FiEE, Inc.

Notes to Condensed Consolidated Financial Statements

(1)NATURE OF OPERATIONS AND BASIS OF PRESENTATION

FiEE, Inc. (formerly, Minim, Inc.) was founded in 1977 as a networking company and pivoted into delivering intelligent software to protect and improve the WiFi connections we depend on to work, learn, and live. FiEE held the exclusive global license to design, manufacture, and sell consumer networking products under the Motorola brand until 2023. Our cable and WiFi products, with an intelligent operating system and bundled mobile app, were sold in leading retailers and e-commerce channels in the United States (“U.S.”). Our artificial intelligence (“AI”)-driven cloud software platform and applications made network management and security simple for home and business users, as well as the service providers that assisted them - leading to higher customer satisfaction and decreased support burden.

On February 27, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Amended and Restated Certificate of Incorporation to change the name of the Company from Minim, Inc. to FiEE, Inc., effective as of February 27, 2025.

We continue to grow and expand our operations as a digital service provider focused on integrating AI and data analytics into content creation and brand management. We offer a wide range of Software as a Service (“SaaS”) solutions through a cloud-based platform designed to support our clients in developing, managing, and optimizing their digital presence across global platforms, including customized graphics and posts, short videos, and editorial calendars aligned with brand goals. Additionally, we offer comprehensive software development and maintenance services, delivering custom software solutions from system design and development to deployment and post-launch maintenance.

On November 30, 2025, we completed the acquisition of Houren-Geiju Kabushikikaisha (“HGK”), a Japanese technology company specializing in digital authentication services for artworks, leveraging AI and blockchain technology to provide artwork authentication, certification, and display services for individual and corporate clients. This acquisition introduces AI image recognition and blockchain authentication technologies to the Company’s service portfolio, further bolstering our technological capabilities and optimizing our comprehensive brand management solutions for customers.

During the six months ended June 30, 2026, the Company incorporated two new wholly owned subsidiaries: FiEE Channel Limited in Hong Kong on March 5, 2026, and FiEE Singapore Pte. Ltd. in Singapore on March 26, 2026. As of June 30, 2026, FiEE Singapore Pte. Ltd. had commenced its authentication services business, while FiEE Channel Limited had not yet commenced operations.

On May 31, 2026, the Company, through its wholly owned subsidiary FiEE (HK) Limited (“FiEE HK”), completed the acquisition of a 51% equity interest (and 60% of the voting rights) in Guangzhou Yinlian Culture Co., Ltd. (“Yinlian Culture”), a limited liability company formed under the laws of the People’s Republic of China (the “PRC”). Upon the closing of the acquisition, Yinlian Culture became a consolidated subsidiary of the Company. Through the variable interest entity (“VIE”) Agreements between Yinlian Culture and Guangzhou Maltose Culture Communication Co., Ltd., a limited liability company formed under the laws of the PRC (“Maltose Culture”), Maltose Culture is consolidated as a VIE of the Company. Through this acquisition, the Company commenced its music-related business, combining Maltose Culture’s music expertise with its AI capabilities to build an advanced AI music infrastructure and strengthen its position in the global music ecosystem. See Note 4 – Business Combination and Note 5 –VIE Arrangements for further details.

FiEE, Inc. and its subsidiaries and consolidated VIE are herein collectively referred to as “FiEE,” the “Company,” “we,” “our,” “us,” or similar terms. The following table lists all of the Company’s subsidiaries and consolidated VIE:

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) can be condensed or omitted. In the opinion of management, the financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results. All intercompany balances and transactions have been eliminated in consolidation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

The results of the Company’s operations can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year or any future periods.

Principles of Consolidation

The condensed consolidated financial statements include the accounts and operations of the Company, its wholly owned subsidiaries and its consolidated variable interest entity. All intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. These judgments, estimates and assumptions made by the Company include, but are not limited to revenue recognition, expected credit losses, contract liabilities, valuation allowance for deferred tax assets, fair value of acquired assets, valuation of warrants and stock-based compensation. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results may differ from those estimates under different assumptions or conditions and the differences may be material.

Liquidity

The Company’s operations have historically been primarily financed through the issuance of its common stock, $0.01 par value per share (the “Common Stock”), and preferred stock, $0.001 par value per share (the “Preferred Stock”). Since inception, the Company has incurred significant losses and negative cash flows from operations. The Company began generating operating profit in the fourth quarter of 2025 and has continued to do so thereafter. During the six months ended June 30, 2026, the Company reported a net income of $2.5 million, a positive working capital of $7.1 million and an increase in cash of $2.4 million. The increase in cash was primarily attributable to $90 thousand of cash provided by operating activities, $1.9 million of cash provided by financing activities, and $366 thousand of cash provided by investing activities. As of June 30, 2026, the Company had an accumulated deficit of $93.2 million and cash on hand of $5.4 million. Although the Company generated net income, positive working capital, and positive operating cash flows during the six months ended June 30, 2026 following changes in management and business strategy, it has incurred significant losses in prior years and has a limited history of profitability. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the date the condensed consolidated financial statements were issued. The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly.

The Company’s condensed consolidated financial statements as of June 30, 2026 do not include any adjustments to the carrying amounts or classification of assets, liabilities, and reported expenses that may be necessary should the Company be unable to continue as a going concern. If the Company is unable to raise additional capital, it may be forced to liquidate its assets at amounts less than their carrying values, and investors could lose all or a portion of their investment.

(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2025. There were no material changes to the Company’s significant accounting policies during the six months ended June 30, 2026, except for the following updates resulting from transactions that occurred during the period.

Functional Currency

The functional currency of FiEE (HK) Limited is the Hong Kong dollar (“HKD”). The functional currency of HGK is the Japanese Yen (JPY). The functional currency of FiEE Singapore Pte. Ltd. is the U.S. Dollar (USD). The functional currency of Yinlian Culture and Maltose Culture is the Chinese Renminbi (RMB). Foreign currency transactions are translated into their respective functional currencies using exchange rates at the transaction dates, while monetary assets and liabilities denominated in foreign currencies are remeasured at period-end rates. The functional currency of all other entities of the Company is U.S. Dollar (“USD”), the same as the reporting currency.

Assets and liabilities of the Company denominated in functional currency other than USD are translated into USD at period-end exchange rates. Equity accounts other than earnings generated in the current period are translated into USD at the appropriate historical rates. The results of operations and the statements of cash flows denominated in functional currency other than USD are translated into USD at the average exchange rates during the reporting period. Translation adjustments arising from these are reported as cumulative translation adjustments and are shown as a separate component of accumulated other comprehensive income (loss) in the consolidated statements of changes in stockholders’ equity (deficit).

Property, Equipment and Software

Property, equipment and software primarily consisted of equipment, vehicles, land, building and internal-use software customized by a vendor, which are stated at cost, and are depreciated or amortized on a straight-line basis over their estimated useful lives. Maintenance and repairs are charged to expense as incurred. Significant improvements that substantially enhance the useful life of an asset are capitalized and depreciated. When assets are retired or disposed of, the cost together with related accumulated depreciation is removed from the balance sheet and any resulting gain or loss is reflected in the Company’s statements of operations in the period realized. Costs incurred to develop internal-use software are capitalized only during the application development stage.

Noncontrolling interests

The Company presents noncontrolling interests as a component of equity on its condensed consolidated balance sheets and reports the portion of its earnings or loss for noncontrolling interests as net earnings or loss attributable to noncontrolling interests in the condensed consolidated statements of operations.

Noncontrolling interests represent interests in the net assets of the Company’s consolidated subsidiary and VIE that are not attributable, directly or indirectly, to the Company. Noncontrolling interests are adjusted, as applicable, for their respective shares of net income or loss, other comprehensive income or loss, and distributions.

Income Taxes

Entities incorporated in Hong Kong are subject to Hong Kong Profits Tax at a rate of 8.25% on the first HKD 2 million of assessable profits and at 16.5% thereon. There are no withholding taxes on the payment of dividends by entities incorporated in Hong Kong to their stockholders.

Entities incorporated in Japan are subject to Japanese corporate income tax at an effective rate of approximately 37% (including national and local taxes).

Entities incorporated in Singapore are subject to Singapore corporate income tax at a flat rate of 17% on chargeable income. There are no withholding taxes upon payment of dividends by an entity incorporated in Singapore to its shareholders.

For the three and six months ended June 30, 2026, the Company recorded income tax expense of $526,897 and $663,726, respectively, primarily attributable to its Hong Kong, Singapore, and Japan subsidiaries’ taxable income. The Company recognized deferred tax assets of $26,371 as of June 30, 2026, which arose primarily from the allowance for credit losses on other receivables.

Segment reporting

The Company operates as a single operating segment. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating financial performance. The measure of segment profit or loss reviewed by the CODM is operating income. The Company’s primary operations were historically in the U.S., and during the year ended December 31, 2025, primarily Hong Kong. Beginning in March 2026, following the incorporation of its subsidiary in Singapore, the Company has derived substantially all of its revenues from Hong Kong and Singapore. As of June 30, 2026, the Company’s long-lived assets are mainly located in U.S., Hong Kong and Japan.

For the three and six months ended June 30, 2026 and 2025, significant segment expenses that are regularly provided to the CODM and included in this measure consist of cost of revenues, selling, general, and administrative expenses. These expenses are consistent with the amounts presented in the consolidated statements of operations. There are no other segment items as there are no significant assets or operations not regularly reviewed by the CODM.

Recently Issued Accounting Standards

There have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows**.**

(3)REVENUE AND OTHER CONTRACTS WITH CUSTOMERS

The Company adopted ASC 606, Revenue from Contracts with Customers, which requires a five-step model to recognize revenue from customer contracts. The five-step model requires entities to exercise judgment when considering the terms of contracts, including: (1) identifying the contracts or agreements with a customer; (2) identifying the performance obligations in the contract or agreement; (3) determining the transaction price; (4) allocating the transaction price to the separate performance obligations; and (5) recognizing revenue as each performance obligation is satisfied. The Company applies the five-step model to contracts only when it is probable that the Company will collect the consideration to which it is entitled in exchange for the services it transfers to its clients.

Revenues from SaaS service- Multi-Channel Network (“MCN”) Digital Service

Since March 2025, the Company has expanded SaaS operations as a digital service provider, delivering full-cycle services to brand clients through legally binding agreements. The Company offers full-service account management, content production, and targeted promotion to grow followers across key platforms. Service packages are customizable via the SaaS portal. Customers may purchase value-added services with or after their purchases of basic package. The Company’s services comprise two distinct performance obligations: (1) the basic service, which represents a single performance obligation as the promises for account setup, SaaS platform access, account management, and basic digital content creation and publishing are highly interdependent and bundled together; and (2) the value-added services, which represents a performance obligation for additional digital content created and customized to meet the customer’s special request. Each performance obligation has a standalone transaction price. The Company recognizes revenues from basic services ratably over the contract term beginning on the commencement date of each contract. The revenues from value-added services are recognized at a point in time when customers approve or accept the value-added services or system automatically approves whichever is later. The Company offers MCN digital services under two payment structures: (i) prepaid arrangements, where customers are required to make an upfront payment for the services, which is non-refundable upon execution of the contract and are recorded as contract liabilities until recognized as revenue; and (ii) post-paid arrangements, where customers are granted payment terms of 90 days from the contract signing date. The 90-day credit period is offered to customers who satisfy the Company’s internal credit assessment criteria, which consider factors such as the customer’s credit profile, contract size, and historical relationship. For post-paid arrangements, the Company records accounts receivable when the services are performed and the Company has an unconditional right to consideration. Customers retain the right to terminate the contract prior to its expiration date, subject to the early termination fees, including information transfer fees and fan development fees. The Company regularly monitors the collectability of receivables arising from post-paid arrangements.

Revenues from Software Service

The Company enters into bundled arrangements that typically include the sale of on-premise software licenses, standard or customized modules, and maintenance and support (“M&S”) services. These arrangements are evaluated to determine whether the promises represent distinct performance obligations. The standard or customized modules are highly interdependent and interrelated with the software license and are therefore combined with the license as a single performance obligation, while the M&S services are capable of being distinct and are accounted for as a separate performance obligation. The M&S services are provided free of charge for a specified contract period, typically encompassing the first year of service following software delivery.

The transaction price is allocated to each performance obligation based on their relative stand-alone selling prices (“SSP”). The SSP for the combined software license and customized or standard modules, and M&S services is determined using the adjusted market assessment approach, which considers market conditions, competitive pricing, the Company’s market position, expected profit margins, and cost structure. For customized arrangements only, contracts include retention fees that represent variable consideration, as their payment is contingent upon no major defects being identified within a specified period. These retention fees are excluded from the initial transaction price. The related revenue is recognized only when it’s probable that a significant reversal will not occur. Contracts for software licensing and M&S services generally include a renewal option for M&S services; however, the renewal option to acquire additional services is neither offered free of charge nor at a discount and accordingly does not represent a material right.

The Company provides assurance-type warranties to ensure that the delivered software complies with agreed-upon specifications. These warranties do not constitute a separate performance obligation as they cannot be purchased separately and do not provide a service beyond remedying defects to bring the software to the specified standard.

The Company’s contracts typically specify a payment schedule whereby payments from the customer are linked to the signing of the contract and the achievement of specific milestones for customized arrangements, while for standard arrangements, customers are granted payment terms with an initial payment due within three months after acceptance and a final payment due within nine months after acceptance. Contracts are generally fixed price, and the Company has elected the practical expedient not to adjust the promised consideration for the effects of a significant financing component when the period between transfer of goods or services and customer payment is one year or less.

For contracts with customized modules, revenue from the combined software license and customized modules is recognized over time as the Company fulfils its performance obligations by developing and enhancing the software assets throughout the project period. The Company recognizes revenue using the output method based on the measurements of the value of the services transferred to date in relation to total performance obligation promised. For contracts with standard modules, revenue from the combined software license and standard modules is recognized at a point in time upon final delivery and customer acceptance. Revenue from maintenance and support services for both types is recognized over time on a straight-line basis over the M&S contract period. This recognition pattern reflects the continuous transfer of services to the customer, who simultaneously receives and consumes the benefits of these services throughout the service period.

Revenues from Digital Authentication Service

The Company provides digital authentication services for artworks, leveraging AI and blockchain technology. Services include microstructure analysis, AI image comparison, authenticity determination, blockchain registration, and issuance of digital authentication reports. Service packages are offered in standard and expedited editions, with fees calculated based on the dimensions of the artwork. The Company’s services comprise a single performance obligation, as the promised services are highly interdependent and integrated to deliver a conclusive authentication outcome. The transaction price is fixed at contract inception. Revenue is recognized at a point in time upon delivery of the final digital authentication report and blockchain certificate to the client, when the client obtains control of the completed authentication package. The Company offers these services under two payment structures: (i) prepaid arrangements, where customers are required to make an upfront payment for the services, which is non-refundable upon execution of the contract and is recorded as a contract liability until recognized as revenue; and (ii) post-paid arrangements, where customers are granted payment terms of 90 days from the contract signing date. For post-paid arrangements, the Company records accounts receivable when the services are performed and the Company has an unconditional right to consideration.

Revenues from others

Through the acquisition of Yinlian Culture and the Company’s VIE, Maltose Culture in May 2026, the Company commenced its music services business. As the acquisition was completed on May 31, 2026, the Company recorded only one month of revenue from music services during the three and six months ended June 30, 2026, and the amount was immaterial to the condensed consolidated financial statements.

Remaining Performance Obligations

The remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities and non-cancellable backlog. Non-cancellable backlog includes service orders for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for delivery or performance, and that are not yet invoiced.

As of June 30, 2026 and December 31, 2025, the remaining performance obligations related to MCN digital services purchased and paid for in advance by customers for basic and value-added packages amounted to $507,140 and $1,497,721, respectively. These amounts are expected to be recognized as revenue within the next 12 months.

The remaining performance obligations for software services as of June 30, 2026 and December 31, 2025, were $465,354 and $521,082, respectively, excluding retention fees. These amounts relate to unsatisfied performance obligations for the combined software license and customized modules, which are expected to be recognized as revenue upon the completion and customer acceptance of specific milestones, predominantly within the next three months.

As of June 30, 2026 and December 31, 2025, there were no remaining performance obligations related to digital authentication services.

Contract Costs

The Company recognizes the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized, and the Company amortizes these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on the Company’s condensed consolidated balance sheets if any.

The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less.

Contract Balances

The Company records accounts receivable when it has an unconditional right to the consideration. The accounts receivable balances were $5,134,459 and $2,110,715 as of June 30, 2026 and December 31, 2025, respectively. Subsequent to June 30, 2026 and through the date of this filing, the Company collected approximately $2,282,433 of the accounts receivable balance outstanding as of June 30, 2026. Contract liabilities are recorded when customers remit payment prior to revenue recognition, representing the Company’s obligation to transfer services in the future. Liabilities arise upon customer order placement. The contract liabilities balances were $343,015 and $1,497,721 as of June 30, 2026 and December 31, 2025, respectively.

Disaggregation of Revenue

The following table sets forth our revenues by product:

The following table sets forth our revenues by the timing of revenue recognition:

(4)BUSINESS COMBINATION

On March 23, 2026, FiEE HK entered into an Investment Agreement with Yinlian Culture, Maltose Culture, Guangzhou Qingniao Culture Co., Ltd., Shenzhen Yaojin Creative Media Co., Ltd., Cai Yuanyao, Zhang Dingcheng, and Zhang Rong (the “Investment Agreement”), pursuant to which (i) FiEE HK agreed to acquire a 51% equity interest (and 60% of the voting rights) in Yinlian Culture for an aggregate purchase price of $51,000. Yinlian Culture was incorporated on February 11, 2026 to facilitate the investment in Maltose Culture. In connection with the signing of the Investment Agreement, a Shareholder Agreement was also entered into on March 23, 2026 (the “Shareholder Agreement” and, together with the Investment Agreement, the “VIE Agreements”), governing the rights and obligations of the shareholders of Yinlian Culture, including, but not limited to, board composition and governance, voting rights, dividend rights and distribution thresholds, liquidation preference, and transfer restrictions. The acquisition closed on May 31, 2026. Through the VIE Agreements between Yinlian Culture and Maltose Culture, the Company obtained control over Maltose Culture, which is consolidated as a VIE of the Company.

In accordance with ASC 810-10-40-6, the Investment Agreement, the Shareholder Agreement, and the VIE Agreements were entered into in contemplation of one another and were essentially a single transaction designed to achieve an overall commercial effect. Accordingly, these agreements have been combined and accounted for as a single transaction for financial reporting purposes.

The Company evaluated the transaction in accordance with the guidance in ASC 805 and determined that the acquired set met the definition of a business. The acquired set includes both inputs and a substantive process that together significantly contribute to the ability to create outputs, including two key employees forming an organized workforce and the ability to continue revenue-generating operations without significant disruption. Accordingly, the transaction was accounted for as a business combination.

The aggregate purchase price for the 51% equity interest was $51,000 in cash, which represents a capital contribution to be made by FiEE HK to Yinlian Culture. As of June 30, 2026, this amount remained unpaid.

On May 31, 2026, FiEE HK and Yinlian Culture entered into a Supplemental Agreement to the Investment Agreement (the “Supplemental Agreement”), filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q. Under the Supplemental Agreement, (i) FiEE HK waived, solely as a condition precedent to the first closing, the requirement that Yinlian Culture open a foreign exchange capital account capable of receiving the capital increase payment, provided that Yinlian Culture remains obligated to open such account following the first closing; (ii) the parties agreed that the first closing under the Investment Agreement occurs on the date the conditions precedent to the first closing are satisfied or waived, rather than within five business days thereafter, and that the signing date of the Supplemental Agreement is deemed the First Closing Date; and (iii) the parties agreed that FiEE HK’s payment of the RMB 354,807 (approximately $51,000) investment amount is due within seven business days from the date Yinlian Culture opens its foreign exchange capital account, rather than within seven business days following the first closing as originally provided.

Fair Value of Identifiable Assets Acquired and Liabilities Assumed

The purchase consideration was allocated to the identifiable assets acquired and liabilities assumed based on their estimated acquisition-date fair values. The noncontrolling interests were also measured at their acquisition date fair value, which consist of (i) the 49% equity interest in Yinlian Culture not acquired by the Company and (ii) the interest in Maltose Culture’s acquisition-date net assets attributable to its registered equity shareholders. The allocation is as follows:

The fair value of the identifiable net assets was determined using an asset approach, which estimates fair value based on the replacement cost or reproduction cost of the assets, adjusted for physical deterioration, functional obsolescence, and economic obsolescence. The fair values of financial assets and liabilities, including cash and cash equivalents, other current assets, and accrued liabilities, approximated their respective carrying amounts at the acquisition date due to their short-term nature.

Convertible Note

Under the same Investment Agreement, FiEE HK also agreed to provide, or cause an entity designated by FiEE HK to provide, a zero-interest convertible loan to Yinlian Culture in the principal amount of up to RMB 20,000,000 (approximately $2.9 million). The convertible loan is to be funded in three tranches and provides FiEE HK with the option, exercisable at any time by written notice, to either (i) require Yinlian Culture to repay all or any portion of the convertible loan in cash, or (ii) convert all or any portion of the convertible loan into additional equity in Yinlian Culture, which, upon full conversion, would result in FiEE HK and its designated entities collectively holding 60% of the total equity interests in Yinlian Culture. This convertible loan is accounted for as a separate financing arrangement and does not form part of the equity consideration in accordance with ASC 805-10-55-18. As of June 30, 2026, the Company had disbursed approximately RMB 7.6 million (approximately $1.1 million) of the convertible loan. Upon consolidation, the intercompany loan receivable and payable were eliminated in their entirety, and no liability or receivable related to this convertible loan is recognized in the condensed consolidated balance sheets. The convertible loan effectively represents a cash transfer from FiEE, Inc. (the parent) to Yinlian Culture (the acquired subsidiary), of which $51,000 can be designated as capital contribution.

(5)VIE ARRANGEMENTS

VIE Agreements

Maltose Culture is an AI-empowered music ecosystem that integrates content creation, intelligent platform distribution, and next-generation home entertainment. At or immediately prior to the closing of the Equity Investment, Maltose Culture was owned 40% by Zhang Dingcheng and 60% by Yang Kai, the spouse of Cao Yu, who serves as Chief Financial Officer and a member of the board of directors of the Company.

In order to establish effective control over, and the right to receive the economic benefits of, Maltose Culture, pursuant to the requirements of PRC law, Yinlian Culture entered into the following agreements (collectively, the “VIE Agreements”) with Maltose Culture, Yang Kai, and Zhang Dingcheng. The VIE Agreements were effective on March 23, 2026, and the related business registration changes were completed on March 26, 2026.

Exclusive Purchase Option Agreement

Pursuant to the Exclusive Purchase Option Agreement, dated as of March 23, 2026, in connection with the signing of the Investment Agreement, each of Yang Kai and Zhang Dingcheng granted to Yinlian Culture an exclusive and irrevocable option to acquire 100% of the equity interests of Maltose Culture at the lowest price permitted by applicable PRC law, together with the right to acquire all of the assets of Maltose Culture. The option may be exercised by Yinlian Culture at any time, subject to applicable PRC regulatory requirements and approvals.

Irrevocable Proxy Agreement

Pursuant to the Irrevocable Proxy Agreement, dated as of March 23, 2026, in connection with the signing of the Investment Agreement, each of Yang Kai and Zhang Dingcheng irrevocably appointed Yinlian Culture as their exclusive proxy to exercise all shareholder voting rights with respect to their respective equity interests in Maltose Culture, including without limitation all voting rights, the right to appoint directors and senior management, and the right to transfer, pledge, or otherwise dispose of their equity interests. The proxy is irrevocable and remains effective for the entire operating term of Maltose Culture, unless earlier terminated by Yinlian Culture.

Business Cooperation Agreement

Pursuant to the Business Cooperation Agreement, dated as of March 23, 2026, in connection with the signing of the Investment Agreement, Yinlian Culture agreed to provide exclusive consulting and technical services to Maltose Culture and to license certain intellectual property to Maltose Culture on a non-exclusive, non-transferable basis, in exchange for service fees payable by Maltose Culture to Yinlian Culture. The service fees under the agreement are structured to equal substantially all of the net income of Maltose Culture, thereby transferring the economic benefits of Maltose Culture to Yinlian Culture.

Equity Pledge Agreement

Pursuant to the Equity Pledge Agreement, dated as of March 23, 2026, in connection with the signing of the Investment Agreement, each of Yang Kai and Zhang Dingcheng pledged all of their respective equity interests in Maltose Culture to Yinlian Culture as security for the performance of all of their obligations and Maltose Culture’s obligations under the VIE Agreements.

Spousal Consent

In connection with the signing of the Investment Agreement, Cao Yu executed a Spousal Consent, dated as of March 23, 2026, acknowledging and consenting to Yang Kai’s entry into and performance of the VIE Agreements, and confirming that she has no claim to the equity interests of Maltose Culture held by Yang Kai.

Based on the terms of the VIE Agreements, the Company has determined that it is the primary beneficiary of Maltose Culture for the following reasons: (i) through the Irrevocable Proxy Agreement, Yinlian Culture has the power to direct the voting and operational activities of Maltose Culture, including the appointment of directors and senior management; (ii) through the Exclusive Purchase Option Agreement, Yinlian Culture has the right to acquire 100% of the equity interests of Maltose Culture at any time; (iii) through the Business Cooperation Agreement, Yinlian Culture provides consulting and technical services that are essential to Maltose Culture’s operations; and (iv) through the Equity Pledge Agreement, Yinlian Culture has security interest over the equity interests of Maltose Culture. Accordingly, the Company has both the power to direct the activities that most significantly impact Maltose Culture’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to Maltose Culture. Therefore, the Company is the primary beneficiary of Maltose Culture and consolidates Maltose Culture as a VIE.

Assets and Liabilities of VIE

The Company’s condensed consolidated financial statements include the assets, liabilities and results of operations of the VIE for which the Company is the primary beneficiary. The noncontrolling interest holder’s interest is reflected in “Net income (loss) attributable to noncontrolling interests” in the condensed consolidated statements of operations and “Noncontrolling interests” in the condensed consolidated balance sheets. See Note 4 – Business Combination for details of noncontrolling interests.

The creditors of the consolidated VIE do not have recourse to the Company other than to the assets of the consolidated VIE. The following table summarizes the carrying amounts of the Company’s VIE assets and liabilities, after elimination of any intercompany transactions and balances, included in the Company’s condensed consolidated balance sheets at June 30, 2026:

(6)BALANCE SHEET COMPONENTS

Property, equipment and software, net

Property, equipment and software, net consists of the following:

For the three months ended June 30, 2026 and 2025, depreciation and amortization was $35 thousand and $22 thousand, respectively. Depreciation and amortization expense was $64 thousand and $72 thousand for the six months ended June 30, 2026 and 2025, respectively.

Intangible assets

As part of the asset acquisitions completed on June 30, 2025 and November 30, 2025, the amount allocated to the intangible assets acquired was approximately $1.3 million and $2.5 million, respectively, primarily consisting of acquired proprietary software, which represent a group of copyrights, associated patents and software source codes that are expected to provide future economic benefits to the Company. The allocation of the purchase price was performed on a relative fair value basis in accordance with ASC 805-50. The acquired group of proprietary software is being amortized over three years, its estimated useful life.

Intangible assets consisted of the following at June 30, 2026 and December 31, 2025:

Amortization expense was $316 thousand and $0 thousand in the three months ended June 30, 2026 and 2025, respectively. Amortization expense was $631 thousand and $0 thousand in the six months ended June 30, 2026 and 2025, respectively.

Estimated amortization expenses for the future years are as follows:

Other receivables, net

Other receivables, net as of June 30, 2026 and December 31, 2025 included gross amounts of $70,012 and $85,134, respectively. During the six months ended June 30, 2026, the Company recorded a full allowance of $70,012 against the outstanding balance due from a third party. In addition, other receivables, net included $1,132,558 as of December 31, 2025, representing funds temporarily held in a settlement platform and pending transfer to the Company’s bank account, and no such funds were held as of June 30, 2026.

Prepaid and other current assets

Prepaid and other current assets consist of the following:

Other assets

Other assets consist of the following:

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

(7)COMMITMENTS AND CONTINGENCIES

(a) Commitments

Except as disclosed elsewhere in the accompanying notes, the Company had no other material commitments as of June 30, 2026.

(b) Contingencies

Contingencies on potential lawsuits

The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit.

The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If both criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, or that the amount is not material, or that an estimate of the loss cannot be made. At June 30, 2026, the Company is not currently a party to any legal proceedings that, if determined adversely to the Company, in management’s opinion, are currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole. The Company expenses its legal fees as incurred.

In the ordinary course of its business, the Company is subject to lawsuits, arbitrations, claims, and other legal proceedings in connection with its business. Some of the legal actions include claims for substantial or unspecified compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows. Management believes that the Company has adequate legal defenses with respect to the legal proceedings to which it is a defendant or respondent, and that the outcome of these pending proceedings is not likely to have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, the Company is unable to predict the outcome of these matters.

Uncertainty on the business operations

For the three and six months ended June 30, 2026, the Company’s operations depended in part on the continued service of its senior management, whose relationships with artists support the expansion and development of the Company’s primary customer base. The loss of key management or technical personnel could adversely affect the Company’s ability to maintain these relationships and develop its technology-driven services.

(8)SIGNIFICANT CUSTOMERS AND DEPENDENCY ON KEY SUPPLIERS

During the three and six months ended June 30, 2026, the Company had one customer that individually accounted for approximately 14% and 21% of its total revenues for the three and six months ended June 30, 2026, respectively, and no customers that individually accounted for 10% or more of its accounts receivable. Two suppliers accounted for approximately 43%and 41%, respectively, of the Company’s total accounts payable as of June 30, 2026. Other than the foregoing, no other customer or supplier accounted for 10% or more of the Company’s total revenue, accounts receivable, or accounts payable.

During the three and six months ended June 30, 2025, two suppliers accounted for approximately 59% and 19%, respectively, of the Company’s total cost of revenues, and no other customer or supplier accounted for 10% or more of the Company’s total revenue, accounts receivable, or accounts payable.

(9)CONVERTIBLE NOTE PAYABLE TO RELATED PARTY

The Company entered into an unsecured promissory note (the “Convertible Note”) effective February 18, 2025, with David Lazar, a stockholder holding more than 10% of the Company’s outstanding shares and a former officer and director. Under the terms of the Convertible Note, the Company agreed to pay Mr. Lazar a principal amount of $300,000, bearing interest at an annual rate of approximately 4.34%, with the full principal and interest balance due on or before December 31, 2025. Upon stockholders’ approval, the Convertible Note will automatically convert into shares of the Company’s common stock at a conversion price of $0.25 per share.

The Convertible Note to related party is accounted for as a single liability in accordance with Accounting Standards Update (ASU) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

On October 27, 2025, at the Company’s 2025 Annual Meeting of Stockholders, stockholders approved the conversion of the Convertible Note. Pursuant to the terms of the Convertible Note, it automatically converted into 1,235,814 shares of common stock. As of December 31, 2025, the Convertible Note had no outstanding balance.

(10)RELATED PARTY TRANSACTIONS

The Company had the following related party transactions during the three and six months ended June 30, 2026 and 2025:

(11)EARNINGS (LOSS) PER SHARE

The Company’s Series A Preferred Stock is considered a participating security because it has the right to participate in dividends with common stockholders on an as-converted basis. Accordingly, the Company applies the two-class method to compute basic and diluted earnings (loss) per share. Under the two-class method, net income is allocated between common stockholders and participating securities based on their respective rights to receive dividends as if all earnings for the period had been distributed. Net losses are not allocated to the Series A Preferred Stock, as holders do not have a contractual obligation to share in losses.

Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock. Potentially dilutive securities include convertible Preferred Stock, warrants, and restricted shares. Warrants and restricted shares are included in diluted EPS using the treasury stock method. For convertible Preferred Stock that is a participating security, diluted EPS is calculated using the more dilutive of the two-class method or the if-converted method in accordance with ASC 260. Under the two-class method, the numerator used in diluted EPS is consistent with that used in basic EPS. Potential common shares are included only to the extent they are dilutive, and anti-dilutive securities are excluded.

Earnings (loss) per share for the three and six months ended June 30, 2026 and 2025, respectively, were as follows:

Diluted earnings (loss) per common share for the three and six months ended June 30, 2026 and 2025 excludes the effects of 3,227,500 and 7,242,339 common share equivalents, respectively, since such inclusion would be anti-dilutive. The common share equivalents consist of shares of Common Stock issuable upon the exercise or conversion of outstanding Series A Preferred Stock, warrants, restricted stock units and convertible note (including certain securities requiring stockholder approval prior to exercise or conversion).

(12)EQUITY

Preferred Stock and Warrants

On February 18, 2025, the Company entered into a Securities Purchase Agreement (the “February 18, 2025 SPA”) with Lazar, and Cao Yu, Hu Bin, and Youxin Consulting Limited (collectively, the “Purchasers”), which was subsequently amended on May 9, 2025. Pursuant to the February 18, 2025 SPA and its amendment, Lazar, a former director and officer of the Company, sold to the Purchasers (i) 2,219,447 shares of Series A Preferred Stock, (ii) a warrant to purchase up to 2,800,000 shares of Common Stock at an exercise price of $1.00 per share, subject to adjustment (the “Warrant”), and (iii) certain receivables owed by the Company to Lazar associated with the transaction (the “Lazar Receivables”). On April 10, 2025, Lazar transferred an additional 31,258 shares of Series A Preferred Stock to the Purchasers (together with the previously transferred shares and the Warrant, the “Securities”). The aggregate purchase price for the Securities and the Lazar Receivables was $500,000, of which $300,000 was directed by Lazar to be paid to the Company in exchange for a convertible note. The Purchasers also paid a $3.4 million earn-out payment to Lazar for his efforts related to the Company’s successful relisting on Nasdaq as of June 30, 2025. As of June 30, 2025, the Lazar Receivables were forgiven for the benefit of the Company, and the Warrant was amended and restated to eliminate the beneficial ownership limitations previously contained therein. No dividends have been declared or paid on the Common Stock or the Series A Preferred Stock as of June 30, 2026 and December 31, 2025.

As of June 30, 2026 and December 31, 2025, the Company had 2,305,357 shares of Series A Preferred Stock issued and outstanding. Each share of Series A Preferred Stock is convertible, at the option of the holder, into 1.4 shares of Common Stock, votes on an as-if-converted basis, and has full ratchet protection in any subsequent offerings. The Warrants remained outstanding as of June 30, 2026.

Securities Purchase Agreements

On May 9, 2025, the Company entered into, and simultaneously closed the transactions under, certain securities purchase agreements with Cao Yu and Hu Bin, pursuant to which the Company sold an aggregate of 2,439,025 shares of Common Stock -1,585,366 shares to Cao Yu for an aggregate purchase price of $2,600,000 and 853,659 shares to Hu Bin for an aggregate purchase price of $1,400,000.

On January 30, 2026, the Company entered into a securities purchase agreement (the “2026 Purchase Agreement”) with certain purchasers named therein (the “2026 Purchasers”), pursuant to which the Company agreed to sell and issue to the 2026 Purchasers, at the closing of the private placement (the “Closing”) in March 2026, an aggregate of 394,476 shares of Common Stock (the “Shares”), at an offering price of $5.07 per Share. The Closing occurred on March 31, 2026. The Company received total gross proceeds of $1,999,993 from the 2026 Purchasers. As of June 30, 2026, $3,945 was recorded as Common Stock and $1,996,048 was recorded as additional paid-in capital (“APIC”), net of $53,823 of legal fees related to the offering, which were charged to APIC.

Helena Purchase Agreement

On May 9, 2025, the Company entered into a Purchase Agreement (the “Helena Purchase Agreement”) with Helena Global Investment Opportunities I Ltd. (“Helena”) whereby the Company shall have the right to issue and sell to Helena, from time to time, and Helena shall purchase from the Company, up to $15,000,000 of Common Stock, during the period commencing on May 9, 2025 and ending on the first day of the month immediately following the 36-month anniversary of May 9, 2025.

The closing of each Advance (as defined in the Helena Purchase Agreement) and each sale and purchase of Common Stock related to each Advance shall take place on the applicable Settlement Date (as defined in the Helena Purchase Agreement), at a Purchase Price (as defined in the Helena Purchase Agreement) based on 95% of the lowest VWAP for the Common Stock, in respect of any Advance, during the three (3) trading days commencing on the date of Helena’s receipt of the shares of Common Stock relating to such Advance.

In consideration for Helena’s execution and delivery of the Helena Purchase Agreement, the Company issued to Helena, as a commitment fee, shares of Common Stock (the “Commitment Fee Shares”), having an aggregate value of $150,000, of which (i) 71,572 shares of Common Stock were issued on May 14, 2025, and (ii) 71,572 shares of Common Stock were issued on August 11, 2025. The Commitment Fee Shares were fully earned as of the execution date of the Helena Purchase Agreement, and the issuance of the Commitment Fee Shares was not contingent upon any other event or condition. The number of the Commitment Fee Shares issued in each tranche was determined by dividing $75,000 by the lowest Volume Weighted Average Price (VWAP) of the Common Stock during the five trading days immediately preceding the agreement date. As of June 30, 2026, the $150,000 commitment fee previously recorded as deferred offering costs was fully amortized and expensed, as the Company had not sold any shares and does not expect to sell any shares in the future under the Helena Purchase Agreement.

July 2025 Warrant

On July 2, 2025, the Company issued a warrant to purchase 404,002 shares of Common Stock with an exercise price of $0.01 per share, subject to stockholder approval (the “July 2025 Warrant”), to Lazar. This warrant was issued as compensation for services provided by Lazar.

In accordance with the accounting requirements of ASC 718, “Compensation - Stock Compensation,” the Company measured this equity instrument at fair value and recognized the compensation cost immediately on the grant date. Using the Black-Scholes option pricing model, with key inputs including a fair value of the underlying Common Stock of $2.67, an exercise price of $0.01 per share, an expected term of 0.405 years, a risk-free interest rate of 4.33%, expected volatility of 90%, and a dividend yield of 0%, the fair value of this warrant was determined to be $1,074,715.55 as of July 2, 2025. On the grant date, the Company recognized the compensation expense with a corresponding credit to APIC.

On November 12, 2025, Lazar exercised the warrant through a cashless exercise mechanism. Pursuant to the cashless exercise,402,347 shares of Common Stock were issued. The warrant was fully settled upon this exercise and no longer remains outstanding.

ATM Sales Agreement

In June 2026, the Company entered into a sales agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) under which the Company may offer and sell up to an estimated $6,272,809 of shares of Common Stock from time to time through an “at the market” offering program under which A.G.P. will act as sales agent. Pursuant to the Sales Agreement, the Company has agreed to pay A.G.P. a commission of 3.25% of the aggregate gross proceeds from any shares of Common Stock sold by A.G.P. The Company has no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. During the six months ended June 30, 2026, the Company did not sell any shares of Common Stock pursuant to the Sales Agreement.

Stock-Based Compensation

Director Equity Fees

On April 29, 2025, the Company entered into director agreements with two independent directors, pursuant to which each director is entitled to receive 100,000 shares of Common Stock, provided they remain a director for one year from the effective date of the director agreements. The grant date for these equity awards was April 29, 2025, with a one-year service period ending on April 29, 2026.

Compensation expense is recognized on a straight-line basis over the service period. For the six months ended June 30, 2026, the Company recognized $61,333 of stock-based compensation expense related to these awards, representing the portion of the service period completed during the six months ended June 30, 2026. This amount is recorded as an increase to additional paid-in capital and is included in general and administrative expenses in the consolidated statements of operations.

On May 5, 2026, upon the completion of the requisite service period, the Company issued an aggregate of 200,000 shares of Common Stock to the two directors in settlement of these awards. The issuance was recorded as an increase to common stock of $2,000 (representing the par value of $0.01 per share), with a corresponding reduction to additional paid-in capital of $2,000. The $2,000 reduction to additional paid-in capital represents the net effect of reclassifying the accumulated stock-based compensation expense previously recognized in additional paid-in capital upon the issuance of the shares.

The following table summarizes the stock-based compensation expense for the director equity fees by line item in the consolidated statements of operations and comprehensive income (loss):

2025 Equity Incentive Plan

On October 27, 2025, the Company’s stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”), which authorized 1,394,230 shares of Common Stock for issuance to employees, directors, and other eligible participants. The 2025 Plan permits the grant of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards.

On May 12, 2026 (the “Grant Date”), the Company granted an aggregate of 585,288 RSUs under the 2025 Plan to two officers and six business partners in exchange for their future services. The RSUs granted vest in three annual tranches on May 12, 2027, May 12, 2028, and May 12, 2029, subject to the grantee’s continued service through each applicable vesting date. The fair value of the RSUs was determined based on the closing price of the Company’s common stock on the Grant Date, which was $6.81 per share. The aggregate grant date fair value of the RSUs was approximately $3.99 million. For employee awards, compensation cost is recognized using the graded vesting attribution method over the requisite service period for each separate vesting tranche. For non-employee awards, compensation cost is recognized on a straight-line basis over the three-year service period as a whole.

The following table summarizes the stock-based compensation expense for the 2025 Plan by line item in the consolidated statements of operations and comprehensive income (loss):

As of June 30, 2026, there was approximately $3.7 million of unrecognized compensation cost related to these RSUs, which is expected to be recognized over a weighted-average period of approximately 2.43 years.

(13)SUBSEQUENT EVENTS

The Company has evaluated subsequent events from June 30, 2026 through August 14, 2026, the date that the unaudited condensed consolidated financial statements were issued, and has determined that there are no additional events requiring recognition or disclosure in the financial statements.