RDGT

Business Context and Reporting Period

Ridgetech, Inc. (RDGT), formerly China Jo-Jo Drugstores, Inc., is a Cayman Islands holding company conducting pharmaceutical wholesale operations in the People's Republic of China (PRC). The filing covers the fiscal year ended March 31, 2025.

During the period, the Company executed a strategic restructuring:

• Divestiture: Sold its retail pharmacy business (Jiuxin Investment and related VIEs) to former management, classifying these operations as discontinued.
• Acquisition: Acquired Ridgeline International Limited (parent of Allright), a B2B online and offline wholesale distributor, via a stock exchange.
• Rebranding: Changed its name to Ridgetech, Inc. and trading symbol to RDGT.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 3.2% to $119.97 million. Offline wholesale revenue dropped 4.3% due to the abandonment of low-margin sales to maintain profitability. Online platform revenue increased to $1.11 million, driven by the acquisition of Allright.
• Profitability Shift: While continuing operations incurred a net loss of $1.45 million, the Company reported a total net income of $10.20 million, primarily due to a $15.76 million gain on the divestiture of the retail business.
• Customer Concentration: Following the divestiture, sales to the former retail entity (Jiuzhou Pharmacy) are now treated as third-party sales. Two customers accounted for 67.1% and 18.7% of total sales in 2025, compared to 61.7% and 24.9% in 2024.
• Liquidity Improvement: Working capital improved significantly from a deficit of $4.68 million in 2024 to a surplus of $25.35 million in 2025, supported by cash inflows from financing activities and the divestiture.

Guidance, Outlook, Risks, and Contingencies

Outlook and Strategy: Management intends to focus exclusively on wholesale distribution (offline and online). The Company relies on a three-year supply agreement with the divested retail entity (Jiuzhou Pharmacy) to maintain a significant revenue stream, though this relationship is subject to termination rights.

Material Risks:

• Customer Concentration: Over 60% of revenue is derived from a single customer (Jiuzhou Pharmacy). Loss of this relationship would materially impact operations.
• Regulatory Environment: Operations are subject to PRC regulations, including data security laws, foreign exchange controls, and potential restrictions on overseas listings (HFCAA).
• Internal Controls: Management concluded that disclosure controls and internal controls over financial reporting were ineffective as of March 31, 2025, due to material weaknesses in accounting personnel experience and reconciliation processes.
• Going Concern: While the Company believes it has sufficient resources for the next 12 months, its ability to continue depends on aligning funding sources with expenditure requirements and repaying short-term debt.

Investor Verification Checklist

• Verify the terms and termination clauses of the three-year supply agreement with Jiuzhou Pharmacy, given it represents the majority of revenue.
• Assess the remediation plan for the identified material weaknesses in internal controls over financial reporting.
• Review the collectability of the $13.6 million in accounts receivable due from the divested retail entities.
• Monitor compliance with Nasdaq listing requirements, specifically the minimum bid price rule, following the recent reverse stock split.
• Confirm the status of the PCAOB inspection of the Company's auditor (YCM CPA Inc.) to ensure continued listing eligibility under the HFCAA.