(3) REVENUE AND OTHER CONTRACTS WITH CUSTOMERS

The Company adopted ASC 606, Revenue from Contracts with Customers, which requires a five-step model to recognize revenue from customer contracts. The five-step model requires entities to exercise judgment when considering the terms of contracts, including: (1) identifying the contracts or agreements with a customer; (2) identifying the performance obligations in the contract or agreement; (3) determining the transaction price; (4) allocating the transaction price to the separate performance obligations; and (5) recognizing revenue as each performance obligation is satisfied. The Company applies the five-step model to contracts only when it is probable that the Company will collect the consideration to which it is entitled in exchange for the services it transfers to its clients.

Revenues from SaaS service- Multi-Channel Network (“MCN”) Digital Service

Since March 2025, the Company has expanded SaaS operations as a digital service provider, delivering full-cycle services to brand clients through legally binding agreements. The Company offers full-service account management, content production, and targeted promotion to grow followers across key platforms. Service packages are customizable via the SaaS portal. Customers may purchase value-added services with or after their purchases of basic package. The Company’s services comprise two distinct performance obligations: (1) the basic service, which represents a single performance obligation as the promises for account setup, SaaS platform access, account management, and basic digital content creation and publishing are highly interdependent and bundled together; and (2) the value-added services, which represents a performance obligation for additional digital content created and customized to meet the customer’s special request. Each performance obligation has a standalone transaction price. The Company recognizes revenues from basic services ratably over the contract term beginning on the commencement date of each contract. The revenues from value-added services are recognized at a point in time when customers approve or accept the value-added services or system automatically approves whichever is later. The Company offers MCN digital services under two payment structures: (i) prepaid arrangements, where customers are required to make an upfront payment for the services, which is non-refundable upon execution of the contract and are recorded as contract liabilities until recognized as revenue; and (ii) post-paid arrangements, where customers are granted payment terms of 90 days from the contract signing date. The 90-day credit period is offered to customers who satisfy the Company’s internal credit assessment criteria, which consider factors such as the customer’s credit profile, contract size, and historical relationship. For post-paid arrangements, the Company records accounts receivable when the services are performed and the Company has an unconditional right to consideration. Customers retain the right to terminate the contract prior to its expiration date, subject to the early termination fees, including information transfer fees and fan development fees. The Company regularly monitors the collectability of receivables arising from post-paid arrangements.

Revenues from Software Service

The Company enters into bundled arrangements that typically include the sale of on-premise software licenses, standard or customized modules, and maintenance and support (“M&S”) services. These arrangements are evaluated to determine whether the promises represent distinct performance obligations. The standard or customized modules are highly interdependent and interrelated with the software license and are therefore combined with the license as a single performance obligation, while the M&S services are capable of being distinct and are accounted for as a separate performance obligation. The M&S services are provided free of charge for a specified contract period, typically encompassing the first year of service following software delivery.

The transaction price is allocated to each performance obligation based on their relative stand-alone selling prices (“SSP”). The SSP for the combined software license and customized or standard modules, and M&S services is determined using the adjusted market assessment approach, which considers market conditions, competitive pricing, the Company’s market position, expected profit margins, and cost structure. For customized arrangements only, contracts include retention fees that represent variable consideration, as their payment is contingent upon no major defects being identified within a specified period. These retention fees are excluded from the initial transaction price. The related revenue is recognized only when it’s probable that a significant reversal will not occur. Contracts for software licensing and M&S services generally include a renewal option for M&S services; however, the renewal option to acquire additional services is neither offered free of charge nor at a discount and accordingly does not represent a material right.

The Company provides assurance-type warranties to ensure that the delivered software complies with agreed-upon specifications. These warranties do not constitute a separate performance obligation as they cannot be purchased separately and do not provide a service beyond remedying defects to bring the software to the specified standard.

The Company’s contracts typically specify a payment schedule whereby payments from the customer are linked to the signing of the contract and the achievement of specific milestones for customized arrangements, while for standard arrangements, customers are granted payment terms with an initial payment due within three months after acceptance and a final payment due within nine months after acceptance. Contracts are generally fixed price, and the Company has elected the practical expedient not to adjust the promised consideration for the effects of a significant financing component when the period between transfer of goods or services and customer payment is one year or less.

For contracts with customized modules, revenue from the combined software license and customized modules is recognized over time as the Company fulfils its performance obligations by developing and enhancing the software assets throughout the project period. The Company recognizes revenue using the output method based on the measurements of the value of the services transferred to date in relation to total performance obligation promised. For contracts with standard modules, revenue from the combined software license and standard modules is recognized at a point in time upon final delivery and customer acceptance. Revenue from maintenance and support services for both types is recognized over time on a straight-line basis over the M&S contract period. This recognition pattern reflects the continuous transfer of services to the customer, who simultaneously receives and consumes the benefits of these services throughout the service period.

Revenues from Digital Authentication Service

The Company provides digital authentication services for artworks, leveraging AI and blockchain technology. Services include microstructure analysis, AI image comparison, authenticity determination, blockchain registration, and issuance of digital authentication reports. Service packages are offered in standard and expedited editions, with fees calculated based on the dimensions of the artwork. The Company’s services comprise a single performance obligation, as the promised services are highly interdependent and integrated to deliver a conclusive authentication outcome. The transaction price is fixed at contract inception. Revenue is recognized at a point in time upon delivery of the final digital authentication report and blockchain certificate to the client, when the client obtains control of the completed authentication package. The Company offers these services under two payment structures: (i) prepaid arrangements, where customers are required to make an upfront payment for the services, which is non-refundable upon execution of the contract and is recorded as a contract liability until recognized as revenue; and (ii) post-paid arrangements, where customers are granted payment terms of 90 days from the contract signing date. For post-paid arrangements, the Company records accounts receivable when the services are performed and the Company has an unconditional right to consideration.

Revenues from others

Through the acquisition of Yinlian Culture and the Company’s VIE, Maltose Culture in May 2026, the Company commenced its music services business. As the acquisition was completed on May 31, 2026, the Company recorded only one month of revenue from music services during the three and six months ended June 30, 2026, and the amount was immaterial to the condensed consolidated financial statements.

Remaining Performance Obligations

The remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities and non-cancellable backlog. Non-cancellable backlog includes service orders for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for delivery or performance, and that are not yet invoiced.

As of June 30, 2026 and December 31, 2025, the remaining performance obligations related to MCN digital services purchased and paid for in advance by customers for basic and value-added packages amounted to $507,140 and $1,497,721, respectively. These amounts are expected to be recognized as revenue within the next 12 months.

The remaining performance obligations for software services as of June 30, 2026 and December 31, 2025, were $465,354 and $521,082, respectively, excluding retention fees. These amounts relate to unsatisfied performance obligations for the combined software license and customized modules, which are expected to be recognized as revenue upon the completion and customer acceptance of specific milestones, predominantly within the next three months.

As of June 30, 2026 and December 31, 2025, there were no remaining performance obligations related to digital authentication services.

Contract Costs

The Company recognizes the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized, and the Company amortizes these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on the Company’s condensed consolidated balance sheets if any.

The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less.

Contract Balances

The Company records accounts receivable when it has an unconditional right to the consideration. The accounts receivable balances were $5,134,459 and $2,110,715 as of June 30, 2026 and December 31, 2025, respectively. Subsequent to June 30, 2026 and through the date of this filing, the Company collected approximately $2,282,433 of the accounts receivable balance outstanding as of June 30, 2026. Contract liabilities are recorded when customers remit payment prior to revenue recognition, representing the Company’s obligation to transfer services in the future. Liabilities arise upon customer order placement. The contract liabilities balances were $343,015 and $1,497,721 as of June 30, 2026 and December 31, 2025, respectively.

Disaggregation of Revenue

The following table sets forth our revenues by product:

The following table sets forth our revenues by the timing of revenue recognition: