Core Insights - Tian Ruixiang Holdings Limited (TIRX) is transitioning from a traditional insurance broker to a technology-driven health insurance innovator, highlighted by its recent acquisition of Ucare for $150 million in stock [1][2]. Group 1: Market Opportunity - TIRX's acquisition of Ucare positions the company to tap into China's expanding health insurance market, projected to grow from approximately $126 billion today to $280 billion by 2030 [2]. - The domestic healthcare IT market in China is expected to reach around $35 billion by 2030, growing at a CAGR of approximately 15.6%, providing a favorable environment for TIRX's business model [4]. Group 2: Business Model and Revenue Generation - Ucare's cloud-native platform, supported by over 4,000 hospital relationships, allows TIRX to scale with minimal incremental costs, achieving gross margins above 90% and generating recurring subscription-based revenue [3]. - The integration of Ucare's AI-driven analytics enhances TIRX's revenue growth prospects, complementing its existing brokerage commission income [3][5]. Group 3: Growth Projections - TIRX is projected to achieve a revenue CAGR of 35% through FY28 on a pro forma basis, driven by the adoption of its enhanced AI-brokerage business model [4]. - The company is also exploring expansion opportunities beyond Mainland China, starting with its entry into the Hong Kong market [4]. Group 4: Valuation - TIRX's valuations are currently below most selected comparables on both a Price and EV basis, indicating potential for upside as revenue growth prospects improve [5].

Core Viewpoint - TIAN RUIXIANG Holdings Ltd has completed the acquisition of Ucare Inc, enhancing its position in the health insurance sector through a cloud-based AI-driven platform valued at US$150 million [1][2]. Company Overview - TIAN RUIXIANG Holdings Ltd is an insurance broker based in Beijing, China, offering a variety of insurance products, including property and casualty insurance, health insurance, and life insurance [5]. - Ucare Inc. specializes in innovative healthcare solutions aimed at reducing fraud, waste, and administrative costs in the healthcare system [6]. Acquisition Details - The acquisition involved the issuance of 101,486,575 Class A ordinary shares at a par value of US$0.025, marking a significant step in TRX's strategy to expand its distribution channels [2]. - The transaction is valued at US$150 million, indicating a strong commitment to growth in the health insurance market [1]. Strategic Implications - The integration of Ucare's generative AI platform into TRX's operations is expected to enhance underwriting and claims processing, thereby improving pricing precision and operational efficiency [3]. - TRX aims to leverage Ucare's existing relationships with over 4,000 hospitals to create unique health insurance service offerings [3]. Leadership Insights - The CEO of TRX expressed enthusiasm about the acquisition, highlighting its potential to transform health insurance design and service delivery [4]. - Ucare's CEO noted that joining TRX will accelerate their mission to innovate in hospital and health insurance risk management [4].

Core Viewpoint - TIAN RUIXIANG Holdings Ltd plans to acquire Ucare Inc., a cloud-based AI-driven health insurance risk management platform, in an all-share deal valued at US$150 million, aiming to enhance growth opportunities in the health insurance sector [1][4]. Company Summary - TIAN RUIXIANG Holdings Ltd is an insurance broker based in China, distributing a variety of insurance products, including property and casualty insurance, health insurance, and life insurance [7]. - Ucare Inc. operates the only cloud-based AI-driven hospital and health insurance risk management platform in China, serving over 4,000 hospitals and contributing to a reduction of US$6.82 billion in avoidable healthcare expenditures as of December 2024 [3][8]. Acquisition Details - The acquisition involves a share exchange agreement where Ucare's shareholders will receive 101,486,575 newly-issued class A ordinary shares of TRX, representing approximately 91.75% of TRX's total issued Class A shares and about 13.70% of its total voting power upon closing [2][5]. - The transaction is expected to close around July 2025, with shares held in escrow until Ucare achieves a cumulative revenue target of at least RMB150 million over three years post-closing [5]. Strategic Implications - The acquisition is positioned to leverage Ucare's AI-driven data analytics to create differentiated health insurance products and strengthen distribution within hospital systems, aligning with the rapid expansion of China's health insurance market [4]. - Ucare's integration into TRX is expected to enhance the company's ability to design tailored insurance products, streamline claims, and diversify revenues, marking a significant step towards a data-powered insurance service model [6].

PART I [ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](index=8&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) This section is not applicable as stated in the report - The report states that this item is not applicable[22](index=22&type=chunk) [ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE](index=8&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) This section is not applicable as stated in the report - The report states that this item is not applicable[23](index=23&type=chunk) [ITEM 3. KEY INFORMATION](index=8&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section introduces the company's Cayman Islands holding structure, its operations via a Variable Interest Entity (VIE) in China, and key risks including PRC regulations and HFCAA, alongside selected condensed consolidating financial data for fiscal years 2022-2024 - The company is a Cayman Islands holding company, not a Chinese operating company, conducting all operations in China through a VIE, Zhejiang Tianruixiang Insurance Broker Co. LTD. (TRX ZJ), controlled via contractual agreements[10](index=10&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - The VIE structure poses unique risks, as the contractual agreements have not been tested in a Chinese court, and the PRC government could disallow this structure, materially harming the company's operations and share value[25](index=25&type=chunk) - The company is subject to risks from PRC regulatory actions, including those related to cybersecurity and overseas listings, which as of the report date have not materially impacted the business, but future interpretations remain uncertain[26](index=26&type=chunk)[30](index=30&type=chunk) - The company's auditor, RBSM LLP, is a U.S.-based firm regularly inspected by the PCAOB, making it currently compliant with the Holding Foreign Companies Accountable Act (HFCAA), though future inability to inspect the auditor could lead to delisting[27](index=27&type=chunk) Selected Condensed Consolidating Balance Sheet as of October 31, 2024 (in USD) | Account | TRX (Cayman Islands) | Subsidiary (Hong Kong) | WFOE (PRC) | VIE and its Subsidiaries (PRC) | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | $36,585,985 | $16,202,577 | $875,274 | $31,895,377 | $39,979,194 | | **Total Liabilities** | $2,695,855 | $9,385,097 | $524,893 | $4,221,235 | $6,089,064 | | **Total Equity** | $33,890,130 | $6,817,480 | $350,381 | $27,674,142 | $33,890,130 | Selected Condensed Consolidating Statement of Operations for the Year Ended October 31, 2024 (in USD) | Account | TRX (Cayman Islands) | Subsidiary (Hong Kong) | WFOE (PRC) | VIE and its Subsidiaries (PRC) | Consolidated Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $0 | $0 | $0 | $3,219,336 | $3,219,336 | | **Net (Loss) Income** | $(3,986,928) | $49,841 | $1,698,626 | $0 | $(3,986,928) | | **Comprehensive (Loss) Income** | $(3,986,928) | $50,366 | $1,685,144 | $2,495,068 | $(3,220,343) | [Risk Factors](index=19&type=section&id=D.%20Risk%20Factors) This subsection details significant business, corporate structure, China-specific, and share-related risks, including intense competition, regulatory changes, VIE instability, and the dilutive dual-class share structure - **Business & Industry Risks:** The company faces risks from its limited operating history, intense competition, reliance on commission rates set by insurance companies, and a highly regulated environment in China, with the failure of its online platform, Needbao, also posing a risk to future growth[47](index=47&type=chunk)[57](index=57&type=chunk)[62](index=62&type=chunk) - **Corporate Structure Risks:** The VIE agreements that provide control over PRC operations have not been tested in court and may be unenforceable, with a critical risk being the judicial freezing of the VIE (TRX ZJ) equity shares due to debts of its sole shareholder, potentially leading to a loss of control and rendering the company's securities worthless[48](index=48&type=chunk)[77](index=77&type=chunk)[87](index=87&type=chunk) - **Risks of Doing Business in China:** The company is subject to substantial PRC government influence, potential regulatory crackdowns on overseas-listed companies, currency conversion controls, and uncertainties regarding the application of PRC laws, where the legal system's opaqueness could impede the enforcement of its rights[50](index=50&type=chunk)[117](index=117&type=chunk)[128](index=128&type=chunk) - **Share & Market Risks:** The dual-class share structure gives Mufang Gao, through Unitrust Holdings Limited, control of **98.66%** of the voting power, significantly limiting the influence of Class A shareholders, with other risks including market volatility, the lack of a dividend policy, and potential delisting under the HFCAA if the auditor becomes un-inspectable[52](index=52&type=chunk)[97](index=97&type=chunk)[174](index=174&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=54&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of the company's history, insurance brokerage business model in China via its VIE, organizational structure, and property, detailing the contractual VIE agreements [History and Development of the Company](index=54&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This subsection outlines the company's corporate history, from the VIE's formation in 2010 and its acquisition, to the establishment of the current holding structure and its Nasdaq IPO in January 2021 - The VIE entity, TRX ZJ, was formed in 2010, and the current holding company, TIAN RUIXIANG Holdings Ltd (TRX), was established in the Cayman Islands in 2019[198](index=198&type=chunk)[201](index=201&type=chunk) - The company's Class A Ordinary Shares began trading on the Nasdaq Capital Market under the symbol "TIRX" on January 27, 2021[201](index=201&type=chunk) [Business Overview](index=55&type=section&id=B.%20Business%20Overview) The company operates as an insurance broker in China via its VIE, earning commissions from property & casualty and other insurance products, with high revenue concentration from top partners and the discontinuation of its Needbao platform - The company distributes property and casualty insurance (commercial property, liability, accidental, auto) and other insurance (health, life), does not assume underwriting risks, and earns revenue from commissions[208](index=208&type=chunk)[209](index=209&type=chunk) Revenue Trend (in USD) | Fiscal Year Ended | Revenue | YoY Change | | :--- | :--- | :--- | | Oct 31, 2024 | $3,219,336 | +158.7% | | Oct 31, 2023 | $1,244,247 | -8.0% | | Oct 31, 2022 | $1,351,909 | -51.6% | Commission Revenue Breakdown by Product (FY 2024) | Insurance Product | Commissions (USD) | % of Total | | :--- | :--- | :--- | | Liability Insurance | $2,197,113 | 68.2% | | Commercial Property Insurance | $536,071 | 16.6% | | Accidental Insurance | $437,308 | 13.6% | | Automobile Insurance | $42,788 | 1.4% | | Other Insurance | $6,056 | 0.2% | | **Total** | **$3,219,336** | **100.0%** | - The company has a high concentration of revenue from its top insurance partners, with the top five partners accounting for **90.7%** of total revenues in fiscal year 2024, and China Pacific Property Insurance Co., Ltd. alone contributing **51.9%**[210](index=210&type=chunk)[236](index=236&type=chunk) - The company's online insurance platform, Needbao, was discontinued due to the negative impact of the COVID-19 pandemic, resulting in an impairment loss of **$0.12 million** in fiscal year 2022[62](index=62&type=chunk)[228](index=228&type=chunk) [Organizational Structure](index=77&type=section&id=C.%20Organizational%20Structure) This subsection details the company's corporate structure, comprising its Cayman holding company, Hong Kong subsidiary, PRC WFOE, and VIE, explaining the four key contractual arrangements that enable WFOE control and financial consolidation - The company controls its PRC operating entity, TRX ZJ, through a series of VIE agreements between its WFOE and TRX ZJ's sole shareholder, WDZG Consulting[304](index=304&type=chunk)[305](index=305&type=chunk) - The VIE Agreements consist of four key contracts designed to provide effective control and transfer economic benefits: - **Exclusive Business Cooperation and Service Agreement:** WFOE provides exclusive services to TRX ZJ in exchange for service fees equal to TRX ZJ's net income - **Equity Interest Pledge Agreement:** TRX ZJ's shareholder pledges all its equity to WFOE to guarantee performance - **Share Disposal and Exclusive Option to Purchase Agreement:** WFOE has the exclusive right to purchase all equity in TRX ZJ - **Proxy Agreement:** TRX ZJ's shareholder grants WFOE its voting rights[307](index=307&type=chunk)[310](index=310&type=chunk)[313](index=313&type=chunk)[316](index=316&type=chunk) [Property, Plants and Equipment](index=80&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) The company operates from leased office spaces, reporting total rental expenses of approximately $0.04 million, $0.08 million, and $0.32 million for fiscal years 2024, 2023, and 2022 respectively - The company leases all its office spaces, with total rental expenses amounting to approximately **$0.04 million** in fiscal year 2024, a significant decrease from **$0.32 million** in fiscal year 2022[318](index=318&type=chunk) [ITEM 4A. UNRESOLVED STAFF COMMENTS](index=80&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[319](index=319&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=80&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial condition and operations for fiscal years 2022-2024, noting FY2024 revenue growth to $3.22 million, a widened net loss of $3.99 million due to increased expenses and impairment, and liquidity supported by cash and investments despite currency risks Consolidated Results of Operations (FY2024 vs. FY2023) | Account | FY 2024 (USD) | FY 2023 (USD) | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | $3,219,336 | $1,244,247 | 158.7% | | **Loss from Operations** | $(4,645,247) | $(3,016,326) | 54.0% | | **Net Loss** | $(3,986,928) | $(2,453,982) | 62.5% | - The **158.7%** revenue increase in FY2024 was driven by significant growth in commissions from liability insurance (approx. **+$1.22 million**), accidental insurance (approx. **+$0.42 million**), and commercial property insurance (approx. **+$0.39 million**)[362](index=362&type=chunk) - General and administrative expenses increased by **146.5%** in FY2024, primarily due to a **$1.68 million** impairment loss on intangible assets related to the Peak acquisition and a **$1.24 million** increase in compensation and benefits, largely from stock-based compensation[368](index=368&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk) Summary of Cash Flows (FY2024 vs. FY2023) | Cash Flow Activity | FY 2024 (USD) | FY 2023 (USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $897,894 | $994,304 | | Net cash used in investing activities | $(1,821,085) | $(992,717) | | Net cash provided by (used in) financing activities | $1,188,823 | $(283) | - The company acquired Peak Consulting Services Limited in February 2024, treating the acquisition as an asset purchase, with the **$1.8 million** excess purchase price allocated to intangible assets (regulatory licenses) which were subsequently fully impaired in October 2024[429](index=429&type=chunk)[430](index=430&type=chunk)[720](index=720&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=102&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section provides information on the company's directors, executive officers, and employees, including compensation, share incentive plans, board structure, and a significant decrease in employee count to 8 as of October 31, 2024 - As of the report date, the board consists of five directors: Sheng Xu (Chairman & CEO), Qin'er Zhou, Ning Xue (Independent), Yu He (Independent), and Jingyu Li (Independent)[438](index=438&type=chunk)[470](index=470&type=chunk) Executive Compensation Summary (FY 2024) | Name and Principal Position | Salary (USD) | Total (USD) | | :--- | :--- | :--- | | Sheng Xu (CEO, Chairman) | $87,050 | $87,050 | | Yue Wang (CFO) | $20,071 | $20,988 | | Zhe Wang (former CEO) | $64,799 | $64,799 | | Mingxiu Luan (former CFO) | $69,167 | $69,167 | - The company has two active share incentive plans: the 2021 Plan (**0.20 million** Class A shares authorized) and the 2023 Plan (**1.00 million** Class A shares authorized), with nearly all authorized shares under both plans granted as of the report date[452](index=452&type=chunk)[461](index=461&type=chunk)[453](index=453&type=chunk)[462](index=462&type=chunk) - Employee count has decreased significantly, from **22** as of October 31, 2022, to **8** as of October 31, 2024, attributed to the negative impact of the COVID-19 pandemic[483](index=483&type=chunk) - Unitrust Holdings Limited, controlled by Mufang Gao, holds **100%** of Class B Ordinary Shares and **6.25%** of Class A Ordinary Shares, giving it **98.66%** of the total voting power[487](index=487&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=110&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details major shareholders and related party transactions, primarily the VIE contractual arrangements, alongside borrowings, a significant note receivable, and amounts due to/from executive team family members - The contractual VIE arrangements with TRX ZJ and its shareholder, WDZG Consulting, constitute the most significant related party transactions[490](index=490&type=chunk) - On September 19, 2024, the company entered into a promissory note receivable with Xian Xu, TRX ZJ's manager, with an outstanding balance of **$1.37 million** as of October 31, 2024[494](index=494&type=chunk)[793](index=793&type=chunk) Due to Related Parties (as of Oct 31, 2024) | Name of Related Party | Amount (USD) | | :--- | :--- | | Mufang Gao (Mother of former CEO) | $768,506 | | Baohai Xu (Manager) | $503,713 | | Feng'e Feng (Mother of CEO) | $186,571 | | Mingxiu Luan (Former CFO) | $123,436 | | Zhe Wang (Former CEO) | $121,195 | | **Total** | **$1,703,421** | [ITEM 8. FINANCIAL INFORMATION](index=113&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the appended consolidated financial statements, states no material legal proceedings, and outlines the company's policy of retaining earnings for expansion, with future dividends dependent on PRC subsidiary distributions and regulations - The company has no present plan to pay any cash dividends and intends to retain future earnings for business operations and expansion[504](index=504&type=chunk) - As a holding company, its ability to pay dividends relies on distributions from its PRC subsidiary, which are subject to PRC regulations and profit availability[505](index=505&type=chunk) - The company is not currently involved in any material legal or administrative proceedings[503](index=503&type=chunk) [ITEM 9. THE OFFER AND LISTING](index=114&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details the trading market for the company's Class A Ordinary Shares, which have been listed on the Nasdaq Capital Market under the symbol "TIRX" since January 27, 2021 - The company's Class A Ordinary Shares are listed on the Nasdaq Capital Market under the symbol "TIRX"[508](index=508&type=chunk)[509](index=509&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=114&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides additional information on corporate governance, including the dual-class share structure, recent material contracts like the Peak Consulting acquisition and financing agreements, and tax implications in the Cayman Islands, PRC, and U.S - The company has a dual-class share structure, where each Class A Ordinary Share has one vote, while each Class B Ordinary Share has **600** votes[520](index=520&type=chunk) - Class B Ordinary Shares are convertible into Class A Ordinary Shares on a one-to-one basis at the holder's option, while Class A shares are not convertible[522](index=522&type=chunk) - Material contracts include the February 2024 acquisition of Peak Consulting, November 2024 subscription agreements for a **$10 million** private placement, and January 2025 debt conversion agreements to settle **$2.2 million** in debt[552](index=552&type=chunk)[554](index=554&type=chunk)[556](index=556&type=chunk) - The company is an exempted company in the Cayman Islands and is not subject to income, gains, or withholding taxes there, but in the PRC, its entities are subject to a **25%** Enterprise Income Tax, with a risk that the holding company could be classified as a PRC "resident enterprise," leading to unfavorable tax consequences for non-PRC shareholders[567](index=567&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=129&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, including credit risk from receivables, liquidity risk, and foreign exchange risk due to RMB operations reported in USD, noting no hedging activities are currently employed - The company is exposed to foreign exchange risk as its revenues and expenses are denominated in RMB, while its reporting currency is the U.S. dollar, meaning RMB depreciation against the USD would negatively impact reported financial results[600](index=600&type=chunk) - Credit risk is managed through credit approvals and monitoring of customers, with concentration risk in trade accounts receivable being limited due to short-term payment terms[598](index=598&type=chunk)[420](index=420&type=chunk) - The company faces liquidity risk, which it manages through financial position analysis and may seek short-term funding from financial institutions or related parties if necessary[599](index=599&type=chunk) [ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](index=129&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section is not applicable as the company has not issued securities other than equity securities - The report states that this item is not applicable[601](index=601&type=chunk) PART II [ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES](index=130&type=section&id=ITEM%2013.%20DEFAULTS%2C%20DIVIDEND%20ARREARAGES%20AND%20DELINQUENCIES) The company reports no defaults, dividend arrearages, or delinquencies - The company has no defaults, dividend arrearages, or delinquencies to report[606](index=606&type=chunk) [ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS](index=130&type=section&id=ITEM%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) This section confirms no material modifications to security holder rights and details the use of proceeds from the January 2021 IPO and unspent proceeds from the June 2021 follow-on offerings - There have been no material modifications to the rights of security holders[607](index=607&type=chunk) - From its January 2021 IPO, the company received net proceeds of approximately **$10.01 million** and has used **$2.33 million** for general operating purposes as of the report date[608](index=608&type=chunk) - From its June 2021 follow-on offerings, the company received net proceeds of approximately **$22.2 million**, which have not yet been spent as of the report date[609](index=609&type=chunk) [ITEM 15. CONTROLS AND PROCEDURES](index=131&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were effective as of October 31, 2024, but internal control over financial reporting was not effective due to material weaknesses, including a lack of U.S. GAAP expertise and inadequate accounting manual, with remedial measures outlined - Management concluded that disclosure controls and procedures were effective as of October 31, 2024[611](index=611&type=chunk) - Management concluded that internal control over financial reporting was **not effective** as of October 31, 2024[617](index=617&type=chunk) - Identified material weaknesses include: - Lack of qualified accounting personnel with U.S. GAAP and SEC reporting expertise - Absence of a comprehensive accounting policies and procedures manual - Deficiencies in formal disclosure controls and procedures[615](index=615&type=chunk) - The company has taken several remedial measures, including developing an accounting manual, implementing formal controls, establishing a risk assessment process, and enhancing its governance framework[616](index=616&type=chunk) [ITEM 16. CORPORATE GOVERNANCE AND OTHER ITEMS](index=132&type=section&id=ITEM%2016.%20CORPORATE%20GOVERNANCE%20AND%20OTHER%20ITEMS) This section covers corporate governance, identifying the audit committee financial expert, detailing principal accountant fees, explaining differences in governance practices as a foreign private issuer, and outlining cybersecurity risk management processes - The board has determined that Jingyu Li, chairman of the audit committee, is an audit committee financial expert[621](index=621&type=chunk) Principal Accountant Fees (RBSM LLP) | Service | FY 2024 (USD) | FY 2023 (USD) | | :--- | :--- | :--- | | Audit Fees | $365,000 | $365,000 | | Other Fees | $10,000 | $10,000 | | **Total** | **$375,000** | **$375,000** | - As a foreign private issuer, the company follows Cayman Islands corporate governance practices, which do not require shareholder approval for certain security issuances that would typically require it under Nasdaq rules for U.S. domestic companies[630](index=630&type=chunk) - The company has established a cybersecurity risk management process and reports that no incidents have materially affected its business, operations, or financial condition to date[635](index=635&type=chunk) PART III [ITEM 17. FINANCIAL STATEMENTS](index=134&type=section&id=ITEM%2017.%20FINANCIAL%20STATEMENTS) The company has elected to provide financial statements pursuant to Item 18 - The company has elected to provide financial statements as required under Item 18[637](index=637&type=chunk) [ITEM 18. FINANCIAL STATEMENTS](index=134&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for fiscal years ended October 31, 2024, 2023, and 2022, prepared in accordance with U.S. GAAP, including balance sheets, statements of operations, equity changes, and cash flows Consolidated Balance Sheet Highlights (as of Oct 31) | Account (USD) | 2024 | 2023 | | :--- | :--- | :--- | | **Total Assets** | $39,979,194 | $35,479,774 | | Cash & Restricted Cash | $996,237 | $695,075 | | Short-term Investments | $28,090,382 | $26,797,081 | | **Total Liabilities** | $6,089,064 | $3,062,868 | | **Total Equity** | $33,890,130 | $32,416,906 | Consolidated Statement of Operations Highlights (Year Ended Oct 31) | Account (USD) | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Total Revenues** | $3,219,336 | $1,244,247 | $1,351,909 | | **Total Operating Expenses** | $7,864,583 | $4,260,573 | $6,420,823 | | **Net Loss** | $(3,986,928) | $(2,453,982) | $(4,684,189) | | **Net Loss Per Share (Basic & Diluted)** | $(2.42) | $(3.87) | $(9.03) | - Subsequent to the fiscal year-end, the company raised **$10 million** in cash through a private placement in November 2024, issued shares to settle **$2.2 million** in debt in January 2025, and sold **1.00 million** Class B shares to a related party for **$2.31 million** in January 2025[850](index=850&type=chunk)[853](index=853&type=chunk)[854](index=854&type=chunk) [ITEM 19. EXHIBITS](index=135&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including articles of association, securities descriptions, material contracts like VIE and financing agreements, and CEO/CFO certifications - Key exhibits filed include the Amended and Restated Memorandum and Articles of Association, the VIE Agreements (Exclusive Service, Equity Pledge, Option to Purchase, Proxy), and recent material contracts like the Peak acquisition SPA and various subscription and debt conversion agreements[640](index=640&type=chunk)[641](index=641&type=chunk)

[Condensed Consolidated Financial Statements](index=1&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's financial position, operational performance, equity changes, and cash flows for the period ended April 30, 2024 [Condensed Consolidated Balance Sheets](index=1&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of April 30, 2024, total assets increased to $38.0 million from $35.5 million at October 31, 2023, primarily driven by a significant rise in cash to $27.5 million and the addition of $1.8 million in intangible assets from an acquisition; total liabilities grew to $5.6 million from $3.1 million, mainly due to a new $1.9 million acquisition payable, while total equity remained relatively stable at $32.3 million Condensed Consolidated Balance Sheet Highlights (in U.S. Dollars) | Account | April 30, 2024 (Unaudited) | October 31, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | $28,255,209 | $27,618,624 | | Cash | $27,456,502 | $2,383 | | Short-term investments | $0 | $26,797,081 | | **Total Non-current Assets** | $9,712,084 | $7,861,150 | | Intangible assets, net | $1,766,961 | $0 | | **Total Assets** | **$37,967,293** | **$35,479,774** | | **Total Current Liabilities** | $5,584,333 | $3,062,868 | | Acquisition payable | $1,875,002 | $0 | | **Total Liabilities** | **$5,624,205** | **$3,062,868** | | **Total Equity** | **$32,343,088** | **$32,416,906** | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=2&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) For the six months ended April 30, 2024, the company reported a significant revenue decline to $178,345 from $724,859 in the prior-year period, with operating expenses increasing to $3.1 million due to higher compensation costs, resulting in a wider loss from operations of $3.0 million and a net loss attributable to shareholders of $2.6 million, or ($2.68) per share, compared to a net loss of $1.5 million, or ($2.50) per share, in the same period last year Statement of Operations Summary (For the Six Months Ended April 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | **Revenues** | **$178,345** | **$724,859** | | Total Operating Expenses | $3,141,175 | $2,652,845 | | Loss from Operations | ($2,962,830) | ($1,927,986) | | **Net Loss** | **($2,605,349)** | **($1,486,253)** | | Net Loss Per Share (Basic and Diluted) | ($2.68) | ($2.50) | | Weighted Average Shares Outstanding | 970,721 | 594,901 | [Unaudited Condensed Consolidated Statements of Changes in Equity](index=3&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) For the six months ended April 30, 2024, total equity decreased slightly from $32.42 million to $32.34 million, primarily due to a net loss of $2.61 million, partially offset by the issuance of ordinary shares for services valued at $2.27 million and a positive foreign currency translation adjustment of $0.26 million - Equity was impacted by the issuance of **698,000** ordinary shares for services, valued at **$2,270,015**[7](index=7&type=chunk) - The net loss for the six-month period reduced equity by **$2,605,348**[7](index=7&type=chunk) - A foreign currency translation adjustment added **$261,512** to equity[7](index=7&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended April 30, 2024, the company generated $0.26 million in cash from operating activities, a decrease from $0.76 million in the prior-year period, with a significant cash inflow of $27.4 million from investing activities driven by the sale of short-term investments, while financing activities provided $58 thousand, leading to an overall increase in cash and restricted cash of $27.5 million, ending the period at $28.2 million Cash Flow Summary (For the Six Months Ended April 30) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $258,210 | $761,583 | | Net Cash Provided by Investing Activities | $27,414,831 | $35,115,075 | | Net Cash Provided by Financing Activities | $57,987 | $0 | | **Net Increase in Cash and Restricted Cash** | **$27,461,957** | **$35,960,965** | | **Cash and Restricted Cash - End of Period** | **$28,157,032** | **$36,656,207** | - The primary source of cash from investing activities was **$27.3 million** in proceeds from the sale of short-term investments[11](index=11&type=chunk) - A significant non-cash adjustment to reconcile net loss was **$2.27 million** in stock-based compensation[11](index=11&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, significant transactions, and financial statement line items [Note 1 – Organization and Nature of Operations](index=6&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20NATURE%20OF%20OPERATIONS) TIAN RUIXIANG Holdings Ltd is a Cayman Islands holding company that operates as an insurance broker in the PRC through a Variable Interest Entity (VIE), Zhejiang Tianruixiang Insurance Broker Co., Ltd. (TRX ZJ), with a structure including a Hong Kong subsidiary (TRX HK) and a Wholly Foreign-Owned Enterprise (WFOE) in China, and expanded its operations on February 29, 2024, by acquiring Peak Consulting Services Limited, a licensed insurance brokerage in Hong Kong - The company operates in the PRC insurance brokerage market through a VIE structure with TRX ZJ[13](index=13&type=chunk)[14](index=14&type=chunk) - On February 29, 2024, the company acquired **100%** of Peak Consulting Services Limited, a Hong Kong-based insurance brokerage, in exchange for **694,445** shares of the company's ordinary stock[14](index=14&type=chunk) [Note 3 – Summary of Significant Accounting Policies](index=8&type=section&id=NOTE%203%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The financial statements are prepared under U.S. GAAP, requiring management estimates for asset valuations and impairments, with revenue from insurance brokerage recognized when a policy becomes effective and the premium is collected, and the company uses a dual-class share structure and accounts for stock-based compensation at fair value, with a one-for-five reverse stock split effected on May 14, 2024, and all share and per-share data retroactively adjusted - Revenue is recognized when an insurance policy is effective and the premium is collected, as collectability is not ensured until receipt of premium[43](index=43&type=chunk) - The company effected a **one-for-five reverse stock split** on May 14, 2024, and all share and per-share data has been retroactively adjusted[55](index=55&type=chunk) - The company's functional currencies are the USD (for parent and TRX HK), HKD (for Peak), and RMB (for PRC entities); assets and liabilities are translated at the period-end exchange rate[47](index=47&type=chunk) [Note 4 – Acquisition](index=21&type=section&id=NOTE%204%20%E2%80%93%20ACQUISITION) On February 29, 2024, the company acquired 100% of Peak Consulting Services Limited for consideration of 694,445 Class A ordinary shares, valued at $2.70 per share for a total purchase price of $1,875,002, with the transaction treated as an asset acquisition as substantially all of the fair value was concentrated in regulatory licenses, and the cost was allocated primarily to $1.8 million in intangible assets (regulatory licenses) and $77,893 in cash - The acquisition of Peak Consulting Services Limited was completed on February 29, 2024, to expand business into Hong Kong[59](index=59&type=chunk) Acquisition of Peak Consulting Services Limited (February 29, 2024) | Item | Value | | :--- | :--- | | **Consideration (694,445 shares @ $2.70)** | **$1,875,002** | | **Assets Acquired:** | | | Cash | $77,893 | | Intangible assets (Regulatory licenses) | $1,797,109 | | **Total Assets Acquired** | **$1,875,002** | - The acquisition was accounted for as an asset acquisition because the fair value was concentrated in a single identifiable asset (regulatory licenses)[60](index=60&type=chunk) [Note 5 – Intangible Assets](index=22&type=section&id=NOTE%205%20%E2%80%93%20INTANGIBLE%20ASSETS) As of April 30, 2024, the company's intangible assets consist solely of regulatory licenses valued at $1.8 million, acquired through the Peak acquisition, which are being amortized on a straight-line basis over an estimated useful life of 10 years, with amortization expense for the period from February 29 to April 30, 2024, totaling $30,148 Intangible Assets as of April 30, 2024 | Item | Useful Life | Amount | | :--- | :--- | :--- | | Regulatory licenses | 10 Years | $1,797,109 | | Less: accumulated amortization | | ($30,148) | | **Net Intangible Assets** | | **$1,766,961** | - Future annual amortization expense is projected to be **$179,711** for each of the next four fiscal years[63](index=63&type=chunk) [Note 7 – Note Receivable](index=22&type=section&id=NOTE%207%20%E2%80%93%20NOTE%20RECEIVABLE) The company holds a note receivable with a principal amount of $7.8 million, originated on October 31, 2023, with a maturity date of October 31, 2025, and bearing a fixed interest rate of 2.0% per annum, resulting in an outstanding principal of $7.8 million and accrued interest receivable of $78,000 as of April 30, 2024 - A note receivable of **$7.8 million** was originated on October 31, 2023, with a **2-year term** and a **2.0% annual interest rate**[65](index=65&type=chunk) - Interest income from the note for the six months ended April 30, 2024, was **$78,000**[65](index=65&type=chunk) [Note 10 – Related Party Transactions](index=23&type=section&id=NOTE%2010%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) As of April 30, 2024, the company had $1.31 million due to related parties, an increase from $1.17 million at October 31, 2023, representing expenses paid on behalf of the company by its managers, CEO, former CEO, and their relatives, with these amounts being non-interest bearing, unsecured, and repayable on demand, and during the period, the company also borrowed $93,794 from and repaid $35,807 to related parties Due to Related Parties (in U.S. Dollars) | Related Party | April 30, 2024 | October 31, 2023 | | :--- | :--- | :--- | | Baohai Xu (Manager) | $398,213 | $321,385 | | Zhe Wang (Former CEO) | $124,584 | $120,985 | | Sheng Xu (CEO) | $100,443 | $110,362 | | Mufang Gao (Zhe Wang's mother) | $377,298 | $310,771 | | Others | $433,443 | $433,443 | | **Total** | **$1,310,545** | **$1,173,510** | - The amounts due to related parties are for expenses they paid on the company's behalf and are short-term, non-interest bearing, and repayable on demand[70](index=70&type=chunk) [Note 11 – Equity](index=24&type=section&id=NOTE%2011%20%E2%80%93%20EQUITY) The company has a dual-class share structure where Class B shares have 18 votes each versus one vote for Class A shares, and during the six months ended April 30, 2024, the company issued 698,000 Class A shares for services, recognizing $2.27 million in stock-based compensation, with 131,000 warrants outstanding at an exercise price of $200.00, and PRC regulations restricting the transfer of net assets from the company's PRC entities, totaling $7.8 million - The company has Class A (**1 vote/share**) and Class B (**18 votes/share**) ordinary shares; Class B shares are convertible to Class A[71](index=71&type=chunk) - Issued **698,000 Class A shares** for services, resulting in a share-based compensation expense of **$2,270,015** for the six months ended April 30, 2024[72](index=72&type=chunk) - As of April 30, 2024, restricted net assets of PRC subsidiaries totaled **$7,809,598**, limiting their ability to transfer funds to the parent company[79](index=79&type=chunk) [Note 12 – Commitments and Contingencies](index=25&type=section&id=NOTE%2012%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company has operating lease commitments for office space expiring through January 2027, with total future lease payments of $68,866, and while management believes its VIE structure complies with PRC laws, it acknowledges substantial uncertainties regarding the interpretation of these regulations, considering the likelihood of loss related to the VIE structure remote Operating Lease Liabilities as of April 30, 2024 | Description | Amount | | :--- | :--- | | Total lease payments | $68,866 | | Less: Imputed interest | ($4,102) | | **Total present value of lease liabilities** | **$64,764** | | Current portion | $24,892 | | Long-term portion | $39,872 | - Management asserts that the company's VIE structure is compliant with current PRC laws, but notes that there are substantial uncertainties in the interpretation and application of these laws[83](index=83&type=chunk)[84](index=84&type=chunk) [Note 13 – Concentrations](index=27&type=section&id=NOTE%2013%20%E2%80%93%20CONCENTRATIONS) The company faces significant concentration risks, with a substantial portion of its cash ($27.9 million out of $28.1 million) held in PRC and Hong Kong banks being uninsured, and revenue highly concentrated, with three insurance carriers (A, B, and C) accounting for 49%, 15%, and 15% of total revenue, respectively, for the six months ended April 30, 2024, and one insurance carrier accounting for 85.9% of total accounts receivable as of the same date - As of April 30, 2024, approximately **$27.9 million** of the company's cash held in PRC banks was not covered by deposit insurance[85](index=85&type=chunk) Revenue Concentration by Insurance Carrier (Six Months Ended April 30) | Carrier | 2024 | 2023 | | :--- | :--- | :--- | | Carrier A | 49% | <10% | | Carrier B | 15% | <10% | | Carrier C | 15% | <10% | | Carrier D | <10% | 36% | | Carrier E | <10% | 24% | | Carrier F | <10% | 12% | - One insurance carrier represented **85.9%** of total accounts receivable at April 30, 2024[89](index=89&type=chunk) [Note 14 – Subsequent Events](index=29&type=section&id=NOTE%2014%20%E2%80%93%20SUBSEQUENT%20EVENTS) After the balance sheet date, the company executed several key transactions, including a one-for-five reverse stock split on May 14, 2024, the issuance of 694,445 Class A shares on May 7, 2024, to complete the Peak Consulting acquisition, and the issuance of an additional 200,000 Class A shares for services in May and June 2024, valued at $548,550 - A **one-for-five reverse stock split** of outstanding ordinary shares was effected on May 14, 2024[92](index=92&type=chunk) - On May 7, 2024, **694,445 Class A ordinary shares** were issued to the former shareholder of Peak Consulting Services Limited as part of the acquisition agreement[94](index=94&type=chunk) - In May and June 2024, an additional **200,000 Class A shares** were issued for services, valued at **$548,550**[93](index=93&type=chunk)

Core Viewpoint - TIAN RUIXIANG Holdings Ltd reported a significant decline in revenue and an increase in net loss for the first half of 2024, primarily due to the loss of key insurance company partners, but showed growth in liability insurance commissions, indicating potential for future recovery through market expansion and client diversification strategies [1][2][5]. Financial Performance - Revenue for the six months ended April 30, 2024, was $0.2 million, a decrease of $0.5 million or 75.4% compared to $0.7 million for the same period in 2023, mainly due to the loss of certain insurance company partners [2]. - The loss from operations for the same period was $3.0 million, compared to $1.9 million for the six months ended April 30, 2023, reflecting an increase of 53.7% [4]. - The net loss was $2.6 million for the six months ended April 30, 2024, compared to $1.5 million for the same period in 2023, representing a change of $1.1 million or 75.3% [5]. Operating Expenses - Total operating expenses for the six months ended April 30, 2024, were $3.1 million, an increase of 18.4% from $2.7 million in the same period in 2023 [7]. - Selling and marketing expenses decreased to $1.2 million from $1.6 million, a reduction of $0.4 million or 26.5% [7]. - General and administrative expenses rose to $2.0 million from $1.1 million, an increase of $0.9 million or 83.0% [7]. Cash Flow and Assets - As of April 30, 2024, total assets were $37.97 million, an increase from $35.48 million as of October 31, 2023 [11][13]. - Cash and restricted cash at the end of the period totaled $28.16 million, down from $36.66 million at the end of the previous period [19][20]. Strategic Outlook - The company is pursuing strategies to expand into the Hong Kong insurance brokerage market and diversify its client base to mitigate the impact of lost partnerships and improve financial performance [1].

Group 1 - TIAN RUIXIANG Holdings Ltd has regained compliance with Nasdaq's periodic filing requirements after filing its annual report on Form 20-F for the period ended October 31, 2023 on July 17, 2024 [1] - The company operates as an insurance broker in China through a variable interest entity, offering a wide range of insurance products [2] - The insurance products are categorized into two major groups: property and casualty insurance, and other types of insurance including health and life insurance [2]

Core Viewpoint - TIAN RUIXIANG Holdings Ltd reported a revenue decline of 8.0% for the fiscal year ended October 31, 2023, primarily due to lower commissions from insurance products and loss of partners, but achieved a significant reduction in net loss by 47.6% compared to the previous year, indicating improved operational efficiency and a strategic focus on liability insurance products [1][3]. Financial Performance - Revenue for the fiscal year 2023 was approximately $1.2 million, down from $1.4 million in 2022, reflecting an 8.0% decrease [2][3]. - Total operating expenses decreased by 33.6% to $4.3 million in 2023 from $6.4 million in 2022 [2][3]. - Loss from operations narrowed by 40.5% to $3.0 million in 2023, compared to $5.1 million in 2022 [2][3]. - Net loss decreased by 47.6% to $2.5 million in 2023, down from $4.7 million in 2022 [2][3]. Business Segments - The company experienced a notable increase of approximately $612,000 in commissions from liability insurance products, highlighting growth in this segment despite overall revenue decline [1]. Shareholder Information - Loss per share improved to $3.87 in 2023 from $9.03 in 2022, indicating better financial performance for shareholders [2][3]. Assets and Liabilities - As of October 31, 2023, total current assets were $27.6 million, a decrease from $34.9 million in 2022 [7]. - Total current liabilities increased to $3.1 million in 2023 from $1.5 million in 2022, indicating a rise in financial obligations [8]. Cash Flow - The company reported net cash provided by operating activities of $994,304 in 2023, a significant improvement compared to a cash outflow of $198,760 in 2022 [12].

Financial Performance - The company reported a revenue of approximately $1.2 million for the fiscal year ended October 31, 2023, which is an 8.0% decrease from $1.4 million in the previous year [1][3] - Total operating expenses decreased by 33.6% to $4.3 million from $6.4 million in the prior year [2][3] - Loss from operations narrowed by 40.5% to $3.0 million compared to $5.1 million in the previous year [2][3] - The net loss decreased by 47.6% to $2.5 million from $4.7 million in the prior year [2][3] Business Segments - The company experienced a significant increase of approximately $612,000 in commissions from liability insurance products, indicating growth in this segment despite overall revenue decline [1] Shareholder Information - Loss per share improved to $3.87 from $9.03 in the previous year, reflecting a 55.4% reduction [2]

Introduction [Company Structure and Operations](index=5&type=section&id=Company%20Structure%20and%20Operations) The company operates in the PRC through a VIE structure, controlling its Chinese operating entity (TRX ZJ) contractually, exposing investors to unique risks - The Company is a Cayman Islands holding company, not a Chinese operating company, and conducts its business through a VIE structure in the PRC[6](index=6&type=chunk) - Control over the VIE (TRX ZJ) is established through contractual VIE Agreements, enabling the consolidation of financial results under U.S. GAAP. However, these agreements have not been tested in a Chinese court[6](index=6&type=chunk) - Investors own equity in the Cayman Islands holding company, not in the PRC-based VIE, exposing them to risks associated with the VIE structure[6](index=6&type=chunk) - The company's business is conducted in Renminbi (RMB), while its consolidated financial statements are presented in United States dollars, creating exposure to currency exchange rate fluctuations[8](index=8&type=chunk) Forward-Looking Information [Forward-Looking Statements Disclosure](index=7&type=section&id=Forward-Looking%20Statements%20Disclosure) This section details forward-looking statements on future performance and strategies, subject to various risks and uncertainties, with no obligation to update - The report includes forward-looking statements concerning future financial results, growth strategies, and economic conditions[11](index=11&type=chunk) - Key areas covered by forward-looking statements include revenue projections, growth execution, competition, the future of the Chinese insurance industry, and the stability of the VIE structure[11](index=11&type=chunk) - The company warns that these statements involve risks and uncertainties, and actual results may differ materially. It does not commit to updating forward-looking statements unless required by law[12](index=12&type=chunk)[15](index=15&type=chunk) PART I [Key Information](index=8&type=section&id=Item%203.%20KEY%20INFORMATION) This section details the company's Cayman Islands holding structure and reliance on a VIE for PRC operations, highlighting associated legal, regulatory, and financial risks - The company operates as a Cayman Islands holding company controlling its PRC operations through a VIE structure, which involves unique risks as investors do not own equity in the Chinese operating entity[16](index=16&type=chunk)[17](index=17&type=chunk) - The company is subject to risks from recent PRC regulatory actions, including those related to cybersecurity and overseas listings, although it states these have not impacted its operations as of the report date[19](index=19&type=chunk) - Cash transfers between the holding company, subsidiaries, and the VIE are detailed, noting that PRC government controls on currency conversion could restrict the ability to fund operations outside of China or pay dividends[21](index=21&type=chunk)[22](index=22&type=chunk) - The company's auditor, RBSM LLP, is a U.S.-based firm regularly inspected by the PCAOB, and is not currently affected by the Holding Foreign Companies Accountable Act. However, future inspection issues could lead to delisting[20](index=20&type=chunk) [Selected Condensed Consolidating Financial Schedule](index=11&type=section&id=Selected%20Condensed%20Consolidating%20Financial%20Schedule) This section presents condensed consolidating financial schedules for the Cayman parent, subsidiaries, and VIE for FY2021-2023, showing most financial activity within the PRC VIE structure Condensed Consolidating Balance Sheet as of October 31, 2023 (in $) | Entity | Total Assets | Total Liabilities | Total Equity | | :--- | :--- | :--- | :--- | | TRX (Cayman Islands) | 34,289,999 | 1,873,093 | 32,416,906 | | Subsidiary (Hong Kong) | 14,268,263 | 7,501,149 | 6,767,114 | | WFOE (PRC) | (842,405) | 492,358 | (1,334,763) | | VIE and Subsidiaries (PRC) | 27,663,627 | 290,935 | 27,372,692 | | **Consolidated Total** | **35,479,774** | **3,062,868** | **32,416,906** | Condensed Consolidating Statement of Operations for the Year Ended October 31, 2023 (in $) | Entity | Revenues | Loss from operations | Net (Loss) Income | | :--- | :--- | :--- | :--- | | TRX (Cayman Islands) | — | (2,773,070) | (2,453,982) | | Subsidiary (Hong Kong) | — | — | 319,088 | | WFOE (PRC) | — | (40,605) | 284,399 | | VIE and Subsidiaries (PRC) | 1,244,247 | (202,651) | — | | **Consolidated Total** | **1,244,247** | **(3,016,326)** | **(2,453,982)** | Condensed Consolidating Statement of Cash Flows for the Year Ended October 31, 2023 (in $) | Entity | Net cash from operating | Net cash from investing | Net cash from financing | | :--- | :--- | :--- | :--- | | TRX (Cayman Islands) | — | — | — | | Subsidiary (Hong Kong) | 300,000 | (300,591) | — | | WFOE (PRC) | (14,464) | 14,019 | — | | VIE and Subsidiaries (PRC) | 708,485 | (692,717) | — | | **Consolidated Total** | **994,021** | **(992,717)** | **—** | [Risk Factors](index=17&type=section&id=D.%20Risk%20Factors) This section outlines principal risks, including business competition, VIE structure enforceability, PRC government intervention, and share-related market volatility and dual-class structure - **Business Risks:** The company has a limited operating history, faces intense competition, and its revenue is dependent on commission rates set by insurance companies, which can decrease[41](index=41&type=chunk) - **Corporate Structure Risks:** The VIE structure is a primary risk, as the agreements may not be enforceable under PRC law. If the government deems the structure non-compliant, the company could face severe penalties, and shares could become worthless[44](index=44&type=chunk)[86](index=86&type=chunk) - **China-Related Risks:** The PRC government exerts substantial influence and may intervene in operations at any time. Changes in laws regarding foreign investment, data security (CAC), and overseas listings (CSRC) create significant uncertainty[47](index=47&type=chunk)[121](index=121&type=chunk)[173](index=173&type=chunk) - **Market & Share Risks:** The company is an emerging growth company and a foreign private issuer, exempting it from certain U.S. disclosure and governance standards. The dual-class share structure concentrates voting power with a single controlling shareholder[54](index=54&type=chunk)[55](index=55&type=chunk)[103](index=103&type=chunk) - The company has identified material weaknesses in its internal control over financial reporting, including a lack of personnel with U.S. GAAP knowledge and a lack of formal disclosure controls[116](index=116&type=chunk)[118](index=118&type=chunk) [Information on the Company](index=49&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of TIAN RUIXIANG Holdings Ltd, detailing its history, insurance brokerage operations in China via a VIE, and regulatory environment - The company operates as an insurance brokerage in China through its VIE, TRX ZJ, distributing property & casualty and other insurance products from over 30 insurance company partners[217](index=217&type=chunk)[218](index=218&type=chunk) - The company's online platform, Needbao, was unsuccessful due to the impact of COVID-19, leading to an impairment loss of **$123,646** in fiscal year 2022[71](index=71&type=chunk)[234](index=234&type=chunk) - The company's corporate structure relies on a series of VIE agreements (Exclusive Business Cooperation, Equity Pledge, Exclusive Option to Purchase, and Proxy Agreement) to control its PRC operating entity, TRX ZJ[318](index=318&type=chunk) - The insurance industry in the PRC is highly regulated, with the National Financial Regulatory Administration (NFRA) replacing the CBIRC in 2023 as the primary supervisory body[261](index=261&type=chunk)[272](index=272&type=chunk) [History and Development of the Company](index=49&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This section traces the company's corporate history, from the VIE entity's formation in 2010 to the Cayman Islands holding company's establishment and its Nasdaq IPO in January 2021 - The VIE entity, TRX ZJ, was formed in 2010. The current management team's involvement began in May 2016[210](index=210&type=chunk) - The Cayman Islands holding company, TRX, was established on March 5, 2019, followed by the creation of its Hong Kong subsidiary and PRC WFOE[211](index=211&type=chunk) - The company's Class A Ordinary Shares commenced trading on the Nasdaq Capital Market under the symbol "TIRX" on January 27, 2021[212](index=212&type=chunk) [Business Overview](index=52&type=section&id=B.%20Business%20Overview) The company operates as an insurance broker in China via its VIE, distributing various insurance products, with FY2023 revenue decreasing by **8.0%** to **$1.24 million** Revenue by Insurance Product Commissions (FY2021-FY2023) | Product Category | 2023 Commissions ($) | 2022 Commissions ($) | 2021 Commissions ($) | | :--- | :--- | :--- | :--- | | **Property & Casualty** | | | | | Automobile Insurance | 6,103 | 134,718 | 434,793 | | Commercial Property Ins. | 151,013 | 382,180 | 213,204 | | Liability Insurance | 975,460 | 363,899 | 1,588,818 | | Accidental Insurance | 20,361 | 255,218 | 356,156 | | **Other Insurance** | | | | | Life Insurance | 576 | 20,489 | 70,336 | | Health Insurance | 49,712 | 25,524 | 3,747 | | Miscellaneous Insurance | 41,022 | 142,627 | 8,557 | | **Total Commissions** | **$1,244,247** | **$1,324,655** | **$2,675,611** | - In FY2023, revenue concentration was high, with the top three insurance partners accounting for **32.1%**, **28.0%**, and **10.5%** of total revenues, respectively[219](index=219&type=chunk)[244](index=244&type=chunk) - The company discontinued its institutional risk management services in November 2022 due to diminished demand[217](index=217&type=chunk)[233](index=233&type=chunk) - The company's distribution network includes **155 sales professionals** and **seven branch offices** in major Chinese cities as of June 1, 2024[235](index=235&type=chunk) [Organizational Structure](index=72&type=section&id=C.%20Organizational%20Structure) The company's organizational structure centers on a VIE model, where the Cayman Islands parent controls PRC operations through contractual agreements with its WFOE and the VIE (TRX ZJ) - The company controls its PRC operating entity, TRX ZJ, through a series of VIE agreements entered into on May 20, 2019[318](index=318&type=chunk) - **Exclusive Business Cooperation and Service Agreement:** WFOE provides exclusive technical and management services to TRX ZJ in exchange for service fees equal to TRX ZJ's net income[323](index=323&type=chunk) - **Equity Interest Pledge Agreement:** The shareholder of TRX ZJ has pledged all its equity interests to WFOE to guarantee the performance of the service agreement[325](index=325&type=chunk) - **Share Disposal and Exclusive Option to Purchase Agreement:** WFOE holds an exclusive option to purchase all or part of the equity interests in TRX ZJ for a nominal price, subject to PRC law[328](index=328&type=chunk) - **Proxy Agreement:** The shareholder of TRX ZJ has irrevocably granted all shareholder rights, including voting rights, to WFOE[330](index=330&type=chunk) [Operating and Financial Review and Prospects](index=76&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of financial condition and operations for FY2021-2023, showing revenue decreased to **$1.24 million** in FY2023, while net loss improved to **$2.45 million** Consolidated Results of Operations Summary (FY2021-FY2023) | Metric | FY 2023 ($) | FY 2022 ($) | FY 2021 ($) | | :--- | :--- | :--- | :--- | | **Revenues** | 1,244,247 | 1,351,909 | 2,790,617 | | **Loss from Operations** | (3,016,326) | (5,068,914) | (2,253,804) | | **Net Loss** | (2,453,982) | (4,684,189) | (1,944,577) | | **Comprehensive Loss** | (2,515,116) | (8,401,667) | (1,730,454) | - FY2023 revenue decreased by **8.0%** YoY due to lower commissions from automobile, commercial property, and accidental insurance, partially offset by a significant increase in liability insurance commissions[365](index=365&type=chunk) - General and administrative expenses decreased by **60.9%** in FY2023, primarily due to a **$2.23 million** reduction in compensation and benefits, including lower stock-based compensation[370](index=370&type=chunk)[372](index=372&type=chunk) - As of October 31, 2023, the company had approximately **$695,000** in cash and restricted cash and **$26.8 million** in short-term investments, which management believes is sufficient to meet cash requirements for the next twelve months[408](index=408&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk) [Directors, Senior Management and Employees](index=96&type=section&id=Item%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board practices, and employee structure, including executive compensation and the dual-class share structure - Sheng Xu has served as the CEO and Chairman of the board since April 2024[434](index=434&type=chunk) FY2023 Named Executive Officer Compensation | Name and Principal Position | Salary (US$) | Total (US$) | | :--- | :--- | :--- | | Zhe Wang (former CEO, Chairman) | 150,000 | 150,000 | | Mingxiu Luan (CFO) | 80,000 | 80,000 | - The company has two share incentive plans: the 2021 Plan (**200,000 Class A shares** authorized) and the 2023 Plan (**1,000,000 Class A shares** authorized)[445](index=445&type=chunk)[449](index=449&type=chunk) - As of June 1, 2024, the company had **8 employees** and **152 contractual sales agents**[464](index=464&type=chunk) - Unitrust Holdings Limited holds all **50,000 Class B Ordinary Shares**, representing **33.43%** of the total voting power due to the **18-to-1** voting ratio of Class B to Class A shares[468](index=468&type=chunk)[470](index=470&type=chunk) [Major Shareholders and Related Party Transactions](index=104&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details major shareholders and related party transactions, including VIE contractual arrangements, working capital borrowings, and balances due to/from related parties - The company's operations are controlled through VIE contractual arrangements with TRX ZJ, which is a related party transaction[471](index=471&type=chunk) - In FY2023, the company borrowed **$9,535** from and repaid **$9,818** to related parties for working capital needs. These borrowings are non-interest bearing and unsecured[473](index=473&type=chunk) Due to Related Parties (as of Oct 31, 2023) | Related Party | Amount Due ($) | | :--- | :--- | | Baohai Xu (Manager) | 321,385 | | Zhe Wang (Former CEO) | 120,985 | | Sheng Xu (CEO) | 110,362 | | Mufang Gao (Mother of former CEO) | 310,771 | | Feng'e Feng (Mother of CEO) | 186,571 | | Mingxiu Luan (CFO) | 123,436 | | **Total** | **$1,173,510** | [Financial Information](index=105&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) This section confirms appended consolidated financial statements, states no material legal proceedings, and outlines the dividend policy of retaining earnings for expansion - The company is not currently involved in any material legal or administrative proceedings[481](index=481&type=chunk) - The company has no present plan to pay cash dividends and intends to retain future earnings for business operations and expansion[482](index=482&type=chunk) - As a holding company, its ability to pay dividends depends on receiving funds from its PRC subsidiary, which is subject to PRC regulations on profit distribution and currency exchange[482](index=482&type=chunk) [The Offer and Listing](index=106&type=section&id=Item%209.%20THE%20OFFER%20AND%20LISTING) This section details the trading of the company's Class A Ordinary Shares on the Nasdaq Capital Market under the ticker symbol "TIRX" since January 27, 2021 - The company's Class A Ordinary Shares are listed on the Nasdaq Capital Market under the symbol "TIRX"[485](index=485&type=chunk)[486](index=486&type=chunk) - The listing has been active since January 27, 2021[485](index=485&type=chunk) [Additional Information](index=107&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) This section provides further details on corporate governance, including the dual-class share structure, a material acquisition contract, and taxation considerations in the Cayman Islands, PRC, and U.S - The company has a dual-class share structure: Class A Ordinary Shares have one vote per share, while Class B Ordinary Shares have **18 votes per share**[489](index=489&type=chunk) - In February 2024, the company's Hong Kong subsidiary entered into an agreement to acquire Peak Consulting Services Limited, a licensed insurance brokerage in Hong Kong, for **$1.5 million** paid in Class A Ordinary Shares[514](index=514&type=chunk) - The Cayman Islands levies no corporate or income taxes. PRC taxation includes a potential **10%** withholding tax on dividends paid from the PRC subsidiary[517](index=517&type=chunk)[519](index=519&type=chunk) - There is a risk that the company could be classified as a PRC "resident enterprise," which would subject its global income to PRC taxes and could result in PRC withholding tax on dividends paid to non-PRC shareholders[520](index=520&type=chunk)[523](index=523&type=chunk) - For U.S. investors, the company does not expect to be a Passive Foreign Investment Company (PFIC), but this is a factual determination made annually and is subject to change[536](index=536&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=119&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks including interest rate, credit, liquidity, and significant foreign exchange risk due to RMB-denominated revenues and U.S. dollar reporting - The company's primary market risks include interest rate risk, credit risk, liquidity risk, and foreign exchange risk[544](index=544&type=chunk)[545](index=545&type=chunk)[546](index=546&type=chunk)[547](index=547&type=chunk) - Foreign exchange risk is significant because revenues and expenses are denominated in RMB, while financial statements are reported in U.S. dollars. A depreciating RMB would negatively impact reported results[547](index=547&type=chunk) - The company has not entered into any hedging transactions to mitigate its exposure to foreign exchange risk[547](index=547&type=chunk) [Description of Securities Other Than Equity Securities](index=119&type=section&id=Item%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section indicates the company has no debt securities, warrants, rights, or other securities to describe under this item - The company reports no debt securities, warrants, rights, or other securities under this item[547](index=547&type=chunk)[548](index=548&type=chunk) PART II [Defaults, Dividend Arrearages and Delinquencies](index=120&type=section&id=Item%2013.%20DEFAULTS%2C%20DIVIDEND%20ARREARAGES%20AND%20DELINQUENCIES) The company reports no defaults, dividend arrearages, or delinquencies during the reporting period - The company has no defaults, dividend arrearages, or delinquencies to report[548](index=548&type=chunk) [Material Modifications to the Rights of Security Holders and Use of Proceeds](index=120&type=section&id=Item%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) This section reports no material modifications to security holder rights and details the use of proceeds from the January 2021 IPO and June 2021 follow-on offerings - There have been no material modifications to the rights of security holders[548](index=548&type=chunk) - The company raised net proceeds of approximately **$10.01 million** from its IPO in January 2021 and has used **$2.33 million** for general operating purposes[549](index=549&type=chunk) - An additional **$22.2 million** in net proceeds was raised from follow-on offerings in June 2021, which remains unspent as of the report date[550](index=550&type=chunk) [Controls and Procedures](index=121&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective as of October 31, 2023, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Management concluded that as of October 31, 2023, the company's disclosure controls and procedures were not effective[552](index=552&type=chunk) - Material weaknesses in internal control were identified, including: (1) a lack of accounting personnel with knowledge of U.S. GAAP and SEC reporting requirements; (2) a lack of formal disclosure controls and procedures; and (3) a lack of a comprehensive accounting policies and procedures manual[556](index=556&type=chunk) - Significant deficiencies identified include a lack of formal internal controls over financial closing and a lack of a formal risk assessment process[556](index=556&type=chunk) - The company is undertaking remedial measures, including preparing an accounting manual and establishing formal control and risk assessment processes[557](index=557&type=chunk) [Other Information](index=122&type=section&id=Item%2016.%20Other%20Information) This section covers governance and compliance, including the audit committee financial expert, code of ethics, principal accountant fees, foreign private issuer corporate governance, and cybersecurity risk management - The board has designated Jingyu Li as the audit committee financial expert[561](index=561&type=chunk) Principal Accountant Fees (RBSM LLP) | Service | FY 2023 (US$) | FY 2022 (US$) | | :--- | :--- | :--- | | Audit Fees | 365,000 | 365,000 | | Audit-Related Fees | — | — | | Tax Fees | — | — | | Other fees | — | — | | **Total** | **365,000** | **365,000** | - As a foreign private issuer, the company follows Cayman Islands corporate governance practices, which do not require shareholder approval for certain equity issuances that would be required for U.S. domestic companies under Nasdaq rules[568](index=568&type=chunk) - The company has implemented a cybersecurity risk management process and reports no material cybersecurity incidents to date[572](index=572&type=chunk) PART III [Financial Statements](index=124&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) This section contains the audited consolidated financial statements for FY2021-2023, prepared under U.S. GAAP, including balance sheets, statements of operations, and cash flows, with an unqualified auditor's opinion [Consolidated Balance Sheets](index=130&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets of **$35.48 million** in 2023, dominated by short-term investments, with total liabilities increasing to **$3.06 million** and total equity slightly decreasing Consolidated Balance Sheet Highlights (in U.S. Dollars) | Account | As of Oct 31, 2023 | As of Oct 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | 27,618,624 | 34,858,624 | | **Total Assets** | **35,479,774** | **35,030,828** | | **Total Current Liabilities** | 3,062,868 | 1,494,088 | | **Total Liabilities** | **3,062,868** | **1,548,806** | | **Total Equity** | **32,416,906** | **33,482,022** | [Consolidated Statements of Operations and Comprehensive Loss](index=131&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For FY2023, total revenues were **$1.24 million**, with a net loss of **$2.45 million**, representing a significant improvement from the prior year's **$4.68 million** loss Consolidated Operations Highlights (in U.S. Dollars) | Metric | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Total Revenues | 1,244,247 | 1,351,909 | 2,790,617 | | Loss from Operations | (3,016,326) | (5,068,914) | (2,253,804) | | Net Loss | (2,453,982) | (4,684,189) | (1,944,577) | | Net Loss Per Share | (3.87) | (9.03) | (5.65) | [Consolidated Statements of Cash Flows](index=133&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For FY2023, net cash provided by operating activities was **$994,304**, a significant turnaround from the prior year's usage, with net cash used in investing activities at **$992,717** Consolidated Cash Flow Highlights (in U.S. Dollars) | Cash Flow Activity | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 994,304 | (198,760) | (1,363,938) | | Net Cash from Investing Activities | (992,717) | (28,897,466) | (7,503,411) | | Net Cash from Financing Activities | (283) | — | 32,642,481 | | **Net Change in Cash** | **(167)** | **(30,148,399)** | **23,920,146** | [Notes to Consolidated Financial Statements](index=134&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including VIE consolidation and revenue recognition, along with explanations of VIE agreements, related party transactions, income taxes, and equity structure - The financial statements are prepared under U.S. GAAP and consolidate the VIE (TRX ZJ) as the company is deemed its primary beneficiary[600](index=600&type=chunk)[611](index=611&type=chunk) - Revenue from insurance brokerage services is recognized at the point in time when an insurance policy becomes effective and the premium is collected[649](index=649&type=chunk) - As of October 31, 2023, the company had a **$7.8 million** note receivable with a third party, bearing a **2.0%** annual interest rate and maturing in October 2025[690](index=690&type=chunk) - In FY2023, three insurance carriers accounted for **32%**, **28%**, and **10%** of total revenue, indicating significant customer concentration[756](index=756&type=chunk)[757](index=757&type=chunk)