Ridgetech Inc.

Ridgetech Inc. operates in the pharmaceutical distribution industry in China, which is highly competitive and expected to intensify further. The industry is subject to rapidly changing customer preferences, pricing volatility, and the continued penetration of counterfeit products. The company's primary wholesale competitors include regional and national players, some of which enjoy greater financial resources, larger economies of scale, stronger brand recognition, and larger sales and distribution networks. The pharmaceutical wholesale market is also subject to complex and evolving Chinese regulations governing drug distribution, online sales, data security, and foreign ownership.

The company's primary wholesale competitors include regional and national players in China. Competitive advantages held by larger competitors include greater financial and other resources, larger variety of products, stronger relations with large pharmaceutical manufacturers, greater pricing flexibility, larger economies of scale and purchasing power, more extensive advertising and marketing efforts, greater knowledge of local market conditions, stronger brand recognition, and larger sales and distribution networks. The company faces significant competition and expects it to intensify.

Ridgetech generates revenue through the wholesale distribution of pharmaceutical products, operating two segments: offline wholesale distribution and online platform sales. The online platform segment distributes pharmaceutical and healthcare products across China through third-party e-commerce platforms and its own online platform. The company relies heavily on third-party electronic platforms for its online sales. Following the divestiture of its retail pharmacy business, the company is no longer engaged in any retail pharmacy business and derives its wholesale revenue from sales to outside customers, with a significant portion coming from a three-year supply agreement with the divested retail entity.

For the fiscal year ended March 31, 2026, revenue from the offline wholesale business was approximately $117.87 million ¹, representing a decrease of $0.99 million ², or 0.8% ³, compared to the prior year. The decline was attributed to the discontinuation of credit sales to certain customers effective March 2025 as a risk mitigation measure after experiencing delayed repayments. Revenue from the online platform segment was approximately $14.29 million ⁴ for the fiscal year ended March 31, 2026. The increase in online platform revenue was primarily attributable to the inclusion of a full twelve months of Allright's revenue in fiscal year 2026, compared to only one month (March 2025) in fiscal year 2025 following the acquisition of Ridgeline on February 28, 2025.

The company's wholesale business has experienced significant growth in recent years compared with other businesses. The offline wholesale segment previously provided credit terms to certain customers, but after experiencing delayed repayments from several customers, the company decided to discontinue some of its credit sales effective March 2025. The online platform segment is operated by Allright, which distributes pharmaceutical and healthcare products across China through third-party e-commerce platforms and its own online platform.

On February 28, 2025, the company completed the acquisition of all issued and outstanding ordinary shares of Ridgeline International Limited from Mr. Lingtao Kong, concurrently with the sale of all equity in Jiuxin Investment to Mr. Lei Liu and Ms. Li Qi. Following these Restructuring Transactions, the company changed its name from China Jo-Jo Drugstores, Inc. to Ridgetech, Inc. and changed its trading symbol from CJJD to RDGT. Effective as of the closing, Mr. Lei Liu and Ms. Li Qi resigned from the board of directors, and Mr. Ming Zhao was appointed as interim Chief Executive Officer. In October 2025, both Hangzhou Shouantang Bio-technology Co., Ltd. and Hangzhou Kahamadi Bio-technology Co., Ltd. were dissolved. The company raised capital for a total amount of $57.79 million ⁵ from 2015 to 2026 through various financings. As of the date of the annual report, the total amount invested in, and lent to, by the company to its subsidiaries and historical VIEs are approximately $44.5 million ⁶ and $8.7 million ⁷, respectively.

For the fiscal year ended March 31, 2026, total revenue increased by approximately $12.19 million ⁸, or 10.2% ⁹, as compared to the fiscal year ended March 31, 2025. The company had one customer that accounted for 53.7% ¹⁰ of total sales from continuing operations for the fiscal year ended March 31, 2026. For the fiscal year ended March 31, 2025, the company had two customers that accounted for 67.1% ¹¹ and 18.7% ¹² of total sales from continuing operations, respectively. As of March 31, 2025, the Divested Retail Entities were expected to have accounts payable to the company totaling $13.6 million ¹³.

Following the Restructuring Transactions, the company's business focus has transitioned to wholesale distribution of pharmaceutical products. The acquisition of Ridgeline and its wholly owned subsidiary Allright, which focuses on development of trading on electronic platforms, is expected to provide additional distribution channels and enhance revenue opportunities. The company may decide to further grow the wholesale business through future acquisitions, though there is no assurance that a suitable target can be found or a deal reached. The company entered into a three-year supply agreement with Jiuzhou Pharmacy pursuant to the Equity Exchange Agreement for Divestiture, under which Jiuxin Medicine agrees to supply pharmaceutical products to Jiuzhou Pharmacy at a price no higher than the lowest wholesale price in the area where Jiuzhou Pharmacy is located.

The company needs to continue to invest heavily in platform development, which it believes will play a critical role in the wholesale industry going forward. The company expects to incur substantial expenses in marketing and promotional efforts to both attract and retain customers. The transition away from the retail pharmacy business may cause short-term operational inefficiencies and impact brand recognition.

The company's online distribution business is operated by Allright, which is required to obtain and maintain certain assets relevant to its business, such as computers and other electrical equipment, as well as applicable licenses or approvals from different regulatory authorities. The company believes that providing insights from data, including artificial intelligence and machine learning, will become increasingly important to the value that its solutions and services deliver to customers. The company's ability to provide data-driven insights may be constrained by current or future regulatory requirements or ethical considerations.

The filing does not contain specific quantitative figures for R&D spending, capital expenditure plans, share repurchase authorization amounts, or dividend policy for the upcoming period.

The company faces significant challenges in growing and sustaining its wholesale business, including limited bargaining power with suppliers due to lower purchase volumes, pricing volatility, and the need for ongoing investment in platforms, customer acquisition, and management. The wholesale business is relatively new to the company and most senior management personnel are less experienced in the wholesale business. The company may not be able to effectively grow its wholesale business organically and may not realize all anticipated benefits from growing through acquisitions.

The company faces the risk that accounts receivable from Jiuzhou Pharmacy and associated clinics following the Restructuring Transactions may not be fully collected, which could adversely impact financial position and liquidity. As of March 31, 2025, the Divested Retail Entities were expected to have accounts payable to the company totaling $13.6 million . Sales to Jiuzhou Pharmacy currently account for over 50% of the company's revenue and are expected to remain a significant source of revenue in the near term. Any disruption or termination of this relationship could result in a material loss of revenue. The company also faces risks related to the continued penetration of counterfeit products into the pharmaceutical market in China, which could damage its reputation.

The company faces significant customer concentration risk, with one customer accounting for 53.7% of total sales from continuing operations in fiscal year 2026, and the loss of this key customer could materially and adversely affect results of operations. There is also a risk that accounts receivable from the Divested Retail Entities totaling $13.6 million as of March 31, 2025 may not be fully collected. The company's wholesale business has limited bargaining power with suppliers due to lower purchase volumes, which may negatively affect gross margins. The company is subject to complex and evolving Chinese regulations governing pharmaceutical wholesale and online sales, data security, and cybersecurity, with potential fines for non-compliance under the Amended Cyber Security Law of up to RMB 2 million ¹⁴ or approximately RMB 10 million ¹⁵ for violations affecting critical information infrastructure, and under the Personal Information Protection Law of up to RMB 50 million ¹⁶ or 5% ¹⁷ of annual revenues from the prior year.

Management's message emphasizes the strategic transformation following the Restructuring Transactions completed on February 28, 2025, which included the acquisition of Ridgeline International Limited and the divestiture of the retail and online pharmacy businesses. The company changed its name to Ridgetech, Inc. and its trading symbol to RDGT. Management's strategic priorities include transitioning the business focus to wholesale distribution of pharmaceutical products, growing the wholesale business through the online platform operated by Allright, and maintaining the supply relationship with Jiuzhou Pharmacy through a three-year supply agreement. The company expects that the acquisition of Ridgeline may continue to provide additional distribution channels and enhance revenue opportunities, though there is no guarantee that these benefits will be realized or that the Restructuring Transactions will improve overall profitability.