Xchange Technologies Inc.

Company Overview

Business Model: XChange TEC.INC is a Cayman Islands holding company that conducts its primary operations through its PRC subsidiaries and consolidated variable interest entities (VIEs), including Alpha Mind, Huaming Insurance, and Huaming Yunbao. The core business is professional insurance agency and insurance technology. The Company provides a wide variety of insurance products underwritten by major insurance companies in China, offering comprehensive services from application to claim settlement. Revenue is generated from commissions paid by insurance companies, typically a percentage of the premium. The business operates primarily on a "Business to Business to Consumer" (B2B2C) model, utilizing an extensive nationwide sales network comprising external referral sources (registered sales representatives and strategic channel partners) and an in-house sales force. In 2023, Alpha Mind launched a SaaS platform designed as an internal operational management system to enhance efficiency, scalability, and customer accessibility, though it does not directly generate revenue. On March 24, 2025, XChange TEC.INC expanded its international footprint by acquiring Topone Consultant Limited, a Hong Kong-based insurance brokerage firm, gaining direct access to the Hong Kong insurance market.

Market Position: In 2024, XChange TEC.INC was ranked 80th among the top 100 insurance intermediaries in China based on insurance premium facilitated. The Company initially specialized in automobile insurance and has since diversified its product portfolio to include life, health, group accident, and other property-related insurances. In fiscal year 2025, property-related insurance accounted for approximately 98.75% of the total insurance premium from Alpha Mind's policies sold. The Company competes in a highly fragmented and competitive market against other insurance agencies, in-house sales forces of insurance companies, direct online sales platforms, and ancillary distributors. Key competitive advantages cited include strong technology and infrastructure capabilities, deep connections with insurance companies, and robust marketing capabilities.

Recent Strategic Developments:

• Disposal of Long-term Apartment Rental Business: XChange TEC.INC completed the divestiture of its long-term apartment rental business. This included the sale of all equity interest in Haoju (Shanghai) Artificial Intelligence Technology Co., Ltd. on October 31, 2023, and subsequently QK365.com.INC (BVI), FENGLINJU PROPERTY (CHINA) LIMITED, and Shanghai Meileju Intelligent Technology Co., Ltd on September 12, 2024, all to Wangxiancai Limited for nominal consideration. This marked a strategic shift away from the rental business.
• Acquisition of Alpha Mind: On December 28, 2023, the Company completed the acquisition of 100% equity interest in Alpha Mind, a PRC-based insurance agency and insurance technology business, for an aggregate purchase price of US$180,000,000. The consideration was paid in promissory notes, which were secured by Alpha Mind's equity and assets. As of September 30, 2025, US$77,000,000 of the principal amount had been repaid through the issuance of Class A ordinary shares. The maturity date for the remaining notes was extended to December 31, 2025, with an automatic extension to the end of the following year if an outstanding balance remains.
• SaaS Platform Launch: Alpha Mind introduced its SaaS platform in 2023, leveraging mobile internet to streamline and popularize its insurance agency business, aiming to enhance accessibility and convenience for customers and agents.
• Acquisition of Topone Consultant Limited: On March 24, 2025, XChange TEC.INC acquired Topone Consultant Limited, a Hong Kong-based insurance brokerage firm, for HK$1,200,000 in cash. This acquisition provides direct access to the Hong Kong insurance market and supports the Company's vision to offer tailored insurance solutions across China and international markets.

Geographic Footprint: XChange TEC.INC's primary operations are conducted in the People's Republic of China through its PRC subsidiaries and VIEs. As of September 30, 2025, the Company had branch coverage in 12 cities across 10 provinces, autonomous regions, and municipalities in China. The Company also has an international presence in Hong Kong through its subsidiary Alpha Mind Technology Limited (Hong Kong) and the newly acquired Topone Consultant Limited. The Company operates under the regulatory frameworks of the PRC, Cayman Islands, and Hong Kong.

Cross-Border Operations: XChange TEC.INC is a Cayman Islands holding company. Its operations in the PRC are conducted through a multi-layered structure involving Alpha Mind Technology Limited (BVI), Alpha Mind Technology Limited (Hong Kong), Jiachuang Yingan (Beijing) Information & Technology Co., Ltd. (a Wholly Foreign-Owned Enterprise, or WFOE, in the PRC), and two consolidated Variable Interest Entities (VIEs), Huaming Insurance Agency Co., Ltd. and Huaming Yunbao (Tianjin) Technology Co., Ltd. The VIE structure, governed by contractual arrangements, allows the Company to direct the activities and receive economic benefits from the PRC operating entities, consolidating their financial results under U.S. GAAP. The acquisition of Topone Consultant Limited in Hong Kong further diversifies its international business structure. Cash and asset flows within the organization are subject to PRC foreign exchange regulations for transfers from PRC entities, while non-PRC entities (Cayman Islands and Hong Kong) face no such restrictions for transfers among themselves or to U.S. investors. No dividends or distributions have been made to date to the holding company or investors, and there are no plans for such distributions in the foreseeable future. During fiscal year 2025, Alpha Mind Technology Limited (Hong Kong) paid RMB 59,087,700 in notes payable on behalf of XChange TEC.INC.

Financial Performance

Revenue Analysis

Profitability Metrics (FY2025):

• Gross Margin: 2.19%
• Operating Margin: -197.20%
• Net Margin: -204.99%

Investment in Growth (FY2025):

• R&D Expenditure: $0 (RMB 0)
• Capital Expenditures: Not explicitly detailed as a single line item.
• Strategic Investments: Acquisition of Topone Consultant Limited for RMB 1,107,000 (US$155,000).

Currency Impact Analysis (FY2025):

• Foreign exchange translation adjustments resulted in an expense of RMB 22,077,000 (US$3,101,000).
• The functional currency of the Company's entities incorporated in Cayman Islands, the United States, and Hong Kong is the U.S. dollar, while PRC subsidiaries use Renminbi. The reporting currency is Renminbi.
• A 10% depreciation of the U.S. dollar against the Renminbi could increase loss and shareholders’ deficits by RMB 83.3 million (US$11.7 million) for FY 2025.
• The Company has not entered into any material hedging transactions to reduce foreign currency exchange risk.

Business Segment Analysis

Insurance Agency Business (Alpha Mind)

Financial Performance (FY2025):

• Revenue: RMB 365,267,000 (+26.67% YoY) (US$51,309,000)
• Operating Margin: -197.20% (calculated from gross profit and operating expenses)
• Key Growth Drivers: Expansion of the insurance product portfolio, leveraging the SaaS platform for enhanced accessibility and convenience, and maintaining an extensive nationwide sales network. Strategic collaborations with insurance companies and the recent acquisition of Topone Consultant Limited in Hong Kong are also key drivers.

Product Portfolio: The Company offers a diverse range of insurance products underwritten by major insurance companies in China. While initially specializing in automobile insurance, the portfolio has expanded to include life, health, group accident, and other property-related insurances. In FY2025, property-related insurance constituted approximately 98.75% of the total insurance premium from Alpha Mind's policies sold. The Company sold 6,348,844 insurance policies in FY2025, compared to 22,765,794 in FY2024. The overall average commission rate for Alpha Mind was 10.6% in FY2025, ranging from 3% to 71% depending on insurance type and geographic region.

Market Dynamics: The insurance agency market in China is highly fragmented and intensely competitive. XChange TEC.INC faces competition from traditional insurance agencies, online platforms, in-house sales forces of insurance companies, and ancillary distributors like auto dealerships. The rise of FinTech and internet insurance products presents a risk of "disintermediation," where insurance companies directly access customers. The Company is also subject to customer concentration risk, with one state-owned insurance company accounting for 18.4% of total revenue in FY2025.

Geographic Revenue Distribution (FY2025):

• Tianjin: RMB 79,998,000 (21.88% of total revenue)
• Shandong: RMB 77,700,000 (21.28% of total revenue)
• Jiangsu: RMB 76,870,000 (21.04% of total revenue)
• Growth Markets: The acquisition of Topone Consultant Limited provides direct access to the Hong Kong market, targeting high-net-worth individuals, multinational corporations, and cross-border investors.

International Operations & Geographic Analysis

Revenue by Geography (FY2025):

International Business Structure:

• Subsidiaries:
  • Alpha Mind Technology Limited (BVI) - Holding company.
  • Alpha Mind Technology Limited (Hong Kong) - Holding company.
  • Jiachuang Yingan (Beijing) Information & Technology Co., Ltd. (PRC) - Wholly-owned foreign enterprise (WFOE).
  • XH TEC, INC (BVI) - Holding company.
  • Topone Consultant Limited (Hong Kong) - Wholly-owned insurance brokerage firm.
• Joint Ventures: Not explicitly mentioned in the filing.
• Licensing Agreements: The Company's VIEs in China hold the requisite insurance agent operating licenses. Topone Consultant Limited is licensed by the Hong Kong Insurance Authority.

Cross-Border Trade:

• Export Markets: Not explicitly detailed in the filing.
• Import Dependencies: Not explicitly detailed in the filing.
• Transfer Pricing: Inter-company transactions are subject to scrutiny by PRC tax authorities, with a ten-year statute of limitations for transfer pricing related adjustments.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Not mentioned in the filing.
• Dividend Payments: XChange TEC.INC has not made any dividend distributions to date and does not plan to pay cash dividends in the foreseeable future. The Company intends to retain most, if not all, available funds and future earnings to support business development and growth.
• Dividend Yield: Not applicable.
• Future Capital Return Commitments: Not mentioned in the filing.

Balance Sheet Position (as of September 30, 2025):

• Cash and Equivalents: RMB 10,879,000 (US$1,528,000)
• Total Debt: RMB 700,554,000 (US$98,406,000), comprising short-term debt of RMB 32,533,000 (US$4,570,000) and notes payable of RMB 668,021,000 (US$93,836,000).
• Net Cash Position: RMB (689,675,000) (Net Debt: US$96,878,000).
• Credit Rating: Not disclosed in the filing.
• Debt Maturity Profile: Short-term debt maturities extend through September 2026. The promissory notes issued for the Alpha Mind acquisition have a maturity date extended to December 31, 2025, with an automatic extension to the end of the following year if an outstanding balance remains.

Cash Flow Generation (FY2025):

• Operating Cash Flow: RMB (11,698,000) (US$(1,643,000)) (net cash used in operating activities from continuing operations).
• Free Cash Flow: Not explicitly stated, but negative given operating cash flow and investing activities.
• Cash Conversion Metrics: Not explicitly stated in the filing.

Currency Management:

• Cash holdings by major currencies: A portion of cash and cash equivalents are denominated in U.S. dollars.
• Natural hedging through operational diversification: Not explicitly mentioned as a strategy.
• Financial hedging instruments and strategies: The Company has not entered into any material hedging transactions to reduce its exposure to foreign currency exchange risk.

Operational Excellence

Production & Service Model: XChange TEC.INC operates as an insurance agency, facilitating the promotion and distribution of insurance products for major insurance companies in China. Its service model focuses on providing comprehensive support to insurance purchasers, from application to claim settlement. The Company does not underwrite insurance policies but plays a crucial role in streamlining the claim process. The SaaS platform, introduced in 2023, serves as an internal operational management system, designed to enhance the efficiency and scalability of insurance operations by facilitating agent onboarding, organizational structure configuration, and real-time integration with external insurance databases and performance tracking.

Global Supply Chain Architecture: Key Suppliers & Partners:

• Insurance Company Partners: As of September 30, 2025, the Company had established business relationships with 24 insurance companies and approximately 136 of their branches across China. These include industry-leading and state-owned property and casualty insurance companies, as well as regional players.
• Distribution Channel Partners: The Company collaborates with 221 distribution channel partners, such as auto dealerships, as of September 30, 2025. These partners introduce insurance products to their customers and are selected based on reputation, consumer flows, and operational track record.
• External Registered Sales Representatives: Over 765 external registered sales representatives contribute to the Company's sales network, sharing commissions from insurance product sales.
• Technology Partners: The SaaS platform integrates with external insurance databases and appointment scheduling systems, though specific technology partners are not named.

Facility Network:

• Manufacturing: Not applicable, as the Company operates a service-based business.
• Research & Development: While the Company invests in IT developments for its SaaS platform, specific R&D centers or international collaboration networks are not detailed. The IT Department is responsible for security inspections and remedial actions.
• Distribution: The Company maintains branch coverage in 12 cities across 10 provinces, autonomous regions, and municipalities in China. Physical office spaces are used for administration and operating branches.

Operational Metrics (FY2025):

• Number of insurance policies sold: 6,348,844.
• Overall average commission rate: 10.6%.
• Employee headcount: 30 employees as of September 30, 2025, with 8 in Administration, 2 in IT, and 20 in Marketing.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The Company employs an in-house sales team responsible for directly promoting and selling insurance products to customers, offering personalized guidance and support.
• Channel Partners: A network of 221 distribution channel partners, including auto dealerships, strategically introduces the Company's insurance products to their customer base as part of their existing sales processes.
• Digital Platforms: The SaaS platform facilitates the online sales process for insurance agents and end-customers. Additionally, a WeChat mini program serves as a gateway for potential insurance agents to submit online applications. The Company also utilizes targeted online and social media advertisements to enhance brand exposure and customer conversion.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: In FY2025, one state-owned insurance company accounted for 18.4% of the Company's total revenue, indicating a degree of customer concentration.
• Strategic Partnerships: The Company has established business relationships with 24 insurance companies and approximately 136 of their branches in China, including industry-leading and state-owned property and casualty insurers. Regular engagement through visits, marketing events, and close communication with headquarters is maintained.
• Customer Concentration: Beyond the single major client, the Company also faces concentration risk from specific geographical regions. Regional Market Penetration (FY2025):
• Tianjin: Contributed 21.88% of total revenue.
• Shandong: Contributed 21.28% of total revenue.
• Jiangsu: Contributed 21.04% of total revenue.
• Growth Markets: The recent acquisition of Topone Consultant Limited provides a strategic entry into the Hong Kong market, aiming to serve high-net-worth individuals, multinational corporations, and cross-border investors.

Competitive Intelligence

Global Market Structure & Dynamics

Industry Characteristics: The insurance agency market and the integrated after-sales service market in China are characterized by high fragmentation and intense competition. The industry is rapidly evolving, influenced by the advancement of financial technologies (FinTech) and the emergence of internet insurance products, which enable insurance companies to directly access a broader customer base at lower costs. This trend poses a risk of "disintermediation" for traditional intermediaries. In contrast, Hong Kong's insurance sector has shown robust growth, driven by increasing demand from mainland Chinese clients and expatriates seeking international-standard wealth preservation tools.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: XChange TEC.INC faces competition from a diverse set of players, including:

• Large and regional insurance agency companies.
• Online insurance agency platforms.
• Direct online sales platforms operated by insurance companies.
• Insurance companies utilizing in-house sales forces, exclusive sales agents, and telemarketing.
• Business entities that distribute insurance products on an ancillary basis, such as commercial banks, postal offices, and automobile dealerships.

Regional Competitive Dynamics: The competitive landscape varies across major geographic markets. The Company's significant revenue concentration in Tianjin, Shandong, and Jiangsu exposes it to localized competitive pressures, economic downturns, or new regional regulations. The disruption of business cooperation with major banks and insurance companies could also impact its competitive advantages in certain areas.

Risk Assessment Framework

Strategic & Market Risks

Global Market Dynamics:

• Economic Downturns: A severe or prolonged slowdown in the Chinese economy could materially and adversely affect demand for the Company's products and services.
• Technology Disruption: The advancement of FinTech and internet insurance products could lead to "disintermediation," where insurance companies sell directly to customers, reducing the need for agency services. The Company's SaaS platform may also fail to gain sufficient market acceptance.
• Customer Concentration: Significant reliance on one major client (18.4% of total revenue in FY2025) and three specific provinces (over 50% of total revenue in FY2025) creates vulnerability to adverse events or policy changes unique to these customers or regions.
• Industry-Specific Risks: The business is substantially dependent on automobile insurance (77% of Alpha Mind's total revenue in FY2025), making it susceptible to downturns in this segment. Declines in demand for life, health, group accident, and other property-related insurance could also adversely affect performance.
• External Events: Natural disasters, health epidemics (e.g., COVID-19), or geopolitical instability in operating regions could disrupt economic activities and negatively impact business.

Operational & Execution Risks

Global Supply Chain Vulnerabilities:

• Supplier Dependency: The Company's success relies on maintaining stable relationships with its insurance company partners and external referral sources. Failure to renew contracts or disruptions in these relationships could materially affect operations.
• Regional Disruptions: Localized economic or regulatory changes in key operating regions could impact business volume and profitability.

Internal Operational Risks:

• Limited Operating History: The Company has a limited operating history in the insurance agency market (post-Alpha Mind acquisition), making future prospects and results of operations difficult to evaluate.
• Management Experience: The management team has limited experience in the insurance agency industry, which could adversely impact future performance.
• IT System Disruptions: High dependence on information technology systems, mobile applications, and telecommunications networks in China. Any significant disruption or failure could damage reputation and profitability.
• Technological Obsolescence: Failure to keep pace with rapid technological changes could render existing systems and infrastructure obsolete, impacting customer satisfaction and income generation.
• Misconduct: Risks associated with misconduct by in-house sales force or external referral sources (e.g., misrepresentation, fraud) could lead to regulatory sanctions, litigation, or reputational harm.
• Credit Risks: Exposure to credit risk from insurance customers and potential failure of end customers to repay insurance premiums.
• New Business/Market Expansion: Expansion into new businesses (SaaS) and markets (Hong Kong) exposes the Company to unfamiliar regulatory, competitive, strategic, and operational challenges.

Financial & Regulatory Risks

Currency & Financial Risks:

• Going Concern Uncertainty: The Company has incurred recurring losses, negative operating cash flows, and has a working capital deficiency, raising substantial doubt about its ability to continue as a going concern.
• Indebtedness: Significant outstanding promissory notes (US$93.8 million as of September 30, 2025) related to the Alpha Mind acquisition. Failure to repay or refinance these notes could result in the loss of control over Alpha Mind.
• Foreign Exchange: Fluctuations in the Renminbi-U.S. dollar exchange rate can affect the value of investments and the Company's financial results, with limited hedging options available.
• Dividend Restrictions: PRC laws and regulations restrict the ability of PRC subsidiaries to pay dividends, and withholding taxes apply to dividends paid to non-PRC resident investors.
• PFIC Status: There is a significant risk that XChange TEC.INC was, and will continue to be, classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could lead to significant adverse tax consequences for U.S. Holders.

Regulatory & Compliance Risks:

• VIE Structure Enforceability: Substantial uncertainties exist regarding the interpretation and application of PRC laws concerning the VIE structure. The PRC government could potentially disallow the structure, leading to severe penalties or forced relinquishment of interests.
• PRC Government Intervention: The PRC government exercises significant influence over the economy, and new or stricter regulations could be imposed, requiring additional compliance efforts or hindering operations.
• Overseas Listing Regulations: Future offshore offerings may require approval and/or filing with the CSRC, and failure to comply could limit the Company's ability to raise capital.
• Cybersecurity & Data Privacy: Increasing regulatory scrutiny in China (e.g., Cybersecurity Law, Data Security Law, PIPL, CAC Measures) poses risks of fines, penalties, or operational suspension if non-compliant, with uncertainties regarding the scope of "national security" and "critical information infrastructure."
• Licensing & Permits: Failure to obtain, renew, or maintain necessary operating licenses (e.g., insurance agent operating license) could materially and adversely affect business operations.
• Regulatory Examinations: Periodic examinations by PRC regulatory authorities (e.g., CBIRC) may result in fines or other penalties.
• Foreign Investment Law: Uncertainties regarding the implementation of the Foreign Investment Law could impact the Company's corporate structure and operations.
• SAFE Regulations: PRC regulations on offshore investments by PRC residents (Circular 37) may subject beneficial owners to liabilities or penalties and limit capital flows.
• PRC Tax Laws: Risk of being deemed a PRC tax resident enterprise, subjecting global income and dividends/gains to PRC taxation. Uncertainties also exist regarding indirect transfers of equity interests.
• Labor Compliance: Failure to make adequate contributions to employee benefit plans as required by PRC regulations may lead to penalties.
• HFCA Act: The Holding Foreign Companies Accountable Act poses a risk of trading prohibition or delisting of ADSs if the PCAOB is unable to inspect the Company's auditors for two consecutive years.
• Legal Proceedings: A civil lawsuit against Huaming Insurance Agency Co., Ltd. and its Tianjin Second Branch for alleged breach of an insurance agency contract, seeking RMB 4.265 million, presents an uncertain outcome.

Geopolitical & External Risks

Country-Specific Risks:

• Political Risk: Changes in China's political or social conditions or government policies could have a material adverse effect on the business.
• Economic Risk: Any severe or prolonged slowdown in China's economic growth could negatively impact demand for services.
• Regulatory Changes: The rapidly changing nature of PRC laws and regulations, often with short notice, creates ongoing compliance challenges.
• U.S.-China Relations: The broader geopolitical environment and specific U.S. regulations (like the HFCA Act) create uncertainties regarding the Company's ability to maintain its U.S. listing and access capital markets.

Innovation & Technology Leadership

Research & Development Focus: The Company's innovation efforts are primarily centered on its SaaS platform, which was introduced in 2023. The focus is on continuously refining the platform's functions to better suit the evolving needs of the insurance agency business. This includes investments in information technologies and the development of proprietary technologies aimed at enhancing operational efficiency and scalability.

Global R&D Network: While the filing mentions an IT Department responsible for security inspections and remedial actions, it does not detail a specific global R&D network, dedicated R&D centers, or international collaboration programs. The IT team consists of 2 employees.

Intellectual Property Portfolio: As of the date of the annual report, XChange TEC.INC holds one copyright, one domain name, and one trademark registered in China. The Company intends to file additional intellectual property applications as it continues its innovation efforts and to pursue further protection where deemed beneficial and cost-effective. Confidentiality agreements are in place with key employees and business partners to protect proprietary information. The Company acknowledges the risk of intellectual property infringement claims by third parties.

Technology Partnerships: The SaaS platform integrates with "external insurance databases" and appointment scheduling systems, indicating reliance on or collaboration with technology providers, though specific strategic alliances or research collaborations are not explicitly named in the filing.

Leadership & Governance

Executive Leadership Team

International Management Structure: The Company's management structure includes regional leadership for its branch coverage in China. However, specific details on regional leadership and reporting relationships, or the balance between local management autonomy and centralized oversight, are not explicitly provided in the filing.

Board Composition: The Board of Directors consists of four members: Zhichen Sun, Jiaxing Chang, Guofu Wu, and Nini Qiao. Dr. Guofu Wu and Ms. Nini Qiao are independent directors, with Ms. Qiao also qualifying as an "audit committee financial expert." The Board has established an Audit Committee (Dr. Guofu Wu, Ms. Nini Qiao), a Compensation Committee (Mr. Zhichen Sun, Ms. Jiaxing Chang), and a Nominating and Corporate Governance Committee (Mr. Zhichen Sun, Ms. Nini Qiao). Due to its status as a foreign private issuer listed on the NASDAQ Capital Market, the Company avails itself of certain home country corporate governance practices that differ from NASDAQ standards, including not requiring a majority of independent directors on its board. The Company operates with a dual-class share structure, where Golden Stream Ltd. (controlled by Mr. Yong Zhang) holds all Class B ordinary shares, representing 9.59% of total outstanding share capital and 51.47% of the voting power. This concentration of ownership, with voting decisions guided by an ESOP Operation Committee, significantly influences corporate matters and limits the ability of Class A ordinary shareholders to influence decisions.

Regulatory Environment & Compliance

Multi-Jurisdictional Regulatory Framework: Primary Regulatory Environments:

• People's Republic of China (PRC): The Company's operations in China are subject to extensive regulation, including the PRC Insurance Law, Provisions on the Regulation of Insurance Agencies, and Measures for the Administration of Insurance Sales Activities, which govern market access, operating rules, and compliance for insurance agencies. Internet insurance activities are regulated by the Internet Insurance Measures. Foreign investment is governed by the Foreign Investment Law and Negative List, while value-added telecommunication services have specific restrictions. Consumer protection, anti-money laundering, information security, censorship, and labor laws also impose significant compliance requirements. Tax regulations include the Enterprise Income Tax Law (25% rate) and Value-Added Tax Law (6% for services), with specific rules for dividend withholding tax and transfer pricing.
• Cayman Islands: As an exempted company, XChange TEC.INC is not subject to taxes on profits, income, gains, or appreciation in the Cayman Islands, benefiting from a 20-year tax concession undertaking from March 8, 2018.
• Hong Kong: Alpha Mind Technology Limited (Hong Kong) and Topone Consultant Limited are subject to Hong Kong Profits Tax at a rate of 16.5%. No provisions for Hong Kong profit tax have been made to date due to the absence of assessable profits.

Cross-Border Compliance:

• Cybersecurity Review (CAC): The Company believes it is not currently required to apply for a cybersecurity review under the Revised CAC Measures, as it is already listed on Nasdaq, does not hold personal information of more than one million users, and its data processing activities do not bear on national security. However, uncertainties in interpretation and future regulatory changes could alter this assessment.
• CSRC Filing: As a "Stock Enterprise" listed prior to the Overseas Listing Filing Rules (effective March 31, 2023), the Company is not required to file immediately but will need to for any future follow-on offerings or listings on other offshore markets.
• HFCA Act: XChange TEC.INC is subject to the U.S. Holding Foreign Companies Accountable Act. While its current auditor, OneStop Assurance PAC Singapore, is not on the PCAOB Identified Firms list, uncertainties remain regarding the PCAOB's ability to fully inspect audit working papers located in China without PRC government approval, posing a risk of trading prohibition or delisting of ADSs.
• International Tax Strategy: The Company's PRC subsidiaries are subject to PRC tax laws, including potential withholding tax on dividends to non-PRC resident enterprises (10%, potentially 5% under tax treaties for Hong Kong residents, subject to "beneficial owner" determination). Indirect transfers of equity interests by non-PRC holding companies may also be subject to PRC tax under Circular 7.

Environmental & Social Impact

Global Sustainability Strategy: The provided 20-F filing does not explicitly detail a global sustainability strategy, environmental commitments, or specific regional sustainability initiatives for XChange TEC.INC.

Regional Sustainability Initiatives:

• Supply Chain: Not explicitly detailed in the filing.

Social Impact by Region:

• Community Investment: Not explicitly detailed in the filing.
• Labor Standards: The Company's PRC subsidiaries are required to participate in various government statutory employee benefit plans, including pension, unemployment, maternity, work-related injury, medical insurance, and housing provident funds. There is a risk of penalties for failure to make full contributions to these plans as required by PRC regulations.

Currency Management & Financial Strategy

Multi-Currency Operations: Currency Exposure (FY2025):

Hedging Strategies:

• Transaction Hedging: Not explicitly detailed in the filing.
• Translation Hedging: Not explicitly detailed in the filing.
• Economic Hedging: Not explicitly detailed in the filing.
• XChange TEC.INC has not entered into any material hedging transactions to reduce its exposure to foreign currency exchange risk. The Company acknowledges that the value of investments in its ADSs will be affected by the exchange rate between the U.S. dollar and Renminbi, as its business value is effectively denominated in Renminbi. Currency exchange losses may be magnified by PRC exchange control regulations.