discretion from time to time over a one-year period commencing after the satisfaction of certain conditions set forth in the Purchase Agreement. The purchase price for the ADSs that we may sell to VG under the Purchase Agreement will fluctuate based on the price of our ADSs. Depending on market liquidity at the time, sales of such shares may cause the trading price of our ADSs to fall.

We generally have the right to control the timing and amount of any future sales of our ADSs to VG. Additional sales of our ADSs, if any, to VG will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to VG all, some or none of the additional ADSs that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell ADSs to VG, after VG has acquired the ADSs, VG may resell all, some or none of those ADSs at any time or from time to time in its discretion. Therefore, sales to VG by us could result in substantial dilution to the interests of other holders of our ADSs.

Additionally, the sale of a substantial number of ADSs to VG, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

A substantial number of ADSs may be sold in the market following this offering, which may depress the market price for our ADSs.

Sales of a substantial number of ADSs in the public market following this offering could cause the market price of our ADSs to decline. A substantial majority of the outstanding ADSs are, and all of the ADSs sold in this offering upon issuance will be, freely tradable without restriction or further registration under the Securities Act, unless these shares are owned or purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act.

Since we have broad discretion in how we use the proceeds from this offering, we may use the proceeds in ways with which you disagree.

We have not allocated specific amounts of the net proceeds from this offering for any specific purpose. Accordingly, our management will have some flexibility in applying the net proceeds of this offering. You will

 

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be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.

We may not be able to access sufficient funds under the Purchase Agreement when needed.

Our ability to sell ADSs to VG and obtain funds under the Purchase Agreement is limited by the terms and conditions in the Purchase Agreement, including restrictions on the amounts we may sell to VG at any one time. Therefore, we may not in the future have access to the full amount available to us under the Purchase Agreement, depending on the price of our ADSs. In addition, any amounts we sell under the Purchase Agreement may not satisfy all of our funding needs, even if we are able and choose to sell and issue all of our ADSs currently registered.

You may experience future dilution as a result of future equity offerings.

In order to raise additional capital, we may at any time, including during the pendency of this offering, offer additional ADSs or other securities convertible into or exchangeable for our ADSs at prices that may not be the same as the price per ADS in this offering. We may sell ADSs or other securities in any other offering at a price per ADS that is less than the price per ADS paid by investors in this offering, and investors purchasing ADSs or other securities in the future could have rights superior to existing shareholders. The price per ADS at which we sell additional ADSs, or securities convertible or exchangeable into ADSs, in future transactions may be higher or lower than the price per ADS paid by investors in this offering.

We may require additional financing to sustain our operations, and the terms of such subsequent financings may adversely impact our shareholders.

The extent to which we rely on VG as a source of funding will depend on a number of factors including the prevailing market price of our ADSs and the extent to which we are able to secure working capital from other sources. If funding from VG were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital needs. Even if we sell all of the $8,000,000 of our ADSs to VG under the Purchase Agreement, we may still need additional capital to finance our future working capital needs, and we may have to raise funds through the issuance of equity or debt securities. Depending on the type and the terms of any financing we pursue, shareholders’ rights and the value of their investment in our ADSs could be reduced. A financing could involve one or more types of securities including, but not limited to, ADSs, convertible debt or warrants to acquire ADSs. These securities could be issued at or below the then prevailing market price for our ADSs. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that would be prior to the rights of shareholders until the debt is paid. Interest on these debt securities would increase costs and negatively impact operating results. If the issuance of new securities results in diminished rights to holders of our ADSs, the market price of our ADSs could be negatively impacted. Should the financing we require to sustain our clinical development and working capital needs be unavailable or prohibitively expensive when we require it, the consequences of our inability to obtain such financing could be a material adverse effect on our business, operating results, financial condition, and prospects.

The market price of our ADSs is volatile, and you could lose all or part of your investment.

There are many internal and external factors that may cause the market price and demand for our ADSs to fluctuate substantially, which may limit or prevent our shareholders from readily selling their ADSs and may otherwise negatively affect the liquidity of our ADSs. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If holders of our ADSs brought a lawsuit against us, we could incur substantial costs defending the lawsuit regardless of the merits of the case or the eventual outcome. Such a lawsuit also would divert the time and attention of our management from running our company.

 

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Risks Related to Our Corporate Structure and Contractual Arrangements

If the VIE structure for our operations in China are deemed as in violation of PRC laws and regulations, and the PRC government accordingly finds that our contractual arrangements noncompliant, we could be subject to severe penalties or be forced to relinquish our interests in the VIEs.

PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in internet and other related businesses, including the provision of internet content. Specifically, foreign ownership is prohibited in industries of online audio program services and internet cultural business (excluding music), foreign ownership of an internet content provider in managing value-added telecommunications business may not exceed 50%. Foreign investment in the value-added telecommunication services industry and certain other businesses is subject to certain restrictions. Pursuant to the Special Management Measures (Negative List) for the Access of Foreign Investment (2021), published by the National Development and Reform Commission and the Ministry of Commerce on December 27, 2021 and effective on January 1, 2022, with a few exceptions, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider.

In March 2019, the National People’s Congress of the PRC adopted the PRC Foreign Investment Law, which became effective on January 1, 2020. Among other things, the PRC Foreign Investment Law defines the “foreign investment” as investment activities in China by foreign investors in a direct or indirect manner, including those circumstances explicitly listed thereunder as establishing new projects or foreign invested enterprises or acquiring shares of enterprises in China, and other approaches of investment as stipulated by laws, administrative regulations or otherwise regulated by the State Council. The PRC Foreign Investment Law does not specify whether foreign investors’ controlling PRC onshore variable interest entities via contractual arrangements will be recognized as “foreign investment” and thus be subject to the restrictions and/or prohibitions on foreign investments. If future laws and regulations specify that the VIE agreements are in violation of relevant PRC laws and regulations and the PRC government accordingly finds that the VIE agreements that establish the structure for operating our podcasts, audio entertainment and other internet related businesses or for importing veterinary drugs do not comply with PRC government restrictions on foreign investment in these industries, our securities may decline in value or become worthless, we could be subject to severe penalties, including being prohibited from continuing operations.

We are an exempted company with limited liability incorporated in the Cayman Islands and our wholly owned PRC subsidiaries are currently considered foreign-invested enterprise. Accordingly, our PRC subsidiaries are not eligible to provide value-added telecommunication services in China or import veterinary drugs. To ensure strict compliance with the PRC laws and regulations, we conduct such business activities through the VIEs, including Shanghai Guangcheng, Nanjing Xingmu, Suzhou Taicheng, and Suzhou Xingyun. Shanghai Xincheng, Meiyizhi WFOE and Xingmu WFOE, our wholly owned subsidiaries in China, have entered into a series of contractual arrangements with the VIEs and their respective shareholders, which enable us to (i) exercise effective control over the VIEs, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law. As a result of these contractual arrangements, we have control over and are the primary beneficiary of the VIEs and hence consolidate their financial results as the VIEs under U.S. GAAP.

If the PRC government finds that our contractual arrangements do not comply with its restrictions on foreign investment in the value-added telecommunication services industry or certain other businesses, or if the PRC government otherwise finds that we, the VIEs, or any of their subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities would take administrative actions in accordance with laws and regulations to deal with such violation or failures, including, without limitation:

 

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revoking the business licenses and/or operating licenses of such entities;

 

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discontinuing or placing restrictions or conditions on our operation through any transactions between our PRC subsidiaries and the VIEs;

 

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imposing fines on us, placing restrictions on our right to collect revenues, confiscating the income from our PRC subsidiaries or the VIEs,;

 

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requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIEs;

 

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shutting down our servers or blocking our mobile apps and websites;

 

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requiring us to restructure the operations in such a way as to compel us to establish a new enterprise, reapply for the necessary licenses or relocate our businesses, staff and assets;

 

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imposing additional conditions or requirements with which we may not be able to comply; or

 

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taking other regulatory or enforcement actions against us that could be harmful to our business.

The imposition of any of these penalties may result in a material and adverse effect on our ability to conduct our business operations. In addition, new PRC laws, regulations, and rules may be introduced to impose additional requirements, posing additional challenges to our corporate structure and contractual arrangements. If the imposition of any of these penalties causes us to lose the rights to direct the activities of our the VIEs or the right to receive their economic benefits, we would no longer be able to consolidate their financial results and/or claim our contractual control rights over the assets of the VIEs that conduct substantially all of our operations in China, which could materially and adversely affect our financial condition and results of operations and cause our securities to significantly decline in value or become worthless.

Interpretation and implementation of the Foreign Investment Law may impact our business, financial condition and results of operations.

On March 15, 2019, the National People’s Congress of the PRC promulgated the Foreign Investment Law of the People’s Republic of China, or the Foreign Investment Law, which came into effect on January 1, 2020 and replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. On December 26, 2019, the State Council published the Implementation Rules of Foreign Investment Law, or the Implementation Rules, which came into effect on January 1, 2020. The Foreign Investment Law and its Implementation Rules embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The enacted Foreign Investment Law and its Implementation Rules do not mention concepts such as “actual control” and “controlling PRC companies by contracts or trusts” that were included in the previous drafts, nor do they specify regulation on controlling through contractual arrangements, and thus this regulatory topic remains unclear under the Foreign Investment Law. The Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign investment, it contains a catch-all provision under the definition of “foreign investment,” which includes investments made by foreign investors in China through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. If future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, such as unwinding our existing contractual arrangements and/or disposal of our related business operations, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations. If any of these occurrences results in our inability to direct the activities of any of the VIEs and/or our failure to receive economic benefits from any of them, we may not be able to consolidate their results into our consolidated financial statements in accordance with U.S. GAAP.

 

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We rely on contractual arrangements with the VIEs and their respective shareholders for our business operations, which may not be as effective as direct ownership in providing operational control.

We have relied and expect to continue to rely on contractual arrangements with the VIEs and their respective shareholders to operate our business in China. These contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs. For example, the VIEs and their respective shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of the VIEs in China, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by the VIEs and their respective shareholders of their obligations under the contracts to exercise control over the VIEs. The shareholders of the VIEs may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual arrangements with the VIEs. If any dispute relating to these contracts remain unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings. Therefore, our contractual arrangements with the VIEs may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.

Any failure by any of the VIEs or their shareholders to perform their respective obligations under our contractual arrangements with them would have a material and adverse effect on our business.

If any of the VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may be limited in our ability to enforce the contractual arrangements that give us effective control over the VIEs, and if we are unable to maintain such control, our ability to consolidate the financial results of the VIEs will be affected. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you that our claims would be supported by the court under PRC law. For example, if the shareholders of any of the VIEs refuse to transfer their equity interests in such VIEs to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third parties claim any interest in such shareholders’ equity interests in any of the VIEs, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other disputes between the shareholders of the VIEs and third parties were to impair our control over the VIEs, our ability to consolidate the financial results of the VIEs would be affected, which would in turn result in a material adverse effect on our business, operations and financial condition.

In addition, the individual shareholders of the VIEs may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their respective equity interests in the VIEs and the validity or enforceability of the contractual arrangements. For instance, in the event that such shareholder divorces his or her spouse, the spouse may claim that the equity interest of the VIEs held by such shareholder is part of their marital or community property and should be divided between such shareholder and his or her spouse. If such claim is supported by the competent court, the relevant equity interest may be obtained by the shareholder’s spouse or another third-party who is not bound by our contractual arrangements, which could result in our losing effective control over the VIEs. Even if we receive a consent letter from the spouse of an individual nominee shareholder of the VIEs where such spouse undertakes that he or she would not take any actions to interfere with the contractual arrangements through which we control such VIEs, including by claiming that the equity interest of the VIEs held by such shareholder is part of their marital or community property, we cannot assure you that these undertakings will be complied with or effectively enforced. In the event that any of them is breached or becomes unenforceable and leads to legal proceedings, it could disrupt our business, distract our management’s attention and subject us to substantial uncertainties as to the outcome of any such legal proceedings. Similarly, if

 

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any of the equity interests of the VIEs are inherited by a third-party on whom the current contractual arrangements are not binding, we could lose our control over the VIEs or have to maintain such control at unpredictable cost, which could cause significant disruption to our business operations and harm our financial condition and results of operations.

Our contractual arrangements are governed by PRC law. Accordingly, these contracts would be interpreted in accordance with PRC law, and any disputes would be resolved in accordance with PRC legal procedures.

The PRC legal system is a civil law system based on written statutes, in which prior court decisions or precedents do not have so much value as common law systems do. Also, it is constantly evolving.

In the event that we resort to litigation or arbitration arising from disputes over the establishment of VIE structure or the performance of the contractual arrangements, we can provide no assurance that we will prevail in such litigation or arbitration to the extent that our VIE structure would not be adversely affected.

The shareholders of the VIEs may have actual or potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

The shareholders of the VIEs may have actual or potential conflicts of interest with us. These shareholders may refuse to sign or breach, or cause the VIEs to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIEs, which would have a material and adverse effect on our ability to effectively control the VIEs and receive economic benefits from them. For example, the shareholders may be able to cause our agreements with the VIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings. Since it is difficult to predict and evaluate the outcome of legal proceedings, such conflicts of interest would result in disruption of our business.

We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by the VIEs, which could severely disrupt our business, render us unable to conduct some or all of our business operations and constrain our growth.

As part of our contractual arrangements with the VIEs, the VIEs hold certain assets, licenses and permits that are material to our business operations, such as the ICP License and Veterinary Drug Distribution License. The contractual arrangements contain terms that specifically obligate VIEs’ shareholders to ensure the valid existence of the VIEs and restrict the disposal of material assets of the VIEs. However, in the event the VIEs’ shareholders breach the terms of these contractual arrangements and voluntarily liquidate the VIEs, or the VIEs declare bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of our business operations or otherwise benefit from the assets held by the VIEs, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, if any of the VIEs undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of the assets of such VIE, thereby affecting our ability to operate our business as well as constrain our growth.

Risks Related to Doing Business in China

PRC laws and regulations regarding data security and cybersecurity are evolving. These laws and regulations could have material impact on our business operation.

PRC regulators, including the Standing Committee of the National People’s Congress, or the SCNPC, the Ministry of Industry and Information Technology of the PRC, or the MIIT and the CAC, have been increasingly

 

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focused on regulation in the areas of data security and cybersecurity. A series of laws and regulations relating to the protection of privacy, date security and cyber security have been enacted.

On July 1, 2015, the SCNPC promulgated the National Security Law, or the New National Security Law, which took effect on the same date and replaced the former National Security Law promulgated in 2009. The New National Security Law covers various types of national security including technology security and information security. According to the New National Security Law, the state shall ensure that the information system and data in important areas are secure and controllable. In addition, according to the New National Security Law, the state shall establish national security review and supervision policies and mechanisms, and conduct national security reviews of key technologies and IT products and services that affect or may affect national security. In particular, we are obligated under the New National Security Law to safeguard national security by, for example, providing evidence related to activities endangering national security, providing convenience and assistance for national security work, and providing necessary support and assistance for national security institutions, public security institutions as well as military institutions. As such, we are obliged to provide data to PRC government authorities and military institutions for compliance with the New National Security Law.

On November 7, 2016, the SCNPC promulgated the Cybersecurity Law, which took effect on June 1, 2017. The Cybersecurity Law specifies requirements on user information protection applicable to network operators, who are prohibited from collecting or disclosing without permission or selling individual information with limited exceptions. When network operators become aware of any information of which the release or transmission is prohibited by any law or administrative regulation, they are required to immediately cease transmission of such information, and take measures such as deletion of relevant information to prevent its dissemination. In addition, according to the Cybersecurity Law and relevant regulations, network operators, are obligated to take technical and other necessary measures to ensure the security and stable operation of network, maintain the integrity, confidentiality and availability of network data, and furthermore provide assistance and support in accordance with the law for public security and national security authorities to protect national security or assist with criminal investigations. In addition, the PRC Cybersecurity Law provides that personal information and important data collected and generated by operators of critical information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the law imposes heightened regulation and additional security obligations on operators of critical information infrastructure. On September 12, 2022, the CAC proposed a series of draft amendments to the Cybersecurity Law, including raising the size of fines for some violations. Such draft amendments were released for soliciting public comments and its final form has not come out yet as of the date of this prospectus supplement.

On June 10, 2021, the SCNPC, promulgated the PRC Data Security Law, which became effective in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data and information. On December 28, 2021, the CAC, together with other authorities, jointly promulgated the Revised Cybersecurity Review Measures, effective on February 15, 2022 and repeal the Cybersecurity Review Measures promulgated on April 13, 2020. The Revised Cybersecurity Review Measures provide that a critical information infrastructure operator purchasing network products and services, and platform operators carrying out data processing activities, which affect or may affect national security, shall apply for cybersecurity review and that a platform operator with more than one million users’ personal information aiming to list abroad must apply for cybersecurity review. Such measures further restate and expand the applicable scope of the cybersecurity review.

On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. On December 31, 2021, the CAC together with

 

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other relevant administrative departments published the Administrative Provisions on Internet Information Service Algorithm Recommendation, which became effective on March 1, 2022. This recommendation provides that, among others, that algorithm recommendation service providers shall (i) establish and improve the management systems and technical measures for algorithm mechanism and principle review, scientific and technological ethics review, user registration, information release review, data security and personal information protection, anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident emergency response, formulate and disclose the relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service; (ii) regularly review, evaluate and verify the principle, models, data and application results of algorithm mechanisms, (iii) strengthen information security management, establish and improve a feature database for identifying illegal and bad information, and improve entry standards, rules and procedures; (iv) strengthen the management of user models and user labels, and improve the rules on points of interest recorded into user models and user label management, and shall not record illegal and harmful information keywords into the points of interest of users or use them as user labels to push information.

On November 14, 2021, the CAC released the Regulations on the Network Data Security (Draft for Comments), or the Draft Regulations. The Draft Regulations provide that data processors refer to individuals or organizations that have autonomy over the purpose and the manner of data processing activities such as data collection, storage, utilization, transmission, publication and deletion. In accordance with the Draft Regulations, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing abroad of data processors that process the personal information of more than one million users and (ii) any data processing activity that affects or may affect national security. In addition, the Draft Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. As of the date of this prospectus supplement, the Draft Regulations was released for public comment only, and its final form has not come out yet.

On July 7, 2022, the CAC promulgated the Data Outbound Transfer Security Assessment Measures or the Security Assessment Measures, which came into effect on September 1, 2022. The Security Assessment Measures provides that, among others, data processors shall apply to competent authorities for security assessment when transferring important data abroad or when, in the case of a critical information infrastructure operator, or a personal information processor that has processed personal information of more than one million individuals, transferring personal information abroad.

We are making efforts to comply with the applicable laws, regulations and standards relating to the protection of privacy, date security and cybersecurity. Considering relevant laws and regulations (including whether the Draft Regulations will be implemented in the proposed form and when they will be implemented) are evolving, there can be no assurance that our measures will be effective and sufficient, or we would be able to comply with the requirements therein in a timely manner. Failure to comply with such laws and regulations may lead to fines, suspension of business operation, revocation of business permits or licenses and other sanctions, which may have material impact on our business operation. Newly promulgated laws and regulations reflect PRC government further attempts to strengthen the legal protection for the national network security, data security, the security of critical information infrastructure and the security of personal information protection.

In addition, we procure server and system for storage, process and other aspects of business operation from time to time. It remains unclear whether such server and system will fall into the category of the so-called “critical network equipment” or “dedicated network security products” due to lack of specific criteria or standards in the Cybersecurity Law. As such, we cannot assure you that the server and system we have procured or may procure in the future comply with relevant requirements, and we may incur additional costs to comply with such requirements. Also, as the scope of operator of critical information infrastructure is not completely clear, certain parties involved in our business operation (such as, our customers or suppliers) may be deemed as

 

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an operator of critical information infrastructure where the cybersecurity review could be required before we enter into relevant business relationships with them which may have a material adverse effect on our business and prospects.

Current and future laws, regulations and interpretations may require us to take more actions to comply with such laws, regulations. Any failure to comply with relevant laws and regulations could adversely affect us.

The PRC legal system is a civil law system based on written statutes, in which prior court decisions or precedents do not have so much value as common law systems do. Also, it is constantly evolving. If we resort to litigation or arbitration arising from disputes governed by PRC laws and regulations, it may be difficult to evaluate the outcome of administrative and court proceedings and we cannot assure you that our claims or pleadings would be supported by courts or arbitration bodies.

The issuance of the Overseas Listing Trail Measures indicates that PRC governments regulate the overseas listing and securities offering of China-based companies. If we fail to comply with the requirements specified in applicable PRC laws and regulations, our business, financial condition and results of operations would be adversely affected.

Changes in economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

Our business, financial condition, results of operations and prospects are influenced by economic, political and legal developments.

Any adverse changes in economic conditions, in the policies or in the laws and regulations could have a material adverse effect on the overall economic growth. Such developments could adversely affect our business, financial condition and results of operations.

The potential enactment of the Accelerating Holding Foreign Companies Accountable Act would decrease the number of non-inspection years from three years to two years, thus reducing the time period before our ADSs may be delisted or prohibited from over-the-counter trading. If this bill were enacted, our ADS could be delisted from the exchange and prohibited from over-the-counter trading in the U.S. in 2023.

On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, or the AHFCA Act, which, if enacted into law, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years, instead of three consecutive years as currently enacted in the HFCAA.

On February 4, 2022, the U.S. House of Representatives passed the America Competes Act of 2022, which contained, among other things, an identical provision as the AHFCA Act.

If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from three years to two, then our ADSs could be delisted from the exchange and prohibited from over-the-counter trading in the U.S. in 2023 if the PCAOB is unable to inspect and investigate completely auditors located in China.

You may be subject to the relevant requirements as stipulated by law if you effect service of legal process, enforece foreign judgments or bring agactions in China against us, our directors or our management named in this prospectus.

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands, we conduct substantially all of our operations in China, and substantially all of our assets are located in China. In

 

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addition, all our senior executive officers and directors reside within China for a significant portion of the time and most are PRC nationals. There are also uncertainties regarding the status of the rights of Boqii Holding Limited, our Cayman Islands holding company, with respect to our contractual arrangements with the VIEs, our founders and shareholders. It may be difficult for our shareholders to effect service of process upon us or those persons inside China if the service of process that our shareholders effect are not in accordance with applicable laws and regulations.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law and other applicable laws, regulations and interpretations based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with the U.S. and certain other jurisdictions that provide for the reciprocal recognition and enforcement of judgments from the U.S. and certain other jurisdictions. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether a PRC court would enforce a judgment rendered by a court in the U.S and certain other jurisdictions.

If new and stricter regulations or interpretations of existing regulations are issued or promulgated, the government actions would be taken accordingly. Such actions by the PRC government may cause us to make material changes to the operations of our PRC subsidiary or the affiliated entities, may affect our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

The PRC government has regulated and continues to regulate the Chinese economy through laws and regulations. The ability of our subsidiaries and the affiliated entities to operate in China may be affected by changes in its laws and regulations, including those relating to value-added telecommunications service industry, taxation, foreign investment limitations, and other matters.

If new and stricter regulations or interpretations of existing regulations are issued or promulgated, the government actions would be taken accordingly. If such regulations and interpretations requires more approvals, filings or other requirements, our PRC subsidiary and the affiliated entities might accordingly be subject to government actions and regulatory supervision and regulation in the provinces in which they operate. They may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

The approval of and the filing with the CSRC or other PRC government authorities are be required in connection with this offshore offering under PRC law, and we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, include, among other things, provisions that purport to require that if a special-purpose company is the one which for the purpose of getting listed abroad, its shareholders or the special-purpose company purchase (purchases) the equities of the shareholders of a domestic company or the share increase of a domestic company by paying with the equities of the special-purpose company it holds or by paying with the share-increase of the special-purpose company, such special-purpose company’s transaction for the overseas listing shall be subject to approval of the securities regulatory institution of the State Council. However, the detailed procedures how such offshore special purpose vehicles go through to obtain approvals from the CSRC is not directly specified in the M&A Rules.

On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law. These opinions emphasized the need to strengthen the

 

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administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.

On February 17, 2023, the CSRC promulgated Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following circumstances exists: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.

The Overseas Listing Trial Measures also provides that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (2) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual material events in mainland China.

The Overseas Listing Trial Measures further provides that, initial public offerings or listings in overseas markets by domestic companies, either in direct or indirect form shall be filed with the CSRC pursuant to the requirements of the Overseas Listing Trial Measures within three business days after the relevant application is submitted overseas. On the same day when the Overseas Listing Trial Measures are issued, the CSRC also issued a notice in relation to the management arrangement of above-mentioned filing. The Overseas Listing Trial Measures, together with such notice issued by the CSRC, provide that the companies that had already been listed on overseas stock exchanges prior to March 31, 2023 or the companies that had obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing prior to March 31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing, but are required make filings for subsequent offerings in accordance with the Overseas Listing Trial Measures. Companies that had already submitted an application for an initial public offering to overseas supervision administrations but had not yet obtained the approval from overseas supervision administrations or stock exchanges for the offering and listing prior to March 31, 2023 may arrange for the filing within a reasonable time period and should complete the filing procedure before such companies’ overseas issuance and listing. Companies, like us, that had already been listed overseas as of March 31, 2023 are not required to make immediate filing with the CSRC but are required to file with the CSRC within three business days after the completion of subsequent securities offerings in the same overseas market where its securities were previously offered and listed, or file the required filing materials with the CSRC within three business days after the submission of relevant application for subsequent securities offerings and listings in other overseas markets. If a PRC domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in the filing documents, such PRC domestic company may be subject to penalties, such as an

 

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order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to warnings and fines.

Any such future offering pursuant to a prospectus supplement to this prospectus will be subject to the Overseas Listing Trial Measures, and we are required to file for record through our major operating entity incorporated in the PRC with the CSRC within three business days after the completion of the initial offering pursuant to the prospectus supplement and make a summary report to the CSRC after the completion of offerings under this prospectus. In addition, an overseas listed company is required to report to the CSRC within three business days after the occurrence and announcement of any of the following material events: (1) a change of control of the listed company; (2) the investigation, sanction or other measures undertaken by any foreign securities regulatory agencies or authorities in respect of the listed company; (3) a change of listing status or transfer of listing segment; and (4) the voluntary or mandatory delisting of the listed company. If there is any material change of the principal business of the listed company after the overseas offering and listing so that the listed company is no longer required to file with the CSRC, it shall file a specific report and a legal opinion issued by a domestic law firm to the CSRC within three business days after the occurrence thereof.

As of the date of this prospectus supplement, we are in the process of preparing the required filling matters in relation to this offering and plan to submit such filing materials within three business days after the initial closing of the sales of ADSs in this offering in according with the Overseas Listing Trial Measures.

However, there can be no assurance that we can complete the filing procedures, obtain the required approvals or authorizations, or complete required procedures or other requirements in a timely manner, or at all. Any failure of us to fully comply with the regulatory requirements may subject us to regulatory actions, such as warnings and fines, which may affect our operation in China, delay or restrict the repatriation of the proceeds from offshore fund-raising activities into the PRC or take other actions that could materially affect our business, financial condition, results of operations, reputation and prospects, as well as the trading price of the ADSs.

Pursuant to Article 6 of the Interpretation Note of the Negative List (2021 Version), if a PRC company engaging in the prohibited business stipulated in the Negative List (2021 Version) seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities (the “Requirement”). The foreign investors of the issuer shall not be involved in the company’s operation and management, and their shareholding percentages shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors. At an official press conference held on January 18, 2022, the NDRC clarified that the Requirement would only apply to PRC domestic company’s direct overseas offerings. Due to this offering falling within the scope of the indirect overseas offerings, the Requirement is not applicable to this offering and this offering would not be subject to the Requirement.

In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. Provided that any new rules or regulations promulgated in the future imposes additional requirements on us, our offshore offerings may be required to go through the procedures under the Measures for Cybersecurity Review and be subject to the annual data security review under the Administrative Measures for Internet Data Security, are required for our offshore offerings. Under such circumstance, we cannot assure you that we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of any such approval or filing if obtained by us, may subject us to sanctions by the CSRC or other PRC regulatory authorities, which could materially affect our business, results of operations, financial condition and prospects, as well as the trading price of our listed securities. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we cannot assure you that we can obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any failure of us to fully satisfy with such approval requirement could materially affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.

 

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The ADSs may be delisted from a U.S. exchange and prohibited from being traded over-the-counter in the United States under the HFCAA if the PCAOB determines in the future that it is unable to fully inspect or investigate our auditor. The delisting and cease of trading of the ADSs, or the threat of their being delisted or prohibited from being traded, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors of the benefits of such inspections.

The HFCAA was enacted in December 2020 and was subsequently amended in December 2022. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for two consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over- the-counter trading market in the United States.

According to Article 177 of the PRC Securities Law (last amended in March 2020), the overseas securities regulatory agencies shall not directly conduct investigation, evidence collection, and other activities in the territory of the PRC, and without the consent of the securities regulatory agency of the State Council and the appropriate departments of the State Council, no entity or individual may provide documents and materials related to securities business activities to any overseas parties. Therefore, the audit working papers of our financial statements may not be directly inspected by the PCAOB without the approval of the PRC authorities. The ADSs could be delisted and prohibited from being traded over-the-counter under the HFCAA if the PCAOB determines in the future that it is unable to fully inspect or investigate our auditor which has a presence in China.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to determine, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC adopted amendments to finalize the implementation of disclosure and documentation measures, which require us to identify, in our Annual Report on Form 20-F, (1) the auditors that provided opinions to the financial statements presented in the annual report, (2) the location where the auditors’ report was issued, and (3) the PCAOB ID number of the audit firm or branch that performed the audit work.

On August 26, 2022, the CSRC, the Ministry of Finance of China, and the PCAOB signed the Protocol, which established a specific framework for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and US. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022, and the PCAOB Board vacated its previous determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, it remains unclear whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong, which depends on a number of factors out of our and our auditor’s control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

Notwithstanding the foregoing, our ability to retain an auditor subject to PCAOB inspection and investigation, including but not limited to inspection of the audit working papers related to us, may depend on the relevant positions of U.S. and Chinese regulators. If, in the future, we have been identified by the SEC for two consecutive years as a “commission-identified issuer” whose registered public accounting firm is determined by the PCAOB that it is unable to inspect or investigate completely because of a position taken by one or more authorities in China, the SEC may prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. In addition, it remains unclear what the

 

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SEC’s implementation process related to the above rules will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on companies that have significant operations in China and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market). We cannot assure you whether regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. If we fail to meet the new listing standards specified in the HFCAA, we could face possible delisting from the Nasdaq Stock Market, cessation of trading in over-the-counter market, deregistration from the SEC and/or other risks, which may materially and adversely affect the trading price of the ADSs or terminate the trading of the ADSs in the United States.

Furthermore, the absence of inspections by the PACOB in China in the past prevented it from fully evaluating the audits and quality control procedures of our prior independent registered public accounting firm. As a result, we and our investors were not be able to take the benefits of such PCAOB inspections. The absence of inspections by the auditors with presence in China in the past made it more difficult to evaluate the effectiveness of our prior independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that were subject to the PCAOB inspections, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

We may rely on dividends paid by our PRC subsidiary to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.

We are a Cayman Islands holding company, and we may rely on dividends to be paid by our PRC subsidiary for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to the holders of the ADSs and our ordinary shares and service any debt we may incur. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Under PRC laws and regulations, all enterprises in the PRC, including wholly foreign-owned enterprises in the PRC, such as WFOE, may pay dividends only out of their accumulated profits as determined in accordance with PRC laws and regulations and accounting standards. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends. Any limitation on the ability of our wholly-owned PRC subsidiary to pay dividends or make other distributions to us could materially limit our ability to make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Governmental regulation of currency conversion may affect our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes supervision and regulation on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. However, approval from or registration with appropriate government authorities is required where 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

 

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foreign currencies. Pursuant to the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, a foreign-invested enterprise may convert up to 100% of the foreign currency in its capital account into RMB on a discretionary basis according to the actual needs. The Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (the “SAFE Circular 16”) provides for an integrated standard for conversion of foreign exchange under capital account items on a discretionary basis, which applies to all enterprises registered in China. In addition, the SAFE Circular 16 has narrowed the scope of purposes for which an enterprise must not use the RMB funds so converted, which include, among others, (i) payment for expenditure beyond its business scope or otherwise as prohibited by the applicable laws and regulations, (ii) investment in securities or other financial products other than banks’ principal-secured products, (iii) provision of loans to non-affiliated enterprises, except where it is expressly permitted in the business scope of the enterprise, and (iv) construction or purchase of non-self-used real properties, except for real estate developers. If we are unable to obtain sufficient foreign currencies to satisfy our foreign currency needs, we may not be able to pay dividends in foreign currencies to our shareholders.

 

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Cautionary Note Regarding Forward-Looking Statements

Some of the information in this prospectus supplement, the accompanying prospectus and the documents we incorporate by reference contains forward-looking statements within the meaning of the federal securities laws. You should not rely on forward-looking statements in this prospectus, the accompanying prospectus, or the documents we incorporate by reference. Forward-looking statements typically are identified by use of terms such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue,” and similar words, although some forward-looking statements are expressed differently. This prospectus, the accompanying prospectus, and the documents we incorporate by reference may also contain forward-looking statements attributed to third parties relating to their estimates regarding the growth of our markets. All forward-looking statements address matters that involve risks and uncertainties, and there are many important risks, uncertainties and other factors that could cause our actual results, as well as those of the markets we serve, levels of activity, performance, achievements and prospects to differ materially from the forward-looking statements contained in this prospectus, the accompanying prospectus, and the documents we incorporate by reference. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus supplement, particularly under “Supplemental Risk Factors” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make. You should read this prospectus supplement, the accompanying prospectus and the documents that we incorporate by reference herein and therein completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. You should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. Before deciding to purchase our securities, you should carefully consider the risk factors discussed and incorporated by reference in this prospectus supplement and the accompanying prospectus and in the registration statement of which this prospectus supplement and the accompanying prospectus form a part.

 

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Use of Proceeds

We may receive up to $8,000,000 in aggregate gross proceeds under the Purchase Agreement from any sales we make to VG pursuant to the Purchase Agreement after the date of this prospectus supplement. We may sell fewer than all of the ADSs offered by this prospectus supplement, in which case our offering proceeds will be less. Because we are not obligated to sell any ADSs under the Purchase Agreement, other than the Commitment Shares (from which we will receive no proceeds), the actual total offering amount and proceeds to us, if any, are not determinable at this time. There can be no assurance that we will receive any proceeds under or fully utilize the Purchase Agreement. See “Plan of Distribution” elsewhere in this prospectus supplement for more information.

We intend to use the net proceeds from the sale of the ADSs offered by us hereunder, if any, for general corporate purposes, including research and development expenses and working capital. We do not currently have specific plans or commitments with respect to the net proceeds from this offering and, accordingly, we are unable to quantify the allocations of such proceeds among the various potential uses. The amounts and timing of our actual expenditures will depend on numerous factors, such as our business development in the pet products and service and expenses related to optimizing our technology on big data analytics, and any unforeseen cash needs and other factors described under “Supplemental Risk Factors” in this prospectus supplement, the “Risk Factors” in the accompanying prospectus, and the documents incorporated by reference herein and therein, as well as the amount of cash used in our operations. We will have broad discretion in the way we use the net proceeds of this offering.

 

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Dilution

The sale of our ADSs to VG pursuant to the Purchase Agreement may have a dilutive impact on our shareholders. In addition, the lower our ADS price is at the time we exercise our right to sell shares to VG, the more ADSs we will have to issue to VG pursuant to the Purchase Agreement and our existing shareholders will experience greater dilution.

Our net tangible book value as of March 31, 2023 was approximately $29.443 million, or $0.43 per ordinary share and $1.93 per ADSs. Net tangible book value per ordinary share as of March 31, 2023 is equal to our total tangible assets minus total liabilities, all divided by the number of ordinary shares outstanding as of March 31, 2023. There were 68,800,820 ordinary shares, including Class A ordinary shares in the form of ADSs, outstanding as of March 31, 2023 (based on the 70,729,482 ordinary shares outstanding as of March 31, 2023, excluding 1,928,662 Class A ordinary shares held by the depositary bank underlying the options granted but not yet exercised under the Company’s Amended and Restated 2018 Global Share Plan).

After giving effect to the assumed sale by us of 6,060,606 ADSs to VG pursuant to the Purchase Agreement at an assumed offering price of $1.32 per ADSs, which is 80% of $1.65, the last reported sale price of our ADSs on the NYSE on July 19, 2023, and the issuance of 27,211 ADSs to VG as Commitment Shares at the price of $1.47 per ADSs, the last reported sale price of our ADSs on the NYSE on July 27, 2023, the business day preceding the execution of the Purchase Agreement (assuming no adjustment as detailed under “VG Transaction — General” in this prospectus supplement), and after deducting estimated aggregate offering expenses payable by us and the fair value of Commitment Shares, our as adjusted net tangible book value as of March 31, 2023 would have been $37.44 million, or $0.39 per ordinary share and $1.75 per ADS. This represents an immediate decrease in net tangible book value of $0.04 per ordinary share and $0.17 per ADS to the existing shareholders and an immediate increase in net tangible book value of $0.10 per ordinary share and $0.43 per ADS to VG.

The following table illustrates this calculation on a per ADS basis. The as adjusted information is illustrative only and will adjust based on the actual price at which ADSs in this offering are sold and therefore, could result in an increase or decrease in net tangible book value per ordinary share and per ADS as a result of this offering.

 

Assumed public offering price per ADS		$	1.32
Net tangible book value per ADS as of March 31, 2023		$	1.93
Decrease in net tangible book value per ADS attributable to our existing shareholders		$	0.17
As adjusted net tangible book value per ADS as of March 31, 2023, after giving effect to this offering		$	1.75
Increase in net tangible book value per ADS to VG		$	0.43

The above discussion is based on 68,800,820 ordinary shares, including Class A ordinary shares in the form of ADSs, outstanding as of March 31, 2023 (based on the 70,729,482 ordinary shares outstanding as of March 31, 2023, excluding 1,928,662 Class A ordinary shares held by the depositary bank underlying the options granted but not yet exercised under the Company’s Amended and Restated 2018 Global Share Plan).

 

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VG Transaction

General

On July 28, 2023, we entered into the Purchase Agreement with VG. Pursuant to the terms of the Purchase Agreement, VG has agreed to purchase from us up to $8,000,000 of our ADSs (subject to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, we have filed with the SEC this prospectus supplement regarding the sale under the Securities Act of the ADSs issuable to VG under the Purchase Agreement.

Pursuant to the terms of the Purchase Agreement, as consideration for VG’s commitment to purchase ADSs, we will be issuing an aggregate of $40,000 of ADSs to VG pursuant to the schedule under the Purchase Agreement, in which (i) $10,000 of the Commitment Shares shall be issued after the closing of the purchase and sale of the shares pursuant to the first Purchase Notice; and (ii) $30,000 of ADS shall be issued after the receipt by us of aggregate gross proceeds of at least $4,000,000; provided, however, in the event that the aggregate gross proceeds received by us under the Purchase Agreement are less than $4,000,000, the number of Commitment Shares issuable to VG shall be adjusted proportionately based on the ratio the aggregate gross proceeds received by us bears to the amount of the Commitment Shares.

We may, from time to time, and at our sole discretion, direct VG to purchase ADSs upon the satisfaction of certain conditions set forth in the Purchase Agreement at a purchase price per ADS based on the market price of our ADSs at the time of sale as computed under the Purchase Agreement. VG may not assign or transfer its rights and obligations under the Purchase Agreement.

Purchases of ADSs under the Purchase Agreement

Under the Purchase Agreement, at any time and from time to time during the period commencing on the date of the execution of the Purchase Agreement and ending on the earlier of (i) the date on which VG has cumulatively purchased a number of Purchase Notice Shares equal to the Commitment Amount or (ii) July 28, 2024, we may direct VG, by written notices (the “Purchase Notices”), to purchase ADSs on such business days (or the purchase dates), provided that the number of ADSs to be purchased on such purchase date pursuant to each Purchase Notice shall not exceed, subject to increase by VG, the lesser of (i) 200% of the median daily trading volume of the Company’s ADSs over the most recent five (5) business days prior to the respective Purchase Notice date, as reported by Bloomberg, L.P. or (ii) $1,000,000 divided by the highest closing price of the ADSs over the most recent five business days including the respective Purchase Notice date. VG may waive such limit at any time to purchase additional shares under a Purchase Notice. The foregoing ADS amounts and per ADS prices will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring after the date of the Purchase Agreement.

The purchase price for ADS for each purchase will be equal to eighty percent (80%) of the lowest daily closing price of our ADSs as reported on NYSE (as adjusted for any reorganization, recapitalization, non-cash dividend, share subdivision, share consolidation or other similar transaction) during the three business days beginning on and including the date that VG receives our written Purchase Notice.

Our Termination Rights

We have the unconditional right, at any time, for any reason by giving written notice to VG to terminate the Purchase Agreement.

No Short-Selling or Hedging by VG

VG has agreed that neither it nor any of its agents, representatives or affiliates shall engage in or effect any direct or indirect short-selling or hedging of our ADSs during any time prior to the termination of the Purchase Agreement.

Effect of Performance of the Purchase Agreement on our Shareholders

All ADSs registered in this offering that have been or may be issued or sold by us to VG under the Purchase Agreement are expected to be freely tradable. ADSs registered in this offering may be sold over a period of up to

 

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12 months commencing on the date of this prospectus supplement. The sale by VG of a significant number of ADSs registered in this offering at any given time could cause the market price of our ADSs to decline and to be highly volatile. Sales of our ADSs to VG, if any, will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to VG all, some or none of the additional ADSs that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell ADSs to VG, after VG has acquired the ADSs, VG may resell all, some or none of those ADSs at any time or from time to time in its discretion. Therefore, sales to VG by us under the Purchase Agreement may result in substantial dilution to the interests of other holders of our ADSs. In addition, if we sell a substantial number of ADSs to VG under the Purchase Agreement, or if investors expect that we will do so, the actual sales of ADSs or the mere existence of our arrangement with VG may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales. However, we have the right to control the timing and amount of any additional sales of our ADSs to VG and the Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.

Pursuant to the terms of the Purchase Agreement, we have the right, but not the obligation, to direct VG to purchase up to $8,000,000 of our ADSs, exclusive of the $40,000 of Commitment Shares to be issued to VG as consideration for its commitment to purchase ADSs under the Purchase Agreement.

The following table sets forth the amount of gross proceeds we would receive from VG from our sale of ADSs to VG under the Purchase Agreement at varying purchase prices:

 

Assumed Average Purchase Price		Number of Registered ADSs to be Issued if Full Purchase(1)				Percentage of Outstanding ADSs After Giving Effect to the Issuance to VG(2)				Gross Proceeds to Us from the Sale of ADSs to VG Under the Purchase Agreement(2)
$     1			10,000,000				38.9	%		$	8,000,000
$1.65(3)			6,060,606				27.8	%		$	8,000,000
$     2			5,000,000				24.1	%		$	8,000,000
$     3			3,333,333				17.5	%		$	8,000,000
$     4			2,500,000				13.7	%		$	8,000,000
$     5			2,000,000				11.3	%		$	8,000,000

 

(1)	Includes the total number of Purchase Shares which we would have sold under the Purchase Agreement at the corresponding assumed average purchase price set forth in the first column, up to the aggregate purchase price of $8,000,000, and excludes the Commitment Shares.

(2)

The denominator is based on 15,717,663 ADSs outstanding as of July 19, 2023. The numerator is based on the total number of ADSs issuable under the Purchase Agreement (that are the subject of this offering) at the corresponding assumed average purchase price set forth in the first column, which excludes the issuance of the Commitment Shares.

(3)	The closing sale price of our ADSs on The NYSE on July 19, 2023.

 

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Plan of Distribution

Pursuant to this prospectus supplement and the accompanying prospectus, we are offering up to $8,040,000 in ADSs, including $40,000 of ADSs to be issued to VG as Commitment Shares (assuming no adjustment as detailed under “VG Transaction — General” in this prospectus supplement) pursuant to the Purchase Agreement. This prospectus supplement and the accompanying prospectus also cover the resale of these ADSs by VG to the public.

We may, from time to time, and at our sole discretion, direct VG to purchase ADSs on such business day (or the purchase date), the number of ADSs to be purchased on such purchase date pursuant to each Purchase Notice shall not exceed, subject to increase by VG, the lesser of (i) 200% of the median daily trading volume of the Company’s ADSs over the most recent five (5) business days prior to the respective Purchase Notice date, as reported by Bloomberg, L.P. or (ii) $1,000,000 divided by the highest closing price of the ADSs over the most recent five business days including the respective Purchase Notice date. We may direct VG to purchase ADSs as often as every business day. The purchase price for ADS for each purchase will be equal to eighty percent (80%) of the lowest daily closing price of our ADSs as reported on NYSE (as adjusted for any reorganization, recapitalization, non-cash dividend, share subdivision, share consolidation or other similar transaction) during the three business days beginning on and including the date that VG receives our written Purchase Notice. See “VG Transaction — Purchases of ADSs under the Purchase Agreement” in this prospectus supplement. VG is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.

We will pay the expenses incident to the registration under the Securities Act of the offer and sale of the ADSs covered by this prospectus supplement to VG. We have also agreed to reimburse VG for certain expenses in connection with this offering. Each of us and VG has agreed to indemnify each other and certain other persons against certain liabilities in connection with the Purchase Agreement or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement contained in the Purchase Agreement, (ii) any untrue statement or alleged untrue statement of a material fact contained in the registration statement or any post-effective amendment thereof or prospectus or prospectus supplement, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or contained in the final prospectus (as amended or supplemented, if filed with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading.

VG has represented to us that at no time prior to the Purchase Agreement has VG or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of our ADSs or any hedging transaction, which establishes a net short position with respect to our ADSs. VG agreed that during the term of the Purchase Agreement, it, its agents, representatives or affiliates will not enter into or effect, directly or indirectly, any of the foregoing transactions.

We have advised VG that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes VG, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus supplement.

This offering will automatically terminate on the earlier of (i) the date on which VG shall have purchased a number of shares pursuant to the Purchase Agreement equal to $8,000,000 or (ii) July 28, 2024. This Agreement may also be terminated by the Company at any time for any reason by giving written notice to the Investor.

Our ADSs are listed on the NYSE under the symbol “BQ”. Global Incorporation Centre Limited is our company’s transfer agent.

 

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Taxation

The following summary of the material Cayman Islands, People’s Republic of China and U.S. federal income tax consequences of an investment in the ADSs or Class A ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus supplement, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in the ADSs or Class A ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the United States.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our ordinary shares or ADSs will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares or ADSs, nor will gains derived from the disposal of our ordinary shares or ADSs be subject to Cayman Islands income or corporate tax.

People’s Republic of China Taxation

Under the PRC EIT Law, which became effective on January 1, 2008 and was most recently amended on December 29, 2018, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation regulations to the PRC EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, the STA Circular 82 issued by the STA in April 2009 specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: (a) senior management personnel and departments that are responsible for daily production, operation and management; (b) financial and personnel decision making bodies; (c) key properties, accounting books, company seal, minutes of board meetings and shareholders’ meetings; and (d) half or more of the senior management or directors having voting rights. Further to STA Circular 82, the STA issued the STA Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of STA Circular 82. STA Bulletin 45 provides for procedures and administration details of determination on resident status and administration on post-determination matters. Our company is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located outside the PRC. As such, we do not believe that our company meets all of the conditions above or is a PRC resident enterprise for PRC tax purposes. For similar reasons, we believe our other entities outside of China are also not PRC resident enterprises. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us.

In terms of material tax consequences to ADS holders, if the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC enterprise income tax purposes, a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders (including the ADS holders). In addition, nonresident enterprise shareholders (including the ADS holders) may be subject to

 

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PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares, if such gains are treated as derived from a PRC source. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders (including the ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC individual income tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to in practice, obtain the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. See “Item 3. Key Information—3.D.Risk Factors—Risks Related to Doing Business in China —If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.” in our FY 2023 20-F, which is incorporated by reference in this prospectus supplement and the accompanying prospectus.

Material U.S. Federal Income Tax Considerations

The following are material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposing of the ADSs or Class A ordinary shares, but this discussion does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to own ADSs or Class A ordinary shares. The following applies only to a U.S. Holder that holds the ADSs or Class A ordinary shares as capital assets for U.S. federal income tax purposes. In addition, it does not address all of the tax consequences that may be relevant in light of a U.S. Holder’s particular circumstances, including the alternative minimum tax, the Medicare contribution tax on net investment income and tax consequences applicable to U.S. Holders subject to special rules, such as:

 

•

certain financial institutions;

 

•

insurance companies;

 

•

regulated investment companies;

 

•

dealers or traders in securities that use a mark-to-market method of tax accounting;

 

•

persons holding ADSs or Class A ordinary shares as part of a straddle, integrated or similar transaction; persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

 

•

entities classified as partnerships for U.S. federal income tax purposes and their partners;

 

•

tax-exempt entities, “individual retirement accounts” or “Roth IRAs”;

 

•

persons that acquired ADSs or Class A ordinary shares as compensation;

 

•

persons that own or are deemed to own ADSs or Class A ordinary shares representing 10% or more of our voting power or value; or

 

•

persons holding ADSs or Class A ordinary shares in connection with a trade or business outside the United States.

If a partnership (or other entity that is classified as a partnership for U.S. federal income tax purposes) owns ADSs or Class A ordinary shares, the U.S. federal income tax treatment of a partner will depend on the status of the partner and the activities of the partnership. Partnerships owning ADSs or Class A ordinary shares and their partners should consult their tax advisers as to their particular U.S. federal income tax consequences of owning and disposing of ADSs or Class A ordinary shares. The following is based on the Internal Revenue Code of 1986, as amended, or the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the income tax treaty between the United States and the PRC, or the Treaty, all as of the date hereof, any of which is subject to change, possibly with retroactive effect. The following assumes that each obligation under the deposit agreement and any related agreement will be performed in accordance with its terms.

 

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As used herein, a “U.S. Holder” is a person that is, for U.S. federal income tax purposes, a beneficial owner of the ADSs or Class A ordinary shares and:

 

•

a citizen or individual resident of the United States;

 

•

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or

 

•

an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

A U.S. Holder that owns ADSs generally will be treated as the owner of the underlying Class A ordinary shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying Class A ordinary shares represented by those ADSs. U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of ADSs or Class A ordinary shares in their particular circumstances.

Passive Foreign Investment Company Rules

In general, a non-U.S. corporation is a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 50% or more of the average value of its assets (generally determined on a quarterly basis) consists of assets that produce, or are held for the production of, passive income (the “asset test”), or (ii) 75% or more of its gross income consists of passive income. For purposes of the above calculations, a non-U.S. corporation that owns (or is treated as owning for U.S. federal income tax purposes), directly or indirectly, at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and gains from financial investments. Cash is generally a passive asset for these purposes. Goodwill (the value of which may be determined by reference to the excess of the sum of the corporation’s market capitalization and liabilities over the value of its assets) is generally characterized as an active asset to the extent it is associated with business activities that produce active income.

If the value of our goodwill is determined by reference to our market capitalization, then we would have had a negative amount of goodwill for a portion of our most recent taxable year ended on March 31, 2023. There is uncertainty as to how to apply the asset test is that situation. Taking into account the composition of our income and assets for that year, we believe it is reasonable to take the position that we were not a PFIC for our taxable year ended on March 31, 2023. However, due to the uncertainty described above, as well as uncertainties regarding the characterization and value of certain of our assets for purposes of the asset test, our PFIC status for our taxable year ended on March 31, 2023 is not entirely clear and the Internal Revenue Service may assert that we were a PFIC for that year. Furthermore, because of the substantial fluctuations in our market capitalization, there is a significant risk that we will be a PFIC for our current taxable year ending on March 31, 2024, and possibly future taxable years. We hold a substantial amount of cash and financial investments and while this continues to be the case, our PFIC status may depend on the average value of our goodwill. The value of our goodwill may be determined, in large part, by reference to our market capitalization, which has been volatile and generally in decline in recent years. As a result, there is a significant risk that we will be a PFIC for any taxable year because the average value of our goodwill (if any) and other active assets may not be sufficiently large in relation to the average value of our passive assets. Moreover, it is not entirely clear how the contractual arrangements between us, the VIEs and their nominal shareholders will be treated for purposes of the PFIC rules, and we may be or become a PFIC if the VIEs are not treated as owned by us for these purposes.

If we are a PFIC for any taxable year and any entity in which we own or are deemed to own equity interests (including our subsidiaries and the VIEs) is also a PFIC (any such entity, a “Lower-tier PFIC”), U.S. Holders will be deemed to own a proportionate amount (by value) of the shares of each Lower-tier PFIC and will be subject to U.S. federal income tax according to the rules described in the next paragraph on (i) certain distributions by a Lower-tier PFIC and (ii) dispositions of shares of Lower-tier PFICs, in each case as if the U.S. Holders held such shares directly, even though the U.S. Holder did not receive any proceeds of those distributions or dispositions.

 

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If we are a PFIC for any taxable year during which a U.S. Holder owns ADSs or Class A ordinary shares, and unless the mark-to-market election described in the subsequent paragraph applies, gain recognized by such U.S. Holder on a sale or other disposition (including certain pledges) of its ADSs or Class A ordinary shares will be allocated ratably over its holding period. The amounts allocated to the taxable year of the sale or disposition and to any year before we became a PFIC will be taxed as ordinary income. The amount allocated to each other taxable year will be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge will be imposed on the resulting tax liability for each such year. Furthermore, to the extent that distributions received by a U.S. Holder in any taxable year on its ADSs or Class A ordinary shares exceed 125% of the average of the annual distributions on the ADSs or Class A ordinary shares received during the preceding three taxable years or the U.S. Holder’s holding period, whichever is shorter, such excess distributions will be subject to taxation in the same manner. If we are a PFIC for any taxable year during which a U.S. Holder owns ADSs or Class A ordinary shares, we will continue to be treated as a PFIC with respect to the U.S. Holder for all succeeding years during which the U.S. Holder owns the ADSs or Class A ordinary shares, even if we cease to meet the threshold requirements for PFIC status, unless the U.S. Holder makes a timely “deemed sale” election, in which case any gain on the deemed sale will be taxed under the PFIC rules described above. U.S. Holders should consult their tax advisers regarding the advisability of making a deemed sale election in the event that we are a PFIC for any taxable year and cease to be a PFIC thereafter.

Alternatively, if we are a PFIC and if the ADSs are “regularly traded” on a “qualified exchange,” a U.S. Holder of ADSs may be able to make a mark-to-market election that would result in tax treatment different from the general tax treatment for PFICs described in the preceding paragraph. The ADSs will be treated as regularly traded for any calendar year in which more than a de minimis quantity of the ADSs are traded on a qualified exchange on at least 15 days during each calendar quarter. The NYSE, where the ADSs are listed, is a qualified exchange for this purpose, but there is no assurance that our ADSs will be regularly traded. If a U.S. Holder of ADSs makes the mark-to-market election, the U.S. Holder will recognize as ordinary income any excess of the fair market value of the ADSs at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ADSs over their fair market value at the end of the taxable year to the extent of the net amount of income previously included as a result of the mark-to-market election. If a U.S. Holder makes the election, the U.S. Holder’s tax basis in the ADSs will be adjusted to reflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition of ADSs in a year in which we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election, with any excess treated as capital loss). If a U.S. Holder makes the mark-to-market election, distributions paid on ADSs will be treated as discussed under “—Taxation of Distributions” below. U.S. Holders should consult their tax advisers regarding the availability and advisability of making a mark-to-market election in their particular circumstances. In particular, U.S. Holders should consider carefully the impact of a mark-to-market election with respect to their ADSs given that we may have Lower-tier PFICs, and there is no provision in the Code, Treasury regulations or other official guidance that would permit U.S. Holders to make a mark-to-market election with respect to any Lower-tier PFIC, the shares of which are not regularly traded. Therefore, if we are a PFIC for any taxable year, a U.S. Holder could be subject to the general PFIC rules described in the preceding paragraph with respect to any Lower-tier PFIC, even if the U.S. Holder makes a mark-to-market election with respect to us. A mark-to-market election will not be available for Class A ordinary shares unless they are regularly traded on a qualified exchange. Our Class A ordinary shares currently are not listed on any exchange and therefore, if our ADSs are delisted from trading on the NYSE, a mark-to-market election will not be available.

If we are a PFIC (or with respect to a particular U.S. Holder are treated as a PFIC) for a taxable year of ours in which we pay a dividend or for the prior taxable year, the favorable tax rate described above with respect to dividends paid to certain non-corporate U.S. Holders will not apply.

 

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We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.

If we are a PFIC for any taxable year during which a U.S. Holder owns any ADSs or Class A ordinary shares, subject to certain limited exceptions set forth in applicable Treasury regulations the U.S. Holder will be required to file annual reports with the Internal Revenue Service. U.S. Holders should consult their tax advisers regarding the determination of whether we are a PFIC for any taxable year and the potential application of the PFIC rules to their ownership of ADSs or Class A ordinary shares.

Taxation of Distributions

The following is subject to the discussion under “—Passive Foreign Investment Company Rules” above.

Distributions paid on the ADSs or Class A ordinary shares, other than certain pro rata distributions of ADSs or Class A ordinary shares, will be treated as dividends to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions will be reported by financial intermediaries to U.S. Holders as dividends. Dividends will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Subject to applicable limitations, dividends paid on our ADSs to certain non-corporate U.S. Holders may be taxable at a favorable rate, provided that we are not a PFIC for our taxable year in which the dividend is paid or the preceding taxable year. Furthermore, assuming we are not entitled to the benefits of the Treaty (which is the position we have taken), the favorable tax rate will not apply if our ADSs are delisted from trading on the NYSE. Non-corporate U.S. Holders should consult their tax advisers to determine whether the favorable rate may apply to dividends, if any, and whether they are subject to any special rules that limit their ability to be taxed at this favorable rate.

Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s, or in the case of ADSs, the depositary’s, receipt. The amount of any dividend income paid in non-U.S. currency will be the U.S. dollar amount calculated by reference to the spot rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the amount received. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.

Dividends will be treated as foreign-source income for foreign tax credit purposes. As described in “—People’s Republic of China Taxation,” dividends paid by us may be subject to PRC withholding tax. For U.S. federal income tax purposes, the amount of the dividend income will include any amounts withheld in respect of PRC withholding tax. Subject to applicable limitations, which vary depending upon the U.S. Holder’s circumstances, and the discussion below regarding certain Treasury regulations, PRC taxes withheld from dividend payments (at a rate not exceeding any applicable Treaty rate) will be creditable against a U.S. Holder’s U.S. federal income tax liability. The rules governing foreign tax credits are complex. For example, Treasury regulations provide that, in the absence of an election to apply the benefits of an applicable income tax treaty, in order for foreign income taxes to the creditable, the relevant foreign income tax rules must be consistent with certain U.S. federal income tax principles, and we have not determined whether the PRC income tax system meets these requirements. U.S. Holders should consult their tax advisers regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a credit, a U.S. Holder may elect to deduct creditable PRC taxes in computing its taxable income, subject to applicable limitations. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all creditable foreign taxes paid or accrued in the relevant taxable year.

Sale or Other Taxable Disposition of ADSs or Class A Ordinary Shares

The following is subject to the discussion under “—Passive Foreign Investment Company Rules” above.

 

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A U.S. Holder will recognize capital gain or loss on a sale or other taxable disposition of ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized on the sale or disposition and the U.S. Holder’s tax basis in the ADSs or Class A ordinary shares disposed of, in each case as determined in U.S. dollars. Such gain or loss will be long-term capital gain or loss if at the time of the sale or disposition the U.S. Holder has owned the ADSs or Class A ordinary shares for more than one year. Long-term capital gains recognized by non-corporate U.S. Holders are subject to tax rates that are lower than those applicable to ordinary income. The deductibility of capital losses is subject to limitations.

As described in “—People’s Republic of China Taxation”, gains on the sale of ADSs or Class A ordinary shares may be subject to PRC taxes. Under the Code, capital gains of U.S. persons are generally treated as U.S. source income. However, a U.S. Holder that is eligible for Treaty benefits may be able to elect to treat the gain as foreign-source income under the Treaty and claim foreign tax credit in respect of any PRC tax on dispositions. Under certain Treasury regulations, a U.S. Holder generally will be precluded from claiming a foreign tax credit with respect to PRC income taxes on gains from dispositions of ADSs or Class A ordinary shares if the U.S. Holder unless the U.S. Holder is eligible for Treaty benefits and elects to apply them. However, if a U.S. Holder is so precluded from claiming a foreign tax credit, it is possible that any PRC taxes on disposition gains may either be deductible or reduce the amount realized on the disposition. The rules governing foreign tax credits and deductibility of foreign taxes are complex. U.S. Holders should consult their tax advisers regarding the consequences of the imposition of any PRC tax on disposition gains, including the Treaty’s resourcing rule, the eligibility for the benefits of the Treaty in the U.S. Holders’ circumstances, the obligation to report a Treaty-based return position and any limitation on the creditability or deductibility of any PRC tax on disposition gains in their particular circumstances.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding, unless (i) the U.S. Holder is a corporation or other “exempt recipient” and (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against its U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

Certain U.S. Holders who are individuals (or certain specified entities) may be required to report information relating to their ownership of ADSs or Class A ordinary shares or non-U.S. accounts through which ADSs or Class A ordinary shares are held. U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to ADSs and Class A ordinary shares.

Legal Matters

We are being represented by Ellenoff Grossman & Schole LLP with respect to legal matters of United States federal securities. The validity of the ADSs offered in this offering and legal matters as to Cayman Islands law will be passed upon for us by Maples and Calder (Hong Kong) LLP. Certain legal matters as to PRC law will be passed upon for us by Commerce & Finance Law Offices. Ellenoff Grossman & Schole LLP may rely upon Maples and Calder (Hong Kong) LLP with respect to matters governed by Cayman Islands law and Commerce & Finance Law Offices and Jingtian & Gongcheng with respect to matters governed by PRC law.

Experts

The financial statements incorporated in this prospectus by reference to the Annual Report on Form 20-F for the year ended March 31, 2023 have been so incorporated in reliance on the report of PricewaterhouseCoopers

 

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Zhong Tian LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The office of PricewaterhouseCoopers Zhong Tian LLP is located at 42nd Floor, New Bund Center, 588 Dongyu Road, Shanghai, the People’s Republic of China.

 

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Incorporation of Documents by Reference

The SEC allows us to “incorporate by reference” into this prospectus the documents we file with, or furnish to, them, which means that we can disclose important information to you by referring you to these documents. The information that we incorporate by reference into this prospectus forms a part of this prospectus, and information that we file later with the SEC automatically updates and supersedes any information in this prospectus. We incorporate by reference into this prospectus the Annual Report on Form 20-F for the fiscal year ended March 31, 2023 as filed with the SEC on July 25, 2023.

We are also incorporating by reference all subsequent Annual Reports on Form 20-F that we file with the SEC and we may also incorporate certain reports on Forms 6-K that we furnish to the SEC by identifying in such Forms that they are being incorporated by reference into this prospectus supplement after the date of this prospectus supplement prior to the termination of this offering (if they state that they are incorporated by reference into this prospectus supplement). In all cases, you should rely on the later information over different information included in this prospectus supplement or any accompanying prospectus.

Unless expressly incorporated by reference, nothing in this prospectus supplement shall be deemed to incorporate by reference information furnished to, but not filed with, the SEC.

Any statement contained in a document incorporated by reference into this prospectus supplement shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement, in one of those other documents or in any other later filed document that is also incorporated by reference into this prospectus modifies or supersedes that statement. Any such statement so modified shall not be deemed, except as so modified, to constitute a part of this prospectus supplement. Any such statement so superseded shall be deemed not to constitute a part of this prospectus.

Any person receiving a copy of this prospectus supplement, including any beneficial owner, may obtain without charge, upon written or oral request, a copy of any of the documents incorporated by reference into this prospectus supplement, except for the exhibits to those documents unless the exhibits are specifically incorporated by reference into those documents. Requests should be directed to our principal executive office, Building 9, No. 388, Shengrong Road, Pudong New District, Shanghai 201210, the People’s Republic of China. Telephone number is +86-21-68826799.

You should rely only on information contained in, or incorporated by reference into, this prospectus supplement. We have not authorized anyone to provide you with information different from that contained in this prospectus or incorporated by reference in this prospectus. We are not making offers to sell the securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.

 

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Where You Can Find More Information

We have filed with the SEC a registration statement on Form F-3 under the Securities Act with respect to the offer and sale of securities pursuant to this prospectus supplement. This prospectus supplement does not contain all of the information set forth in the registration statement or the exhibits and schedules thereto in accordance with the rules and regulations of the SEC and no reference is hereby made to such omitted information. Statements made in this prospectus supplement concerning the contents of any contract, agreement or other document filed as an exhibit to the registration statement are summaries of all of the material terms of such contract, agreement or document, but do not repeat all of their terms. Reference is made to each such exhibit for a more complete description of the matters involved and such statements shall be deemed qualified in their entirety by such reference.

We are subject to the reporting requirements of the Exchange Act that are applicable to a foreign private issuer. In accordance with the Exchange Act, we file reports with the SEC, including annual reports on Form 20-F which are required to be filed within four months following our fiscal year end. Our fiscal year end is March 31 of each year. We also furnish to the SEC under cover of Form 6-K material information required to be made public in the Cayman Islands, filed with and made public by any stock exchange or automated quotation system or distributed by us to our shareholders. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders. In addition, our officers, directors and principal shareholders are exempt from the “short-swing profits” reporting and liability provisions contained in Section 16 of the Exchange Act and related Exchange Act rules.

The registration statement and the exhibits and schedules thereto, and reports and other information filed by us with the SEC may be inspected, without charge, and copies may be obtained at prescribed rates, at the public reference facility maintained by the SEC at its principal office at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference facility by calling 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically through the SEC’s Electronic Data Gathering, Analysis and Retrieval system, including the Company, which can be accessed at http://www.sec.gov.

 

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PROSPECTUS

US$260,000,000

 

Boqii Holding Limited

 

 

Class A Ordinary Shares

Warrants

Units

 

 

Boqii Holding Limited ( “the Company”) may offer from time to time up to a total amount of US$260,000,000, consisting of (i) Class A ordinary shares, par value US$0.001 per share, including American depositary shares, or ADSs, each representing 4.5 Class A ordinary shares, (ii) warrants to purchase Class A ordinary shares or other securities, (iii) units (collectively, the “Securities”), or any combination thereof, in one or more offerings, at prices and on terms described in one or more supplements to this prospectus.

Each time we sell Securities, we will provide a supplement to this prospectus that contains specific information about the offering and the terms of these Securities. The supplement may also add, update or change information contained in this prospectus. We may also authorize one or more free writing prospectuses to be provided in connection with a specific offering. You should read this prospectus, any prospectus supplement and any free writing prospectus carefully before you invest in any of our Securities.

We may sell the Securities independently or together with any other Securities registered hereunder to or through one or more underwriters, dealers and agents, or directly to purchasers, or through a combination of these methods, on a continuous or delayed basis. See “Plan of Distribution” in this prospectus. If any underwriters, dealers or agents are involved in the sale of any of the Securities, their names, and any applicable purchase price, fee, commission or discount arrangements between or among them, will be set forth, or will be calculable from the information set forth, in the applicable prospectus supplement.

Our ADSs are currently listed on the NYSE under the symbol “BQ.” As of November 14, 2022, the closing price of our ADSs on the NYSE was US$1.08 per ADS. Pursuant to General Instruction I.B.5 of Form F-3, in no event will we sell the Securities covered hereby in a public primary offering with a value exceeding more than one-third of the aggregate market value of our voting and non-voting common equity held by non-affiliates in any 12-month period so long as the aggregate market value of our outstanding voting and non-voting common equity held by non-affiliates remains below US$75,000,000. During the 12 calendar months prior to and including the date of this prospectus, we have not offered or sold any securities pursuant to General Instruction I.B.5 of Form F-3.

Investing in our Securities involves risks. You should read the “Risk Factors” in Item 3.D of our most recent annual report on Form 20-F incorporated by reference in this prospectus, the “Risk Factors” of this prospectus, and in any applicable prospectus supplement(s), any related free writing prospectus and the documents we incorporate by reference in this prospectus before investing in our Securities.

Boqii Holding Limited is a Cayman Islands holding company with no business operations. Our corporate structure involves unique risks to investors in the ADSs. The Company conducts its operations in China through its PRC subsidiaries and the consolidated variable interest entities, or the VIEs, and the VIEs’ subsidiaries. The Company, its shareholders who are non-PRC residents and its subsidiaries do not and are not legally permitted to have any equity interests in the VIEs as current PRC laws and regulations restrict foreign investment in companies that engage in value-added telecommunication services and certain other restricted services related to our businesses. As a result, the Company operates relevant businesses in China through certain contractual arrangements by and among its PRC subsidiaries (namely Xingmu WFOE, Shanghai Xincheng and Meiyizhi WFOE, or collectively, the WFOEs), the VIEs and the respective shareholders of the VIEs. This structure allows the WFOEs to exercise effective control over the VIEs, and be considered the primary beneficiary of the VIEs, which serves the purpose of consolidating the VIEs’ operating results in the Company’s financial statements under the U.S. GAAP. This structure also provides contractual exposure to foreign investment in such companies. Investors in the Company’s ADSs are purchasing equity securities of a Cayman Islands holding company rather than equity securities issued by the Company’s subsidiaries and the VIEs. The securities offered in this prospectus are securities of our Cayman Islands holding company, not of its operating subsidiaries or the VIEs. Investors of the Company’s ADSs may never hold equity interests in our PRC operating subsidiaries or the VIEs. As used in this prospectus, “Boqii,” “we,” “us,” “our company,” “the Company,” “the Group” and “our” refer to Boqii Holding Limited, a Cayman Islands exempted company and its subsidiaries and, in the context of describing our operations and consolidated financial information, its VIEs and their respective subsidiaries, “the VIEs” refers to the consolidated PRC variable interest entities, including Suzhou Taicheng, Shanghai Guangcheng, Nanjing Xingmu and Suzhou Xingyun.

We and our investors face significant uncertainty about potential future actions by the PRC government that could affect the legality and enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of our company as a whole. As of the date of this prospectus, to the best knowledge of our Company, our directors and management, the VIE agreements have not been tested in a court of law in the PRC. If the PRC government deems that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to material penalties or be forced to relinquish our interests in those operations or otherwise significantly change our corporate structure. Our ADSs may decline in value or become worthless, if we are unable to claim our contractual control rights over the assets of the VIEs that conduct substantially all of our operations in China. For a detailed description of the risks associated with our corporate structure, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Corporate Structure and Contractual Arrangements” in our annual report on Form 20-F for the fiscal year ended March 31, 2022 filed with the SEC on July 27, 2022 (the “FY 2022 Form 20-F”) and “Risk Factors—Risks Related to Our Corporate Structure and Contractual Arrangements” in this prospectus.

Further, we are subject to certain legal and operational risks associated with the operations of our subsidiaries and the VIEs in the PRC. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material negative change in our subsidiaries’ and the VIEs’ operations, significant depreciation of the value of our ADSs, or a complete hindrance of our ability to offer or continue to offer our securities to investors, which could cause the value of your securities to become worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in the PRC with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over PRC-based companies listed overseas using the VIE structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact of such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on a U.S. or other foreign exchange. For a detailed description of risks related to doing business in China, see “Item 3. Key Information—3.D. Risk Factor—Risks Related to Doing Business in China” in our FY 2022 Form 20-F and “Risk Factors—Risks Related to Doing Business in China—PRC laws and regulations regarding data security and cybersecurity are evolving. These laws and regulations are subject to change and substantial uncertainties, and could have material impact on our business operation” in this prospectus.

Our ADSs will be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the Public Company Accounting Oversight Board, or the PCAOB, is unable to inspect or fully investigate auditors located in China for three consecutive years. The trading prohibition could be accelerated to 2023 if the Accelerating Holding Foreign Companies Accountable Act is enacted. The process for implementing trading prohibitions pursuant to the HFCAA will be based on a list of registered public accounting firms that the PCAOB has been unable to inspect and investigate completely as a result of a position taken by a non-U.S. government, or the Relevant Jurisdiction. The first such list was included in a release by the PCAOB on December 16, 2021, or the PCAOB December 2021 Release, and all PCAOB-registered firms in China, including our auditor, were included on that list. We were conclusively identified as a “Commission-Identified Issuer” under the HFCAA on August 22, 2022. See https://www.sec.gov/hfcaa. Such identification and other efforts under the HFCAA to increase U.S. regulatory access to audit information could cause investment uncertainties for affected issuers, including us, which could increase the volatility of the trading price of our ADSs. On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission, or the CSRC, and the Ministry of Finance of PRC, or the Protocol, taking the first step toward opening access for the PCAOB to inspect and investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. Furthermore, the PCAOB will need to reassess by the end of 2022 whether China remains a jurisdiction where the PCAOB is not able to inspect and investigate completely auditors registered with the PCAOB. However, there are uncertainties with respect to regulatory cooperation between the PCAOB and the Chinese regulators. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Such risks could result in a material change in our operations and/or the value of our ADSs or could significantly limit or completely hinder our ability to offer or continue to offer ADSs and/or other securities to investors and cause the value of such securities to significantly decline or be worthless. For a detailed description of risks related to HFCAA, see “Risk Factors—Risks Related to Doing Business in China—Our ADSs will be prohibited from trading in the United States under the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment” in this prospectus. In addition, the inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in our ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

We currently do not have cash management policies that dictate how funds are transferred between us, our subsidiaries and the VIEs. In practice, we estimate and allocate funds to our WFOE and the VIEs based on their respective available cash balances and forecasted cash requirements. For details, see “Prospectus Summary—Cash Flows through Our Organization” included below in this prospectus. As of March 31, 2022, Boqii Holding Limited had made cumulative capital contributions of RMB1,065.1 million to its PRC subsidiaries through intermediate holding companies, and were accounted as for long-term investments of Boqii Holding Limited. Furthermore, funds equivalent to RMB9.8 million and RMB31.4 million were provided to the PRC subsidiaries as loans in 2021 and 2022, which were accounted as intra-Group payables due to the Group’s entities. These funds have been used by the PRC subsidiaries for their operations. The VIEs may transfer cash to the relevant WFOEs by paying service fees according to the exclusive business cooperation agreements. Pursuant to these agreements between each of the VIEs and its corresponding WFOEs, each of the VIEs agrees to pay the relevant WFOE for services related to design and maintenance of the E-Commerce platform, consulting services, technical training, research, planning and development of the market and customer support at an amount based on 100% of the balance of the gross consolidated profits of each VIE after offsetting the accumulated losses for the preceding financial years and deducting the working capital, expenses, taxes and other statutory contributions required for any financial year, or the amount determined by the WFOE in accordance with the terms of the agreements. Considering the future operating and cash flow needs of the VIEs, for the years ended March 31, 2020, 2021 and 2022, no service fees were charged to the VIEs by the WFOEs, and no payments were made by the VIEs under these agreements. As of March 31, 2022, the VIEs have not distributed earnings or settled any amounts owed to us under the VIE agreements. However, if there is any amount payable to relevant WFOEs under the VIE agreements, the VIEs plan to settle the amount accordingly. For more information, see “Item 4. Information on the Company—4.A. History and Development of the Company—Recent Regulatory Development—Condensed Consolidating Schedule” and the consolidated financial statements in our FY 2022 Form 20-F and the condensed consolidating schedule included elsewhere in this prospectus. There are limitations on our ability to transfer cash between the Company, its subsidiaries and the VIEs, and there is no assurance that PRC government will not intervene or impose restrictions on the ability of the Company, its subsidiaries and the VIEs to transfer cash. For more information, see “Item 4. Information on the Company—4.A. History and Development of the Company—Recent Regulatory Development—Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors” in our FY 2022 Form 20-F and “Prospectus Summary—Cash Flows through Our Organization—Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors” included elsewhere in this prospectus.

As of the date of this prospectus, the Company has not declared or paid any cash dividend, dividend in kind or distributions, and has no plan to declare or pay any dividends or distributions in the near future on its shares or the ADSs representing its Class A ordinary shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. For details

regarding the payments between the Company, its subsidiaries and the VIEs, see “Prospectus Summary—Cash Flows through Our Organization” in this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                    , 2022.

TABLE OF CONTENTS

 

		Page
ABOUT THIS PROSPECTUS			1
INCORPORATION OF DOCUMENTS BY REFERENCE			3
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS			4
PROSPECTUS SUMMARY			6
RISK FACTORS			34
USE OF PROCEEDS			49
DESCRIPTION OF SHARE CAPITAL			50
DESCRIPTION OF AMERICAN DEPOSITARY SHARES			61
DESCRIPTION OF WARRANTS			69
DESCRIPTION OF UNITS			70
PLAN OF DISTRIBUTION			71
TAXATION			74
ENFORCEABILITY OF CIVIL LIABILITIES			75
LEGAL MATTERS			77
EXPERTS			78
WHERE YOU CAN FIND MORE INFORMATION ABOUT US			79

ABOUT THIS PROSPECTUS

Before you invest in any of our securities, you should carefully read this prospectus and any prospectus supplement, together with the additional information described in the sections entitled “Where You Can Find More Information About Us” and “Incorporation of Documents by Reference” in this prospectus.

In this prospectus, unless otherwise indicated or unless the context otherwise requires:

 

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“ADSs” refers to the American depositary shares, each representing 4.5 Class A ordinary shares;

 

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“Boqii,” “we,” “us,” “our company,” “the Company,” “the Group” and “our” refer to Boqii Holding Limited, a Cayman Islands exempted company and its subsidiaries and, in the context of describing our operations and consolidated financial information, its VIEs and their respective subsidiaries;

 

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“brand owner” refers to a company engaging in the production and sale of branded pet goods;

 

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“brand partner” refers to a specific brand owner whose products are sold via our online sales platforms and offline network;

 

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“Class A ordinary shares” refers to our Class A ordinary shares, par value US$0.001 per share;

 

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“Class B ordinary shares” refers to our Class B ordinary shares, par value US$0.001 per share;

 

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“China” or “the PRC” refers to the People’s Republic of China, including Hong Kong and Macau and, only for the purpose of this prospectus, excluding Taiwan; the only instances in which “China” or “the PRC” do not include Hong Kong or Macau are when used in the case of laws and regulations, including, among others, tax matters, adopted by the People’s Republic of China; the legal and operational risks associated with operating in China also apply to our operations in Hong Kong;

 

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“GMV” refers to gross merchandise volume, which is the total value of confirmed orders placed with us and sold through distribution model or drop shipping model where we act as a principal in the transaction regardless of whether the products are delivered or returned, calculated based on the listed prices of the ordered products without taking into consideration any discounts. With respect to products sold by Xingmu, such GMV is calculated based on the suggested retail prices of the ordered products without taking into consideration any discounts and regardless of whether the products are delivered or returned. For the avoidance of doubt, the total GMV amounts disclosed in this prospectus (i) includes GMV of products sold by Xingmu, (ii) excludes products sold through consignment model and (iii) excludes the value of services offered by us;

 

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“KOL” refers to key opinion leaders, or individuals who have the power to engage and impact people within a specific community or field;

 

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“MAU” refers to monthly active user, or the aggregate number of unique devices that were used to access our online platforms at least once in a given month. Our MAUs are calculated using internal company data, treating each distinguishable device as a separate MAU even though some users may access our platforms using more than one device and multiple users may access our platforms using the same device;

 

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“online platforms” refers to our online sales platforms and our content platform;

 

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“online sales platforms” refer to Boqii Mall, our flagship stores on third-party e-commerce platforms and our proprietary SaaS system;

 

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“MAA” means the twelfth amended and restated memorandum and articles of association of our company currently effective;

 

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“RMB” or “Renminbi” refers to the legal currency of the People’s Republic of China;

 

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“Shanghai Guangcheng” refers to Guangcheng (Shanghai) Information Technology Co., Ltd.;

 

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“Meiyizhi WFOE” refers to Shanghai Meiyizhi Supply Chain Co., Ltd.;

 

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“Shanghai Xincheng” refers to Xincheng (Shanghai) Information Technology Co., Ltd.;

 

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“shares” or “ordinary shares” refers to our Class A ordinary shares and Class B ordinary shares, par value US$0.001 per share;

 

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“Suzhou Taicheng” refers to Suzhou Taicheng Supply Chain Co., Ltd.;

 

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“Suzhou Xingyun” refers to Suzhou Xingyun Yueming Supply Chain Co., Ltd.;

 

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“US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States;

 

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“variable interest entities,” or “VIEs,” refers to the PRC entities of which we have power to control the management, and financial and operating policies and have the right to recognize and receive substantially all the economic benefits and in which we have an exclusive option to purchase all or part of the equity interests at the minimum price possible to the extent permitted by PRC law;

 

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“Xingmu” or “Nanjing Xingmu” refers to Nanjing Xingmu Biotechnology Co., Ltd.;

 

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“Xingmu WFOE” refers to Nanjing Xinmu Information Technology Co., Ltd.; and

 

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“Yoken WFOE” refers to Chengdu Chongaita Information Technology Co., Ltd.

This prospectus is part of a registration statement on Form F-3 that we filed with the United States Securities and Exchange Commission, or SEC, utilizing a shelf registration process permitted under the Securities Act of 1933, or the Securities Act. By using a shelf registration statement, we may sell any of our securities from time to time and in one or more offerings. Each time we sell securities, we may provide a supplement to this prospectus that contains specific information about the securities being offered and the terms of that offering. The supplement may also add, update or change information contained in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the prospectus supplement.

You should rely only on the information contained or incorporated by reference in this prospectus, any applicable prospectus supplement or any related free writing prospectus that we may authorize to be delivered to you. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We will not make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or the applicable supplement to this prospectus is accurate as of its respective date, and that any information incorporated by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

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INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows us to incorporate by reference the information we file with them. This means that we can disclose important information to you by referring you to those documents. Each document incorporated by reference is current only as of the date of such document, and the incorporation by reference of such documents should not create any implication that there has been no change in our affairs since such date. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. When we update the information contained in documents that have been incorporated by reference by making future filings with the SEC, the information incorporated by reference in this prospectus is considered to be automatically updated and superseded. In other words, in the case of a conflict or inconsistency between information contained in this prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later.

We incorporate by reference the documents listed below:

 

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the annual report on Form 20-F for the fiscal year ended March 31, 2022 filed with the SEC on July 27, 2022, or the FY 2022 Form 20-F;

 

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the report on Form 6-K regarding the senior management change furnished with the SEC on September 6, 2022 and any exhibit contained therein;

 

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the report on Form 6-K regarding our unaudited financial results for the first quarter ended June 30, 2022 furnished with the SEC on September 15, 2022 and any exhibit contained therein; and

 

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with respect to each offering of securities under this prospectus, all our subsequent annual reports on Form 20-F and any report on Form 6-K that indicates that it is being incorporated by reference, in each case, that we file with the SEC on or after the date of this prospectus and until the termination or completion of the offering under this prospectus.

Our FY 2022 Form 20-F contains a description of our business and audited consolidated financial statements with a report by our independent auditor. These financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Unless expressly incorporated by reference, nothing in this prospectus shall be deemed to incorporate by reference information furnished to, but not filed with, the SEC. We will provide to you, upon your written or oral request, without charge, a copy of any or all of the documents we refer to above which we have incorporated in this prospectus by reference, other than exhibits to those documents unless such exhibits are specifically incorporated by reference in the documents. You should direct your requests to our principal executive office located at Building 9, No. 388, Shengrong Road, Pudong New District, Shanghai 201210, the People’s Republic of China. Our telephone number at this address is +86-21-68826799.

 

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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This prospectus, any accompanying prospectus supplement and related free writing prospectus, and the information incorporated by reference herein and therein may contain forward-looking statements that relate to our current expectations and views of future events. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

 

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our mission and strategies;

 

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our future business development, financial conditions and results of operations;

 

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the expected growth of the online retail and pet industries in China;

 

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our expectations regarding demand for and market acceptance of our products and services;

 

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our expectations regarding keeping and strengthening our relationships with customers, users, KOLs, brand partners, manufacturers, strategic partners, offline pet stores and pet hospitals and other stakeholders;

 

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competition in our industry;

 

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general economic and business condition in China;

 

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global or national health concerns, including the outbreak of pandemic or contagious diseases such as the pandemic of COVID-19;

 

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legislative and regulatory developments related to U.S.-listed China-based companies due to lack of PCAOB inspection;

 

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relevant government policies and regulations relating to our industry; and

 

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other risk factors discussed under “Item 3. Key Information—3.D. Risk Factors” in our FY 2022 Form 20-F.

You should read this prospectus, any accompanying prospectus supplement and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus and any accompanying prospectus supplement include additional factors that could adversely affect our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

Forward-looking statements speak only as of the date they are made, and except to the extent required by applicable laws and regulations, we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events. This prospectus contains or incorporates by reference data, including we obtained from various government and private publications. Statistical data in these

 

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publications also include projections based on a number of assumptions. Our industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of our ADSs. In addition, the rapidly changing nature of pet industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

 

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