| UNAUDITED CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY |
Note 19 — UNAUDITED CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY The Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company. The payment of dividends by entities organized in the PRC is subject to limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in the PRC. The Company’s subsidiaries are also required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its statutory reserves account until the accumulative amount of such reserves reaches 50% of its respective registered capital. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. In addition, the Group’s operations and revenue are conducted and generated in the PRC, and all of the Group’s revenue earned and currency received are denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Group may be unable to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Group’s ability to convert RMB into U.S. dollars. Regulation S-X requires the condensed financial information of the registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed 25% of consolidated net assets as of the end of the most recently completed fiscal year. The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Company’s PRC subsidiary exceed 25% of the consolidated net assets of the Company. Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been condensed or omitted. The Company’s investment in subsidiary is stated at cost plus equity in undistributed earnings of subsidiaries. The condensed financial information has been prepared using the same accounting policies as set out in the unaudited condensed consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries. For the parent company, the Company records its investments in subsidiaries under the equity method of accounting as prescribed in ASC 323, Investments — Equity Method and Joint Ventures. For the six months ended June 30, 2025 and 2026, there were no material contingencies, significant provisions of long-term obligations, or guarantees of the Company. PARENT COMPANY CONDENSED BALANCE SHEETS | | | | | | | | | As of | | As of | | As of | | | December 31, | | June 30, | | June 30, | | | 2025 | | 2026 | | 2026 | | | RMB | | RMB | | US$ | ASSETS: | | | | | | | Cash and cash equivalents | | 1,490 | | 1,504,953 | | 221,803 | Prepayment and other current assets | | 40,672,667 | | 28,802,750 | | 4,245,000 | Amounts due from related parties | | 66,413,758 | | 95,487,773 | | 14,073,156 | Intangible assets | | — | | 73,930,843 | | 10,896,058 | Investment in subsidiaries | | 16,111,116 | | 14,336,134 | | 2,112,885 | TOTAL ASSETS | | 123,199,031 | | 214,062,453 | | 31,548,902 | LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | Payroll payables | | 531,990 | | 294,865 | | 43,457 | Other payables | | 1,855,822 | | — | | — | Amounts due to related parties | | 229,730 | | 55,384 | | 8,163 | TOTAL LIABILITIES | | 2,617,542 | | 350,249 | | 51,620 | SHAREHOLDERS’ EQUITY | | | | | | | Class A ordinary shares, US$0.000025 par value, 1,988,800,000 shares authorized, 89,269 and 5,137,272 shares issued and outstanding as of December 31, 2025 and June 30, 2026, respectively* | | 15 | | 870 | | 128 | Class B ordinary shares, US$0.000025 par value, 10,000,000 shares authorized, 4,209 and 294,209 shares issued and outstanding as of December 31, 2025 and June 30, 2026, respectively* | | 1 | | 50 | | 7 | Additional paid-in capital | | 127,470,080 | | 257,008,148 | | 37,878,314 | Statutory reserves | | 2,111,434 | | 2,111,434 | | 311,187 | Ordinary shares subscribed | | (15,755,217) | | — | | — | Accumulated other comprehensive loss | | (1,086,344) | | (2,793,592) | | (411,724) | Retained earnings (Accumulated deficit) | | 7,841,520 | | (42,614,706) | | (6,280,630) | TOTAL SHAREHOLDERS’ EQUITY | | 120,581,489 | | 213,712,204 | | 31,497,282 | TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | 123,199,031 | | 214,062,453 | | 31,548,902 |
* | Shares have been retroactively adjusted to reflect the decreased number of shares resulting from the Share Consolidations, Change of Authorized Share Capital and Issue of Dual Class Shares effective from June 24, 2025, March 23, 2026 and June 1, 2026. |
Note 20 — UNAUDITED CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (continued) PARENT COMPANY CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | | | | | | | | | For the six months ended June 30, | | | 2025 | | 2026 | | 2026 | | | RMB | | RMB | | US$ | General and administrative expenses | | 3,465,275 | | 43,964,197 | | 6,479,522 | Research and development expenses | | 43,415 | | 41,086 | | 6,055 | LOSS FROM OPERATIONS | | (3,508,690) | | (44,005,283) | | (6,485,577) | Interest income | | — | | 8 | | 1 | Other expenses, net | | (4,751) | | (4,772) | | (703) | Equity in loss of subsidiaries | | (967,999) | | (6,446,179) | | (950,049) | LOSS BEFORE INCOME TAX | | (4,481,440) | | (50,456,226) | | (7,436,328) | NET LOSS | | (4,481,440) | | (50,456,226) | | (7,436,328) | OTHER COMPREHENSIVE LOSS | | | | | | | Foreign currency translation adjustment | | (678,443) | | (1,707,248) | | (251,617) | TOTAL COMPREHENSIVE LOSS | | (5,159,883) | | (52,163,474) | | (7,687,945) |
Note 20 — UNAUDITED CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (continued) PARENT COMPANY CONDENSED STATEMENTS OF CASH FLOWS | | | | | | | | | For the six months ended June 30, | | | 2025 | | 2026 | | 2026 | | | RMB | | RMB | | US$ | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | Total net loss | | (4,481,440) | | (50,456,226) | | (7,436,328) | Adjustments to reconcile net income to net cash used in operating activities: | | | | | | | Equity in loss of subsidiaries | | 967,999 | | 6,446,179 | | 950,049 | Employee stock compensation | | — | | 32,964,266 | | 4,858,332 | Unrealized foreign exchange gain | | (678,443) | | (453,211) | | (66,795) | Changes in operating assets and liabilities: | | | | | | | Prepayment and other current assets | | 170,185 | | (588,420) | | (86,722) | Other payables | | 892,751 | | (1,855,822) | | (273,515) | Payroll payables | | 220,721 | | (237,125) | | (34,948) | NET CASH USED IN OPERATING ACTIVITIES | | (2,908,227) | | (14,180,359) | | (2,089,927) | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | Purchase of intangible assets | | — | | (62,838,947) | | (9,261,315) | NET CASH USED IN INVESTING ACTIVITIES | | — | | (62,838,947) | | (9,261,315) | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | Proceeds from issuance of ordinary shares, net of issuance costs | | — | | 112,456,186 | | 16,573,991 | Net repayment from related parties | | 4,393,049 | | (33,919,558) | | (4,999,124) | Deferred costs related to initial public offering | | (1,487,976) | | — | | — | NET CASH PROVIDED BY FINANCING ACTIVITIES | | 2,905,073 | | 78,536,628 | | 11,574,867 | EFFECT OF FOREIGN EXCHANGE RATE ON CASH AND CASH EQUIVALENT | | — | | (13,859) | | (2,042) | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENT | | (3,154) | | 1,503,463 | | 221,583 | TOTAL CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | | 4,437 | | 1,490 | | 220 | TOTAL CASH AND CASH EQUIVALENTS, END OF PERIOD | | 1,283 | | 1,504,953 | | 221,803 |
|