Akso Health Group — FY2022 Form 20-F
Reporting period: Fiscal year ended March 31, 2022; the filing is an annual report, not a standalone 2021 Q4 report. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars. The company, formerly Xiaobai Maimai Inc., changed its name to Akso Health Group in December 2021.
Business context
The company is a Cayman Islands holding company with operations in China conducted partly through variable interest entities (VIEs), alongside U.S. subsidiaries. It has exited its P2P lending business and stopped issuing new microlending loans in 2019. Its newer activities include China social e-commerce, U.S. sales of iHealth COVID-19 antigen tests, and plans to develop U.S. cancer therapy and radiation oncology services.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net revenue | $6.31 million | $1.75 million |
| Gross profit / margin | $0.92 million / 14.5% | $1.75 million / 100%* |
| Net loss | $16.85 million | $34.83 million |
| Operating cash flow | $(8.63) million | $10.06 million |
| Cash and cash equivalents at year-end | $21.93 million | $15.13 million |
| Current assets / current liabilities | $50.62 million / $38.39 million | $30.12 million / $14.41 million |
| Related-party amounts due | $37.20 million | $2.97 million |
| Note payable | — | $10.00 million |
*FY2021 had no cost of goods sold reported. FY2022 sales of medical devices contributed $6.00 million, or 95.1% of revenue; the company reported $5.39 million in cost of goods sold for this business. Social e-commerce commissions were $96,332, and legacy microlending interest income was $215,393.
The net loss narrowed by about 52%, mainly as operating expenses fell and there were no FY2022 discontinued-operation losses. General and administrative expense was $15.00 million, including a $10.38 million allowance for uncollectible loans. The full $46.12 million gross loan balance was reserved, leaving no net loans receivable at year-end. Cash flow from investing activities was a use of $19.96 million, principally reflecting a $20.00 million loan to four individuals; financing activities provided $34.78 million, including related-party funding and private-placement proceeds. The $10.00 million senior note was repaid in October 2021.
Changes, outlook, and material risks
- Revenue rose 260% year over year, primarily because COVID-19 test-kit sales began in February 2022; this newly launched business had one customer representing 95.1% of revenue and one supplier representing all medical-device purchases.
- The company reported $7.80 million of test-kit inventory at year-end. In July 2022, four individuals returned the $20.00 million principal advanced to them, plus $0.30 million interest.
- At March 31, 2022, the company owed related parties $37.20 million, including a $35.20 million loan from SOS Information Technology New York, Inc. and a $2.00 million zero-interest loan from Webao Limited. In July 2022, it repaid $27.51 million of SOS principal and accrued interest; the remaining balance is not clearly stated in the filing.
- The auditor highlighted substantial doubt about the company’s ability to continue as a going concern, citing losses, planned investment in a new healthcare business, and COVID-related uncertainty. Management said available resources should cover the next 12 months, but the financial statements contain no adjustments for a possible failure to continue as a going concern.
- The company planned to pursue 100 radiation oncology centers and two vaccine research centers in the U.S.; these are plans, not assured results. A planned $12.7 million equipment purchase was terminated in February 2022 and the prepayment was refunded. No quantified earnings or revenue guidance is provided.
- Key exposures include execution and regulatory risks in new healthcare and test-kit businesses; customer and supplier concentration; PRC VIE enforceability, data-protection and overseas-listing rules; currency controls; and the ability to collect legacy loans and other receivables. The company disclosed a $4.6 million allowance against a vendor receivable and legal proceedings initiated in June 2022.
- The audit opinion was unqualified, but included going-concern and related-party transaction emphasis paragraphs. Management stated internal control over financial reporting was effective; the auditor did not attest to internal-control effectiveness.
Most important facts for investors to verify
- Reconcile the cash-flow disclosures: the audited statement reports $8.63 million of cash used in operations and $19.96 million used in investing, while parts of the narrative describe these cash flows inconsistently.
- Confirm the post-July 2022 related-party debt balance, repayment terms, and any subsequent changes in liquidity.
- Assess recoverability of the $7.80 million test-kit inventory and the company’s ability to diversify its highly concentrated customer and supplier base.
- Review the status and terms of the four-individual advances, their repayment, and the separate vendor receivable/legal dispute.
- Evaluate the going-concern warning against actual cash needs, operating cash burn, and the funding required for planned healthcare expansion.