Cenntro Inc.

Previous wording

Net revenues during the three months ended 2026 and 2025 were generated from (a) vehicles sales, which primarily represent net revenues from sales of Metro® vehicles (including vehicle kits), Logistar™ 100, Teemak™, Logistar™ 210, Logistar™ 260, Antric®, Avantier™, Logistar™ 100 and 1-ton Electric Flatbed Truck, (b) sales of ECV spare-parts related to our Metro® vehicles, and (c) other sales, which primarily were: (i) the sales of inventory of outsourced ECV batteries, and (ii) charges on services provided to channel partners for technical developments and assistance with vehicle homologation or certification.

Current wording

Net revenues during the six months ended 2026 and 2025 were generated from (a) vehicles sales, which primarily represent net revenues from sales of Metro® vehicles (including vehicle kits), Logistar™ 200, Logistar™ 210, Logistar™ 260, Logistar™ 450, Antric®, Avantier™, Logistar™ 100, Clubcar and 1-ton Electric Flatbed Truck, (b) sales of ECV spare-parts related to our Metro® vehicles, and (c) other sales, which primarily were: (i) the sales of inventory of outsourced ECV batteries, and (ii) charges on services provided to channel partners for technical developments and assistance with vehicle homologation or certification.

Previous wording

Cost of goods sold mainly consists of production-related costs including costs of raw materials, consumables, direct labor, overhead costs, depreciation of plants and equipment, manufacturing waste treatment processing fees, shipping cost, inventory write-downs and inventory write-off. We incur cost of goods sold in relation to (i) vehicle sales and spare-part sales, including, among others, purchases of raw materials, labor costs, and manufacturing expenses that related to ECVs, and (ii) other sales, including cost and expenses that are not related to ECV sales.

Current wording

Cost of goods sold mainly consists of production-related costs including costs of raw materials, consumables, direct labor, overhead costs, depreciation of plants and equipment, manufacturing waste treatment processing fees, shipping cost and inventory write-downs. We incur cost of goods sold in relation to (i) vehicle sales and spare-part sales, including, among others, purchases of raw materials, labor costs, and manufacturing expenses that related to ECVs, and (ii) other sales, including cost and expenses that are not related to ECV sales.

Previous wording

We adopted ASC 326 Financial Instruments – Credit Losses using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit from January 1. 2023 and interim periods therein. We used an expected credit loss model for the impairment of accounts receivable as of period ends. We believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. We measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, we will evaluate such accounts receivable for expected credit loss on an individual basis. Allowance for credit losses balances are written off and deducted from allowance. when receivables are deemed uncollectible. after all collection efforts have been exhausted and the potential for recovery is considered remote. We expect provision for credit losses to decrease in the future as we shift our sales more to FOB terms, when goods will be delivered only if material payment are received.

Current wording

We adopted ASC 326 Financial Instruments – Credit Losses using the modified retrospective approach through a cumulative-effect adjustment to accumulated deficit from January 1, 2023 and interim periods therein. We used an expected credit loss model for the impairment of accounts receivable as of period ends. We believe the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected credit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule were developed on basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences in current conditions and forecasted changes. We measured the expected credit losses of accounts receivable on a collective basis. When an accounts receivable does not share risk characteristics with other accounts receivables, we will evaluate such accounts receivable for expected credit loss on an individual basis. Allowance for credit losses balances are written off and deducted from allowance. when receivables are deemed uncollectible. after all collection efforts have been exhausted and the potential for recovery is considered remote. We expect provision for credit losses to decrease in the future as we shift our sales more to FOB terms, when goods will be delivered only if material payment are received.

Previous wording

Income (loss) from long-term investments

Current wording

Gain (loss) from long-term investments

Previous wording

We prepare and analyze operating and financial data to assess the performance of our business and allocate our resources. The following table sets forth our key performance indicators for the three months ended March 31, 2026 and 2025.

Current wording

We prepare and analyze operating and financial data to assess the performance of our business and allocate our resources. The following table sets forth our key performance indicators for the six months ended June 30, 2026 and 2025.

Previous wording

Comparison of the Three months ended March 31, 2026 and 2025

Current wording

Comparison of the Three and Six months ended June 30, 2026 and 2025

Previous wording

Net revenues for the three months ended March 31, 2026 were approximately $1.2 million, a decrease of approximately $0.9 million or 43.4% from approximately $2.1 million for the three months ended March 31, 2025. The decrease in net revenues in 2026 was primarily attributed to a decrease in vehicle sales by approximately $1.2 million and other sales by approximately $0.1 million, offset by an increase in spare-part sales by approximately $0.4 million. The net revenues in Europe market for the three months ended March 31, 2026 were approximately $0.4 million, a decrease of approximately $0.3 million from approximately $0.7 million for the three months ended March 31, 2025. The net revenues in Asia market for the three months ended March 31, 2026 were approximately $0.7 million, a decrease of approximately $0.5 million from approximately $1.2 million for the three months ended March 31, 2025.

Current wording

Net revenues for the three months ended June 30, 2026 were approximately $6.2 million, a decrease of approximately $0.2 million or 2.9% from approximately $6.4 million for the three months ended June 30, 2025. The decrease in net revenues in 2026 was primarily due to the decrease in vehicle sales of approximately $1.4 million, offset by the increase in spare-part sales by approximately $1.2 million due to the increase in sales of iChassis™. The net revenues in Europe market for the three months ended June 30, 2026 were approximately $2.6 million, a decrease of approximately $2.3 million from approximately $4.9 million for the three months ended June 30, 2025. While the net revenues in America market for the three months ended June 30, 2026 were approximately $1.8 million, representing an increase of approximately $1.1 million from approximately $0.7 million for the three months ended June 30, 2025.

Previous wording

Additional units were sold during the three months ended March 31, 2026; we sold 57 ECVs, including 3 fully assembled Metro® units, 10 fully assembled Logistar™ 100, 3 fully assembled Teemak™, 14 fully assembled Logistar™ 260, 7 fully assembled Avantier™ units, 7 fully assembled Logistar™ 210 units, 3 Antric® units and 10 1-ton Electric Flatbed Truck units.

Current wording

For the six months ended June 30, 2026, we sold 563 ECVs, including 10 fully assembled Metro® units, 132 fully assembled Logistar™ 100 units, 14 fully assembled Logistar™ 260 units,4 fully assembled Teemak™ units, 141 fully assembled Logistar™ 210 units, 11 fully assembled Logistar™ 450 units, 231 fully assembled Avantier™ units, 8 Antric® units, 2 Clubcar units, and 10 fully assembled 1-ton Electric Flatbed Truck, compared with 559 ECVs for the six months end ed June 30, 2025, including 30 fully assembled Metro® units, 28 fully assembled Logistar™ 200 units, 58 fully assembled Logistar™ 100 units, 33 fully assembled Teemak™ units, 2 fully assembled Logistar™ 260 units, 1 fully assembled Logistar™ 400 units, 80 fully assembled Logistar™ 450 units, 7 fully assembled Logistar™ 210 units, 222 fully assembled Avantier™ units, 14 Antric® units, 57 Clubcar units, 21 fully assembled Seres 5 units, 5 fully assembled Joylong-A4 units and 1 fully assembled Joylong-EA6 units.

Previous wording

For the three months ended March 31, 2026, we also sold 72 iChassis™ units, other than the 57 ECVs.

Current wording

For the three months ended June 30, 2026, we also sold 111 iChassis™ units, other than the 506 ECVs.

Previous wording

Geographically, the vast majority of our net revenues were generated from vehicle sales in Asia during the three months ended March 31, 2026 and 2025. For the three months ended March 31, 2026, net revenues from Europe, North America, and Asia as a percentage of total revenues was 29.4%, 5.8%, and 54.9%, respectively, compared to 32.9%, 12.3%, and 54.8%, respectively for the corresponding period in 2025.

Current wording

The vast majority of our net revenues were generated from vehicle sales in European during the three months ended June 30, 2026. For the three months ended June 30, 2026, net revenues from Europe, North America, Asia (including China) and Africa as a percentage of total revenues was 41.4%, 28.3%, 26.1% and 4.2%, respectively, compared to 76.8%, 10.9%, 11.8% and 0.5%, respectively for the corresponding period in 2025.

Previous wording

For the three months ended March 31, 2026, net revenues from vehicle sales in Europe, North America, and Asia as a percentage of total vehicle net revenues was 48.9%, 10.4%, and 21.3%, respectively, compared to 33.1%, 9.5%, and 57.4%, respectively, for the corresponding period in 2025.

Current wording

For the three months ended June 30, 2026, net revenues from vehicle sales in Europe and North America, Asia (including China) and Africa as a percentage of total vehicle net revenues was 48.0%, 36.6%, 9.9% and 5.5%, respectively, compared to 78.8%, 11.5%, 9.2% and 0.6%, respectively, for the corresponding period in 2025.

Previous wording

Cost of goods sold for the three months ended March 31, 2026 was approximately $1.0 million, a decrease of approximately $0.8 million or approximately 46.5% from approximately $1.8 million for the three months ended March 31, 2025. The decrease of cost of goods sold was mainly caused by the decreased cost of vehicle sales of approximately $1.1 million, offset by the increased cost of spare-part sales of approximately $0.3 million.

Current wording

Cost of goods sold for the three months ended June 30, 2026 was approximately $5.8 million, a decrease of approximately $0.6 million or approximately 9.6% from approximately $6.4 million for the three months ended June 30, 2025. The decrease of cost of vehicle sales was mainly caused by the decrease in the cost of vehicle sales of approximately $1.5 million, offset by the decrease in the cost of spare-part sales of approximately $1.2 million.

Previous wording

Gross profit for the three months ended March 31, 2026 was approximately $0.2 million, a decrease of approximately $0.1 million or approximately 26.3% from $0.3 million of gross profit for the three months ended March 31, 2025. The decrease was primarily due to lower vehicle sales volume and a decline in vehicle gross margin, partially offset by higher-margin spare-part sales. For the three months ended March 31, 2026 and 2025, our overall gross margin was approximately 19.6% and 15.0%, respectively. Our gross margin of vehicle sales for the three months ended March 31, 2026 and 2025 was 18.5% and 10.8%, respectively.

Current wording

Gross profit for the three months ended June 30, 2026 was approximately $0.4 million, a change of approximately $0.4 million from approximately $0.02 million of gross loss for the three months ended June 30, 2025. For the three months ended June 30, 2026 and 2025, our overall gross margin was approximately 6.6% and negative 0.3%, respectively. Our gross margin of vehicle sales for the three months ended June 30, 2026 and 2025 was 6.8% and negative 1.5%, respectively. The increase of our overall gross profit was caused by the increase in the gross profit of our vehicle sales of approximately $0.4 million.

Previous wording

General and administrative expenses for the three months ended March 31, 2026 were approximately $3.4 million, a decrease of approximately $1.5 million or approximately 30.9% from approximately $4.9 million for the three months ended March 31, 2025. The decrease in general and administrative expenses in 2026 was primarily attributed to the decrease in salary and social insurance and lease expenses, of approximately $0.5 million and $0.3 million, respectively, reflecting the Company’s ongoing cost optimization initiatives.

Current wording

General and administrative expenses for the six months ended June 30, 2026 were approximately $7.2 million, a decrease of approximately $2.9 million or approximately 28.3% from approximately $10.1 million for the six months ended June 30, 2025. The decrease in general and administrative expenses in 2026 was primarily attributed to a decrease in salary and social insurance, leasing cost, and share-based compensation of approximately $0.5 million, $1.1 million, and $0.7 million, respectively, reflecting the Company’s ongoing cost optimization initiatives.

Previous wording

Research and development expenses for the three months ended March 31, 2026 were approximately $0.5 million, a decrease of approximately $0.3 million or approximately 39.0% from approximately $0.8 million for the three months ended March 31, 2025. The decrease in research and development expenses in 2026 was primarily attributed to the decrease in salary expense of approximately $0.3 million, partially reflecting timing differences in project development activities.

Current wording

Research and development expenses for the three months ended June 30, 2026 were approximately $0.5 million, a decrease of approximately $0.2 million or approximately 28.3% from approximately $0.6 million for the three months ended June 30, 2025. The decrease in research and development expenses in 2026 was primarily attributed the decrease in salary expense and share-based compensations of approximately $0.1 million and $0.1 million respectively.

Previous wording

Other expense, net for the three months ended March 31, 2026 was approximately $0.3 million, and other income, net was $0.7 million of for the three months ended March 31, 2025. The change of other (expense) income in 2026 compared to 2025 was primarily attributable to: (i) foreign currency exchange loss of $0.1 million in 2026 compared with Foreign currency exchange gain of $0.4 million in 2025; and (ii) a decrease of approximately $0.2 million in litigation compensation from Fujian Newlongma Automotive Co., Ltd..

Current wording

Other income, net for the three months ended June 30, 2026 was approximately $0.7 million, representing a change of approximately $0.7 million compared to approximately $0.07 million of other expense, net for the three months ended June 30, 2025. The change of other expense in 2026 compared to 2025 was mainly attributable to the increase in income from early termination and modification of lease of approximately $0.8 million and the increase in income on disposal of PPE of approximately $0.1 million.

Previous wording

Adjusted EBITDA for the three months ended March 31, 2026 and 2025

Current wording

Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025

Previous wording

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. We define Adjusted EBITDA as net income (or net loss) before net interest expense, income tax expense, depreciation and amortization as further adjusted to exclude the impact of stock-based compensation expense and other non-recurring expenses including expenses related to loss on redemption of convertible promissory notes, loss on exercise of warrants, and change in fair value of convertible promissory notes and derivative liability.

Current wording

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. We define Adjusted EBITDA as net income (or net loss) before net interest expense, income tax expense, depreciation and amortization as further adjusted to exclude the impact of stock-based compensation expense and other non-recurring expenses including expenses related to TME Acquisition, expenses related to one-off payment inherited from the original Naked Brand Group, impairment of goodwill, convertible bond issuance fee, loss on redemption of convertible promissory notes, and change in fair value of convertible promissory notes and derivative liability.

Previous wording

Due to these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of stock-based compensation expense and material infrequent items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal operating results and operating results of other companies over time. In addition, Adjusted EBITDA may include adjustments for other items that we do not expect to regularly occur in future reporting periods. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

Current wording

Due to these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of stock-based compensation expense and material infrequent items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal operating results and operating results of other companies over time. In addition, Adjusted EBITDA may include adjustments for other items that we do not expect to regularly occur in future reporting periods. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below helps management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

Previous wording

We have historically funded working capital and other capital requirements primarily through bank loans, equity financings and short-term loans. Also, the reverse recapitalization we have completed at the end of December 2021 provided significant funding for the Company’s operations. Cash is required primarily to purchase raw materials, repay debts and pay salaries, office expenses and other operating expenses.

Current wording

We have historically funded working capital and other capital requirements primarily through bank loans, equity financings and short-term loans. Also, the reverse recapitalization we have completed at the end of December 2021 and in the mid-April 2026 provided significant funding for the Company’s operations. Our Cash is required primarily to purchase raw materials, and pay salaries, office expenses and other operating expenses.

Previous wording

As of March 31, 2026 we had approximately $3.6 million in cash and cash equivalents and approximately $1.2 million of accounts receivables as compared to approximately $8.5 million in cash and cash equivalents and $3.1 million in accounts receivable as of March 31, 2025. For the three months ended March 31, 2026 and 2025, net cash used in operating activities was approximately $2.8 million and $5.0 million, respectively.

Current wording

As of June 30, 2026 we had approximately $4.3 million in cash and cash equivalents and approximately $1.5 million of accounts receivables as compared to approximately $6.0 million in cash and cash equivalents and $3.2 million in accounts receivable as of June 30, 2025. For the six months ended June 30, 2026 and 2025, net cash used in operating activities was approximately $5.5 million and $9.4 million, respectively.

Previous wording

We believe our cash and cash equivalents will be sufficient for us to continue to execute our business strategy over the twelve months period following the date of issuance of our report. Our current business strategy for the next twelve months includes (i) the continued rollout of our new ECV models and green energy related products in North America and Europe, as applicable and (ii) the establishment and development of local distribution channels in the United States and the European Union. Actual results could vary materially as a result of a number of factors, including:

Current wording

We are looking at measures to generate operating efficiency as well as increasing the inventory turns in containing the growth of working capital for reducing negative net cash used in operating activities. With the cash improvement initiatives, we believe our cash and cash equivalents will be sufficient for us to continue to execute our business strategy over the twelve months period following the date of issuance of this 10Q. Our current business strategy for the next twelve months includes (i) the continued rollout of our new ECV models in North America and Europe, as applicable, (ii) the establishment of local assembly facilities in the United States and the European Union and (iii) additional plants and equipment for the expansion of our Changxing factory. Actual results could vary materially as a result of a number of factors, including:

Previous wording

In the long-term, we plan to regionalize the manufacturing and supply chain relating to certain components of our ECVs in the geographic markets in which our ECVs are sold. In the long-term, through our supply chain development know-how, we intend to establish supply chain relationships in North America and the European Union to support anticipated manufacturing and assembly needs in these markets, thereby reducing the time in transit and potentially other landed costs elements associated with importing our components and spare parts from China. Currently, the majority of our revenues is derived from the sale of ECVs by private label channel partners that assemble our vehicle kits in their own facilities. As part of our growth strategy, we plan to expand our channel partner network, and local assembly facilities to regionalize our manufacturing and supply chains to better serve our global customers especially to expand our after-sales-market services offerings.

Current wording

In the long-term, we plan to regionalize the manufacturing and supply chain relating to certain components of our ECVs in several geographic markets. Through our supply chain development know-how, we intend to establish supply chain relationships especially in the North America to support anticipated manufacturing and assembly needs in these markets, thereby reducing the time in transit and potentially other landed costs elements associated with importing our components and spare parts from China. As part of our growth strategy, we plan to expand our channel partner network, and local assembly facilities to regionalize our manufacturing and supply chains to better serve our global customers, especially to expand our after-sales-market services offerings.

Previous wording

We intend to further expand our technology through continued investment in research and development. Since inception in 2013 through March 31, 2026 we have spent over approximately $97.2 million in research and development activities related to our operations. We plan to increase our research and development expenditure over the long term as we build on our technologies in vehicle development, driving control, cloud-based platforms, and innovations for promoting sustainable energy.

Current wording

We intend to further expand our technology through continued investment in research and development. Since inception in 2013 through June 30, 2026, we have spent over approximately $97.7 million in research and development activities related to our operations. We plan to increase our research and development expenditure over the long term as we build on our technologies in vehicle development, driving control, cloud-based platforms, and innovations for promoting sustainable energy.

Previous wording

As of March 31, 2026, our working capital was approximately $18.4 million, as compared to a working capital of approximately $19.0 million as of December 31, 2025. The approximately $0.6 million decrease in working capital during 2026 was primarily due to the decrease of cash and cash equivalents of approximately $0.9 million.

Current wording

As of June 30, 2026, our working capital was approximately $16.4 million, as compared to a working capital of approximately $19.0 million as of December 31, 2025. The approximately $2.5 million decrease in working capital during 2026 was primarily due to (i) the decrease in inventories, net and assets held for sale, current of $3.5 million and $2.7 million;(ii) increase in accrued expenses and other current liabilities and contractual liabilities of $2.3 million and $2.7 million; and partially offset by (i) the increase in prepayment and other current assets of approximately $2.2 million, and (ii) the decrease in accounts payable, short-term loans, convertible promissory notes and current portion of long-term loans, operating lease liabilities, current and liabilities held for sale, current of $0.8 million, $1.3 million, $1.3 million, $0.5 million and $2.1 million.

Previous wording

Our net cash used in operating activities was approximately $2.8 million, $5.0 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

Our net cash used in operating activities was approximately $5.5 million and $9.4 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026 was primarily attributable to (i) our net loss of approximately $3.9 million and adjusted for non-cash items of approximately $1.1 million, which primarily consisted of depreciation and amortization and share based compensation expense of approximately $0.5 million and $0.7 million respectively, (ii) the increase in deferred revenue and prepayment and other current assets of approximately $1.4 million and $0.5 million, respectively, (iii) decrease in accounts payable and accrued expense and other current liabilities of approximately $0.7 million and $0.4 million, respectively.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026 was primarily attributable to (i) our net loss of approximately $14.5 million and adjusted for non-cash items of approximately $5.5 million, which primarily consisted of loss from liquidation of discontinued operations, impairment loss, share based compensation expense , depreciation and amortization, amortization of operating lease right-of-use asset and loss in change in fair value of convertible promissory notes and derivative liability of approximately $4.5 million, $2.9 million, $0.7 million, $1.1 million, $0.6 million and $1.3 million, respectively, (ii) the decrease in inventories and contractual liabilities, of approximately $2.8 million, and $2.6 million, respectively, (iii) increase in prepayment and other current assets, accounts payable, accrued expense and other current liabilities and of approximately $1.0 million , $0.9 million, and $2.5 million, respectively.

Previous wording

Net cash provided by financing activities was approximately $1.7 million for the three months ended March 31, 2026. Net cash provided by financing activities for the three months ended March 31, 2026 was primarily attributable to proceeds from bank loans of approximately $1.8 million and loans proceed from third parties of approximately $1.5 million, offset by the repayment of bank loans of approximately $1.3 million.

Current wording

Net cash provided by financing activities was approximately $5.0 million for the six months ended June 30, 2026. Net cash provided by financing activities for the six months ended June 30, 2026 was primarily attributable to proceeds from loans proceed from third parties and proceeds from bank loans of approximately $4.4 million and $2.3 million, and partially offset by repayment to bank loan of approximately $1.3 million.

Previous wording

The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated and combined financial statements, the reported amounts of revenue and expenses during the reporting period and the related disclosures in the consolidated and combined financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in “Note 2—Summary of Significant Accounting Policies” of our consolidated and combined financial statements for the three months ended March 31, 2026, included elsewhere in this Quarter Report, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.

Current wording

The preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, the reported amounts of revenue and expenses during the reporting period and the related disclosures in the unaudited condensed consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in “Note 2—Summary of Significant Accounting Policies” of our unaudited condensed consolidated financial statements for the six months ended June 30, 2026, included elsewhere in this Quarterly Report, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.

Previous wording

The Company’s financial instruments not reported at fair value primarily consist of cash and cash equivalents, restricted cash, accounts receivable, other current assets, amount due from and to related parties, accounts payable and other current liabilities and short-term loans.

Current wording

The Company’s financial instruments not reported at fair value primarily consist of cash and cash equivalents, restricted cash, accounts receivable, other current assets, amount due from and due to related parties, accounts payable and other current liabilities and short-term loans.

Previous wording

The carrying value of cash and cash equivalents, restricted cash, accounts receivable and other current assets, accounts payable, other current liabilities, bank loans and amount due from and to related parties, current were approximate their fair values because of the short-term nature of these items. The estimated fair values of loans from third parties were not materially different from their carrying value as presented due to the brief maturities and because the interest rates on these borrowings approximate those that would have been available for loans of similar remaining maturities and risk profiles.

Current wording

The carrying value of cash and cash equivalents, restricted cash, accounts receivable and other current assets, accounts payable, other current liabilities, bank loans and amount due from and due to related parties, current were approximate fair value because of the short-term nature of these items. The estimated fair values of loan from third party, and amount due from related party, non-current were not materially different from their carrying value as presented due to the brief maturities and because the interest rates on these borrowings approximate those that would have been available for loans of similar remaining maturities and risk profiles.

Previous wording

Currency-cross swap was classified within Level 1 of the fair value hierarchy because they were valued using quoted prices in active markets. As the issuer is not yet listed and there are no similar companies in the market at the same stage of development for comparison, the investment is difficult to value, and the valuation is not considered reliable. Therefore, the Company develop its own assumption by future cash flow forecast, which contains principal paid and interests accrued.

Current wording

Currency-cross swap were classified within Level 1 of the fair value hierarchy because they were valued using quoted prices in active markets. Our debt security investments are classified within Level 3 of the fair value hierarchy. As the counterparty that issued the subject debt security held by the Company(“the Issuer”) is not yet listed and there are no similar companies in the market at the same stage of development for comparison, the Issuer is difficult to value, and the valuation is not considered reliable. Therefore, the Company develop own assumption by future cash flow forecast, which contains principle paid and interests accrued.

Previous wording

The fair value option provides an election that allows a company to irrevocably elect to record certain financial assets and liabilities at fair value on an instrument-by-instrument basis at initial recognition. The Company has elected to apply the fair value option to: i) convertible promissory notes payable due to the complexity of the various conversion and settlement options available to notes holders; ii) convertible loan receivable, which was recognized as debt security in long-term investments, and iii) currency-cross swap, which was recognized as derivative financial instruments. Specifically, positive fair values of cross-currency swaps are classified as short-term investments in the unaudited condensed consolidated balance sheet, and negative fair values of such instruments are recorded in other current liabilities.

Current wording

The fair value option provides an election that allows a company to irrevocably elect to record certain financial assets and liabilities at fair value on an instrument-by-instrument basis at initial recognition. The Company has elected to apply the fair value option to: i) convertible promissory notes payable due to the complexity of the various conversion and settlement options available to notes holders; and ii) currency-cross swap, which was recognized as derivative financial instruments in short-term investments.

Previous wording

In connection with the issuances of convertible promissory notes, the Company issued investor warrants and placement agent warrants to purchase warrant shares of the Company. The Company utilizes a Binomial model to estimate the fair value of the warrants, which are classified as Level 3 within the fair value hierarchy. The warrants are measured at each reporting period, with changes in fair value recognized in the statement of operations.

Current wording

In connection with the issuances of convertible promissory notes, the Company issued investor warrants and placement agent warrants to purchase ordinary shares of the Company. The Company utilizes a Binomial model to estimate the fair value of the warrants and are considered a Level 3 fair value measurement. The warrants are measured at each reporting period, with changes in fair value recognized in the statement of operations.

Previous wording

As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. The Company’s investments valued at NAV as a practical expedient are private equity funds, which represent the investment in equity security on the unaudited condensed consolidated balance sheet. The Company evaluates whether NAV remains representative of fair value at each reporting date, considering, among other factors, liquidity restrictions, the financial condition of the investee, and the ability to realize returns. Adjustments may be required to reflect the specific characteristics that market participants would consider in pricing the investment.

Current wording

As a practical expedient, the Company uses Net Asset Value (“NAV”) or its equivalent to measure the fair value of its certain fund investment. The Company’s investments valued at NAV as a practical expedient are: private equity funds, which represent the investment in equity security on the unaudited condensed consolidated balance sheet.

Previous wording

The Company acts as a principal in the revenue generating process and should recognize revenue on a gross basis. Revenues are measured as the amount of consideration the Company expects to receive in exchange for transferring products to customers. The transaction price is generally fixed as specified in the contracts. The Company’s contracts do not include explicit rights of return, and variable consideration is not significant.

Current wording

The Company acts as a principal in the revenue generating process and should recognize revenue on a gross basis. Revenues are measured as the amount of consideration the Company expects to receive in exchange for transferring products to customers. Consideration is recorded net of sales returns and VAT. Sales returns is estimated based on historical experiences, which were insignificant for the six months ended June 30, 2026 and 2025. The consideration is fixed, with no variable consideration. All transactions are settled in cash within the normal credit period, and there is no financing component.

Previous wording

Shipping, handling costs and freight-out expenses for product shipments that occur prior to the customer obtaining control of the goods are accounted for as fulfilment costs rather than separate performance obligations and are recorded as selling and marketing expenses. These costs primarily include domestic transportation and other logistics expenses incurred prior to export under EXW, FOB or FCA arrangements, or costs incurred before delivery to customers.

Current wording

Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods are accounted for as fulfilment costs rather than separate performance obligations and recorded as sales and marketing expenses.

Previous wording

The following table disaggregated the Company’s revenues by product line for the three months ended March 31, 2026 and 2025:

Current wording

The following table disaggregates the Company’s revenues by product line for the six months ended June 30, 2026 and 2025:

Previous wording

The Company’s revenues are primarily derived from America, Europe and Asia. The following table set forth disaggregation of revenue by customer location.

Current wording

The Company’s revenues are derived from Europe, Asia and America. The following table sets forth disaggregation of revenue by customer location.

Previous wording

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration. The consideration received remains a contractual liability until goods or services have been provided to the customer. For the three months ended March 31, 2026 and 2025, the Company recognized $89,620 and $374,384 revenue that was included in contract liabilities as of January 1, 2026 and 2025, respectively.

Current wording

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration. The consideration received remains a contractual liability until goods or services have been provided to the customer. For the six months ended June 30, 2026 and 2025, the Company recognized $365,239 and $568,035 revenue that was included in contractual liabilities as of January 1, 2026 and 2025, respectively.