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Zhibao Technology(ZBAO) - 2025 Q2 - Quarterly Report

Financial Statements Unaudited Condensed Consolidated Balance Sheets Zhibao Technology's balance sheet expanded significantly by December 31, 2024, with substantial growth in total assets and liabilities, and rising shareholders' equity Condensed Consolidated Balance Sheet Summary (as of Dec 31, 2024 vs. June 30, 2024) | Balance Sheet Item | June 30, 2024 (RMB) | December 31, 2024 (RMB) | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | 197,551,743 | 297,530,672 | ▲ 50.6% | | Total Assets | 208,787,640 | 314,978,389 | ▲ 50.9% | | Total Current Liabilities | 141,068,960 | 235,018,593 | ▲ 66.6% | | Total Liabilities | 144,796,846 | 242,206,924 | ▲ 67.3% | | Total Shareholders' Equity | 63,990,794 | 72,771,465 | ▲ 13.7% | - Significant increases in liabilities were driven by a rise in Insurance premium payable from RMB 38.4 million to RMB 111.4 million and the appearance of new liabilities including Convertible notes (RMB 6.5 million) and Warrant liabilities (RMB 1.2 million)1 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Strong revenue growth and an operating profit turnaround significantly reduced the company's net loss for the six months ended December 31, 2024 Statement of Operations Summary (For the Six Months Ended Dec 31) | Metric | 2023 (RMB) | 2024 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | 84,254,221 | 146,371,285 | ▲ 73.7% | | Gross Profit | 30,062,171 | 42,559,597 | ▲ 41.6% | | (Loss) income from operations | (8,378,957) | 3,804,338 | Turnaround to Profit | | Net Loss | (8,546,000) | (644,605) | ▼ 92.5% | | Basic and Diluted EPS | (0.28) | (0.02) | ▲ 92.9% | - The company recorded a gain on fair value change of warrant liabilities (RMB 1.43 million) and derivative liabilities (RMB 0.72 million), but also a significant loss on the settlement of convertible notes (RMB 4.44 million)4 Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased for the six months ended December 31, 2024, primarily due to convertible note settlements - The settlement of convertible notes resulted in the issuance of 524,314 Class A ordinary shares and an increase of RMB 9.79 million in equity (Additional Paid-in Capital)6 Shareholders' Equity Movement (For the Six Months Ended Dec 31, 2024) | Item | Amount (RMB) | | :--- | :--- | | Balance as of June 30, 2024 | 63,990,794 | | Settlement of convertible notes | 9,789,421 | | Net loss | (644,605) | | Foreign exchange adjustments | (364,145) | | Balance as of December 31, 2024 | 72,771,465 | Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow decreased, while financing activities provided significant cash, leading to an overall cash increase for the period Cash Flow Summary (For the Six Months Ended Dec 31) | Cash Flow Activity | 2023 (RMB) | 2024 (RMB) | | :--- | :--- | :--- | | Net cash provided by operating activities | 85,607,856 | 74,197,711 | | Net cash used in investing activities | (264,606) | (4,375,000) | | Net cash provided by financing activities | 9,275,004 | 23,026,767 | | Net increase in cash | 94,616,741 | 92,768,978 | - Financing activities in 2024 included proceeds from convertible notes (RMB 16.0 million) and short-term bank borrowings (RMB 32.0 million), offset by repayments of borrowings (RMB 25.0 million)10 - Non-cash financing activities included the settlement of convertible notes by issuing ordinary shares valued at RMB 9.8 million12 Notes to Unaudited Condensed Consolidated Financial Statements Note 1: Nature of the Organization and Business Zhibao Technology, a digital insurance brokerage, completed its Nasdaq IPO, with the CEO retaining significant voting control - The company is primarily engaged in providing digital insurance brokerage services to end customers through its PRC subsidiaries14 - Completed its IPO on April 3, 2024, issuing 1,500,000 Class A ordinary shares at $4.00 per share for gross proceeds of $6.0 million15 - A reorganization in 2023 established Zhibao Technology Inc. as the parent holding company of the Zhibao China Group1718 - Shares were reclassified into Class A (1 vote) and Class B (20 votes), with all Class B shares controlled by founder and CEO Mr. Botao Ma, granting him significant voting control2021 Note 2: Summary of Significant Accounting Policies The company adopted new credit loss standards, classifies certain warrants as liabilities, and faces significant concentration risk - The company adopted the new credit loss standard (ASU 2016-13 / Topic 326) on July 1, 2023, resulting in an increase of RMB 8.8 million in the allowance for credit losses for accounts receivable34 - Warrants that do not meet all criteria for equity classification are recorded as liabilities at fair value, with changes in fair value recognized in the statements of operations55 Revenue Disaggregation (For the Six Months Ended Dec 31) | Revenue Stream | 2023 (RMB) | 2024 (RMB) | | :--- | :--- | :--- | | Insurance brokerage service fees | 75,354,494 | 144,964,797 | | MGU service fees | 9,217,678 | 1,766,514 | | Total Revenues (net of taxes) | 84,254,221 | 146,371,285 | Customer and Vendor Concentration | Concentration Type | Period | Details | | :--- | :--- | :--- | | Revenue | 6 months ended Dec 31, 2024 | Four customers accounted for 20%, 14%, 12%, and 10% of total revenue | | Accounts Receivable | As of Dec 31, 2024 | Two customers accounted for 20% and 18% of accounts receivable | | Accounts Payable | As of Dec 31, 2024 | Two vendors accounted for 20% and 15% of accounts payable | Note 3: Accounts Receivable Net accounts receivable increased as of December 31, 2024, with a corresponding allowance for credit losses Accounts Receivable, Net | Item | June 30, 2024 (RMB) | December 31, 2024 (RMB) | | :--- | :--- | :--- | | Accounts receivable | 144,670,083 | 149,920,975 | | Less: Allowance for credit losses | (14,315,654) | (14,607,614) | | Net Accounts Receivable | 130,354,429 | 135,313,361 | Note 9: Convertible Note The company secured convertible note financing, classifying notes as liabilities, and settled a portion by issuing shares - The company entered into a financing agreement for up to $8.0 million via convertible notes and received $2.25 million in net proceeds during the six months ended Dec 31, 20248690 - The convertible notes are classified as liabilities, and the embedded conversion feature is treated as a derivative liability, measured at fair value with changes recognized in earnings101105 - The company settled notes with a principal of $1.15 million by issuing 524,314 Class A ordinary shares, recognizing a loss on settlement of RMB 4.44 million100104 - As of December 31, 2024, the carrying amount of the convertible notes was RMB 6.45 million105 Note 10: Warrant Liabilities Warrants issued with convertible notes are classified as liabilities and remeasured at fair value, with a prior accounting error corrected - Purchase Warrants issued with the convertible notes are classified as a liability and remeasured to fair value each period112 - A gain on fair value change of warrant liabilities of $196,000 (RMB 1.43 million) was recognized for the six months ended December 31, 2024113117 - The company corrected a prior accounting error, reclassifying the warrants from equity to liability, which increased total liabilities by RMB 0.8 million and decreased net loss by RMB 0.87 million for the period114116117 Note 11: Equity The company has Class A and B ordinary shares outstanding, classified certain warrants as equity, and faces PRC dividend restrictions - As of Dec 31, 2024, there were 15,231,387 Class A and 16,816,692 Class B ordinary shares outstanding120 - Warrants issued to the IPO underwriter, EF Hutton LLC, were classified as equity instruments121123 - The company's PRC subsidiaries have restricted net assets of RMB 106.1 million as of Dec 31, 2024, which are not distributable as cash dividends126127 Note 12: Income Tax PRC subsidiaries face a 25% EIT rate, with income tax expense recorded and a valuation allowance against deferred tax assets Income Tax Expense (Benefit) | Period | Amount (RMB) | | :--- | :--- | | Six Months Ended Dec 31, 2023 | 137,354 (Benefit) | | Six Months Ended Dec 31, 2024 | (1,091,247) (Expense) | - As of December 31, 2024, the company had net operating losses of RMB 37.9 million available to offset future taxable income, which will expire between 2025 and 2029135 - A valuation allowance of RMB 9.3 million was recorded against deferred tax assets as of December 31, 2024, due to uncertainty about their future realization137 Note 14: Commitments and Contingencies The company is involved in several legal proceedings, including a settled lawsuit and two pending disputes - A lawsuit with Shanghai Chenxi Technology Group was settled, with Sunshine Insurance Brokers agreeing to pay a total of RMB 13.26 million in promotion service fees145 - A pending lawsuit with Guangdong Zhongkang involves a dispute over joint brokerage fees of approximately RMB 1.4 million, with a counterclaim filed by the company for RMB 4.5 million146 - A pending lawsuit filed by Beijing Tiantan Puhua hospital involves a claim for medical expenses of approximately RMB 1.4 million, for which Zhibao China is requested to bear joint liability147 Note 15: Related Party Transactions Significant balances exist with related parties controlled by the CEO, including advances for services and payments on the company's behalf Balances with Related Parties (as of Dec 31, 2024) | Related Party | Balance Type | Amount (RMB) | Description | | :--- | :--- | :--- | :--- | | Shanghai GBG | Due From | 17,131,396 | Advances for future MGU services | | Shanghai Xinhui | Due To | 8,561,749 | Payments on behalf of the company and a RMB 2.5M interest-free loan | Note 16: Subsequent Events Subsequent events include additional convertible note issuances, termination of a share purchase facility, and further note settlements - In February 2025, the company received an additional $630,000 (net) from the issuance of a second tranche of convertible notes156158 - On March 11, 2025, the company terminated a $50 million share subscription facility agreement with GEM Global Yield LLC SCS161162 - From January to April 2025, the company settled an additional portion of its convertible notes by issuing 605,392 Class A ordinary shares163