经销模式

In 2023, 2024 and 2025, revenue generated from our distribution channels amounted to RMB73.6 million, RMB108.6 million, and RMB150.6 million, representing 18.9%, 27.5% and 29.2% of our total revenue for the same periods, respectively.

As of December 31, 2025, we had six domestic distributors and 12 overseas distributors.

We have implemented measures to minimize the risk of channel stuffing and inventory backlog within the distribution network, as (i) we generally do not allow returns of products sold to distributors, except for limited reasons such as defective products; (ii) we maintain regular communication with distributors to understand their sales performance and inventory levels, ensuring inventory levels match market demand; and (iii) we do not set minimum purchase requirements, encouraging distributors to be more cautious in their ordering to align their purchases with actual sales patterns and market demand.

The transaction amount between Customer A1 and the Group was RMB51.1 million in FY2023, RMB27.9 million in FY2024, and RMB9.3 million in FY2025.

The transaction amount between Customer A2 and the Group was RMB30.6 million in FY2024, and RMB77.8 million in FY2025.

The collaboration operates on a non-exclusive, business-to-business (B2B) basis.

In 2023, 2024 and 2025, our sales generated from distributor sales accounted for 60.8%, 58.9% and 53.1% of our total revenues, respectively.

To further mitigate this risk, we have established a structured channel-inventory monitoring mechanism under which distributors provide inventory reports.

Given this turbulence in the downstream semiconductor market, we adjusted our distributorship structure by phasing out certain underperforming distributors and engaging new distributors with stronger multi-channel capabilities in 2023.

In 2023, 2024 and 2025, there were 93, 85 and 85 channel partners, respectively.

Our relationship with our channel partners is a buyer and seller relationship whereby our channel partners acquire ownership of, and we recognize revenue upon transfer of control of, the products delivered to them.

The risk of channel stuffing across the distribution chain is nonetheless inherently limited by our project-based business model, whereby products are delivered and deployed in response to specific end-customer project requirements, resulting in no inventory accumulation at the channel partner or sub-distributor level.

In 2023, 2024 and 2025, our revenue generated from sales to distributors amounted to RMB128.4 million, RMB105.0 million and RMB144.7 million, respectively, accounting for 29.7%, 27.4% and 26.7% of our revenue generated from the product sales of the same periods.

The number of distributors at the end of the period decreased to 81 as of December 31, 2025, mainly reflecting the replacement of certain distributors, which demonstrates our ongoing efforts to optimize our distribution network.

We believe that our sales reflect the actual demand from end customers, thus minimizing the risk of channel stuffing and inventory backlog within the distribution network, as (i) we conduct regular online follow-ups with them to understand their inventory level, through which, we may understand prevailing market conditions and check whether they have sufficient stock level; and (ii) we generally do not grant long credit periods to distributors or set minimum purchase requirements, encouraging distributors to be more cautious in their ordering to align their purchases with actual sales patterns and market demand.

Sales to offline distributors | 855,457 | 60.6 | 1,008,144 | 55.3 | 2,044,333 | 58.6

We recognize revenue from product sales to TOP TOY Retail Partners when they sell the products to end-customers in their own TOP TOY stores.

We believe that our sales to distributors during the Track Record Period reflected genuine market demand and there was effective management and control over the inventory levels held by our distributors.

– Sales to distributors | 97,897 | 6.1 | 208,759 | 15.1 | 217,022 | 13.5

During the Track Record Period, we did not terminate any distributor.

We believe the risk of channel stuffing is minimal. We generally do not impose mandatory sales targets or minimum purchase requirements on our distributors, allowing purchases to reflect actual market demand rather than sales pressure. During the Track Record Period and up to the Latest Practicable Date, we did not receive any significant product returns from distributors.

Distributorship model contributed 74.8%, 73.5% and 58.8% of our total sales in 2023, 2024 and 2025, respectively.

We control channel stuffing risks through our internal management policies for distributors and measures by keeping track of the information of end customers.

Based on the above, and to the best of our knowledge, our Directors do not believe there was any material channel stuffing issue and cannibalization risks among our distributors as a result of their buy-out model with us during the Track Record Period.

Distribution | 400,708 | 56.4 | 520,780 | 57.2 | 782,272 | 69.8

We believe our sales correspond to the actual customer demands and that our products are at a low risk of channel stuffing in our sales and distribution network.

During the Track Record Period and up to the Latest Practicable Date, we did not impose any minimum purchase requirement on our distributors.

We generate income from selling edible fungi to distributors and recognize revenue generally at the time when the goods are delivered to them. Our distributors are responsible for the profit or loss resulted from their subsequent sales.

During the Track Record Period, the turnover rates of our distributors were 35.6%, 27.9% and 21.1%, respectively.

The number of distributors for our edible fungi business deceased during the Track Record Period, primarily due to (i) our strategy to focus on cooperation with distributors that are more capable, experienced, and highly credible, and strategically terminate relationship with relatively small distributors and (ii) the distributors’ own strategic adjustments.

Franchised stores | 8,320,591 | 95.0 | 31,150,071 | 98.0 | 50,425,059 | 99.2

Under our franchise model, the franchisees have little incentive to maintain an unreasonably high level of inventory because: (i) franchisees typically make advance payment before the products are delivered to them; (ii) we do not have a minimum purchase requirement; (iii) we generally do not accept product return absent quality issues; and (iv) franchisees can place orders for store supplies frequently and conveniently to fulfill the daily operational needs given our prompt delivery of orders.

Additionally, we utilize our digital systems to actively track and manage the inventory level of the stores. Therefore, the risk of channel stuffing by our franchisees is low.

We primarily rely on distributors to promote and sell our SoC products, and to a lesser extent, we sell SoCs directly to end customers.

Our distributors maintain a “buy-out” model with us.

Among the 28 new distributors for the year of 2025, 27 were distributors of Frequen, a subsidiary that the Group acquired in October 2025.

As of December 31, 2025, our offline retail coverage reached virtually 100% of all prefecture-level cities in China, while expanding into townships, towns, and villages, and our products were available in over 110,000 offline outlets.

We terminated cooperation with 21, 198, and 324 offline distributors in 2023, 2024 and 2025, primarily reflecting our distributor management optimization initiatives aimed at streamlining our network and enhancing overall efficiency.

We strive to minimize the channel stuffing risks associated with our distributors through the following measures: (i) except for online distributors under the consignment model, we generally require full payment before shipping products to distributors;

During the Track Record Period, substantially all of our revenue were derived from our distributors. In 2023, 2024 and 2025, our revenue from distributors accounted for 97.4%, 99.4% and 99.5% of our total revenue, respectively.

In 2023, we engaged 126 new distributors and terminated our partnership with 360 distributors, primarily due to the distribution channel reform that we initiated in 2022, which streamlined the management of our multi-tiered distribution system.

The significant number of terminations in 2023 and 2025 was primarily attributable to our proactive channel optimization strategy.

During the Track Record Period, our sales generated from distribution amounted for 3.8%, 2.7% and 2.3% of the total revenue of each period, respectively.

Adherent to our sales policies including Trade Business Management Standards, we manage our sales to distributors through valuating the qualifications of the distributors, assessing potential profits before formal engagements, specifying major terms in contracts, managing financial and other risks and keeping records of the transactions.

We did not set mandatory sales targets for distributors but provide sales incentives.

As of December 31, 2023, 2024 and 2025, we had 11, 13 and 15 distributors, respectively.

In 2023, 2024 and 2025, our revenue generated from our distributors amounted to RMB26.6 million, RMB74.8 million and RMB64.0 million, respectively, representing 18.5%, 29.7% and 10.6% of our total revenue for the corresponding years.

We adopt a sales model that transfers full ownership of goods at the time of delivery and our distributors are not entitled to return the sold products unless in cases of product defects.

During the Track Record Period, our distribution revenue amounted to RMB127.8 million, RMB121.4 million, RMB117.0 million, RMB91.4 million and RMB74.6 million for the years ended December 31, 2022, 2023, 2024 and the nine months ended September 30, 2024 and 2025, respectively, accounting for 25.4%, 24.0%, 20.5%, 22.7% and 16.7% of our revenue for the same years/periods.

During the Track Record Period, the number of PRC offline distributors declined, reflecting a gradual realignment of our channel strategy to place greater emphasis on and dedicate more resources toward the expansion of our offline self-operated store network.

We do not push shipments to distributors to meet internal sales targets or “make up numbers,” nor do we require distributors to accept inventory in excess of their expected sales needs.

In 2022, 2023, 2024 and the ten months ended October 31, 2024 and 2025, we recognized revenue from distributors of RMB125.2 million, RMB129.6 million, RMB324.6 million, RMB266.5 million and RMB239.3 million, respectively, representing 96.1%, 86.2%, 91.4%, 92.3% and 85.2% of our total revenue in the same periods.

Distributors assume the credit risk for sales to end customers, allowing us to avoid credit risk exposure and reducing the administrative burden of credit control and collection.

We do not set sales target for distributors.

We have successfully established a nationwide distribution network of 75 distributors, covering over 400 healthcare centers and medical institutions in 31 provinces, autonomous regions and municipalities as of September 30, 2025.

During the Track Record Period, the new distributors we had each year were primarily due to the growth of our business and expansion of our sales network.

Given our robust channel management abilities, we believe our sales accurately reflect actual end-customer demand, mitigating risks of channel stuffing and cannibalization.

In 2022, 2023 and 2024 and for the nine months ended September 30, 2025, revenue from our channel partners amounted to RMB96.1 million, RMB126.7 million, RMB72.0 million and RMB32.1 million, respectively, representing 21.8%, 11.1%, 7.4% and 6.0% of the total revenue for the respective periods.

We and our channel partners constitute a seller and buyer relationship, under which we do not pay commissions or make other payments to our channel suppliers.

Risk allocation: all significant risks, including inventory risks, are transferred to our channel partners upon delivery and acceptance, and we retain no ownership control over the products sold to our channel partners;