Summary of significant accounting policies

2.2

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIEs and VIEs’ subsidiaries. All inter-company transactions and balances have been eliminated.

The Company, through its wholly-owned foreign invested subsidiary, WFOE, in the PRC, entered into a series of contractual arrangements (“VIE agreements”) with Wuhan Douyu and Wuhan Ouyue (collectively known as “the VIEs”) and their respective shareholders that enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of the VIEs, and (2) absorb losses or receive benefits from the VIEs that could potentially be significant to the VIEs.

Applicable PRC laws and regulations currently limit foreign ownership of companies that provide internet valued-added businesses. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are not eligible to engage in provisions of internet content or online services. The Group therefore operates its business, primarily through the VIEs and the subsidiaries of the VIEs.

If the PRC government finds that the Company’s contractual arrangements do not comply with its restrictions on foreign investment in the value-added telecommunication services, or if the PRC government otherwise finds that the Company’s or the VIEs are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate its business, the relevant PRC regulatory authorities, including the MIIT and SAMR, would have discretion in dealing with such violations or failures in accordance with applicable laws, including, without limitation:

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revoking the business licenses and/or operating licenses of such entities;

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discontinuing or placing restrictions or onerous conditions on the Company’s operation through any transactions between our PRC subsidiaries and the VIEs;

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imposing fines, confiscating the income from the Company’s PRC subsidiaries or the VIEs, or imposing other requirements with which the Company or the VIEs may not be able to comply; or

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requiring the Company to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate or derive economic interests from the VIEs.

Any of these actions could cause significant disruptions to the Company’s business operations and severely damage the Company’s reputation, which would in turn materially and adversely affect the Company’s business, financial condition and results of operations.

The following financial statement amounts and balances of the VIEs, were included in the accompanying consolidated financial statements after elimination of intercompany balances and transactions among the Company, its subsidiaries and its VIEs:


	As of December 31,
	2024	2025
	RMB	RMB
ASSETS
Cash and cash equivalents	339,495,145	469,616,029
Restricted cash	83,387	34,931
Short-term bank deposits	80,000,000	196,493,754
Accounts receivable, net	48,706,963	76,835,525
Prepayments	26,353,088	15,565,395
Amounts due from related parties	74,116,192	91,548,882
Other current assets	175,835,175	169,919,175
Property and equipment, net	3,088,802	2,626,675
Long-term bank deposits	160,000,000	—
Intangible assets, net	59,542,225	32,278,768
Right-of-use assets	12,891,088	3,341,437
Investments	193,677,231	195,447,619
Other non-current assets	63,013,382	56,286,173
Total Assets	1,236,802,678	1,309,994,363
LIABILITIES
Accounts payable	436,642,460	498,282,741
Advances from customers	4,412,848	2,277,588
Deferred revenue	251,591,800	236,124,062
Accrued expenses and other current liabilities	117,124,157	111,867,960
Amounts due to related parties	220,194,409	111,302,560
Lease liabilities	12,649,480	3,165,386
Total Liabilities	1,042,615,154	963,020,297


	Years ended December 31,
	2023	2024	2025
	RMB	RMB	RMB
Net revenue	5,459,630,803	4,234,608,729	3,809,355,931
Net (loss) income	(49,971,489)	(266,581,526)	185,239,077


	Years ended December 31,
	2023	2024	2025
	RMB	RMB	RMB
Net cash (used in) provided by operating activities	(180,359,213)	(385,060,569)	85,673,058
Net cash provided by investing activities	55,516,731	380,148,093	47,771,310
Net cash used in financing activities	(965)	—	—

The WFOE is entitled to receive substantially all of the net income and transfer a majority of the economic benefits in the form of service fees from the VIEs. The inter-company service fees charged by WFOE were RMB354,509,123, RMB198,006,640 and RMB149,512,987 for the years ended December 31, 2023, 2024 and 2025, respectively. The amounts due to WFOE were RMB1,691,181,872 and RMB1,748,790,690 as of December 31, 2024 and 2025, respectively. These inter-company transactions and balances were eliminated in the consolidated financial statements.

The VIEs contributed approximately 99%, 99%, and 99% of the Group’s consolidated revenue for the years ended December 31, 2023, 2024 and 2025, respectively. As of December 31, 2024 and 2025, the VIEs accounted for an aggregate of 23% and 42% of the consolidated total assets and 84% and 85% of the consolidated total liabilities.

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs were ever to need financial support, the Group may provide financial support to the VIEs through loans to the shareholders of the VIEs or entrustment loans to the VIEs.

The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its registered capital, to the Company in the form of loans and advances or cash dividends.

Fair value measurements

2.4

Fair value measurements

The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

Level 1 — Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Group’s short-term financial instruments include cash and cash equivalents, short-term bank deposits, receivables, payables, other current assets, amounts due from related parties, other current liabilities and amounts due to related parties. The carrying amounts of these short-term financial instruments approximate their fair values due to the short-term maturity of these instruments. The carrying amounts of the long-term bank deposits approximate their fair values as the interest rates are comparable to the prevailing interest rates in the market. The fair value of equity investments without readily determinable fair values cannot be reasonably estimated without undue costs.

When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates. The following table presents the Group’s assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.


			Quoted Prices in Active	Significant Other
			Markets for Identical	Observable
As of December 31,	Description	Fair Value	Assets (Level 1)	Inputs (Level 2)
		RMB	RMB	RMB
2024	Investment in equity investees	76,929,667	76,929,667	—
2025	Investment in equity investees	11,062,659	11,062,659	—

Certain assets have been measured at fair value on a nonrecurring basis, using significant unobservable inputs (Level 3). The following table presents the nonrecurring losses recognized for the years ended December 31, 2024 and 2025, respectively, based on the relevant assets classification:

As of December 31, 2024


Description		Fair Value		Total Losses
		RMB		RMB
Equity method investments		—		7,085,156
Equity investments without readily determinable fair value		—		19,689,373
Intangible assets, net – agency contract rights		—		61,679,245
Other non-current assets - prepayments		—		13,793,447
Total		—		102,247,221

As of December 31, 2025


Description	Fair Value	Total Losses
	RMB	RMB
Equity investments without readily determinable fair value	—	2,114,370
Total	—	2,114,370

Investments were primarily valued using the market approach (i.e. market multiples derived from a set of comparable companies). The fair value of intangible assets, net and other non - current assets are determined by using discounted cashflow method associated with the underlying assets, such as current economic condition, management forecasts, etc.

Convenience Translation into United States Dollars

2.6

Convenience Translation into United States Dollars

Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive income (loss) and consolidated statements of cash flows from RMB into United States dollars are solely for the convenience of the readers and were calculated at the rate of US$1.00 = RMB6.9931 on December 31, 2025 as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2025, or at any other rate.

Short-term and long-term bank deposits

2.8

Short-term and long-term bank deposits

The Group holds fixed term certificates of deposit. Certificate of deposits with original maturities between three months to one year are classified as short-term bank deposits and fixed term certificates of deposit with maturities beyond one year are classified as long-term bank deposits.

Property and equipment, net

2.10

Property and equipment, net

Property and equipment are recorded at cost less accumulated depreciation and impairment. Depreciation is calculated on a straight-line basis over the following estimated useful lives:


Computer and transmission equipment		3 years
Leasehold improvements		Over the shorter of the lease term or expected useful lives
Furniture and office equipment		5 years
Motor vehicles		5 years

Gains and losses from disposals of property and equipment are included in other operating income or expense in the consolidated statements of comprehensive income (loss).

Goodwill

2.12

Goodwill

Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. The Group’s annual testing date is December 31.

In accordance with ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) issued by the Financial Accounting Standards Board (“FASB”) guidance on testing of goodwill for impairment, the Group first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of each reporting unit exceeds its fair value, an impairment loss equal to the difference between the fair value of the reporting unit and its carrying amount will be recorded.

Long-term investments

2.14

Long-term investments

Equity method investments

The Group accounts for its equity investments over which it has significant influence but does not own a majority equity interest or otherwise control using the equity method. The Group adjusts the carrying amount of the investments by recognizing investment income or loss for share of the earnings or loss of the investee after the date of investment, as well as any impairment loss.

The Group assesses its equity method investments for impairment by considering factors including, but not limited to, financial performance and operating performance of the entities, including current earnings and operating cash flows, and other entity-specific information. The fair value determination, particularly for investments in privately-held entities, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions could affect the calculation of the fair value of the investments and determination of whether any identified impairment is other-than-temporary. If the decline in the fair value is deemed to be other-than-temporary, the carrying value of the equity method investment is written down to fair value. The Group recorded impairment loss of RMB29,123,511, RMB7,085,156 and RMB nil, respectively, in share of loss in equity method investments for the years ended December 31, 2023, 2024 and 2025, respectively.

Investment in equity investees

The Group measures its investment in equity investees that have readily determinable fair values at fair value, with gains and losses from fair value changes recognized as other (expenses) income, net in the consolidated statements of comprehensive income (loss). The Group recognized fair value changes on investments based on observable stock trading prices in active markets of RMB nil, RMB40,628,028 and RMB(65,200,488) for the years ended December 31, 2023, 2024 and 2025, respectively.

Equity securities without readily determinable fair value

The Group’s investment in equity securities comprise of investment in privately-held companies.

The Group adopted ASC Topic 321, Investments—Equity Securities (“ASC 321”) and elected to measure these investments at cost minus impairment, if any, adjusted up or down for observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any adjustment to the carrying amount is recorded in other expense, net. The Group also makes qualitative assessment at each reporting period and if the assessment indicates that the fair value of the investment is less than the carrying value, the investment in equity securities will be written down to its fair value, with the difference between the fair value of the investment and its carrying amount recorded as impairment loss.

For years ended December 31, 2023, 2024 and 2025, the Group recorded impairment loss of RMB58,005,769, RMB19,689,373 and RMB2,114,370 in other (expenses) income, net, respectively.

Cost of revenues

2.16

Cost of revenues

Amounts recorded as cost of revenues relate to direct expenses incurred in order to generate revenue. Such costs are recorded as incurred. Cost of revenues consists primarily of (i) revenue sharing fees paid to live streamers and talent agencies determined based on a percentage of revenue from sale of virtual items, (ii) content costs, (iii) bandwidth, (iv) salaries and welfare, (v) depreciation and amortization expense for servers and other equipment, and intangibles directly related to operating the platform, and (vi) payment handling costs.

Sales and marketing expenses and General and administrative expenses

2.18

Sales and marketing expenses

Sales and marketing expenses consist primarily of (i) advertising and market promotion expenses, and (ii) salaries and welfare for sales and marketing personnel.

2.19

General and administrative expenses

General and administrative expenses consist primarily of (i) professional service fees, and (ii) salaries and welfare for general and administrative personnel and (iii) allowance for credit loss.

Segment information

2.21

Segment information

The Group operates as one operating segment and reportable segment. The Group’s chief operating decision maker (“CODM”) is the Co-CEO, who reviews financial information presented on a consolidated basis.

The measures used by CODM to assess performance and make operating decisions are the net revenues and net income (loss) as reported on the Group’s consolidated statements of comprehensive income (loss). The CODM uses performance measures to monitor operating forecast versus actual results and determine how to allocate resources of the Group as a whole. Further, the CODM reviews and utilizes cost of revenues to manage the Group’s operation.

As of December 31, 2024 and 2025, the majority of the long-lived assets of the Company are located in the PRC, and therefore no geographical segments are presented.

Government subsidies

2.23

Government subsidies

Government subsidies are primarily referred to the amounts received from various levels of local governments from time to time which are granted for general corporate purposes and to support its ongoing operations in the region. The grants are determined at the discretion of the relevant government authority and there are no restrictions on their use. The government subsidies are recorded in other operating income (expenses), net, in the period the cash is received. Government subsidies recognized for the years ended December 31, 2023, 2024 and 2025 were RMB29,733,380, RMB5,234,088 and RMB2,287,338, respectively.

Recently issued accounting pronouncements

2.25

Recently issued accounting pronouncements

Recent accounting pronouncements adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)- Improvements to Income Tax Disclosures. ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Group’s adoption of this standard did not have a material impact on its consolidated financial statements.

Recent accounting pronouncements not yet adopted

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 requires disaggregation of certain expense captions into specified natural expense categories in the disclosures within the notes to the financial statements. In addition, the guidance requires disclosure of selling expenses and its definition. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance can be applied either prospectively or retrospectively. The Group continues to evaluate the impact of this guidance on its disclosures, but plan to adopt this guidance prospectively and conform with the disclosure requirements when it becomes mandatorily effective for the Group’s annual report for the year ending December 31, 2027.