*ST Sansheng: Special Instructions for 2025 Annual Report Inquiry Letter

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1. Regarding the cancellation of risk warning……………………………………pages 1-26

2. About liabilities and solvency………………… Pages 26-45

3. Regarding asset impairment……………………………………………………pages 45-67

4. Regarding the disposal of subsidiaries……………………………………pages 67-71

Special instructions for inquiry letters

Tianjian Letter [2026] No. 8-51

Shenzhen Stock Exchange:

We are informed of the "Inquiry Letter Regarding *ST Sansheng's 2025 Annual Report" (Corporate Department Annual Report Inquiry Letter [2026] No. 11, hereinafter referred to as the Inquiry Letter) transferred from Chongqing Sansheng Industrial Co., Ltd. (hereinafter referred to as Sansheng Co., Ltd. or the company). We have carefully reviewed the financial matters that we need to explain in the inquiry letter, and the report is now explained as follows.

1. Regarding the cancellation of risk warnings. The company's net assets at the end of the audited period in 2024 were negative, and according to regulations, the company's stock trading has been subject to a delisting risk warning since April 29, 2025. At the same time, the company's stock continues to be subject to other risk warnings, including: ① The company and Chongqing Peisheng Pharmaceutical Technology Co., Ltd. controlled by the former controlling shareholder jointly borrowed money from Chongqing Wansheng District Henghui Small Loan Co., Ltd., and provided the loan to Peisheng Pharmaceutical for use. This matter has not been reviewed by the company's board of directors, supervisory board and shareholders' meeting, constituting related party capital occupation; ② The company's overseas subsidiary Sansheng Pharmaceutical Co., Ltd. entered into an agreement with Ethiopian NIB on June 26, 2019 The international bank signed a mortgage guarantee contract and used its plants and machinery and equipment as collateral to provide guarantee for SSC Construction P.L.C's borrowing of 400 million birr (equivalent to approximately RMB 51.83 million) from Ethiopian NIB International Bank. This matter was not reviewed by the company's board of directors, board of supervisors and shareholders' meeting, and constituted the company's illegal provision of external guarantees. ③ The company has an internal control audit report that issued a negative opinion in the past year; ④ The company's main bank account has been frozen; ⑤ The company's net profit before and after deducting non-recurring gains and losses in the past three fiscal years, whichever is lower, is negative, and the audit report for the most recent year shows that there is uncertainty in the company's ability to continue operating. On March 31, 2026, the company disclosed the "Announcement on Application for Cancellation of Delisting Risk Warning and Other Risk Warnings", and the company applied to cancel the delisting risk warning and other risk warnings. The company completed bankruptcy reorganization in December 2025. During the reporting period, the company's reorganization profit and loss was 225 million yuan. Please ask your company: (1) Combined with the impact and changes of bankruptcy and reorganization on the main financial data during the reporting period, explain the accuracy of net assets;

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Whether the recognition process and accounting treatment are legal and compliant, whether the specific content of reorganization gains and losses and accounting treatment are legal and compliant, whether there are other reorganization or debt restructuring gains and losses, if so, please describe the specific content. (2) Combined with the specific contents of Article 9.3.8 of the "Shenzhen Stock Exchange Stock Listing Rules" and other relevant regulations, explain whether the company meets the conditions, specific contents and basis for revoking the delisting risk warning point by point. (3) Explain the background reasons, specific process and content of the resolution of related party fund occupation and illegal guarantee issues, the basis and evidence for the elimination of related matters, whether the relevant rectification is thorough and effective, and whether it involves information disclosure and clear opinions issued by professional institutions. If so, please explain the specific content. (4) Combined with the relevant background of the company’s 2024 financial report being issued with an audit opinion of “significant uncertainties related to continuing operations”, explain the main content and process, basis and relevant evidence for the elimination of the above risk warning situation, a comparison of the relevant contents of the “significant uncertainties related to continuing operations” in the last two annual reports, and whether the intermediary agency has issued a clear opinion. (5) The company's 2024 internal control report was issued a negative opinion by the accountant. The main matters involved are as follows: The company has been occupied by related parties for non-operating funds and illegal guarantees for many consecutive years since 2020, and has been issued administrative supervision measures many times. There are major internal control deficiencies in related transaction decision-making, fund management, borrowing and guarantees, information disclosure, etc. Please explain the main content and process, basis and relevant evidence of the elimination of the above-mentioned internal control-related risk warning situations based on the background of the negative opinion issued on the company's 2024 internal control report, as well as the comparison and changes with the main content of the 2025 internal control report, whether the relevant rectifications are thorough and effective, and whether the standardization of corporate governance and the effectiveness of internal control after the reorganization are legal and compliant. (6) Combined with the background and specific content of the unfreezing of the company's main frozen bank accounts in 2024, explain the main content, process, basis and relevant evidence of the elimination of the above-mentioned relevant risk warning situations. As of now, whether the company's bank accounts are still frozen, if so, please provide the specific content. (7) Combined with the above issues, explain whether the company has other situations and risks that may trigger delisting risks or other risk warnings, and whether the intermediary institution has expressed clear opinions on all the above-mentioned cancellation of risk warning situations (if necessary). Please ask the accounting firm to verify the above matters and issue a clear opinion. (Item 1 of the inquiry letter)

(1) Combined with the impact and changes of bankruptcy and reorganization on the main financial data during the reporting period, explain whether the net asset recognition process and accounting treatment are legal and compliant, the specific content of reorganization gains and losses and whether the accounting treatment is legal and compliant, and whether there are other reorganization or debt reorganization gains and losses. If so, please explain the specific content

1. Changes in net assets

The changes in the company's main financial data after the reorganization is completed are as follows:

Unit: 10,000 yuan

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2025/2025 2024/2024

Item Change amount

Mo Mo

Operating income 89,984.85 119,571.82 -29,586.97Total profit -43,670.40 -62,895.31 19,224.91Net profit -45,878.90 -64,975.30 19,096.41Net attributable to owners of the parent company

-41,968.27 -65,013.06 23,044.79Profit

Total assets 119,575.90 262,604.13 -143,028.23 Owner's equity attributable to the parent company 16,838.05 -41,181.09 58,019.15

As shown in the table above, the company's operating income in 2025 was 899.8485 million yuan, a decrease of 17.30% from the previous year. This was mainly due to the impact of the market, funds, etc., and the operating income of building materials and pharmaceuticals declined to varying degrees. Although the reorganization was completed this year and reorganization income was formed, due to the impact of the decline in gross profit margin, high financing costs, goodwill impairment and asset impairment, the total profit, net profit and net profit attributable to the parent company for the year are still negative. This year's net assets turned from negative to positive, mainly due to the increase in capital reserves and the write-off of other comprehensive income and other non-profit changes in owner's equity caused by the reorganization, rather than the contribution of current operating profits.

The comparison of changes in net assets between December 31, 2024 and December 31, 2025 is as follows: Unit: 10,000 yuan project December 31, 2025 December 31, 2024 Change amount paid-in capital (or share capital) 68,410.20 43,200.00 25,210.20 Capital reserve 67,956.44 25,416.92 42,539.51 Other comprehensive income -33,298.30 33,298.30 Special reserves 1,060.60 -1,060.60 Surplus reserve 7,558.04 7,558.04

Undistributed profits -127,086.62 -85,118.36 -41,968.27 belong to the parent company

16,838.05 -41,181.09 58,019.15 Total shareholders’ equity

The items that increased net assets this year were due to the increase in paid-in capital, capital reserves and other comprehensive income. The individual items are explained as follows:

(1) Changes in paid-in capital (share capital)

According to the reorganization plan approved by the court ruling, the company increased its paid-in capital by converting capital reserves into share capital. A total of RMB 252.102 million was transferred during this period, correspondingly reducing the equivalent amount of capital reserve. This matter is an internal structural adjustment of owners' equity and will not affect the total net assets.

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(2) Changes in capital reserve

Changes in capital reserve this year mainly consist of the following events:

1. Received investment funds from reorganization investors: In 2025, the company received a total of 254.2 million yuan in investment funds from investors including reorganization investor Hebei Jiheng Group Co., Ltd. (hereinafter referred to as Jiheng Group). In terms of accounting treatment, bank deposits are increased and capital reserves are increased at the same time. This matter increased net assets by RMB 254.2 million;

2. Converting capital reserves to equity to offset debts: According to the reorganization plan, 92,102,041 shares of the shares converted from capital reserves were used to distribute to ordinary creditors to pay off debts. The fair value of this part of the stock calculated based on the closing price of the stock on the day after the completion of the conversion of capital reserves into shares (trading was suspended on the day of completion) was 42,551.14 Ten thousand yuan, the company will recognize the difference between the book value of the debt repaid and the fair value of the above equity instruments in the current profit and loss, and at the same time increase the capital reserve by 425.5114 million yuan based on the fair value of the equity instruments;

3. Reduction in capital reserve converted into share capital: As mentioned above, due to the implementation of capital reserve converted into share capital, capital reserve decreased by RMB 252.102 million (internal structural adjustment does not affect net assets);

4. Splitting subsidiaries to reduce capital reserves: The reorganization plan was implemented this year and subsidiaries related to the building materials sector were divested, resulting in a reduction of capital reserves of RMB 2.2143 million;

In summary, the total net increase in capital reserves is RMB 425.3951 million.

(3) Changes in other comprehensive income

This year, due to the implementation of the reorganization plan, the company divested its building materials sector subsidiary. Other comprehensive income (debit balance, red letter) caused by the translation difference of foreign currency financial statements was transferred to the current profit and loss in accordance with the "Accounting Standards for Business Enterprises No. 22" and relevant regulations when the subsidiary was terminated. This write-off increased net assets by RMB 332.983 million.

2. The specific content and accounting treatment of reorganization gains and losses, and whether there are other reorganization or debt restructuring gains and losses. Based on the implementation of the reorganization plan, the debt restructuring gains and losses recognized by the company mainly include:

1. Profit and loss arising from cash repayment of debts: The company uses part of the funds invested by reorganization investors and its own funds to repay various claims according to the amount specified in the reorganization plan. The difference between the book value of the debt repaid and the cash paid is included in the current profit and loss;

2. Gains and losses arising from the use of shares to offset debts: According to the reorganization plan, the company will use 92,102,041 shares converted into shares to offset debts. The difference between the book value of the debts paid off and the fair value is recognized as debt restructuring income and included in the current profits and losses.

3. Gains and losses arising from the extension of retained debt and modification of debt conditions: For the situation of extended debt, the following

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According to the provisions of "Accounting Standards for Business Enterprises No. 12 - Debt Restructuring", profits and losses are recognized as the difference between the fair value of the modified debt terms and the book value of the original debt.

The above-mentioned debt restructuring gains will be recognized after the reorganization plan is implemented and major uncertainties are eliminated (that is, December 25, 2025). The accounting treatment complies with the provisions of "Accounting Standards for Business Enterprises No. 12 - Debt Restructuring" and "Regulatory Guidelines for Listed Companies No. 11 - Matters Related to Bankruptcy and Reorganization of Listed Companies" (CSRC Announcement [2025] No. 2).

3. Are there any gains or losses from other restructuring or debt restructuring?

According to the company's self-examination, in addition to the above-mentioned reorganization income and investment income generated from divesting building materials assets, it also involves estimated liabilities that may be formed by the company's subsidiaries providing guarantees for original debts. For details, see the description in Note 2 (3). Apart from this, the company has no other major restructuring or debt restructuring gains and losses.

4. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Obtain and review key information related to the company's reorganization, including the "Civil Ruling", "Reorganization Plan", reorganization investment agreement, court-approved reorganization plan implementation documents, legal opinions on the completion of the reorganization plan, etc.;

(2) Understand the implementation status of the reorganization plan with the company's management and reorganization administrator, including the court's ruling on reorganization-related matters, the process of creditors' declaration of claims and administrator review and court ruling, the administrator's confirmation and suspension of confirmation of claims, the availability of debt repayment shares and funds, the performance of reorganization investors, etc., and determine whether there are major uncertainties in the implementation of the reorganization plan;

(3) Obtain the details of claims and main claim declaration materials provided and confirmed by the administrator, and check them with court ruling documents, company accounting data, etc.;

(4) Obtain and check the bank receipt of the reorganization investor’s investment funds, and check the status of the investment funds;

(5) Obtain and check the transfer registration confirmation of China Securities Depository and Clearing Co., Ltd. regarding the transfer of shares and the use of shares to offset debts, etc., to determine whether the major uncertainties in the implementation of the reorganization plan have been eliminated and whether the conditions for the termination of recognition of claims and debts have been met;

(6) Review the calculation process of the company's reorganization profit and loss amount to confirm whether the amount is accurate; review the accounting processing involved in the company's reorganization and check whether it complies with the Accounting Standards for Business Enterprises and related regulations;

(7) Conduct inquiry procedures with the company’s management to learn whether there are any other restructuring or debt restructuring profits and losses.

After verification, we believe that the company’s net asset recognition process and accounting treatment are legal and compliant, and the reorganization of profits and losses is

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The specific content and accounting treatment are legal and compliant, and the company has no other profit or loss from reorganization or debt restructuring.

(2) Combined with the specific contents of Article 9.3.8 of the "Shenzhen Stock Exchange Stock Listing Rules" and other relevant regulations, explain whether the company meets the conditions, specific contents and basis for revoking the delisting risk warning point by point.

1. Basic information on the company’s stocks being subject to delisting risk warnings

According to the relevant provisions of Article 9.3.1 of the "Stock Listing Rules", because the company's audited net assets at the end of 2024 were negative, its stock trading was subject to a delisting risk warning.

2. A step-by-step comparison of whether the company meets the conditions for canceling the delisting risk warning

According to Article 9.3.8 of the Stock Listing Rules: “After a listed company’s stock transactions are subject to a delisting risk warning due to the circumstances specified in paragraph 1 of Article 9.3.1 of these Rules, if the annual report of the year immediately following the year in which the delisting risk warning is actually triggered indicates that the company does not have any of the circumstances specified in paragraphs 1 to 7 of Article 9.3.12 of these Rules, the company may apply to the Exchange to cancel the delisting risk warning for its stock transactions.”

The company's 2025 annual report has been audited by this firm. With reference to the first to seventh items of Article 9.3.12 of the "Stock Listing Rules", the company's absence of relevant circumstances is explained as follows:

"Stock Listing Rules" Article 9.3.12 Whether there is a serial number? Specific circumstances and basis

The circumstances of termination of listing listed in Article 1. In this case, the Exchange has conducted a review of the company’s 2025 financial statements.

Audited and issued an audit report (Tianjian Review [2026]

Audited total profit, net profit,

No. 8-147), the company’s audited profit in 2025

Net profit after deducting non-recurring gains and losses

(1) The lower of total profit, net profit, and non-existent profit after deducting non-recurring gains and losses is a negative value, and after deducting

The net profits are all negative, but the operating income after deduction

The subsequent operating income is less than 300 million yuan

The income was RMB 882.198 million, higher than 300 million

Yuan

As of December 31, 2025, the company has audited

(2) If the audited net assets at the end of the period are negative, the net assets attributable to the owners of the parent company are not RMB 168.3805 million and are positive.

The financial accounting report was issued with a reservation. The firm has reviewed the company’s 2025 financial statements.

(3) Opinion, unable to express an opinion or negative opinion, and issued a standard unqualified audit report Audit report without opinion (Tianjian Shen [2026] No. 8-147)

Total profit and net profit after retrospective restatement

Profit, after deducting non-recurring gains and losses

The company’s 2025 financial report does not need to be reviewed

The lower of the three net profits is negative, and

(4) There are no retrospective restatements, so there is no operating income after deductions that is less than 300 million due to retrospective restatements.

Situations that lead to the above financial indicators being hit

Yuan; or retrospective restatement period-end net

Assets are negative

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The Exchange has reviewed the company’s financial results as of December 31, 2025

Internal control over financial reporting was issued

Audited the effectiveness of internal controls and issued standards

(5) There is no quasi-unqualified internal control audit report (day) that expresses an opinion or a negative opinion.

Audit report

Jian Shen [2026] No. 8-148)

Failure to disclose internal control audits as required

According to the accounting report, due to the completion of the bankruptcy resumption, the company has disclosed in 2025 in accordance with relevant regulations.

(6) In case of reorganization, listing or major assets, the internal control audit shall be disclosed at the same time as the annual report. If there is no reorganization, the report cannot be disclosed in accordance with relevant regulations.

except

The company's 2025 annual report has been reviewed by all directors

Failure to disclose more than half within the statutory period

passed and completed on March 31, 2026

(7) Directors guarantee that there is no disclosure, and all directors guarantee that the contents of the annual report are true, accurate and complete.

annual report

True, accurate and complete

3. Application status for canceling delisting risk warning

According to Article 9.3.9 of the Stock Listing Rules, “If a company meets the conditions specified in Article 9.3.8 of these Rules, it shall state when disclosing its annual report whether it will apply to the Exchange to cancel the delisting risk warning. If the company intends to apply to cancel the delisting risk warning, it shall submit an application to the Exchange within five trading days from the date of disclosure.” The company has announced its annual report on March 31, 2026, and simultaneously submitted an application to cancel the delisting risk warning to your exchange, which complies with relevant regulations.

To sum up, the company's 2025 annual financial report and internal control audit show that the company does not have any termination of listing as stipulated in the first to seventh items of Article 9.3.12 of the "Stock Listing Rules". The company has fully satisfied all the conditions for applying to cancel the delisting risk warning stipulated in Article 9.3.8 of the Stock Listing Rules, and has submitted the relevant application to your exchange within the prescribed period.

4. Explanation on whether the company has delisting risk due to negative audited net assets in the next three years.

As of December 31, 2025, the company's audited net assets attributable to the owners of the parent company were RMB 168,380,500. Factors that led to the company's continuous large losses, such as the decline in performance of the company's original building materials segment, asset impairment, currency depreciation of overseas operations and increase in financial expenses due to overdue debt, have all been eliminated. After the company completed the judicial reorganization, the management appointed by the new board of directors took effective operating measures in accordance with the reorganization plan. According to the company's order volume and post-inventory production and carry-over status from January to March 2026, the company's production and operation order has gradually restored, the efficiency of the pharmaceutical sector has gradually improved, and there are signs of turning losses into profits.

According to the reorganization plan, Jiheng Group, as an industrial investor, will provide cash flow support of no less than 200 million yuan to listed companies through shareholder loans, non-public issuance, etc. within 3 years from the date it becomes the company’s controlling shareholder. On March 31, 2026, the company disclosed the "2026 Financial Budget Report". According to the content of the report:

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Project Unit 2026 Budget Actual Variable Ratio Sales Expenses in 2025 Ten thousand yuan 1,284.00 4,255.09 -69.82% Administrative expenses Ten thousand yuan 6,687.79 16,844.75 -60.30% Financial expenses Ten thousand yuan 2,380.46 21,126.03 -88.73% Credit impairment loss (loss

Ten thousand yuan 977.03 -100.00% (please enter with "-")

Asset impairment loss (loss

Ten Thousand Yuan -250.00 -15,870.46 -98.42% (cannot be filled in with "-")

Because the company's original building materials segment and overseas business have been divested, administrative expenses and sales expenses will be significantly reduced; because the company's asset-liability structure and financial status have been fundamentally improved after judicial reorganization, financial expenses will be significantly reduced; because asset impairments and estimated liabilities in previous years have been fully provided, the company will not experience large asset impairments in the future.

To sum up, the company will not suffer large losses in the next three years, nor will there be a risk of delisting due to negative net assets after auditing.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Audit the company's operating results in 2025, and check the company's total profits, net profits, net profits after deducting non-recurring gains and losses, the amount of operating income after deductions and the amount of net assets attributable to the company at the end of the period based on the audit results;

(2) Understand the company's key internal controls, evaluate the design of these controls, determine whether they are implemented, and test the operating effectiveness of relevant internal controls;

(3) Check the disclosure time of the company's 2025 annual report and the signature of all directors, confirm that the company has disclosed the annual report within the legal period, and all directors have guaranteed the authenticity, accuracy and completeness of the contents of the annual report;

(4) Check the relevant documents and submission time for the company's application to cancel the delisting risk warning to the Shenzhen Stock Exchange, and confirm that the company has submitted the application to the exchange within the specified time;

(5) Inquire with the company’s management to find out whether there are other circumstances that may lead to the termination of listing. After verification, we believe that the company meets all the conditions for applying to cancel the delisting risk warning stipulated in Article 9.3.8 of the Stock Listing Rules, and the company has submitted a cancellation application to the exchange within the prescribed period.

(3) Explain the background reasons, specific processes and internal procedures for solving related party fund occupation and illegal guarantee issues.

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content, the basis and evidence for the elimination of relevant matters, whether the relevant rectifications are thorough and effective, and whether it involves information disclosure and clear opinions issued by professional institutions. If so, please explain the specific content.

1. The company's stocks are subject to other risk warnings "due to the occupation of funds and the situation is serious"

On April 28, 2022, the company disclosed the "2021 Annual Report". The company signed a "Loan Contract" with Chongqing Bisheng Pharmaceutical Technology Co., Ltd. (hereinafter referred to as Bisheng Pharmaceutical) and Chongqing Wansheng District Henghui Small Loan Co., Ltd. (hereinafter referred to as Henghui Small Loan) on May 15, 2019, agreeing that Bisheng Pharmaceutical and the company will jointly borrow RMB 100 million from Henghui Small Loan. On the same day, Henghui Small Loan paid 100 million yuan to the account of Bisheng Medical as agreed. On November 18, 2021, Henghui Small Loan filed a lawsuit with the People's Court of Qijiang District, Chongqing, requesting a judgment that the company and Bisheng Medicine jointly repay the loan principal, interest and legal fees.

On July 8, 2022, the company disclosed the "Announcement on the Progress of the Company's Litigation and the Receipt of Civil Judgment" (Announcement No.: 2022-38). The company received the "Civil Judgment" (2021) Yu 0110 Minchu No. 14529 from the People's Court of Qijiang District, Chongqing. The court ruled that Peisheng Pharmaceutical and the company should repay the principal, interest and legal fees of Henghui Small Loan after the judgment takes effect.

On September 24, 2022, the company disclosed the "Announcement on the Implementation of Other Risk Warnings on the Company's Stocks" (Announcement No. 2022-67). The company and Peisheng Pharmaceutical, which was controlled by the controlling shareholder at the time, jointly borrowed money from Henghui Small Loan and provided the loan to Peisheng Pharmaceutical for use. This matter has not been reviewed by the company's board of directors, supervisory board and shareholders' meeting, and has constituted the occupation of related party funds. As of the date of the announcement, the total principal and interest of the balance of funds occupied was 66.9524 million yuan.

According to Articles 9.8.1 and 9.8.2 of the Shenzhen Stock Exchange's "Shenzhen Stock Exchange Stock Listing Rules (2022 Revision)", if there is no feasible solution to the above-mentioned non-operating fund occupation or if a solution is proposed but it is not expected to be resolved within one month, the company's stocks will be subject to other risk warnings.

After the company's board of directors discovered the above-mentioned non-operating capital occupation by the controlling shareholder and its related parties, it immediately launched a self-examination and communicated with the controlling shareholder and its related parties in a timely manner, urging the controlling shareholder and its related parties to formulate solutions. However, due to failure to resolve the issue within the prescribed time limit, the company's stocks have been subject to other risk warnings since September 27, 2022.

2. The company’s stock was subject to other risk warnings due to “providing external guarantees in violation of prescribed procedures and the circumstances were serious”

On September 24, 2022, the company disclosed the "Announcement on the Implementation of Other Risk Warnings on the Company's Stocks"

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(Announcement No. 2022-67). The company's overseas subsidiary Sansheng Pharmaceutical Co., Ltd. signed a mortgage guarantee contract with Ethiopian NIB International Bank on June 26, 2019, using its factory buildings and machinery and equipment as collateral to provide guarantee for SSC Construction P.L.C (hereinafter referred to as "SSC") to borrow 400 million birr (equivalent to approximately RMB 51.83 million) from Ethiopian NIB International Bank. This matter has not been reviewed by the company's board of directors, board of supervisors and shareholders' meeting, and has constituted the company's illegal provision of external guarantees. As of the date of the announcement, SSC still had RMB 26.41 million outstanding.

According to Articles 9.8.1 and 9.8.2 of the Shenzhen Stock Exchange's "Shenzhen Stock Exchange Stock Listing Rules (2022 Revision)", if there is no feasible solution to the above-mentioned illegal guarantee matters or if a solution is proposed but it is not expected to be resolved within one month, the company's stocks will be subject to other risk warnings.

After the company's board of directors discovered the above-mentioned illegal guarantee matters, it immediately launched a self-examination and promptly communicated with the controlling shareholder and its related parties to formulate solutions. However, due to failure to resolve the issue within the prescribed time limit, the company's stocks have been subject to other risk warnings since September 27, 2022.

3. The background of capital occupation and illegal guarantee issues

Peisheng Medicine and SSC are companies controlled by the original actual controller. As a co-borrower of Peisheng Medicine, the company borrowed money from Henghui Small Loan and guaranteed SSC's loan. None of the above matters have been approved by the company's board of directors and shareholders' meeting. As of December 31, 2023, the company has paid a total of 14.7253 million yuan in compensation for fulfilling its guarantee obligations, and recognized a liability of 94.2201 million yuan based on the expected repayment amount of the above matters, resulting in an amount receivable from related parties of 109.595 million yuan (including interest). In addition, despite tight funds, capital occupation and illegal guarantees, the company still paid guarantee fees to related parties, and was entrusted to pay goods to individuals designated by the actual controller, and expense reimbursements were paid to relatives of employees. The company did not maintain effective internal controls over financial reporting in areas such as capital management, borrowings and guarantees.

4. Background of resolution of capital occupation and illegal guarantees

On May 10, 2024, the company received the "Decision on Administrative Supervision Measures" issued by the Chongqing Securities Regulatory Bureau of the China Securities Regulatory Commission. Due to the above-mentioned capital occupation and illegal guarantee matters, according to Article 170, Paragraph 2, of the Securities Law of the People's Republic of China, Article 52 of the "Measures for the Administration of Information Disclosure of Listed Companies" (CSRC Order No. 182), and Article 52 of the "Supervision Guidelines for Listed Companies" According to Article 23 of No. 8 - Supervision Requirements for Capital Transactions and External Guarantees of Listed Companies, the Chongqing Securities Regulatory Bureau decided to take administrative supervision measures to order corrections against the company and its original actual controller Pan Xianwen, requiring the company to take active measures to collect the occupied funds and interest, and to cancel illegal guarantees; requiring Pan Xianwen to effectively perform his main responsibilities and actively raise funds to repay the occupied funds.

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Funds and illegal guarantees shall be released; all occupied funds and interest and illegal guarantees shall be returned and released within 6 months from the date of receipt of the decision letter to achieve true and comprehensive rectification.

5. The specific process and content of rectification

With the assistance of regulatory requirements and the restructuring investor Jiheng Group, the company and its original actual controller Pan Xianwen completed the repayment of all funds occupied and the release of illegal guarantees before November 2024. The specific process is as follows:

(1) Solution to the problem of capital occupation

On November 4, 2024, the company received the "Notice of Voluntary Surrender of Rights" issued by Henghui Small Loan. Henghui Small Loans voluntarily waived its remaining unfulfilled claims and related recourse rights under the (2021) Chongqing 0110 Minchu No. 14529 Civil Judgment and (2022) Chongqing 05 Minzhong No. 8238 Civil Judgment (repaid claims are not within the scope of the waiver), and agreed to immediately lift relevant rights restrictions on the company and its property. On November 5, 2024, the company received a total of 16.2086 million yuan in occupied funds and interest repaid by the restructuring investor Jiheng Group on behalf of Beisheng Medicine and SSC. As of November 5, 2024, all non-operating funds occupied by Peisheng Medicine and SSC have been paid off.

The firm conducted an audit and issued the "Special Audit Instructions" (Tianjian Shen [2024] No. 8-409). On November 7, 2024, the company disclosed the "Announcement on the Completion of Rectification of Fund Occupation" (Announcement No. 2024-81). The non-operating fund occupation by the company's original actual controller and its related parties has been paid off, and the fund occupation problem has been rectified.

(2) Resolution of illegal guarantee issues

In March and June 2024, SSC repaid a total of 125.5071 million birr in loan principal and interest to NIB Bank by borrowing from Eastern Industry Park PLC (including penalty interest and other 4.1649 million birr from January 1 to June 6, 2024). On June 6, 2024, NIB Bank repaid SSC Issue a "Loan Settlement Certificate" to confirm that all principal and interest under the loan contract signed by SSC and NIB Bank on June 26, 2019 have been paid off. On the same day, SSC and its former holding subsidiary Sansheng Pharmaceutical Co., Ltd. obtained the "Notification Letter Lifting the Prohibition on Collateral Mortgage" issued by NIB Bank. On June 7, 2024, Sansheng Pharmaceutical Co., Ltd. retrieved the original copies of the relevant housing rights certificates and obtained a notification letter lifting the ban on mortgages of relevant machinery and equipment. The related illegal guarantees for loans have been eliminated.

Our firm conducted a verification and issued the "Special Instructions on the Release of Illegal Guarantees of Chongqing Sansheng Industrial Co., Ltd." (Tianjianhan [2024] No. 8-67), and Shanghai AllBright (Chongqing) Law Firm issued a "Legal Opinion" confirming that the company's illegal guarantees have been eliminated. December 9, 2024

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The company disclosed the "Announcement on the Completion of Rectification of Illegal Guarantees" (Announcement No. 2024-89), and the company's illegal guarantee cancellation situation has been rectified.

In summary, the company's rectification of related party fund occupation and illegal guarantee issues has been thorough and effective, and the related risks have been completely eliminated.

6. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the internal control system related to the company's capital transactions with related parties, external guarantees and related transactions, evaluate whether its design is reasonable, and test the effectiveness of key control operations;

(2) Obtain and examine the "Notice of Voluntary Surrender of Rights" issued by Henghui Small Loan, relevant civil judgments and second-instance judgments, as well as legal opinions issued by lawyers on Henghui Small Loan loan contract disputes;

(3) Obtain and inspect the bank remittance vouchers, collection receipts and capital flows for the repayment of occupied funds and interest by the restructuring investor Jiheng Group on behalf of Beisheng Medical and SSC;

(4) Obtain and inspect SSC bank statements, loan repayment documents and loan settlement certificates issued by NIB Bank; obtain documents proving the release of asset mortgages issued by relevant Ethiopian government departments and legal opinions issued by Shanghai AllBright (Chongqing) Law Firm on illegal guarantee matters;

(5) Check the company’s announcements on the rectification of capital occupation and illegal guarantee matters, as well as the special audit report issued by the Exchange and the special explanation on the release of illegal guarantees, to confirm that the company has fulfilled its information disclosure obligations.

After verification, we believe that the problems of capital occupation and illegal guarantees by the company's related parties have been completely solved by repaying the reorganized investor Jiheng Group, creditors giving up the remaining claims and paying off the main debt. The relevant rectifications are thorough and effective; the company has fulfilled its information disclosure obligations on the above rectification matters.

(4) Combined with the relevant background of the company’s 2024 financial report being issued with an audit opinion of “significant uncertainties related to continuing operations”, explain the main content and process, basis and relevant evidence of the elimination of the above-mentioned risk warning situation, a comparison of the relevant content of the “significant uncertainties related to continuing operations” in the last two annual reports, and whether the intermediary agency has issued a clear opinion.

1. The company's stock was issued other risk warnings because "the net profit before and after deducting non-recurring gains and losses in the last three fiscal years was negative, whichever was lower, and the audit report of the most recent year showed that there is uncertainty in the company's ability to continue operating."

On April 30, 2024, the company disclosed the "Announcement on the Superimposition of Other Risk Warnings on the Company's Stocks".

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"Announcement No.: 2024-23", according to the company's "2023 Annual Report" disclosed on April 30, 2024, the company's net profit before and after deducting non-recurring gains and losses in the last three fiscal years, whichever is lower, is negative, and the audit report for the most recent year shows that there is uncertainty in the company's ability to continue operating. The Exchange's 2023 The "Audit Report" of 2018 issued a qualified opinion, which stated that "the company has disclosed the main circumstances and matters that may cause significant doubts about its ability to continue operating, the relevant measures to improve its ability to continue operating, and the progress of the reorganization work. Since some response plans related to the assessment of its ability to continue operating are still in the process of program demonstration or approval, the company failed to fully disclose the major uncertainties related to its going concern, which has a significant impact on the assessment of its ability to continue operating." It is believed that there is uncertainty in the company's ability to continue operating. According to the provisions of Article 9.8.1 (7) of the Shenzhen Stock Exchange's "Stock Listing Rules (2023 Revision)", the company's stocks will be superimposed on other risk warnings from April 30, 2024.

2. Background related to “Material uncertainties related to going concern” in the audit opinion of the 2024 financial report

The company's net profits in 2022, 2023, and 2024 were -291.5879 million yuan, -409.3147 million yuan, and -649.753 million yuan respectively. It had suffered losses for three consecutive years and the amount was significant; as of December 31, 2024, the owner's equity attributable to the parent company was -411.8109 million yuan, and the non-restricted funds in monetary funds were. 55.4922 million yuan (of which 28.3552 million yuan was deposited overseas), and interest-bearing liabilities were 1.9169779 million yuan (of which 1.7921648 million yuan was overdue). At the same time, the company has major lawsuits and arbitrations involving an amount of RMB 1,454,028,300, unpaid employee wages and social security of RMB 56,918,200, and unpaid taxes of RMB 81,571,600. Affected by the lawsuit, multiple bank accounts of the company have been frozen. These matters or situations may cause the company to no longer have the ability to continue operating.

In response to the above situation, although the company plans to take measures such as actively resolving litigation and arbitration, strengthening the collection of accounts receivable, expanding business channels, integrating resources, stabilizing personnel, optimizing operations, selling assets, renegotiating financing agreements or obtaining alternative financing, and applying to the court for bankruptcy reorganization, as of the end of 2024, there is still significant uncertainty as to whether these measures can be effectively implemented, and the company's reorganization plan is still in the process of approval, which will have a significant impact on the assessment of its ability to continue operating. Therefore, the firm expressed reservations about the company's ability to continue as a going concern in its 2024 annual report.

3. Comparison of content related to “Material uncertainties related to continuing operations” in the annual reports of the past two years

Comparison dimension 2025 2024

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Qualified opinion (including "type of audit opinion on going concern capability" standard unqualified opinion

matters")

The company partially improved its ability to continue operating. The company did not have any impact on the reporting period.

A major response plan (such as a reorganization plan) for continued operations has not yet been completed. Continued operations within 12 months

The specific nature of uncertainty is failure to fully disclose matters that raise significant doubts about ability during the approval process or

Description: Relevant information that is essential for assessing the ability to continue as a going concern

have a significant impact on

Is there a confrontation?

sustainable operating capability

No Yes

causing serious doubts

matters

Management improvement measures All measures have been implemented and obtained. The measures are still in the approval stage and have not yet been implemented. Significant results have been implemented.

4. The main content and process of eliminating the risk warning situation of sustainable operation capability in 2025

In order to eliminate the major uncertainties in continuing operations revealed by the audit opinions in 2024, the company adjusted its business structure through bankruptcy reorganization in 2025 and systematically improved its ability to continue operating. The specific process is as follows:

(1) Complete bankruptcy reorganization and implement judicial procedures: On December 25, 2025, the company completed the bankruptcy reorganization procedure. The successful implementation of the reorganization laid a legal foundation and practical conditions for the company to resolve the debt crisis and restore its ability to continue operating;

(2) Optimize the business structure and divest the building materials segment: The company made strategic adjustments to the business structure through reorganization, divested the building materials segment business that had operational difficulties, and retained and focused on the pharmaceutical manufacturing segment with core competitiveness and stable profitability. The streamlining and optimization of the business structure has significantly reduced the company's operating risks and financial pressure;

(3) Improve the asset-liability structure and reduce financial risks: As of the end of 2025, the company's audited asset-liability ratio was 79.99%, a decrease of 28.73 percentage points from 108.72% at the end of 2024. The net assets have turned from negative to positive, the financial situation has been fundamentally improved, and the solvency and risk resistance capabilities have been significantly enhanced; the impact of major litigation and arbitration has been basically eliminated through judicial reorganization; as of the end of March 2026, the company's employee salaries payable were 5.1348 million yuan, and taxes payable were 5.4919 million yuan. The impact of unpaid employee wages, social security and taxes on the company's ability to continue operating has been eliminated; as of March 2026 At the end of the month, the company's basic accounts and most general settlement accounts were unfrozen, and the company's fund payment functions required for normal production and operations have been basically restored;

(4) The controlling shareholder provides financial support and actually performs the contract: According to the reorganization plan, the controlling shareholder Jiheng Group has made a commitment to provide necessary financial support according to the company’s business development needs and will continue to assist the company in the future.

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The company optimizes operations and supplements working capital. On March 2, 2026, the company held the second meeting of the sixth board of directors and reviewed and approved the "Proposal on the Provision of Loans and Related Transactions by the Controlling Shareholder to the Company's Wholly-Owned Subsidiaries". The controlling shareholder Jiheng Group plans to provide the company's wholly-owned subsidiary Liaoyuan Baikang Pharmaceutical Co., Ltd. (hereinafter referred to as Liaoyuan Baikang) with the first loan of 50 million yuan to ensure the stable operation of the pharmaceutical sector. Liaoyuan Baikang has received the payment on March 4, 2026.

5. The company’s future business plan

Due to bankruptcy and reorganization, the company's original building materials sector and foreign sectors have been divested, and the bankruptcy and reorganization has been completed, so the relevant negative factors have been eliminated. In the future, the company will focus on the pharmaceutical sector, strengthen international certification, strengthen the construction of the company's quality system, and pass the EU COS certification and US FDA certification; actively explore the international market, enable the sales of raw materials to form domestic and international dual markets, and transfer the sales of raw materials from the low-end market to the high-end market; increase the promotion of existing preparation varieties, and actively explore the international market for preparations to form international sales of preparations; increase investment and construction , to expand the production capacity of its core subsidiary, the company will extend the industrial chain backwards to form API production capacity based on Chongqing Chunrui Pharmaceutical Intermediates; at the same time, it will use the preparation production capacity of Baikang Pharmaceutical to produce and sell preparations, so that the original pharmaceutical sector of the listed company will form a complete industrial chain from raw materials, intermediates, APIs to preparations.

6. Operational measures taken by the company’s management and their results

(1) Through technological transformation and upgrading, energy consumption is reduced, product yield and quality are improved, and cost reduction and efficiency improvement are achieved significantly;

(2) Plan to build new projects for units with insufficient capacity utilization in subsidiaries to improve asset utilization, increase operating income, and reduce costs;

(3) The controlling shareholder provides financial assistance to the company at an interest rate no higher than the bank’s benchmark interest rate, replaces expired high-interest bank loans, and reduces financial costs;

(4) Actively coordinate with all cooperative banks to apply for credit, replace retained debt loans, and reduce the guarantee fees for original retained debt loans;

(5) From January to March 2026, the company's post-inventory production and carry-over situation was good. The procurement and use of raw materials, the completion and carry-over of products in progress, the storage and sales of inventory goods basically matched, and there were no large backlogs or abnormal carry-overs, which further confirmed the stability of the company's production operations and the effectiveness of inventory turnover after reorganization;

(6) The full-year data is calculated based on the order volume from January to March 2026. Compared with the order volume and actual production and sales in 2025, there is an increase to varying degrees, mainly due to the company's reorganization and financial support from the controlling shareholder.

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It has solved its own financial constraints and other problems, gradually restored production and operation order, and gradually improved the efficiency of the pharmaceutical sector.

To sum up, the ongoing operating capability matters involved in the company's qualified opinions on the 2024 financial report have been completely eliminated through a series of measures such as bankruptcy reorganization, business divestiture, asset and liability structure optimization, and financial support from controlling shareholders. The factors that caused the company's continuous large losses due to the decline in performance of the company's original building materials segment, asset impairment, currency depreciation of overseas business, and increase in financial expenses due to overdue debt have all been eliminated. The company's management has actively promoted relevant work according to the above-mentioned business plan, and the operating measures adopted have achieved remarkable results in reducing costs and increasing efficiency. At the same time, they have effectively reduced financial expenses and reduced corporate operating risks. The company's ability to continue operating has been restored and effectively consolidated.

7. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Obtain and review key information related to the company's reorganization, including the "Civil Ruling", "Reorganization Plan", reorganization investment agreement, court-approved reorganization plan implementation documents, legal opinions on the completion of the reorganization plan, etc.;

(2) Understand the implementation status of the reorganization plan with the company's management and reorganization administrator, including the court's ruling on reorganization-related matters, the process of creditors' declaration of claims and administrator review and court ruling, the administrator's confirmation and suspension of confirmation of claims, the availability of debt repayment shares and funds, the performance of reorganization investors, etc., and determine whether there are major uncertainties in the implementation of the reorganization plan;

(3) Understand the financial status of the company’s controlling shareholders and actual controllers, strategic planning and continued support arrangements for the company’s future operations;

(4) Obtain and check the bank remittance voucher for Jiheng Group’s financial support to Liaoyuan Baikang;

(5) Conduct inquiry procedures with the company's management to learn about the implementation progress and effects of various measures formulated by the management to improve the company's ability to continue operating, and obtain a written statement from the management that the company's ability to continue operating has been restored.

After verification, we believe that the impact of the going concern matters in the audit opinion of the company's 2024 financial report has been eliminated in this period.

(5) The company's 2024 internal control report was issued a negative opinion by the accountant. The main matters involved are as follows: The company has been occupied by related parties for non-operating funds and illegal guarantees for many consecutive years since 2020, and has been issued administrative supervision measures many times. There are major internal control deficiencies in related transaction decision-making, fund management, borrowing and guarantees, information disclosure, etc. Please explain the main content and process, basis and relevant evidence of the elimination of the above-mentioned internal control-related risk warning situations based on the background of the negative opinion issued on the company's 2024 internal control report, as well as the comparison and changes with the main content of the 2025 internal control report, and whether the relevant rectifications are thorough and effective.

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After the reorganization is completed, the standardization of corporate governance and the effectiveness of internal control are legal and compliant.

1. The background of the negative opinion issued on internal control in 2024

In 2024, the firm issued an audit report with a negative opinion on the company's internal control. The main reason is that the company has been occupied by related parties for non-operating funds and illegal guarantees for many consecutive years since 2020, and has been issued administrative supervision measures many times. The company has major deficiencies in internal control in aspects such as related-party transaction decision-making, fund management, borrowing and guarantees, and information disclosure. The above-mentioned deficiencies caused the company to be unable to effectively prevent related party fund occupation and illegal guarantee risks, and internal control failed to provide reasonable guarantees.

2. Main contents of the 2025 internal control audit report and changes compared with 2024

In response to the above-mentioned major deficiencies, the company has used judicial reorganization procedures to promote rectification in stages and systematically, and completely eradicate the root causes of risks from the four dimensions of control, governance structure, institutional system, and execution process. The whole process is as follows:

(1) Restructuring intervention period (November 2024-August 7, 2025)

Starting from 2024, the reorganization investor Hebei Jiheng Group Co., Ltd. (hereinafter referred to as "Jiheng Group") will intervene in the company's governance in advance and fully take over the fund management authority. Under the leadership of Jiheng Group, the company rebuilt the fund management and approval mechanism. All fund payments, external transfers, expense reimbursements and other matters must be approved by Jiheng Group personnel before they can be executed. From the payment side, the path and possibility of the original controlling shareholders and related parties continuing to occupy the company's funds for non-operating purposes was completely blocked. After Jiheng Group rebuilt the fund management and approval mechanism, the company did not add any new non-operating fund occupations or illegal guarantees by related parties.

(2) Reorganization acceptance period (August 8, 2025 - December 24, 2025)

On August 8, 2025, the court ruled in accordance with the law to accept the company's reorganization application and appointed an administrator. At this stage, under judicial supervision, the company's operations are fully standardized. The company's official seal, financial seal, contract seal and various certificates and licenses are jointly supervised by the administrator and the company. Strict double approval and registration procedures are required for use to prevent unauthorized external guarantees, contract signing and other violations. During this period, the administrator and the company's management conducted a comprehensive review of historical capital occupation, illegal guarantees and other matters, clarified the relationship between creditors' rights and debts, and included them in the reorganization plan for unified resolution.

(3) Reorganization completion period (December 25, 2025 to present)

On December 25, 2025, the company's reorganization plan was implemented, and Shanghai AllBright (Chongqing) Law Firm issued a legal opinion on the completion of the reorganization plan. After the reorganization process was completed, Jiheng Group became the controlling shareholder of the company and established a new board of directors and senior management. The new management and governance revised the "Authorization"

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Internal control systems such as the Rights Management System, the External Guarantee Management System, and the Special System to Prevent Controlling Shareholders and Related Parties from Appropriating Funds have improved the internal control system in relation to funds and guarantees.

3. Conclusion on thoroughness of rectification and compliance after restructuring

This rectification is not a partial repair, but a fundamental change based on judicial restructuring and accompanied by a complete change of control. Through cutting off the original violation control chain, full judicial supervision, institutional system reconstruction, and execution process reengineering, all major defects involved in the negative opinions on internal control in 2024 have been substantially eliminated. Since the end of 2024, there have been no new related party non-operating fund occupations and illegal guarantees. The rectification is thorough and long-term.

After the reorganization is completed, the company's governance structure will be sound, with clear powers and responsibilities, and effective checks and balances; the internal control system will comply with the requirements of the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Basic Standards for Enterprise Internal Control, and the Shenzhen Stock Exchange's listing rules; internal controls in key aspects such as fund management, related transactions, external guarantees, and information disclosure will be in place and supervision will be effective. The standardization of corporate governance and the effectiveness of internal control comply with laws, regulations and regulatory requirements.

4. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the key internal controls related to the company's capital management, borrowings and guarantees, evaluate the design of these controls, determine whether they are implemented, and test the operating effectiveness of relevant internal controls;

(2) Obtain and review key information related to the company's reorganization, including the "Civil Ruling", "Reorganization Plan", reorganization investment agreement, court-approved reorganization plan implementation documents, legal opinions on the completion of the reorganization plan, etc.;

(3) Obtain internal control system documents such as the newly revised "Authorization Management System", "External Guarantee Management System", "Special System to Prevent Controlling Shareholders and Related Parties from Appropriating Funds" after the company's reorganization is completed, and check whether they comply with the basic corporate internal control standards and other relevant requirements;

(4) Check the announcement of the newly formed board of directors and senior managers after the company's reorganization is completed.

After verification, we believe that the company has solved the problems related to capital occupation and illegal guarantees through bankruptcy reorganization, change of controlling shareholder, optimization of governance structure and improvement of internal control system; the relevant rectifications are thorough and effective; after the reorganization is completed, the standardization of corporate governance and the effectiveness of internal control comply with the provisions of laws and regulations.

(6) Combined with the background and specific content of the unfreezing of the company's main frozen bank accounts in 2024, explain the main content, process, basis and relevant evidence of the elimination of the above-mentioned relevant risk warning situations. As of now, whether the company's bank accounts are still frozen, if so, please provide the specific content.

1. The background of the company’s main bank account being frozen

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In 2024, due to the company being involved in multiple lawsuits and debt disputes, creditors applied to the court for property preservation or enforcement measures, which resulted in the company's main bank account being frozen. This matter has had a serious impact on the company's daily operating capital income and expenditure, constituting other risk warning situations related to "the company's main bank account being frozen" as stipulated in Article 9.8.1(5) of the Shenzhen Stock Exchange Stock Listing Rules (hereinafter referred to as the "Listing Rules").

2. The company’s stock was subject to other risk warnings due to “the main bank account being frozen”

On June 8, 2023, the company disclosed the "Announcement on the Superimposition of Other Risk Warnings on the Company's Stocks" (Announcement No. 2023-57). As of May 31, 2023, the company's bank account had been frozen for a total of 22,090,597.57 yuan, accounting for 2023 of the company's (2023 As of March 31), the proportion of net assets attributable to shareholders of listed companies was 2.8861%, accounting for 26.88% of the company's total monetary funds and 75.14% of the company's total monetary funds (excluding overseas); the company had a total of 151 bank accounts opened (excluding margin accounts), and a total of 51 frozen bank accounts. The number of frozen bank accounts accounted for 33.77% of the total number of bank accounts.

The freezing of the above-mentioned bank accounts has had a certain impact on the normal production and operation of the company's original building materials sector. It is a major bank account and involves the implementation of other risk warnings for the company's stock transactions.

Other risk warning situations related to "the company's main bank account is frozen" according to Article 9.8.1 (5) of the "Shenzhen Stock Exchange Stock Listing Rules". The company's stock trading will be superimposed with other risk warnings from June 8, 2023.

3. The main process and content of unfreezing a bank account

On December 25, 2025, the company’s reorganization plan was completed. According to the reorganization plan, creditors' claims against the company have been paid off in accordance with the law or properly arranged in the form of trust beneficial rights, stocks, etc. According to the progress of the implementation of the reorganization plan, the unfreezing of the company's basic accounts and general settlement accounts continues to advance in an orderly manner. As of March 31, 2026, most of the unfreezing of the company's basic accounts and general settlement accounts has been completed, and the fund payment functions required for the company's normal production and operations have been basically restored. The company continues to communicate with relevant courts and creditors to expedite the unfreezing procedures for remaining accounts.

4. Basis and evidence for elimination of relevant risk warning situations

The main basis and evidence for the lifting of the above-mentioned bank account freeze and the elimination of related risk warning situations include:

(1) The court directly delivers the unfreezing document to the bank: The administrator communicates and coordinates with the relevant courts based on the implementation of the reorganization plan. After confirming that the debts have been paid off in accordance with the reorganization plan, the court will issue a ruling to lift the freeze on the bank account or a notice of assistance in execution in accordance with the law, and directly deliver it to the relevant bank where the account is opened, and the bank will act accordingly

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Understand the freezing procedures. Although the company has not directly obtained the above documents, it can confirm that the relevant accounts have been unfrozen through objective facts such as bank account status inquiries, normal receipt and payment of funds, and written explanations provided by the administrator;

(2) Supervision report on the completion of the implementation of the reorganization plan issued by the administrator: The administrator has issued a "Supervision Report on the Implementation of the "Sansheng Shares Reorganization Plan", confirming that the reorganization plan has been implemented and approved by the court;

(3) Legal opinion issued by the law firm: Shanghai AllBright (Chongqing) Law Firm has issued the "Legal Opinion on the Completion of the Implementation of the Reorganization Plan of Chongqing Sansheng Industrial Co., Ltd.", confirming that the reorganization plan has been completed and the company will no longer be liable for the repayment of debts.

5. The company’s bank account has been frozen so far

As of March 31, 2026, the company's basic accounts and most general settlement accounts have been unfrozen, and the company's fund payment functions required for normal production and operations have been basically restored. There are still a small number of bank accounts that are frozen. The details are as follows:

Project specific content

The company has a total of 86 bank accounts, 19 of which have not been unblocked. The number of frozen accounts accounts for 1% of the total number of bank accounts.

22.09%

This is mainly due to the freezing of all judicial proceedings pending the completion of historical litigation before the reorganization.

order release

As of March 31, 2026, the frozen account balance was 6.159 million yuan.

yuan, accounting for 12.19% of all bank account balances

The above-mentioned small number of frozen accounts are not the company's main settlement accounts, and the company has had an impact on the company's operations. It uses other normal accounts to ensure the income and expenditure of daily operating funds, and has no significant impact on the company's normal production and operations.

The company will continue to promote the unfreezing of the remaining few accounts, actively communicate with relevant courts and creditors, and complete the unfreezing procedures of all accounts as soon as possible.

According to the table above, the number of frozen bank accounts of the company accounts for less than 25% of the total number of bank accounts; the balance of the frozen account accounts for less than 30% of the company's monetary fund balance; the balance of the frozen account accounts for less than 10% of the company's net assets; the frozen account is not the company's main settlement account, and the company has used other normal accounts to ensure the income and expenditure of daily operating funds, which has no significant impact on the company's normal production and operations.

6. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Obtain bank deposits and other monetary fund account statements, check the statement amount with the company's bank journal, log in to online banking to verify whether there are any restrictions on the bank account such as freezing, stop payment, etc.

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shape;

(2) Obtain the company's bank account opening list and check the completeness of the book account details;

(3) In accordance with the provisions of the Stock Listing Rules (2025 Revision), check whether the frozen account is the main account;

(4) Inquire with the management to understand the impact of restricted bank accounts on the company's production and operations, as well as countermeasures, and determine their rationality.

After verification, we believe that the company's bank accounts are still frozen so far, and the frozen bank accounts have no significant impact on the company's production and operations.

(7) Based on the above issues, explain whether the company has other situations and risks that may trigger delisting risks or other risk warnings, and whether the intermediary institution has issued a clear opinion on all the above-mentioned cancellation of risk warning situations (if necessary).

1. Are there other situations and risks that may trigger delisting risks or other risk warnings?

The company has conducted a self-examination against the "Shenzhen Stock Exchange Stock Listing Rules" and relevant regulations. The company has no other circumstances that may trigger delisting risk warnings or other risk warnings. The specific verification details are as follows:

(1) According to the verification by the company and intermediary agencies, and in accordance with the relevant provisions of Article 9.2 of the "Stock Listing Rules", the company's absence of relevant circumstances is explained as follows:

Neither the company’s stock trading conditions nor the number of shareholders fall within the relevant provisions of Article 9.2 of the Stock Listing Rules.

(2) The company refers to the first to sixth items of Article 9.3.1 of the "Stock Listing Rules" and explains that the company does not have relevant circumstances as follows:

Whether there is a serial number as specified in Article 9.3.1 of the "Stock Listing Rules", the specific circumstances and basis

List the circumstances under which delisting risk warning is implemented. In this case, the Exchange has conducted a review on the company’s 2025 financial statements.

The audited profits of the most recent fiscal year were audited and an audit report was issued (Tianjian Review [2026]

Total profit, net profit, excluding non-recurring items (No. 8-147), the company’s audited profit in 2025

1. Net profit after gains and losses, whichever is lower, is negative. Total profit, net profit, and net profit after deducting non-recurring gains and losses have no value, and the net profit after deducting operating income is lower than 3. The net profit is negative, but the operating income after deducting

100 million yuan, the income was RMB 882.198 million, higher than 300 million yuan

Yuan

As of December 31, 2025, the company has audited

Audited period for the most recent fiscal year

The net assets attributable to the owners of the parent company of 2 are people. There is no negative net assets at the end of the year.

RMB 168.3805 million, a positive value

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Financial accounting of the most recent fiscal year. The firm has audited the company's 2025 financial statements. 3 The report was issued with a disclaimer of opinion or estimate, and issued a standard unqualified audit report with a negative opinion (Tianjian Shen [2026] No. 8-147)

The most recent fiscal year following the retrospective restatement

Total profit, net profit, deduction of extraordinary

The company’s 2025 financial report does not need to be reviewed

Which of the three net profits after sexual gains and losses is lower?

4 Retrospective restatement of matters, therefore there is no negative value due to retrospective restatement, and the operating income after deduction is less than

Situations that lead to the above financial indicators being hit

300 million; or the latest period after a retrospective restatement

Net assets at the end of each fiscal year are negative

China Securities Regulatory Commission Administrative Punishment Decision Form

The most recent accounting disclosed by the company indicates that the company has not received any false records or wrongful punishment decisions in the annual financial report of the administrative department related to the financial report. 5 There are no introductory statements or major omissions in the company’s annual accounting report. This major omission caused the relevant financial indicators to reach the risk warning level in the year in which the relevant financial indicators were delisted.

The first and second situations of this paragraph

6 Other circumstances identified by the Exchange After verification, there are no other circumstances identified by the Exchange. None

(3) The company compares the first to tenth items of Article 9.4.1 of the "Stock Listing Rules" and determines whether the company does not exist.

The relevant situations are explained as follows:

Whether there is a serial number listed in Article 9.4.1 of the "Stock Listing Rules" and the specific circumstances and basis

Circumstances in which a delisting risk warning is implemented: In this situation, the annual report is not disclosed within the statutory period or

The company has disclosed the 2025 semi-annual report in accordance with relevant regulations, and the company's stock has been suspended from trading. There is no report.

Not disclosed within two months

More than half of directors cannot guarantee annual report

Or the semi-annual report is true, accurate and complete, and all directors of the company have signed to confirm that the annual report does not exist and is true, accurate and complete within two months of the company's stock suspension.

More than half of the directors cannot guarantee

Due to major accounting discrepancies in the financial accounting report, the company's 2025 annual report has been erroneously or falsely recorded by the company's directors, and was disclosed after review by the China Securities Regulatory Commission. The Exchange issued an "Audit Report" with standard unqualified 3 orders for correction but did not complete the rectification within the required period (Tianjian Review [2026] No. 8-147), and the company's stock was suspended from trading for two months. No. 8-147), and the financial indicators in the annual report did not exist.

Uncompleted rectification and false records

Due to information disclosure or standardized operations, etc.

There are major deficiencies that have been required to be corrected by the Exchange but the company has not received a notice that the company has not completed rectification within the required period due to information disclosure or standardized operations4, and there are major deficiencies in the company that require correction or rectification. The company's stocks have been suspended from trading for two months and have not completed the rectification within two months.

change

The company is controlled by the controlling shareholder (if there is no controlling shareholder, then

(the largest shareholder) or related to the controlling shareholder. According to the company's 2025 annual report, the company has not issued 5 non-operating funds. The balance of the non-operating funds occupied by the controlling shareholder or the controlling shareholder's related persons has reached 2 billion yuan or accounted for the company's most recent operating funds.

More than 30% of the absolute value of the audited net assets is

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The China Securities Regulatory Commission ordered corrections but did not request

Complete the rectification within the deadline, and the company’s stock will be suspended

The rectification has not been completed within two months

Internal financial reports for two consecutive fiscal years

The firm has issued a disclaimer or disapproval on the company’s internal control as of December 31, 2025.

audited the effectiveness of internal control and issued an audit report with 6 opinions, or failed to disclose the financial report and internal control audit report in accordance with regulations. There is no standard unqualified internal control audit report.

(Tianjian Shen [2026] No. 8-148)

sue

Due to the company’s total share capital or equity distribution

There has been no change in the total number of shares or equity distribution of the company for twenty consecutive trading days. 7 There is no situation where the total amount of shares and equity distribution no longer meet the listing conditions of the company.

The case has not been resolved within the prescribed time limit

On March 30, 2026, the firm issued an "Audit Report" with standard qualified opinions (Tianjian Shen [2026] No. 8-147). The continuing operating capability matters involved in the company's qualified opinions on the company's 2023 and 2024 financial reports have been completely eliminated through a series of measures such as bankruptcy reorganization, business divestiture, optimization of the asset and liability structure, and financial support from the controlling shareholder. The company's ability to continue operating has been restored and effectively consolidated, in compliance with relevant regulatory requirements, and there will be no compulsory

risk of dissolution

The court accepts company reorganization, reconciliation or

9 The company’s judicial reorganization has been completed in December 2025, and there is no bankruptcy liquidation application.

After verification, there are no other circumstances identified by the exchange. 10 Other circumstances identified by the Exchange. None.

shape

(4) The company refers to the first to seventh items of Article 9.3.12 of the "Stock Listing Rules" and determines whether the company does not exist.

The relevant situations are explained as follows:

Whether there is a serial number as specified in Article 9.3.12 of the "Stock Listing Rules", the specific circumstances and basis

List the circumstances of termination of listing. In this case, the Exchange has audited the company's 2025 financial statements and issued an audit report (Tianjianshen [2026] audited total profits, net profits, deductions

No. 8-147), the company’s 2025 audited profit and net profit after non-recurring gains and losses

1 The lower of total profit, net profit, and net profit after deducting non-recurring gains and losses is negative, and the operating income after deducting

The net profits are all negative, but the operating income after deduction is less than 300 million yuan

The income was RMB 882.198 million, higher than 300 million

Yuan

As of December 31, 2025, the company's audited 2 audited net assets at the end of the period were negative. The net assets attributable to the owners of the parent company were not available.

RMB 168.3805 million, a positive value.

Page 23 of 71

The financial accounting report has been issued with a qualified opinion, and the firm has reviewed the company’s 2025 financial statements.

3 An audit in which an opinion cannot be expressed or a negative opinion is issued, and a standard unqualified audit report is issued. There is no audit report (Tianjianshen [2026] No. 8-147)

Total profit, net profit after retrospective restatement,

Net profit after deducting non-recurring gains and losses III. The company’s 2025 financial report does not need to be traced.

The lower of 4 is a negative value, and the business after deduction is a matter of retrospective restatement. Therefore, there is no situation where the revenue is less than 300 million yuan due to the retrospective restatement; or the retrospective restatement causes the above financial indicators to be touched.

Net assets at the end of the period are negative

The Exchange has reviewed the company’s financial results as of December 31, 2025

The internal control over financial reporting was not disclosed. The effectiveness of the internal control was audited and a standard was issued.

5. There is no audit report expressing opinions or negative opinions. A quasi-unqualified internal control audit report (day

Jian Shen [2026] No. 8-148)

Failure to disclose internal control audit reports as required

The company has disclosed in accordance with relevant regulations that in 2025

reported that due to the completion of bankruptcy reorganization and restructuring

6 At the same time as the annual report, the internal control audit was disclosed. There was no listing or major asset reorganization in accordance with relevant regulations.

report

Exceptions that cannot be disclosed

The company's 2025 annual report has been reviewed by all directors

Failure to disclose more than half of directors within the statutory period

passed and completed on March 31, 2026

7. Ensure that the annual report is true, accurate and complete. There is no disclosure and all directors guarantee that the contents of the annual report are accurate.

sue

True, accurate and complete

(5) The company has compared the first to second items of Article 9.5 of the "Stock Listing Rules" and found that the company has no relevant

The relevant situation is explained as follows:

The company has no fraudulent issuance, illegal disclosure of major information, or other serious damage to the order of the securities market.

Major illegal acts; there are no violations involving national security, public safety, ecological safety, production safety or public health.

Illegal acts in the fields of health and safety, the circumstances are egregious and seriously harm national interests, social and public interests, or

Situations that seriously affect the listing status.

(6) The company compares the first to tenth items of Article 9.8.1 of the "Stock Listing Rules" and determines whether the company does not exist.

The relevant situations are explained as follows:

"Stock Listing Rules" Article 9.8.1 Whether there is a serial number? Specific circumstances and basis

Other risk warning situations listed in Article In this situation, on November 7, 2024, the firm issued a "Special Audit Report"

Ming" (Tianjian Shen [2024] No. 8-409); 2026

On March 30, the Exchange issued the “Controlling Shareholders and Other Related

1. There is occupation of funds and the situation is serious. There is no occupation and repayment of non-operating funds and illegal guarantees.

and special audit instructions on the circumstances of termination" (Tianjian Review [2026]

No. 8-150)

Providing guarantees in violation of prescribed procedures. On December 6, 2024, the firm issued the "Regarding Guarantees in Violation of Regulations".

2 Special explanation of the circumstances of bail release that does not exist and is serious (Tianjian Review [2024]

Page 24 of 71

No. 8-67); on December 8, 2024, Shanghai AllBright (Chongqing) Law Firm issued the "Legal Opinion on Illegal Guarantee Matters"; on March 30, 2026, the firm issued the "Special Audit Instructions on the Occupation and Liquidation of Non-Operating Funds by Controlling Shareholders and Other Related Parties and the Illegal Guarantees and Release" (Tianjian Shen [2026] No. 8-150). The board of directors and shareholders' meeting cannot convene normally.

3. The company's board of directors and shareholders' meeting were held normally in accordance with relevant rules. There were no meetings and resolutions.

Financial Report for the Most Recent Fiscal Year The firm has audited the company's internal control effectiveness as of December 31, 2025, and issued an internal control audit report with a standard unqualified opinion or a negative opinion (Tianjian Review [2026] 8-148 did not exist, or the financial number was not disclosed in accordance with regulations). The company's 2025 financial report has been audited and the internal control audit report is reported in accordance with regulations; Determined to be disclosed to the outside world

Production and business activities have been seriously affected

and is not expected to recover within three months

5. The company’s production and operation activities are carried out normally, and there are no abnormal situations. There is no normal situation.

The Exchange issued the "Special Instructions for Inquiry Letters" (Tianjian Shen [2026] No. 8-51). The company's basic accounts and most general settlement accounts have been unfrozen. The 6 main bank accounts required for the company's normal production and operations have been frozen. The non-existent fund payment function has been basically restored. As of now, the company's bank account is still frozen, and the bank account is frozen.

The account has no significant impact on the company's production and operations

On March 30, 2026, the firm issued a standard unqualified Audit Report (Tianjian Review [2026] 8-147 after deducting non-economic expenses for the last three fiscal years).

No.), the company’s 2023 and 2024 annual financial reports include net profit before and after extraordinary gains and losses, whichever is lower

See the matters related to the ability to continue operating, and the bankruptcy re-7 has been negative, and there is no restructuring, business divestiture, asset and liability structure optimization, and the annual audit report of the controlling stock shows that the company continues to

A series of measures including East Asian financial support have been completely eliminated. There is uncertainty about the company’s ability to operate;

The company's ability to continue operating has been restored and effectively consolidated, in line with

Comply with relevant regulatory requirements

According to administrative penalties issued by the China Securities Regulatory Commission

First, inform the company of the facts stated in the letter.

The financial indicators disclosed in the annual report are

The company's 2025 annual report has been disclosed in accordance with the first paragraph of Article 9.5.2 of the company's board of directors' review rules. The above-mentioned financial indicators include the operating report (Tianjian Shen [2026] No. 8-147) issued by the firm with a standard unqualified opinion. There are no false records in the annual business income, total profit, net profit, and reported financial indicators.

Assets or liabilities on the balance sheet

Debt account

The net profit of the most recent fiscal year is the company's net profit attributable to shareholders of the listed company in 2025. The company's net profit attributable to shareholders of the listed company is positive, and the profit of the consolidated statement and the parent company is negative. As of December 31, 2025, the company's undistributed profits at the end of the reporting year are all positive. The company's latest three will be negative.

Page 25 of 71

The accumulated cash dividend amount for the fiscal year is low

Average annual net income for the past three fiscal years

30% of profits, and the last three meetings

The accumulated cash dividend amount for the fiscal year is low

At 50 million yuan

Based on its holding subsidiary pharmaceutical intermediates, the company will

The chain extends backward to form API production capacity; at the same time, it utilizes all

It is difficult for investors to judge the company’s prospects,

The subsidiary's preparation production capacity is used to produce and sell preparations.

10 The investment rights and interests may be damaged. There is no possibility that the original pharmaceutical sector of the listed company will be formed from raw materials and intermediates.

other situations

A complete industrial chain from body, API to preparation, with good

market prospects

2. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Compare the relevant provisions of Chapter 9 of the "Shenzhen Stock Exchange Stock Listing Rules" to verify whether the company has various situations that trigger delisting risk warnings or other risk warnings;

(2) Obtain a written statement from the company’s management that there are no other circumstances that may trigger delisting risks or other risk warnings.

After verification, we believe that the company does not have other situations and risks that may trigger delisting risks or other risk warnings.

2. Regarding liabilities and solvency. (1) In December 2025, the company completed the bankruptcy reorganization process and exempted relevant debts or made debt retention arrangements according to the procedures. (2) At the end of the reporting period, the company's monetary fund balance was 114 million yuan (of which 10 million yuan was restricted), short-term borrowings were 57 million yuan, long-term borrowings were 444 million yuan, non-current liabilities due within one year were 25 million yuan, and financial expenses were 211 million yuan. (3) During the reporting period, the company issued 2 external guarantees with a total guarantee amount of 1.15 billion yuan, which have not yet been fulfilled to date. (4) The company has two long-term equity investment pledges. The pledge targets are 100% equity of its holding subsidiary Liaoyuan Baikang Pharmaceutical and 72% equity of Chongqing Chunrui Pharmaceutical. As of the end of the reporting period, the total loan balance was 467 million yuan. (5) The company's subsidiaries, Chongqing Chunrui Pharmaceutical and Liaoyuan Baikang Pharmaceutical, have recognized a total liability of RMB 136 million for joint and several guarantee responsibilities that may be assumed in the future. Please ask your company to: (1) Combine the main contents of the implementation of the bankruptcy reorganization plan and accounting treatment, etc., explain the company's specific debt repayment arrangements and classification, debt repayment sequence, relevant debt exposure and allocation methods, whether the debt repayment plan has covered all debts and contingent debts, whether the debt repayment arrangements for the remaining debts or retained debts as of the end of the reporting period are clear and clear, analyze the debt solvency, and whether there are any debt disputes or lawsuits so far. (2) List the details of the top five interest-bearing liabilities, including but not limited to

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In terms of the name of the creditor, whether there is a relationship with the company, the nature of the loan, the amount of the loan, the interest rate, the maturity date, whether it is overdue, the overdue amount, and whether it involves debt restructuring, combined with the company's freely disposable monetary funds, estimated operating cash flow, asset liquidity, financing arrangements, and restructuring debt retention arrangements, explain the company's subsequent debt repayment arrangements and specific measures to improve the company's cash flow level. (3) Explain the background reasons for the company's two external guarantees, the reasons for the large amount of guarantees, the actual amount incurred, the progress of the guarantee matters so far and future resolution measures, and whether the above situations have a significant adverse impact on the company's solvency. (4) Combined with the main financial data, production and operation status and importance to the company of Liaoyuan Baikang Pharmaceutical and Chongqing Chunrui Medicine, explain the background reasons for the company's two long-term equity investment pledges, the debt repayment arrangements and resolution measures to be taken, whether the above matters have a major adverse impact on the production and operation of Liaoyuan Baikang Pharmaceutical and Chongqing Chunrui Medicine, whether the company actually controls Liaoyuan Baikang Pharmaceutical and Chongqing Chunrui Medicine, and fully disclose the risks. (5) Combined with the summary of external guarantees and overdue liabilities of Chongqing Chunrui Pharmaceutical and Liaoyuan Baikang Pharmaceutical, explain the accounting treatment basis and legal compliance of the company's joint guarantee of the above-mentioned subsidiaries for a total liability of 136 million yuan, the future debt repayment arrangements and the measures to be taken, whether the above two subsidiaries have other large liabilities and contingent liabilities so far, and whether the above situation has a significant adverse impact on the production, operation and performance of Chongqing Chunrui Pharmaceutical and Liaoyuan Baikang Pharmaceutical. (5) Combined with the main content and payment objects of financial expenses, as well as the comparison of comparable companies in the same industry, explain the reasons and rationality for the large amount of the company's financial expenses, and list the names, backgrounds, and reasons of the top ten payment objects; combined with the above situation, explain whether the financial expenses match the company's liabilities, and whether there are special projects such as large-scale consulting. Please ask the accounting firm to verify the above matters and issue a clear opinion. (Article 3 of the inquiry letter)

(1) Combined with the main content of the implementation of the bankruptcy reorganization plan and accounting treatment, explain the company's specific debt repayment arrangements and classification, debt repayment sequence, relevant debt exposure and allocation methods, whether the debt repayment plan has covered all debts and contingent debts, whether the debt repayment arrangements for the remaining debts or retained debts as of the end of the reporting period are clear and clear, analyze the debt solvency, and whether there are any debt disputes or lawsuits so far.

1. Overview of the implementation of the bankruptcy reorganization plan

The company was ruled to accept bankruptcy reorganization by the Chongqing Fifth Intermediate People's Court (hereinafter referred to as the Chongqing Fifth Intermediate People's Court) on August 8, 2025. A draft reorganization plan was submitted on October 30, 2025. On December 25, 2025, the reorganization plan was approved by the court and completed. The reorganization plan classifies the claims of all creditors and formulates differentiated repayment plans, while reserving debt repayment resources for expected claims (claims that have not been declared but may be protected by law).

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2. Classification of claims, order of repayment and specific debt repayment arrangements

According to the "Enterprise Bankruptcy Law of the People's Republic of China" and the reorganization plan, the company's claims are divided into the following categories, and the order and arrangement of repayment are as follows:

Category of claims, order of repayment, specific debt repayment arrangements

Employee claims in the first order involve an amount of approximately RMB 24.9912 million, which will be paid off in full in cash.

Tax claims Second order The amount involved is approximately 15.6928 million yuan, which will be paid off in full in cash

Distinguish between different guaranteed property treatments:

(1) The guaranteed claims corresponding to 60% equity of Chongqing Chunrui Pharmaceutical and Chemical Co., Ltd. (hereinafter referred to as Chunrui Pharmaceutical) and 100% equity of Liaoyuan Baikang are within the scope of the assessed market value

The company's retained debt will be paid off in installments (4 years, with property guarantees of 3%, 5%, 32% and 60% from 2025 to 2028)

The principal is repaid in the third order, and the interest rate is based on LPR);

debt

(2) Corresponding to the secured claims of other secured properties (which will be divested into the trust), the creditor obtains a share of the trust’s beneficial rights and will be paid first with the proceeds from the disposal of the secured property;

(3) The portion of the creditor's rights that exceeds the assessed value of the guaranteed property (approximately 956 million yuan) is converted into ordinary creditor's rights and will be repaid according to the ordinary creditor's rights plan.

(1) The portion below RMB 50,000 per creditor (inclusive): 100% repayment in cash;

(2) For the portion exceeding RMB 50,000, ordinary debts will be settled through a comprehensive method of using shares to offset debts + trust beneficial rights. The fourth sequence

Repayment: approximately 6.317 shares will be allocated for every 100 yuan of debt (debt repayment price is 8.96 yuan/share), and 1 trust beneficiary share will be allocated for every 1 yuan of debt.

Not to be repaid (including doubled debt interest during the period of delayed performance, etc., the amount

Secondary claims final order

68.056 million yuan)

3. Debt repayment plan’s coverage of all debts and contingent debts

(1) Declared claims: As of September 10, 2025, the total amount of claims reviewed and determined by the administrator is approximately 2.063 billion yuan (including employees, taxes, property guarantees, and ordinary claims), which have all been included in the debt repayment plan, and have been distributed or deposited according to the plan; as of the date of reply to this inquiry letter, all employee claims and tax claims have been paid off in cash; the part of the claims of ordinary creditors below 50,000 yuan (including 50,000 yuan) has been paid off in cash. 6,523,300 yuan; 92,102,000 shares of the transferred shares were partially repaid to ordinary creditors by exchanging shares for debts, of which 42,262,200 shares have been repaid, and the remaining 49,839,800 shares are retained in the bankruptcy property disposal account;

(2) Determination of creditor's rights is suspended: 33 creditors are involved, with an amount of approximately 65.4581 million yuan (including 1 property-secured creditor's right of 1,609,600 yuan and 32 ordinary creditors' rights of 63,848,500 yuan). The reorganization plan has reserved corresponding cash, stocks and trust beneficial rights for it, and after the claims are finally confirmed, they will be paid off according to similar claims plans;

(3) Estimated claims (undeclared or potential liabilities): including claims recorded in the books but not declared, as well as contingent liabilities that the company may be claimed by investors due to misrepresentation, totaling approximately 52.4258 million yuan. The reorganization plan has reserved debt repayment resources, and creditors can claim their rights within the statutory period and be repaid according to similar creditor rights plans;

(4) Joint and several guarantee liabilities confirmed by subsidiaries: subsidiaries Chunrui Pharmaceutical and Liaoyuan Baikang may assume

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The joint and several guarantee liability was recognized as a liability of RMB 136 million. These contingent liabilities have been included in the overall consideration of the reorganization plan. If they actually occur in the future, creditors can claim against the trust plan or the subsidiary. However, after the implementation of the reorganization plan, the company's liability for repaying these debts has been handled according to the reorganization plan (except for the retained debt part);

4. Solvency analysis

According to the disclosure of the reorganization plan, the ordinary debt repayment rate under liquidation is only 17.78%. However, according to the debt repayment arrangement of the company's reorganization plan, the portion of ordinary debt over 50,000 yuan is calculated based on the stock debt repayment price of 8.96 yuan/share, and the repayment rate is not less than 56.60%.

At present, the company's employee claims and tax claims have been paid off, and debt repayment resources corresponding to property-guaranteed claims and ordinary claims have also been paid off to creditors or deposited. Specifically:

(1) Claims secured by property

For property-secured claims, in addition to retaining debts to repay creditors, debt repayment resources mainly come from the income from the disposal of the guaranteed property and the shortfall in the disposal of the guaranteed property will be repaid according to ordinary claims. According to the reorganization plan and relevant legal provisions, the secured party may request to start the asset auction and disposal at any time. There is no auction obstacle for the asset itself, and the auction has not yet started as of the date of this reply.

For creditors with property security to repay retained debts, please refer to "5. Debt repayment arrangements for remaining debts (retained debts) as of the end of the reporting period" in this note for specific debt retention arrangements.

(2) Ordinary claims

For ordinary claims, debt repayment resources include cash, stocks, and trust beneficial rights. Among them, the part of ordinary debts below 50,000 yuan (including 50,000 yuan) will be fully repaid in cash. The cash for repayment comes from the investment consideration paid by the reorganization investors and the subsequent operating income of the listed company. RMB 6.5233 million has been paid in cash; for the part of ordinary debts above 50,000 yuan, stocks and trust beneficiary rights will be distributed according to specific proportions. The stocks come from the capital reserve of the company, and a total of 9,210.20 yuan has been transferred. Ten thousand shares, 42.2622 million shares have been paid off so far, and the remaining 49.8398 million shares are retained in the bankruptcy estate disposal account; the trust beneficial rights are consistent with the amount of the creditors' claims to be repaid. At present, the trust plan has been established, some creditors have received the trust beneficial rights shares and registered as trust beneficiary rights, and the remaining beneficial rights shares have been withdrawn.

The aforementioned reservations and withdrawals of cash, stocks and trust beneficial rights include, in addition to declared and confirmed claims, suspended confirmation of claims, estimated claims, etc.

5. Debt repayment arrangements for remaining debt (retained debt) as of the end of the reporting period

After the implementation of the reorganization plan, the company's actual existing debts are only the retained debt part of the property-secured claims.

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points, specifically as follows:

Project details

Amount of retained debt 482.8333 million yuan

Debt retention period: 4 years (2025 is the first year and 2028 is the last year)

Repayment plan: 3% in 2025, 5% in 2026, 32% in 2027, and 60% in 2028

Determined based on the latest LPR with a period of more than one year before the submission of the reorganization plan, with an interest rate of December 20 each year

The interest rate for the next year is adjusted daily based on the LPR of that day.

Debt and interest repayment date: December 21 of each year

During the debt retention period, the original property guarantee relationship remains unchanged. After the company completes the performance, the creditor must terminate the guarantee method.

pledge

As of December 31, 2025, the company's balance sheet had long-term borrowings of RMB 444.2067 million and non-current liabilities due within one year of RMB 24.571 million (including interest accrued from December 21 to 31, 2025), which are the specific embodiment of the above debt retention arrangement.

For the above retained debt, the company's repayment arrangements are as follows: (1) According to the reorganization plan, Jiheng Group, as an industrial investor, will provide cash flow support of no less than 200 million yuan to the listed company through shareholder loans, non-public issuance, etc. within 3 years from the date it becomes the company's controlling shareholder. Therefore, the company has planned to launch a non-public issuance plan in due course after canceling the delisting risk warning and other risk warnings; (2) the company has divested the building materials sector and focused on the main business of pharmaceutical intermediates, APIs and preparations. By optimizing the product structure and strengthening the collection of accounts receivable and inventory turnover, it is expected that the operating net cash flow of the main pharmaceutical business will continue to improve and become the main source of debt repayment; (3) the company will increase the credit line of cooperative banks through the provision of guarantees by industrial investors, and replace part of the retained debt with loans.

6. Are there any debt disputes or lawsuits?

As of the date of this statement, Chongqing No. 5 Intermediate People's Court has ruled that the reorganization plan has been completed. According to Article 94 of the Enterprise Bankruptcy Law of the People's Republic of China, the debtor shall no longer be liable for repayment of debts reduced or reduced in accordance with the reorganization plan from the time the reorganization plan is implemented. Therefore, the company's original debts (except for the retained debt part) have been properly resolved in accordance with the law, the estimated liabilities that may be formed by the subsidiary's guarantee for the original debt have been fully confirmed (see Part 2 (3) of this note for details), and the retained debt part is being performed normally as planned, and no default or dispute has occurred. The company and its subsidiaries currently have no major debt disputes or lawsuits.

7. Relevant accounting treatments

According to "Accounting Standards for Business Enterprises No. 12 - Debt Restructuring" (hereinafter referred to as CAS 12) and "Listing

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According to the provisions of the Corporate Supervision Guidelines No. 11 - Matters Related to the Bankruptcy and Reorganization of Listed Companies (China Securities Regulatory Commission Announcement [2025] No. 2), the company has carried out the following accounting treatments for relevant matters during the implementation of bankruptcy and reorganization:

(1) Recognition of proceeds from debt restructuring

The company will recognize the reorganization income on the completion date of the reorganization plan (December 25, 2025). Before this point in time, there are major uncertainties in the implementation of the reorganization plan (such as investor payment, stock transfer, trust establishment, etc. are not finally completed), which does not meet the income recognition conditions; after this point in time, the reorganization plan is completed and the major uncertainties are eliminated, which complies with the relevant provisions of Article 10 of CAS 12 and the regulatory guidelines of the China Securities Regulatory Commission.

The formula for calculating reorganization income is: reorganization income = book value of debts repaid - (value of debt repayment resources + bankruptcy expenses + mutual benefit debt + expected future debt). After calculation, the company recognized restructuring income of approximately 225.1583 million yuan, which was included in the 2025 profit and loss.

(2) Accounting treatment of retained debt liabilities

For property-secured claims that need to be paid off, the company will recognize them as long-term borrowings based on the present value of the future principal and interest payable on the completion date of reorganization. The company uses the actual interest rate method for subsequent measurement based on amortized cost, recognizes interest expenses (included in financial expenses) in each period, and reduces the book principal according to the principal repayment plan agreed in the reorganization plan.

As of December 31, 2025, the total balance of retained debt liabilities was RMB 468.7776 million, including long-term borrowings of RMB 444.2067 million and non-current liabilities due within one year of RMB 24.571 million.

(3) Accounting treatment of debt offset by shares

According to the provisions of "Accounting Standards for Business Enterprises No. 12 - Debt Restructuring", if a debtor uses equity instruments to repay debts, it shall be measured according to the fair value of the equity instruments. The company completed the capital reserve conversion date on December 10, 2025. Trading was suspended on that day. The closing price of the company's stock the next day was 4.62 yuan/share. The company used this as the fair value of the equity instruments and increased the capital reserve by 425.5114 million yuan. The book value of the debts paid off (that is, the debt was paid off at 8.96 yuan/share) and the fair value of the equity instruments (4.62 yuan/share) The difference between RMB/share × the number of stocks used to pay off the debt) is recognized as debt restructuring income.

(4) Treatment of estimated liabilities of subsidiaries

The borrowings applied by the company from Shanghai Pudong Development Bank, China Guangfa Bank and Agricultural Bank of China are mortgaged and guaranteed by related assets, and joint and several liability guarantees are provided by subsidiaries Chunrui Medicine and Liaoyuan Baikang. Among the above-mentioned loans, the claims of Shanghai Pudong Development Bank have been transferred to Zhejiang Zheshang Asset Management Co., Ltd., and the claims of Agricultural Bank of China have been transferred to Chongqing Branch of China Cinda Asset Management Co., Ltd. During the bankruptcy reorganization process, the court finally confirmed that the total principal and interest of the above-mentioned loans was 326.0925 million yuan.

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According to the reorganization plan, the aforementioned three loans will not be retained for repayment. However, since creditors may still exercise their right of recourse against the jointly and severally liable guarantors, based on the principle of prudence, the company's subsidiaries Chunrui Pharmaceutical and Liaoyuan Baikang have confirmed a total estimated liability of RMB 135.5394 million for the joint and several guarantee liabilities they may bear in the future.

(5) Handling of bankruptcy expenses and mutual debts

Bankruptcy expenses incurred during the reorganization period (including administrator remuneration, intermediary agency fees, case acceptance fees, etc.) and mutual benefit debts are direct expenses during the debt reorganization process. When the company calculates the income from debt restructuring, these expenses are directly offset against the income from debt restructuring, and are not separately recognized as management expenses or other items in current profits and losses. The above treatment is in line with the provisions of Article 10 of CAS 12 regarding "the debtor shall include the difference between the book value of the debts paid off and the book value of the transferred assets in the current profit and loss", where the "book value of the transferred assets" includes the necessary direct expenditures incurred to achieve the reorganization. In the income statement, debt restructuring gains are presented on a net basis, reflecting the above-mentioned write-off factors.

In summary, the accounting treatment related to the company's bankruptcy and reorganization strictly follows the provisions of "Accounting Standards for Business Enterprises No. 12 - Debt Restructuring", "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments" and the relevant regulatory guidelines of the China Securities Regulatory Commission. The timing of recognition of debt restructuring proceeds is appropriate (the date on which the reorganization plan is implemented), the amount recognized is accurate (based on the fair value of debt repayment resources, and deducting bankruptcy expenses and mutual benefit debts), the initial measurement and subsequent presentation of retained debt liabilities are compliant, and the accounting treatment of debt offset by shares complies with the requirements of the standards.

8. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the implementation status of the reorganization plan with the company’s management and reorganization administrator, including the court’s ruling on reorganization-related matters, the process of creditors’ declaration of claims and administrator review and court ruling, the administrator’s confirmation and suspension of confirmation of claims, the availability of shares and funds for debt repayment, the performance of reorganization investors, etc., and determine whether there are major uncertainties in the implementation of the reorganization plan;

(2) Obtain the details of claims and main claim declaration materials provided and confirmed by the administrator, and check them with court ruling documents, company accounting data, etc.;

(3) Obtain and check the bank receipt of the reorganization investor’s investment funds, and check the status of the investment funds;

(4) Obtain and check the bank receipt corresponding to the debt settlement, and check the settlement status of the cash repayment debt;

(5) Obtain and check the transfer registration confirmation of China Securities Depository and Clearing Co., Ltd. regarding the transfer of shares and the use of shares to offset debts, etc., to determine whether the major uncertainties in the implementation of the reorganization plan have been eliminated and whether the conditions for the termination of recognition of claims and debts have been met;

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(6) Review the calculation process of the company's reorganization profit and loss amount to confirm whether the amount is accurate; review the accounting processing involved in the company's reorganization and check whether it complies with the Accounting Standards for Business Enterprises and related regulations;

(7) Conduct interviews with company management to understand whether there are any debt disputes or lawsuits.

After verification, we believe that the debt repayment plan of the company's reorganization plan has covered all debts and contingent debts, and the debt repayment arrangements for the remaining debts or retained debts as of the end of the reporting period are clear and clear; as of now, there are no debt disputes or lawsuits.

(2) List the details of the top five interest-bearing liabilities, including but not limited to the name of the creditor, whether there is a relationship with the company, the nature of the loan, the amount of the loan, the interest rate of the loan, the maturity date, whether it is overdue, the overdue amount, whether it involves debt restructuring, and the company's subsequent debt repayment arrangements and specific measures to improve the company's cash flow level based on the company's freely disposable monetary funds, estimated operating cash flow, asset liquidity, financing arrangements, and restructuring debt retention arrangements.

1. Details of interest-bearing liabilities

As of December 31, 2025, the company had a total of 4 interest-bearing liability balances with a total amount of 525.5695 million yuan. The details are as follows:

Unit: Order of 10,000 yuan Borrowing interest Is the debt involved? Is there a borrowing unit? Loan balance Maturity date Overdue amount

Number, quality rate, overdue debt reorganization, related relationships

annual root

Chongqing Three Gorges Bank Guarantee,

1 40,277.35 According to LPR December 21, 2028 No / Yes No Co., Ltd. Pledge

determined

Chongqing Rural Business Annual Root

guarantee,

2 Bank Co., Ltd. 6,557.48 According to LPR December 21, 2028 No / Yes No

Mortgage

company determined

Jilin Bank shares guarantee,

3 4,950.00 6.53% March 15, 2026 No / No No Limited Company Mortgage

China Cinda Asset

Management Co., Ltd.

4 1,055.69 Guaranteed 7.50% April 16, 2022 Yes 1,055.69 No No Company Chongqing Branch

company[note]

[Note] The original creditor is the Agricultural Bank of China, which was transferred to the Chongqing Branch of China Cinda Asset Management Co., Ltd. in June 2025; the amount listed includes overdue interest

2. Subsequent debt repayment arrangements

(1) Restructure debt repayment arrangements

The debts of Chongqing Three Gorges Bank Co., Ltd. and Chongqing Rural Commercial Bank Co., Ltd. will be implemented in accordance with the reorganization plan. For detailed repayment arrangements, please refer to Part 2 (1) 5 of this Note.

(2) Debt repayment arrangements for other interest-bearing liabilities

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1. The loan from Changchun Jinhui Branch of Jilin Bank Co., Ltd. (serial number 3) is an existing loan of its subsidiary Liaoyuan Baikang, with a maturity date of March 15, 2026, and has not been included in the company's reorganization. As of now, the company has repaid the loan in full;

2. The subject of Cinda Asset’s overdue loan (serial number 4) was originally Chongqing Beibei Branch of Agricultural Bank of China Co., Ltd. The creditor’s rights were transferred to Cinda Asset in June 2025. As of the end of 2025, the overdue principal and interest were 10.5569 million yuan. The company has incorporated this debt into the overall debt planning plan and negotiated a package settlement arrangement with Cinda Assets (see Note 2(1)5 for details of other liabilities), and plans to complete the repayment in 2026. The funds will come from the company's operating repayments and asset revitalization income. Overdue interest and penalty interest have been fully accrued according to the judgment, and there is no subsequent accrual risk.

3. Solvency analysis of key financial indicators

(1) Freely disposable monetary funds: As of December 31, 2025, the company's closing balance of monetary funds was 114 million yuan, of which 104 million yuan was freely disposable, which can cover short-term borrowings and non-current liabilities due within one year. The short-term debt repayment pressure is controllable, but it is not enough to cover all long-term borrowings (444 million yuan), and it needs to rely on operating cash flow and financing arrangements;

(2) Estimated operating cash flow: The company has divested the building materials sector and focused on its main business of pharmaceutical intermediates, APIs and preparations; by optimizing its product structure and strengthening accounts receivable collection and inventory turnover, it is expected that the operating net cash flow of its main pharmaceutical business will continue to improve and become the main source of debt repayment;

(3) Asset liquidity: The equity of subsidiaries (100% equity of Liaoyuan Baikang, 72% equity of Chunrui Medicine) has been pledged for borrowing. After reorganization, the company structure has been clear, and there are no important idle assets. There are certain restrictions on the method of liquidating assets to repay debts;

(4) Financing arrangements and external support: After the reorganization, the actual controller and reorganization investors provided business coordination, resource coordination and liquidity support. In March 2026, the controlling shareholder Jiheng Group provided the first loan of 50 million yuan to subsidiary Liaoyuan Baikang, and Liaoyuan Baikang received the payment on March 4, 2026.

4. Specific measures to improve the company’s cash flow level

(1) The company has divested its building materials segment and will focus on its core business of pharmaceutical intermediates, APIs and preparations in the future. By optimizing the product structure, expanding high-quality customers, and strictly managing accounts receivable collection and inventory turnover, the company will continue to increase the operating net cash flow of the pharmaceutical segment and provide a stable source of funds for debt repayment;

(2) Implement unified allocation of group funds and revenue and expenditure control, give priority to ensuring debt repayment fund needs; comprehensively reduce non-essential expenses such as management and sales, strictly control costs and expenses, improve fund use efficiency, and continue to improve net performance

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Cash flow situation;

(3) Relying on the resource support of the actual controller and reorganization investors after the reorganization, the company will actively seek support from the actual controller and reorganization related parties in terms of business coordination, resource coordination and liquidity support, stabilize the company's overall financial situation, and ensure that debts are repaid in full and on schedule.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the company’s internal controls related to monetary funds and financing activities, evaluate the design of these controls, and determine whether they are implemented;

(2) Obtain and inspect the "Reorganization Plan of Chongqing Sansheng Industrial Co., Ltd." and the confirmation letter of debt retention arrangements approved by the Chongqing Fifth Intermediate People's Court, and verify whether the amount, term and other information of the debt retention arrangements are consistent with the reorganization plan;

(3) Obtain the repayment voucher and bank statement of Jilin Bank loan after the period, and verify the fact that the loan has been repaid in full;

(4) Obtain the relevant loan contracts, overdue interest and penalty interest calculation sheets from China Cinda Asset Management Co., Ltd. Chongqing Branch, and check the accuracy of the overdue amount;

(5) Obtain the board resolution, loan agreement and bank remittance voucher for the loan provided by the controlling shareholder Jiheng Group to Liaoyuan Baikang, and verify the actual availability of external financing and liquidity support;

(6) Conduct inquiry procedures with the company’s management to learn about the company’s subsequent debt repayment arrangements and measures to improve cash flow levels.

After verification, we believe that the company's debts with Chongqing Three Gorges Bank and Chongqing Rural Commercial Bank involve debt restructuring, and the company has overdue loans; the company plans to resolve debt repayments and improve cash flow levels by improving operating efficiency, controlling costs, integrating resources, etc.

(3) Explain the background reasons for the company’s two external guarantees, the reasons for the large amount of the guarantee, the actual amount, the progress of the guarantee matters so far and future resolution measures, and whether the above situations have a significant adverse impact on the company’s solvency.

The guarantee matters involved this time are joint liability guarantees provided by the company's holding subsidiaries Chunrui Pharmaceutical and Liaoyuan Baikang for the company's historical financing.

1. Background and reasons for the large guarantee amount

The company has two major business segments: building materials and pharmaceuticals. However, in recent years, due to various factors such as the industry, building materials

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The sector's difficulty in collecting money has led to the company's overall financial constraints. In order to reduce the group's financing costs and improve financing efficiency, the company applied for credit from Shanghai Pudong Development Bank, China Guangfa Bank, and Agricultural Bank of China, and pledged part of its assets as a guarantee. The original actual controller and its close relatives and subsidiaries provided joint liability guarantees for the company's financing. This guarantee is a conventional credit enhancement arrangement for integrated financing within the group.

The main debt corresponding to this guarantee is a large bank loan formed by the company to support daily operating turnover. As of August 8, 2025, the total amount of principal and interest that the company has not repaid is 326.0928 million yuan (including inferior claims, the same below). The corresponding guarantee limit is formed simultaneously with the scale of the main debt. At the same time, Chunrui Medicine and Liaoyuan Baikang have provided full joint liability guarantee for the company's borrowings and are jointly and severally liable for all debts. Therefore, the guarantee limit is consistent with the scale of the main debt, resulting in a higher amount. After the company's reorganization, the original owner's debts have been properly handled through the reorganization plan, but creditors can still pursue repayment from the guarantor in accordance with the law.

2. Actual amount incurred

The principal claims corresponding to the aforementioned external guarantees have been reviewed and approved by the court, and the total amount of the reviewed claims is RMB 326.0928 million. According to the reorganization agreement, each creditor shall be paid off in full in cash for amounts up to 50,000 yuan. In addition, according to the debt repayment arrangement confirmed through communication between the company and creditors, creditors will give priority to the execution of mortgaged assets and directly pursue repayment from subsidiaries Chunrui Medicine and Liaoyuan Baikang for the remaining claims after the disposal of the mortgages. At the same time, after the compensation, the subsidiary has the right to obtain the share of stocks that the corresponding creditor's rights can enjoy according to the compensation amount. The future realization value of this part of the stock can be used to make up for the subsidiary's compensation losses.

Therefore, based on the above information, the estimated liabilities borne by the subsidiary are determined after comprehensive consideration of multiple factors such as the legal identification of guarantee liability, asset offsets, and reorganization compensation. Specifically, the calculation is based on the formula of "total claims of 326.092 million yuan, minus the cash payment part, then minus the value of mortgage assets, and finally minus the expected realizable value of future stocks." The specific calculation process is as follows:

Unit: 10,000 yuan

Item Amount Remarks

Total debt① 32,609.20 including subordinated claims

Cash payment amount② 15.00

Remaining debt after cash repayment③=①-② 32,594.20

Less: Liquidation value of collateral④ 13,230.24 [Note 1]

Remaining debt ⑤=③-④ 19,363.96

Including: inferior debt 2,024.25 inferior debt does not participate in equity conversion

Number of debt converted into shares (10,000 shares)⑥ 1,095.36 [Note 2]

Market price ⑦ 4.52 The closing price on December 31, 2025 Amount of debt repayment with shares ⑧=⑥*⑦ 4,951.04

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Other special considerations⑨ 858.99 [Note 3]

Calculate the amount of future liability ⑩=⑤-⑧-⑨ 13,553.94

[Note 1] Chongqing Jinhan Asset Appraisal Land and Real Estate Appraisal Co., Ltd. and Chongqing Jindi Real Estate Land Asset Appraisal Co., Ltd. have evaluated the mortgaged assets and issued reports (Chongjinhan Pingzi [2025] No. 0056, Chongjin Ziping (2024) No. 0072). It is difficult to dispose of some assets, and the company determines the final liquidation value through judicial auction.

[Note 2] According to the reorganization plan, 6.317071014 shares of company stock can be obtained for every 100 yuan of ordinary debt.

[Note 3] Regarding Guangfa Bank’s guaranteed claims, according to the civil judgment issued by the Chengyu Financial Court ((2024) Yu 87 Min Zhong No. 5634), the subsidiary only needs to bear half of the guarantee liability. Therefore, when calculating estimated liabilities, the creditor's rights are recognized at half of the estimated amount.

After considering the above factors such as the disposal of mortgaged assets, cash settlement of small claims, realizable value of stocks, and partial liability exemptions, the total claims of RMB 326.0928 million were deducted and adjusted item by item, and the estimated liabilities were finally prudently confirmed to be RMB 135.5394 million.

At the consolidated statement level, the above-mentioned estimated liabilities are the joint and several guarantee liabilities that the subsidiary still needs to bear due to the company's reorganization. The company will offset this loss against the current reorganization profit and loss, and present the estimated liabilities as "other non-current liabilities".

3. Progress and future solutions

As of now, the manager is actively promoting the disposal procedures of the collateral involved in the loan, and plans to realize the value of the assets through judicial auctions and other means to give priority to repaying the secured debt. For the remaining debt that cannot be made up after the disposal of the collateral and for which the subsidiary may assume guarantee liability, the company has accrued a liability of RMB 135.5394 million in the 2025 annual report in accordance with the principle of prudence and fully disclosed it.

In the future, the company will coordinate the operating cash flow of Chunrui Pharmaceuticals and Liaoyuan Baikang, reasonably arrange capital reserves, and ensure that the daily operations of the subsidiaries are not affected by guarantee matters; at the same time, it will sort out the asset structure of the subsidiaries and improve the solvency of the subsidiaries through business efficiency and other methods. The company will also strictly comply with regulatory requirements, continue to disclose the progress of guarantee matters, and perform information disclosure obligations in a timely manner.

4. Whether it has a significant adverse impact on the company’s solvency

The company's bankruptcy reorganization has been completed, the main debts have been properly handled and arranged, the company has returned to normal operating capabilities, and there is no risk of main debt repayment. At the same time, Chunrui Pharmaceuticals and Liaoyuan Baikang, as the company's core profitable subsidiaries, have stable operations, healthy cash flow, and independent debt repayment capabilities; the estimated liabilities accrued this time have fully reflected potential risks and will not have a significant impact on their ongoing operations. The company has included in the financial statements the expected irreversible losses.

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The provision of estimated liabilities for the remaining debt fully reflects the potential risks of guarantee matters and will not have a significant adverse impact on the company's solvency.

Despite this, the company still needs to warn of relevant risks: if the future auction value of the collateral is significantly lower than the assessed value, the stock realization price drops abnormally, or the amount of claims claimed by creditors exceeds the current estimated range, the actual amount of compensation borne by the subsidiary may increase, and the company still needs to adjust the estimated liabilities based on the actual situation, thereby affecting the subsidiary's normal operating ability. The company will continue to track the progress of guarantee matters, adjust estimated liabilities in a timely manner and fulfill its information disclosure obligations.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Obtain and examine the loan contract, guarantee contract and mortgage contract signed between the company and the bank, and verify the main debt amount, guarantee method, guarantee scope and guarantee period;

(2) Conduct inquiry procedures with the company’s management to understand creditors’ rights exercise paths, the progress of guarantee matters and future resolution measures;

(3) Obtain and check the evaluation report of the mortgaged assets, review the basis and method for determining the evaluated value and liquidation value of the mortgaged assets, and evaluate their rationality;

(4) Obtain and check the civil judgment issued by the Chengyu Financial Court, verify the content of the judgment, and confirm whether the consideration of the judgment results in the estimation of estimated liabilities is accurate;

(5) Obtain and review the company’s calculation process of estimated liabilities.

After verification, we believe that the company's two external guarantees are joint liability guarantees provided by subsidiaries for the company's historical financing, which are conventional credit enhancement arrangements for integrated financing within the group; the large guarantee amount is mainly due to the large scale of the main debt and the subsidiary's full joint liability; as of now, creditors have not directly exercised their right of recourse against the subsidiary; the company has formulated follow-up solutions and is not expected to have a significant adverse impact on the company's overall solvency.

(4) Combined with the main financial data, production and operation status and importance to the company of Liaoyuan Baikang Pharmaceutical and Chongqing Chunrui Medicine, explain the background reasons for the company's two long-term equity investment pledges, the debt repayment arrangements and resolution measures to be taken, whether the above matters have a major adverse impact on the production and operation of Liaoyuan Baikang Pharmaceutical and Chongqing Chunrui Medicine, whether the company actually controls Liaoyuan Baikang Pharmaceutical and Chongqing Chunrui Medicine, and fully disclose the risks.

1. Background reasons for long-term equity investment pledge

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The company has two long-term equity investment pledges. The pledge targets are 100% of the equity of Liaoyuan Baikang and 72% of the equity of Chunrui Medicine. The background of the above equity pledge is that the company applied for a loan from the bank due to business needs. The bank needs to provide effective credit enhancement measures due to risk management and control requirements. In view of the stable operation and good profitability of Chunrui Pharmaceutical and Liaoyuan Baikang, the company provided pledge guarantee for the borrowings with its equity interests in Baikang Pharmaceutical and Chunrui Pharmaceutical. This arrangement is a conventional credit enhancement method for integrated financing within the group, aiming to meet bank credit conditions and reduce the group's overall financing costs.

2. Debt repayment arrangements and settlement measures

According to the reorganization plan, the borrowings corresponding to the equity pledges of Baikang Pharmaceutical and Chunrui Pharmaceutical have been included in the reorganization debt retention arrangement. The debt retention period is from 2025 to 2028. The specific repayment arrangements are described in Note 2 (1) 5.

The company will rely on the cash flow generated from its main pharmaceutical business operations, new bank credit and other sources to ensure that the principal and interest of the retained debt are repaid in full and on schedule. If the company obtains sufficient funds in advance (such as liquidity support provided by the actual controller, proceeds from asset disposal, etc.), it will give priority to repaying the retained debt in advance to release the equity pledge as soon as possible and eliminate potential risks.

3. Whether the above matters have a significant adverse impact on the production and operation of the subsidiary

Based on comprehensive judgment, the above equity pledge matters currently do not have a significant adverse impact on the production and operation of Chungrui Pharmaceuticals and Liaoyuan Baikang for the following reasons:

(1) The equity pledge itself does not transfer the ownership of the equity, nor does it affect the subsidiary's daily operating decisions. The company still holds 100% of the voting rights of Liaoyuan Baikang and 72% of Chunrui Medicine. The management of the subsidiaries is stable, and there are no restrictions on production, procurement, sales and other operating activities;

(2) The subsidiary's operating cash flow is normal, its main bank account and use of funds have not been frozen or restricted, and it can pay purchases, employee salaries and taxes normally;

(3) The corresponding main debt is being repaid in an orderly manner according to the reorganization plan, no default event has occurred so far, and there is no real risk of creditors exercising their pledge rights;

Therefore, provided that the current debt repayment arrangements proceed normally, the equity pledge will not have a significant adverse impact on the subsidiary's production and operations. However, if the company's serious default in the future causes creditors to exercise their pledge rights, it may affect the company's control over its subsidiaries and requires attention.

4. Whether the company actually controls Chunrui Pharmaceutical and Liaoyuan Baikang

The company directly holds 100% equity of Liaoyuan Baikang and 72% equity of Chunrui Medicine, both of which are in an absolute controlling position. The equity pledge is a security interest and does not change the ownership of the equity. The company remains the registered stock of the two subsidiaries.

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East. By appointing directors and senior management personnel, the company fully leads the subsidiary's operating policies, financial decisions and major investment and financing activities. Important daily operations of subsidiaries need to be approved by the company, and unified fund scheduling and management are implemented between the company and subsidiaries. Therefore, although the equity is in a pledged state, the company still actually controls the above two subsidiaries.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the company’s internal control system related to external guarantees, asset pledges and financing, evaluate whether its design is reasonable, and test the effectiveness of key control operations;

(2) Obtain and check relevant information on the reorganization plan and debt retention arrangements, verify that the corresponding loans have been included in the reorganization debt retention arrangements, and confirm the debt retention period and installment repayment plan;

(3) Obtain the equity structure chart, company articles of association, board of directors and senior management personnel of the company and its subsidiaries, and verify the equity status and senior management status;

(4) Conduct inquiry procedures with the company’s management to understand the repayment progress and potential risks of retained debt loans, and whether they will have a significant adverse impact on the production and operation of the subsidiary.

After verification, we believe that the company's two long-term equity investment pledges were caused by the need to increase credit from banks for the company's operating needs, and the corresponding loans have been included in the debt retention arrangement for reorganization; the company plans to rely on the cash flow generated from operating business and the liquidity support of the controlling shareholder to ensure repayment on schedule; the equity pledge has not had a major adverse impact on the production and operation of the subsidiary; the company actually controls Chunrui Pharmaceuticals and Liaoyuan Baikang.

(5) Combined with the summary of external guarantees and overdue liabilities of Chongqing Chunrui Pharmaceutical and Liaoyuan Baikang Pharmaceutical, explain the accounting treatment basis and legal compliance of the company's joint guarantee of the above-mentioned subsidiaries for a total liability of 136 million yuan, the future debt repayment arrangements and the measures to be taken, whether the above two subsidiaries have other large liabilities and contingent liabilities so far, and whether the above situation has a significant adverse impact on the production, operation and performance of Chongqing Chunrui Pharmaceutical and Liaoyuan Baikang Pharmaceutical.

1. Basis for accounting treatment and legality and compliance

In accordance with the relevant provisions of "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments", the company identifies the joint liability guarantee provided by the subsidiary to the company as a financial guarantee contract, and conducts subsequent measurement according to the expected credit loss model. Since the company has entered bankruptcy and reorganization procedures, and creditors are still unable to be fully repaid through cash, debt-for-equity swaps, and disposal of collateral, the subsidiary is more likely to be required to perform guarantee obligations, and the related credit losses have increased significantly. Accordingly, the subsidiary shall calculate the amount of expected credit losses during the entire duration.

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Provision for losses is made. The calculation basis for the amount of loss reserve is detailed in this Note 2 (3) 2.

The above accounting treatment complies with the relevant provisions of the "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments" on financial guarantee contracts, and the provision for losses is sufficient, reasonable, and legal and compliant.

2. Future debt repayment arrangements and proposed measures

For details, please refer to instructions 2(3) 2 and 3 of this note.

3. Whether there are other large liabilities and contingent liabilities

As of December 31, 2025, Liaoyuan Baikang had an original loan of RMB 49.5 million from Jilin Bank, which was fully repaid on March 15, 2026. Chunrui Medicine had an overdue loan of RMB 10.5569 million (including interest) at the end of the period. For details, please refer to Note 2 (2). Except for the estimated liability of RMB 136 million confirmed by the above-mentioned external guarantee, Chunrui Pharmaceuticals and Liaoyuan Baikang have no other undisclosed large liabilities or contingent liabilities. The operating liabilities of the two subsidiaries, such as accounts payable, employee salaries payable, taxes payable, etc., are at normal levels, and there are no overdue or major abnormalities. Except for providing guarantees to the company, the two subsidiaries have not provided any other form of guarantees to the outside world, and there are no pending lawsuits, pending arbitrations or other contingencies that may lead to economic benefits. The company has conducted a comprehensive inventory of all liabilities and contingent liabilities of the two subsidiaries, and has fully reflected them in the consolidated financial statements.

4. Whether the above situation has a significant adverse impact on the production, operation and performance of the subsidiary

Based on comprehensive judgment, the above estimated liabilities of RMB 136 million and related guarantee liability matters will not have a significant adverse impact on the production, operation and performance of Chunrui Medicine and Liaoyuan Baikang. For details, please refer to Note 2 (3) 4.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Obtain and examine the loan contract, guarantee contract and mortgage contract signed between the company and the bank, and verify the main debt amount, guarantee method, guarantee scope and guarantee period;

(2) Conduct inquiry procedures with the company’s management to understand the creditor’s exercise path, the progress of guarantee matters and future resolution measures, and confirm whether there are other large liabilities and contingent liabilities, and whether they have a significant adverse impact on the production, operation and performance of the subsidiary;

(3) Obtain and check the evaluation report of the mortgaged assets, review the basis and method for determining the evaluated value and liquidation value of the mortgaged assets, and evaluate their rationality;

(4) Obtain and check the civil judgment issued by Chengyu Financial Court, verify the content of the judgment, and confirm the expected

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Whether the judgment is accurately considered in the calculation of liabilities;

(5) Obtain and review the company's calculation process of estimated liabilities, and check whether the relevant accounting treatments are legal and compliant.

After verification, we believe that the accounting treatment of estimated liabilities confirmed by joint guarantees of the company's subsidiaries is legal and compliant; the company has formulated follow-up solutions; the two subsidiaries do not have other undisclosed large liabilities or contingent liabilities; the above guarantee matters will not have a significant adverse impact on the production, operation and performance of the subsidiaries.

(6) Combined with the main content and payment objects of financial expenses, as well as the comparison of comparable companies in the same industry, explain the reasons and rationality for the large amount of the company's financial expenses, and list the names, backgrounds, and reasons of the top ten payment objects; combined with the above situation, explain whether the financial expenses match the company's liabilities, and whether there are special projects such as large-amount consulting.

1. The specific details of the company’s financial expenses in 2024 and 2025 are as follows:

Unit: 10,000 yuan

Item 2025 2024 Variable amount interest expense 20,144.16 20,496.69 -352.52 Guarantee expense 725.98 725.98 Less: Interest income 3.49 94.54 -91.05 Add: Net exchange loss -22.44 -428.97 406.53 Others 281.82 309.16 -27.34 Total 21,126.03 20,282.33 843.69

In 2025, the company's financial expenses totaled 211.2603 million yuan, an increase of 8.4369 million yuan from 202.8233 million yuan in 2024, a year-on-year increase of 4.16%. The main items of financial expenses are interest expenses and guarantee expenses. Among them, the interest expense is 201.4416 million yuan, a slight decrease of 3.5252 million yuan from 204.9669 million yuan in 2024. This is mainly due to the company's bankruptcy reorganization in 2025, part of the existing debts were dealt with according to the reorganization plan, and the interest calculation scale decreased; another new guarantee fee of 7.2598 million yuan is due to the company's original actual controller providing guarantees for the company's existing financing, and the company should pay the guarantee fees to him.

The company held the 14th meeting of the fifth board of directors on December 18, 2024, and reviewed and approved the "Proposal on the Company and its Subsidiaries Accepting Guarantees and Related Transactions from Related Parties". This matter was reviewed and approved by the 2025 First Extraordinary General Meeting of Shareholders held on January 24, 2025. According to the above resolution, the company’s original controlling shareholder and actual controller Pan Xianwen and its related parties provided guarantees for the debts of the company and its subsidiaries, and the guarantee fee was

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The annual rate is calculated at 1%. If multiple related parties repeatedly provide guarantees for the same debt, there will be no repeated payments. After calculation, the guarantee expenses that should be recognized in 2025 are 7.2598 million yuan. In 2024, because the relevant resolutions have not been reviewed and passed, there is no corresponding amount. The guarantee fee is the necessary cost of the credit enhancement support provided by the related party (i.e. Pan Xianwen) for the company's financing. It is priced fairly and the necessary review procedures have been performed. It does not constitute the occupation of related party funds.

The amounts of items such as interest income, exchange gains and losses, and bank fees are relatively small. Overall, the company's financial expenses are still composed of interest expenses as the absolute core, which is in line with the capital and debt characteristics of the company's bankruptcy and reorganization stage.

2. Top ten payees of financial expenses

The details of the top ten payees of the company’s financial expenses in 2025 are as follows:

Unit: Financial expenses in 10,000 yuan

Serial number Unit name Nature of expense Background/amount of reason

loan interest,

1 Shenzhen Hi-tech Investment Group Co., Ltd. 8,243.02 Targeted financing penalty interest

China Great Wall Asset Management Co., Ltd. Borrowing interest,

2 3,338.25 Bank Borrowing Company Chongqing Branch Penalty Interest

Chongqing Three Gorges Bank Co., Ltd. Loan interest,

3 3,005.90 Bank borrowing from Beibei Branch Penalty interest

Chongqing Rural Commercial Bank Co., Ltd. Loan interest,

4 1,264.80 Bank borrowing company Beibei Branch Penalty interest

Industrial and Commercial Bank of China Co., Ltd. Loan interest,

5 858.51 Bank borrowing from Chongqing Beibei Branch Penalty interest

Borrowing interest, former investor borrowing 6 Shanghai Yihong Investment Management Co., Ltd. 430.33

Penalty interest payment [Note] Agricultural Bank of China Co., Ltd. Borrowing interest,

7 403.33 Bank borrowing from Chongqing Beibei Branch Penalty interest

Jilin Bank Co., Ltd. Liaoyuan

8 Borrowing interest 371.24 Bank loan Jinhui Branch

Bank of Chongqing Co., Ltd. Jiangbei

9 Borrowing interest 326.47 Bank borrowing branch

Industrial Bank Co., Ltd. Chongqing loan interest,

10 320.86 Bank borrowing

Yuzhong Branch Penalty Interest

Total 18,562.71

[Note] In August 2021, Zhou Ting'e, one of the company's original actual controllers, transferred 7.23% of his equity to Deng Hanyin, making Deng Hanyin the company's second largest shareholder. In order to relieve the company's liquidity pressure, Shanghai Yihong Investment Management Co., Ltd. (referred to as "Shanghai Yihong") and Shanghai Kaitian Industrial Investment Co., Ltd. (referred to as "Shanghai Kaitian") controlled by Deng Hanyin signed multiple loan contracts with the company to provide financial support to the company. 2023

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In February 2020, because the company failed to repay the principal and interest as agreed, and Shanghai Kaitian had transferred the relevant claims to Shanghai Yihong, Shanghai Yihong applied for arbitration to the Shanghai International Arbitration Center, requesting a ruling that the company repay the loan principal, interest and liquidated damages. In August 2024, the arbitration tribunal made a ruling requiring the company to pay Shanghai Yihong the debt balance of 39.2998 million yuan, loan interest and overdue interest of 6.2137 million yuan, and three overdue repayment interests calculated at 50,000 per day, and also bear attorney fees and arbitration fees. According to the ruling, the amount of interest and penalty accrued in 2025 is 4.3033 million yuan

As shown in the table, the total amount of the company's top ten financial expense payment objects is 185.6271 million yuan, mainly including loan interest and penalty interest. The main reason for the large financial expenses this year is that the company's funds continued to be tight during the reporting period, and all the company's debts were overdue. Interest expenses were fully accrued in accordance with the interest rates and penalty interest standards agreed in the settlement agreement or loan agreement. The company has completed bankruptcy reorganization in 2025, and the corresponding debts have been properly resolved through debt retention or reorganization plans. To sum up, the company's relatively large financial expenses this year are consistent with its special operating and reorganization actual conditions.

3. Comparison with the same industry

The comparison between the company and comparable companies in the same industry is as follows:

Unit: Ten thousand yuan for this period

Unit name

Financial expenses Operating income Financial expense rate Guobang Pharmaceutical 2,064.93 601,139.75 0.34% Tonghe Pharmaceutical -1,093.81 42,742.22 -2.56% Fengyuan Pharmaceutical 1,427.26 202,714.40 0.70% Hendi Pharmaceutical -988.29 45,330.70 -2.18% Company 21,126.03 89,984.85 23.48%

According to the comparison of the company's financial expense ratio with comparable pharmaceutical companies in the same industry, the company's financial expense rate in 2025 is 23.48%, which is much higher than comparable companies such as Guobang Pharmaceutical (0.34%) and Fengyuan Pharmaceutical (0.70%). The financial expense ratios of Tonghe Pharmaceutical and Hengdi Pharmaceutical are negative, mainly because their interest income is greater than their interest expenses. The reason for the significantly higher financial expense ratio of the company is that the company originally operated two sectors: building materials and pharmaceuticals. In recent years, sales of the building materials sector have continued to decline due to market and other reasons, and payment collection difficulties have caused the company's overall capital chain to be extremely tight. The company's existing debt has been overdue for a long time. According to the loan agreement and settlement agreement, higher penalty interest and compound interest will be borne after overdue, causing a significant increase in interest expenses. It is precisely because the company cannot afford

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Bear the above-mentioned high interest and penalty interest burden, and finally deal with the relevant debts through bankruptcy and reorganization procedures to resolve the overall debt crisis. Therefore, the company's financial expense rate during the reporting period was much higher than that of comparable companies in the same industry. This was due to the company's special operating difficulties and debt overdue history, and was consistent with the company's actual financial status.

4. Whether the financial expenses match the company's liabilities, and whether there are any special projects such as large-scale consulting

The company's financial expenses in 2025 are 211 million yuan, which is relatively large. It is mainly caused by the company's debt being overdue for a long time during the reporting period and a relatively high proportion of penalty interest and compound interest accrued in accordance with the loan agreement and settlement agreement. Such penalty interest has been fully included in the financial expenses. With the completion of the reorganization plan at the end of 2025, overdue debts have been properly resolved through debt retention and settlement, and financial expenses in future years will return to normal levels. Therefore, financial charges match the company's past due liabilities. In addition, there are no special items such as large financing consulting fees and consulting fees in the company's financial expenses. They mainly consist of interest expenses, penalty interest, guarantee fees and bank fees. The relevant details have been fully disclosed in the annual report.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the company’s internal control system related to financing activities, evaluate whether its design is reasonable, and test the effectiveness of key control operations;

(2) Obtain information such as loan contracts and financial expense schedules, and review the accuracy of interest expenses, guarantee expenses, etc.;

(3) Obtain the 2025 annual report or semi-annual report of comparable companies in the same industry, calculate the financial expense rate and conduct comparative analysis with the company to identify the reasons for the differences;

(4) Conduct inquiry procedures with the company’s management to understand the reasons for the large amount of financial expenses, the background of guarantee expenses, the basis for accruing overdue penalty interest, and the trend of financial expenses in the future.

After verification, we believe that the large amount of the company's financial expenses this year is caused by a large number of overdue loans, which is reasonable; the company's financial expenses and liabilities are matched, and the company has solved the main overdue debts through reorganization this year; the company does not have special projects such as large-scale consulting.

3. Regarding asset impairment. During the reporting period, the company made a total of RMB 149 million in asset impairment provisions, including RMB 11 million in inventory depreciation losses, RMB 127 million in goodwill impairments, and RMB 18 million in fixed assets and projects under construction. The impairment of goodwill is mainly due to the impairment of goodwill of two subsidiaries, Chongqing Chunrui Pharmaceutical and Liaoyuan Baikang Pharmaceutical. In 2024, the company's goodwill impairment loss will be 182 million yuan. Please ask your company: (1) Combine the recent

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Comparative changes in the main financial data of Chunrui Pharmaceuticals and Liaoyuan Baikang Pharmaceuticals (including but not limited to operating income, net profit attributable to the parent, net profit attributable to the parent after non-deductions, gross profit margin, net assets) in the past 3 years, the background reasons for the generation of goodwill and changes in the amount, the main contents of asset evaluation, etc., explain the above 2 Contents and changes in the asset composition and key assumptions during the impairment test of the subsidiaries from the time when the subsidiaries were included in the consolidated statements to the end of the reporting period. Compare the key parameters of the goodwill impairment test during the period to analyze the basis for parameter selection, reasons for differences and rationality. Explain the reasons and rationality for large amounts of goodwill accrual for two consecutive years. Whether the goodwill impairment accrual is timely and sufficient, and whether the selection of the asset assessment agency complies with securities regulatory regulations. (2) Explain whether the provision for inventory depreciation provisions is sufficient based on changes in product prices, inventory composition and age, orders on hand, post-period production and carry-over status, inventory depreciation preparation testing process, and the situation of comparable companies in the same industry. (3) Combined with the specific content of the project under construction, the time and basis for the occurrence of impairment signs, the process of impairment testing, etc., explain whether the impairment provision for the project under construction is sufficient. (4) Explain whether the provision for impairment of fixed assets is sufficient based on the business development and use of fixed assets, whether there are product suspensions or production line suspensions, the process of fixed asset impairment testing, etc. Please ask the accounting firm to verify the above matters and issue a clear opinion. (Article 4 of the inquiry letter)

(1) Combined with the comparative changes in the main financial data of Chunrui Pharmaceuticals and Liaoyuan Baikang Pharmaceuticals in the past three years (including but not limited to operating income, net profit attributable to the parent, net profit attributable to the parent after non-deductions, gross profit margin, net assets), the background reasons for the generation of goodwill and changes in the amount, the main content of asset evaluation, etc., explain the above The content and changes in the asset composition and key assumptions during the impairment test of the two subsidiaries from the time when the two subsidiaries were included in the consolidated statements to the end of the reporting period. The key parameters of the goodwill impairment test during the comparison period are analyzed based on parameter selection, reasons for differences and rationality. The reasons and rationality for large amounts of goodwill accrual for two consecutive years are explained. Whether the goodwill impairment accrual is timely and sufficient, and whether the selection of the asset appraisal agency complies with securities regulatory regulations.

1. Chunrui Medicine

In May 2017, the company acquired 60% of the shares of Chunrui Medicine for a purchase price of 538 million yuan. After this acquisition, the company held 60% of the shares of Chunrui Medicine, and the company's wholly-owned subsidiary Chongqing Sansheng Investment Co., Ltd. held 12% of the shares of Chunrui Medicine. Therefore, the company held a total of 72% of the shares of Chunrui Medicine. The company recognized the difference of RMB 315.9268 million between the total consideration of Chunrui Medicine's 72% equity share and Chunrui Medicine's assessed identifiable net asset value as goodwill. In 2018 and 2024, based on the assessment results, the company made goodwill impairment provisions of RMB 2.9206 million and RMB 180.1331 million respectively. As of the assessment base date in 2025, the book value of goodwill was RMB 132.8731 million.

(1) The situation of the goodwill asset group from Chunrui Pharmaceuticals being included in the consolidated statements to the end of the reporting period is as follows:

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Unit: 10,000 yuan

Project 2018 2019 2020 2021 Houses and buildings 7,427.57 7,021.49 10,798.02 8,976.19 Machinery and equipment 11,686.72 12,162.11 11,752.11 9,800.82 Construction in progress 3,020.94 2,324.68 487.46 1,633.36 Land use rights 2,995.28 2,984.48 2,884.77 2,534.39 Intangible assets-others 502.89 400.02 304.88 690.37 Book value of asset group excluding goodwill 25,633.40 24,892.78 26,227.23 23,635.13 Pharmaceutical intermediates asset group portfolio, Luoqi factory relocation, housing structures

Pharmaceutical intermediate assets Pharmaceutical intermediate assets Pharmaceutical intermediate assets

Asset group scope Demolition, only some equipment group combinations Group combinations Group combinations

Moved to Wusheng factory and continued to use it, the book value of the asset group decreased.

Kaiyuan Asset Appraisal has Kaiyuan Asset Appraisal has Kaiyuan Asset Appraisal has Kaiyuan Asset Appraisal has appraisal agency

Ltd. Ltd. Ltd. Ltd. Ltd.

Do you have securities qualifications? Yes Yes Yes Yes

(continued)

Project 2022 2023 2024 2025 Houses and buildings 8,746.52 10,446.70 10,427.27 9,619.79Machinery and equipment 13,078.81 15,536.37 16,046.69 15,152.10Construction in progress 2,538.87 605.30 - - Land use rights 2,471.17 2,407.03 2,343.34 2,678.69 Intangible assets - Others 518.06 410.36 307.10 204.29 Assets excluding goodwill

27,353.44 29,405.77 29,124.40 27,654.88 Face value

Pharmaceutical intermediate assets

Group combination, Chunrui Medicine

Some equipment was relocated to

Pharmaceutical intermediate assets Pharmaceutical intermediate assets Scope of pharmaceutical intermediate assets asset group After Wusheng factory area, involving

Group combination Group combination Group combination partial factory building renovation and

Equipment Procurement, Asset Group

Increase in book value

Beijing Kunyuan Zhicheng Capital Beijing Kunyuan Zhicheng Capital Beijing Kunyuan Zhicheng Capital Beijing Kunyuan Zhicheng Capital Evaluation Agency

Property Appraisal Co., Ltd. Property Appraisal Co., Ltd. Property Appraisal Co., Ltd. Does Property Appraisal Co., Ltd. have securities qualifications? Yes Yes Yes Yes

The book value of the asset group in 2021 has decreased significantly compared with the previous year. This is mainly due to the fact that on August 24, 2021, Chunrui Company and Chongqing Yubei District Land Acquisition Affairs Center signed the "Chongqing Chunrui Pharmaceutical Chemical Co., Ltd. Environmental Relocation Compensation Agreement" (Yubei Zhengdihe (2021) No. 1587). The factory stopped production at the end of 2021 and The relocation work will start in March 2022. All the houses and facilities in the Luoqi factory area will be demolished, and only some assets will be dismantled and moved to

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Wu Sheng Chunrui continues to use it, and the assets in the asset group decrease significantly; the asset group in 2020, 2022, and 2023

The book value has increased to a certain extent compared with the previous year, mainly due to Wu Sheng Chunrui’s expansion of production and new environmental protection facilities.

As a result, the newly added equipment and production lines took over the original Chunrui Pharmaceutical products, effectively making up for the loss of the original asset group due to the relocation.

scale reduction, as the above-mentioned new assets can benefit from the synergies of the business combination, the company adjusted accordingly

The value of the asset group.

(2) Key assumptions of Chunrui Medicine’s impairment testing over the years

Project 2018 2019 2020 2021

1. Assume property rights are held 1) Assume property rights are held 1) Assume property rights are held 1) Assume property rights holders are under existing management The scope, business model and The scope and business model are basically the same as the present. The scope and business model are basically the same as the present. The future development trend of the business is consistent with the future development trend of the industry on the assessment basis. The development trend of the industry on the assessment base date. The development trend of the industry on the assessment base date. The development trend of the industry on the assessment base date. The development trend of quasi-day is basically consistent; basically consistent; basically consistent; basically consistent;

2. Assuming that the property rights are held 2) Assuming that the property rights are held 2) Assuming that the property rights are held 2) Assuming that the owners of property rights are diligent and their managers are diligent and responsible, and their management is responsible and their management is responsible and their management is capable of performing their duties; To serve and perform their duties; To serve and perform their duties; To serve and perform their duties;

3. Assuming the principal and 3) Assuming the principal and 3) Assuming the principal and 3) Assuming the principal and the property rights holder provide the property rights holder provides the property rights holder provides the information provided by the property rights holder (basic information (basic information) (basic information (basic information) (basic information, financial information, operating information, financial information, operating information, financial information, operating information, financial information, operating information, forecast information operating information, forecast information) Operating data, forecast data, etc.) are all true and accurate, etc.) are all true and accurate, etc.) are all true and accurate, etc.) are all true, accurate, and key assumptions

Complete, relevant major matters Complete, relevant major matters Complete, relevant major matters fully disclosed; item disclosed fully; item disclosed fully; item disclosed fully;

4. It is assumed that the property rights are held 4) It is assumed that the property rights are held 4) It is assumed that the property rights are held 4) It is assumed that the property rights holder fully abides by all relevant laws in force; regulations; regulations; regulations;

5. Assume that the property rights are held 5) Assume that the property rights are held 5) Assume that the property rights are held 5) Assume that the income of the property rights holders occurs evenly in each year. The point is the middle of each year. The point is the middle of each year. The point in time. The point in time. The point in time.

6. Assume the company's future 6) Assume the company's future 6) Assume the company's future 6) Assume the company's future production and sales are consistent, that is, production and production and sales are consistent, that is, production and production and sales are consistent, that is, production quantity is equal to sales quantity. The difference between the cost of production and the cost of sales and the cost of sales converted into the difference between the cost and the cost of sales; the difference; the difference; the difference;

7. Assuming that the property rights are held 7) Assuming that the property rights are held 7) Assuming that the property rights are held 7) Assuming that the property rights holder’s operating income and expenses and the person’s operating income and expenses and the person’s operating income and expenses and the person’s operating income and expenses are included in the appraisal object included in the appraisal object included in the appraisal object included in the appraisal object

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The purchase price of the asset is consistent with the local valuation base and the currency purchasing power on the local valuation base date. force to adapt. force to adapt. force to adapt.

(continued)

Project 2022 2023 2024 2025

1. Assume property rights are held 1) Assume property rights are held 1) Assume property rights are held 1) Assume property rights holders are under existing management The scope, business model and The scope and business model are basically the same as the present. The scope and business model are basically the same as the present. The future development trend of the business is consistent with the future development trend of the industry on the assessment basis. The development trend of the industry on the assessment base date. The development trend of the industry on the assessment base date. The development trend of the industry on the assessment base date. The development trend of quasi-day is basically consistent; basically consistent; basically consistent; basically consistent;

2. Assuming that the property rights are held 2) Assuming that the property rights are held 2) Assuming that the property rights are held 2) Assuming that the owners of property rights are diligent and their managers are diligent and responsible, and their management is responsible and their management is responsible and their management is capable of performing their duties; To serve and perform their duties; To serve and perform their duties; To serve and perform their duties;

3. Assuming the principal and 3) Assuming the principal and 3) Assuming the principal and 3) Assuming the principal and the property rights holder provide the property rights holder provides the property rights holder provides the information provided by the property rights holder (basic information (basic information) (basic information (basic information) (basic information, financial information, operating information, financial information, operating information, financial information, operating information, financial information, operating information, forecast information operating information, forecast information) Operating information, forecast information, etc.) are true, accurate, etc.) are true, accurate, etc.) are true, accurate, etc.) are true, accurate, and complete. Relevant major matters are complete. Relevant major matters are complete. Relevant major matters are complete. Relevant major matters are fully disclosed. Items are fully disclosed. Items are fully disclosed. Items are fully disclosed. Items are fully disclosed. Key assumptions

4. It is assumed that the property rights are held 4) It is assumed that the property rights are held 4) It is assumed that the property rights are held 4) It is assumed that the property rights holder fully abides by all relevant laws in force; regulations; regulations; regulations;

5. Assume that the property rights are held 5) Assume that the property rights are held 5) Assume that the property rights are held 5) Assume that the income of the property rights holders occurs evenly in each year. The point is the middle of each year. The point is the middle of each year. The point in time. The point in time. The point in time.

6. Assume the company's future 6) Assume the company's future 6) Assume the company's future 6) Assume the company's future production and sales are consistent, that is, production and production and sales are consistent, that is, production and production and sales are consistent, that is, production quantity is equal to sales quantity. The difference between the cost of production and the cost of sales and the cost of sales converted into the difference between the cost and the cost of sales; the difference; the difference; the difference;

7. Assuming the property rights are held 7) Assuming the property rights are held 7) Assuming the property rights are held 7) Assuming the property rights holder’s operating income and expenses and the person’s operating income and expenses and the person’s operating income and expenses and the person’s operating income and expenses and the appraisal object included The appraisal object includes the acquisition price of the assets included in the appraisal object The acquisition price of the assets and the local appraisal basis The price is consistent with the local valuation basis. The price is consistent with the currency purchasing power on the local valuation base date. force to adapt. force to adapt.

As shown in the table above, Chunrui Pharmaceutical has been selected for all goodwill impairment tests since it was included in the scope of consolidated statements.

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The key assumptions have basically not changed. The valuation assumptions in the asset valuation report are all implemented in accordance with the relevant national laws, regulations and normative documents. They follow common market practices and asset valuation standards and are in line with the actual situation of the valuation object. The valuation assumptions are reasonable.

(3) The main financial status of Chunrui Medicine over the years is as follows:

Unit: Ten thousand yuan project 2018 2019 2020 Operating income in 2021 43,844.62 51,740.25 45,025.23 56,530.63 Operating cost 33,526.73 38,736.30 32,117.10 44,465.17 Total pre-tax profit 8,174.85 9,550.87 9,291.41 7,717.45 Total pre-tax profit after deduction of non-profit

7,870.73 9,872.33 9,264.13 8,218.57 amount

Net profit attributable to the parent company 6,791.79 8,147.75 7,955.66 6,598.92 Net profit attributable to the parent company after deducting non-profit items 6,487.67 8,469.20 7,928.38 7,100.03 Gross profit margin 23.53% 25.13% 28.67% 21.34%Net assets 56,045.17 64,265.70 72,221.36 75,365.28 Profit rate before tax after non-profit deduction 17.95% 19.08% 20.58% 14.54% (continued table)

Project 2022 2023 2024 2025 operating income 48,403.43 53,240.48 33,237.98 31,130.34 operating cost 40,390.42 39,378.73 29,380.05 29,344.73 total pre-tax profit 7,874.21 10,561.45 -2,072.27 -12,079.80 Total profit before tax after non-profit deduction

5,608.17 10,640.73 -364.61 -1,398.80 amount

Net profit attributable to the parent company 6,496.26 8,898.29 -1,679.76 -13,321.02Net profit attributable to the parent company after deducting non-profit items 4,230.22 8,977.57 27.90 -2,640.01Gross profit margin 16.55% 26.04% 11.61% 5.74%Net assets 71,616.53 73,514.82 63,835.05 25,327.39 Profit rate before tax after non-profit deduction 11.59% 19.99% -1.10% -4.49%

(4) Impairment of Chunrui Pharmaceutical’s goodwill

Chunrui Pharmaceutical's operating performance declined in 2024. The main reason is that some products were affected by market conditions, customer demand decreased, and market prices dropped significantly, resulting in a significant drop in overall revenue. Although the cost of raw materials declined due to the impact of the terminal market, the decline was not as much as the decline in sales prices. In early October, a fire broke out in the fifth workshop of the subsidiary Sichuan Wusheng Chunrui Pharmaceutical Chemical Co., Ltd., which caused the workshop to be in a state of insecurity from October to December.

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Discontinued status.

The book value of the asset group containing goodwill in 2024 is 725.9748 million yuan, the recoverable amount calculated using the future discounted cash flow method is 475.790 million yuan, and the goodwill impairment is 250.1848 million yuan.

The market situation has not improved significantly in 2025, and the market prices and sales volume of some products are on a downward trend, resulting in Chunrui Pharmaceutical's operating performance continuing to decline and goodwill showing signs of impairment.

The book value of the asset group containing goodwill in 2025 is 461.0948 million yuan, the recoverable amount calculated using the future discounted cash flow method is 363.260 million yuan, and the goodwill impairment is 97.8348 million yuan.

During the goodwill impairment test in 2024, Chunrui Pharmaceuticals' operating performance declined due to market downturns, reduced end-market demand for some products, and workshop fire shutdowns that had just begun that year. Judging from the perspective at the time, the above factors were not long-term factors, and the provision for goodwill impairment based on the estimated recoverable amount at that point in time was reasonable and sufficient; 2025 Although factors such as workshop fires and production shutdowns did not occur again in 2018, influencing factors such as market conditions and reduced end-market demand for some products continued to exist and did not improve as expected in the previous year. The recoverable amount was calculated on the above basis in 2025, and the amount of goodwill impairment provision was reasonable and sufficient. There is no situation where the goodwill impairment should be accrued in 2024 but deferred to 2025.

(5) Key parameter analysis of goodwill impairment test: parameter selection, reasons for differences and rationality

1. The important parameters of the forecast period in the last three years are detailed as follows:

Project 2023 2024 2025

During the forecast period (2024-2028), the gross profit margin during the forecast period (2025-2029) and the forecast period (2026-2030) are years respectively. The gross profit margin is years respectively). The gross profit margin is respectively

21.98%, 22.42%, 11.30%, 13.67%, 12.40%, 13.93%, gross profit margin

22.73%, 22.77%, 15.80%, 17.75%, 15.27%, 16.53%, 22.61%, the perpetual period is 19.53%, the perpetual period is 17.55%, the perpetual period is 22.61% 19.53% 17.55%

During the forecast period (2024-2028

The net interest rates during the forecast period (2025-2029) and the forecast period (2026-2030) are respectively

year) net interest rate respectively is year) net interest rate respectively

16.75%, 17.31%,

Operating profit margin 5.03%, 7.62%, 9.86%, 6.17%, 7.92%, 9.46%, 17.69%, 17.74%,

11.92%, 13.74%, perpetual 10.86%, 11.98%, perpetual 17.55%, perpetual period is

The period is 13.77% The period is 11.99%

17.55%

By querying the sales gross profit margin level of Flush iFinD chemical raw materials and preparations industry from 2023 to 2025, the situation is as follows:

Gross profit margin 2023 2024 2025 Average

Chemical raw materials 37.00% 35.28% 35.38% 35.89% Chemical preparations 59.33% 58.70% 56.60% 58.21%

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Note: 2025 is the annualization of the third quarter data of 2025.

At the same time, combined with the average pre-tax profit margin of listed companies in the past five years, the following table shows:

Pre-tax profit margin Pre-tax profit margin Pre-tax profit margin Pre-tax profit margin Pre-tax profit margin items

2021 2022 2023 2024 2025 Listed industry average 11.99% 15.19% 14.14% 17.82% 15.74% It can be seen from the above that the historical annual forecast gross profit margin and pre-tax profit margin are within a reasonable range.

2. The discount rate parameters for each period are as follows:

Project 2023 2024 2025 Risk-free interest rate 3.02% 2.09% 2.32% Market risk premium 6.43% 6.76% 6.53% Specific risk return rate 2.28% 2.33% 2.55% Beta coefficient of target financial leverage coefficient βL 0.9170 0.9352 0.9792 Target financial leverage coefficient D/E 28.86% 23.51% 25.64% Cost of equity capital 11.19% 10.74% 11.27% Cost of debt capital 5.86% 4.96% 3.95% Weighted average cost of capital WACC 9.67% 9.40% 9.57% Pre-tax discount rate 12.89% 12.53% 12.77%

As shown in the table above, the discount rate in each period fluctuates slightly mainly due to the risk-free interest rate, market risk premium, beta and capital structure, without major differences.

(6) Instructions for selecting assessment agencies

Kaiyuan Asset Appraisal Co., Ltd. and Beijing Kunyuan Zhicheng Asset Appraisal Co., Ltd. hired by the company have completed the registration for securities service business in accordance with the provisions of the Securities Law and the Ministry of Finance and the China Securities Regulatory Commission's "Regulation Measures for Asset Appraisal Agencies Engaging in Securities Services Business" (Caizi [2024] No. 172), and have the statutory qualifications to provide asset appraisal services for listed companies. This evaluation agency has long been engaged in the goodwill impairment testing and evaluation business of listed companies. The core members of the project team have rich valuation experience and are qualified for this evaluation work. After verification, the appraisal agency and its signed appraiser have no relationship with the company and Chunrui Medicine, and their independence complies with the relevant requirements for the independence of intermediaries in the "Guidelines on the Application of Regulatory Rules - Listing Category No. 1". The company's procedures for selecting appraisal agencies follow relevant regulations such as the "Administrative Measures for the Selection and Employment of Asset Appraisal Agencies by Administrative Institutions, State-owned Enterprises, and Listed Companies" (Caizi [2025] No. 137), and the selection methods and procedures are legal and compliant. In summary, the selection of the company's evaluation agency complies with securities regulatory requirements.

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To sum up, the scope of Chunrui Medicine's asset structure this year is basically the same as that of the acquisition that year. The changes over the years are reasonable changes. The selection of key assumptions is reasonable. The changes in measured key parameters are reasonable. The provision of goodwill impairment for two consecutive years is reasonable, timely and sufficient.

2. Liaoyuan Baikang

In May 2016, the company acquired 100% equity of Liaoyuan Baikang Pharmaceutical for RMB 258 million, generating goodwill of RMB 178.342 million.

(1) The situation of the goodwill asset group of Liaoyuan Baikang from the time it was included in the consolidated statements to the end of the reporting period is as follows: Unit: RMB 10,000

Item 2017 2018 2019 2020 Book value of goodwill in 2021 17,834.20 17,834.20 17,834.20 17,834.20 17,834.20 Excluding goodwill asset group

14,137.57 11,994.28 16,563.79 15,820.46 14,917.49 Book value

Containing goodwill asset group

31,971.77 29,828.48 34,397.99 33,654.66 32,751.69 Book value

Recoverable amount 32,038.09 34,094.61 45,346.57 46,203.35 33,700.00Is goodwill impaired? No No No No No

Chemical Drug Production Chemical Drug Production Industry Chemical Drug Production Chemical Drug Production Chemical Drug Production Asset Group Scope Business Asset Group Phase Business Asset Group Related Assets Business Asset Group Phase Business Asset Group Phase Business Asset Group Related Assets Related Assets Related Assets Related Assets

Kaiyuan Asset Appraisal Kaiyuan Asset Appraisal Kaiyuan Asset Appraisal Kaiyuan Asset Appraisal Kaiyuan Asset Appraisal Appraisal Agency

Co., Ltd. Co., Ltd. Co., Ltd. Does the company have securities qualifications?

Yes Yes Yes Yes Yes Quality

(continued)

Item 2022 2023 2024 Book value of goodwill in 2025 17,834.20 17,834.20 17,834.20 17,834.20 Book value of asset group excluding goodwill

13,988.68 26,169.61 27,014.64 16,617.09 value

The books of the asset group containing goodwill

31,822.88 44,003.81 44,848.84 34,451.29 value

Recoverable amount 36,691.00 45,344.00 45,593.00 28,817.00Is goodwill impaired? No No No Yes

Chemical drug production industry Chemical drug production industry Chemical drug production business

Financial asset group related assets Financial asset group related assets Asset group related assets,

Production, solid waste and solid liquid workshop Production, solid waste and solid liquid workshop will be converted into solid waste and trial operation in 2023

Chemical production business, trial operation of asset transfer to fixed assets, operating efficiency is not as good as the scope of the pre-asset group, processing of Baikang chemical waste

Related assets of the asset group: Processing of Baikang chemical waste period, solid waste and liquid assets for future business strategies

The solid waste and liquid materials of the material have changed, so the asset group containing goodwill is not included.

assets and include them in the asset group containing business and goodwill.

The scope of the asset group to be considered

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Beijing Kunyuan Zhicheng Assets Beijing Kunyuan Zhicheng Assets Beijing Kunyuan Zhicheng Capital Beijing Kunyuan Zhicheng Capital Evaluation Agency

Appraisal Co., Ltd. Appraisal Co., Ltd. Property Appraisal Co., Ltd. Does Property Appraisal Co., Ltd. have securities qualifications? Yes Yes Yes Yes

There were major changes in the asset group in 2019, due to the addition of workshops four and five and related equipment. At the end of 2023, Liaoyuan Baikang's solid waste and liquid workshop was converted to a solid state and began trial operation in 2024. It mainly provides waste treatment supporting services for chemical pharmaceutical production, so it was included in the chemical pharmaceutical production-related asset group. In 2025, due to the decline in sales of Liaoyuan Baikang's pharmaceuticals, insufficient project starts, and slow qualification processing, the workshop has been idle since the beginning of the year. In addition, after completing the reorganization, the company also made adjustments to Liaoyuan Baikang's future business strategy. In view of future changes in business strategy, the workshop will no longer be included in the asset group containing goodwill.

(2) Key assumptions of Liaoyuan Baikang’s impairment testing over the years

Project 2017 2018 2019 2020 2021 1. Assumed client

and the assessed unit

1. Hypothetical client 1. Hypothetical client 1. Hypothetical information provided by the client

and property rights holders and property rights holders and property rights holders (basic information, 1. Assuming that the principal and

The information provided (based on the information provided (based on the information provided (based on the financial information, operating property rights holder)

basic information, financial information, financial information, financial information, forecast information (basic information

Materials, operating data, data, operating data, data, operating data, data, etc.) are all true data, financial data,

Forecast data, etc.) are all Forecast data, etc.) are real, accurate, and complete Operation data, forecasts

True, accurate, complete, relevant material information, etc.) are true,

rectification, relevant major matters rectification, relevant major matters rectification, relevant major matters fully disclosed Accurate, complete and relevant

Items are fully disclosed; Items are fully disclosed; Items are fully disclosed; Points; Disclosure of major matters

2. Assume property rights hold 2. Assume property rights hold 2. Assume property rights hold 2. Assumptions are evaluated Sufficient;

Some people’s income is , Some people’s income is , Someone’s income is , The income of the unit is 2. Assume that the property rights are held

Every year is an even distribution. Every year is an even distribution. Every year is an even distribution. Every year is an even distribution. People's income is distributed in every year.

If something happens, its year will happen evenly.

The time point when the income is realized The time point when the income is realized The time point when the income is realized The time point when the income is realized Its annual income is realized

is the middle of each year. is the middle of each year. is the middle of each year. is the middle of each year. The time point is the middle of each year.

point in time; point in time; point in time;

Key assumptions: time point; mid-time point;

3. Valuation assumptions are disclosed 3. Valuation assumptions are disclosed 3. Valuation assumptions are disclosed 3. This valuation is false 3. Valuation assumptions company

The future production and marketing of the company is the same. The future production and marketing of the company is the same.

Consistent, that is, the production quantity is consistent, that is, the production quantity is consistent, that is, the production quantity is consistent, that is, the production quantity is equal to

The quantity is equal to the sales quantity. The quantity is equal to the sales quantity. The quantity is equal to the sales quantity. The production quantity is equal to the sales quantity. The sales quantity is not considered.

The quantity does not consider the inventory. The quantity does not consider the inventory. The quantity does not consider the inventory. The sales quantity does not consider the inventory turnover.

Survival caused by turnover Survival caused by turnover Survival caused by turnover Production cost and sales

The difference between production cost and sales; production cost and sales;

Difference in cost; Difference in cost; Difference in cost; Difference in cost of sales 4. Assuming property rights are held

4. Assume that the property rights remain unchanged;

Someone’s operating income Someone’s operating income Someone’s operating income

4. Assume that the assessed object includes

The purchase price of the assets of the appraisal unit and the appraisal object are the expenses and the appraisal object.

Included Assets Included Assets Included Assets Income and Expenditure and Valuation Comparison with local valuation basis

The purchase price of and the purchase price of and the purchase price of and the currency purchase on the reference date included in the

Local assessment benchmark Local assessment benchmark The purchase price of the property is commensurate with the local assessment benchmark.

Currency Purchases on Day Currency Purchases on Day Currency Purchases on Day vs. Local Valuation Basis

force to adapt. force to adapt. force to adapt. On-time currency purchases

Purchasing power is commensurate.

(continued)

Page 54 of 71

Project 2022 2023 2024 2025

1. Assuming the principal and 1) Assuming the principal and property holder provide 1. Assuming the principal and property 1) Assuming the principal and property

information (basic resource information (basic resource holder) information (basic resource holder) information (basic resource holder)

materials, financial information, transportation materials, financial information, transportation materials (basic information, financial information (basic information, financial

Operating data, forecast data Operating data, forecast data Business data, operating data, data, operating data, forecast

etc.) are all true and accurate, etc.) are all true and accurate, prediction data, etc.) are all true test data, etc.) are all true,

Complete, relevant to important matters Complete, relevant to important facts, accurate, complete, Accurate, complete, relevant to important facts

Item disclosure is sufficient; Item disclosure is sufficient;

Disclosure of major matters Sufficient disclosure of major matters;

2. Assuming that the property rights are held 2) Assuming that the property rights are held adequately; 2) Assuming that the property rights are held

The person's income in each year is 2. Assume that the property owner's income in each year is

occurs evenly, its income occurs evenly in each year, and its income occurs evenly in each year, and its income occurs evenly in each year.

When the annual income is realized If the annual income is realized evenly, the time point when the annual income is realized is

The point is the mid-year point of each year. The point is the mid-year income realization time point of each year. The point is the mid-year point of each year;

time point; time point;

Key Assumptions Mid-year time point of the year; 3) Evaluate the hypothetical company

3. Evaluate the hypothetical company 3) Evaluate the hypothetical company 3. Evaluate the hypothetical company The future production and sales are not consistent, that is

Future production and sales are consistent, that is, future production and sales are consistent, that is, production quantity is equal to sales

Production quantity is equal to sales. Production quantity is equal to sales. Production quantity is equal to sales quantity. The quantity does not consider the inventory week.

The sales quantity does not take into account the inventory. The sales quantity does not take into account the inventory and does not take into account the production costs caused by inventory turnover.

The difference between the production cost caused by goods turnover and the sales cost

The difference between the cost of production and the cost of sales; the difference between the cost of production and the cost of sales;

The difference between the two; The difference between the two;

4. Assumed property rights holder 4) Assumed property rights holder

4. Assuming property rights holding 4) Assuming property rights holdings’ operating income and expenses and appraiser’s operating income and expenses and appraisal

The person's operating income and expenses and the assets included in the object. The assets included in the valuation object.

The purchase price of the property included in the appraisal object is the same as that of the local property.

The purchase price of the asset. The purchase price of the asset. The currency on the valuation base date. The currency on the valuation base date.

The price is consistent with the local assessment base. The price is consistent with the purchasing power of the local assessment base. currency purchasing power.

The purchase of money on the same date corresponds to the purchasing power of the currency on the date. force to adapt

As shown in the table above, the key assumptions used in previous goodwill impairment tests since Liaoyuan Baikang was included in the consolidated statements have basically remained unchanged. The valuation assumptions in the asset valuation report are all implemented in accordance with the provisions of relevant national laws, regulations and normative documents. They follow common market practices and asset valuation standards and are in line with the actual situation of the valuation object. The valuation assumptions are reasonable.

(3) The main financial status of Liaoyuan Baikang over the years is as follows:

Unit: Ten thousand yuan project 2017 2018 2019 Operating income in 2020 9,857.96 13,962.95 16,905.43 18,198.78 Operating cost 6,180.03 9,825.72 10,812.06 11,420.55 Total pre-tax profit 1,474.92 1,488.41 3,027.35 2,894.20 Total profit before tax after non-profit deduction 1,306.91 1,314.94 2,998.21 2,748.60 Net profit attributable to parent company 1,084.49 1,089.66 2,499.74 2,137.36Net profit attributable to the parent after deducting non-profit items 916.48 916.19 2,470.60 1,991.76Gross profit margin 37.31% 29.63% 36.04% 37.25%

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Net assets 11,451.41 12,541.07 15,040.81 17,178.16 Profit rate before tax after deduction of non-profit 13.26% 9.42% 17.74% 15.10% (continued table)

Project 2021 2022 2023 2024 Operating income in 2025 28,154.98 40,659.73 40,246.82 24,067.94 16,768.86 Operating cost 20,929.06 31,898.40 29,612.39 17,077.18 13,356.68 Total profit before tax 2,917.41 4,170.14 5,044.79 1,807.01 -7,587.97 Total profit before tax after deduction of non-profit 2,918.36 3,708.58 4,737.09 1,718.39 -1,472.75Net profit attributable to the parent company 2,410.28 3,333.88 4,020.07 1,235.78 -7,286.75Net profit attributable to the parent company after non-exclusion 2,411.23 2,872.32 3,712.37 1,147.16 -1,171.53Gross profit margin 25.66% 21.55% 26.42% 29.05% 20.35%Net assets 19,579.71 22,913.59 26,933.66 28,169.44 20,882.60 Profit rate before tax after non-profit deduction 10.37% 9.12% 11.77% 7.14% -8.78%

(4) Impairment of goodwill of Liaoyuan Baikang

Liaoyuan Baikang's operating conditions are good in 2023, and there is no impairment of goodwill after assessment. Liaoyuan Baikang's operating performance declined in 2024. In addition to market factors, the company implemented centralized capital management and control before reorganization, which collected and occupied part of Liaoyuan Baikang's operating funds, which had a certain impact on its normal production and operations. The book value of the asset group containing goodwill in 2024 is 448.4884 million yuan, and the future cash flow discount method is used to calculate the recoverable amount of 455.93 million yuan. The goodwill of Baikang Pharmaceutical has not been impaired.

Competition in the domestic and foreign chemical pharmaceutical markets will be fierce in 2025, especially the decline in revenue from exported API acetaminophen. Affected further by the acetaminophen API and acetaminophen tablets, Biocon Pharmaceutical's operating performance continued to decline. Based on the current continued downturn in the acetaminophen market, Biocon Pharmaceutical's operating performance was poor and its goodwill showed signs of impairment.

The book value of the asset group containing goodwill in 2025 is 344.5129 million yuan, the recoverable amount calculated using the future discounted cash flow method is 288.170 million yuan, and the goodwill impairment is 56.3429 million yuan.

The company's provision for asset impairment this year complies with and complies with the Accounting Standards for Business Enterprises and the company's relevant accounting policies. The provision for asset impairment is based on sufficient basis and is in line with the current status of the company's assets.

(5) Key parameters analysis of goodwill impairment test Parameter selection, reasons for differences and rationality

1. The important parameters of the forecast period in the last three years are detailed as follows:

Project 2023 2024 2025

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During the forecast period (2024-2028), the gross profit margin during the forecast period (2025-2029) and the forecast period (2026-2030) are years respectively. The gross profit margin is years respectively). The gross profit margin is respectively

23.65%, 24.07%, 30.13%, 31.43%, 28.33%, 29.92%, gross profit margin

24.32%, 24.50%, 31.56%, 31.19%, 31.01%, 31.35%, 24.50%, the perpetual period is 30.76%, the perpetual period is 30.93%, the perpetual period is 24.50% 30.88% 30.94%

During the forecast period (2024-2028) During the forecast period (2025-2029

During the forecast period (2026-2030), the net interest rate is

year) net interest rates are respectively

11.06%, 11.67%, 10.71%, 13.32%,

Operating profit margin 5.46%, 9.43%, 13.00%, 11.98%, 12.15%, 14.32%, 14.86%,

14.96%, 15.10%, perpetual 12.15%, perpetual period 14.89%, perpetual period

The period is 15.60%

12.15% 15.28%

This year’s management’s forecast for the next five years is as follows:

Unit: 10,000 yuan

Project 2026 2027 2028 2029 2030 Perpetual period

17,320.84 19,786.56 22,431.53 25,179.78 27,408.95 27,408.95 Operating income

12,413.45 13,865.83 15,475.86 17,285.63 18,931.03 18,929.48 Operating costs

Gross profit margin 28.33% 29.92% 31.01% 31.35% 30.93% 30.94% Profit before tax 945.20 1,866.56 2,915.67 3,767.04 4,139.03 4,275.12 Profit before tax 5.46% 9.43% 13.00% 14.96% 15.10% 15.60%

By querying the sales gross profit margin level of Flush iFinD chemical raw materials and preparations industry from 2023 to 2025, the situation is as follows:

Gross profit margin 2023 2024 2025 Average chemical raw materials 37.00% 35.28% 35.38% 35.89% Chemical preparations 59.33% 58.70% 56.60% 58.21% Note: 2025 is the annualization of the third quarter of 2025 data

At the same time, combined with the pre-tax profit margin of listed companies in the past five years, the following table is as follows:

Pre-tax profit margin Pre-tax profit margin Pre-tax profit margin Pre-tax profit margin Pre-tax profit margin items

2021 2022 2023 2024 2025 Listed industry average 11.99% 15.19% 14.14% 17.82% 15.74% There is no major difference between the company’s forecast operating data and industry data, which is reasonable.

1. The discount rate parameters for the past three years are as follows:

Project 2023 2024 2025 Risk-free interest rate 3.02% 2.09% 2.32% Market risk premium 6.43% 6.76% 6.53% Specific risk return rate 1.25% 1.25% 1.25%

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Beta coefficient of target financial leverage coefficient βL 0.8298 0.9556 1.0093 Target financial leverage coefficient D/E 10.64% 16.18% 14.16% Equity capital cost 9.60% 9.80% 10.17% Debt capital cost 7.08% 6.68% 6.18% Weighted average cost of capital WACC 9.52% 9.13% 9.47% Pre-tax discount rate 12.69% 12.18% 12.62%

As shown in the table above, the discount rate in each period fluctuates slightly mainly due to the risk-free interest rate, market risk premium, beta and capital structure, without major differences.

(6) Instructions for selecting assessment agencies

Kaiyuan Asset Appraisal Co., Ltd. and Beijing Kunyuan Zhicheng Asset Appraisal Co., Ltd. hired by the company have completed the registration for securities service business in accordance with the provisions of the Securities Law and the Ministry of Finance and the China Securities Regulatory Commission's "Regulation Measures for Asset Appraisal Agencies Engaging in Securities Services Business" (Caizi [2024] No. 172), and have the statutory qualifications to provide asset appraisal services for listed companies. This evaluation agency has long been engaged in the goodwill impairment testing and evaluation business of listed companies. The core members of the project team have rich valuation experience and are qualified for this evaluation work. After verification, the appraisal agency and its signed appraiser have no relationship with the company and Liaoyuan Baikang, and their independence complies with the relevant requirements for the independence of intermediaries in the "Guidelines on the Application of Regulatory Rules - Listing Category No. 1". The company's procedures for selecting appraisal agencies follow relevant regulations such as the "Administrative Measures for the Selection and Employment of Asset Appraisal Agencies by Administrative Institutions, State-owned Enterprises, and Listed Companies" (Caizi [2025] No. 137), and the selection methods and procedures are legal and compliant. In summary, the selection of the company's evaluation agency complies with securities regulatory requirements.

To sum up, the composition of the asset group of Baikang Pharmaceutical this year is basically consistent with the asset group at the time of acquisition, the selection of key assumptions is reasonable, the changes in the calculation of key parameters are reasonable, and the goodwill impairment calculation is timely, sufficient and reasonable.

3. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the key internal controls related to goodwill impairment, evaluate the design of these controls, determine whether they are implemented, and test the operating effectiveness of relevant internal controls;

(2) Review the results of management’s estimates of the present value of expected future cash flows in previous years or subsequent re-estimates made by management;

(3) Evaluate the competence, professionalism and objectivity of external valuation experts hired by management;

(4) Evaluate the appropriateness and consistency of the methods used in impairment testing by external valuation experts retained by management;

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(5) Evaluate the appropriateness of the significant assumptions used in the impairment test by the external valuation experts hired by the management, and review whether the relevant assumptions are consistent with the overall economic environment, industry conditions, operating conditions, historical experience, etc.;

(6) Evaluate the appropriateness, relevance and reliability of data used in impairment testing by external valuation experts hired by management, and review the internal consistency of relevant information in impairment testing;

(7) Test whether the calculation of the present value of expected future cash flows or the net amount of fair value less disposal costs by external valuation experts hired by management is accurate;

(8) Check whether the selection of asset appraisal agencies complies with securities regulatory regulations.

After verification, we believe that the changes in the asset group composition since the two subsidiaries were included in the scope of the consolidated statements are reasonable; there are no major differences in the key parameters of the goodwill impairment test in each year; the large amount of goodwill impairment provision for two consecutive years is reasonable, and the goodwill impairment provision is timely and sufficient; the selection of the asset appraisal agency complies with securities regulatory requirements.

(2) Explain whether the provision for inventory depreciation provisions is sufficient based on changes in product prices, inventory composition and age, orders on hand, post-period production and carry-over status, inventory depreciation provision testing process, conditions of comparable companies in the same industry, etc.

1. The rationality and adequacy of the provision for inventory depreciation provisions

(1) Inventory composition and age

As of December 31, 2025, the company’s inventory composition and age are as follows:

Unit: 10,000 yuan

Closing balance Items of 3 years and above Within 1 year 1-2 years 2-3 years

Book balance Provision for price decline Book value Goods in inventory 9,696.55 396.75 9,299.80 9,123.02 539.23 3.33 30.96 Raw materials 5,082.84 41.14 5,041.70 4,701.05 310.08 60.80 10.91 Products in progress 643.60 643.60 643.60

Turnover materials 531.04 531.04 499.01 22.06 6.58 3.39 Goods shipped 271.77 271.77 271.77

Total 16,225.79 437.89 15,787.90 15,238.45 871.37 70.71 45.26 As shown in the table, the company's inventory with an age of less than 1 year accounts for 96.52% of the total. The inventory age is generally short, and the long-age inventory is mainly concentrated in raw materials and a small amount of inventory goods.

(2) Product price changes

Changes in sales unit prices of Chunrui Pharmaceutical's top five products:

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Unit: tons/10,000 yuan Product name Average sales unit price in 2025 Average sales unit price in 2024 Change Change ratio Procaine hydrochloride 6.37 6.75 -0.38 -5.62% T97-C 54.81 54.87 -0.06 -0.10%Jingzuo 34.20 44.08 -9.87 -22.40% T12 series 206.44 220.03 -13.59 -6.18% O5 26.63 26.85 -0.23 -0.84% Sales unit price changes of Liaoyuan Baikang’s top five products:

Unit: KG/yuan, 10,000 pieces/yuan Average in 2025 Average in 2024

Product Name Change Change Ratio Sales Unit Price Sales Unit Price

Acetaminophen 18.35 21.95 -3.60 -16.40% Benoxate 81.63 89.60 -7.97 -8.90% Fenbufen 639.48 646.77 -7.29 -1.13% Compound Paracetamol Diphenhydramine Tablets (80 tablets/film

644.84 633.31 11.53 1.82% 25 films/bag10 bags)

Cloperdine Hydrochloride Tablets (100 tablets/bottle*1 bottle/

510.83 584.18 -73.35 -12.56% box*300 boxes)

According to the average sales price statistics of the top five products of Chunrui Medicine and Liaoyuan Baikang, the average sales unit price of major products in 2025 will show a downward trend compared with 2024. Among them, procaine hydrochloride dropped by 5.62%, Jingzuo dropped by 22.40%, and acetaminophen dropped by 16.40%. The general decline in product prices is mainly affected by market conditions, intensified competition in the API and intermediate industries, and adjustments in downstream demand, which is consistent with the overall price trend of the industry.

(3) Orders on hand

The company will complete the reorganization in 2025. After the reorganization is completed, the company will only retain the pharmaceutical sector business. In 2025 and January to March 2026, the company's pharmaceutical sector order status is as shown in the following table:

2025 2026 1-3

Measurement single section category Month has been signed

Signed contract and reservation Actual production volume Actual sales volume Contracted order volume

Single quantity

Solid preparations 165,034.45 156,859.55 160,227.62 426.9013 million medical tablets

Pharmaceutical intermediates 1,361.43 1,042.22 1,130.91 440.00 tons block

Finished API 2,435.81 2,404.79 2,154.04 1,542.41 tons As shown in the table, the full-year data is calculated based on the order volume from January to March 2026, which is consistent with the order volume and actual performance in 2025.

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Comparing the international production and sales situation, all have increased to varying degrees, mainly because the company has solved its own capital problems through reorganization.

In the face of financial tensions and other issues, production and operation order has gradually been restored, and the efficiency of the pharmaceutical sector has gradually improved.

(4) Post-period production and carry-over status

From January to March 2026, the company’s post-inventory production and carry-over status table is as follows:

Unit: 10,000 yuan

Closing balance will be collected from January to March 2026

Projects to be collected from January to March 2026 and closed in March 2026 will be used or carried forward to be completed or

Book balance Provision for decline in price Book value Purchase and completion warehousing Face value

sales

Inventory goods 9,696.55 396.75 9,299.80 17,788.48 17,182.16 9,884.92Raw materials 5,082.84 41.14 5,041.70 10,093.32 10,775.52 4,470.92Work in progress 643.60 643.60 15,394.84 15,445.78 572.50 Turnover materials 531.04 531.04 359.05 455.54 434.56 Goods shipped 271.77 271.77 271.77

Total 16,225.79 437.89 15,787.90 43,635.70 44,130.77 15,362.90

Production requisition and carry-over after the inventory period include: purchasing raw materials and retrieving them from the warehouse, products in progress being completed and

Carry forward completed products, carry forward sales of inventory goods, etc. Overall, the company’s production and carry-over situation after the inventory period

Good, the procurement and use of raw materials, the completion and carry-out of work-in-progress, and the storage and sales of inventory goods are basically consistent.

There was no large backlog or abnormal carry-over, further confirming the stability of the company's production and operation and inventory after reorganization.

Turnaround effectiveness.

(5) Inventory depreciation preparation test process

Closing balance Net realizable value of inventories Formula Net realizable value of inventories Provision for inventory items

Book balance Provision for decline in value Book value method Comparison with book balance Provision for decline in value

The sales price agreed in the contract or the book price of part of the inventory

Inventory goods 9,696.55 396.75 9,299.80 The market price minus estimated sales value is higher than the net realizable value 396.75 selling expenses and related taxes

(1) Sales price agreed in the contract

price or market price minus

Estimated costs to be incurred at completion

cost, estimated selling expenses and

related taxes;

Partial inventory book value

(2) Some production lines are stopped

Raw materials 5,082.84 41.14 5,041.70 The value is higher than the net realizable value 41.14. Taking into account the possibility of resumption of work,

value

Capability, market realization

etc. Provision for impairment;

(3) Some pharmaceutical raw materials

There is a validity period for use, for

Validity period is considered separately for impairment

The sales price stipulated in the contract or

Market price less until completion

Work in progress 643.6 643.6 Estimated costs to be incurred,

Estimated selling expenses and related

taxes

Book value of inventories, etc.

Turnover materials 531.04 531.04 No signs of impairment found

at net realizable value

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Book value of inventories, etc.

Goods shipped 271.77 271.77 No signs of impairment found

at net realizable value

Total 16,225.79 437.89 15,787.90 437.89

1. For inventory goods, work-in-progress and some raw materials, according to the selling price or market sales price agreed in the sales contract signed with the customer, the production cost, sales expenses and related taxes are reasonably estimated, and the selling price minus the sum of costs, expenses and taxes is compared with the book value. After comparison, a provision for inventory depreciation is made for the part where the book value is higher than the net realizable value.

2. For raw materials corresponding to idle production lines, the net realizable value is determined by comprehensively considering the possibility of resumption of work, market realization, and availability of other production lines. Some pharmaceutical raw materials have a validity period, and impairment is separately considered based on the validity period.

(5) Provision for inventory depreciation provisions of comparable companies in the same industry

After the reorganization is completed, the company is only involved in the pharmaceutical sector. As of December 31, 2025, the company's provision for inventory devaluation compared with the same industry is as follows:

Unit: RMB 10,000 Comparable company Main products Inventory book balance Provision for price decline Provision rate Antibiotic drugs (azithromycin,

Clarithromycin, roxithromycin, salt

Guobang Pharmaceutical 181,105.88 3,490.72 1.93% ciprofloxacin acid, etc.), cardiovascular

Systemic drugs, etc.

Tonghe Pharmaceutical Nervous System Drugs, Digestive System

57,209.29 4,164.51 7.28%

[Note] Medication, anti-inflammatory analgesics

Fengyuan Pharmaceutical Antipyretic, Analgesic, Women and Children, Nervous System

56,319.68 566.06 1.01% [Note] System, cardiovascular, etc.

Antipyretic and analgesic raw materials, anti-inflammatory drugs

Hengdi Pharmaceutical 12,702.40 434.66 3.42% Pain Medicine

Anti-inflammatory raw materials, antipyretics and analgesics

Company 16,225.79 437.89 2.70% Pharmaceutical materials and tablets

[Note] Tonghe Pharmaceutical and Fengyuan Pharmaceutical have not yet disclosed the 2025 annual report, which is listed in the 2025 semi-annual report data

The company's pharmaceutical sector inventory depreciation provision accrual rate is at a medium level compared with comparable companies in the same industry, and there is no significant deviation. The difference in provision ratios among companies in the same industry is mainly affected by factors such as product structure, inventory age, sales strategy and accounting estimates. There is no major abnormality in the company's provision ratio for inventory depreciation compared with the average level in the same industry. The provision policy is prudent and reasonable, fully reflecting the actual net realizable value of the company's inventory, and complying with the provisions of "Accounting Standards for Business Enterprises No. 1 - Inventory".

2. Verification procedures and opinions

We mainly implemented the following verification procedures:

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(1) Understand, evaluate and test the effectiveness of the design and operation of internal controls related to procurement and payment, production and warehousing, and inventory impairment provision;

(2) Understand and inquire about inventory storage locations and inventory accounting methods;

(3) Supervise the inventory and check the quantity and status of the inventory;

(4) Obtain the year-end inventory age list of the inventory, conduct an analytical review of the inventory age based on the status of the products, and analyze whether the inventory depreciation reserve is reasonable;

(5) Obtain and check the orders on hand, subsequent production and carry-over status corresponding to the inventory;

(6) Review and evaluate the reasonableness of significant estimates made by management when determining net realizable value;

(7) Obtain the inventory depreciation reserve calculation sheet, review whether the inventory depreciation reserve is implemented in accordance with relevant accounting policies, recalculate the inventory depreciation reserve, compare it with comparable companies in the same industry, and analyze whether the inventory depreciation reserve is sufficient.

After verification, we believe that the company's provision for inventory depreciation provisions is sufficient and reasonable.

(3) Explain whether the impairment provision for projects under construction is sufficient based on the specific content of the project under construction, the time and basis for the occurrence of impairment signs, the process of impairment testing, etc.

1. Is the impairment provision for construction in progress sufficient?

As of December 31, 2025, the company's project under construction is the "amino product production line renovation project" of its subsidiary Shandong Shouguang Zengrui Chemical Co., Ltd., with an original book value of 4.3238 million yuan and an impairment provision of 4.3238 million yuan. The original plan of the project was to upgrade the technology of the amino product production line to improve production efficiency and use it for the production of related products.

Since 2023, the company has been in financial difficulties due to issues such as the occupation of funds by the original actual controller and illegal guarantees. The overall capital chain has been tense and it is unable to continue to invest funds in the follow-up construction of the project under construction. As a result, project investment has been slow in recent years and has basically been at a standstill.

On December 25, 2025, the company completed bankruptcy and reorganization, and the controlling shareholder was changed to Jiheng Group. After Jiheng Group became the controlling shareholder, it conducted a comprehensive inspection of the company's overall business layout and the operating conditions of each subsidiary, and readjusted its future development strategy. According to the latest industrial plan, the company will focus on the pharmaceutical manufacturing sector in the future and gradually divest itself of the building materials and some chemical intermediates businesses. After evaluation, the "Amino Products Production Line Renovation Project" project has a low correlation with the company's future business plan, and the subsequent investment required for the transformation is large and the expected economic benefits are poor. Therefore, the company's management decided to terminate the project completely and no longer include it in any future business plans.

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Therefore, the company's full provision for impairment of the project under construction in 2025 is based on the objective fact that the project has been actually terminated and will no longer generate any inflow of economic benefits in the future, which is in compliance with the provisions of "Accounting Standards for Business Enterprises No. 8 - Asset Impairment". The accrual amount is equal to the book value, which fully reflects the actual value loss of the asset, and there is no insufficient accrual.

2. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the company’s internal control system related to the management of projects under construction, evaluate whether its design is reasonable, and test the effectiveness of key control operations;

(2) Conduct inquiry procedures with the company’s management to understand the construction status and subsequent planning arrangements of the project;

(3) Review the company's impairment testing process for projects under construction and obtain a written statement from management on the completeness of asset impairment testing.

After verification, we believe that the company's impairment provision for projects under construction at the end of the period is sufficient and reasonable.

(4) Explain whether the provision for impairment of fixed assets is sufficient based on the business development and use of fixed assets, whether there is a suspension of product sales or production lines, the process of impairment testing of fixed assets, etc.

1. New impairment of fixed assets during the reporting period and reasons

In 2025, the company’s new impairment of fixed assets will be as follows:

Unit: Ten thousand yuan for new provision and deduction

Item Original book value Recoverable amount Summary of impairment signs Value amount

Liaoyuan Baikang Pharmaceutical Co., Ltd.

Responsible company’s solid waste and liquid resources 4,662.12 3,916.30 745.82 Economic benefits are lower than expected production group

Due to the decline in Liaoyuan Baikang's pharmaceutical sales this year, insufficient start-up of solid waste and liquid projects and slow qualification processing, the workshop has been idle since the beginning of the year. In addition, after completing the reorganization, the company has also adjusted Liaoyuan Baikang's future business strategy. It plans to process chemical waste externally in the future. Therefore, it has made impairment provisions for the fixed assets in the solid waste and liquid asset group this year.

2. Overall situation of business development and use of fixed assets

In 2025, the company completed bankruptcy reorganization and the controlling shareholder was changed to Jiheng Group. After the reorganization was completed, the company made strategic adjustments to its business structure, divested the building materials segment, and retained and focused on the pharmaceutical manufacturing segment. The fixed assets currently held by the company are mainly production and operating assets in the pharmaceutical manufacturing sector, covering the production plants, machinery and equipment and supporting ancillary facilities of Chunrui Pharmaceutical, Liaoyuan Baikang and other subsidiaries. Solid waste removal

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In the solid and liquid assets group, the main business of the company's pharmaceutical manufacturing segment is operating normally, each production line continues to operate stably, the production and sales of major products remain stable, and there are no idle fixed assets due to product suspensions or long-term suspension of production lines.

3. Judgment process of signs of impairment of fixed assets

According to the provisions of Article 4 of "Accounting Standards for Business Enterprises No. 8 - Asset Impairment", enterprises should determine whether there are signs that assets may be impaired on the balance sheet date. On the balance sheet date of 2025, the company's management made a prudent judgment on the signs of impairment on the fixed assets of the pharmaceutical manufacturing sector item by item. The details are as follows:

Indications of impairment stipulated in the standards and judgment based on the company’s actual situation

(1) The market price of assets fell significantly during the period, and the decline was obvious. The company’s fixed assets are mainly special production equipment and factories. The price was significantly higher than expected due to the passage of time or normal use. There is no public active trading market, and no significant decline in market price was observed.

After the reorganization was completed, the company focused on the pharmaceutical manufacturing sector and

(2) The economic, technical or legal environment in which the enterprise operates

There have been no major adverse changes in industrial policies and market environment; the environment and the market in which the assets are located have not changed in the current period or will be in the near future.

The controlling shareholder Jiheng Group has a background in the pharmaceutical industry, and major changes have occurred during favorable periods, which will have an adverse impact on the company.

The company continues to operate as a going concern

(3) The current market interest rate or other market investment rate of return is

periods have increased, thereby impacting enterprise computing assets projected for the future

There was no significant adverse change in the market interest rate during the reporting period. The discount rate for the present value of cash flows resulted in the recoverable amount of the asset.

Substantially reduced

The overall newness rate of the company's fixed assets is moderate, and the operation of each production line

(4) There is evidence that the assets are obsolete or in fact

The operation is normal, but it is not found that the body cannot be normal due to physical damage. The body has been damaged.

usage situation

(5) The assets have been or will be idle, terminated, or the production lines of the company's pharmaceutical manufacturing segment are in normal production status, and there is no idle or planned early disposal.

(6) Evidence from the company’s internal reports shows that the economic performance of the assets

Except for the solid waste and liquid projects of subsidiaries, the company's efficiency in 2025 has been lower than expected or will be lower than expected.

The operating status of the pharmaceutical manufacturing sector is normal, and various financial items refer to net cash flow or realized operating profit (or loss)

The target is basically in line with expectations

Far lower than (or higher than) the estimated amount, etc.

4. Fixed assets impairment testing process

According to the provisions of "Accounting Standards for Business Enterprises No. 8 - Asset Impairment", if an asset has signs of impairment, its recoverable amount should be estimated. The recoverable amount should be determined based on the higher of the net amount of the asset's fair value minus disposal costs and the present value of the asset's expected future cash flows.

Judging from the above signs of impairment, the company's subsidiary's solid waste and liquid projects showed signs of impairment. The company hired Beijing Kunyuan Zhicheng Asset Appraisal Company (hereinafter referred to as Kunyuan Appraisal Company) to conduct a comprehensive impairment test on the company's fixed assets. When the appraiser works on-site, the company has fully informed the current status of its fixed assets and the specific appraisal Page 65 of 71

The process is: (1) Evaluate and calculate the recoverable amount of the asset, which is the net amount after deducting the disposal costs from the fair value of the asset; (2) Compare the recoverable amount of the asset with the book value; (3) Make impairment provisions for assets whose book value is higher than the recoverable amount. No impairment provision is made for assets whose recoverable amount is higher than the book value. The company makes impairment provisions on a single asset or asset group basis. Kunyuan Appraisal Company issued an appraisal report No. Jingkun Pingbao Zi [2026] 0294. The company made a provision for fixed asset impairment of RMB 7.4582 million based on the appraisal report.

Except for the solid waste and solid liquid projects, the fixed assets of the company's pharmaceutical manufacturing sector do not have any signs of impairment listed in Article 5 of the standards. Therefore, according to the principle of "if there are no signs of impairment, there is no need to estimate the recoverable amount of the assets, nor to recognize impairment losses", the company has not made impairment provisions for this part of the fixed assets.

To sum up, except for the solid waste and solid liquid asset group, the company's pharmaceutical manufacturing segment's fixed assets are in good use, each production line is operating normally, and there is no product suspension or long-term production line suspension. After comparing the signs of impairment listed in Article 5 of "Accounting Standards for Business Enterprises No. 8 - Asset Impairment" item by item, except for solid waste and solid liquid projects, the company's fixed assets have no signs of impairment and no provision for impairment is required. The company has implemented impairment testing procedures in accordance with the requirements of the Accounting Standards for Business Enterprises, and the provision for impairment is sufficient, which is in line with the company's actual operating conditions.

5. Verification procedures and opinions

We mainly implemented the following verification procedures:

(1) Understand the key internal controls related to fixed asset impairment, evaluate the design of these controls, determine whether they are implemented, and test the operating effectiveness of relevant internal controls;

(2) Conduct on-site inspections of fixed assets to understand their usage and check whether they are idle;

(3) Conduct inquiry procedures with management to understand the reasons for asset impairment and evaluate their rationality;

(4) Evaluate the working methods, competence, professionalism and objectivity of external valuation experts hired by management;

(5) Evaluate the appropriateness and consistency of the methods used in impairment testing by external valuation experts retained by management;

(6) Evaluate the appropriateness of the major assumptions used by the external valuation experts hired by the management in the impairment test, and review whether the relevant assumptions are consistent with the overall economic environment, industry conditions, operating conditions, historical experience, etc.;

(7) Evaluate the appropriateness, relevance and reliability of data used in impairment testing by external valuation experts hired by management, and review the internal consistency of relevant information in impairment testing.

After verification, we believe that except for the solid waste and solid liquid asset group, the company has no product suspension or long-term production line

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In the event of production suspension, the provision for impairment of fixed assets shall be sufficient and reasonable.

4. Regarding the disposal of subsidiaries. During the reporting period, the company reorganized and disposed of its subsidiary Chongqing Liangjiang Sansheng Building Materials Company, resulting in a difference of -160 million yuan in the subsidiary's share of net assets in the consolidated statement. Please ask your company to: (1) Combine the main business of the asset, the development and operating performance of the industry, as well as the disposal process and main content, etc., explain the reasons for the disposal, the background of the counterparty, the pricing basis and fairness, the transfer payment arrangement and repayment situation, and whether there are other undisclosed potential arrangements or additional conditions in the relevant transaction. (2) Explain the confirmation and main content of the net asset share of the aforementioned transaction, the impact of the disposal on the company's main financial indicators, and whether the relevant accounting treatment complies with the relevant provisions of the Accounting Standards for Business Enterprises. Ask the accounting firm to verify and issue a clear opinion. (Article 5 of the inquiry letter)

(1) Combined with the main business of the asset, the development and operating performance of the industry in which it is located, as well as the disposal process and main content, etc., explain the reasons for the disposal, the background of the counterparty, the pricing basis and fairness, the transfer payment arrangement and repayment situation, and whether there are other undisclosed potential arrangements or additional conditions in the relevant transaction and other factors.

In 2025, the company disposed of the equity interests of 27 subsidiaries including Chongqing Liangjiang Sansheng Building Materials Co., Ltd. (hereinafter collectively referred to as Liangjiang Sansheng and other subsidiaries), which was a business divestiture arrangement implemented in accordance with the bankruptcy reorganization plan approved by the court ruling. According to the bankruptcy reorganization draft, all assets of the building materials sector and the overseas sector (including the equity of subsidiaries such as Liangjiang Building Materials) need to be transferred as a whole and used as trust property to establish a trust plan for supplementary distribution to creditors who have not been paid in full. The divestiture of the building materials sector can help the company focus on the pharmaceutical industry in the future, complementing the original pharmaceutical business of Jiheng Group, and is more conducive to the company getting on the right track quickly. Therefore, this disposal is not a market-based sale based on individual negotiations, but an overall asset transfer during the implementation of the reorganization plan.

The assets of the building materials sector are distributed among the company and other subsidiaries except Chunrui Pharmaceuticals and Liaoyuan Baikang. This divestiture is divided into several steps: first, the assets and liabilities belonging to the building materials sector under the company's name are divested into subsidiaries such as Liangjiang Sansheng, and then the equity of subsidiaries such as Liangjiang Sansheng is transferred to the trust plan to establish a trust. The above-mentioned asset disposal and equity disposal form a package divestiture arrangement. The counterparty to this transaction is a trust established under the reorganization plan and has no relationship with the company. The trust was established specifically to receive, manage and dispose of divested assets. Its operation is subject to the reorganization plan approved by the court and is subject to the supervision of the creditors committee and administrator.

The appraisal agency hired evaluates the equity of each subsidiary to be divested separately to determine its fair value item by item, and summarizes it to form the overall fair value of the divested assets. After the transferred equity is delivered to the trust plan, it will be transferred to the trust plan.

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The form of beneficial rights is used to repay bankruptcy creditors, and its overall value has been comprehensively reflected in the debt settlement plan. The company did not receive any cash or other consideration for the equity transfer of the building materials sector assets and 27 subsidiaries including Liangjiang Building Materials. According to the reorganization arrangement, the company paid an additional operating capital of 10 million yuan to the trust plan to support the normal operation of the trust plan and ensure that the supplementary repayments of creditors can be realized. The above support funds are an integral part of the reorganization plan. The highest decision-making body of the trust plan is the beneficiary conference composed of all beneficiaries. Based on the decisions and authorization of the beneficiary conference, the management committee formed by representatives of some trust beneficiaries is responsible for the daily management of the trust plan. The assets of the building materials sector and the equity of subsidiaries such as Liangjiang Building Materials are part of the trust property and are operated uniformly by the trust platform company, with the manager supervising and assisting in the auction. The proceeds from the auction, after deducting corresponding expenses, are gradually transferred to a special trust account, and finally supplementary distribution is completed to creditors through trust income distribution. As of December 31, 2025, the reorganization plan has been approved by the court and has been implemented. The equity transfer has sufficient legal basis and judicial effect and has not harmed the interests of the company or creditors.

Based on the above reasons, this disposal does not involve payment arrangements for the transfer price. The company has not received any consideration separately, and there has been no payment collection. After the company's self-examination, except for the content clearly agreed in the reorganization plan, there are no undisclosed potential arrangements or additional conditions. The company has fulfilled its complete information disclosure obligations regarding the reorganization plan and its implementation.

(2) Explain the confirmation and main content of the net asset share of the aforementioned transaction, the impact of the disposal on the company's main financial indicators, and whether the relevant accounting treatment complies with the relevant provisions of the Accounting Standards for Business Enterprises.

1. Confirmation and main contents of net asset share

This disposal is a special disposal implemented according to the reorganization plan during the company's reorganization process. According to the reorganization plan, the company transferred the equity of 27 subsidiaries including Liangjiang Sansheng to the trust platform for subsequent supplementary repayments to creditors. For the above transfer, the company did not receive any cash or non-cash consideration, so the disposal consideration was determined to be 0 yuan. After auditing, the total investment income recognized at the consolidated statement level from this disposal was -176.5431 million yuan, which specifically consisted of the following three parts:

(1) The difference between the disposal consideration and the share of net assets of the subsidiaries: Taking the disposal date as the base date, it was confirmed by audit that the company’s share of the net assets of Liangjiang Sansheng and other subsidiaries at the consolidated statement level totaled -160.3045 million yuan (that is, insolvent). According to Article 50 of "Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements", the calculation formula for profits and losses arising from the disposal of subsidiary equity is: disposal consideration - share of the subsidiary's net assets on the date of disposal. The calculation is as follows: 0-(-160.3045 million yuan) = 160.3045 million yuan (income);

(2) Other comprehensive income of overseas subsidiaries is transferred to the current profit and loss: Other comprehensive income of overseas subsidiaries is transferred to

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Amount of current profit and loss: There are overseas entities within the scope of the company's consolidated statements, and historical translation differences in foreign currency statements are included in other comprehensive income. According to Article 50 of Accounting Standards for Business Enterprises No. 33, when control over a subsidiary is lost, the relevant amounts originally included in other comprehensive income should be transferred to the current profit and loss. After auditing, as of the date of disposal, the accumulated other comprehensive income balance of the above-mentioned overseas subsidiaries was -352.5003 million yuan (loss). Therefore, this part was transferred to profit and loss in the current period of disposal, resulting in -352.5003 million yuan (loss). This data comes from the other comprehensive income statement in the consolidated financial statements;

(3) Asset disposal gains and losses from reclassification at the consolidated statement level: According to the reorganization plan, before the equity disposal, the company first divested assets belonging to the building materials sector into subsidiaries such as Liangjiang Sansheng in order to divest them into the trust plan. This asset divestiture and equity transfer are a package arrangement for the bankruptcy reorganization plan. At the parent company's individual statement level, the asset transfer process recognizes asset disposal income of RMB 15,652,600 based on the difference between the assessed value and the book value. At the consolidated statement level, the asset transfer was an internal transaction within the group and originally needed to be offset; however, due to the subsequent loss of control of the subsidiary by the parent company, the impact of the internal transaction was deemed to be realized when the subsidiary was disposed of. The asset disposal income that was originally offset needed to be reclassified from "asset disposal income" to "investment income", so investment income increased by RMB 15.6526 million.

The total amount of the above three parts ultimately resulted in a loss of -176.5432 million yuan from the disposal of Liangjiang Sansheng and other subsidiaries at the consolidated statement level, which was consistent with the amount of profit and loss arising from the disposal of long-term equity investments disclosed in the notes to the consolidated financial statements (the tail difference of 0.01 million yuan was due to rounding).

2. Relevant accounting treatments comply with the relevant provisions of the Accounting Standards for Business Enterprises

The accounting treatment of this disposal of 27 subsidiaries including Chongqing Liangjiang Sansheng Building Materials Company strictly follows the provisions of relevant standards such as "Accounting Standards for Business Enterprises No. 2 - Long-term Equity Investment", "Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements" and other relevant standards. The specific compliance instructions are as follows: Compliance of net asset share recognition: This disposal uses the disposal date as the base date, confirms the difference between the disposal consideration and the share of the net assets of the subsidiary, and at the same time transfers other comprehensive income related to overseas entities into the current profit and loss, in line with "Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements" No. 33 - Consolidated Financial Statements" stipulates that "when control over the investee is lost due to the disposal of part of the equity investment or other reasons, other comprehensive income related to the equity investment in the original subsidiary shall be converted into investment income for the current period when control is lost";

3. The impact of disposal on the company’s main financial indicators

The impact of the company's disposal of subsidiaries according to the reorganization plan on the main financial indicators in 2025 is as follows:

(1) Impact on the consolidated balance sheet: The assets and liabilities of the building materials segment and overseas segment will no longer be included in the consolidated balance sheet.

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Within the scope of the merger, the company's total assets and total liabilities have dropped significantly, and the asset-liability ratio has dropped from 108.72% at the end of 2024 to 79.99% at the end of 2025, a decrease of 28.73 percentage points, and the financial structure has been significantly improved;

(2) Impact on the consolidated income statement: Investment losses arising from the disposal of long-term equity investments are recognized at the consolidated statement level and included in the current profit and loss, which will have a corresponding impact on the net profit in 2025. As these subsidiaries are no longer included in the scope of consolidation after the disposal date, their subsequent operating losses will no longer affect the company's consolidated financial statements in future periods, which will help the company improve its profitability in the future;

(3) Impact on the consolidated cash flow statement: This disposal was the transfer of subsidiary equity to the trust in accordance with the reorganization plan. The company did not receive any cash consideration, so there was no cash inflow from disposal investment activities. According to the "Accounting Standards for Business Enterprises No. 31 - Cash Flow Statement" and the preparation requirements of the consolidated cash flow statement, when disposing of a subsidiary, even if no consideration is received, if the disposed subsidiary holds cash and cash equivalents on the disposal date, this part of the cash will no longer be included in the scope of consolidation and will be regarded as a cash outflow. The building materials segment and overseas segment subsidiaries disposed of this time held a total of 16.9387 million yuan in cash and cash equivalents on the date of disposal, which correspondingly reduced the closing cash and cash equivalents balance of the consolidated cash flow statement. In addition, according to the reorganization plan, the company needs to pay 10 million yuan for trust operating funds. This amount is regarded as a cash outflow related to the reorganization and is listed in the consolidated cash flow statement as "cash paid related to other financing activities". To sum up, the above two items together lead to a net decrease of 26.9387 million yuan in the company's cash and cash equivalents in 2025.

(3) Verification procedures and opinions

We mainly implemented the following verification procedures:

1. Obtain and check the reorganization plan approved by the court ruling, and understand the specific arrangements for asset divestiture and trust plan establishment;

2. Conduct interviews with the company’s management and reorganization managers to understand the specific reasons, disposal process and main contents of the disposal of the subsidiary;

3. Obtain and verify the financial statements of the disposed subsidiaries, and review the confirmation process of the company’s share of the net assets of such subsidiaries;

4. Review the relevant resolutions and information disclosure documents of the company’s board of directors and general meeting of shareholders, combined with interviews with management, to verify whether there are any undisclosed potential arrangements and additional conditions for this disposal;

5. Review the calculation process of the impact of this disposal on the company's main financial indicators, and verify the authenticity and accuracy of changes in financial indicators based on the company's 2024 and 2025 financial statements;

6. Verify the relevant details and calculation process of other comprehensive income of overseas entities;

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7. Check whether the accounting treatment related to the disposal of subsidiaries complies with the Accounting Standards for Business Enterprises.

After verification, we believe that the company's disposal of the equity of Liangjiang Sansheng and other subsidiaries is a business divestiture arrangement that must be implemented in accordance with the bankruptcy reorganization plan approved by the court ruling, and has sufficient legal basis; the counterparty to the transaction is a trust established under the reorganization plan and has no relationship with the company; this disposal is a legal asset transfer under the judicial reorganization procedure, a non-commercial transaction arrangement, there is no separate transfer consideration or pricing process for a single subsidiary, and there are no undisclosed potential arrangements or additional conditions; the relevant accounting treatment complies with the relevant provisions of the Accounting Standards for Business Enterprises.

Please note this for review.

Tianjian Certified Public Accountants (Special General Partnership) Chinese Certified Public Accountants:

Hangzhou, China Chinese Certified Public Accountant:

April 29, 2026

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