Tonghua Dongbao audit report issued by Daxin Accounting Firm

Tonghua Dongbao Pharmaceutical Co., Ltd. Audit Report

Daxin Shenzi [2026] No. 7-00007

Daxin Accounting Firm (Special General Partnership)

WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.

Daxin Accounting Firm WUYIGE Certified Public Accountants.LLP Telephone: +86 (10) 82330558 Room 2206 22/F, Xueyuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing Fax: +86 (10) 82327668 2206 No.1 Zhichun Road, Haidian Dist., 22nd Floor, Xueyuan International Tower. Website: Internet: www.daxincpa.com.cnZip code 100083 Beijing,China,100083

Audit report

Daxin Shenzi [2026] No. 7-00007 All shareholders of Tonghua Dongbao Pharmaceutical Co., Ltd.:

1. Audit opinions

We have audited the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. (hereinafter referred to as the "Company"), including the consolidated and parent company balance sheets as of December 31, 2025, the consolidated and parent company income statements, consolidated and parent company cash flow statements, consolidated and parent company statements of changes in shareholders' equity, and notes to the financial statements for 2025.

We believe that the attached financial statements have been prepared in all material respects in accordance with the provisions of the Accounting Standards for Business Enterprises and fairly reflect the consolidated and parent company's financial position as of December 31, 2025, as well as the consolidated and parent company's operating results and consolidated and parent company's cash flows in 2025.

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 and the Chinese Certified Public Accountants Independence Standards, we are independent from your company and have fulfilled other responsibilities in professional ethics. In our audit, we complied with the independence requirements applicable to audits of the financial statements of public interest entities.

We believe that the audit evidence we obtained is sufficient and appropriate and provides a basis for issuing an audit opinion.

3. Key audit matters

Key audit matters are matters that we, based on our professional judgment, consider to be most important in the audit of the current period's financial statements. The response to these matters is based on the audit of the financial statements as a whole and the formation of audit opinions. We do not express opinions on these matters individually.

(1) Revenue recognition

1. Description of the matter

Daxin Accounting Firm WUYIGE Certified Public Accountants.LLP Telephone: +86 (10) 82330558 Room 2206 22/F, Xueyuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing Fax: +86 (10) 82327668 2206 No.1 Zhichun Road, Haidian Dist., 22nd Floor, Xueyuan International Tower. Website: Internet: www.daxincpa.com.cn

Postal code 100083 Beijing,China,100083

For example, "(27) Revenue" in "III. Significant Accounting Policies and Accounting Estimates" in the notes to the financial statements and "(40) Operating income and operating costs" in "V. Notes on important items in the consolidated financial statements". Your company is mainly engaged in the production and sales of insulin APIs, preparations and diabetes-related medical devices. The operating income in 2025 is 2,947,228,797.15 yuan, of which the income from the sales of insulin APIs and preparations is 2,668,400,780.59 yuan, accounting for 90.54% of the total operating income.

Revenue is one of your company's key performance indicators. There may be inherent risks of management manipulating revenue recognition in order to achieve specific goals or expectations. At the same time, because insulin APIs and preparations account for a significant proportion of revenue, we identify the revenue recognition of insulin APIs and preparations as a key audit matter.

2. Audit response

Our audit procedures for revenue recognition mainly include:

(1) Understand and evaluate the design of key internal controls related to revenue recognition, and test the operating effectiveness of relevant internal controls;

(2) Check the sales contract, identify the contract terms and conditions related to the customer’s acquisition of control rights of goods or services, and evaluate whether the company’s revenue recognition time meets the requirements of the Accounting Standards for Business Enterprises;

(3) Select samples to check the sales contracts, outbound orders, waybills, customer receipts (domestic sales), export customs declarations, bills of lading or waybills, and foreign exchange receipt verification orders (exports) and other evidence related to revenue recognition;

(4) Execute analytical procedures to analyze changes in revenue and gross profit margin;

(5) Carry out correspondence procedures for important customers during the reporting period;

(6) Select a sample of income transactions recorded before and after the balance sheet date to conduct a cut-off test to evaluate whether the income is included in the correct accounting period.

(2) Confirmation of sales expenses

1. Description of the matter

For example, in "(42) Sales Expenses" in "V. Notes on Important Items of Consolidated Financial Statements" in the notes to the financial statements, your company will incur sales expenses of RMB 1,108,127,227.86 in 2025.

Daxin Accounting Firm WUYIGE Certified Public Accountants.LLP Telephone: +86 (10) 82330558 Room 2206 22/F, Xueyuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing Fax: +86 (10) 82327668 2206 No.1 Zhichun Road, Haidian Dist., 22nd Floor, Xueyuan International Tower. Website: Internet: www.daxincpa.com.cn

Postal code 100083 Beijing,China,100083

Since sales expenses have a greater impact on your company's profits and may result in significant misstatement risks, we regard the recognition of sales expenses as a key audit matter.

2. Audit response

Our audit procedures for sales expense recognition mainly include:

(1) Understand and evaluate the design of key internal controls related to sales expense recognition, and test the operating effectiveness of relevant internal controls;

(2) Check the company's sales policy and calculate the main sales expenses according to the sales policy;

(3) Select samples to check supporting documents such as contracts or agreements, invoices, and bank receipts related to the confirmation of sales expenses; (4) Perform analytical procedures to analyze the ratio of sales expenses to main business income, year-on-year changes, etc.; (5) Select samples of sales expenses recorded before and after the balance sheet date to conduct cut-off testing to evaluate whether sales expenses are included in the correct accounting period.

4. Other information

The management of your company (hereinafter referred to as management) is responsible for other information. The other information includes the information covered in your company's 2025 annual report, but does not include the financial statements and our auditor's report.

Our audit opinion on the financial statements does not cover other information, nor do we express any form of assurance conclusion on other information.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the audit or otherwise appears to be materially misstated. If we determine, based on the work we have performed, that other information is materially misstated, we should report that fact. We have nothing to report in this regard.

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

The management is responsible for preparing financial statements in accordance with the provisions of the Accounting Standards for Business Enterprises to achieve fair reflection, and to design, implement and maintain necessary internal controls so that the financial statements do not contain material misstatements due to fraud or errors.

Daxin Accounting Firm WUYIGE Certified Public Accountants.LLP Telephone: +86 (10) 82330558 Room 2206 22/F, Xueyuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing Fax: +86 (10) 82327668 2206 No.1 Zhichun Road, Haidian Dist., 22nd Floor, Xueyuan International Tower. Website: Internet: www.daxincpa.com.cnZip code 100083 Beijing,China,100083

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

Those charged with governance are responsible for overseeing your company’s financial reporting process.

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.

(2) Understand the internal controls related to auditing to design appropriate audit procedures.

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

(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 is a significant uncertainty about events or conditions that may cause significant doubts about your company's ability to continue as a going concern. 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 your company to cease to continue as a going concern.

(5) Evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect the relevant transactions

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Tonghua Dongbao Pharmaceutical Co., Ltd.

Notes to Financial Statements

(Unless otherwise specified, the amounts in this note are in RMB)

1. Basic situation of the enterprise

(1) Company registration place and headquarters address

The registered address of Tonghua Dongbao Pharmaceutical Co., Ltd. (hereinafter referred to as the "Company" or the "Company") is Dongbao New Village, Tonghua County, Jilin Province, and the company's headquarters address is Dongbao New Village, Tonghua County, Jilin Province. Unified social credit code: 912205012445783007.

The company is a joint-stock pilot enterprise approved by the Jilin Provincial Economic Structural Reform Commission Jigaipi [1992] No. 76 and jointly established by Tonghua Baishan Pharmaceutical Factory No. 5 (now renamed as Tonghua Dongbao Wuyao Co., Ltd.), a subsidiary of the former Dongbao Industrial Group Co., Ltd., and Tonghua Baixueshan Pharmaceutical Factory and Tonghua Petroleum Tools Factory. It was registered in accordance with the law at the Tonghua Administration for Industry and Commerce of Jilin Province on December 28, 1992. When the company was established, the total share capital was 54 million shares.

In 1994, with the approval of Jilin Provincial Government Ji Zheng Han [1993] No. 370 and the State Securities Regulatory Commission's Zheng Jian Shen Zi [1994] No. 26 review and confirmation, the company publicly issued 18 million yuan of ordinary shares (A shares) to the public, and was listed on the Shanghai Stock Exchange on August 24, 1994, with the stock code 600867.

Since its listing, it has experienced several capital increases and changes in its share capital structure. As of December 31, 2025, the company's registered capital and paid-in share capital were both RMB 1.9 billion, 5,800,504,200,800,219 yuan.

(2) The main business activities actually engaged in by the enterprise

The company's main business is biopharmaceuticals, and its independent entities and subsidiaries are involved in the real estate and building materials industries. The main products are human insulin API and injection, insulin glargine injection, insulin aspart injection, liraglutide injection, diabetes-related medical equipment, Zhennaoning capsules (Chinese patent medicine), empagliflozin tablets (chemical medicine), Lijing Garden Community commercial housing, etc.

(3) Approval of the financial report and date of approval of the financial report

This financial report was approved by the company's board of directors on April 17, 2026.

2. Basis for preparation of financial statements

(1) Basis for preparation

The Company's financial statements are based on going concern, based on actual transactions and events, in accordance with the "Accounting Standards for Business Enterprises - Basic Standards" and specific accounting standards promulgated by the Ministry of Finance (hereinafter referred to as the Accounting Standards for Business Enterprises), and are prepared based on the important accounting policies and accounting estimates formulated.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

(2) Continued operations

The company has evaluated the company's ability to continue operating for 12 months from the end of the reporting period, and has found no issues that affect the company's ability to continue operating. It is reasonable for the company to prepare financial statements based on going concern.

3. Important accounting policies and accounting estimates

(1) Statement on compliance with accounting standards for enterprises

The financial statements prepared by the company comply with the requirements of the Accounting Standards for Business Enterprises and truly and completely reflect the financial status as of December 31, 2025, operating results and cash flow in 2025 and other relevant information.

(2) Accounting period

The company's fiscal year is the Gregorian calendar year, that is, from January 1 to December 31 of each year.

(3) Business cycle

The company uses 12 months a year as its normal operating cycle, and uses the operating cycle as the liquidity classification standard for assets and liabilities.

(4) Accounting standard currency

The Company uses RMB as its functional accounting currency.

(5) Methods and selection basis for determining materiality standards

1. Importance of financial statement items

The company determines the importance of financial statement items based on the principle of whether it affects the economic decisions of users of financial statements, and considers both nature and amount. The importance of the amount of items in the financial statements is based on the relevant items accounting for 5% of a certain proportion of total assets, total liabilities, total owners' equity, operating income, and net profit; the importance of the nature of the items in the financial statements is based on factors that have a greater impact on the financial status and operating results, such as whether they belong to daily operating activities, whether they cause changes in profits and losses, whether they affect regulatory indicators, etc.

2. The importance of detailed items in the notes to financial statement items

The company determines the importance of the detailed items in the notes to the financial statement items. Based on the importance of the items in the financial statements, the specific items account for a certain proportion of the item, or combined with the amount, while taking into account the nature of the specific items. Certain items are not material to the financial statements but may be material to the notes and still require separate disclosure in the notes. The relevant materiality standards for notes to financial statement items are:

Project Materiality Criteria

Important individual accounts receivable with provision for bad debts, ending balance of RMB 10 million

Important prepayments aged more than one year, ending balance of RMB 5 million

Important construction projects under construction with ending balance of RMB 10 million

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Project Materiality Criteria

Important capitalized R&D projects ending balance of RMB 10 million

Important accounts payable aged more than one year and their

Ending balance 5 million yuan

he pays

One of the subsidiary's total assets, operating income or total profit (or the absolute value of the loss) or an equally important non-wholly owned subsidiary

Account for more than 5% of the corresponding items in the consolidated financial statements

Important debt restructuring, the amount of items expected to affect the consolidated financial statements exceeds 5 million yuan

Important contingencies: contingencies that are expected to affect the consolidated financial statements with an amount exceeding RMB 10 million

Important joint ventures or associates whose book value accounts for more than 10% of the long-term equity investment projects in the consolidated financial statements

(6) Business merger

1. Business combination under common control

For a long-term equity investment formed by a business merger under the same control, if the merging party pays cash, transfers non-cash assets or assumes debts as the merger consideration, the share of the book value of the owner's equity of the merged party in the final controlling party's consolidated financial statements on the merger date shall be regarded as the initial investment cost of the long-term equity investment. If the merging party issues equity instruments as the consideration for the merger, the total face value of the shares issued shall be deemed as share capital. The difference between the initial investment cost of a long-term equity investment and the book value of the merger consideration (or the total face value of the shares issued) shall be adjusted to the capital reserve; if the capital reserve is insufficient for offset, the retained earnings shall be adjusted. 2. Business combination not under common control

For business combinations not under common control, the combination cost is the sum of the fair value of the assets paid by the purchaser, liabilities incurred or assumed, and equity securities issued by the purchaser to obtain control of the purchased party on the purchase date. The identifiable assets, liabilities and contingent liabilities of the acquiree that meet the recognition conditions and are acquired in a business combination not under common control are measured at fair value on the acquisition date. The difference between the purchaser's cost of merger and the fair value of the acquiree's identifiable net assets acquired in the merger is reflected in the value of goodwill. If the purchaser's merger cost is less than the fair value share of the acquiree's identifiable net assets obtained in the merger, and after review, the difference between the merger cost and the fair value share of the acquiree's identifiable net assets obtained in the merger shall be included in the non-operating income of the current period.

(7) Judgment standards for control and preparation methods of consolidated financial statements

1. Judgment criteria for control

The scope of the company's consolidated financial statements is determined on the basis of control. An invested unit that possesses the following three elements is deemed to control it: having power over the invested unit, enjoying variable returns due to participation in relevant activities of the invested unit, and having the ability to use power over the invested unit to affect the amount of returns.

2. Preparation method of consolidated statements

(1) Unify the accounting policies of the parent company and its subsidiaries, and unify the balance sheet dates and accounting periods of the parent company and subsidiaries

If the accounting policies or accounting periods adopted by a subsidiary and the Company are inconsistent, when preparing consolidated financial statements, necessary adjustments will be made to the financial statements of the subsidiary in accordance with the Company's accounting policies or accounting periods.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 (2) Offsets in Consolidated Financial Statements

The consolidated financial statements are based on the financial statements of the parent company and subsidiaries, and have eliminated internal transactions between the parent company and its subsidiaries, and between subsidiaries. The share of the subsidiary's owner's equity that does not belong to the company, as minority shareholders' equity, is listed as "minority shareholders' equity" under the shareholder's equity item in the consolidated balance sheet. The subsidiary's long-term equity investment held by the parent company is regarded as the parent company's treasury stock. As a deduction from shareholders' equity, it is listed as "less: treasury shares" under the shareholder equity item in the consolidated balance sheet.

(3) Accounting treatment of subsidiaries acquired through merger

For subsidiaries acquired through business combinations under common control, the business combination will be deemed to have occurred when the ultimate controlling party began to exercise control, and its assets, liabilities, operating results and cash flows will be included in the consolidated financial statements from the beginning of the current period of merger; for subsidiaries acquired through business combinations not under common control, when preparing consolidated financial statements, their individual financial statements will be adjusted based on the fair value of the identifiable net assets on the acquisition date.

(4) Accounting treatment for disposal of subsidiaries

If a long-term equity investment in a subsidiary is partially disposed of without losing control, in the consolidated financial statements, the difference between the disposal price and the share of the subsidiary's net assets continuously calculated from the date of purchase or merger will be adjusted to the capital reserve. If the capital reserve is insufficient for offset, the retained earnings will be adjusted. If control over the investee is lost due to disposal of part of the equity investment or other reasons, when preparing consolidated financial statements, the remaining equity shall be remeasured according to its fair value on the date of loss of control. The difference between the sum of the consideration obtained for disposing of the equity and the fair value of the remaining equity, minus the share of the original subsidiary's net assets calculated continuously from the date of purchase or merger based on the original shareholding ratio, shall be included in the investment income in the period when control is lost, and the goodwill shall be offset at the same time. Other comprehensive income related to the equity investment in the original subsidiary will be converted into current investment income when control is lost.

(8) Classification of joint arrangements and accounting treatment methods for joint operations

1. Classification of joint arrangements

Joint arrangements are divided into joint operations and joint ventures. Joint arrangements that are not reached through separate entities are classified as joint operations. An independent entity refers to an entity with a separately identifiable financial structure, including independent legal entities and entities that do not have legal entity qualifications but are recognized by law. Joint arrangements entered into between separate entities are generally classified as joint ventures. If changes in relevant facts and circumstances lead to changes in the rights and obligations of a joint venture party in the joint venture arrangement, the joint venture party shall reassess the classification of the joint venture arrangement.

2. Accounting treatment of joint operations

The company is a joint operating participant and recognizes the following items related to the interest share in the joint operation, and performs accounting treatments in accordance with the relevant accounting standards for enterprises: recognizes assets or liabilities held individually, and recognizes jointly held assets by share.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

Assets or liabilities from January 1, 2025 to December 31, 2025; recognize the income generated from the sale of the share of joint operation output; recognize the income generated by the joint operation from the sale of output based on the share; recognize the expenses incurred individually, and recognize the expenses incurred from the joint operation based on the share.

The Company is a participant in a joint operation that does not enjoy joint control. If it owns the assets related to the joint operation and assumes the liabilities related to the joint operation, the accounting treatment shall be carried out in accordance with the provisions of the joint operation participants; otherwise, the accounting treatment shall be carried out in accordance with the provisions of the relevant accounting standards for enterprises.

3. Accounting treatment of joint ventures

The Company is a party to a joint venture and accounts for investments in joint ventures in accordance with the "Accounting Standards for Business Enterprises No. 2 - Long-term Equity Investment"; the Company is a non-joint party and accounts for investments based on the degree of influence on the joint venture.

(9) Determination standards for cash and cash equivalents

When the company prepares the cash flow statement, it recognizes cash on hand and deposits that can be used for payment at any time as cash. Investments that are short-term (due within three months from the date of purchase), highly liquid, easily convertible into known amounts of cash, and have little risk of value changes are determined as cash equivalents; equity investments are not regarded as cash equivalents.

(10) Foreign currency business and translation of foreign currency financial statements

1. Foreign currency business conversion

The Company's foreign currency transactions are recorded in the functional currency using the spot exchange rate on the date of the transaction. Foreign currency monetary items on the balance sheet date are converted at the spot exchange rate on the balance sheet date. The exchange differences arising from the difference between the spot exchange rate on that day and the spot exchange rate on initial recognition or on the previous balance sheet date are included in the current profit and loss, except for the exchange differences on special foreign currency borrowings that meet the capitalization conditions, which are capitalized and included in the cost of related assets during the capitalization period. Foreign currency non-monetary items measured at historical cost are still converted using the spot exchange rate on the date of transaction, and their recording currency amount does not change. Foreign currency non-monetary items measured at fair value are converted using the spot exchange rate on the date when the fair value is determined. The difference between the converted accounting functional currency amount and the original accounting functional currency amount is treated as a change in fair value (including exchange rate changes), and is included in the current profit and loss or recognized as other comprehensive income.

2. Translation of foreign currency financial statements

If the Company's subsidiaries, joint ventures, associates, etc. use a different recording currency than the Company, their foreign currency financial statements must be converted before accounting and preparation of consolidated financial statements. The asset and liability items in the balance sheet are translated using the spot exchange rate on the balance sheet date. Owner's equity items, except for the "undistributed profits" items, are translated using the spot exchange rate at the time of occurrence. Income and expense items in the income statement are translated using the spot exchange rate on the date of transaction. The translation differences of foreign currency financial statements arising from the translation are listed under other comprehensive income in the owner's equity item in the balance sheet. Foreign currency cash flows shall adopt the spot exchange rate on the date when the cash flows occur. The impact of exchange rate changes on cash is currently

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

The cash flow statement from January 1, 2025 to December 31, 2025 is listed separately. When an overseas operation is disposed of, the translation difference of foreign currency statements related to the overseas operation shall be transferred to the current profit and loss of the disposal in full or in proportion to the disposal of the overseas operation.

(11) Financial instruments

1. Classification, recognition and measurement of financial instruments

(1) Financial assets

Based on the business model of managing financial assets and the contractual cash flow characteristics of financial assets, the Company divides financial assets into the following three categories:

①Financial assets measured at amortized cost. The business model for managing such financial assets is aimed at collecting contractual cash flows, and the contractual cash flow characteristics of such financial assets are consistent with the basic lending arrangement, that is, the cash flows generated on a specific date are only payments of principal and interest based on the outstanding principal amount. Interest income from such financial assets is subsequently recognized in accordance with the effective interest rate method.

② Financial assets measured at fair value with changes included in other comprehensive income. The business model for managing such financial assets aims at both collecting contractual cash flows and selling the financial assets, and the contractual cash flow characteristics of such financial assets are consistent with the basic lending arrangements. This type of financial assets is subsequently measured at fair value, and its changes are included in other comprehensive income, but interest income, impairment losses or gains and exchange gains and losses calculated according to the effective interest rate method are included in the current profit and loss.

③ Measured at fair value and its changes are included in the current profit and loss. Financial assets held that are not divided into those measured at amortized cost and those measured at fair value and whose changes are included in other comprehensive income are measured at fair value, and the gains or losses (including interest and dividend income) generated are included in the current profit and loss. At initial recognition, a financial asset can be irrevocably designated as a financial asset at fair value through profit or loss if the accounting mismatch can be eliminated or reduced. This designation, once made, cannot be revoked.

For investments in non-trading equity instruments, the Company may irrevocably designate them as financial assets at fair value through other comprehensive income upon initial recognition. This designation is made on an investment-by-investment basis and the underlying investment meets the definition of an equity instrument from the issuer's perspective. This type of financial assets is subsequently measured at fair value. Except for the dividends received (except for the recovery part of investment costs), which are included in the current profit and loss, other related gains and losses are included in other comprehensive income and are not subsequently transferred to the current profit and loss.

(2) Financial liabilities

Financial liabilities are classified as: upon initial recognition:

① Financial liabilities measured at fair value with changes included in current profits and losses. Such financial liabilities are subsequently measured at fair value, and the resulting gains or losses are included in the current profits and losses.

② The transfer of financial assets does not meet the conditions for derecognition or the financial liabilities formed by continuing to be involved in the transferred financial assets.

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 ③ Financial liabilities measured at amortized cost. This type of financial liabilities is measured at amortized cost using the effective interest method.

2. Recognition method of fair value of financial instruments

For financial instruments with an active market, the fair value is determined based on the quoted price in the active market; if there is no active market, valuation techniques are used to determine the fair value. In limited circumstances, if there is insufficient recent information to determine fair value, or if there is a wide range of possible estimates of fair value, and the cost represents the best estimate of fair value within that range, the cost may represent an appropriate estimate of fair value within that range. The Company uses all information about the investee's performance and operations that becomes available after the initial recognition date to determine whether the cost represents fair value.

3. Derecognition of financial instruments

If a financial asset meets one of the following conditions, it will be derecognized: (1) The contractual right to receive cash flows from the financial asset terminates; (2) The financial asset has been transferred and meets the conditions for derecognition.

If the current obligation of a financial liability is discharged in whole or in part, the discharged portion shall be derecognised. If an existing liability is replaced by another financial liability with substantially different terms from the same creditor, or the terms of an existing liability are substantially modified, the existing financial liability will be derecognised and a new financial liability will be recognized at the same time. Buying and selling financial assets in a regular manner is recognized and derecognized based on transaction date accounting.

(12) Determination method and accounting treatment method of expected credit losses

1. Scope of expected credit losses

Based on expected credit losses, the Company performs impairment accounting on financial assets (including receivables, including notes receivable and accounts receivable), receivable financing, lease receivables, and other receivables measured at amortized cost and recognizes bad debts.

2. How to determine expected credit losses

The general method of expected credit losses means that the company evaluates on each balance sheet date whether the credit risk of relevant financial instruments has increased significantly since initial recognition, and divides the process of credit impairment of financial instruments into three stages. Different stages of impairment of financial instruments are used. The same accounting treatment method: (1) In the first stage, if the credit risk of a financial instrument has not increased significantly since the initial recognition, the company measures the loss provision based on the expected credit losses of the financial instrument in the next 12 months, and calculates the loss provision based on its book balance (that is, before deducting impairment provisions) and actual Interest income is calculated based on the interest rate; (2) In the second stage, if the credit risk of a financial instrument has increased significantly since the initial recognition but no credit impairment has occurred, the company measures the loss provision based on the expected credit losses throughout the entire duration of the financial instrument, and calculates the loss provision based on its book balance and actual interest rate. Interest income is calculated; (3) In the third stage, if credit impairment occurs after initial recognition, the company measures loss provisions based on the expected credit losses throughout the entire duration of the financial instrument, and calculates interest income based on its amortized cost (book balance minus accrued impairment provisions) and the actual interest rate.

A simplified approach to expected credit losses, which always measures losses at an amount equal to the lifetime expected credit losses.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

Prepared from January 1, 2025 to December 31, 2025.

3. Accounting treatment of expected credit losses

In order to reflect the changes in the credit risk of financial instruments since the initial recognition, the company re-measures expected credit losses on each balance sheet date. The resulting increase or reversal of loss provisions shall be included in current profits and losses as impairment losses or gains, and shall be deducted from the book value of the financial assets listed in the balance sheet or included in estimated liabilities (loan commitments or financial guarantee contracts), depending on the type of financial instrument.

4. Method of measuring loss provisions

(1) Method of measuring loss provisions for financial instruments with lower credit risk

For financial instruments with low credit risk on the balance sheet date, the company can directly make the assumption that the credit risk of the instrument has not increased significantly since the initial recognition without comparing the credit risk with the initial recognition.

If the default risk of a financial instrument is low, the debtor has a strong ability to fulfill its contractual cash flow obligations in the short term, and even if there are adverse changes in the economic situation and operating environment in the longer term, it may not necessarily reduce the borrower's ability to fulfill its contractual cash flow obligations, the financial instrument is considered to have lower credit risk.

(2) Method of measuring loss provisions for notes receivable and accounts receivable financing

The company's notes receivable and receivable financing are divided into two categories according to the acceptor's risk level: one is bank acceptance bills accepted by banks with higher credit ratings; the other is bank acceptance bills accepted by banks with average credit ratings and commercial acceptance bills accepted by enterprises. For bank acceptance bills accepted by banks with an average credit rating and commercial acceptance bills accepted by enterprises, since they are not terminated when endorsed and discounted, they are a business model of holding and collecting contractual cash flows; for bank acceptance bills accepted by banks with a higher credit rating, their recognition is terminated when endorsed and discounted, so it is considered a business model that has the purpose of collecting contract cash flows and selling. That is, bank acceptances accepted by banks with higher credit ratings are classified as "financial assets (debt instruments) at fair value through other comprehensive income."

The first category has a higher credit rating. Taking into account the historical default rate of zero, the expected credit loss rate for bank acceptance bills receivable is determined to be zero; the second category accrues loss provisions based on the expected credit loss rate during the entire duration before the maturity date, and the expected credit loss rate is determined with reference to the one-year expected credit loss rate in the accounts receivable aging portfolio.

(3) Method of measuring loss provision for accounts receivable and lease receivables

The company adopts a simplified method for receivables formed by transactions regulated by "Accounting Standards for Business Enterprises No. 14 - Revenue" (whether or not it contains a significant financing component), as well as lease receivables regulated by "Accounting Standards for Business Enterprises No. 21 - Lease", that is, the loss provision is always measured based on expected credit losses throughout the duration.

Depending on the nature of the financial instrument, the Company evaluates whether the credit risk has increased significantly on the basis of a single financial asset or a combination of financial assets. For individual financial assets with significantly different credit risks, the credit risk shall be evaluated based on the carrying amount of the receivables.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

The difference between January 1, 2025 and December 31, 2025 and the present value of the cash flows expected to be received is used to determine expected credit losses, such as: receivables that have obvious signs that the debtor is likely to be unable to fulfill its repayment obligations, etc. In addition to financial assets for individual assessment of credit risk, the company divides financial assets into different groups based on the same risk characteristics, assesses credit risk on a combination basis, and determines the combination based on the following: Accounts receivable combination 1: related party accounts within the scope of consolidation;

Accounts Receivable Portfolio 2: Aging Analysis Portfolio

Method for determining the aging of accounts receivable: The company starts to calculate the age when it initially recognizes accounts receivable and meets the revenue recognition conditions. The actual aging period is from the time of initial recognition to the balance sheet date.

For accounts receivable classified as Group 1, such accounts receivable have no bad debts in the past years, and generally no loss provisions are made; for accounts receivable classified as Group 2, the Company refers to historical credit loss experience, combined with current conditions and predictions of future economic conditions, prepares a comparison table between the aging of accounts receivable and the expected credit loss rate throughout the duration, and calculates expected credit losses.

The expected credit loss rate of the aging analysis portfolio is as follows:

Aging Expected credit loss rate of accounts receivable

5% within one year

One to two years 7%

Two to three years 8%

Three to four years 20%

Four to five years 30%

More than five years 100%

If there is objective evidence that a certain receivable or lease receivable has been credit-impaired, the company will make individual loss provisions for the receivable or lease receivable and confirm the provision for expected credit losses.

(4) Methods of measuring loss provisions for other financial assets

For financial assets other than the above, such as: debt investments, other debt investments, other receivables, long-term receivables other than lease receivables, etc., the company measures loss provisions in accordance with the general method, that is, the "three-stage" model.

When measuring credit impairment on financial instruments, the Company considers the following factors when assessing whether credit risk has increased significantly: ① Adverse changes in business, financial or external economic conditions that are expected to cause significant changes in the debtor's ability to fulfill its debt repayment obligations.

② Actual or expected significant changes in the debtor’s operating results.

③ Significant adverse changes in the regulatory, economic or technological environment in which the debtor operates.

④ Significant changes in the value of collateral used as debt collateral or the quality of guarantees or credit enhancements provided by third parties.

⑤ Significant changes in the debtor’s expected performance and repayment behavior.

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 ⑥ Overdue information.

For individual credit risks of other financial assets with significantly different credit risks, expected credit losses are determined based on the difference between the carrying amount of other receivables and the present value of the expected cash flows, such as receivables for which there are obvious signs that the debtor is likely to be unable to fulfill its repayment obligations, etc. In addition to financial assets for individual assessment of credit risk, the Company divides other receivables into different groups based on the same risk characteristics, assesses credit risk on a combination basis, and determines the combination based on the following: Other receivables combination 1: Related party accounts within the scope of consolidation

Other receivables portfolio 2: aging analysis portfolio

The company begins to calculate the aging of other receivables when they are initially recorded, and the actual aging period is from the time of initial recognition to the balance sheet date.

For other receivables classified into Portfolio 1, such other receivables have not incurred bad debts in the past years, and generally no loss provisions are made; for other receivables classified into Portfolio 2, they are combined with aging as the credit risk characteristic, and expected credit losses are calculated based on all reasonable and evidence-based information, including forward-looking information.

The expected credit loss rate of the aging analysis portfolio is as follows:

Aging Expected credit loss rate of accounts receivable

5% within one year

One to two years 7%

Two to three years 8%

Three to four years 20%

Four to five years 30%

More than five years 100%

(13) Inventory

1. Inventory classification:

Inventories refer to the finished products or commodities held by the company for sale in daily activities, products in progress during the production process, materials and supplies consumed in the production process or the provision of labor services, etc. The company's inventory includes goods in stock, work in progress, raw materials, developed products (real estate), shipped goods, etc.

2. Valuation method for inventory acquisition and issue:

Inventories are valued at actual cost when acquired and based on the weighted average method when received and shipped.

3. Inventory inventory system:

The inventory inventory system is a perpetual inventory system.

4. Amortization method for low-value consumables and packaging materials

Low-value consumables and packaging are amortized using the one-time write-off method.

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 5. 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. When the net realizable value for the current period is lower than cost, inventory depreciation reserves are withdrawn, and inventory depreciation reserves are accrued based on individual inventory items. However, for inventories with large quantities and low unit prices, inventory depreciation reserves are accrued based on inventory categories. If the factors that previously caused the inventory value to be written down have disappeared, the inventory devaluation provision shall be reversed within the amount originally accrued.

When determining the net realizable value of inventories, it is based on the conclusive evidence obtained and the purpose of holding the inventories and the impact of events after the balance sheet date are also considered.

(14) Contract assets and contract liabilities

1.Contract assets

The Company presents the right to receive consideration for goods or services that have been transferred to the customer (and that right is dependent on factors other than the passage of time) as a contract asset. The provision for impairment of contract assets refers to the method for determining expected credit losses in the note.

2.Contract liabilities

The Company lists the obligation to transfer goods or provide services to customers for consideration received or receivable from customers as contract liabilities, and contract assets and contract liabilities under the same contract are presented as a net amount.

(15) Non-current assets or disposal groups held for sale

1. Recognition standards and accounting treatment methods for non-current assets or disposal groups classified as held for sale

If the company mainly recovers its book value by selling rather than continuing to use a non-current asset or disposal group, it is classified as held for sale and meets the following conditions: First, according to the practice of selling such assets or disposal groups in similar transactions, it can be sold immediately under the current situation; second, the sale is very likely to occur, that is, the enterprise has made a resolution on a sales plan and obtained a firm purchase commitment, and the sale is expected to be completed within one year. If relevant regulations require the approval of the relevant authority or regulatory department of the enterprise before it can be sold, the approval must have been obtained.

When initially measuring or re-measuring a non-current asset or disposal group held for sale on the balance sheet date, if its book value is higher than the net amount of fair value minus selling expenses, the book value should be written down to the net amount of fair value minus selling expenses. The amount of the write-down is recognized as an asset impairment loss and included in the current profit and loss, and an impairment provision for assets held for sale is made at the same time.

For the amount of asset impairment loss recognized by a disposal group held for sale, the book value of the goodwill in the disposal group should first be deducted, and then the book value of the non-current assets should be deducted proportionally based on the proportion of the book value of each non-current asset measured in the applicable "Accounting Standards for Business Enterprises - Non-current Assets Held for Sale, Disposal Groups and Discontinued Operations" applicable to the disposal group.

2. Recognition standards and presentation methods for discontinued operations

Termination of operations is an independently distinguishable component that meets one of the following conditions, and this component has been

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

Disposed of from January 1, 2025 to December 31, 2025 or classified as held for sale by the company: this component represents an independent main business or a separate main operating area; this component is part of an associated plan to dispose of an independent main business or an independent main operating area; this component is a subsidiary acquired specifically for resale.

The company separately lists the profit and loss from continuing operations and the profit and loss from discontinued operations in the income statement. Impairment losses and reversal amounts from discontinued operations and other operating gains and losses as well as disposal gains and losses are presented as gains and losses from discontinued operations. Disclose in the notes the income, expenses, total profits, income tax expenses (income) and net profit from discontinued operations, the impairment losses and reversal amounts recognized for assets or disposal groups from discontinued operations, the total disposal gains and losses from discontinued operations, income tax expenses (income) and net disposal gains and losses, the net cash flows from operating activities, investing activities and financing activities from discontinued operations, the profits and losses from continuing operations and the profits and losses from discontinued operations attributable to the owners of the parent company.

(16) Long-term equity investment

1. Judgment criteria for joint control and significant influence

Joint control means that activities that have a significant impact on the returns of an arrangement must be decided only with the unanimous consent of the parties sharing control rights, including the sale and purchase of goods or services, the management of financial assets, the purchase and disposal of assets, research and development activities, and financing activities, etc. Significant influence refers to having a significant influence when holding more than 20% to 50% of the voting capital of the invested unit, or having a significant influence even though it is less than 20% but meeting one of the following conditions: having representatives on the invested unit's board of directors or similar authority; participating in the policy-making process of the invested unit; dispatching management personnel to the invested unit; the invested unit relying on the technology or technical information of the investing company; and important transactions occurring with the invested unit.

2. Determination of initial investment cost

For long-term equity investments obtained through a business merger, if it is a business merger under the same control, the share of the book value of the owner's equity of the merged party in the consolidated financial statements of the ultimate controlling party shall be used as the initial investment cost of the long-term equity investment on the merger date; for business mergers not under the same control, the merger cost determined on the purchase date shall be used as the initial investment cost of the long-term equity investment; long-term equity investments obtained by paying cash , the initial investment cost is the actual purchase price paid; for long-term equity investments obtained through the issuance of equity securities, the initial investment cost is the fair value of the equity securities issued; for long-term equity investments obtained through debt restructuring, the initial investment cost is determined in accordance with the relevant provisions of the Debt Reorganization Guidelines; for long-term equity investments obtained through the exchange of non-monetary assets, the initial investment cost is determined in accordance with the relevant provisions of the Non-monetary Asset Exchange Guidelines.

3. Subsequent measurement and profit and loss recognition methods

The Company adopts the cost method to account for long-term equity investments that it is able to control over the invested entities, and adopts the equity method to account for long-term equity investments in associates and joint ventures. Equity investments in associated enterprises, part of which are held indirectly through venture capital institutions, mutual funds, trust companies or similar entities including investment-linked insurance funds, regardless of whether the above entities

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

Part of the investment from January 1, 2025 to December 31, 2025 has a significant impact and will be handled in accordance with the relevant provisions of "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments", and the remaining parts will be accounted for using the equity method.

(17) Investment real estate

The company's investment real estate categories include leased land use rights, leased buildings, and land use rights held and prepared to be transferred after appreciation. Investment real estate is initially measured based on cost, and the cost model is used for subsequent measurement.

The leased buildings in the Company's investment real estate use the straight-line method to calculate depreciation, and the specific accounting policy is the same as that for fixed assets. Land use rights leased in investment real estate and land use rights held and prepared to be transferred after appreciation are amortized using the straight-line method. The specific accounting policies are the same as those for intangible assets.

(18) Fixed assets

1.Conditions for confirmation of 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. It shall be recognized when the following conditions are met at the same time: the economic benefits related to the fixed asset are likely to flow into the enterprise; the cost of the fixed asset can be measured reliably.

2. Fixed assets depreciation method

The company's fixed assets are mainly divided into: houses and buildings, machinery and equipment, transportation equipment, electronic equipment, and others; the depreciation method adopts the straight-line method. According to the nature and usage of various types of fixed assets, the service life and estimated net residual value of fixed assets are determined. At the end of the year, the service life, estimated net residual value and depreciation method of fixed assets are reviewed. If there are differences from the original estimates, corresponding adjustments are made. Except for fixed assets that have been fully depreciated and are still in use and land that is separately valued and accounted for, all fixed assets are depreciated.

Asset category Depreciation method Depreciation life Residual value rate Annual depreciation rate (%) Houses and buildings Straight-line method 12-30 5% 3.17-7.92 Machinery and equipment Straight-line method 10 5% 9.50

Transportation equipment Straight-line method 4 5% 23.75 Electronic equipment Straight-line method 3 5% 31.67 Others Straight-line method 5 5% 19.00 3. Other instructions

Fixed asset renovation costs that meet the capitalization conditions: During the shorter of the two renovation periods and the remaining useful life of the fixed asset, depreciation is calculated separately using the straight-line method.

(19) Projects under construction

The Company's projects under construction are mainly self-operated and outsourced. The standard and time point for the transfer of projects under construction into fixed assets shall be based on the fact that the projects under construction have reached the intended usable state. The criteria for judging the intended usable status should meet the following

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

January 1, 2025 - December 31, 2025 Situation one: The physical construction (including installation) of fixed assets has been completed or substantially completed; trial production or trial operation has been carried out, and the results show that the assets can operate normally or can be stable. Qualified products are produced at the designated location, or the trial operation results show that they can operate or operate normally; the amount of expenditure on the fixed assets constructed is very small or almost no longer occurs; the fixed assets purchased and constructed have met the design or contract requirements, or are basically consistent with the design or contract requirements.

(20) Borrowing costs

1. Recognition principles for capitalization of borrowing costs

If the borrowing costs incurred by the company can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they will be capitalized and included in the cost of the relevant assets; other borrowing costs will be recognized as expenses based on the amount incurred when they are incurred and included in the current profits and losses. Assets that meet the conditions for capitalization refer to fixed assets, investment real estate, inventories and other assets that require a considerable period of acquisition, construction or production activities to reach the intended usable or salable state.

2. Calculation method of capitalization amount

The capitalization period refers to the period from the time when capitalization of borrowing costs begins to the time when capitalization stops. The period during which capitalization of borrowing costs is suspended is not included. If an abnormal interruption occurs during the construction or production process and the interruption lasts for more than 3 months, the capitalization of borrowing costs shall be suspended.

Borrowing of special borrowings shall be determined based on the actual interest expense of the special borrowings in the current period, minus the interest income obtained from depositing unused borrowed funds in the bank or the investment income obtained from temporary investments; the amount of general borrowings shall be determined based on the excess of accumulated asset expenditures over the special borrowings. The weighted average of asset expenditures is calculated and determined by multiplying the capitalization rate of the general borrowings occupied, and the capitalization rate is the weighted average interest rate of the general borrowings; if there is a discount or premium on the borrowing, the amount of discount or premium that should be amortized in each accounting period is determined according to the actual interest rate method, and the interest amount of each period is adjusted.

The actual interest rate method is a method of calculating the amortized discount or premium or interest expense based on the actual interest rate of the borrowed money. The actual interest rate is the future cash flow of the loan during the expected duration, and is the interest rate used to discount the current book value of the loan.

(21) Intangible assets

1. Valuation method of intangible assets

The Company's intangible assets are initially measured at cost. The actual cost of purchased intangible assets is based on the actual price paid and related expenditures. The actual cost of intangible assets invested by investors shall be determined based on the value stipulated in the investment contract or agreement. However, if the value stipulated in the contract or agreement is unfair, the actual cost shall be determined based on the fair value. For self-developed intangible assets, the cost is the total expenditure incurred before reaching the intended use.

2. Useful life and its determination basis, estimation, amortization method or review procedure

Intangible assets with limited service life are amortized as shown in the table below. At the end of the year, the service life and amortization method of the intangible assets are reviewed. If there are differences with the original estimates, corresponding adjustments are made. Uncertain service life

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

From January 1, 2025 to December 31, 2025, tangible assets will not be amortized, but at the end of the year, the useful life will be reviewed. When there is conclusive evidence that its useful life is limited, its useful life will be estimated.

The useful life of an intangible asset with a limited useful life and its determination basis and amortization method:

Asset class Useful life (years) Amortization method

Patented technology and independent research and development Patent protection period and 10 years Land use rights stipulated in national laws and regulations or contracts 50 years Software use period stated on the warrant 3-10 years The company’s expected benefit years

The company will determine the intangible assets that cannot foresee the period during which the assets will bring economic benefits to the company, or whose useful life is uncertain, as intangible assets with indefinite useful lives. The basis for judging the uncertain service life is: it comes from contractual rights or other legal rights, but there is no clear service life in the contract or legal provisions; based on the situation in the same industry or the argumentation of relevant experts, it is still impossible to judge the period during which the intangible assets can bring economic benefits to the company.

At the end of each year, the service life of intangible assets with indefinite service life is reviewed, mainly in a bottom-up manner. The relevant departments for the use of intangible assets conduct a basic review to evaluate whether there are changes in the basis for determining the uncertainty of service life. 3. Scope of aggregation of R&D expenditures and related accounting treatment methods

The scope of R&D expenditures is mainly determined based on the company's research and development projects, and mainly includes: R&D personnel labor costs, direct investment costs, depreciation costs, intangible asset amortization costs, drug development and clinical trial costs, commissioned external research and development costs, and other costs, etc.

The company's internal research and development project expenditures are divided into research stage expenditures and development stage expenditures. Expenditures in the research stage are included in the current profit and loss when incurred; expenditures in the development stage that meet the conditions for recognition as intangible assets are transferred to intangible assets accounting. The specific standards for research phase expenditure and development phase expenditure are:

Research phase expenditures include original planned investigations (including market research) to obtain and understand new scientific or technical knowledge, as well as expenditures on applied research, evaluation, and final selection incurred in drug design and trial production, feasibility animal experiment registration inspection (industrial production, formulation of product standards, product type inspection), pre-clinical trials (including preclinical trials, animal experiments to verify product effectiveness and outcome), etc.

The research stage is to prepare the technical basis for further development activities. There is great uncertainty in whether the research activities that have been carried out will be transferred to development in the future and whether intangible assets will be formed after development. It is characterized by its planned and exploratory nature. Expenditures in the research stage should be included in the current profit and loss when incurred and expensed.

The development stage is to use the existing technology platform and the completed research stage work to a large extent to meet the basic conditions for the formation of a new product or new technology. Before commercial production or use, it will conduct registration clinical trials and declare registration activities for various products.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Expenditures in the development phase from January 1, 2025 to December 31, 2025 can only be recognized as intangible assets if they meet the following conditions at the same time:

(1) It is technically feasible to complete the intangible asset so that it can be used or sold;

(2) Have the intention to complete the intangible asset and use or sell it;

(3) The way intangible assets generate economic benefits includes being able to prove that there is a market for the products produced using the intangible assets or that the intangible assets themselves have a market. If the intangible assets will be used internally, their usefulness should be proven;

(4) Have sufficient technical, financial and other resource support to complete the development of the intangible assets, and have the ability to use or sell the intangible assets;

(5) Expenditures attributable to the development stage of the intangible asset can be measured reliably.

The research and development stage before the company obtains clinical approval is defined as the research stage; the stage after obtaining clinical approval until the production approval is obtained is the development stage. Obtaining drug production approval converts development expenditures into intangible assets.

(22) Impairment of long-term assets

If there are signs of impairment on the balance sheet date for long-term equity investments, investment real estate, fixed assets, projects under construction, right-of-use assets measured using the cost model, productive biological assets measured using the cost model, oil and gas assets, intangible assets and other long-term assets on the balance sheet date, an impairment test is conducted. If the impairment test results show that the recoverable amount of the asset is lower than its book value, impairment provisions will be made based on the difference and included in the impairment loss.

The recoverable amount is the higher of the asset's fair value less disposal costs and the present value of the asset's expected future cash flows. Asset impairment provisions are calculated and recognized on the basis of individual assets. If it is difficult to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset belongs is determined. An asset group is the smallest combination of assets that can independently generate cash inflows.

Goodwill that is presented separately in the financial statements shall be tested for impairment at least annually, regardless of whether there is any indication of impairment. During impairment testing, the book value of goodwill is allocated to asset groups or combinations of asset groups that are expected to benefit from the synergies of a business combination. If the test results show that the recoverable amount of an asset group or combination of asset groups containing amortized goodwill is lower than its book value, the corresponding impairment loss will be recognized. The amount of impairment loss first deducts the book value of the goodwill allocated to the asset group or asset group combination, and then deducts the book value of other assets in proportion to the proportion of the book value of other assets in the asset group or asset group combination except goodwill.

Once the above-mentioned asset impairment losses are recognized, the portion whose value has been restored will not be reversed in subsequent periods.

(23) Long-term deferred expenses

The company's long-term deferred expenses refer to various expenses that have been incurred but have a benefit period of more than one year (excluding one year). Long-term deferred expenses are amortized in installments according to the benefit period of the expense item. If a long-term deferred expense item cannot benefit future accounting periods, all the amortized value of the item that has not been amortized will be transferred to the current profit and loss.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

(24) Employee compensation

Employee compensation refers to various forms of remuneration or compensation given by the company to obtain services provided by employees or to terminate labor relations. Employee compensation mainly includes short-term compensation, post-employment benefits, termination benefits and other long-term employee benefits.

1. Accounting treatment method for 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, except where the accounting standards for enterprises require or allow it to be included in the cost of assets. The employee welfare expenses incurred by the company are included in the current profit and loss or related asset costs according to the actual amount when they are actually incurred. If employee benefits are non-monetary benefits, they are measured at fair value. The company pays social insurance premiums such as medical insurance premiums, work-related injury insurance premiums, maternity insurance premiums, and housing provident funds for its employees, as well as labor union funds and employee education funds withdrawn in accordance with regulations. During the accounting period when employees provide services, the corresponding amount of employee compensation is determined based on the prescribed accrual basis and accrual ratio, and the corresponding liabilities are recognized and included in the current profit and loss or related asset costs.

2. Accounting treatment of post-employment benefits

During the accounting period when employees provide services, the company recognizes the deposit amount payable based on the defined contribution plan as a liability and includes it in the current profit and loss or related asset costs. According to the formula determined by the expected cumulative welfare unit method, the welfare obligations generated by the defined benefit plan are attributed to the period during which the employees provide services, and are included in the current profit and loss or related asset costs.

3. Accounting treatment method for dismissal benefits

When the company provides dismissal benefits 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: when the company cannot unilaterally withdraw the dismissal benefits provided due to the termination of labor relations plan or layoff proposal; when the company recognizes the costs or expenses related to the restructuring involving the payment of dismissal benefits.

4. Accounting treatment methods for other long-term employee benefits

Other long-term employee benefits provided by the company to employees that meet the conditions of the defined contribution plan shall be handled in accordance with the relevant provisions of the defined contribution plan; in addition, other long-term employee benefits net liabilities or net assets shall be recognized and measured in accordance with the relevant provisions of the defined benefit plan.

(25) Estimated liabilities

When the obligation related to a contingency is a current obligation borne by the company, and the performance of the obligation is likely to result in an outflow of economic benefits, and the amount can be measured reliably, the obligation is recognized as a provisional liability. The company makes initial measurement based on the best estimate of the expenditures required to fulfill relevant current obligations. If the required expenditures exist in a continuous range and the likelihood of various outcomes within the range is the same, the best estimate is determined based on the mid-range value within the range; if multiple projects are involved, the best estimate is determined based on various possible outcomes and related probabilities.

The book value of estimated liabilities should be reviewed on the balance sheet date. If there is conclusive evidence that the book value cannot truly reflect

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

The book value should be adjusted based on the current best estimate from January 1, 2025 to December 31, 2025.

(26) Share-based payment

The company's share-based payment is a transaction in which equity instruments are granted or liabilities determined based on equity instruments are granted in order to obtain services from employees. The Company's share-based payment is divided into equity-settled share-based payment and cash-settled share-based payment. 1. Equity-settled share-based payment

Equity-settled share-based payment granted to employees

For equity-settled share-based payments in exchange for services provided by employees, the company measures the fair value of the equity instruments granted to employees on the date of grant. The amount of the fair value during the waiting period is based on the best estimate of the number of exercisable equity instruments and is calculated on a straight-line basis and included in the relevant costs or expenses. When vested immediately after grant, the amount of the fair value is included in the relevant costs or expenses on the date of grant and the capital reserve is increased accordingly.

On each balance sheet date during the waiting period, the Company makes its best estimate based on the latest changes in the number of vested employees and other subsequent information, and corrects the number of equity instruments expected to be vested. The impact of the above estimates is included in the relevant costs or expenses of the current period, and the capital reserve is adjusted accordingly.

2. Cash-settled share-based payment

Cash-settled share-based payments are measured based on the fair value of the company's liabilities determined based on shares or other equity instruments. Cash-settled share-based payments that become exercisable immediately after grant will be included in relevant costs or expenses on the date of grant, and liabilities will increase accordingly. /On each balance sheet date of the waiting period, based on the best estimate of the vesting situation and the fair value of the liabilities borne by the company, the services obtained in the current period will be included in costs or expenses, and the liabilities will be increased accordingly. On each balance sheet date and settlement date before the settlement of relevant liabilities, the fair value of the liability is remeasured, and its changes are included in the current profit and loss.

3. Accounting treatments related to the implementation, modification, and termination of share-based payment plans

When the company modifies the share-based payment plan, if the modification increases the fair value of the equity instruments granted, the increase in services obtained shall be recognized accordingly according to the increase in the fair value of the equity instruments; if the modification increases the number of equity instruments granted, the fair value of the increased equity instruments shall be recognized accordingly as an increase in services obtained. The increase in the fair value of equity instruments refers to the difference between the fair values ​​of the equity instruments before and after the modification on the modification date. If the modification reduces the total fair value of share-based payment or the terms and conditions of the share-based payment plan are modified in other ways that are unfavorable to employees, the accounting treatment for the services obtained will continue to be performed as if the change has never occurred, unless the company cancels some or all of the equity instruments that have been granted. During the waiting period, if the granted equity instruments are canceled, the company will treat the cancellation of the granted equity instruments as accelerated exercise, and the amount that should be recognized during the remaining waiting period will be immediately included in the current profit and loss, and the capital reserve will be recognized at the same time. If employees or other parties can choose to meet the non-vesting conditions but fail to do so within the waiting period, the company will treat it as a cancellation of the equity instruments granted.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

From January 1, 2025 to December 31, 2025.

(27) Income

1. General principles

The company recognizes revenue when it fulfills its performance obligations in the contract, that is, when the customer obtains control of the relevant goods or services.

When the contract between the company and the customer meets the following conditions at the same time, the company recognizes revenue when the customer obtains control of the relevant goods:

(1) All parties to the contract have approved the contract and promised to perform their respective obligations;

(2) The contract clarifies the rights and obligations of the parties to the contract related to the transferred goods or provision of services (hereinafter referred to as the transferred "goods");

(3) The contract has clear payment terms related to the transferred goods;

(4) The contract has commercial substance, that is, the performance of the contract will change the risk, time distribution or amount of the enterprise's future cash flows;

(5) The consideration to which the Company is entitled for transferring goods to customers is likely to be recovered.

For contracts that do not meet the aforementioned requirements on the contract inception date, the Company will continuously evaluate them and conduct accounting treatment when they meet the requirements.

For contracts that do not meet the foregoing requirements, the company can only recognize the consideration received as revenue when it no longer has the remaining obligation to transfer goods to the customer and the consideration collected from the customer does not need to be returned; otherwise, the consideration received will be accounted for as a liability. No revenue is recognized for non-monetary asset exchanges without commercial substance.

For performance obligations fulfilled at a certain point in time, the Company recognizes revenue 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 or services, the company considers the following signs:

(1) The company has the current right to receive payment for the goods or services, that is, the customer has current payment obligations for the goods; (2) the company has transferred the legal ownership of the goods to the customer, that is, the customer has legal ownership of the goods; (3) the company has transferred the physical object of the goods to the customer, that is, the customer has physical possession of the goods;

(4) The company has transferred the main risks and rewards of ownership of the commodity to the customer, that is, the customer has obtained the main risks and rewards of ownership of the commodity;

(5) The customer has accepted the goods or services;

(6) Other signs indicating that the customer has obtained control of the product.

2. Specific methods

(1) Domestic sales

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

The company's domestic product sales mainly adopt the distribution model. That is, medicines are sold and distributed to hospitals through pharmaceutical commercial companies, and commercial companies do not assume market development and promotion functions. The company develops the market through independent professional academic promotion. Under this sales method, the commercial company places demand orders to the company based on the drug needs of hospitals or pharmacies in its distribution area. The company reviews the credit status and sells drugs to cooperative pharmaceutical commercial companies according to the orders, and each regional commercial company completes the sales and logistics distribution of drugs to hospitals and retail terminals. The company issues invoices to pharmaceutical commercial companies and confirms sales revenue after obtaining receipts.

(2) Overseas sales

The company's products sold overseas are currently mainly insulin APIs, which are sold through export agents. The company ships the goods after obtaining advance payment or letter of credit deposit from overseas customers, and confirms sales revenue after obtaining the export declaration form and delivering the customer's bill of lading.

(28) Contract costs

Contract costs include incremental costs incurred to obtain the contract and contract performance costs. The incremental costs incurred to obtain a contract ("contract acquisition costs") are costs that would not have been incurred had the contract not been obtained. If the cost is expected to be recovered, the company will recognize it as the contract acquisition cost and as an asset.

Costs incurred to fulfill the contract, which do not fall within the scope of inventory and other accounting standards for enterprises and meet the following conditions, are recognized as contract performance costs as an asset: the cost is directly related to a current or expected contract, including direct labor, direct materials, manufacturing expenses (or similar expenses), costs clearly borne by the user, and other costs incurred solely because of the contract; the cost increases the resources used to perform performance obligations in the future; the cost is expected to be recovered.

The company will recognize the contract performance costs as assets. If the amortization period does not exceed one year or one normal operating cycle at the time of initial recognition, it will be included in the "inventory" item in the balance sheet; if the amortization period is more than one year or one normal operating cycle at the time of initial recognition, it will be included in the "other non-current assets" item in the balance sheet.

The company will recognize the contract acquisition costs as assets. If the amortization period does not exceed one year or one normal operating cycle at the time of initial recognition, it will be included in the "other current assets" item in the balance sheet; if the amortization period is more than one year or one normal operating cycle at the time of initial recognition, it will be included in the "other non-current assets" item in the balance sheet.

The company's assets recognized as contract acquisition costs and contract performance costs are amortized on the same basis as the commodity revenue recognition related to the assets, and included in the current profit and loss. If the amortization period of the assets formed by the incremental cost of acquiring the contract does not exceed one year, it shall be included in the current profit and loss when incurred.

When the book value of assets related to contract costs is higher than the difference between the following two items, the company will make provision for impairment and recognize the excess as asset impairment losses: the remaining consideration expected to be obtained from the transfer of the goods related to the asset; the estimated cost to be incurred for the transfer of the related goods.

If the factors of impairment in previous periods subsequently change, causing the difference between the two aforementioned items to be higher than the book value of the asset, it shall be transferred to the asset.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

From January 1, 2025 to December 31, 2025, the asset impairment provision that has been previously accrued will be reversed and included in the current profit and loss, but the book value of the asset after the reversal will not exceed the book value of the asset on the reversal date assuming that no impairment provision is made.

(29) Government subsidies

1. Accounting treatment of government subsidies related to assets

Government subsidies refer to the monetary assets or non-monetary assets that the company obtains from the government for free (but does not include the capital invested by the government as the owner). If government subsidies are monetary assets, they shall be measured according to 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.

Government subsidies related to daily activities shall be included in other income according to the economic business essence. Government subsidies unrelated to daily activities are included in non-operating income.

Government documents that clearly stipulate that government subsidies are used to purchase, construct or otherwise form long-term assets are recognized as asset-related government subsidies. If the government documents do not clearly stipulate the subsidy objects, and if they can form long-term assets, the part of the government subsidy corresponding to the asset value shall be regarded as the government subsidy related to the assets, and the remaining part shall be regarded as the government subsidy related to the income; if it is difficult to distinguish, the entire government subsidy shall be regarded as the government subsidy related to the income. Government subsidies related to assets are recognized as deferred income. The amount recognized as deferred income shall be included in the current profit and loss in installments according to a reasonable and systematic method within the useful life of the relevant assets.

Government subsidies other than those related to assets are recognized as government subsidies related to income. If government subsidies related to income are used to compensate the enterprise for relevant expenses or losses in the future period, they are recognized as deferred income, and are included in the current profit and loss during the period when the relevant expenses are recognized; if they are used to compensate the enterprise for relevant expenses or losses that have already occurred, they are directly included in the current profit and loss.

The company obtains policy-based preferential loan interest discounts, and the finance department allocates interest-rate discount funds to the lending bank. If the lending bank provides loans to the company at policy-based preferential interest rates, the actual borrowing 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. If the finance department directly allocates interest discount funds to the company, the company will offset the corresponding interest rate discounts against related borrowing costs.

2. Government subsidy confirmation time

Government subsidies are recognized when the conditions attached to the government subsidies are met and received. Government subsidies measured according to the amount receivable shall be recognized at the end of the period when there is conclusive evidence that the relevant conditions stipulated in the financial support policy can be met and the financial support funds are expected to be received. Government subsidies other than those measured according to the amount receivable shall be recognized when the subsidy is actually received.

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

1. Recognition of deferred income tax

According to the difference between the book value of assets and liabilities and their tax basis (items not recognized as assets and liabilities are classified as

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

From January 1, 2025 to December 31, 2025, if the tax basis can be determined in accordance with the provisions of the tax law, the tax basis shall be determined as the difference), and deferred income tax assets or deferred income tax liabilities shall be 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.

2. Measurement of deferred income tax

Deferred income tax assets are recognized to the extent that it is probable that taxable income will be available against which the deductible temporary differences can be utilised. 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. If it is likely that sufficient taxable income will not be available in the future to offset the deferred income tax assets, the book value of the deferred income tax assets will be reduced.

Deferred income tax liabilities are recognized for taxable temporary differences related to investments in subsidiaries and associates, unless the company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not be reversed in the foreseeable future. For deductible temporary differences related to investments in subsidiaries and associates, deferred income tax assets are recognized when the temporary differences are likely to be reversed in the foreseeable future and it is likely to be taxable income that can be used to offset the deductible temporary differences in the future. 3. Basis for net offset of deferred income tax

When the following conditions are met at the same time, the company will present the deferred income tax assets and deferred income tax liabilities as the net amount after offsetting: it has the legal right to settle the current income tax assets and current income tax liabilities on a net basis; the deferred income tax assets and deferred income tax liabilities are for the same taxpayer with the same tax collection department. It is related to the income tax collected by an entity or to different taxable entities, but in the future during each period when important deferred income tax assets and deferred income tax liabilities are reversed, the taxable entity involved intends to settle the current income tax assets and current income tax liabilities with a net amount or to obtain assets and pay off debts at the same time.

(31) Leasing

The Company will evaluate whether the contract is a lease or contains a lease on the contract commencement date. A contract is a lease or contains a lease if a party transfers the right to control the use of one or more identified assets for a certain period in exchange for a consideration. 1. Accounting treatment of lessee

On the start date of the lease period, the Company recognizes right-of-use assets and lease liabilities for leases other than short-term leases and low-value asset leases, and recognizes depreciation expenses and interest expenses respectively during the lease period.

(1) Right-of-use assets

On the commencement date of the lease term, the right-of-use asset is initially measured at cost. This cost includes the initial measurement amount of the lease liability, the amount of lease payments net of lease incentives paid on or before the lease commencement date, initial direct costs, etc.

If it is reasonably certain that the ownership of the leased asset will be obtained at the expiration of the lease term, depreciation will be accrued over the estimated remaining useful life of the leased asset; if it cannot be reasonably determined, depreciation will be accrued during the shorter of the lease term and the remaining useful life of the leased asset. When the recoverable amount is lower than the book value of the right-of-use asset, its book value is written down to the recoverable amount.

(2) Lease liabilities

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

From January 1, 2025 to December 31, 2025, lease liabilities are initially measured based on the present value of the unpaid lease payments at the beginning of the lease term. Lease payments include fixed payments and amounts payable when it is reasonably certain that the option to purchase or the option to terminate the lease will be exercised. Variable lease payments that are not included in the measurement of lease liabilities are included in the current profit and loss when actually incurred.

The company uses the interest rate implicit in the lease as the discount rate; if the interest rate implicit in the lease cannot be reasonably determined, the company's incremental borrowing rate is used as the discount rate. The interest expense of the lease liability in each period during the lease term is calculated based on a fixed periodic interest rate, that is, the discount rate adopted by the Company or the revised discount rate, and is included in financial expenses.

2. As the lessee’s judgment basis and accounting treatment method for simplified treatment of short-term leases and low-value asset leases, for short-term leases with a lease period of no more than 12 months, and leases where the value of a single asset when new is less than 10,000.00 yuan, the company chooses not to recognize right-of-use assets and lease liabilities, and the relevant rental expenses will be included in the current profit and loss or related asset costs according to the straight-line method in each period during the lease term.

3. Lease classification standards and accounting treatment methods as a lessor

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

(1) Accounting treatment of operating leases

Rental income from operating leases is recognized on a straight-line basis over the lease term. The initial direct costs are capitalized and included in the current income in installments during the lease term on the same recognition basis as rental income. Variable rent that is not included in the lease receipts is included in rental income when it is actually incurred.

(2) Accounting treatment of financial leases

On the lease commencement date, the difference between the sum of the finance lease receivable, the unguaranteed residual value and its present value is recognized as unrealized financing income, and is recognized as lease income in each period in which rent is received in the future, and the financial lease assets are derecognized. Initial direct costs are included in the initial recording value of finance lease receivables.

(32) Changes in important accounting policies and changes in accounting estimates

1. Changes in important accounting policies

The company's important accounting policies have not changed during the reporting period.

2. Changes in important accounting estimates

The company's important accounting estimates have not changed during the reporting period.

4. Taxes

(1) The company’s main tax types and tax rates

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Tax types Tax calculation basis Tax rate

1. Sales of goods and provision of taxable services and sales services calculated in accordance with tax laws, no

The output tax is calculated based on the income obtained from tangible assets or real estate, and the output tax is deducted in the current period.

After the input tax is allowed to be deducted, the difference is the value-added tax payable;

3%, 5%, 6%, VAT

2. Biological products (insulin APIs and injections) from January 1, 2015 to

9%, 13% will be taxed according to the simplified method until December 31, 2025, with a tax rate of 3%;

3. Property leasing and commercial housing sales will be taxed according to the simplified method starting from May 1, 2016.

The tax rate is 5%.

Urban maintenance and construction tax is levied based on the actual value-added tax paid. 1%, 5%, 7%. Education fee surcharge is calculated and levied based on the actual value-added tax paid. 3%

Local education surcharge is levied at 2% based on the actual value-added tax paid

Corporate income tax is levied on taxable income at 15%, 25% 1. Value-added tax

The company and each subsidiary and separate entity within the scope of the consolidated financial statements are all general taxpayers of value-added tax.

A simple tax rate of 3% is applicable to the company's sales of biological products (insulin API and injection); a simple tax rate of 5% is applicable to the commercial housing sales of Tonghua County No. 1 Branch of Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd., a separate entity, and the house rental income of subsidiary Beijing Dongbao Biotechnology Co., Ltd.

2. Urban maintenance and construction tax and education surcharge

The urban maintenance and construction tax of the company and its subsidiaries is calculated and paid at 1%, 5% or 7% of the turnover tax payable; the education surcharge is calculated and paid at 3% of the turnover tax payable; the local education surcharge is calculated and paid at 2% of the turnover tax payable.

3.Corporate income tax

The company is a high-tech enterprise in Jilin Province, and the corporate income tax rate is 15%; except for Changchun Dongbao Pharmaceutical Co., Ltd., Tonghua Zixing Biopharmaceutical Co., Ltd., and Shanghai Juyi Network Technology Co., Ltd., which implement preferential tax policies for small and low-profit enterprises, the corporate income tax rate for all other subsidiaries and independent entities is 25%.

(2) Tax incentives and approval documents

1. According to the "Notice of the Ministry of Finance and the State Administration of Taxation on the Application of Low VAT Rates and Simplified VAT Collection Policies for Some Goods" (Caishui [2009] No. 9), biological products made from microorganisms, microbial metabolites, animal toxins, human or animal blood or tissues can be calculated and paid VAT at a 6% tax rate according to the simplified method. The Ministry of Finance and the State Administration of Taxation issued the "Notice on the Simplified Value-Added Tax Collection Rate Policy" (Caishui [2014] No. 57), which stipulates that "the "6% tax rate" in item (4) of Article 2 of the Caishui [2009] No. 9 document is adjusted to "based on the 3% tax rate." The company's sales of biological products are subject to a simplified tax rate of 3%.

2. According to the relevant provisions of the "High-tech Enterprise Recognition Management Measures" (Guokefahuo [2016] No. 32) and the "High-tech Enterprise Recognition Management Guidelines" (Guokefahuo [2016] No. 195), the company was included in the 2023 accreditation agency of Jilin Province.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

The first batch of high-tech enterprise registration list to be reported from January 1, 2025 to December 31, 2025, certificate number: GR202322000032, certificate issuance date: October 16, 2023, valid for three years (2023-2025). This is the company's re-certification as a high-tech enterprise after the expiration of its original validity period. According to relevant national regulations, the company can continue to enjoy the country's preferential tax policies for high-tech enterprises for three consecutive years since it passed the national high-tech enterprise certification, that is, it pays corporate income tax at a rate of 15%.

3. Changchun Dongbao Pharmaceutical Co., Ltd., Tonghua Zixing Biopharmaceutical Co., Ltd. and Shanghai Juyi Network Technology Co., Ltd. are regarded as small and low-profit enterprises in this period. According to the "Ministry of Finance and State Administration of Taxation Announcement No. 12 of 2023", the taxable income is calculated at a reduced rate of 25% and the corporate income tax is paid at a tax rate of 20%.

5. Notes on important items in the consolidated financial statements

(1) Monetary funds

Item Ending balance Beginning balance

Cash on hand 117,097.92 98,420.06 Bank deposits 1,425,056,493.76 590,096,868.02 Other monetary funds 8,661,031.81 4.05 Total 1,433,834,623.49 590,195,292.13

(2) Trading financial assets

Item Closing balance Opening balance Reason and basis for designation Designated as measured at fair value with changes

63,218,438.36 55,400,927.52

Financial assets included in current profits and losses

Including: Bank structured financial products 63,218,438.36 55,400,927.52 Total derivative financial instruments 63,218,438.36 55,400,927.52 ——

The description of bank structured financial products is as follows:

Bank of Depository Wealth Management Product Characteristics Principal Change in Fair Value Yield Range Product Maturity Date Bank of Communications Co., Ltd.

The Company’s Beijing Free Trade Pilot Structured Deposits 25,000,000.00 146,986.31 1.65%-1.45%-0.85% 2026/8/10 District Branch

Bank of Communications Co., Ltd.

The Company’s Beijing Free Trade Pilot Structured Deposits 16,000,000.00 54,575.34 1.7%-1.5%-0.85% 2026/10/8 District Branch

Bank of Communications Co., Ltd.

The Company’s Beijing Free Trade Pilot Structured Deposits 22,000,000.00 16,876.71 1.6%-1.4%-0.65% 2026/5/14 District Branch

Total 63,000,000.00 218,438.36

(3) Notes receivable

1. Classification of notes receivable

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Ending balance Beginning balance

Bank acceptance bill 16,920,717.41 6,984,010.41 Less: Bad debt provision 846,035.87 349,200.52 Total 16,074,681.54 6,634,809.89

2. Notes receivable that have been endorsed or discounted at the end of the period but have not yet matured on the balance sheet date

Item Amount derecognized at the end of the period Amount not derecognized at the end of the period Bank acceptance bill 9,845,171.18 Total 9,845,171.18

3. Classification and disclosure according to bad debt accrual method

Ending balance

Book balance Bad debt provision

Category

book value ratio

Amount Amount Provision ratio (%)

(%)

Provision for bad debts is made on a group basis

16,920,717.41 100.00 846,035.87 5.00 16,074,681.54 Notes receivable

Including: bank acceptance bill 16,920,717.41 100.00 846,035.87 5.00 16,074,681.54 Total 16,920,717.41 100.00 846,035.87 5.00 16,074,681.54

Opening balance

Category Book balance Bad debt provision

book value

Amount Proportion (%) Amount Provision Proportion (%)

Provision for bad debts is made on a group basis

6,984,010.41 100.00 349,200.52 5.00 6,634,809.89 Notes receivable

Including: bank acceptance bill 6,984,010.41 100.00 349,200.52 5.00 6,634,809.89 Total 6,984,010.41 100.00 349,200.52 5.00 6,634,809.89

(1) Notes receivable with bad debt provisions based on combinations of credit risk characteristics

① Bank acceptance draft

Ending balance Beginning balance

Aging

Book balance Provision for bad debts Proportion of provision (%) Book balance Provision for bad debts Proportion of provision (%) Within 1 year 16,920,717.41 846,035.87 5.00 6,984,010.41 349,200.52 5.00Total 16,920,717.41 846,035.87 5.00 6,984,010.41 349,200.52 5.00

4. Bad debt provisions

Amount of changes in the current period

Category Beginning Balance Ending Balance

Provision Recovery or transfer Write-off Other changes

Provision based on combination

349,200.52 496,835.35 846,035.87 Bad debt provision

Total 349,200.52 496,835.35 846,035.87

(4) Accounts receivable

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

1. Disclosure by age

Aging Closing balance Opening balance

Within 1 year (including 1 year) 427,198,535.83 476,266,387.26 1 to 2 years 921,470.12 35,129,011.95 2 to 3 years 2,405,591.32 1,328,308.49 3 to 4 years 140,771.06 73,190.68 4 to 5 years 154,848.60 More than 5 years 91,388,488.79 104,045,119.07

Subtotal 522,054,857.12 616,996,866.05 Less: Bad debt provision 113,033,520.01 130,484,826.67 Total 409,021,337.11 486,512,039.38

2. Classified disclosure according to bad debt accrual method

Ending balance

Book balance Bad debt provision

Category

Book value ratio Provision ratio

Amount Amount

(%) (%)

The amount of provision for bad debts based on individual assessments should be

21,817,562.92 4.18 21,817,562.92 100.00

Collect accounts

Among them: the individual amount is not significant but is calculated separately

21,817,562.92 4.18 21,817,562.92 100.00

Provision for bad debts

Accounts receivable with provision for bad debts on a group basis

500,237,294.20 95.82 91,215,957.09 18.23 409,021,337.11

Among them: Provision based on combination of credit risk characteristics

500,237,294.20 95.82 91,215,957.09 18.23 409,021,337.11 Bad debt provision

Total 522,054,857.12 100.00 113,033,520.01 21.65 409,021,337.11

Opening balance

Book balance Bad debt provision

Category

Book value ratio Provision ratio

Amount Amount

(%) (%)

Receivables with provision for bad debts based on individual assessments

21,969,130.57 3.56 21,969,130.57 100.00

Accounts

Among them: the individual amount is not significant but is calculated separately

21,969,130.57 3.56 21,969,130.57 100.00

Provision for bad debts

Accounts receivable with provision for bad debts based on combinations 595,027,735.48 96.44 108,515,696.10 18.24 486,512,039.38 Of which: provision based on combinations of credit risk characteristics

595,027,735.48 96.44 108,515,696.10 18.24 486,512,039.38 Bad debt provision

Total 616,996,866.05 100.00 130,484,826.67 21.15 486,512,039.38

(1) Individual assessment of accounts receivable with provision for bad debts

Ending balance

Unit name Provision ratio

Book balance Bad debt provision Basis

(%)

Shengguang Group Pharmaceutical Logistics

6,949,967.00 6,949,967.00 100.00 Debtor Unit Bankruptcy Reorganization Co., Ltd.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Ending Balance from January 1, 2025 to December 31, 2025

Unit name Provision ratio

Book balance Bad debt provision Basis (%)

Subsidiary Greenland Benxi Real Estate Co., Ltd., which is being liquidated and dissolved

14,867,595.92 14,867,595.92 100.00 The company’s claims receivable, expected from 20 units including the company

Total that cannot be recovered 21,817,562.92 21,817,562.92 100.00

Opening balance

Unit name Provision ratio

Book balance Bad debt provision Basis

(%)

Shengguang Group Pharmaceutical Logistics

6,949,967.00 6,949,967.00 100.00 Debtor Unit Bankruptcy Reorganization Co., Ltd.

Subsidiary Greenland Benxi Real Estate Co., Ltd., which is being liquidated and dissolved

15,019,163.57 15,019,163.57 100.00 The company’s claims receivable, expected from 20 units including the company

Total that cannot be recovered 21,969,130.57 21,969,130.57 100.00

(2) Accounts receivable with provision for bad debts based on combinations of credit risk characteristics

Ending balance Beginning balance

Aging Provision Proportion Provision Proportion Book Balance Bad Debt Provision Book Balance Bad Debt Provision

(%) (%) Within 1 year 427,198,535.83 21,359,926.79 5.00 476,266,387.26 23,813,319.36 5.00 1 to 2 years 921,470.12 64,502.91 7.00 35,129,011.95 2,459,030.84 7.00 2 to 3 years 2,405,591.32 192,447.31 8.00 1,328,308.49 106,264.68 8.00 3 to 4 years 140,771.06 28,154.21 20.00 73,190.68 14,638.14 20.00 4 to 5 years 154,848.60 46,454.58 30.00 More than 5 years 69,570,925.87 69,570,925.87 100.00 82,075,988.50 82,075,988.50 100.00Total 500,237,294.20 91,215,957.09 18.23 595,027,735.48 108,515,696.10 18.24

3. Bad debt provisions

Amount of changes in the current period

Category Beginning Balance Ending Balance

Provision Recovery or transfer Write-off Other changes

Provision for individual assessment 21,969,130.57 151,567.65 21,817,562.92 Credit risk portfolio 108,515,696.10 17,299,739.01 91,215,957.09 Total 130,484,826.67 17,451,306.66 113,033,520.01

4. Accounts receivable actually written off in the current period

The amount of accounts receivable actually written off in this period was RMB 13,679,577.81, and there were no important accounts receivable written off.

5. Accounts receivable and contract assets of the top five ending balances by debtors

Accounts receivable and combined

Contract Assets Accounts Receivable and Contracts

Accounts receivable Ending balance of the same asset Bad debt provision period Unit name End of production period End of asset period

Closing balance Proportion of total Closing balance Balance Balance

(%)

Sinopharm Holdings Co., Ltd. 142,273,793.16 142,273,793.16 27.25 7,129,426.49

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Accounts receivable and combined

Contract Assets Accounts Receivable and Contracts

Accounts receivable Ending balance of the same asset Bad debt provision period Unit name End of production period End of asset period

Closing balance Proportion of total Closing balance Balance Balance

(%)

China Resources Pharmaceutical Commercial Group Co., Ltd.

49,147,450.47 49,147,450.47 9.41 2,550,032.86Company

Jiuzhoutong Pharmaceutical Group Co., Ltd.

21,549,598.03 21,549,598.03 4.13 1,078,881.42 Co., Ltd.

Shanghai Pharmaceuticals Holdings Co., Ltd. 21,026,168.99 21,026,168.99 4.03 1,051,308.45 MJ.BIOPHARM PVT.LTD 17,132,700.00 17,132,700.00 3.28 856,635.00Total 251,129,710.65 251,129,710.65 48.10 12,666,284.22

(5) Accounts receivable financing

1. Classified presentation of financing receivables

Item Ending balance Beginning balance

Bank acceptance bill 58,067,116.90 54,419,623.26 Total 58,067,116.90 54,419,623.26

2. Financing of receivables that have been endorsed or discounted at the end of the period but have not yet matured on the balance sheet date

Item Amount derecognized at the end of the period Amount not derecognized at the end of the period Bank acceptance bill 57,662,229.36

Total 57,662,229.36

(6) Advance payment

1. Prepayments are listed based on aging

Ending balance Beginning balance

Aging

Amount Proportion (%) Amount Proportion (%) Within 1 year 37,953,473.45 97.54 27,715,180.79 97.71 1 to 2 years 821,000.00 2.11 360,945.73 1.27 2 to 3 years 71,536.00 0.18 283,539.60 1.00 More than 3 years 65,561.60 0.17 5,697.00 0.02Total 38,911,571.05 100.00 28,365,363.12 100.00

2. The top five companies with closing balances by prepayment objects

Account for the total closing balance of prepayments Unit name Closing balance

Proportion (%)

Ganyun Pharmaceutical Technology (Hainan) Co., Ltd. 8,154,120.00 20.96

Riejiawen Pharmaceutical Technology Co., Ltd. 5,147,217.00 13.23

Tonghua China Resources Gas Co., Ltd. 4,894,734.95 12.58

Shenyang Xinxinxi Technology and Trade Co., Ltd. 3,493,370.00 8.98

Merck LTD Merck Hong Kong Limited 2,831,083.37 7.28

Total 24,520,525.32 63.03

(7) Other receivables

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Ending balance Beginning balance

Other receivables 10,524,522.55 7,881,764.21 Total 10,524,522.55 7,881,764.21

1. Other receivables

(1) Disclosure based on aging

Aging Closing balance Opening balance

Within 1 year (including 1 year) 5,041,529.00 3,847,750.33 1 to 2 years 1,780,476.51 618,841.43 2 to 3 years 131,100.67 992,259.53 3 to 4 years 992,066.49 55,000.00 4 to 5 years 55,000.00 478,000.00 More than 5 years 4,833,695.30 4,398,830.07

Subtotal 12,833,867.97 10,390,681.36 Less: Bad debt provision 2,309,345.42 2,508,917.15 Total 10,524,522.55 7,881,764.21

(2) Disclosure according to the nature of the payment

Nature of payment Ending balance Beginning balance

Reserve fund 1,500,772.48 769,761.78 Current accounts with related units 911,062.11 Current accounts with external units 7,884,646.93 5,400,857.47 Temporary payment 3,448,448.56 3,309,000.00

Subtotal 12,833,867.97 10,390,681.36 Less: Bad debt provision 2,309,345.42 2,508,917.15 Total 10,524,522.55 7,881,764.21

(3) Classified disclosure according to bad debt accrual method

Ending balance

Book balance Bad debt provision

Category

Book value accrual ratio

Amount Ratio (%) Amount

(%)

Other receivables with provision for bad debts on a group basis

12,833,867.97 100.00 2,309,345.42 17.99 10,524,522.55 models

Among them: Provision based on combination of credit risk characteristics

12,833,867.97 100.00 2,309,345.42 17.99 10,524,522.55 Bad debt provision

Total 12,833,867.97 100.00 2,309,345.42 17.99 10,524,522.55

Opening balance

Book balance Bad debt provision

Category

Book value accrual ratio

Amount Ratio (%) Amount

(%)

Other receivables with provision for bad debts on a group basis 10,390,681.36 100.00 2,508,917.15 24.15 7,881,764.21

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Opening Balance from January 1, 2025 to December 31, 2025

Book balance Bad debt provision

Category

Book value accrual ratio

Amount Ratio (%) Amount

(%)

money

Among them: Provision based on combination of credit risk characteristics

10,390,681.36 100.00 2,508,917.15 24.15 7,881,764.21 Bad debt provision

Total 10,390,681.36 100.00 2,508,917.15 24.15 7,881,764.21

① Other receivables for which bad debt provisions are made on a group basis

Ending balance

Name

Book balance Bad debt provision Provision ratio (%) Credit risk characteristics combination 12,833,867.97 2,309,345.42 17.99

Total 12,833,867.97 2,309,345.42 17.99

Opening balance

Name

Book balance Bad debt provision Provision ratio (%) Credit risk characteristics combination 10,390,681.36 2,508,917.15 24.15

Total 10,390,681.36 2,508,917.15 24.15

(4) Other receivables for which bad debt provisions are made based on the general expected credit loss model

The first stage The second stage The third stage

Bad debt provisions Next 12 months Expected credit losses throughout the entire duration Expected credit losses throughout the duration Total expected credit losses

Loss (no credit impairment occurred) (credit impairment occurred)

lose

Balance on January 1, 2025 189,386.24 1,867,217.81 452,313.10 2,508,917.15 Balance on January 1, 2025

In this issue

—Transfer to the second stage -84,121.16 84,121.16

—Transfer to the third stage -1,300,000.00 1,300,000.00

Provision in this period 183,737.40 142,662.17 200,000.00 526,399.57 Transfer in this period 35,523.43 38,134.77 73,658.20 Write-off in this period 652,313.10 652,313.10 As of December 31, 2025

253,479.05 794,001.14 1,261,865.23 2,309,345.42 amount

(5) Bad debt provisions

Amount of changes in the current period

Category Beginning Balance Ending Balance

Provision Recovery or reversal Write-off or write-off Other changes

Credit Risk Group

2,508,917.15 526,399.57 73,658.20 652,313.10 2,309,345.42 combined

Total 2,508,917.15 526,399.57 73,658.20 652,313.10 2,309,345.42

(6) Other receivables actually written off in the current period

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. From January 1, 2025 to December 31, 2025, the amount of other receivables actually written off during the period was 652,313.10 yuan, and there were no important other receivables written off.

(7) Other receivables with top five closing balances based on debtors

Accounting for other receivables

Bad debt provision unit name at the end of the period Nature of the payment Ending balance Aging Total balance at the end of the period

balance

Proportion of number (%)

Novartis (China) Health

Biomedical Research Rent Deposit 2,688,686.79 Within 2 years 20.95 166,981.48 Co., Ltd.

Jilin Province Longfeng Medicine

Purchase of medicinal materials 1,300,000.00 More than 5 years 10.13 1,300,000.00 Industry Co., Ltd.

Shanghai Kindly Enterprise

Industrial Development Group Co., Ltd. Purchase deposit 1,000,000.00 Within 1 year 7.79 50,000.00 Co., Ltd.

Beijing China Overseas Plaza

Commercial Development Co., Ltd. Lease deposit 820,938.24 Within 1 year 6.40 41,046.91 Company

State Grid Jilin Electricity Province

Power Co., Ltd.

Deposit for electricity bill 700,000.00 3 to 4 years 5.45 140,000.00 Hua City Suburban Power Supply

company

Total 6,509,625.03 50.72 1,698,028.39

(8) Inventory

1. Classification of inventory

Ending balance Beginning balance

Item Price drop provision/ Price drop provision/

Book balance Contract performance costs Book value Book balance Contract performance costs Book value

This impairment provision This impairment provision

Goods in stock 254,846,505.08 7,518,918.90 247,327,586.18 336,799,638.16 5,373,608.86 331,426,029.30 Work in progress 27,391,559.38 27,391,559.38 18,492,635.82 18,492,635.82Raw materials 294,688,343.58 16,910,921.79 277,777,421.79 236,604,794.47 12,109,259.65 224,495,534.82Develop products

177,509,047.42 26,621,048.94 150,887,998.48 183,617,555.10 26,080,962.00 157,536,593.10 (real estate)

Goods shipped 838,834.95 838,834.95 4,358,519.87 4,358,519.87Total 755,274,290.41 51,050,889.63 704,223,400.78 779,873,143.42 43,563,830.51 736,309,312.91

2. Increases and decreases in inventory depreciation provisions and contract performance cost impairment provisions

Increase amount in this period Decrease amount in this period

Item Beginning balance Closing balance

Provision Others Reversal or write-off Others

Inventory goods 5,373,608.86 4,361,190.72 2,215,880.68 7,518,918.90Raw materials 12,109,259.65 6,618,758.01 1,817,095.87 16,910,921.79Developed products

26,080,962.00 735,131.21 195,044.27 26,621,048.94 (real estate)

Total 43,563,830.51 11,715,079.94 4,228,020.82 51,050,889.63

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

(9) Other current assets

Item Ending balance Beginning balance

Input tax credit and input tax to be certified 6,063,313.00 14,005,605.07 Corporate income tax paid in advance 5,195,394.24 29,951,261.31 Other taxes paid in advance 1,594,106.95 240,158.03

Total 12,852,814.19 44,197,024.41

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

(10) Long-term equity investment

Increases and decreases in the current period

Impairment

chase

Invested entity Beginning balance (book provision plus other comprehensive income recognized under the equity method Other equity changes Announcement of cash distribution

Value) Decrease in investment Impairment (other value) Investment gains and losses at the end of the period Dividends or profits

Prepare balance

Capital

Associates

Xiamen Tebao

Bioengineering

409,234,300.15 29,658,616.61 130,756,823.68 12,534,599.90 -40,424,070.68 -127,398,434.52 355,044,601.92 Co., Ltd.

company

Huaguang Biotechnology

Co., Ltd. 84,117,300.92 -10,810,077.12 1,641,196.38 947,581.98 476,341.33 76,372,343.49 Company

Jun He Meng Sheng

Pharmaceutical (Hangzhou)

98,194,038.55 -40,588,514.92 11,558,473.82 69,163,997.45 state) shares

Ltd.

Total 591,545,639.62 29,658,616.61 79,358,231.64 1,641,196.38 25,040,655.70 -40,424,070.68 -126,922,093.19 500,580,942.86

1. Increases and decreases in the long-term equity investment of Xiamen Tebao Bioengineering Co., Ltd. during the current period. “Others” are due to the company transferring the no-sale condition to Tibet Trust Co., Ltd. on May 22, 2025.

There are 23,187,600 shares in circulation, accounting for 5.70% of its current total share capital, resulting in a corresponding decrease in the accumulated investment gains and losses and other changes in equity recognized under the equity method.

2. The increase or decrease in the long-term equity investment of Huaguang Biotechnology Co., Ltd. in the current period. "Others" is due to the impact of countercurrent transactions.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

(11) Investment in other equity instruments

Increases and decreases in the current period

Included in it in this period. Included in it in this period.

Item Opening balance Other Ending balance Additional investment Decrease investment Other comprehensive income Other comprehensive income

him

gain loss

Jilin Baishanzheng

Mao Pharmaceutical Co., Ltd. 200,000.00 145,863.79 54,136.21

Shanghai Dongbaosheng

Pharmaceutical Medicine Co., Ltd. 36,000,000.00 1,762,065.19 37,762,065.19 Company

Shanghai New Yaopai

Branch Medical Technology

30,000,000.00 877,168.56 30,877,168.56 Co., Ltd.

Division

Total 36,200,000.00 30,000,000.00 2,639,233.75 145,863.79 68,693,369.96

(continued)

Designated as fair cumulatively included in other

Dividends recognized in the current period are cumulatively included in other value measurements and their items are included in the loss of comprehensive income.

Changes in income and comprehensive income are included in other losses

Reasons for comprehensive income

Long-term holding, no ownership of Jilin Baishan Zhengmao Pharmaceutical Co., Ltd.

145,863.79 Control and significant influence over the company

equity investment

Long-term holding, equity investment with no control or significant influence on Shanghai Dongbao Biopharmaceutical Co., Ltd. 1,762,065.19

Long-term holding, does not own shares of Shanghai New Yaopaike Medical Technology

877,168.56 Control and Significant Influence Ltd.

Total equity investment 2,639,233.75 145,863.79

(12) Investment real estate

1. Investment real estate measured at cost

Item Houses and buildings Land use rights Total

1. Original book value

1. Opening balance 131,214,923.85 11,019,996.49 142,234,920.34 2. Reduction amount in the current period 4,977,749.14 1,603,872.47 6,581,621.61 (1) Transferred to fixed assets 4,977,749.14 1,603,872.47 6,581,621.61 3. Closing balance 126,237,174.71 9,416,124.02 135,653,298.73

2. Accumulated depreciation and accumulated amortization

1. Opening balance 42,197,283.77 3,714,540.45 45,911,824.22 2. Increase in current period 4,147,196.59 242,338.10 4,389,534.69 (1) Provision or amortization 4,147,196.59 242,338.10 4,389,534.69

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Houses and buildings Land use rights Total

3. Decrease amount in the current period 2,133,760.97 665,374.07 2,799,135.04 (1) Transfer to fixed assets 2,133,760.97 665,374.07 2,799,135.04 4. Ending balance 44,210,719.39 3,291,504.48 47,502,223.87

3. Impairment provision

1. Opening balance

2. Increase in the current period 728,824.01 728,824.01 (1) Provision 728,824.01 728,824.01 3. Ending balance 728,824.01 728,824.01

4. Book value

1. Book value at the end of the period 81,297,631.31 6,124,619.54 87,422,250.85 2. Book value at the beginning of the period 89,017,640.08 7,305,456.04 96,323,096.12

2. Impairment provision testing of investment real estate using the cost method measurement model

(1) The recoverable amount is determined based on the net amount of fair value minus disposal costs.

fair value and disposal

Key Parameters Items of Key Parameters Book Value Recoverable Amount Impairment Amount Method for Determining Purchase Expenses

Number Determining basis formula

Recent category

Zhongming Pingbao Lijing Garden Division adopts market approach to acquire similar assets

22,960,216.98 22,231,392.97 728,824.01 [2026] No. 5001 City Bank Assessment Comparable Transactions

No.

Easy price

Total 22,960,216.98 22,231,392.97 728,824.01

(13) Fixed assets

Item Ending balance Beginning balance

Fixed assets 2,335,265,069.94 2,482,294,125.72 Liquidation of fixed assets 262,323.46

Total 2,335,527,393.40 2,482,294,125.72

1. Fixed assets

(1) Fixed assets

Items Houses and buildings Machinery and equipment Transportation equipment Electronic equipment Others Total

1. Accounts

original value

1. period

1,844,156,711.56 2,206,524,250.57 27,361,409.42 121,901,900.80 62,872,558.18 4,262,816,830.53 Initial balance

2. Ben

Period increase 7,755,703.58 52,711,996.07 2,639,698.55 11,148,069.53 10,665,112.38 84,920,580.11

(1)

521,150.00 28,254,817.28 2,639,698.55 11,148,069.53 7,473,363.06 50,037,098.42 Purchase

(2)

2,256,804.44 24,457,178.79 3,191,749.32 29,905,732.55 Construction in progress

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Items Houses and buildings Machinery and equipment Transportation equipment Electronic equipment Others Total transfer

(3)

Investment housing 4,977,749.14 4,977,749.14 Real estate transfer

3.

Decrease in the current period 16,565,826.99 35,546,767.54 6,032,949.91 5,979,329.87 12,362,530.99 76,487,405.30 amount

(1)

Disposal or report 69,930.00 35,546,767.54 6,032,949.91 5,979,329.87 12,362,530.99 59,991,508.31 Waste

(2

) Other transfers 16,495,896.99 16,495,896.99 out

4. period

1,835,346,588.15 2,223,689,479.10 23,968,158.06 127,070,640.46 61,175,139.57 4,271,250,005.34 Ending balance

2. Accumulation

depreciation

1. period

637,714,823.39 941,271,719.65 25,002,853.37 113,254,468.90 48,347,105.75 1,765,590,971.06 Initial balance

2. Ben

Period increase fund 60,314,452.89 143,009,553.73 519,671.45 2,737,699.28 6,553,139.79 213,134,517.14 amount

(1)

58,180,691.92 143,009,553.73 519,671.45 2,737,699.28 6,553,139.79 211,000,756.17 Provision

(2)

Investment housing 2,133,760.97 2,133,760.97 Real estate transfer

3. Ben

Period reduction payment 2,240,658.84 32,310,465.70 5,702,388.32 5,665,944.75 11,748,875.15 57,668,332.76

(1)

Disposal or reporting 66,434.00 32,310,465.70 5,702,388.32 5,665,944.75 11,748,875.15 55,494,107.92 Waste

(2)

2,174,224.84 2,174,224.84 Other transfers

4. period

695,788,617.44 1,051,970,807.68 19,820,136.50 110,326,223.43 43,151,370.39 1,921,057,155.44 Ending balance

3. Impairment

Prepare

1. period

14,907,562.55 24,171.20 14,931,733.75 Initial balance

2. Original 140.87 20,076.54 20,217.41

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Items Houses and buildings Machinery and equipment Transportation equipment Electronic equipment Others Total period increase

Um

(1)

140.87 20,076.54 20,217.41 Provision

3. Ben

Period reduction payment 24,171.20 24,171.20 amount

(1)

Disposal or scrap 24,171.20 24,171.20

4. period

14,907,703.42 20,076.54 14,927,779.96 Ending balance

4. Accounts

value

1. period

Final book price 1,124,650,267.29 1,171,698,594.88 4,148,021.56 16,744,417.03 18,023,769.18 2,335,265,069.94 value

2. period

Initial book price 1,191,534,325.62 1,265,252,530.92 2,334,384.85 8,647,431.90 14,525,452.43 2,482,294,125.72 value

The original value of fixed assets that have been fully depreciated and are still in use at the end of the period is 970,828,706.48 yuan.

(2) As of December 31, 2025, the situation of temporarily idle fixed assets

Category Original book value Accumulated depreciation Impairment provision Book value Remarks Houses and buildings 122,187,868.13 75,620,225.17 140.87 46,567,502.09

Machinery and equipment 83,655,528.15 79,472,751.75 20,076.54 4,162,699.86

Total 205,843,396.28 155,092,976.92 20,217.41 50,730,201.95

(3) As of December 31, 2025, fixed assets leased through operating leases

Category Book Value

Houses and buildings 51,227,952.37 Machinery and equipment 12,739,843.20 Electronic equipment 546,853.87 Other equipment 7,858.01 Total 64,522,507.45

(4) As of December 31, 2025, the property rights certificate has not been completed

Item Book value Reason for not completing the property ownership certificate Changchun Dongbao Pharmaceutical Co., Ltd. Complex Building 7,533,312.83 Warrant matters are being processed

Changchun Dongbao Pharmaceutical Co., Ltd. comprehensive workshop 7,529,993.89 Warrant matters are being processed

Changchun Dongbao Pharmaceutical Co., Ltd. Power Station 784,753.04 Warrant matters are being processed

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Book value Reasons for not completing the ownership certificate Changchun Dongbao Pharmaceutical Co., Ltd. Boiler room garage 681,813.68 Changchun Dongbao Pharmaceutical Co., Ltd. guard in the process of warrant matters 211,113.61 Total in the process of warrant matters 16,740,987.05

2. Fixed assets liquidation

Item Ending balance Beginning balance Imported multifunctional centrifuge 196,663.92

Others 65,659.54

Total 262,323.46

(14) Projects under construction

Item Closing balance Opening balance Construction in progress 169,504,027.65 226,112,962.99 Total 169,504,027.65 226,112,962.99

1.Construction in progress

(1) Basic situation of projects under construction

Ending balance Beginning balance

Project

Book balance Impairment provision Book value Book balance Impairment provision Book value Ultra-rapid-acting insulin lispro

Injection project quality control 16,987,966.61 1,029,420.18 15,958,546.43 16,768,186.30 1,029,420.18 15,738,766.12 Manufacturing center

Ultra-fast-acting insulin lispro

75,494,815.76 4,624,978.42 70,869,837.34 75,136,777.37 4,612,741.84 70,524,035.53Injection production base

Injection three workshops once

Sexual injection pen assembly and packaging 4,111,383.19 4,111,383.19

Assembly production line construction project

Extraction workshop pre-processing

2,929,476.84 2,929,476.84

renovation project

Injection No. 4 Workshop Xilin

61,888,837.05 61,888,837.05

Bottle production line construction project

One truck of raw materials for industrial park

13,745,946.80 13,745,946.80

room renovation project

Ultra-fast-acting insulin lispro

Injection project supporting work 54,907,452.39 3,370,837.98 51,536,614.41 Cheng

Insulin analog injection

solution (insulin glargine,

86,301,982.61 86,301,982.61 Insulin aspart) production

line project

Insulin second phase underground storage

2,011,564.32 2,011,564.32 Tank construction project

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Ending Balance from January 1, 2025 to December 31, 2025 Beginning Balance

Project

Book balance Impairment provision Book value Book balance Impairment provision Total book value 175,158,426.25 5,654,398.60 169,504,027.65 235,125,962.99 9,013,000.00 226,112,962.99

(2) Changes in major construction projects under construction

Transferred to other items in this period

Project name Budget amount Beginning balance Increase amount in the current period Ending balance

Fixed assets reduction amount

Super fast acting

proinsulin

Injection items 16,768,186.30 219,780.31 16,987,966.61 items quality control

Manufacturing center 235,800,000.00

Super fast acting

proinsulin

75,136,777.37 358,038.39 75,494,815.76 Injection production

production base

Injection IV

Workshop Xilin

132,000,000.00 61,888,837.05 61,888,837.05 bottle production line

construction project

Industrial park original

A cart of ingredients and medicines

10,760,000.00 13,745,946.80 13,745,946.80 renovation projects

Head

Super fast acting

proinsulin

Injection items 54,907,452.39 54,907,452.39

Project supporting equipment

Cheng

Insulin

analogue injection

liquid (pancreatic glargine

275,736,400.00 86,301,982.61 24,457,178.79 61,844,803.82

Insulin, aspart

insulin)

Production line project

Total 654,296,400.00 233,114,398.67 76,212,602.55 24,457,178.79 116,752,256.21 168,117,566.22

Note: 1. In order to further rationally utilize resources, save costs and energy consumption, and achieve centralized and optimized management, the company decided to terminate the original plan for ultra-fast-acting insulin lispro injection.

The construction plan for supporting projects for the ejection project will no longer be implemented independently, but will be shared with the liraglutide/insulin degludec co-line production base engineering project.

The company wrote it off in this period, with a book balance of RMB 54,907,452.39 and an impairment provision of RMB 3,370,837.98.

2. Due to the simultaneous increase in demand for insulin vials in the domestic market and the international market, in order to effectively meet market demand, the company has introduced insulin analogue injection (Glargine Pancreas

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

January 1, 2025 - December 31, 2025

Insulin, insulin aspart) production line project was changed to injection vial production line construction project in the fourth workshop. In this period, the company transferred the book balance of 61,844,803.82 yuan to

carry forward.

Changes in major projects under construction (continued) Cumulative investment in the project Interest capitalization Including: interest for the current period Name of the interest item for the current period Project progress Proportion of funding sources to the budget (%) Cumulative amount Capitalized amount Capitalization rate (%) Super fast efficiency

proinsulin

Injection project self-raised funds have completed the quality control of the main project

Body construction, mechanism center 39.22

The device is not over-speeding

Installation

proinsulin

Self-financed injection production

production base

The infrastructure part consists of insulin analog injection (Glargine Injection IV

Insulin, door shop cillin

46.89 Winter insulin) Self-financing bottle production line

Production line construction project

The project is transferred in, and the production line machinery and equipment are to be installed and accepted.

Industrial park original

The debugging of one truck of materials and medicines has been completed 127.75. The self-financed room renovation project has been completed and is awaiting acceptance.

Super fast acting

proinsulin

Construction terminated, injection project - self-raised funds fully written off

Cheng

Insulin

Change to analogue injection

Ejaculation Siche Liquid (Glargine Pancreas)

— Between Vials Self-funded Insulin, Aspartame

Production line built for insulin production

Set up project

Production line project

(3) Provision for impairment of projects under construction

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Opening balance Increase in the current period Decrease in the current period Closing balance Reason for accrual Super fast-acting insulin lispro injection Estimated recoverable amount

1,029,420.18 1,029,420.18

Liquid Project Quality Control Center The estimated recoverable amount of ultra-fast-acting insulin lispro injection is lower than its book value

4,612,741.84 12,236.58 4,624,978.42

liquid production base is less than its book value and the expected recoverable amount of ultra-fast-acting insulin lispro injection

3,370,837.98 3,370,837.98

Supporting works for the liquid project are lower than their book value

Total 9,013,000.00 12,236.58 3,370,837.98 5,654,398.60

(15) Right-of-use assets

Project Houses and Buildings Total

1. Original book value

1. Opening balance 24,883,940.10 24,883,940.10 2. Increase in the current period 16,371,102.32 16,371,102.32 (1) New leases 16,371,102.32 16,371,102.32 3. Decrease in the current period 518,001.17 518,001.17 (1) Early termination of lease 518,001.17 518,001.17 4. Closing balance 40,737,041.25 40,737,041.25

2. Accumulated depreciation

1. Opening balance 1,203,914.99 1,203,914.99 2. Increase in the current period 7,285,367.21 7,285,367.21 (1) Provision 7,285,367.21 7,285,367.21 3. Decrease in the current period 353,756.89 353,756.89 (1) Early termination of lease 353,756.89 353,756.89 4. Closing balance 8,135,525.31 8,135,525.31

3. Book value

1. Book value at the end of the period 32,601,515.94 32,601,515.94 2. Book value at the beginning of the period 23,680,025.11 23,680,025.11

(16) Intangible assets

1. Intangible assets

proprietary technology and

Project Land Use Rights Software Total

Conduct research and development

1. Original book value

1. Opening balance 226,745,066.39 553,042,531.77 14,773,306.33 794,560,904.49 2. Increase in the current period 1,603,872.47 15,910,823.02 1,668,871.70 19,183,567.19 (1) Purchase 1,668,871.70 1,668,871.70 (2) Internal research and development 15,910,823.02 15,910,823.02 (3) Transfer of investment real estate 1,603,872.47 1,603,872.47 3. Decrease amount in this period 46,606,037.47 251,415.93 46,857,453.40

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Proprietary technology and self-

Project Land Use Rights Software Total

Conduct research and development

(1) Disposal 251,415.93 251,415.93 (2) Termination of recognition 40,000,000.00 40,000,000.00 (3) Other transfers 6,606,037.47 6,606,037.47 4. Closing balance 228,348,938.86 522,347,317.32 16,190,762.10 766,887,018.28

2. Accumulated amortization

1. Opening balance 30,481,456.18 127,858,421.39 8,166,378.53 166,506,256.10 2. Increase in the current period 6,087,148.63 54,392,351.44 1,567,841.48 62,047,341.55 (1) Provision 5,421,774.56 54,392,351.44 1,567,841.48 61,381,967.48 (2) Transfer of investment real estate 665,374.07 665,374.07 3. Decrease amount in the current period 9,399,999.91 251,415.93 9,651,415.84 (1) Disposal 251,415.93 251,415.93 (2) Termination of recognition 9,399,999.91 9,399,999.91 4. Closing balance 36,568,604.81 172,850,772.92 9,482,804.08 218,902,181.81

3. Book value

1. Book value at the end of the period 191,780,334.05 349,496,544.40 6,707,958.02 547,984,836.47 2. Book value at the beginning of the period 196,263,610.21 425,184,110.38 6,606,927.80 628,054,648.39

Intangible assets formed through the company's internal research and development accounted for 63.26% of the closing book value of intangible assets.

(17) Long-term deferred expenses

Category Opening balance Increase in the current period Amortization in the current period Other decreases Closing balance Biological products API production

24,279,440.05 38,112,874.55 28,706,807.59 33,685,507.01 Prepaid materials

Raw material pharmaceutical students in research projects

1,367,933.80 5,532,294.60 758,474.09 6,141,754.31 Prepaid materials

Alibaba Cloud server data

29,538.71 18,656.04 10,882.67 library

House decoration expenses 14,099,235.42 385,321.09 13,713,914.33

Total 25,676,912.56 57,744,404.57 29,869,258.81 53,552,058.32

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

1. Deferred income tax assets and deferred income tax liabilities without offset

Ending balance Beginning balance

Item Deferred income tax assets Deductible/taxable Deferred income tax assets Deductible/taxable temporary differences/liabilities Temporary differences Assets/liabilities

Differential deferred income tax assets:

Provision for impairment of fixed assets 2,239,167.00 14,927,779.96 2,239,760.06 14,931,733.75 Unrealized profits from internal transactions 40,683,845.38 268,862,572.04 8,185,550.01 53,736,596.45 Provision for bad debts 15,046,556.70 99,643,997.51 17,566,135.62 116,895,765.53 Provision for inventory decline 3,664,476.10 24,429,840.69 9,142,670.78 43,563,830.51 Staff education funds 19,696.39 78,785.55

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Ending Balance from January 1, 2025 to December 31, 2025 Beginning Balance

Item Deferred income tax assets Deductible/taxable Deferred income tax assets Deductible/taxable temporary differences/liabilities Temporary differences Assets/liabilities

Income from government subsidies 2,611,475.01 17,409,833.43 2,408,175.00 16,054,500.03 Recoverable losses 5,044.82 100,896.36 96,409,413.93 641,948,799.95 Charitable donation expenses that can be carried forward and deducted 807,671.21 5,384,474.75 Impairment provision for construction in progress 848,159.79 5,654,398.60 1,351,950.00 9,013,000.00 Lease liabilities 7,923,572.47 33,922,099.20 4,779,807.12 23,899,035.59 Equity incentive 836,100.00 5,574,000.00

Provision for impairment of investment real estate 109,323.60 728,824.01

Subtotal 73,967,720.87 471,254,241.80 142,910,830.12 925,506,522.11 Deferred income tax liabilities:

High-tech enterprises purchase equipment in the fourth quarter of 2022

One-time pre-tax deduction for depreciation of 6,965,831.32 46,438,875.47 7,156,846.51 47,712,310.08

Changes in fair value of trading financial assets 54,609.59 218,438.36 100,231.88 400,927.52 Right-of-use assets 7,617,252.06 32,601,515.94 4,736,005.02 23,680,025.11 Changes in fair value of other equity instruments 374,005.49 2,493,369.96

Subtotal 15,011,698.46 81,752,199.73 11,993,083.41 71,793,262.71

2. Deferred income tax assets and deferred income tax liabilities are presented at the net amount after offsetting

Ending balance

Project

Amount of offset of deferred income tax assets and liabilities Balance of deferred income tax assets or liabilities after offset Deferred income tax assets 7,615,082.77 66,352,638.10 Deferred income tax liabilities 7,615,082.77 7,396,615.69

3. Details of deferred income tax assets not recognized

Item Ending balance Beginning balance

Deductible temporary differences 51,718,852.46 25,000,078.54 Deductible losses 320,453,203.86 277,845,834.63 Total 372,172,056.32 302,845,913.17

4. Deductible losses that have not been recognized as deferred income tax assets will expire in the following years

Year Ending Balance Beginning Balance Remarks

2025 1,724,418.38

2026 80,477,487.23 131,566,916.25

2027 64,416,150.87 64,756,422.92

2028 68,609,309.78 68,609,309.78

2029 10,565,872.28 11,188,767.30

2030 96,384,383.70

Total 320,453,203.86 277,845,834.63

(19) Other non-current assets

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Ending Balance from January 1, 2025 to December 31, 2025 Beginning Balance

Project

Book balance Impairment provision Book value Book balance Impairment provision Book value Prepayment for equipment purchase 48,630,410.64 48,630,410.64 20,381,261.43 20,381,261.43 Prepayment for project construction 1,024,783.40 1,024,783.40 1,496,059.50 1,496,059.50 Prepaid super fast-acting insulin supplier

63,378,150.00 63,378,150.00 63,378,150.00 63,378,150.00 Industrial rights payment

Prepaid capitalized R&D expenditures 4,312,090.41 4,312,090.41 3,924,333.56 3,924,333.56 Prepaid semaglutide injection

Liquid commercialization authorization and MAH 86,250,000.00 86,250,000.00 82,500,000.00 82,500,000.00 cooperation funds

Total 203,595,434.45 203,595,434.45 171,679,804.49 171,679,804.49

(20) Assets with restricted ownership or use rights

Situation at the end of the period Situation at the beginning of the period

Project

Book balance Book value Restriction type Restriction situation Book balance Book value Restriction type Restriction situation

Bank guarantee cannot be guaranteed at any time

Monetary funds 8,657,093.67 8,657,093.67

gold used

No trading financial financing before maturity Structural deposit Structural deposit

63,218,438.36 63,218,438.36 Able to pay in advance 55,400,927.52 55,400,927.52 Able to pay in advance wealth management funds and other financial services

take take

Total 71,875,532.03 71,875,532.03 55,400,927.52 55,400,927.52 --

(21) Short-term loans

Borrowing conditions Closing balance Opening balance

Credit borrowings 33,024,236.11 414,247,463.22 Discounted bills that have not been terminated 2,511,528.00 Total 33,024,236.11 416,758,991.22

(22) Notes payable

Item Ending balance Beginning balance

Bank acceptance bill 8,657,093.67

Commercial acceptance bill 10,000.00 Total 8,657,093.67 10,000.00

(23) Accounts payable

Item Ending balance Beginning balance

Within 1 year (including 1 year) 57,601,400.44 84,678,696.70 More than 1 year 24,844,428.19 12,020,681.44 Total 82,445,828.63 96,699,378.14

(24) Advance payments

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Ending balance Beginning balance

Within 1 year (including 1 year) 1,591,036.77 1,712,014.13 Total 1,591,036.77 1,712,014.13

(25) Contract liabilities

Item Ending balance Beginning balance

Amounts related to transferred goods 7,133,699.66 14,359,574.01 Total 7,133,699.66 14,359,574.01

The decrease in contract liabilities was mainly due to the recognition of revenue in the current period from advances received from foreign customers.

(26) Employee benefits payable

1. Classified presentation of employee benefits payable

Item Beginning balance Increase in the current period Decrease in the current period Ending balance Short-term compensation 2,478,654.56 628,369,953.79 622,408,613.27 8,439,995.08 Post-employment benefits - defined contribution plan 316,911.44 49,356,565.05 49,205,747.43 467,729.06 Dismissal benefits 7,945,757.16 7,945,757.16

Total 2,795,566.00 685,672,276.00 679,560,117.86 8,907,724.14

2. Short-term employee compensation situation

Item Opening balance Increase in the current period Decrease in the current period Ending balance wages, bonuses, allowances and subsidies 1,572,951.01 553,202,133.93 547,296,245.24 7,478,839.70 Employee welfare fees 10,672,011.40 10,672,011.40

Social insurance premiums 170,462.63 25,050,254.14 24,954,675.84 266,040.93 Including: medical insurance premiums 164,050.41 23,277,288.05 23,190,932.38 250,406.08

Work-related injury insurance premium 6,412.22 1,772,966.09 1,763,743.46 15,634.85 Housing provident fund 104,707.00 32,655,940.46 32,564,851.46 195,796.00 Trade union funds and employee education funds 630,533.92 6,789,613.86 6,920,829.33 499,318.45Total 2,478,654.56 628,369,953.79 622,408,613.27 8,439,995.08

3. Set up the withdrawal plan

Item Opening balance Increase in the current period Decrease in the current period Ending balance Basic pension insurance 305,977.50 47,462,644.35 47,315,728.79 452,893.06 Unemployment insurance premium 10,933.94 1,893,920.70 1,890,018.64 14,836.00 Total 316,911.44 49,356,565.05 49,205,747.43 467,729.06

(27) Taxes payable

Item Ending balance Beginning balance

Value-added tax 9,299,739.44 45,770,265.64 Real estate tax 24,932.57 Land use tax 8,300.29 8,841.88 Corporate income tax 1,707,806.62 78,042.09

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Ending balance Beginning balance

Education fee surcharge 275,969.88 1,374,250.65 Local education fee surcharge 183,979.92 913,725.55 Water conservancy construction fund 98,166.25 170,401.60 Personal income tax 22,857,133.79 4,279,643.85 Urban maintenance and construction tax 106,394.46 478,933.27 Stamp tax 600,529.20 390,622.59 Environmental protection tax 5,488.65 5,402.61 Water resources tax 85,429.75 19,118.40 Total 35,228,938.25 53,514,180.70

(28) Other payables

Item Ending balance Beginning balance

Other payables 83,125,907.92 73,761,189.17 Total 83,125,907.92 73,761,189.17

1. Other payables

(1) Classification by nature of payment

Item Ending balance Beginning balance

Current accounts with related units 333,213.07 Current accounts with external units 14,168,647.83 73,417,083.79 Current accounts with employees 1,138,860.09 10,892.31 Equity incentive repurchase obligations 67,818,400.00

Total 83,125,907.92 73,761,189.17

(29) Non-current liabilities due within one year

Item Ending balance Beginning balance

Lease liabilities due within one year 8,591,852.90 4,396,642.54 Long-term borrowings due within one year 266,750,000.00

Total 275,341,852.90 4,396,642.54

(30) Other current liabilities

Item Ending balance Beginning balance

Output tax to be transferred 213,409.85 157,447.52 Endorsed but unexpired acceptance bills 9,845,171.18 2,480,995.13 Total 10,058,581.03 2,638,442.65

(31) Long-term loans

Item Ending balance Beginning balance Interest rate range credit loan 458,940,000.00 253,490,000.00 2.40%-3.00%

Subtotal 458,940,000.00 253,490,000.00

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Closing balance Opening balance Interest rate range minus: long-term borrowings due within one year 266,750,000.00

Total 192,190,000.00 253,490,000.00

(32) Lease liabilities

Item Ending balance Beginning balance

Lease payments 36,354,823.69 26,170,600.27 Less: Unrecognized financing costs 2,432,724.49 2,271,564.68 Less: Lease liabilities due within one year 8,591,852.90 4,396,642.54

Total 25,330,246.30 19,502,393.05

The analysis of lease liabilities based on the maturity period of the undiscounted remaining contractual obligations is as follows:

Item Ending balance Beginning balance

Within 1 year 9,623,661.91 4,804,392.00 1 to 2 years 9,409,467.74 5,007,448.27 2 to 3 years 8,207,860.00 4,907,628.00 3 to 4 years 7,049,569.70 4,907,628.00 4 to 5 years 2,064,264.34 4,907,628.00 More than 5 years 1,635,876.00

Total 36,354,823.69 26,170,600.27

(33) Deferred income

Item Beginning balance Increase in the current period Decrease in the current period Ending balance Reason for formation

Government subsidies according to relevant policies 27,655,981.71 1,950,000.00 1,197,340.92 28,408,640.79

Total subsidies granted 27,655,981.71 1,950,000.00 1,197,340.92 28,408,640.79

(34) Share capital

Changes in the current period (+, -)

Items Beginning balance Closing balance Issuance of provident fund

Bonus shares Other subtotal

New shares Conversion

1,981,734,074.00 -23,191,245.00 -23,191,245.00 1,958,542,829.00 Total shares

The decrease in this period is due to the cancellation of 23,191,245 treasury shares that have been repurchased in accordance with the "Proposal on the Second Phase of the Company's Share Repurchase Plan through Centralized Bidding Transactions in 2024".

(35) Capital reserve

Item Opening balance Increase in the current period Decrease in the current period Ending balance Equity premium 421,115,678.07 418,766.40 220,166,262.99 201,368,181.48 Other capital reserves 88,199,827.39 30,614,655.70 18,508,009.58 100,306,473.51

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Items Beginning balance Increase in the current period Decrease in the current period Total closing balance 509,315,505.46 31,033,422.10 238,674,272.57 301,674,654.99

The increase in equity premium in this period is due to the passive dilution of the equity of subsidiary Shanghai Longke Pharmaceutical Co., Ltd. by RMB 418,766.40. The decrease in this period is due to the cancellation of 23,191,245 treasury shares that have been repurchased in accordance with the "Proposal on the Plan to Repurchase the Company's Shares in the Second Phase of 2024 through Centralized Bidding Transactions", a decrease of 156,849,783.40 yuan; According to the "About Tonghua Dongbao 2025" approved by "Proposal on the Employee Stock Ownership Plan (Draft)> and its Summary" and "Proposal on the "Employee Stock Ownership Plan (Draft) of Tonghua Dongbao R&D and Production System> and its Summary", the implementation of the employee stock ownership plan decreased by RMB 59,724,979.59; affected by the merger of enterprises under the same control, a decrease of RMB 3,591,500.00.

The increase in other capital reserves in the current period is due to changes in other equity interests of associates and an increase in share calculated based on shareholding ratio of RMB 25,040,655.70; the implementation of the employee stock ownership plan in this period confirmed an increase in share payment of RMB 5,574,000.00. The decrease in this period is due to the transfer of 23,187,600 shares of Xiamen Tebao Bioengineering Co., Ltd.'s unrestricted tradable shares held by the company. The corresponding part of other equity changes accumulated under the equity method has a decrease of RMB 18,508,009.58.

(36) Treasury stocks

Item Opening balance Increase in the current period Decrease in the current period Ending balance Repurchase of shares 300,279,281.09 27,596,629.06 307,584,407.99 20,291,502.16 Obligation to repurchase treasury shares 67,818,400.00 67,818,400.00Total 300,279,281.09 95,415,029.06 307,584,407.99 88,109,902.16

The increase in the amount of shares repurchased in this period is due to the company convening the 18th meeting of the 11th board of directors on October 17, 2025, which reviewed and approved the "Proposal on the Plan to Repurchase the Company's Shares through Centralized Bidding Transactions" and agreed that the company would use its own funds to raise funds. The company's shares will be repurchased through bidding transactions, and the repurchased shares will be used for employee stock ownership plans and/or equity incentives; as of December 31, 2025, a total of 3,000,000 shares have been repurchased, with an amount of 27,596,629.06 yuan. The decrease in this period is due to the cancellation of 23,191,245 treasury shares that have been repurchased in accordance with the "Proposal on the Second Phase of the Company's Share Repurchase Plan through Centralized Bidding in 2024", with an amount of 180,041,028.40 yuan; the implementation of the employee stock ownership plan in this period reduced 15,660,000 treasury shares with an amount of 127,543,379.59 yuan.

The increase in stock capital stock under repurchase obligations is the equity incentive repurchase obligation of RMB 67,818,400.00 confirmed based on the employee stock ownership plan for the current period.

(37) Other comprehensive income

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Periodic Amounts from January 1, 2025 to December 31, 2025

minus: before

Less: before tax

Period plan

After period

into it

Go home

He comprehensive

Income at the beginning of the period Other comprehensive items at the end of the period Total income Less: Income Attribution after tax

Balance: Consolidated income before tax, balance of income and tax expense, in the parent company

The amount of benefit is less

forward

Number of rollovers

stay

Losing shares

Deposit and receive

Yidong

benefit

1. Cannot be reclassified

Other comprehensive income into profit and loss 3,452,408.36 374,005.49 3,078,402.87 3,078,402.87

Including: other rights and interests

Instrument investment company 2,493,369.96 374,005.49 2,119,364.47 2,119,364.47 Change in fair value

Not under the equity method

Can be converted into profit and loss

959,038.40 959,038.40 959,038.40 Other comprehensive income

benefit

2. Reclassify into

Other comprehensive gains and losses 6,910,223.58 682,157.98 682,157.98 7,592,381.56 Income

Among them: foreign currency finance

6,910,223.58 682,157.98 682,157.98 7,592,381.56 Statement conversion difference

Other comprehensive income

6,910,223.58 4,134,566.34 374,005.49 3,760,560.85 10,670,784.43 total

(38) Surplus reserve

Item Opening balance Increase in the current period Decrease in the current period Ending balance

Statutory surplus reserve 1,027,149,340.36 1,027,149,340.36 Total 1,027,149,340.36 1,027,149,340.36

The company's statutory surplus reserve has accumulated to more than 50% of the registered capital and will no longer be withdrawn during the reporting period.

(39) Undistributed profits

Item Amount of this period Before adjustment to the amount of the previous period, undistributed profits at the end of the previous period 3,160,028,831.05 3,697,417,176.64 Total undistributed profits at the beginning of the period adjusted (increase +, decrease -)

Undistributed profit at the beginning of the period after adjustment 3,160,028,831.05 3,697,417,176.64 Plus: Net profit attributable to shareholders of the parent company for the period 1,219,052,875.25 -41,954,827.09 Less: Appropriation of statutory surplus reserve

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Amount for the current period Amount for the previous period

Undistributed profits at the end of the previous period before adjustment 3,160,028,831.05 3,697,417,176.64 Total undistributed profits at the beginning of the period before adjustment (adjustment +, decrease -)

Undistributed profit at the end of the period after adjustment 3,160,028,831.05 3,697,417,176.64 Common stock dividends payable 485,866,253.00 495,433,518.50 Undistributed profit at the end of the period 3,893,215,453.30 3,160,028,831.05

The change in the scope of consolidation due to the same control affected the undistributed profit at the beginning of the period of RMB 768,335.21.

(40) Operating income and operating costs

1. Operating income and operating costs

Amount for the current period Amount for the previous period

Project

Revenue Cost Revenue Cost Main business 2,910,823,634.96 854,627,871.90 1,976,452,105.40 510,530,821.85 Other businesses 36,405,162.19 19,868,604.68 33,148,954.03 13,984,707.73

Total 2,947,228,797.15 874,496,476.58 2,009,601,059.43 524,515,529.58

2. Breakdown information of operating income and operating costs

Amount for the current period Amount for the previous period

Income classification

Operating income Operating costs Operating income Operating costs Main business

By industry type

Pharmaceutical industry 2,903,482,610.16 848,714,408.49 1,973,761,914.93 508,821,521.39 Real estate industry 7,341,024.80 5,913,463.41 2,690,190.47 1,709,300.46 by variety

Biological products (raw materials and manufacturing

2,668,400,780.59 724,713,002.20 1,746,482,948.15 399,917,534.29 dosage products)

Injection pens, blood glucose test strips, etc.

164,131,576.10 78,098,270.25 180,776,246.89 85,799,165.66 Medical devices

Chinese patent medicines and chemicals 70,950,253.47 45,903,136.04 46,502,719.89 23,104,821.44 Rental and sale of real estate in Lijing Garden Community 7,341,024.80 5,913,463.41 2,690,190.47 1,709,300.46Other businesses

According to business nature

Technical services 2,048,792.26 126,112.26

Operating lease 24,626,308.27 9,637,195.59 25,219,510.04 7,157,730.60 Others 9,730,061.66 10,231,409.09 7,803,331.73 6,826,977.13

Total 2,947,228,797.15 874,496,476.58 2,009,601,059.43 524,515,529.58

(41) Taxes and surcharges

Item Amount for the current period Amount for the previous period

Urban maintenance and construction tax 1,722,230.75 973,920.98 Education surcharge 4,868,994.37 2,697,393.76 Local education surcharge 3,245,996.24 1,798,262.53

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Amount for the current period Amount for the previous period

Real estate tax 11,680,387.40 4,246,398.19 Land use tax 2,952,551.72 3,008,457.39 Vehicle and vessel use tax 41,451.04 55,200.96 Stamp tax 1,552,003.94 1,083,334.86 Land value-added tax 59,189.84 172,781.85 Environmental protection tax 25,256.14 17,772.71 Water resources tax 346,857.70 19,118.40 Total 26,494,919.14 14,072,641.63

(42) Sales expenses

Item Amount for the current period Amount for the previous period

Employee compensation 388,715,715.51 257,212,746.07 Depreciation expenses 393,779.59 113,287.05 Travel expenses 248,159,514.49 311,986,939.48 Office expenses 21,601,966.44 44,122,571.50 Postal and telecommunications fees 837,541.32 1,021,472.10 Publicity fees 74,430,884.95 93,237,271.80 Consulting fees and market development fees 336,299,339.92 326,433,473.10 Overseas sales service fees 8,389,173.13 6,719,797.48 Chronic disease platform technology and market service fee 722,236.13 Conference fee 7,965,396.87 8,642,802.50 Others 21,333,915.64 17,934,041.91 Total 1,108,127,227.86 1,068,146,639.12

(43) Management expenses

Item Amount for the current period Amount for the previous period

Employee compensation 64,823,987.46 62,944,302.58 Depreciation expense 32,828,150.17 47,981,802.94 Office expenses 2,316,921.76 1,610,947.38 Travel expenses 4,577,415.38 3,810,341.10 Union funds 5,447,800.91 5,329,142.40 Employee education funds 854,799.69 95,137.37 Amortization of intangible assets 6,509,969.11 5,886,431.29 Water, electricity and steam expenses 4,125,988.61 7,633,123.10 Business entertainment expenses 3,280,408.84 1,799,810.87 Vehicle operation and maintenance expenses 2,021,451.46 1,952,952.02 Postage and telecommunications expenses 100,423.25 78,354.48 Property insurance expenses 38,149.64 356,843.19 Maintenance fee 1,759,192.89 6,350,667.23 Import agency fee 2,425,605.88 Water conservancy construction fund 1,664,171.76 1,233,037.54 Intermediary agency service fee (legal, financial, personnel, etc.) 11,695,883.65 10,072,542.41

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Amount for the current period Amount for the previous period

Consulting fee 1,281,593.72 2,316,093.33 Material consumption 398.23 517,046.08 Share-based payment 5,574,000.00

Other expenses 31,983,621.11 20,232,540.91 Total 180,884,327.64 182,626,722.10

(44) Research and development expenses

Item Amount for the current period Amount for the previous period

Employee compensation 30,381,407.17 10,910,880.32 Depreciation of fixed assets 10,732,511.92 6,221,530.30 Direct investment 68,408,463.20 33,166,997.42 Amortization of intangible assets 51,536,454.55 51,152,997.97Entrusted external expenses 3,854,490.63 -4,230,000.00Others 2,208,697.16 2,082,540.77Total 167,122,024.63 99,304,946.78

(45) Financial expenses

Item Amount for the current period Amount for the previous period

Interest expense 21,813,576.53 14,381,591.49 Fiscal interest discount -479,250.00 Less: Interest income 3,907,249.81 7,927,356.82 Handling fee 211,881.08 963,125.66 Exchange loss 625,240.43 -698,407.25Total 18,743,448.23 6,239,703.08

(46) Other income

Items Amount incurred in the current period Amount incurred in the previous period Asset-related/income-related Government subsidies related to daily activities 10,246,678.70 3,532,209.45 Assets/income-related advanced manufacturing enterprise value-added tax additional deduction

2,059,505.29 437,373.60 Related to income

tax deduction

To absorb employment value-added tax exemption for key groups 16,450.00 72,150.00 Related to income

Personal income tax fee refund 414,565.38 562,251.23 Related to income

Total 12,737,199.37 4,603,984.28

(47) Investment income

Item Amount for the current period Amount for the previous period

Income from long-term equity investments accounted for using the equity method 79,358,231.64 122,210,072.71 Investment income from disposal of long-term equity investments 1,099,181,917.70

Investment income from disposal of trading financial assets 1,051,930.43 694,870.48 Total 1,179,592,079.77 122,904,943.19

(48) Gains from changes in fair value

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Sources of income from changes in fair value Amount incurred in the current period Amount incurred in the previous period

Trading financial assets 218,438.36 400,927.52 Including: Gains from changes in fair value generated by bank wealth management products 218,438.36 400,927.52 Total 218,438.36 400,927.52

(49) Credit impairment losses

Item Amount for the current period Amount for the previous period

Provision for bad debts of notes receivable and accounts receivable financing -496,835.35 165,024.10 Provision for bad debts of accounts receivable 3,843,889.51 15,585,566.90 Provision for bad debts of other receivables -452,741.37 -196,740.44 Total 2,894,312.79 15,553,850.56

(50) Asset impairment losses

Item Amount for the current period Amount for the previous period

Provision for impairment of inventories -11,715,079.94 -22,947,722.63 Provision for impairment of construction in progress -12,236.58 -9,013,000.00 Provision for impairment of development expenses -176,679,703.49 -71,671,367.69 Provision for impairment of fixed assets -20,217.41

Provision for impairment of investment real estate -728,824.01

Total -189,156,061.43 -103,632,090.32

(51) Income from asset disposal

Item Amount for the current period Amount for the previous period

Gains from the disposal of fixed assets not classified as held for sale -3,049,981.56 14,784,313.21 Gains from the disposal of intangible assets not classified as held for sale 344,521.07 Gains from the disposal of right-of-use assets not classified as held for sale -65,182.98

Total -3,115,164.54 15,128,834.28

(52) Non-operating income

Included in non-recurring profit and loss items for the current period Amount incurred in the current period Amount incurred in the previous period

amount of

Penalty income 18,800.00 6,600.00 18,800.00 Accounts payable that cannot be paid 5,809,063.87

The merger cost is less than that of the purchased party.

2,690,806.50

Share of fair value of net assets

Gains from disposal of non-current assets 500.00 135,163.67 500.00 Others 249,893.99 927,240.55 249,893.99 Total 269,193.99 9,568,874.59 269,193.99

(53) Non-operating expenses

Included in non-recurring profit and loss items for the current period Amount incurred in the current period Amount incurred in the previous period

amount of

Loss on scrapping of non-current assets 82,140,987.80 255,095,918.88 82,140,987.80 External donation expenditure 12,187,309.23 5,384,474.75 12,187,309.23

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. From January 1, 2025 to December 31, 2025, items included in non-recurring gains and losses for the current period Amount incurred in the current period Amount incurred in the previous period

amount of

Late fees and fines 2,111,835.60 84,553.32 2,111,835.60 Litigation compensation 60,816,238.80

Others 1,108,085.41 121,762.61 1,108,085.41 Total 97,548,218.04 321,502,948.36 97,548,218.04

(54) Income tax expenses

1. Details of income tax expenses

Item Amount for the current period Amount for the previous period

Current income tax expense 208,466,988.73 149,397.94 Deferred income tax expense 71,587,718.81 -99,702,243.56 Total 280,054,707.54 -99,552,845.62

2. Adjustment process of accounting profits and income tax expenses

Item Amount

Total profit 1,477,252,153.34 Income tax expense calculated according to statutory/applicable tax rates 221,587,823.00 Impact of different tax rates applicable to subsidiaries 4,244,071.41 Impact of adjusting income tax in previous periods 4,132,888.61 Impact of non-taxable income -11,903,734.75 Impact of non-deductible costs, expenses and losses 62,478,203.55 Effect of using deductible losses of deferred income tax assets not recognized in the previous period -14,943,436.48 Deductible temporary differences or deductible temporary differences of deferred income tax assets not recognized in the current period

55,166,756.35 The impact of deducting losses

The impact of additional deductible expenses stipulated in the tax law -40,696,913.63 Changes in the balance of deferred income tax assets/liabilities at the beginning of the period due to tax rate adjustments -10,950.52 Income tax expenses 280,054,707.54

(55) Other comprehensive income

See Note 5 (37) for details.

(56) Cash flow statement

1. Cash related to operating activities

(1) Other cash received related to operating activities

Item Amount for the current period Amount for the previous period

Government subsidies and personal tax refunds 11,384,012.46 4,754,074.07 House rent collected 25,119,183.31 24,273,242.68 Interest income 3,936,590.55 7,925,200.37 Current accounts and others 35,056,478.31 2,136,409.43

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Items Amount for the current period Amount for the previous period

Total 75,496,264.63 39,088,926.55

(2) Other cash paid related to operating activities

Item Amount for the current period Amount for the previous period

Various sales expenses 676,295,018.32 719,987,595.67 Various administrative expenses 57,383,436.35 43,757,376.84 Various research and development expenses 31,217,956.60 5,901,409.35 Payment of current accounts and others 99,996,771.55 3,354,671.50 Total 864,893,182.82 773,001,053.36

2. Cash related to investing activities

(1) Cash received related to important investment activities

Item Amount for the current period Amount for the previous period

Recovery of investment in purchasing financial products with own funds 100,000,000.00 130,000,000.00 Recovery of equity transfer funds for investment in associates 1,301,288,112.00

Total 1,401,288,112.00 130,000,000.00

(2) Cash payments related to important investment activities

Item Amount for the current period Amount for the previous period

Use own funds to purchase financial products 100,000,000.00 130,000,000.00 Purchase equity in Shanghai Xinyao Paike Medical Technology Co., Ltd. 30,000,000.00

Purchase an associate (Junhemeng Biopharmaceutical (Hangzhou) Co., Ltd.)

100,000,000.00 equity

Purchase equity in a joint venture (Shanghai Juyi Network Technology Co., Ltd.) 1.00 Pay clinical trial fees for capitalized projects 70,000,000.00

Total 200,000,000.00 230,000,001.00

(3) Other cash paid related to investment activities

Item Amount for the current period Amount for the previous period

Handling fee for transfer of investment equity in associated enterprises 44,374.00

Total 44,374.00

3. Cash related to financing activities

(1) Other cash received related to financing activities

Item Amount for the current period Amount for the previous period

Employee stock ownership plan funds 67,818,400.00

30% of the unvested portion of the employee stock ownership plan is sold to external parties, minus the repurchase capital

7,245,976.65 interest

Total 67,818,400.00 7,245,976.65

(2) Other cash paid related to financing activities

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Amount for the current period Amount for the previous period

Pay the investment amount of minority shareholders of the subsidiary to be dissolved 60,000.00 Repay the factoring financing of accounts receivable 124,031,323.95 Repurchase the principal and interest of the restricted stocks that have been granted but not unlocked 16,302,622.65 Repurchase the company's shares for cancellation or equity incentive 300,279,281.09 Pay the lease liability deposit and rent 7,206,946.01 2,994,883.85 Repurchase of treasury shares 27,596,629.06

Total 34,803,575.07 443,668,111.54

(3) Changes in various liabilities arising from financing activities

Increase in this period Decrease in this period

Item Beginning balance Closing balance

Cash changes Non-cash changes Cash changes Non-cash changes

Short-term borrowings 416,758,991.22 203,000,000.00 24,236.11 584,247,463.22 2,511,528.00 33,024,236.11

Long-term borrowings 253,490,000.00 270,100,000.00 64,650,000.00 266,750,000.00 192,190,000.00 Arrival within one year

Non-current liabilities for the period 4,396,642.54 276,110,022.36 5,164,812.00 275,341,852.90 Current liabilities

Lease liabilities 19,502,393.05 16,371,102.32 7,199,249.60 3,343,999.47 25,330,246.30

Total 694,148,026.81 473,100,000.00 292,505,360.79 661,261,524.82 272,605,527.47 525,886,335.31

(57) Supplementary information for cash flow statement

1. Supplementary information to the cash flow statement

Item Amount incurred in the current period Amount incurred in the previous period 1. Adjust net profit to cash flow from operating activities

Net profit 1,197,197,445.80 -42,725,901.50 plus: credit impairment provision -2,894,312.79 -15,553,850.56 Asset impairment loss 189,156,061.43 103,632,090.32 Depreciation of fixed assets, depreciation of oil and gas assets, depreciation of productive biological assets,

205,046,414.49 127,616,061.27 Depreciation of investment real estate

Depreciation of right-of-use assets 7,285,367.21 1,203,914.99 Amortization of intangible assets 58,787,682.47 60,189,867.54 Amortization of long-term prepaid expenses 29,869,258.81 16,031,705.11 Losses on disposal of fixed assets, intangible assets and other long-term assets (collection

3,115,164.54 -15,128,834.28 (please fill in with "-")

Loss on scrapping of non-current assets (income is listed with "-") 82,140,487.80 255,095,918.88 Net exposure hedging loss (income is listed with "-")

Loss from change in fair value (income is listed with "-") -218,438.36 -400,927.52 Financial expenses (income is listed with "-") 21,881,108.21 13,458,412.94 Investment losses (income is listed with "-") -1,179,592,079.77 -122,904,943.19

Decrease in deferred income tax assets (increases are listed with "-") 76,558,192.02 -104,360,643.84

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Items Amount incurred in the current period Increase in deferred income tax liabilities in the amount incurred in the previous period (decreases are indicated with "-") -4,596,467.72 4,580,358.19 Decrease in inventories (increases are indicated with "-") 20,370,832.19 -48,506,463.48 Decrease in operating receivables (increases are indicated by "-") 85,452,893.72 319,112,392.24 Increase in operating payables (decreases are indicated by "-") -100,334,360.22 -89,010,297.16

Others

Net cash flow generated from operating activities 689,225,249.83 462,328,859.95 2. Major investments and financing activities that do not involve cash receipts and payments

debt to capital

Convertible corporate bonds due within one year

Financing leased fixed assets

3. Net changes in cash and cash equivalents

Closing balance of cash 1,425,177,529.82 590,195,292.13 Less: Opening balance of cash 590,195,292.13 1,104,204,462.65 Add: Closing balance of cash equivalents

Less: Opening balance of cash equivalents

Net increase in cash and cash equivalents 834,982,237.69 -514,009,170.52

2. Cash and cash equivalents

Item Ending balance Beginning balance

1. Cash 1,425,177,529.82 590,195,292.13 Including: Cash on hand 117,097.92 98,420.06 Bank deposits that can be used for payment at any time 1,425,056,493.76 590,096,868.02

Other monetary funds available for payment at any time 3,938.14 4.05

2. Cash equivalents

3. Balance of cash and cash equivalents at the end of the period 1,425,177,529.82 590,195,292.13

4. Monetary funds that are not cash and cash equivalents

Item Ending balance Beginning balance Reason

Bank guarantee deposit 8,657,093.67 cannot be used at any time Total 8,657,093.67 ——

(58) "Other" items in the statement of changes in owners' equity

The equity part corresponding to "III. (II) 4. Others" in the statement of changes in owner's equity is the cancellation of treasury shares, with an impact of -23,191,245.00 yuan. The corresponding capital reserve part is the cancellation of treasury shares, with an impact of -156,849,783.40 yuan; the implementation of the employee stock ownership plan has an impact of -59,724,979.59 yuan. For details of the corresponding treasury shares, please refer to "Note 5 (36) Treasury Stocks" for disclosure.

The capital reserve portion corresponding to "III. (VI) Others" in the statement of changes in owners' equity is the impact of the merger of enterprises under common control -3,591,500.00 yuan and the impact of passive dilution of the equity of subsidiary Shanghai Longke Pharmaceutical Co., Ltd. 418,766.40 yuan.

(59) Foreign currency monetary items

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Foreign currency balance at the end of the period Conversion exchange rate Monetary funds converted into RMB at the end of the period 6,701,919.96 Including: U.S. dollars 953,494.19 7.0288 6,701,919.96 Accounts receivable 24,827,093.62 Including: U.S. dollars 3,532,195.20 7.0288 24,827,093.62 Accounts payable 7,883,236.03 Including: Euro 260,602.86 8.2355 2,146,194.85

Swiss francs 648,180.00 8.8510 5,737,041.18 Other payables 1,289,222.50 Including: US dollars 183,420.00 7.0288 1,289,222.50

(sixty) leasing

1. As a lessee

Item Amount

Short-term lease expenses included in the simplified treatment of related asset costs or current profits and losses 1,062,356.49 Interest expenses on lease liabilities 1,036,759.16 Total cash outflows related to leases 8,269,302.50

2.As a lessor

(1) Operating lease

Including: Variable lease items not included in lease receipts Lease income

Payment related revenue

House rental income 20,481,138.14

Equipment rental income 4,145,170.13

Total 24,626,308.27

6. R&D expenditures

(1) Listed by nature of expenses

Item Amount for the current period Amount for the previous period

Employee compensation 85,171,888.46 64,795,882.01 Depreciation of fixed assets 21,076,388.29 17,187,607.66 Direct investment 317,300,190.54 71,859,407.37 Asset amortization 53,922,043.91 53,741,976.16Entrusted external expenses 5,169,678.96 220,658,571.83Others 23,213,924.80 22,218,798.66

Total 505,854,114.96 450,462,243.69 Including: Expenditure R&D expenditure 167,122,024.63 99,304,946.78 Capitalized R&D expenditure 338,732,090.33 351,157,296.91

(2) Development expenditures on R&D projects that meet capitalization conditions

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Increased amount in this period Decreased amount in this period Beginning of period Items at the end of period

Balance Recognized as intangible Balance internal development expenditure Others transferred to current profit and loss

assetsinsulin environment

External research and development expenditure 63,646,349.03 72,984.86 63,719,333.89 expenditure

islet of degludec

Vegetarian raw materials and

13,611,710.32 13,611,710.32 Injection

(DB06)

Aspart International

Register

10,428,794.11 20,836,549.16 31,265,343.27 (THDB021

8)

Recombinant Lai Prefecture

proinsulin

Ingredients and injections 45,637,300.39 45,637,300.39 Injection

(DB04)

Super fast acting type

Insulin

Research on similar substances

research and development

351,591,695.75 494,912,589.65 (BC 143,320,893.90

Lispro)

(THDB020

6)

islet of lispro

Injection

113,656,635.27 8,444,190.38 122,100,825.65 (25R)

(DB042)

SGLT1

/SGLT

2/DPP4 three

target inhibition

26,659,063.73 31,603.77 26,690,667.50 doses for sugar

Urine treatment

(THDBH10

0/101)

etoricoxib

film

15,570,325.86 340,497.16

(THDBH16 15,910,823.02 1)

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

Glargine International Registration from January 1, 2025 to December 31, 2025

7,325,612.26 6,002,103.41 13,327,715.67 (THDB021 7)

Gout URAT1 project (THDBH130 83,803,235.05 2,466,467.05 86,269,702.10 /THDBH130 tablets)

Gout XO/URAT1 project

70,264,403.48 10,278,957.59 80,543,361.07 (THDBH150/THDBH151 tablets)

GIP&GLP-1 for diabetes treatment

43,472,021.80 9,200,035.07 - - - 52,672,056.87 (THDBH120 / THDBH120 for injection) small molecule GLP-1 agonist for the treatment of diabetes 15,195,211.48 1,685,926.92 16,881,138.40 (THDBH110 /THDBH110 capsule)

Semaglutide injection

55,876,707.46 36,639,043.72 92,515,751.18 (THDB022 5)

International registration of liraglutide API and liraglutide injection 2,112,462.97 3,832,819.20 5,945,282.17 (THDB022 6)

International registration of insulin lispro 1,748,396.06 3,786,814.19 5,535,210.25 (THDB022 7)

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

January 1, 2025 - December 31, 2025

Su/Lilaru

Peptide compound injection

18,277,375.69 52,124,487.32 70,401,863.01 Injection

(THDB021

3)

polypeptide

GIP&GLP-1

weight loss program

8,839,284.45 38,004,785.56 46,844,070.01 (THDBH12

0/THDBH12

1)

islets of aspart

Vitamin 30 injection

New liquid regulations 959,493.31 959,493.31 projects

(DB230)

islets of aspart

Vitamin 50 injection

New liquid regulations 704,437.76 704,437.76 projects

(DB231)

Total 947,716,585.16 338,732,090.33 15,910,823.02 176,679,703.49 1,093,858,148.98

(1) Important capitalized R&D projects

Estimated completion date Estimated economic benefits generation date Capitalization commencement date

Project R&D progress Specific basis time method points

After obtaining the production approval document, pass

Insulin degludec raw materials and injection preparation clinical trials

September 2028 Obtained through self-production and sales September 2022

(DB06) Test Approval

profit

Aspartame international registration official declaration European and American official

December 2027 Profitable from self-production and sales September 2022

(THDB0218) Review Stage Acceptance Letter

After obtaining the production approval document, pass

Recombinant insulin lispro API and phase III clinical trial 2027-12

Obtained through self-production and sales in October 2018

Injection (DB04) Trial Phase Month Approval

profit

After obtaining the production approval for ultra-rapid-acting insulin analogues,

Phase III clinical trial research and development (BC Lispro) June 2028 Obtained through self-production and sales November 2020

Trial phase approval (THDB0206)

Phase III clinical

After obtaining the production approval document, pass

Insulin Lispro Injection (25R) Experimental Phase Clinical Trial

December 2027 Obtained the title through self-production and sales October 2018

(DB042) Completed and prepared for compound interest

Report an NDA

Glycerin International Registration Preparation for declaration December 2028 Profit from self-production and sales July 2022 European and American official

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Estimated completion Time when economic benefits are expected to be generated Start of capitalization

Project R&D progress Specific basis

time way point

(THDB0217) Information stage communication emails/meetings

After obtaining the production approval document, pass

Gout XO/URAT1 Project Phase II Clinical Trial

December 2030 Obtained through self-production and sales December 2022

(THDBH150/THDBH151 tablets) Trial Phase Approval

profit

GIP&GLP-1 is used in phase I clinical trials for the treatment of diabetes. After obtaining the production approval,

Clinical trial treatment (THDBH120/injection) Trial phase December 2031 Obtained through self-production and sales December 2023

Approved by THDBH120)

Small molecule GLP-1 agonists are used

After obtaining the production approval for Phase I clinical trials,

Diabetes Treatment Clinical Trials

Experimental phase December 2030, November 2023 through self-production and sales

(THDBH110/THDBH110 glue approved

profit

sac)

Sign a business

Obtain production approval documents and suppliers

Semaglutide injection phase III clinical authorization and

In December 2027, after the industrialization of equity interests, the sale will be completed in May 2024.

(THDB0225) MAH profit from cooperative sales in experimental stage

Agreement

After obtaining the production approval document, pass

Insulin degludec/liraglutide complex phase III clinical trial

September 2028 Obtained through self-production and sales May 2024

Fang injection (THDB0213) trial phase batch compound interest

After obtaining the production approval document, pass

Peptide GIP&GLP-1 Weight Loss Project Phase II Clinical Trial

December 2030 Obtained through self-production and sales April 2024

(THDBH120/THDBH121) Experimental phase with compound interest

(2) Provision for impairment of development expenditures

Item Opening balance Increase in the current period Decrease in the current period Ending balance Impairment test situation SGLT1/SGLT2/DPP4 Three targets

Point inhibitors are used for the treatment of diabetes 26,690,667.50 26,690,667.50 Full provision for impairment preparation (THDBH100/101)

Overseas R&D expenditures on insulin 63,719,333.89 63,719,333.89 Full impairment provision Gout URAT1 project

(THDBH130/THDBH130 86,269,702.10 86,269,702.10 Full impairment provision)

Total 176,679,703.49 176,679,703.49 ——

7. Changes in consolidation scope

(1) Business mergers under the same control that occurred in the current period

1. Business mergers under common control that occurred in the current period

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

industry

Together

constitute

and merge

same

China and Japan

Controlled by merger Beginning of the current period of merger Beginning of the current period of merger

The merged company is merged during the comparison period. The merged party is a subsidiary during the comparison period. It is merged until the merger date. It is merged on the merger date.

Acquisition date Confirmed Income of the merging party Net profit of the merging party Name of business combination Income of the merging party Net profit of the merging party

Determined

merged

Quanyi

Basis

Benefits

Than

Example

participate

merge

enterprise

industry in

Toho

merge

in and out

before and after

Export trade is subject to

2025

Dongbao got

Yi 55 years 7 6,767,486.79 4,043,180.46 3,442,180.29 1,396,973.10

industrial control

(Hai % 7 Yuan Yuan Yuan Yuan Group Co., Ltd.

day

South) share rights

limited

limited

company

company

control

And not

temporarily

sexual

2. Merger costs

Merger cost Dongbao Import and Export Trading (Hainan) Co., Ltd. Cash 3,591,500.00

3. Book value of the assets and liabilities of the merged party on the merger date

Dongbao Import and Export Trading (Hainan) Co., Ltd.

Merger date Assets at the end of the previous period: 8,272,367.69 3,600,117.42 Monetary funds 8,261,909.69 3,600,091.90 Accounts receivable 10,458.00 25.52 Liabilities: 1,831,519.00 1,203,144.32 Accounts payable 1,831,519.00 1,203,144.32 Net assets: 6,440,848.69 2,396,973.10 Less: minority shareholders’ equity 2,898,381.91 1,078,637.89 Acquired share attributable to the acquirer 3,542,466.78 1,318,335.21

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

8. Interests in other entities

(1) Equity in subsidiaries

1. Structure of enterprise groups

Main business Registered capital Shareholding ratio (%)

Subsidiary name Place of registration Nature of business Place of acquisition (RMB 10,000) Direct Indirect

Plastic building materials

and product production

Tonghua Dongbao manufactures and sells

Tonghua County Express Tonghua County Express sets up or invests in environmentally friendly building materials sales services;

Damao Town Li 10,000.00 Damao Town Li 95.09 Shareholding limited company acquired by other building materials and

Mingcun Mingcun Subsidiary Company Product Production

manufacturing, sales

Services etc.

Changchun City High Changchun City High

Changchun Dongbao established or invested

New Development Zone New Development Zone Pharmaceutical Research and Development

Pharmaceutical Co., Ltd. 1,000.00 95.00 Obtained from capital

Innovation Road 66 Innovation Road 66 Research and Development

Company Subsidiary No.

biological products,

beijing economy beijing economy

Beijing Dongbao Natural Medicine Establishment or Investment

technology development technology development

Biotechnology 10,000.00 technology development 100.00 obtained

District Donghuan North District Donghuan North

Co., Ltd. issued; rented from No. 11 Zizi Road No. 11 Road

Have a workshop

Tonghua Dongbao

Jinhongjifang Real Estate Development

Tonghua County Express Tonghua County Express

Real estate development, sale,

Damao Town Li — Damao Town Li 97.59 Independent Entity Co., Ltd. Second-hand House Transaction

Mingcun Mingcun

Tonghua County No.1

A branch

Tonghua Shitong Tonghua Shitong Biopharmaceuticals

Tonghua Purple Star Establishment or Investment

Chemical Development Zone Chemical Development Zone Manufacturing; Biology

Biopharmaceutical 10,000.00 100.00 Capital-obtained

Dongbao Street Dongbao Street Drug R&D,

Co., Ltd. Subsidiary No. 3539 No. 3539 Production and sales

medical research

and experimental

Dongbao Purple Star Hangzhou, Zhejiang Province Hangzhou, Zhejiang Province Exhibition, pharmaceutical production

Establish or invest in (Hangzhou) manufacturing industry, retail and

10,000.00 100.00 The medical and pharmaceutical materials obtained are Xinqu Xiasha Xinqu Xiasha wholesale; technology

Subsidiary Co., Ltd. Street Street Service, Technology

development, technology

Consultation, etc.

pharmaceutical production;

China (Part 1) China (Part 1)

Pharmaceutical wholesale;

Sea) free trade Sea) free trade

Pharmaceutical retail;

Shanghai Longke Easy Test Zone Easy Test Zone Establishment or Investment

Drug import and export

Pharmaceutical Co., Ltd. Zhongke Road 702 4,872.71 Zhongke Road 702 55.00 Obtained by capital

mouth; pharmaceutical committee

Company No. 3, Building 13, Building 3, 13. The subsidiary company entrusts the production. doctor

Layer A1305 Layer A1305

academic research and

room room

Experimental development

Third type of doctor

3,400.00 Medical equipment

Shanghai Municipality Shanghai Municipality

Shanghai Orange Medical

Touqiao, Xian District

(Note: 2026

Touqiao, Xian District

Business; Goods import Non-identical control Network Technology Export; Technology 100.00 Enterprise Co., Ltd. under the control

Lane 498, East Road

In March of this year, note

Lane 498, East Road

Import and export; Food Merger No. 47 No. 47

product management; mutual

Registered capital consists of

Online sales.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Main business Registered capital Shareholding ratio (%)

Subsidiary name Place of registration Nature of business Place of acquisition (RMB 10,000) Direct Indirect

First class doctor

62.85 million

Medical device sales

Change to sale; second category

medical device

34 million)

sales; health

Consulting services

(excluding medical consultation

medical services)

Hainan Province 3 Hainan Province 3

Yazhou Yazhou Yazhou Yazhou

Toho in and out

District Yazhou Bay District Yazhou Bay Same control port trade (sea import and export agency

Science and Technology City Ya 100.00 Science and Technology City Ya 55.00 Under the enterprise Henan) Co., Ltd. Axiom, etc.

bren industries bren industries and

Division

Building 5, Garden 3 Building 5, Garden 3

Room 516, Floor 516, Floor

Other notes:

(1) There is no situation where the shareholding ratio of a subsidiary is different from the voting rights ratio.

(2) Explanation on the inclusion of the independent entity Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. Tonghua County First Branch into the scope of consolidation:

On December 26, 2013, the company's original holding subsidiary - Tonghua Dongbao Yongjian Pharmaceutical Co., Ltd. and its holding subsidiary - Tonghua Dongbao Environmental Protection Building Materials Co., Ltd. and Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. signed an investment cooperation agreement. The agreement stipulates that Tonghua Dongbao Yongjian Pharmaceutical Co., Ltd. and Tonghua Dongbao Environmental Protection Building Materials Co., Ltd. will invest a total of 50 million yuan, with an investment ratio of 51%: 49%, Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. Tonghua County No. 1 Branch (hereinafter referred to as "Jinhongji No. 1 Branch") was established. Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. uses qualifications as capital contribution and is responsible for the management and operation of real estate projects. Tonghua Dongbao Yongjian Pharmaceutical Co., Ltd. and Tonghua Dongbao Environmental Protection Building Materials Co., Ltd. enjoy income distribution based on their capital contribution ratio. Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. enjoys a one-time fixed income of 1 million yuan and will no longer participate in income distribution.

Because the following conditions are met: ① The assets of Jinhongji Branch 1 are the only source of repaying its liabilities or other equity and cannot be used to repay other liabilities of Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. Therefore, the Company regards Jinhongji Branch No. 1 as a separable part from Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. and includes it within the scope of the Company's consolidated financial statements.

In 2015, the company absorbed and merged the original holding subsidiary Tonghua Dongbao Yongjian Pharmaceutical Co., Ltd., and Tonghua Dongbao Yongjian Pharmaceutical Co., Ltd.'s rights and risks in Jinhongji Branch 1 were inherited by the company.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

2. Important non-wholly owned subsidiaries of the company

If the total assets, operating income or total profits (or absolute value of losses) of each non-wholly-owned subsidiary does not reach more than 5% of the corresponding items in the company's consolidated financial statements, that is, there is no important non-wholly-owned subsidiary.

(2) Interests in joint ventures or associated enterprises

1. Important information on joint ventures

Shareholding ratio (%) Accounting treatment of investment Name of associated enterprise Main place of business Registration place Nature of business

Direct Indirect method pharmaceutical production;

Drug import and export

mouth; second category

Xiamen city sea

Xiamen Haicangxin Medical Device Manufacturing Co., Ltd.

Xiamen Tebao Bioengineering Cangxinyang Engineering

Yang Industrial Zone Wengjiao Industrial; Category III 10.29 Equity Method Accounting Co., Ltd. Industrial Zone Wengjiao

No. 330 Medical Devices Department

Road No. 330

product; third category

medical device

camp.

Medical device batch

Taichung City Nanfa; Biotechnology

Taichung City South District

Huaguang Biotechnology Co., Ltd. Daqing Street, District Technical Services; Precision

Qing Street Section 2 100 19.62 Equity method accounting company Section 2 100 Confidential instrument batch

No.

No. issued; medical device

Material manufacturing, etc.

Because it has representatives on the board of directors or similar authority of the investee, the company still has significant influence on the above associates although it holds less than 20% of the voting rights.

2. Main financial information of important associates

Ending balance/Amount incurred in the current period

Project

Xiamen Tebao Bioengineering Co., Ltd. Huaguang Biotechnology Co., Ltd.

Current assets 2,730,375,042.65 348,284,979.60 Non-current assets 1,643,145,577.89 924,366,660.40 Total assets 4,373,520,620.54 1,272,651,640.00 Current liabilities 707,113,916.83 463,670,514.80 Non-current liabilities 216,828,051.17 417,304,088.00 Total liabilities 923,941,968.00 880,974,602.80 Minority shareholders’ equity 2,473,934.40 Equity attributable to shareholders of the parent company 3,449,578,652.54 389,203,102.80 Net assets calculated based on shareholding ratio

355,044,601.92 76,372,343.49 shares

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Ending balance/Amount incurred in the current period

Project

Xiamen Tebao Bioengineering Co., Ltd. Huaguang Biotechnology Co., Ltd.

Adjustments

Among them: goodwill

Unrealized profits from internal transactions -476,341.33

Others

Investment in equity interests in associated enterprises

355,044,601.92 75,896,002.16 Book value

Joint ventures with public quotations

3,515,607,171.52 182,595,429.58 Fair value of equity investment

Operating income 3,695,567,867.63 449,016,427.20 Net profit 1,031,236,252.58 -43,467,168.00 Net profit from discontinued operations

Other comprehensive income 8,348,054.00 Total comprehensive income 1,031,236,252.58 -35,119,114.00 Received from associates in this period

40,424,070.68

of dividends

Beginning balance/Amount incurred in the previous period

Project

Xiamen Tebao Bioengineering Co., Ltd. Huaguang Biotechnology Co., Ltd.

Current assets 1,827,090,165.08 395,468,734.20 Non-current assets 1,223,324,670.50 904,019,892.75 Total assets 3,050,414,835.58 1,299,488,626.95 Current liabilities 420,629,465.19 515,121,454.20 Non-current liabilities 76,469,078.64 352,462,185.30 Total liabilities 497,098,543.83 867,583,639.50 Minority shareholders’ equity 2,052,981.70 Equity attributable to shareholders of the parent company 2,553, 316,291.75 429,852,005.75 Net assets calculated based on shareholding ratio

409,234,300.15 84,507,306.44 shares

Adjustments

Among them: goodwill

Unrealized profits from internal transactions 283,545.62

Others -10,843,321.04 Investment in equity interests in associates

409,234,300.15 84,117,300.92 Book value

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Beginning balance/Amount incurred in the previous period

Project

Xiamen Tebao Bioengineering Co., Ltd. Huaguang Biotechnology Co., Ltd.

Joint ventures with public quotations

4,783,732,364.18 173,059,560.00 Fair value of equity investment

Operating income 2,817,158,242.24 444,578,661.45 Net profit 827,602,233.89 -28,620,672.85 Net profit from discontinued operations

Other comprehensive income 8,278,252.90 Total comprehensive income 827,602,233.89 -20,342,419.95 Received from associates in this period

Dividends of 26,732,046.74 5,282,166.33

9. Government subsidies

(1) Liability items involving government subsidies

Included in this period

Financial statements New in this period Transferred in this period Others and assets/receipts Opening balance Non-operating income Closing balance

Item Subsidy amount Other income changes Amount of stakeholder participation

Assets/deferred income 27,655,981.71 1,950,000.00 1,197,340.92 28,408,640.79

Total related interests 27,655,981.71 1,950,000.00 1,197,340.92 28,408,640.79 ——

(2) Government subsidies included in current profits and losses

Type Amount for the current period Amount for the previous period

Related to assets 1,197,340.92 823,174.29 Related to income 9,049,337.78 2,709,035.16 Total 10,246,678.70 3,532,209.45

10. Risks related to financial instruments

(1) Risks of financial instruments

The Company faces various financial risks in the course of its operations: credit risk, market risk and liquidity risk.

1. Credit risk

Credit risk refers to the risk that one party to a financial instrument fails to perform its obligations, causing financial losses to the other party. The Company mainly faces customer credit risks caused by credit sales.

Before entering into a new contract, the Company conducts an assessment of the credit risk of new customers, including external credit ratings and, in some cases, bank references when this information is available. The company conducts quarterly monitoring of existing customer credit ratings to

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

Monthly review from January 1, 2025 to December 31, 2025 and aging analysis of accounts receivable to ensure that the company's overall credit risk is within a controllable range.

2. Market risk

Market risk of financial instruments refers to the risk that the fair value or future cash flow of financial instruments fluctuates due to changes in market prices, including exchange rate risk, interest rate risk, etc.

(1) Interest rate risk

Interest rate risk refers to the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market interest rates. The Company has no long-term borrowings and there is no interest rate risk related to long-term borrowings.

(2) Exchange rate risk

Exchange rate risk refers to the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in foreign exchange rates. The Company tries its best to match foreign currency income with foreign currency expenditures to reduce exchange rate risk.

3. Liquidity risk

Liquidity risk refers to the risk of a shortage of funds when an enterprise fulfills its obligations to settle by delivering cash or other financial assets. The Company's policy is to ensure that sufficient cash is available to repay debt obligations as they fall due.

The Company's various financial liabilities are listed as follows based on undiscounted contractual cash flows by maturity date:

Ending balance

Item Total

Within one year One to two years Two to three years More than three years

Short-term borrowings 33,024,236.11 33,024,236.11 Notes payable 8,657,093.67 8,657,093.67 Accounts payable 57,601,400.44 18,273,259.13 5,299,143.05 1,272,026.01 82,445,828.63 Other payables 76,978,371.98 453,044.35 312,500.00 5,381,991.59 83,125,907.92 Non-current accounts due within one year

275,341,852.90 275,341,852.90 Liquid liabilities

Long-term borrowings 192,190,000.00 192,190,000.00 Lease liabilities 9,409,467.74 8,207,860.00 9,113,834.04 26,731,161.78 Total 451,602,955.10 220,325,771.22 13,819,503.05 15,767,851.64 701,516,081.01

Opening balance

Item Total

Within one year One to two years Two to three years More than three years

Short-term borrowings 416,758,991.22 416,758,991.22 Notes payable 10,000.00 10,000.00 Accounts payable 84,678,696.70 10,617,034.09 351,265.60 1,052,381.75 96,699,378.14 Other payables 66,330,991.25 748,796.42 842,500.00 5,838,901.50 73,761,189.17

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Opening Balance from January 1, 2025 to December 31, 2025

Item Total

Within one year One to two years Two to three years More than three years

Non-current due within one year

4,396,642.54 4,396,642.54 Liquid liabilities

Long-term borrowings 97,500,000.00 155,990,000.00 253,490,000.00 Lease liabilities 5,007,448.27 4,907,628.00 11,451,132.00 21,366,208.27Total 572,175,321.71 113,873,278.78 162,091,393.60 18,342,415.25 866,482,409.34

(2) Transfer of financial assets

1. Classification of transfer methods

Finance transferred Finance transferred Derecognition situation Transfer method of derecognition situation

Nature of assets Amount of assets Termination of recognition Basis for judgment of non-termination of recognition

Credit endorsement from the accepting bank Notes receivable 39,358,556.52 29,513,385.34 9,845,171.18

Higher level

Accepting bank credit discount notes receivable 28,148,844.02 28,148,844.02

Total of higher grades 67,507,400.54 57,662,229.36 9,845,171.18

2. Financial assets derecognized due to transfer

Financial assets derecognized Category of financial assets with gains related to derecognition Method of transfer

amount and loss

Notes receivable endorsement 29,513,385.34

Notes receivable Discount 28,148,844.02 -942,500.69

11. Fair value

(1) Analysis of assets and liabilities measured at fair value according to fair value hierarchy

The first level of fairness The second level of fairness The third level of fairness

Item Total

value measurement value measurement value measurement

1. Continuous fair value measurement 121,285,555.26 68,693,369.96 189,978,925.22

(1) Trading financial assets 63,218,438.36 63,218,438.36

(2) Investment in other equity instruments 68,693,369.96 68,693,369.96

(3) Financing of receivables 58,067,116.90 58,067,116.90 Total assets continuously measured at fair value 121,285,555.26 68,693,369.96 189,978,925.22

1. The fair value of trading financial assets (bank structured wealth management products) in the second level fair value measurement is measured using the deposit principal plus the most likely structural interest;

2. The fair value of receivable financing (bank acceptance bills with a higher credit rating of the accepting bank) in the second level fair value measurement is measured at the face amount;

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

3. The fair value of other equity instrument investments in the third-level fair value measurement, the change in fair value is measured by the invested unit

Net profit is determined based on parameters such as shareholding ratio.

12. Related party relationships and transactions

(1) The parent company of the company

Parent company to this company Parent company to this company

Name of parent company Registration place Nature of business Registered capital The company’s voting shareholding ratio

Right proportion building materials, machinery

Equipment purchase and sale; import

Dongbao Industrial Group Dongbao, Tonghua County (nationally limited one,

25,900.00 31.63% 31.63% Co., Ltd. Xincun (excluding Class II commodities)

Raw materials required for production

Materials etc.

The ultimate controlling party of the company is: Li Yikui.

(2) Situation of the Company’s subsidiaries

See Note "8. Interests in Other Entities" for details.

(3) Information on the Company’s joint ventures and associated enterprises

The company The company's joint (joint) company Enterprise type Legal representative Owner Registered address of the invested party Nature of business Registered capital

Name Type Person-to-Stock Ratio Voting Rights Example Ratio Pharmaceutical production; pharmaceuticals

Xiamen City Sea Import and Export; Category II

Xiamen Tebao Biotechnology

The shares include Cangxin Yanggong Medical Equipment Manufacturing;

Engineering Co., Ltd. Sun Li 408.18948 million yuan 10.29 10.29

Co., Ltd. Business District Wengjiao Class III Medical Devices

company

No. 330 Road Machinery production; Category III

Medical device business

Medical device wholesale;

Taichung City South Biotechnology Services;

Huaguang Biotechnology Co., Ltd. shares

District Daqing Street Huang Chunmu Precision Instrument Wholesale; 1 billion (NT$) 19.62 19.62 Co., Ltd.

No. 100, Section 2 Medical equipment manufacturing

Wait

Shares have

Co., Ltd. Hangzhou, Zhejiang Province

(Note: Qiantang, Prefecture and City Pharmaceutical Production; Pharmaceuticals

Junhe alliance biological system

2026 Ou Hexiangke commissioned production; pharmaceuticals

Pharmaceutical (Hangzhou) Shares XU KUI 133,862,443 yuan 7.10 7.10

Changed in January: Building 9, Technology Center Wholesale; Pharmaceutical retail

Ltd.

Update stocks 501, 502, etc.

Limited copies, Room 503, 504

company)

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

(4) Other related parties

Names of other related parties Relationship with the Company

Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd. Tonghua Chengbao Investment Co., Ltd., a company controlled by the major shareholder Tonghua Dongbao Construction Engineering Co., Ltd., a company controlled by the major shareholder Tonghua Dongbao Wuyao Co., Ltd., a company controlled by the major shareholder Jilin Haide Environmental Protection Engineering Co., Ltd., a company controlled by the major shareholder Shanghai Yousate Management Consulting Partnership (Limited Partnership), Tonghua Innovation Color Printing Co., Ltd., a company controlled by the major shareholder Companies controlled by the same major shareholder: Tonghua Dongbao Group Import and Export Co., Ltd. Jilin Hengde Environmental Protection Co., Ltd., a company controlled by the major shareholder; Shanghai Tongbao Investment Consulting Co., Ltd., a company controlled by the major shareholder; Tonghua Lijing Jianguo Hotel Co., Ltd., a company controlled by the major shareholder; Shanghai Shanyong Marketing Management Co., Ltd., a company controlled by the major shareholder; Tonghua Bencao Biotechnology Co., Ltd., a company controlled by the major shareholder; Tonghua Lijing Energy Thermal Co., Ltd., a company controlled by the major shareholder Tonghua Dongbao Pharmaceutical Operations Co., Ltd., a company controlled by a major shareholder Tonghua Dongbao Biotechnology Co., Ltd., a company controlled by a major shareholder Tonghua Dongbao Lijing Garden Property Management Co., Ltd., a company controlled by a major shareholder Tonghua Dongbao Jinhongji Property Management Co., Ltd., a company controlled by a major shareholder Tonghua Lijing Shuxiangyuan Property Management Co., Ltd., a company controlled by a major shareholder Tongbao International Business (Hainan) Co., Ltd., a company controlled by a major shareholder Tonghua Hongbao Pharmaceutical Co., Ltd., a company controlled by a major shareholder Tonghua Evertech Biopharmaceutical Co., Ltd., a company controlled by close relatives of the actual controller Tonghua Hengzhi Enterprise Management Consulting Co., Ltd., an associate of the major shareholder Tonghua Huitong Investment Center (limited partnership), a company controlled by the chairman of the company Tonghua Huitong Investment Center (limited partnership), Zhejiang Huike Biopharmaceutical Co., Ltd., a company controlled by the chairman of the company, Shanghai Huike Biopharmaceutical Co., Ltd., a company controlled by the chairman of the company, Tonghua Shengtong Enterprise Management Center (limited partnership), a company controlled by the chairman of the company, Tonghua Shengtong Enterprise Management Center (limited partnership), a company controlled by the chairman of the company

(5) Related transactions

1. Related transactions related to the purchase and sale of goods, provision and receipt of services

(1) Purchasing goods/receiving services

Whether the approved transaction exceeds the number of related parties involved in the transaction. Contents of related transactions. Amount incurred in the current period. Amount incurred in the previous period.

Quota (if applicable) Quota (if applicable) Jilin Hengde Environmental Protection Co., Ltd. accepts environmental protection processing services

19,292,846.00 20,000,000.00 No 14,493,284.50 Divisional affairs

Huaguang Biotechnology Co., Ltd. Procurement of goods\receipt of services

7,524,108.12 20,000,000.00 No 13,167,660.96 Divisional affairs

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Whether the transactions approved from January 1, 2025 to December 31, 2025 exceeded the transaction

Related parties Related party transaction content Amount incurred in the current period Amount incurred in the previous period

Quota (if applicable) Quota (if applicable)

Tonghua Dongbao Group Import and Export

Import (export) agency fee 13,041,399.45 16,000,000.00 No 10,580,429.52 Co., Ltd.

Dongbao Industrial Group Co., Ltd.

Accept water supply 935,757.64 1,000,000.00 No 879,622.97 Co., Ltd.

Dongbao Industrial Group Co., Ltd.

Payment of loan interest 470,712.33

Ltd.

Dongbao International Business (Hainan) accepts export agency services

1,801,149.01

Limited company

Tonghua Dongbaolijing Garden Properties

Receiving property services 988,536.48 629,578.08 Property Management Co., Ltd.

Tonghua Lijing Jianguo Hotel has

Accepting hotel services 462,478.50 1,500,000.00 No 106,628.00 Co., Ltd.

Tonghua Dongbao Jinhongji Property

Receive property services 7,696.32

Management Co., Ltd.

Tonghua Lijing Energy Thermal Co., Ltd.

Accepting labor services/heating fees 742,086.37 800,000.00 No 694,043.44 Co., Ltd.

Tonghua Hongbao Pharmaceutical Co., Ltd.

Entrusted processing services 56,340.00

Division

150,000.00 No

Tonghua Hongbao Pharmaceutical Co., Ltd. Purchase goods\Receive services

9,240.00

Divisional Affairs

Total 45,332,350.22 59,450,000.00 40,551,247.47

Note: The above-mentioned loan interest of RMB 470,712.33 paid to Dongbao Industrial Group Co., Ltd. is the interest expense paid by its holding subsidiary Shanghai Longke Pharmaceutical Co., Ltd. to borrow funds from it.

(2) Sales of goods/provision of services

Related parties Contents of related transactions Amount for the current period Amount for the previous period Jilin Hengde Environmental Protection Co., Ltd. Sales of steam 3,819,019.16 1,910,167.23 Jilin Hengde Environmental Protection Co., Ltd. Sales of electricity 2,592,537.38

Junhemeng Biopharmaceutical (Tonghua) Co., Ltd. Sales of steam/electricity 2,356,669.49 154,005.00 Tonghua Dongbao Five Medicines Co., Ltd. Provision of processing services 2,034,417.00 469,380.53 Tonghua Dongbao Pharmaceutical Operations Co., Ltd. Sales of medicines 1,143,660.00

Tonghua Hongbao Pharmaceutical Co., Ltd. Providing processing services 846,370.00 705,403.95 Tonghua Lijing Energy and Thermal Co., Ltd. Selling raw coal 638,776.14 1,017,553.10 Tonghua Dongbao Group Import and Export Co., Ltd. Selling medicines 43,200.00

Junhemeng Biopharmaceutical (Hangzhou) Co., Ltd. Sales of raw materials 207,469.82 Tonghua Hongbao Pharmaceutical Co., Ltd. Sales of raw materials 77,471.46

Total 13,474,649.17 4,541,451.09

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 2. Related leases

(1) The situation of our company as a lessor

Name of lessee Type of leased assets Lease income recognized in the current period Lease income recognized in the previous period

Jilin Hengde Environmental Protection Co., Ltd. Sewage treatment equipment 2,389,380.52 1,769,911.52 Junhemeng Biopharmaceutical (Tonghua) has

Pilot workshop equipment 1,743,111.45 1,414,751.45 Co., Ltd.

Dongbao Industrial Group Co., Ltd.

Venue rental 47,619.05

Division

Total 4,180,111.02 3,184,662.97

(2) The company’s status as a lessee

Amount for the current period Amount for the previous period

Cheng Cheng

burden

Increase rent Simplified treatment Not included Simplified treatment Not included

The short-term lease of the lease and the lease liability of the short-term lease and the lease liability of the lease

The name of the lessor. Measurement of capital lease and low-priced debt. Measurement of lease and low-priced debt. Payment of the lease.

The rent paid makes it a variable negative variable in the rental value of the asset.

Financial use Lease rent Lease payment debt Lease rent Lease payment Lease debt

Rights-type fees (such as amount (such as interest) Fees (such as amount (such as interest)

capital (applicable) (applicable) interest (applicable) (applicable) interest

production branch

out out

Dongbao Industrial

room

Group shares 95,238.10 95,238.10

house

Ltd.

3. Fund lending situation of related parties

Related parties Placements/lenders Amount Start date Maturity date Description Dongbao Industrial Group

Borrowing 30,000,000.00 2025/7/3 2025/12/15 Annual interest rate 3.45% Co., Ltd.

Dongbao Industrial Group

Return 30,000,000.00

Co., Ltd.

4. Remuneration of key management personnel

Unit: 10,000 yuan

Name Position Amount for the current period Amount for the previous period Li Jiahong Chairman, President 331.56 94.48 Leng Chunsheng Vice Chairman 300.33 369.68 Zhang Guodong Employee Representative Director, Vice President 214.32 113.57 Zhang Wenhai Director, Vice President 184.32 113.57 Bi Yan Independent Director 10.00 10.00 Xu Dai Independent Director 10.00 10.00

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Name Position Amount for the current period Amount for the previous period Xu Li Independent Director 10.00 10.00 Chi Junyu Chief Accountant 116.24 82.24 Wang Junye Chairman of the Board of Supervisors (retired) 17.32 Cao Fubo Supervisor (retired) 17.32 He Qingxia Employee Supervisor (retired) 37.22

Deputy General Manager, Secretary of the Board of Directors

Su Fan 113.34 96.25

(retired)

Chen Hong Deputy General Manager (retired) 52.22 49.72 DuZhiqiang (Du Zhiqiang) Deputy General Manager (retired) 77.93 141.74 Total 1,420.26 1,163.11

(6) Unsettled items such as receivables and payables to related parties

1. Items receivable

Ending balance Beginning balance

Project name Related parties

Book balance Provision for bad debts Book balance Provision for bad debts

Tonghua Dongbao Wu

Accounts receivable financing 1,000,000.00 524,483.20

Pharmaceutical Co., Ltd.

Tonghua Hongbao Medicine

Receivables financing 827,017.44

Industry Co., Ltd.

Tonghua Dongbao Medical

Accounts receivable Pharmaceutical Operations Co., Ltd. 677,280.00 33,864.00 583,300.00 40,831.00 Company

Subtotal 2,504,297.44 33,864.00 1,107,783.20 40,831.00

Tonghua Materia Medica

Other receivables Biotechnology Co., Ltd. 20,179.93 1,009.00 Company

Tonghua Lijingneng

Other receivables Yuanheli Co., Ltd. 393,327.65 19,666.38 Company

Junhe Alliance Creatures

Pharmaceutical (Hangzhou)

Other receivables 495,048.12 24,752.41 Co., Ltd.

Division

Tonghua Innovation Color

Other receivables 2,506.41 154.70 Printing Co., Ltd.

Subtotal 911,062.11 45,582.49 Total 2,504,297.44 33,864.00 2,018,845.31 86,413.49

2. Payable items

Project name Related party Closing balance Opening balance

Accounts payable Huaguang Biotechnology Co., Ltd. (consolidated) 1,105,870.62 849,249.56 Accounts payable Tonghua Dongbao Group Import and Export Co., Ltd. 68,581.77 4,697,578.73

Subtotal 1,174,452.39 5,546,828.29 Other payables Dongbao Industrial Group Co., Ltd. 74,271.76 Other payables Jilin Hengde Environmental Protection Co., Ltd. 258,941.31

Subtotal 333,213.07

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Project name Related parties Closing balance Total opening balance 1,174,452.39 5,880,041.36

13. Share-based payment

(1) Various equity instruments

1.Details

Grant object Granted in this period Exercisable in this period Unlocked in this period Expired in this period

Category Quantity Amount Quantity Amount Quantity Amount Quantity Amount Employee Stock Ownership

Plan (Director and Supervisor)

9,290,000 39,854,100.00

High to the core

technical staff)

employee stock ownership

Plan (R&D

6,370,000 27,964,300.00

production system

core backbone)

Total 15,660,000 67,818,400.00

2. Stock options or other equity instruments outstanding at the end of the period

Stock options outstanding at the end of the period Other equity instruments outstanding at the end of the period Grant object categories

Range of exercise price Remaining term of the contract Range of exercise price Remaining term of the contract Employee Stock Ownership Plan (Directors, Supervisors and Senior Management

4.29 yuan/share for 46 months and core technical personnel)

Employee Stock Ownership Plan (R&D Production

4.39 yuan/share 60 monthly production system core backbone)

(2) Equity-settled share-based payment

Equity-settled share-based payment objects for directors, supervisors, senior executives, core technical personnel, and R&D and production systems

core backbone

Method for determining the fair value of equity instruments on the grant date. Important parameters for confirming the fair value of equity instruments on the grant date based on the closing price on the grant date. Stock grant date closing price, exercise price, etc.

Basis for determining the best estimate of the number of exercisable equity instruments taking into account turnover rate and performance compliance

count

Reasons for significant differences between the current period’s estimate and the previous period’s estimate None

The cumulative amount of equity-settled share-based payments included in capital reserves 5,574,000.00 Total expenses recognized for equity-settled share-based payments in the current period 5,574,000.00

(3) Share-based payment expenses for this period

Category of grant objects Equity-settled share-based payment expenses Cash-settled share-based payment expenses Employee stock ownership plan 5,574,000.00

Total 5,574,000.00

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

14. Commitments and contingencies

(1) Commitments

As of the balance sheet date, the Company has no major commitments that would affect the reading and understanding of these financial statements.

(2) Contingencies

As of the balance sheet date, the Company has no significant contingencies that would affect the reading and understanding of these financial statements.

15. Events after the balance sheet date

(1) Profit distribution situation

Profit or dividends to be distributed 586,837,503.60

As of the date of this report, the company's total share capital is 1,958,542,829 shares. After deducting 2,417,817 shares in the special securities account for repurchase, the number of shares is 1,956,125,012 shares. Based on this, a cash dividend of RMB 3.00 (tax included) will be distributed to all shareholders for every 10 shares. There will be no bonus shares this year, nor will the capital reserve be converted into share capital. This plan still needs to be submitted to the 2025 Annual Shareholders Meeting for review.

(2) Description of other post-balance sheet events

1. As of the date of issuance of this financial statement, the parent company - Dongbao Industrial Group Co., Ltd. has pledged a total of 586,439,472 shares, accounting for 94.66% of the total shares of the company held by it, accounting for 29.94% of the total shares of the company.

2. As of the date of issuance of this financial statement, except for the above-mentioned matters, the Company has no other post-balance sheet non-adjusting events that affect the reading and understanding of this financial statement.

16. Other important matters

(1) Termination of operations

Items attributable to parent company Revenue Expenses Total Profit Income Tax Expense Net Profit Termination of Owner

Operating Profit Subsidiary-Tonghua Dongbao

Environmental Building Materials Co., Ltd. - 159,415.39 56,228.39 - 56,228.39 53,466.45 Building materials business

(2) Except for the termination of the construction materials business of the subsidiary, as of the balance sheet date, the Company has no other important events that affect the reading and understanding of these financial statements.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

17. Notes on main items of the parent company’s financial statements

(1) Accounts receivable

1. Disclosure by age

Aging Closing balance Opening balance

Within 1 year (including 1 year) 426,553,920.85 475,729,307.26 1 to 2 years 921,470.12 31,039,342.95 2 to 3 years 125,591.32 1,328,308.49 3 to 4 years 140,771.06 73,190.68 4 to 5 years 154,848.60 More than 5 years 76,520,892.87 89,025,955.50

Subtotal 504,262,646.22 597,350,953.48 Less: Bad debt provision 96,879,429.49 115,152,532.27 Total 407,383,216.73 482,198,421.21

2. Classified disclosure according to bad debt accrual method

Ending balance

Book balance Bad debt provision

Category

Book value ratio Provision ratio

Amount Amount

(%) (%)

The amount of provision for bad debts based on individual assessments should be

6,949,967.00 1.38 6,949,967.00 100.00

Collect accounts

Among them: the individual amount is not significant but is calculated separately

6,949,967.00 1.38 6,949,967.00 100.00

Provision for bad debts

Accounts receivable with provision for bad debts on a group basis

497,312,679.22 98.62 89,929,462.49 18.08 407,383,216.73

Among them: Provision based on combination of credit risk characteristics

475,875,402.22 94.37 89,929,462.49 18.90 385,945,939.73 Bad debt provision

Group related party portfolio 21,437,277.00 4.25 21,437,277.00 Total 504,262,646.22 100.00 96,879,429.49 19.21 407,383,216.73

Opening balance

Book balance Bad debt provision

Category

Book value ratio Provision ratio

Amount Amount

(%) (%)

The amount of provision for bad debts based on individual assessments should be

6,949,967.00 1.16 6,949,967.00 100.00

Collect accounts

Among them: the individual amount is not significant but is calculated separately

6,949,967.00 1.16 6,949,967.00 100.00

Provision for bad debts

Accounts receivable with provision for bad debts on a group basis

590,400,986.48 98.84 108,202,565.27 18.33 482,198,421.21

Among them: Provision based on combination of credit risk characteristics

590,400,986.48 98.84 108,202,565.27 18.33 482,198,421.21 Bad debt provision

Total 597,350,953.48 100.00 115,152,532.27 19.28 482,198,421.21

(1) Individual assessment of accounts receivable with provision for bad debts

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Ending Balance from January 1, 2025 to December 31, 2025

Unit name

Book balance Bad debt provision Provision ratio (%) According to the debt unit breakdown of Shengguang Group Pharmaceutical Logistics

6,949,967.00 6,949,967.00 100.00

Co., Ltd. Total production and weight 6,949,967.00 6,949,967.00

Opening balance

Unit name

Book balance Bad debt provision Provision ratio (%) According to the debt unit breakdown of Shengguang Group Pharmaceutical Logistics

6,949,967.00 6,949,967.00 100.00

Co., Ltd. Total production and weight 6,949,967.00 6,949,967.00

(2) Accounts receivable with provision for bad debts based on combinations of credit risk characteristics

Ending balance Beginning balance

Aging Provision Proportion Provision Proportion Book Balance Bad Debt Provision Book Balance Bad Debt Provision

(%) (%) Within 1 year 405,116,643.85 20,255,832.19 5.00 475,729,307.26 23,786,465.36 5.00 1 to 2 years 921,470.12 64,502.91 7.00 31,039,342.95 2,172,754.01 7.00 2 to 3 years 125,591.32 10,047.31 8.00 1,328,308.49 106,264.68 8.00 3 to 4 years 140,771.06 28,154.21 20.00 73,190.68 14,638.14 20.00 4 to 5 years 154,848.60 46,454.58 30.00 More than 5 years 69,570,925.87 69,570,925.87 100.00 82,075,988.50 82,075,988.50 100.00Total 475,875,402.22 89,929,462.49 18.90 590,400,986.48 108,202,565.27 18.33

3. Bad debt provisions

Amount of changes in the current period

Category Beginning Balance Ending Balance

Provision Recovery or transfer Write-off Other changes

Provision for individual assessment 6,949,967.00 6,949,967.00 Credit risk portfolio 108,202,565.27 18,273,102.78 89,929,462.49 Total 115,152,532.27 18,273,102.78 96,879,429.49

4. Accounts receivable actually written off in the current period

The amount of accounts receivable actually written off in this period was RMB 13,679,577.81, and there were no important accounts receivable written off.

5. Accounts receivable and contract assets with the top five closing balances based on debtors

accounts receivable and

Contract capital accounted for accounts receivable and joint venture

Accounts receivable Contract asset period Bad debt provision Ending unit name End of production period Ending balance of the same asset

Ending balance Ending balance Proportion of total balance (%)

balance

Sinopharm Holdings Co., Ltd. 142,050,344.96 142,050,344.96 28.17 7,118,254.08 China Resources Pharmaceutical Commercial Group Co., Ltd.

49,147,450.47 49,147,450.47 9.75 2,550,032.86Company

Jiuzhoutong Pharmaceutical Group Co., Ltd.

21,522,398.03 21,522,398.03 4.27 1,077,521.42 Co., Ltd.

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 Accounts Receivable and

Contract capital accounted for accounts receivable and joint venture

Accounts receivable Contract asset period Bad debt provision Ending unit name End of production period Ending balance of the same asset

Ending balance Ending balance Proportion of total balance (%)

balance

Shanghai Pharmaceuticals Holdings Co., Ltd. 20,941,768.99 20,941,768.99 4.15 1,047,088.45 Dongbao Import and Export Trade (Hainan)

20,685,897.00 20,685,897.00 4.10

Ltd.

Total 254,347,859.45 254,347,859.45 50.44 11,792,896.81

(2) Other receivables

Item Ending balance Beginning balance

Dividends receivable 48,130,858.20 48,130,858.20 Other receivables 141,339,620.29 364,483,927.22 Total 189,470,478.49 412,614,785.42

1. Dividends receivable

Investee Ending balance Beginning balance

Tonghua Dongbao Jinhongji Real Estate Development Co., Ltd.

48,130,858.20 48,130,858.20 The company’s Tonghua County First Branch

Total 48,130,858.20 48,130,858.20

2. Other receivables

(1) Disclosure based on aging

Aging Closing balance Opening balance

Within 1 year (including 1 year) 83,121,724.49 132,822,048.97 1 to 2 years 611,851.72 124,136,766.86 2 to 3 years 461,100.67 51,809,102.66 3 to 4 years 1,151,486.91 409,714.89 4 to 5 years 409,714.89 4,378,052.29 More than 5 years 56,384,418.25 52,011,365.96

Subtotal 142,140,296.93 365,567,051.63 Less: Bad debt provision 800,676.64 1,083,124.41 Total 141,339,620.29 364,483,927.22 (2) Disclosure by nature of payment

Nature of payment Ending balance Beginning balance

Reserve fund 614,493.05 723,998.26 Accounts from related entities 138,167,915.27 363,212,312.69 Accounts from external entities 3,228,440.05 1,630,740.68 Temporary payment 129,448.56

Subtotal 142,140,296.93 365,567,051.63

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Nature of payment Ending balance Beginning balance

Less: Bad debt provision 800,676.64 1,083,124.41

Total 141,339,620.29 364,483,927.22 (3) Classified disclosure based on bad debt accrual method

Ending balance

Book balance Bad debt provision

Category Book value provision ratio

Amount Ratio (%) Amount

(%)

Other receivables with provision for bad debts on a group basis

142,140,296.93 100.00 800,676.64 0.56 141,339,620.29

Among them: Provision based on combination of credit risk characteristics

3,972,381.66 2.79 800,676.64 20.16 3,171,705.02 Bad debt provision

Group related party portfolio 138,167,915.27 97.21 138,167,915.27 Total 142,140,296.93 100.00 800,676.64 0.56 141,339,620.29

Opening balance

Book balance Bad debt provision

Category

Book value accrual ratio

Amount Ratio (%) Amount

(%)

Other receivables with provision for bad debts on a group basis

365,567,051.63 100.00 1,083,124.41 0.30 364,483,927.22

Among them: Provision based on combination of credit risk characteristics

3,265,801.05 0.89 1,083,124.41 33.17 2,182,676.64 Bad debt provision

Group’s related party portfolio 362,301,250.58 99.11 362,301,250.58

Total 365,567,051.63 100.00 1,083,124.41 0.30 364,483,927.22

① Other receivables for which bad debt provisions are made on a group basis

Ending balance

Name

Book balance Bad debt provision Provision ratio (%)

Credit risk characteristics combination 3,972,381.66 800,676.64 20.16

Group related party portfolio 138,167,915.27

Total 142,140,296.93 800,676.64 0.56

Opening balance

Aging

Book balance Bad debt provision Provision ratio (%)

Credit risk characteristics combination 3,265,801.05 1,083,124.41 33.17

Group related party portfolio 362,301,250.58

Total 365,567,051.63 1,083,124.41 0.30

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 (4) Other receivables with provision for bad debts based on the general expected credit loss model

The first stage The second stage The third stage

Bad debt provision Next 12 months Expected credit for the entire duration Expected credit for the entire duration Total credit losses (credit losses that have not occurred (credit losses that have occurred)

expected credit losses

Use impairment) Use impairment)

Balance on January 1, 2025 63,593.50 567,217.81 452,313.10 1,083,124.41 Balance on January 1, 2025

In this issue

—Transfer to the second stage -2,189.92 2,189.92

Provision for this period 59,975.66 109,889.67 200,000.00 369,865.33 Write-off for this period 652,313.10 652,313.10 December 31, 2025

121,379.24 679,297.40 800,676.64 Balance

(5) Bad debt provisions

Amount of changes in the current period

Category Beginning Balance Ending Balance

Provision Recovery or transfer Write-off or write-off Other changes

Credit risk portfolio 1,083,124.41 369,865.33 652,313.10 800,676.64 Total 1,083,124.41 369,865.33 652,313.10 800,676.64

(6) Other receivables actually written off in the current period

The amount of other receivables actually written off in this period was RMB 652,313.10, and there were no important other receivables written off.

(7) Other receivables with top five closing balances based on debtors

Account for other receivable periods

Name of unit during bad debt provision period Nature of payment Closing balance Aging Total closing balance

Final balance

Proportion(%)

Shanghai Longke Pharmaceutical

Current accounts 80,082,191.78 Within 1 year 56.34

Ltd.

Changchun Dongbao Pharmaceutical 1 to 5 years

Current account 45,198,408.15 31.80

Co., Ltd. more than 5 years

Tonghua Dongbao Environmental Protection

Building Materials Co., Ltd. Current account 12,887,315.34 Less than 2 years 9.07

company

Shanghai Kindly Enterprise

Industrial Development Group Co., Ltd. Purchase deposit 1,000,000.00 Within 1 year 0.70 50,000.00 Co., Ltd.

Beijing China Overseas Plaza

Commercial Development Co., Ltd. Lease deposit 820,938.24 Within 1 year 0.58 41,046.91 Company

Total 139,988,853.51 98.49 91,046.91

(3) Long-term equity investment

Ending balance Beginning balance

Project

Book balance Impairment provision Book value Book balance Impairment provision Book value Investment in subsidiaries 373,487,728.96 373,487,728.96 369,945,262.18 369,945,262.18

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. Closing balance and opening balance items from January 1, 2025 to December 31, 2025

Book balance Impairment provision Book value Book balance Impairment provision Book value to associates and joint ventures

500,104,601.53 500,104,601.53 591,545,639.62 591,545,639.62 Industrial investment

Total 873,592,330.49 873,592,330.49 961,490,901.80 961,490,901.80

1. Situation of long-term equity investment

(1) Investment in subsidiaries

Impairment allowance Increase or decrease in current period

Impairment reserve invested unit Opening balance Provision at the beginning of the period Decrease Provision Decrease Ending balance Additional investment Others Ending balance

Balance Investment Value Reserve

Tonghua Dongbaohuan

Bao Building Materials Co., Ltd. 95,088,000.00 95,088,000.00

Changchun Dongbao Medicine

9,500,000.00 9,500,000.00 Industrial Co., Ltd.

Beijing Dongbaosheng

Material Technology Co., Ltd. 100,366,451.68 100,366,451.68 Company

Tonghua Dongbao Gold

Hongji Real Estate

Development Co., Ltd. 25,500,000.00 25,500,000.00 Sitonghua County No.

A branch

Tonghua Zi Xingsheng

Pharmaceutical Co., Ltd. 10,000,000.00 10,000,000.00 Company

Dongho Purple Star

(Hangzhou) student

100,000,000.00 100,000,000.00Pharmaceutical Co., Ltd.

company

Shanghai Juyi Network

Network Technology Co., Ltd. 2,690,810.50 2,690,810.50 Company

Shanghai Longke Medicine

26,800,000.00 26,800,000.00 Industrial Co., Ltd.

Dongho Import and Export

Trading (Hainan) 3,542,466.78 3,542,466.78 Co., Ltd.

Total 369,945,262.18 3,542,466.78 373,487,728.96

Notes to the financial statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025 (2) Investments in associates and joint ventures

Increases and decreases in the current period

Beginning balance (account) Closing balance (account) Impairment provision invested unit

(face value) Additional recognition under the equity method Other comprehensive changes in other equity Announcement of cash distribution Provision minus (face value) Closing balance decreases investments Others

Investment gains and losses, income adjustment, dividend or profit value provision

Associates

Xiamen Tebaosheng

Chemical Engineering Co., Ltd. 409,234,300.15 29,658,616.61 130,756,823.68 12,534,599.90 -40,424,070.68 -127,398,434.52 355,044,601.92 Co., Ltd.

Huaguang Biotech Stock

84,117,300.92 -10,810,077.12 1,641,196.38 947,581.98 75,896,002.16 Co., Ltd.

Junhe Alliance Creatures

Pharmaceutical (Hangzhou)

98,194,038.55 -40,588,514.92

Co., Ltd. 11,558,473.82 69,163,997.45

Total 591,545,639.62 29,658,616.61 79,358,231.64 1,641,196.38 25,040,655.70 -40,424,070.68 -127,398,434.52 500,104,601.53

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd.

January 1, 2025 - December 31, 2025

(4) Operating income and operating costs

1. Operating income and operating costs

Amount for the current period Amount for the previous period

Project

revenue cost revenue cost

Main business 2,882,415,889.58 848,391,256.82 1,973,011,349.13 508,821,521.39 Other businesses 20,374,837.56 21,236,975.88 52,729,878.49 52,078,516.31

Total 2,902,790,727.14 869,628,232.70 2,025,741,227.62 560,900,037.70

2. Breakdown information of operating income and operating costs

Amount for the current period Amount for the previous period

Income classification

Operating income Operating costs Operating income Operating costs Main business

By industry type

Pharmaceutical industry 2,882,415,889.58 848,391,256.82 1,973,011,349.13 508,821,521.39 By variety

Biological products (raw materials and preparations

2,652,151,195.21 724,499,111.66 1,746,396,493.64 399,917,534.29 products)

Injection pens, blood sugar test strips, etc.

159,314,440.90 77,989,009.12 180,112,135.60 85,799,165.66 Medical devices

Chinese patent medicines and chemical drugs 70,950,253.47 45,903,136.04 46,502,719.89 23,104,821.44 Other businesses

According to business nature

Technical services 4,443,715.40 2,394,922.02 40,614,166.09 39,313,269.35 Operating lease 6,264,567.73 7,355,825.95 5,487,165.15 5,938,269.83 Others 9,666,554.43 11,486,227.91 6,628,547.25 6,826,977.13

Total 2,902,790,727.14 869,628,232.70 2,025,741,227.62 560,900,037.70

(5) Investment income

Item Amount for the current period Amount for the previous period

Income from long-term equity investments accounted for using the equity method 79,358,231.64 122,210,072.71 Investment income from disposal of long-term equity investments 1,099,181,917.70

Investment income from disposal of trading financial assets 557,249.93 334,065.65 Total 1,179,097,399.27 122,544,138.36

18. Supplementary information

(1) Detailed statement of non-recurring profits and losses for the current period

Item Amount for the current period Amount for the previous period

1. Profit and loss from disposal of non-current assets, including provision for asset impairment

1,096,066,753.16 15,128,834.28 offset portion

2. Government subsidies included in the current profit and loss, but related to the company's normal operations

12,737,199.37 3,673,422.69 Business closely related, in compliance with national policies and regulations, and in accordance with determined standards

Notes to the Financial Statements of Tonghua Dongbao Pharmaceutical Co., Ltd. January 1, 2025 - December 31, 2025

Item Amount for the current period, except for government subsidies that have a continuing impact on the company's profits and losses, including the amount of the previous period.

3. Except for effective hedging related to the company’s normal business operations

In addition to financial affairs, non-financial enterprises hold financial assets and financial liabilities arising from

1,270,368.79 1,095,798.00 Gains and losses from changes in fair value and disposal of financial assets and financial liabilities

Profit and loss incurred

4. Occupation of funds collected from non-financial enterprises included in current profits and losses

fee

5. Gains and losses from entrusting others to invest or manage assets

6. Profit and loss from external entrusted loans

7. Various damages caused by force majeure, such as natural disasters.

asset loss

7. Reversal of impairment provision for accounts receivable that were individually tested for impairment 151,567.65

8. The enterprise obtains investment profits from subsidiaries, associated enterprises and joint ventures.

The capital is less than the income generated from the fair value of the investee's identifiable net assets 2,690,806.50 that should be enjoyed when the investment is obtained.

10. Subsidiaries resulting from business mergers under common control from the beginning of the period to the merger

4,043,180.46

Net profit and loss for the current period

11. Profit and loss from non-monetary asset exchange

12. Gains and losses from debt restructuring

13. One-time occurrence of the enterprise due to the cessation of relevant business activities

Expenses, such as expenses for relocating employees, etc.

14. Current profit and loss due to adjustments to taxation, accounting and other laws and regulations

one-time impact

15. Shares recognized in one go due to cancellation or modification of equity incentive plan

Pay the fee

16. For cash-settled share-based payment, after the vesting date,

Deal with employees

Gains and losses arising from changes in fair value of compensation

17. Investment properties that adopt the fair value model for subsequent measurement

Real estate equity

Gains and losses arising from changes in value

18. Gains from transactions where the transaction price is unfair

19. Losses arising from contingencies unrelated to the company’s normal business operations

-60,816,238.80 profit

20. Custody fee income from entrusted operations

21. Other non-operating income and expenses other than the above items -97,279,024.05 -285,089.88 22. Other profit and loss items that meet the definition of non-recurring gains and losses -26,847,992.60 1,499,142.51 Less: Income tax impact 145,922,739.47 -5,609,187.67 Impact on minority shareholders’ equity (after tax) 124,750.45 508,672.85 Total 844,094,562.86 -31,912,809.88

Other profit and loss items that meet the definition of non-recurring profits and losses:

Item Amount involved Reason Investment income calculated using the equity method is non-judgment based on the economic nature of transactions and events

-26,847,992.60

Recurring gains and losses are subject to the principle of materiality.

Total -26,847,992.60

For reporting use only For reporting use only For reporting use only