| Contingent royalty payment description |
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For each of the first two years starting from June 2025, the minimum annual commission is RMB 10 million, or approximately $1.5 million, based on the June 30, 2026 spot exchange rate, which has already been included in the IP cost. If the sales-based commission calculated at 5% of annual sales in the first year exceeds RMB 10 million (approximately $1.5 million, based on the June 30, 2026 spot exchange rate) or the commission calculated at 4% of annual sales in the second year exceeds RMB 10 million (approximately $1.5 million, based on the June 30, 2026 spot exchange rate), the excess amount for each year will be recognized as contingent consideration. For the third year through the eighth year, the contingent payments will be calculated at 3%, 2%, 2%, 1%, 1%, and 1% of sales in each year, respectively.
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For each of the first two years starting from June 2025, the minimum annual commission is RMB 10 million, or approximately $1.5 million, based on the June 30, 2026 spot exchange rate, which has already been included in the IP cost. If the sales-based commission calculated at 5% of annual sales in the first year exceeds RMB 10 million (approximately $1.5 million, based on the June 30, 2026 spot exchange rate) or the commission calculated at 4% of annual sales in the second year exceeds RMB 10 million (approximately $1.5 million, based on the June 30, 2026 spot exchange rate), the excess amount for each year will be recognized as contingent consideration. For the third year through the eighth year, the contingent payments will be calculated at 3%, 2%, 2%, 1%, 1%, and 1% of sales in each year, respectively.
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