# EDGAR Filing Document

**Accession Number:** 0001738906
**File Stem:** 0001410578-25-001911
**Filing Date:** 2025-8
**Character Count:** 191782
**Document Hash:** 227d27521ee5d766eb4a494561323b11
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001410578-25-001911.hdr.sgml**: 20250829

**ACCESSION NUMBER**: 0001410578-25-001911

**CONFORMED SUBMISSION TYPE**: 20-F/A

**PUBLIC DOCUMENT COUNT**: 108

**CONFORMED PERIOD OF REPORT**: 20241231

**FILED AS OF DATE**: 20250829

**DATE AS OF CHANGE**: 20250829

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** 111, Inc.
- **CENTRAL INDEX KEY:** 0001738906
- **STANDARD INDUSTRIAL CLASSIFICATION:** RETAIL-DRUG STORES AND PROPRIETARY STORES [5912]
- **ORGANIZATION NAME:** 07 Trade & Services
- **EIN:** 000000000
- **STATE OF INCORPORATION:** E9
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 20-F/A
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38639
- **FILM NUMBER:** 251275746

**BUSINESS ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 3-4/F, NO.295 ZUCHONGZHI ROAD
- **STREET 2:** PUDONG NEW AREA
- **CITY:** SHANGHAI
- **PROVINCE COUNTRY:** F4
- **ZIP:** 201203
- **BUSINESS PHONE:** 862120536666

**MAIL ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 3-4/F, NO.295 ZUCHONGZHI ROAD
- **STREET 2:** PUDONG NEW AREA
- **CITY:** SHANGHAI
- **PROVINCE COUNTRY:** F4
- **ZIP:** 201203

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** New Peak Group
- **DATE OF NAME CHANGE:** 20180427

?xml version='1.0' encoding='ASCII'? 111, Inc._December 31, 2024

[**Table of Contents**](#TOC)

------

#### UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

### FORM 20-F/A

### (Amendment No. 1)
(Mark One)

☐ **REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934** 

#### OR
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;☒ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

#### For the fiscal year ended December 31, 2024

#### OR
☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

#### For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .

#### OR
☐ **SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** 

**Date of event requiring this shell company report** 

**For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .**

#### Commission file number: 001-38639

### 111, Inc.
(Exact name of Registrant as specified in its charter)

#### N/A
(Translation of Registrant's name into English)

#### Cayman Islands
(Jurisdiction of incorporation or organization)

#### 3-4/F, No.295 ZuChongZhi Road, Pudong New Area Shanghai, 201203 The People's Republic of China
(Address of principal executive offices)

#### Junling Liu, Chief Executive Officer

#### Telephone: +86 21 2053-6666

#### Email: junling @111.com.cn

#### Pudong New Area Shanghai, 201203 The People's Republic of China
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol** | **Name of each exchange on which registered** |
| American depositary shares (one American depositary share representing twenty Class A ordinary shares, par value US$0.00005 per share) | YI | The Nasdaq Stock Market LLC<br>(The Nasdaq Global Market) |
| Class A ordinary shares, par value US$0.00005 per share\* |  | The Nasdaq Stock Market LLC<br>(The Nasdaq Global Market) |

---

\* Not for trading, but only in connection with the listing on the Nasdaq Global Market of American depositary shares.

[**Table of Contents**](#TOC)

Securities registered or to be registered pursuant to Section 12(g) of the Act:

**Not Applicable** 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

**Not Applicable**

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

**As of December 31, 2024, there were 172,877,660 ordinary shares outstanding, par value US$0.00005 per share, being the sum of 100,877,660 Class A ordinary shares and 72,000,000 Class B ordinary Shares.**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☒U.S. GAAP

☐International Financial Reporting Standards as issued by the International Accounting Standards Board

☐Other

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No ☒

**APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS**

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No ☐

------

[**Table of Contents**](#TOC)

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | Page |
| [EXPLANATORY NOTE](#EXPLANATORYNOTE_836720) | [EXPLANATORY NOTE](#EXPLANATORYNOTE_836720) | 1 |
| [Part III](#PARTIII_64223) | [Part III](#PARTIII_64223) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;[Item 17.](#Item17FinancialStatements_925322) | [Financial Statements](#Item17FinancialStatements_925322) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;[Item 18.](#Item18FinancialStatements_764326) | [Financial Statements](#Item18FinancialStatements_764326) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;[Item 19.](#Item19Exhibits_232362) | [Exhibits](#Item19Exhibits_232362) | 2 |

---

i

[**Table of Contents**](#TOC)

**EXPLANATORY NOTE**

111, Inc. (the "Company") is filing this Amendment No. 1 on Form 20-F/A (this "Amendment No. 1") to amend its annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on April 29, 2025 (the "Original Filing"), to amend Items 17 and 18 with the inclusion of an updated opinion from the predecessor auditor which does not include reference to the exclusion of the retrospective adjustments related to basis of presentation and segment reporting discussed in Note 2(a) and 2(ad) to the Company's financial statements, as requested by the SEC in relation to the Original Filing. The Company is restating in their entirety the following sections of the Original Filing: (i) "Part III – Item 17. Financial Statements" and (ii) "Part III – Item 18. Financial Statements" in this Amendment No. 1.

This Amendment No. 1 speaks as of the filing date of the Original Filing, or April 29, 2025. No attempt has been made in this Amendment No. 1 to modify or update in any way any other items or disclosures in the Original Filing. Except as specifically noted herein, this Amendment No. 1 does not amend, update or restate any of the information previously included in the Original Filing, nor does this Amendment No. 1 reflect any event that has occurred after the date of the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and the Company's other filings with the SEC subsequent to April 29, 2025.

As required by Rule 12b-15 of the Securities and Exchange Act of 1934, as amended, the Company is also filing or furnishing the certifications required under Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 as exhibits to this Amendment No. 1.

[**Table of Contents**](#TOC)

**PART III**

#### Item 17. Financial Statements
We have elected to provide financial statements pursuant to Item 18.

#### Item 18. Financial Statements
The consolidated financial statements of 111, Inc., its subsidiaries and its consolidated affiliated entities are included at the end of this annual report.

#### Item 19. Exhibits

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description of Document** |
| 1.1 | [Twelfth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-3_2.htm) |
| 2.1 | [Registrant's Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-4_3.htm) |
| 2.2 | [Registrant's Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.2 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-4_2.htm) |
| 2.3 | [Deposit Agreement between the Registrant, the Bank of New York Mellon and all owner and holders from time to time of ADSs issued thereunder, dated September 12, 2018 (incorporated by reference to Exhibit 4.3 of our registration statement on Form S-8 (file no. 333-229313), as amended, initially filed with the Securities and Exchange Commission on January 22, 2019)](https://www.sec.gov/Archives/edgar/data/1738906/000110465919002594/a19-3005_1ex4d3.htm) |
| 2.4\* | [Description of Securities](https://www.sec.gov/Archives/edgar/data/1738906/000141057825000964/yi-20241231xex2d4.htm) |
| 4.1 | [English translation of 2013 Share Incentive Policy of the Registrant (incorporated by reference to Exhibit 10.1 of our Registration Statement on Form F-1 (file no. 333-226849) filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005629/a2236354zex-10_1.htm) |
| 4.2 | [English translation of 2014 Share Incentive Policy of the Registrant (incorporated by reference to Exhibit 10.2 of our Registration Statement on Form F-1 (file no. 333-226849) filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005629/a2236354zex-10_2.htm) |
| 4.3 | [The 2016 Share Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.3 of our Registration Statement on Form F-1 (file no. 333-226849) filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005629/a2236354zex-10_3.htm) |
| 4.4 | [The 2018 Share Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.4 of our Registration Statement on Form F-1 (file no. 333-226849) filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-10_4.htm) |
| 4.5 | [Form of Employment Agreement between the Registrant and its executive officers (incorporated by reference to Exhibit 10.5 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-10_5.htm) |
| 4.6 | [Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by reference to Exhibit 10.6 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-10_6.htm) |
| 4.21 | [English translation of Property Lease Contract between Kunshan Fuchan Warehousing Services Co., Ltd. and Yao Fang Information Technology (Shanghai) Co., Ltd. dated February 5, 2016 (incorporated by reference to Exhibit 10.21 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005629/a2236354zex-10_21.htm) |
| 4.22 | [English translation of Property Lease/Pre-lease Contract between Shanghai Zhangjiang Hi-tech Park Development Co., Ltd. and Yao Fang Information Technology (Shanghai) Co., Ltd. dated November 28, 2017 (incorporated by reference to Exhibit 10.22 of our registration statement on Form F-1 (file no. 333-226849), as amended, initially filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005629/a2236354zex-10_22.htm) |
| 4.26 | [English translation of Capital Increase Agreement in respect of Yao Fang Information Technology (Shanghai) Co., Ltd. dated August 10, 2020 (incorporated by reference to Exhibit 4.26 of our Annual Report on Form 20-F (file no. 001-38639) filed with the Securities and Exchange Commission on April 30, 2021).](https://www.sec.gov/Archives/edgar/data/1738906/000110465921058014/yi-20201231xex4d26.htm) |

---

[**Table of Contents**](#TOC)

---

| | |
|:---|:---|
| **Exhibit**<br>**Number** | **Description of Document** |
| 4.27 | [English translation of Supplementary Agreement of Capital Increase Agreement in respect of Yao Fang Information Technology (Shanghai) Co., Ltd. dated August 26, 2020 (incorporated by reference to Exhibit 4.27 of our Annual Report on Form 20-F (file no. 001-38639) filed with the Securities and Exchange Commission on April 30, 2021).](https://www.sec.gov/Archives/edgar/data/1738906/000110465921058014/yi-20201231xex4d27.htm) |
| 4.28 | [English translation of Capital Increase Agreement in respect of 1 Pharmacy Yao Fang Technology (Shanghai) Co., Ltd. dated December 14, 2020 (incorporated by reference to Exhibit 4.28 of our Annual Report on Form 20-F (file no. 001-38639) filed with the Securities and Exchange Commission on April 30, 2021).](https://www.sec.gov/Archives/edgar/data/1738906/000110465921058014/yi-20201231xex4d28.htm) |
| 8.1\* | [List of Principal Subsidiaries and Consolidated Affiliated Entities](https://www.sec.gov/Archives/edgar/data/1738906/000141057825000964/yi-20241231xex8d1.htm) |
| 11.1 | [Code of Business Conduct and Ethics (incorporated by reference to Exhibit 99.1 of our Registration Statement on Form F-1 (file no. 333-226849) filed with the Securities and Exchange Commission on August 15, 2018)](https://www.sec.gov/Archives/edgar/data/1738906/000104746918005870/a2236508zex-99_1.htm) |
| 11.2\* | [Statement of Policies Governing Material Non - Public Information and the Prevention of Insider Trading](https://www.sec.gov/Archives/edgar/data/1738906/000141057825000964/yi-20241231xex11d2.htm) |
| 12.1\*\* | [Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](yi-20241231xex12d1.htm) |
| 12.2\*\* | [Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002](yi-20241231xex12d2.htm) |
| 13.1\*\*\* | [Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](yi-20241231xex13d1.htm) |
| 13.2\*\*\* | [Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](yi-20241231xex13d2.htm) |
| 15.1\* | [Consent of Maples and Calder (Hong Kong) LLP](https://www.sec.gov/Archives/edgar/data/1738906/000141057825000964/yi-20241231xex15d1.htm) |
| 15.2\* | [Consent of Grant Thornton Zhitong Certified Public Accountants LLP](https://www.sec.gov/Archives/edgar/data/1738906/000141057825000964/yi-20241231xex15d2.htm) |
| 15.3\* | [Consent of Commerce & Finance Law Offices](https://www.sec.gov/Archives/edgar/data/1738906/000141057825000964/yi-20241231xex15d3.htm) |
| 15.4\*\* | [Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP](yi-20241231xex15d4.htm) |
| 15.5 | [Letter from Deloitte Touche Tohmatsu Certified Public Accountants LLP to the Securities and Exchange Commission, dated July 19, 2024 (incorporated by reference to Exhibit 16.1 to our Form 6 - K (File No. 001 - 38639), filed with the SEC on July 19, 2024)](https://www.sec.gov/Archives/edgar/data/1738906/000095010324010255/dp214579_ex1601.htm) |
| 97 | [Clawback Policy (incorporated by reference to Exhibit 97 to our Form 20 - F (File No. 001 - 38639) filed with the SEC on May 14, 2024)](https://www.sec.gov/Archives/edgar/data/1738906/000110465924060922/yi-20231231xex97.htm) |
| 101.INS\* | Inline XBRL Instance Document |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL\* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF\* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB\* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE\* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104\* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

\*&nbsp;&nbsp;&nbsp;&nbsp; Previously filed with the Original Filing

\*\* Filed herewith

\*\*\* Furnished herewith

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**SIGNATURES**

The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

---

| | | |
|:---|:---|:---|
|  | 111, Inc. | 111, Inc. |
|  | By: | /s/ Junling Liu |
|  | Name: | Junling Liu |
|  | Title:  | Chief Executive Officer and Co-Chairman of the Board |
| Date: August 29, 2025 |  |  |

---

[**Table of Contents**](#TOC)

**111, INC.**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
| [Report of Independent Registered Public Accounting Firm](#REPORTOFINDEPENDENTREGISTEREDPUBLICACCOU) (PCAOB ID: 1487) | F-2 |
| [Reports of Independent Registered Public Accounting Firm](#PUBLICACCOUNTINGFIRM_760657) (PCAOB ID: 1113) | F-4 |
| [Consolidated Balance Sheets as of December 31, 2023 and 2024](#BALANCESHEETS_739852) | F-5 |
| [Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022, 2023 and 2024](#COMPREHENSIVELOSS_91398) | F-6 |
| [Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the years ended December 31, 2022, 2023 and 2024](#CONSOLIDATEDSTATEMENTSOFSHAREHOLDERSDEFI) | F-7 |
| [Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2023 and 2024](#CONSOLIDATEDSTATEMENTSOFCASHFLOWS_557788) | F-8 |
| [Notes to Consolidated Financial Statements](#a1ORGANIZATIONANDPRINCIPALACTIVITIES_458) | F-9 |
| [Financial Statements Schedule I — Financial Information for Parent Company](#ADDITIONALFINANCIALINFORMATIONFINANCIALS) | F-40 |

---

[**Table of Contents**](#TOC)

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Board of Directors and Shareholders

111, Inc.

#### Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of 111, Inc. and subsidiaries (the "Company") as of December 31, 2024, the related consolidated statements of comprehensive loss, changes in shareholders' equity (deficit), and cash flows for the year then ended, and the related notes and the financial statement schedule (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

**Convenience Translation**

Our audit also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2(aj). Such United States dollar amounts are presented solely for the convenience of readers in the United States of America.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

[**Table of Contents**](#TOC)

**Revenue Recognition**

As described in Note 2(m) and Note 13, the Company generated substantially all of its revenue from sales of medicines, healthcare products and other wellness merchandise through its online platforms in the year ended December 31, 2024, of which product revenues from the B2B segment ("B2B product sales") were RMB14,033 million, or 97.5% of total revenues. The Company recognizes revenues from B2B product sales at the point in time when the delivery was completed and uses systems to process and record its revenue transactions.

The principal considerations for our determination that occurrence of product revenue is a critical audit matter are the inherent risk around the occurrence of revenue given the significance of B2B product sales and large volume processed by the systems. Our audit procedures related to B2B product revenue recognition included the following, among others:

● We tested the design and implementation of the controls over product revenue recognition.

● We performed tests on product revenue transaction data to ensure consistency between operation system and the accounting system, to evaluate data accuracy and completeness.

● We analyzed product revenue transaction data by comparing data in different periods and identifying transactions with characteristics of audit interest for further testing to evaluate the reasonableness of the transactions.

● We tested revenue recognition through performing test of details on selected orders by tracing the selected samples to supporting documentation such as cash collection and logistic delivery information to verify whether the revenue was properly recorded.

/s/ Grant Thornton Zhitong Certified Public Accountants LLP

We have served as the Company's auditor since 2024.

Shanghai, The People's Republic of China

April 29, 2025

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**REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

TO SHAREHOLDERS AND THE BOARD OF DIRECTORS OF 111, INC.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheet of 111, Inc. and its subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of comprehensive loss, changes in shareholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2023 and the related notes and the financial statement schedule (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

**Going Concern**

The 2023 financial statements were prepared assuming that the Company would continue as a going concern. As of the date of issuance of the Company's 2023 financial statements, the Company had accumulated deficit due to recurring losses from operations, and had not yet completed its qualified initial public offerings, which, if not completed as planned, would result in the potential cash redemption of the redeemable non-controlling interest, that raised substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters were also described in the 2023 financial statements. The 2023 financial statements did not include any adjustments that might result from the outcome of this uncertainty.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shanghai, the People's Republic of China

May 14, 2024

We have served as the Company's auditor since 2018. In 2024, we became the predecessor auditor.

[**Table of Contents**](#TOC)

#### 111, INC.

#### CONSOLIDATED BALANCE SHEETS
**(Amounts in thousands, except for share and per share data)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **As of December 31,**  | **As of December 31,**  | **As of December 31,**  |
|  |  | **2023** | **2024** | **2024** |
|  |  |  |  | **US$** |
|  | **Notes** | **RMB** | **RMB** | **(Note 2 (aj))** |
| **ASSETS** |  |  |  |  |
| Current assets: |  |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents |  | 603523 | 462289 | 63333 |
| &nbsp;&nbsp;Restricted cash |  | 20025 | 56043 | 7678 |
| &nbsp;&nbsp;Short-term investments measured at fair value | 3 | 50143 |  |  |
| &nbsp;&nbsp;Accounts receivable, net of allowance of credit loss of RMB4,282 and RMB3,223 as of December 31, 2023 and 2024, respectively |  | 536823 | 413101 | 56595 |
| &nbsp;&nbsp;Notes receivable | 4 | 77598 | 78827 | 10799 |
| &nbsp;&nbsp;Inventories | 5 | 1419396 | 1387403 | 190073 |
| &nbsp;&nbsp;Prepayments and other current assets | 6 | 225823 | 251994 | 34523 |
| Total current assets |  | 2933331 | 2649657 | 363001 |
| Property and equipment, net |  | 34340 | 32903 | 4508 |
| Intangible assets, net |  | 2256 | 1437 | 197 |
| Long-term investments |  | 2000 |  |  |
| Operating lease right-of-use assets | 7 | 103799 | 89071 | 12203 |
| Other non-current assets |  | 13310 | 14682 | 2011 |
| Total assets |  | 3089036 | 2787750 | 381920 |
| **LIABILITIES AND EQUITY** |  |  |  |  |
| &nbsp;&nbsp;Short-term borrowings | 8 | 338075 | 160981 | 22054 |
| &nbsp;&nbsp;Accounts payable |  | 1588693 | 1721425 | 235834 |
| &nbsp;&nbsp;Accrued expenses and other current liabilities | 9 | 818295 | 460173 | 63043 |
| Total current liabilities |  | 2745063 | 2342579 | 320931 |
| Long-term operating lease liabilities | 7 | 62624 | 55448 | 7596 |
| Other non-current liabilities |  | 5245 | 8961 | 1228 |
| Total liabilities |  | 2812932 | 2406988 | 329755 |
| Commitments and contingencies | 19 |  |  |  |
| **MEZZANINE EQUITY** |  |  |  |  |
| Redeemable non-controlling interests | 10 | 870825 | 1038914 | 142331 |
| **SHAREHOLDERS' DEFICIT** |  |  |  |  |
| Ordinary shares Class A ($0.00005 par value per share; 800,000,000 shares authorized; 101,588,106 issued; 99,044,214and 100,877,660 outstanding as of December 31, 2023 and 2024, respectively) | 12 | 32 | 33 | 5 |
| Ordinary shares Class B ($0.00005 par value per share; 72,000,000 shares authorized, 72,000,000 shares issued and outstanding as of December 31, 2023 and 2024) | 12 | 25 | 25 | 3 |
| Treasury shares (333,000 shares as of December 31, 2023 and 2024) |  | (5887) | (5887) | (807) |
| Additional paid-in capital |  | 3169114 | 3172820 | 434675 |
| Accumulated deficit |  | (3819249) | (3883992) | (532105) |
| Accumulated other comprehensive income |  | 72514 | 74357 | 10187 |
| Total 111, Inc.' deficit |  | (583451) | (642644) | (88042) |
| Non-controlling interests | 11 | (11270) | (15508) | (2124) |
| Total deficit |  | (594721) | (658152) | (90166) |
| Total liabilities, mezzanine equity and equity |  | 3089036 | 2787750 | 381920 |

---

The accompanying notes are an integral part of these financial statements.

[**Table of Contents**](#TOC)

#### 111, INC.

#### CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
**(Amounts in thousands, except for share and per share data)**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  |  | **2022** | **2023** | **2024** | **2024** |
|  | **Notes** | **RMB** | **RMB** | **RMB** | **US$** |
|  |  |  |  |  | **(Note 2 (aj))** |
| Net revenues | 13 | 13516698 | 14948129 | 14401249 | 1972963 |
| Operating costs and expenses: |  |  |  |  |  |
| &nbsp;&nbsp;Cost of products sold |  | (12676722) | (14099151) | (13572020) | (1859359) |
| &nbsp;&nbsp;Fulfillment expenses |  | (401414) | (400538) | (381035) | (52202) |
| &nbsp;&nbsp;Selling and marketing expenses |  | (457880) | (448387) | (313897) | (43004) |
| &nbsp;&nbsp;General and administrative expenses |  | (205623) | (224202) | (70907) | (9714) |
| &nbsp;&nbsp;Technology expenses |  | (139504) | (124341) | (69635) | (9540) |
| &nbsp;&nbsp;Other operating income (expenses), net |  | (6556) | (1607) | 8359 | 1145 |
| Total operating costs and expenses |  | (13887699) | (15298226) | (14399135) | (1972674) |
| (Loss) Income from operations |  | (371001) | (350097) | 2114 | 289 |
| Interest income |  | 8118 | 8834 | 7041 | 965 |
| Interest expense |  | (13443) | (20141) | (28331) | (3881) |
| Foreign exchange gain (loss) |  | (7875) | 610 | (909) | (125) |
| Other income (loss), net |  | 8132 | 7612 | (595) | (82) |
| Loss before income taxes |  | (376069) | (353182) | (20680) | (2834) |
| Income tax expense | 16 |  | (251) | (96) | (13) |
| Net loss |  | (376069) | (353433) | (20776) | (2847) |
| Net loss attributable to non-controlling interest  |  | 15281 | 16829 | 8398 | 1151 |
| Net loss attributable to redeemable non-controlling interest | 10 | 32329 | 30852 | 1992 | 273 |
| Adjustment attributable to redeemable non-controlling interest | 10 | (88419) | (86941) | (54357) | (7447) |
| Net loss attributable to ordinary shareholders |  | (416878) | (392693) | (64743) | (8870) |
| Other comprehensive income (loss), net of tax of nil |  |  |  |  |  |
| &nbsp;&nbsp;Unrealized gains of available-for-sale securities |  | 4810 | 4343 | 1074 | 147 |
| &nbsp;&nbsp;Realized gains of available-for-sale securities |  | (4464) | (4166) | (1217) | (167) |
| &nbsp;&nbsp;Foreign currency translation adjustments |  | 15869 | (3249) | 1986 | 273 |
| Comprehensive loss |  | (400663) | (395765) | (62900) | (8617) |
| Loss per share: |  |  |  |  |  |
| &nbsp;&nbsp;Basic and diluted | 15 | (2.50) | (2.33) | (0.38) | (0.05) |
| Weighted average number of shares used in computation of loss per share: |  |  |  |  |  |
| &nbsp;&nbsp;Basic and diluted | 15 | 166634121 | 168609128 | 171835632 | 171835632 |

---

The accompanying notes are an integral part of these financial statements.

[**Table of Contents**](#TOC)

#### 111, INC.

#### CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
**(Amounts in thousands, except for share data)**

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Ordinary Shares** | **Ordinary Shares** | **Ordinary Shares** | **Ordinary Shares** |  |  | | | | | |
|  | **Class A** | **Class A** | **Class B** | **Class B** |  |  | | | | | |
|  | | | | | **Treasury Shares** | **Treasury Shares** | | | | | |
|  | **Outstanding**<br>**Shares** | <br>**Amount** | **Outstanding**<br>**Shares** | <br>**Amount** | **Shares** | **Amount** | <br>**Additional**<br>**Paid-in**<br>**Capital** | <br>**Accumulated**<br>**Deficit** | **Accumulated**<br>**Other**<br>**Comprehensive**<br>**Income (Loss)** | <br>**Non-**<br>**controlling**<br>**Interests** | <br>**Total** <br>**Equity**<br>**(Deficit)** |
|  |  | **RMB** |  | **RMB** |  | **RMB** | **RMB** | **RMB** | **RMB** | **RMB** | **RMB** |
| Balance at January 1, 2022 | 94148486 | 31 | 72000000 | 25 | 2330620 | (40859) | 2817789 | (3009678) | 59371 | 21176 | (152145) |
| Share-based compensation  |  |  |  |  |  |  | 162069 |  |  |  | 162069 |
| Issuance of ordinary shares upon the exercise of stock options and vesting of restricted share units | 886138 |  |  |  |  |  | 274 |  |  |  | 274 |
| Former VIE reorganization |  |  |  |  |  |  | (2958) |  |  |  | (2958) |
| Net loss |  |  |  |  |  |  |  | (360788) |  | (15281) | (376069) |
| Net loss attributable to redeemable non-controlling interest |  |  |  |  |  |  |  | 32329 |  |  | 32329 |
| Adjustment attributable to redeemable non-controlling interest |  |  |  |  |  |  |  | (88419) |  |  | (88419) |
| Unrealized gains of available-for-sale securities, net of tax |  |  |  |  |  |  |  |  | 4810 |  | 4810 |
| Reclassification of realized gains, net of tax |  |  |  |  |  |  |  |  | (4464) |  | (4464) |
| Foreign currency translation, net of tax |  |  |  |  |  |  |  |  | 15869 |  | 15869 |
| Balance at December 31, 2022 | 95034624 | 31 | 72000000 | 25 | 2330620 | (40859) | 2977174 | (3426556) | 75586 | 5895 | (408704) |
| Share-based compensation  |  |  |  |  |  |  | 226690 |  |  |  | 226690 |
| Issuance of ordinary shares upon the exercise of stock options and vesting of restricted share units  | 2011970 | 1 |  |  |  |  | 222 |  |  |  | 223 |
| Vest of restricted stock and stock option in Treasury Shares | 1997620 |  |  |  | (1997620) | 34972 | (34972) |  |  |  |  |
| Net loss |  |  |  |  |  |  |  | (336604) |  | (17165) | (353769) |
| Net loss attributable to redeemable non-controlling interest |  |  |  |  |  |  |  | 30852 |  |  | 30852 |
| Adjustment attributable to redeemable non-controlling interest |  |  |  |  |  |  |  | (86941) |  |  | (86941) |
| Unrealized gains of available-for-sale securities, net of tax |  |  |  |  |  |  |  |  | 4343 |  | 4343 |
| Reclassification of realized gains, net of tax |  |  |  |  |  |  |  |  | (4166) |  | (4166) |
| Foreign currency translation, net of tax |  |  |  |  |  |  |  |  | (3249) |  | (3249) |
| Balance at December 31, 2023 | 99044214 | 32 | 72000000 | 25 | 333000 | (5887) | 3169114 | (3819249) | 72514 | (11270) | (594721) |
| Share-based compensation  |  |  |  |  |  |  | 20149 |  |  |  | 20149 |
| Issuance of ordinary shares upon the exercise of stock options and vesting of restricted share units | 1833446 | 1 |  |  |  |  | 13 |  |  |  | 14 |
| Capital repurchase from non-controlling interest holders (Note 11) |  |  |  |  |  |  | (16456) |  |  | 2935 | (13521) |
| Capital contribution from non-controlling interest holders |  |  |  |  |  |  |  |  |  | 1225 | 1225 |
| Net loss |  |  |  |  |  |  |  | (12378) |  | (8398) | (20776) |
| Net loss attributable to redeemable non-controlling interest |  |  |  |  |  |  |  | 1992 |  |  | 1992 |
| Adjustment attributable to redeemable non-controlling interest |  |  |  |  |  |  |  | (54357) |  |  | (54357) |
| Unrealized gains of available-for-sale securities, net of tax |  |  |  |  |  |  |  |  | 1074 |  | 1074 |
| Reclassification of realized gains, net of tax |  |  |  |  |  |  |  |  | (1217) |  | (1217) |
| Foreign currency translation, net of tax |  |  |  |  |  |  |  |  | 1986 |  | 1986 |
| Balance at December 31, 2024 | 100877660 | 33 | 72000000 | 25 | 333000 | (5887) | 3172820 | (3883992) | 74357 | (15508) | (658152) |

---

The accompanying notes are an integral part of these financial statements.

[**Table of Contents**](#TOC)

#### 111, INC.

#### CONSOLIDATED STATEMENTS OF CASH FLOWS
**(Amounts in thousands)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** | **2024** |
|  |  |  |  | **US$** |
|  | **RMB** | **RMB** | **RMB** | **(Note 2 (aj))** |
| Operating activities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net loss  | (376069) | (353433) | (20776) | (2847) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash used in operating activities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation | 162069 | 226691 | 20149 | 2760 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 40819 | 21780 | 16967 | 2324 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of property and equipment | 1372 | 992 | 31 | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disposal of intangible assets | 18 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory write-down | 28498 | 19910 | 3887 | 533 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit loss | 2694 | 1950 | 519 | 71 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investment (income) loss, net | (4214) | (4025) | 170 | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncash lease expense | 69322 | 62610 | 48497 | 6644 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange loss | 7875 | 610 | 910 | 125 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (86977) | (49898) | 123203 | 16879 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes receivable | 47402 | (34266) | (1230) | (169) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (406291) | 59594 | 28107 | 3851 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepayments and other current assets | (39491) | 57165 | (26214) | (3591) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-current assets | 1738 | 7038 | (1372) | (188) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 417497 | (176735) | 132734 | 18184 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 177644 | (229975) | (32199) | (4410) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities | (65521) | (62497) | (34082) | (4669) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-current liabilities | (1537) | 5245 | 3715 | 509 |
| Net cash (used in) provided by operating activities | (23152) | (447244) | 263016 | 36033 |
| Investing activities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of property and equipment | (31574) | (9822) | (15199) | (2082) |
| &nbsp;&nbsp;&nbsp;Purchases of intangible assets | (114) | (3) |  |  |
| &nbsp;&nbsp;&nbsp;Purchase of long-term investments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Payment of former VIE reorganization | (2958) |  |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of long-term investments | 750 |  | 900 | 123 |
| &nbsp;&nbsp;&nbsp;Purchase of short-term investments | (1268925) | (914326) | (460000) | (63020) |
| &nbsp;&nbsp;&nbsp;Proceeds from sale or maturity of short-term investments | 1254463 | 1074246 | 511217 | 70036 |
| &nbsp;&nbsp;&nbsp;Proceeds from disposal of property and equipment | 1185 | 1648 | 458 | 63 |
| Net cash (used in) provided by investing activities | (47173) | 151743 | 37376 | 5120 |
| Financing activities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net proceeds from issuance of ordinary shares upon the exercise of stock options | 274 | 223 | 14 | 2 |
| &nbsp;&nbsp;&nbsp;Contribution from redeemable non-controlling interest holders |  |  | 1225 | 168 |
| &nbsp;&nbsp;&nbsp;Payment for share repurchase from non-controlling interest holders |  |  | (13521) | (1852) |
| &nbsp;&nbsp;&nbsp;Repayment of redemption rights from redeemable non-controlling interest holders |  |  | (87502) | (11988) |
| &nbsp;&nbsp;&nbsp;Proceeds from short-term bank borrowings | 788153 | 919635 | 438864 | 60124 |
| &nbsp;&nbsp;&nbsp;Repayment of short-term bank borrowings | (868821) | (750127) | (615958) | (84386) |
| &nbsp;&nbsp;&nbsp;Proceeds from other financing activities | 646399 | 1451352 | 710954 | 97400 |
| &nbsp;&nbsp;&nbsp;Repayment for other financing activities | (543270) | (1415105) | (840312) | (115122) |
| Net cash provided by (used in) financing activities | 22735 | 205978 | (406236) | (55654) |
| Effect of exchange rate changes on cash and cash equivalents, and restricted cash | 3709 | (3720) | 628 | 86 |
| Net decrease in cash and cash equivalents, and restricted cash | (43881) | (93243) | (105216) | (14415) |
| Cash and cash equivalents, and restricted cash at the beginning of the year | 760672 | 716791 | 623548 | 85426 |
| Cash and cash equivalents, and restricted cash at the end of the year | 716791 | 623548 | 518332 | 71011 |
| Supplemental disclosure of cash flow information: |  |  |  |  |
| Interest paid | 9549 | 10423 | 6157 | 844 |
| Income tax paid |  | 251 | 96 | 13 |
| Supplemental disclosures of non-cash investing and financing activities: |  |  |  |  |
| Change in fair value of available-for-sale investments | 4810 | 4343 | 1074 | 147 |
| Purchases of property and equipment included in payables | 570 |  |  |  |
| Adjustment attributable to redeemable non-controlling interest | (88419) | (86941) | (54357) | (7447) |

---

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **2022** | **2023** | **2024** | **2024** |
|  | **RMB** | **RMB** | **RMB** | **US$** |
|  |  |  |  | **(Note 2 (aj))** |
| Cash and cash equivalents | 673669 | 603523 | 462289 | 63333 |
| Restricted cash | 43122 | 20025 | 56043 | 7678 |
| Cash and cash equivalents, and restricted cash  | 716791 | 623548 | 518332 | 71011 |

---

The accompanying notes are an integral part of these financial statements.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024**

**(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;1. **ORGANIZATION AND PRINCIPAL ACTIVITIES** 

111, Inc. (the "Company"), was incorporated under the laws of the Cayman Islands in May 2013. The Company, through its subsidiaries, variable interest entities ("former VIE") and former VIE's subsidiaries (collectively, the "Group"), operates an integrated online and offline platform in the healthcare ecosystem in China, whereby the Group is principally engaged in the sales of medical and wellness products through online retail and wholesale pharmacies and offline retail pharmacies, as well as provision of certain value-added services, such as online consultation services and e-prescription services to consumers in the People's Republic of China (the "PRC").

As of December 31, 2024, the Group operates its business mainly through the following subsidiaries:

---

| | | | | |
|:---|:---|:---|:---|:---|
| Name of subsidiaries | Date of <br>incorporation/<br>establishment | Place of<br>incorporation/<br>establishment | Percentage of<br>shareholdings | Principal activities |
| Yao Wang Corporation Limited ("Yao Wang ") | June 4, 2013 | Hong Kong | 100.0000% | Investment holding |
| 1 Pharmacy Technology | August 12, 2013 | Shanghai | 89.0408% | Research and development, and consulting |
| Yihao Pharmacy | March 7, 2003 | Guangdong | 89.0408% | Warehousing, logistics and procurement |
| Guangdong Yihao Pharmaceutical Chain Co., Ltd. ("Yihao Pharmaceutical Chain") | November 1, 2001 | Guangdong | 89.0408% | Retail |
| Wuhan Central China Drug Trading Co., Ltd. ("Wuhan Huazhong") | August 5, 2015 | Wuhan | 62.3286% | Software development and information technology support |
| Chongqing Yihao Pharmacy Co., Ltd.("Chongqing Yihao Pharmacy") | May 18, 2018 | Chongqing | 89.0408% | Warehousing, logistics and procurement |
| Tianjin Yihao Pharmacy Co., Ltd. ("Tianjin Yihao Pharmacy") | June 20, 2018 | Tianjin | 89.0408% | Warehousing, logistics and procurement |
| Kunshan Yifang Pharmacy Co., Ltd. ("Kunshan Yifang Pharmacy") | July 30, 2018 | Kunshan | 89.0408% | Warehousing, logistics and procurement |
| Hubei Yihao Pharmacy Co., Ltd ("Hubei Yihao Pharmacy") | Aug 31, 2019 | Wuhuan | 89.0408% | Warehousing, logistics and procurement |
| Shanxi Yaofang Pharmacy Co., Ltd ("Shanxi Yaofang Pharmacy") | Oct 15, 2020 | Shanxi | 89.0408% | Warehousing, logistics and procurement |
| Liaoning Yaofang Pharmacy Co., Ltd ("Liaoning Yaofang Pharmacy") | Nov 6, 2020 | Liaoning | 89.0408% | Warehousing, logistics and procurement |

---

&nbsp;&nbsp;&nbsp;&nbsp;2. **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Basis of presentation

The consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America ("US GAAP").

The consolidated financial statements have been prepared assuming that the Group will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Group's ability to generate cash flows from operations, and the Group's ability to arrange adequate financing arrangements, to support its working capital requirements.

For the years ended December 31, 2022, 2023 and 2024, the Group incurred net losses of RMB376,069, RMB353,433 and RMB20,776, respectively. For the years ended December 31, 2022, 2023, the Group generated negative cash flows from operating activities amounting to RMB23,152 and RMB447,244, respectively. In contrast, the Group generated positive operating cash flows of RMB263,016 for the year ended December 31, 2024. As of December 31, 2024, the Group had working capital of RMB307,078, shareholders' deficit of RMB642,644, and cash and cash equivalents, and restricted cash balance of RMB518,332. As of December 31, 2024, the Group also had outstanding borrowings of RMB160,981 due in the next 12 months, and other current liabilities of RMB2,181,598, including accounts payable and accrued expenses and other current liabilities.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(a) Basis of presentation (Continued)***

Furthermore, under the equity financing agreement signed in 2020 (Note 10) between 1 Pharmacy Technology and its investors, if 1 Pharmacy Technology cannot complete qualified initial public offerings ("IPOs") before June 30, 2023, the investors have the rights to request Yao Wang to redeem all or part of their equity at the price of the investment cost plus annual interest rate of 6%. As of December 31, 2024, redeemable non-controlling interests amounting to RMB39,142 have been classified as accrued expense and other current liabilities; RMB1,038,914 remained as redeemable non-controlling interests where significant majority of the investors signed the share repurchase agreements with the Company in 2024 and 2025, to agree not to exercise their redemption rights within certain agreed period of times. These conditions may raise substantial doubt about the Group's ability to continue as a going concern within one year after the date that the financial statements are issued. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.

Management's plan to improve the Company's liquidity and successfully mitigate the substantial doubt by implemented the following plans and actions:

● The Group has been actively communicating with redeemable non-controlling interest holders to reschedule the repayments or restructure the redemption obligations. As of the date of issuance of the financial statements, certain of these holders with carrying amount of RMB 631,698 at December 31, 2024 have signed the share repurchase agreements to facilitate the repayments where the second instalment will be 20% of the principal due on September 30, 2025 if the holders exercise their redemption rights subject to 90 -day advance notice, and the rest 70% principal as well as all accumulated interests will be due on September 30, 2026 if the holders exercise their redemption rights subject to 90 -day advance notice. Certain of these holders with carrying amount of RMB 286,314 as of December 31, 2024 have signed the share repurchase agreements and commitments to rearrange their redemption schedules where 20% of the principal will be due no later than September 30, 2025 and the remaining 70% principal as well as all accumulated interests will be due on September 30, 2026 if the holders exercise their redemption rights. Certain of these holders with carrying amount of RMB 24,833 as of December 31, 2024 have signed the share repurchase agreements to facilitate the repayments where the first instalment is 30% of the principal due on September 30, 2025 if the holders exercise their redemption rights, and the remaining 70% principal as well as all accumulated interests will be due on September 30, 2026 if the holders exercise their redemption rights. Certain of these holders with carrying amount of RMB 85,594 as of December 31, 2024 have signed the share repurchase agreements to facilitate the repayments where the second instalment will be 20% of the principal due on September 30, 2025 if the holders exercise their redemption rights subject to 90 -day advance notice and the rest 71.92% principal as well as all accumulated interests will be due on September 30, 2026 subject to 90 -day advance notice. Pursuant to the share repurchase agreements, in the event that 1 Pharmacy Technology proceeds with an IPO, the unredeemed portions will be entitled to a proportionate share of the listing proceeds in accordance with their equity interests. The Group has been actively evaluating strategic capital restructuring initiatives, including potential mergers and acquisitions opportunities, to enhance its competitive positioning in the market and optimize its capital structure for long-term value creation.

● Management has consistently secured bank loan facilities to support its daily operations. The Group has entered into a Master Guarantee Facility Agreement with a bank, that provides a committed credit facility up to RMB 100,000 , which are guaranteed through March 2030. Pursuant to the agreement, there are undrawn balance of RMB 50,000 available for use as of the date of issuance of the financial statements. Additionally, the Group has entered into another credit facility agreement with a bank that provides borrowing up to RMB 30,000 , which expires in January 2026.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(a) Basis of presentation (Continued)***

● Management has taken variety of initiatives to improve the Group's liquidity and financial position, including utilizing the supplier chain financings arrangement, as well as continuing efforts to achieve margin expansion and implement cost reduction program. As a result, the Group generated positive operating cash flows of RMB 263,016 for the year ended December 31, 2024.

Based on the above actions, management believes, after considerations to its plans, that the Group has adequate resources to meet its obligations as they come due for at least twelve months from the date of issuance of these financial statements. Accordingly, the management has prepared the financial statements on the going concern basis.

The consolidated financial statements include the financial statements of the Company, its subsidiaries, former VIE and former VIE's subsidiaries for which the Company is the primary beneficiary. All intercompany transactions, balances and unrealized profit and losses have been eliminated upon consolidation.

The Group evaluates the need to consolidate certain former VIE in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or the entity is structured with disproportionate voting rights, and substantially all of the activities are conducted on behalf of an investor with disproportionately few voting rights.

The Group is deemed as the primary beneficiary of and consolidates variable interest entities when the Group has the power to direct the activities that most significantly impact the economic success of the entities and effectively assumes the obligation to absorb losses or has the rights to receive benefits that are potentially significant to the entities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)***Basis of consolidation***

As of the commence date of the Group, as a foreign-invested company engaged in Internet-based businesses, the Group is subject to significant restrictions under current PRC laws and regulations, specifically the Company and its PRC subsidiary, 1 Pharmacy Technology, are both restricted from holding the licenses that are necessary for the online operation in China. To comply with these restrictions, the Company conducts the online operations principally through Yihao Pharmacy Chain via Yihao Pharmacy. Yihao Pharmacy Chain holds the licenses necessary to conduct the internet-related operations of 1 Medicine Marketplace and 1 Pharmacy in China. The foreign party investing in e-commerce business, as a type of value-added telecommunication services, has been allowed to hold up to 100% of the equity interests of the Foreign-Invested Telecommunications Enterprises (FITE) in 2015. Yihao Pharmaceutical Chain operates e-commerce business, which falls within the scope of online data processing and transaction processing (operating e-commerce), and therefore 111, Inc. is allowed to hold 100% of its equity.

Prior to the reorganization in February 2022, since the Company does not have any equity interests in Yihao Pharmacy, in order to exercise effective control over its operations, the Company, through its wholly owned subsidiary, 1 Pharmacy Technology, entered into a series of contractual arrangements with Yihao Pharmacy and its shareholders, pursuant to which the Company is entitled to receive effectively all economic benefits generated from Yihao Pharmacy shareholders' equity interests in it. Details of the key agreements entered into between 1 Pharmacy Technology, Yihao Pharmacy and each of its two individual shareholders nominated by the Founders ("Nominees") in September 2013 are as follows:

Exclusive Option Agreement: Under the exclusive option agreement, the Nominees granted an irrevocable assets and equity option to 1 Pharmacy Technology, that entitles 1 Pharmacy Technology or its designated entity or individual to acquire all or a portion of the assets owned by Yihao Pharmacy and its subsidiaries and all the equity interests held by nominees in Yihao Pharmacy and its subsidiaries at its sole discretion, at zero price or the lowest price permitted under PRC laws then in effect. The option may be exercised by 1 Pharmacy Technology or its designee. The exclusive option agreement remains effective for the same period as the exclusive support service agreement.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)***Basis of consolidation (Continued)***

Proxy Agreement: Under the shareholder voting right proxy agreement, the Nominees irrevocably grant any person designated by 1 Pharmacy Technology the power to exercise all voting rights. This Agreement may not be terminated without the consent of 1 Pharmacy Technology, which may unilaterally terminate the agreement, by giving a thirty (30) day prior written notice to the Nominees. The proxy agreement remains in force for the same period as the exclusive support services agreement.

In February 2022, 1 Pharmacy Technology purchased equity interests in Yihao Pharmacy from its shareholders, Mr. Yue Xuan and Ms. Jing Liu, at fair value; and, as a results, the contractual arrangements of VIE were terminated. Following such transaction, all of the former VIEs became the Company's subsidiaries in which the Company had direct equity ownership.

The agreements that transfer economic benefits to the Company include:

*Equity Pledge Agreement:* Under the equity pledge agreement, all of the equity interest in Yihao Pharmacy were pledged to 1 Pharmacy Technology to guarantee the performance of the obligations of Yihao Pharmacy and Nominees under the exclusive support services agreement, the proxy agreement, the exclusive option agreement, and repayment of all accounts payable to 1 Pharmacy Technology from time to time. If the Nominees or Yihao Pharmacy breach their respective contractual obligations, 1 Pharmacy Technology, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests. Pursuant to the equity pledge agreement, the Nominees shall not transfer, assign or otherwise create any new encumbrance on their respective equity interest in Yihao Pharmacy without the prior written consent of 1 Pharmacy Technology. The equity pledge right enjoyed by 1 Pharmacy Technology will expire when the Nominees and Yihao Pharmacy have fully performed their respective contractual obligations, including but not limited to pay services fees to the 1 Pharmacy Technology under the exclusive support services agreement, authorize the 1 Pharmacy Technology to act as its attorney-in fact to exercise shareholders' rights of Nominees under the proxy agreements, grant exclusive option to the 1 Pharmacy Technology or any third party designated by 1 Pharmacy Technology to purchase all or part of their respective equity interests at the lowest price permitted by law under the exclusive option agreements, and repay all accounts payable to 1 Pharmacy Technology.

*Exclusive Support Service Agreement:* Pursuant to the exclusive support service agreement, 1 Pharmacy Technology provides Yihao Pharmacy with a series of technical support services and is entitled to receive related fees. This agreement shall be in full force and effective until Yihao Pharmacy's valid operation term as stated on business license expires. During the term of this agreement, 1 Pharmacy Technology shall be the exclusive provider of the services. Yihao Pharmacy shall not seek or accept similar services from other providers without the prior written approval of 1 Pharmacy Technology. The agreement will remain effective for ten years and will be automatically extended for another ten years thereafter, unless 1 Pharmacy Technology terminates the agreement or it is terminated in advance pursuant to other provisions of the agreement such as bankruptcy of one party or one party's failure to perform its obligation for more than six consecutive months due to a force majeure event.

In September 2019, exclusive support services agreements with each of the variable interest entities were amended, pursuant to which, the variable interest entities agree to pay service fees in an amount equivalent to the balance calculated as 3% of quarterly revenue (exclusive of revenue from related parties) of the variable interest entities on a quarterly basis. 1 Pharmacy Technology has the right to delay or waive payment of service fees at its discretion and the service fee level is subject to adjustment at any time upon mutual agreement between 1 Pharmacy Technology and the variable interest entities.

Similar contractual agreements were also entered into by 1 Pharmacy Technology, Yihao Pharmaceutical Chain and Yao Wang, and their respective shareholders in September 2013 and September 2019.

US GAAP provides guidance on the identification of VIE and financial reporting for entities over which control is achieved through means other than voting interests. The Group evaluates each of its interests in an entity to determine whether or not the investee is a VIE and, if so, whether the Group is the primary beneficiary of such VIE. In determining whether the Group is the primary beneficiary, the Group considers if the Group (1) has power to direct the activities that most significantly affect the economic performance of the VIE, and (2) receives the economic benefits of the VIE that could be significant to the VIE. If deemed the primary beneficiary, the Group consolidates the VIE.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)***Basis of consolidation (Continued)***

The irrevocable power of attorney has conveyed all shareholder rights held by the former VIE's shareholders to 1 Pharmacy Technology, including the right to appoint board members who nominate the general managers of the former VIE to conduct day-to-day management of the former VIE's businesses, and to approve significant transactions of the former VIE. In addition, the exclusive option agreements provide 1 Pharmacy Technology with a substantive kick-out right of the former VIE's shareholders through an exclusive option to purchase all or any part of the shareholders' equity interest in the former VIE at zero price or the lowest price permitted under PRC laws then in effect. In addition, through the exclusive support services agreements, the Company established the right to receive benefits from the former VIE that could potentially be significant to the former VIE, and through the equity pledge agreement, the Company has, in substance, an obligation to absorb losses of the former VIE that could potentially be significant to the former VIE.

The Group believes that there are no assets held in the former VIE that can be used only to settle obligations of the former VIE, except for registered capital and the PRC statutory reserves. As the former VIE are incorporated as limited liability companies under the PRC Company Law, creditors of the former VIE do not have recourse to the general credit of the Company for any of the liabilities of the former VIE.

The following financial information of the former VIE and its subsidiaries were the amounts after elimination of intercompany transactions and balances.

As of December 31, 2021, the former VIE and former VIE's subsidiaries accounted for an aggregate of 36% of the consolidated total assets and the consolidated total liabilities. The former VIE and its subsidiaries contributed 41% of the Group's consolidated revenue for the year ended December 31, 2021. The former VIE and its subsidiaries accounted for 22% of the Group's consolidated operating cash inflow, 30% of the Group's consolidated investing cash outflow, 18% of the Group's consolidated financing cash inflow for the year ended December 31, 2021.

For two months ended February 28, 2022, the former VIE and its subsidiaries did not contribute materially to the Group's consolidated revenues, total assets and total liabilities, operating cash outflow.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Use of estimates

The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the period. Areas where management uses subjective judgment include estimating current expected credit losses on accounts receivable balances, inventory net realizable value, and assumptions used in valuation of share-based compensation. Management bases the estimates on historical experience and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and demand deposits, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less when purchased.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Restricted cash

Restricted cash mainly represents the Group's deposits to the banks as a form of security with respect to the Group's debt. The cash held as deposits in the bank are not available to fund the general operating purposes of the Group.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Short-term investments

Short-term investments include (i) structured deposits from commercial banks with guaranteed principal and variable interest rates indexed to the performance of underlying assets and with maturities of one year or less; (ii) fund products purchased from certain financial institutions with maturities of one year or less. The Group classifies the short-term investments in debt securities as held-to-maturity when it has both the positive intent and ability to hold them until maturity. Short-term investments that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Short-term investments that do not meet the criteria of held-to-maturity or trading securities are classified as available-for-sale, and are reported at fair value with changes in fair value with the unrealized gains or losses recorded in accumulated other comprehensive income (loss) as a component of shareholders' equity (deficit). The Group has no intent to hold the debt securities till maturity or may sell the debt securities in response to the changes in economic conditions and classified all short-term investments as available-for-sale debt securities as of December 31, 2023 and 2024.

Credit-related impairment is measured as the difference between the debt security's amortized cost basis and the present value of expected cash flows and is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. The allowance should not exceed the amount by which the amortized cost basis exceeds fair value. As of December 31, 2023 and 2024, the fair value of the Group's available-for-sale debt securities is approximate their amortized cost amounting to RMB50,143 and RMB nil, respectively. The Group did not identify any factors that are indicative of impairment with respect to its available-for-sale debt securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(g) Accounts receivable, net***

Accounts receivable mainly consists of amounts due from the Group's customers, which is recorded net of allowance for credit losses.

The Group accounted for current expected credit losses ("CECL") model in accordance with ASC topic 326, Financial Instruments – Credit Losses. The Group monitors the estimated credit losses based on historical experience, the age of the accounts receivable balances, credit quality of its customers, economic conditions, and other factors that may affect its ability to collect from customers and the impact of CECL is not material for the years ended December 31, 2022, 2023 and 2024.

---

| | |
|:---|:---|
|  | **Total allowance for**<br>**credit losses** |
| Balance at December 31, 2022 | 3630 |
| Credit loss expense | 1950 |
| Write-offs | (1298) |
| Balance at December 31, 2023 | 4282 |
| Credit loss expense | (519) |
| Write-offs | (540) |
| Balance at December 31, 2024 | 3223 |

---

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Inventories

***Inventories, consisting of products available for sale, are accounted for using the weighted average cost method, and are valued at lower of cost or the net realizable value. Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving or damaged products, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. Write-downs are recorded in cost of products sold in the consolidated statements of comprehensive loss.***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Property and equipment

Property and equipment are stated at cost less accumulated depreciation and impairment. The renovations, betterments and interest cost incurred during construction are capitalized. Property and equipment are depreciated at their costs less impairment and residual value, if any, over the estimated useful lives on a straight-line basis. The estimated useful lives are as follows:

---

| | |
|:---|:---|
| Leasehold improvements | Shorter of the lease term or their estimated useful lives |
| Furniture, fixtures and equipment | 3-5 years |
| Electronic equipment | 3-5 years |
| Vehicles | 4-5 years |

---

Construction in progress represents leasehold improvements under construction or being installed and is stated at cost. Cost comprises original cost of property and equipment, installation, construction and other direct costs. Construction in progress is transferred to leasehold improvements and depreciation commences when the asset is ready for its intended use.

Expenditures for repairs and maintenance are expensed as incurred. Gain or loss on disposal of property and equipment, if any, is recognized in the consolidated statements of comprehensive loss as the difference between the net sales proceeds and the carrying amount of the underlying asset. Accumulated depreciation was RMB135,644 and RMB79,196 as of December 31, 2023 and 2024, respectively. Depreciation expense was RMB39,081, RMB20,769 and RMB16,152 for the years ended December 31, 2022, 2023 and 2024, respectively. There was no interest cost capitalized during the years ended December 31, 2022, 2023 and 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(j) Intangible assets***

Intangible assets mainly consist of externally purchased software and licenses. Software are amortized over an estimated useful life of ten years on a straight-line basis. Licenses are amortized over the remaining estimated useful life on a straight-line basis. Accumulated amortization was RMB9,643 and RMB10,458 as of December 31, 2023 and 2024, respectively. Amortization expense was RMB1,738, RMB1,011 and RMB815 for the years ended December 31, 2022, 2023 and 2024, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Impairment of long-lived assets

Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be fully recoverable. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. For the years ended December 31, 2022, 2023 and 2024, there was no impairment recognized for the Group's long-lived assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) Long-term investments

#### The Group's investments in equity investees consist of investments in equity securities without readily determinable fair values and equity method investments in privately-held companies.
***The Group measures its equity securities without a readily determinable fair value at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.***

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;2. **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(l) Long-term investments (Continued)***

***The Group accounts for its equity investments over which it has significant influence but does not own a majority equity interest or otherwise control using the equity method. The Group adjusts the carrying amount of the investments and recognizes in earnings its share of the earnings or loss of the investee after the date of investment.***

***These investments are measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive loss equal to the amount by which the carrying value exceeds the fair value of the investment.***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) Revenue recognition

The Group follows five steps for its revenue recognition under Accounting Standard Codification ("ASC")606:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 1: Identify the contract (s) with a customer

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 2: Identify the performance obligations in the contract

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 3: Determine the transaction price

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 4: Allocate the transaction price to the performance obligations in the contract

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Group's revenue is reported net of discounts, and value added tax. The primary sources of the Group's revenues are as follows:

#### Product revenues
The Group recognizes revenues from the sale of medicines, healthcare products and other wellness merchandise through its online platforms, including its internet website 1 Medicine Marketplace, cellular phone application, other online channels and its offline pharmacies mainly to individual consumers (the "B2C Business"). The Group also generates revenues from the sale of medicines to its pharmacy customers mainly through the online platform 1 Pharmacy (the "B2B Business").

Under both B2C Business and B2B Business, revenues from product sales are recognized at the point in time when the delivery is made and when title and risk of loss transfers to the consumers and pharmacy customers. Revenues are measured at the amount of consideration the Group expects to receive in exchange for transferring products to consumers and pharmacy customers ("transaction price"). The Group provides the right of return in circumstances when there is packing or delivery damage or other quality problems identified which is considered to be a form of variable consideration. The Group estimates sales returns based on historical experience and based on such, the amount of sales returns accrual was insignificant as of December 31, 2022, 2023 and 2024.

The Group voluntarily provides discount coupons through its websites during its marketing activities. These coupons are not related to prior purchases, and can only be utilized in conjunction with subsequent purchases on the Group's platforms. The coupons are recorded as a reduction of revenue at the time of use.

Under both B2B and B2C Businesses the Group utilizes delivery service providers to deliver products to its consumers and pharmacy customers ("shipping activities"), but the delivery service is not considered as a separate obligation as the shipping activities are performed before the consumers and pharmacy customers obtain control of the products. Therefore, shipping activities are not considered a separate promised service to the consumers and pharmacy customers, but rather are activities to fulfill the Group's promise to transfer the products and are recorded as fulfillment expenses.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;2. **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) Revenue recognition (Continued)

***Product revenues (Continued)***

Product revenues are recorded net of value added tax ("VAT") ranging from 0% to 13% for different kinds of products based on the sales amount. The Group records revenues on a gross basis because the Group controls the products before they are transferred to the consumers and pharmacy customers determined on the basis that: (1) the Group is primarily responsible for fulfilling its promise to deliver the specified products to consumers and pharmacy customers; (2) the Group has inventory risk before the specified products are transferred to a consumers and pharmacy customers or after transfer of control to the consumers and pharmacy customers, and (3) the Group has discretion in establishing the price for the specified products.

#### Service revenues
Service revenues primarily consist of fees charged to third-party marketplace sellers for whom the Group acts as an agent to facilitate the marketplace sellers' online sales of their products through the online platforms 1 Medicine Marketplace and 1 Pharmacy, which is referred to as marketplace service ("MP") revenue. The Group has determined it is not the principal in the arrangement as it is not responsible to fulfill the order for the specified products, it does not bear the inventory risk for the products, nor does it have the ability to establish prices. The Group also provided digital marketing service, and supply chain management to customers (collectively referred to "other services"), which it recognizes over time when the customer simultaneously receives and consumes the benefits provided by the Group's performance, or recognize at a point in time when the customer obtains control of the goods and services.

***Contract balances***

Accounts receivable represents amounts invoiced and revenue recognized prior to invoicing when the Group has satisfied its performance obligation and the unconditional right to payment.

The estimated inventories in-transit relating to estimated returns are contract assets included in inventories.

Contract liabilities consist of advance payments, which were recorded in accrued expenses and other current liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) Cost of products sold

Cost of products sold consists of the purchase price of products and inbound shipping charges. The Group periodically receives rebates from certain vendors in the form of cash or credits. The Group accounts for the rebates as a reduction to the price the Group pays for the products purchased and therefore records such amounts as a reduction of cost of products sold and inventory when recognized in the financial statements. Cost of products does not include other direct costs related to cost of product sales such as shipping and handling expense, payroll and benefits of logistics staff, logistics centers rental expenses and depreciation expenses. Therefore, the Group's cost of products sold may not be comparable to other companies which include such expenses in their cost of products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) Fulfillment expenses

Fulfillment expenses primarily consist of payroll, bonus and benefits of logistics staff, logistics centers rental expenses, depreciation expenses, shipping and handling expenses, and packaging expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) Selling and marketing expenses

Selling and marketing expenses primarily consist of payroll, bonus and benefits of sales and marketing staff, advertising costs, agency fees and costs for promotional materials.

Advertising expenses are charged to the statements of comprehensive loss in the period incurred. The amounts of advertising expenses incurred were RMB35,647, RMB35,684 and RMB52,213 for the years ended December 31, 2022, 2023 and 2024, respectively.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;2. **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) Technology expenses

Technology expenses primarily consist of technology infrastructure expenses, payroll, bonus and benefits of the employees, and costs associated with the computer, storage and telecommunications infrastructure for use in technology department.

For internal and external use software, the Group expenses all costs incurred for the preliminary project stage and post implementation-operation stage of development, and costs associated with repair or maintenance of the existing platform. Costs incurred in the application development stage are capitalized and amortized over the estimated useful life. The amount of the Group's technology expenses qualifying for capitalization has been insignificant, and as a result, all development costs incurred for development of internal used software have been expensed as incurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) General and administrative expenses

General and administrative expenses primarily consist of payroll, bonus and benefit costs for corporate employees, legal, finance, rental expenses and other corporate overhead costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) Government grants

Government grants represent rewards provided by the relevant PRC government authorities to the Group for tax refunds and support for investment in certain local districts, which are typically granted based on the amount of investments the Group made as well as income generated by the Group in such districts. Such subsidies allow the Group full discretion to utilize the funds and are used by the Group for general corporate purposes. Normally, the Group does not receive written confirmation from local governments indicating the approval of the cash subsidy before cash is received, and therefore cash subsidies are recognized when received or when all the conditions for their receipts have been satisfied. Government grants recognized were RMB13,190, RMB7,463 and RMB7,587 for the years ended December 31, 2022, 2023 and 2024, respectively, which were recorded in other operating income (expenses), net.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) Income taxes

Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements, the Group is required to estimate its income taxes in each of the jurisdictions in which it operates. The Group accounts for income taxes using the liability method. Under this method, deferred income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Group applies the provisions of ASC Topic 740, Income Taxes ("ASC 740"), in accounting for uncertainty in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Group has elected to, as a policy, classify interest and penalties related to an uncertain tax position (if and when required) as part of income tax expense in the consolidated statements of comprehensive loss. The Group does not have any unrecognized tax benefits for the years ended December 31, 2022, 2023 and 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) Value added taxes

The Group's PRC subsidiaries are subject to VAT at rates ranged from 0% to 13% on proceeds received from customers, and are entitled to a deduction for VAT already paid or borne on the products purchased by them. The VAT balance is recorded in other current assets or other current liabilities on the consolidated balance sheets.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;2. **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Comprehensive income (loss)

Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. During the periods presented, comprehensive income (loss) is reported in the consolidated statements of comprehensive loss, and other comprehensive loss includes foreign currency translation adjustments and fair value changes of available-for-sale debt securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) Foreign currency translation

The reporting currency of the Group is the Renminbi ("RMB"). The functional currency of the Company and Yao Wang is the United States dollar ("US dollar"). The functional currency of all the other significant subsidiaries and the former VIEs is RMB. The determination of the respective functional currency is based on the criteria of ASC 830, *Foreign Currency Matters*.

Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the functional currencies at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are re-measured into the applicable functional currencies at historical exchange rates. Transactions in currencies other than the applicable functional currencies during the year are converted into the functional currencies at the applicable rates of exchange prevailing at the transaction dates. Transaction gains and losses are recognized in the consolidated statements of comprehensive loss.

Assets and liabilities are translated from each entity's functional currency to the reporting currency at the exchange rate on the balance sheet date. Equity amounts are translated at historical exchange rates, and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of accumulated other comprehensive loss in the consolidated statements of shareholders' equity (deficit).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) Concentration of credit risk

Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments, accounts receivable and prepayments. The Group places its cash and cash equivalents, restricted cash and short-term investments with financial institutions with high-credit ratings and quality. Accounts receivable mainly consist of amounts receivable from B2B customers, product delivery service providers and payment processing service providers, which are all with relatively good collection history. There are no significant concentrations of credit risk.

#### Concentration of customers
There were no customers individually representing 10% or more of revenues for the years ended December 31, 2022, 2023 and 2024.

There were no customers accounted for 10% or more of balances of accounts receivable as of December 31, 2023 and 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(y) Foreign currency risk***

Renminbi ("RMB") is not a freely convertible currency. The State Administration of Foreign Exchange, under the authority of the People's Bank of China, controls the conversion of RMB into foreign currencies. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The cash and cash equivalents of the Group included aggregated amounts of RMB564,317 and RMB430,274, which were denominated in RMB, as of December 31, 2023 and 2024, respectively.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;2. **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(z) Fair value***

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates.

The estimated fair value of the Group's financial instruments of which the inputs used to value are classified as Level 2 and are not reported at fair value, including cash and cash equivalents, restricted cash, short - term investment, accounts receivable, other current assets, accounts payable, short-term borrowings, other current liabilities, approximates their carrying value due to their short-term nature.

As of December 31, 2023 and 2024, information about inputs into the fair value measurement of the Group's assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is mainly related to short-term investments, wealth management products amounting to RMB50,143 and RMB nil, respectively.

The fair values of wealth management products are the redemption price provided by the investment bank or fund company that sells such financial products. There are observable and market-based inputs but not quoted prices in active markets for identical assets. If statements are not available, the Group will measure fair value using valuation techniques that use current market-based parameters, such as currency rates. The total gain recognized for change in fair values of short-term investments is RMB4,464, RMB4,166 and RMB1,217 for the years ended December 31, 2022, 2023 and 2024.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(aa) Share-based compensation*

The Group grants share options and restricted share units of the Company and its subsidiary to eligible employees and a few non-employees and accounts for these share based awards in accordance with ASC 718 Compensation-Stock Compensation.

Share-based awards are measured at the grant date fair value of the awards and recognized as expenses a) immediately at grant date if no vesting conditions are required; or b) using straight-line vesting method over the requisite service period, which is the vesting period. To the extent the required vesting conditions are not met resulting in the forfeiture of the share-based awards, previously recognized compensation expense relating to those awards are reversed. A cancellation of an award that is not accepted by the concurrent grant of (or offer to grant) a replacement award or other valuable consideration shall be accounted for as a refund for no consideration. Correspondingly, any previously unrecognized compensation cost shall be recognized at the cancellation date.

The Black Scholes option pricing model is applied in determining the estimated fair value of the options granted to employees. Market approach or income approach is applied in determining the fair value of the restricted shares of limited liability partnerships ("LLPs").

The Group estimates the Company's subsidiary's enterprise value for purposes of recording share-based compensation, and the information considered by the Company mainly include but are not limited to the pricing of recent rounds of financing, future cash flow forecasts, discount rates, and liquidity factors.

The compensation expense for the awards with performance conditions is based upon the Group's judgement of likely future performance and may be adjusted in future periods depending on actual performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(ab) Treasury shares***

Treasury shares represent shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury shares are accounted for under the cost method. The repurchased shares are presented as "treasury shares" on the consolidated balance sheets. Repurchased shares were reserved for the share settlement upon share option exercises or Restricted Stock Unit ("RSU") vests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(ac) loss per share*

Basic loss per ordinary share is computed by dividing net loss attributable to ordinary shareholders by weighted average number of ordinary shares outstanding during the period.

Diluted loss per ordinary share reflects the potential dilution that could occur if securities were exercised or converted into ordinary shares. The Group has stock options and restricted share units, which could potentially dilute basic loss per share in the future. To calculate the number of shares for diluted loss per share, the effect of the stock options and restricted share units is computed using the treasury stock method. Ordinary share equivalents are excluded from the computation of the diluted loss per share in years when their effect would be anti-dilutive.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ad) Segment reporting

In accordance with ASC 280, Segment Reporting, the Group's chief operating decision maker (the "CODM") has been identified as the Co-Chairmen and Chief Executive Officer, who review the segment information when making decisions about allocating resources and assessing performance of the Group. The Group classifies its operations into two segments: B2C segment and B2B segment whereby the B2C business represents revenue generated from individual consumers while B2B business represents revenue generated from corporate customers. There are no internal revenue transactions between the reportable segments. The Group does not distinguish expenses (i.e. operating expenses and other expenses) between segments in its internal reporting, and reports expenses by nature as a whole. As a result, the Group does not allocate or disclose certain expense details by segment. Furthermore, the Group's CODM is not provided with asset information by segment. As such, no asset information by segment is presented. The information of segment reporting is presented consistently for the years ended December 31, 2022, 2023 and 2024. The following tables summarize the Group's product revenues and segment profit generated by its segments.

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** |
| **B2C segment** |  |  |  |
| Product revenues | 408305 | 357975 | 261197 |
| Service revenues | 33223 | 19388 | 16900 |
| Cost of products sold\* | (345065) | (297979) | (214403) |
| Segment profit for B2C Business | 96463 | 79384 | 63694 |
| **B2B segment** |  |  |  |
| Product revenues | 12995131 | 14483935 | 14033543 |
| Service revenues | 80039 | 86831 | 89609 |
| Cost of products sold\* | (12331657) | (13801172) | (13357617) |
| Segment profit for B2B Business | 743513 | 769594 | 765535 |
| **Total segment profit** | **839976** | **848978** | **829229** |

---

\* For segment reporting purpose, purchase rebate is allocated to B2C segment and B2B segment primarily based on the amount of cost of products sold for each segment. Cost of products sold does not include other direct costs related to cost of product sales such as shipping and handling expense, payroll and benefits of logistic staff, logistic centers rental expenses and depreciation expenses, which are recorded in the fulfillment expenses.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ad) Segment reporting (Continued)

The following is a reconciliation of the reportable segments' measures of profit or loss to the Group's consolidated loss before income taxes:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** |
| Total profit for reportable segments | 839976 | 848978 | 829229 |
| Unallocated amounts: |  |  |  |
| Fulfillment expenses | (401414) | (400538) | (381035) |
| Selling and marketing expenses | (457880) | (448387) | (313897) |
| General and administrative expenses | (205623) | (224202) | (70907) |
| Technology expenses | (139504) | (124341) | (69635) |
| Other operating income (expenses), net | (6556) | (1607) | 8359 |
| Interest income | 8118 | 8834 | 7041 |
| Interest expense | (13443) | (20141) | (28331) |
| Foreign exchange gain (loss) | (7875) | 610 | (909) |
| Other income, net | 8132 | 7612 | (595) |
| Loss before income tax | (376069) | (353182) | (20680) |

---

Revenues from different product groups and services are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** |
| **Product Revenues** | **13403436** | **14841910** | **14294740** |
| &nbsp;&nbsp;Drugs | 12572634 | 13883055 | 13398162 |
| &nbsp;&nbsp;Nutritional supplements | 554789 | 631122 | 550464 |
| &nbsp;&nbsp;Medical supplies and devices | 164916 | 157504 | 144282 |
| &nbsp;&nbsp;Other products | 111097 | 170229 | 201832 |
| **Service Revenues** | **113262** | **106219** | **106509** |
| &nbsp;&nbsp;MP Service | 68477 | 70271 | 65536 |
| &nbsp;&nbsp;Other Services | 44785 | 35948 | 40973 |
| **Total** | **13516698** | **14948129** | **14401249** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ae) Leases

Under ASC Topic 842, Leases ("ASC 842"), the Group determines if a contract is or contains a lease at the inception of the contract, and the Group classifies that lease as a finance lease if it meets certain criteria or as an operating lease when it does not.

At the commencement date of a lease, the Group recognizes a lease liability for future fixed lease payments and a right-of-use ("ROU") asset representing the right to use the underlying asset during the lease term. The lease liability is initially measured as the present value of the future fixed lease payments that will be made over the lease term. The lease term includes lessee options to extend the lease and periods occurring after a lessee early termination option, only to the extent it is reasonably certain that the Group will exercise such extension options and not exercise such early termination options, respectively. The future fixed lease payments are discounted using the rate implicit in the lease, if available, or the incremental borrowing rate ("IBR"). The Group's IBR is estimated to approximate the interest rate on similar terms and payments and in economic environments where the leased asset is located. Current maturities and long-term portions of operating lease liabilities are classified as accrued expenses and other current liabilities and long-term operating lease liabilities, respectively, in the consolidated balance sheets.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ae) Leases (Continued)

The ROU asset is measured at the amount of the lease liability with adjustments, if applicable, for lease prepayments made prior to or at lease commencement, initial direct costs incurred by the Group and lease incentives. The Group evaluates the carrying value of ROU assets if there are indicators of impairment and review the recoverability of the related asset group.

The Group's leases include offices and warehouses which are all classified as operating leases with fixed lease payments, or minimum payments, as contractually stated in the lease agreement. For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis over the lease term.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(af) Non-controlling interests

For the Company's consolidated subsidiaries and former VIE, non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. Non-controlling interests are classified as a separate line item in the equity section of the Group's consolidated balance sheets and have been separately disclosed in the Group's consolidated statements of operations and comprehensive loss to distinguish the interests from that of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ag) Redeemable non-controlling interest

***The Group classifies the redeemable non-controlling interest as mezzanine equity as the non-controlling interest is redeemable upon the occurrence of an event not solely within the control of the Group.***

Due to the probability of being redeemed, the Group adjusts the carrying amount of the mezzanine equity to equal the redemption value at the end of each reporting period as if it was the redemption date for the redeemable non-controlling interest. The balance of the redeemable non-controlling interest is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest's share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount (increases or decreases) are recorded in net loss or profit attributable to non-controlling interests. These interests are presented on the consolidated balance sheets outside of equity under the caption "Redeemable non-controlling interest".

According to ASC 480, if a financial instrument will be redeemed only upon the occurrence of a conditional event, redemption of that instrument is conditional and, therefore, the instrument does not meet the definition of mandatorily redeemable financial instrument. The financial instrument would be assessed at each reporting period to determine whether circumstances have changed such that the instrument now meets the definition of a mandatorily redeemable instrument (that is, the event is no longer conditional). If the event has occurred, the condition is triggered, or the event has become certain to occur, the financial instrument is reclassified as a liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ah) Recently issued accounting pronouncements

In November 2024, the FASB issued ASU No. 2024-04: Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversion. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods. The Company's management is evaluating the impact this guidance will have on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU No. 2024-03: Income Statement – Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of qualitative and quantitative information about certain costs and expenses in the notes to the financial statements on an interim and annual basis. The amendments in this ASU are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company's management is evaluating the impact this guidance will have on its consolidated financial statements and disclosures.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ah) Recently issued accounting pronouncements (Continued)

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold. The amendment also includes other changes to improve the effectiveness of income tax disclosures, including further disaggregation of income taxes paid for individually significant jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024. Adoption of this ASU should be applied on a prospective basis. Early adoption is permitted. The Company does not expect the adoption of this ASU will have a significant impact on its consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ai) Recently adopted accounting pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities' segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. The Company adopted ASU No. 2023-07 effective for its Annual Report on Form 20F for the year ended December 31, 2024 and subsequent interim periods. Since ASU No. 2023-07 addresses only disclosures, the adoption of ASU No. 2023-07 did not have a significant impact on its consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aj) Convenience translation

Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss, and consolidated statements of cash flows from RMB into US dollar as of and for the year ended December 31, 2024 are solely for the convenience of the readers and were calculated at the rate of 7.2993, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 31, 2024. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US dollar at that rate on December 31, 2024, or at any other rate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ak) Structured payment arrangements

*Reverse factoring arrangements*

In 2021, the Group entered into a structured payment arrangement with a bank ("reverse factoring arrangement"). Under the reverse factoring arrangement, certain suppliers were able to put their receivables from the Group to the bank for early payment.

As a result of the reverse factoring arrangements, the payment terms of the Group's original accounts payables were substantially modified and considered extinguished as the nature of the original liability has changed from accounts payables to loan borrowings from the bank. The agreement does not require that the entity provide assets pledged as security for the reverse factoring arrangement. The proceeds from the bank used to settle the payables and subsequent repayments to the bank are considered financing activities and reported as "Proceeds from other financing activities" and "Repayment for other financing activities" on the consolidated statements of cash flows, respectively. The interest expense charged from the bank at annual rate of 4.35%, is recorded in interest expense in the consolidated statements of comprehensive loss. As of December 31, 2023 and 2024, the outstanding confirmed amount from the reverse factoring arrangements were RMB98,109 and RMB nil respectively, which is repayable within one year and are included in "Accrued expenses and other current liabilities" on the consolidated balance sheets. The Group does not intend to renew the reverse factoring arrangement upon the agreement expires. The rollforward of obligations under its reverse factoring arrangements for years ended December 31, 2023, and 2024, are as follows:

---

| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2023** | **2024** |
| The outstanding confirmed amount at the beginning of the year | 64120 | 98109 |
| The amount of obligation confirmed during the year | 303764 | 147857 |
| The amount of obligation paid during the year | (269775) | (245966) |
| The outstanding confirmed amount at the end of the year | 98109 |  |

---

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(ak) Structured payment arrangements (Continued)***

*Factoring program*

In 2021, the Group entered into factoring agreement with recourse with a third-party financial institution, pursuant to which the institution will make an advance payment of accounts with credit term of 30 days typically. The term of the loan is mostly three months. The agreement requires that the entity provide RMB 2,000 as security deposit for the factoring arrangement, the factoring agreement ended on July 2, 2024. The interest rate charged from the institution was at annual rate of 8.5% in 2021, renewed in 2022 of 9%, renewed in 2023 of 10.5% and remained the same through the expiry of the agreement. In 2024, the Group entered into a new factoring agreement with recourse with a third - party financial institution, pursuant to which it transferred all legally held accounts receivable under the underlying contracts to the institution. The term of the loan is mostly six months. The agreement does not require the Group to provide any security deposit. Under this factoring agreement, the principal amount of financing shall not exceed RMB 30,000. The factoring fees charged from the institution were RMB 2,121 for the year ended December 31, 2024.

The Group does not derecognize accounts receivable when receiving advance payment from the institution. The Group is required to pay the principal and interest to the institution on due. The proceeds from the institution used to settle the accounts receivable and subsequent repayment to the financial institution are considered financing activities and reported as "Proceeds from other financing activities" and "Repayment for other financing activities" on the consolidated statements of cash flows, respectively.

As of December 31, 2023 and 2024, the outstanding borrowings from the factoring arrangements were RMB40,353 and RMB30,000 respectively, which is repayable within one year and are included in "Accrued expenses and other current liabilities" on the consolidated balance sheets. The rollforward of outstanding borrowing from the factoring arrangements for years ended December 31, 2023, and 2024, are as follows:

---

| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2023** | **2024** |
| Outstanding borrowing at the beginning of the year | 40112 | 40353 |
| Borrowing received during the year | 405122 | 89500 |
| Borrowing repaid during the year | (404881) | (99853) |
| Outstanding borrowing at the end of the year | 40353 | 30000 |

---

*Guaranteed customer loans* 

Since 2022, the Group cooperated with a bank to provide a borrowing facility for its customers, who applied for loans directly with the bank. If the loans are approved by the bank, the proceeds, which represent the total order amount, are remitted to the Group by way of the customers' entrustment. Customers repay the loan principal directly to the bank and the Group pays the loan interest at an annual interest rate, which is no more than 5.5%, within the shorter of borrowing period and 45 days. The agreement require that the entity provide RMB 10,000 as security for the factoring arrangement. Besides, the Group also provides guarantee to the bank with respect to its customers' repayment of the loans. In the event that the customers default on the repayment, the Group must return the prepayments to the bank within a prescribed period of time. The substance of the arrangement is that the Group borrowed funds from the bank using the customers' credit as collateral. The Group records the entire payment in "Accrued expenses and other current liabilities" on the consolidated balance sheets.

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#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**2.** **SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (Continued)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***(ak) Structured payment arrangements (Continued)***

*Guaranteed customer loans (Continued)*

For customer loans received directly from the bank, the Group determines this portion was classified as "Proceeds from other financing activities" in its statements of cash flows. During the credit term, constructive receipts and disbursements are recognized by recognizing the repayment of loans as "Repayment for other financing activities" and the receipt of order payment as an operating cash inflow. The rollforward of outstanding guaranteed customer loans for years ended December 31, 2023, and 2024, are as follows:

---

| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2023** | **2024** |
| Outstanding guaranteed customer loans at the beginning of the year | 46512 | 54999 |
| Guaranteed during the year | 742464 | 473597 |
| Repaid by customers during the year | (733977) | (495161) |
| Outstanding guaranteed customer loans at the end of the year | 54999 | 33435 |

---

&nbsp;&nbsp;&nbsp;&nbsp;3. **SHORT-TERM INVESTMENTS** 

Short-term investments as of December 31, 2023 and 2024 were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  |  | **As of December 31,**  | **As of December 31,**  |
|  |  | **2023** | **2024** |
| Wealth Management Products |  | 50,143 |  |

---

The Group classifies the wealth management products as "available-for-sale" debt securities which are recorded at fair value. For the years ended December 31, 2022, 2023 and 2024, the Group recorded RMB4,810, RMB4,343 and RMB1,074 of changes in fair value of these available-for-sale debt securities, net of tax, in other comprehensive loss, respectively, and RMB4,464, RMB4,166 and RMB1,217 of realized gains transferred from other comprehensive income to other income when the security was sold. No credit loss was recognized for the years ended December 31, 2022, 2023 and 2024.

&nbsp;&nbsp;&nbsp;&nbsp;**4.** **NOTES RECEIVABLE** 

As of December 31, 2023 and 2024, the total notes receivable balance were RMB77,598 and RMB78,827 and among which RMB10,168 and RMB37,904 were pledged as collateral for notes payable which has been recorded in accounts payables. No credit loss was recognized for the years ended December 31, 2022, 2023 and 2024.

&nbsp;&nbsp;&nbsp;&nbsp;5. **INVENTORIES** 

---

| | | | |
|:---|:---|:---|:---|
|  |  | **As of December 31,**  | **As of December 31,**  |
|  |  | **2023** | **2024** |
| Products |  | 1,419,396 | 1,387,403 |

---

During the years ended December 31, 2022, 2023 and 2024, inventories were written down by RMB28,498, RMB19,910 and RMB3,887, respectively, to reflect the lower of cost and net realizable value.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;6. **PREPAYMENTS AND OTHER CURRENT ASSETS** 

---

| | | |
|:---|:---|:---|
|  | **As of December 31,**  | **As of December 31,**  |
|  | **2023** | **2024** |
| Receivable from payment platforms | 33060 | 16191 |
| Rebate receivable from suppliers | 74751 | 66765 |
| Advance to suppliers | 17190 | 18410 |
| Value added tax recoverable | 54283 | 55837 |
| Deposits | 31231 | 83270 |
| Prepaid expense | 5905 | 4746 |
| Others | 9403 | 6775 |
| Total | 225823 | 251994 |

---

&nbsp;&nbsp;&nbsp;&nbsp;**7.** **LEASES** 

The Group has operating leases for offices and warehouses. The Group recognized ROU assets of RMB103,799 and RMB89,071, and corresponding current liabilities of RMB42,530 and RMB40,341 in accrued expenses and other current liabilities, and long-term operating lease liabilities of RMB62,624 and RMB55,448, as of December 31, 2023 and 2024. The amount of short-term lease is not material and no variable lease cost existed for the years ended December 31, 2022, 2023 and 2024, respectively.

Lease expenses were RMB75,827, RMB62,610 and RMB48,497 for the year ended December 31, 2022, 2023 and 2024. The maturities of lease liabilities in accordance with *Leases (Topic 842)* in each of the next five years and thereafter as of December 31, 2024 were as follows:

---

| | |
|:---|:---|
|  | **As of December 31,** |
| **Year Ending December 31,** | **2024** |
| 2025 | 43206 |
| 2026 | 27818 |
| 2027 | 18108 |
| 2028 | 9198 |
| 2029 | 2963 |
| Total lease payment | 101293 |
| Less: imputed interest | 5504 |
| Present value of minimum operating lease payments | 95789 |

---

Right-of-use assets recorded in connection with the operating lease liabilities in non-cash transactions for the years ended December 31, 2022, 2023 and 2024 were RMB10,274, RMB58,364 and RMB58,667.

Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2022, 2023 and 2024 were RMB73,407, RMB61,952 and RMB41,772. Interest expenses were RMB10,327, RMB5,932 and RMB3,761 for the year ended December 31, 2022, 2023 and 2024.

Weighted-average remaining lease terms and discount rates are as follows:

---

| | | |
|:---|:---|:---|
|  | **As of December 31,**  | **As of December 31,**  |
|  | **2023** | **2024** |
| Weighted-average remaining lease term | 2.7years | 2.9years |
| Weighted-average discount rate | 4.0% | 3.8% |

---

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**8.** **SHORT-TERM BORROWINGS** 

Short-term borrowings were RMB 338,075 and RMB160,981 as of December 31, 2023 and 2024, respectively, all of which consisted of borrowings from financial institutions and are repayable within one year. As of December 31, 2024, the Group had an undrawn balance of RMB99,000 under the credit facilities agreement. All of these borrowings were unsecured and accrue interest at an average annual interest rate of 3.86% and 3.67% for the years ended December 31, 2023 and 2024, respectively.

In September 2019, 1 Pharmacy Technology entered into a credit agreement with China Merchant Bank (CMB) which provides a revolving credit facility that allows 1 Pharmacy Technology to borrow up to RMB 100,000 for working capital purpose in one year. In October 2020, November 2021, December 2022 and December 2023, 1 Pharmacy Technology renewed the credit agreement that allowed 1 Pharmacy Technology to borrow up to RMB200,000 for working capital purposes for another one year. Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People's Bank of China plus 0.30%. The borrowings were guaranteed by Yihao Pharmacy. During the years ended December 31, 2023 and 2024, RMB 779,635 and RMB 347,864 were drawn on above credit facility and RMB 700,540 and RMB 495,968 were repaid, with the balance of RMB 198,085 and RMB 49,981 outstanding as of December 31, 2023 and 2024, respectively. The interest rate range for the borrowings in 2023 and 2024 were from 3.65% to 3.75 % per annum.

In June 2020, 1 Pharmacy Technology entered into a credit agreement with Industrial Bank (IB) which provides a revolving credit facility that allows 1 Pharmacy Technology to borrow up to RMB100,000 for working capital purpose in one year. Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People's Bank of China minus 0.35%. In June 2021, the credit agreement was renewed and allows 1 Pharmacy Technology to borrow up to RMB200,000 for working capital purpose in seven months. Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People's Bank of China plus 0.78%. In November 2022, the credit agreement was renewed and allows 1 Pharmacy Technology to borrow up to RMB200,000 for working capital purpose in twelve months and the agreement expired on November 13, 2023. In January 2024, 1 Pharmacy Technology entered into a new credit agreement with IB for a working capital and committed credit facility of up to RMB130,000, with a twelve month term expiring on January 2025. Any draw down on the credit facility will be charged with interest at one-year loan prime rate published by People's Bank of China plus 0.85% in 2022, plus 0.55% in 2023 and plus 0.55% in 2024, respectively and any draw down on the new committed credit facility will be charged with an average annual interest rate of 2.78% in 2024. The borrowings in the years ended December 31, 2023 and 2024 were guaranteed by Yihao Pharmacy. During the years ended December 31, 2023 and 2024, RMB20,000 and RMB50,000 were drawn on this credit facility, RMB30,000 and RMB20,000 were repaid in 2023 and 2024, with the balance of RMB20,000 and RMB50,000 outstanding as of December 31, 2023 and 2024, respectively.

In September 2022, 1 Pharmacy Technology obtained loans from Shanghai Pudong Development Bank. The borrowing was guaranteed by Yihao Pharmacy and the agreement expired on September 2024. During the years ended December 31, 2023 and 2024, RMB50,000 with annual interest rate of 3.65% and RMBnil were obtained. RMB30,000 and RMB50,000 were repaid in 2023 and 2024, with the balance of RMB50,000 and RMBnil outstanding as of December 31, 2023 and 2024, respectively. In October 2024, 1 Pharmacy Technology entered a committed credit facility with Shanghai Pudong Development Bank that allows 1 Pharmacy Technology to borrow up to RMB30,000 for working capital purpose till March 2025. The credit facility was guaranteed by Yihao Pharmacy. During the year ended December 31, 2024, RMB30,000 with annual interest rate of 2.45% were obtained, with the balance of RMB30,000 outstanding as of December 31, 2024.

In March 2023, the Group entered a revolving credit facility with China CITIC Bank that allows the Group to borrow up to RMB20,000 for working capital purpose till December 31, 2023. During the year ended December 31, 2023 and 2024, RMB20,000 with annual interest rate of 3.70% were obtained. RMB10 and RMB19,990 were repaid in 2023 and 2024, with the balance of RMB19,990 and RMBnil outstanding as of December 31, 2023 and 2024, respectively.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**8.** **SHORT-TERM BORROWINGS (Continued)** 

In December 2024, the Group secured committed credit facilities with Bank of Ningbo Co., Ltd. that allows the Group to borrow up to RMB50,000 for working capital purpose till December 2025. During the year ended December 31, 2024, RMB31,000 with annual interest rate of 3.00% were obtained, with the balance of RMB31,000 outstanding as of December 31, 2024.

As of December 31, 2024, the Group is in compliance of the financial covenants.

&nbsp;&nbsp;&nbsp;&nbsp;9. **ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES** 

Accrued expenses and other current liabilities as of December 31, 2023 and 2024 were as follows:

---

| | | |
|:---|:---|:---|
|  | **As of December 31,**  | **As of December 31,**  |
|  | **2023** | **2024** |
| Reclassified from redeemable non-controlling interests (Note) | 240474 | 39142 |
| Advance from customers | 124995 | 149687 |
| Salary and welfare payables | 78298 | 42259 |
| Accrued expenses | 78145 | 57839 |
| Current portion of operating lease liabilities | 42530 | 40341 |
| Liability under reverse factoring program | 98109 |  |
| Guaranteed customer loans  | 54999 | 33435 |
| Liability under factoring program  | 40353 | 30000 |
| Tax payables | 6945 | 4223 |
| Deposits from marketplace sellers | 28504 | 36185 |
| Others | 24943 | 27062 |
| Total | 818295 | 460173 |

---

Note: As of December 31, 2023 and 2024, redeemable non-controlling interest at the amount of RMB240,474 and RMB39,142, respectively, was classified as accrued expenses and other current liabilities due to the exercise redemption right. For the year ended December 31, 2024, an amount of RMB205,030 was reclassified from accrued expenses and other current liabilities to mezzanine equity set forth in Note 10.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**10.** **REDEEMABLE NON-CONTROLLING INTERESTS** 

In August and December 2020, 1 Pharmacy Technology issued its ordinary shares to certain private placement investors at fair value evaluated by the third-party valuer, representing 9.2% of the outstanding shares of 1 Pharmacy Technology for total consideration of RMB934,820. Under the agreements, 1 Pharmacy Technology and the investors agreed to facilitate 1 Pharmacy Technology's IPO in the Shanghai Sci-Tech Innovation Board ("STAR") prior to June 30, 2023. If the IPO has not been completed and the China Securities Regulatory Commission has not otherwise approved the registration of the STAR Listing registration application prior to June 30, 2023, the investors have the right to require Yao Wang to repurchase all or any portion of their ownership interests in 1 Pharmacy Technology at the cost plus annual interest rate of 6%. The ownership interests held by the investors were classified as redeemable non-controlling interests under ASC 480 Distinguishing Liabilities from Equity as the redemption feature embedded in the non-controlling interests and not solely within the Group's control. Total number of 66,318,885 shares was increased in Yao Wang's redeemable non-controlling interests due to issuance of common stock of 1 Pharmacy Technology.

The Company negotiated with the investors of 1 Pharmacy Technology in the contingently redeemable non-controlling interest in 1 Pharmacy Technology, and has signed agreements or commitment letters to reschedule the repayments with certain investors in 2024. The redeemable non-controlling interests as of and for the years ended December 31, 2023 and 2024 were summarized as follows:

---

| | | |
|:---|:---|:---|
|  | **2023** | **2024** |
| Opening balance as of January 1 | 1056939 | 870825 |
| Net loss attributable to the redeemable non-controlling interest  | (30852) | (1992) |
| Accretion of redeemable non-controlling interest | 86941 | 54357 |
| Payment of redeemable non-controlling interest | (1729) | (87502) |
| Reclassified from accrued expenses and other current liabilities |  | 205030 |
| Reclassified to accrued expenses and other current liabilities | (240474) | (1804) |
| Ending balance as of December 31 | 870825 | 1038914 |

---

&nbsp;&nbsp;&nbsp;&nbsp;11. **NON-CONTROLLING INTERESTS** 

In November 2020, the Company's subsidiary, 1 Pharmacy Technology issued 32,500,000 ordinary shares to 13 LLPs founded by the employees of 1 Pharmacy Technology with the total consideration of RMB 32,500. With full shareholders' rights of these ordinary shares issued to the LLPs, these shares are accounted as non-controlling interest of 1 Pharmacy Technology. The shares issued to the employees in each LLP are not outstanding shares but are restricted with 50% of the shares vesting within two years from the issuance date and the remaining 50% vesting evenly on an annual basis over the 2 years thereafter, which are also subject to adjustment based on performance condition. Such arrangement was entered into to provide a share incentive plan to the employees of 1 Pharmacy Technology ("Employee ownership plan of 1 Pharmacy Technology"). Share-based compensation was recognized over the vesting period based on the excess of the fair value of these shares over the issuance price (see Note 14). In July 2024, the Company's subsidiary, Yao Wang Corporation Limited had repurchased an aggregate of 13,521,445 ordinary shares of 1 Pharmacy Technology from departed employees and unvested options at cost for total cash consideration of RMB13,521. Repurchased shares were reserved from reissuance to employees based on performance conditions.

Non-controlling interest ("NCI") was recognized at RMB2,935 based on the proportional net assets of 1 Pharmacy Technology, with the difference of RMB16,456 recognized as a deduction to additional paid-in capital as of December 31, 2024. For the years ended December 31, 2022, 2023 and 2024, RMB15,281, RMB16,829 and RMB8,398 was recorded as net loss attributable to the NCI shareholders.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;12. **ORDINARY SHARES** 

Each Class A ordinary share entitles the holder to one vote, and each Class B ordinary share entitles the holder to fifteen votes on all matters subject to the vote at general meetings of the Company. Both Class A ordinary shares and Class B ordinary shares are entitled to the same dividend right, as such, this dual class share structure has no impacts to the earnings per share calculation. Basic earnings per share and diluted earnings per share are the same for each Class A ordinary share and Class B ordinary share. In September 2018, 75,118,996 former preferred shares were converted into Class A ordinary shares and the Company issued 15,969,110 Class A ordinary shares with the completion of the IPO.

On January 25, 2019, 5,500,000 Class A ordinary shares were issued to the Company's depositary bank, Bank of New York Mellon ("BNYM"), for bulk issuance of ADSs reserved for future issuances restricted stocks upon the exercise of stock options or vesting of restricted stocks under the 2013 Share Incentive Policy, 2014 Share Incentive Policy, 2016 Share Incentive Plan and 2018 Share Incentive Plan (together, the "Plans"). From August 15, 2019 to August 14, 2020 and from September 6, 2021 to September 5, 2022, the Company repurchased a total of 2,330,620 Class A ordinary shares of the Company and the repurchased shares were transferred to Computershare Hong Kong Investor Services Ltd. ("Computershare"), also for future issuances upon the exercise of stock options or vesting of restricted stocks under the Plans.

&nbsp;&nbsp;&nbsp;&nbsp;**13.** **NET REVENUES** 

#### Disaggregation of revenues
As disclosed in Note 2(m), the Group recognizes product revenue at the point in time when the delivery is made and when title and risk of loss transfers to the consumers and pharmacy customers. The Group service revenue is recognized over time when the customer simultaneously receives and consumes the benefits provided by the Group's performance.

All of the Group's revenues for the years ended December 31, 2022, 2023 and 2024 were generated within the PRC. The following table illustrates the disaggregation of the Group's revenue streams by type of customers and nature of services the Group offered:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** |
| **Product Revenues** | **13403436** | **14841910** | **14294740** |
| B2C Business | 408305 | 357975 | 261197 |
| B2B Business | 12995131 | 14483935 | 14033543 |
| **Service Revenues** | **113262** | **106219** | **106509** |
| MP Service | 68477 | 70271 | 65536 |
| Other Services | 44785 | 35948 | 40973 |
| **Total** | **13516698** | **14948129** | **14401249** |

---

The revenues by different product groups and services has been disclosed in Note 2(ad).

#### Contract balance
The typical contract term of MP service is no more than one year and the remaining unsatisfied performance obligation as of December 31, 2023 and 2024 was insignificant.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;**13.** **NET REVENUES (Continued)** 

#### Disaggregation of revenues (Continued)

#### Contract balance (Continued)
In some arrangements from which product revenue is generated, the Group receives advance payments from consumers and pharmacy customers before the product is delivered, which is recorded as advance from customers included in the accrued expenses and other current liabilities on the consolidated balance sheets. The movements of the Group's accounts receivable and advances from customers are as follows:

---

| | | |
|:---|:---|:---|
|  | **Accounts**<br>**Receivable** | **Advances from**<br>**Customers** |
| Ending Balance as of December 31, 2022 | 488875 | 296361 |
| Increase/(decrease), net  | 47948 | (171366) |
| Ending Balance as of December 31, 2023 | 536823 | 124995 |
| Increase/(decrease), net  | (123722) | 24692 |
| Ending Balance as of December 31, 2024 | 413101 | 149687 |

---

Revenues with amount of RMB296,361 and RMB124,995 were recognized in the years ended December 31, 2023 and 2024, respectively that were included in the balance of advance from customers at the beginning of the each year. The Group expected that RMB149,687 will be recognized in one month after year end.

&nbsp;&nbsp;&nbsp;&nbsp;14. **SHARE-BASED COMPENSATION** 

In September 2013, the Board of Directors of the Company approved an Equity Incentive Plan (the "Plan"), under which, the Board of Directors may grant options to purchase ordinary shares to officers and directors, employees and individual advisors who render services to the Group to purchase an aggregate of no more than 1,287,500 ordinary shares of the Group ("ESOP Pool"). From 2014 to 2024, the Board of Directors approved to increase the ESOP Pool to 23,638,998 ordinary shares.

*Employee Share options*

The options granted have a contractual term of 10 years and generally vest over a four-year period, with vesting schedules: 25% of the awards vesting on the anniversary of the grant date each year.

On October 27, 2022, the Board of directors of the Company has resolved, effective December 31, 2022 (the "Effective Date"), the exercise price per share of each option that is outstanding and not exercised, canceled, forfeited, or surrendered immediately prior to the effective Date, whether vested or unvested, shall be amended to USD 0.01 per Share. All other terms of the share options granted remain unchanged. As of December 31, 2022, there were 51 grantees affected with the incremental cost of RMB 42,100 for vested options to be recognized as compensation expenses immediately and the incremental cost of RMB 6,652 for unvested options to be recognized over the remaining vesting period, ranging from 2022 to 2025.

The Black Scholes model was applied in determining the estimated fair value of the options granted. The model requires the input of subjective assumptions. The following table presents the assumptions used to estimate the fair values of the share options granted for the year ended December 31, 2021. The Company did not grant options during the years ended December 31, 2022, 2023 and 2024.

---

| | |
|:---|:---|
|  | **2021** |
| Risk-free rate of return | 0.84% |
| Contractual life of option | 10 years |
| Expected term | 6.25 years |
| Estimated volatility rate | 39% |
| Dividend yield |  |
| Fair value per ordinary share | US$3.08 |

---

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;14. **SHARE-BASED COMPENSATION (Continued)** 

*Employee Share options (Continued)*

A summary of employee option activity under the Plan during the year ended December 31, 2024 is presented below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | <br>**Number of**<br>**Options** | <br>**Weighted**<br>**average**<br>**exercise**<br>**price** | **Weighted**<br>**average**<br>**remaining**<br>**contractual**<br>**term** | <br>**Aggregate**<br>**intrinsic**<br>**value** |
|  |  | **US$** | **Years** | **US$** |
| Outstanding at December 31, 2023 | 2192361 | 0.01 | 4.15 | 1677 |
| Granted |  |  |  |  |
| Forfeited |  |  |  |  |
| Expired |  |  |  |  |
| Exercised | (195414) | 0.01 |  |  |
| Outstanding at December 31, 2024 | 1996947 | 0.01 | 3.18 | 599 |
| Vested and exercisable as of December 31, 2024 | 1979091 | 0.01 | 3.15  | 594 |
| Vested or expected to vest as of December 31, 2024 | 1996947 | 0.01 | 3.18  | 599 |

---

The weighted-average grant-date fair value of options granted during the years 2021 was US$0.70. The total intrinsic value of options exercised during the years ended December 31, 2022, 2023, and 2024, was RMB 641, RMB 330 and nil, respectively. Total compensation cost recognized for the years ended December 31, 2022, 2023 and 2024 was RMB 47,117, RMB 6,206 and RMB 653, respectively.

As of December 31, 2024, there was RMB 196 of unrecognized compensation expense related to unvested share options, which is expected to be recognized over a weighted average period of 0.58 years.

*Non- Employee Share options*

The options granted have a contractual term of 10 years and were issued in payment for their consultation services which was expected to be performed over 4 years from the date of issuance. As services are performed, 25% of the awards vest on the anniversary of the grant date each year. The estimated fair value of the awards were determined using the Black Scholes model with the same assumptions used in employee share options.

On October 27, 2022, the Board of directors of the Company has resolved, effective December 31, 2022 (the "Effective Date"), the exercise price per share of each option that is outstanding and not exercised, canceled, forfeited, or surrendered immediately prior to the effective Date, whether vested or unvested, shall be amended to USD0.01 per Share. All other terms of the share options granted remain unchanged. As of December 31, 2022, there were 4 grantees affected by the modification, with total incremental compensation cost RMB 617 resulting from the modification and nil incremental to be recognized after 2022.

As of December 31, 2023 and 2024, there were 45,795 fully vested options with weighted average exercise price US$0.01, weighted average remaining contractual term 3.87 years and 2.86 years, respectively and aggregate intrinsic value RMB 249 and RMB 252. Nil option was granted during 2023 and 2024.

The weighted-average grant-date fair value of options granted during the years 2022, 2023 and 2024 was nil, respectively. The total intrinsic value of options exercised during the years ended December 31, 2022, 2023 and 2024 was nil, respectively. Total compensation cost recognized for the years ended December 31, 2022, 2023 and 2024 was RMB639, nil and nil, respectively.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;14. **SHARE-BASED COMPENSATION (Continued)** 

*Restricted share units*

The restricted share units granted have a contractual term of 10 years and vest over between one - year and four-year period that 100% and 25% of the award vesting on the anniversary of the grant date each year, respectively. The fair value of restricted share units with service conditions or performance conditions is based on the fair market value of the underlying ordinary shares on the date of grant.

The following table summarized the Group's restricted share unit activities during the year ended December 31, 2024.

---

| | | |
|:---|:---|:---|
|  | **Number of** <br>**Restricted** <br>**Share Units** | **Weighted**<br>**Average Grant Date**<br>**Fair Value** |
|  |  | **US$** |
| Restricted share units outstanding at December 31, 2023 | 3898327 | 1.73 |
| Granted | 1927930 | 0.52 |
| Forfeited | (216839) | 2.09 |
| Vested | (1638032) | 1.83 |
| Restricted share units outstanding at December 31, 2024 | 3971386 | 1.08 |

---

The weighted-average grant-date fair value of share units granted during the years 2022, 2023 and 2024 was US$1.26, US$1.30 and US$0.52, respectively. During the years ended December 31, 2022, 2023 and 2024, 837,238, 867,116 and 1,638,032 share units were vested with an aggregate intrinsic value of RMB 17,072, RMB 17,681 and RMB 7,308, respectively. The total fair value of restricted share units vested during the years ended December 31, 2022, 2023 and 2024 was RMB 23,921, RMB 18,261 and RMB 21,568, respectively. Total compensation cost recognized for the years ended December 31, 2022, 2023 and 2024 was RMB 22,410, RMB 15,611 and RMB 19,496. As of December 31, 2024, there was RMB 21,808 in total unrecognized compensation expense related to such non vested restricted shares, which is expected to be recognized over a weighted-average period of 0.3 year.

On September 9, 2022, the Company received a preliminary non-binding proposal letter from Dr. Gang Yu, Mr. Junling Liu, and Shanghai Guosheng Capital Management Co., Ltd., proposing to acquire all of the outstanding Class A ordinary shares of the Company ("Proposed Transaction"). On October 27, 2022, the Board of directors of the Company has resolved that any and all of the options or RSUs that are outstanding and unvested and not otherwise exercised, forfeited immediately upon the closing of the Company's Proposed Transaction shall vest immediately upon closing of the Proposed Transaction (the "Vest Acceleration"), and the Vest Acceleration shall no longer be in effect in the event that the Proposed Transaction is not closed by June 30, 2023. The Company assessed that the Proposed Transaction was not probable as of December 31, 2022, therefore, the modification did not have accounting consequence.

On February 27, 2024, the Consortium comprises of Dr. Gang Yu, co-founder and co-chairman, Mr. Junling Liu, co-founder, co-chairman and chief executive officer of the Company and certain investors, announced that it would withdraw the Proposed Transaction started on September 9, 2022. The Consortium will formally terminate further negotiation with the special committee of the Company's board of directors regarding the transactions as contemplated by the Proposed Transaction.

*Employee ownership plan of 1 Pharmacy Technology*

As disclosed in Note 11, the excess of the fair value of the restricted shares of LLPs issued to the employees of 1 Pharmacy Technology over the issuance price of RMB 32,500 is recognized as share-based compensation over the vesting period. The shares issued to the employees in each LLP are not outstanding shares but are restricted with 50% of the shares vesting within two years from the issuance date and the remaining 50% vesting evenly on an annual basis over the 2 years thereafter, which are also subject to adjustment based on performance condition.

For the years ended December 31, 2022 and 2023, the Group determined the fair value of the restricted shares of LLPs using income approach with the assistance from third party valuation specialist and the weighted average fair value of the restricted shares was estimated at RMB 14.5 and RMB 14.5 per share respectively.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;14. **SHARE-BASED COMPENSATION (Continued)** 

*Employee ownership plan of 1 Pharmacy Technology (Continued)*

On July 1, 2022, the Company modified the vesting terms that substantially all of the unvested restricted shares of LLPs would not be exercisable until the completion of the 1 Pharmacy Technology's qualified IPO. The modification was a probable-to-improbable modification as IPO constituted a performance condition that was not considered probable until the IPO completion date. As such, no incremental fair value was recognized unless and until the modified condition becomes probable. The award's original grant-date fair value is recognized as an expense, over the requisite service period, regardless of whether the modified conditions are satisfied. For the restricted shares granted after July 1, 2022, no share-based compensation expense was recognized. As of December 31, 2022, there were 46 grantees affected with the total unrecognized share-based compensation expenses of RMB 2,289, which will be recognized as share-based compensation expense when qualified IPO is probable.

On December 28, 2023, Employee Stock Ownership Plan management committee, a committee authorized by the Board of Director of 1 Pharmacy, adopted and approved a resolution of cancellation of this incentive plan. The management immediately recognized all remaining share-based compensation expenses of RMB 152,991 in December 2023.

The following table summarized the Group's restricted shares of LLPs activities during the year ended December 31, 2023.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | <br>**Number of Restricted** <br>**Share Units of LLPs** | <br>**Weighted Average** <br>**Grant Date Fair Value** | **Weighted average** <br>**remaining contractual** <br>**term** | <br>**Aggregate intrinsic** <br>**value** |
|  |  | **RMB** |  |  |
| Non-vested restricted shares outstanding at December 31, 2022 | 31571186 | 14.06 | 2.07 | 427158 |
| Granted | 3041555 | 13.50 |  |  |
| Forfeited | (3730484) | 14.01 |  |  |
| Vested | (18968249) | 13.12 |  |  |
| Canceled | (11914008) | 13.84 |  |  |
| Non-vested restricted shares outstanding at December 31, 2023 |  |  |  |  |

---

The weighted-average grant-date fair value of share units granted during the years 2022, 2023 and 2024 was RMB13.50, RMB13.50 and nil, respectively. The total fair value of restricted share units vested during the years ended December 31, 2022, 2023 and 2024 was nil. Total compensation cost recognized for the years ended December 31, 2022, 2023 and 2024 was RMB87,218, RMB204,353 and nil.

*Share-based compensation for all share options, restricted share units and employee ownership plan of 1 Pharmacy Technology*

The Group recorded share-based compensation expense of RMB157,384, RMB226,170 and RMB20,149 for the years ended December 31, 2022, 2023 and 2024, respectively, which were classified in the accompanying consolidated statements of operations as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** |
|  | **RMB** | **RMB** | **RMB** |
| General and administrative expenses | 86992 | 113536 | 9230 |
| Selling and marketing expenses | 50110 | 76976 | 6899 |
| Technology expenses | 20282 | 35658 | 4020 |
| Total | 157384 | 226170 | 20149 |

---

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;15. **LOSS PER SHARE** 

The following table sets forth the computation of basic and diluted loss per share for the years indicated:

---

| | | | |
|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** |
| Net loss attributable to ordinary shareholders | (416878) | (392693) | (64743) |
| Weighted average number of ordinary shares-basic and diluted | 166634121 | 168609128 | 171835632 |
| Net loss per ordinary share-basic and diluted | (2.50) | (2.33) | (0.38) |

---

As a result of the Group's net loss for the three years ended December 31, 2022, 2023 and 2024, share options and restricted share units outstanding in the respective periods were excluded from the calculation of diluted loss per share as their inclusion would have been anti-dilutive.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **As of December 31,**  | **As of December 31,**  | **As of December 31,**  |
|  |  | **2022** | **2023** | **2024** |
| Share options and nonvested restricted share units |  | 7,223,033 | 6,136,483 | 6,014,128 |

---

&nbsp;&nbsp;&nbsp;&nbsp;16. **INCOME TAX EXPENSE** 

#### Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain.

#### Hong Kong
Yao Wang and HK Yiyaolian are subject to Hong Kong profit tax at a rate of 16.5%. No Hong Kong profit tax has been provided as the Group has not had assessable profit that was earned in or derived from Hong Kong during the years presented.

#### PRC
Under the Law of the PRC on Enterprise Income Tax ("EIT Law"), domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. High-technology enterprises may obtain a preferential tax rate of 15% provided they meet the related criteria. In December 2019, 1 Pharmacy Technology received approval from relevant government authorities to be classified as a "High and New Technology Enterprise" ("HNTE") and 1 Pharmacy Technology is still on the position of loss. The HNTE qualification is valid for three years through 2021. In December 2022, 1 Pharmacy Technology renewed HNTE qualification for another three years.

There is no provision for income taxes because the Company and all of its owned subsidiaries are in cumulative loss positions for all the periods presented.

A reconciliation between the effective income tax rate and the PRC statutory income tax rate is as follows:

---

| | | |
|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2023** | **2024** |
| PRC statutory tax rate | 25% | 25% |
| Tax effect of other expenses that are not deductible in determining taxable profit | (1)% | (8)% |
| Effect of R&D super deduction | 4% | 38% |
| Effect of enacted tax rate change | 3% | 25% |
| Effect of change in valuation allowance | (31)% | (80)% |
| Effective tax rate | 0% | 0% |

---

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

**16.** **INCOME TAX EXPENSE (Continued)**

#### PRC (Continued)
The principal components of the Group's deferred income tax assets and liabilities as of December 31, 2023 and 2024 are as follows:

---

| | | |
|:---|:---|:---|
|  | **As of December 31,**  | **As of December 31,**  |
|  | **2023** | **2024** |
| **Deferred tax assets:** |  |  |
| &nbsp;&nbsp;Net loss carryforward | 670062 | 635188 |
| &nbsp;&nbsp;Accrued expenses and payroll payable | 18967 | 17230 |
| &nbsp;&nbsp;Provision for impairment of assets | 5663 | 3620 |
| &nbsp;&nbsp;Others | 94 |  |
| &nbsp;&nbsp;Valuation allowance | (694786) | (656038) |
| &nbsp;&nbsp;Total deferred tax assets |  |  |
| **Deferred tax liabilities:** |  |  |
| &nbsp;&nbsp;Total deferred tax liabilities |  |  |

---

As of December 31, 2023 and 2024, valuation allowance of RMB694,786 and RMB656,038 was provided, respectively. The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, the Group's experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more likely than not threshold. The Group's ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carryforward periods provided for in the tax law.

As of December 31, 2024, the Group had tax loss carryforwards of RMB2,540,751 which will expire between 2025 and 2033 if not used.

The Group determines whether or not a tax position is "more-likely-than-not" of being sustained upon audit based solely on the technical merits of the position. The Group does not anticipate any significant changes to its liability for unrecognized tax benefits within the next 12 months.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB100 is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. From 2019 to 2024, the Group's PRC subsidiaries were still within the examination period of the PRC tax authorities.

A deferred tax liability should be recognized for the undistributed profits of the PRC subsidiaries unless the Company has sufficient evidence to demonstrate that the undistributed dividends will be reinvested and the remittance of the dividends will be postponed indefinitely. The Company plans to indefinitely reinvest undistributed profits earned from its PRC subsidiaries in its operations in the PRC. Therefore, no withholding income taxes for undistributed profits of the Company's subsidiaries were provided as of December 31, 2023 and 2024.

[**Table of Contents**](#TOC)

#### 111, INC.

#### NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**FOR THE YEARS ENDED DECEMBER 31, 2022, 2023 and 2024(Amounts in thousands, except for share data and per share data, unless otherwise stated)**

&nbsp;&nbsp;&nbsp;&nbsp;17. **MAINLAND CHINA CONTRIBUTION PLAN** 

Full time employees of the Group in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on a certain percentage of the employees' salaries. The total contribution for such employee benefits were RMB67,384, RMB61,725 and RMB49,069 for the years ended December 31, 2022, 2023 and 2024, respectively. The Group has no ongoing obligation to its employees subsequent to its contributions to the PRC plan.

&nbsp;&nbsp;&nbsp;&nbsp;18. **RESTRICTED NET ASSETS** 

Pursuant to laws applicable to entities incorporated in the PRC, the subsidiaries of the Group in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriation of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% of their registered capital; the other fund appropriations are at the subsidiaries' discretion. These reserve funds can only be used for the specific purposes of offsetting future losses, enterprise expansion and staff bonus and welfare and are not distributable as cash dividends. During the years ended December 31, 2022, 2023 and 2024, no appropriation to statutory reserves was made because the PRC subsidiaries had substantial losses during such periods. In addition, due to restrictions on the distribution of share capital from the Company's PRC subsidiaries, the PRC subsidiaries' share capital of RMB618,830 and RMB639,000 on December 31, 2023 and 2024 is considered restricted, which are not available for distribution to the Company by its PRC subsidiaries in the form of dividends, loans or advances.

&nbsp;&nbsp;&nbsp;&nbsp;19. **COMMITMENTS AND CONTINGENCIES** 

The Group is subject to periodic legal or administrative proceedings in the ordinary course of its business. The Group does not believe that any currently pending legal or administrative proceeding to which the Group is a party will have a material adverse effect on the financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;**20.** **SUBSEQUENT EVENTS** 

On January 8, 2025, the Group announced its plan to change the ratio of its American Depositary Shares ("ADSs") to Class A ordinary shares from one (1) ADS representing two (2) Class A ordinary shares to a new ratio of one (1) ADS representing twenty (20) Class A ordinary shares. The ratio change took effect for ADS trading prices on Nasdaq at the opening of business on January 24, 2025.

The Group has evaluated subsequent events through the date of issuance of the consolidated financial statements, there were no other subsequent events occurred that would require recognition or disclosure in the consolidated financial statements.

[**Table of Contents**](#TOC)

#### ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I

#### 111, INC.

#### FINANCIAL INFORMATION FOR PARENT COMPANY

#### CONDENSED BALANCE SHEETS
**(Amounts in thousands)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2023** | **2024** | **2024** |
|  | **RMB** | **RMB** | **US$** |
|  |  |  | **(Note 2 (aj))** |
| **ASSETS** |  |  |  |
| Current assets: |  |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | 166942 | 58086 | 7958 |
| &nbsp;&nbsp;Short term investments |  |  |  |
| &nbsp;&nbsp;Prepayments and other current assets | 1948 | 671 | 92 |
| &nbsp;&nbsp;Total current assets | 168890 | 58757 | 8050 |
| Total assets | 168890 | 58757 | 8050 |
| **LIABILITIES AND EQUITY** |  |  |  |
| Other current liabilities | 13883 | 600 | 82 |
| Amount due to subsidiaries | 187606 | 20820 | 2852 |
| Deficit in subsidiaries | 550852 | 679981 | 93157 |
| Total liabilities | 752341 | 701401 | 96091 |
| **SHAREHOLDERS' DEFICIT** |  |  |  |
| Ordinary shares Class A | 32 | 33 | 5 |
| Ordinary shares Class B | 25 | 25 | 3 |
| Treasury shares | (5887) | (5887) | (807) |
| Additional paid-in capital | 3169114 | 3172820 | 434675 |
| Accumulated deficit | (3819249) | (3883992) | (532105) |
| Accumulated other comprehensive income | 72514 | 74357 | 10187 |
| Total shareholders' deficit | (583451) | (642644) | (88042) |
| Total liabilities and shareholders' deficit | 168890 | 58757 | 8049 |

---

[**Table of Contents**](#TOC)

#### ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I

#### 111, INC.

#### FINANCIAL INFORMATION FOR PARENT COMPANY

#### CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
**(Amounts in thousands, unless otherwise stated)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** | **2024** |
|  | **RMB** | **RMB** | **RMB** | **US$** |
|  |  |  |  | **(Note 2 (aj))** |
| Operating expenses: |  |  |  |  |
| &nbsp;&nbsp;General and administrative expenses | (19613) | (19303) | (1767) | (242) |
| &nbsp;&nbsp;Interest income | 12 | 1772 | 410 | 56 |
| &nbsp;&nbsp;Other operating expenses, net |  |  | (63) | (8) |
| &nbsp;&nbsp;Other income, net | 3985 | 3546 | 4574 | 626 |
| Loss (Profit) before tax and loss from investment in subsidiaries and former VIE | (15616) | (13985) | 3154 | 432 |
| Equity in loss from subsidiaries and share of loss in former VIE | (401262) | (378708) | (67897) | (9302) |
| Net loss attributable to ordinary shareholders | (416878) | (392693) | (64743) | (8870) |
| Other comprehensive income (loss) (net of tax of nil) |  |  |  |  |
| Unrealized securities holding gains | 640 |  |  |  |
| Realized securities holding gains |  | (640) |  |  |
| Foreign currency translation adjustments | 15869 | (3249) | 1986 | 273 |
| Unrealized securities holding gains of subsidiaries and former VIE | 4170 | 4343 | 1074 | 147 |
| Realized securities holding gains of subsidiaries and former VIE | (4464) | (3526) | (1217) | (167) |
| Comprehensive loss | (400663) | (395765) | (62900) | (8617) |

---

[**Table of Contents**](#TOC)

#### ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I

#### 111, INC.

#### FINANCIAL INFORMATION FOR PARENT COMPANY

#### CONDENSED STATEMENTS OF CASH FLOWS
**(Amounts in thousands, unless otherwise stated)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  | **Years Ended December 31,**  |
|  | **2022** | **2023** | **2024** | **2024** |
|  | **RMB** | **RMB** | **RMB** | **US$** |
|  |  |  |  | **(Note 2 (aj))** |
| Operating activities: |  |  |  |  |
| &nbsp;&nbsp;Net loss | (416878) | (392693) | (64743) | (8870) |
| &nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Share of loss of subsidiaries and former VIE | 401262 | 378708 | 67897 | 9302 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities | 5870 | 5007 | (9682) | (1326) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-current liabilities | (1537) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (11283) | (8978) | (6528) | (894) |
| Investing activities: |  |  |  |  |
| &nbsp;&nbsp;Purchase of short-term investments | (18925) |  |  |  |
| &nbsp;&nbsp;Proceeds from sale or maturity of short-term investments |  | 57434 |  |  |
| Net cash (used in) provided by investing activities | (18925) | 57434 |  |  |
| Financing activities: |  |  |  |  |
| &nbsp;&nbsp;Proceeds from ordinary shareholders | 274 | 223 | 14 | 2 |
| &nbsp;&nbsp;Proceeds from loan from subsidiaries | 19010 | 167414 |  |  |
| &nbsp;&nbsp;Payment for loan from subsidiaries |  | (54229) | (102683) | (14068) |
| Net cash (used in) provided by financing activities | 19284 | 113408 | (102669) | (14066) |
| Effect of exchange rate changes on cash and cash equivalents, and restricted cash | 2854 | 205 | 341 | 47 |
| Net (decrease) increase in cash and cash equivalents | (8070) | 162069 | (108856) | (14913) |
| Cash and cash equivalents at the beginning of the year | 12943 | 4873 | 166942 | 22871 |
| Cash and cash equivalents at the end of the year | 4873 | 166942 | 58086 | 7958 |

---

[**Table of Contents**](#TOC)

#### ADDITIONAL FINANCIAL INFORMATION - FINANCIAL STATEMENTS SCHEDULE I

#### 111, INC.

#### FINANCIAL INFORMATION FOR PARENT COMPANY

#### Note to Schedule I
Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04-(c) of Regulation S-X, which require condensed financial information as to the financial position, change in financial position and results of operations of a parent company as of the same dates and for the same periods for which audited financial statements have been presented when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

The condensed financial information has been prepared using the same accounting policies as set out in the consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries and former VIE. For the parent company, the Group records its investments in subsidiaries and former VIE under the equity method of accounting as prescribed in ASC 323, Investments—Equity Method and Joint Ventures. Ordinarily under the equity method, an investor in an equity method investee would cease to recognize its share of the losses of an investee once the carrying value of the investment has been reduced to nil absent an undertaking by the investor to provide continuing support and fund losses. For the purpose of Schedule I, the parent company has continued to reflect its share, based on its proportionate interest, the losses of subsidiaries and former VIE regardless of the carrying value of the investment even though the parent company is not obligated to provide continuing support or fund losses.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the accompanying financial statements.

As of December 31, 2024, there are no material contingencies, mandatory dividend and significant provisions for long-term obligations or guarantees of the Company, except for those which have separately disclosed in the financial statements.

## Exhibit 12.1

**Exhibit 12.1**

**Certification by the Principal Executive Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Junling Liu, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 20-F, as amended by Amendment No. 1 thereto, of 111, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

*CEO's Section 302 Certification*

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: August 29, 2025

---

| | | |
|:---|:---|:---|
| By: | /s/ Junling Liu | /s/ Junling Liu |
|  | Name: | Junling Liu  |
|  | Title: | Chief Executive Officer |

---

------

## Exhibit 12.2

**Exhibit 12.2**

**Certification by the Principal Financial Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Junling Liu, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this annual report on Form 20-F, as amended by Amendment No. 1 thereto, of 111, Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):

*CFO's Section 302 Certification*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: August 29, 2025

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| | | |
|:---|:---|:---|
| By: | /s/ Junling Liu | /s/ Junling Liu |
|  | Name: | Junling Liu |
|  | Title: | Chief Executive Officer, acting in the capacity of Chief Financial Officer |

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## Exhibit 13.1

**Exhibit 13.1**

**Certification by the Principal Executive Officer**

**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

In connection with the Annual Report of 111, Inc. (the "Company") on Form 20-F for the year ended December 31, 2024 as filed with the Securities and Exchange Commission on April 29, 2025, as amended by Amendment No. 1 thereto (the "Report"), I, Junling Liu, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 29, 2025

---

| | | |
|:---|:---|:---|
| By: | /s/ Junling Liu | /s/ Junling Liu |
|  | Name: | Junling Liu |
|  | Title: | Chief Executive Officer |

---

*CEO's Section 906 Certification*

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## Exhibit 13.2

**Exhibit 13.2**

**Certification by the Principal Financial Officer**

**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

In connection with the Annual Report of 111, Inc. (the "Company") on Form 20-F for the year ended December 31, 2024 as filed with the Securities and Exchange Commission on April 29, 2025, as amended by Amendment No. 1 thereto (the "Report"), I, Junling Liu, acting in the capacity of Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 29, 2025

---

| | | |
|:---|:---|:---|
| By: | /s/ Junling Liu | /s/ Junling Liu |
|  | Name: | Junling Liu |
|  | Title: | Chief Executive Officer, acting in the capacity of Chief Financial Officer |

---

*CFO's Section 906 Certification*

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## Exhibit 15.4

**Exhibit 15.4**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in this Registration Statement No. 333-229313 on Form S-8 of our report dated May 14, 2024, relating to the financial statements of 111, Inc., appearing in the Annual Report on Form 20-F/A of 111, Inc. for the year ended December 31, 2024.

---

| |
|:---|
| /s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP |
| Shanghai, China |
| August 29, 2025 |

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