Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP to reflect the financial position and results of operations of the Company. The results of operations for the six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for any other interim period or for the full year of 2026. Accordingly, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the years ended December 31, 2025 and 2024.

The significant accounting policies followed by the Company in the preparation of the accompanying unaudited condensed consolidated financial statements are summarized below.

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries, which include the wholly- foreign owned enterprise (“WFOE”) over which the Company exercises control and, when applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

Variable Interest Entity Agreement

On November 2, 2022, the Company entered into a certain share purchase agreement (the “Disposition SPA”) with S International Holdings Limited (the “Purchaser”), a Cayman Islands exempt company, and S International Group Limited (“S International” or the “Target”), a British Virgin Islands company and the Company’s wholly owned subsidiary prior to the Disposition. Pursuant to the Disposition SPA, the Purchaser agreed to purchase S International in exchange for cash consideration of $17,000,000. Upon the closing of the transaction (the “Disposition”) contemplated by the Disposition SPA on November 2, 2022 (the “Closing Date”) , the Purchaser became the sole shareholder of S International and as a result, assume all assets and liabilities of all the subsidiaries and VIE entities owned or controlled by S International. S International owns 100% of the issued shares in S International Holdings Limited, which owns 100% of the issued shares in Qingdao S Investment. Qingdao S Investment controls Qingdao SOS Industrial, the former VIE, through a series of contractual agreements with the former VIE and the shareholders of the former VIE dated November 2, 2022. The former VIE owns 100% of the equity interests in each of SOS Information Technology Co., Ltd. and Qingdao SOS Digital Technologies Inc.

As the VIE structure has been unwound, the financial results of the former VIE and its subsidiaries are no longer consolidated into the Company’s financial statements after the Closing Date. As of the date of the annual report of December 31, 2026, our current corporate structure does not contain any VIE in mainland China and neither we nor our subsidiaries has intention establishing any VIEs in mainland China in the future.

Reverse Acquisitions of China Rapid Finance by SOS

On May 18, 2020, the Company completed the reverse acquisition with Yong Bao Two Ltd. (“YBT”), the parent company of SOS Information Technology Co., Ltd. (“SOS”), acquiring 37,985,203 Class A ordinary shares, and 3,465,574 Class B ordinary shares, par value $0.193 per ordinary share, for its SOS’s asset injection and private placement transactions.

Following the completion of the acquisition, the operations of the Company were primarily comprised of the operations of SOS.

SOS was determined to be the accounting acquirer of the Company. As such, the historical financial statements are those of SOS, and SOS’s equity has been re-cast to reflect the equity structure of the Company and the shares of common stock received.

The reverse acquisition was accounted for as asset acquisitions. The purchase price for China Rapid Finance (“CRF”) was $9.7 million. The transaction price of CRF includes 100% of all outstanding stock valued at net $9.7 million. The stock exchanged equal to the 72,636,230 shares of CRF outstanding prior to the issuance of additional shares in the acquisition, at the market price of $0.133 per share. The total purchase price has been allocated based on an estimate of the fair value of CRF’s assets acquired and liabilities assumed with the remainder recorded as an expense.

On May 18, 2020, the fair value of the following assets and liabilities were acquired resulting in the total loss of approximately $5.7 million:

On August 3, 2020, SOS Limited (the “Company,” previously known as China Rapid Finance Limited) and Hantu (Hangzhou) Asset Management Co., Ltd. (the “Purchaser”) entered into certain share purchase agreement (the “Disposition SPA”). Pursuant to the Disposition SPA, the Purchaser agreed to purchase CRF China Holding Co. Limited, a Hong Kong limited company (“CRF China”), China Capital Financial LLC, a Delaware limited liability company (“China Capital”), CRF China Limited, a British Virgin Islands company (“CRF BVI”), CRF Technology LLC, a California limited liability company (“CRF Technology”), and HML China LLC, a Delaware limited liability company (“HML”) (collectively, the “Subsidiaries”) in exchange for cash consideration of $3.5 million (the “Purchase Price”). Upon the closing of the transaction (the “Disposition”) contemplated by the Disposition SPA, the Purchaser will become the sole shareholder of the Subsidiaries and as a result, assume all assets and liabilities of all the subsidiaries and variable interest entities owned or controlled by the Subsidiaries.

On August 3, 2020, the fair value of the following assets and liabilities were disposed of resulting in the total gain of approximately $0.063 million:

Loss on discontinued operations for the year ended December 31, 2020 was as follows:

On November 2, 2022, the fair value of the following assets and liabilities were disposed of resulting in the total gain of approximately $0.8 million:

Loss on discontinued operations for the year ended December 31, 2022 was as follows:

Disposal loss from selling off insurance marketing business segment

Pursuant to the Share Purchase Agreement (this “Agreement”) is made and entered into as of  November 2, 2022 by and among (i) S International Holdings Limited, a Cayman Islands exempt company (the “Purchaser”), (ii) S International Group Limited, a British Virgin Islands company (the “Company”), and (iii) SOS Limited, a Cayman Islands exempt company (“SOS” or the “Seller” of disposed asset group in insurance marketing). The Purchaser, the Company and the Seller are sometimes referred to herein individually as a “Party” and, collectively, as the “Parties”.

As at the date hereof, (i) SOS owns 100% of the issued shares in the Company, the Company owns 100% of the issued shares in S International Holdings Limited (“S International HK”), S International HK owns 100% of the issued shares in Qingdao S Investment Holding Limited (“WFOE”), and WFOE controls Qingdao SOS Industrial Holding Co., Ltd. through a series of contractual agreements with the Company and the shareholders of the Company dated November 2, 2022 (the “VIE Agreements”); and (ii) Qingdao SOS Industrial Holding Co., Ltd owns 100% of the equity interests in each of SOS Information Technology Co., Ltd. and Qingdao SOS Digital Technologies Inc.;

The Seller desires to sell to the Purchaser, and the Purchaser desire to purchase from the Seller, all of the Purchased Shares (as hereinafter defined) in exchange for US$ 17.0 million (the “Purchase Price”), subject to the terms and conditions set forth herein (the “Transaction”).

Use of estimates and assumptions

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the balance sheet date, and the reported amounts of revenues and expenses during the reporting period.

Significant estimates and judgments reflected in the Company’s consolidated financial statements include, but are not limited to:

These estimates are based on historical experience, current market conditions, and various other assumptions that management believes to be reasonable under the circumstances. However, actual results could differ materially from those estimates.

The Company’s estimates are subject to a higher degree of uncertainty due to the nature of its operations, including commodity trading activities, digital asset exposure, and evolving business strategies.

Foreign currency translation and transaction

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts is translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive loss amounted to $20.7 million and $25.7 million, as of June 30, 2026 and December 31, 2025, respectively. The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2026, and December 31, 2025 were translated at 6.7851 RMB and   6.9931 RMB to $1.00,   respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the period ended   June 30, 2026 and the period ended June 30, 2025 were 6.8624 RMB, and 7.2526 RMB to $1.00, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand; demand deposits and time deposits placed with banks or other financial institutions and have original maturities of less than three months.

Derivative Instruments and Trading Activities

The Company engages in futures trading activities through accounts held with a licensed futures broker. These activities are classified as trading activities and are not designated as hedging instruments.

Funds held in futures trading accounts primarily represent margin deposits and settlement balances and are not classified as cash and cash equivalents due to their restricted nature and exposure to market risk.

The Company accounts for its futures contracts as derivative instruments in accordance with applicable accounting guidance. Derivatives are recognized as either assets or liabilities in the consolidated balance sheets and are measured at fair value.

Changes in the fair value of derivative instruments, including both realized and unrealized gains and losses, are recognized in earnings in the period in which they arise.

The Company closed out its open futures positions with associated margin deposits in May 2026.

Accounts receivable, net

Accounts receivable represent amounts due from customers for goods delivered or services rendered for which the Company has an unconditional right to consideration. Accounts receivable are recognized when control of goods or services has been transferred to the customer and are recorded at the invoiced amount, net of an allowance for expected credit losses.

The Company maintains an allowance for expected credit losses in accordance with ASC 326. The allowance is based on management’s estimate of lifetime expected credit losses inherent in the accounts receivable balance. In estimating expected credit losses, the Company considers a combination of factors, including the aging of receivables, historical collection experience, current economic conditions, industry trends, and forward-looking information, as well as specific customer credit risk characteristics.

The Company also evaluates subsequent cash collections, customer payment history, and the financial condition of significant customers in assessing the adequacy of the allowance. Receivables are assessed on a collective basis when similar risk characteristics exist and on an individual basis for customers with elevated credit risk or significant outstanding balances.

A significant portion of the Company’s accounts receivable is generated from commodity trading transactions and service arrangements with a limited number of counterparties. These balances may be subject to increased credit risk due to the nature of the transactions and the financial condition of the customers.

The determination of the allowance for expected credit losses requires significant judgment and is sensitive to changes in economic conditions, customer creditworthiness, and other factors. If actual collections differ from management’s estimates, the Company may be required to record additional provisions in future periods.

Receivables are written off when management determines that collection is not probable after all reasonable collection efforts have been exhausted.

In certain arrangements, customers may make advance payments or balances may be settled through offsetting transactions. The Company evaluates the substance of these arrangements to determine whether amounts should be classified as accounts receivable or contract liabilities based on the timing of revenue recognition and the Company’s right to consideration.

Other receivables and prepayments

Other receivables and prepayments include advances to suppliers, deposits, loans to third parties and employees, and other non-trade receivables arising from the Company’s operations.

Prepayments primarily represent amounts advanced to suppliers in connection with commodity trading transactions and are expected to be settled through delivery of goods or services.

Other receivables include, among others, loan receivables, refundable deposits, advances, and other non-operating receivables.

The Company evaluates the classification of balances based on the underlying nature of the transaction, including whether amounts represent prepayments for goods or services, financing arrangements, or other receivable balances.

Allowance for credit losses

The Company recognizes an allowance for expected credit losses on other receivables and certain prepayments where recovery is uncertain. The allowance is determined based on:

For certain balances, particularly long-outstanding advances or loans, the Company applies a specific assessment approach, whereby additional allowance is recognized based on management’s assessment of expected recoverability.

Balances deemed uncollectible are written off against the allowance when all reasonable collection efforts have been exhausted.

Inventories

The availability and prices of inventories are subject to wide fluctuations due to factors such as changes in weather conditions, government programs and policies, competition, changes in customer preferences. Currently, the Company entered into non-derivative contracts. The inventories are valued at the lower of cost or market. The Company determines cost based on the first-in, first-out method. Net realizable value represents the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

The Company’s inventories primarily consist of commodities and trading goods, including sesame, gold concentrate powder, sulfur, coal, diluted asphalt, servers, mining machines, and other related products.

The Company performs periodic reviews of inventory to identify slow-moving, excess, or obsolete items. Such reviews consider inventory ageing, historical turnover, current market conditions, expected selling prices, and estimated costs to sell. Where the carrying value of inventory exceeds its net realizable value, an impairment loss is recognized in cost of revenues.

For certain commodity-based inventories, including metal-related products, the Company estimates NRV based on observable market prices of underlying commodities (e.g., gold and silver), product-specific characteristics such as grade or metal content, and applicable pricing or recovery coefficients. Estimated costs to complete and sell, including processing, refining, and logistics costs, are also considered in determining NRV.

The Company applies additional scrutiny to inventories held for extended periods, as such inventories may be subject to increased uncertainty regarding realizability and timing of sale.

Inventory write-downs establish a new cost basis and are not subsequently reversed in future periods under U.S. GAAP. Value-added taxes (“VAT”) related to inventory purchases are recorded separately and are not included in inventory cost.

The determination of NRV involves significant judgment and estimates, particularly in relation to market price volatility, expected selling prices, and costs to sell.

Property, plant and equipment, net

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

The cost and accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Digital assets

The Company’s digital assets consist primarily of Bitcoin (“BTC”) and Ethereum (“ETH”). Effective January 1, 2025, the Company adopted ASU 2023-08, Accounting for and Disclosure of Crypto Assets, which requires qualifying crypto assets to be measured at fair value, with changes in fair value recognized in earnings.

Digital assets are initially recognized at fair value at the time of receipt or acquisition. Subsequent to initial recognition, digital assets are remeasured at fair value at each reporting date using quoted prices in active markets for identical assets.

Changes in fair value are recognized in earnings and presented separately as fair value gain or loss on digital assets in the consolidated statements of operations.

The Company determines fair value based on observable market prices from major cryptocurrency exchanges, which represent the principal market for these assets. Digital assets are classified as Level 1 within the fair value hierarchy under ASC 820.

The Company has designated Blockchain.com (www.blockchain.com) as its principal active market for the trading of crypto assets, including BTC and ETH.

The Company has determined that Blockchain.com constitutes the principal active market for its crypto asset holdings based on the following selection factors set forth under US GAAP, in particular ASC 820 (Fair Value Measurement) and ASC 350-60 (Intangible Assets — Crypto Assets). Under ASC 820-10-20, fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Among markets accessible to the Company, Blockchain.com exhibits characteristics that support its designation as the principal market: consistent and accessible trading volume enabling price discovery, established global recognition as a leading digital asset platform, publicly verifiable and real-time quoted prices, and substantive regulatory compliance facilitating reliable valuation inputs.

The Company adopted this standard using the modified retrospective method, with a cumulative effect adjustment recorded to retained earnings as of January 1, 2025.

Prior to adoption, digital assets were accounted for as indefinite-lived intangible assets and measured at cost less impairment.

Digital asset mining

The Company has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed digital assets award the mining pool operator receives, for successfully adding a block to the blockchain. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The provision of such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized. There is no significant financing component in these transactions.

The Company participates in digital asset mining activities by providing computing power to mining pool operators in exchange for digital asset rewards.

These arrangements are accounted for as contracts with customers under ASC 606. The Company has a single performance obligation, which is to provide computing power to the mining pool operator.

The performance obligation is satisfied at a point in time when the mining pool operator successfully validates a block and the Company becomes entitled to its share of the reward.

The consideration received is noncash and is measured at fair value at the time control of the digital assets is transferred to the Company. The transaction price is variable and is constrained until it is probable that a significant reversal of cumulative revenue will not occur, which is generally when the reward is confirmed by the mining pool operator.

Revenue is recognized at that point in time based on the fair value of the digital assets received.

The Company did not generate revenue from digital asset mining during the period ended June 30, 2026.

Goodwill

Goodwill of $71,977 was recognized as of December 31, 2020 in connection with the transaction of SOS IT acquiring Inner Mongolia SOS Agency Co. Ltd. In future years, the Company will complete an annual impairment test for goodwill that includes an assessment of qualitative factors including, but not limited to, macroeconomic conditions, industry and market conditions, and entity specific factors such as strategies and financial performance. The Company will perform annual impairment tests as of June 30, 2026 or earlier if indicators of impairment exist. There were no indicators of goodwill impairment as of June 30, 2026.

Impairment for long-lived assets

Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. 

Such events or changes in circumstances include, but are not limited to:

The determination of impairment involves significant judgment and estimates, including assumptions related to future cash flows, expected utilization of assets, cryptocurrency market conditions, and discount rates.

The Company has recognized significant impairment losses on mining equipment and related infrastructure in prior periods, reflecting changes in market conditions and expected economic benefits.

As disclosed in Note 8, impairment losses recognized during the period ended June 30, 2026 and the years ended December 31, 2025 amounted to nil and $6.8 million, respectively, primarily relating to cryptocurrency mining equipment.

Other payables

Other payables primarily consist of non-trade operating liabilities, including deposits received under hosting arrangements, freight and logistics-related balances, rental and service-related payables, and other operational settlement obligations.

Other payables are initially recognized at the invoiced or contractual amount and subsequently measured at amortized cost, which approximates fair value due to the short-term nature of the balances.

Deposits received under hosting and operational agreements are recognized as liabilities until the related contractual obligations are fulfilled, settled, refunded, or otherwise extinguished in accordance with the underlying agreements.

The Company periodically evaluates long-outstanding balances to assess settlement expectations, contractual obligations, and appropriate financial statement classification.

Accounts payable

Accounts payable primarily represent obligations arising from purchases of inventory, commodity trading goods, equipment, logistics services, and other operating expenditures incurred in the ordinary course of business.

Certain balances classified within accounts payable relate to advances received from customers in connection with commodity trading arrangements. Such balances primarily represent customer prepayments received prior to delivery of goods and are recognized as contract liabilities until the related performance obligations are satisfied in accordance with ASC 606.

The Company’s trading activities may also involve advances paid to suppliers and settlement arrangements associated with commodity transactions. Management evaluates the nature and classification of balances based on the underlying contractual arrangements and transaction substance.

Accounts payable are initially recognized at the invoiced amount and subsequently measured at amortized cost, which approximates fair value due to the short-term nature of the balances.

The Company periodically evaluates long-outstanding balances to assess:

The determination of appropriate classification and settlement assessment involves management judgment, particularly for balances arising from commodity trading arrangements and long-outstanding transactions.

Fair value measurement

The Company measures certain financial assets at fair value in accordance with ASC 820, Fair Value Measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company uses a three-level hierarchy to prioritize inputs used in measuring fair value:

Digital Assets

The Company accounts for its digital assets, including Bitcoin (“BTC”) and Ethereum (“ETH”), in accordance with ASU 2023-08. Digital assets are measured at fair value with changes in fair value recognized in earnings in the period in which they occur.

Fair value is determined based on quoted market prices in active markets for identical assets and is classified as Level 1 in the fair value hierarchy.

As of June 30, 2026 and December 31, 2025, the carrying value of digital assets approximated their fair value.

Fair value measurement of digital assets

Effective January 1, 2025, the Company adopted ASU 2023-08, Accounting for and Disclosure of Crypto Assets, which requires qualifying crypto assets to be subsequently measured at fair value with changes in fair value recognized in earnings.

The Company’s digital assets consist primarily of Bitcoin (“BTC”) and Ethereum (“ETH”). Digital assets are measured at fair value at each reporting date using quoted prices in active markets for identical assets and are classified as Level 1 fair value measurements under ASC 820, Fair Value Measurement.

As of June 30, 2026, the Company held approximately: 802.77 units of BTC with a fair value of approximately $47.1 million; and 2,949.79 units of ETH with a fair value of approximately $4.6 million.

During the period ended June 30, 2026, the Company recognized net unrealized fair value losses on digital assets of approximately $27.4 million in earnings.

Prior to adoption of ASU 2023-08, digital assets were accounted for as indefinite-lived intangible assets under ASC 350 and measured at cost less impairment.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, using the five-step model: (i) identify the contract, (ii) identify performance obligations, (iii) determine transaction price, (iv) allocate transaction price, and (v) recognize revenue when or as performance obligations are satisfied. The Company’s revenue streams primarily consist of (i) commodity trading revenue and (ii) hosting and technology service revenue.

The Company generates revenue from the purchase and sale of commodities (including agricultural products, coal, and other materials).

Revenue is recognized at a point in time when control of the goods is transferred to the customer. Control is generally considered transferred when:

The Company enters into back-to-back purchase and sales arrangements and acts as a principal in these transactions, as it controls the goods prior to transfer and is primarily responsible for fulfillment. Accordingly, revenue is recognized on a gross basis.

The Company provides technology services, including insurance marketing and customer data processing.

Revenue is recognized over time, as services are rendered, based on monthly service periods. The Company typically:

Revenue is recognized when:

The Company is engaged in cryptocurrency mining (which was temporarily suspended during the reporting period) and provides hosting services, including electricity supply, infrastructure support, and equipment maintenance.

Revenue is recognized over time as the services are provided, as customers simultaneously receive and consume the benefits of the services.

Service fees are typically based on agreed rates (e.g., power usage or hosting capacity) and are recognized in the period the services are rendered.

In prior periods, the Company generated revenue from cryptocurrency mining. During the first half year of 2026, the Company did not engage in cryptocurrency mining activities due to economic factors and the lack of suitable mining equipment. Accordingly, no mining revenue was recognized during the year. The Company is currently focused on hosting service activities and may resume mining operations upon acquisition of new equipment.

Transaction Price and Variable Consideration

The transaction price is based on contractual consideration and excludes value-added taxes (“VAT”), which are presented as a reduction of revenue.

Variable consideration is included only to the extent that it is probable that a significant reversal will not occur. Variable consideration is generally not significant for the Company’s current revenue streams.

Significant Judgments

Significant judgments applied by management include:

Management considers contractual terms, delivery documentation, customer acceptance, and historical collection experience in making these judgments.

Operating lease

We adopted ASU No. 2016-02, Leases (Topic 842), or ASC 842, from January 1, 2019. We determine if an arrangement is a lease or contains a lease at lease inception. For operating leases, we recognize a right-of-use (“ROU”) asset and a lease liability based on the present value of the lease payments over the lease term on the consolidated balance sheets at commencement date. As most of our leases do not provide an implicit rate, we estimate our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The ROU assets also include any lease payments made, net of lease incentives. Lease expense is recorded on a straight-line basis over the lease term. Our leases often include options to extend and lease terms include such extended terms when we are reasonably certain to exercise those options. Lease terms also include periods covered by options to terminate the leases when we are reasonably certain not to exercise those options.  

Value added taxes

Revenue is presented net of value-added taxes (“VAT”). VAT is levied on the Company’s sales of goods and services in the PRC at applicable rates ranging primarily from 6% to 13%, depending on the nature of the underlying transactions.

Entities that are general VAT taxpayers are permitted to offset qualified input VAT paid to suppliers against output VAT on sales. The net amount of VAT payable or recoverable is recorded within “taxes payable” or “other receivables,” as appropriate.

Input VAT that has not yet been certified or is pending verification by tax authorities (“uncertified input VAT”) is recorded separately and is not available for offset until certification is completed.

Excess input VAT may be carried forward to future periods for offset against output VAT. The Company assesses the recoverability of input VAT balances based on expected future taxable sales.

Certain gold and gold concentrate transactions may qualify for VAT exemption under applicable PRC tax regulations.

VAT returns filed by the Company’s subsidiaries in the PRC are subject to examination by the tax authorities for a period of up to five years from the date of filing.

Income taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Current income taxes are provided based on taxable income in accordance with the applicable tax laws and regulations of the relevant tax jurisdictions.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the periods in which the temporary differences are expected to be recovered or settled.

The Company records a valuation allowance against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers both positive and negative evidence in determining whether a valuation allowance is required. The Company accounts for uncertain tax positions in accordance with ASC 740. A tax benefit from an uncertain tax position is recognized only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority, based on the technical merits of the position. The amount recognized is measured as the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement.

For interim reporting purposes, the Company determines its income tax provision in accordance with the applicable interim reporting requirements of ASC 740, based on the estimated annual effective tax rate, adjusted for the tax effects of significant unusual or infrequently occurring items, where applicable.

Other comprehensive income

Comprehensive income consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes revenues, expenses, gains and losses that, under U.S. GAAP, are included in comprehensive income but excluded from net income (loss). The Company’s other comprehensive income (loss) primarily consists of foreign currency translation adjustments arising from the translation of the financial statements of subsidiaries whose functional currencies are other than the U.S. dollar.

Losses per share

The Company computes losses per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Accordingly, basic and diluted loss per share are the same where all potentially dilutive ordinary shares are anti-dilutive. For the period ended June 30, 2026 and the period ended June 30, 2025, there are 7,986,477 and 6,810,554 dilutive shares, respectively.

Share-based compensation

The Company recognizes compensation expense for all share–based payments in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. The Company follows the fair value method of accounting for awards granted to employees, directors, officers and consultants. Share-based awards are measured at their estimated fair value on each respective grant date. The Company recognizes share-based payment expenses over the vesting period. The Company’s share-based compensation awards are subject only to service-based vesting conditions. Forfeitures are accounted for as they occur. The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the expected stock volatility, the risk–free interest rate, the expected life of the option and the expected dividend yield which is based on the historical dividends issued by the Company. The Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Expected volatility is calculated based on the analysis of other public companies. Risk–free interest rates are calculated based on risk–free rates for the appropriate term. The expected life is calculated as (i) the mid-point between the average vested date and the contractual expiration of the option for executives and directors and (ii) three years from the average vesting date for all others due to limited exercise history. Determining the appropriate fair value model and calculating the fair value of equity–based payment awards require the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment.

Employee benefits

The full-time employees of the Company are entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are government mandated defined contribution plans by law. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 added a new impairment model (known as the CECL model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to financial assets measured at amortized costs, including loans and accounts receivable. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. As the company was no longer an emerging growth company, the Company adopted ASU 2016-13 effective January 1, 2025, which did not have a material impact on the consolidated financial statements.

Income Taxes (Topic 740)

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740). ASU No. 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 Company adopted ASU 2016-13 effective January 1, 2025, which did not have a material impact on the consolidated financial statements.