KOLAREIDI: The original company leaders of employees and distributors share the same name. The affiliated company also serves as a major client, establishing a cost-sharing mechanism. The company incurred losses that year.

How does the AI cost-sharing mechanism affect the profitability of U.S. Kle?

“Jinzhengyan” Southern Capital Center Perspective/Author: Xizhou Yingwei / Risk Control

As of March 31, 2026, Guangzhou Kle Radi Medical Equipment Co., Ltd. (hereinafter referred to as “Kle Radi”) has entered the submission registration process for the Beijing Stock Exchange. Previously, Kle Radi had applied for the ChiNext Board, but was rejected due to reasons such as “limited market space for main products, unclear whether new products can achieve scaled revenue,” with review comments indicating non-compliance with issuance, listing, or disclosure requirements, ultimately failing to list on the ChiNext.

Focusing on this application, Kle Radi’s actual controller’s nephew-controlled companies Wuhan Kle Radi Trading Co., Ltd. (hereinafter “Wuhan Kle Radi”) and Wuhan Kangheli’an Technology Co., Ltd. (hereinafter “Kangheli’an”) are identified as related parties. During inquiry, Kle Radi was asked about the reasons for lower gross profit margins on sales to distributors such as Wuhan Kle Radi. Additionally, the original business license holder of Kangheli’an shares the same name as an employee of Kle Radi, Ouyang Jinxian. Moreover, Kangheli’an had previously bid alongside Kle Radi and was awarded the contract. Under these circumstances, the report period’s sales to the same end customer via different sales models or other related-party transactions warrant attention.

On the other hand, during the application period, Kle Radi’s largest customer was its equity affiliate Klarity Medical Products, LLC. (hereinafter “U.S. Kle”). The timeline extends back to 2017, with cumulative transactions exceeding 100 million yuan. Behind this cooperation, both parties share market results in some sales regions. Notably, after June 2024, Kle Radi and U.S. Kle established a cost-sharing mechanism, and in the same year, U.S. Kle shifted from profit to loss, with net profit further declining the following year. Additionally, Kle Radi’s credit policy towards U.S. Kle was more lenient than for other major overseas distributors, with overdue accounts receivable exceeding 49% in each of the past three years.

1. The lower gross profit margin of sales to related companies controlled by the actual controller’s relatives, with employees sharing the same name as the original business license holder of the related party Kangheli’an

The latest regulatory guidelines state that the financial data of proposed listed companies should accurately and truly reflect their operational capabilities, and behaviors such as financial fraud, false statements, or embellishments must be promptly and strictly held accountable according to law.

In this application, two companies controlled by the actual controller’s relatives, which are distributors of Kle Radi, are involved. Among them, the original business license holder of Kangheli’an shares the same name as an employee of Kle Radi, Ouyang Jinxian, and historically, Kangheli’an had bid alongside Kle Radi, with Kle Radi being the successful bidder.

1.1 Wuhan Kle Radi and Kangheli’an are companies controlled by relatives of the actual controller, questioned about the reasons for lower gross profit margins on sales to Wuhan Kle Radi and other distributors

According to the prospectus signed on September 14, 2022 (“September 14, 2022 ChiNext Prospectus”), the Beijing Stock Exchange prospectus signed on December 15, 2025 (“December 15, 2025 BEI Prospectus”), and the prospectus signed on March 23, 2026 (“March 23, 2026 BEI Prospectus”), from 2019 to 2025, Kle Radi’s revenue was 153 million yuan, 160 million yuan, 209 million yuan, 233 million yuan, 238 million yuan, 285 million yuan, and 315 million yuan, with year-over-year growth rates of 4.84%, 30.39%, 11.81%, 2.12%, 19.79%, and 10.48%, respectively.

From 2019 to 2025, net profits were 48.84M yuan, 3.53M yuan, 60.1206 million yuan, 69.3673 million yuan, 59.9183 million yuan, 67.2148 million yuan, and 64.0384 million yuan, with annual growth rates of 25.87%, 23.1%, 15.38%, -13.62%, 12.18%, and -4.73%.

It is evident that, despite revenue increasing annually from 2023 to 2025, the growth rate of net profit has been highly volatile.

Additionally, from 2019 to 2025, Kle Radi’s gross profit margins were 66.7%, 66.01%, 65.54%, 64.63%, 63.2%, 62.1%, and 60.32%. During the same period, the average gross profit margins of comparable industry companies were 71.39%, 72.97%, 73.35%, 72.41%, 72.36%, 71.64%, and 71.05%.

This indicates that from 2020 to 2025, Kle Radi’s gross profit margin has declined for six consecutive years and has remained below the industry average.

According to the March 23, 2026 prospectus, Kle Radi disclosed related-party companies including Wuhan Kle Radi and Kangheli’an. Wuhan Kle Radi is controlled by Yi Ligang, the nephew of one of Kle Radi’s actual controllers, Zhan De Ren’s sister. Kangheli’an is jointly controlled by Yi Ligang and his spouse.

Based on the inquiry reply issued by the Market Supervision Bureau and Kle Radi on September 26, 2025 (“September 26, 2025 BEI First Inquiry Reply”), Wuhan Kle Radi and Kangheli’an were established in 2009 and 2014, respectively. Kle Radi began cooperation with Wuhan Kle Radi and Kangheli’an in 2009 and 2024.

According to the inquiry reply issued by Kle Radi on August 29, 2022 (“August 29, 2022 ChiNext Second Inquiry Reply”), in 2019 and 2021, Wuhan Kle Radi ranked as the 9th and 7th largest distributor for Kle Radi.

The September 26, 2025 BEI inquiry reply also requested Kle Radi to explain whether the transaction prices are fair, whether there is benefit transfer or cost prepayment, and to clarify the credit policies and receivables collection from related parties compared to non-related third-party transactions.

The December 15, 2025 BEI inquiry reply questioned the authenticity of Kle Radi’s performance and asked whether the sales prices and gross profit margins to Wuhan Kle Radi are below the minimum guidance prices and whether special approval procedures were followed.

Kle Radi responded that the lower sales prices and gross profit margins to Wuhan Kle Radi are mainly related to product sales structure and lower terminal prices in Hubei Province, which are commercially reasonable, and do not involve benefit transfer or cost prepayment.

From 2019 to 2025, sales revenue to Wuhan Kle Radi were 2.3142 million yuan, 1.8018 million yuan, 3.1496 million yuan, 2.3859 million yuan, 232.5k yuan, 2.2934 million yuan, and 232.5k yuan.

In 2024-2025, sales to Kangheli’an were 709.9k yuan and 8.1573 million yuan.

According to the inquiry reply dated May 26, 2022 (“May 26, 2022 ChiNext First Inquiry Reply”) and December 15, 2025 (“December 15, 2025 BEI Second Inquiry Reply”), from 2019 to 2024 and the first half of 2025, gross profit margins on sales to Wuhan Kle Radi and its related parties were 53.68%, 54.96%, 52.65%, 52.99%, 44.49%, 52.28%, and 53.32%. In comparison, domestic distributor gross profit margins were 66.18%, 63.54%, 64.73%, 65.85%, 64.02%, 63.56%, and 62.17%.

Calculations show that during 2019-2024 and the first half of 2025, gross profit margins on sales to Wuhan Kle Radi and related parties were respectively 12.5, 8.58, 12.08, 12.86, 19.53, 11.28, and 8.85 percentage points lower than those for domestic distributors.

In 2021, Wuhan Kle Radi was the third-largest customer for Kle Radi’s domestic sales; in 2023, it was the fifth-largest distributor.

Furthermore, the December 15, 2025 BEI inquiry reply notes that during 2022-2024 and the first half of 2025, Wuhan Kle Radi and its related parties were core distributors in Hubei Province, accounting for 82.14%, 89.15%, 95.08%, and 95.52% of Kle Radi’s local sales revenue.

It is also noteworthy that an employee of Kle Radi shares the same name as the responsible person of Kangheli’an’s business license.

1.2 Ouyang Jinxian, sales manager of the Radiation Therapy Sales Department, shares the same name as the original business license holder of Kangheli’an

As of March 8, 2026, according to the National Medical Products Administration data, the medical device business license numbered “E H Han Shi Yao Jian Xie Ying Ye Xu 20220080” is issued to Kangheli’an, with the responsible person named Ouyang Jinxian. The license was issued on December 20, 2024, valid until January 10, 2027.

However, as of April 3, 2026, the responsible person for this license is Yi Ligang. The license was issued on March 13, 2026, valid until January 10, 2027.

Kle Radi’s disclosures show that Ouyang Jinxian has been a limited partner in the employee shareholding platform Zhuhai Huaxinghai Investment Partnership (Limited Partnership) (“Huaxinghai”) with a 0.63% stake, as per the September 14, 2022 prospectus and the March 23, 2026 prospectus.

According to the equity incentive granted in May 2016, Ouyang Jinxian was a marketing manager at that time. As of September 26, 2025, he is the sales manager of Kle Radi’s Radiation Therapy Sales Department.

This indicates that from at least May 2016 to September 26, 2025, there has been an employee named “Ouyang Jinxian” at Kle Radi, who shares the same name as the responsible person of Kangheli’an’s medical device license as of March 8, 2023, which later changed to Yi Ligang.

It is also noteworthy that Kle Radi adopts different sales modes for the same end customer.

1.3 The same end customer is served via both direct sales and through distributors such as Shanghai Qiancheng

According to the May 26, 2022 ChiNext First Inquiry Reply, if there are overlapping end customers between direct sales and distributors, the Shenzhen Stock Exchange requires Kle Radi to explain the reasons and reasonableness of using both sales modes simultaneously.

Kle Radi responded that from 2019 to 2022, there were a few cases of overlap between direct customers and main distributors’ end customers.

For example, the direct customer Shiyan *** Hospital was also the end customer of distributor Wuhan Kle Radi. Similarly, Zhejiang *** Hospital was a direct customer and also an end customer of distributor Shanghai Qiancheng.

During this listing, as per the March 23, 2026 prospectus, Kle Radi mainly adopts a “distributor-led, direct-sales supplementary” sales model. In the direct sales mode, customers include medical institutions, OEM clients, prosthetics and orthotics manufacturers, and radiotherapy equipment manufacturers.

According to the December 15, 2025 BEI inquiry reply, long-term direct customers include Zhejiang *** Hospital, and key end customers of Shanghai Qiancheng include ***** Hospital.

In summary, for the same end customer, Kle Radi employs both direct sales and distributor channels.

Additionally, Kle Radi has participated in joint bidding with related party Kangheli’an.

1.4 In 2023, Kangheli’an and Kle Radi “bidded together” on a public hospital project, with Kle Radi winning

According to information released by Chenzhou ***** Hospital on May 30, 2023, the top three bidders for the “Chenzhou ***** Hospital Rehabilitation Hospital Third-Party Cooperation for Rehabilitation Auxiliary Devices Project” were Kle Radi, Kangheli’an, and Guangzhou Shengye Medical Equipment Co., Ltd. (“Guangzhou Shengye”), with scores of 92, 57.33, and 56.33, respectively. Kle Radi was the successful bidder.

It should be noted that Chenzhou ***** Hospital is a national public tertiary Grade A comprehensive hospital.

In short, in 2023, Kle Radi and its related party Kangheli’an jointly bid on a project at a public hospital, with Kle Radi ultimately winning.

Overall, this application to the BEI involves two related-party distributors, Wuhan Kle Radi and Kangheli’an, controlled by the actual controller’s nephew. Notably, the original business license holder of Kangheli’an shares the same name as an employee of Kle Radi. Furthermore, in 2023, Wuhan Kle Radi bid alongside Kle Radi and was awarded the contract. Under these circumstances, the sales to the same end customer via different models or related-party transactions during the report period warrant attention.

2. The largest affiliated company has contributed over 709.9k yuan in revenue over the years, establishing a cost-sharing mechanism despite incurring losses that year

For listed companies, overseas revenue verification is a key step to ensure the authenticity and compliance of financial data, including review of business models, revenue recognition policies, and the authenticity of business operations and customer penetration.

It is noteworthy that the affiliated company U.S. Kle has been Kle Radi’s largest customer for years, contributing over 8.18M yuan cumulatively since 2017. Behind this, Kle Radi states that both parties share market results in some sales regions. Moreover, after June 2024, they established a cost-sharing mechanism, and in the same year, U.S. Kle shifted from profit to loss.

2.1 The affiliated company U.S. Kle has been the largest customer, contributing over 8.38M yuan, and Kle Radi can use the “Klarity” trademark owned by U.S. Kle in the EU region free of charge

According to the March 23, 2026 prospectus, Kle Radi’s affiliated companies include U.S. Kle, jointly held by Kle Radi (40%) and Larson Medical Products, Inc. (“U.S. Larson”) (60%). U.S. Kle mainly manufactures, imports, and sells radiotherapy positioning products and rehabilitation aids, serving as Kle Radi’s primary distributor in North America.

The September 14, 2022 ChiNext prospectus states that U.S. Kle was established in 2012 as a joint venture between Kle Radi and U.S. Larson, taking over U.S. Larson’s distribution business, and became a Kle Radi customer immediately upon establishment.

According to the July 27, 2016 public transfer prospectus (“July 27, 2016 Public Transfer Prospectus”) and the 2016-2017 annual reports, from 2014 to 2017, U.S. Kle was Kle Radi’s largest customer, with sales of 159.6k yuan, 10.8105 million yuan, 10.2766 million yuan, and 22.2136 million yuan, accounting for 10.12%, 11.17%, 8.91%, and 18.62% of Kle Radi’s revenue in those years.

From 2019 to 2025, U.S. Kle remained Kle Radi’s largest customer, with sales of 14.7423 million yuan, 14.1831 million yuan, 15.6019 million yuan, 19.4036 million yuan, 21.2971 million yuan, 19.4419 million yuan, and 26.8329 million yuan, representing 9.66%, 8.86%, 7.48%, 8.32%, 8.94%, 6.81%, and 8.51% of Kle Radi’s revenue in each period.

Calculations show that during 2014-2017 and 2019-2025, U.S. Kle contributed over 183 million yuan in revenue to Kle Radi.

According to the December 15, 2025 BEI prospectus, in January 2021, Kle Radi signed a “Cooperation Framework Agreement” with U.S. Kle, which included a clause that U.S. Kle agreed to allow Kle Radi to use the “Klarity” trademark owned by U.S. Kle in the EU region free of charge.

Furthermore, if U.S. Kle intends to transfer its “Klarity” trademark or similar trademarks, Kle Radi should be the sole trademark rights transferee; if U.S. Kle needs to use the “Klarity” brand on products beyond main products, such as shaping pads or bite blocks, prior written consent from Kle Radi is required.

This is where the “issue” arises.

2.2 Establishment of a cost-sharing mechanism with U.S. Kle and sharing of some market results, with overlapping suppliers and customers

According to the September 26, 2025 BEI First Inquiry Reply and the December 15, 2025 BEI Second Inquiry Reply, the BEI requires Kle Radi to verify the authenticity and fairness of related-party transactions with U.S. Kle, whether U.S. Kle bears costs or constructs off-balance sheet funds, and to explain reasons for U.S. Kle’s foreign loan applications, collateral assets, and whether funds originate from Kle Radi; also, to clarify the final flow of loan funds and whether there are issues such as commercial bribery, repayment sources, and whether funds ultimately come from Kle Radi.

The replies indicate that due to some overlapping suppliers and customers between U.S. Kle and Kle Radi’s foreign suppliers and customers, there are minor overlaps (“overlapping suppliers” and “overlapping customers”).

Regarding overlapping customers, Kle Radi states that the regional division and cooperation mode involve markets in third countries where both parties’ market coverage was initially weak, following a “customer-first, dominant party” principle for joint development, with the first contact being the leading party, sharing market results. In rare cases where both sell similar products in the same country or region, solutions are negotiated based on “maximizing brand interests.”

Moreover, since June 2024, for the purpose of maintaining long-term cooperation and market share, Kle Radi and U.S. Kle have established a reasonable cost-sharing mechanism through friendly negotiations.

This shows that beyond equity holdings, Kle Radi and U.S. Kle have multiple agreements.

The issue remains that during the listing application, the Shenzhen Stock Exchange also paid attention to U.S. Kle’s losses.

2.3 Inquiry whether performance was manipulated via U.S. Kle, which reported a loss of over USD 1 million in the first half of 2025

According to the May 26, 2022 ChiNext First Inquiry Reply, the Shenzhen Stock Exchange asked Kle Radi to explain why it maintained large-scale distribution cooperation with U.S. Kle despite U.S. Kle’s losses.

The September 26, 2025 BEI First Inquiry Reply further requested Kle Radi to clarify whether, given U.S. Kle’s annual investment losses, there was any unfair transaction used to manipulate Kle Radi’s performance.

Additionally, the December 15, 2025 BEI Second Inquiry Reply asked Kle Radi to explain the pricing adjustment mechanisms with U.S. Kle, reasons for low prices and gross margins of radiotherapy positioning membrane products, and whether the gross margins of related products match the reported performance.

It is evident that the authenticity and fairness of transactions between Kle Radi and U.S. Kle are under scrutiny.

From the May 26, 2022 and December 15, 2025 replies, U.S. Kle’s revenue from 2018 to 2024 and the first half of 2025 was approximately USD 4.2241 million, 5.4839 million, 5.4138 million, 6.4639 million, 6.9511 million, 112.6k, 8.6792 million, and 5.8429 million.

During the same period, net profits were -15,960 USD, 11,260 USD, 5,540 USD, 21,170 USD, 38,880 USD, 73,260 USD, -47,640 USD, and -103,600 USD.

Gross margins ranged from approximately 45.93% to 52.83%.

Furthermore, the reports indicate that from 2019 to 2023, U.S. Kle’s sales of Kle Radi products accounted for over 60% of its total sales, with a significant contribution to Kle Radi’s revenue.

In 2019, U.S. Kle transitioned from loss to profit, with profits generally increasing until 2023, after which, in 2024, profits declined, and in the first half of 2025, further decreased.

This suggests that the performance was possibly influenced by related-party transactions, with the establishment of a cost-sharing mechanism in June 2024 coinciding with a profit decline.

2.4 The credit policy towards U.S. Kle has been more lenient than for other major overseas distributors, with overdue accounts receivable exceeding 49% in the past four years

According to the August 8, 2024 inquiry reply, the stock transfer company asked Kle Radi to compare the average collection days, credit policies, and accounts receivable ratios for U.S. Kle and other distributors, to assess transaction fairness and whether there are significant differences, potential benefit transfers, or other arrangements.

Kle Radi responded that in 2022-2023, sales to U.S. Kle accounted for about 30.29% of overseas distributor revenue, with credit terms of “payment due in 3 months,” and average collection days of approximately 295 and 289 days, with accounts receivable at 86.91% and 79.3% of revenue.

In contrast, for other top five overseas distributors, credit terms were “payment due in 1 month” or “45 days,” with collection days averaging around 28 to 86 days in 2022 and 31 to 67 days in 2023. Accounts receivable at period-end ranged from about 0.2% to 29.24% of revenue.

The BEI’s inquiry on September 26, 2025, required Kle Radi to justify the receivables aging and overdue ratios, and whether the business is genuine.

As of the end of 2021-2024 and June 2025, accounts receivable from U.S. Kle were approximately 14.5436 million yuan, 55.4k yuan, 211.7k yuan, 388.8k yuan, and 21.7908 million yuan, with overdue amounts of 732.6k yuan, 476.4k yuan, 8.4269 million yuan, 16.86M yuan, and 11.1509 million yuan, respectively. Overdue ratios exceeded 49% in all periods.

In summary, from 2014-2017 and 2019-2025, U.S. Kle has been Kle Radi’s largest customer, contributing over 180 million yuan cumulatively. The cooperation involves overlapping suppliers and customers, shared market results, and a cost-sharing mechanism established in June 2024. U.S. Kle’s profits shifted from loss to profit in 2019, then declined from 2024 onward, with a high overdue receivables ratio.

3. Conclusion

In short, Wuhan Kle Radi and its related party Kangheli’an, controlled by the actual controller’s nephew, are distributors of Kle Radi. The recent inquiry into Kle Radi’s listing application questions the low gross profit margins on sales to Wuhan Kle Radi and related parties. The original business license holder of Kangheli’an shares the same name as an employee of Kle Radi, and in 2023, Wuhan Kle Radi bid jointly with Kle Radi and was awarded the project. During the report period, sales to the same end customer via different models or related-party transactions warrant attention.

Meanwhile, the affiliated company U.S. Kle has been Kle Radi’s largest customer for years, with over 16.89M yuan in contributions. The two parties share market results in some regions, and since June 2024, they established a cost-sharing mechanism. U.S. Kle shifted from profit to loss in 2024, with further profit decline in 2025. The credit policy towards U.S. Kle has been more lenient than for other major overseas distributors, with overdue receivables exceeding 49% over the past four years.

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