Zhengye Biotechnology H1 revenue falls to RMB50.9M
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Zhengye Biotechnology Holding Ltd. reported net revenues of RMB50.947 million for the six months ended June 30, 2026, compared with RMB62.328 million in the same 2025 period. Gross profit was RMB16.749 million, down from RMB19.384 million. Operating loss narrowed to RMB20.823 million from RMB28.879 million, and consolidated net loss narrowed to RMB22.163 million from RMB25.550 million. The company researches, develops, manufactures and sells veterinary vaccines, with an emphasis on livestock vaccines.
Net cash used in operating activities increased to RMB16.813 million from RMB13.968 million. As of June 30, 2026, cash and restricted cash totaled RMB31.886 million and working capital was RMB5.120 million. Total loans were RMB78.574 million, compared with RMB74.650 million as of December 31, 2025. The company said conditions initially raised substantial doubt about its ability to continue as a going concern within one year after the financial statements were issued. Management believes renewal of existing short-term bank loans and forecast cash flows will be sufficient to meet obligations and that its plans alleviate that doubt.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointNet loss narrowed to RMB22.163 million from RMB25.550 million.
Negative
- Major pointNote says substantial doubt was initially raised; management says plans alleviate it.
- Moderate pointRevenue fell to RMB50.947 million from RMB62.328 million.
- Moderate pointOperating cash use rose to RMB16.813 million from RMB13.968 million.
Filing Explained
At June 30, 2026, RMB 70,074 thousand of the company’s loans was current, and it reported no unused working-capital credit facility.
This Form 6-K furnishes Zhengye Biotechnology’s unaudited financial statements for the six months ended
At June 30, loans totaled
Key Figures
Key Terms
going concern financial
contract liabilities financial
variable consideration financial
noncontrolling interests financial
fair value hierarchy technical
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did ZYBT report for the first half of 2026?
How much operating cash did ZYBT use in the first half of 2026?
Why did ZYBT disclose substantial doubt about its ability to continue as a going concern?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November
Commission File Number:
No.1 Lianmeng Road, Jilin Economic & Technical Development Zone
Jilin City, Jilin Province, China
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Explanatory Note
Zhengye Biotechnology Holding Limited, a Cayman Islands exempted company (the “Company”), is furnishing its unaudited financial statements and notes for the six months ended June 30, 2026. The financial statements and notes are attached as Exhibit 99.1 to this report. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2026 is attached as Exhibit 99.2 to this report.
1
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Unaudited Consolidated Financial Statements and Notes of Zhengye Biotechnology Holding Limited for the Six Months Ended June 30, 2026 and 2025 | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Zhengye Biotechnology Holding Limited | ||
| Date: November 12, 2026 | By: | /s/ Songlin Song |
| Name: | Songlin Song | |
| Title: | Co-Chief Executive Officer | |
3
Exhibit 99.1
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of RMB and US$, except for number of shares)
| As of | ||||||||||||
| December 31, 2025 |
June 30, 2026 |
|||||||||||
| RMB | RMB | US$ | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash | ||||||||||||
| Restricted cash | - | |||||||||||
| Short-term investments | ||||||||||||
| Notes receivable, net | - | |||||||||||
| Accounts receivable, net | ||||||||||||
| Advance to suppliers | ||||||||||||
| Advance to suppliers-a related party | - | |||||||||||
| Inventories, net | ||||||||||||
| Prepayments and other current assets, net | ||||||||||||
| Total current assets | ||||||||||||
| Non-current assets: | ||||||||||||
| Property, plant and equipment, net | ||||||||||||
| Land use rights, net | ||||||||||||
| Intangible assets, net | ||||||||||||
| Right-of-use assets, net | ||||||||||||
| Long-term prepayments | ||||||||||||
| Total non-current assets | ||||||||||||
| Total assets | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Short-term loans | ||||||||||||
| Current maturities of long-term loans | ||||||||||||
| Derivative liabilities | - | |||||||||||
| Operating lease liabilities-current | ||||||||||||
| Accounts payable | ||||||||||||
| Contract liabilities | ||||||||||||
| Taxes payable | ||||||||||||
| Accrued expenses and other liabilities | ||||||||||||
| Total current liabilities | ||||||||||||
| Non-current liabilities: | ||||||||||||
| Long-term loans | ||||||||||||
| Operating lease liabilities-non-current | ||||||||||||
| Deferred tax liabilities | - | - | ||||||||||
| Total non-current liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Commitments and contingencies | - | - | - | |||||||||
| Shareholders’ equity: | ||||||||||||
| Class A ordinary shares (US$ | - | |||||||||||
| Class B ordinary shares (US$ | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Statutory reserves | ||||||||||||
| Retained deficit | ( | ) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ( | ) | ||||||
| Total Zhengye Biotechnology Holding Limited’s shareholders’ equity | ||||||||||||
| Noncontrolling interests | ||||||||||||
| Total equity | ||||||||||||
| Total liabilities and equity | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
| For the six months ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | USD | ||||||||||
| Net revenues | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Sales and marketing expenses | ( | ) | ( | ) | ( | ) | ||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ||||||
| Reversal of (provision for) credit losses | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Other income (expenses): | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||
| Unrealized gains (losses) on marketable equity securities and derivative instruments | ( | ) | ( | ) | ||||||||
| Unrealized foreign exchange gain (loss) | ( | ) | ||||||||||
| Government subsidy | ||||||||||||
| Other expenses | - | ( | ) | ( | ) | |||||||
| Total other expenses, net | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income tax benefits | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Net loss attributable to noncontrolling interests | ||||||||||||
| Net loss attributable to the Zhengye Biotechnology Holding Limited’s shareholders | ( | ) | ( | ) | ( | ) | ||||||
| Comprehensive loss | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Other comprehensive loss | ||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Total comprehensive loss attributable to non-controlling interest | ||||||||||||
| Total comprehensive loss attributable to the Zhengye Biotechnology Holding Limited’s shareholders | ( | ) | ( | ) | ( | ) | ||||||
| Loss per share: | ||||||||||||
| -Basic and diluted – Class A Ordinary shares | ( | ) | ( | ) | ( | ) | ||||||
| -Basic and diluted – Class B Ordinary shares | ( | ) | ( | ) | ( | ) | ||||||
| Weighted average shares outstanding used in calculating basic and diluted earnings per share: | ||||||||||||
| Ordinary shares – basic and diluted | ||||||||||||
| Basic and diluted – Class A Ordinary shares | ||||||||||||
| Basic and diluted – Class B Ordinary shares | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in thousands of RMB and US$, except for number of shares)
| Class A Ordinary shares | Class B Ordinary shares | Additional paid-in |
Statutory | Retained earnings |
Accumulated Other Comprehensive income |
Total Zhengye Biotechnology Holding Limited’s shareholders’ |
Non- controlling | Total | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | reserve | (deficit) | (deficit) | equity | interests | Equity | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 (RMB) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares in initial public offering | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Shareholders contribution | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | ( | ) | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||
| Balance, June 30, 2025 (RMB) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 (RMB) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustment | - | - | - | - | - | - | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||
Balance, June 30, 2026 (RMB) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 (US$) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of RMB and US$, except for number of shares)
| For the six months ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Amortization of operating lease right-of-use assets | - | |||||||||||
| Provision for (reversal of) credit losses | ( | ) | ||||||||||
| Impairment for inventory | ||||||||||||
| Deferred tax benefits | ( | ) | ( | ) | ( | ) | ||||||
| Unrealized (gains) losses on marketable equity securities and derivative instruments | ( | ) | ||||||||||
| Unrealized foreign exchange (gain) loss | ( | ) | ( | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Notes receivable | ( | ) | ( | ) | ( | ) | ||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||
| Advance to suppliers | ( | ) | ||||||||||
| Advance to suppliers-a related party | - | ( | ) | ( | ) | |||||||
| Inventories | ( | ) | ( | ) | ||||||||
| Prepayments and other current assets | ( | ) | ||||||||||
| Other receivable -a related party | - | - | ||||||||||
| Operating lease liabilities | - | ( | ) | ( | ) | |||||||
| Accounts payable | ( | ) | ( | ) | ( | ) | ||||||
| Contract liabilities | ( | ) | ( | ) | ||||||||
| Taxes payable | ||||||||||||
| Accrued expenses and other liabilities | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Loans to a related party | ( | ) | - | - | ||||||||
| Loan repayment from a related party | - | - | ||||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Prepayment for purchase of intangible assets | ( | ) | ( | ) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from loans | ||||||||||||
| Repayment of loans | ( | ) | ( | ) | ( | ) | ||||||
| Repayment to a related party | ( | ) | - | - | ||||||||
| Proceeds from initial public offering | - | - | ||||||||||
| Shareholder contribution | - | - | ||||||||||
| Net cash provided by financing activities | ||||||||||||
| Effect of exchange rate changes on cash and restricted cash | ( | ) | ( | ) | ( | ) | ||||||
| Net increase (decrease) in cash and restricted cash | ( | ) | ( | ) | ||||||||
| Cash and restricted cash at beginning of period | ||||||||||||
| Cash and restricted cash at end of period | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||
| Cash paid for: | ||||||||||||
| Interest | ||||||||||||
| Income taxes | - | |||||||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||
| Liabilities assumed in connection with purchase of property, plant and equipment | ||||||||||||
| Derecognition of right-of-use asset and lease liability due to operating lease modification | - | |||||||||||
| Reclassification of deferred initial public offering cost into additional paid-in capital | - | - | ||||||||||
The table below reconciles cash and restricted cash as reported in the unaudited condensed consolidated statement of financial position to the total of the same amounts shown in the unaudited condensed consolidated statement of cash flows:
| For the six months ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Cash | ||||||||||||
| Restricted cash | - | |||||||||||
| Total cash and restricted cash | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
1. ORGANIZATION
Nature of operations
Zhengye Biotechnology Holding Limited (the “Company”) was incorporated in the Cayman Islands in March 2023 under the Cayman Islands Companies Act as an exempted company with limited liability. The Company through its consolidated subsidiaries principally focuses on the research, development, manufacture and sales of veterinary vaccines, with an emphasis on vaccines for livestock in the People’s Republic of China (the “PRC” or “China”).
Reorganization
In preparation for its initial public offering (“IPO”) in the United States, the following transactions were undertaken to reorganize the legal structure of Operating Entities. The Company was incorporated in connection with a reorganization of Jilin Zhengye Biological Products Co., Ltd. (“Jilin Zhengye”). On April 3, 2023, the Company incorporated a wholly-owned subsidiary, VVAX Skyline Holdings Limited (“VVAX Skyline”), in the British Virgin Islands. On April 18, 2023, Peg Biotechnology (HK) Holding Limited (“Peg Biotechnology”) was incorporated in Hong Kong as a company with limited liability and as a wholly owned subsidiary of VVAX Skyline. On May 22, 2023, Peg Biotechnology incorporated a wholly-owned subsidiary, Hainan Senhan Biotechnology Co., Ltd. (“Hainan Senhan”) in the PRC. On May 30, 2023, VVAX Skyline acquired
Prior to the reorganization described below, Jilin Zhengye was controlled by several individual, corporate and institutional shareholders. A reorganization of the Company’s legal structure (“Reorganization”) was completed on June 21, 2023. The Reorganization involved the transfer of
Upon the completion of the Reorganization, the Company became the ultimate holding company of all other entities mentioned above. The Company is effectively controlled by the same group of controlling shareholders before and after the Reorganization; therefore, the Reorganization is considered as a recapitalization of these entities under common control. The consolidation of the Company and its subsidiaries was accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying unaudited condensed consolidated financial statements. Results of operations for the period presented comprise those of the previous separate entities combined from the beginning of the period to the end of the period, eliminating the effects of intra-entity transactions.
As of the date of this filing, the details of the Company’s principal subsidiaries are as follows:
| Entity | Date of incorporation/ acquisition | Place of incorporation | Percentage of direct or indirect ownership by the Company | Principal activities | ||||
| Subsidiaries: | ||||||||
| VVAX Skyline Holdings Limited (“VVAX Skyline”) | Islands | |||||||
| Windsor Holdings Co., Ltd. (“Windsor Holdings”) | Islands | |||||||
| Peg Biotechnology (HK) Holding Limited (“Peg Biotechnology”) | ||||||||
| Hainan Senhan Biotechnology Co., Ltd. (“Hainan Senhan”) | ||||||||
| Jilin Zhengye Biological Products Co., Ltd. (“Jilin Zhengye”) | ||||||||
| Beijing Zhongnong Zhengye Biotechnology Co., Ltd. (“Beijing Zhengye”) |
5
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Liquidity
The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.
The Company incurred net loss of RMB
The Company has incurred losses since 2025, and has primarily funded its working capital needs through operations, bank loans, advance payments from customers, and contributions from shareholders. These conditions and events, considered in the aggregate, initially raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date these unaudited condensed consolidated financial statements are issued.
Management intends to maintain sufficient liquidity primarily through the renewal of its existing short-term bank loans. Management believes that the amount of available cash balance as of June 30, 2026 and forecasted net cash flows for a period of one year after the issuance of the unaudited condensed consolidated financial statements will be sufficient for the Company to satisfy its obligations and commitments when they become due. As a result, management believes its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments relating to the carrying amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the U.S. Securities and Exchange Commission.
Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
6
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Use of estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenue and expenses during the reported period in the unaudited condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements mainly include, but are not limited to, allowance for credit losses, depreciable lives of property, plant and equipment and amortization lives of intangible asset, inventory valuation for excess and obsolete inventories, lower of cost and net realizable value of inventories, the valuation of derivative instruments, and the valuation allowance for deferred tax assets.
Management bases the estimates on historical experience and on various other assumptions as discussed elsewhere in the unaudited condensed consolidated financial statements that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. On an ongoing basis, management evaluates its estimates based on information that is currently available. Changes in circumstances, facts and experience may cause the Company to revise its estimates. Changes in estimates are recorded in the period in which they become known. Actual results could materially differ from these estimates.
Foreign currency
The Company’s reporting currency is the Renminbi (“RMB”). The functional currency of the Company and its subsidiaries which are incorporated in British Virgin Islands (“BVI”) and Hong Kong (“HK”) is United States dollars (“US$”). The functional currencies of the other subsidiaries are their respective local currencies. The determination of the respective functional currency is based on the criteria set out by ASC 830, Foreign Currency Matters, (“ASC 830”).
Transactions denominated in currencies other than in the functional currency are translated into the functional currency using the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into functional currency using the applicable exchange rates at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains or losses arising from foreign currency transactions are included in the unaudited condensed consolidated statements of operations and comprehensive loss.
The financial statements of the Company’s entities of which the functional currency is not RMB are translated from their respective functional currency into RMB. Assets and liabilities denominated in foreign currencies are translated into RMB at the exchange rates at the balance sheet date. Equity accounts other than earnings generated in current period are translated into RMB at the appropriate historical rates. Income and expense items are translated into RMB using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded in other comprehensive income in the unaudited condensed consolidated statements of operations and comprehensive loss, and the accumulated foreign currency translation adjustments are presented as a component of accumulated other comprehensive income in the unaudited condensed consolidated statements of shareholders’ equity if any.
7
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Convenience translation
Translations of balances in the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations and comprehensive loss and unaudited condensed consolidated statements of cash flows from RMB into US$ as of and for the six months ended June 30, 2026 are solely for the convenience of the reader and were calculated at the rate of US$
Cash
Cash consists of cash on hand and cash in bank, which are highly liquid and have original maturities of three months or less and are unrestricted as to withdrawal or use. The Company maintains cash with various financial institutions primarily in mainland China. The Company has not experienced any losses in bank accounts.
Restricted cash
Restricted cash primarily comprises a certificate of deposit (CD) subject to contractual penalties for early withdrawal prior to maturity.
Short-term investments
All highly liquid investments with maturities of greater than three months, but less than twelve months, are classified as short-term investments. Short-term investments primarily consist of (i) investment in marketable securities and (ii) derivative assets arising from non-designated foreign exchange swap contracts and interest rate swap contracts. The Company classifies the investment in marketable securities as trading securities given the securities are purchased for the purpose of selling them in the near term. Changes in fair values of marketable securities and changes in fair values of derivative assets arisen from non-designated foreign exchange swap contracts and interest rate swap contracts are included in unrealized gains (losses) on marketable equity securities and derivative instruments in the unaudited condensed consolidated statements of operations and comprehensive loss.
Accounts receivable and allowance for credit losses
Accounts receivable are stated at the historical carrying amount net of allowance for expected credit losses.
The Company’s policy for estimating credit losses also applies to notes receivable and other receivables. To estimate expected credit losses, the Company has identified the relevant risk characteristics of its customers and the related receivables. The Company considers the past collection experience, current economic conditions, future economic conditions (external data and macroeconomic factors) and changes in the Company’s customer collection trends. The allowance for credit losses and corresponding receivables are written off when they are determined to be uncollectible.
8
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Prepayments and other assets, net
Prepayments and other assets consisted of security deposit, prepaid advertising and promotion expenses, prepaid financial consulting expenses, technology transfer license fees, and others. Prepayments and other assets are reviewed periodically to determine whether their carrying value has become impaired.
Impairment of long-lived assets other than goodwill
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. Impairment charge recognized for the six months ended June 30, 2025 and 2026 was nil.
Fair value of financial instruments
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| Level 1 — | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| Level 2 — | Other inputs that are directly or indirectly observable in the marketplace. | |
| Level 3 — | Unobservable inputs which are supported by little or no market activity. |
Financial assets and liabilities of the Company primarily consist of cash, restricted cash, short-term investments, notes receivable, accounts receivable, other receivable - a related party, other receivables, accounts payable, short-term loans, accrued expenses, and other liabilities excluding payroll and welfare payables. As of December 31, 2025 and June 30, 2026, except for short-term investments, the carrying values of these financial assets and liabilities approximate their fair values due to the short-term nature. The Company reports short-term investments at fair value at each balance sheet date and changes in fair value are reflected in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company determined that the carrying value of the long-term loans approximated their fair value by comparing the stated loan interest rate to the rate charged by similar financial institutions.
9
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Assets and Liabilities Measured or Disclosed at Fair Value on a recurring basis
The following tables represent the fair value hierarchy of the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2025 and June 30, 2026:
| As of December 31, 2025 | ||||||||||||||||
| Fair Value Measurement at the Reporting Date using | ||||||||||||||||
| Quoted price in active markets for identical assets Level 1 | Significant other observable inputs Level 2 | Significant unobservable inputs Level 3 | Total | |||||||||||||
| RMB | RMB | RMB | RMB | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Investment in marketable equity security (i) | - | - | ||||||||||||||
| Derivative assets | ||||||||||||||||
| Foreign currency swap contracts (ii) | - | - | ||||||||||||||
| Interest rate swap contracts (ii) | - | - | ||||||||||||||
| Total short-term investments | - | |||||||||||||||
| As of June 30, 2026 | ||||||||||||||||
| Fair Value Measurement at the Reporting Date using | ||||||||||||||||
| Quoted price in active markets for identical assets Level 1 | Significant other observable inputs Level 2 | Significant unobservable inputs Level 3 | Total | |||||||||||||
| RMB | RMB | RMB | RMB | |||||||||||||
| Short-term investment: | ||||||||||||||||
| Investment in marketable equity security (i) | - | - | ||||||||||||||
| Total short-term investment | - | - | ||||||||||||||
| Derivative liabilities: | ||||||||||||||||
| Foreign currency swap contracts (ii) | - | - | ||||||||||||||
| Interest rate swap contracts (ii) | - | - | ||||||||||||||
| Total derivative liabilities | - | - | ||||||||||||||
| (i) |
10
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| (ii) | Jilin Zhengye entered into foreign currency swap contracts and cross-currency interest rate swap contracts on November 7, 2025 with a commercial bank to (i) exchange its funds denominated in RMB for Japanese Yen (“JPY”) at a fixed exchange rate of |
The fair values of the foreign currency swap contracts and cross currency interest rate swap contracts are the estimated amount that the Company would pay to sell or transfer the swap at the reporting date, taking into account current interest rates and the current credit worthiness of the swap counterparties, in addition to foreign exchange rates for the cross-currency swap agreement. The estimated amount is the present value of future cash flows, adjusted for credit risk. The Company transacts all of these derivative instruments through investment-grade rated financial institutions at the time of the transaction. It is possible that the amount recorded as a derivative asset or liability could vary by a material amount in the near term if there is volatility in the credit markets or if credit risk were to change significantly.
The fair value of the Company’s foreign currency forward contracts and cross-currency interest rate swap agreement at the end of each period is most significantly affected by the interest rate implied by the benchmark interest yield curve, including their relative steepness and the forward foreign exchange rates, respectively. Interest rates and foreign exchange rates have experienced significant volatility in recent years in both the short and long term. While the fair value of our swap agreements is typically more sensitive to changes in short-term rates, significant changes in the long-term benchmark interest, foreign exchange rates, and the credit risk of the counterparties or the Company also materially impact on the fair values of our swap agreements.
During the six months ended June 30, 2025 and 2026, there were no transfers between levels of the fair value hierarchy.
Revenue recognition
The Company adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customer. To determine revenue recognition for contracts with customers, the Company performs the following five steps:
| Step 1: | Identify the contract with the customer |
| Step 2: | Identify the performance obligations in the contract |
| Step 3: | Determine the transaction price |
| Step 4: | Allocate the transaction price to the performance obligations in the contract |
| Step 5: | Recognize revenue when the company satisfies a performance obligation |
11
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The Company manufactures and sells veterinary vaccines, with an emphasis on vaccines for livestock, to customers.
The Company enters into contract with its customers to provide veterinary vaccines, mainly vaccines for livestock. All of the Company’s contracts have a single performance obligation as the promise is to transfer the goods to customers, and there are no other separately identifiable promises in the contracts. The Company recognizes revenue when it transfers its goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products to its customers on a gross basis, because the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers with the specified goods. The Company’s revenue is recognized at a point in time when the control has been transferred, usually when the customer accepts the goods.
The Company offers their distributors with sales rebate. According to the items in the contract, the Company pays certain sales rebate, in the form of products with equivalent value, to a distributor once the distributor purchases stipulated amount products from the Company. Sales rebate is considered as variable consideration. The Company estimates annual expected revenue of each individual distributor with reference to their historical results. The sales rebate reduces revenues recognized. At the end of each reporting period, the Company updates the estimated revenue to represent faithfully the circumstances present at the end of the reporting period.
Apart from the sales rebate, the Company’s products are sold with no right of return and the Company does not provide other credits or sales incentives to customers. Revenue is reported net of value added tax (“VAT”) collected on behalf of tax authorities in respect of product sales.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts by product category and distribution channel. See Note 12 for information regarding revenue disaggregation.
Contract assets and liabilities
The Company did not have contract assets as of December 31, 2025 and June 30, 2026, respectively.
The Company’s contract liabilities primarily relate to unsatisfied performance obligations, such as sales rebate and payment received from customers before the Company’s products are delivered. Contract liabilities amounted to RMB
Cost of revenues
Costs of revenues consist primarily of materials costs, labor costs, shipping and handling expense, inspection costs, depreciation and amortization expenses and related costs, which are directly attributable to production. Write-down of inventories is also recorded in cost of sales, if any.
Shipping and handling costs incurred to transport goods to customers are expensed in the periods incurred and are included in cost of revenues. The Company accounts for shipping and handling expenses as fulfillment costs because shipping and handling activities occur before the customers obtain control of the goods. Shipping and handling expenses amounted to RMB
12
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Sales and marketing expenses
Sales and marketing expenses consist primarily of travelling expenses, marketing conference expenses, advertising expenses and salaries and other compensation-related expenses for sales and marketing personnel. The Company expenses all advertising costs as incurred. Advertising costs amounted to RMB
Research and development expenses
Research and development costs are expensed as incurred. These costs primarily consist of production and procurement expenses related to research and development activities, technical expenses, payroll and related expenses for personnel engaged in research and development activities, depreciation and amortization of fixed assets which are used in research and development activities.
General and administrative expenses
General and administrative expenses consist primarily of salaries, bonuses and benefits for employees involved in general corporate functions and those not specifically dedicated to research and development activities, depreciation and amortization, which are not used in research and development activities, legal and other professional services fees, rental and other general corporate related expenses.
Government subsidy
Government subsidy represents cash subsidies received from the PRC government. Cash subsidies that have no defined rules and regulations to govern the criteria necessary for companies to enjoy the benefits are recognized when received. Such subsidies are generally provided as incentives from the local government to encourage the expansion of local business.
Derivative instruments
Derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying balance sheet and subsequently remeasured to fair value at each reporting date, regardless of the purpose or intent for holding the derivative. The resulting derivative assets or liabilities are shown as a single line and are not net off against one another on the face of the balance sheet. The method of recognizing the resulting gain or loss is dependent on whether the derivative contract qualifies for hedge accounting and has been designated as a hedging instrument. For derivative instruments that are not designated or that do not qualify as hedging instruments under ASC 815 – Derivatives and Hedging, the assets have been recognized as “derivative assets” included in the short-term investments and the liability has been recognized as “derivative liabilities” on the balance sheet and changes in the fair value of the derivative financial instruments are recognized in earnings (losses). Gains and losses from the Company’s non-designated foreign currency swap contracts and interest rate swap contracts are recorded in unrealized gains (losses) on marketable equity securities and derivative instruments in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss but do not impact the Company’s cash flows.
Value-added taxes
Revenue is recognized net of VAT. VAT is based on gross sales price. Prior to December 31, 2025, Jilin Zhengye and Beijing Zhengye were general VAT taxpayers that applied the simplified VAT calculation method, and their sales of goods were subject to VAT at a levy rate of
13
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Income taxes
Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Tax, (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax basis, and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the unaudited condensed consolidated statements of operations and comprehensive loss in the period of change. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is considered more likely than not that amount of the deferred tax assets will not be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.
Noncontrolling interests
A noncontrolling interest is recognized to reflect the portion of a subsidiary’s equity which is not attributable, directly or indirectly, to the Company. Among them,
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share.” ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income (loss) attributable to the Company, divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect on a per-share basis of the potential ordinary shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later.
14
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Comprehensive income
The Company applies ASC 220, Comprehensive Income (“ASC 220”), with respect to reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income is defined to include all changes in equity of the Company during a period arising from transactions and other events and circumstances except those resulting from investments by shareholders and distributions to shareholders. For the six months ended June 30, 2025 and 2026, the Company’s comprehensive loss includes net loss and foreign currency translation adjustment.
Statutory reserves
Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund.” Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical performance and the specific facts and circumstances of each matter.
Leases
The Company adopts Accounting Standards Update (“ASU”) 2016-02, Lease (FASB ASC Topic 842) to account its lease. ASC 842 requires that lessees recognize right-of-use (“ROU”) assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. ASC 842 distinguishes leases as either a finance lease or an operating lease on the unaudited condensed consolidated balance sheets that affects how the leases are measured and presented in the statement of operations and statement of cash flows.
ROU assets represent the Company’s right to use underlying assets for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset and whether it has the right to control the use of the asset.
The ROU of asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received. The ROU assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease expenses on a straight-line basis over the lease term.
15
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Lease liability is initially measured at the present value of the outstanding lease payments at the commencement date, discounted using the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee and any exercise price under a purchase option that the Company is reasonably certain to exercise.
Lease liability is measured at amortized cost using the effective interest rate method. It is re-measured when there is a change in future lease payments, if there is a change in the estimate of the amount expected to be payable under a residual value guarantee, or if there is any change in the Company assessment of option purchases, contract extensions or termination options.
Segment reporting
ASC 280, Segment Reporting, (“ASC 280”), establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers.
Based on the criteria established by ASC 280,
Uncertainty and risks
Political, social and economic risks
The Company has substantial operations in China through its PRC subsidiaries. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to regional wars, geopolitical tensions, natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could potentially and significantly disrupt the Company’s operations.
Interest rate risk
The Company is exposed to interest rate risk on its interest-bearing assets and liabilities. As part of its asset and liability risk management, the Company reviews and takes appropriate steps to manage its interest rate exposure on its interest-bearing assets and liabilities. The Company has not been exposed to material risks due to changes in market interest rates and has not used any derivative financial instruments to manage the interest rate risk exposure during the periods presented, other than the cross-currency interest rate swap agreement described in Note 3.
16
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Concentration risks
Concentration of credit risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash in bank and accounts receivable. The Company places its cash with financial institutions with high credit ratings and quality.
The Company conducts credit evaluations of customers, and generally does not require collateral or other security from its customers. The Company establishes an allowance for expected credit losses primarily based upon the factors surrounding the credit risk of specific customers.
Concentration of customers and suppliers
As of December 31, 2025, two clients accounted for
For the six months ended June 30, 2025, one client accounted for
As of December 31, 2025, one vendor accounted for
For the six months ended June 30, 2025, three vendors accounted for
Recent accounting pronouncements
The Company is an emerging growth company (“EGC”) as defined by the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act provides that an EGC can take advantage of extended transition periods for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies.
17
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The other amendments in this update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that are no longer considered cost beneficial or relevant. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. The Company will adopt the standard in its annual reporting for the fiscal year ended December 31, 2026. The adoption of the standard will result in expanded annual income tax disclosures, with no impact on the Company’s financial position or results of operations.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). The objective of ASU 2024-03 is to improve disclosures about a public entity’s expenses, primarily through additional disaggregation of income statement expenses. In January 2025, the FASB further clarified the effective date of ASU 2024-03 with the issuance of ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2025-01”). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and may be applied either on a prospective or retrospective basis. The Company is currently evaluating the impact ASU 2024-03 will have on its financial statement disclosures.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 clarifies the guidance to determine the accounting acquirer in a business combination that is affected primarily by exchanging equity interests, when the legal acquiree is a variable interest entity that meets the definition of a business. ASU 2025-03 requires entities to consider the same factors in ASC 805, Business Combinations, required for determining which entity is the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-03 is required to be applied on a prospective basis to any acquisition transaction that occurs after the initial application date. The Company is currently evaluating the impact ASU 2025-03 will have on its financial statement disclosures.
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). ASU 2025-04 revises the definition of the term performance condition for share-based consideration payable to a customer to incorporate conditions that are based on the volume or monetary amount of a customer’s purchases or potential purchases. ASU 2025-04 also eliminates the policy election to account for forfeitures as they occur for awards with service conditions. ASU 2025-04 also clarifies that ASC 606 variable consideration guidance does not apply to share-based payments to customers; instead, vesting probability should be assessed solely under ASC 718, Compensation—Stock Compensation. ASU 2025-04 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-04 may be applied on either a modified retrospective basis or on a retrospective basis. The Company is currently assessing the impact this standard will have on the Company’s unaudited condensed consolidated financial statements.
18
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 amends ASC 326, Financial Instruments—Credit Losses, and introduces a practical expedient available for all entities and an accounting policy election available for all entities, other than public business entities, that elect the practical expedient. These changes apply to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue Recognition. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This simplifies the estimation process for short-term financial assets. ASU 2025-05 is effective for the Company’s annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-05 should be applied on a prospective basis. ASU 2025-05 became effective for the Company on January 1, 2026. Accordingly, ASU 2025-05 did not have an impact on its unaudited condensed consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software to modernize the accounting for internal-use software costs, primarily by simplifying the requirements to capitalize software development costs. This update is effective beginning with the Company’s 2028 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its unaudited condensed consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities to establish authoritative guidance on the accounting for government grants received by business entities. This update is effective beginning with the Company’s 2030 fiscal year annual reporting period, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its unaudited condensed consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvement. ASU 2025-11 is intended to improve the navigability of required interim disclosures and clarify when that guidance is applicable, and also to provide additional guidance on what disclosures should be provided in interim reporting periods. ASU 2025-11 is effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027, and for interim reporting periods within annual reporting periods beginning after December 15, 2028, for entities other than public business entities. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-11 on its unaudited condensed financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. ASU 2025-12 makes thirty-three incremental improvements to generally accepted accounting principles. ASU 2025-12 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of ASU 2025-12 on its unaudited condensed financial statements and related disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s balance sheets, statements of income and statements of cash flow.
19
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. SHORT-TERM INVESTMENTS AND DERIVATIVE LIABILITIES
Short-term investments consisted of the following:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| Short-term investments: | RMB | RMB | US$ | |||||||||
| Investment in marketable securities in Zhengbang (i) | ||||||||||||
| Derivative assets (ii) | ||||||||||||
| Total short-term investments | ||||||||||||
Derivative liabilities consisted of the following:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| Derivative liabilities: | RMB | RMB | US$ | |||||||||
| Derivative liabilities (ii) | - | |||||||||||
| Total derivative liabilities | - | |||||||||||
| (i) |
| (ii) |
For the six months ended June 30, 2025 and 2026, the Company recorded loss on fair value changes of RMB
4. ACCOUNTS RECEIVABLE, NET
Accounts receivable and the allowance for credit losses consisted of the following:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Accounts receivable | ||||||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Accounts receivable, net | ||||||||||||
An analysis of the allowance for credit losses was as follows:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at beginning of the year | ( | ) | ( | ) | ( | ) | ||||||
| Provision | ( | ) | ( | ) | ( | ) | ||||||
| Write-off | ||||||||||||
| Balance at the end of the year | ( | ) | ( | ) | ( | ) | ||||||
20
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
5. PREPAYMENTS AND OTHER ASSETS, NET
Prepayments and other assets consisted of the following:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Security deposit | ||||||||||||
| Prepaid advertising and promotion expenses | ||||||||||||
| Prepaid financial consulting expenses | ||||||||||||
| Prepaid legal expenses | - | - | ||||||||||
| Technology transfer license fee | ||||||||||||
| Others | ||||||||||||
| Prepayments and other assets | ||||||||||||
| Less: long-term prepayments | ( | ) | ( | ) | ( | ) | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Prepayments and other current assets, net | ||||||||||||
An analysis of the allowance for credit losses was as follows:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Balance at beginning of the year | ( | ) | ( | ) | ( | ) | ||||||
| Reversal (provision) | ( | ) | ||||||||||
| Balance at the end of the year | ( | ) | ( | ) | ( | ) | ||||||
6. LEASES
The Company has several operating leases for employee dormitory, garage and offices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As of December 31, 2025 and June 30, 2026, supplemental balance sheet information related to operating leases was as follows:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Right-of-use assets, net | ||||||||||||
| Operating lease liabilities - current | ||||||||||||
| Operating lease liabilities - non-current | ||||||||||||
| Total operating lease liabilities | ||||||||||||
Total operating lease expense for the six months ended June 30, 2026 amounted to RMB
Amortization of operating lease ROU assets amounted to RMB
Total rent expenses of short-term lease for the six months ended June 30, 2026 amounted to nil.
21
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
6. LEASES (cont.)
The weighted average remaining lease terms and discount rates for all operating leases as of June 30, 2026 were as follows:
| June 30, 2026 | ||||
| Weighted-average remaining lease term (years): | ||||
| Operating leases | ||||
| Weighted average discount rate: | ||||
| Operating leases | % | |||
| RMB | US$ | |||||||
| Six months ending December 31, 2026 | ||||||||
| Twelve months ending December 31, | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total future minimum lease payments | ||||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Present value of operating lease liabilities | ||||||||
7. LOANS
Outstanding balances of loans consist of the following:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| Industrial Bank Jilin Branch | RMB | RMB | US$ | |||||||||
| (1) Annual interest rate of | ||||||||||||
| (2) Annual interest rate of | - | - | ||||||||||
| (3) Annual interest rate of | - | - | ||||||||||
| (4) Annual interest rate of | ||||||||||||
| (5) Annual interest rate of | ||||||||||||
| (6) Annual interest rate of | - | |||||||||||
| (7) Annual interest rate of | - | |||||||||||
| (8) Annual interest rate of | - | |||||||||||
| Industrial Bank Hong Kong Branch | ||||||||||||
| (9) Annual interest rate of | ||||||||||||
| China Minsheng Bank Jilin Branch | ||||||||||||
| (10) Annual interest rate of | - | - | ||||||||||
| (11) Annual interest rate of | - | - | ||||||||||
| (12) Annual interest rate of | ||||||||||||
| (13) Annual interest rate of | - | |||||||||||
| (14) Annual interest rate of | - | |||||||||||
| Bank of Jilin | ||||||||||||
| (15) Annual interest rate of | - | - | ||||||||||
| (16) Annual interest rate of | - | |||||||||||
| Total | ||||||||||||
| Less: Bank loans – current portion | ( | ) | ( | ) | ( | ) | ||||||
| Bank loans– non-current portion | ||||||||||||
| (i) | |
| (ii) |
22
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
7. LOANS (cont.)
In connection with borrowing of the JPY loan, the Company entered into foreign exchange swap contracts and cross-currency interest rate swap contracts with Industrial Bank with termination dates November 5, 2026 and November 6, 2026, respectively, to run concurrently with the JPY Loan. The interest rates payable by the Company under the cross-currency interest rate swap contracts are fixed interest rates of
The weighted average short-term interest rate was
China Minsheng Bank Jilin Branch provided a working capital credit facility to the Company with a term from February 4, 2026 to February 3, 2027. Bank of Jilin provided a working capital credit facility to the Company with a term from March 23, 2026 to March 16, 2027. As of June 30, 2026, the Company’s unused working capital credit facility was nil.
As of June 30, 2026, the Company’s future long-term loan obligations according to the terms of the loan agreement are as follows:
| RMB | US$ | |||||||
| The remaining six months ending December 31, 2026 | ||||||||
| The twelve months ending | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
8. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the following:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Reimbursement payables | ||||||||||||
| Deferred income | ||||||||||||
| Social welfare payables | ||||||||||||
| Deposit | ||||||||||||
| Maintenance fee payables | ||||||||||||
| Subsidy payable | - | |||||||||||
| Others | ||||||||||||
23
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
9. TAXATION
Enterprise income tax (“EIT”)
Cayman Islands
The Company is incorporated in the Cayman Islands and conducts its primary business operations through the subsidiaries in the PRC. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain arising in Cayman Islands.
British Virgin Islands (“BVI”)
The Company’s subsidiaries incorporated in the BVI are not subject to tax on income or capital gain, in addition, payments of dividend by these subsidiaries to their shareholders are not subject to withholding tax in the BVI.
Hong Kong
The Company’s subsidiary incorporated in Hong Kong, which is a two-tiered profits tax rates regime, in which the first HK$
PRC
The Company’s PRC subsidiaries are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified
Income tax benefits comprised of:
| For the six months ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Current | - | |||||||||||
| Deferred | ( | ) | ( | ) | ( | ) | ||||||
| ( | ) | ( | ) | ( | ) | |||||||
24
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
9. TAXATION (cont.)
The reconciliation of tax computed by applying the statutory income tax rate of
| For the six months ended June 30, | ||||||||
| 2025 | 2026 | |||||||
| Statutory income tax rate | % | % | ||||||
| Effect of income tax exemptions and reliefs | ( | )% | ( | )% | ||||
| Effect of non-deductible expense | ( | )% | ( | )% | ||||
| Additional deduction for development and research expense | % | % | ||||||
| Valuation allowance on deferred tax assets | - | % | ( | )% | ||||
| Income tax expense | % | % | ||||||
The components of deferred tax assets are as follows:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Deferred tax assets | ||||||||||||
| Impairment of long-lived assets | ||||||||||||
| Allowance for credit losses | ||||||||||||
| Net operation loss | ||||||||||||
| Others | ||||||||||||
| Total deferred tax assets | ||||||||||||
| Valuation allowance on deferred tax assets | (23,184 | ) | ( | ) | ( | ) | ||||||
| Net off against deferred tax liabilities | - | - | - | |||||||||
| Total net deferred tax assets | - | - | - | |||||||||
The component of deferred tax assets liabilities:
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Deferred tax liabilities | ||||||||||||
| Fair value change gain | - | - | ||||||||||
| Total deferred tax liabilities | - | - | ||||||||||
| Net off against deferred tax assets | - | - | - | |||||||||
| Net deferred tax liabilities | - | - | ||||||||||
Realization of the net deferred tax assets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income. The Company and its subsidiaries evaluate the potential realization of deferred tax assets on an entity-by-entity basis.
25
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
10. SHAREHOLDERS’ EQUITY
The Company was incorporated in the Cayman Islands in March 2023 under the Cayman Islands Companies Act as an exempted company with limited liability. The Company authorized
On June 6, 2024, the Company formally executed a forward stock split of its ordinary shares at a ratio of
Initial public offering
On January 8, 2025, the Company closed its IPO of
Share reclassification
On March 24, 2026, the shareholders of the Company adopted certain resolutions to approve a share reclassification. As a result, all of the issued and unissued ordinary shares of a par value of US$
The above Share Reclassification is part of the Company’s recapitalization, which was accounted for on a retroactive basis as if the transaction occurred at the beginning of the earliest period presented pursuant to ASC 260. All Class A ordinary shares and Class B ordinary shares and per share data for all periods have been retroactively restated accordingly. Each Class A ordinary share is entitled to
26
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
11. RESTRICTED NET ASSETS
As a result of the PRC laws and regulations and the requirement that distributions by PRC entities can only be paid out of distributable profits computed in accordance with PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Company.
| As of | ||||||||||||
| December 31, 2025 | June 30, 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Additional paid-in-capital | ||||||||||||
| Statutory reserve | ||||||||||||
12. SEGMENT INFORMATION
The following table summarizes the revenues generated from different product categories for the six months ended June 30, 2025 and 2026:
| For the six months ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Swine vaccines | ||||||||||||
| Poultry vaccines | ||||||||||||
| Other vaccines | ||||||||||||
The following table summarizes the revenues generated from different distribution channels for the six months ended June 30, 2025 and 2026:
| For the six months ended June 30, | ||||||||||||
| 2025 | 2026 | |||||||||||
| RMB | RMB | US$ | ||||||||||
| Direct sales channel | ||||||||||||
| Distribution network | ||||||||||||
| Government tender and procurement | ||||||||||||
27
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
13. RELATED PARTY TRANSACTIONS
For the year ended December 31, 2023, the operating entity sold a motor vehicle to Beijing Hanzhenyuan international hotel Co., Ltd. (“Beijing Hanzhenyuan”), a company controlled by a shareholder of the Company, with a net carrying value of RMB
For the year ended December 31, 2024, the Company obtained a working capital loan from Jiahe Developments Limited, which is controlled by Mr. Zhenfa Han, the principal shareholder, director, and chairman of the board of the directors of the Company, in the amount of RMB
For the six months ended June 30, 2025 and 2026, the operating entity purchased goods from Jilin Huazheng Agriculture and Animal Husbandry Development Co., Ltd. (“Jilin Huazheng”), which is controlled by Mr. Zhenfa Han, the principal shareholder, director, and chairman of the board of the Company, in the amount of RMB
For the six months ended June 30, 2025, the operating entity provided a working capital loan to Jilin Huazheng, in the amount of RMB
For the six months ended June 30, 2025, the operating entity purchased venue and catering services from Beijing Hanzhenyuan International Hotel Co., Ltd. (“Beijing Hanzhenyuan”), which is controlled by a shareholder of the Company, in the amount of RMB
As of December 31, 2025 and June 30, 2026, bank loans from China Minsheng Bank Jilin Branch and Bank of Jilin amounting to RMB
14. COMMITMENTS AND CONTINGENCIES
Commitments
The Company had no significant capital expenditure commitment as of December 31, 2025 and June 30, 2026.
Contingencies
The Company may be involved in various legal proceedings, claims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on the Company’s consolidated financial position or results of operations or liquidity.
Contractual obligations
The Company’s material cash requirements as of June 30, 2026 and any subsequent interim period primarily include working capital needs, capital expenditures, operating lease obligations, and long-term and short-term loans.
The following table sets forth the Company’s contractual obligations and commercial commitments as of June 30, 2026.
| Payment Due by Period (in thousands) | ||||||||||||||||||||
| Total | Less than 1 Year | 1 – 3 Years | 3 – 5 Years | More than 5 Years | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Operating lease commitments | ||||||||||||||||||||
| Long-term loans | - | - | ||||||||||||||||||
| Short-term loans | - | - | - | |||||||||||||||||
| Total | ||||||||||||||||||||
28
ZHENGYE BIOTECHNOLOGY HOLDING LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
15. SUBSEQUENT EVENTS
The Company has assessed all events from June 30, 2026 through November 12, 2026, the date the unaudited condensed consolidated financial statements were available to be issued, except as disclosed below, there were no material subsequent events that require disclosure in these unaudited condensed consolidated financial statements.
On July 6, 2026, Jilin Zhengye entered into a loan agreement with Industrial Bank Jilin Branch, pursuant to which Jilin Zhengye obtained a loan in the amount of RMB
On August 7, 2026, Jilin Zhengye entered into a loan agreement with China Minsheng Bank Jilin Branch, pursuant to which Jilin Zhengye obtained a loan in the amount of RMB
On July 7, 2026, Jilin Zhengye followed the loan agreement and repaid RMB
On September 21, 2026, Jilin Zhengye followed the loan agreement and repaid RMB
On November 6, 2026, Jilin Zhengye repaid RMB
29
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors.
Business Overview
We, through the operating entity, focus on the research, development, manufacturing, and sales of veterinary vaccines, with an emphasis on vaccines for livestock. For over 20 years, the operating entity has been committed to enhancing the health of animals. The operating entity markets a diverse range of vaccines, including vaccines for swine, cattle, goats, sheep, poultry, and dogs. The operating entity’s products are available in 29 provincial regions across China and are exported overseas to Vietnam, Pakistan, and Egypt.
Key Factors Affecting Our Results of Operations
Our results of operations and financial condition are affected by the general factors driving the veterinary vaccine market. We have benefited from China’s overall economic growth, increased number of large-scale farms, and national policies of animal epidemic detection and prevention, which has been attracting breeders’ attention and promoting compulsory immunization to raise breeders’ full awareness of the risk of animal epidemics and the necessity of immunization.
While our business is influenced by these general factors, we believe our results of operations are also directly affected by certain company specific factors, including the following major factors:
| ● | the operating entity’s ability to develop high-demand products and expand its business beyond vaccines for livestock by entering into the household animal vaccine industry; |
| ● | the operating entity’s ability to expand its sales and distribution network; | |
| ● | the operating entity’s ability to continue to upgrade its technological capabilities; and |
| ● | the operating entity’s ability to maintain its product quality. |
Results of Operations
Net Revenues
We derived revenues from (i) swine vaccines, (ii) poultry vaccines and (iii) other vaccines. The following table sets forth a breakdown of our revenues both in absolute amounts and as a percentage of our total revenues for the six months ended June 30, 2025 and 2026.
| For the six months ended June 30, (Unaudited) | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Revenues | RMB | % | RMB | US$ | % | |||||||||||||||
| Swine vaccines | 46,706 | 74.9 | 38,202 | 5,630 | 75.0 | |||||||||||||||
| Poultry vaccines | 7,015 | 11.3 | 6,496 | 957 | 12.8 | |||||||||||||||
| Other vaccines | 8,607 | 13.8 | 6,249 | 922 | 12.2 | |||||||||||||||
| Total | 62,328 | 100 | 50,947 | 7,509 | 100 | |||||||||||||||
As our revenues are generated from different distribution channels, the following table sets forth a breakdown of our revenues from different distribution channels for the six months ended June 30, 2025 and 2026:
| For the six months ended June 30, (Unaudited) | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Revenues | RMB | % | RMB | US$ | % | |||||||||||||||
| Direct sales channel | 30,101 | 48.3 | 18,068 | 2,663 | 35.5 | |||||||||||||||
| Distribution network | 31,334 | 50.3 | 32,172 | 4,742 | 63.1 | |||||||||||||||
| Government tender and procurement | 893 | 1.4 | 707 | 104 | 1.4 | |||||||||||||||
| Total | 62,328 | 100 | 50,947 | 7,509 | 100 | |||||||||||||||
Cost of Revenues
Costs of revenues consist primarily of inventory cost and shipping and handling cost of providing these services or goods. The following table sets forth a breakdown of our cost of revenues by product both in absolute amounts and as a percentage of our total cost of revenues for the six months ended June 30, 2025 and 2026:
| For the six months ended June 30, (Unaudited) | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Cost of revenues: | RMB | % | RMB | US$ | % | |||||||||||||||
| Swine vaccines | 25,260 | 58.8 | 21,290 | 3,138 | 62.3 | |||||||||||||||
| Poultry vaccines | 7,283 | 17.0 | 6,686 | 985 | 19.6 | |||||||||||||||
| Other vaccines | 10,401 | 24.2 | 6,222 | 917 | 18.1 | |||||||||||||||
| Total | 42,944 | 100 | 34,198 | 5,040 | 100 | |||||||||||||||
Operating Expenses
Our operating expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses, and provision for (reversal of) credit losses.
Sales and marketing expenses
Sales and marketing expenses consist primarily of travelling expenses, marketing conference expenses, advertising expenses and salaries and other compensation-related expenses for sales and marketing personnel. We expense all advertising costs as incurred and classify these costs under sales and marketing expenses.
General and administrative expenses
General and administrative expenses consist primarily of salaries, bonuses and benefits for employees involved in general corporate functions and those not specifically dedicated to research and development activities, depreciation and amortization, which are not used in research and development activities, legal and other professional services fees, rental and other general corporate related expenses.
Research and development expenses
Research and development costs are expensed as incurred. These costs primarily consist of production and procurement expenses related to research and development activities, technical expenses, payroll and related expenses for personnel engaged in research and development activities, and depreciation and amortization of fixed assets which are used in research and development activities.
2
Allowance for credit losses
We consider the past collection experience, current economic conditions, future economic conditions (external data and macroeconomic factors) and changes in our customer collection trends. The allowance for credit losses and corresponding receivables were written off when they are determined to be uncollectible.
| For the six months ended June 30, (Unaudited) | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| RMB | % | RMB | US$ | % | ||||||||||||||||
| Sales and marketing expenses | 23,243 | 48.2 | 18,629 | 2,746 | 49.6 | |||||||||||||||
| General and administrative expenses | 16,770 | 34.7 | 13,703 | 2,020 | 36.4 | |||||||||||||||
| Research and development expenses | 8,969 | 18.6 | 4,770 | 703 | 12.7 | |||||||||||||||
| Provision for (reversal of) credit losses | (719 | ) | (1.5 | ) | 470 | 69 | 1.3 | |||||||||||||
| Total | 48,263 | 100 | 37,572 | 5,538 | 100 | |||||||||||||||
TAXATION
Cayman Islands
Under current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the Company to its shareholders, no withholding tax will be imposed.
British Virgin Islands (“BVI”)
Our subsidiaries incorporated in the BVI are not subject to tax on income or capital gains. In addition, payments of dividends by these subsidiaries to their shareholders are not subject to withholding tax in the BVI.
Hong Kong
Our subsidiary in Hong Kong is subject to a two-tiered profits tax rate regime. The first HK$2 million of assessable profits earned by a company is taxed at a profits tax rate of 8.25%, while the remaining profits will continue to be taxed at the profits tax rate of 16.5%. Under the Hong Kong tax law, our subsidiary in Hong Kong is exempted from income tax on its foreign derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
China
Effective from January 1, 2008, the PRC’s statutory Enterprise Income Tax (“EIT”) rate is 25%. If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC ‘resident enterprise’ for PRC enterprise income tax purposes. Jilin Zhengye benefits from a 15% HNTE rate and Hainan Senhan and Beijing Zhengye from a 5% effective SLPE rate for the periods presented. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment”.
RESULTS OF OPERATIONS
The following table sets forth a summary of our unaudited condensed consolidated results of operations for the six months ended June 30, 2025 and 2026, both in absolute amounts and as a percentage of our total revenues. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
3
Translations of balances in the unaudited condensed consolidated balance sheets, unaudited condensed consolidated statements of operations and comprehensive loss, and unaudited condensed consolidated statements of cash flows from RMB into US$ as of and for the six months ended June 30, 2026, are solely for the convenience of the readers, and they were calculated at the rate of US$1.00 to RMB6.7851.
| For the six months ended June 30, (Unaudited) | ||||||||||||
| 2025 | 2026 | |||||||||||
| (in thousands, except for percentages) | ||||||||||||
| RMB | RMB | US$ | ||||||||||
| Net revenues | 62,328 | 50,947 | 7,509 | |||||||||
| Cost of revenues | (42,944 | ) | (34,198 | ) | (5,040 | ) | ||||||
| Gross profit | 19,384 | 16,749 | 2,469 | |||||||||
| Sales and marketing expenses | (23,243 | ) | (18,629 | ) | (2,746 | ) | ||||||
| General and administrative expenses | (16,770 | ) | (13,703 | ) | (2,020 | ) | ||||||
| Research and development expenses | (8,969 | ) | (4,770 | ) | (703 | ) | ||||||
| Reversal of (provision for) credit losses | 719 | (470 | ) | (69 | ) | |||||||
| Total operating expenses | (48,263 | ) | (37,572 | ) | (5,538 | ) | ||||||
| Operating loss | (28,879 | ) | (20,823 | ) | (3,069 | ) | ||||||
| Other income (expenses): | ||||||||||||
| Interest income | 72 | 11 | 2 | |||||||||
| Interest expense | (1,752 | ) | (1,565 | ) | (231 | ) | ||||||
| Unrealized gains (losses) on marketable equity securities and derivative instruments | 588 | (1,326 | ) | (195 | ) | |||||||
| Unrealized foreign exchange gain (loss) | (1,421 | ) | 627 | 92 | ||||||||
| Government subsidy | 502 | 893 | 132 | |||||||||
| Other expenses | - | (79 | ) | (12 | ) | |||||||
| Total other expenses, net | (2,011 | ) | (1,439 | ) | (212 | ) | ||||||
| Loss before income taxes | (30,890 | ) | (22,262 | ) | (3,281 | ) | ||||||
| Income tax benefits | 5,340 | 99 | 14 | |||||||||
| Net loss | (25,550 | ) | (22,163 | ) | (3,267 | ) | ||||||
Net revenues
Our revenue decreased by RMB11.4 million or 18.3% from RMB62.3 million for the six months ended June 30, 2025 to RMB50.9 million (US$7.5 million) for the six months ended June 30, 2026, primarily due to our customers’ sustained losses and cost-cutting requirements, which resulted in an overall reduction in sales volume.
Our revenue from sales to the operating entity’s largest customer for the six months ended June 30, 2025 decreased from RMB12.5 million for the six months ended June 30, 2025 by RMB7.3 million to RMB5.2 million (US$0.8 million) for the six months ended June 30, 2026, primarily because this customer has built its own production facilities and begun producing vaccines in-house, which reduced its purchases from us. As a result, this customer became the operating entity’s second largest customer for the six months ended June 30, 2026. Revenue from sales to the operating entity’s largest customer for the six months ended June 30, 2026 amounted to RMB7.7 million (US$1.1 million).
Revenue from sales of swine vaccines. Our revenue from sales of swine vaccines dropped from RMB46.7 million for the six months ended June 30, 2025 to RMB38.2 million (US$5.6 million) for the six months ended June 30, 2026. Amid the broader industry environment, cost-cutting requirements from key customers resulted in lower sales volume.
Revenue from sales of poultry vaccines. Our revenue from sales of poultry vaccines dropped from RMB7.0 million for the six months ended June 30, 2025 to RMB6.5 million (US$1.0 million) for the six months ended June 30, 2026. This decline was primarily due to lower sales volume amid weak market demand in the broader industry environment.
Revenue from sales of other vaccines. Our revenue from sales of other vaccines decreased from RMB8.6 million for the six months ended June 30, 2025 to RMB6.2 million (US$0.9 million) for the six months ended June 30, 2026. Lower demand from key customers resulted in reduced sales volume.
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Cost of revenues
Our cost of revenues decreased by 20.4% from RMB42.9 million for the six months ended June 30, 2025 to RMB34.2 million (US$5.0 million) for the six months ended June 30, 2026.
Gross profit
The following table sets forth a breakdown of our gross profit by product, both in absolute amounts and as gross profit margin, for the six months ended June 30, 2025 and 2026:
| For the six months ended June 30, (Unaudited) | ||||||||||||||||||||
| 2025 | 2026 | |||||||||||||||||||
| (in thousands, except for percentages) | ||||||||||||||||||||
| Gross profit: | RMB | % | RMB | US$ | % | |||||||||||||||
| Swine vaccines | 21,446 | 45.9 | 16,912 | 2,493 | 44.3 | |||||||||||||||
| Poultry vaccines | (268 | ) | (3.8 | ) | (190 | ) | (28 | ) | (2.9 | ) | ||||||||||
| Other vaccines | (1,794 | ) | (20.8 | ) | 27 | 4 | 0.4 | |||||||||||||
| Total | 19,384 | 31.1 | 16,749 | 2,469 | 32.9 | |||||||||||||||
As a result of the foregoing, our gross profit decreased from RMB19.4 million for the six months ended June 30, 2025 to RMB16.7 million (US$2.5 million) for the six months ended June 30, 2026. Our gross profit margin increased from 31.1% for the six months ended June 30, 2025 to 32.9% for the six months ended June 30, 2026. The increase in our gross profit margin was primarily attributable to other vaccines, the gross profit margin of which improved from negative 20.8% for the six months ended June 30, 2025 to 0.4% for the six months ended June 30, 2026, mainly because the sales volume of sheep vaccines, which carry relatively high unit costs and fixed production costs, decreased amid weak market demand. The gross profit margins of swine vaccines and poultry vaccines remained relatively stable, at 44.3% and negative 2.9%, respectively, for the six months ended June 30, 2026, as compared to 45.9% and negative 3.8%, respectively, for the six months ended June 30, 2025.
Operating expenses
Our total operating expenses decreased from RMB48.3 million for the six months ended June 30, 2025 to RMB37.6 million (US$5.5 million) for the six months ended June 30, 2026, reflecting the decrease in our general and administrative expenses, sales and marketing expenses and research and development expenses, partially offset by a provision for credit losses of RMB0.5 million (US$0.07 million) for the six months ended June 30, 2026, as compared to a reversal of credit losses of RMB0.7 million for the six months ended June 30, 2025.
Sales and marketing expenses. Our sales and marketing expenses decreased from RMB23.2 million for the six months ended June 30, 2025 to RMB18.6 million (US$2.7 million) for the six months ended June 30, 2026. The decrease in sales and marketing expenses mainly resulted from a decrease in payroll for sales staff and travel expenses.
General and administrative expenses. Our general and administrative expenses decreased from RMB16.8 million for the six months ended June 30, 2025 to RMB13.7 million (US$2.0 million) for the six months ended June 30, 2026. The decrease in administrative expenses was attributed to the decrease in employee compensation, professional service fees and travel expenses. The decrease in professional service fees was mainly because we incurred such fees in connection with the preparation for our initial public offering for the six months ended June 30, 2025, while no such fees were incurred for the six months ended June 30, 2026.
Research and development expenses. Our research and development expenses decreased from RMB9.0 million for the six months ended June 30, 2025 to RMB4.8 million (US$0.7 million) for the six months ended June 30, 2026. The decrease in research and development expenses mainly resulted from a decrease in development material expenses and the absence of one-time bonuses paid to research and development personnel in connection with our initial public offering in the current period.
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The following table sets forth a summary of our total spending for each research and development project subsidized by the Government of Jilin Province, the PRC, for the six months ended June 30, 2025 and 2026.
| For the six months ended June 30, (Unaudited) | ||||||||||||
| 2025 | 2026 | |||||||||||
| Total Project Expenses | RMB | RMB | US$ | |||||||||
| The Key Technique Study for the Development of the Live Gene-deletion-attenuated Vaccine against Ovine and Caprine Ecthyma (Orf) | 516,404 | 335,091 | 49,386 | |||||||||
| The Virus Study, Laboratory Sample Preparation and Efficacy Evaluation of Inactivated Bovine Akabane Disease Vaccine | 892,366 | - | - | |||||||||
| The Development and Application of Fluorescent ERA Rapid Thermostatic Diagnostic Technology for Key Viral Diarrhea Diseases in Pigs | 95,976 | - | - | |||||||||
| Total | 1,504,746 | 335,091 | 49,386 | |||||||||
The investment in research and development project costs is not comparable, and different projects are at different stages and their inputs are different.
Reversal of (provision for) credit losses. Our reversal of credit loss amounted to RMB0.7 million for the six months ended June 30, 2025. Our provision for credit losses amounted to RMB0.5 million (US$0.07 million) for the six months ended June 30, 2026.
Operating loss
Our operating loss was RMB28.9 million for the six months ended June 30, 2025. Our operating loss was RMB20.8 million (US$3.1 million) for the six months ended June 30, 2026.
Income tax benefits
Our income tax benefits decreased from RMB5.3 million for the six months ended June 30, 2025 to RMB0.1 million (US$0.01 million) for the six months ended June 30, 2026, primarily because we provided a full valuation allowance against our deferred tax assets, which amounted to RMB26.6 million (US$3.9 million) as of June 30, 2026, and therefore did not recognize deferred tax benefits on the net operating losses incurred during the six months ended June 30, 2026.
Net loss
As a result of the foregoing, net loss was RMB25.6 million for the six months ended June 30, 2025. The net loss was RMB22.2 million (US$3.3 million) for the six months ended June 30, 2026.
LIQUIDITY AND CAPITAL RESOURCES
We incurred net loss of RMB22.2 million (US$3.3 million) for the six months ended June 30, 2026. Net cash used in operating activities was RMB16.8 million (US$2.5 million) for the six months ended June 30, 2026. As of June 30, 2026, we had cash and restricted cash of RMB31.9 million (US$4.7 million) and working capital of RMB5.1 million (US$0.8 million).
We have incurred losses since 2025, and have primarily funded our working capital needs through operations, bank loans, advance payments from customers, and contributions from shareholders. These conditions and events, considered in the aggregate, initially raised substantial doubt about our ability to continue as a going concern within one year after the date these unaudited condensed consolidated financial statements are issued.
Management intends to maintain sufficient liquidity primarily through the renewal of its existing short-term bank loans. Management believes that the amount of available cash balance as of June 30, 2026 and forecasted net cash flows for a period of one year after the issuance of the unaudited condensed consolidated financial statements will be sufficient for us to satisfy our obligations and commitments when they become due. As a result, management believes its plans alleviate substantial doubt about our ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments relating to the carrying amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
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The following table sets forth a summary of our cash flows for the six months ended June 30, 2025 and 2026:
| For the six months ended June 30, (Unaudited) | ||||||||||||
| 2025 | 2026 | |||||||||||
| (in thousands) | ||||||||||||
| RMB | RMB | US$ | ||||||||||
| Net cash used in operating activities | (13,968 | ) | (16,813 | ) | (2,478 | ) | ||||||
| Net cash used in investing activities | (664 | ) | (5,737 | ) | (846 | ) | ||||||
| Net cash provided by financing activities | 42,315 | 4,550 | 671 | |||||||||
| Effect of exchange rate changes on cash and restricted cash | (680 | ) | (448 | ) | (66 | ) | ||||||
| Net increase (decrease) in cash and restricted cash | 27,003 | (18,448 | ) | (2,719 | ) | |||||||
| Cash and restricted cash at beginning of period | 18,606 | 50,334 | 7,418 | |||||||||
| Cash and restricted cash at end of period | 45,609 | 31,886 | 4,699 | |||||||||
As of the date of this report, we have financed our operating and investing activities primarily through cash generated from financing activities, including bank loans and proceeds from our initial public offering, as well as cash on hand. As of June 30, 2026 and December 31, 2025, our cash was RMB31.9 million (US$4.7 million) and RMB50.3 million, respectively. Our cash primarily consists of bank deposits.
As of June 30, 2026 and December 31, 2025, our restricted cash was RMB1,500 (US$221) and RMB1,500, respectively. Restricted cash mainly consists of bank time deposits, which are defined as time deposits with original maturities longer than three months but less than one year, or long-term bank deposits with maturity dates within one year.
We believe that our current cash and expected cash provided by operating and financing activities will be sufficient to meet our current and anticipated working capital requirements and capital expenditures for the next twelve months. We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we identify and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions.
All of our revenues have been, and we expect that they are likely to continue to be, in the form of Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
Our PRC subsidiaries are required to set aside at least 10% of their after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their registered capital. These reserves are not distributable as cash dividends.
As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions, subject to the approval, filings or registration of government authorities and limits on the amount of capital contributions and loans.
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Operating Activities
Net cash used in operating activities was RMB16.8 million (US$2.5 million) in the six months ended June 30, 2026. The difference between our net cash used in operating activities and our net loss of RMB22.2 million (US$3.3 million) was due to the combined effects of adjustments for non-cash items and changes in working capital. Adjustments for non-cash items primarily included (i) depreciation and amortization of RMB14.0 million (US$2.1 million), as compared to RMB12.3 million in the six months ended June 30, 2025, for we had more property, plant and equipment and intangible assets in the six months ended June 30, 2026 than in the six months ended June 30, 2025, (ii) a provision for credit losses of RMB0.5 million (US$0.07 million), as compared to a reversal of credit losses of RMB0.7 million in the six months ended June 30, 2025, primarily due to the provision for credit losses on accounts receivable of RMB0.5 million (US$0.07 million) as a result of the increase in accounts receivable from RMB36.5 million as of December 31, 2025 to RMB43.3 million (US$6.4 million) as of June 30, 2026, and the allowance for credit losses provided on the commercial notes receivable newly received in the six months ended June 30, 2026, as we had no notes receivable as of December 31, 2025, and (iii) the impairment for inventory was RMB8.4 million (US$1.2 million), compared to an impairment of RMB4.1 million in the six months ended June 30, 2025, primarily due to the increase in slow-moving and obsolete inventories as a result of the decline in sales volume. Changes in working capital mainly resulted from (i) an increase in notes receivable of RMB0.5 million (US$0.07 million), as compared to an increase of RMB0.1 million in the six months ended June 30, 2025, because we received new notes receivable and recorded an allowance for credit losses thereon in the six months ended June 30, 2026, (ii) an increase in accounts receivable of RMB6.9 million (US$1.0 million), as compared to a decrease of RMB23.3 million in the six months ended June 30, 2025, for we did not collect the related accounts receivable in the six months ended June 30, 2026, (iii) an increase in inventories of RMB9.6 million (US$1.4 million), as compared to a decrease of RMB0.6 million in the six months ended June 30, 2025, primarily due to inventory buildup caused by a decline in sales volume, (iv) a decrease in accounts payable of RMB1.5 million (US$0.2 million), as compared to a decrease of RMB1.5 million in the six months ended June 30, 2025, because we paid accounts payable for our materials which were due in the six months ended June 30, 2026, and (v) a decrease in contract liabilities of RMB1.3 million (US$0.2 million), as compared to an increase of RMB1.5 million in the six months ended June 30, 2025, due to a decline in customer orders.
Net cash used in operating activities was RMB14.0 million in the six months ended June 30, 2025. The difference between our net cash used in operating activities and our net loss of RMB25.6 million was due to the combined effects of adjustments for non-cash items and changes in working capital. Adjustments for non-cash items primarily included (i) depreciation and amortization of RMB12.3 million, as compared to RMB11.3 million in the six months ended June 30, 2024, for we had more property, plant and equipment and intangible assets in the six months ended June 30, 2025 than in the six months ended June 30, 2024, (ii) a reversion of allowance for credit losses of RMB0.7 million, as compared to RMB1.0 million in the six months ended June 30, 2024, because we have collected cash from the client’s bank debts and commercial notes, and (iii) the impairment for inventory was RMB4.1 million, compared to an impairment of RMB2.2 million in the six months ended June 30, 2024. Changes in working capital mainly resulted from (i) an increase in notes receivable of RMB0.1 million, as compared to a decrease of RMB5.6 million in the six months ended June 30, 2024, for we cashed our banker’s acceptance bill collected in the six months ended June 30, 2024, (ii) a decrease in accounts receivable of RMB23.3 million, as compared to a decrease of RMB3.7 million in the six months ended June 30, 2024, for we cashed our accounts receivable collected in the six months ended June 30, 2025 and 2024, (iii) an increase in advance to suppliers of RMB1.6 million, as compared to an increase of RMB5.6 million in the six months ended June 30, 2024, because we had made advance payments in the six months ended June 30, 2024 for purchases due in the six months ended June 30, 2025, (iv) an increase in prepayments and other current assets of RMB23.4 million, as compared to an increase of RMB1.0 million in the six months ended June 30, 2024, for we cashed our prepayments and other current assets payment in the six months ended June 30, 2025, and (v) a decrease in accounts payable of RMB1.5 million, as compared to a decrease of RMB2.5 million in the six months ended June 30, 2024, because we paid accounts payable for our materials which were due in the six months ended June 30, 2025.
Investing Activities
Net cash used in investing activities was RMB5.7 million (US$0.8 million) in the six months ended June 30, 2026, which represented purchases of property and equipment of RMB3.4 million (US$0.5 million) and prepayments for purchase of intangible assets of RMB2.4 million (US$0.3 million).
Net cash used in investing activities was RMB0.7 million in the six months ended June 30, 2025, which represented loans to a related party of RMB7.0 million, loan repayment from a related party of RMB7.0 million, purchases of property and equipment of RMB0.3 million and prepayments for purchase of intangible assets of RMB0.4 million.
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Financing Activities
Net cash provided by financing activities was RMB4.6 million (US$0.7 million) in the six months ended June 30, 2026, which represented proceeds from loans of RMB46.8 million (US$6.9 million) and repayment of loans of RMB42.3 million (US$6.2 million).
Net cash provided by financing activities was RMB42.3 million in the six months ended June 30, 2025, which represented proceeds from loans of RMB41.9 million, repayment of loans of RMB44.0 million, repayment to a related party of RMB0.1 million, proceeds from initial public offering of RMB43.1 million, and receipt of shareholder’s capital contribution of RMB1.5 million.
Capital Expenditure
Our capital expenditures are primarily incurred for purchases of intangible assets, property, plant and equipment and prepayment for purchase of intangible assets. We made capital expenditures of RMB0.7 million and RMB5.7 million (US$0.8 million) in the six months ended June 30, 2025 and 2026, respectively. The increase of capital expenditures was mainly because of purchases of property, plant and equipment of RMB3.4 million (US$0.5 million) and prepayments for purchase of intangible assets of RMB2.4 million (US$0.3 million) in the six months ended June 30, 2026. Our capital expenditures have been primarily funded by bank loans and our cash on hand. We expect to continue to make capital expenditures to support the expected growth of our business. We also expect that cash generated from the operating entity’s operating activities and financing activities will meet our capital expenditure needs in the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign exchange risk
Since July 21, 2005, RMB has been permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. It is difficult to predict how market forces or the PRC or U.S. government policy may impact the exchange rate between RMB and the U.S. dollar in the future. To the extent that we need to convert the U.S. dollar into RMB for capital expenditures and working capital and other business purposes, appreciation of RMB against U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert RMB into the U.S. dollar for the purpose of making payments for dividends on ordinary shares, strategic acquisitions or investments or other business purposes, appreciation of the U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to us. In addition, a significant depreciation of RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings or losses.
Political, social and economic risks
The Company has substantial operations in China through its PRC subsidiary, Jilin Zhengye. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1 of our unaudited condensed consolidated financial statements, this may not be indicative of future results.
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to regional wars, geopolitical tensions, natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could potentially and significantly disrupt the Company’s operations.
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Interest rate risk
The Company is exposed to interest rate risk on its interest-bearing assets and liabilities. As part of its asset and liability risk management, the Company reviews and takes appropriate steps to manage its interest rate exposure on its interest-bearing assets and liabilities. The Company has not been exposed to material risks due to changes in market interest rates and has not used any derivative financial instruments to manage the interest rate risk exposure during the periods presented, other than the cross-currency interest rate swap agreement described in Note 3 to our unaudited condensed consolidated financial statements.
Concentration of credit risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash in bank and accounts receivable. The Company places its cash with financial institutions with high credit ratings and quality.
The Company conducts credit evaluations of customers, and generally does not require collateral or other security from its customers. The Company establishes an allowance for expected credit losses primarily based upon the factors surrounding the credit risk of specific customers.
Concentration of customers and suppliers
As of December 31, 2025, two clients accounted for 11.8% and 11.6% of the Company’s total accounts receivable, respectively. As of June 30, 2026, one client accounted for 19.6% of the Company’s total accounts receivable.
For the six months ended June 30, 2025, one client accounted for 20.0% of the Company’s total revenues. For the six months ended June 30, 2026, two clients accounted for 15.2% and 10.2% of the Company’s total revenues, respectively.
As of December 31, 2025, one vendor accounted for 10.2% of the Company’s total accounts payable. As of June 30, 2026, one vendor accounted for 12.9% of the Company’s total accounts payable.
For the six months ended June 30, 2025, three vendors accounted for 12.9%, 11.6% and 10.2% of the Company’s total purchases, respectively. For the six months ended June 30, 2026, two vendors accounted for 29.1% and 13.9% of the Company’s total purchases, respectively.
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Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Contractual Obligations
Our material cash requirements as of June 30, 2026 and any subsequent interim period primarily include working capital needs, capital expenditures, operating lease obligations, and long-term and short-term loans.
The following table sets forth our contractual obligations and commercial commitments as of June 30, 2026:
| Payment Due by Period (in thousands) | ||||||||||||||||||||
| Total | Less than 1 Year | 1 – 3 Years | 3 – 5 Years | More than 5 Years | ||||||||||||||||
| RMB | RMB | RMB | RMB | RMB | ||||||||||||||||
| Operating lease commitments | 321 | 25 | 52 | 57 | 187 | |||||||||||||||
| Long-term loans | 9,200 | 700 | 8,500 | - | - | |||||||||||||||
| Short-term loans | 69,374 | 69,374 | - | - | - | |||||||||||||||
| Total | 78,895 | 70,099 | 8,552 | 57 | 187 | |||||||||||||||
CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES
An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain and requires significant judgment at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the unaudited condensed consolidated financial statements.
We prepare our unaudited condensed consolidated financial statements in accordance with U.S. GAAP. Significant accounting policies we follow in the preparation of the accompanying unaudited condensed consolidated financial statements are summarized below.
Revenue recognition
The Company adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customer. To determine revenue recognition for contracts with customers, the Company performs the following five steps:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
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Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
The Company manufactures and sells veterinary vaccines, with an emphasis on vaccines for livestock, to customers.
The Company enters into contract with its customers to provide veterinary vaccines, mainly vaccines for livestock. All of the Company’s contracts have a single performance obligation as the promise is to transfer the goods to customers, and there are no other separately identifiable promises in the contracts. The Company recognizes revenue when it transfers its goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products to its customers on a gross basis, because the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods. The Company’s revenue is recognized at a point in time when the control has been transferred, usually when the customer accepts the goods.
The Company offers its distributors sales rebates. According to the items in the contract, the Company pays certain sales rebate, in the form of products with equivalent value, to a distributor once the distributor purchases a stipulated amount of products from the Company. Sales rebate is considered as variable consideration. The Company estimates annual expected revenue of each individual distributor with reference to their historical results. The sales rebate reduces revenues recognized. At the end of each reporting period, the Company updates the estimated revenue to represent faithfully the circumstances present at the end of the reporting period.
Apart from the sales rebate, the Company’s products are sold with no right of return and the Company does not provide other credits or sales incentives to customers. Revenue is reported net of value added tax (“VAT”), collected on behalf of tax authorities in respect of product sales.
Accounts receivable and allowance for credit losses
Accounts receivable are stated at the historical carrying amount net of allowance for expected credit losses.
The Company’s policy for estimating credit losses also adopted to notes receivable and other receivables. To estimate expected credit losses, the Company has identified the relevant risk characteristics of its customers and the related receivables. The Company considers the past collection experience, current economic conditions, future economic conditions (external data and macroeconomic factors) and changes in the Company’s customer collection trends. The allowance for credit losses and corresponding receivables are written off when they are determined to be uncollectible.
Inventories, net
Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. The cost of inventory are determined using the weighted average method. The Company records inventory reserves for obsolete and slow-moving inventory.
Inventory reserves are based on inventory obsolescence trends, historical experience and application of the specific identification method.
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Impairment of long-lived assets other than goodwill
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment by comparing carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. Impairment charge recognized for the six months ended June 30, 2025 and 2026 was nil.
Derivative instruments
Derivative instruments are initially recorded at fair value as either assets or liabilities in the accompanying balance sheet and subsequently remeasured to fair value at each reporting date, regardless of the purpose or intent for holding the derivative. The resulting derivative assets or liabilities are shown as a single line and are not netted off against one another on the face of the balance sheet. The method of recognizing the resulting gain or loss is dependent on whether the derivative contract qualifies for hedge accounting and has been designated as a hedging instrument. For derivative instruments that are not designated or that do not qualify as hedging instruments under ASC 815 – Derivatives and Hedging, the assets have been recognized as “derivative assets” included in the short-term investments and the liability has been recognized as “derivative assets” on the balance sheet and changes in the fair value of the derivative financial instruments are recognized in earnings (losses). Gains and losses from our non-designated foreign currency swap contract and interest rate swap contract are included in unrealized gains (losses) on marketable equity securities and derivative instruments in our unaudited condensed consolidated statements of operations and comprehensive loss but do not impact our cash flows.
Valuation allowance for deferred tax assets
Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the financial statements. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized, which can require the use of accounting estimation and the exercise of judgment. The impact of an uncertain income tax position is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. Significant judgment is required in determining the valuation allowance. In assessing the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable temporary differences and ongoing tax planning strategies. If it is determined that we are able to realize deferred tax assets in excess of the net carrying value or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance in the period in which such a determination is made, with a corresponding increase or decrease to earnings.
RECENT ACCOUNTING PRONOUNCEMENTS
For detailed discussion on recent accounting pronouncements, see Note 2 to our Unaudited Condensed Consolidated Financial Statements.
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