/Special audit report on the profits and losses during the transition period of Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd.

NEWS

Special audit report on the profits and losses during the transition period of Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd.

Shanghai Stock Exchange

2025/12/11

1. Audit opinions

We audited the income statement and related notes (hereinafter collectively referred to as the financial statements) of Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd. (hereinafter referred to as Xiangjiang Pharmaceutical Company) during the asset delivery transition period (October 1, 2024 to September 30, 2025).

In our opinion, the accompanying financial statements have been prepared in all material respects in accordance with the preparation basis described in Note 3 to the financial statements.

2. The basis for forming audit opinions

We performed the audit work in accordance with the Chinese Certified Public Accountants Auditing Standards. Our responsibilities under these standards are further described in the "CPA's Responsibilities for the Audit of Financial Statements" section of the auditor's report. In accordance with the Chinese Code of Professional Ethics for Certified Public Accountants, we are independent from Xiangyao Company and have fulfilled other responsibilities in professional ethics. We believe that the audit evidence we obtained is sufficient and appropriate and provides a basis for issuing an audit opinion.

3. Emphasis on matters - basis of preparation

We remind users of financial statements to pay attention to the explanation of the basis of preparation in Note 3 of the financial statements. The financial statements prepared by Xiangyao Company are only for the asset delivery matters mentioned in Note 2 of the financial statements and are not suitable for other purposes. The contents of this paragraph do not affect the published audit opinion.

Page 1 of 31

4. Other matters - restrictions on the recipients and use of audit reports

Our reports are only used by Zhuzhou Qianjin Pharmaceutical Co., Ltd., Zhuzhou State-owned Assets Investment Holding Group Co., Ltd. and Huaian Liebang Kangtai Chemical Co., Ltd. for the asset delivery matters described in Note 2 of the financial statements, and should not be sent to or used by other parties other than the above-mentioned parties.

5. Responsibility of management and those charged with governance for financial statements

The management of Xiangyao Company (hereinafter referred to as the management) is responsible for preparing financial statements in accordance with the preparation basis described in Note 3 of the financial statements, and designing, implementing and maintaining necessary internal controls so that the financial statements are free of material misstatements due to fraud or error.

When preparing financial statements, management is responsible for assessing Xiangyao's ability to continue as a going concern, disclosing matters related to going concern (if applicable), and applying the going concern assumption unless it plans to liquidate, terminate operations, or has no other realistic alternative.

Those charged with governance of Xiangyao Company (hereinafter referred to as those with governance) are responsible for overseeing the financial reporting process of Xiangyao Company.

6. Responsibilities of certified public accountants for auditing financial statements

Our objective is to obtain reasonable assurance as to whether the financial statements as a whole are free of material misstatements due to fraud or error, and to issue an audit report containing an audit opinion. Reasonable assurance is a high level of assurance, but it does not guarantee that an audit performed in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements may be due to fraud or error and are generally considered material if they are reasonably expected individually or in aggregate to affect the economic decisions made by users of financial statements based on the financial statements.

In the process of performing audit work in accordance with the auditing standards, we use professional judgment and maintain professional skepticism. At the same time, we also perform the following tasks:

(1) Identify and assess the risks of material misstatement of financial statements due to fraud or errors, design and implement audit procedures to respond to these risks, and obtain sufficient and appropriate audit evidence as the basis for issuing audit opinions. Because fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls, the risk of failing to detect a material misstatement resulting from fraud is higher than the risk of failing to detect a material misstatement resulting from error.

Page 2 of 31

(2) Understand the internal controls related to auditing in order to design appropriate audit procedures, but the purpose is not to express an opinion on the effectiveness of internal controls.

(3) Evaluate the appropriateness of the accounting policies adopted by management and the reasonableness of accounting estimates and related disclosures.

(4) Draw conclusions on the appropriateness of management’s use of the going concern assumption. At the same time, based on the audit evidence obtained, a conclusion is drawn as to whether there are significant uncertainties in matters or circumstances that may cause significant doubts about Xiangyao Company's ability to continue operating. If we conclude that significant uncertainty exists, auditing standards require us to draw the attention of users to the relevant disclosures in the financial statements in our audit report; if the disclosures are insufficient, we should issue a qualified opinion. Our conclusions are based on information available as of the date of the auditor's report. However, future events or conditions may cause Xiangyao Company to cease to continue as a going concern.

We communicate with those charged with governance regarding, among other matters, the planned audit scope, timing and significant audit findings, including communication of significant internal control deficiencies identified during our audit.

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

Hangzhou, China Chinese Certified Public Accountant:

December 8, 2025

Page 3 of 31

Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd.

Notes to Financial Statements

October 1, 2024 to September 30, 2025

Amount unit: RMB

1. Basic situation of the company

Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd. (hereinafter referred to as the company or the company) was formerly known as Zhuzhou Xiangjiang Pharmaceutical Factory. On April 6, 1998, the Hunan Provincial Economic and Technological Reform Commission approved the establishment of Hunan Zhuzhou Xiangjiang Pharmaceutical Co., Ltd. (referred to as Xiang style [1] 998〕18), it was registered with the Zhuzhou Municipal Administration for Market Regulation on May 26, 1998. It currently holds a business license with a unified social credit code of 9143020071210238X7 and a registered capital of 48 million yuan.

The company belongs to the pharmaceutical manufacturing industry. The main business activities include the production and sales (limited to self-produced) of tablets, hard capsules, granules, powders, lotions, APIs, psychotropic drugs; general freight; research and development of new pharmaceutical products; transfer of medical technology achievements; export business of chemical synthetic drugs produced by the enterprise and import business of raw and auxiliary materials, mechanical equipment, instruments and accessories required for the enterprise's production and scientific research; production and sales of disinfectants and sanitary products; and enterprise management services.

2. The purpose of preparing the income statement during the asset delivery transition period

According to the "Conditionally Effective Share Issuance and Asset Purchase Agreement of Zhuzhou Qianjin Pharmaceutical Co., Ltd." (hereinafter referred to as the acquisition agreement) signed by Zhuzhou Qianjin Pharmaceutical Co., Ltd., Zhuzhou State-owned Assets Investment Holding Group Co., Ltd. and Huai'an Liebang Kangtai Chemical Co., Ltd., Zhuzhou Qianjin Pharmaceutical Co., Ltd. Pharmaceutical Co., Ltd. issued 42,248,453 shares to Zhuzhou State-owned Assets Investment Holding Group Co., Ltd. to purchase 28.50% of the company's equity, and issued 617,667 shares to Huai'an Liebang Kangtai Chemical Co., Ltd. to purchase 0.42% of the company's equity. According to the acquisition agreement, if the company achieves profits or increases in net assets due to other reasons during the asset delivery transition period, the corresponding part of the net assets will be enjoyed by Zhuzhou Qianjin Pharmaceutical Co., Ltd. If losses occur or the net assets decrease due to other reasons, the counterparty will bear the proportion of the equity held before this transaction. In order to fulfill the above-mentioned agreement, the Company prepared an income statement for the transition period of asset delivery.

According to the acquisition agreement, the asset delivery transition period refers to the period from the valuation base date to the asset delivery date. The valuation base date is September 30, 2024, and the asset delivery date is September 30, 2025. The transition period for asset delivery in this transaction is determined to be from October 1, 2024 to September 30, 2025.

Page 5 of 31

3. Basis for preparation of income statement during asset delivery transition period

(1) Basis for compilation

The company's financial statements are prepared on a going concern basis. This financial statement is prepared only for the purpose of asset delivery between Zhuzhou Qianjin Pharmaceutical Co., Ltd., Zhuzhou State-owned Assets Investment Holding Group Co., Ltd. and Huai'an Liebang Kangtai Chemical Co., Ltd. with respect to the company's equity. This financial statement only presents the income statement and notes from October 1, 2024 to September 30, 2025.

(2) Evaluation of sustainable operating capabilities

The Company has no events or circumstances that would cause significant doubts about its ability to continue operating within 12 months from the end of the reporting period.

4. Important accounting policies and accounting estimates

(1) Statement on compliance with accounting standards for enterprises

Except for the matters mentioned in Note 3(1) of this note, the financial statements prepared by the company comply with the requirements of the Accounting Standards for Business Enterprises.

(2) Accounting period

The fiscal year begins on January 1 and ends on December 31 of the Gregorian calendar. The accounting period for the financial information contained in this financial statement is from October 1, 2024 to September 30, 2025.

(3) Accounting standard currency

RMB is adopted as the standard accounting currency.

(4) Accounting treatment methods for business combinations under the same control and those not under the same control

Accounting treatment for business combinations under common control

The assets and liabilities acquired by the company in a business merger are measured according to the book value of the merged party in the consolidated financial statements of the ultimate controlling party on the merger date. The company adjusts the capital reserve based on the difference between the book value share of the owner's equity of the merged party in the final controlling party's consolidated financial statements and the book value of the merger consideration paid or the total face value of the shares issued; if the capital reserve is insufficient for offset, the company adjusts the retained earnings.

Accounting treatment for business combinations not under common control

On the acquisition date, the company recognizes the difference between the merger cost and the fair value share of the acquiree's identifiable net assets acquired in the merger as goodwill; if the merger cost is less than the fair value share of the acquiree's identifiable net assets acquired in the merger, the difference is first recognized as goodwill. The fair value of the acquiree's identifiable assets, liabilities and contingent liabilities and the measurement of merger costs are reviewed. After review, if the merger cost is still less than the fair value share of the acquiree's identifiable net assets obtained in the merger, the difference is included in the current profit and loss.

Page 6 of 31

(5) Financial instruments

Classification of financial assets and financial liabilities

Financial assets are divided into the following three categories upon initial recognition: (1) Financial assets measured at amortized cost; (2) Financial assets measured at fair value with changes included in other comprehensive income; (3) Financial assets measured at fair value with changes included in current profits and losses.

Financial liabilities are divided into the following four categories upon initial recognition: (1) Financial liabilities measured at fair value through current profits and losses; (2) Financial liabilities formed when the transfer of financial assets does not meet the conditions for derecognition or continued involvement in the transferred financial assets; (3) Financial guarantee contracts that do not belong to the above (1) or (2), and loan commitments that do not belong to the above (1) and provide loans at lower than market interest rates; (4) Financial liabilities measured at amortized cost.

Recognition basis, measurement method and derecognition conditions of financial assets and financial liabilities

(1) Recognition basis and initial measurement method of financial assets and financial liabilities

When a company becomes a party to a financial instrument contract, it recognizes a financial asset or financial liability. When financial assets or financial liabilities are initially recognized, they are measured at fair value; for financial assets and financial liabilities measured at fair value and whose changes are included in current profits and losses, relevant transaction costs are directly included in current profits and losses; for other types of financial assets or financial liabilities, relevant transaction costs are included in the initial recognition amount. However, if the company's initial recognition of accounts receivable does not contain a significant financing component or the company does not consider the financing component of a contract that does not exceed one year, the initial measurement shall be based on the transaction price defined in "Accounting Standards for Business Enterprises No. 14 - Revenue".

(2) Subsequent measurement method of financial assets

Financial assets measured at amortized cost

The actual interest rate method is adopted and subsequent measurement is carried out based on amortized cost. Gains or losses arising from financial assets that are measured at amortized cost and are not part of any hedging relationship are included in the current profit and loss when derecognized, reclassified, amortized according to the effective interest method, or impairment is recognized.

Debt instrument investments measured at fair value and changes included in other comprehensive income

Fair value is used for subsequent measurement. Interest, impairment losses or gains and exchange gains and losses calculated using the effective interest rate method are included in the current profit and loss, and other gains or losses are included in other comprehensive income. When derecognition is terminated, the accumulated gains or losses previously included in other comprehensive income will be transferred out of other comprehensive income and included in the current profit and loss.

Equity instrument investments measured at fair value and changes included in other comprehensive income

Fair value is used for subsequent measurement. Dividends received (except for the recovery part of investment costs) are included in the current profits and losses, and other gains or losses are included in other comprehensive income. When derecognition is terminated, the accumulated gains previously included in other comprehensive income

Page 7 of 31

or losses are transferred from other comprehensive income and included in retained earnings.

Financial assets measured at fair value and changes included in current profits and losses

Fair value is used for subsequent measurement, and the resulting gains or losses (including interest and dividend income) are included in the current profit or loss, unless the financial asset is part of a hedging relationship.

(3) Subsequent measurement method of financial liabilities

Financial liabilities measured at fair value and changes included in current profits and losses

Such financial liabilities include trading financial liabilities (including derivatives that are financial liabilities) and financial liabilities designated as measured at fair value with changes included in current profits and losses. Such financial liabilities are subsequently measured at fair value. The amount of changes in the fair value of financial liabilities designated as at fair value through profit or loss due to changes in the company's own credit risk is included in other comprehensive income, unless such treatment would cause or expand accounting mismatches in profit or loss. Other gains or losses arising from such financial liabilities (including interest expenses, excluding changes in fair value caused by changes in the company's own credit risk) are included in the current profits and losses, unless the financial liabilities are part of a hedging relationship. Upon derecognition, the accumulated gains or losses previously included in other comprehensive income will be transferred out of other comprehensive income and included in retained earnings.

Financial liabilities arising from the transfer of financial assets that do not meet the conditions for derecognition or continued involvement in the transferred financial assets shall be measured in accordance with the relevant provisions of "Accounting Standards for Business Enterprises No. 23 - Transfer of Financial Assets".
Financial guarantee contracts that do not fall under 1) or 2) above, and loan commitments that do not fall under 1) above and provide loans at lower than market interest rates

After initial recognition, subsequent measurement shall be based on the higher of the following two amounts: ① The amount of loss provision determined in accordance with the impairment regulations of financial instruments; ② The balance after the initial recognition amount deducts the accumulated amortization amount determined in accordance with the relevant provisions of "Accounting Standards for Business Enterprises No. 14 - Revenue".

Financial liabilities measured at amortized cost

Measured at amortized cost using the effective interest method. Gains or losses arising from financial liabilities that are measured at amortized cost and are not part of any hedging relationship are included in the current profit and loss when they are derecognized and amortized according to the effective interest method.

(4) Derecognition of financial assets and financial liabilities

Financial assets are derecognised when one of the following conditions is met:

① The contractual right to receive cash flows from financial assets has terminated;

② The financial assets have been transferred, and the transfer meets the provisions of the "Accounting Standards for Business Enterprises No. 23 - Transfer of Financial Assets" regarding the derecognition of financial assets.

When the current obligation of a financial liability (or part thereof) has been discharged, the financial liability (or part thereof) shall be derecognised accordingly.

Page 8 of 31

this part of financial liabilities).

Recognition basis and measurement method of financial asset transfer

If the company transfers almost all the risks and rewards of the ownership of the financial asset, it shall terminate the recognition of the financial asset, and separately recognize the rights and obligations arising or retained in the transfer as assets or liabilities; if it retains almost all the risks and rewards of the ownership of the financial asset, it shall continue to recognize the transferred financial asset. If the company neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, the following situations will apply: (1) If it does not retain control over the financial asset, the financial asset will be derecognised, and the rights and obligations arising or retained in the transfer will be separately recognized as assets or liabilities; (2) If it retains control over the financial asset, the relevant financial assets will be recognized to the extent of its continued involvement in the transferred financial assets, and the relevant liabilities will be recognized accordingly.

If the overall transfer of a financial asset meets the conditions for derecognition, the difference between the following two amounts will be included in the current profit and loss: (1) The book value of the transferred financial asset on the date of derecognition; (2) The sum of the consideration received for the transfer of the financial asset and the amount corresponding to the derecognition part of the cumulative amount of changes in fair value originally directly included in other comprehensive income (the financial assets involved are debt instrument investments measured at fair value and their changes are included in other comprehensive income). If a part of a financial asset is transferred, and the transferred part as a whole meets the conditions for derecognition, the entire book value of the financial asset before transfer will be apportioned between the derecognized part and the continued recognition part according to their respective relative fair values on the date of transfer, and the difference between the following two amounts shall be included in the current profit and loss: (1) The book value of the derecognized part; (2) The consideration for the derecognition part is the sum of the amount corresponding to the derecognition part of the cumulative amount of changes in fair value that was originally directly included in other comprehensive income (the financial assets involved in the transfer are debt instrument investments that are measured at fair value and their changes are included in other comprehensive income).

Determination method of fair value of financial assets and financial liabilities

The company determines the fair value of relevant financial assets and financial liabilities using valuation techniques that are applicable under the current circumstances and supported by sufficient available data and other information. The company divides the input values used in the valuation technology into the following levels and uses them in sequence:

(1) The first level input value is the unadjusted quoted price in an active market for the same asset or liability that can be obtained on the measurement date;

(2) The second level input value is the directly or indirectly observable input value of the relevant assets or liabilities in addition to the first level input value, including: quotations of similar assets or liabilities in active markets; quotations of the same or similar assets or liabilities in inactive markets; other observable input values other than quotations, such as interest rates and yield curves that are observable during normal quotation intervals; market verification input values, etc.;

(3) The third level input value is the unobservable input value of the relevant assets or liabilities, including interest rates, stock volatility, future cash flows of disposal obligations assumed in business combinations, and use cases that cannot be directly observed or verified by observable market data.

Page 9 of 31

Financial forecasts made using own data, etc.

Impairment of financial instruments

Based on expected credit losses, the company calculates financial assets measured at amortized cost, debt instrument investments measured at fair value with changes included in other comprehensive income, contract assets, lease receivables, and financial liabilities classified as measured at fair value with changes included in current profits and losses. Other than loan commitments, financial liabilities that are not measured at fair value through profit or loss, or financial guarantee contracts that are not financial liabilities arising from the transfer of financial assets that do not meet the conditions for derecognition or that continue to be involved in the transferred financial assets are subject to impairment treatment and loss provisions are recognized.

Expected credit losses refer to the weighted average of the credit losses of financial instruments with the risk of default as the weight. Credit loss refers to the difference between all contractual cash flows receivable under the contract and all cash flows expected to be received by the company, discounted at the original effective interest rate, that is, the present value of all cash shortfalls. Among them, credit-impaired financial assets purchased or originated by the company are discounted according to the credit-adjusted actual interest rate of the financial assets.

For purchased or originated financial assets that have suffered credit impairment, the company will only recognize the cumulative change in expected credit losses during the entire duration since initial recognition as loss provisions on the balance sheet date.

For lease receivables, receivables and contract assets formed by transactions regulated by "Accounting Standards for Business Enterprises No. 14 - Revenue", the company uses simplified measurement methods and measures loss provisions based on an amount equivalent to the expected credit losses during the entire duration.

For financial assets other than the above measurement methods, the company evaluates at each balance sheet date whether its credit risk has increased significantly since initial recognition. If the credit risk has increased significantly since initial recognition, the company will measure loss provisions based on the amount of expected credit losses during the entire duration; if the credit risk has not increased significantly since initial recognition, the company will measure loss provisions based on the amount of expected credit losses on the financial instrument within the next 12 months.

The Company uses reasonable and evidence-based information available, including forward-looking information, to determine whether the credit risk of a financial instrument has increased significantly since initial recognition by comparing the risk of default on the financial instrument on the balance sheet date with the risk of default on the initial recognition date.

On the balance sheet date, if the company determines that a financial instrument has only low credit risk, it is assumed that the credit risk of the financial instrument has not increased significantly since initial recognition.

The company assesses expected credit risk and measures expected credit losses on the basis of a single financial instrument or a combination of financial instruments. When based on a portfolio of financial instruments, the company divides financial instruments into different portfolios based on common risk characteristics.

The company remeasures expected credit losses on each balance sheet date, and the resulting increase or reversal of loss provisions is included in the current profit and loss as impairment losses or gains. For financial assets measured at amortized cost, the loss allowance is reduced by the

Page 10 of 31

The book value of financial assets as presented in the balance sheet; for fair value through other comprehensive income

For debt investments, the company recognizes its loss provisions in other comprehensive income and does not deduct the book value of the financial assets.

Offset of financial assets and financial liabilities

Financial assets and financial liabilities are presented separately in the balance sheet and do not offset each other. But if the following conditions are met at the same time,

The company presents the net amount after offsetting each other in the balance sheet: (1) The company has the legal right to offset the recognized amount,

And the legal right is currently enforceable; (2) The company plans to settle on a net basis, or to realize the financial assets and repay the debt at the same time

the financial liability.

For transfers of financial assets that do not meet the conditions for derecognition, the company will not offset the transferred financial assets and related liabilities.

(6) Recognition standards and accrual methods for expected credit losses on accounts receivable and contract assets

Accounts receivable with expected credit losses based on combination of credit risk characteristics

Portfolio category Basis for determining portfolio Method for measuring expected credit losses

Pre-receivable bank acceptance bills refer to historical credit loss experience, combined with current conditions and future economic conditions.

The management evaluates that this type of account has low credit risk and no provision for bad debts is made. Note Types Referring to historical credit loss experience, combined with current conditions and future economic conditions, the expected credit losses are calculated through the default risk exposure and the expected credit loss rate throughout the duration.

With reference to historical credit loss experience, combined with current accounts receivable - government customer group receivables, medical insurance settlement receivables and receivables

Current situation and prediction of future economic situation. Collection of payments from public hospitals.

Accounts receivable - accounts receivable - non-governmental customers Receivables from non-governmental customers

Use the loss rate comparison table to calculate the expected credit portfolio items

loss

With reference to historical credit loss experience, combined with the current receivables from Zhuzhou Qianjin Pharmaceutical Co., Ltd.

Other receivables - receivables from Zhuzhou Qianjin Medicine Co., Ltd. Settlement Center Current status and prediction of future economic conditions

If the settlement center portfolio of a joint-stock company is tested and no impairment occurs after testing, the amount will not be included.

Provision for bad debts

With reference to historical credit loss experience, combined with current conditions and predictions of future economic conditions, prepare a comparison table between the aging of other receivables and expected credit loss rates to calculate expected credit losses.

Comparison table of aging and expected credit loss rate of aging portfolio

Page 11 of 31

Notes receivable Accounts receivable Accounts receivable

Other receivables Receivables from commercial acceptances Receivables from government customers Receivables from non-government customers

Account aging Expected credit loss Expected credit of bill of exchange Expected credit of account portfolio Expected credit of account portfolio

Loss rate (%)

Loss rate (%) Use loss rate (%) Loss rate (%)

Within 1 year (inclusive, the same below) 5.00 2.50 5.00 5.00 1-2 years / 7.50 15.00 15.00 2-3 years / 12.50 25.00 25.00 More than 3 years / 25.00 50.00 50.00

Recognition standards for accounts receivable for which expected credit losses are calculated individually

For receivables whose credit risk is significantly different from the combined credit risk, the company accrues expected credit losses on an individual basis.

(7) Inventory

Classification of inventory

Inventories include finished products or commodities held for sale in daily activities, work-in-progress in the production process, materials and supplies consumed in the production process or in the process of providing services, etc.

Valuation method for issued inventory

Inventories are issued using the weighted average method at the end of the month.

Inventory inventory system

The inventory system of inventories is the perpetual inventory system.

Amortization method for low-value consumables and packaging materials

(1) Low value consumables

Amortization is carried out according to the one-time write-off method.

(2) Packaging

Amortization is carried out according to the one-time write-off method.

Provision for inventory decline

Recognition standards and accrual methods for inventory depreciation provisions

On the balance sheet date, inventories are measured at the lower of cost and net realizable value, and inventory depreciation provisions are made based on the difference between cost and net realizable value. For inventories that are directly used for sale, the net realizable value is determined by the estimated selling price of the inventory minus the estimated sales expenses and related taxes in the normal production and operation process; for inventories that need to be processed, the estimated selling price of the finished products produced during the normal production and operation process is deducted from the estimated selling price until completion. The net realizable value is determined based on the estimated cost, estimated sales expenses and related taxes. On the balance sheet date, if part of the same inventory has a contract price and other parts do not have a contract price, the net realizable value shall be determined respectively and compared with its corresponding cost.

Page 12 of 31

Determine the amount of provision or reversal of inventory depreciation provisions respectively.

(8) Fixed assets

Recognition conditions for fixed assets

Fixed assets refer to tangible assets held for the production of goods, provision of labor services, leasing or operation and management, and with a useful life of more than one accounting year. Fixed assets are recognized when it is likely that economic benefits will flow in and the cost can be measured reliably.

Depreciation methods for various types of fixed assets

Category Depreciation method Depreciation life (years) Salvage value rate (%) Annual depreciation rate (%) Houses and buildings Double declining balance method 15-30 3 6.67-13.33 Special equipment Double declining balance method 5-14 3 14.29-40 Transportation equipment Double declining balance method 5 3 40 Office equipment Double declining balance method 5 3 40

(9) Construction in progress

Construction in progress is recognized when it is likely that economic benefits will flow in and the cost can be measured reliably. Construction in progress is measured based on the actual costs incurred before the asset reaches its intended usable condition.
When the project under construction reaches the intended usable state, it will be transferred to fixed assets according to the actual cost of the project. If the asset has reached the intended usable state but has not yet completed the final settlement, the estimated value will be transferred to fixed assets first. After the final settlement is completed, the original temporary estimated value will be adjusted according to the actual cost, but the originally accrued depreciation will not be adjusted.

Category Standards and timing for transferring construction in progress to fixed assets

The main construction project and supporting projects have been substantially completed and reached the schedule

Houses and buildings

design requirements

After installation and commissioning, the machinery and equipment meet the design requirements or standards stipulated in the contract.

(10) Intangible assets

Intangible assets include land use rights and software, which are initially measured at cost.
Intangible assets with limited service life shall be amortized systematically and reasonably within the service life according to the expected realization method of the economic benefits related to the intangible asset. If the expected realization method cannot be reliably determined, the straight-line method shall be used for amortization. The details are as follows:

Item Useful life and basis for determination Amortization method software 10 years (best estimate) Straight-line method

Land use rights Amortized over the validity period of the land use certificate Straight-line method

Scope of aggregation of R&D expenditures

Page 13 of 31

(1) Salaries of R&D personnel

Personnel labor expenses include the wages and salaries of the company's R&D personnel, basic pension insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, maternity insurance premiums and housing provident funds.

If R&D personnel serve multiple R&D projects at the same time, labor costs will be recognized based on the working hours records of R&D personnel for each R&D project provided by the company's management department, and will be allocated proportionally among different R&D projects.

For those who are directly engaged in R&D activities or external R&D personnel who are also engaged in non-R&D activities, the company will allocate the actual labor costs incurred by the R&D personnel between R&D expenses and production and operating expenses based on reasonable methods such as the proportion of actual working hours based on the R&D personnel’s working time records in different positions.

(2) R&D-related materials, fuel, and power costs

Direct investment expenses refer to the actual expenditures incurred by the company to implement research and development activities. Including: 1) Direct consumption of materials, fuel and power costs; 2) Development and manufacturing costs of molds and process equipment used for intermediate testing and product trial production, purchase costs for samples, prototypes and general testing means that do not constitute fixed assets, and inspection fees for trial products; 3) Operation and maintenance, adjustment, inspection, detection, repair and other costs of instruments and equipment used for research and development activities.

(3) Depreciation or rental fees for R&D instruments and equipment

Depreciation expenses refer to the depreciation expenses of instruments, equipment and buildings in use used for research and development activities.

If instruments, equipment, and buildings in use are used for R&D activities and are also used for non-R&D activities, necessary records shall be made of the use of such instruments, equipment, and buildings in use, and the actual depreciation expenses incurred shall be allocated between R&D expenses and production and operating expenses in a reasonable manner based on factors such as actual working hours and usage area.

Long-term deferred expenses refer to the long-term deferred expenses incurred during the reconstruction, modification, decoration and repair of R&D facilities. They are collected based on actual expenditures and amortized evenly in installments within the specified period.

(4) New product design and new process specification formulation fees

Design expenses refer to the expenses incurred in conceiving, developing and manufacturing new products and new processes, and designing processes, technical specifications, procedures, operating characteristics, etc., including expenses related to creative design activities to obtain innovative, creative, and breakthrough products.

(5) Outsourced research and development expenses

Entrusted external research and development expenses refer to the expenses incurred by the company entrusting other institutions or individuals at home and abroad to conduct research and development activities (the results of research and development activities are owned by the company and are closely related to the company's main business).

(6) Other expenses

Other expenses refer to other expenses directly related to research and development activities in addition to the above expenses, including technical library materials fees,

Page 14 of 31

Data translation fees, expert consultation fees, high-tech R&D insurance fees, retrieval, demonstration, review, identification, and acceptance fees for R&D results, intellectual property application fees, registration fees, agency fees, conference fees, travel expenses, communication fees, etc.

Expenditures in the research phase of internal research and development projects are included in the current profits and losses when incurred. Expenditures in the development phase of internal research and development projects are recognized as intangible assets if they meet the following conditions: (1) It is technically feasible to complete the intangible asset so that it can be used or sold; (2) There is the intention to complete the intangible asset and use or sell it; (3) The way in which the intangible asset generates economic benefits includes being able to prove that there is a market for the products produced using the intangible asset or that the intangible asset itself has a market. If the intangible asset will be used internally, its usefulness can be proven; (4) It has sufficient technical, financial and other resource support to complete the development of the intangible asset and has the ability to use or sell the intangible asset; (5) Expenditures attributable to the development stage of the intangible asset can be measured reliably.

(11) Impairment of some long-term assets

For long-term assets such as fixed assets, projects under construction, and intangible assets with limited useful lives, if there are signs of impairment on the balance sheet date, the recoverable amount is estimated. Goodwill and intangible assets with indefinite useful lives formed due to business combinations are subject to impairment testing every year regardless of whether there are signs of impairment. Goodwill is tested for impairment in combination with its related asset groups or combinations of asset groups.

If the recoverable amount of the above-mentioned long-term assets is lower than its book value, the asset impairment provision shall be recognized based on the difference and included in the current profit and loss.

(12) Long-term deferred expenses

Long-term deferred expenses are calculated as expenses that have been spent and have an amortization period of more than 1 year (excluding 1 year). Long-term deferred expenses are recorded based on the actual amount incurred, and are amortized evenly over the benefit period or a specified period. If a long-term deferred expense item cannot benefit future accounting periods, all the amortized value of the item that has not yet been amortized will be transferred to the current profit and loss.

(13) Employee compensation

Employee compensation includes short-term compensation, post-employment benefits, termination benefits and other long-term employee benefits.
Accounting treatment of short-term compensation

During the accounting period when employees provide services to the company, the actual short-term compensation is recognized as a liability and included in the current profit and loss or related asset costs.

Accounting treatment of post-employment benefits

Post-employment benefits are divided into defined contribution plans and defined benefit plans.

(1) During the accounting period when employees provide services to the company, the deposit amount payable calculated according to the defined contribution plan is recognized as a liability and included in the current profit and loss or related asset costs.

Page 15 of 31

(2) The accounting treatment of defined benefit plans usually includes the following steps:

Based on the expected cumulative benefit unit method, use unbiased and mutually consistent actuarial assumptions to estimate relevant demographic variables and financial variables, measure the obligations arising from the defined benefit plan, and determine the period to which the relevant obligations belong. At the same time, the obligations arising from the defined benefit plan are discounted to determine the present value of the defined benefit plan obligations and the current service cost;
If there are assets in the defined benefit plan, the deficit or surplus formed by deducting the present value of the defined benefit plan obligations from the fair value of the defined benefit plan assets is recognized as a net liability or net asset of the defined benefit plan. If a defined benefit plan has a surplus, the net assets of the defined benefit plan shall be measured at the lower of the surplus of the defined benefit plan and the asset upper limit;
At the end of the period, the employee compensation costs generated by the defined benefit plan are recognized as service costs, net interest on the net liabilities or net assets of the defined benefit plan, and changes caused by remeasurement of the net liabilities or net assets of the defined benefit plan. Among them, service costs and net liabilities or net assets of the defined benefit plan are The net interest is included in the current profit and loss or related asset costs, and the changes resulting from the remeasurement of the net liabilities or net assets of the defined benefit plan are included in other comprehensive income, and are not allowed to be transferred back to profit or loss in subsequent accounting periods, but these amounts recognized in other comprehensive income can be transferred within the scope of equity.

Accounting treatment of dismissal benefits

For dismissal benefits provided to employees, the employee compensation liabilities arising from the dismissal benefits are recognized at the earliest of the following two times and included in the current profit and loss: (1) When the company cannot unilaterally withdraw the dismissal benefits provided due to the labor relationship termination plan or layoff proposal;

(2) When a company recognizes costs or expenses related to a restructuring involving the payment of termination benefits.

Accounting treatment methods for other long-term employee benefits

Other long-term benefits provided to employees that meet the conditions of the defined contribution plan shall be accounted for in accordance with the relevant provisions of the defined contribution plan; other long-term benefits shall be accounted for in accordance with the relevant provisions of the defined benefit plan. In order to simplify the relevant accounting treatment, the employee compensation costs incurred are recognized as service costs, net interest on other long-term employee benefit net liabilities or net assets, and the total net amount of the changes resulting from the remeasurement of other long-term employee benefit net liabilities or net assets shall be included in the current profit and loss or related asset costs.

(14) Estimated liabilities

Obligations resulting from contingencies such as external guarantees, litigation matters, product quality guarantees, loss-making contracts, etc., become current obligations borne by the company. When the performance of the obligation is likely to cause economic benefits to flow out of the company, and the amount of the obligation can be reliably measured, the company will recognize the obligation as an estimated liability.
The company initially measures estimated liabilities based on the best estimate of the expenditure required to fulfill relevant current obligations, and reviews the book value of estimated liabilities on the balance sheet date.

(15) Income

Page 16 of 31

Principles of revenue recognition

On the contract commencement date, the company evaluates the contract, identifies each individual performance obligation contained in the contract, and determines whether each individual performance obligation is to be performed within a certain period of time or at a certain point in time.

When one of the following conditions is met, the performance obligation is fulfilled within a certain period of time; otherwise, the performance obligation is fulfilled at a certain point in time: (1) The customer obtains and consumes the economic benefits brought by the company's performance while the company performs the contract; (2) The customer is able to control the goods under construction during the company's performance; (3) The goods produced during the company's performance have irreplaceable uses, and the company has the right to collect payment for the cumulative performance part that has been completed so far during the entire contract period.

For performance obligations performed within a certain period of time, the company recognizes revenue based on the performance progress within that period of time. When the progress of contract performance cannot be reasonably determined, if the costs incurred are expected to be compensated, revenue shall be recognized based on the amount of costs incurred until the progress of contract performance can be reasonably determined. For performance obligations fulfilled at a certain point in time, revenue is recognized at the point when the customer obtains control of the relevant goods or services. When judging whether the customer has obtained control of the goods, the company considers the following signs:

(1) The company has a current right to receive payment for the commodity, that is, the customer has a current payment obligation for the commodity; (2) The company has transferred the legal ownership of the commodity to the customer, that is, the customer has legal ownership of the commodity; (3) The company has physically transferred the commodity to the customer, that is, the customer has physically taken possession of the commodity; (4) The company has transferred the major risks and rewards of ownership of the commodity to the customer, that is, the customer has obtained the major risks and rewards of ownership of the commodity; (5) The customer has accepted the product; (6) Other signs indicating that the customer has obtained control of the product.

Income measurement principles

(1) The company measures revenue based on the transaction price allocated to each individual performance obligation. The transaction price is the amount of consideration that the company expects to be entitled to receive for transferring goods or services to the customer, excluding amounts collected on behalf of third parties and amounts expected to be returned to the customer.

(2) If there is variable consideration in the contract, the company determines the best estimate of the variable consideration based on the expected value or the most likely amount, but the transaction price including the variable consideration shall not exceed the amount at which a significant reversal of the cumulative recognized revenue is unlikely to occur when the relevant uncertainty is eliminated.

(3) If there is a significant financing component in the contract, the company determines the transaction price based on the amount payable in cash when the customer obtains control of the goods or services. The difference between the transaction price and the contract consideration is amortized using the effective interest method during the contract period.

(4) If the contract contains two or more performance obligations, the company will allocate the transaction price to each individual performance obligation based on the relative proportion of the stand-alone selling price of the goods promised by each individual performance obligation on the contract commencement date.

(16) Contract acquisition costs and contract performance costs

Page 17 of 31

The incremental costs incurred by the company to obtain the contract are expected to be recovered and are recognized as an asset as the contract acquisition cost. If the costs incurred by the company to fulfill the contract do not apply to the scope of relevant standards such as inventory, fixed assets or intangible assets and meet the following conditions at the same time, they will be recognized as an asset as the cost of contract performance:

The cost is directly related to a current or expected contract, including direct labor, direct materials, manufacturing overhead (or similar expenses), costs expressly borne by the customer, and other costs incurred solely because of the contract;
This cost increases the company’s future resources for fulfilling performance obligations;
The cost is expected to be recovered.

The company amortizes assets related to contract costs on the same basis as the revenue recognition of goods or services related to the assets, and includes them in the current profits and losses.

If the book value of an asset related to the contract cost is higher than the remaining consideration expected to be obtained from the transfer of the goods or services related to the asset minus the estimated costs to be incurred, the company will make an impairment provision for the excess and recognize it as an asset impairment loss. If the factors of impairment in the previous period subsequently change, so that the remaining consideration expected to be obtained from the transfer of the goods or services related to the asset minus the estimated costs to be incurred is higher than the book value of the asset, the asset impairment provision that has been originally accrued will be reversed and included in the current profit and loss, but the book value of the asset after the reversion shall not exceed the book value of the asset on the date of reversal if no impairment provision is made.

(17) Contract assets and contract liabilities

Companies present contract assets or contract liabilities on their balance sheets based on the relationship between the fulfillment of performance obligations and payments from customers. The company will present the net amount after offsetting contract assets and contract liabilities under the same contract.

The company presents the right to receive consideration from customers that is unconditional (i.e., dependent only on the passage of time) as receivables and the right to receive consideration for goods transferred to the customer that is subject to factors other than the passage of time as contract assets.

The Company presents obligations to transfer goods to customers for consideration received or receivable from customers as contract liabilities.

(18) Government subsidies

Government subsidies are recognized when the following conditions are met at the same time: (1) The company is able to meet the conditions attached to the government subsidy;

(2) The company can receive government subsidies. If government subsidies are monetary assets, they shall be measured based on the amount received or receivable. If the government subsidy is a non-monetary asset, it shall be measured at fair value; if the fair value cannot be obtained reliably, it shall be measured at the nominal amount.

Judgment basis and accounting treatment method for government subsidies related to assets

Government documents stipulate that government subsidies used to purchase, construct or otherwise form long-term assets are classified as asset-related government subsidies. If the government documents are not clear, the judgment will be based on the basic conditions necessary to obtain the subsidy.

Page 18 of 31

Other ways to form long-term assets are as basic conditions as asset-related government subsidies. Government subsidies related to assets are offset against the book value of the relevant assets or recognized as deferred income. If government subsidies related to assets are recognized as deferred income, they shall be included in profits and losses in installments according to a reasonable and systematic method within the useful life of the relevant assets. Government subsidies measured according to the nominal amount are directly included in the current profit and loss. If the relevant assets are sold, transferred, scrapped or damaged before the end of their useful life, the undistributed balance of relevant deferred income will be transferred to the profit and loss of the current period of asset disposal.

Basis for judgment and accounting treatment of government subsidies related to income

Government subsidies other than asset-related government subsidies are classified as income-related government subsidies. For government subsidies that contain both asset-related parts and income-related parts, it is difficult to distinguish whether they are asset-related or income-related, and are classified as a whole as income-related government subsidies. If government subsidies related to income are used to compensate for relevant costs, expenses or losses in the future period, they are recognized as deferred income. During the period when the relevant costs, expenses or losses are recognized, they are included in the current profits and losses or offset the relevant costs; if they are used to compensate for the relevant costs, expenses or losses that have already occurred, they are directly included in the current profits and losses or offset the relevant costs.

Government subsidies related to the company's daily operating activities shall be included in other income or offset related costs and expenses according to the economic business essence. Government subsidies that have nothing to do with the company's daily activities are included in non-operating income and expenses.
Accounting treatment method for policy preferential loan interest discounts

(1) The finance department allocates interest discount funds to the lending bank, and the lending bank provides loans to the company at policy-based preferential interest rates. The actual loan amount received is used as the entry value of the loan, and the relevant borrowing costs are calculated based on the loan principal and the policy-based preferential interest rate.

(2) If the finance department directly allocates interest discount funds to the company, the corresponding interest discount will be used to offset related borrowing costs.

(19) Deferred income tax assets and deferred income tax liabilities

Based on the difference between the book value of assets and liabilities and their tax basis (if the tax basis of items not recognized as assets and liabilities can be determined in accordance with tax laws, the difference between the tax basis and their book amount), deferred income tax assets or deferred income tax liabilities are calculated and recognized according to the applicable tax rate during the period when the asset is expected to be recovered or the liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that the taxable income will be available to offset the deductible temporary differences. On the balance sheet date, if there is conclusive evidence that sufficient taxable income is likely to be obtained in the future period to offset the deductible temporary differences, deferred income tax assets that have not been recognized in previous accounting periods will be recognized.
On the balance sheet date, the book value of the deferred tax assets is reviewed. If it is likely that sufficient taxable income will not be available in the future period to offset the benefits of the deferred tax assets, the book value of the deferred tax assets will be written down. The amount of the write-down is reversed when it is probable that sufficient taxable income will be obtained.
The company's current income tax and deferred income tax are included in the current profit and loss as income tax expenses or income, but do not include the following

Page 19 of 31

Income tax arising from: (1) business combination; (2) transactions or events directly recognized in owner's equity.

(20) Leasing

The company as lessee

On the start date of the lease period, the company identifies leases with a lease term of no more than 12 months and that do not include a purchase option as short-term leases; leases with a low value when a single leased asset is a new asset are identified as low-value asset leases. If a company subleases or anticipates subletting a leased asset, the original lease will not be deemed a low-value asset lease.

For all short-term leases and low-value asset leases, the company includes the lease payments into the relevant asset cost or current profit and loss on a straight-line basis throughout the lease term.

In addition to the above-mentioned short-term leases and low-value asset leases that adopt simplified treatment, the company recognizes right-of-use assets and lease liabilities for leases on the start date of the lease period.

(1) Right-of-use assets

The right-of-use assets are initially measured at cost, which includes: 1) the initial measurement amount of the lease liability; 2) the lease payment amount paid on or before the start date of the lease period, and if there is a lease incentive, the amount related to the lease incentive that has been enjoyed will be deducted;

The initial direct costs incurred by the lessee; 4) The costs that the lessee expects to incur to dismantle and remove the leased asset, restore the site where the leased asset is located, or restore the leased asset to the state agreed upon in the lease terms.

The company depreciates right-of-use assets on a straight-line basis. If it is reasonably certain that the ownership of the leased asset will be obtained at the expiration of the lease term, the company will accrue depreciation over the remaining useful life of the leased asset. If it is not reasonably certain that the ownership of the leased asset will be obtained at the expiration of the lease term, the company will accrue depreciation during the shorter of the lease term and the remaining useful life of the leased asset.

(2) Lease liabilities

At the beginning of the lease period, the company recognizes the present value of the unpaid lease payments as lease liabilities. When calculating the present value of lease payments, the interest rate implicit in the lease is used as the discount rate. If the interest rate implicit in the lease cannot be determined, the company's incremental borrowing rate is used as the discount rate. The difference between the lease payment and its present value is regarded as an unrecognized financing expense, and interest expenses are recognized at the discount rate used to confirm the present value of the lease payment during each period of the lease term, and included in the current profit and loss. Variable lease payments that are not included in the measurement of lease liabilities are included in the current profit and loss when actually incurred.

After the start date of the lease period, when the actual fixed payment amount changes, the estimated amount payable of the guaranteed residual value changes, the index or ratio used to determine the lease payment amount changes, the evaluation results or actual exercise of the purchase option, lease renewal option or termination option change, When a change occurs, the company remeasures the lease liability based on the present value of the changed lease payment, and adjusts the book value of the right-of-use asset accordingly. If the book value of the right-of-use asset has been reduced to zero, but the lease liability still needs to be further reduced, the remaining amount will be included in the current profit and loss.

Page 20 of 31

The company acts as lessor

On the lease commencement date, the Company classifies leases that substantially transfer almost all risks and rewards related to the ownership of the leased assets as finance leases, and other leases as operating leases.

(1) Operating lease

The company recognizes the lease receipts as rental income according to the straight-line method in each period during the lease term. The initial direct expenses incurred are capitalized and amortized on the same basis as the rental income recognition, and included in the current profit and loss in installments. Variable lease payments obtained by the company related to operating leases that are not included in the lease receipts are included in the current profit and loss when they actually occur.

(2) Finance lease

On the start date of the lease period, the company recognizes the financial lease receivables based on the net lease investment (the sum of the unguaranteed residual value and the present value of the lease payments not yet received on the start date of the lease discounted at the interest rate implicit in the lease), and terminates the recognition of financial lease assets. During each period of the lease term, the company calculates and recognizes interest income based on the interest rate implicit in the lease.

Variable lease payments obtained by the company that are not included in the measurement of net lease investment are included in the current profit and loss when actually incurred.

Sale and leaseback

(1) The company as lessee

The company evaluates and determines whether the asset transfer in the sale and leaseback transaction is a sale in accordance with the provisions of "Accounting Standards for Business Enterprises No. 14 - Revenue".

If the asset transfer in a sale and leaseback transaction is a sale, the company measures the right-of-use assets formed by the sale and leaseback based on the portion of the original asset's book value related to the right of use obtained through the leaseback, and only recognizes relevant gains or losses for the rights transferred to the lessor.

If the asset transfer in a sale and leaseback transaction does not constitute a sale, the company will continue to recognize the transferred assets, and at the same time recognize a financial liability equal to the transfer income, and perform accounting treatment on the financial liability in accordance with the "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments".

(2) The company acts as lessor

If the asset transfer in a sale and leaseback transaction is a sale, the company will account for the asset purchase in accordance with other applicable accounting standards for enterprises, and account for the asset leasing in accordance with "Accounting Standards for Business Enterprises No. 21 - Lease". If the asset transfer in a sale and leaseback transaction does not constitute a sale, the company does not recognize the transferred asset, but recognizes a financial asset equal to the transfer income, and performs accounting treatment on the financial asset in accordance with the "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments".

Page 21 of 31

5. Taxes

(1) Main tax types and tax rates

Type of tax Tax calculation basis Tax rate is calculated based on the sales of goods and taxable goods calculated in accordance with tax laws.

Calculate output tax based on labor service income and deduct

Value-added tax 13%, 6% After the input tax allowed to be deducted in the current period, the difference shall be

VAT payable

It is levied on an ad valorem basis, with a one-time deduction of 20% from the original value of the property.

Property tax 1.2%

1.2% of value calculated

Land use tax Land area 6 yuan/square meter Urban maintenance and construction tax Actual turnover tax paid 7% education surcharge Actual turnover tax paid 3% local education surcharge Actual turnover tax paid 2% Corporate income tax Taxable income 15%

(2) Tax incentives

(1) High-tech enterprises

The company was re-identified as a high-tech enterprise on October 16, 2023, and is levied a reduced corporate income tax at a 15% rate, valid for 3 years, and the certificate number is GR202343003173.

(2) Super deduction for R&D expenses

According to the "Announcement on Further Improving the Pre-tax Super Deduction Policy for R&D Expenses" (Announcement No. 7 of the Ministry of Finance and the State Administration of Taxation in 2023), starting from January 1, 2023, if the actual R&D expenses incurred by the enterprise in carrying out R&D activities do not form intangible assets and be included in the current profits and losses, on the basis of actual deductions in accordance with regulations, 100% of the actual amount will be super-deducted before tax; if they form intangible assets, they will be amortized before tax at 200% of the cost of the intangible assets. The company enjoys the above tax benefits of super deduction.

(3) Additional deduction of value-added tax

The company is an advanced manufacturing enterprise. According to the "Announcement on the Additional Deduction Policy for Value-Added Tax for Advanced Manufacturing Enterprises" issued by the Ministry of Finance and the State Administration of Taxation in September 2023 (Announcement No. 43 of the Ministry of Finance and the State Administration of Taxation of 2023), from January 1, 2023 to December 31, 2027, advanced manufacturing enterprises are allowed to deduct an additional 5% of the deductible input tax for the current period to deduct the value-added tax payable. Our company enjoys this value-added tax additional deduction policy.

(4) Value-added tax exemption

Page 22 of 31

According to the "Notice of the Ministry of Finance, the State Administration of Taxation, the Ministry of Human Resources and Social Security, and the State Council Poverty Alleviation Office on Tax Policies to Further Support and Promote Entrepreneurship and Employment of Key Groups" (Ministry of Finance State Administration of Taxation Announcement No. 22 of 2019) stipulates that enterprises recruit registered poor people, as well as people who have been registered as unemployed for more than six months at the public employment service agency of the human resources and social security department and hold an "Employment and Entrepreneurship Certificate" or "Employment and Unemployment Registration Certificate" (marked with "Enterprise Tax Absorption Policy") , who signs a labor contract with a term of more than 1 year and pays social insurance premiums in accordance with the law, starting from the month when the labor contract is signed and social insurance is paid, a fixed amount of value-added tax, urban maintenance and construction tax, education surcharge, local education surcharge and corporate income tax discounts will be deducted based on the actual number of employees within 3 years. Our company applies the above preferential policies.

6. Notes on Income Statement Items

Note: The current period numbers in the notes to the income statement during this transitional period refer to the period from October 1, 2024 to September 30, 2025.

Operating income/operating costs

(1) Details

Number of current period

Project

revenue cost

Main business income 738,540,527.58 256,731,999.79 Other business income 862,073.04 92,035.95 Total 739,402,600.62 256,824,035.74

(2) Main business income/main business costs

Number of current period

Project

revenue cost

Pharmaceutical sales 738,540,527.58 256,731,999.79 Subtotal 738,540,527.58 256,731,999.79

Taxes and surcharges

Item number in this period

Urban maintenance and construction tax 4,344,841.79

Education surcharge and local education surcharge 3,103,458.42

Stamp duty 308,951.33

Property tax 1,256,048.40

Land use tax 784,240.30

Page 23 of 31

Item number in this period

Others 18,831.42 Total 9,816,371.66

Selling expenses

Item number in this period

Travel expenses, market maintenance and promotion expenses 111,315,691.62 Labor costs 70,632,022.41 Transportation expenses 2,589,045.30 Business entertainment expenses 1,806,649.83 Office expenses 953,696.59 Conference expenses 837,184.58 Total 188,134,290.33

Administrative expenses

Item number in this period

Labor costs 60,003,101.65 Office expenses 6,207,573.15 Depreciation expenses 5,341,912.63 Material consumption 3,049,261.45 Travel expenses 587,714.55 Business entertainment expenses 425,024.67 Amortization of intangible assets 1,507,917.32 Vehicle transportation expenses 167,390.90 Repair fee 15,012.00 Others 13,724,659.26 Total 91,029,567.58

Research and development expenses

Page 24 of 31

Item number in this period

Outsourcing R&D expenses 26,262,007.25 Salaries and salaries of R&D personnel, etc. 21,599,976.68 R&D-related materials, fuel, and power expenses 10,062,335.89 New product design and new process specification formulation fees 1,560,316.97 Demonstration, review, and inspection fees for R&D results 2,696,335.52 Depreciation or leasing fees for R&D instruments and equipment 1,100,435.33 Others 1,534,840.91 Total 64,816,248.55

Financial charges

Item number in this period

Interest expense 73,266.68 Less: Interest income 12,551,957.91 Others 230,998.82 Total -12,247,692.41

Other income

Item number in this period

Government subsidies related to assets 4,336,576.46 Government subsidies related to income 128,009.50 Refund of personal income tax withholding fees 105,455.29 Tax exemptions 172,900.00 Additional value-added tax deductions 1,132,194.84 Total 5,875,136.09

Investment income

Item number in this period

Investment income from financial products 5,572,619.52

Page 25 of 31

Item number in this period

Total 5,572,619.52

Credit impairment losses

Item number in this period

Bad debt losses 169,096.46 Total 169,096.46

Asset impairment loss

Item number in this period

Inventory impairment loss -2,002,895.48 Total -2,002,895.48

Income from asset disposals

Item number in this period

Income from fixed asset disposal -48,511.61 Total -48,511.61

Non-operating income

Item number in this period

Others 53,996.90 Total 53,996.90

Non-operating expenses

Item number in this period

Late payment fee 510,445.33 Others 80,462.93 Total 590,908.26

Page 26 of 31

This copy is only for attachment to the Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd. Tianjian Shen [2025] No. 2-499 report to prove that Tianjian Accounting Firm (Special General Partnership) operates legally. It is invalid for other uses and may not be spread without authorization.

Page 28 of 31

This copy is only for attachment to the Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd. Tianjian Shen [2025] No. 2-499 report to prove that Tianjian Accounting Firm (Special General Partnership) has the legal qualifications to practice. It is invalid for other uses and may not be spread without authorization.

Page 29 of 31

This copy is only for attachment to Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd. Tianjian Shen [2025] No. 2-499 report to prove that Liu Liya is a Chinese certified public accountant. It is invalid for other purposes and may not be transmitted without authorization.

Page 30 of 31

This copy is only for attachment to Hunan Qianjin Xiangjiang Pharmaceutical Co., Ltd. Tianjian Shen [2025] No. 2-499 report to prove that Liu Lingshan is a Chinese certified public accountant. It is invalid for other purposes and may not be disseminated without authorization.

Page 31 of 31