Common Control Merger and Retrospective Recast

The Company acquired Cullgen in an all-stock transaction pursuant to which all outstanding shares of Cullgen capital stock were exchanged for shares of the Company’s common stock or Series B Convertible Preferred Stock in accordance with the exchange terms set forth in the Merger Agreement. The Company evaluated the Merger under ASC 805-50 and determined that the Merger is a combination of entities under common control because both the Company and Cullgen were controlled by GNI Japan before and after the Merger and such control was not transitory. The net assets transferred in the Merger were determined to represent a business, as defined under ASC 805-10-55-4, and the Merger resulted in a change in reporting entity, as defined under ASC 250-10-20. The Company was identified as the receiving entity and Cullgen as the transferring entity for accounting purposes. The assets and liabilities transferred were recognized at their historical carrying amounts on the Merger Closing Date. No new basis of accounting or goodwill was recognized in accordance with ASC 805-50.

In accordance with ASC 805-50 and applicable SEC rules and regulations, the historical periods included in the accompanying interim financial statements have been retrospectively recast to reflect the common control transaction. As such, the financial statements for periods prior to the Merger reflect the combined results of the Company and Cullgen as if Cullgen had been part of the Company during the historical periods presented during which the entities were under common control.

The Merger also resulted in the Company acquiring or exchanging Cullgen ownership interests held by parties other than GNI Japan. The Company accounts for the acquisition or exchange of those non-GNI interests as an equity transaction as of the Merger Closing Date. Accordingly, the retrospective recast of historical periods prior to the Merger Closing Date does not give effect to the acquisition or exchange of such non-GNI interests before the date those interests were acquired or exchanged. For those pre-Merger periods, the Company retained and attributed Cullgen’s historical non-GNI ownership interests as noncontrolling interests, including redeemable preferred stock interests classified outside permanent equity when applicable.

The historical financial data of Cullgen included in the historical recast periods has been derived from the historical financial statements and accounting records of Cullgen, which were prepared on a standalone basis in accordance with U.S. GAAP using the historical accounting policies applied by Cullgen. Management reviewed GNI Japan’s historical carrying-basis information for Cullgen and did not identify acquisition-accounting basis differences, pushdown accounting adjustments, or goodwill associated with Cullgen that would require adjustment to Cullgen’s standalone historical financial information for purposes of the retrospective recast.

Effect of Change in Reporting Entity

The following table presents the effect of the retrospective recast resulting from the common-control Merger on the Company’s condensed consolidated statements of operations and comprehensive (loss) income and related per-share amounts for the periods presented. Management assessed that the effect of change in reporting entity resulting from the Merger was immaterial for the three months ended June 30, 2026 as the Company assumed consummation of the Merger at the beginning of second quarter 2026.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance of doubtful accounts, long-term receivable, warrant liability, allowance for credit losses, reserves for excess or obsolete inventory, operating lease right-of-use assets and liabilities, recognition of research and development expenses to the appropriate financial reporting period based on the progress of the research and development projects, income taxes, stock-based compensation, preferred stock warrant liabilities, and useful lives of property and equipment and intangibles with definite lives. The Company bases its estimates on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Noncontrolling Interest

The Company reports noncontrolling interest (“NCI”) in a subsidiary as a separate component of equity in the condensed consolidated balance sheets. The Company also reports the portion of net income or loss and comprehensive income or loss attributable to the Company and NCI separately in the condensed consolidated statements of operations and comprehensive income.

In connection with the retrospective recast of the Merger, for periods prior to the Merger Closing Date, the Company attributes Cullgen’s historical equity, net income or loss, and comprehensive income or loss between the controlling interest and NCI based on the applicable ownership interests and contractual or economic rights. Cullgen interests held by GNI Japan or its controlled affiliates are attributed to the controlling interest and eliminated in consolidation. Cullgen interests held by parties other than GNI Japan are presented as NCI. The non-GNI portion of Cullgen’s redeemable convertible preferred stock principal and cumulative accretion is presented as redeemable noncontrolling interests outside permanent equity until the Merger Closing Date when such interests were acquired or exchanged in the Merger.

For pre-Merger periods, accretion of Cullgen redeemable convertible preferred stock held by non-GNI holders is retained in the recast financial statements and considered in the attribution of income or loss between the controlling interest and NCI. The residual Cullgen income or loss after the effect of such preferred stock accretion is attributed between the controlling interest and NCI based on the applicable common ownership interests. On the Merger Closing Date, Cullgen became a wholly owned subsidiary of the Company and the related Cullgen NCI was eliminated within equity, with no gain or loss recognized in net income or comprehensive income.

Series B Convertible Preferred Stock

The Company accounts for its Series B Convertible Preferred Stock in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and other applicable U.S. GAAP. The Series B Convertible Preferred Stock was issued by the Company in connection with the Merger and was initially recognized at the carryover-basis amount determined in the common-control transaction. The Company evaluates the instrument’s redemption, conversion, and other substantive terms at each reporting date to determine whether classification as a liability, temporary equity, or permanent equity is required. Preferred stock that is mandatorily redeemable is classified as a liability and measured at the present value of the redemption amount. Preferred stock that is redeemable upon the occurrence of events not solely within the Company’s control is classified as temporary equity. At all other times, preferred stock is classified within stockholders’ equity. The Company records accretion to redemption value when required by applicable accounting guidance. The Company concluded that the Series B Convertible Preferred Stock was classified as temporary equity (mezzanine equity) as of June 30, 2026 under ASC 480-10-S99.

Stockholder approval for conversion of the Series B Convertible Preferred Stock was obtained on June 10, 2026, which eliminated the stockholder-approval contingency that had restricted conversion and could have resulted in cash settlement if conversion shares were not deliverable. However, stockholder approval did not eliminate a separate fundamental transaction feature that may require settlement upon events not solely within the Company’s control. Accordingly, while any Series B Convertible Preferred Stock remains outstanding, the Company will continue to classify the instrument in temporary equity unless the shares are converted into common stock, the fundamental transaction feature is removed or amended such that temporary equity classification is no longer required, or the Company otherwise concludes that permanent equity classification is appropriate under applicable accounting guidance. Because the Series B Convertible Preferred Stock does not have an ultimate redemption amount or earliest redemption date to which the carrying amount should be accreted and was not currently redeemable or probable of becoming redeemable as of June 30, 2026, the Company did not record periodic accretion to redemption value.

Segments

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The CODM uses segment net income or loss generated from segment assets in monitoring budget versus actual results in assessing the performance of the segment.

Following the Merger with Cullgen, the Company's CODM changed from a previous group consisting of (i) the Executive Chairman of Gyre’s Board of Directors, who also served as Gyre’s Interim Chief Executive Officer, and (ii) Gyre’s Chief Operating Officer, who also served as Gyre Pharmaceuticals’ General Manager, to the Company’s Chief Executive Officer. The Company has determined that it has two reportable segments.

Risks and Uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from larger and established companies, uncertainty of clinical results, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, accounts receivable, note receivable, long-term certificates of deposits and short-term bank deposits.

The Company is exposed to United States credit risk in the event of default by the United States institutions holding cash to the extent beyond the amount insured by the United States federal depository insurance corporation. In the United States, the Federal Deposit Insurance Corporation (“FDIC”) insures deposits at federally insured financial institutions up to a limit of $250,000 per depositor, per insured bank, for each account ownership category. The Securities Investor Protection Corporation (“SIPC”) protects customer assets held by registered broker‑dealers, with a standard limit of $500,000 per customer. The Company maintains cash and deposits in excess of the amount protected by FDIC and SIPC insurance. In the event of failure or insolvency of one of these financial institutions, the Company may be unable to recover its deposits in full. Management believes that these financial institutions are of high credit quality and continually monitors the creditworthiness of these financial institutions. As of June 30, 2026 and December 31, 2025, the Company had cash and cash equivalents held in U.S. financial institutions of $43.3 million and $49.2 million, respectively. Of the 2026 balance, $4.7 million represented general bank deposits and $20.5 million represented investment related cash. At June 30, 2026, the Company’s U.S. cash balances exceeded FDIC insurance coverage by $4.4 million and exceeded SIPC coverage by $15.1 million.

In May 2015, a new Deposit Insurance System (“DIS”) managed by the People’s Bank of China was implemented by the Chinese government. Deposits in the licensed banks in mainland China are protected by DIS, up to a limit of Chinese Renminbi (“RMB”) 500,000, or approximately $73,412, based on the June 30, 2026 spot exchange rate. The Company maintains cash and deposits in excess of the amount protected by DIS and in the event of bankruptcy of one of these financial institutions, the Company may be unable to claim its deposits back in full. Management believes that these financial institutions are of high credit quality and continually monitors the creditworthiness of these financial institutions. The following table presents the Company's cash balances maintained in mainland China by investment type and the amount (in millions) that exceeded applicable deposit insurance coverage as of June 30, 2026 and December 31, 2025:

Accounts receivable are typically unsecured and are derived from product sales. The Company manages credit risk related to the accounts receivable through ongoing monitoring of outstanding balances and limiting the amount of credit extended based upon payment history and creditworthiness. Historically, the Company has collected receivables from customers within the credit terms with no significant credit losses incurred. Note receivable is also subject to credit risk. The Company monitors the creditworthiness and repayment performance of the borrower on an ongoing basis and has not experienced significant credit losses related to such receivable.

The Company’s short-term investments include marketable securities. The Company classifies its marketable securities as available-for-sale securities, which include commercial paper, corporate debt securities and U.S. government agency securities. These securities are recorded at fair value with the related unrealized gains and losses included in accumulated other comprehensive loss. Premiums or discounts from par value are amortized to investment income over the life of the underlying investment and are included in ‘interest income’ within the consolidated statements of comprehensive loss. All the Company’s available-for-sale securities are available to the Company for use in current operations. As a result, the Company classified all these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in ‘Net loss’ within the consolidated statements of comprehensive loss. If any adjustment is required to reflect a decline in the value of the investment that the Company considers to be “other than temporary”, the Company recognizes a charge to the consolidated statements of comprehensive loss.

Concentration of Customer Risk

For the three months ended June 30, 2026, following the completion of the Merger with Cullgen, the Company’s revenue consists of (i) pharmaceutical product sales primarily generated through its legacy business and (ii) collaboration-based revenue generated by Cullgen’s operations.

Pharmaceutical Product Sales

For the three months ended June 30, 2026, the Company had three customers, Sinopharm Group Co., Ltd. ("Sinopharm"), Shanghai Pharmaceuticals Holding Co., Ltd. (“Shanghai Pharmaceuticals”) and China Resources Pharmaceutical Group Ltd. (“Resources Pharmaceutical”), who accounted for approximately 48.7%, 12.2% and 11.6% of total revenue, respectively. For the three months ended June 30, 2025, the Company had three customers, Sinopharm, Resources Pharmaceutical, and Shanghai Pharmaceuticals, who accounted for approximately 48.0%, 11.3% and 11.9% of total revenue, respectively. All customers are located in mainland China.

For the six months ended June 30, 2026, the Company had three customers, Sinopharm, Shanghai Pharmaceuticals and Resources Pharmaceutical, who accounted for approximately 44.7%, 12.3% and 12.5% of total revenue, respectively. For the six months ended June 30, 2025, the Company had three customers, Sinopharm, Resources Pharmaceutical, and Shanghai Pharmaceuticals, who accounted for approximately 42.0%, 11.2% and 10.4% of total revenue, respectively. All customers are located in mainland China.

Collaboration-Based Revenue

Cullgen’s collaboration-based revenue is generated pursuant to a single collaboration agreement with one customer. For the three and six months ended June 30, 2026 and 2025, all of Cullgen’s revenue was derived from this single customer under its collaboration arrangement, as further described in Note 6 to the consolidated financial statements.

As of June 30, 2026 and December 31, 2025, the Company had one customer, Sinopharm, who accounted for approximately 45.5% and 53.3% of accounts receivable, respectively.

Foreign Currency Risk

Transactions in subsidiaries are recorded in the functional currency of the respective subsidiary. The determination of functional currency is based on the criteria of Accounting Standard Codification (“ASC”) 830, Foreign Currency Matters.

Accounting Pronouncements – Recently Adopted

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient for measuring expected credit losses for current accounts receivable and current contract assets that arise from revenue transactions within the scope of ASC 606, permitting an entity to assume that economic conditions as of the balance sheet date will remain unchanged over the remaining life of the financial assets when developing reasonable and supportable forecasts. ASU 2025-05 is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2025, with early adoption permitted. The amendments in this update should be applied on a prospective basis. The Company adopted the provisions of the amendments as of January 1, 2026. The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements Issued and Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 modifies the disclosure or presentation requirements of a variety of Topics in the Financial Accounting Standards Codification (the “Codification”). Certain of the amendments represent clarifications to or technical corrections of the current requirements. Because of the variety of Topics amended, a broad range of entities may be affected by one or more of those amendments. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later. The amendments in this update should be applied prospectively. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40) (“ASU 2024-03”). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Clarifying the Effective Date to clarify the effective date of ASU 2024-03 for non-calendar year-end entities. ASU 2024-03 is effective for the Company's fiscal year 2027, and interim periods starting in fiscal year 2028. Early adoption is permitted. The amendments in this ASU are to be applied retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. The Company has elected not to early adopt ASU 2024-03. The Company is currently assessing the impact of the disclosure requirements 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. This ASU provides guidance on the recognition, measurement, presentation and disclosure of government grants received by business entities. The ASU is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual periods, with early adoption permitted. The Company has elected not to early adopt ASU 2025-10. The Company is currently evaluating the impact that the adoption of ASU 2025-10 will have on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the applicability of the interim reporting guidance in Topic 270 and improves the navigability and organization of the guidance. The amendments also introduce a principle requiring entities that issue interim financial statements to disclose events and changes occurring after the end of the most recent annual reporting period that are expected to have a material impact on the entity. ASU 2025-11 does not change the recognition or measurement requirements for interim reporting. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company has elected not to early adopt ASU 2025-11. The Company is currently evaluating the potential impact of this guidance on its interim and annual financial statement disclosures.

Subsequent Events

The Company accounts for subsequent events in accordance with ASC 855, Subsequent Events, which defines subsequent events as events or transactions that occur after the balance sheet date but before the financial statements are issued. Management has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission.