エドガーで原本を確認する
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of September
Commission file number:
Yongxu Industrial Park
No.19-23 Hejing Road, Dongsha Street
Liwan District, Guangzhou 510000
People’s Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
EXPLANATORY NOTE
POMDOCTOR LIMITED is furnishing its unaudited interim condensed consolidated financial statements and footnotes for the six months ended June 30, 2025 and 2026. The unaudited interim condensed consolidated financial statements and notes are attached as Exhibit 99.1 to this report of foreign private issuer on Form 6-K, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2025 and 2026 is attached as Exhibit 99.2 to this report of foreign private issuer on Form 6-K.
| 1 |
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Unaudited Interim Condensed Consolidated Financial Statements of POMDOCTOR LIMITED | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2025 and 2026 | |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 2 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| POMDOCTOR LIMITED | ||
| By: | /s/ Zhenyang Shi | |
| Name: | Zhenyang Shi | |
| Title: | Chairman and Chief Executive Officer | |
Date: September 29, 2026
| 3 |
Exhibit 99.1
POMDOCTOR LIMITED
INDEX TO FINANCIAL STATEMENTS
F-1
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, 2025 |
June 30, 2026 |
June 30, 2026 |
||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Accounts receivable, net (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Accounts receivable - a related party (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Amount due from related parties (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Inventories (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Other receivables, net (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Advances to suppliers (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Total current assets | ||||||||||||
| Property and equipment, net (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Other non-current assets (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Total non-current assets | ||||||||||||
| Total assets | ||||||||||||
F-2
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
| December 31, 2025 |
June 30, 2026 |
June 30, 2026 |
||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Liabilities | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Accounts payable – a related party (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Short-term bank loans (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Long-term bank loans, current (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Long-term loans, current (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Long-term loans from third parties, current (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Salary and welfare payable (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Advance from customers (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Value added tax (“VAT”) and other tax payable (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Other payables (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Accrued liabilities (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Short-term loans from third parties (including amounts of the consolidated VIEs of RMB | ||||||||||||
F-3
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
| December 31, 2025 |
June 30, 2026 |
June 30, 2026 |
||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Loans from related parties, current (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Amount due to related parties (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Operating lease liabilities, current (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Total current liabilities | ||||||||||||
| Long-term bank loans, noncurrent (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Long-term loans from third parties, noncurrent (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Loans from related parties, noncurrent (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Operating lease liabilities, noncurrent (including amounts of the consolidated VIEs of RMB | ||||||||||||
| Total non-current liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Commitments and contingencies (Note 19) | ||||||||||||
F-4
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
| December 31, 2025 |
June 30, 2026 |
June 30, 2026 |
||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Deficit | ||||||||||||
| Class A Ordinary shares (US$ | ||||||||||||
| Class B Ordinary shares (US$ | ||||||||||||
| Subscription receivable | ( | ) | ( | ) | ( | ) | ||||||
| Additional paid-in capital | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Total Pomdoctor Limited’s shareholders’ deficit | ( | ) | ( | ) | ( | ) | ||||||
| Noncontrolling interests | ( | ) | ( | ) | ( | ) | ||||||
| Total deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total liabilities and deficit | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-5
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Net revenues – third parties | ||||||||||||
| Net revenues – a related party | ||||||||||||
| Net revenues | ||||||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Sales and marketing expenses (including related party amounts of RMB | ||||||||||||
| General and administrative expenses | ||||||||||||
| Research and development expenses | ||||||||||||
| Impairment loss on long-lived assets | ||||||||||||
| Total operating expenses | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other expense, net: | ||||||||||||
| Other income | ||||||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ||||||
| Interest expense (including related party amounts of RMB | ( | ) | ( | ) | ( | ) | ||||||
| Government grants | ||||||||||||
| Total other expense, net | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income tax | ( | ) | ( | ) | ( | ) | ||||||
| Income tax expense | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Accretion to redemption value of mezzanine equity | ( | ) | ||||||||||
| Less: Net loss attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ||||||
| Net loss attributable to the Pomdoctor Limited’s ordinary shareholders | ( | ) | ( | ) | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Other comprehensive loss: | ||||||||||||
| Foreign currency translation adjustments, net of income taxes | ( | ) | ( | ) | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Accretion to redemption value of mezzanine equity | ( | ) | ||||||||||
| Less: comprehensive loss attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ||||||
| Comprehensive loss attributable to the Pomdoctor Limited’s ordinary shareholders | ( | ) | ( | ) | ( | ) | ||||||
| Loss per share | ||||||||||||
| Basic and diluted | ( | ) | ( | ) | ( | ) | ||||||
| Weighted average number of ordinary shares outstanding | ||||||||||||
| Basic and diluted | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-6
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
| Class A ordinary shares | Class B ordinary shares | Subscription | Additional paid-in |
Accumulated | Accumulated other comprehensive |
Total Pomdoctor Limited’s shareholders’ |
Noncontrolling | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | receivable | capital | deficit | loss | deficit | interests | deficit | ||||||||||||||||||||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | RMB | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Accretion on convertible redeemable preferred shares to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | ) | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balances as of June 30, 2026, in US$ | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-7
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||||||
| Depreciation of property and equipment | ||||||||||||
| Change in expected credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Allowance for inventory | ||||||||||||
| Impairment loss on long-lived assets | ||||||||||||
| Share-based compensation | ||||||||||||
| Loss on disposal of property and equipment | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||
| Accounts receivable – a related party | ( | ) | ( | ) | ( | ) | ||||||
| Amount due from related parties | ( | ) | ( | ) | ( | ) | ||||||
| Inventories | ||||||||||||
| Other receivables | ||||||||||||
| Advances to suppliers | ( | ) | ( | ) | ( | ) | ||||||
| Other non-current assets | ||||||||||||
| Accounts payable | ( | ) | ( | ) | ( | ) | ||||||
| Accounts payable – a related party | ( | ) | ||||||||||
| Salary and welfare payable | ||||||||||||
| Advance from customers | ( | ) | ( | ) | ( | ) | ||||||
| Value added tax (“VAT”) and other tax payable | ( | ) | ( | ) | ||||||||
| Other payables | ( | ) | ||||||||||
| Accrued liabilities | ||||||||||||
| Amount due to related parties | ||||||||||||
| Operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Refund liability | ( | ) | ||||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||
| Payment for purchase of property and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Payment for other noncurrent assets | ( | ) | ( | ) | ( | ) | ||||||
| Proceeds from disposal of property and equipment | ||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
F-8
POMDOCTOR LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ Note 3 |
||||||||||
| Cash flows from financing activities: | ||||||||||||
| Loans from related parties | ||||||||||||
| Repayment to related parties | ( | ) | ( | ) | ( | ) | ||||||
| Proceeds from short-term bank loans | ||||||||||||
| Repayment of short-term bank loans | ( | ) | ( | ) | ( | ) | ||||||
| Proceeds from long-term bank loans | ||||||||||||
| Repayment of long-term bank loans | ( | ) | ( | ) | ( | ) | ||||||
| Repayment of long-term loans | ( | ) | ( | ) | ||||||||
| Loans from third parties | ||||||||||||
| Repayment to third parties | ( | ) | ( | ) | ( | ) | ||||||
| Payment for deferred offering costs | ( | ) | ||||||||||
| Net cash provided by (used in) financing activities | ( | ) | ( | ) | ||||||||
| Effect of exchange rate changes | ( | ) | ( | ) | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||||||
| Cash and cash equivalents at beginning of the period | ||||||||||||
| Cash and cash equivalents at end of the period | ||||||||||||
| Supplemental disclosures of cash flows information: | ||||||||||||
| Cash paid for income tax | ||||||||||||
| Cash paid for interest expense | ||||||||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||||||
| Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-9
POMDOCTOR LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — DESCRIPTION OF BUSINESS AND ORGANIZATION
Pomdoctor Limited (“Pomdoctor” or the “Company”) was incorporated in the Cayman Islands on
As of June 30, 2026, the details of the Company’s major subsidiaries, consolidated VIE and the subsidiaries of the VIE are as follows:
| Date of | Place of | Percentage of ownership by the Company | ||||||||
| Entity | incorporation | incorporation | Direct | Indirect | Principal activities | |||||
| Subsidiaries: | ||||||||||
| Pom (HK) | ||||||||||
| Guangzhou WFOE | ||||||||||
| Guangzhou Li Luo Technology Co., Ltd. | ||||||||||
| VIE: | ||||||||||
| Qilekang Digital Health | ||||||||||
| VIE’s subsidiaries: | ||||||||||
| Guangzhou Qilekang Modern Pharmaceutical Logistics Co., Ltd. (“Modern Logistics”) | ||||||||||
| Hangzhou Qilekang Pharmaceutical Co., Ltd. (“Hangzhou Qilekang”) | ||||||||||
| Nanjing Qilekang Pharmaceutical Co., Ltd. (“Nanjing Qilekang”) | ||||||||||
| Suzhou Qilekang Pharmaceutical Co., Ltd. (“Suzhou Qilekang”) | ||||||||||
| Guangzhou Qilekang Cloud Technology Co., Ltd. (“Guangzhou Cloud Tech”) | ||||||||||
| Guangzhou Pomegranate Cloud Pharma Health Industry Technology Co., Ltd. | ||||||||||
| Guangzhou Wanggang International Medical Management Co., Ltd. | ||||||||||
F-10
The PRC laws and regulations currently place certain restrictions on foreign ownership of companies that engage in internet content and other restricted businesses. To comply with PRC laws and regulations, the Group conducts all of its business in China through the VIE and subsidiaries of the VIE. Despite the lack of technical majority ownership, the Company has effective control of the VIE through a series of contractual arrangements (the “Contractual Agreements”) and a parent-subsidiary relationship exists between the Company and the VIE. The equity interests of the VIE are legally held by PRC individuals and PRC entities (the “Nominee Shareholders”). Through the Contractual Agreements, the Nominee Shareholders of the VIE effectively assigned all of their voting rights underlying their equity interests in the VIE to the Company, via the WFOE, and therefore, the Company has the power to direct the activities of the VIE that most significantly impact its economic performance. The Company also has the right to receive economic benefits and obligations to absorb losses from the VIE, via the WFOE, that potentially could be significant to the VIE. Based on the above and in accordance with SEC Regulation SX-3A-02 and ASC810-10, the Company is deemed to be the primary beneficiary of Qilekang Digital Health and the financial positions, the operating results and cash flows of Qilekang Digital Health and its subsidiaries are consolidated in the Company’s consolidated financial statements for financial reporting purposes. The described contractual arrangements are as follows:
Exclusive Business Cooperation Agreement. Pursuant to an Exclusive Business Cooperation Agreement dated August 10, 2021 by and between Guangzhou WFOE and Qilekang Digital Health, Guangzhou WFOE has the exclusive right to provide or designate any third party to provide comprehensive technical support, consulting services and other related services to Qilekang Digital Health. In exchange, Qilekang Digital Health agrees to pay an agreed service fees to Guangzhou WFOE on annual basis or at any other agreed time. Without the prior written consent of Guangzhou WFOE, Qilekang Digital Health cannot accept same or similar services provided by, or establish same or similar cooperation relationship with, any third party. This Exclusive Business Cooperation Agreement will remain effective for 30 years unless earlier terminated in accordance with provisions of this agreement or other agreements separately executed between Guangzhou WFOE and Qilekang Digital Health, and will automatically be extended for another 30 years unless agreed by Guangzhou WFOE on this agreement’s termination upon expiration of its term. Unless otherwise required by the applicable laws, Qilekang Digital Health has no right to terminate this agreement unilaterally.
Power of Attorney. Pursuant to each of the Power of Attorneys dated August 10, 2021 and October 24, 2023 by and among Guangzhou WFOE, Qilekang Digital Health, and each of the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology), the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology) irrevocably authorized Guangzhou WFOE to act on their respective behalf as proxy attorney, to exercise the voting and management rights of shareholders concerning all the equity interests held by each of them in Qilekang Digital Health, including but not limited to right to convene and attend shareholders’ meetings, the right to vote and all other rights as shareholders under the articles of association of Qilekang Digital Health and under the laws of China. Without the prior written consent of Guangzhou WFOE, the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have no right to increase, decrease, transfer, pledge, or by any other manner to dispose of or change all or a portion of the equity interest held by such shareholders. The Power of Attorneys shall be irrevocable and remain effective as long as such shareholders remain as Qilekang Digital Health’s shareholders.
F-11
Spousal Consent Letters. Spouses of two shareholders of Qilekang Digital Health, Mr. Zhenyang Shi and Ms. Li Xu, who collectively hold
Equity Interest Pledge Agreement. Pursuant to each of the Equity Interest Pledge Agreements dated August 10, 2021 and October 24, 2023 by and between Guangzhou WFOE, Qilekang Digital Health and each of the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology), the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have agreed to pledge
Exclusive Option Agreement. Pursuant to each of the Exclusive Option Agreements dated August 10, 2021 and October 24, 2023 by and between Guangzhou WFOE, Qilekang Digital Health, and each of the shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology), such shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have irrevocably granted Guangzhou WFOE or its designated person, to the extent permitted by PRC laws, an exclusive option to purchase all or part of their equity interests in Qilekang Digital Health. Guangzhou WFOE or its designated person may exercise such option to purchase all of equity interests at the price based on registered capital contributed by the shareholders (except for Zhongke Baiyun and General Technology) or the price as agreed in a separate equity transfer agreement. Qilekang Digital Health has undertaken that, without Guangzhou WFOE’s prior written consent, it will not, among other things, (i) change its registered capital, (ii) merge with any other entity, (iii) sell, transfer, mortgage, or dispose of its material assets, or (iv) amend its articles of association. The shareholders of Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have undertaken that, without Guangzhou WFOE’s prior written consent, they will not sell, transfer, mortgage or dispose of equity interest in Qilekang Digital Health. The Exclusive Option Agreements will remain effective until all equity interest held by the shareholders of Qilekang Digital Health in Qilekang Digital Health (except for Zhongke Baiyun and General Technology) have been transferred or assigned to Guangzhou WFOE or any other person designated by Guangzhou WFOE.
In August 2021, Guangdong Zhongke Baiyun Emerging Industry Venture Capital Fund Co., Ltd., or Zhongke Baiyun, which holds
In October 2023, the Company terminated the contractual arrangements with General Technology Group Investment Management Co. Ltd., or General Technology. General Technology, which holds
F-12
In the same month, the Company terminated the relevant agreements with Mr. Shi and Ms. Xu, with Guangzhou WFOE entering into a new series of agreements with Qilekang Digital Health and each of Mr. Shi and Ms. Xu, Guangzhou Jinpin Management Consulting Partnership (Limited Partnership), or Guangzhou Jin Pin, Guangzhou Jinshang Management Consulting Partnership (Limited Partnership), or Guangzhou Jin Shang, Guangzhou Jinyue Management Consulting Partnership (Limited Partnership). or Guangzhou Jin Yue. and Guangzhou Jinqiu Management Consulting Partnership (Limited Partnership), or Guangzhou Jin Qiu. In January 2024, the Company completed the ODI procedures and registration of adding four domestic limited partnerships as the new shareholders of Qilekang Digital Health. Since January 2024, 34 nominators indirectly hold the equity of Qilekang Digital Health through four domestic limited partnerships in China. The owners of the three domestic limited partnerships, namely Guangzhou Jin Pin, Guangzhou Jin Shang and Guangzhou Jin Yue indirectly hold the shares of the Company. The owners of Guangzhou Jin Qiu indirectly holds the shares of the Company through an qualified overseas related entities.
In the opinion of the Company’s management and PRC counsel, (i) the ownership structure of the Group, including its subsidiary, the VIE and the subsidiaries of the VIE, is not in violation with any applicable PRC laws, (ii) each of the VIE agreements is legal, valid, binding and enforceable to each party of such agreements in accordance with its terms and applicable PRC Laws; and (iii) each of the Group’s PRC subsidiaries, the VIE and the subsidiaries of the VIE have the necessary corporate power and authority to conduct its business as described in its business scope under its business license, which is in full force and effect, and the Group’s business operation in PRC are in compliance with existing PRC laws and regulations.
Risks in relation to the VIE structure
The Company believes that the contractual arrangements with its VIE and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could cause the relevant regulatory authorities to find the current Contractual Agreements and businesses to be in violation of any existing or future PRC laws or regulations. If the Company, the WFOE or any of its current or future VIE are found in violation of any existing or future laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, which may include, but not limited to, revocation of business and operating licenses, being required to discontinue or restrict its business operations, restriction of the Group’s right to collect revenues, being required to restructure its operations, imposition of additional conditions or requirements with which the Group may not be able to comply, or other regulatory or enforcement actions against the Group that could be harmful to its business. The imposition of any of these or other penalties may result in a material and adverse effect on the Group’s ability to conduct its business. In addition, if the imposition of any of these penalties causes the Company to lose the rights to direct the activities of the VIE or the right to receive their economic benefits, the Company would no longer be able to consolidate the VIE.
In addition, if the VIE or the Nominee Shareholders fail to perform their obligations under the Contractual Agreements, the Group may have to incur substantial costs and expend resources to enforce the primary beneficiary’ rights under the contracts. The Group may have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. All of the Contractual Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the Group’s ability to enforce these contractual arrangements. Under PRC laws, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would incur additional expenses and delay. In the event the Group is unable to enforce the Contractual Agreements, the primary beneficiary may not be able to exert effective control over its VIE, and the Group’s ability to conduct its business may be negatively affected.
F-13
The following tables represent the selected financial information for the VIE as of December 31, 2025 and June 30, 2026 and for the six months ended June 30, 2025 and 2026.
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Current assets | ||||||||||||
| Non-current assets | ||||||||||||
| Total assets | ||||||||||||
| Current liabilities | ||||||||||||
| Non-current liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Net deficit | ( | ) | ( | ) | ( | ) | ||||||
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Net revenues | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ( | ) | ||||||||
There are no pledge or collateralization of the VIE and VIE’s subsidiaries’ assets that can only be used to settled obligations of the VIE and VIE’s subsidiaries, except for the restricted net assets. Relevant PRC laws and regulations restrict the VIE from transferring a portion of its net assets to the Company in the form of loans and advances or cash dividends. As the VIE is incorporated as limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the VIE in normal course of business.
Note 2 — GOING CONCERN
The Group’s consolidated financial statements have been prepared assuming the Group will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as reflected in the Group’s financial statements, the Group incurred net losses of RMB
F-14
Management’s plan to alleviate the substantial doubt about the Group’s ability to continue as a going concern include as follows: (i) On August 3, 2026, the Group obtained a loan of RMB
The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amount or the amounts and classification of liabilities that may result should the Group be unable to continue as a going concern.
Note 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and consolidation
The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2025 (the “2025 Form 20-F”), as filed with the SEC on May 14, 2026. The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, VIE and VIE’s subsidiaries in which the Company is the primary beneficiary. The results of the subsidiaries are consolidated from the date on which the Group obtained control and continues to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity. However, if the Company demonstrates its ability to control the VIE through power to govern the activities which most significantly impact VIE’s economic performance and is obligated to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, then the entity is consolidated. All significant inter-company transactions and balances between the Company, its subsidiaries, VIE and VIE’s subsidiaries are eliminated upon consolidation.
Noncontrolling interests
For the Group’s subsidiaries majority-owned by the Company’s VIE and VIE’s subsidiaries, noncontrolling interests are recognized to reflect the portion of the equity which is not attributable, directly or indirectly, to the Group as the controlling shareholder. As of December 31, 2025 and June 30, 2026, noncontrolling interest on the consolidated balance sheets was resulted from the consolidating
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The major accounting estimates made in the preparation of the accompanying consolidated financial statements relate to the assessment of the valuation of accounts receivable, advances to suppliers, other receivables and related allowance for credit losses, useful lives of property and equipment, inventory reserve, recoverability and useful lives of long-lived assets, and valuation allowance on deferred tax assets. The Group bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.
F-15
Functional currency and foreign currency translation
The Group uses Renminbi (“RMB”) as its reporting currency. The functional currency of the Group and its overseas subsidiaries which incorporated in the Cayman Islands and Hong Kong is US$. The functional currency of the Group’s PRC entities is RMB.
In the consolidated financial statements, the financial information of the Group and other entities located outside of the PRC have been translated into RMB. Assets and liabilities are translated at the exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates, and revenues, expenses, gains and losses are translated using the average rate for the periods. Translation adjustments are reported as foreign currency translation adjustments, and are shown as a component of other comprehensive loss in the consolidated statements of operations and comprehensive loss. For the six months ended June 30, 2025 and 2026, the Group has foreign currency translation adjustment of positive RMB
Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Financial assets and liabilities denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing at the balance sheet date.
Convenience translation
Translations of amounts from RMB into US$ for the convenience of the reader have been calculated at the exchange rate of US$
Fair value measurements
The Group applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| 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. |
Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, other receivables, advance to suppliers, other current assets, accounts payable, other payable, salary and welfare payable, value added tax (“VAT”) and other tax payable, advance from customers and accrued liabilities are a reasonable approximation of fair value due to the short maturities of these instruments.
Cash and cash equivalents
Cash and cash equivalents primarily consist of cash and investments in interest bearing demand deposit accounts.
F-16
Accounts receivable
Accounts receivable is stated at the historical carrying amount net of allowance for expected credit loss. The Group uses the aging schedule method to calculate the credit loss and considered the relevant factors of the historical and future conditions of the Company to make reasonable estimation of the risk rate. Additionally, the Group provides specific provision for credit losses based on any specific knowledge the Group has acquired that might indicate that an account is uncollectible. The facts and circumstances of each account may require the Group to use substantial judgment in assessing its collectability. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate.
Allowance for credit losses
Commencing January 1, 2023, the Group adopted ASC326, Financial Instruments-Credit Losses (“ASC326”), using modified-retrospective transition approach. Pursuant to ASC 326, an allowance for credit losses for financial assets is carried at amortized cost to present the net amount expected to be collected as of the balance sheet date.
Such allowance is based on credit losses expected to arise over the life of the asset’s contractual term, which includes consideration of prepayments. Assets are written off when the Group determines that such financial assets are deemed uncollectible and are recognized as a deduction from the allowance for credit losses. Expected recoveries of amounts previously written off, not to exceed the aggregate of the amount previously written off, are included in determining the necessary reserve at the balance sheet date.
Following the adoption of this guidance, a cumulative-effect adjustment in accumulated deficit of was recognized as of January 1, 2023. The adoption of ASC 326 did not have a material impact on the Company’s financial statements. The Group pools financial assets based on similar risk characteristics to estimate expected credit losses. The Group estimates expected credit losses on financial assets individually when those assets do not share similar risk characteristics. The Group has adopted aging schedule method to calculate the credit loss and considered the relevant factors of the historical and future conditions of the Company to make reasonable estimation of the risk rate.
Advances to suppliers
Advances to suppliers consist of prepayments to its suppliers, such as pharmaceutical manufacturers and other distributors. The Group continuously monitor delivery from, and payments to, its vendors while an allowance for estimated credit losses based upon historical experience and any specific supplier issues, such as discontinuing of inventory supply, that have been identified. The balance is refundable and bears no interest. No allowance was provided for the balances of advances to suppliers as of December 31, 2025 and June 30, 2026.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The Group periodically reviews its inventory and records write-downs to inventories for losses and damages that are identified. The Group provides a reserve for estimated inventory obsolescence or excess quantities on hand equal to the difference, if any, between the cost of the inventory and its estimated realizable value. For the six months ended June 30, 2025 and 2026, the write-down of inventories was RMB
F-17
Property and equipment, net
Property and equipment are stated at cost, net of accumulated depreciation or amortization, and impairment, if any. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets, taking into consideration the assets’ estimated residual value. Leasehold improvements are amortized over the shorter of lease term or remaining lease period of the underlying assets.
| Estimated Useful Life | Net Residual Value Rate | |||||
| Leasehold improvements |
| % | ||||
| Office equipment & furniture |
| % | ||||
| Motor vehicles |
| % | ||||
Maintenance, repairs and minor renewals are charged to expenses as incurred.
Impairment of long-lived assets with definite lives
The Group evaluates long-lived assets, including property and equipment and operating lease right-of-use assets for impairment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability is measured by comparing the carrying amount of the asset or asset group to the related projected undiscounted cash flows expected to result from the use of the assets or asset group and their eventual disposition, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the carrying amount of the assets or assets group exceeds the expected undiscounted cash flows, the Group would recognize an impairment loss based on the fair value of the assets or assets group.
The Group recorded impairment loss on property and equipment and operating lease right-of-use assets of RMB
Impairment of long-term investment
The Group assesses impairment of equity investments without readily determinable fair values by assessment for impairment qualitatively at each reporting period. That impairment assessment is similar to the qualitative assessment for long lived assets, goodwill, and indefinite-lived tangible assets. Upon determining that impairment exists, the Group should calculate the fair value of that investment and recognize as an impairment in net income any amount by which the carrying value exceeds the fair value of the investment. For the six months ended June 30, 2025 and 2026, there was no impairment loss on long-term investment recorded for the Group.
F-18
Revenue recognition
Under ASC 606, Revenue from Contracts with Customers, the core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. This new guidance provides a five-step analysis in determining when and how revenue is recognized. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the new guidance requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The Group identifies its contracts with customers and all performance obligations within those contracts. The Group then determines the transaction price and allocates the transaction price to the performance obligations within the Group’s contracts with customers, recognizing revenue when, or as, the Group satisfies its performance obligations.
The following is a discussion of the Group’s revenue recognition policies by segment under the new revenue recognition accounting standard:
Internet hospital
The Internet hospital is a comprehensive remote medical service platform, especially for certain chronic disease, that connects doctors with customers through the Group’s WeChat official account and mobile apps to facilitate the doctors to provide online follow-up consultations and online prescription renewal service to the customers and also the Group sells pharmaceuticals to the customers through the Internet hospital platform.
Online consultation and prescription renewal service
Patients can consult doctors on medical issues or renew their prescriptions through Internet hospital platform. Patients could first describe their symptoms via text or picture, choose doctors based on the description of symptoms and their medical records. Based on a patient’s responses during the consultation, the doctor provides medical recommendations or advises the patient to conduct detailed examinations at hospitals and upload the results to our system for follow-up consultations. Each medical consultation lasts up to 24 hours by system default and can be terminated by the doctor upon its conclusion. The Group charges service fee to the patients at a fixed price set case-by-case based on the doctor’s rank. The Group’s performance obligation is to provide consultation services to customers. Specifically, other than consultation services there are no other commitments, quantitatively or qualitatively, related to provision of service via the online platform. Therefore, there is only one performance obligation in this type of contract. The Group recognizes the revenue on a gross basis as the Group is acting as a principal because the Group controls the services provided to the patients. The Group is able to direct registered doctors to provide service on the behalf of the Group. If the directed doctor is not able to complete the service in limited circumstances, the Group will assign another registered doctor to provide the service. In addition, the Group has the discretion in setting the prices for the services. The registered doctors are obligated to comply with the rules set by the Group when providing the service. The service revenue is recognized at the point in time when the service is rendered.
Online pharmacy sales
The Group generates revenue from online pharmacy sales through its Internet hospital. Upon the completion of a doctor’s service to a customer and the prescription drug is also applicable to the customer, a prescription drugs list will be generated automatically in the customer’s account. The patient may directly confirm the prescription drugs list and make payment, then the Group delivers the prescription drugs to the customer by third party courier companies. The performance obligation is to deliver the prescription drugs ordered by customers. Specifically, other than products delivery there are no other commitments, quantitatively or qualitatively, related to sales of products via the online platform. Therefore, there is only one performance obligation in this type of contract. The Group recognizes the revenue on a gross basis as it obtains control of the drugs upon purchase from its vendors, before transferring them to the customers. Revenue from online drug sales is recognized when prescription drugs are accepted by customers.
F-19
Pharmaceuticals supply chain
Pharmacy retail sales
The Group generates revenue from the sale of prescription drugs, over-the-counter (“OTC”) drugs, traditional Chinese medicine (“TCM”) and others in physical pharmacies. The sales price is fixed based on each transaction. No financial component, variable consideration and redeemed membership rewards. The performance obligation under the contract is to deliver the prescription drugs ordered by customers. Specifically, other than products delivery there are no other commitments, quantitatively or qualitatively, related to sales of products via pharmacy retail sales. Therefore, there is only one performance obligation in this type of contract. Revenue from sales of drugs and others at drugstores is recognized when the customer picks up and pays for the drugs and others. Usually the majority merchandise, such as prescription and OTC drugs, are not refundable after the customers leave the counter. The revenue is recognized on a gross basis as the Group obtains control of the drugs before transferring them to the customers.
Pharmacy wholesale
The Group generates revenue from selling pharmaceuticals to businesses, primarily to pharmacies and medical products dealers. The terms of pricing and payment stipulated in the contract are fixed. The performance obligation under the contract is to deliver the prescription drugs ordered by customers. Specifically, other than products delivery there are no other commitments, quantitatively or qualitatively, related to sales of products via the Company’s pharmacy wholesale business. Therefore, there is only one performance obligation in this type of contract. Revenue from sales of pharmacies to non-retail customers is recognized when the pharmaceuticals are transferred to and accepted by customers. The revenue is recognized on a gross basis as the Group obtains control of the pharmaceuticals before transferring them to the customers.
The Group’s revenue is net of value added tax (“VAT”) collected on behalf of the PRC tax authorities. VAT collected from customers, net of VAT paid for purchases, is recorded as a liability in the accompanying consolidated balance sheets until it is paid to the relevant PRC tax authorities.
Disaggregation of Revenue
The following table summarizes disaggregated revenue from contracts with customers by service type:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Revenue from Internet hospital | ||||||||||||
| – Online pharmacy sales and other sales revenue | ||||||||||||
| – Online consultation service and other service revenue | ||||||||||||
| Subtotal | ||||||||||||
| Revenue from pharmaceuticals supply chain | ||||||||||||
| – Pharmacy retail sales | ||||||||||||
| – Pharmacy wholesale | ||||||||||||
| Subtotal | ||||||||||||
| Total | ||||||||||||
All the Group’s revenue is recognized at a point in time. See Note 18 for more information regarding revenue disaggregation by major source in each segment.
F-20
Sales returns
The Group provides a refund policy to accept returns from customers, which varies and depends on the different products and customers. The estimated sales returns are determined based upon an analysis of historical sales returns. Return allowances are recorded as a reduction in revenues with corresponding sales return liabilities which are included in “Refund liabilities”. The estimated cost of returned inventory is recorded as a reduction to cost of revenues and an increase of right of return assets which is included in “Inventories”. As of December 31, 2025 and June 30, 2026, no refund liability associated with estimated product returns were recorded in the consolidated balance sheet.
Contract Balances
Contract liabilities are presented as advance from customers in the consolidated balance sheets, which primarily represent the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration in advance. The consideration received remains a contract liability until goods or services have been provided to the customers. Due to the generally short-term duration of the relevant contracts, the obligations are satisfied within one year. The amount of revenue recognized that was included in advance from customers at the beginning of the period were RMB
In accordance with ASC340-40-25-1, an entity shall recognize as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs. As of December 31, 2025 and June 30, 2026, the Group does not have any contract costs.
Segment reporting
In November 2023, the FASB issued Accounting Standards Update, or ASU 2023-07 — Improvements to Reportable Segment Disclosures, which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements, including additional, more detailed information about a reportable segment’s expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Group adopted ASU 2023-07 for the year ended December 31, 2024, retrospectively to all periods presented in the consolidated financial statement. The adoption of this ASU had no material impact on reportable segments identified and had no effect on the Group’s consolidated financial position, results of operations, or cash flows.
ASC 280, Segment Reporting, (“ASC 280”), establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Based on the criteria established by ASC 280, our chief operating decision maker (“CODM”) has been identified as our Chief Executive Officer, who reviews operating income (loss) for each segment when making decisions about allocating resources and assessing performance of the Group. The Group operates within
F-21
Cost of revenues
Costs of revenues consist primarily of cost of goods sold. These costs are charged to the consolidated statements of operation and comprehensive loss as incurred.
Shipping and handling expense
Shipping and handling fees associated with outbound freight are expensed as incurred and included in sales and marketing expenses. Shipping and handling expense were RMB
Income taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. The Group follows FASB ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The accounting standards clarify the accounting and disclosure requirements for uncertain tax positions and prescribe a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return. The accounting standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties, uncertain tax provisions or interest relating to income taxes were incurred for the six months ended June 30, 2025 and 2026.
Value added tax
Sales revenue represents the invoiced value of goods, net of VAT. All of the Group’s products are sold in the PRC and are subject to a VAT on the gross sales price. The VAT rates range up to
Advertising and promotion costs
Advertising expenditures are expensed when incurred and are included in sales and marketing expenses, which amounted to RMB
Research and development expenses
Research and development expenses consist primarily of personnel-related expenses incurred for the enhancement and maintenance of the Group’s websites and internal use software. Depreciation expenses and other operating costs that are directly related to research and development, if any, are also included in research and development expenses. The Group recognizes research and development expenses when incurred.
F-22
Government grants
Government grants include cash subsidies received from various government agencies by the VIE and VIE’s subsidiaries of the Group. Such subsidies are generally provided as incentives from the local government to encourage the expansion of local business. The government grant is recognized in the consolidated statements of operations and comprehensive loss when the relevant performance criteria specified in the grant are met. The government grants with certain operating conditions are recorded as “other payable” when received, if any, and will be recorded as other income when the conditions are met.
Share-based compensation
The Company grants American depositary shares, or ADS to the service suppliers in exchange for consultancy and professional service and accounted for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”).
Awards granted to service suppliers with service conditions are measured at fair value on the grant date and are recognized as compensation expenses over the period when the specified service were received. The Group has elected to recognize the effect of forfeitures as compensation cost when they occur. To the extent the required vesting conditions are not met which leads to the forfeiture of the share-based awards, previously recognized compensation expenses relating to such awards will be reversed. The Group has elected to recognize compensation expense using the straight-line method for all awards granted with graded vesting based on service conditions. The Group determined the fair value of the awards granted based on the closing market price of the Company’s Class A ordinary shares on the grant date.
Loss per share
Net losses are not allocated to other participating securities if based on their contractual terms they are not obligated to share the losses. Basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary equivalent shares outstanding during the year. Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary equivalent shares consist of ordinary shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such share would be anti-dilutive.
Related party transactions
A related party is generally defined as (i) any person and or their immediate family hold 5% or more of the Group’s securities (ii) the Group’s management and or their immediate family, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Group, or (iv) anyone who can significantly influence the financial and operating decisions of the Group. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Commitments and contingencies
In the normal course of business, the Group is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If the assessment of a contingency indicates that it is probable that a loss is incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Group’s consolidated financial statements. If the assessment indicates that a potential loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
F-23
Mezzanine Equity
Convertible Redeemable preferred shares
Mezzanine equity represents the Series Pre-A, Series A, Series B-1, Series B-2, Series B-3 and Series B-4 convertible redeemable preferred shares (collectively, the “Preferred Shares”) issued by the Company. Preferred Shares are redeemable at the holders’ option any time after a certain date and were contingently redeemable upon the occurrence of certain events outside of the Company’s control. Therefore, the Group classifies the Preferred Shares as mezzanine equity.
The Series Pre-A and A Preferred Share will be recorded at the higher of (i)
The Series B-1, B-2, B-3 and B-4 Preferred Share will be recorded at the higher of (i)
Upon conversion of the Preferred Shares into ordinary shares, the carrying amount of the Preferred Shares as of the conversion date is reclassified to ordinary shares and additional paid-in capital.
Redeemable non-controlling interests
Redeemable non-controlling interests represent preferred shares financing by subsidiaries of the Group from non-controlling shareholders. As the preferred shares could be redeemed by such shareholders upon the occurrence of certain events that are not solely within the control of the Group, these preferred shares are accounted for as redeemable non-controlling interests. The Group accounts for the changes in accretion to the redemption value in accordance with ASC topic 480, Distinguishing Liabilities from Equity. The noncontrolling interest will be recorded at the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 (i.e., initial carrying amount, increased or decreased for the noncontrolling interest’s share of net income or loss, other comprehensive income or loss, and dividends) or (2) the redemption price.
Upon conversion of the preferred shares into ordinary shares of the Company’s subsidiary, the carrying amount of the preferred shares as of the conversion date is reclassified to non-controlling interests.
Employee benefits
The full-time employees of the Group’s PRC subsidiaries are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance, which are governmental mandated defined contribution plans. These entities are required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued.
Risks and uncertainties
The operations of the Group are located in the PRC. Accordingly, the Group’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Group’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Group’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC.
F-24
Substantially all of the Group’s operating activities are settled in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with supporting documents.
Concentrations and credit risk
Certain financial instruments, which subject the Group to concentration of credit risk, consist of cash. The Group has cash balances at financial institutions located in PRC. Since March 31, 2015, balances at financial institutions and state-owned banks within the PRC are covered by insurance up to RMB
For the six months ended June 30, 2026, there was one customer collectively accounted for
For the six months ended June 30, 2026, there was two suppliers accounted for
Leases
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Lessees are required to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of lease payments. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). Lessor accounting is similar to the prior model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue standard, ASU 2014-9.
The following is a discussion of the Group’s lease policy under the new lease accounting standard:
The Group determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Group’s right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Group’s leases is not readily determinable, the Group utilizes its incremental borrowing rate for a similar term as the underlying lease, determined by class of underlying asset, to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and exclude lease incentives.
F-25
The Group leases premises for retail drugstores, warehouse and offices under non-cancellable operating leases. Operating lease payments are expensed over the term of lease using straight line method. A majority of the Group’s retail drugstore leases have a
Under the terms of the lease agreements, the Group has no legal or contractual asset retirement obligations at the end of the leases. See Note 8 “LEASE” for additional information.
The Group elected the short-term lease exemption for all contracts with lease term of 12 months or less.
The Group evaluates right-of-use assets for impairment whenever events or changes in circumstances indicate that the assets might be impaired. Impairment charges for right-of-use assets were recognized of RMB
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The Group adopted ASU 2023-09 for its annual period beginning January 1, 2025, on a prospectively basis. See Note 9 Income taxes, for further information.
Recent Accounting Pronouncements
The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequently to the enactment of the JOBS Act until such time as those standards apply to private companies.
In accordance with the recent updates to the accounting standards, the FASB has issued several new ASUs to enhance the clarity and consistency in financial reporting. Below is a summary of the key amendments and their effective dates:
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amended guidance improves the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). The amended guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. The Group is currently in the process of evaluating the impact this amended guidance may have on the footnotes to its consolidated financial statements.
In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This guidance amends the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Update 2024-03 is permitted. The Group is currently in the process of evaluating the impact this amended guidance may have on the footnotes to its consolidated financial statements.
F-26
In April 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. This Update is issued to reduce diversity in practice and improve the decision usefulness and operability of the guidance for share-based consideration payable to a customer in conjunction with selling goods or services. The amendments in this Update are effective for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) beginning after December 15, 2026. Early adoption is permitted. The Group is currently in the process of evaluating the impact this amended guidance may have on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This Update is issued to address challenges encountered when applying the guidance in Topic 326, Financial Instruments—Credit Losses, to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Group is currently in the process of evaluating the impact this amended guidance may have on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which provides updated guidance on how to recognize, measure, and present government grants. The new standard is effective for interim and annual periods beginning after December 15, 2028. Early adoption is permitted. The Group is currently in the process of evaluating the impact this amended guidance may have on its consolidated financial statements.
Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Group does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
Note 4 — ACCOUNTS RECEIVABLE, NET
Trade accounts receivable consisted of the following:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Accounts receivable | ||||||||||||
| Allowance for expected credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Total | ||||||||||||
The following table presents movement of allowance for expected credit losses against accounts receivable:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at the beginning of the period | ||||||||||||
| Accrual/(reversal) | ( | ) | ( | ) | ( | ) | ||||||
| Balance at the end of the period | ||||||||||||
F-27
Note 5 — INVENTORIES
Inventory mainly consists finished goods, such as prescription drugs and over-the-counter (“OTC”) drugs, traditional Chinese medicine (“TCM”) and others, valued at RMB
Note 6 — OTHER RECEIVABLES, NET
Other receivables consisted of the following:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Other deposits* | ||||||||||||
| Other current assets** | ||||||||||||
| Advance to employees*** | ||||||||||||
| Deposits | ||||||||||||
| Prepaid expenses | ||||||||||||
| Others | ||||||||||||
| Subtotal | ||||||||||||
| Allowance for expected credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Total | ||||||||||||
| * |
| ** |
| *** |
The following table presents movement of allowance for expected credit losses against other receivables:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at the beginning of the period | ||||||||||||
| Accrual | ||||||||||||
| Reversal | ( | ) | ( | ) | ( | ) | ||||||
| Balance at the end of the period | ||||||||||||
F-28
Note 7 — PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Leasehold improvements | ||||||||||||
| Office equipment and furniture | ||||||||||||
| Motor vehicles | ||||||||||||
| Total property and equipment | ||||||||||||
| Less: Accumulated depreciation and amortization | ||||||||||||
| Less: Impairment | ||||||||||||
| Property and equipment, net | ||||||||||||
Total depreciation expense for property and equipment was RMB
The following table presents movement of impairment of property and equipment:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at the beginning of the period | ||||||||||||
| Accrual | ||||||||||||
| Balance at the end of the period | ||||||||||||
Note 8 — LEASE
The Group leases office space, warehouse and pharmacy from third parties.
The Group does not have any finance lease for the six months ended June 30, 2025 and 2026. As of December 31, 2025 and June 30, 2026, the Group recognized the following items related to operating leases in its consolidated balance sheet.
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| ASSETS | ||||||||||||
| Right-of-use assets | ||||||||||||
| Less: impairment | ||||||||||||
| Right-of-use assets, net | ||||||||||||
| LIABILITIES | ||||||||||||
| Operating lease liabilities – current | ||||||||||||
| Operating lease liabilities – non-current | ||||||||||||
F-29
As of December 31, 2025 and June 30, 2026, the operating lease’s weighted average remaining lease term was
The following table presents movement of impairment of operating lease right-of-use assets:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at the beginning of the period | ||||||||||||
| Accrual | ||||||||||||
| Write off | ( | ) | ||||||||||
| Balance at the end of the period | ||||||||||||
Cash flow information related to leases consists of the following:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Operating cash payments for operating leases | ||||||||||||
The minimum future lease payments as of June 30, 2026 are as follows:
| Operating leases | ||||||||
| RMB | US$ | |||||||
| For the years ending June 30, | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Total future lease payments | ||||||||
| Less: Imputed interest | ||||||||
| Total lease liability balance | ||||||||
Note 9 — TAXES
Composition of income tax
Cayman Islands
Under the current laws of the Cayman Islands, the Group and its intermediate holding companies in the Cayman Islands are not subject to tax on income or capital gain. Additionally, upon payments of dividends by the Group or its subsidiaries in the Cayman Islands to their shareholders, no withholding tax will be imposed.
Hong Kong
Pom (HK) is incorporated in Hong Kong and is subject to Hong Kong profits tax rate. Under the two-tiered profits tax rates regime, the first HK$
F-30
PRC
Under the Enterprise Income Tax (“EIT”) Law in the PRC, the unified EIT rate for domestic enterprises and foreign invested enterprises is
For qualified small and low-profit enterprises, from January 1, 2023 to December 31, 2027,
Income (loss) before income tax expense for the six months ended June 30, 2025 and 2026, is attributable to the following geographic locations:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| PRC | ( | ) | ( | ) | ( | ) | ||||||
| Cayman | ( | ) | ( | ) | ||||||||
| Hong Kong | ||||||||||||
| Total loss before income tax expense | ( | ) | ( | ) | ( | ) | ||||||
For the six months ended June 30, 2025 and 2026, the current and deferred components of income tax expenses, disaggregated by jurisdiction, are as follows:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Current income tax expense | ||||||||||||
| PRC | ||||||||||||
| Cayman | ||||||||||||
| Hong Kong | ||||||||||||
| Total current tax expense (benefit) | ||||||||||||
| Deferred income tax expense | — | |||||||||||
| PRC | ||||||||||||
| Cayman | ||||||||||||
| Hong Kong | ||||||||||||
| Total deferred tax expense (benefit) | ||||||||||||
| Total income tax expense/(benefit) | — | |||||||||||
| PRC | ||||||||||||
| Cayman | ||||||||||||
| Hong Kong | ||||||||||||
| Total income tax expense | ||||||||||||
F-31
The reconciliation of taxes at the PRC statutory rate to our provision for income taxes for the six months ended June 30, 2026 was as follows (in RMB, except for percentages):
| For the Six Months Ended June 30, 2026 | ||||||||||||
| RMB | US$ | % | ||||||||||
| Loss before income tax expense | ( | ) | ( | ) | % | |||||||
| income tax statutory rate | % | % | % | |||||||||
| Computed income tax benefit with PRC statutory income tax rate | ( | ) | ( | ) | % | |||||||
| Domestic tax effects | ||||||||||||
| Non-deductible expenses | ( | )% | ||||||||||
| Non-deductible interest expense | ( | )% | ||||||||||
| Non-deductible entertainment expense | ( | )% | ||||||||||
| Others | ( | )% | ||||||||||
| Effect of preferential tax rate | ( | )% | ||||||||||
| Prior year true up of NOL | ( | )% | ||||||||||
| Expiration of NOL | % | |||||||||||
| Changes in tax rates enacted in the current period | ||||||||||||
| Change in valuation allowance | ( | )% | ||||||||||
| Foreign tax effects | ( | )% | ||||||||||
| Statutory tax rate difference between Cayman and PRC | ( | )% | ||||||||||
| Statutory tax rate difference between HK and PRC | ( | ) | ( | ) | % | |||||||
| Ture up adjustments for income tax expense for FY2026 | ( | )% | ||||||||||
| Income tax expense | ( | )% | ||||||||||
The reconciliation of taxes at the PRC statutory rate to our provision for income taxes for the six months ended June 30, 2025 was as follows (in RMB, except for percentages):
| For the Six Months Ended June 30, 2025 | ||||||||
| RMB | % | |||||||
| Loss before income tax expense | ( | ) | % | |||||
| PRC income tax statutory rate | % | % | ||||||
| Computed income tax benefit with PRC statutory income tax rate | ( | ) | % | |||||
| Domestic tax effects | ||||||||
| Non-deductible expenses | ( | )% | ||||||
| Non-deductible interest expense | ( | )% | ||||||
| Non-deductible entertainment expense | ( | )% | ||||||
| Others | ( | )% | ||||||
| Effect of preferential tax rate | ( | )% | ||||||
| Prior year true up of NOL | ( | )% | ||||||
| Expiration of NOL | ( | )% | ||||||
| Changes in tax rates enacted in the current period | ||||||||
| Change in valuation allowance | ( | )% | ||||||
| Foreign tax effects | ||||||||
| Statutory tax rate difference between Cayman and PRC | ||||||||
| Statutory tax rate difference between HK and PRC | ||||||||
| Income tax expense | ||||||||
F-32
For the six months ended June 30, 2025 and 2026, the income taxes paid by jurisdiction is as follows
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| PRC | ||||||||||||
| Cayman | ||||||||||||
| Hong Kong | ||||||||||||
| Total | ||||||||||||
The tax effects of temporary differences and net operating losses that give rise to the deferred tax balances at December 31, 2025 and June 30, 2026 are as follows:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Deferred tax assets: | ||||||||||||
| Credit loss provision | ||||||||||||
| Inventory reserve | ||||||||||||
| Impairment of fixed asset | ||||||||||||
| Lease liability | ||||||||||||
| Accrued payroll payable | ||||||||||||
| Net operating loss carry forwards | ||||||||||||
| Total deferred tax assets | ||||||||||||
| Valuation allowance | ( | ) | ( | ) | ( | ) | ||||||
| Deferred tax assets, net | ||||||||||||
F-33
Changes in valuation allowance are as follows:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at beginning of the period | ||||||||||||
| Expiration of NOL | ( | ) | ( | ) | ( | ) | ||||||
| Addition | ||||||||||||
| Prior year true up of NOL | ( | ) | ( | ) | ( | ) | ||||||
| Balance at end of the period | ||||||||||||
According to PRC tax regulations, the PRC enterprise net operating loss can generally carry forward for no longer than five years, and HNTE’s net operating losses can be carried forward for no more than ten years, starting from the year subsequent to the year in which the loss was incurred. Carryback of losses is not permitted. As of December 31, 2025 and June 30, 2026, tax-loss carry-forwards amounted to RMB
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 carry forward 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. Under the applicable accounting standards, management has considered the Group’s history of losses and concluded that it is more likely than not that the Group will not generate future taxable income prior to the expiration of the majority of net operating losses. Accordingly, as of December 31, 2025 and June 30, 2026 RMB
Uncertain tax positions
The Group evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of December 31, 2025 and June 30, 2026, the Group did not have any unrecognized uncertain tax positions and the Group does not believe that its unrecognized tax benefits will change over the next twelve months. For the six months ended June 30, 2025 and 2026, the Company did not incur any interest and penalties related to potential underpaid income tax expenses.
As of June 30, 2026, the tax years ended December 31, 2021 through 2025 for the Group’s subsidiaries in the PRC and the VIEs are generally subject to examination by the PRC tax authorities.
F-34
Note 10 — SHARE-BASED COMPENSATION
In February 2025, we adopted the 2025 Share Incentive Plan, or the 2025 Plan, for the purpose of granting share-based compensation awards to selected directors, employees and other eligible persons to incentivize their performance and align their interests with the Group. The maximum aggregate number of Class A ordinary shares which may be issued pursuant to all awards under the 2025 Plan is
On November 28, 2025, the Group entered into service agreements with three suppliers to obtain specified consultancy and professional services to improve the Group’s marketing, administrative and research and development capabilities. In exchange for service acquired, the Group granted American depositary shares, or ADS to the suppliers. The agreements only contain service conditions and the grantees are generally subject to a vesting schedule of one year, under which the grantee earns an entitlement to vest a certain percentage of ADSs granted at the end of each phase of completed service. The share-based agreements signed with the suppliers contained forfeiture policy and the granted ADS becomes fully vested and nonforfeitable only after the suppliers provide the corresponding service.
On November 28, 2025, the grant date, the fair value of one ADS was US$
A summary of the Group’s ADS activity under the plans for the six months ended June 30, 2026 is presented as follows:
| Number of shares | Weighted Average Grant-date fair value US$ | Weighted Average Remaining terms (Years) | Grant-date fair value of ADS | |||||||||||||||||
| RMB | US$ | |||||||||||||||||||
| Outstanding as of January 1, 2026 | ||||||||||||||||||||
| Granted | — | |||||||||||||||||||
| Vested | ||||||||||||||||||||
| Forfeited | ||||||||||||||||||||
| Outstanding as of June 30, 2026 | ||||||||||||||||||||
The unrecognized share-based compensation expense for ADSs granted to service suppliers, maybe adjusted for actual forfeitures occurring in the future, were RMB
The allocation of total share-based compensation expenses for service suppliers was set forth as follows:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Service suppliers: | ||||||||||||
| Selling and marketing expenses | ||||||||||||
| General and administrative expenses | ||||||||||||
| Research and development expenses | ||||||||||||
| Total share compensation for service suppliers: | ||||||||||||
F-35
Note 11 — LOANS FROM THIRD PARTIES
| As of June 30, 2026 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||||||
| RMB | US$ | |||||||||||||
| Short-term loans from third parties(a) | ||||||||||||||
|
| ||||||||||||||
| Total | ||||||||||||||
| As of June 30, 2026 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||||||
| RMB | US$ | |||||||||||||
| Long-term loans from third parties, noncurrent | ||||||||||||||
| Ping Fang(b) | RMB | |||||||||||||
| As of June 30, 2026 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||||||
| RMB | US$ | |||||||||||||
| Long-term loans from third parties, current | ||||||||||||||
| Xueyi Xie(c) | ||||||||||||||
| As of December 31, 2025 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||
| RMB | ||||||||||
| Short-term loans from third parties(a) | ||||||||||
F-36
| As of December 31, 2025 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||
| RMB | ||||||||||
| Long-term loans from third parties, noncurrent | ||||||||||
| Ping Fang(b) | RMB16,000 per month (approximately | |||||||||
| As of December 31, 2025 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||
| RMB | ||||||||||
| Long-term loans from third parties, current | ||||||||||
| Xueyi Xie(c) | ||||||||||
| (a) | |
| (b) | |
| (c) |
Interest expenses of the loans from third parties for the six months ended June 30, 2025 and 2026 amounted to RMB
As of June 30, 2026, the Group’s future obligations for the loans from third parties according to the terms of the loans are as follows:
| For the years ending June 30, | RMB | US$ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Total future loan payments | ||||||||
| Less: Imputed interest | ||||||||
| Total loans from third parties | ||||||||
F-37
Note 12 — LOANS
Outstanding balances of loan consist of the following:
| As of June 30, 2026 | Balance | Maturity Date | Effective Interest Rate | Collateral/Guarantee | ||||||||||||
| RMB | US$ | |||||||||||||||
| Short-term bank loans | ||||||||||||||||
| Industrial Bank Co., Ltd. | % | |||||||||||||||
| Industrial Bank Co., Ltd. | % | |||||||||||||||
| China Guangfa Bank(a) | % | |||||||||||||||
| China Guangfa Bank | % | |||||||||||||||
| Bank of Communications(a) | % | |||||||||||||||
| Bank of Communications(a) | % | |||||||||||||||
| Industrial and Commercial Bank of China | % | |||||||||||||||
| China CITIC Bank | % | |||||||||||||||
| Total | ||||||||||||||||
| Long-term bank loans, current | ||||||||||||||||
| Agricultural Bank of China. | % | |||||||||||||||
| Bank of Jiujiang | % | |||||||||||||||
| Bank of Jiujiang | % | |||||||||||||||
| China Resource Bank of Zhuhai | % | |||||||||||||||
| Total | ||||||||||||||||
| Long-term bank loans, noncurrent | ||||||||||||||||
| Agricultural Bank of China | % | |||||||||||||||
| Bank of Jiujiang | % | |||||||||||||||
| Bank of Jiujiang | % | |||||||||||||||
| China Resource Bank of Zhuhai | % | |||||||||||||||
| Total | ||||||||||||||||
F-38
| As of June 30, 2026 | Balance | Maturity Date | Effective Interest Rate | Collateral/Guarantee | ||||||||||||
| RMB | US$ | |||||||||||||||
| Long-term loans, current | ||||||||||||||||
| Xi’an Changtao Network Small Loan Co., Ltd.(b) | % | |||||||||||||||
| (a) | The balances as of June 30, 2026 was fully repaid till the date of this report. |
| (b) |
| As of December 31, 2025 | Balance | Maturity Date | Effective Interest Rate | Collateral/Guarantee | ||||||||
| RMB | ||||||||||||
| Short-term bank loans | ||||||||||||
| Industrial Bank Co., Ltd. | % | |||||||||||
| Agricultural Bank of China | % | |||||||||||
| Bank of Guangzhou | % | |||||||||||
| China Guangfa Bank | % | |||||||||||
| Bank of Communications | % | |||||||||||
| Industrial and Commercial Bank of China | % | |||||||||||
| China CITIC Bank | % | |||||||||||
| Total | ||||||||||||
| Long-term bank loans, current | ||||||||||||
| Agricultural Bank of China. | % | |||||||||||
| Bank of Jiujiang | % | |||||||||||
| China Resource Bank of Zhuhai | % | |||||||||||
| Bank of Jiujiang | % | |||||||||||
| Total | ||||||||||||
| Long-term bank loans, noncurrent | ||||||||||||
| Agricultural Bank of China | % | |||||||||||
| Bank of Jiujiang | % | |||||||||||
| China Resource Bank of Zhuhai | % | |||||||||||
| Total | ||||||||||||
F-39
| As of December 31, 2025 | Balance | Maturity Date | Effective Interest Rate | Collateral/Guarantee | ||||||||
| RMB | ||||||||||||
| Long-term loans, current | ||||||||||||
| Xi’an Changtao Network Small Loan Co., Ltd. | % | |||||||||||
Interest expenses of the bank loans and loans from other financial institutions for the six months ended June 30, 2025 and 2026, amounted to RMB
As of June 30, 2026, the Group’s future obligations for loans from banks and other financial institutions, according to the terms of the loans are as follows:
| For the years ending June 30, | RMB | US$ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Total future loan payments | ||||||||
| Less: imputed interest | ||||||||
| Total bank loans and loans from other financial institutions | ||||||||
F-40
Note 13 — RELATED PARTIES BALANCE AND TRANSACTIONS
| Name of related parties | Relationship with the Group | |
| Nanjing Benyu Investments Management Limited | ||
| Guangzhou Shennong Xuanpin Products Sales Co., Ltd. | ||
| Guangzhou Zhiyao Cloud Technology Co., Ltd. (previously known as Guangzhou Guozhi Pharmaceutical Co., Ltd.) | ||
| Guangzhou Aopolikang Biotechnology Co., Ltd. | ||
| Guangzhou Liwan Linghai Medical Outpatients Department | ||
| Guangzhou Aixiangbao Investment Limited Liability Partnership | ||
| Chunong Diet Therapy (Guangzhou) Sales Co., Ltd. | ||
| Zhenyang Shi | ||
| Li Xu | ||
| Wanmei Shi | ||
| Aihua Peng | ||
| Guoji Luo | ||
| Yongan Zhong | ||
| Dexiang Wei | ||
| Yi Zhi | ||
| Tibet Huijian Management Consulting Partnership (Limited Partnership) (previously known as Dazi Jinnuo Huijian Investment Management Partnership Enterprise (Limited Partnership)) | ||
| Jiangsu Gaotou Bangsheng Venture Capital Partnership (Limited Partnership) | ||
| Nanjing Bangsheng Juyuan Venture Capital Partnership (Limited Partnership) (formerly known as Nanjing Bangsheng Juyuan Investment Management Partnership (Limited Partnership)) | ||
| Guangdong Qicheng Youth Venture Capital Partnership (L.P.) | ||
| Guangzhou Golden Pomegranate Digital Media Co., Ltd. (before June 11, 2024) |
F-41
| Name of related parties | Relationship with the Group | |
| Shanghai Guohong Kaiyuan Investment Center (Limited Partnership) | ||
| Shanghai Chuangye Jieli Taili Venture Capital Center (L.P.) | ||
| Dan Hong (H.K.) Technology Limited | ||
| Shanghai Zhongwei Anjian Venture Capital Investment LLP (Limited Partnership) | ||
| Beijing HongShan Enterprise Information Management Consulting Center (Limited Partnership) (formerly known as Beijing Sequoia Enterprise Information Management Consulting Center (Limited Partnership)) | ||
| Guangdong Ginkgo Guangbo Venture Capital Partnership (L.P.) | ||
| Shanghai Jinglin Jinghui Equity Investment Center (L.P.) | ||
| Shenzhen Sharing Precision Medical Investment Partnership (Limited Partnership) | ||
| Zhuhai Huajin Chuangying No.1 Equity Investment Fund Partnership (Limited Partnership) | ||
| Alps Innovation Limited | ||
| Neijiang Yunrui Investment Partnership (Limited Partnership) | ||
| Beijing Gaotejia Technology Partnership (Limited Partnership) | ||
| General technology Group Investment Management Co., Ltd. | ||
| Nova Compass Investment Limited | ||
| Guangzhou Hikvision Enterprise Management Consulting Service Partnership Enterprise (Limited Partnership) | ||
| Guangzhou Qingbai Operation Management Co., Ltd. | ||
| Guangzhou Pet Vision Information Technology Co., Ltd. (formerly known as Guangzhou Brother Youyi Business Internet Co. Ltd.) (after August 22, 2025) | ||
| Foshan Nanhai Zhongyi Qifa Clinic Co., Ltd. | ||
| Dazinuojin Enterprise Management Consulting Co., Ltd. |
a) Accounts receivable — a related party
As of December 31, 2025 and June 30, 2026, the amount of accounts receivable — a related party consisted of the followings:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Guangzhou Zhiyao Cloud Technology Co., Ltd. (previously known as Guangzhou Guozhi Pharmaceutical Co., Ltd.) | ||||||||||||
F-42
b) Accounts payable — a related party
As of December 31, 2025 and June 30, 2026, the amount of accounts payable — a related party consisted of the followings:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Guangzhou Aopolikang Biotechnology Co., Ltd. | ||||||||||||
c) Amount due from related parties
The balance of due from related parties represents advances to the related parties. The balances advanced to the related parties are unsecured, non-interest bearing and due on demand. As of December 31, 2025 and June 30, 2026, amount due from related parties consisted of the followings:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Yi Zhi | ||||||||||||
| Dazinuojin Enterprise Management Consulting Co., Ltd. | ||||||||||||
| Guangzhou Zhiyao Cloud Technology Co., Ltd. (previously known as Guangzhou Guozhi Pharmaceutical Co., Ltd.) | ||||||||||||
| Guangzhou Liwan Linghai Medical Outpatients Department | ||||||||||||
| Wanmei Shi | ||||||||||||
| Total amount due from related parties | ||||||||||||
As of the filing of this report, partial collection has been made in respect of the amount due from Guangzhou Zhiyao Cloud Technology Co., Ltd. (previously known as Guangzhou Guozhi Pharmaceutical Co., Ltd.) and no collection has been made for the remaining amounts due from other relevant parties.
F-43
d) Amount due to related parties
As of December 31, 2025 and June 30, 2026, amount due to related parties consisted of the followings:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Zhenyang Shi* | ||||||||||||
| Aihua Peng* | ||||||||||||
| Nanjing Benyu Investments Management Limited* | ||||||||||||
| Guangzhou Pet Vision Information Technology Co., Ltd. (formerly known as Guangzhou Brother Youyi Business Internet Co. Ltd.) (after August 22, 2025) | ||||||||||||
| Dexiang Wei* | ||||||||||||
| Guoji Luo* | ||||||||||||
| Li Xu | ||||||||||||
| Yongan Zhong | ||||||||||||
| Total amount due to related parties | ||||||||||||
| * |
The above balances are without interest-bearing. Except interest payable, other balances due to related parties are due on demand.
e) Loans from related parties
| As of June 30, 2026 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||||||||
| RMB | US$ | |||||||||||||||
| Loans from related parties, current | ||||||||||||||||
| Nanjing Benyu Investments Management Limited**** | % | |||||||||||||||
| Aihua Peng | % | |||||||||||||||
| Wanmei Shi | ||||||||||||||||
| Li Xu | ||||||||||||||||
| Yongan Zhong | ||||||||||||||||
| Dexiang Wei*** | ||||||||||||||||
| Guoji Luo*** | ||||||||||||||||
| Total | ||||||||||||||||
| Loans from related parties, noncurrent | ||||||||||||||||
| Guangzhou Aixiangbao Investment Limited Liability Partnership* | ||||||||||||||||
| Zhenyang Shi** | % | |||||||||||||||
| Total | ||||||||||||||||
| * |
| ** |
| *** |
| **** |
F-44
| As of December 31, 2025 | Balance | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||||
| RMB | ||||||||||||
| Loans from related parties, current | ||||||||||||
| Nanjing Benyu Investments Management Limited**** | % | |||||||||||
| Aihua Peng | % | |||||||||||
| Wanmei Shi | ||||||||||||
| Li Xu | ||||||||||||
| Yongan Zhong | ||||||||||||
| Dexiang Wei*** | ||||||||||||
| Guoji Luo*** | ||||||||||||
| Total | ||||||||||||
| Loans from related parties, noncurrent | ||||||||||||
| Guangzhou Aixiangbao Investment Limited Liability Partnership* | ||||||||||||
| Zhenyang Shi** | % | |||||||||||
| Total | ||||||||||||
| * | On August 10, 2021, the Group entered into tripartite agreements with Focus Media, Inc (“Focus Media”) and Guangzhou Aixiangbao Investment Limited Liability Partnership (“Aixiangbao”), |
| ** | The purpose of obtaining loans from Zhenyang Shi is to maintain the daily operation of the Group. In 2025, the loan was renewed with maturity date of December 31, 2030. |
| *** |
| **** |
Interest expenses of loans from related parties for the six months ended June 30, 2025 and 2026 amounted to RMB
As of June 30, 2026, the Group’s future obligations for loans from related parties according to the terms of the loans are as follows:
| For the years ending June 30, | RMB | US$ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
| Total future loan payments | ||||||||
| Less: Imputed interest | ||||||||
| Total loans from related parties | ||||||||
f) Sales to a related party
| For the Six Months Ended June 30, | ||||||||||||||
| Nature | 2025 | 2026 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||||
| Guangzhou Zhiyao Cloud Technology Co., Ltd. (previously known as Guangzhou Guozhi Pharmaceutical Co., Ltd.) | ||||||||||||||
F-45
g) Purchase from a related party
| For the Six Months Ended June 30, | ||||||||||||||
| Nature | 2025 | 2026 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||||
| Guangzhou Aopolikang Biotechnology Co., Ltd. | ||||||||||||||
h) Service provided from a related party
| For the Six Months Ended June 30, | ||||||||||||||
| Nature | 2025 | 2026 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||||
| Guangzhou Pet Vision Information Technology Co., Ltd. (formerly kown as Guangzhou Brother Youyi Business Internet Co. Ltd.) | ||||||||||||||
| Guangzhou Zhiyao Cloud Technology Co., Ltd. | ||||||||||||||
| Total | ||||||||||||||
i) Guarantee provided from related parties
As of June 30, 2026, the loans from Industrial Bank Co., Ltd. were of total amount of RMB
As of June 30, 2026, the loans from China Guangfa Bank Co., Ltd. were of total amount of RMB
As of June 30, 2026, the loan from Bank of Communications were of total amount of RMB
As of June 30, 2026, the loans from China CITIC Bank were of total amount of RMB
As of June 30, 2026, the loans from Agricultural Bank of China Co., Ltd. Guangzhou International Pharmaceutical Port Sub-branch; were of total amount of RMB
As of June 30, 2026, the loans from Bank of Jiujiang were of total amount of RMB
As of June 30, 2026, the loans from Zhuhai China Resources Bank Co., Ltd. were of total amount of RMB
F-46
j) Interest expense to related parties
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Zhenyang Shi | ||||||||||||
| Li Xu | ||||||||||||
| Nanjing Benyu Investments Management Limited | ||||||||||||
| Aihua Peng | ||||||||||||
| Total | ||||||||||||
Note 14 — CONVERTIBLE REDEEMABLE PREFERRED SHARES
Series Pre-A Preferred Shares
On December 19, 2014, Dazinuojin Enterprise Management Consulting Co., Ltd. (formerly known as Dazi Jinnuo Investment Management Consulting Co., Ltd.) (“Dazi Jinnuo”), Jiangsu Gaotou Bangsheng Venture Capital Partnership (Limited Partnership) (“Jiangsu Gaotou”), Nanjing Bangsheng Juyuan Venture Capital Partnership (Limited Partnership) (formerly known as Nanjing Bangsheng Juyuan Investment Management Partnership (Limited Partnership)) (“Nanjing Bangsheng”), Guangdong Qicheng Youth Venture Capital Partnership (L.P.) (“Guangdong Qicheng”), Shanghai Guohong Kaiyuan Investment Center (Limited Partnership) (“Shanghai Guohong”), Shanghai Chuangye Jieli Taili Venture Capital Center (L.P.) (formerly known as Shanghai Venture Relay Taili Venture Capital Center) (“Chuangye Jieli”), and Grand Yangtze Hongtao Capital, L.P. (“Grand Yangtze”) respectively subscribed
Series A Preferred Shares
On October 26, 2015, Dan Hong (H.K.) Technology Limited (“Dan Hong”) subscribed
Series B-1 and B-2 Preferred Shares
On September 25, 2016, Shanghai Zhongwei Anjian Venture Capital Investment LLP (Limited Partnership) (“Shanghai Zhongwei”) subscribed
On December 29, 2016, Beijing HongShan Enterprise Information Management Consulting Center (Limited Partnership) (“Beijing HongShan”), Guangdong Ginkgo Guangbo Venture Capital Partnership (L.P.) (“Guangdong Ginkgo”), Shanghai Jinglin Jinghui Equity Investment Center (L.P.) (“Shanghai Jinglin”), Shenzhen Sharing Precision Medical Investment Partnership (Limited Partnership) (“Shenzhen Sharing”), Zhuhai Huajin Chuangying No.1 Equity Investment Fund Partnership (Limited Partnership) (“Zhuhai Huajin”), and Alps Innovation Limited (“Alps Innovation”) respectively subscribed
F-47
Series B-3 Preferred Shares
On September 1, 2017, Neijiang Yunrui Investment Partnership (Limited Partnership) (“Neijiang Yunrui”) subscribed
Series B-4 Preferred Shares
On June 8, 2018 and August 10, 2018, Beijing Gaotejia Technology Partnership (Limited Partnership) (“Beijing Gaotejia”), and General Technology Group Investment Management Co., Ltd. (“General Technology”) respectively subscribed
On August 10, 2021, Nova Compass Investment Limited (“Nova Compass”) subscribed
The rights, preferences and privileges of the Preferred Shares pursuant to the third amended and restated memorandum and articles of association of the Company in place prior to the Company’s IPO (the “Pre-IPO Articles”) were as follows:
| ● | Conversion right |
The Preferred Shares (exclusive of unpaid shares) would be automatically converted into ordinary shares 1) upon a qualified initial public offering (“IPO”); or 2) upon the approval of the Preferred Shareholders with respect to conversion of the preferred shares.
The initial conversion ratio of Preferred Shares to Class A ordinary shares was 1:1, subject to adjustments in the event of share splits, share dividends, combinations, recapitalization and similar events.
| ● | Redemption right |
The investors of Series Pre-A and A Preferred Shares had a right to require the Company to redeem their investments, at any time and from time to time on or after the date of the earliest to occur of the following: (i) the Company’s failure to complete a qualified initial public offering (“IPO”) until December 31, 2022; (ii) at any time upon the occurrence of any fraudulent act; (iii) any of the Company or any Founder’s the conviction of breaches or violation of criminal laws and/or applicable regulations which may have a material adverse effect on the consummation of the IPO or Trade Sale; or (iv) the occurrence of the change of Control of the Company.
The redeemed price for each Series Pre-A and A Preferred Share should equal to the higher of (i)
The investors of Series B-1, B-2, B-3 and B-4 Preferred Shares have a right to require the Company to redeem their investments, at any time and from time to time on or after the date of the earliest to occur of the following: (i) the Company fails to complete a qualified initial public offering (“IPO”) until December 31, 2022; (ii) at any time upon the occurrence of a material breach of the transaction documents by the Company, which have a material adverse effect on the business, operations, properties or financial or other condition of the Company (iii) any failure to obtain or maintain any material permit or governmental approvals; (iv) any holder of any other class or series of shares has requested the Company to redeem its shares in the Company, and (v) the occurrence of the change of Control of the Company.
F-48
The redeemed price for each Series B-1, B-2, B-3 and B-4 Preferred Share should equal to the higher of (i)
| ● | Liquidation |
| (i) | Statutory liquidation event |
In a Statutory Liquidation Event, all assets and funds of the Company legally available for distribution to the Shareholders shall be distributed and the following circumstances shall be deemed a “Statutory Liquidation Event”: (a) the Company lose the rights on all or substantially all of any the Company’s Intellectual Properties, or there are material disputes or Liens on the rights of all or substantially all of any the Company’s Intellectual Properties, which will result in or have resulted in a material adverse effect on the business, operations of the Company; and (b) all or substantially all of the assets of the Company have been levied or commandeer, which will result in or have resulted in a material adverse effect on the business, operations of the Company.
All assets and funds of the Company legally available for distribution should be distributed for Series B-1, B-2, B-3 and B-4 Preferred Shareholders. The liquidation amount for each SeriesB-1, B-2, B-3 and B-4 Preferred Share should equal to the applicable Issue Price plus an interest accrued at a compound interest rate of
After payment for Series B-1, B-2, B-3 and B-4 Preferred Shareholders, Series A Preferred Shareholder shall be entitled to receive an amount equal to the Issue Price, plus all declared but unpaid dividends thereto on each Series Preferred Share.
After payment for Series A Preferred Shareholders, each Series Pre-A Preferred Shareholders shall be entitled to receive for each outstanding Series Pre-A Preferred Share held by such Series Pre-A Preferred Shareholder, an amount equal to the Series Pre-A Issue Price.
| (ii) | Deemed liquidation event |
In a Deemed Liquidation Event, all proceeds resulting to the Shareholders of the Company therefrom shall be distributed and the following circumstance shall be deemed as a “Deemed Liquidation Event”: a Trade Sale shall be deemed a Liquidation Event.
The payment should be distributed in following order: Series B-1, B-2, B-3 and B-4 preferred shareholders shall receive the payment at first, Series A shall receive the payment secondly, Series Pre-A shall receive the payment at last. The amount equal to the higher of (i) the Issue Price, plus an interest accrued at a compound interest rate of
| ● | Voting Right |
The holders of redeemable shares and Class A ordinary shares have the equivalent voting rights based on their proportionate holding of the Company.
| ● | Dividend |
Each holder of redeemable shares shall be entitled to receive dividends and distributions on an as-converted basis together with the Class A and Class B ordinary shares on parity with each other, provided that such dividends and distributions shall be payable only when, as, and if declared by the Board.
F-49
Accounting of convertible redeemable preferred shares
Each issuance of the convertible redeemable preferred shares is recognized at the respective issue price at the date of issuance net of issuance costs. The Company has classified the convertible redeemable shares in the mezzanine equity of the consolidated balance sheets as of December 31, 2024, because they were contingently redeemable upon the occurrence of certain liquidation events outside of the Company’s control. The Company’s redeemable preferred shares was subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or remeasurement is treated as a deemed dividend. The change in redemption value is recorded against retained earnings, or in the absence of retained earnings, against additional paid-in capital. Once additional paid-in capital has been exhausted, additional charges are recorded by increasing the accumulated deficit.
Conversion upon IPO
As the Company completed its IPO in October 2025, all convertible redeemable preferred shares were automatically converted to Class A ordinary shares based on the aforementioned conversion ratio. mezzanine equity was recognized as of December 31, 2025 and June 30, 2026.
Note 15 — REDEEMABLE NON-CONTROLLING INTEREST
Upon the completion of the Company’s IPO in October 2025, the non-controlling interests were automatically converted to ordinary shares of the VIE. redeemable non-controlling interest was recognized as of December 31, 2025 and June 30, 2026.
Note 16 — SHAREHOLDERS’ EQUITY
Common stock
The Company was incorporated under the laws of the Cayman Islands on February 26, 2021. As of December 31, 2025 and June 30, 2026, the authorized number of Class A ordinary Shares was
Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to
F-50
Initial Public Offering
On October 9, 2025, the Company closed its IPO on the Nasdaq Capital. In this offering,
On October 10, 2025, upon the full exercise of the underwriter’s over-allotment option, the Company issued
The gross proceeds of this offering were approximately RMB
Immediately upon the completion of the IPO, all of the
ADS Ratio Change
On May 28, 2026, the Company announced a change in its ADS to equity shares ratio (the “ADS Ratio Change”), from the current ratio of one (1) ADS representing one-sixth (1/6) Class A ordinary share to a new ratio of one (1) ADS representing three (3) Class A ordinary shares. The ADS Ratio Change became effective on June 22, 2026. There was no change to the Company’s equity shares.
Statutory reserves
Statutory reserves represent restricted retained earnings. Based on their legal formation, the Group is required to set aside
Appropriations to the Reserve Fund are accounted for as a transfer from unrestricted earnings to statutory reserves. During the six months ended June 30, 2025 and 2026, the Group did not make appropriations to statutory reserves.
There are no legal requirements in the PRC to fund the Reserve Fund by transfer of cash to any restricted accounts, and the Group does not do so.
Profit appropriation and restricted net assets
Relevant PRC laws and regulations permit the PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC GAAP and regulations. Additionally, the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries can only distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to the statutory reserves. As of June 30, 2026, the Group had recurring loss with shareholders’ deficit in the amount of RMB
F-51
Subscription receivable
The balance as of December 31, 2025 and June 30, 2026 represents the outstanding subscription consideration for the
Note 17 — LOSS PER SHARE
Basic and diluted loss per ordinary share is computed using the weighted average number of ordinary shares outstanding during the period. The effects of all outstanding convertible redeemable preferred shares were excluded from the computation of diluted loss per share in each of the applicable periods as their effects would be anti-dilutive during the respective period.
Basic and diluted loss per share for each of the periods presented were calculated as follows:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Numerator: | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Accretion to redemption value of mezzanine equity | ( | ) | ||||||||||
| Less: Net loss attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ||||||
| Net loss attributable to the Pomdoctor Limited’s ordinary shareholders | ( | ) | ( | ) | ( | ) | ||||||
| Denominator: | ||||||||||||
| Weighted average number of shares outstanding – basic | ||||||||||||
| Weighted average number of shares outstanding – diluted | ||||||||||||
| Loss per share – Basic: | ( | ) | ( | ) | ( | ) | ||||||
| Loss per share – Diluted: | ( | ) | ( | ) | ( | ) | ||||||
F-52
Note 18 — SEGMENTS
The following table presents summarized information by segment of the operations for the six months ended June 30, 2026:
| Internet hospital | Pharmaceutical supply chain | Total | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Net revenue | ||||||||||||
| Less: | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||
| Salaries and welfare | ( | ) | ( | ) | ( | ) | ||||||
| Commissions to doctors | ( | ) | ( | ) | ||||||||
| Consultancy and professional service fees | ( | ) | ( | ) | ( | ) | ||||||
| Advertising and promotion costs | ( | ) | ( | ) | ( | ) | ||||||
| Contracted development and research service fees | ( | ) | ( | ) | ||||||||
| Other segment items* | ( | ) | ( | ) | ( | ) | ||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ||||||
| Reconciliation of segment loss: | ||||||||||||
| Impairment on long-lived assets and long-term assets | ( | ) | ||||||||||
| Other professional service fees | ( | ) | ||||||||||
| Other income | ||||||||||||
| Other expense | ( | ) | ||||||||||
| Interest expense | ( | ) | ||||||||||
| Government grants | ||||||||||||
| Loss before income tax | ( | ) | ||||||||||
| Internet hospital | Pharmaceutical supply chain | Total | ||||||||||
| US$ | US$ | US$ | ||||||||||
| Net revenue | ||||||||||||
| Less: | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||
| Salaries and welfare | ( | ) | ( | ) | ( | ) | ||||||
| Commissions to doctors | ( | ) | ( | ) | ||||||||
| Consultancy and professional service fees | ( | ) | ( | ) | ( | ) | ||||||
| Advertising and promotion costs | ( | ) | ( | ) | ( | ) | ||||||
| Contracted development and research service fees | ( | ) | ( | ) | ||||||||
| Other segment items* | ( | ) | ( | ) | ( | ) | ||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ||||||
| Reconciliation of segment loss: | ||||||||||||
| Impairment on long-lived assets and long-term assets | ( | ) | ||||||||||
| Other professional service fees | ( | ) | ||||||||||
| Other income | ||||||||||||
| Other expense | ( | ) | ||||||||||
| Interest expense | ( | ) | ||||||||||
| Government grants | ||||||||||||
| Loss before income tax | ( | ) | ||||||||||
| * |
F-53
The following table presents summarized information by segment of the operations for the six months ended June 30, 2025:
| Internet hospital | Pharmaceutical supply chain | Total | ||||||||||
| RMB | RMB | RMB | ||||||||||
| Net revenue | ||||||||||||
| Less: | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||
| Salaries and welfare | ( | ) | ( | ) | ( | ) | ||||||
| Commissions to doctors | ( | ) | ( | ) | ||||||||
| Consultancy and professional service fees | ( | ) | ( | ) | ||||||||
| Advertising and promotion costs | ( | ) | ( | ) | ( | ) | ||||||
| Other segment items* | ( | ) | ( | ) | ( | ) | ||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ||||||
| Reconciliation of segment loss: | ||||||||||||
| Impairment on long-lived assets and long-term assets | ( | ) | ||||||||||
| Other income | ||||||||||||
| Other expense | ( | ) | ||||||||||
| Interest expense | ( | ) | ||||||||||
| Government grants | ||||||||||||
| Loss before income tax | ( | ) | ||||||||||
| * | For each reportable segment, the other segment item category primarily includes shipping expenses, rental costs, entertainment expense, office expense and expected credit losses. |
In accordance with the enterprise-wide disclosure requirements, the Group’s net revenue from external customers through Internet hospital by main product category is as follows:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Prescription drugs | ||||||||||||
| Over-the-counter (“OTC”) medicines | ||||||||||||
| Traditional Chinese medicine (“TCM”) | ||||||||||||
| Medical apparatus and instruments (“MAAI”) | ||||||||||||
| Online consultation | ||||||||||||
| Others | ||||||||||||
| Total | ||||||||||||
The Group’s net revenue from external customers through pharmaceutical supply chain by main product category is as follows:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Prescription drugs | ||||||||||||
| Over-the-counter (“OTC”) medicines | ||||||||||||
| Traditional Chinese medicine (“TCM”) | ( | ) | ||||||||||
| Medical apparatus and instruments (“MAAI”) | ||||||||||||
| Others | ||||||||||||
| Total | ||||||||||||
F-54
Total segment assets exclude corporate assets, such as cash and cash equivalents, amounts due from related parties, other non-current assets and deferred offering costs. Total segment assets reconciled to combined amounts are as follows:
| As of December 31, 2025 | As of June 30, 2026 | As of June 30, 2026 | ||||||||||
| RMB | RMB | US$ | ||||||||||
| Assets | ||||||||||||
| Total assets for reportable segments | ||||||||||||
| Unallocated assets | ||||||||||||
| Total combined assets | ||||||||||||
The asset information is not regularly provided to the CODM as it is not utilized in the assessment of performance and allocation of resources. Consequently, the disclosure of asset information is not mandated for reportable segments.
Note 19 — COMMITMENTS AND CONTINGENCIES
As of June 30, 2026, the Group was not involved in any pending legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters. The Group believes there was no loss of the legal case that will have a material adverse impact on its financial position, results of operations or liquidity.
Note 20 — SUBSEQUENT EVENTS
On August 3, 2026, the Group obtained a loan of RMB
From July 1, 2026, to September 29, 2026, the Group obtained loans of RMB
In July 2026, the Group adopted the 2026 Share Incentive Plan (the “2026 Plan”) for the purpose of granting share-based compensation awards to selected Directors, Employees, Consultants and other individuals to incentivize their performance and align their interests with the Company. The maximum aggregate number of Class A ordinary shares which may be issued pursuant to all awards under the 2026 Plan shall be
The Group evaluated all events and transactions that occurred after June 30, 2026 and up through the date of issuance of consolidated financial statements. Other than the event disclosed above and elsewhere in these consolidated financial statements, there is no other subsequent event occurred that would require recognition or disclosure in the Group’s consolidated financial statements.
F-55
Exhibit 99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF
POMDOCTOR LIMITED
A. Operating Results
Key Factors Affecting Our Results of Operations
General Factors Affecting Our Results of Operations
Our results of operations and financial condition are affected by the general factors driving China’s Internet industry in China, which include China’s overall economic growth and level of per capital disposable income, growth of mobile Internet usage and penetration rate. They are also affected by factors driving healthcare industry and online healthcare services in China, such as aging population, rising prevalence of chronic diseases, growing health awareness, governmental policies and initiatives affecting online healthcare industry and market and social acceptance of online healthcare services. As a result, unfavorable changes in any of these general factors could materially and adversely affect demand for our services and our results of operations.
Specific Factors Affecting Our Results of Operations
While our business is influenced by the general factors set forth above, our results of operations are also more directly affected by specific factors relating to our business, including:
Our ability to increase user accounts and drive additional purchase from our online pharmacy
Our results of operation and future growth will largely depend on our ability to attract new users, create new transacting patient accounts and drive additional purchases from existing user accounts. We expect to achieve continuing growth in our Internet hospital business in the foreseeable future as we attract more users to our platform.
We are committed to providing superior user experience and services. In particular, our platform offers a wide selection of pharmaceutical and healthcare products at competitive prices, and we also provide timely and reliable delivery, convenient payment options and superior customer services. We offer a large number of products on our platform, which enables us to serve a large user base, expand our reach and coverage and in turn drive additional purchases. In addition, we have utilized and will continue to utilize our big data technology to better understand our users so that we could better serve their evolving needs and demands.
Our ability to further increase and leverage our scale of business
Our results of operations are directly affected by our ability to further increase and leverage our scale of business, particularly our online hospital business. As our business further grows in scale, we expect to obtain more favorable terms from suppliers, including pricing terms, credit period and volume-based rebates. In addition, we aim to create value for our suppliers by providing an effective and transparent channel for selling large volumes of their products online and by offering them valuable insights on market demand, customer preferences and supply chain information based on our vast user base. We believe the value propositions will also help us deepen our relationships with, and obtain favorable terms from, suppliers and reduce our procurement costs.
Our ability to enhance the coverage of our product offering to strengthen our customer base
We currently derive our revenues substantially from sales of pharmaceutical products to users under online hospital business, product sales to third-party pharmaceutical platforms or companies, and retail sales of drugs in our offline pharmacies. Accordingly, the breadth of our coverage of pharmaceutical products can greatly affect our revenues. We are currently expanding our supplier base to further enhance the coverage of our product offering. As of June 30, 2026, we collaborated with 724 suppliers offering 47,229 SKUs.
Our ability to promote our brand effectively and efficiently
As we operate in intensely competitive markets, we need to provide incentives to attract doctors and users, and conduct promotion and advertising activities to enhance our brand awareness. Our sales and marketing expenses are a significant component of our operating expenses, and they primarily consist of (i) contracted consultancy and professional service fees; (ii) service fees to doctors, (iii) promotion and advertising expenses, and (iv) staff cost in relation to marketing and business development activities. For the six months ended June 30, 2025 and 2026, sales and marketing expenses accounted for 15.9% and 41.3% of our total revenues, respectively.
Results of Operations
The following table sets forth our results of operations with line items in absolute amounts and as a percentage of our net revenues for the periods indicated:
| For the Six Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| RMB | % | RMB | US$ | % | ||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Net revenues | 174,470 | 100.0 | 185,000 | 27,266 | 100.0 | |||||||||||||||
| Cost of revenues | 146,152 | 83.8 | 159,727 | 23,541 | 86.3 | |||||||||||||||
| Gross profit | 28,318 | 16.2 | 25,273 | 3,725 | 13.7 | |||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing expenses | 27,762 | 15.9 | 76,404 | 11,261 | 41.3 | |||||||||||||||
| General and administrative expenses | 10,495 | 6.0 | 75,472 | 11,123 | 40.8 | |||||||||||||||
| Research and development expenses | 1,480 | 0.8 | 106,274 | 15,663 | 57.4 | |||||||||||||||
| Impairment loss on long-lived assets | 2,041 | 1.2 | 456 | 67 | 0.2 | |||||||||||||||
| Total operating expenses | 41,778 | 23.9 | 258,606 | 38,114 | 139.7 | |||||||||||||||
| Loss from operations | (13,460 | ) | (7.7 | ) | (233,333 | ) | (34,389 | ) | (126.0 | ) | ||||||||||
| Other expense, net: | ||||||||||||||||||||
| Other income | 28 | 0.0 | 1,333 | 197 | 0.7 | |||||||||||||||
| Other expense | (130 | ) | (0.1 | ) | (59 | ) | (9 | ) | 0.0 | |||||||||||
| Interest expense | (6,471 | ) | (3.7 | ) | (6,121 | ) | (902 | ) | (3.3 | ) | ||||||||||
| Government grants | 148 | 0.1 | 77 | 11 | 0.0 | |||||||||||||||
| Total other expense, net | (6,425 | ) | (3.7 | ) | (4,770 | ) | (703 | ) | (2.6 | ) | ||||||||||
| Loss before income tax | (19,885 | ) | (11.4 | ) | (238,103 | ) | (35,092 | ) | (128.6 | ) | ||||||||||
| Income tax expenses | — | — | (67 | ) | (10 | ) | 0.0 | |||||||||||||
| Net loss | (19,885 | ) | (11.4 | ) | (238,170 | ) | (35,102 | ) | (128.6 | ) | ||||||||||
Key Components of Results of Operations
Net Revenues
Net revenues consist of revenues from (i) internet hospital, including revenues generated from online consultation and prescription renewal services, and online pharmacy sales and (ii) pharmaceutical supply chain, including revenues generated from pharmacy retail sales and pharmacy wholesale. The following table sets forth a breakdown of our net revenues by type in absolute amounts and as a percentage of our net revenues for the periods indicated:
| For the Six Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| RMB | % | RMB | US$ | % | ||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Net Revenues | ||||||||||||||||||||
| Revenue from internet hospital | 67,161 | 38.5 | 100,256 | 14,776 | 54.2 | |||||||||||||||
| Revenue from pharmaceutical supply chain | 107,309 | 61.5 | 84,744 | 12,490 | 45.8 | |||||||||||||||
| Total | 174,470 | 100.0 | 185,000 | 27,266 | 100.0 | |||||||||||||||
| 2 |
Cost of revenues
The following table sets forth a breakdown of our cost of revenues by type in absolute amounts and as a percentage of our net revenues for the periods indicated:
| For the Six Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| RMB | % | RMB | US$ | % | ||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Internet hospital | 39,985 | 22.9 | 76,292 | 11,244 | 41.2 | |||||||||||||||
| Pharmaceutical supply chain | 106,167 | 60.9 | 83,435 | 12,297 | 45.1 | |||||||||||||||
| Total | 146,152 | 83.8 | 159,727 | 23,541 | 86.3 | |||||||||||||||
Gross Profit
The following table sets forth a breakdown of our gross profit by type in absolute amounts and as a percentage of the net revenues for each business segment, or gross margin, for the periods indicated:
| For the Six Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| RMB | % | RMB | US$ | % | ||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Internet hospital | 27,176 | 40.5 | 23,964 | 3,532 | 23.9 | |||||||||||||||
| Pharmaceutical supply chain | 1,142 | 1.1 | 1,309 | 193 | 1.5 | |||||||||||||||
| Total | 28,318 | 16.2 | 25,273 | 3,725 | 13.7 | |||||||||||||||
Operating expenses
Our operating expenses consist of (i) sales and marketing expenses, (ii) general and administrative expenses, (iii) research and development expenses, (iv) impairment loss on long-lived assets, and (v) impairment loss on long-term investment. The following table sets forth a breakdown of our operating costs and expenses both in absolute amounts and as a percentage of our net revenues for the periods indicated:
| For the Six Months Ended June 30, | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| RMB | % | RMB | US$ | % | ||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing expenses | 27,762 | 15.9 | 76,404 | 11,261 | 41.3 | |||||||||||||||
| General and administrative expenses | 10,494 | 6.0 | 75,473 | 11,123 | 40.8 | |||||||||||||||
| Research and development expenses | 1,480 | 0.8 | 106,274 | 15,663 | 57.4 | |||||||||||||||
| Impairment loss on long-lived assets | 2,041 | 1.2 | 456 | 67 | 0.2 | |||||||||||||||
| Total | 41,777 | 23.9 | 258,607 | 38,114 | 139.7 | |||||||||||||||
| 3 |
Sales and marketing expenses. Sales and marketing expenses consist primarily of staff cost, service fees to doctors, share-based compensation paid to outsourced consultants for professional service to promote our brand and advertising and promotion costs. The service fees to doctors are marketing fees paid to doctors as (i) the doctors introduce patients to use our online platform, and (ii) the doctors provide prescription renewal to the patients which would bring revenues of product sales to us and we would pay certain percentage of such product sales to the doctors.
General and administrative expenses. General and administrative expenses consist primarily of share-based compensation paid to outsourced consultants for consultancy for investor relationship management, staff cost, office rent, audit fee and expected credit losses for accounts receivable and other receivables.
Research and development expenses. Research and development expenses consist primarily of staff cost, share-based compensation to an outsourced service provider for artificial intelligence and healthcare-related AI applications and information service fees.
Impairment loss on long-lived assets. Impairment of loss on long-lived assets represents primarily impairment loss on property and equipment and operating lease right-of-use assets.
Other income (expense), net
Other income consists primarily of government grants. Other expense mainly consists of interest expense, liquidated damages and donations.
Taxation
Cayman Islands
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation, and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or brought within the jurisdiction of, the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments.
Hong Kong
On March 21, 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017, which introduces the two-tiered profits tax rates regime. The bill was signed into law on March 28, 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%.
Accordingly, the Hong Kong profits tax of the qualifying group entity is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million.
PRC
Under the PRC Enterprise Income Tax Law effective from January 1, 2008 and its implementation rules, our PRC subsidiaries, are subject to the statutory rate of 25%, subject to preferential tax treatments available to qualified enterprises in certain encouraged sectors of the economy.
Enterprises that qualify as “high and new technology enterprises” are entitled to a preferential rate of 15% for three years. Guangzhou Qilekang Digital Health Medical Technology Co., Ltd. is certified as “high and new technology enterprises” under the relevant PRC laws and regulations, and accordingly, is eligible for a preferential income tax rate of 15% during 2024 to 2026.
| 4 |
Our remaining PRC entities were subject to enterprise income tax at a rate of 25% in 2023, 2024 and 2025. Pursuant to the PRC Enterprise Income Tax Law and its implementation rules, and the Arrangement between Chinese mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, a 5% or 10% withholding tax is levied on dividends declared to foreign investors from China effective from January 1, 2008.
For qualified small and low-profit enterprises, from January 1, 2023 to December 31, 2027, 25% of the first RMB 3.0 million of the assessable profit before tax is subject to the tax rate of 20%. For the six months ended June 30, 2025 and 2026, some of our PRC entities are qualified small and low-profit enterprises, and thus are eligible for the above preferential tax rates for small and low-profit enterprises.
We had no current or deferred income tax expenses or benefits for the six months ended June 30, 2025. We had current income tax expenses of RMB67.1 thousands (US$9.9 thousands) for the six months ended June 30, 2026.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Net revenues
| For the Six Months Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2026 | Changes | ||||||||||||||||||||||
| RMB | RMB | US$ | RMB | US$ | % | |||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||||||
| Net revenues | ||||||||||||||||||||||||
| Internet hospital | 67,161 | 100,256 | 14,776 | 33,095 | 4,878 | 49.3 | ||||||||||||||||||
| Pharmaceutical supply chain | 107,309 | 84,744 | 12,490 | (22,565 | ) | (3,326 | ) | (21.0 | ) | |||||||||||||||
| Total | 174,470 | 185,000 | 27,266 | 10,530 | 1,552 | 6.0 | ||||||||||||||||||
Our net revenues increased by 6.0% from RMB174.5million for the six months ended June 30, 2025 to RMB185.0 million (US$27.3 million) for the six months ended June 30, 2026.
Net revenues from Internet hospital. Net revenues from Internet hospital increased by 49.3% from RMB67.2 million for the six months ended June 30, 2025 to RMB100.3 million (US$14.8 million) for the six months ended June 30, 2026, primarily attributable to the increase in revenues generated from online pharmacy sales. In the second half of 2025, we introduced a number of best-selling products with lower gross margins, which led to that revenue from our online pharmacy sales increased from RMB66.4 million for the six months ended June 30, 2025 to RMB99.5 million (US$14.7 million) for the six months ended June 30, 2026. Revenue from our online consultation service slightly increased from RMB0.7 million for the six months ended June 30, 2025 to RMB0.8 million (US$0.1 million) for the six months ended June 30, 2026.
Net revenues from pharmaceutical supply chain. Net revenues from pharmaceutical supply chain decreased by 21.0% from RMB107.3 million for the six months ended June 30, 2025 to RMB84.7 million (US$12.5 million) for the six months ended June 30, 2026, primarily driven by the decrease in our pharmacy wholesale business from RMB105.1 million for the six months ended June 30, 2025 to RMB81.9 million (US$12.1 million) for the six months ended June 30, 2026, as a result of our reduction cooperation with one big customer whose credit term was relatively longer than others, partially offset by newly obtained big customers. Our revenues from pharmacy retail sales slightly increased from RMB2.2 million for the six months ended June 30, 2025 to RMB2.8 million (US$0.4 million) for the six months ended June 30, 2026.
Cost of revenues
Our cost of revenues increased by 9.3% from RMB146.2 million for the six months ended June 30, 2025 to RMB159.7 million (US$23.5 million) for the six months ended June 30, 2026, primarily due to the increase in cost of revenues in online pharmacy sales from RMB40.0 million for the six months ended June 30, 2025 to RMB76.3 million (US$11.2 million) for the six months ended June 30, 2026, which was attribute to the increase in our net revenues from Internet hospital. The cost of revenues in pharmaceutical supply chain decreased from RMB106.2 million for the six months ended June 30, 2025 to RMB83.4 million (US$12.3 million) for the six months ended June 30, 2026, in line with the decline in the related revenues.
| 5 |
Gross profit and gross profit margin
As a result of the foregoing, we recorded gross profit of RMB28.3 million and RMB25.3 million (US$3.7 million) for the six months ended June 30, 2025 and 2026, respectively. Our gross profit margin decreased from 16.2% for the six months ended June 30, 2025 to 13.7% for the six months ended June 30, 2026. The gross profit margin of our Internet hospital decreased from 40.5% for the six months ended June 30, 2025 to 23.9% for the six months ended June 30, 2026, mainly attributable to the increase in the online pharmacy sales of products with lower gross profit margin. The gross profit margin of our pharmaceutical supply chain slightly increased from 1.1% for the six months ended June 30, 2025 to 1.5% for the six months ended June 30, 2026.
Operating expenses
Sales and marketing expenses. Our sales and marketing expenses increased from RMB27.8 million for the six months ended June 30, 2025 to RMB76.4 million (US$11.3 million) for the six months ended June 30, 2026, primarily due to (i) the share-based compensation of approximately RMB46.4 million (US$6.8 million) to outsourced consultants for professional service to promote our brand; (ii) the increase in service fees to doctors of approximately RMB2.4 million (US$0.3 million), as a result of the growth in our Internet hospital business.
General and administrative expenses. Our general and administrative expenses increased from RMB10.5 million for the six months ended June 30, 2025 to RMB75.5 million (US$11.1 million) for the six months ended June 30, 2026, primarily due to (i) the share-based compensation to outsourced consultants for investor relationship management consultancy of approximately RMB64.8 million (US$9.6 million) incurred in 2026; (ii) the increase in staff costs of RMB1.0 million (US$0.1 million) as a result of the expansion of headcounts in general administrative function after initial public offering; (iii) a decrease in reversed allowance of credit losses of RMB0.7 million (US$0.1 million) for accounts receivable and other receivables, and offset by (iv) a decrease of RMB1.6 million (US$0.2 million) in consultancy and professional service fees, which had been higher prior to the completion of our initial public offering in October 2025, as the offering required more professional financial services.
Research and development expense. Our research and development expenses increased from RMB1.5 million for the six months ended June 30, 2025 to RMB106.3 million (US$15.7 million) for the six months ended June 30, 2026, primarily due to the share-based compensation to an outsourced service provider of RMB104.5 million (US$15.4 million), for a new project launched in the second half in 2025 to develop artificial intelligence and healthcare-related AI applications.
Impairment loss on long-lived assets. We recorded impairment loss on operating lease right-of-use assets with definite lives of RMB2.0 million and RMB0.5 million (US$0.07 million) for the six months ended June 30, 2025 and 2026, respectively. The decrease was due to fewer new leases entered into the first half in 2026.
Government grants
Our government grants decreased by 48.0%, from RMB148.0 thousands for the six months ended June 30, 2025 to RMB76.6 thousands (US$11.3 thousands) for the six months ended June 30, 2026, primarily due to the decrease in grants of RMB132.5 thousands (US$19.5 thousands) from local government for specialized and sophisticated small and medium-sized enterprises that produce new and unique products, and partially offset by the increase in subsidies of RMB56.0 thousands (US$8.3 thousands) received for employee social security contributions paid.
Income tax expenses
We incurred income tax expenses of nil and RMB67.1 thousands (US$9.9 thousands) for the six months ended June 30, 2025 and 2026, respectively.
Net loss
As a result of the foregoing, our net loss was RMB19.9 million and RMB238.2 million (US$35.1 million) for the six months ended June 30, 2025 and 2026, respectively. On November 28, 2025, we entered into service agreements with three suppliers to obtain specified consultancy and professional services to improve our marketing, administrative and research and development capabilities. In exchange for service acquired, we granted American depositary shares, or ADS to the suppliers. The aggregated amount for share-based compensation expenses was RMB215.7 million (US$31.8 million) for the six months ended June 30, 2026. Excluding the impact of share-based compensation expenses, our net loss for the first half of 2026 was increased by RMB2.6 million when comparing with that for the first half of 2025.
| 6 |
B. Liquidity and Capital Resources
Liquidity and Capital Resources
The following table sets forth a summary of our cash flows for the periods indicated:
| For the Six Months Ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| (in thousands) | ||||||||||||
| Summary Consolidated Cash Flow Data | ||||||||||||
| Net cash (used in) provided by operating activities | (14,988 | ) | 10,077 | 1,485 | ||||||||
| Net cash used in investing activities | (512 | ) | (63 | ) | (9 | ) | ||||||
| Net cash provided by (used in) financing activities | 13,588 | (4,662 | ) | (687 | ) | |||||||
| Effect of exchange rate changes | 7 | (2,326 | ) | (343 | ) | |||||||
| Net (decrease) increase in cash and cash equivalents | (1,905 | ) | 3,026 | 446 | ||||||||
| Cash and cash equivalents at the beginning of the period | 7,652 | 9,580 | 1,412 | |||||||||
| Cash and cash equivalents at the end of the period | 5,747 | 12,606 | 1,858 | |||||||||
To date, we have financed our operating and investing activities primarily through cash generated by historical equity and debt financing activities. We obtained loans from our related parties at interest rate between nil to 20.00%. We also obtained loans from certain financial institutions. Additionally, we received net proceeds of RMB139.9 million (US$20.0 million) from our initial public offering in October 2025. We had cash and cash equivalents of RMB9.6 million and RMB12.6 million (US$1.9 million) as of December 31, 2025 and June 30, 2026, respectively.
We incurred net losses of RMB19.9 million and RMB238.2 million (US$35.1 million) for the six months ended June 30, 2025 and 2026, respectively. Net cash used in operating activities was RMB15.0 million for the six months ended June 30, 2025, and net cash provided by operating activities RMB10.1 million (US$1.5 million) for the six months ended June 30, 2026. We had accumulated deficit of RMB2,476.0 million and RMB2,705.8 million (US$398.8 million) as of December 31, 2025 and June 30, 2026, respectively. The working capital deficit was RMB113.2 million and RMB137.2 million (US$20.2 million) as of December 31, 2025 and June 30, 2026, respectively. Our cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses and meet our obligations as they become due for the next twelve months from the date of issuance of these consolidated financial statements. These factors raise substantial doubt about our ability to continue as a going concern.
Our liquidity is based on our ability to generate cash from operating activities, debt financing and capital contributions from our shareholders to fund its general operations and capital expansion needs. Our ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes generating revenue while controlling operating cost and expenses to generate positive operating cash flows and obtaining funds from outside sources of financing to generate positive financing cash flows. As of June 30, 2026, the balance of cash and cash equivalents was RMB12.6 million (US$1.9 million), which cannot cover the current liabilities of RMB210.9 million (US$31.1million). Currently, we are working to improve our liquidity and capital sources mainly through borrowing from related parties and financial institutions.
However, there can be no assurance that these plans and arrangements will be sufficient to fund our ongoing capital expenditure, working capital, and other requirements. The consolidated financial statements do not include any adjustments related to the recoverability or classification of asset and the amounts or classification of liabilities that may result from the outcome of this uncertainty.
As of June 30, 2026, our cash and cash equivalents were held in mainland China and Hong Kong, denominated in Renminbi, U.S. dollars and Hong Kong dollars.
| 7 |
Substantially all of our net revenues have been, and we expect will likely to continue to be, denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
Operating activities
Net cash (used in) provided by operating activities primarily comprises our net loss and non-cash items, depreciation, change in expected credit losses, allowance, impairment, and adjusted by changes in working capital.
For the six months ended June 30, 2026, net cash provided by operating activities was RMB10.1 million (US$1.5 million), which was attributable to our net loss of RMB238.2 million (US$35.1 million), as adjusted by the reconciliation of net loss to net cash provided by operating activities, which primarily comprised of (i) share-based compensation of RMB215.6 million (US$31.8 million) to contracted consultancy and professional service providers, recognized according to the progress of their services; (ii) provision of allowance for inventory of RMB2.0 million (US$0.3 million); (iii) impairment loss on long-lived assets of RMB0.5 million (US$0.1 million); and (iv) changes in operating assets and liabilities, which was primarily the result of (a) a decrease in other receivables of RMB58.7 million (US$8.7 million), as we received refundable deposits from contracted consultancy and professional service providers due to their agreement cancellation; (b) an increase in amounts due to related parties of RMB3.6 million (US$0.5 million), primarily as a result of an increase of interest payable for the loans from related parties; (c) an increase in accrued liabilities of RMB3.6 million (US$0.5 million), which was primarily due to the increase in the service fee payable to the doctors and interest payables for the loan from a financial institution; (d) an increase in salary and welfare payable of RMB1.3 million (US$0.2 million); (e) a decrease in inventories of RMB0.6 million (US$0.1 million), offset by (f) an increase in accounts receivable of RMB25.3 million (US$3.7 million), which was primarily attributable to prolonged credit terms for one big customer in first quarter of 2026; (g) a decrease in accounts payable of RMB9.7 million (US$1.4 million), resulted from the decline in our pharmaceutical supply chain business; and (h) an increase in amounts due from related parties of RMB1.7 million (US$0.2 million), which was mainly attributable to newly incurred expenses paid on behalf of a related party in first half of 2026; (i) a decrease in advance from customers of RMB0.7 million (US$0.1 million); and (j) a decrease in operating lease liabilities of RMB0.5 million (US$0.1 million).
For the six months ended June 30, 2025, net cash used in operating activities was RMB15.0 million, which was primarily attributable to our net loss of RMB19.9 million, as adjusted by the reconciliation of net loss to net cash used in operating activities, which primarily comprised of (i) impairment loss on long-lived assets of RMB2.0 million; (ii) reversal in expected credit losses of RMB0.7 million; (iii) provision of allowance for inventory of RMB0.6 million; and (iv) changes in operating assets and liabilities, which was primarily the result of (a) an increase in amounts due to related parties of RMB5.6 million; (b) a decrease in inventories of RMB2.1 million; (c) a decrease in accounts receivable of RMB2.4 million; (d) an increase in accrued liabilities of RMB1.9 million; (e) a decrease in other receivables of RMB0.7 million; offset by (f) a decrease of other payables of RMB2.3 million; (g) an increase in advances to suppliers of RMB2.0 million; (h) an increase of amounts due from related parties of RMB1.8 million; (i) a decrease in refund liabilities of RMB1.8 million; (j) a decrease in operating lease liabilities of RMB1.0 million; and (k) a decrease in advance from customers of RMB0.8 million .
Investing activities
For the six months ended June 30, 2026, net cash used in investing activities was RMB63.1 thousands (US$9.3 thousands), which was primarily attributable to the payment for a long-term investment of RMB200.0 thousands (US$29.5 thousands) and the purchase for furniture and office equipment of RMB133.1 thousands (US$19.6 thousands), offset by the cash receipt from disposal of a motor vehicle of RMB270.0 thousands (US$39.8 thousands).
For the six months ended June 30, 2025, net cash used in investing activities was RMB512.2 thousands, which was primarily attributable to the payment for long-term investments of RMB510.0 thousands.
| 8 |
Financing activities
For the six months ended June 30, 2026, net cash used in financing activities was RMB4.7 million (US$0.7 million), which primarily comprised (i) proceeds from short-term bank loans of RMB24.0 million (US$3.5 million), representing loans from Industrial Bank Co, Ltd., Bank of Communications and Bank of Jiujiang; (ii) proceeds from related parties of RMB16.0 million (US$2.4 million), representing loans from related parties; (iii) proceeds from long-term bank loans of RMB2.4 million (US$0.4 million), representing loans from Bank of Jiujiang; and (iv) proceeds from third parties of RMB1.3 million (US$0.2 million), representing loans from third parties; partially offset by (a) repayment of short-term bank loans of RMB26.3 million (US$3.9 million); (b) repayment to related parties of RMB18.9 million (US$2.8 million); and (c) repayment of long-term bank loans of RMB2.8 million (US$0.4 million).
For the six months ended June 30, 2025, net cash provided by financing activities was RMB13.6 million, which primarily comprised (i) proceeds from short-term bank loans of RMB29.0 million, representing loans from Industrial Bank Co, Ltd., Agricultural Bank of China and Bank of Guangzhou; (ii) proceeds from related parties of RMB24.8 million, representing loans from related parties; and (iii) proceeds from third parties of RMB1.6 million, representing loans from third parties; partially offset by (a) repayment of short-term bank loans of RMB29.3 million; (b) repayment to third parties of RMB6.0 million; (c) repayment to related parties of RMB5.7 million; and (d) repayment of long-term bank loans of RMB0.6 million.
Contractual Obligations
The following table sets forth our contractual obligations as of June 30, 2026.
| Payment due for the twelve months ended June 30, | 2027 | 2028 | 2029 | 2030 | 2031 | Total future loan payments |
Imputed interest |
Total | ||||||||||||||||||||||||
| Loans from bank and other financial institutions(1) | 62,695 | 9,436 | 3,372 | — | — | 75,503 | (453 | ) | 75,050 | |||||||||||||||||||||||
| Loans from third parties | 2,069 | 2,096 | — | — | — | 4,165 | (378 | ) | 3,787 | |||||||||||||||||||||||
| Loans from related parties(2) | 20,105 | 6,615 | 6,615 | 6,615 | 359,376 | 399,326 | (30,725 | ) | 368,601 | |||||||||||||||||||||||
| Operating lease commitments | 1,948 | 817 | — | — | — | 2,765 | (77 | ) | 2,688 | |||||||||||||||||||||||
| Total | 86,817 | 18,964 | 9,987 | 6,615 | 359,376 | 481,759 | (31,633 | ) | 450,126 | |||||||||||||||||||||||
| Notes: |
| (1) | The long-term loan (including current portion) outstanding as of June 30, 2026 bore a weighted average interest rate of 4.23% per annum. |
| (2) | The majority of this balance is related to payable arising from cooperation with Focus Media. On August 10, 2021, we entered into tripartite agreements with Focus Media and Aixiangbao, a wholly-owned entity by Mr. Zhenyang Shi, pursuant to which, we are released from being the obligor to Focus Media under the liability but the obligor to Aixiangbao as Aixiangbao assumed the obligation on behalf of us in the amount of RMB221.0 million, and we agreed to repay such debt to Aixiangbao. On September 10, 2021, we reached an agreement with Aixiangbao, pursuant to which we will not be required to repay the liability for five years and after then Aixiangbao can only require us to repay the liability in a non-cash method, but we still have an obligation to repay such outstanding debt, with no interest bearing. In 2025, the agreement was renewed with maturity date of August 10, 2030. |
Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of June 30, 2026.
| 9 |
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us.
Going Concern
As discussed in Liquidity and Capital Resources, our cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses and meet our obligations as they become due for the next twelve months after the date that the consolidated financial statements were available to be issued. These factors raise substantial doubt about our ability to continue as a going concern.
Management’s plan to alleviate the substantial doubt about our ability to continue as a going concern include as follows: (i) on August 3, 2026, we obtained a loan of RMB6.0 million (US$0.9 million USD) from the Guangzhou Rural Commercial Bank, which was required to be repaid on July 28, 2027 and with an annual interest rate of 3.5%. The loan was guaranteed by Zhenyang Shi, Li Xu and Qilekang Modern Logistics; (ii) From July 1, 2026, to September 29, 2026, we obtained loans of RMB2.1 million (US$0.3 million) in aggregate from Li Xu, which are non-interest bearing and due on demand; and (iii) we are attempting to improve our business profitability, our ability to generate sufficient cash flow from our operations to meet our operating needs on a timely basis, obtain additional working capital funds through debt and equity financings in order to meet its anticipated cash requirements. However, there can be no assurance that these plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements.
We obtained loans from our related parties at interest rates between 0.00% to 20.00%. As of June 30, 2026, the amounts of loans from related parties, current portion, were RMB12.6 million (US$1.9 million), and the amounts of loans from related parties, noncurrent portion, were RMB356.0 million (US$52.5 million). Given that we will take measures as stated in the above management plan, the cash flows are sufficient to cover the costs of the loans from related parties and such financing would not impact on our ability to continue as a going concern.
Inflation
To date, inflation in China has not materially affected our results of operations. According to the PRC National Bureau of Statistics, the year-over-year percentage changes in the consumer price index for December 2025 and June 2026 were an increase of 0.8% and of 1.0%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences higher rates of inflation in the future. For example, certain operating expenses, such as employee compensation and rental and related expenses for office may increase as a result of higher inflation. We are not able to hedge our exposure to higher inflation in China.
C. Trend Information
Other than as disclosed elsewhere in this current report, we are not aware of any trends, uncertainties, demands, commitments or events for the six months ended June 30, 2026 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.
| 10 |
D. Critical Accounting Estimates
We have identified certain accounting estimates that are significant to the preparation of our historical financial information in accordance with the U.S. GAAP. Our management continually evaluates such estimates, assumptions, and judgments based on past experience and other factors, including industry practices and expectations of future events that we believe to be reasonable under the circumstances. There has not been any material deviation between our management’s estimates or assumptions and actual results, and we have not made any material changes to these estimates or assumptions for the six months ended June 30, 2025 and 2026. We do not expect any material changes in these estimates and assumptions in the foreseeable future.
Our significant accounting policies, which are important for an understanding of our financial position and results of operations, are set forth in detail in Note 3 to the unaudited condensed consolidated financial statements included in Exhibit 99.1 in this current report. Some of our accounting policies are considered to be critical as 1) they require us to apply estimates and assumptions as well as complex judgments relating to accounting items; and 2) the estimates and assumptions that we use and the judgments that we make in applying our accounting policies have a significant impact on our financial position and results of operations. Our critical accounting policies and practices include the following: (i) revenue recognition; (ii) accounts receivable; (iii) inventories, net; (iv) impairment of long-live assets; and (v) income tax. See Note 3 to our unaudited condensed consolidated financial statements for the disclosure of these accounting policies. Our critical accounting estimates include the following: (i) allowance for credit loss; (ii) reserve for inventories; (iii) impairment for long-lived assets; and (iv) valuation allowance for deferred tax assets.
Allowance for credit losses
Accounts receivables are stated at the historical carrying amount net of allowance for expected credit losses. We use the aging schedule method to calculate the expected credit losses and consider the reverent factors of the historical and future conditions of us to make reasonable estimation of the risk rate. Additionally, we make specific provision for credit losses based on any specific knowledge we have acquired that might indicate that an account is uncollectible. The facts and circumstances of each account may require us to use substantial judgment in assessing its collectability. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate. For the six months ended June 30, 2025 and 2026, we reversed allowance of credit losses of RMB122,811 and RMB893 for accounts receivable, respectively. For the six months ended June 30, 2025 and 2026, we provided allowance of credit losses of RMB2,220 and RMB45,000 (US$6,632) for other receivables, respectively, and reversed allowance of credit losses of RMB601,758 and RMB51,000 (US$7,516) for other receivables, respectively.
As of June 30, 2026, the total allowance for financial assets was RMB2,926,063 (US$431,249). If change in various factors constituting the estimate of loss rate result in 10 percentage point increase/decrease in overall estimate loss rate, it would result in an increase/decrease of RMB292,606 (US$43,125) for the allowance for total financial assets.
Reserve for inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. We periodically review our inventory and records write-downs to inventories for losses and damages that are identified. We provide a reserve for estimated inventory obsolescence or excess quantities on hand equal to the difference, if any, between the cost of the inventory and its estimated realizable value. For the six months ended June 30, 2025 and 2026, the write-down of inventories was RMB599,926 and RMB2,002,377 (US$295,114), respectively.
As of June 30,2026, the reserve for inventories was RMB2,002,377 (US$295,114). If change in various factors constituting the estimate for the inventory obsolescence or excess quantities result in 10 percentage point increase/decrease in reserve rate, it would result in an increase/decrease of RMB200,238 (US$29,511) for the reserve for inventories.
| 11 |
Impairment for long-lived assets
We evaluate long-lived assets, including property and equipment and operating lease right-of-use assets for impairment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability is measured by comparing the carrying amount of the asset or asset group to the related projected undiscounted cash flows expected to result from the use of the assets or asset group and their eventual disposition, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the carrying amount of the assets or assets group exceeds the expected undiscounted cash flows, we would recognize an impairment loss based on the fair value of the assets or assets group. We recorded impairment loss on property and equipment and operating lease right-of-use assets of RMB2,200 and RMB2,039,099 for the six months ended June 30, 2025. We recorded impairment loss on property and equipment and operating lease right-of-use assets of RMB79,538 (US$11,722) and RMB376,982 (US$55,560) for the six months ended June 30, 2026.
Changes to key assumptions can significantly affect these cash flow projections and the results of the impairment tests.
Valuation allowance for deferred tax assets
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. We follow FASB ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The valuation allowance was RMB105,750,054 (US$15,585,630) as of June 30, 2026.
The accounting standards clarify the accounting and disclosure requirements for uncertain tax positions and prescribe a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return. The accounting standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.
Changes to the estimates for the tax consequences in future years can significantly affect the valuation allowance for deferred tax assets.
Recently Issued Accounting Pronouncements
A list of recently issued accounting pronouncements that are relevant to us is included in Note 3 of our unaudited condensed consolidated financial statements included in Exhibit 99.1 in this current report.
| 12 |