{"url_path":"/sec/pom/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1877971/0001213900-26-056576-index.html","accession_number":"0001213900-26-056576","cik":"0001877971","ticker":"POM","issuer_name":"POMDOCTOR Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1877971/0001213900-26-056576-index.html","primary_entity_key":"0001877971","primary_entity_name":"POMDOCTOR Ltd"},"word_count":7531,"has_tables":true,"body_markdown":"ITEM 5.OPERATING\nAND FINANCIAL REVIEW AND PROSPECTS\n\n* *\n\n*You should read the following\ndiscussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion\ncontains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently\nanticipate as a result of many factors, including those we describe under “Item 3.D. Risk Factors” and elsewhere in this\nannual report.*\n\n \n\n5.A.\nOperating Results\n\n \n\n**Key Factors Affecting Our Results of Operations**\n\n** **\n\n**General Factors Affecting Our Results of Operations**\n\n \n\nOur results of operations\nand financial condition are affected by the general factors driving China’s Internet industry in China, which include China’s\noverall economic growth and level of per capital disposable income, growth of mobile Internet usage and penetration rate. They are also\naffected by factors driving healthcare industry and online healthcare services in China, such as aging population, rising prevalence\nof chronic diseases, growing health awareness, governmental policies and initiatives affecting online healthcare industry and market\nand social acceptance of online healthcare services. As a result, unfavorable changes in any of these general factors could materially\nand adversely affect demand for our services and our results of operations.\n\n** **\n\n92\n\n \n\n** **\n\n**Specific Factors Affecting Our Results of\nOperations**\n\n \n\nWhile our business is influenced\nby the general factors set forth above, our results of operations are also more directly affected by specific factors relating to our\nbusiness, including:\n\n** **\n\n**Our ability to increase user accounts and\ndrive additional purchase from our online pharmacy**\n\n \n\nOur results of operation and\nfuture growth will largely depend on our ability to attract new users, create new transacting patient accounts and drive additional purchases\nfrom existing user accounts. We expect to achieve continuing growth in our Internet hospital business in the foreseeable future as we\nattract more users to our platform.\n\n \n\nWe are committed to providing\nsuperior user experience and services. In particular, our platform offers a wide selection of pharmaceutical and healthcare products\nat competitive prices, and we also provide timely and reliable delivery, convenient payment options and superior customer services. We\noffer 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\ndrive additional purchases. In addition, we have utilized and will continue to utilize our big data technology to better understand our\nusers so that we could better serve their evolving needs and demands.\n\n** **\n\n**Our ability to further increase and leverage\nour scale of business**\n\n \n\nOur results of operations\nare directly affected by our ability to further increase and leverage our scale of business, particularly our online hospital business.\nAs our business further grows in scale, we expect to obtain more favorable terms from suppliers, including pricing terms, credit period\nand volume-based rebates. In addition, we aim to create value for our suppliers by providing an effective and transparent channel for\nselling large volumes of their products online and by offering them valuable insights on market demand, customer preferences and supply\nchain information based on our vast user base. We believe the value propositions will also help us deepen our relationships with, and\nobtain favorable terms from, suppliers and reduce our procurement costs.\n\n** **\n\n**Our ability to enhance the coverage of\nour product offering to strengthen our customer base**\n\n \n\nWe currently derive our revenues\nsubstantially from sales of pharmaceutical products to users under online hospital business, product sales to third-party pharmaceutical\nplatforms or companies, and retail sales of drugs in our offline pharmacies. Accordingly, the breadth of our coverage of pharmaceutical\nproducts can greatly affect our revenues. We are currently expanding our supplier base to further enhance the coverage of our product\noffering. As of December 31, 2025, we collaborated with 703 suppliers offering 46,912 SKUs.\n\n** **\n\n**Our ability to promote our brand effectively\nand efficiently**\n\n \n\nAs we operate in intensely competitive markets, we need to provide\nincentives to attract doctors and users, and conduct promotion and advertising activities to enhance our brand awareness. Our sales and\nmarketing expenses are a significant component of our operating expenses, and they primarily consist of (i) service fees to doctors,\n(ii) promotion and advertising expenses, and (iii) staff cost in relation to marketing and business development activities.\nIn 2023, 2024 and 2025, sales and marketing expenses accounted for 14.3%, 16.5% and 24.1% of our total revenues, respectively.\n\n \n\n93\n\n \n\n** **\n\n**Results of Operations**\n\n** **\n\nThe following table sets forth\nour results of operations with line items in absolute amounts and as a percentage of our net revenues for the periods indicated:\n\n \n\n  \nFor the Year Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nNet revenues \n 304,853  \n 100.0  \n 342,558  \n 100.0  \n 399,915  \n 57,187  \n 100.0 \n\nCost of revenues \n 266,131  \n 87.3  \n 294,864  \n 86.1  \n 347,633  \n 49,711  \n 86.9 \n\nGross profit \n 38,722  \n 12.7  \n 47,694  \n 13.9  \n 52,282  \n 7,476  \n 13.1 \n\n  \n    \n    \n    \n    \n    \n    \n   \n\nOperating expenses: \n    \n    \n    \n    \n    \n    \n   \n\nSales and marketing expenses \n 43,679  \n 14.3  \n 56,366  \n 16.5  \n 96,214  \n 13,758  \n 24.1 \n\nGeneral and administrative expenses \n 12,314  \n 4.0  \n 11,878  \n 3.5  \n 59,729  \n 8,541  \n 14.9 \n\nResearch and development expenses \n 3,371  \n 1.1  \n 3,002  \n 0.9  \n 12,865  \n 1,840  \n 3.2 \n\nImpairment loss on long-lived assets \n 1,107  \n 0.4  \n 2,239  \n 0.7  \n 2,109  \n 302  \n 0.5 \n\nImpairment loss on long-term investment \n 500  \n 0.2  \n —  \n —  \n —  \n —  \n — \n\nTotal operating expenses \n 60,971  \n 20.0  \n 73,485  \n 21.6  \n 170,917  \n 24,441  \n 42.7 \n\nLoss from operations \n (22,249) \n (7.3) \n (25,791) \n (7.7) \n (118,635) \n (16,965) \n (29.6)\n\nOther income (expenses): \n    \n    \n    \n    \n    \n    \n   \n\nOther income \n 164  \n 0.1  \n 1,239  \n 0.4  \n 496  \n 71  \n 0.1 \n\nOther expense \n (1,337) \n (0.4) \n (38) \n 0.0  \n (60) \n (9) \n 0.0 \n\nInterest expense \n (13,849) \n (4.5) \n (12,965) \n (3.8) \n (12,885) \n (1,843) \n (3.2)\n\nGovernment grants \n 322  \n 0.1  \n 190  \n 0.1  \n 152  \n 22  \n 0.0 \n\nTotal other expense, net \n (14,700) \n (4.7) \n (11,574) \n (3.3) \n (12,297) \n (1,758) \n (3.1)\n\nLoss before income tax \n (36,949) \n (12.0) \n (37,365) \n (11.0) \n (130,932) \n (18,723) \n (32.7)\n\nIncome tax expenses \n —  \n —  \n —  \n —  \n —  \n —  \n — \n\nNet loss \n (36,949) \n (12.0) \n (37,365) \n (11.0) \n (130,932) \n (18,723) \n (32.7)\n\n \n\n**Key Components of Results of Operations**\n\n** **\n\n**Net Revenues**\n\n \n\nNet revenues consist of revenues\nfrom (i) internet hospital, including revenues generated from online consultation and prescription renewal services, and online\npharmacy sales and (ii) pharmaceutical supply chain, including revenues generated from pharmacy retail sales and pharmacy wholesale.\nThe following table sets forth a breakdown of our net revenues by type in absolute amounts and as a percentage of our net revenues for\nthe periods indicated:\n\n \n\n  \nFor the Year Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nNet Revenues \n   \n   \n   \n   \n   \n   \n  \n\nRevenue from internet hospital \n 71,009  \n 23.3  \n 89,040  \n 26.0  \n 150,712  \n 21,552  \n 37.7 \n\nRevenue from pharmaceutical supply chain \n 233,844  \n 76.7  \n 253,518  \n 74.0  \n 249,203  \n 35,635  \n 62.3 \n\nTotal \n 304,853  \n 100.0  \n 342,558  \n 100.0  \n 399,915  \n 57,187  \n 100.0 \n\n** **\n\n94\n\n \n\n** **\n\n**Cost of revenues**\n\n \n\nThe following table sets forth\na breakdown of our cost of revenues by type in absolute amounts and as a percentage of our net revenues for the periods indicated:\n\n \n\n  \nFor the Year Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nCost of revenues \n   \n   \n   \n   \n   \n   \n  \n\nInternet hospital \n 35,453  \n 11.6  \n 50,987  \n 14.9  \n 101,430  \n 14,504  \n 25.3 \n\nPharmaceutical supply chain \n 230,678  \n 75.7  \n 243,877  \n 71.2  \n 246,203  \n 35,207  \n 61.6 \n\nTotal \n 266,131  \n 87.3  \n 294,864  \n 86.1  \n 347,633  \n 49,711  \n 86.9 \n\n** **\n\n**Gross Profit**\n\n \n\nThe following table sets forth\na breakdown of our gross profit by type in absolute amounts and as a percentage of the net revenues for each business segment, or gross\nmargin, for the periods indicated:\n\n \n\n  \nFor the Year Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nGross profit \n   \n   \n   \n   \n   \n   \n  \n\nInternet hospital \n 35,556  \n 50.1  \n 38,053  \n 42.7  \n 49,282  \n 7,048  \n 32.7 \n\nPharmaceutical supply chain \n 3,166  \n 1.4  \n 9,641  \n 3.8  \n 3,000  \n 428  \n 1.2 \n\nTotal \n 38,722  \n 12.7  \n 47,694  \n 13.9  \n 52,282  \n 7,476  \n 13.1 \n\n** **\n\n**Operating expenses**\n\n \n\nOur operating expenses consist\nof (i) sales and marketing expenses, (ii) general and administrative expenses, (iii) research and development expenses,\n(iv) impairment loss on long-lived assets, and (v) impairment loss on long-term investment. The following table sets forth\na breakdown of our operating costs and expenses both in absolute amounts and as a percentage of our net revenues for the periods indicated:\n\n \n\n  \nFor the Year Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \n%  \nRMB  \n%  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nOperating expenses: \n   \n   \n   \n   \n   \n   \n  \n\nSales and marketing expenses \n 43,679  \n 14.3  \n 56,366  \n 16.5  \n 96,214  \n 13,758  \n 24.1 \n\nGeneral and administrative expenses \n 12,314  \n 4.0  \n 11,878  \n 3.5  \n 59,729  \n 8,541  \n 14.9 \n\nResearch and development expenses \n 3,371  \n 1.1  \n 3,002  \n 0.9  \n 12,865  \n 1,840  \n 3.2 \n\nImpairment loss on long-lived assets \n 1,107  \n 0.4  \n 2,239  \n 0.7  \n 2,109  \n 302  \n 0.5 \n\nImpairment loss on long-term investment \n 500  \n 0.2  \n —  \n —  \n —  \n —  \n — \n\nTotal \n 60,971  \n 20.0  \n 73,485  \n 21.6  \n 170,917  \n 24,441  \n 42.7 \n\n* *\n\n95\n\n \n\n* *\n\n*Sales and marketing\nexpenses.*Sales and marketing expenses consist primarily of staff cost, service fees to doctors and advertising and promotion\ncosts. The service fees to doctors are marketing fees paid to doctors as (i) the doctors introduce patients to use our online\nplatform, and (ii) the doctors provide prescription renewal to the patients which would bring revenues of product sales to us\nand we would pay certain percentage of such product sales to the doctors.\n\n* *\n\n*General and administrative\nexpenses.*General and administrative expenses consist primarily of professional service fee paid to outsourced consultants for consultancy\nfor investor relationship management, staff cost, office rent, audit fee and expected credit losses for accounts receivable and other\nreceivables.\n\n* *\n\n*Research and development\nexpenses.*Research and development expenses consist primarily of staff cost and information service fees.\n\n* *\n\n*Impairment loss on long-lived\nassets.*Impairment of loss on long-lived assets represents primarily impairment loss on property and equipment\nand operating lease right-of-use assets.\n\n* *\n\n*Impairment loss on long-term\ninvestment.*Impairment of loss on long-term investment represents impairment loss on long-term investment\non Guangzhou Liwan Linghai Medical Outpatients Department.\n\n** **\n\n**Other income (expense), net**\n\n \n\nOther income consists primarily\nof government grants. Other expense mainly consists of interest expense, liquidated damages and donations.\n\n** **\n\n**Taxation**\n\n** **\n\n**Cayman Islands**\n\n \n\nThe Cayman Islands currently\nlevies no taxes on individuals or corporations based upon profits, income, gains, or appreciation, and there is no taxation in the nature\nof inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands\nexcept for stamp duties, which may be applicable on instruments executed in, or brought within the jurisdiction of, the Cayman Islands.\nIn addition, the Cayman Islands does not impose withholding tax on dividend payments.\n\n** **\n\n**Hong Kong**\n\n \n\nOn March 21, 2018, the\nHong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017, which introduces the two-tiered profits tax\nrates regime. The bill was signed into law on March 28, 2018 and was gazetted on the following day. Under the two-tiered profits\ntax 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\nwill be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be\ntaxed at a flat rate of 16.5%.\n\n \n\nAccordingly, the Hong Kong\nprofits tax of the qualifying group entity is calculated at 8.25% on the first HK$2 million of the estimated assessable profits\nand at 16.5% on the estimated assessable profits above HK$2 million.\n\n** **\n\n**PRC**\n\n \n\nUnder the PRC Enterprise Income\nTax Law effective from January 1, 2008 and its implementation rules, our PRC subsidiaries, are subject to the statutory rate of\n25%, subject to preferential tax treatments available to qualified enterprises in certain encouraged sectors of the economy.\n\n \n\nEnterprises that qualify as\n“high and new technology enterprises” are entitled to a preferential rate of 15% for three years. Guangzhou Qilekang\nDigital Health Medical Technology Co., Ltd. is certified as “high and new technology enterprises” under the relevant PRC\nlaws and regulations, and accordingly, is eligible for a preferential income tax rate of 15% during 2024 to 2026.\n\n \n\n96\n\n \n\n \n\nOur remaining PRC entities\nwere 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\nimplementation rules, and the Arrangement between Chinese mainland and the Hong Kong Special Administrative Region for the Avoidance\nof Double Taxation and Tax Evasion on Income, a 5% or 10% withholding tax is levied on dividends declared to foreign investors from China\neffective from January 1, 2008.\n\n \n\nFor qualified small and low-profit\nenterprises, from January 1, 2023 to December 31, 2027, 25% of the first RMB 3.0 million of the assessable profit before\ntax is subject to the tax rate of 20%. For the year ended December 31, 2024 and 2025, some of our PRC entities are qualified small\nand low-profit enterprises, and thus are eligible for the above preferential tax rates for small and low-profit enterprises.\n\n \n\nWe had no current or deferred income tax expenses or benefits for the years\nended December 31, 2023 and 2024. Current income tax and deferred income tax expenses was RMB375 (US$54) and nil for the year ended\nDecember 31, 2025, respectively.\n\n** **\n\n**Year Ended December 31, 2025 Compared to Year\nEnded December 31, 2024**\n\n** **\n\n**Net revenues**\n\n** **\n\n  \nFor the Year Ended December 31, \n\n  \n2024  \n2025  \nChanges \n\n  \nRMB  \nRMB  \nUS$  \nRMB  \nUS$  \n% \n\n  \n(in thousands, except for percentages) \n\nNet revenues \n   \n   \n   \n   \n   \n  \n\nInternet hospital \n 89,040  \n 150,712  \n 21,552  \n 61,672  \n 8,819  \n 69.3 \n\nPharmaceutical supply chain \n 253,518  \n 249,203  \n 35,635  \n (4,315) \n (617) \n (1.7)\n\nTotal \n 342,558  \n 399,915  \n 57,187  \n 57,357  \n 8,202  \n 16.7 \n\n \n\nOur net revenues increased\nby 16.7% from RMB342.6 million for the year ended December 31, 2024 to RMB399.9 million (US$57.2 million) for the year\nended December 31, 2025.\n\n* *\n\n*Net revenues from Internet\nhospital. *Net revenues from Internet hospital increased by 69.3% from RMB89.0 million for the year ended December\n31, 2024 to RMB150.7 million (US$21.6 million) for the year ended December 31, 2025, primarily attributable to the increase in revenues\ngenerated from online pharmacy sales. In 2025, we deepened cooperation with pharmacy manufacturers to sell their products through our\nInternet hospital platform, which led to that revenue from our online pharmacy sales increased from RMB87.8 million for the year ended\nDecember 31, 2024 to RMB149.2 million (US$21.3 million) for the year ended December 31, 2025. Revenue from our online consultation\nservice slightly increased from RMB1.2 million for the year ended December 31, 2024 to RMB1.5 million (US$0.2 million) for the year ended\nDecember 31, 2025.\n\n* *\n\n*Net revenues from pharmaceutical\nsupply chain. *Net revenues from pharmaceutical supply chain decreased by 1.7% from RMB253.5 million for the\nyear ended December 31, 2024 to RMB249.2 million (US$35.6 million) for the year ended December 31, 2025, primarily driven by the decrease\nin our pharmacy wholesale business from RMB246.9 million for the year ended December 31, 2024 to RMB243.2 million (US$34.8 million) for\nthe year ended December 31, 2025, as a result of our stable pharmaceutical supply chain business and reduction cooperation with the customers\nwhose credit terms were relatively longer than others. Because of high competition of retail pharmacy store, our two retail sales stores\nwere closed for the year ended December 31, 2025, which led to that the revenues from pharmacy retail sales also decreased from RMB6.6\nmillion for the year ended December 31, 2024 to RMB6.0million (US$0.9 million) for the year ended December 31, 2025.\n\n** **\n\n**Cost of revenues**\n\n \n\nOur cost of revenues increased\nby 17.9% from RMB294.9 million for the year ended December 31, 2024 to RMB347.6 million (US$49.7 million) for the year\nended December 31, 2025, primarily due to the increase in cost of revenues in online pharmacy sales from RMB51.0 million for the\nyear ended December 31, 2024 to RMB101.4 million (US$14.5 million) for the year ended December 31, 2025, which was in line\nwith the increase in our net revenues from Internet hospital. The cost of revenues in pharmaceutical supply chain increased from RMB243.9\nmillion for the year ended December 31, 2024 to RMB246.2 million (US$35.2 million) for the year ended December 31,\n2025.\n\n** **\n\n97\n\n \n\n** **\n\n**Gross profit and gross profit margin**\n\n \n\nAs a result of the foregoing,\nwe recorded gross profit of RMB47.7 million and RMB52.3 million (US$7.5 million) for the year ended December 31, 2024 and 2025, respectively.\nOur gross profit margin slightly decreased from 13.9% for the year ended December 31, 2024 to 13.1% for the year ended December 31, 2025.\nThe gross profit margin of our Internet hospital decreased from 42.7% for the year ended December 31, 2024 to 32.7% for the year ended\nDecember 31, 2025, mainly attributable to the increase in the online pharmacy sales of products with lower gross profit margin. The gross\nprofit margin of our pharmaceutical supply chain decreased from 3.8% for the year ended December 31, 2024 to 1.2% for the year ended\nDecember 31, 2025, which was primarily because the gross profit margin of our pharmacy wholesale customers newly obtained for the year\nended December 31, 2025 was lower than that of customers for the year ended December 31, 2024.\n\n \n\n**Operating expenses**\n\n* *\n\n*Sales and marketing\nexpenses.*Our sales and marketing expenses increased by 70.7% from RMB56.4 million\nfor the year ended December 31, 2024 to RMB96.2 million (US$13.8 million) for the year ended December 31, 2025, primarily due to the increase\nin professional service fee paid to outsourced consultants for promoting our brand and internet medical platform of approximately RMB36.5\nmillion (US$5.2 million) and service fees to doctors and staff costs which is in line of the increase in the revenues from Internet hospital\nbusiness.\n\n* *\n\n*General and\nadministrative expenses.*Our general and administrative expenses increased by 402.9% from RMB11.9 million for the year ended\nDecember 31, 2024 to RMB59.7 million (US$8.5 million) for the year ended December 31, 2025, primarily due to (i) increase in\nprofessional service fee paid to outsourced consultants for consultancy for investor relationship management of approximately\nRMB38.0 million (US$5.4 million) incurred in 2025; and (ii) the increase in consulting service fee and office fees of RMB6.5 million\n(US$0.9 million) paid during the process of initial public offering, primarily offset by the decrease in expected credit loss\nrecognized resulting from the efforts for collection of accounts receivable.\n\n \n\n*Research and development\nexpense.*Our research and development expenses increased by 328.5% from RMB3.0\nmillion for the year ended December 31, 2024 to RMB12.9 million (US$1.8 million) for the year ended December 31, 2025, primarily due to\na new research and development project, especially in artificial intelligence and healthcare-related AI applications, launched in 2025\nand related consulting service fee paid.\n\n* *\n\n*Impairment loss on long-lived\nassets.*We recorded impairment loss on property and equipment and operating lease right-of-use assets with\ndefinite lives of RMB2.2 million and RMB2.1 million (US$0.3 million) for the years ended December 31, 2024 and 2025, respectively.\n\n** **\n\n**Government grants**\n\n \n\nOur government grants decreased\nby 19.5%, from RMB189.5 thousands for the year ended December 31, 2024 to RMB152.6 thousands (US$21.8 thousands) for the year ended December\n31, 2025, primarily due to the decrease in grants from local government for specialized and sophisticated small and medium-sized enterprises\nthat produce new and unique products in 2025 compared with that in 2024.\n\n** **\n\n**Net loss**\n\n \n\nWe incurred income tax expenses nil and RMB375 (US$54) for the year\nended December 31, 2024 and 2025, respectively. As a result of the foregoing, our net loss was RMB37.4 million and RMB130.9 million\n(US$18.7 million) for the year ended December 31, 2024 and 2025, respectively.\n\n** **\n\n**Year Ended December 31, 2024 Compared\nto Year Ended December 31, 2023**\n\n** **\n\nSee “Management’s\nDiscussion and Analysis of Financial Condition and Results of Operations—Year Ended December 31, 2024 Compared to Year\nEnded December 31, 2023” beginning on page 93 of our prospectus filed with the Securities and Exchange Commission on\nOctober 9, 2025 pursuant to Rule 424(b)(4) under the Securities Act (Securities Act File No. 333-285771) incorporated\nby reference into this annual report.\n\n \n\n98\n\n \n\n \n\n5.B. Liquidity and Capital\nResources\n\n \n\n**Liquidity and Capital Resources**\n\n** **\n\nThe following table sets forth\na summary of our cash flows for the periods indicated:\n\n \n\n  \nFor the Year Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nRMB  \nRMB  \nRMB  \nUS$ \n\n  \n(in thousands) \n\nSummary Consolidated Cash Flow Data \n   \n   \n   \n  \n\nNet cash used in operating activities \n (45,796) \n (16,131) \n (148,480) \n (21,232)\n\nNet cash used in investing activities \n (112) \n (33) \n (1,608) \n (230)\n\nNet cash provided by financing activities \n 50,067  \n 17,016  \n 153,927  \n 22,011 \n\nEffect of exchange rate changes \n —  \n (5) \n (1,911) \n (273)\n\nNet increase in cash and cash equivalents and restricted cash \n 4,159  \n 847  \n 1,928  \n 276 \n\nCash and cash equivalents and restricted cash at the beginning of the year/period \n 2,646  \n 6,805  \n 7,652  \n 1,094 \n\nCash and cash equivalents and restricted cash at the end of the year/period \n 6,805  \n 7,652  \n 9,580  \n 1,370 \n\n \n\nTo date, we have financed\nour operating and investing activities primarily through cash generated by historical equity and debt financing activities. We obtained\nloans from our related parties at interest rate between nil to 20.00%. See “Item 7. Major Shareholders and Related Party Transactions”\nfor details. We also obtained loans from certain financial institutions. Additionally, we received net proceeds of RMB139.9 million (US$20.0\nmillion) from our initial public offering in October 2025. We had cash and cash equivalents and restricted cash of RMB6.8 million, RMB7.7\nmillion, RMB9.6 million (US$1.4 million) as of December 31, 2023, 2024 and 2025, respectively.\n\n \n\nWe incurred net losses of RMB36.9 million, RMB37.4 million, and RMB130.9\nmillion (US$18.7 million) for the years ended December 31, 2023, 2024 and 2025, respectively. Net cash used in operating activities was\nRMB45.8 million, RMB16.1 million and RMB148.5 million (US$21.2 million) for the years ended December 31, 2023, 2024 and 2025, respectively.\nWe had accumulated deficit of RMB2,120.1 million, RMB2,263.4 million and RMB2,476.0 million (US$354.1 million) as of December 31, 2023,\n2024 and 2025, respectively. The working capital deficit was RMB112.6 million, RMB141.6 million and RMB113.2 million (US$16.2 million)\nas of December 31, 2023, 2024 and 2025, respectively. Our cash balance and revenues generated are not currently sufficient and cannot\nbe projected to cover operating expenses and meet our obligations as they become due for the next twelve months from the date of\nissuance of these consolidated financial statements. These factors raise substantial doubt about our ability to continue as a going concern.\n\n \n\nOur liquidity is based on our ability to generate cash from operating\nactivities, debt financing and capital contributions from our shareholders to fund its general operations and capital expansion needs.\nOur ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which\nincludes generating revenue while controlling operating cost and expenses to generate positive operating cash flows and obtaining funds\nfrom outside sources of financing to generate positive financing cash flows. As of December 31, 2025, the balance of cash and cash equivalents\nwas RMB9.6 million (US$1.4 million), which cannot cover the current liabilities of RMB218.2 million (US$31.2 million). Currently, we are\nworking to improve our liquidity and capital sources mainly through borrowing from related parties and financial institutions.\n\n \n\nHowever, there can be no assurance\nthat these plans and arrangements will be sufficient to fund our ongoing capital expenditure, working capital, and other requirements.\nThe consolidated financial statements do not include any adjustments related to the recoverability or classification of asset and the\namounts or classification of liabilities that may result from the outcome of this uncertainty.\n\n \n\n99\n\n \n\n \n\nAs of December 31, 2025, substantially\nall of our cash and cash equivalents were held in China and all were denominated in Renminbi. As of December 31, 2025, substantially\nall of our cash and cash equivalents were held by our subsidiaries.\n\n \n\nSubstantially all of our net\nrevenues have been, and we expect will likely to continue to be, denominated in Renminbi. Under existing PRC foreign exchange regulations,\npayments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions,\ncan be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore,\nour PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine\nprocedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi\nis to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated\nin foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions\nin the future.\n\n** **\n\n**Operating activities**\n\n \n\nNet cash used in operating\nactivities primarily comprises our net loss and non-cash items, depreciation, change in expected credit losses, allowance, impairment,\nand adjusted by changes in working capital.\n\n \n\nFor the year ended December 31, 2025, net cash used in operating\nactivities was RMB148.5 million (US$21.2 million), which was primarily attributable to our net loss of RMB130.9 million (US$18.7 million),\nas adjusted by the reconciliation of net loss to net cash used in operating activities, which primarily comprised of changes in operating\nassets and liabilities, which was primarily the result of (i) share base payment of RMB16.4 million (US$2.3 million); (ii) impairment\nloss on long-lived assets of RMB2.1 million (US$0.3 million); (iii) allowance for inventory of RMB1.9 million (US$0.3 million); (iv) an\nincrease in accounts payable of RMB19.5 million (US$2.8 million), which was primarily due to newly cooperation with three big suppliers\nfor pharmaceutical supply chain business in 2025; (v) an increase in amounts due to related parties of RMB9.1 million (US$1.3 million),\nprimarily as a resulting of an increase of interest payable for the loans from related parties; (vi) an increase in accrued liabilities\nof RMB4.9 million (US$0.7 million), which was primarily due to the increase in the service fee payable to the doctors; (vii) a decrease\nof amounts due from related parties of RMB2.0 million (US$0.3 million); and (viii) an increase of other payables of RMB1.3 million (US$0.2\nmillion); offset by (a) an increase in other receivables of RMB57.9 million (US$8.3 million), which was primarily due to the deposits\npaid to public relation and marketing advisory agreements in 2025; (b) an increase in accounts receivable of RMB10.1 million (US$1.4 million),\nprimarily because we newly obtained two big customers for pharmacy wholesale business in 2025; (c) an increase in accounts receivable-a\nrelated party of RMB0.4 million (US$0.1 million); (d) an increase in inventories of RMB1.0 million (US$0.1 million); (e) a decrease in\noperating lease liabilities of RMB2.3 million (US$0.3 million); (f) a decrease in refund liability of RMB2.1 million (US$0.3 million);\nand (g) a decrease in salary and welfare payable of RMB0.9 million (US$0.1 million).\n\n \n\nFor the year ended December 31,\n2024, net cash used in operating activities was RMB16.1 million, which was primarily attributable to our net loss of RMB37.4 million,\nas adjusted by the reconciliation of net loss to net cash used in operating activities, which primarily comprised (i) changes in\nexpected credit losses of RMB0.8 million; (ii) impairment losses of long-lived assets of RMB2.2 million; (iii) written-down\nof inventories for RMB0.5 million; and (iv) changes in operating assets and liabilities, which was primarily the result of (a) a\ndecrease in accounts receivable of RMB20.3 million, primarily because we invested resources and vigorously promoted the pharmaceutical\nsupply chain business in 2024, and the credit term we granted to these supply chain customers was comparatively shorter; (b) a decrease\nof inventory of RMB3.0 million as a result of accelerating the inventory turnover in 2024; (c) a decrease in advances to suppliers\nof RMB2.0 million; (d) an increase in other payables of RMB3.4 million; (e) an increase in amount due to related parties of\nRMB7.1 million; (f) an increase in amount due from related parties of RMB3.2 million; (g) a decrease in operating\nlease liabilities of RMB1.1 million; (h) an increase in refund liability of RMB2.1 million; and (i) a decrease in accounts\npayable of RMB16.3 million mainly due to shorter credit terms provided by suppliers in 2024.\n\n \n\nFor the year ended December 31,\n2023, net cash used in operating activities was RMB45.8 million, which was primarily attributable to our net loss of RMB36.9 million,\nas adjusted by the reconciliation of net loss to net cash used in operating activities, which primarily comprised (i) changes in\nexpected credit losses of RMB1.5 million; (ii) impairment losses of long-lived assets of RMB1.1 million; and (iii) changes\nin operating assets and liabilities, which was primarily the result of (a) an increase in accounts receivable of RMB1.3 million,\nprimarily because we invested resources and vigorously promoted the pharmaceutical supply chain business in 2023, and the credit term\nwe granted to these supply chain customer was comparatively longer, (b) an increase of inventory of RMB5.0 million as the result\nof increase in revenue from pharmaceuticals supply, we need to maintain a higher level of inventories for the anticipated sales; (c)\nan increase in other receivables of RMB4.0 million; (d) a decrease in accounts payable of RMB1.6 million mainly due to shorter\ncredit terms provided by suppliers in 2023; (e) an increase in amount due to related parties of RMB8.9 million, (f) a\ndecrease in advance from customers of RMB1.5 million, (g) a decrease in salary and welfare payable of RMB3.4 million;\n(h) a decrease in other payables of RMB3.0 million; and (i) a decrease in operating lease liability of RMB2.0 million.\n\n** **\n\n100\n\n \n\n** **\n\n**Investing activities**\n\n \n\nFor the year ended December 31,\n2025, net cash used in investing activities was RMB1.6 million (US$0.2 million), which was entirely attributable to the payment for a\nmotor vehicle of RMB0.9 million (US$0.1 million) and the cash paid for a long-term investment of RMB0.6 million (US$0.09 million).\n\n \n\nFor the year ended December 31,\n2024, net cash used in investing activities was RMB33.4 thousands, which was attributable to the payment for purchasing office equipment\nand furniture.\n\n \n\nFor the year ended December 31,\n2023, net cash used in investing activities was RMB0.1 million, which was entirely attributable to the payment for purchasing an\nautomobile.\n\n** **\n\n**Financing activities**\n\n \n\nFor\nthe year ended December 31, 2025, net cash provided by financing activities was RMB153.9 million (US$22.0 million), which primarily\ncomprised (i) net proceeds from our initial public offering of RMB139.9 million (US$20.0 million); (ii) proceeds from short-term bank\nloans of RMB56.0 million (US$8.0 million), representing loans from Industrial Bank Co, Ltd., China Guangfa Bank, Agricultural Bank of\nChina, Bank of Guangzhou, Industrial and Commercial Bank of China, Bank of Communications and China CITIC Bank;\n(iii) proceeds from related parties of RMB24.8 million (US$3.5 million), representing loans from related parties; (iv) proceeds from\nlong-term bank loans of RMB7.0 million (US$1.0 million), representing loans from Agricultural Bank of China and Bank of Jiujiang; and\n(v) proceeds from third parties of RMB3.0 million (US$0.4 million), representing loans from third parties; partially offset by (a) repayment\nof short-term bank loans of RMB38.0 million (US$5.4 million); (b) repayment to related parties of RMB23.7 million (US$3.4 million); (c)\nrepayment to third parties of RMB13.9 million (US$2.0 million); and (d) repayment of long-term bank loans of RMB1.0 million (US$0.1 million).\n\n \n\nFor the year ended December 31,\n2024, net cash provided by financing activities was RMB17.0 million, which primarily comprised (i) loans from related parties\nof RMB15.3 million; (ii) proceeds from short-term bank loans of RMB44.1 million, representing loans from Shanghai Pudong\nDevelopment Bank, Industrial Bank Co., Ltd., Zhejiang E-Commerce Bank Co., Ltd., Industrial and Commercial Bank of China and China CITIC\nBank; (iii) proceeds from a long-term bank loan of RMB6.0 million, representing loan from China Resource Bank; and (iv) loans\nfrom third parties of RMB19.9 million; partially offset by (a) repayment of short-term bank loans of RMB31.1 million;\n(b) repayment to long-term bank loans of RMB0.8 million; (c) repayment of loans from related parties of RMB25.0 million;\nand (d) repayment of loans from third parties of RMB10.8 million.\n\n \n\nFor the year ended December 31,\n2023, net cash provided by financing activities was RMB50.1 million, which primarily comprised (i) loans from related parties\nof RMB104.4 million; (ii) proceeds from short-term bank loans of RMB28.0 million, representing loans from Agricultural\nBank of China, Industrial Bank Co, and Industrial and Commercial Bank of China and China CITIC Bank, (iii) proceeds from long-term\nbank loan of RMB3.0 million, representing loan from Jiujiang Bank, and (iv) proceeds from third parties of RMB1.1 million,\nrepresenting loans from third parties; partially offset by (i) repayment to related parties of RMB64.5 million, (ii) repayment\nto third parties of RMB3.6 million, (iii) repayment of short-term bank loans of RMB15.7 million, and (iv) payment\nfor deferred offering costs of RMB2.3 million.\n\n** **\n\n101\n\n \n\n** **\n\n**Contractual Obligations**\n\n** **\n\nThe following table sets forth\nour contractual obligations as of December 31, 2025.\n\n \n\nPayment due for the year ended December 31, \n2026  \n2027  \n2028  \n2029  \n2030  \nTotal\nfuture\nloan\n\npayments  \nImputed\ninterest  \nTotal \n\nLoans\nfrom bank and other financial institutions(1) \n 70,283  \n 5,865  \n 5,676  \n —  \n —  \n 81,824  \n (4,124) \n 77,700 \n\nLoans from third parties \n 1,003  \n 2,192  \n —  \n —  \n —  \n 3,195  \n (384) \n 2,811 \n\nLoans\nfrom related parties(2) \n 22,771  \n 6,632  \n 6,632  \n 6,632  \n 363,023  \n 405,690  \n (34,101) \n 371,589 \n\nOperating lease commitments \n 1,625  \n 1,175  \n 149  \n —  \n —  \n 2,949  \n (109) \n 2,840 \n\nTotal \n 95,682  \n 15,864  \n 12,457  \n 6,632  \n 363,023  \n 493,658  \n (38,718) \n 454,940 \n\n \n\n \n\nNotes:\n\n \n\n(1)The long-term loan (including current portion) outstanding\nas of December 31, 2025 bore a weighted average interest rate of 4.36% per annum.\n\n  \n\n(2)The majority of this balance is related to payable\narising from cooperation with Focus Media. On August 10, 2021, we entered into tripartite\nagreements with Focus Media and Aixiangbao, a wholly-owned entity by Mr. Zhenyang Shi,\npursuant to which, we are released from being the obligor to Focus Media under the liability\nbut the obligor to Aixiangbao as Aixiangbao assumed the obligation on behalf of us in the\namount of RMB221.0 million, and we agreed to repay such debt to Aixiangbao. On September 10,\n2021, we reached an agreement with Aixiangbao, pursuant to which we will not be required\nto repay the liability for five years and after then Aixiangbao can only require us\nto repay the liability in a non-cash method, but we still have an obligation to repay such\noutstanding debt, with no interest bearing. In 2025, the agreement was renewed with maturity date of August 10,\n2030.\n\n \n\nOther than as shown above,\nwe did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2025.\n\n** **\n\n**Off-Balance Sheet Commitments and Arrangements**\n\n \n\nWe have not entered into any\nfinancial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered\ninto any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in\nour consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated\nentity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated\nentity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development\nservices with us.\n\n** **\n\n**Going Concern**\n\n \n\nAs discussed in Liquidity\nand Capital Resources, our cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating\nexpenses and meet our obligations as they become due for the next twelve months after the date that the consolidated financial statements\nwere available to be issued. These factors raise substantial doubt about our ability to continue as a going concern.\n\n \n\nManagement’s plan to alleviate the substantial doubt about our\nability to continue as a going concern include as follows: (i) on February 6, 2026, we obtained a loan in amount of RMB4.0 million\nfrom Bank of Communications, which was required to be repaid on September 1, 2026 and guaranteed by Zhenyang Shi, Li Xu and Qilekang\nModern Logistics. The interest rate is 3.2% per annum; (ii) on March 13, 2026, we obtained a loan in amount of RMB2.4 million from Bank\nof Jiujiang which was required to be repaid on March 13, 2029 and guaranteed by Zhenyang Shi and Qilekang Digital Health. The interest\nrate is 4.2% per annum; (iii) on February 5, 2026, the Group obtained a loan in amount of RMB20.0 million from Industrial Bank which was\nrequired to be repaid on February 4, 2027 and guaranteed by Zhenyang Shi, Li Xu, Wanmei Shi, Qilekang Digital Health and Qilekang Modern\nLogistics. The interest rate is 3.3% per annum; (iv) we obtained loans from third parties in amount of RMB0.5 million which was required\nto be repaid on December 31, 2026 and interest rate of 18% per annum; (v) the Group obtained loans from a related party in amount of RMB7.2 million\ndue on demand without interest bearing; and (vi) we are attempting to improve our business profitability, our ability to generate\nsufficient cash flow from our operations to meet our operating needs on a timely basis, obtain additional working capital funds through\ndebt and equity financings in order to meet its anticipated cash requirements. However, there can be no assurance that these plans and\narrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements.\n\n \n\nWe obtained loans from our\nrelated parties at interest rates between 0.00% to 20.00%. See “Item 7. Major Shareholders and Related Party Transactions”\nfor details. As of December 31, 2025, the amounts of loans from related parties, current portion, were RMB15.2 million (US$2.2 million),\nand the amounts of loans from related parties, noncurrent portion, were RMB356.4 million (US$51.0 million). Given that we will\ntake measures as stated in the above management plan, the cash flows are sufficient to cover the costs of the loans from related parties\nand such financing would not impact on our ability to continue as a going concern.\n\n** **\n\n102\n\n \n\n** **\n\n**Inflation**\n\n \n\nTo date, inflation in China\nhas not materially affected our results of operations. According to the PRC National Bureau of Statistics, the year-over-year percentage\nchanges in the consumer price index for December 2023, 2024 and 2025 were a decrease of 0.3%, an increase of 0.1% and an increase\nof 0.8%, respectively. Although we have not been materially affected by inflation in the past, we may be affected if China experiences\nhigher rates of inflation in the future. For example, certain operating expenses, such as employee compensation and rental and related\nexpenses for office may increase as a result of higher inflation. We are not able to hedge our exposure to higher inflation in China.\n\n \n\n5.C. Research and Development, Patents\nand Licenses, etc.\n\n \n\nSee “Item 4. Information\non The Company—4.B. Business Overview—Technology” and “Item 4. Information on the Company—4.B. Business\nOverview—Intellectual Property.”\n\n \n\n5.D. Trend Information\n\n \n\nOther than as disclosed elsewhere\nin this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the years ended December 31,\n2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital\nresources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or\nfinancial condition.\n\n \n\n5.E. Critical Accounting Estimates\n\n \n\nWe have identified certain\naccounting estimates that are significant to the preparation of our historical financial information in accordance with the U.S. GAAP. Our\nmanagement continually evaluates such estimates, assumptions, and judgments based on past experience and other factors, including industry\npractices and expectations of future events that we believe to be reasonable under the circumstances. There has not been any material\ndeviation between our management’s estimates or assumptions and actual results, and we have not made any material changes to these\nestimates or assumptions for the years ended December 31, 2023, 2024 and 2025. We do not expect any material changes in these\nestimates and assumptions in the foreseeable future.\n\n \n\nOur significant accounting\npolicies, which are important for an understanding of our financial position and results of operations, are set forth in detail in Note 3\nto the consolidated financial statements included elsewhere in this annual report. Some of our accounting policies are considered to\nbe critical as 1) they require us to apply estimates and assumptions as well as complex judgments relating to accounting items; and 2)\nthe estimates and assumptions that we use and the judgments that we make in applying our accounting policies have a significant impact\non our financial position and results of operations. Our critical accounting policies and practices include the following: (i) revenue\nrecognition; (ii) accounts receivable; (iii) inventories, net; (iv) impairment of long-live assets; and (v) income\ntax. See Note 3 to our consolidated financial statements for the disclosure of these accounting policies. Our critical accounting\nestimates include the following: (i) allowance for credit loss; (ii) reserve for inventories; (iii) impairment for long-lived\nassets; and (iv) valuation allowance for deferred tax assets.\n\n** **\n\n**Allowance for credit losses**\n\n \n\nAccounts receivables are stated\nat the historical carrying amount net of allowance for expected credit losses. We use the loss rate method to calculate the expected\ncredit losses and consider the reverent factors of the historical and future conditions of us to make reasonable estimation of the risk\nrate. Additionally, we make specific provision for credit losses based on any specific knowledge we have acquired that might indicate\nthat an account is uncollectible. The facts and circumstances of each account may require us to use substantial judgment in assessing\nits collectability. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding\nadjustment is made to the allowance account as a change in estimate. For the years ended December 31, 2023, 2024 and 2025,\nwe provided allowance of credit losses of RMB903,326, reversed allowance of credit losses of RMB40,335 and provided RMB33,513 (US$4,792)\nfor accounts receivable, respectively. For the years ended December 31, 2023, 2024 and 2025, we provided allowance of credit losses of\nRMB624,980, RMB1,036,603 and RMB377,263 (US$53,948) for other receivables, respectively, and reversed allowance of credit losses of RMB39,847,\nRMB154,585 and RMB651,758 (US$93,200) for other receivables, respectively.\n\n \n\nAs of December 31, 2025, the\ntotal allowance for financial assets was RMB2,932,956 (US$419,406). If change in various factors constituting the estimate of loss rate\nresult in 10 percentage point increase/decrease in overall estimate loss rate, it would result in an increase/decrease of RMB293,296\n(US$41,941) for the allowance for total financial assets.\n\n** **\n\n103\n\n \n\n** **\n\n**Reserve for inventories**\n\n \n\nInventories are stated at the lower of cost or net realizable value.\nCost is determined using the weighted average method. We periodically review our inventory and records write-downs to inventories for\nlosses and damages that are identified. We provide a reserve for estimated inventory obsolescence or excess quantities on hand equal to\nthe difference, if any, between the cost of the inventory and its estimated realizable value. For the years ended December 31, 2023, 2024\nand 2025, the write-down of inventories was RMB503,079, RMB494,459 and RMB1,883,635 (US$269,355), respectively.\n\n \n\nAs of December 31, 2025, the\nreserve for inventories was and RMB1,883,635 (US$269,355). If change in various factors constituting the estimate for the inventory obsolescence\nor excess quantities result in 10 percentage point increase/decrease in reserve rate, it would result in an increase/decrease of RMB188,364\n(US$26,936) for the reserve for inventories.\n\n** **\n\n**Impairment for long-lived assets**\n\n \n\nWe evaluate long-lived\nassets, including property and equipment and operating lease right-of-use assets for impairment, whenever events or changes in\ncircumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability is\nmeasured by comparing the carrying amount of the asset or asset group to the related projected undiscounted cash flows expected to\nresult from the use of the assets or asset group and their eventual disposition, considering a number of factors including past\noperating results, budgets, economic projections, market trends and product development cycles. If the carrying amount of the assets\nor assets group exceeds the expected undiscounted cash flows, we would recognize an impairment loss based on the fair value of the\nassets or assets group. We recorded impairment loss on property and equipment and operating lease right-of-use assets of RMB73,240\n(US$10,473) and RMB2,035,277 (US$291,041) for the year ended December 31, 2025.\n\n \n\nChanges to key assumptions\ncan significantly affect these cash flow projections and the results of the impairment tests.\n\n** **\n\n**Valuation allowance for deferred tax assets**\n\n \n\nCurrent income taxes are provided on the basis of net income for financial\nreporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance\nwith the regulations of the relevant tax jurisdictions. We follow FASB ASC Topic 740, “Income Taxes,” which requires\nthe recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the\nfinancial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years\nof differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted\ntax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation\nallowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The valuation allowance\nwas RMB94,139,807 (US$13,461,813) as of December 31, 2025.\n\n \n\nThe accounting standards clarify\nthe accounting and disclosure requirements for uncertain tax positions and prescribe a recognition threshold and measurement attribute\nfor recognition and measurement of a tax position taken or expected to be taken in a tax return. The accounting standards also provide\nguidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.\n\n \n\nChanges to the estimates for\nthe tax consequences in future years can significantly affect the valuation allowance for deferred tax assets.\n\n** **\n\n**Recently Issued Accounting Pronouncements**\n\n \n\nA list of recently issued\naccounting pronouncements that are relevant to us is included in Note 3 of our consolidated financial statements included elsewhere in\nthis annual report.\n\n \n\n104"}