As filed with the U.S. Securities and Exchange Commission on July 1, 2022

Registration No. 333-          

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

YUKAI Health Group Limited

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Xinya Building 909, 910, and 911

121 Dongjie Road

Gulou District, Fuzhou

Fujian Province, China 350001

Tel: +86 13705018865

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

800-221-0102

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications

sent to agent for service, should be sent to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company x

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

4,000,000 Ordinary Shares

YUKAI Health Group Limited

This is the initial public offering of ordinary shares of YUKAI Health Group Limited, a Cayman Islands exempted holding company with no material operations of our own. We conduct a substantial majority of our operations through our subsidiaries established in the People’s Republic of China (the “PRC”). Throughout this prospectus, unless the context indicates otherwise, references to “YUKAI” refer to YUKAI Health Group Limited, a holding company and references to “we,” the “Company” or “our company” are to YUKAI and/or its consolidated subsidiaries.

We are offering 4,000,000 ordinary shares, par value $0.0005 per share. We expect the initial public offering price of the shares to be in the range of $4.00 to $6.00 per share. Prior to this offering, there has been no public market for our ordinary shares. We have applied to have our ordinary shares listed on the Nasdaq Capital Market (or Nasdaq) under the symbol “     .” We cannot guarantee that we will be successful in listing our ordinary shares on the Nasdaq; however, we will not complete this offering unless we are so listed.

We are both an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for this and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company” and “Prospectus Summary — Implications of Being a Foreign Private Issuer.”

Investing in our ordinary shares involves significant risks. The risks could result in a material change in the value of the securities we are registering for sale or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Our ordinary shares offered in this prospectus are shares of our Cayman Islands holding company, which has no material operations of its own and conducts substantially all of its operations through the subsidiaries established in the PRC. Fujian Yukai Health Technology Co., Ltd. is our wholly owned subsidiary and currently has no operations (“Fujian Yukai” or “WFOE”). Through our WFOE, we own 100% of the equity interests in Fuzhou Yukai Trading Co., Ltd., (“Fuzhou Yukai”). As of the date of this prospectus, substantially all of our business is conducted through Fuzhou Yukai.

In addition, as substantially all of our operations are conducted through our subsidiaries in China, we are subject to legal and operational risks associated with China, including risks related to the legal, political and economic policies of the Chinese government, the relations between China and the United States, and any Chinese or United States regulations, which risks could result in a material change in our operations and/or cause the value of our ordinary shares to significantly decline or become worthless and affect our ability to offer or continue to offer securities to investors. For example, recently, the PRC government initiated a series of regulatory actions and made several public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. On July 6, 2021, General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. On December 28, 2021, the Cyberspace Administration of China, together with 12 other governmental departments of the PRC, jointly promulgated the Measures for Cybersecurity Review (2021 version), which became effective on February 15, 2022. The Measures for Cybersecurity Review (2021 version) requires that an online platform operator which possesses the personal information of at least one million users must apply for a cybersecurity review by the Cyberspace Administration of China if it intends to be listed in foreign countries. As advised by our PRC counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, we are not directly subject to these regulatory actions or statements, as we have not implemented any monopolistic behavior and our business does not involve the collection of user data, implicate cybersecurity, or involve any other type of restricted industry. As further advised by our PRC counsel, as of the date of this prospectus, no effective laws or regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory Commission (the “CSRC”) or any other PRC governmental authorities for our overseas listing plan, nor has our company or any of our subsidiaries received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the CSRC or any other PRC governmental authorities. However, since these statements and regulatory actions by the PRC government are newly published and official guidance and related implementation rules have not been issued, the potential impact such modified or new laws and regulations will have on our daily business operation and our ability to accept foreign investments and list on a U.S. exchange is highly uncertain. The Standing Committee of the National People’s Congress (the “SCNPC”) or other PRC regulatory authorities may in the future promulgate laws, regulations or implement rules that require our company, or any of our subsidiaries to obtain regulatory approval from Chinese authorities before listing in the U.S. See “Risk Factors” beginning on page 16 for a discussion of these legal and operational risks and other information that should be considered before making a decision to purchase our ordinary shares.

Furthermore, as more stringent criteria have been imposed by the U.S. Securities and Exchange Commission (the “SEC”) and the Public Company Accounting Oversight Board (the “PCAOB”) recently, our securities may be prohibited from trading if our auditor cannot be fully inspected by the PCAOB. 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, because of positions taken by PRC authorities in those jurisdictions, 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 list does not include our auditor, TPS Thayer, LLC. While our auditor is based in the U.S. and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause our securities to be delisted from the stock exchange. See “Risk Factors — Risks Related to Doing Business in China — Recent joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing or future offerings of our securities in the U.S.” on page 30.

As a holding company, we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us. Moreover, under the Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they become due in the ordinary course of business. None of our subsidiaries has made any dividends or other distributions to our holding company as of the date of this prospectus. In the future, cash proceeds raised from overseas financing activities, including this offering, may be transferred by us to our PRC subsidiaries via capital contribution or shareholder loans, as the case may be. As of the date of this prospectus, we have not made any dividends or distributions to U.S. investors.

As of the date of this prospectus, there were no cash flows between our Cayman Islands holding company and our subsidiaries. Also, there have been no funds transferred among our PRC subsidiaries for working capital purposes, primarily between our WFOE, and Fuzhou Yukai, our WFOE’s wholly owned subsidiary and our main operating subsidiary. In case any funds transfer in the future, the transfer of funds among companies will subject us to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Revision, the “Provisions on Private Lending Cases”), which was implemented on August 20, 2020 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. As advised by our PRC counsel, AllBright Law Offices (Fuzhou), the Provisions on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary’s operations. We have not been notified of any other restriction which could limit our PRC subsidiaries’ ability to transfer cash between subsidiaries.

We have granted a 45-day option to the Representative to purchase up to an additional 600,000 ordinary shares, solely to cover over-allotments, if any. 

Neither the U.S. Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ordinary shares to purchasers against payment therefor on                , 2022.

The date of this prospectus is               , 2022.

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus. We have not, and the underwriters have 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 the underwriters are not, making an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

For investors outside of the United States of America (the “United States” or the “U.S.”): Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our Shares and the distribution of this prospectus outside of the United States.

ABOUT THIS PROSPECTUS

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf or to which we have referred you. We take no responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the ordinary shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. For the avoidance of doubt, no offer or invitation to subscribe for ordinary shares are made to the public in the Cayman Islands. The information contained in this prospectus is current only as of the date on the front cover of the prospectus. Our business, financial condition, results of operations, and prospects may have changed since that date.

Neither we nor the underwriters have taken any action to permit a public offering of the ordinary shares outside the United States or to permit the possession or distribution of this prospectus or any filed free-writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ordinary shares and the distribution of this prospectus or any filed free-writing prospectus outside the United States.

Conventions that Apply to this Prospectus

Unless otherwise indicated or the context requires otherwise, references, in this prospectus to:

Our reporting currency is the U.S. dollar and our functional currency is the Renminbi. Solely for the convenience of the reader, this prospectus contains translations of some RMB amounts into U.S. dollars, at specified rates. The results of operations and the statement of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period, which are RMB6.4474 to US$1.00 and RMB6.8941 to US$1.00 for fiscal year 2021 and 2020, respectively. No representation is made that the RMB amounts referred to in this prospectus could have been or could be converted into U.S. dollars at such rate. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date, which are RMB6.3757 to US$1.00 and RMB6.5249 to US$1.00, respectively, as published by the Federal Reserve Board on December 31, 2021 and December 31, 2020.

Our fiscal year end is December 31. References to a particular “fiscal year” are to our fiscal year ended December 31 of that calendar year. Our audited consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States (the “U.S. GAAP”).

Except where indicated or where the context otherwise requires, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

We obtained the industry, market and competitive position data in this prospectus from Haiqiao Zhiku (Xiamen) Cultural Development Co., Ltd. (the “Haiqiao Zhiku”). None of the independent industry publications used in this prospectus were prepared on our behalf. Industry publications, research, surveys, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus, and to risks due to a variety of factors, including those described under “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these forecasts and other forward-looking information.

We have proprietary rights to trademarks used in this prospectus that are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are without the ®, ™ and other similar symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

This prospectus contains additional trademarks, service marks and trade names of others. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other person.

PROSPECTUS SUMMARY

Investors are cautioned that you are buying shares of a Cayman Islands holding company with no operations of its own.

This summary highlights certain information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including our financial statements and related notes and the risks described under “Risk Factors.” Our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.

Overview

We are not a Chinese operating company, but rather an exempted company with limited liability incorporated in the Cayman Islands on October 19, 2021. We are a holding company that has no operations ourselves. We operate through our two subsidiaries in China, Fujian Yukai, our WFOE, and Fuzhou Yukai. Fujian Yukai, currently with no business operations, is our wholly foreign-owned subsidiary formed on December 29, 2021 in Fuzhou city, Fujian province. Our WFOE holds 100% of the equity interests in Fuzhou Yukai, which entity was formed on September 28, 2005 in Fuzhou city, Fujian province. As of the date of this prospectus, substantially all of our business is conducted by Fuzhou Yukai.

Fuzhou Yukai used to sell medical equipment and serve as distributors for many medical device manufacturers in Fujian province, such as Toshiba, RadioMeter, and GE Healthcare China. In 2016, Fuzhou Yukai’s management decided to adjust its development strategy, taking advantage of its medical equipment selling experience, and entered the outsourced medical equipment maintenance market.

We believe we are an expert in managing and maintaining mission-critical, regulated, reusable medical devices. Through Fuzhou Yukai, we offer healthcare providers comprehensive medical equipment services that are designed to reduce capital and operating expenses, optimize medical equipment utilization, reduce waste, enhance staff productivity and bolster patient safety. Our outsourcing services include maintenance and the provision of spare equipment during maintenance. We generally maintain all of our customers’ medical equipment, including life-supporting medical devices, diagnostic equipment, basic treatment equipment, and supporting equipment, in accordance with relevant contract terms.

During the fiscal years ended December 31, 2021 and 2020, our revenues were $9,650,305 and $8,094,290 respectively, and net income was $935,824 and $7,743, respectively.

Our Customers

Our customer base includes 1) hospital customers and 2) business partner customers. We obtain our hospital customers through the public bidding process. We enter into contracts directly with our hospital customers after winning the bids. In addition to bidding, we also win business by cooperating with our business partners. Such cooperation with our business partners includes two different models: a) a joint bidding model, and b) a subcontract model. In the joint bidding model, we submit bidding documents together with our business partner. After winning the bids, we, our business partner, and the hospital will enter into a tripartite agreement which, among other things, will stipulate that the hospital will pay the business partner directly. We and the business partner will also enter into a separate agreement which, among other things, will provide that we receive payment from our business partner. The subcontract model works in two steps: first, our business partners obtain hospital customers through the bidding process or their sales teams; and second, after business partners win contracts from hospital customers, they then subcontract the projects to us. In these cooperation models, we provide maintenance services to the hospitals and receive compensation from our business partners.

As of December 31, 2021, and 2020, we had a total of 19 and 23 customers, respectively. Among the 19 customers, as of December 31, 2021, (i) 12 customers were hospitals with which Fuzhou Yukai directly entered into medical equipment maintenance service agreements, (ii) one of which was a hospital customer to which Fuzhou Yukai only sells Class II medical devices, and (iii) six of which were business partners. Through such six business partners, Fuzhou Yukai provides medical equipment maintenance services to eight hospitals. Among the 23 customers, as of December 31, 2020, (i) 20 customers were hospitals with which Fuzhou Yukai directly entered into medical equipment maintenance service agreements, and (ii) three of which were business partners. Through such three business partners, Fuzhou Yukai provided medical equipment maintenance services to six hospitals. Fuzhou Yukai also sold Class II medical devices to some of those business partners during such periods.

Development Trend

We believe that the following trends support the essential nature of our work:

Competitive Strengths

We believe that the following strengths contribute to our growth and differentiate us from our competitors:

Key Elements of our Growth Strategy

We intend to grow our business using the following key strategies:

Our Corporate History and Structure

We are an exempted company with limited liability incorporated in the Cayman Islands on October 19, 2021. We are a holding company that has no operations ourselves.

On September 28, 2005, Fuzhou Yukai was formed as a limited liability company in Fuzhou, Fujian province, China.

On December 29, 2021, Fujian Yukai, our WFOE, was formed as a limited liability company in China.

On April 24, 2022, as a part of our re-organization, our WFOE acquired all of the shares of Fuzhou Yukai, and Fuzhou Yukai became a wholly-owned subsidiary of our WFOE.

As of the date of this prospectus, substantially all of our business is conducted by Fuzhou Yukai.

For more details regarding our corporate structure and related changes, see “Corporate History and Structure.”

Our WFOE’s wholly owned subsidiary, Fuzhou Yukai, contributed 100% of our consolidated revenue and accounted for 100% of our consolidated total assets and liabilities for the fiscal years ended December 31, 2021 and 2020, and there was no reconciliation performed among the financial position, cash flows and results of operations of Fuzhou Yukai, our WFOE and us. The following financial information of Fujian Yukai and Fuzhou Yukai was included in the consolidated financial statements. For more information, see our consolidated financial statements and related notes from page F-1 to page F-28 that appear in this prospectus.

Our subsidiaries do not operate in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, AllBright Law Offices (Fuzhou), other than those requisite for a domestic company in China to engage in businesses similar to ours, we are not required to obtain any permission from Chinese authorities, including the CSRC, the Cyberspace Administration of China, or any other governmental agency that is required to approve our operations. However, if we do not receive or maintain the approvals, when, as, or if required, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to investigations by competent regulators, fines or penalties, ordered to suspend our relevant operations and rectify any non-compliance, prohibited from engaging in relevant business or conducting any offering, and any of these risks could result in a material adverse change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

As of the date of this prospectus, we and our PRC subsidiaries have received from the PRC authorities all requisite licenses, permissions or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied. Such licenses and permissions include Business Licenses, and a Class II medical device selling record certificate.

The following table provides details on the licenses and permissions held by our PRC subsidiaries.

As advised by our PRC counsel, AllBright Law Offices (Fuzhou), neither we nor any of our subsidiaries is currently required to obtain regulatory approval from Chinese authorities before listing in the U.S. under any existing PRC law, regulations or rules, including from the CSRC, the Cyberspace Administration of China, or any other relevant Chinese regulatory agencies that is required to approve Fuzhou Yukai and Fujian Yukai’s operations. However, the PRC government may take actions to exert more oversight and control over offerings by China-based issuers conducted overseas and/or foreign investment in such companies, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors outside China and cause the value of our securities to significantly decline or become worthless. See “Risk Factors — Risks Related to Doing Business in China — Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated by relevant PRC regulatory agencies in the future could delay this offering and failure to obtain any such approvals, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ordinary shares, and could also create uncertainties for this offering and affect our ability to offer or continue to offer securities to investors outside China” on page 21.

As advised by our PRC counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, we are not required to obtain any permission from any PRC governmental authorities to offer securities to foreign investors. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings, including this offering. As of the date of this prospectus, we have not received any inquiry, notice, warning, sanction or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. If it is determined in the future that the approval of the CSRC, the Cyberspace Administration of China or any other regulatory authority is required for this offering, we may face sanctions by the CSRC, the Cyberspace Administration of China or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, the Cyberspace Administration of China or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of our ordinary shares. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC, the Cyberspace Administration of China or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of our securities. See “Risk Factors — Risks Related to Doing Business in China — The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless” on page 19.

The chart below summarizes our corporate structure as of the date of this prospectus:

Dividends and Other Distributions

We are a holding company with no material operations of our own and do not generate any revenue. We currently conduct substantially all of our operations through Fuzhou Yukai, our indirectly wholly owned subsidiary. We are permitted under PRC laws and regulations to provide funding to PRC subsidiaries only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business” on page 16.

Under our current corporate structure, we rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have, including the funds necessary to pay dividends and other cash distributions to our shareholders or to service any debt we may incur. Our subsidiaries in the PRC generate and retain cash generated from operating activities and re-invest it in our business. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends to us. As of the date of this prospectus, there were no cash flows between the Company and our subsidiaries.

As of December 31, 2021, there were no funds transferred among our PRC subsidiaries and our Company.

Our PRC subsidiaries are permitted to pay dividends only out of their retained earnings. However, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, after making up for previous year’s accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such funds reaches 50% of its registered capital. This portion of our PRC subsidiaries’ respective net assets are prohibited from being distributed to their shareholders as dividends. See “Regulation — Regulations on Dividend Distributions.” However, none of our subsidiaries has made any dividends or other distributions to our holding company or any U.S. investors as of the date of this prospectus. See also “Risk Factors — Risks Related to Doing Business in China — We rely to a significant extent on dividends and other distributions on equity paid by our subsidiaries to fund offshore cash and financing requirements and any limitation on the ability of our PRC subsidiaries to make remittance to pay dividends to us could limit our ability to access cash generated by the operations of those entities” on page 27.

As of the date of this prospectus, none of our subsidiaries have ever issued any dividends or made other distributions to us or their respective holding companies nor have we or any of our subsidiaries ever paid dividends or made other distributions to U.S. investors. We intend to retain all of our available funds and any future earnings after this offering and cash proceeds from overseas financing activities, including this offering, to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future.

In addition, the PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to transfer cash out of China, and pay dividends in foreign currencies to our shareholders. There can be no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations. See “Risk Factors — Risks Related to Doing Business in China — Restrictions on currency exchange may limit our ability to utilize our revenues effectively” on page 29.

A 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises. Any gain realized on the transfer of ordinary shares by such investors is also subject to PRC tax at a current rate of 10%, which, in the case of dividends, will be withheld at source if such gain is regarded as income derived from sources within the PRC. See also “Risk Factors — Risks Related to Doing Business in China — Dividends payable to our foreign investors and gains on the sale of our ordinary shares by our foreign investors may be subject to PRC tax” on page 28.

Summary of Risks Affecting Our Company

Investing in our ordinary shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our ordinary shares. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Risk Factors.”

Risks Related to Doing Business in China

We are subject to risks and uncertainties relating to doing business in China in general, including, but are not limited to, the following:

Risks Related to Our Business and Industry:

Risks and uncertainties related to our business and industry include, but are not limited to, the following:

Risks Related to this Offering and Ownership of our Ordinary Shares

In addition to the risks and uncertainties described above, we are subject to risks relating to ordinary shares and this offering, including, but not limited to, the following:

Recent Regulatory Developments in China

Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement.

Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”) and Anti-Monopoly Law of the People’s Republic of China promulgated by the SCNPC which took effect in 2008 (“Anti-Monopoly Law”), established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulations require, among other things, that the State Administration for Market Regulation (“SAMR”) be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly Law requires that transactions which involve national security, the examination on the national security shall also be conducted according to the relevant provisions of the SAMR. In addition, the PRC Measures for the Security Review of Foreign Investment which took effect in January 2021 require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition.

On July 6, 2021, the relevant PRC government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law (the “Illegal Securities Opinions”). The Illegal Securities Opinions emphasize the need to strengthen the 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 address the risks and incidents faced by China-based overseas-listed companies. Pursuant to the Illegal Securities Opinions, Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures are expected to be adopted under the umbrella of or in addition to the Cybersecurity Law and Data Security Law. As of the date of this prospectus, no official guidance or related implementation rules have been issued and the interpretation of the Illegal Securities Opinions remains unclear at this stage. See “Risk Factors — Risks Related to Doing Business in China — Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated by relevant PRC regulatory agencies in the future could delay this offering and failure to obtain any such approvals, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ordinary shares, and could also create uncertainties for this offering and affect our ability to offer or continue to offer securities to investors outside China” on page 21.

In addition, on July 10, 2021, the Cyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments), or the Measures, for public comments, which propose to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million users. On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and took effect on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 version), further elaborate on the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” The cybersecurity review will also review the potential national security risks from overseas IPOs.

On December 24, 2021, the CSRC, together with other relevant government authorities in China, released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures,” collectively with the Draft Administrative Provisions, the “Draft Rules Regarding Overseas Listing”), which had a comment period that expired on January 23, 2022. The Draft Rules Regarding Overseas Listing provide the filing regulation arrangements for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in an overseas market, the record-filing obligation is with a major operating entity incorporated in the PRC and such filing obligation shall be completed within three working days after the overseas listing application is submitted. The required filing materials for an initial public offering and listing shall include but not limited to: regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable).

The Draft Rules Regarding Overseas Listing, if enacted, may subject us to additional compliance requirements in the future, and we cannot assure you that we will be able to get the clearance on filing procedures under the Draft Rules Regarding Overseas Listing on a timely basis, or at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless.

As advised by our PRC counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, no effective laws or regulations in the PRC explicitly require us to seek approval from the CSRC or any other PRC governmental authorities for our overseas listing plan, nor has our company or any of our subsidiaries received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the CSRC or any other PRC governmental authorities. However, since these statements and regulatory actions by the PRC government are newly published and official guidance and related implementation rules have not been issued, it is highly uncertain what the potential impact 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. exchange. The SCNPC or other PRC regulatory authorities may in the future promulgate laws, regulations or implementing rules that may require our company, or any of our subsidiaries to obtain regulatory approval from Chinese authorities before listing in the U.S. See “Risk Factors” beginning on page 16 for a discussion of these legal and operational risks and other information that should be considered before making a decision to purchase our ordinary shares.

Implications of Being an Emerging Growth Company

We had less than $1.07 billion in revenue during our last fiscal year. As a result, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of reduced public reporting requirements. These provisions include, but are not limited to:

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant to this offering. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” if our annual gross revenues exceed $1.07 billion or if we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act.

Implications of Being a Foreign Private Issuer

Upon consummation of this offering, we will report under the Exchange Act, as a non-U.S. company with “foreign private issuer” status. Even after we no longer qualify as an emerging growth company, so long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act and the rules thereunder that are applicable to U.S. domestic public companies, including:

We will file with the SEC, within four months after the end of each fiscal year (or such other reports required by the SEC), an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

Both foreign private issuers and emerging growth companies are also exempt from certain of the more extensive SEC executive compensation disclosure rules. Therefore, if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from such rules and will continue to be permitted to follow our home country practice as to the disclosure of such matters.

Corporate Information

Our principal executive offices are located at Xinya Building, Room 909, 910, and 911, 121 Dongjie Road, Gulou District, Fuzhou, Fujian Province, China 350001, and our telephone number is + 86-13705018865. Our website is yukaigroup.cn. Information contained on, or available through, our website does not constitute part of, and is not deemed incorporated by reference into, this prospectus. Our registered office in the Cayman Islands is located at the offices of Tricor Services (Cayman Islands) Limited, Second Floor, Century Yard, Cricket Square, P.O. Box 902, Grand Cayman, KY1-1103, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., which is located at 122 East 42nd Street, 18th Floor, New York, NY 10168.

The Offering

RISK FACTORS

An investment in our ordinary shares involves a high degree of risk. Before deciding whether to invest in our ordinary shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. If any of these risks actually occur, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of our ordinary shares to decline, resulting in a loss of all or part of your investment. The risks described below and discussed in other parts of this prospectus are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our ordinary shares if you can bear the risk of loss of your entire investment.

Risks Related to Doing Business in China

Changes in the political and economic policies of the PRC government or in relations between China and the United States or other governments may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

Substantially all of our operations are conducted in Fujian province, PRC, and all of our revenue is generated from the PRC. Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC or changes in government relations between China and the United States or other governments. There is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs.

The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China are still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policies, regulating financial services and institutions, and providing preferential treatment to particular industries or companies.

While the PRC economy has experienced significant growth in the past four decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results of operations could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, the PRC government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activities.

In July 2021, the Chinese government provided new guidance on China-based companies raising capital outside of China, including through variable interest entity, or VIE, arrangements. In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. As all of our operations are based in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities by China-based companies could adversely affect our business and results of operations. If the business environment in China deteriorates from the perspective of domestic or international investment, or if relations between China and the United States or other governments deteriorate, the Chinese government may intervene with our operations, and the market price of our ordinary shares may also be adversely affected.

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.

All of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies. In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the violation.

Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business, financial condition and results of operations.

Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Illegal Securities Opinions, which were made available to the public on July 6, 2021. The Illegal Securities Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to address with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Illegal Securities Opinions remain unclear on how the law will be interpreted, amended and implemented by the relevant PRC governmental authorities, but the Illegal Securities Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future.

On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments, which required that, among others, in addition to “operator of critical information infrastructure,” any “data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities.

On November 14, 2021, the Cyberspace Administration of China released the Regulations on Network Data Security (draft for public comments) and accepted public comments until December 13, 2021. The draft Regulations on Network Data Security provide that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year. On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and took effect on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. As advised by our PRC counsel, AllBright Law Offices (Fuzhou), we are not the “operator of critical information infrastructure” or “data processor” as mentioned above.

The Company, through our WFOE and its operating subsidiary, Fuzhou Yukai, is an outsourced medical equipment maintenance service provider, and neither the Company nor its subsidiaries engage in data activities as defined under the Personal Information Protection Law of the People’s Republic of China (the “Personal Information Protection Law”), which includes, without limitation, collection, storage, use, processing, transmission, provision, publication and deletion of data. In addition, neither the Company nor its subsidiaries are operators of any “critical information infrastructure” as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure. However, the Measures for Cybersecurity Review (2021 version) was recently adopted and the Network Internet Data Protection Draft Regulations (draft for comments) is in the process of being formulated and the Illegal Securities Opinions remain unclear on how such measures will be interpreted, amended and implemented by the relevant PRC governmental authorities.

There remain uncertainties as to when the final measures will be issued and take effect, how they will be enacted, interpreted or implemented, and whether they will affect us. If we inadvertently conclude that the Measures for Cybersecurity Review (2021 version) do not apply to us, or applicable laws, regulations, or interpretations change and it is determined in the future that the Measures for Cybersecurity Review (2021 version) become applicable to us, we may be subject to review when conducting data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices. We may incur substantial costs in complying with the Measures for Cybersecurity Review (2021 version), which could result in material adverse changes in our business operations and financial position. If we are not able to fully comply with the Measures for Cybersecurity Review (2021 version), our ability to offer or continue to offer securities to investors may be significantly limited or completely hindered, and our securities may significantly decline in value or become worthless.

On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments), both of which had a comment period that expired on January 23, 2022, and if enacted, may subject us to additional compliance requirement in the future. See “Risk Factors — Risks Related to Doing Business in China — The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless.”

Thus, it is still uncertain how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals. Furthermore, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering and any follow-on offering, we may be unable to obtain such approvals which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors.

Furthermore, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may intervene or influence our operations at any time, which are beyond our control. Therefore, any such action may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer securities to you and reduce the value of such securities.

Uncertainties regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance and/or the value of our ordinary shares or impair our ability to raise money.

The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless.

We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges, however, if our holding company or any of our PRC subsidiaries are required to obtain approval in the future and are denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges, or continue to offer securities to investors, and it may materially affect the interest of the investors and cause significantly depreciation of our price of ordinary shares.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in our operations in China.

For example, the Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the company’s app be removed from smartphone app stores. Similarly, our business segments may be subject to various government and regulatory interference in the regions in which we operate. We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. We may incur increased costs to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

Furthermore, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although we believe we are currently not required to obtain permission from any of the PRC national or local government regulatory entities to obtain such permission and have not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. Recent statements by the Chinese government indicate an intent, and the PRC government may take actions, to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, could, if implemented, significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or become worthless.

The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless.

On December 24, 2021, the CSRC released the Draft Rules Regarding Overseas Listing, which had a comment period that expired on January 23, 2022. The Draft Rules Regarding Overseas Listing provide the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas markets.

The Draft Rules Regarding Overseas Listing stipulate that the Chinese-based companies, or the issuer, shall fulfill the filing procedures within three working days after the issuer makes an application for initial public offering and listing in an overseas market. The required filing materials for an initial public offering and listing should include at least the following: record-filing report and related undertakings; regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable); PRC legal opinion; and prospectus.

In addition, an overseas offering and listing is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute a threat to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) if there are material ownership disputes over the equity, major assets, and core technology, etc. of the issuer; (4) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in past three years, directors, supervisors, or senior executives have been subject to administrative punishments for severe violations, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (6) other circumstances as prescribed by the State Council. The Draft Administration Provisions defines the legal liabilities of breaches such as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and in cases of severe violations, a parallel order to suspend business operations for rectification, revoke relevant business permits or operational license.

The Draft Rules Regarding Overseas Listing, if enacted, may subject us to additional compliance requirements in the future, and we cannot assure you that we will be able to get the clearance of filing procedures under the Draft Rules Regarding Overseas Listing on a timely basis, or at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the prospectus based on foreign laws.

We are an exempted company 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 addition, the majority of our senior executive officers reside within China and are PRC nationals. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside China. In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.

Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which took effect in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. See also “Risk Factors —Risks Relating to Our Ordinary Shares and this Offering — You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” for risks associated with investing in us as a Cayman Islands company.

Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated by relevant PRC regulatory agencies in the future could delay this offering and failure to obtain any such approvals, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ordinary shares, and could also create uncertainties for this offering and affect our ability to offer or continue to offer securities to investors outside China.

On August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce (the “MOFCOM”), the State-Owned Assets Supervision and Administration Commission (the “SASAC”), the State Administration of Taxation (the “SAT”), the State Administration of Industry and Commerce (the “SAIC”), the CSRC, and the State Administration of Foreign Exchange (the “SAFE”), jointly adopted the M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules include, among other things, provisions that purport to require that an offshore special purpose vehicle formed for the purpose of an overseas listing of securities in a PRC company obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles.

While the application of the M&A Rules remains unclear, we believe, based on the advice of our PRC counsel, AllBright Law Offices (Fuzhou), that the CSRC approval is not required in the context of this offering because (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings under the prospectus are subject to the M&A Rules; and (ii) we established our PRC subsidiary, Fujian Yukai, by means of direct investment rather than by merger with or acquisition of PRC domestic companies. However, uncertainties still exist as to how the M&A Rules will be interpreted and implemented, and the opinion of our PRC counsel is subject to any new laws, rules, and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC’s approval for this offering or if the CSRC or any other PRC government authorities promulgates any interpretation or implements rules before our listing that would require us to obtain CSRC or other governmental approvals for this offering, we may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. In any such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into the PRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as our ability to complete this offering. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ordinary shares offered by this prospectus. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that such settlement and delivery may not occur. See “Regulation — Regulations Relating to Overseas Listing and M&A.”

In addition, the security review rules issued by the MOFCOM that took effect in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. Furthermore, according to the security review, foreign investments that would result in acquiring the actual control of assets in certain key sectors, such as critical agricultural products, energy and resources, equipment manufacturing, infrastructure, transport, cultural products and services, information technology, Internet products and services, financial services and technology sectors, are required to obtain approval from designated governmental authorities in advance.

We are not operating in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, AllBright Law Offices (Fuzhou), other than those requisite for a domestic company in China to engage in the businesses similar to ours, we are not required to obtain any permission from Chinese authorities including the CSRC, Cyberspace Administration of China or any other governmental agency that is required to approve our operations. However, if we do not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to investigations by competent regulators, fines or penalties, ordered to suspend our relevant operations and rectify any non-compliance, prohibited from engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

As of the date of this prospectus, we and our PRC subsidiaries have received from PRC authorities all requisite licenses, permissions or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied. Such licenses and permissions include Business License, and Class II medical device selling record certificate. As advised by our PRC counsel, AllBright Law Offices (Fuzhou), neither we nor any of our subsidiaries are required to obtain regulatory approval from Chinese authorities before listing in the U.S. under any existing PRC law, regulations or rules, including from the CSRC, the Cyberspace Administration of China, or any other relevant Chinese regulatory agencies that is required to approve our operations in China. However, the PRC government may take actions to exert more oversight and control over offerings by China-based issuers conducted overseas and/or foreign investment in such companies, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors outside China and cause the value of our securities to significantly decline or become worthless.

In the future, we may grow our business by acquiring businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions, if required, could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected. Furthermore, according to the M&A Rules, if a PRC entity or individual plans to merge or acquire its related PRC entity through an overseas company legitimately incorporated or controlled by such entity or individual, such a merger and acquisition will be subject to examination and approval by the MOFCOM. There is a possibility that the PRC regulators may promulgate new rules or explanations requiring that we obtain the approval of the MOFCOM or other PRC governmental authorities for our completed or ongoing mergers and acquisitions. There is no assurance that, if we plan to make an acquisition, we can obtain such approval from the MOFCOM or any other relevant PRC governmental authorities for our mergers and acquisitions, and if we fail to obtain those approvals, we may be required to suspend our acquisition and be subject to penalties. Any uncertainties regarding such approval requirements could have a material adverse effect on our business, results of operations and corporate structure.

In addition, on July 6, 2021, the relevant PRC government authorities made public the Illegal Securities Opinions. These opinions emphasized the need to strengthen the 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 address the risks and incidents faced by China-based overseas-listed companies. Pursuant to the Illegal Securities Opinions, Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures are expected to be adopted under the umbrella of or in addition to the Cybersecurity Law and Data Security Law. As of the date of this prospectus, no official guidance or related implementation rules have been issued yet and the interpretation of these opinions remains unclear at this stage.

On July 10, 2021, the Cyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments) for public comments, which proposes to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million users.

On November 14, 2021, the Cyberspace Administration of China issued the Regulations on Network Data Security (draft for public comments) which set forth cyber data security compliance requirements in greater detail.

On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and took effect on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. As advised by our PRC counsel, AllBright Law Offices (Fuzhou), we are not among the “operators of critical information infrastructure” or “online platform operators” as mentioned above. The Company, through our WFOE and its operating subsidiary, Fuzhou Yukai, is an outsourced medical equipment maintenance service provider, and neither the Company nor its subsidiaries is engaged in data activities as defined under the Personal Information Protection Law, which includes, without limitation, collection, storage, use, processing, transmission, provision, publication and deletion of data. In addition, neither the Company nor its subsidiaries is an operator of any “critical information infrastructure” as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure. However, the Measures for Cybersecurity Review were recently adopted and the Network Internet Data Protection Draft Regulations (draft for comments) are in the process of being formulated and the Illegal Securities Opinions remain unclear on how they will be interpreted, amended and implemented by the relevant PRC governmental authorities.

There remain uncertainties as to when the final measures will be issued and take effect, how they will be enacted, interpreted or implemented, and whether they will affect us. If we inadvertently conclude that the Measures for Cybersecurity Review do not apply to us, or applicable laws, regulations, or interpretations change and it is determined in the future that the Measures for Cybersecurity Review become applicable to us, we may be subject to review when conducting data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices. We may incur substantial costs in complying with the Measures for Cybersecurity Review, which could result in material adverse changes in our business operations and financial position. If we are not able to fully comply with the Measures for Cybersecurity Review, our ability to offer or continue to offer securities to investors may be significantly limited or completely hindered, and our securities may significantly decline in value or become worthless.

On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments), both of which had a comment period that expired on January 23, 2022, and, if enacted, may subject us to additional compliance requirement in the future. See “Risk Factors — Risks Related to Doing Business in China — The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless.” Thus, it is still uncertain how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals or to fulfill any record-filing requirements. Furthermore, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their prior approvals or ex-post record-filing for this offering and any follow-on offering, we may be unable to obtain such approvals or record-filing which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors.

As advised by our PRC counsel, AllBright Law Offices (Fuzhou), as of the date of this prospectus, we are not required to obtain any permission from any PRC governmental authorities to offer securities to foreign investors. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings, including this offering and offering securities to foreign investors. As of the date of this prospectus, we have not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. If it is determined in the future that the approval of the CSRC, the Cyberspace Administration of China or any other regulatory authority is required for this offering, we may face sanctions by the CSRC, the Cyberspace Administration of China or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operations in China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our securities. The CSRC, the Cyberspace Administration of China or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of our ordinary shares. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC, the Cyberspace Administration of China or other regulatory PRC agencies later promulgate new rules requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such an approval requirement could have a material adverse effect on the trading price of our securities.

PRC regulations regarding acquisitions impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions.

Under the PRC Anti-Monopoly Law, companies undertaking acquisitions relating to businesses in China must notify the State Administration for Market Regulation, or the SAMR, in advance of any transaction where the parties’ revenues in the China market exceed certain thresholds and the buyer would obtain control of, or decisive influence over, the target, while under the M&A Rules, the approval of MOFCOM must be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire domestic companies affiliated with such PRC enterprises or residents. Applicable PRC laws, rules and regulations also require certain merger and acquisition transactions to be subject to security review. As a result, the transactions, if any, we may undertake could be subject to SAMR merger review. Complying with the requirements of the relevant regulations to complete such transactions could be time-consuming, and any required approval processes, including approval from the SAMR, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. If the practice of SAMR and MOFCOM remains unchanged, our ability to carry out our acquisition strategy may be materially and adversely affected and there may be significant uncertainty as to whether we will be able to complete large acquisitions in the future in a timely manner or at all.

PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.

The SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or the SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as the “SAFE Circular 75” promulgated by the SAFE on October 21, 2005. The SAFE Circular 37 requires PRC residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in the SAFE Circular 37 as a “special purpose vehicle.” The SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required the SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various registration requirements with the SAFE described above could result in liability under PRC law for evasion of foreign exchange controls.

We have notified substantial beneficial owners of ordinary shares who we know are PRC residents of their filing obligation, and all substantial beneficial owners have completed the necessary registration with the local SAFE branch or qualified banks as required by the SAFE Circular 37. However, we may not at all times be aware of the identities of all of our beneficial owners who are PRC residents. We do not have control over our beneficial owners and cannot assure you that all of our PRC-resident beneficial owners will comply with the SAFE Circular 37 and subsequent implementation rules. The failure of our beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner pursuant to the SAFE Circular 37 and subsequent implementation rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE Circular 37 and subsequent implementation rules, may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Furthermore, since it is unclear how the SAFE Circular 37, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, we cannot predict how these regulations will affect our business operations or future strategies. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to our company. These risks may have a material adverse effect on our business, financial condition and results of operations.

Any failure to comply with PRC regulations regarding the registration requirements for employee share incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, replacing earlier rules promulgated in March 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any share incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with the SAFE through a domestic qualified agent, which could be the PRC subsidiary of such overseas listed company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of share options and the purchase or sale of shares and interests. In the event we adopt an equity incentive plan, our executive officers and other employees who are PRC citizens or who have resided in the PRC for a continuous period of not less than one year and who are granted options or other awards under the equity incentive plan will be subject to these regulations when our company becomes an overseas listed company upon the completion of this offering. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law.

PRC regulations of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in China through our PRC subsidiaries. We may make loans to our PRC subsidiaries subject to the approval from governmental authorities and limitations on borrowed amounts, or we may make additional capital contributions to our subsidiaries in China.

Any loans to our WFOE in China, which is treated as a foreign-invested enterprise under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our WFOE in China to finance its activities cannot exceed statutory limits and must be registered with the local counterparts of the SAFE. In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign invested enterprise shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprise or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or the SAFE Circular 19, effective June 2015, in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses. Although the SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether the SAFE will permit such capital to be used for equity investments in China in actual practice. The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or the SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in the SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of the SAFE Circular 19 and the SAFE Circular 16 could result in administrative penalties. The SAFE Circular 19 and the SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from this offering, to our WFOE, which may adversely affect our liquidity and our ability to fund and expand our business in China.

On October 23, 2019, the SAFE issued the Circular on Further Promoting Cross-border Trade and Investment Facilitation, or the SAFE Circular 28, which took effect on the same day. The SAFE Circular 28, subject to certain conditions, allows foreign-invested enterprises whose business scope does not include investment, or non-investment foreign-invested enterprises, to use their capital funds to make equity investments in China. Since the SAFE Circular 28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, and the fact that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to PRC subsidiaries in or future capital contributions by us to our WFOE in China. As a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries when needed. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from this offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We rely to a significant extent on dividends and other distributions on equity paid by our subsidiaries to fund offshore cash and financing requirements and any limitation on the ability of our PRC subsidiaries to transfer cash out of China and/or make remittance to pay dividends to us could limit our ability to access cash generated by the operations of those entities.

We are a holding company and rely to a significant extent on dividends and other distributions on equity paid by our subsidiaries for our offshore cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, fund inter-company loans, service any debt we may incur outside of China and pay our expenses. The laws, rules and regulations applicable to our PRC subsidiaries permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicable accounting standards and regulations.

Under PRC laws, rules and regulations, each of our subsidiaries incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up for previous years’ accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such fund reaches 50% of its registered capital. As a result of these laws, rules and regulations, our subsidiaries incorporated in China are restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends. As of December 31, 2021, and 2020, these restricted assets totaled $0 and $0, respectively, due to the accumulated losses from prior years. However, there can be no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations.

Limitations on the ability of our PRC subsidiaries to make remittance to pay dividends to us could limit our ability to access cash generated by the operations of those entities, including to make investments or acquisitions that could be beneficial to our businesses, pay dividends to our shareholders or otherwise fund and conduct our business.

We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income.

Under the PRC Enterprise Income Tax Law and its implementing rules, both of which came into effect on January 1, 2008 and were last amended on December 29, 2018, enterprises established under the laws of jurisdictions outside of China with “de facto management bodies” located in China may be considered PRC tax resident enterprises for tax purposes and may be subject to the PRC enterprise income tax at the rate of 25% on their global income. “De facto management body” refers to a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise. The SAT issued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or the SAT Circular 82, on April 22, 2009. SAT Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. Although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those controlled by individuals or foreign enterprises, the determining criteria set forth in SAT Circular 82 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises. If we were to be considered a PRC resident enterprise, we would be subject to PRC enterprise income tax at the rate of 25% on our global income, and our profitability and cash flow may be materially reduced as a result of our global income being taxed under the Enterprise Income Tax Law. We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. 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”.

Dividends payable to our foreign investors and gains on the sale of our ordinary shares by our foreign investors may be subject to PRC tax.

Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Any gain realized on the transfer of ordinary shares by such investors is also subject to PRC tax at a current rate of 10% which in the case of dividends will be withheld at source if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our ordinary shares, and any gain realized from the transfer of our ordinary shares, may be treated as income derived from sources within the PRC and may as a result be subject to PRC taxation. See “Regulation—Regulations Relating to Taxation.” Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of ordinary shares by such investors may be subject to PRC tax at a current rate of 20%. Any PRC tax liability may be reduced under applicable tax treaties. However, it is unclear whether holders of our ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas if we are considered a PRC resident enterprise. If dividends payable to our non-PRC investors, or gains from the transfer of our ordinary shares by such investors are subject to PRC tax, the value of your investment in our ordinary shares may decline significantly.

We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

On February 3, 2015, the SAT issued the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or the SAT Circular 7. The SAT Circular 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, the SAT Circular 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. The SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. On October 17, 2017, the SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Circular 37, which came into effect on December 1, 2017. The SAT Circular 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.

Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is deemed an “Indirect Transfer” pursuant to SAT Circular 7 and SAT Circular 37, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under the SAT Circular 7 and/or the SAT Circular 37. For transfer of shares in our company that do not qualify for the public securities market safe harbor by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under the SAT Circular 7 and/or the SAT Circular 37. As a result, we may be required to expend valuable resources to comply with the SAT Circular 7 and/or the SAT Circular 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively.

All of our revenues are denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries. Currently, our PRC subsidiaries may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the SAFE’s approval by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Since we expect a significant portion of our future revenue will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of the PRC and/or transfer cash out of China to pay dividends in foreign currencies to our shareholders. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries. In addition, there can be no assurance that the PRC government will not intervene or impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations.

Fluctuations in exchange rates could result in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our shares in foreign currency terms.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policies adopted by the PRC government. In August 2015, the People’s Bank of China, or PBOC, changed the way it calculates the mid-point price of RMB against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. In 2017, the value of the Renminbi appreciated by approximately 6.3% against the U.S. dollar; and in 2018, the Renminbi depreciated by approximately 5.7% against the U.S. dollar. From the end of 2018 through the end of December 2020, the value of the Renminbi appreciated by approximately 5.10% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policies, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the RMB and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the RMB against the U.S. dollar. However, the PRC government may still at its discretion restrict access to foreign currencies for current account transactions in the future. Therefore, it is difficult to predict how market forces or government policies may impact the exchange rate between the RMB and the U.S. dollar or other currencies in the future. In addition, the PBOC regularly intervenes in the foreign exchange Company market to limit fluctuations in RMB exchange rates and achieve policy goals. If the exchange rate between RMB and U.S. dollar fluctuates in unanticipated manners, our results of operations and financial condition, and the value of, and dividends payable on, our shares in foreign currency terms may be adversely affected. We may not be able to pay dividends in foreign currencies to our shareholders. Appreciation of RMB to U.S dollar will result in exchange loss, while depreciation of RMB to U.S dollar will result in exchange gain.

Failure to make adequate contributions to various employee benefit plans and withhold individual income tax on employees’ salaries as required by PRC regulations may subject us to penalties.

Companies operating in China are required to participate in various government-mandated employee benefit contribution plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit contribution plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. Companies operating in China are also required to withhold individual income tax on employees’ salaries based on the actual salary of each employee upon payment. We may be subject to late fees and fines in relation to certain underpaid employee benefits and individual income tax withholding requirements, which fees and fines, if and when imposed, could adversely affect our financial condition and results of operations.

According to our PRC legal counsel, the PRC subsidiaries have signed labor contracts with all of their employees. However, our PRC subsidiaries did not pay social insurance contributions and housing provident fund contributions in full for all of the employees. As of the date of this prospectus, no administrative actions, fines or penalties have been imposed by the relevant PRC government authorities with respect to such non-compliance, nor has any order been received by our PRC subsidiaries to settle the outstanding amount of social insurance contributions and housing provident fund contributions.

The recent joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our continued listing or future offerings of our securities in the U.S.

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over the counter trading market in the U.S.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements described above. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act 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. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, 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 issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (i) China, and (ii) Hong Kong. Our auditor, TPS Thayer, LLC, is not headquartered in China or Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination.

Furthermore, various equity-based research organizations have recently published reports on China-based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges. Any similar scrutiny on us, regardless of its lack of merit, could cause the market price of our ordinary shares to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance.

Our auditor, TPS Thayer, LLC, the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor’s registration with the PCAOB took effect in September 2020, and it is currently subject to PCAOB inspections. The PCAOB currently has access to inspect the working papers of our auditor. However, the recent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or 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.

The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspections. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCA Act. However, some of the recommendations were more stringent than the HFCA Act. For example, if a company’s auditor was not subject to PCAOB inspections, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.

The SEC has announced that the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations will be adopted. The implications of this possible regulation in addition to the requirements of the HFCA Act are uncertain. While we understand that there has been dialogue among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-registered accounting firms in China, there can be no assurance that we will be able to comply with requirements imposed by U.S. regulators. Such uncertainty could cause the market price of our ordinary shares to be materially and adversely affected, and our securities could be delisted and prohibited from being traded on the national securities exchange earlier than would be required by the HFCA Act. If our securities are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase our ordinary shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of our ordinary shares.

Furthermore, new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our ordinary shares on Nasdaq, which could materially impair the market for and market price of our ordinary shares.

Risks Related to Our Business and Industry

Fuzhou Yukai’s operating history may not be indicative of its future growth or financial results and it may not be able to sustain its historical growth rates.

Fuzhou Yukai’s operating history may not be indicative of its future growth or financial results. There is no assurance that Fuzhou Yukai will be able to grow its revenue in the future. Fuzhou Yukai’s growth rate may decline for any number of possible reasons, and some of them are beyond Fuzhou Yukai’s control, including decreasing customer demand, increasing competition, declining growth of the healthcare industry in general, emergence of alternative business models, changes in government policies, or general economic conditions. Fuzhou Yukai will continue to expand its business scope to serve its customers and increase its customer base. However, the execution of Fuzhou Yukai’s expansion plan is subject to uncertainties and the customer base may not grow at the rate Fuzhou Yukai expects for the reasons stated above. If Fuzhou Yukai’s growth rates decline, investors’ perceptions of its business and prospects may be adversely affected and the market price of our ordinary shares could decline accordingly.

The COVID-19 pandemic could materially and adversely affect Fuzhou Yukai’s business, operating results, financial condition and prospects.

We and our PRC subsidiaries are closely monitoring the COVID-19 pandemic (and any evolutions thereof or related or associated epidemics, pandemics or disease outbreaks, “COVID-19”). COVID-19 has spread to many countries and has been declared by the World Health Organization to be a pandemic, resulting in actions from national and local governments that have significantly affected virtually all facets of the PRC and global economies. The PRC government has implemented enhanced screenings, quarantine requirements and travel restrictions in connection with the COVID-19 outbreak.

As of the date of this prospectus, Fuzhou Yukai’s business has not been materially adversely affected by the COVID-19 pandemic but may be more adversely impacted in the future. Fuzhou Yukai sources equipment parts from China and other parts of the world. If COVID-19 adversely affects any of Fuzhou Yukai’s significant suppliers, it could disrupt Fuzhou Yukai’s supply chain. While the spread of COVID-19 was substantially controlled in 2021, due to the availability of vaccinations, several types of COVID-19 variants emerged in different parts of the world and restrictions were re-imposed from time to time in certain cities to combat sporadic outbreaks. For example, in early 2022, the Omicron variant of COVID-19 spread in China, especially in Jilin province, Shenzhen and Shanghai, where strict lockdowns were imposed. Given the significant economic uncertainty and volatility created by the COVID-19 pandemic, it is difficult to predict the nature and extent of impacts.

The extent of the impact of COVID-19 on Fuzhou Yukai’s operational and financial performance will depend on future developments, including, but not limited to, the duration and spread of the pandemic and related travel advisories and restrictions, all of which are highly uncertain and cannot be predicted. Government shutdown orders may result in a closure of operations for an uncertain duration impacting Fuzhou Yukai’s business results. Preventing the effects from and responding to this market disruption or any other public health threat, related or otherwise, may further increase Fuzhou Yukai’s costs of doing business and may have a material adverse effect on its business, financial condition and results of operations.

While Fuzhou Yukai has taken steps to minimize the COVID-19 exposure in the workplace, a COVID-19 outbreak within the workplace may occur and significantly disrupt operations. Any COVID-19 outbreak in Fujian province and other locations in which Fuzhou Yukai operates may disrupt Fuzhou Yukai’s operations at a greater rate than we currently experience.

The spread of COVID-19 has caused Fuzhou Yukai to modify its business practices, including reducing travel and conducting virtual meetings, events and conferences, and adopting social distancing measures, and Fuzhou Yukai may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, and suppliers. Work-from-home and other measures, if taken by Fuzhou Yukai, will introduce additional operational risks, including cybersecurity risks, which could have an adverse effect on Fuzhou Yukai’s operations. In addition, even if such measures are undertaken by Fuzhou Yukai, there is no assurance that such measures will be sufficient to mitigate the risks posed by COVID-19, and illness and workforce disruptions could lead to unavailability of key personnel and harm Fuzhou Yukai’s ability to perform critical functions.

The severity, magnitude and duration of the COVID-19 pandemic is uncertain and depends on events beyond our knowledge or control. These and other impacts of the COVID-19 pandemic could heighten many of the other risks described in this “Risk Factors” section, such as those relating to Fuzhou Yukai’s reputation, sales, results of operations or financial condition. We and Fuzhou Yukai might not be able to predict or respond on a timely basis to prevent near- or long-term adverse impacts of COVID-19, which could have a material adverse effect on Fuzhou Yukai’s business, results of operations, financial condition and cash flows.

Fuzhou Yukai may be unable to maintain existing contracts or contract terms or enter into new contracts with its customers.

Fuzhou Yukai’s revenue and growth depend, in part, on continuing contracts with customers. Fuzhou Yukai has been able to maintain and renew the majority of such contracts and expand the solutions it offers under such contracts. If Fuzhou Yukai is unable to maintain its contracts, or if the existing and potential customers seek to lower the contract prices or adjust other terms, Fuzhou Yukai may lose a portion or all of the existing or potential business with, or revenue from, such existing or potential customers. Some contracts include an annual review clause that entitles the hospital to terminate the contracts based on evaluation of Fuzhou Yukai’s work performance each year. Although Fuzhou Yukai has not experienced contract termination due to the evaluation, if such termination occurs, Fuzhou Yukai’s business, results of operations, and financial condition will be adversely impacted.

In addition, certain of Fuzhou Yukai’s customers account for a large portion of its revenue. From time to time, a single customer may account for 10% or more of Fuzhou Yukai’s total revenue. For example, Xiamen C&D Hitek Co., Ltd., Fuzhou No. 2 Hospital, and China Resources (Fuzhou) Medical Equipment Co., Ltd. accounted for 10% or more of revenue, as of the fiscal year ended December 31, 2021. China Resources (Fuzhou) Medical Equipment Co., Ltd., Fuzhou No. 2 Hospital, and Xiamen C&D Hitek Co., Ltd. accounted for 10% or more of revenue as of the fiscal year ended December 31, 2020. As a result, a single customer’s actions can expose Fuzhou Yukai’s business and operating results to great volatility.

Fuzhou Yukai has little bargaining power over the terms of the contracts with its hospital customers. If the hospitals lower their budgets, such actions could decrease the amount of revenue Fuzhou Yukai generates, thereby adversely impacting Fuzhou Yukai’s business, results of operations, and financial condition.

Fuzhou Yukai obtains its hospital customers through the public bidding process. After winning the bid, Fuzhou Yukai will enter into contracts with such customers. In general, such contracts are based on a conventional government procurement contract template. Fuzhou Yukai has little bargaining power over the terms of the contracts with its hospital customers. Therefore, if the hospitals lower their overall budgets and their budgets for medical device maintenance also decreases, the hospitals will likely decrease the contract price with Fuzhou Yukai. Accordingly, this will decrease the amount of revenue Fuzhou Yukai generates, thereby adversely impacting Fuzhou Yukai’s business, results of operations, and financial condition.

If our PRC subsidiaries fail to maintain their reputation, including by adequately protecting their intellectual property, their sales and operating results may decline.

We believe the PRC subsidiaries’ continued success depends on their ability to maintain and grow the value of their brand. Brand value is based in large part on perceptions of subjective qualities. Even isolated incidents can erode the trust and confidence of the PRC subsidiaries’ customers and damage the strength of their brand, if such incidents result in adverse publicity or litigation. Challenges or reactions to action (or inaction) or perceived action (or inaction), by the PRC subsidiaries on issues such as social policies, compliance related to social, product, labor and environmental standards or other sensitive topics, and any perceived lack of transparency about such matters, could harm the PRC subsidiaries’ reputation. The increasing use of social media platforms and online forums may increase the chance that an adverse event could negatively affect the reputation of the PRC subsidiaries’ brands. The online dissemination of negative information about the PRC subsidiaries’ brand, including inaccurate information, could harm their reputation, business, competitive advantage and goodwill. Damage to the PRC subsidiaries’ reputation could result in declines in customer loyalty and sales, relationships with the PRC subsidiaries’ suppliers, business development opportunities, divert attention and resources from management, including by requiring responses to inquiries or additional regulatory scrutiny, and otherwise materially adversely affect the PRC subsidiaries’ results. Any failure to offer and maintain high-quality customer support, or a market perception that the PRC subsidiaries do not maintain high-quality customer support, could similarly adversely affect the PRC subsidiaries’ reputations, their ability to sell their services, and, in turn, their business, financial condition and results of operations.

Furthermore, the PRC subsidiaries’ ability to protect their brand depends in part on their ability to protect their confidential information, including unpatented know-how, technology and other proprietary information, maintaining, defending and enforcing their intellectual non-disclosure and confidentiality agreements with employees and third parties, and their trademarks and copyrights to protect their intellectual property rights. However, any of these parties may breach such agreements and disclose the PRC subsidiaries’ proprietary information, and the PRC subsidiaries may not be able to obtain adequate remedies for such breaches. In addition, third parties may allege that products and services, or the conduct of the PRC subsidiaries business, infringe, misappropriate or otherwise violate such third party’s intellectual property rights. Moreover, although the PRC subsidiaries try to ensure that their employees do not use the proprietary information or know-how of others in their work for the PRC subsidiaries, the PRC subsidiaries may be subject to claims that they or these employees have used or disclosed intellectual property of any third parties, including such individual’s former employer. If the PRC subsidiaries fail in defending any such claims, in addition to paying monetary damages, the PRC subsidiaries may lose valuable intellectual property rights or personnel. Even if the PRC subsidiaries are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management. Furthermore, any of the PRC subsidiaries’ trademarks may be challenged, opposed, infringed, cancelled, circumvented or declared generic, or determined to be infringing on other marks. The PRC subsidiaries may not be able to protect their rights to these trademarks, which they need in order to maintain name recognition by potential collaborators or clients in their markets of interest.

A global economic downturn could adversely affect Fuzhou Yukai’s customers and suppliers or have new, additional adverse effects on them, which could have further adverse effects on Fuzhou Yukai’s operating results and financial position.

Although a substantial amount of Fuzhou Yukai’s end customers are currently hospitals in Fuzhou Province, we believe that it is possible that Fuzhou Yukai’s customers could be adversely affected by a global economic downturn, which may result in, among other things, fewer patients at any time (which we refer to as “patient census”), less demand for non-essential patient services, more uncompensated care, more bad debt, increasing difficulty in obtaining financing on favorable terms, and tighter capital and operating budgets. If economic conditions worsen, the customers may seek to reduce their costs and may be unable to pay for the outsourced services, and Fuzhou Yukai may experience fewer orders, slower payment cycles, and more bad debt.

Fuzhou Yukai’s suppliers also may be negatively impacted by an economic downturn and tighter capital and credit markets. If Fuzhou Yukai’s key suppliers experience financial difficulty and are unable to deliver parts or technical support, Fuzhou Yukai may be forced to seek alternative sources of parts or technical support or to purchase parts or technical support on less favorable terms, or Fuzhou Yukai may be unable to fulfill its obligations. A delay in procuring parts or technical support or an increase in the costs to purchase parts or technical support could limit Fuzhou Yukai’s ability to provide maintenance to customers on a timely and cost-effective basis. Any of these occurrences are beyond our control and could have a material adverse effect on our financial condition.

Fuzhou Yukai’s competitors may engage in significant competitive practices, which could cause Fuzhou Yukai to lose market share, reduce prices or increase expenditures.

Fuzhou Yukai’s competitors may engage in competitive practices that could cause Fuzhou Yukai to lose market share, reduce its prices, or increase its expenditures. For example, competitors may offer prices at much lower gross margins to obtain customers. If Fuzhou Yukai is unable to offer a comparable price, it may experience reduced demand for its service. If Fuzhou Yukai is forced to lower the price, its ability to maintain its gross margins will be impacted. Any actions Fuzhou Yukai may be required to take as a result of increased competitive pressure, including decreasing prices, renegotiating contracts with customers on less favorable terms or increasing its sales and marketing expenses, could have a material adverse effect on Fuzhou Yukai’s business, financial condition and results of operations.

Fuzhou Yukai has relationships with certain key repair parts and technical support suppliers, and adverse developments concerning these parts and technical support suppliers could delay Fuzhou Yukai’s ability to procure parts or provide certain services or increase its costs of purchasing parts and technical support.

Fuzhou Yukai purchases repair parts and technical support from its parts and technical support suppliers. Adverse developments concerning key suppliers or relationships with suppliers could force Fuzhou Yukai to seek alternative sources for its repair parts or technical support or purchase repair parts or technical support on less favorable terms. A delay in procuring repair parts or technical support or an increase in Fuzhou Yukai’s costs to purchase repair parts or technical support could limit Fuzhou Yukai’s ability to provide services to its customers on a timely and cost-effective basis. In addition, if Fuzhou Yukai does not have access to certain parts, or if manufacturers do not provide access to the appropriate equipment manuals or training, Fuzhou Yukai may not be able to provide certain maintenance services.

If Fuzhou Yukai is unable to change the manner in which hospitals traditionally procure medical equipment maintenance, Fuzhou Yukai may not be able to achieve significant revenue growth.

We believe the outsourced medical equipment maintenance services significantly increase the repair efficiency of hospital equipment. Many hospitals view medical equipment maintenance service primarily as a means of meeting short-term or supplemental needs, rather than as a long-term, effective and cost-efficient choice. Many hospitals may continue to maintain their medical equipment on their own in-house staff. If Fuzhou Yukai is unable to influence these hospitals to switch to outsourced medical equipment services, its ability to achieve significant revenue growth will be materially impaired.

We may be unable to make attractive acquisitions, successfully integrate acquired businesses or find local partners to establish new companies, and any inability to do so may disrupt our business and hinder our ability to grow.

As one of our growth strategies, we may expand our business beyond Fujian Province. Although as of the date of this prospectus, we have not identified, or engaged in any material discussions regarding any potential target, we may seek acquisition candidates, local partners or other strategic relationships within the healthcare industry that may fit our business strategies in the future. However, there is no guarantee we will be able to identify attractive acquisition opportunities or find a local partner to establish new companies. In the event we are able to identify attractive acquisition opportunities or find local partners, we may not be able to develop markets outside Fujian province or do so on commercially acceptable terms. Additionally, we may not be successful in acquiring businesses, and the businesses we do acquire may not ultimately produce returns that justify our related investment.

Acquisitions may involve numerous risks, including:

Although we do not manufacture any medical equipment, our business entails the risk of claims related to the medical equipment that we maintain. We may not have adequate insurance to cover such claims, and it may be expensive or difficult for us to obtain adequate insurance in the future.

We may be liable for claims related to our maintenance or repair of medical equipment. Any such claims, if made and upheld, could make our business more expensive to operate and therefore less profitable. We and the PRC subsidiaries do not maintain any property insurance, business interruption insurance, or general third-party liability insurance. If we are found liable for any significant claims, our liquidity and operating results could be materially adversely affected. In addition, litigation relating to a claim could adversely affect our existing and potential customer relationships, create adverse public relations and divert management’s time and resources from the operation of the business.

Fuzhou Yukai may incur increased costs that it cannot pass through to the customers.

Fuzhou Yukai is fully responsible for maintaining its customers’ medical equipment as required by the contracts in which its services are engaged. Fuzhou Yukai relies on third parties, including repair parts and technical support suppliers, to provide some of the repair parts and technical support it requires, and Fuzhou Yukai does not have fixed pricing contracts with these suppliers. Therefore, Fuzhou Yukai may incur increasing costs that it is unable to pass through to its customers, and accordingly its revenue may decrease.

Any bidding misjudgment could harm our business and operating results.

We obtain our hospital customers through the public bidding process. Fuzhou Yukai is fully responsible for maintaining all of the medical equipment in an outsourced service. Although Fuzhou Yukai carefully evaluates tenders before submitting its bidding documents, it cannot avoid certain business risks. For example, the expenses of maintaining medical equipment may significantly exceed Fuzhou Yukai’s estimates proposed in its bids. Any such misjudgment could harm our business and results of operations.

There are inherent limitations in all internal control systems over financial reporting, and misstatements due to error or fraud may occur and not be detected.

While we have taken actions designed to address compliance with the internal control over financial reporting and disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the SEC implementing these requirements, there are inherent limitations in our ability to control all circumstances. We do not expect that our internal control over financial reporting and disclosure controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions, such as our growth or increased transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We have not yet completed an evaluation of our internal control over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act.

We will be required to comply with the internal control evaluation by the end of our 2023 fiscal year. We have not yet completed an evaluation as to whether our current internal control over financial reporting is broadly compliant with Section 404. We may not be compliant and may not be able to meet the Section 404 requirements in a timely manner. If it is determined that we are not in compliance with Section 404, we may be required to implement new internal control procedures and re-evaluate our financial reporting. We may also experience higher than anticipated operating expenses during the implementation of these changes, and we may need to hire additional qualified personnel to help us become compliant with Section 404. If we fail, for any reason, to implement these changes effectively or efficiently, or if we conclude that our internal controls are not effective due to the presence of a material weakness, such failure or conclusion could harm our reputation, operations, financial reporting or financial results.

If Fuzhou Yukai does not respond to technological changes, its services could become obsolete, and it could lose customers.

To remain competitive, Fuzhou Yukai must continue to enhance and improve the functionality and features of the technology that forms part of its service. The healthcare industry is rapidly changing, and if competitors introduce new services using new technologies or if new industry standards and practices emerge, Fuzhou Yukai’s existing services may become obsolete. Fuzhou Yukai’s failure to respond to technological change or to adequately maintain, upgrade and develop its services could harm its business, prospects, financial condition and results of operations.

Fuzhou Yukai currently maintains a limited number of customers. The loss of any of the customers could adversely affect our results of operations and financial condition.

Our customer base includes hospital customers and business partner customers. As of December 31, 2021, and 2020, we had a total of 19 and 23 customers, respectively. Among the 19 customers, as of December 31, 2021, (i) 12 customers were hospitals with which Fuzhou Yukai directly entered into medical equipment maintenance service agreements, (ii) one of which was a hospital customer to which Fuzhou Yukai only sells Class II medical devices, and (iii) six of which were business partners. Through such six business partners, Fuzhou Yukai provides medical equipment maintenance services to eight hospitals. Among the 23 customers, as of December 31, 2020, (i) 20 customers were hospitals with which Fuzhou Yukai directly entered into medical equipment maintenance service agreements, and (ii) three of which were business partners. The loss of all, or even a portion of the revenues from these customers, as a result of competition, market conditions or otherwise, could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

We and our PRC subsidiaries may from time to time be subject to litigation, which may be extremely costly to defend, could result in a substantial judgment or settlement costs or subject us to other remedies.

We are currently not a party to any material legal proceedings. From time to time, however, we may be involved in various legal proceedings, including, but not limited to, actions relating to breach of contract, employment proceedings, anti-competition matters and intellectual property infringement, misappropriation or other violations. Claims may be expensive to defend and may divert management’s time away from our operations, regardless of whether they are meritorious or ultimately lead to a judgment against us. We cannot assure you that we will be able to successfully defend or resolve any current or future litigation matters, in which case those litigation matters could have a material and adverse effect on our business, financial condition, operating results, cash flows, and prospects.

Any failure to maintain effective quality control over our services could materially adversely affect our business.

We are committed to providing high quality service to our customers. The quality of our services is critical to the success of our business, and such quality to a large extent depends on the effectiveness of our quality control systems. However, despite our quality control systems, we cannot eliminate the risks of errors, defects or failures. We may fail to detect or cure defects as a result of a number of factors, many of which are outside our control, including, but not limited to:

Any failure to maintain effective quality control over our services could result in customer dissatisfaction, or other problems that could seriously harm our reputation and business, expose us to liability, and adversely affect our revenue and profitability.

We do not have long-term contracts with our suppliers and they can reduce order quantities or terminate their sales to us at any time.

We do not have long-term contracts with our suppliers. At any time, our suppliers can reduce the quantities of repair parts they sell to us, or cease selling parts to us altogether. Such reductions or terminations could have a material adverse impact on our revenue, profits and financial condition.

Overall tightening of the labor market, increases in labor costs or any possible labor unrest may adversely affect our business and results of operations.

Our business requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us may disrupt our business operations. Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition and results of operations may be materially and adversely affected.

We are dependent on our top customers. If we fail to acquire new customers or retain existing customers in a cost-effective manner, our business, financial condition and results of operations may be materially and adversely affected.

Maintaining existing customers and developing new customers are always essential to our success. Although we are not heavily dependent on one or two customers, we are still dependent on our top customers. For the years ended December 31, 2021 and 2020, our top three customers contributed approximately 66.8% and 49.5%, respectively, to our revenue.

Our ability to provide cost-effectively outsourced medical equipment maintenance services to attract new customers and retain existing customers, especially our top customers, is crucial to driving net revenue growth and achieving profitability. There can be no assurance that new customers will stay with us, or the net revenue from new customers we acquire will ultimately exceed the cost of acquiring those customers. In addition, if our existing customers, especially our existing top customers, no longer find our service appealing, or if our competitors offer more attractive prices or better customer services, our existing customers may lose interest in us and refuse to continue or extend our contracts. If we are unable to retain our existing customers, especially our top customers or to acquire new customers in a cost-effective manner, our revenues may decrease and our results of operations will be adversely affected.

Our industry is intensely competitive. We may face competition from, and we may be unable to compete successfully against, new entrants and established companies with greater resources.

The healthcare industry is intensely competitive. We will face increasing competitive pressures to grow our business in order to maintain our competitive position, and we may encounter competition from, and lose customers to, other companies with technological capabilities similar to ours. Some of our potential competitors may have greater name recognition, greater operating revenues, larger customer bases, longer customer relationships and greater financial, technical, personnel and marketing resources than we have. If we are unsuccessful competing with our competitors for our existing and prospective customers’ business, our financial conditions and results of operation may be adversely affected.

Furthermore, increased competition may reduce our market share and profitability and require us to increase our capital commitment in the future, which could negatively affect our results of operations or force us to incur further losses. Although we have accumulated some and continuously growing our customer base, there is no assurance that we will be able to continue to do so in the future against current or future competitors, and such competitive pressures may have a material adverse effect on our business, financial condition and results of operations.

We rely on the skills, experience, and leadership of our senior management team and other key personnel, the loss of which could adversely affect us.

We believe that our future success depends significantly on the continued services of key members of our management. Our executives’ and senior engineers’ knowledge of the market, the technology, our business, and our Company represents a key strength of our business, which cannot be easily replicated. The success of our business strategy and our future growth also depend on our ability to attract, train, retain and motivate skilled managerial, engineers, sales, administration, development and operating personnel. We benefit from our senior management team, including Mr. Zhenyu Zheng, in successfully growing our operations in Fujian province.

There can be no assurance that our existing personnel will be adequate or qualified to carry out our strategy, or that we will be able to hire or retain experienced, qualified employees to carry out our strategy. The loss of one or more of our key management or technical personnel, or the failure to attract and retain additional key personnel, could have a material adverse effect on our business, financial condition and results of operations. Moreover, if any of these individuals joins a competitor or undertakes a competing business, we may lose crucial business secrets, personal, and other valuable resources, notwithstanding our contractual arrangements designed to mitigate this loss.

If we are unable to collect accounts receivable from our customers, our results of operations and cash flows could be adversely affected.

As of the date of this prospectus, our customers include hospitals and business partners. All of our hospital customers and business partners have established reputations for reliability in making payments when due, therefore, generally, we believe the accounts receivable will be recovered within the contract period. As of December 31, 2021 and 2020, we determined that all accounts receivable were collectible. However, we cannot assure you that we can collect our debts on time in the future. If we are unable to collect our accounts receivable on a timely and consistent basis, our cash flows and access to operating capital could be adversely affected.

Changes to our payment terms with both customers and suppliers may materially adversely affect our operating cash flows.

Although our accounts receivable are generally recovered within the contract period, we cannot assure you that we would not experience pressure from our customers to extend the number of days before paying accounts receivable. In addition, we may also experience pressure from our suppliers to reduce the number of days of our accounts payable. Any failure to manage our accounts payable and accounts receivable may have a material adverse effect on our business, financial condition and results of operations.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We rely on a combination of trademarks, fair trade practice, copyright and trade secret protection laws in China, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We regard our trademarks and similar intellectual property as critical to our success. We may become an attractive target to intellectual property attacks in the future with the increasing recognition of our brand. Any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, there can be no assurance that (i) all of our intellectual property rights will be adequately protected, or (ii) our intellectual property rights will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Intellectual property protection may not be sufficient in China. Confidentiality agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in any such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

A cybersecurity attack, or any other interruption in information technology and/or data security, could adversely affect our business and financial condition.

Fuzhou Yukai uses its MEMS Yukai Medical Hospital Asset Information Management System (the “MEMS System”) when analyzing the value and usage of the tendering hospital’s medical equipment. In June 2022, Fuzhou Yukai acquired several software systems to further update its current MEMS System, including an intelligent medical operation and maintenance system, medical equipment asset management system, medical information service file system, intelligent medical heavy asset operation and maintenance ERP system, medical device adverse event management system, and medical equipment maintenance management system (collectively, the “New Managing Systems,” together with the MEMS System, the “Yukai Systems”). Fuzhou Yukai is currently integrating and modifying the New Managing Systems and expects to operate the New Managing Systems by the end of September 2022.

Cybersecurity breaches of the Yukai System may result from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions, any of which could expose Fuzhou Yukai to data loss, and reputation and monetary damages. An interruption of Fuzhou Yukai’s access to, or an inability to access, the Yukai System, could impair Fuzhou Yukai’s ability to perform an evaluation or management of its medical equipment maintenance services on a timely basis. Fuzhou Yukai has from time-to-time experienced cybersecurity breaches, such as computer viruses and similar incidents, which, as of the date of this prospectus, have not had a material impact on Fuzhou Yukai’s business. In the future, any material cybersecurity breach could cause Fuzhou Yukai to experience loss of proprietary data and loss of revenue.

We have no business liability or disruption insurance, which could expose us to significant costs and business disruption and we may incur liabilities that are not covered by insurance.

While we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that are not covered by insurance. We provide social security insurance, including pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan for our employees. The insurance industry in China is still at an early stage of development, and insurance companies in China currently offer limited business-related insurance products. We do not carry any key-man life insurance, product liability, professional liability or business liability insurance. Even if we purchase these kinds of insurance, the insurance may not fully protect us from the financial impact of defending against professional liability claims. We have not purchased any property insurance or business interruption insurance. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical. We consider our insurance coverage to be sufficient for our business operations in China. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected. We could, for example, be subject to substantial claims for damages upon the occurrence of several events within one calendar year. Any uninsured risks may result in substantial costs and the diversion of resources, which could adversely affect our results of operations and financial condition. In addition, our insurance costs may increase over time in response to any negative development in our claims history or due to material price increases in the insurance market in general.

Pandemics and epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could disrupt our operations, which could materially and adversely affect our business, financial condition, and results of operations.

Global pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD), coronavirus disease 2019 (COVID-19), Middle East respiratory syndrome (MERS), severe acute respiratory syndrome (SARS), H1N1 flu, H7N9 flu, and avian flu, as well as hurricanes, earthquakes, tsunamis, or other natural disasters could disrupt our business operations, reduce or restrict our supply of products and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations. Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainty could have a similar adverse effect on our business, financial condition, and results of operations. Any one or more of these events may impede our production and delivery efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations.

We are also vulnerable to natural disasters and other calamities. We cannot assure you that we are adequately protected from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events. Any of the foregoing events could adversely affect our business, financial condition, and results of operations.

Failure to keep up with the changes in domestic industry policies or standards could have a material and adverse effect on our reputation, financial condition and results of operations.

As of the date of this prospectus, our customers include hospitals and business partners. As a participator in the heathy industry, we provide our outsourced medical equipment maintenance service to our customers. The related national government authorities have issued a series of regulatory guidelines and industry policies to ensure the healthy development of the industry. In recent years, as China further deepens the reform of its medical and health system, relevant government departments have successively implemented a series of regulations and policies regarding industry standards, bidding, price formation mechanisms, circulation systems and other related fields.

The deepening of the reform of the domestic pharmaceutical industry and the strengthening of supervision may affect our layout and profitability in the domestic market. If we fail to timely adapt to the profound changes in industry policies, it could materially and adversely affect our business, financial condition, and results of operations.

We depend on our professional technology talents and we cannot assure their retention.

Our success partly depends upon the retention of our professional technology talents including our engineers and technicians. As of December 31, 2021, we maintain a professional team comprised of 68 engineers and technicians, who have expertise in medical equipment maintenance and profound industry experience. Among those talents, 54 of them received college and bachelor degree. There can be no assurance that our existing engineers and technicians will be adequate or qualified to carry out our strategy, or that we will be able to hire or retain new engineers and technicians to carry out our strategy. The loss of one or more of our engineers and technicians, or the failure to attract and retain additional engineers and technicians, could have a material adverse effect on our business, financial condition and results of operations.

In addition, if we fail to establish a competitive incentive mechanism in terms of career prospects, salary, benefits and working environment, we may face the risk of instability in our engineers and technicians team, which could adversely affect our long-term development.

Loss of certain procurement bids could have a material and adverse effect on our reputation, financial conditions and results of operations.

One way we obtain our hospital customers is through the public bidding process. The winning bid price of the outsourced service will be made public by the bidding website. If we lose a bid to our competitors due to a disadvantageous price quote contained in a bid or other reason, we will lose hospital customers. If the local procurement platforms do not solicit supplementary bids for a long time or reopen bids, we may not prevail over our competitors, which could have a material and adverse effect on our reputation, financial conditions and results of operations.

If we fail to maintain an effective Class II medical device selling record certificate, it could adversely affect our reputation, financial conditions and results of operations.

Pursuant to the Administrative Measures on the Operation Supervision of Medical Devices, promulgated on July 30, 2014 and came into effect on October 1, 2014, amended on March 10, 2022, and which amendment came into effect on May 1, 2022, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the operation of Class II medical devices are subject to filing administration and will receive a Class II medical device selling record certificate upon satisfaction of the filing requirement. While operators engaged in the operation of Class III medical devices are subject to pre-approval licensing administration and will receive a medical device operation license upon receipt of approval for licensing. A medical device operation license for Class III is valid for five years and may be renewed six months prior to its expiration date.

Fuzhou Yukai used to sell Class III medical equipment. Since 2016, it has adjusted its business operations to provide outsourcing services to hospitals. Fuzhou Yukai obtained a medical device business license for selling Class III medical devices, and such license expired on June 1, 2021. Although Fuzhou Yukai no longer sells medical equipment, it remains in good relationships with some Class III medical equipment manufacturers. In January 2021, prior to the expiration of the medical device business license, Fuzhou Yukai sold two Class III medical equipment to its customers.

Since June 1, 2021, Fuzhou Yukai has not sold Class III medical equipment. We have no intention of selling Class III medical equipment in the future. Fuzhou Yukai obtained a Class II medical device selling record certificate on December 18, 2017. Such selling record certificate will remain effective for the long term, i.e., until Fuzhou Yukai is inspected by the local medical administration department and has been determined by such department to have failed to ensure the safety and effective of the medical devices it sells. Although as of the date of this prospectus, no event which could cause this selling record certificate to be revoked or cancelled has occurred, we cannot assure you that such Class II medical device selling record certificate will not be revoked or cancelled in the future. If we fail to maintain an effective Class II medical device selling record certificate, it could adversely affect our reputation, financial conditions and results of operations.

Risks Related to this Offering and Ownership of our Ordinary Shares

An active trading market for our ordinary shares may not develop and the trading price for our ordinary shares may fluctuate significantly.

We have applied to list our ordinary shares on the Nasdaq. Prior to the completion of this offering, there has been no public market for our ordinary shares, and we cannot assure you that a liquid public market for our ordinary shares will develop. If an active public market for our ordinary shares does not develop following the completion of this offering, the market price and liquidity of our ordinary shares may be materially and adversely affected. The initial public offering price for our ordinary shares was determined by negotiation between us and the underwriters based upon several factors, and we can provide no assurance that the trading price of our ordinary shares after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ordinary shares.

The trading price of our ordinary shares may be volatile, which could result in substantial losses to investors.

The trading price of our ordinary shares may be volatile and could fluctuate widely due to factors beyond our control. This may happen because of the broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. A number of Chinese companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performance of these Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading performance of our ordinary shares, regardless of our actual operating performance.

In addition to market and industry factors, the price and trading volume for our ordinary shares may be highly volatile for factors specific to our own operations, including the following:

Any of these factors may result in large and sudden changes in the volume and price at which our ordinary shares will trade.

In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ordinary shares, the market price for our ordinary shares and trading volume could decline.

The trading market for our ordinary shares will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our ordinary shares, the market price for our ordinary shares would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ordinary shares to decline.

The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price.

Sales of substantial amounts of our ordinary shares in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our ordinary shares and could materially impair our ability to raise capital through equity offerings in the future. The ordinary shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 under the Securities Act and the applicable lock-up agreements. Following the consummation of our initial public offering, there will be 16,000,000 ordinary shares outstanding immediately after this offering or 16,600,000 ordinary shares assuming the full exercise of the underwriters’ over-allotment option. In connection with this offering, each of our directors and officers named in the section “Management,” and shareholders of 5% or more ordinary shares of the Company have agreed not to sell any ordinary shares for six months from the effective date of the registration statement of which this prospectus forms a part without the prior written consent of the underwriter, subject to certain exceptions. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”). We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ordinary shares. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of our ordinary shares for return on your investment.

We currently intend to retain all of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ordinary shares as a source for any future dividend income.

Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ordinary shares will likely depend entirely upon any future price appreciation of our ordinary shares. There is no guarantee that our ordinary shares will appreciate in value after this offering or even maintain the price at which you purchased our ordinary shares. You may not realize a return on your investment in our ordinary shares and you may even lose your entire investment.

Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

If you purchase ordinary shares in this offering, you will pay more for each share than the corresponding amount paid by existing shareholders for their ordinary shares. As a result, you will experience immediate and substantial dilution of $3.74 per share, representing the difference between our net tangible book value per share of $1.26 as of December 31, 2021, after giving effect to this offering and an assumed initial public offering price of $5.00 per share. See “Dilution” for a more complete description of how the value of your investment in our ordinary shares will be diluted upon the completion of this offering.

You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase our share price.

We plan to use the net proceeds of this offering primarily for expanding our operations, purchasing spare equipment and properties for our offices and headquarters, and working capital and other general corporate purposes. See “Use of Proceeds.” However, our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve or maintain profitability or increase our share price. The net proceeds from this offering may be placed in investments that do not produce income or that lose value.

If we are classified as a passive foreign investment company, United States taxpayers who own our ordinary shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either

Passive income generally includes dividends, interest, rents, royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our ordinary shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. Although the law in this regard is unclear, we treat our consolidated affiliated entities as being owned by us for United States federal income tax purposes, because we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Taxation — Material United States Federal Income Tax Considerations — Passive Foreign Investment Company.”

The amended and restated memorandum and articles of association that we intend to adopt contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares.

Some provisions of our articles of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue shares at such times and on such terms and conditions as the board of directors may decide without any further vote or action by our shareholders to the extent authorized but unissued. Under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our articles of association for what they believe in good faith to be in the best interests of our company and for a proper purpose.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of the register of members of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the U.S. Currently, we do not plan to rely on home country practice with respect to any corporate governance matter. However, if we choose to follow our home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Comparison of Cayman Islands Corporate Law and U.S. Corporate Law.”

You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. These rights, however, may be provided in a company’s articles of association. Our articles of association allow one or more of our shareholders who together hold not less than 10% of the rights to vote to requisition a general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least twenty-one clear days is required for the convening of an annual general meeting and at least fourteen clear days is required for the convening of any other general meeting. A quorum required for a general meeting is one or more holders holding shares that represent not less than one-third of the outstanding shares of the Company carrying the right to vote at such general meeting. For these purposes, “clear days” means that period excluding (a) the day when the notice is given or deemed to be given and (b) the day for which it is given or on which it is to take effect.

Newly enacted Economic Substance Legislation in the Cayman Islands may have an impact on the Company.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act, 2018 (the “Substance Act”) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019 will apply in respect of financial years commencing July 1, 2019 onwards. However, it is anticipated that the Company itself may remain out of scope of the legislation or else be subject to more limited substance requirements. Although it is presently anticipated that the Substance Act will have little material impact on the Company or its operations, as the legislation is new and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of these legislative changes on the Company.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted in the PRC. In addition, most of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and the PRC, see “Enforceability of Civil Liabilities.”

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period. As a result of this election, our future financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a semi-annual basis through press releases, distributed pursuant to the rules and regulations of the Nasdaq Capital Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.

We will incur significantly increased costs and devote substantial management time as a result of the listing of our ordinary shares.

We will incur additional legal, accounting and other expenses as a public reporting company, particularly after we cease to qualify as an emerging growth company. For example, we will be required to comply with the additional requirements of the rules and regulations of the SEC and the Nasdaq rules, including applicable corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the number of additional costs we may incur as a result of becoming a public company or the timing of such costs.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidelines are provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings against us and our business may be adversely affected.

If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our ordinary shares may be volatile which could subject us to securities litigation and make it more difficult for you to sell your shares.

As a company conducting a relatively small public offering, we are subject to the risk that a small number of investors will purchase a high percentage of the offering. While the underwriters are required to sell shares in this offering to at least 300 round lot shareholders (a round lot shareholder is a shareholder who purchases at least 100 shares), in order to ensure that we meet the Nasdaq initial listing standards, we have not otherwise imposed any obligations on the underwriters as to the maximum number of shares they may place with individual investors. If, in the course of marketing the offering, the underwriters were to determine that demand for our shares was concentrated in a limited number of investors and such investors determined to hold their shares after the offering rather than trade them in the market, other shareholders could find the trading and price of our shares affected (positively or negatively) by the limited availability of our shares. If this were to happen, investors could find our shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their share price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their shares.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and “Regulation.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

These forward-looking statements are subject to various and significant risks and uncertainties, including those which are beyond our control. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should thoroughly read this prospectus and the documents that we refer to herein with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. We disclaim any obligation to update our forward-looking statements, except as required by law.

This prospectus contains certain data and information that we obtained from Haiqiao Zhiku. Statistical data in these publications also include projections based on a number of assumptions.

In addition, the new and rapidly changing nature of the medical equipment industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our industry. Furthermore, 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.

USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $16,954,837, after deducting estimated underwriting discounts and commissions and the estimated offering expenses payable by us, and based upon an assumed initial offering price of $5.00 per ordinary share (excluding any exercise of the underwriters’ over-allotment option). A $1 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us from this offering by approximately $2,394,837, after deducting the estimated underwriting discounts and commissions and estimated aggregate offering expenses payable by us and assuming no change to the number of ordinary shares offered by us as set forth on the cover page of this prospectus.

We plan to use the net proceeds from this offering as follows:

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

In utilizing the proceeds from this offering, we are permitted under PRC laws and regulations to provide funding to PRC subsidiaries only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. The relevant filing and registration processes for capital contributions typically take approximately eight weeks to complete. The filing and registration processes for loans typically take approximately four weeks or longer to complete. While we currently see no material obstacles to completing the filing and registration procedures with respect to future capital contributions and loans to PRC subsidiaries, we cannot assure you that we will be able to complete these filings and registrations on a timely basis, or at all. We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” Pending use of the net proceeds, we intend to hold our net proceeds in short-term, interest-bearing, financial instruments or demand deposits.

DIVIDEND POLICY

Our board of directors has discretion regarding whether to declare or pay dividends. All dividends are subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that we are able to pay our debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

We have never declared or paid cash dividends on our shares. We currently do not have any plans to pay cash dividends. Rather, we currently intend to retain all of our available funds and any future earnings to operate and grow our business.

Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

CAPITALIZATION

The following table sets forth our total capitalization as of December 31, 2021:

You should read this table together with our consolidated financial statements, the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

DILUTION

If you invest in our ordinary shares, your interest will be diluted to the extent of the difference between the initial public offering price per ordinary shares and the pro forma net tangible book value per ordinary share after the offering. Dilution results from the fact that the per ordinary share offering price is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares. Our net tangible book value attributable to shareholders at December 31, 2021 was $1,763,791 or approximately $0.15 per ordinary share. Net tangible book value per ordinary share as of December 31, 2021 represents the amount of total assets less intangible assets and total liabilities, divided by the number of ordinary shares outstanding.

We will have 16,000,000 ordinary shares outstanding upon completion of the offering, or 16,600,000 ordinary shares, assuming the full exercise of the underwriters’ over-allotment option. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering at an assumed initial public offering price of $5.00 per share, but does not take into consideration any other changes in our net tangible book value after December 31, 2021, will be approximately $1.17 per ordinary share. This would result in dilution to investors in this offering of approximately $3.83 per ordinary share, or approximately 76.6% from the assumed offering price of $5.00 per ordinary share. Net tangible book value per ordinary share would increase to the benefit of present shareholders by $1.02 per share attributable to the purchase of the ordinary shares by investors in this offering.

The following table sets forth the estimated net tangible book value per ordinary share after the offering and the dilution to investors purchasing ordinary shares in the offering.

Assuming the underwriters’ over-allotment option is not exercised, each $1.00 increase (decrease) in the assumed initial public offering price of $5.00 per ordinary share would increase (decrease) the pro forma as adjusted amount of total capitalization by $2,394,837, assuming, that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and estimated offering expenses payable by us.

The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our shares and other terms of this offering determined at pricing.

The following tables summarize the differences between our existing shareholders and the new investors with respect to the number of ordinary shares purchased from us in this offering, the total consideration paid and the average price per share paid at an assumed initial public offering price of $5.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and before deducting estimated underwriting discounts and commissions and estimated offering expenses.

Minimum offering

Maximum offering

The discussion and the tables above exclude ordinary shares issuable upon exercise of warrants to be issued to the underwriter in this offering.

ENFORCEABILITY OF CIVIL LIABILITIES

We were incorporated in the Cayman Islands in order to enjoy the following benefits:

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:

Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated. Currently, all of our operations are conducted outside the United States, and all of our assets are located outside the United States. All of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

We have appointed Cogency Global Inc., as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

Ogier, our counsel as to Cayman Islands law, and AllBright Law Offices (Fuzhou), our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

Enforcement of Judgments/Enforcement of Civil Liabilities

We have been advised by our Cayman Islands legal counsel, Ogier, that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) in original actions brought in the Cayman Islands, impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign judgment or order, without re-examination or re-litigation of the matters adjudicated upon, if the judgment:

We have been advised by our PRC counsel, AllBright Law Offices (Fuzhou), that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedure Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedure Law based either on treaties between China and the country where the judgment is made or on reciprocity between different jurisdictions, and PRC courts will not recognize or enforce these foreign judgments if PRC courts believe the foreign judgments violate the basic principles of PRC laws or national sovereignty, security or public interest after review. However, currently, China does not have treaties or reciprocity arrangement providing for recognition and enforcement of foreign judgments ruled by courts in the United States or the Cayman Islands. Thus, it is uncertain whether a PRC court would enforce a judgment ruled by a court in the United States or the Cayman Islands.

CORPORATE HISTORY AND STRUCTURE

Corporate History

We are an exempted company with limited liability incorporated in the Cayman Islands on October 19, 2021. We are a holding company that has no operations ourselves.

We operate business through our two subsidiaries in China: Fujian Yukai and Fuzhou Yukai. Fujian Yukai, currently has no business operations, is our wholly foreign-owned subsidiary formed on December 29, 2021 in Fuzhou city, Fujian province. Fujian Yukai holds 100% of the equity interests in Fuzhou Yukai, which was formed on September 28, 2005 in Fuzhou city, Fujian province.

Fuzhou Yukai used to sell medical equipment and serve many medical device manufacturers in Fujian province, such as Toshiba, RadioMeter, and GE Healthcare China. In 2016, Fuzhou Yukai’s management decided to adjust its development strategy, take advantage of its medical equipment selling experience, and enter the outsourced medical equipment maintenance market.

As of the date of this prospectus, substantially all of our business is conducted by Fuzhou Yukai. We intend to use Fujian Yukai as our holding WFOE.

Corporate Structure

The chart below summarizes our corporate structure as of the date of this prospectus:

We are not operating in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, AllBright Law Offices (Fuzhou), other than those requisite for a domestic company in China to engage in the businesses similar to ours, we are not required to obtain any permission from Chinese authorities, including the CSRC, Cyberspace Administration of China or any other governmental agency that is required to approve our operations. However, if we do not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to investigations by competent regulators, fines or penalties, ordered to suspend our relevant operations and rectify any non-compliance, prohibited from engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

As of the date of this prospectus, we and our PRC subsidiaries have received from PRC authorities all requisite licenses, permissions or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied. Such licenses and permissions include Business License, and Class II medical device selling record certificate.

The following table provides details on the licenses and permissions held by our PRC subsidiaries.

As advised by our PRC counsel, AllBright Law Offices (Fuzhou), neither we nor any of our subsidiaries is currently required to obtain regulatory approval from Chinese authorities before listing in the U.S. under any existing PRC law, regulations or rules, including from the CSRC, the Cyberspace Administration of China, or any other relevant Chinese regulatory agencies that is required to approve Fuzhou Yukai and our WFOE’s operations. However, the PRC government may take actions to exert more oversight and control over offerings by China-based issuers conducted overseas and/or foreign investment in such companies, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors outside China and cause the value of our securities to significantly decline or become worthless.

Fujian Yukai’s wholly owned subsidiary, Fuzhou Yukai contributed 100% of our consolidated revenue and accounted for 100% of our consolidated total assets and liabilities for the fiscal years ended December 31, 2021 and 2020 and there was no reconciliation performed between the financial position, cash flows and results of operations of Fuzhou Yukai, our WFOE and us. The following financial information of our WFOE and Fuzhou Yukai was included in the consolidated financial statements. For more information, see our consolidated financial statements and related notes from page F-1 to page F- 28 that appear in this prospectus.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements, the notes to those financial statements and other financial data that appear elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Risk Factors” and elsewhere in this prospectus. See “Cautionary Note Regarding Forward-looking Statements.”

Overview

We are an exempted company with limited liability incorporated in the Cayman Islands on October 19, 2021. We are a holding company that has no operations ourselves. We operate business through our two subsidiaries in China: Fujian Yukai and Fuzhou Yukai. Fujian Yukai, currently with no business operations, is our wholly foreign-owned subsidiary formed on December 29, 2021 in Fuzhou city, Fujian province. Fujian Yukai holds 100% of the equity interests in Fuzhou Yukai, which was formed on September 28, 2005 in Fuzhou city, Fujian province. As of the date of this prospectus, substantially all of our business is conducted by Fuzhou Yukai.

We believe we provide expertise in managing and maintaining mission-critical, regulated, reusable medical devices. Through Fuzhou Yukai, we offer healthcare providers comprehensive medical equipment services that reduce capital and operating expenses, optimize medical equipment utilization, reduce waste, enhance staff productivity and bolster patient safety.

We obtain our hospital customers through the public bidding process and obtain our business partners through our contacts and resources in the industry. Revenue is recognized when the promised services or goods are delivered to customers, in an amount that reflects the consideration allocated to the respective performance obligation. We recorded and recognized revenues from both products and services in one account, which we present as revenues in the accompanying consolidated statements of operations and comprehensive income.

During the fiscal years ended December 31, 2021 and 2020, we derived revenue from the following factors:

Outsourced Medical Equipment Management Service

Our outsourcing services include maintenance and the provision of spare equipment during maintenance. We generally maintain all of our customers’ medical equipment, including life-supporting medical devices, diagnostic equipment, basic treatment equipment, and supporting equipment, in accordance with relevant contract terms.  We provide spare equipment to our customers while their equipment is under repair.

Outsourced medical equipment maintenance service is our major service. Revenue attributable to such service for the years ended December 31, 2021 and 2020 was $9,549,767 and $8,032,639, respectively, representing 99.0% and 99.2% of the total revenue, respectively.

Sales of Medical Equipment

Fuzhou Yukai used to sell Class III medical devices (defined below), but has adjusted its business operations to provide outsourcing services to hospitals since 2016. Although Fuzhou Yukai has shifted its business focus, it remains in good relationships with some Class III medical device manufactures. Fuzhou Yukai sold a very limited number of Class III medical devices to its customers during fiscal years ended December 31, 2021 and 2020. Our subsidiary, Fuzhou Yukai obtained a medical device business license for selling Class III medical devices, and such license expired on June 1, 2021. Since June 1, 2021, Fuzhou Yukai has not engaged in selling Class III medical equipment. We have no intention of selling Class III medical equipment in the future.

Fuzhou Yukai obtained a Class II medical device selling record certificate on December 18, 2017. Such selling record certificate will remain effective for the long term, i.e., until Fuzhou Yukai is inspected by the local medical administration department and has been determined by such department to have failed to ensure the safety and effective of the medical devices it sells. Fuzhou Yukai has only sold Class II medical devices since June 1, 2021.

Revenue attributable to the sales of the medical equipment for the years ended December 31, 2021 and 2020 was $100,538 and $61,651, respectively, representing 1.0% and 0.8% of the total revenue, respectively.

Principal Factors Affecting Our Financial Performance

We believe that our operating results are primarily affected by the following factors:

Result of Operations

Revenues

We recognize revenue evenly by month according to the signed contracts. Our total revenue grew from approximately $8.09 million for the year ended December 31, 2020, to approximately $9.65 million for the year ended December 31, 2021, an increase of 19.22%. The Company obtained and entered into certain new contracts, such as outsourced medical equipment maintenance service contracts with a hospital in Fuzhou, during the year end of December 31, 2021, causing an increase of revenue by approximately $2.5 million for the year ended December 31, 2021. Some of such contracts expired and terminated in the end of December 31, 2021, leading to the decrease of revenue by approximately $1.5 million for the year ended December 31, 2021.

Cost of Revenues and Gross Margin

Cost of revenues increased by $0.46 million from $6.89 million for the year ended December 31, 2020, to $7.35 million for the year ended December 31, 2021, an increase of 6.74%, and correspondingly, gross profit margin increased to approximately 24% for the year ended December 31, 2021 from approximately 15% for the year ended December 31, 2020. The increase of gross profit margin in such period is primarily attributed to employee turnover. During the year ended December 31, 2020, we hired some new technicians, including apprentices. During the year ended December 31, 2021, some of the apprentices and technicians voluntarily left our company and we did not hire new technicians to replace them.

Sales and marketing expenses

Sales and marketing expenses are primarily comprised of certain salaries of employees in the marketing department, transportation fees, fees associated with trade shows and similar exhibitions and other marketing expenses. Sales and marketing expenses were $0.06 million for the year ended December 31, 2021, an increase of $0.03 million as compared to the same period in 2020.

General and administrative expenses

General and administrative expenses are incurred in the day-to-day operations of a business and may not be directly tied to a specific function or department within the company, such as manufacturing, production, or sales. General and administrative expenses are primarily comprised of rental fees, utilities, insurance, legal fees, certain salaries and operational overhead expenses that impact the entire business. We record equipment, vehicles and appliances at cost and calculate depreciation using the straight-line method over the estimated useful lives of our assets, which generally range from three to five years. General and administrative expenses were $0.91 million for the year ended December 31, 2021, remaining almost the same as that for the year ended December 31, 2020.

Income from operations

Income from operations increased from approximately $0.27 million for the year ended December 31, 2020 to approximately $1.32 million for the year ended December 31, 2021, an increase of approximately $1.06 million.

Total other income (expenses), net

For the year ended December 31, 2021, total other expense (net of other income) was $83,849, compared to total other expense (net of other income) of $253,209 for the year ended December 31, 2020, with a decrease of $169,360. The decrease of other expenses was primarily attributable to the decrease of interest expense incurred from short term loans.

Net income attributable to company shareholders

As a result of the factors described above, our net income for the year ended December 31, 2021 was $0.94 million, compared to net income of $7,743 for the year ended December, 2020, an increase in net income of $0.93 million.

Foreign currency translation

The accompanying consolidated financial statements are presented in the United States dollars. The functional currency of YUKAI established pursuant to the laws of the Cayman Islands are the United States dollar. The functional currency of Fujian Yukai and Fuzhou Yukai are established pursuant to the laws of China, are RMB. For the subsidiaries whose functional currencies are RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the exchange rate at the end of the period, and equity is translated at historical exchange rates.

The Consolidated Balance Sheet balances, with the exception of equity at December 31, 2021 and December 31, 2020, were translated at RMB6.3757 and RMB 6.5249 to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rates applied to the consolidated statements of operations and comprehensive income and the consolidated statements of cash flows for the years ended December 31, 2021 and 2020 were RMB 6.4474 and RMB 6.8941 to $1.00, respectively.

Net gains and losses resulting from foreign exchange translations are included in the comprehensive income and the consolidated statements of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation income of $13,478 for the year ended December 31, 2021. We reported a foreign currency translation loss of $7,326 for the year ended December 31, 2020. This non-cash income/loss had the effect of decreasing/increasing our reported comprehensive income or loss.

Liquidity and Capital Resources

Liquidity

As of December 31, 2021, we had cash and cash equivalents of $1.21 million. To date, we have financed our operations primarily through net cash flow from operations, proceeds from short-term bank loans and proceeds of funds borrowed from related parties. We expect to finance our operations and working capital needs in the near future from part of our net proceeds of this offering and cash generated through operations.

We believe that our current levels of cash and cash flows from operations, combined with the net proceeds from this offering, will be sufficient to meet our anticipated cash needs for our operations and expansion plans for at least the next 12 months.

We may, however, in the future require additional cash resources, due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Because the exchange rate conversion is different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities reflected on the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the consolidated balance sheets.

Cash Flow Summary

The following table sets forth a summary of our cash flows for the periods presented:

Operating Activities:

Net cash provided by operating activities of continuing operations was approximately $3.09 million for the year ended December 31, 2021, primarily due to a net income of approximately $0.94 million adjusted by non-cash working capital. The adjustments for changes in assets and liabilities primarily included (i) a decrease of approximately $2.11 million of accounts receivable, (ii) a decrease of approximately $1.36 million of advances to suppliers, deposits and other current assets, and (iii) a decrease of accounts payable by approximately $2.13 million.

Net cash used in operating activities of continuing operations was approximately $1.07 million for the year ended December 31, 2020, primarily due to a net income of approximately $7,743 adjusted by non-cash working capital. The adjustments for changes in assets and liabilities primarily included (i) a decrease of $1.36 million of advances to suppliers, deposits and other current assets, (ii) a decrease of approximately $1.02 million of account payable, and (iii) a decrease of advances from customers by approximately $1.15 million.

Investing Activities:

Net cash used in investing activities of continuing operations was $0.33 million for the year ended December 31, 2021, which is due to an amount spent on the purchase of a piece of software copyright and a net advance provided to related parties.

Net cash provided in investing activities of continuing operations was $7,863 for the year ended December 31, 2020, which is due to net a repayment received from related parties.

Financing Activities:

Net cash used in financing activities of continuing operations was $2.15 million for the year ended December 31, 2021. It was mainly attributable to (i) a net repayment of $1.53 million to the related parties, and (ii) a net repayment of $1.87 million short-term loans. Net cash provided by financing activities was for continuing operations of $1.06 million for the year ended December 31, 2020. It was primarily attributable to net proceeds of $1.53 million from short-term loans.

We expect to incur additional costs associated with becoming a public company in the United States, primarily due to increased expenses related to accounting and tax services, legal expenses and investor and stockholder-related expenses. These additional long-term expenses may require us to seek other sources of financing, such as additional borrowings or public or private equity or debt capital. The availability of these other sources of financing will depend upon our financial condition and results of operations as well as prevailing market conditions and may not be available on terms reasonably acceptable to us or at all.

Capital Resources

Cash

As of December 31, 2021, we had a total of $1.21 million in cash and cash equivalents, wholly held inside the PRC and as of December 31, 2020, we had a total of $0.60 million in cash and cash equivalents, which amount was wholly held inside the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.

Advances to suppliers, deposits and other current assets

As of December 31, 2021, balances of advances to suppliers, deposits and other current assets were $97,511, a decrease of $1.35 million, compared to $1.44 million as of December 31, 2020. The decrease was primarily due to a decrease in advances to suppliers.

Current assets

Current assets as of December 31, 2021 totaled $3.34 million, a decrease of $3.20 million from our December 31, 2020 balance. The decrease primarily resulted from (i) a $0.6 million increase in cash and cash equivalents, (ii) a $2.0 million decrease in accounts receivables, and (iii) a $1.35 million decrease in advances to suppliers, deposits and other current assets.

Current liabilities

Current liabilities as of December 31, 2021 were $2.15 million, a decrease of $5.51 million, compared to $7.66 million as of December 31, 2020.

Credit Facility

During the year ended December 31, 2021, we entered into a mortgage loan agreement with CIB China's Industrial Bank for a short-term bank loan in the principal amount of $418,776. The term of the loan was for one-year with a fixed annual interest rate of 4.85%. During the year ended December 31, 2020, we entered into credit facility agreements with multiple banks in the PRC for a total of short-term bank loans in the aggregate principal amount of $2,857,516. The terms of loans were of one-year term with fixed annual interest rates that ranged from 5% to 10%.

We also partially finance our operations through loan borrowed from shareholders. During the year ended December 31, 2021, we obtained a loan in the principal amount of $913,552 for daily operations from our shareholder, Mr. Zhenyu Zheng, free of interest. As of December 31, 2021, the Company had a $256,067 outstanding loan payable to Mr. Zhenyu Zheng considering the exchange rate fluctuation $122,821. During the year ended December 31, 2020, the Company obtained loans in the principal amounts of $437,330 and $446,759 for daily operations from our shareholders, Mr. Zhenyu Zheng and Fujian Yukai Medical Technology Group Co., Ltd., Fuzhou Yukai’s then shareholder before the re-organization (“Yukai Medical”), respectively, free of interest. As of December 31, 2020, the Company had a $1,859,067 outstanding loan payable to Mr. Zhenyu Zheng considering the exchange rate fluctuation of $25,205.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these audited consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our estimates on an ongoing basis, including those related to revenue recognition and income taxes. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making the judgments we make about the carrying values of our assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from the estimates.

The critical accounting policies summarized in this section are discussed in further detail in the notes to the audited consolidated financial statements appearing elsewhere in this annual report. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

Revenue Recognition

We adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all years presented. The core principle of this new revenue standard is that a company should recognize revenue when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle by us in determination of revenue recognition:

Our main business is to provide outsourced medical equipment maintenance services for hospitals; specifically, the Company provides comprehensive machine maintenance services for the medical equipment in hospitals, which services and related details are usually listed in the revenue contract or bidding document of each hospital.

The performance obligation was to provide medical equipment maintenance services over the contracted period. The performance obligation was distinct, as (i) the customer can benefit from the service on its own; and (ii) no other performance obligation was identified in the agreement, that is, the performance obligation was separately identifiable.

The transaction price in the contract was usually reflected as a flat fee for the whole contract period, and after signing the contract, we did not expect the contract to be cancelled, renewed or modified. Furthermore, the Company did not identify any other types of consideration, other than the flat fee per the contract, in exchange for providing the repair and maintenance services.

Fuzhou Yukai was a principal for this performance obligation. There was only one performance obligation in each of the contracts and there was no need for allocation. The performance obligation is fulfilled once the Company has provided repair and maintenance services over the agreed upon contract period.

Fuzhou Yukai agrees in each contract to provide medical equipment maintenance services during a certain period. As the work may be delivered on a recurring basis, the customers (usually hospitals) can simultaneously receive and consume the benefits when Fuzhou Yukai provides relevant services. No asset that the customer controls is created or enhanced during the performance. Fuzhou Yukai has enforceable rights to payment for performance obligations completed as identified in the contracts. If the contracts are terminated by the customer or another party for reasons other than the Company’s failure to perform as promised. Based on the above analysis, the works are substantially the same and that have the same pattern of transfer to the customer over a time period and the medical equipment repair and maintenance services should be recognized over time. The Company recognizes revenue evenly each month according to the terms of each contract for services.

In addition, Fuzhou Yukai also sells Class II medical devices or medical materials, although, the revenue received for such sales accounted for a small proportion, only 1.0% and 0.8% for the year ended December 31, 2021 and the year ended December 31, 2020, respectively. For this kind of revenue, the revenue should be recognized upon fulfillment of the performance obligation, after the customer has checked and accepted the goods, which is at a point in time.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Significant estimates and assumptions by management include, among others, the valuation of accounts receivable, advances to suppliers, and other receivables, useful lives and impairment of long-lived assets, allowance for doubtful accounts, income taxes including the valuation allowance for deferred tax assets. While we believe that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.

Fair Value of Financial Instruments

We follow the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”). It clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the accompanying consolidated balance sheets for cash and cash equivalents, accounts receivable, advances to suppliers, deposits and other current assets, short-term loans, accounts payable, other current liabilities, amounts due to related parties and income tax payable approximate their fair value based on the short-term maturity of these instruments.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board(“FASB“) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This amends guidelines on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current U.S. GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date of ASU 2016-13. Early adoption is permitted. Although the Company adopted the guidance, there was no impact on the consolidated financial statements for the Company’s two fiscal years ended on December 31, 2021 and 2020, since the Company did not have any assets held at amortized cost basis or available-for-sale debt securities as of December 31, 2021 and 2020.

In August 2017, the FASB amended the existing accounting guidance for hedge accounting. The amendments require expanded hedge accounting for both non-financial and financial risk components and refine the measurement of hedge results to better reflect an entity’s hedging strategies. The new guidance also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The new guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. The new guidance must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. We adopted the amendment on January 1, 2020 by using the modified retrospective method. The adoption had no impact on the Company’s financial position, the results of operations and statement of cash flows for the years ended December31, 2021 and 2020.

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,” which amends the FASB ASC and XBRL Taxonomy based on the Tax Cuts and Jobs Act, or the Act, that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 that was released by the SEC. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. We adopted the amendment on January 1, 2020 by using the modified retrospective method. The adoption had no impact on the Company’s financial position, the results of operations and statement of cash flows for the years ended December31, 2021 and 2020.

Recently issued ASUs by the FASB, except for the ones mentioned above, are not expected to have a significant impact on our consolidated results of operations or financial position. Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows, or disclosures.

INDUSTRY

All the information and data presented in this section have been derived from the industry report of Haiqiao Zhiku (Xiamen) Cultural Development Co., Ltd. (the “Haiqiao Zhiku”), commissioned by us in April 2022 entitled “Analysis of After-sales Service Market of Medical Devices in China” (the “Haiqiao Zhiku Report”), unless otherwise noted. Haiqiao Zhiku has advised us that the statistical and graphical information contained herein is drawn from its database and other sources. The following discussion contains projections for future growth, which may not occur at the rates that are projected or at all.

Overview of Medical Equipment Repair and Maintenance Industry

Growing Demands Boost Industry Expansion

According to the National Health Commission of China, China's medical equipment sector witnessed robust growth in the past five years, with the market size reaching 840 billion RMB (about $131.81 billion) in 2020.

Prospects of the Medical Equipment Maintenance Industry

Healthcare investment continues to increase: According to the National Bureau of Statistics of China, China’s total health expenditure (the “THE”) increased from approximately 2 trillion RMB in 2011 to 7.2 trillion RMB in 2020, with a compound annual growth rate of 13.67%. China’s government health expenditure (the “GHE”) also increased from 746.4 billion RMB in 2011 to 2,194.1 billion RMB in 2020, with a compound annual growth rate of 11.39%.

* Data source: National Bureau of Statistics, interpreted by Haiqiao Zhiku (Xiamen)

Year-on-year increase in medical institutions: As a result of China’s increasing investment in the healthcare sector, the total number of hospitals in China has increased significantly over the last decade from roughly 21,000 in 2011 to about 37,000 hospitals in 2021.

2011-2021 Number of hospitals in China's mainland

* Data source: National Bureau of Statistics, interpreted by Haiqiao zhiku (Xiamen)

Industry overview for Fujian province: According to Haiqiao Zhiku’s report, the total number of healthcare institutions in Fujian province was 28,105 in 2021, of which 1,072 were hospitals, as compared with 789 healthcare institutions in 2011, of which 789 were hospitals.

* Data source: National Bureau of Statistics, interpreted by Haiqiao zhiku (Xiamen)	* Data source: National Bureau of Statistics, interpreted by Haiqiao zhiku (Xiamen)

New opportunities arising from new medical infrastructure: On March 22, 2022, the General Office of the People’s Government of Fujian province released the “Implementation Plan for Promoting the High-Quality Development of Public Hospitals in Fujian” (the “Fujian Implementation Plan”). According to the requirements of the Fujian Implementation Plan, the average number of beds in medical institutions per 1,000 people in Fujian province will reach 6.10 by 2025; and the number of beds in public hospitals per 1,000 people will be 3.6 by 2025. There will be at least one tertiary hospital in each district and each county with a population of more than 300,000 should have at least one secondary hospital.

Hospital equipment maintenance market size in Fujian province: According to official data from the Fujian Provincial Health Commission, Fujian province had 87 tertiary hospitals in 2020, representing an increase of 23 tertiary hospitals as compared with the number in 2016, with new beds growing by more than 25%.

* Data source: Fujian Provincial Health Commission, interpreted by Haiqiao Zhiku (Xiamen)

Analysis of Competition Pattern and Market Share of Fujian Province

The most significant medical device equipment maintenance service companies in Fujian province currently include Shanghai Kedu Healthcare Technology Co., Ltd. (“Shanghai Kedu”), Shanghai Kunya Medical Apparatus Co., Ltd. (“Shanghai Kunya”) and Fuzhou Yukai Trading Co., Ltd. (“Fuzhou Yukai”). According to Fujian Province government procurement website http://www.ccgp-fujian.gov.cn/, from January 2018 to March 2022, a total of 49 hospital service tenders were made in Fujian province. Shanghai Ked, Shanghai Kunya and Fuzhou Yukai represented the three top providers of medical equipment maintenance services in market share for this period, based on the amounts and percentages of their respective winning bids.

BUSINESS

Our Mission

Through our PRC subsidiaries, mainly Fuzhou Yukai, we provide solutions to the PRC healthcare industry to support efficient, safe and sustainable medical equipment maintenance systems. We endeavor to ensure that healthcare providers, especially hospitals, have the critical medical equipment to care for patients, and we offer them services that lower costs, reduce waste, and maintain a high standard of medical device management in the healthcare industry.

Our mission is to maintain the medical equipment that protects the health of the Chinese and to make a difference for the customers, patients and communities we serve.

Overview

We are an exempted company with limited liability incorporated in the Cayman Islands on October 19, 2021. We are a holding company that has no operations ourselves. We operate business through our two subsidiaries in China: Fujian Yukai and Fuzhou Yukai. Fujian Yukai, currently with no business operations, is our wholly foreign-owned subsidiary formed on December 29, 2021 in Fuzhou city, Fujian province. Fujian Yukai holds 100% of the equity interests in Fuzhou Yukai, which was formed on September 28, 2005 in Fuzhou city, Fujian province. As of the date of this prospectus, substantially all of our business is conducted by Fuzhou Yukai.

Fuzhou Yukai used to sell medical equipment and serve many medical device manufacturers in Fujian province, such as Toshiba, RadioMeter, and GE Healthcare China. In 2016, Fuzhou Yukai’s management decided to adjust its development strategy, take advantage of its medical equipment selling experience, and enter the outsourced medical equipment maintenance market.

We believe we are an expert in managing and maintaining mission-critical, regulated, reusable medical devices. Through Fuzhou Yukai, we offer healthcare providers comprehensive medical equipment services that reduce capital and operating expenses, optimize medical equipment utilization, reduce waste, enhance staff productivity and bolster patient safety.

Our professional services enable healthcare providers to have high-quality, expertly maintained equipment to serve their patients. Our strong connections in Fujian province enable us to reach customers across the healthcare system in Fujian province. Our ability to rapidly repair equipment during peak times and emergencies makes us a service provider of choice for many county, city, and provincial hospitals in Fujian province.

Our customer base includes 1) hospital customers and 2) business partner customers. We obtain our hospital customers through the public bidding process. We enter into contracts directly with our hospital customers after winning the bids. In addition to bidding, we also win business by cooperating with our business partners. Such cooperation with our business partners includes two different models: a) a joint bidding model, and b) a subcontract model. In the joint bidding model, we submit bidding documents together with our business partner. After winning the bids, we, our business partner, and the hospital will enter into a tripartite agreement which, among other things, will stipulate that the hospital will pay the business partner directly. We and the business partner will also enter into a separate agreement which, among other things, will provide that we receive payment from our business partner. The subcontract model works in two steps: first, our business partners obtain hospital customers through the bidding process or their sales teams; and second, after business partners win contracts from hospital customers, they then subcontract the projects to us. In these cooperation models, we provide maintenance services to the hospitals and receive compensation from our business partners.

Through Fuzhou Yukai, we provide medical device remediation and repair services to hospitals. We have 13 service centers and deliver 24/7 services through these service centers to our hospital customers.

As of December 31, 2021, we employ a team of more than 68 specialized repair technicians and engineers, and among them, (i) approximately 60 are field-based technicians who work onsite within customers’ hospital facilities, and (ii) approximately 8 technicians work in the Company headquarters and can be dispatched to different hospitals as required. Approximately 24 employees are management personnel, including bidding managers and account managers. Our fees are paid directly by our customers according to the payment terms in the contracts. As of the date of this prospectus, we estimate all of our debts are receivable.

Development Trends

We believe that the following trends characterize the essential nature of our work:

Improved patient safety and outcomes. Hospitals across Fujian province and China focus on improving patient safety and outcomes. Fuzhou Yukai assists the hospitals in maintaining their equipment to ensure such equipment is available when and where it is needed for patient care, thereby improving patient safety and optimizing patient outcomes.

Increased capital and operating expense pressures. Hospitals are restricted by capital and operating budgets while facing the increasing costs and complexity of medical equipment. The increasing complexity of medical equipment necessitates more recordkeeping and more communications with third-party maintenance providers in the use of such equipment. Fuzhou Yukai provides outsourced maintenance services to hospitals to save their capital and operating expenses and improve their operational efficiencies.

Our Services

Through Fuzhou Yukai, we provide comprehensive outsourced maintenance services to our hospital customers to optimize the usage of reusable medical equipment. The integrated nature of our services maximizes value to our customers as we address various aspects of the equipment lifecycle continuum.

Outsourced Medical Equipment Management Service

Our outsourcing services include maintenance and the provision of spare equipment during maintenance. We generally maintain all of our customers’ medical equipment, including life-supporting medical devices, diagnostic equipment, basic treatment equipment, and supporting equipment, in accordance with relevant contract terms.

Maintenance Service

Equipment maintenance involves ensuring adequate service and limiting down time of medical devices in the hospitals. We divide our maintenance services into two parts: 1) preventive maintenance and 2) corrective maintenance.

Preventive maintenance (“PM”) is a scheduled event. PMs are scheduled according to the risk ranking of a particular medical equipment. Risk ranking is a unitless number derived from a formula that mainly incorporates two factors: (1) the relative maintenance frequency and (2) the effect on patient care if the device fails.

Our engineers, who are well versed in PMs, have developed a work log system for PMs based on the aforementioned two factors. The work log system requires onsite engineers to inspect medical devices according to regular schedules and fill out work logs during or after such inspections. Daily inspections are conducted on life-supporting medical devices, including ventilators, anesthesia machines, heart-lung machines, defibrillators and paddles, and breathing frequency monitors. Weekly inspections are conducted on diagnostic equipment, including computed tomography scanner (CT scanner), X-ray diagnostic equipment, and ultrasonic diagnostic equipment. Monthly inspections are conducted on basic treatment equipment and supporting equipment, including beds, carts, and blood pressure monitors. During such inspections, onsite engineers conduct performance and safety tests. They also stand by and provide 24/7 support when any issue arises.

Corrective Maintenance (“CM”) involve all of the medical equipment repair services, including repairs performed by a hospital’s in-house personnel, by equipment manufacturers, and by third parties, such as Fuzhou Yukai. A hospital’s in-house personnel may handle basic issues on their own. They may also notify our onsite engineers about reported issues. When a medical device exceeds its warranty period, we will repair such device. When a medical device is within its warranty period, a hospital’s in-house personnel will directly contact the device manufacturer to repair such device.

We bear all of the repairing expenses, including repair expenses incurred from hazard notifications and user errors, as required by the outsourced medical maintenance service agreements.

Equipment Solutions

We provide spare equipment to our customers while their equipment is under repair. We are able to provide some common medical equipment, such as mobile C-arm X-ray machines, ultrasound imaging diagnostic equipment, ECG monitors, defibrillators. Some of our contracts require us to provide certain spare equipment, as needed. As of December 31, 2021, through Fuzhou Yukai, we own in total eight types of spare equipment, which include: ECG monitors, portable DRs, defibrillators, anesthesia machines, mobile C-arm X-ray machines, portable color ultrasound machines transdermal detectors, and medical blue light lamps.

This provision of spare equipment is included in our outsourcing services. Accordingly, our customers do not need to pay separate fees.

Outsourced medical equipment maintenance service is our major service. Revenue attributable to such service for the years ended December 31, 2021 and 2020 represented 99.0% and 99.2% of the total revenue, respectively.

Sales of Medical Equipment

Fuzhou Yukai formerly sold Class III medical equipment (defined below), however, it has adjusted its business operations to primarily provide outsourcing services to hospitals since 2016. Although Fuzhou Yukai has shifted its business focus, it has retained relationships with some Class III medical equipment manufactures. Fuzhou Yukai sold a very limited number of Class III medical equipment to its customers during fiscal years ended December 31, 2021 and 2020.

Class I, II, and III medical devices are defined by the National Medical Products Administration of China according to their risk levels under the Regulation on the Supervision and Administration of Medical Devices (2021 Revision), Article 6 of which sets out as follows:

Pursuant to the Administrative Measures on the Operation Supervision of Medical Devices, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the operation of Class II medical devices are subject to filing administration and will receive a Class II medical device selling record certificate upon satisfaction of filing requirement. Operators engaged in the operation of Class III medical devices are subject to pre-approval licensing administration and will a receive medical device operation license upon receipt of approval for licensing. A medical device operation license for Class III is valid for five years and may be renewed six months prior to its expiration date. Fuzhou Yukai has only sold Class II medical devices since June 1, 2021.

Our subsidiary, Fuzhou Yukai, obtained a medical device business license for selling Class III medical devices, and such license expired on June 1, 2021. Since June 1, 2021, Fuzhou Yukai has not engaged in selling Class III medical equipment. We have no intention of selling Class III medical equipment in the future. Fuzhou Yukai obtained a Class II medical device selling record certificate on December 18, 2017. Such selling record certificate will remain effective for the long term, i.e., until Fuzhou Yukai is inspected by the local medical administration department and has been determined by such department to have failed to ensure the safety and effective of the medical devices it sells. Although as of the date of this prospectus, no event which could cause this selling record certificate to be revoked has occurred, we cannot assure you that such Class II medical device selling record certificate will not be revoked in the future. See “Risk Factors — Risks Related to Our Business and Industry — If we fail to maintain an effective Class II medical device selling record certificate, it could adversely affect our reputation, financial conditions and results of operations.”

Revenue attributable to the sales of medical equipment for the years ended December 31, 2021 and 2020 was $100,538 and $61,651, respectively, representing 1.0% and 0.8% of the total revenue, respectively.

Quality Control Systems

We are committed to providing high-quality services to our customers. We implement comprehensive quality control systems based on the internationally recognized quality standard for medical devices: ISO 13485:2016. Our quality control systems consist of an equipment maintenance system, an onsite engineer management system, a medical equipment inspection system, a measurement management system, an adverse event monitoring system, a maintenance management system, an all-level position responsibility system, a quality assessment, and contingency plan for emergency events. We also provide trainings regarding these quality control systems from time to time to our employees. We are committed to ensuring our customers have access to equipment which has been maintained and repaired up to a high industry standard. We provide technical support and educational in-servicing for equipment in clinical departments, including emergency rooms, operating rooms, intensive care, rehabilitation and general patient care areas, and we believe we have consistently achieved high customer satisfaction. On April 25, 2021, Fuzhou Yukai received a “Five Star” certificate issued by Yicheng Certification Ltd., certifying that Fuzhou Yukai provides Five Stars service in medical device repair and maintenance according to the after-sales service management system GB/T 27922-2011 standard. This GB/T 27922-2011 is a Chinese standard issued by the Ministry of Commerce of PRC. This standard specifies the basic elements that constitute the evaluation system of after-sales service of goods/services, including the principles, indicators and methods.

Customers

Our customer base includes hospital customers and business partner customers. As of December 31, 2021, and 2020, we had a total of 19 and 23 customers, respectively. Among the 19 customers, as of December 31, 2021, (i) 12 customers were hospitals with which Fuzhou Yukai directly entered into medical equipment maintenance service agreements, (ii) one of which was a hospital customer to which Fuzhou Yukai only sells Class II medical devices, and (iii) six of which were business partners. Through such six business partners, Fuzhou Yukai provides medical equipment maintenance services to eight hospitals. Among the 23 customers, as of December 31, 2020, (i) 20 customers were hospitals with which Fuzhou Yukai directly entered into medical equipment maintenance service agreements, and (ii) three of which were business partners. Through such three business partners, Fuzhou Yukai provided medical equipment maintenance services to six hospitals. Fuzhou Yukai also sold Class II medical devices to some of those business partners during such periods.

Public Hospital Bidding

We obtain our public hospital customers through the public bidding process. Fuzhou Yukai has one staff member dedicated to searching for bidding opportunities and preparing related documents. Fuzhou Yukai’s sales personnel and senior engineers are also involved in the bidding process, which is illustrated below:

Contracts with Hospitals

Fuzhou Yukai enters into contracts directly with its hospital customers after winning the bids. In general, such contracts are based on the Government Procurement Contract template and include standard provisions, such as the parties’ information, the project information, payment details, term, service scope, service requirements, force majeure provisions, and choice of law/venue. Fuzhou Yukai has little bargaining power over the contract provisions.

Contracts with Business Partners

In addition to bidding, we also win business by cooperating with our business partners. Such cooperation with our business partners includes two different models: a) joint bidding model and b) subcontract model. In the joint bidding model, we submit bidding documents together with our business partner. After winning the bids, we, our business partner, and the hospital will enter into a tripartite agreement which, among other things, will stipulate that the hospital will pay directly to the business partner. We and the business partner will also enter into a separate agreement which, among other things, will provide that we receive payment from our business partner. The subcontract model works in two steps: first, our business partners obtain hospital customers through the bidding process or their sales teams; and second, after business partners win contracts from hospital customers, they then subcontract the projects to us. In these cooperation models, we provide maintenance services to the hospitals and receive compensation from our business partners.

Through Fuzhou Yukai, we normally do not maintain long-term contractual relationships with our customers. Our contractual terms are usually three years. Some contracts include an annual review clause that give the hospital customers a right to terminate the contracts based on annual evaluation of our work performance. As of the date of this prospectus, no such evaluation has resulted in any contract termination.

The top three customers for the fiscal year ended December 31, 2021 included Xiamen C&D Hitek Co., Ltd., Fuzhou No. 2 Hospital, and China Resources (Fuzhou) Medical Equipment Co., Ltd., which collectively accounted for 66.8% of our total revenue for that period. Xiamen C&D Hitek Co., Ltd. accounted for 28.8% of our total revenue for the fiscal year ended December 31, 2021. Our top four customers for the fiscal year ended December 31, 2020 included China Resources (Fuzhou) Medical Equipment Co., Ltd, Fuzhou No. 2 Hospital, Xiamen C&D Hitek Co., Ltd. and Xiamen No. 5 Hospital, which collectively accounted for 58.2% of our total revenue for that period. China Resources (Fuzhou) Medical Equipment Co., Ltd accounted for 25.6% of our total revenue for the fiscal year ended December 31, 2020.

Our Suppliers

We have two types of suppliers: 1) medical equipment repair parts suppliers and 2) technical support service suppliers. We purchase medical equipment repair parts based on specific maintenance requirements on an as-needed basis. We also store some basic parts at our service centers as backup. We contact our technical support service suppliers when we encounter issues that are beyond our ability to solve. We promise 24/7 quick response to our customers; accordingly, we also request our suppliers to respond within 24 hours. If a supplier fails to do so, we will switch to other suppliers where feasible.

When choosing our suppliers, we consider their qualification and reputation, their response speed in general, and the proposed pricing. We believe our supply has been very stable and easily sourced for the fiscal years ended December 31, 2020 and 2021. We do not have long-term written purchase agreements with our suppliers. We do not consider any of our suppliers to be material to our business. As of December 31, 2021, we have a total number of 136 suppliers, and among them, 130 medical equipment repair parts suppliers and six technical support suppliers. We can select any supplier at our sole discretion, and we believe that we have established stable relationships with our significant suppliers through years of cooperation.

These significant suppliers, in the aggregate, accounted for over 68.7% and 53.3% of our purchases for the fiscal years ended December 31, 2021 and 2020, respectively. For the fiscal year ended December 31, 2021, the top three suppliers were Guangzhou Zhiheng Medical Devices Repairing Service Co., Ltd., Shanghai Yingtai Medical Equipment Co., Ltd., and Fuzhou Tengjian Medical Instrument Co., Ltd., representing 42.4%, 26.3%, and 4.7% of our total purchase, respectively. For the year ended December 31, 2020, the top three suppliers were Fuzhou Tengjian Medical Instrument Co., Ltd., Shanghai Bangyuan Medical Technology Service Center, and Shanghai Yingtai Medical Equipment Co., Ltd., representing 36.7%, 16.6%, and 9.7% of our total purchase, respectively. There are no minimum purchase requirements with any of the suppliers. Each supplier order is typically governed by a brief purchase-order-based purchase agreement. The key terms of the medical equipment parts supplier purchase-order-based purchase agreement (including those agreements with our significant suppliers) include 1) the product’s name, type, quantity, and price; 2) quality terms with reference to national or industry standards; 3) the delivery method and payment terms; 4) the warranty period; and 5) breach of contract terms, including refund and return of products provisions and compensatory damages. The key terms of the technical support service agreement (including those agreements with our significant suppliers) include 1) the service scope; 2) both parties’ respective rights and obligations, including the supplier’s responsibility to provide 24 hours quick response and technical support and maintenance solutions; 3) the warranty period; and 4) the payment terms.

Our Engineers

We believe our strength and sustainability depend on our engaged and empowered team. We are committed to investing in our team’s training and development, encouraging open communications, and promoting equity and inclusion in our workplace. As of December 31, 2021, we had in total 68 technicians, and among them, 54 received college and bachelor’s degree, representing 79% of the total technicians.

Training

To remain competitive, we endeavor to improve our services. Accordingly, we provide training to our technicians. Such training consists of external and internal training. External training is mainly provided by medical equipment manufacturers, such as Toshiba, to the personnel who use and maintain their medical equipment. External training is also provided by healthcare industry associations to their practitioners. We support our technicians to participate in external training by paying for their training, travel and accommodation expenses.

We believe that medical equipment maintenance requires field practice. We arrange skilled engineers to conduct onsite teaching for our new employees. In addition, senior engineers at our headquarters also respond to the questions from our onsite technicians.

Internal Assessment and Promotion

We offer job promotion opportunities to our technicians. In our service centers, we offer positions, including engineers, team leaders, deputy supervisors, and supervisors. We assess, evaluate and review work performance from time to time. Our evaluation focuses on the following factors:

Based on the evaluation, we promote excellent employees to better positions and increase their salary to match their new roles.

Localized Service Teams

We provide 24/7, year-round services to our hospital customers through our local service teams. We recruit and train local technicians to ensure prompt services to be provided to our customers.

Competitive Strengths

We believe our high-quality maintenance service differentiates us in the marketplace. We believe our industry experience, well trained technician teams, and reputation will enable us to main our position as a market leader in Fujian province. Compared with our competitors, we believe that we have the following advantages:

24/7 Quick Response. Our 13 service centers provide 24/7, year-round services, which we believe enables us to compete effectively and grow our business regionally and locally. We plan to gradually expand our operations to surrounding areas and the whole PRC market.

Strong Management and Professional Team. Our senior management team, led by our chief executive officer and chairman Mr. Zhenyu Zheng, is comprised of highly skilled and dedicated professionals with significant experience in the healthcare industry. We also employ a number of technical specialists. As of December 31, 2021, we had 68 technicians comprised of 60 field-based technicians and 8 technicians in company headquarters. We believe that our management and professional teams provide a unique competitive advantage.

Commitment to quality control.  Independent third-party service providers like us are not required to register with the NMPA. However, we are committed to managing quality based on the internationally recognized quality standard for medical devices: ISO 13485:2016. Central China International Certification and Inspection Group, a third-party certification agency approved and recognized by the Citification and Accreditation Administration of the PRC (“Central China International”) has certified Fuzhou Yukai to have met the standards of ISO 13485:2016, environmental management system certification ISO 14001:2015, occupational health and safety management system certification ISO 45001:2018, and Quality Management System Certification ISO 9001:2015. We believe that our commitment to quality control sets us apart from those who may use less stringent quality practices.

Superior customer service. We believe we have a long-standing reputation among our customers for outstanding services. This reputation is largely attributable to our focus on customer service and our investments in hiring and training employees. We believe that our focus on customer service helps us achieve high customer satisfaction ratings, as evidenced by the “Five Star” certificate certified by Yicheng Certification Ltd. according to the after-sales service management system GB/T 27922-2011 standard.

Growth Strategies

Growing our customer base among customers that presently outsource. We believe there is a significant opportunity to grow our business by winning new contracts from customers that outsource medical equipment maintenance in Fujian province. We believe we are poised to grow our customer base among customers that outsource.

Growing our serviceable market by contracting with those that presently insource. We believe there is a significant opportunity to grow our customer base by converting potential customers that currently insource. As of December 31, 2021, we estimate that in Fujian province, there are approximately 1038 hospitals in which medical equipment maintenance is done in-house. We believe we can demonstrate the value of our services to potential customers that insource medical equipment maintenance and contract with them. As of the date of this prospectus, no customers that insource medical equipment maintenance have been converted to customers of Fuzhou Yukai.

Expanding beyond Fujian province by investing in joint ventures or through acquisitions. We recognize a vast market for outsourced medical equipment maintenance services in the PRC and the demand for local technical personnel. We believe that we could expand beyond Fujian province by investing in joint ventures or through acquiring targets that fit our strategic objectives, although we have not identified or engaged in any such discussions as of the date of this prospectus. In the event that we invest in or acquire such business, the local company may hire and manage local technicians and we expect to provide the training and technical support.

The COVID-19 Update

Since late December 2019, the outbreak of a novel strain of coronavirus, later named COVID-19, first emerged in the PRC and has spread globally. On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a “Public Health Emergency of International Concern (PHEIC),” and later on March 11, 2020 a global pandemic. The COVID-19 outbreak has led governments across the globe to impose measures intended to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. From 2020 to the middle of 2021, COVID-19 vaccinations were promoted around the globe.

The COVID-19 pandemic has placed us in uncharted waters. We have evaluated the impact of the pandemic on our business operations, revenue, publicity and the need for our solutions and expect that more customers may be preparing for potential surges in demand for equipment necessary for patient care. We have concluded that, as of the date of this prospectus, the pandemic has not materially adversely affected our business based on the following factors:

However, if our technicians become infected or there are logistical issues that may prevent us from obtaining the parts we need, our operations could be affected and our business, financial condition and results of operations may be materially and adversely affected.

The extent to which COVID-19 impacts our business in the future will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, our ability to pursue our business objectives may be materially adversely affected. In addition, our ability to raise equity and debt financing may be adversely impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all.

Any future impact on the results of operations will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the spread or treat its impact, almost all of which are beyond our control. Given the general slowdown in economic conditions globally and the volatility in the capital markets, we cannot assure you that we will be able to maintain the growth rate we have experienced or projected. We will continue to closely monitor the situation throughout 2022 and beyond.

Business Operations

Service Centers in Hospital Facilities

As of December 31, 2021, we collectively operated 13 service centers in each of the hospital facilities we serve. Such service centers are staffed by one to five local technicians, depending on the size of the hospital and the amount of medical equipment. Depending on the needs of our customers, we may establish more service centers in the future.

Some service centers maintain equipment and parts to accommodate the needs of the hospitals. We maintain some common medical equipment, such as mobile C-arm X-ray machines, ultrasound imaging diagnostic equipment, ECG monitors, defibrillators, etc. Should additional parts be required by one of our customers, a service center can draw upon the resources of other service centers.  As of December 31, 2021, Fuzhou Yukai owned spare equipment totaling 233 items, comprised of eight types, which include: ECG monitors, portable DRs, defibrillators, anesthesia machines, mobile C-arm X-ray machines, portable color ultrasound machines transdermal detectors, and medical blue light lamps.

Centralized Functions

To maximize operational efficiencies and service consistency, we standardize key elements of our services, including internal technical support, contract administration, bidding, marketing, purchasing, pricing, accounting, and information technology.

Working Process

Our technicians do not work directly with doctors and nurses. Typically, the hospitals’ in-house personnel report issues to our technicians at the service centers. When these technicians are unable to solve the issues, they will report the issues to the senior technicians at our headquarters. When the senior technicians are unable to solve the issues, they will seek assistance from technical support suppliers. When the technology suppliers are unable to solve the issues, our technicians will report to the hospital and recommend replacing the equipment.

The following diagram shows our working process:

Employees

As of December 31, 2021, 2020, and 2019, we had 92, 155, and 150 employees, respectively. The following table sets forth the number of our employees by each function as of December 31, 2021:

Generally, we enter into standard employment contracts with our officers, managers, technician, and other employees. According to these contracts, all of our employees are prohibited from engaging in any other employment during their employment with us. The employment contracts with officers, managers and employees are subject to renewal in three years and, if renewed, will last another three years before becoming at-will employment contracts.

We believe our PRC subsidiaries maintain good relationships with their employees. None of their employees are represented by labor unions.

Intellectual Property

Our business is dependent on a combination of trademarks, copyrights, domain names, trade names, trade secrets, and other proprietary rights in order to protect our intellectual property rights. As of the date of this prospectus, we have two (2) registered trademarks, one (1) domain name, and seven (7) copyrights in the PRC. We do not own any patents. Our PRC subsidiaries do not have any applications pending with the China National Intellectual Property Administration (the “CNIPA”).

Fuzhou Yukai has registrations with the CNIPA for the following two trademarks:

Country

Trademark

Trademark Registration No.

Trademark Name

Trademark Classes

Trademark Owner

Trademark Term

Trademark Status

China

26811950

Yukai

37

Fuzhou Yukai

12/ 28/ 2018 to 12/27/2028

Registered

China

47562546

Yukai

42

Fuzhou Yukai

04/14/ 2021 to 04/01/2031

Registered

Our PRC subsidiaries have a domain name registration for yukaigroup.cn, which serves as our main website. We have developed a software program, MEMS System, and acquired six systems, including an intelligent medical operation and maintenance system, medical equipment asset management system, medical information service file system, intelligent medical heavy asset operation and maintenance ERP system, medical device adverse event management system, and medical equipment maintenance management system, to support our operations. Fuzhou Yukai is currently integrating and modifying these systems and expects to operate the New Managing Systems by the end of September 2022.

Marketing

We obtain our hospital customers through the public bidding process. Fuzhou Yukai maintains an in-house bidding team consisting of one employee, who is mainly responsible for searching for bidding information, preparing bidding documents, and contract administration. We did not and do not intend to solicit customers by advertising our services. Our sales team is staffed with three employees who are mainly responsible for performance feedback and quality control.

We believe that our bidding and sales personnel are hard-working, passionate, and responsive, and we offer them training in bidding, marketing and management.

Seasonality

Our business is not subject to seasonality.

Insurance

As required by regulations in China, our PRC subsidiaries participate in various employee social security plans that are organized by municipal and provincial governments for their full-time employees, including pension, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance, and housing fund. The PRC subsidiaries are required under the PRC law to make contributions from time to time to employee benefit plans for their full-time employees at specified percentages of the salaries, bonuses, and certain allowances of such employees, up to a maximum amount specified by the local governments in China. We and the PRC subsidiaries do not maintain other property insurance, business interruption insurance, or general third-party liability insurance. We believe the insurance coverage the PRC subsidiaries maintain is in line with the industry practice.

Legal Proceedings

From time to time, our PRC subsidiaries may become a party to various legal or administrative proceedings arising in the ordinary course of their business, including actions with respect to intellectual property infringement, violation of third-party licenses or other rights, breach of contract, and labor and employment claims. In addition, although our PRC subsidiaries do not manufacture any medical equipment, their business entails the risk of claims related to the outsourcing, sale and service of medical equipment.

We and our PRC subsidiaries are currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, are likely to have any material and adverse effect on our business, financial condition, cash flow, or results of operations.

Facilities

Our principal executive offices are located in Fuzhou city, Fujian province, China, one of which is leased by Fuzhou Yukai from an independent third party with an area of approximately 2,107 square feet. The lease term commenced from May 1, 2021 to May 31, 2023 and the monthly rent is RMB9,000 (approximately $1,395.91). The lease requires Fuzhou Yukai to provide at least two months’ notice to renew the lease.

Fuzhou Yukai leases another office in Fuzhou from an independent third party with an area of approximately 3,799.66 square feet. The lease term extends from August 17, 2021 to August 16, 2022, and the monthly rent is RMB 29,000 (approximately $4,498). Fuzhou Yukai is required to provide at least one month’ notice to renew the lease. Fuzhou Yukai currently intends to renew this lease and will notify the landlord in July 2022. Fujian Yukai, our WFOE, currently has no operations and it shares this office space with Fuzhou Yukai. Fuzhou Yukai allows Fujian Yukai to use the offices rent-free.

Fuzhou Yukai also leases a storehouse in Fuzhou from an independent third party with an area of approximately 12,916.69 square feet. The lease term goes from December 1, 2020 to November 30, 2022 and the annual rent is RMB240,000 (approximately $37,224.31). Fuzhou Yukai is required to provide at least three months’ notice to renew the lease.

The service centers are located in the hospital facilities and the hospitals allow our technicians to use them for free.

We lease all of our facilities. We believe that the offices our PRC subsidiaries currently leased facilities are adequate to meet our current and foreseeable needs.

Fuzhou Yukai leases real properties from third parties primarily for its offices in China, and such lease agreements for these properties have not been registered with the PRC governmental authorities as required by PRC law. Although the failure to do so does not in itself invalidate the leases, the PRC subsidiaries may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance is not rectified within a given period of time, Fuzhou Yukai may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for each lease agreement that has not been registered with the relevant PRC governmental authorities. See “Regulation — Regulations Relating to Leasing.”

REGULATION

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.

Regulations Related to Foreign Investment

The establishment, operation and management of companies in China are mainly governed by the PRC Company Law, as most recently amended in 2018, which applies to both PRC domestic companies and foreign-invested companies. On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, and on December 26, 2019, the State Council promulgated the Implementing Rules of the PRC Foreign Investment Law, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the Foreign Investment Law. The Foreign Investment Law and the Implementing Rules both took effect on January 1, 2020 and replaced three major previous laws on foreign investments in China, namely, the Sino-foreign Equity Joint Venture Law, the Sino-foreign Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their respective implementing rules. Pursuant to the Foreign Investment Law, “foreign investments” refer to investment activities conducted by foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council. The Implementing Rules introduce a see-through principle and further provide that foreign-invested enterprises that invest in the PRC shall also be governed by the Foreign Investment Law and the Implementing Rules.

The Foreign Investment Law and the Implementing Rules provide that a system of pre-entry national treatment and negative list shall be applied for the administration of foreign investment, where “pre-entry national treatment” means that the treatment given to foreign investors and their investments at market access stage is no less favorable than that given to domestic investors and their investments, and “negative list” means the special administrative measures for foreign investment’s access to specific fields or industries, which will be proposed by the competent investment department of the State Council in conjunction with the competent commerce department of the State Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the competent investment department or competent commerce department of the State Council after being reported to the State Council for approval. Foreign investment beyond the negative list will be granted national treatment. Foreign investors shall not invest in the prohibited fields as specified in the negative list, and foreign investors who invest in the restricted fields shall comply with the special requirements on the shareholding, senior management personnel, etc. In the meantime, relevant competent government departments will formulate a catalogue of industries for which foreign investments are encouraged according to the needs for national economic and social development, to list the specific industries, fields and regions in which foreign investors are encouraged and guided to invest. The current industry entry clearance requirements governing investment activities in the PRC by foreign investors are set out in two categories, namely the Special Entry Management Measures (Negative List) for the Access of Foreign Investment (2021 version), or the 2021 Negative List, promulgated by the National Development and Reform Commission and the Ministry of Commerce, or the MOFCOM, on December 27, 2021 and took effect on January 1, 2022, and the Encouraged Industry Catalogue for Foreign Investment (2020 version), or the 2020 Encouraged Industry Catalogue, promulgated by the MOFCOM on December 27, 2020 and took effect on January 27, 2021. Industries not listed in these two categories are generally deemed “permitted” for foreign investment unless specifically restricted by other PRC laws. The medical equipment repair and maintenance industry is not on the Negative List and therefore we are not subject to any restriction or limitation on foreign ownership.

According to the Implementing Rules, the registration of foreign-invested enterprises shall be handled by the SAMR or its authorized local counterparts. Where a foreign investor invests in an industry or field subject to licensing in accordance with laws, the relevant competent government department responsible for granting such license shall review the license application of the foreign investor in accordance with the same conditions and procedures applicable to PRC domestic investors unless it is stipulated otherwise by the laws and administrative regulations, and the competent government department shall not impose discriminatory requirements on the foreign investor in terms of licensing conditions, application materials, reviewing steps and deadlines, etc. However, the relevant competent government departments shall not grant the license or permit enterprise registration if the foreign investor intends to invest in the industries or fields as specified in the negative list without satisfying the relevant requirements. In the event that a foreign investor invests in a prohibited field or industry as specified in the negative list, the relevant competent government department shall order the foreign investor to stop the investment activities, dispose of the shares or assets or take other necessary measures within a specified time limit, and restore to the status prior to the occurrence of the aforesaid investment, and the illegal gains, if any, shall be confiscated. If the investment activities of a foreign investor violate the special administration measures for access restrictions on foreign investments as stipulated in the negative list, the relevant competent government department shall order the investor to make corrections within the specified time limit and take necessary measures to meet the relevant requirements. If the foreign investor fails to make corrections within the specified time limit, the aforesaid provisions regarding the circumstance that a foreign investor invests in the prohibited field or industry shall apply.

Pursuant to the Foreign Investment Law and the Implementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated by the MOFCOM and the SAMR, which took effect on January 1, 2020, a foreign investment information reporting system shall be established and foreign investors or foreign-invested enterprises shall report investment information to competent commerce departments of the government through the enterprise registration system and the national enterprise credit information publicity system, and the administration for market regulation shall forward the above investment information to the competent commerce departments in a timely manner. In addition, the MOFCOM shall set up a foreign investment information reporting system to receive and handle the investment information forwarded by the administration for market regulation and inter-departmentally shared information in a timely manner. The foreign investors or foreign-invested enterprises shall report the investment information by submitting reports including initial reports, change reports, deregistration reports and annual reports.

Furthermore, the Foreign Investment Law provides that foreign-invested enterprises established according to the previous laws regulating foreign investment prior to the implementation of the Foreign Investment Law may maintain their structure and corporate governance within five years after the implementation of the Foreign Investment Law. The Implementing Rules further clarify that such foreign-invested enterprises established prior to the implementation of the Foreign Investment Law may either adjust their organizational forms or organizational structures pursuant to the Company Law or the Partnership Law, or maintain their current structure and corporate governance within five years upon the implementation of the Foreign Investment Law. Since January 1, 2025, if a foreign-invested enterprise fails to adjust its organizational form or organizational structure in accordance with the laws and go through the applicable registrations for changes, the relevant administration for market regulation shall not handle other registrations for such foreign-invested enterprise and shall publicize the relevant circumstances. However, after the organizational forms or organizational structures of a foreign-invested enterprise have been adjusted, the original parties to the Sino-foreign equity or cooperative joint ventures may continue to process such matters as the equity interest transfer, the distribution of income or surplus assets as agreed by the parties in the relevant contracts.

In addition, the Foreign Investment Law and the Implementing Rules also specify other protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited, etc.

As confirmed by our PRC counsel, both Fujian Yukai, our WFOE, and Fuzhou Yukai are required to comply with the information reporting requirements under the Foreign Investment Law the Implementing Rules and the Information Reporting Measures for Foreign Investment and are in full compliance.

In addition, according to our PRC legal counsel, as of the date of this prospectus, neither we nor any of our PRC subsidiaries has been subject to any investigation, or receive any notice, warning, or sanction from relevant government authorities related to non-compliance with the PRC Company Law or foreign investment laws.

Regulations on Dividend Distributions

The principal laws, rule and regulations governing dividends distribution by companies in the PRC are the PRC Company Law, which applies to both PRC domestic companies and foreign-invested companies, and the Foreign Investment Law and its implementing rules, which apply to foreign-invested companies. Under these laws, regulations and rules, both domestic companies and foreign-invested companies in the PRC are required to set aside as statutory reserves at least 10% of their after-tax profit, until the cumulative amount of their reserves reach 50% of their registered capital. PRC companies are not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Medical Equipment Tendering and Procurement

According to the Government Procurement Law of the People’s Republic of China (the “Government Procurement Law”) promulgated by SCNPC on June 29, 2002 and last amended on August 31, 2014 and the Regulations for Implementation of the Government Procurement Law of the People’s Republic of China (the “Implementation Regulations”) promulgated by State Council on January 30, 2015 and came into effect on March 1, 2015, the term “government procurement” means the use of fiscal funds by all levels of State authorities, institutions and social organizations to procure goods, projects and services that fall within the catalogue for centralized procurement formulated in accordance with the law or that are above the procurement limits. Government procurement shall combine centralized and decentralized procurement. The scope of centralized procurement shall be defined by the catalogue for centralized procurement promulgated by the people’s governments at provincial level and above. The catalogue for centralized procurement for government procurement items that fall within the central government budget shall be determined and promulgated by the State Council. The catalogue for centralized procurement for government procurement items that fall within the local government budget shall be determined and promulgated by the people's government or its authorized institution of provinces, autonomous regions and municipalities directly under the central government. Government procurement items that are included in the catalogue for centralized procurement shall be subject to centralized procurement. The limits for government procurement for government procurement items that fall within the central government budget shall be determined and promulgated by the State Council. The limits for government procurement for government procurement items that fall within local government budgets shall be determined and promulgated by the people's government or its authorized institution of provinces, autonomous regions and municipalities directly under the central government. Government procurement contracts shall be in writing. A supplier may sub-contract certain parts of its obligations under the government procurement contract but is prohibited from sub-contracting the obligations in their entirety. Any supplier acting in violation of the prohibition shall be prosecuted for legal liability.

In the event that buyers procure goods or services items whose budget amount more than the standard of public bidding amount, the public bidding must be adopted. The standard for the amount of public bidding at the provincial level is 3 million RMB, and that at the city and county level is 2 million RMB.

According to our PRC legal counsel, our outsourced medical equipment maintenance service is governed by the Government Procurement Law. As of the date of this prospectus, we believe we have been in full compliance with such law when we have participated the bidding procedures and have not received any notifications of any non-incompliance of the related rules.

Regulations on Outsourced Medical Equipment Maintenance Service

Pursuant to the Administrative Measures for Quality Supervision on the Use of Medical Devices promulgated on October 21, 2015, effective on February 1, 2016, a medical device user may entrust qualified and competent maintenance service providers to provide medical equipment maintenance and repair services. Where a piece of medical equipment is maintained and repaired by a maintenance service provider, the contract shall clarify quality requirements, maintenance requirements and other relevant matters. The food and drug administration department shall conduct supervision inspections on the establishment and implementation of the quality management systems of medical device use by medical device users. During a supervision inspection of a medical device user, the food and drug administration department may conduct extended inspections on relevant medical device maintenance service providers. Medical device maintenance service providers shall cooperate with food and drug administration departments in supervision inspections, and provide true information and documents, and shall not refuse cooperation or conceal information. For medical device maintenance service providers that refuse to cooperate with food and drug administration departments in supervision inspection, or conceal or refuse to provide, or fail to truthfully provide relevant information and documents, the food and drug administration departments at or above the county level shall order them to make rectification, and give them a warning, and may impose a fine of not more than 20,000 RMB.

According to our PRC legal counsel, our outsourced medical equipment maintenance service is supervised by the local food and drug administration departments. As of the date of this prospectus, we are in full compliance and have not received any notifications of any non-compliance from the local food and drug administration departments.

Regulation and Classification of Medical Devices

Pursuant to the Regulations on the Supervision and Administration of Medical Devices promulgated on January 4, 2000 and came into effect on April 1, 2000 (the “Supervision and Administration of Medical Devices”), which was latest amended on February 9, 2021 and came into effect on June 1, 2021, the National Medical Products Administration shall be responsible for the national administration and supervision of medical devices and its local counterparts are responsible for the local administration and supervision of medical devices.

Under this regulation, medical devices have been classified into three categories based on the degree of risk. Class I medical devices shall refer to those devices with low level of risks and whose safety and effectiveness can be ensured through routine administration. Class II medical devices shall refer to those devices with moderate risks that must be strictly controlled and regulated to ensure their safety and effectiveness. Class III medical devices shall refer to those devices with relatively high risks that must be strictly controlled and regulated through special measures to ensure their safety and effectiveness.

Operation of Medical Devices

Pursuant to the Supervision and Administration of Medical Devices, and the Administrative Measures on the Operation Supervision of Medical Devices, promulgated on July 30, 2014, and came into effect on October 1, 2014, then amended on March 10, 2022, and came into effect on May 1, 2022, filing and licensing are not required for the operation of Class I medical devices. Operators engaged in the operation of Class II medical devices are subject to filing administration and will receive a Class II medical device selling record certificate upon satisfaction of filing requirement and operators are required to guarantee the safety and effectiveness of Class II medical devices, or the record-filing shall be cancelled, and an announcement shall be made. While operators engaged in the operation of Class III medical devices are subject to pre-approval licensing administration and will receive medical device operation license upon receipt of approval for licensing. A medical device operation license for Class III is valid for five years and may be renewed six months prior to its expiration date.

To engage in business operations of medical devices, the following requirements shall be met (a qualifying enterprise must have):

An enterprise to be engaged in business operations of Class III medical devices shall also have a computerized information management system compliant with quality standards to ensure traceability of products. An enterprise to be engaged in business operations of Class I or Class II medical devices is encouraged to set up such a system.

As confirmed by our PRC counsel, our subsidiary, Fuzhou Yukai obtained its Class II medical device selling record certificate on December 18, 2017, which certificate will remain in effect unless and until Fuzhou Yukai is inspected by the local medical administration department and determined by such department to have failed to ensure the safety and effective of the medical devices it sells. In addition, Fuzhou Yukai obtained a medical device business license for selling Class III medical devices, and such license expired on June 1, 2021. Since June 1, 2021, we have not been engaged in Class III medical equipment selling and we have no intention of selling Class III medical equipment in the future. In addition, through Fuzhou Yukai, we provide very limited sales service to our customers. We sell certain Class II medical devices, as may be needed, by conducting our outsourced medical equipment service and selling certain Class II medical devices to some third-party medical device dealers. Although as of the date of this prospectus, no event which could cause the Class II medical device selling record certificate to be revoked has occurred, we cannot assure you that such Class II medical device selling record certificate will not be revoked in the future See “Risk Factors — Risks Related to Our Business and Industry — If we fail to maintain an effective Class II medical device selling record certificate , it could adversely affect our reputation, financial conditions and results of operations.”

Advertisements of Medical Devices

Pursuant to the Regulations on Tentative Measures for the Censorship of Advertisement for Drugs, Medical Devices, Dietary Supplements, Food Formula for Special Medical Purpose promulgated by SAMR on December 24, 2019 and came into effect on March 1, 2020, the State Administration for Market Regulation is responsible for organizing and guiding the review of advertisements for drugs, medical devices, health foods and formula foods for special medical purposes. The administrations for market regulation and drug administrations of all provinces, autonomous regions and centrally administered municipalities shall be responsible for the review of advertisements for drugs, medical devices, health food and formula food for special medical purposes, and may entrust other administrative authorities to implement review of advertisements pursuant to the law.

The validity period of the advertisement approval number for drugs, medical devices, health food and formula food for special medical purposes shall be consistent with the shortest validity period of the product registration certificate, filing certificate or production license. If no valid period is prescribed in the product registration certificate, filing certificate or production license, the valid period of the advertisement approval number shall be two years.

Advertisements for drugs, medical devices, health food and formula food for special medical purposes shall be true and legitimate and shall not contain any false or misleading contents. Advertisers shall be responsible for the veracity and legitimacy of the contents of advertisements for drugs, medical devices, health food and formula food for special medical purposes.

As of the date of this prospectus, neither we nor our PRC subsidiaries have engaged in any advertising. We have no intention of engaging in any advertising in the future.

Regulations Relating to Leasing

Pursuant to the Law on Administration of Urban Real Estate which took effect in January 1995 with the latest amendment in August 2019, lessors and lessees are required to enter into a written lease contract, containing such provisions as the term of the lease, the use of the premises, liability for rent and repair, and other rights and obligations of both parties.

According to the Civil Code of the PRC, which was enacted by the NPC in May 2020 and took effect on January 1, 2021, the lessee may sublease the leased premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. Where the third party causes any damage to the premises, the lessee should be liable for such damage. The lessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises within the period when the lessee is entitled to possess in accordance with the lease contract, the lease contract between the lessee and the lessor will still remain valid. As of the date of this prospectus, we are not aware of any claim or challenge brought by any third parties concerning the use of the PRC subsidiaries leased properties without obtaining proper ownership proof.

Pursuant to the Administrative Measures for Commodity Housing Tenancy issued by the Ministry of Housing and Urban-Rural Development on December 1, 2010 and in effect as of February 1, 2011, the parties to a housing tenancy shall go through the housing tenancy registration formalities with the competent construction (real estate) departments of the municipalities directly under the central government, cities and counties where the housing is located within 30 days after the housing tenancy contract is signed. Our PRC subsidiaries lease real properties from third parties primarily for their offices in China, and such lease agreements for these properties have not been registered with the PRC governmental authorities as required by PRC law. Although the failure to do so does not in and of itself invalidate the leases, the PRC subsidiaries may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance is not rectified within a given period of time, our PRC subsidiaries may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for each lease agreement that has not been registered with the relevant PRC governmental authorities.

Regulations Relating to Intellectual Property

China has adopted comprehensive legislation governing intellectual property rights, including copyrights, trademarks, patents and domain names. China is a signatory to the primary international conventions on intellectual property rights and has been a member of the Agreement on Trade Related Aspects of Intellectual Property Rights since its accession to the World Trade Organization in December 2001.

Copyright

On September 7, 1990, the SCNPC promulgated the Copyright Law of the People’s Republic of China, or the Copyright Law, effective on June 1, 1991 and amended on October 27, 2001 and February 26, 2010, respectively. The amended Copyright Law extends copyright protection to internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the Copyright Protection Center of China.

Under the Regulations on the Protection of the Right to Network Dissemination of Information that took effect on July 1, 2006 and was amended on January 30, 2013, it is further provided that an Internet information service provider may be held liable under various situations, including that if it knows or should reasonably have known a copyright infringement through the Internet and the service provider fails to take measures to remove or block or disconnect links to the relevant content, or, although not aware of the infringement, the Internet information service provider fails to take such measures upon receipt of the copyright holder’s notice of such infringement.

In order to further implement the Regulations on Computer Software Protection, promulgated by the State Council on December 20, 2001 and amended on January 8, 2011 and January 30, 2013, respectively, the National Copyright Administration issued the Measures for the Registration of Computer Software Copyright on February 20, 2002, which specify detailed procedures and requirements with respect to the registration of software copyrights.

Trademark

According to the Trademark Law of the People’s Republic of China promulgated by the SCNPC on August 23, 1982, and amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, respectively, the Trademark Office of the SAIC is responsible for the registration and administration of trademarks in China. The SAIC under the State Council has established a Trademark Review and Adjudication Board for resolving trademark disputes. Registered trademarks are valid for ten years from the date the registration is approved. A registrant may apply to renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed registrations are valid for ten years. On April 29, 2014, the State Council issued the revised the Implementing Regulations of the Trademark Law of the People’s Republic of China, which specified the requirements of applying for trademark registration and renewal.

Patent

According to the Patent Law of the People’s Republic of China, or the Patent Law, promulgated by the SCNPC on March 12, 1984, latest amended on October 17, 2020 and came into effect on June 1, 2021, and the Implementation Rules of the Patent Law of the People’s Republic of China, or the Implementation Rules of the Patent Law, promulgated by the State Council on June 15, 2001, as revised on December 28, 2002 and January 9, 2010, the patent administrative department under the State Council is responsible for the administration of patent-related work nationwide and the patent administration departments of provincial or autonomous regions or municipal governments are responsible for administering patents within their respective administrative areas. The Patent Law and Implementation Rules of the Patent Law provide for three types of patents, namely “inventions”, “utility models” and “designs”. Invention patents are valid for twenty years, utility model patents are valid for ten years, and design patents are valid for fifteen years, in each category measured from the date of application. The Chinese patent system adopts a “first come, first file” principle, which means that where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first. An invention or a utility model must possess novelty, inventiveness and practical applicability to be patentable. Consent or a proper license from the patent owner must be obtained by a non-patent holder to use patented material. Otherwise, the unauthorized use constitutes an infringement on the patent rights.

Domain Names

On August 24, 2017, the Ministry of Industry and Information Technology promulgated the Administrative Measures for Internet Domain Names, or the Domain Name Measures, which took effect on November 1, 2017. The Domain Name Measures regulate the registration of domain names, such as the China’s national top-level domain name “.CN”. The China Internet Network Information Center, or the CNNIC, issued the Implementation Rules for Country Code Top-Level Domain Name Registration, which sets forth detailed rules for registration of domain names, and Country Code Top-Level Dispute Resolutions Rules on June 18, 2019, pursuant to which domain name disputes shall be accepted and resolved by the dispute resolution service providers as accredited by the CNNIC.

Our business is dependent on a combination of trademarks, copy rights, domain names, trade names, trade secrets and other proprietary rights in order to protect our intellectual property rights. As of the date of this prospectus, we have two (2) registered trademarks, one (1) domain name and seven (7) copyrights in the PRC. We do not own any patents. Our PRC subsidiaries do not have any applications pending with the CNIPA.

As of the date of this prospectus, to the best of our knowledge, we have legally obtained adequate copyrights, trademarks and domains names to support our operations and, as our business develops, we may need to apply for or obtain more intellectual rights. To the best of our knowledge, neither we, nor any of our PRC subsidiaries have infringed, nor have we received any notice of infringement or been subject to any disputes regarding the intellectual property of others since our inception. See “Risk Factors — Risks Related to Our Business and Industry — If our PRC subsidiaries fail to maintain their reputation, including by adequately protecting their intellectual property, their sales and operating results may decline.” and “Risk Factors — Risks Related to Our Business and Industry — We and our PRC subsidiaries may from time to time be subject to litigation, which may be extremely costly to defend, could result in a substantial judgment or settlement costs or subject us to other remedies.”

Regulations Relating to Foreign Exchange

The principal regulations governing foreign currency exchange in China are the Administrative Regulations on Foreign Exchange of the People’s Republic of China, or the Foreign Exchange Administrative Regulation, which was promulgated by the State Council on January 29, 1996, which took effect on April 1, 1996 and was subsequently amended on January 14, 1997 and August 5, 2008 and the Administrative Regulations on Foreign Exchange Settlement, Sales and Payment which was promulgated by the People’s Bank of China, or the PBOC, on June 20, 1996 and took effect on July 1, 1996. Under these regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from State Foreign Exchange Administration of the People’s Republic of China, or the SAFE, by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items such as the repayment of foreign currency-denominated loans, direct investment overseas and investments in securities or derivative products outside of the PRC. Foreign-invested enterprises, or the FIEs, are permitted to convert their after-tax dividends into foreign exchange and to remit such foreign exchange out of their foreign exchange bank accounts in the PRC.

On March 30, 2015, SAFE promulgated the Notice on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or the SAFE Circular 19, which took effect on June 1, 2015. According to SAFE Circular 19, the foreign currency capital contribution to a FIE in its capital account may be converted into RMB on a discretional basis.

On June 9, 2016, the SAFE promulgated the Circular on Reforming and Regulating Policies on the Management of the Settlement of Foreign Exchange of Capital Accounts, or the SAFE Circular 16. The SAFE Circular 16 unifies the discretional foreign exchange settlement for all the domestic institutions. The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account which has been confirmed by the relevant policies subject to the discretional foreign exchange settlement (including foreign exchange capital, foreign loans and funds remitted from the proceeds from the overseas listing) can be settled at the banks based on the actual operational needs of the domestic institutions. The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital is temporarily determined as 100%. Violations of SAFE Circular 19 or SAFE Circular 16 could result in administrative penalties in accordance with the Foreign Exchange Administrative Regulation and relevant provisions.

Furthermore, SAFE Circular 16 stipulates that the use of foreign exchange incomes of capital accounts by FIEs shall follow the principles of authenticity and self-use within the business scope of the enterprises. The foreign exchange incomes of capital accounts and capital in RMB obtained by the FIE from foreign exchange settlement shall not be used for the following purposes: (i) directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities or financial schemes other than bank’s principal-secured products unless otherwise provided by relevant laws and regulations; (iii) used for granting loans to non-affiliated enterprises, unless otherwise permitted by its business scope; and (iv) used for the construction or purchase of real estate that is not for self-use (except for the real estate enterprises).

Regulations Relating to Offshore Special Purpose Companies Held by PRC Residents

SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents, or Circular 21, on May 10, 2013, which took effect on May 13, 2013 and was partially revised on December 30, 2019. Circular 21 specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

SAFE promulgated Notice on Issues Relating to Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE Circular 37, on July 4, 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and term of operation), capital increase or capital reduction, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 was issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purposes Vehicles.

SAFE further enacted the Notice of the State Administration of Foreign Exchange on Further Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment, or the SAFE Circular 13, which allows PRC residents or entities to register with qualified banks in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. However, remedial registration applications made by PRC residents that previously failed to comply with the SAFE Circular 37 continue to fall under the jurisdiction of the relevant local branch of SAFE. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfil the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary.

On January 26, 2017, SAFE issued the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange Control, or the SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.

Regulations Relating to Private Lending

The transfer of funds among companies are subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases, or the Provisions on Private Lending Cases, which was issued by the Supreme People’s Court of the People’s Republic of China, or the People’s Court, on August 25, 2015 and amended on August 19, 2020 and December 29, 2020, respectively, to regulate the private lending activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases do not apply to the disputes arising from relevant financial services such as loan disbursement by financial institutions and their branches established upon approval by the financial regulatory authorities to engage in lending business.

The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal or criminal activities; (v) the lending is in violations of public orders or good morals; or (vi) the lending is in violations of mandatory provisions of laws or administrative regulations.

In addition, the Provisions on Private Lending Cases set forth that the People's Court shall support the interest rates not exceeding four times of the market interest rate quoted for one-year loan at the time the private lending contracts were entered into.

Regulations Relating to Taxation

Income Tax

According to the Enterprise Income Tax Law of the People’s Republic of China, or the EIT Law, which was promulgated on March 16, 2007, took effect as from January 1, 2008 and amended on February 24, 2017 and December 29, 2018, an enterprise established outside the PRC with de facto management bodies within the PRC is considered as 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. The Implementing Rules of the Enterprise Income Law of the People’s Republic of China, or the Implementing Rules of the EIT Law, defines a de facto management body as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. Non-PRC resident enterprises without any branches in the PRC pay an enterprise income tax in connection with their income originating from the PRC at the tax rate of 10%.

On February 3, 2015, the PRC State Administration of Taxation, or the SAT, issued the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or the SAT Circular 7. The SAT Circular 7 repeals certain provisions in the Notice of the State Administration of Taxation on Strengthening the Administration of Enterprise Income Tax on Income from Equity Transfer by Non-Resident Enterprises, or the SAT Circular 698, issued by SAT on December 10, 2009 and the Announcement on Several Issues Relating to the Administration of Income Tax on Non-resident Enterprises issued by SAT on March 28, 2011 and clarifies certain provisions in the SAT Circular 698. The SAT Circular 7 provides comprehensive guidelines relating to, and heightening the Chinese tax authorities’ scrutiny on, indirect transfers by a non-resident enterprise of assets (including assets of organizations and premises in PRC, immovable property in the PRC, equity investments in PRC resident enterprises), or the PRC Taxable Assets. For instance, when a non-resident enterprise transfers equity interests in an overseas holding company that directly or indirectly holds certain PRC Taxable Assets and if the transfer is believed by the Chinese tax authorities to have no reasonable commercial purpose other than to evade enterprise income tax, the SAT Circular 7 allows the Chinese tax authorities to reclassify the indirect transfer of PRC Taxable Assets into a direct transfer and therefore impose a 10% rate of PRC enterprise income tax on the non-resident enterprise. The SAT Circular 7 lists several factors to be taken into consideration by tax authorities in determining if an indirect transfer has a reasonable commercial purpose. However, regardless of these factors, the overall arrangements in relation to an indirect transfer satisfying all the following criteria will be deemed to lack a reasonable commercial purpose: (i) 75% or more of the equity value of the intermediary enterprise being transferred is derived directly or indirectly from PRC Taxable Assets; (ii) at any time during the one year period before the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) is comprised directly or indirectly of investments in the PRC, or during the one year period before the indirect transfer, 90% or more of its income is derived directly or indirectly from the PRC; (iii) the functions performed and risks assumed by the intermediary enterprise and any of its subsidiaries and branches that directly or indirectly hold the PRC Taxable Assets are limited and are insufficient to prove their economic substance; and (iv) the foreign tax payable on the gain derived from the indirect transfer of the PRC Taxable Assets is lower than the potential PRC tax on the direct transfer of those assets. On the other hand, indirect transfers falling into the scope of the safe harbors under the SAT Circular 7 will not be subject to PRC tax under the SAT Circular 7. The safe harbors include qualified group restructurings, public market trades and exemptions under tax treaties or arrangements.

On October 17, 2017, SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Circular 37, which took effect on December 1, 2017. According to the SAT Circular 37, the balance after deducting the equity net value from the equity transfer income shall be the taxable income amount for equity transfer income. Equity transfer income shall mean the consideration collected by the equity transferor from the equity transfer, including various income in monetary form and non-monetary form. Equity net value shall mean the tax computation basis for obtaining the said equity. The tax computation basis for equity shall be: (i) the capital contribution costs actually paid by the equity transferor to a Chinese resident enterprise at the time of investment and equity participation, or (ii) the equity transfer costs actually paid at the time of acquisition of such equity to the original transferor of the said equity. Where there is reduction or appreciation of value during the equity holding period, and the gains or losses may be confirmed pursuant to the rules of the finance and tax authorities of the State Council, the equity net value shall be adjusted accordingly. When an enterprise computes equity transfer income, it shall not deduct the amount in the shareholders’ retained earnings such as undistributed profits etc. of the investee enterprise, which may be distributed in accordance with the said equity. In the event of partial transfer of equity under multiple investments or acquisitions, the enterprise shall determine the costs corresponding to the transferred equity in accordance with the transfer ratio, out of all costs of the equity.

Under the SAT Circular 7 and the Law of the People’s Republic of China on the Administration of Tax Collection promulgated by the SCNPC on September 4, 1992 and newly amended on April 24, 2015, in the case of an indirect transfer, entities or individuals obligated to pay the transfer price to the transferor shall act as withholding agents. If they fail to make withholding or withhold the full amount of tax payable, the transferor of equity shall declare and pay tax to the relevant tax authorities within seven days from the occurrence of tax payment obligation. Where the withholding agent does not make the withholding, and the transferor of the equity does not pay the tax payable amount, the tax authority may impose late payment interest on the transferor. In addition, the tax authority may also hold the withholding agents liable and impose a penalty of ranging from 50% to 300% of the unpaid tax on them. The penalty imposed on the withholding agents may be reduced or waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities in accordance with the SAT Circular 7.

According to our PRC counsel, the applicable EIT rate of our PRC subsidiaries is 25%. As of the date of this prospectus, we believe that we fully comply with the EIT Law in China, and we have not received any notifications of any non-compliance from the tax authorities.

Withholding Tax on Dividend Distribution

The EIT Law prescribes a standard withholding tax rate of 20% on dividends and other China-sourced income of non-PRC resident enterprises which have no establishment or place of business in the PRC, or if established, the relevant dividends or other China-sourced income are in fact not associated with such establishment or place of business in the PRC. However, the Implementing Rules of the EIT Law which reduced the rate from 20% to 10%, took effect from January 1, 2008. However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding companies, for example, pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income, or the Double Tax Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under the Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends that the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon receiving approval from the tax authority in charge.

Based on the Notice on Relevant Issues Relating to the Enforcement of Dividend Provisions in Tax Treaties issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, at their discretion, that a company benefits from such reduced income tax rate due to a structure or an arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment; and based on the Announcement of the State Administration of Taxation on Issues Concerning “Beneficial Owners” in Tax Treaties, which was promulgated on February 3, 2018 and came into effect on April 1, 2018. If the company’s activities do not constitute substantive business activities, it will be analyzed according to the actual situation of the specific case, which may not be conducive to the determination of its “beneficiary owner” capacity, and thus may not enjoy the concessions under the Double Tax Avoidance Arrangement.

Value-Added Tax

Pursuant to the Interim Regulations on Value-Added Tax of the People’s Republic of China, which was promulgated by the State Council on December 13, 1993 and amended on November 10, 2008, February 6, 2016 and November 19, 2017, and the Implementation Rules for the Interim Regulations on Value-Added Tax of the People’s Republic of China, which was promulgated by the MOF on December 25, 1993 and amended on December 15, 2008 and October 28, 2011, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement services or import of goods within the territory of the PRC shall pay value-added tax, or the VAT. Unless provided otherwise, the rate of VAT is 17% on sales and 6% on the services. On April 4, 2018, MOF and SAT jointly promulgated the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates, or the Circular 32, according to which (i) for VAT taxable sales acts or import of goods originally subject to VAT rates of 17% and 11% respectively, such tax rates shall be adjusted to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to tax rate of 11%, such tax rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purpose of production and sales or consigned processing of goods subject to tax rate of 16%, such tax shall be calculated at the tax rate of 12%; (iv) for exported goods originally subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v) for exported goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate shall be adjusted to 10%. Circular 32 took effect on May 1, 2018 and shall supersede existing provisions which are inconsistent with Circular 32.

Since January 1, 2012, the MOF and the SAT have implemented the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax, or the VAT Pilot Plan, which imposes VAT in lieu of business tax for certain “modern service industries” in certain regions and eventually expanded to nation-wide application in 2013. According to the Implementation Rules for the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax released by the MOF and the SAT on the VAT Pilot Program, the “modern service industries” include research, development and technology services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestation and consulting services. The Notice on Comprehensively Promoting the Pilot Plan of the Conversion of Business Tax to Value-Added Tax, which was promulgated on March 23, 2016, took effect on May 1, 2016 and amended on July 11, 2017, sets out that VAT in lieu of business tax be collected in all regions and industries.

On March 20, 2019, MOF, SAT and GAC jointly promulgated the Announcement on Relevant Policies for Deepening Value-Added Tax Reform, which took effect on April 1, 2019 and provides that (i) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16% and 10% respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (ii) with respect to purchase of agricultural products originally subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (iii) with respect to purchase of agricultural products for the purpose of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate of 10%; (iv) with respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund rate shall be adjusted to 13%; and (v) with respect to export of goods and cross-border taxable acts originally subject to tax rate of 10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.

According to our PRC counsel, the applicable VAT rate of our PRC subsidiaries are 6% for our outsourced medical equipment maintenance service and 13% for our sales of medical devices. As of the date of this prospectus, we have not received any notifications of any non-compliance from the tax authorities.

Regulations Relating to Employment

The Labor Contract Law of the People’s Republic of China, or the Labor Contract Law, and its implementation rules provide requirements concerning employment contracts between an employer and its employees. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. The Labor Contract Law and its implementation rules also require compensation to be paid upon certain terminations. In addition, if an employer intends to enforce a non-compete provision in an employment contract or non-competition agreement with an employee, it has to compensate the employee on a monthly basis during the term of the restriction period after the termination or expiry of the labor contract. Employers in most cases are also required to provide severance payment to their employees after their employment relationships are terminated.

Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located. According to the Social Insurance Law and Interim Regulation on the Collection and Payment of Social Insurance Premiums, an employer that fails to make social insurance contributions may be ordered to rectify the non-compliance and pay the required contributions within a stipulated deadline and relevant management in charge or other directly responsible personnel may be fined from RMB1,000 to RMB10,000 for the non-compliance. According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline; if the enterprise fails to rectify the non-compliance with the stipulated deadline, it be may be subject to a fine ranging from RMB10,000 or RMB50,000 and an application may be made to a local court for compulsory enforcement.

According to our PRC legal counsel, the PRC subsidiaries have signed labor contracts with all of their employees. However, our PRC subsidiaries did not pay social insurance contributions and housing provident fund contributions in full for all of the employees. As of the date of this prospectus, no administrative actions, fines or penalties have been imposed by the relevant PRC government authorities with respect to such non-compliance, nor has any order been received by our PRC subsidiaries to settle the outstanding amount of social insurance contributions and housing provident fund contributions.

On December 28, 2012, the Labor Contract Law was amended to impose more stringent requirements on labor dispatch which took effect on July 1, 2013. Pursuant to the amended Labor Contract Law, the outsourced contract workers shall be entitled to equal pay for equal work as a fulltime employee of an employer, and they shall only be engaged to perform temporary, ancillary or substitute works, and an employer shall strictly control the number of outsourced contract workers so that they do not exceed certain percentage of total number of employees. “Temporary work” means a position with a term of less than six months; “auxiliary work” means a non-core business position that provides services for the core business of the employer; and “substitute worker” means a position that can be temporarily replaced with an outsourced contract worker for the period that a regular employee is away from work for vacation, study or for other reasons. According to the Interim Provisions on Labor Dispatch, promulgated by the Ministry of Human Resources and Social Security on January 24, 2014, which took effect on March 1, 2014, outsourced workers are entitled to equal pay with full-time employees for equal work. Employers are allowed to use outsourced workers for temporary, auxiliary or substitutive positions, and the number of outsourced workers may not exceed 10% of the total number of employees. Any labor dispatching entity or employer in violation of the Labor Dispatch Provisions shall be ordered by the labor administrative authorities to rectify the noncompliance within a prescribed time limit; and if such entity or employer fails to do so within the prescribed time limit, it may be subject to a fine from RMB5,000 to RMB10,000 for each noncompliance outsourced worker, and the labor dispatching entity is subject to revocation of its license for engaging in the labor dispatch business. Where the employer causes any damage to the outsourced worker, the labor dispatch entity and the employer shall assume joint and several liabilities.

Pursuant to the PRC Civil Code, which was promulgated by the National People’s Congress on May 28, 2020 and took effect on January 1, 2021, employers shall bear tortious liability for any injury or damage caused to other people by their employees in the course of their work. Parties that use outsourced labor shall bear tortious liability for any injury or damage caused to other people by outsourced personnel during the course of their work during the labor dispatch period; the labor dispatching party shall bear corresponding supplementary liability where it is at fault.

Regulations Relating to Ownership of Companies Limited by Shares

Pursuant to the Company Law of the PRC, directors, supervisors and senior management members of a company limited by shares are required to report their shareholding in the company and changes in such shareholding to the company; and shall not transfer more than 25% of their shareholding in the company during their term of service or transfer their shares within one year from the date on which the shares of the company are listed on a stock exchange. The directors, supervisors and senior management members are also prohibited from transferring their shares of the company within half a year after termination of their services.

Regulations Relating to Overseas Listing and M&A

On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, which took effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules, among other things, require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC domestic enterprises or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC. Although the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to the M&A Rules, the interpretation and application of the regulations remain unclear, and this offering may ultimately require approval from the CSRC. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.

The M&A Rules, and other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. According to our PRC legal counsel, as of the date of this prospectus, we have not received any notifications of any non-compliance of the M&A Rules.

In addition, according to the Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the State Council on February 3, 2011 and which took effect 30 days thereafter, the Rules on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the MOFCOM on August 25, 2011 and which took effect on September 1, 2011, mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the regulations prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement.

On July 6, 2021, the State Council and General Office of the CPC Central Committee issued the Illegal Securities Opinions. The Illegal Securities Opinions emphasized the need to strengthen the 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 address the risks and incidents faced by China-based overseas-listed companies. See “Risk Factors —Risks Relating to Doing Business in China — Any requirement to obtain prior approval under the M&A Rules and/or any other regulations promulgated by relevant PRC regulatory agencies in the future could delay this offering and failure to obtain any such approvals, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ordinary shares, and could also create uncertainties for this offering and affect our ability to offer or continue to offer securities to investors outside China.”

On December 24, 2021, the CSRC released the Draft Rules Regarding Overseas Listing, which had a comment period that expired on January 23, 2022. The Draft Rules Regarding Overseas Listing provide the filing regulation arrangements for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas markets.

The Draft Rules Regarding Overseas Listing stipulate that the Chinese-based companies, or the issuer, shall fulfill the filing procedures within three business days after the issuer makes an application for initial public offering and listing in an overseas market. The required filing materials for an initial public offering and listing shall include but are not limited to, record-filing report and related undertakings; regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable); PRC legal opinion; and prospectus. In addition, an overseas offering and listing is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute a threat to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) if there are material ownership disputes over the equity, major assets, and core technology, etc. of the issuer; (4) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in past three years, directors, supervisors, or senior executives have been subject to administrative punishments for severe violations, or are currently under judicial investigation for suspected criminal offenses, or are under investigation for suspected major violations; and (6) other circumstances as prescribed by the State Council. The Draft Administration Provisions defines the legal liabilities of breaches such as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and in cases of severe violations, a parallel order to suspend relevant business or halt operation for rectification, revoke relevant business permits or operational license.

MANAGEMENT

Directors, Director Nominees and Executive Officers

The following table sets forth information regarding our executive officers, directors and director nominees as of the date of this prospectus. Unless otherwise stated, the business address for our directors and executive officers is that of our principal executive offices at Xinya Building 909, 910, and 911, 121 Dongjie Road, Gulou District, Fuzhou, Fujian Province, China 350001.

Zhenyu Zheng, has served as our director since inception, our chairman of the board of directors and Chief Executive Officer since May 30, 2022 and the general manager of Fuzhou Yukai since September 2005. Relying on his medical background, Mr. Zheng has extensive experience in the medical equipment industry. Mr. Zheng founded Fuzhou Yukai in 2005. Under Mr. Zheng’s leadership, Fuzhou Yukai has grown to be a leading provider of medical equipment outsourcing in Fujian province. Mr. Zheng started his career working as a doctor from July 1999 to April 2000 at Fujian Medical University Affiliated Union Hospital. From May 2000 to May 2002, Mr. Zheng worked for Fujian Minwei Medical Equipment Company. Mr. Zheng also has served as the executive vice president of Fujian Medical Equipment Chamber of Commerce since October 2020 and was a vice president from October 2014 to September 2020. Mr. Zheng received his Bachelor’s degree in medicine from Fujian Medical University in July 1999.

Liping Ni, has served as our director and Chief Financial Officer since May 30, 2022, and the chief financial officer of Fuzhou Yukai since December 2010. Ms. Ni has extensive experience of more than twenty years in financial accounting, financial reporting and audit. Since December 2010, Ms. Ni has served as the chief financial officer of Fuzhou Yukai. From July 2008 to December 2010, Ms. Ni served as the financial manager of Fuzhou Wangbo Telecommunications Co., Ltd. From July 2001 to July 2008, Ms. Ni served as a financial manager of Fuzhou Huifeng Lighting Co., Ltd. Ms. Ni received her vocational degree in financial accounting and audit from Wuyi College (previous name: Nanping Teacher’s College) in June 2001.

Shenghao Zeng, will serve as our director upon effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Mr. Zeng has extensive experience of more than twenty years in the legal area. Mr. Zeng has worked at Fujian Minrong Law Firm since April 2006 and has served as a director at FMM Brothers Pty. Ltd., an Australian company, since June 2022. From November 1998 to May 2003, Mr. Zeng worked at Fujian Minrong Law Firm. Mr. Zeng received his Bachelor’s degree in Economics from Xiamen University in 1991.In 2005, Mr. Zeng received his MBA degree in accounting from the University of Technology Sydney, Australia.

George Xu, will serve as our director upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. Mr. Xu has over 25 year of experience in the accounting and financial industry in the U.S. Mr. Xu started his public accounting practice in 1994 and has served as the principal officer of George Xu, C.P.A., P.C. since 2016. Mr. Xu leads a team of ten professionals providing services in taxation, accounting, auditing, financial planning, and business consulting for various U.S. and international individuals and companies. Mr. Xu earned a Bachelor's degree in 1986 from Shanghai University of Engineering Science and a Master's degree in taxation from the State University of New York at Albany in 1991. Mr. Xu is a board-certified public accountant licensed in the State of New York.

Yuan Yuan, will serve as our director upon effectiveness of our registration statement on Form F-1, of which this prospectus is a part. From August 2002 to October 2007, Ms. Yuan served as a staff accountant of Department of Interior Bureau of Land Management of the federal government. From September 2001 to July 2002, Ms. Yuan served as an auditor of PricewaterhouseCoopers. From June 2000 to May 2001, Ms. Yuan served as a staff finance accountant of Quest Company. Ms. Yuan received her Bachelor’s degree in accounting and finance from the University of Colorado Denver in May 2001.

Board of Directors and Committees

Upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part, our board of directors will consist of five directors, including two executive directors and three independent directors. We will also establish an Audit Committee, a Nominating and Corporate Governance Committee and a Compensation Committee upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part. We will adopt a charter for each of the three committees. Each of the committees of our board of directors shall have the composition and responsibilities described below.

Audit Committee

Shenghao Zeng and Yuan Yuan will serve as members of our Audit Committee with George Xu serving as the chairman of the Audit Committee. Each of our Audit Committee members will satisfy the “independence” requirements of the Nasdaq listing rules and meet the independence standards under Rule 10A-3 under the Exchange Act. Our board of directors have determined that George Xu possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC. Our Audit Committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our Audit Committee will perform several functions, including:

Compensation Committee

Shenghao Zeng and George Xu will serve as members of our Compensation Committee with Yuan Yuan serving as the chairman of the Compensation Committee. All of our Compensation Committee members satisfy the “independence” requirements of the Nasdaq listing rules. Our Compensation Committee will be responsible for overseeing and making recommendations to our board of our directors regarding the salaries and other compensation of our executive officers and general employees and providing assistance and recommendations with respect to our compensation policies and practices.

Nominating and Corporate Governance Committee

Yuan Yuan and George Xu will serve as members of our Nominating and Corporate Governance Committee, with Shenghao Zeng serving as the chairman of the Nominating and Corporate Governance Committee. All of our Nominating and Corporate Governance Committee members will satisfy the “independence” requirements of the Nasdaq listing rules. Our Nominating and Corporate Governance Committee will be responsible for identifying and proposing new potential director nominees to the board of directors for consideration and reviewing our corporate governance policies.

Code of Ethics

Effective upon consummation of this offering, we will adopt a code of ethics that applies to all of our executive officers, directors and employees in accordance with the rules of the Nasdaq and the SEC. The code of ethics codifies the business and ethical principles that govern all aspects of our business. We will file a copy of our Code of Ethics as an exhibit to the registration statement of which this prospectus is a part. You will be able to review these documents by accessing our public filings at the SEC’s website at www.sec.gov.

Family Relationships

There are no family relationships, or other arrangements or understandings between or among any of the directors, director nominees, executive officers or other person pursuant to which such person was selected to serve as a director or officer

Duties of Directors

Under Cayman Islands law, directors and officers owe the following fiduciary duties:

In addition to the above, directors also owe a duty of care which is not fiduciary in nature. This duty has been defined as a requirement to act as a reasonably diligent person having both the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company and the general knowledge skill and experience which that director has.

As set out above, directors have a duty not to put themselves in a position of conflict and this includes a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the shareholders provided that there is full disclosure by the directors. This can be done by way of permission granted in the memorandum and articles of association or alternatively by shareholder approval at general meetings.

Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. In addition, conflicts of interest may arise when our board of directors evaluates a particular business opportunity with respect to the above-listed criteria. We cannot assure you that any of the afore-mentioned conflicts will be resolved in our favor. Furthermore, each of our officers and directors has pre-existing fiduciary obligations to other businesses of which they are officers or directors.

Our company has the right to seek damages if a duty owed by our directors is breached. A shareholder may in certain limited exceptional circumstances have the right to seek damages in our name if a duty owed by our directors is breached. You should refer to “Description of Share Capital — Comparison of Cayman Islands Corporate Law and U.S. Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law.

Terms of Directors and Officers

Our officers are appointed by and serve at the discretion of our board of directors and the shareholders voting by ordinary resolution. Our directors are not subject to a set term of office and hold office until the next general meeting called for the appointment of directors and until their successor is duly appointed or such time as they die, resign or are removed from office by a shareholders’ ordinary resolution. The office of a director will be vacated automatically if, among other things, the directors resigns in writing, becomes bankrupt or makes any arrangement or composition with his/her creditors generally or is found to be or becomes of unsound mind.

Employment Agreements

We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for an initial term of three years and is subject to successive, automatic three-years extensions unless either party gives notice of non-extension to the other party at least 30 days prior to the end of the applicable term.

The executive officers are entitled to a fixed salary and to participate in our equity incentive plans, if any, and other company benefits, each as determined by the board of directors from time to time.

We may terminate the executive officer’s employment for cause, at any time, without notice or remuneration, for certain acts, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and his/her right to all other benefits will terminate, except as required by any applicable law. We may also terminate the executive officer’s employment without cause immediately and without prior written notice upon the removal of the executive officer pursuant to the exercise of any power contained in the memorandum and articles of association of the Company or upon 30 days’ advance written notice. In such case of termination by us, we are required to provide the following severance payments and benefits to the executive officer: a payment of one month of base salary as of the date of such termination.

The executive officer may terminate his or her employment at any time with 30 days’ advance written notice if there is any significant change in his or her duties and responsibilities or a material reduction in his or annual salary.

During the year ended December 31, 2021, we paid an aggregate of RMB83,150 (US$12,897) to our executive officers and directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.

PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of this prospectus by our officers, directors, director nominees and 5% or greater beneficial owners of ordinary shares.

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all shares shown as beneficially owned by him, subject to applicable community property laws.

As of the date of this prospectus, we had no ordinary shares outstanding that were held by record holders in the United States. Other than disclosed above, none of our shareholders has informed us that it is affiliated with a registered broker-dealer or is in the business of underwriting securities. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

RELATED PARTY TRANSACTIONS

Before the completion of this offering, we intend to adopt an audit committee charter, which will require the committee to review all related-party transactions on an ongoing basis and all such transactions be approved by the committee.

Set forth below are the related party transactions of our company that occurred during the past three fiscal years up to the date of this prospectus.

Mr. Zhenyu Zheng, our Chief Executive Officer, chairman of the board of directors and shareholder, made unsecured, interest-free and due-on-demand loans to us for working capital purposes during the fiscal years ended December 31, 2021, 2020 and, 2019, and Fuzhou Yukai made repayments to Mr. Zhenyu Zheng periodically. During the fiscal years ended December 31, 2021, 2020, and 2019, we borrowed an aggregate of $913,552, $437,330, and $207,850 from Mr. Zheng, respectively. During the fiscal years ended December 31, 2021, 2020, and 2019, we repaid an aggregate of $2,541,757, $ 654,468, and $1,568,200 to Mr. Zheng, respectively. As of December 31, 2021, 2020, and 2019, we had outstanding loans of $256,067, $1,859,067, and $1,953,384, after considering the exchange rate fluctuation of $25,205, $122,821 and $ (38,347), respectively, payable to Mr. Zheng. As of May 31, 2022, we had an outstanding loan of $572 payable to Mr. Zheng.

During the fiscal year ended December 31, 2021, Fuzhou Yukai provided an unsecured, interest-free and due-on-demand advance of $21,513 to Yukai Medical, a former shareholder of Fuzhou Yukai before the reorganization, and Fuzhou Yukai received repayment of $776 from Yukai Medical. As of December 31, 2021, Fuzhou Yukai had outstanding amounts of $20,970 due from Yukai Medical after considering the exchange rate fluctuation of $233. During the fiscal years ended December 31, 2020, Fuzhou Yukai obtained an unsecured, interest-free and due-on-demand loan of $446,759 from Yukai Medical for daily operation purposes and made repayment of $446,759 to Yukai Medical. As of December 31, 2020, Fuzhou Yukai had no outstanding amount due to Yukai Medical. During the fiscal year ended December 31, 2019, Fuzhou Yukai did not provide loans to or obtain loans from Yukai Medical and had no outstanding amount due to or due from Yukai Medical as of year ended December 31, 2019.

During the fiscal year ended December 31, 2021, Fuzhou Yukai provided an unsecured, interest-free and due-on-demand advance of $23,079 to Yukai Medical Equipment Co., Ltd, a company subject to common control or significant influence with Fujian Yukai before the reorganization (“Yukai Medical Equipment”). During the fiscal years ended December 31, 2020, and 2019, Fuzhou Yukai did not enter into any current transactions with Yukai Medical Equipment. As of December 31, 2021, 2020 and 2019, Fuzhou Yukai had outstanding amounts of $23,339, $0 and $0 due from Yukai Medical Equipment after considering the exchange rate fluctuation of $260, $0 and $0, respectively.

During the fiscal years ended December 31, 2021 and 2020, Fuzhou Yukai provided unsecured, interest-free and due-on-demand advances of $103,003 and $ 41,920 to Fujian Yukai Medical Equipment Co., Ltd., a company subject to common control or significant influence with Fuzhou Yukai before the reorganization (“Fujian Yukai Medical Equipment”), respectively. During the fiscal years ended December 31, 2021 and 2020, Fuzhou Yukai received repayment of $145,781 and $1,915 from Fujian Yukai Medical Equipment. As of the years ended December 31, 2021 and 2020 Fuzhou Yukai had $0 and $42,269 outstanding amounts due from Fujian Yukai Medical Equipment, after considering the exchange rate fluctuation of $509 and $2,264, respectively. During the fiscal years ended December 31, 2021, Fuzhou Yukai borrowed an unsecured, interest-free and due-on-demand advance of $98,893 from Fujian Yukai Medical Equipment for daily operation purpose. As of December 31, 2021, Fuzhou Yukai had outstanding amounts of $100,005, due to Fujian Yukai Medical Equipment after considering the exchange rate fluctuation of $1,112. As of December 31, 2019, Fuzhou Yukai had no outstanding amounts due from or to Fujian Yukai Medical Equipment.

As of the fiscal year ended December 31, 2019, Fuzhou Yukai had $47,305 due from Fujian Yukai Medical Investment Management Co., Ltd., a company subject to common control or significant influence with Fujian Yukai before the reorganization (“Fujian Yukai Medical Investment”). During the fiscal year ended December 31, 2020, Fuzhou Yukai provided an unsecured, interest-free and due-on-demand advance of $42,649 to Fujian Yukai Medical Investment and received repayment of $90,517 from Fujian Yukai Medical Investment. As of December 31, 2020, Fuzhou Yukai had no outstanding amounts due from Fujian Yukai Medical Investment after considering the exchange rate fluctuation of $563. During the fiscal year ended December 31, 2021, Fujian Yukai did not enter into any current transactions with Fujian Yukai Medical Investment and as of December 31, 2021, Fujian Yukai had no outstanding amounts due from Fujian Yukai Medical Investment.

Share Issuances

See “Description of Share Capital—History of Share Issuances.”

Employment Agreements

See “Management — Employment Agreements.”

DESCRIPTION OF SHARE CAPITAL

We are a Cayman Islands exempted company and our affairs are governed by our amended and restated memorandum and articles of association and the Companies Act (Revised) of the Cayman Islands, which we refer to as the Companies Act below.

We intend to adopt an amended and restated memorandum and articles of association (which we refer to as the Articles below) immediately prior to the completion of this offering and will replace our current memorandum and articles of association in its entirety.

Upon adoption of the Articles, our authorized share capital consists of 100,000,000 ordinary shares, par value $0.0005 per share. As of the date of this prospectus, 12,000,000 ordinary shares were issued and outstanding.

We were incorporated as an exempted company with limited liability under the Companies Act on October 19, 2021. A Cayman Islands exempted company:

The following are summaries of material provisions of our proposed post-offering memorandum and articles of association and the Companies Act insofar as they relate to the material terms of our ordinary shares that we expect will become effective upon the completion of this offering.

Ordinary Shares

Dividends. Subject to the provisions of the Companies Act and any rights attaching to any class or classes of shares under and in accordance with the Articles:

Subject to the requirements of the Companies Act regarding the application of a company’s share premium account and with the sanction of an ordinary resolution, dividends may also be declared and paid out of any share premium account. The directors when paying dividends to shareholders may make such payment either in cash or in specie.

Unless provided by the rights attached to a share, no dividend shall bear interest.

Voting Rights. Holders of our ordinary shares vote as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. On a show of hands, every shareholder shall have one vote. On a poll a shareholder shall have one vote for each share he holds, unless any share carries special voting rights. A resolution put to the vote of the meeting shall be decided on a show of hands unless before, or on, the declaration of the result of the show of hands, a poll is duly demanded.

An ordinary resolution requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the company; and a special resolution requires the affirmative vote of a majority of at least two-thirds of the shareholders who attend and vote at a general meeting of the company. Actions that may be taken at a general meeting also may be taken by a resolution in writing by simple majority of the shareholders in writing entitled to vote in respect of an ordinary resolution, or a unanimous resolution of all the shareholders in writing in respect of a special resolution.

Under Cayman Islands law, some matters, such as amending the memorandum and articles of association or changing the name, require the approval of shareholders by a special resolution.

There are no limitations on non-residents or foreign shareholders to hold or exercise voting rights on the ordinary shares imposed by foreign law or by the charter or other constituent documents of our company. However, no person will be entitled to vote at any general meeting or at any separate meeting of the holders of the ordinary shares unless the person is registered as of the record date for such meeting and unless all calls or other sums presently payable by the person in respect of our ordinary shares have been paid.

Winding Up; Liquidation. Upon the winding up of our company, after the full amount that holders of any issued shares ranking senior to the ordinary shares as to distribution on liquidation or winding up are entitled to receive has been paid or set aside for payment, the holders of our ordinary shares are entitled to receive any remaining assets of our company available for distribution as determined by the liquidator. The assets received by the holders of our ordinary shares in a liquidation may consist in whole or in part of a property, which is not required to be of the same kind for all shareholders.

Calls on Ordinary Shares and Forfeiture of Ordinary Shares. Subject to the terms of allotment, our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time and place of payment. Any ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption of Ordinary Shares. We may issue shares that are, or at our option or at the option of the holders are, subject to redemption on such terms and in such manner as our directors may, before the issue of the shares, determine. Under the Companies Act, shares of a Cayman Islands company may be redeemed or repurchased out of profits of the company, out of the share premium account, out of the proceeds of a fresh issue of shares made for that purpose or out of capital, provided the memorandum and articles of association authorize this and, immediately following the date on which the payment out of capital is proposed to be made, it has the ability to pay its debts as they come due in the ordinary course of business.

No Preemptive Rights. Holders of ordinary shares will have no preemptive or preferential right to purchase any securities of our company.

Variation of Rights Attaching to Shares. If at any time the share capital is divided into different classes of shares, the rights attaching to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the memorandum and articles of association, be varied or abrogated with the consent in writing of the holders of not less than two-thirds of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Anti-Takeover Provisions. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders to the extent authorized but unissued.

Special Considerations for Exempted Companies. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except for the exemptions and privileges listed below:

“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).

Preference Shares

The board of directors is empowered to designate and issue from time to time to the extent authorized but unissued one or more classes or series of preference shares and to fix and determine the relative rights, preferences, designations, qualifications, privileges, options, conversion rights, limitations and other special or relative rights of each such class or series so authorized. Such action could adversely affect the voting power and other rights of the holders of our ordinary shares or could have the effect of discouraging any attempt by a person or group to obtain control of us.

Comparison of Cayman Islands Corporate Law and U.S. Corporate Law

Cayman Islands companies are governed by the Companies Act. The Companies Act is modeled on English Law but does not follow recent English Law statutory enactments, and differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the material differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.

Mergers and Similar Arrangements

The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation’’ means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.

In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of the shareholders of each constituent company, and such other authorization, if any, as may be specified in such constituent company’s articles of association. A merger between a Cayman Islands parent company and its Cayman Islands subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman Islands subsidiary if a copy of the plan of merger is given to every member of that Cayman Islands subsidiary to be merged unless that member agrees otherwise. For this purpose, a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.

The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by a Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement in question is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting or meetings convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder would have the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

Squeeze-out Provisions

When a takeover offer is made and accepted by holders of 90% of the shares within four months of the offer, the offeror may, within a two-month period, give notice to require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection may be made to the Grand Court of the Cayman Islands by a dissenting shareholder within one month from the date on which the notice was given but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.