祖龙娱乐(09990) - 2025 - 中期财报

Definitions This section defines key terms and abbreviations used in the interim report, covering company entities, regulatory bodies, game genres, currency units, and major shareholders for clear understanding - The report defines several key entities, including "the Company" or "ZuLong Entertainment" (a limited company incorporated in the Cayman Islands, stock code: 9990), and its controlling shareholders Cresc Chorus Limited and LuckQ Technology Limited[4] - Game industry-specific terms such as "MMORPG" (Massively Multiplayer Online Role-Playing Game) and "SLG" (Simulation Game) are explained, indicating the company's core business is related to game development[6][7] - Major shareholders and their shareholding percentages are listed, for example, Perfect World Interactive held 16.55% of the company's shares as of June 30, 2025, and Tencent Holdings Limited held 17.19%[7][8] Company Information This section details ZuLong Entertainment's governance structure, key management, and essential contact and registration information Board of Directors and Committees This section lists ZuLong Entertainment's board members and their roles in various committees (Audit, Remuneration, Nomination, Risk Management), showcasing the company's governance structure and key management personnel - The Board of Directors comprises executive directors (Mr. Li Qing as Chairman and CEO, Mr. Bai Wei), non-executive directors (Mr. Li Nachuan, Mr. Lu Xiaoyin), and independent non-executive directors (Ms. Wang Jing, Mr. Zhu Lin, Mr. Ding Zhiping)[9] - Mr. Zhu Lin chairs the Audit Committee, Ms. Wang Jing chairs the Remuneration Committee, Mr. Li Qing chairs the Nomination Committee, and Mr. Ding Zhiping chairs the Risk Management Committee[9] Contact and Registration Information This section provides detailed contact and registration information for the company, including joint company secretaries, authorized representatives, auditors, legal advisors, registered office, headquarters, principal place of business in Hong Kong, share registrar, and principal bankers - The company's joint company secretaries are Ms. Hao Lili and Ms. Zhang Xiao, and the auditor is PricewaterhouseCoopers[9] - The company's headquarters are located in Dongcheng District, Beijing, China, with its principal place of business in Hong Kong located in Wan Chai, Hong Kong, and its stock code is 9990[10][11] Financial Performance Summary ZuLong Entertainment achieved significant revenue growth and substantially narrowed operating and adjusted net losses in H1 2025, driven by new game launches and stable existing titles Key Financial Indicators ZuLong Entertainment achieved significant revenue growth and substantially narrowed operating and adjusted net losses in H1 2025, driven by new game launches and stable existing titles 2025 H1 Key Financial Data (RMB millions) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | Change % | | :--- | :--- | :--- | :--- | | Revenue | 634.3 | 439.4 | 44.4% | | Cost of revenue | (181.5) | (117.7) | 54.2% | | Gross profit | 452.8 | 321.7 | 40.8% | | R&D expenses | (265.5) | (264.1) | 0.5% | | Sales and marketing expenses | (222.3) | (172.7) | 28.7% | | Administrative expenses | (44.8) | (47.0) | (4.7%) | | Operating loss | (36.8) | (154.0) | (76.1%) | | Loss for the period | (11.7) | (134.0) | (91.3%) | | Adjusted net loss | (7.7) | (120.4) | (93.6%) | - Revenue increased by 44.4% year-on-year to RMB 634.3 million, primarily driven by the launch of new games "Dragon Raja: The Gate of Cassell" and "Treading on the Wind," and the stable performance of "Fashion Dream"[12] - Operating loss significantly narrowed by 76.1% to RMB 36.8 million, loss for the period decreased by 91.3% to RMB 11.7 million, and adjusted net loss decreased by 93.6% to RMB 7.7 million[12] Management Discussion and Analysis This section provides an in-depth review of ZuLong Entertainment's business operations, financial performance, and strategic outlook for future growth Business Review ZuLong Entertainment aims to be a world-class game company, focusing on developing high-quality mobile games across various genres, and enhancing Unreal Engine technology and AI applications. The company has launched 24 mobile games in over 170 regions globally, continuously optimizing its integrated R&D and operation model, achieving significant growth and long-term operation for multiple games - The company's goal is to become a world-class game company, focusing on developing MMORPG, female-oriented, strategy card, and SLG mobile games, while deepening the application of Unreal Engine technology and AI in game development[14] - As of the reporting date, the company has launched 24 mobile games in over 170 regional markets globally, supporting 14 language versions[15] - "Fashion Dream" achieved significant year-on-year and quarter-on-quarter profit growth in H1 2025, with global cumulative revenue exceeding RMB 2 billion, and topped both iOS and Google Play free charts upon its South Korea launch on September 10, 2025[16] - "Dragon Raja: The Gate of Cassell" launched in Hong Kong, Macau, and Taiwan in April 2025, and in Southeast Asia on August 14, entering the top three on the iOS game free chart on its launch day in Thailand[17] - "Jade Dynasty" achieved positive growth in revenue and new users in H1 2025 against market trends, demonstrating the long-term vitality of turn-based MMORPG games[18] Our Game Product Pipeline ZuLong Entertainment plans to launch seven new games of various genres globally between H2 2025 and 2027, including strategy card, female-oriented, idle RPG, MMORPG, and action-shooter games, to enrich its product portfolio and expand market reach - The company expects to launch seven new games of different genres globally between H2 2025 and 2027 to build a diversified game portfolio[20] Expected New Game Product Pipeline | Name | Type | IP Source | Development Stage | Expected Launch Year | Main Markets | | :--- | :--- | :--- | :--- | :--- | :--- | | Dragon Raja: The Gate of Cassell | Strategy Card Game | Licensed IP | –(3) | 2025 | Southeast Asia | | Fashion Dream | Female-Oriented Game | Original IP | –(4) | 2025 | South Korea | | Dragon Raja: The Gate of Cassell | Strategy Card Game | Licensed IP | Game Testing | 2026 | Japan, South Korea, and other global regions | | Treading on the Wind | Idle RPG | Original IP | Game Testing | 2026 | Asia (excluding Mainland China) | | Project Code: Xiaoyao | MMORPG | Original IP | Game Production | 2026 | Mainland China | | Project K | Female-Oriented Game | Original IP | Game Production | 2026 | Global | | Project G | Strategy Card Game | Licensed IP | Game Production | 2027 | Global | | Project Code: One | Action Shooter Game | Original IP | Game Proposal | 2027 | Global | - New games include the turn-based MMORPG "Project Code: Xiaoyao" (combining Chinese traditional and cartoon aesthetics, planned for H2 2025 testing), the Western fantasy strategy card game "Project G" based on a well-known IP, and the female-oriented game "Project K" developed using Unreal Engine 5[26][27][28] Financial Review ZuLong Entertainment's H1 2025 revenue significantly increased by 44.4%, driven by new game launches and the stable performance of "Fashion Dream." Despite increases in cost of revenue and sales and marketing expenses, the company substantially reduced operating and adjusted net losses through cost control and foreign exchange gains - Total revenue increased by 44.4% year-on-year to RMB 634.3 million, primarily due to the launch of "Dragon Raja: The Gate of Cassell" and "Treading on the Wind" in Mainland China and the continued stable performance of "Fashion Dream"[28][33] - Revenue from integrated game publishing and operations grew by 53.8% to RMB 579.0 million, accounting for 91.3% of total revenue; revenue from the Mainland China market grew by 68.3% to RMB 511.7 million, accounting for 80.7% of total revenue[31][32] - Gross profit increased by 40.8% to RMB 452.8 million, while gross margin slightly decreased from 73.2% to 71.4%[35] - Sales and marketing expenses increased by 28.7% to RMB 222.3 million, mainly due to promotional expenses for "Treading on the Wind" launch and "Dragon Raja: The Gate of Cassell," partially offset by reduced advertising expenses for "Fashion Dream" as it entered a stable operational phase[37] - Other net gains significantly increased by 934.2% to RMB 39.3 million, primarily benefiting from net foreign exchange gains[40] - Adjusted net loss significantly decreased by 93.6% to RMB 7.7 million, mainly attributable to increased revenue and net foreign exchange gains[43] Revenue In H1 2025, ZuLong Entertainment's total revenue grew by 44.4% year-on-year to RMB 634.3 million, primarily driven by strong growth in integrated game publishing and operations and significant contributions from the Mainland China market Revenue Breakdown by Business Segment (RMB millions) | Business Segment | 2025 (Unaudited) | % of Total Revenue | 2024 (Unaudited) | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Development and licensing | 55.1 | 8.7% | 62.0 | 14.1% | | – Revenue sharing | 51.6 | 8.1% | 57.5 | 13.1% | | – Non-refundable fixed licensing fees | 3.5 | 0.6% | 4.5 | 1.0% | | Integrated game publishing and operations | 579.0 | 91.3% | 376.5 | 85.7% | | Others | 0.2 | 0.0% | 0.9 | 0.2% | | Total | 634.3 | 100.0% | 439.4 | 100.0% | Revenue Breakdown by Geographical Location (RMB millions) | Geographical Location | 2025 (Unaudited) | % of Total Revenue | 2024 (Unaudited) | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Mainland China | 511.7 | 80.7% | 304.0 | 69.2% | | Regions outside Mainland China | 122.6 | 19.3% | 135.4 | 30.8% | | Total | 634.3 | 100.0% | 439.4 | 100.0% | - Revenue from integrated game publishing and operations increased by 53.8% year-on-year, while revenue from development and licensing decreased by 11.1% year-on-year. Revenue from the Mainland China market increased by 68.3% year-on-year, while revenue from regions outside Mainland China decreased by 9.5% year-on-year[31][32] Cost of Revenue In H1 2025, ZuLong Entertainment's cost of revenue increased by 54.2% year-on-year to RMB 181.5 million, primarily due to the growth in integrated game publishing and operations revenue, with commissions from distribution channels accounting for the largest proportion Cost of Revenue Breakdown by Nature (RMB millions) | Nature | 2025 (Unaudited) | % of Cost of Revenue | 2024 (Unaudited) | % of Cost of Revenue | | :--- | :--- | :--- | :--- | :--- | | Commissions from distribution channels and payment channels | 135.2 | 74.5% | 86.4 | 73.4% | | Commissions from IP holders | 19.9 | 11.0% | 9.6 | 8.2% | | Bandwidth and server hosting fees | 13.3 | 7.3% | 11.8 | 10.0% | | Employee benefit expenses | 6.4 | 3.5% | 6.2 | 5.3% | | Depreciation and amortization expenses | 3.7 | 2.0% | 1.2 | 1.0% | | Others | 3.0 | 1.7% | 2.5 | 2.1% | | Total | 181.5 | 100.0% | 117.7 | 100.0% | - Cost of revenue increased by 54.2% year-on-year to RMB 181.5 million, consistent with the growth trend in integrated game publishing and operations revenue[34] - Commissions from distribution channels and payment channels are the main component of cost of revenue, accounting for 74.5% of the total cost of revenue[34] Gross Profit and Gross Margin In H1 2025, ZuLong Entertainment's gross profit increased by 40.8% year-on-year to RMB 452.8 million, primarily driven by increased revenue, while gross margin slightly decreased to 71.4% - Gross profit increased by 40.8% year-on-year to RMB 452.8 million, mainly due to the launch of new games "Dragon Raja: The Gate of Cassell" and "Treading on the Wind" and the stable performance of "Fashion Dream"[35] - Gross margin decreased from 73.2% in the same period of 2024 to 71.4% in H1 2025, but remained largely consistent[35] Research and Development Expenses In H1 2025, ZuLong Entertainment's R&D expenses remained relatively stable, with a slight year-on-year increase of 0.5% to RMB 265.5 million, primarily due to the company's continued control over employee benefit expenses - R&D expenses slightly increased by 0.5% year-on-year to RMB 265.5 million, mainly due to the company's continuous control over employee benefit expenses[36] - R&D expenses primarily include employee benefit expenses, outsourced technical services, and depreciation and amortization expenses[36] Sales and Marketing Expenses In H1 2025, ZuLong Entertainment's sales and marketing expenses increased by 28.7% year-on-year to RMB 222.3 million, primarily due to new game promotions and increased advertising expenses, partially offset by reduced advertising for mature games - Sales and marketing expenses increased by 28.7% year-on-year to RMB 222.3 million[37] - The increase was mainly due to promotional and advertising expenses for the launch of "Treading on the Wind" in Mainland China and the ongoing "Dragon Raja: The Gate of Cassell," partially offset by reduced advertising expenses for "Fashion Dream" as it entered a stable operational phase[37] Administrative Expenses In H1 2025, ZuLong Entertainment's administrative expenses decreased by 4.7% year-on-year to RMB 44.8 million, primarily due to the company's effective control over administrative costs - Administrative expenses decreased by 4.7% year-on-year to RMB 44.8 million, primarily attributable to the company's cost control over administrative expenses[38] - Administrative expenses primarily include employee benefit expenses, utilities, and office expenses[38] Other Income In H1 2025, ZuLong Entertainment's other income significantly increased by 135.3% year-on-year to RMB 4.0 million, mainly due to increased interest income from financial assets, partially offset by reduced government grants - Other income increased by 135.3% year-on-year to RMB 4.0 million[39] - The increase was mainly due to interest income generated from other financial assets measured at amortized cost held by the Group, partially offset by a decrease in government grants[39] Other Net Gains In H1 2025, ZuLong Entertainment's other net gains significantly increased by 934.2% year-on-year to RMB 39.3 million, primarily benefiting from substantial net foreign exchange gains - Other net gains significantly increased by 934.2% year-on-year to RMB 39.3 million[40] - The increase was mainly due to net foreign exchange gains[40] Net Finance Income In H1 2025, ZuLong Entertainment's net finance income slightly decreased by 3.7% year-on-year to RMB 23.7 million, remaining relatively stable over the comparable period - Net finance income decreased by 3.7% year-on-year to RMB 23.7 million, remaining relatively stable over the comparable period[41] - Finance income primarily refers to interest income from bank deposits, and finance costs primarily include interest expenses accrued on lease liabilities[41] Income Tax Expense In H1 2025, ZuLong Entertainment's income tax expense increased by 45.5% year-on-year to RMB 1.6 million, primarily due to the partial utilization of deferred tax assets related to promotional and advertising expenses from prior periods - Income tax expense increased by 45.5% year-on-year to RMB 1.6 million[42] - The increase was mainly due to the partial utilization of deferred tax assets related to promotional and advertising expenses from prior periods[42] Adjusted Net Loss In H1 2025, ZuLong Entertainment's adjusted net loss significantly decreased by 93.6% to RMB 7.7 million, primarily due to increased revenue and net foreign exchange gains, reflecting a substantial improvement in the company's operating performance - Adjusted net loss was RMB 7.7 million, a significant decrease of 93.6% compared to RMB 120.4 million in the same period of 2024[43] - The reduction in loss was mainly due to increased revenue driven by new game launches and the stable performance of "Fashion Dream," as well as the contribution from net foreign exchange gains[43] Reconciliation of Loss for the Period to Adjusted Net Loss (RMB millions) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Loss for the period | (11.7) | (134.0) | | Add back: Share-based payment expenses | 4.0 | 13.6 | | Adjusted net loss for the period | (7.7) | (120.4) | Liquidity and Financial Resources ZuLong Entertainment maintains a prudent financial management policy to ensure sufficient working capital. In H1 2025, cash outflow from operating activities significantly decreased, but cash outflow from investing activities substantially increased, leading to a net decrease in cash and cash equivalents - The company adopts a prudent financial management policy to ensure a sound financial position and sufficient working capital[44] Cash Flow Summary (RMB millions) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | Change % | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (36.1) | (68.3) | (47.1%) | | Net cash (used in) / generated from investing activities | (117.7) | 112.7 | (204.4%) | | Net cash used in financing activities | (16.2) | (43.5) | (62.8%) | | Net (decrease) / increase in cash and cash equivalents | (170.0) | 0.9 | (18988.9%) | | Cash and cash equivalents at end of period | 261.7 | 558.5 | (53.1%) | - Cash and cash equivalents at the end of the period were RMB 261.7 million, a year-on-year decrease of 53.1%[45] Operating Activities In H1 2025, ZuLong Entertainment's net cash used in operating activities decreased by 47.1% year-on-year to RMB 36.1 million, primarily due to increased cash inflow from game operations - Net cash used in operating activities was RMB 36.1 million, a year-on-year decrease of 47.1%[46] - The decrease was mainly due to increased cash inflow generated from game operations[46] Investing Activities In H1 2025, ZuLong Entertainment's net cash used in investing activities was RMB 117.7 million, compared to a net inflow in the prior year, primarily due to increased purchases of time deposits during the reporting period - Net cash used in investing activities was RMB 117.7 million, compared to a net inflow of RMB 112.7 million in the same period of 2024[47] - This was primarily due to increased purchases of time deposits during the reporting period[47] Financing Activities In H1 2025, ZuLong Entertainment's net cash used in financing activities decreased by 62.8% year-on-year to RMB 16.2 million, primarily due to reduced prepayments to stockbrokers for share repurchase arrangements in prior periods - Net cash used in financing activities was RMB 16.2 million, a year-on-year decrease of 62.8%[48] - The decrease was mainly due to prepayments to stockbrokers for share repurchase arrangements in prior periods during the reporting period[48] Gearing Ratio As of June 30, 2025, ZuLong Entertainment's gearing ratio was 23.7%, an increase from 19.0% as of December 31, 2024 - As of June 30, 2025, the gearing ratio was 23.7%, an increase from 19.0% as of December 31, 2024[50] Capital Expenditure In H1 2025, ZuLong Entertainment's total capital expenditure significantly decreased by 72.5% year-on-year to RMB 4.4 million, primarily due to reduced payments for intangible asset purchases - Total capital expenditure was RMB 4.4 million, a year-on-year decrease of 72.5%[51] - The decrease was mainly due to reduced payments for intangible asset purchases[51] Material Investments Held / Future Plans for Material Investments or Capital Assets ZuLong Entertainment holds financial products from Morgan Stanley Asia (including redeemable step-up fixed coupon notes and US Treasury Notes) as material investments, aiming to enhance capital returns while ensuring fund safety and liquidity. The company currently has no other future plans for material investments or capital assets Material Investment Details (As of June 30, 2025) | Investment Name | Cost (RMB millions) | Carrying Value (RMB millions) | Expected Annualized Return | Income Generated for the Six Months Ended June 30, 2025 (RMB millions) | % of Total Group Assets | | :--- | :--- | :--- | :--- | :--- | :--- | | Morgan Stanley Asia Redeemable Step-up Fixed Coupon Notes | 70.1 | 71.8 | Year 1: 5.68% | 1.9 | 2.6% | | US TREASURY NOTE | 72.0 | 72.3 | 4.43% | 1.6 | 2.7% | | Total | 142.1 | 144.1 | | 3.5 | 5.3% | - The company utilizes idle funds effectively by subscribing to wealth management products (such as Morgan Stanley Asia notes and US Treasury Notes) to enhance capital returns while ensuring fund safety and liquidity[55][56] - As of June 30, 2025, other than the disclosed investments, the Group held no other material investments or had future plans for material investments or capital assets[57] Significant Acquisitions and Disposals of Subsidiaries, Associates, and Joint Ventures For the six months ended June 30, 2025, ZuLong Entertainment did not undertake any significant acquisitions or disposals of subsidiaries, associates, or joint ventures - For the six months ended June 30, 2025, there were no significant acquisitions or disposals of subsidiaries, associates, or joint ventures[58] Pledge of Assets As of June 30, 2025, ZuLong Entertainment had not pledged any property, plant, and equipment - As of June 30, 2025, no property, plant, and equipment were pledged[59] Contingent Liabilities As of June 30, 2025, ZuLong Entertainment faced no significant unrecorded contingent liabilities - As of June 30, 2025, the company faced no significant unrecorded contingent liabilities[60] Employees and Remuneration Policy As of June 30, 2025, ZuLong Entertainment employed approximately 1,052 full-time employees, with 76.0% in R&D. The company is committed to providing competitive compensation, benefits, and professional training, and incentivizes employees through share-based payment schemes - As of June 30, 2025, the company employed approximately 1,052 full-time employees, with about 76.0% in R&D, primarily located in Beijing, China[61] - For the six months ended June 30, 2025, employee compensation and benefits costs were approximately RMB 276.4 million, a slight increase from RMB 274.6 million in the same period last year[61] - The company continuously refines its remuneration and incentive policies through market research, including basic salary, performance bonuses, and year-end bonuses, and has adopted pre-IPO restricted share unit schemes, restricted share unit schemes, and share option schemes to reward employees[61] - The company provides regular professional training to employees, covering general management, project execution, and technical knowledge, to help them understand the latest industry developments[62] Foreign Currency Exchange Risk ZuLong Entertainment's management team closely monitors foreign currency exchange risk, and despite most transactions being denominated in RMB, USD, and HKD, no significant foreign currency exchange losses were incurred for the six months ended June 30, 2025 - The Group's majority of transactions, cash, and cash equivalents are denominated in RMB, USD, and HKD[63] - The management team closely monitors foreign currency exchange risk, and no significant foreign currency exchange losses were incurred for the six months ended June 30, 2025[63] Use of Net Proceeds from Global Offering ZuLong Entertainment's global offering raised net proceeds of approximately HKD 2,358.5 million, with approximately HKD 2,112.4 million utilized as of June 30, 2025. The timetable for funds allocated to strategic acquisitions and investments has been delayed to December 2026 due to unstable external factors - The global offering raised net proceeds of approximately HKD 2,358.5 million[64] Use and Application of Net Proceeds from Global Offering (HKD millions) | Purpose | % | Net Proceeds | Amount Utilized as of June 30, 2025 | Unutilized Amount | Expected Timeline for Remaining Net Proceeds | | :--- | :--- | :--- | :--- | :--- | :--- | | Enhance development capabilities and technology and expand game portfolio | 40% | 943.5 | 943.5 | – | – | | Expand game publishing and operations business, especially in markets outside Mainland China | 20% | 471.7 | 471.7 | – | – | | Fund strategic acquisitions and investments in upstream and downstream businesses in the industry value chain, and invest in investment funds focusing on pan-entertainment or technology, media, and telecommunications | 20% | 471.7 | 225.6 | 246.1 | July 2025 to December 2026 | | Expand IP reserve and enrich our content supply | 10% | 235.8 | 235.8 | – | – | | Working capital and general corporate purposes | 10% | 235.8 | 235.8 | – | – | | Total | 100% | 2,358.5 | 2,112.4 | 246.1 | | - As of June 30, 2025, approximately HKD 2,112.4 million of the net proceeds from the global offering had been utilized[66] - The timetable for the utilization of remaining net proceeds for strategic acquisitions and investments has been delayed to December 2026, primarily due to unstable and uncertain external factors[66] Events After Reporting Period ZuLong Entertainment had no significant events after the reporting period as of June 30, 2025 - The Group had no significant events after the reporting period[67] Other Information This section covers details on director and major shareholder interests, share incentive schemes, capital changes, and corporate governance compliance Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, and Debentures of the Company or Any Associated Corporation As of June 30, 2025, ZuLong Entertainment's executive directors, Mr. Li Qing and Mr. Bai Wei, held company shares through controlled corporations, accounting for 35.23% and 1.93% of the issued share capital, respectively Directors' and Chief Executive's Shareholding (As of June 30, 2025) | Name of Director or Chief Executive | Nature of Interest | Number of Shares Interested | Approximate % of the Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Li Qing | Interest in controlled corporation | 282,266,802 | 35.23% | | Mr. Bai Wei | Interest in controlled corporation | 15,447,304 | 1.93% | - Mr. Li Qing's interests are primarily held through Cresc Chorus and Pondweed Holdings Limited, while Mr. Bai Wei's interests are held through Wade Data Services Limited[71] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares and Debentures of the Company As of June 30, 2025, ZuLong Entertainment's substantial shareholders include Mr. Li Qing, Cresc Chorus, LuckQ, Perfect World Interactive and its affiliates, and Tencent and its subsidiaries, all holding interests exceeding 5% of the company's shares Substantial Shareholders' Shareholding (As of June 30, 2025) | Name / Designation | Nature of Interest | Number of Shares Interested | Approximate % of the Company's Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Li Qing | Interest in controlled corporation | 282,266,802 | 35.23% | | Cresc Chorus | Beneficial owner | 278,329,802 | 34.74% | | LuckQ | Interest in controlled corporation | 278,329,802 | 34.74% | | Perfect World Interactive | Beneficial owner | 132,593,999 | 16.55% | | Tencent | Interest in controlled corporation | 137,698,399 | 17.19% | - Tencent holds company shares through its wholly-owned subsidiaries, Image Frame Investment (Hong Kong) Limited and Image Flag Investment (Hong Kong) Limited[72] Restricted Share Unit Schemes ZuLong Entertainment has a pre-IPO Restricted Share Unit Scheme and a Restricted Share Unit Scheme to incentivize employees. In H1 2025, 275,100 units vested under the pre-IPO scheme; under the Restricted Share Unit Scheme, 2,307,000 units vested, and 1,050,000 new units were granted Pre-IPO Restricted Share Unit Scheme Movements (As of June 30, 2025) | Participant | Number of Unvested Units as of January 1, 2025 | Number of Units Vested During the Period | Number of Units Lapsed During the Period | Number of Unvested Units as of June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Employees | 299,100 | 275,100 | 12,000 | 12,000 | Restricted Share Unit Scheme Movements (As of June 30, 2025) | Participant | Number of Unvested Units as of January 1, 2025 | Number of Units Granted During the Period | Number of Units Vested During the Period | Number of Units Lapsed During the Period | Number of Unvested Units as of June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Employees | 4,905,000 | 1,050,000 | 2,307,000 | 420,000 | 3,228,000 | - Restricted share units typically vest in tranches over three years from the grant date, incentivizing long-term employee service[78] Share Option Scheme ZuLong Entertainment has a share option scheme to incentivize employees. For the six months ended June 30, 2025, no share options were exercised or granted, but 293,000 share options lapsed, with 3,812,783 share options remaining unexercised at period-end Share Option Scheme Movements (As of June 30, 2025) | Participant | Number of Unexercised Share Options as of January 1, 2025 | Number of Share Options Granted During the Period | Number of Share Options Exercised During the Period | Number of Share Options Lapsed During the Period | Number of Unexercised Share Options as of June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Employees | 4,105,783 | – | – | 293,000 | 3,812,783 | - Share options are exercisable in tranches from the commencement of the relevant vesting period until January 7, 2032[80] - For the six months ended June 30, 2025, the number of shares that may be issued upon exercise of share options and restricted share units granted under all schemes, divided by the weighted average number of issued shares, was 0.13%[80] Changes in Share Capital Details of ZuLong Entertainment's share capital changes are provided in Note 22 to the interim consolidated financial statements - Details of the company's share capital changes during the reporting period are set out in Note 22 to the consolidated financial statements on page 61 of this interim report[81] Purchase, Sale or Redemption of Listed Securities In H1 2025, ZuLong Entertainment repurchased 817,000 shares on the Stock Exchange for a total consideration of HKD 971,100, aiming to enhance net asset value and return on equity. As of June 30, 2025, all repurchased shares had not yet been cancelled - For the six months ended June 30, 2025, the company repurchased a total of 817,000 shares on the Stock Exchange for a total consideration of HKD 971,100[82] - The Board believes that the share repurchases can enhance the Group's net asset value and improve return on equity[82] - As of June 30, 2025, all such repurchased shares had not yet been cancelled[82] Interim Dividend ZuLong Entertainment's Board of Directors has resolved not to declare any interim dividend for the six months ended June 30, 2025 - The Board of Directors has resolved not to declare any interim dividend for the six months ended June 30, 2025[84] Compliance with Corporate Governance Code ZuLong Entertainment generally complied with the Corporate Governance Code in H1 2025, but the roles of Chairman and CEO are combined in Mr. Li Qing, which the company believes benefits management, and the effectiveness of the governance structure will be continuously reviewed - The company has complied with all applicable code provisions set out in Part 2 of the Corporate Governance Code, except for a deviation from code provision C.2.1 (the roles of chairman and chief executive should be separate)[85] - Mr. Li Qing serves as both Chairman and CEO, which the Board believes benefits the Group's management, and the independence of senior management and the Board is sufficient to provide effective checks and balances[85] Standard Securities Dealing Code for Directors ZuLong Entertainment has adopted a code of conduct for directors' securities transactions no less stringent than the Model Code, and all directors confirmed compliance with this code in H1 2025 - The company has adopted a code of conduct for directors' securities transactions, the terms of which are no less stringent than the required standards set out in the Model Code[87] - All directors confirmed their compliance with the Model Code for the six months ended June 30, 2025[87] Sufficient Public Float Based on available information, ZuLong Entertainment maintained a sufficient public float throughout H1 2025 - For the six months ended June 30, 2025, the company maintained a sufficient public float[88] Information on Directors and Chief Executive There were no changes in the information of ZuLong Entertainment's directors and chief executive requiring disclosure under the Listing Rules from the date of the 2024 annual report to the date of this interim report - Subsequent to the date of the 2024 annual report and up to the date of this interim report, there were no changes in the information of directors and the company's chief executive requiring disclosure under Rule 13.51B(1) of the Listing Rules[89] Audit Committee ZuLong Entertainment's Audit Committee comprises three members: Mr. Zhu Lin (Chairman), Ms. Wang Jing, and Mr. Ding Zhiping, and is responsible for reviewing interim financial information - The Audit Committee comprises Mr. Zhu Lin (Chairman), Ms. Wang Jing, and Mr. Ding Zhiping[90] Review of Interim Report ZuLong Entertainment's Audit Committee has reviewed the unaudited interim condensed consolidated financial information and interim report for the six months ended June 30, 2025, and found no objections to the accounting treatments - The Audit Committee has reviewed the Group's unaudited interim condensed consolidated financial information for the six months ended June 30, 2025, and the Group's interim report for the six months ended June 30, 2025[91] - The Audit Committee had no objections to the accounting treatments in the unaudited interim condensed consolidated financial information and this interim report[91] - Independent auditor PricewaterhouseCoopers has reviewed the Group's unaudited interim condensed consolidated financial information for the six months ended June 30, 2025[91] Review Report on Interim Financial Information PwC reviewed ZuLong Entertainment's H1 2025 interim financial information, concluding no material non-compliance with IAS 34 Review Conclusion PricewaterhouseCoopers has reviewed ZuLong Entertainment's interim financial information for the six months ended June 30, 2025, in accordance with International Standard on Review Engagements 2410, and found no matters that cause them to believe the information is not prepared in all material respects in accordance with International Accounting Standard 34 - The auditor has conducted the review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity"[94] - The auditor has not found any matters that cause them to believe that the Group's interim financial information is not prepared in all material respects in accordance with International Accounting Standard 34, "Interim Financial Reporting"[95] - The scope of a review is substantially less than that of an audit, and therefore no audit opinion is expressed[94] Interim Condensed Consolidated Statement of Profit or Loss ZuLong Entertainment's H1 2025 revenue grew significantly by 44.4% to RMB 634,366 thousand, with operating loss substantially narrowed by 76.1% to RMB 36,761 thousand, and loss for the period decreased by 91.3% to RMB 11,730 thousand, indicating significant improvement in operating conditions Profit or Loss Statement Overview ZuLong Entertainment's H1 2025 revenue grew significantly by 44.4% to RMB 634,366 thousand, with operating loss substantially narrowed by 76.1% to RMB 36,761 thousand, and loss for the period decreased by 91.3% to RMB 11,730 thousand, indicating significant improvement in operating conditions Interim Condensed Consolidated Statement of Profit or Loss (For the six months ended June 30, 2025, RMB thousands) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Revenue | 634,366 | 439,432 | | Cost of revenue | (181,545) | (117,686) | | Gross profit | 452,821 | 321,746 | | R&D expenses | (265,481) | (264,104) | | Sales and marketing expenses | (222,313) | (172,711) | | Administrative expenses | (44,748) | (47,009) | | Operating loss | (36,761) | (153,969) | | Net finance income | 23,642 | 24,571 | | Loss before income tax | (10,097) | (132,881) | | Loss for the period | (11,730) | (134,041) | | Basic loss per share (RMB per share) | (0.01) | (0.17) | | Diluted loss per share (RMB per share) | (0.01) | (0.17) | - Revenue increased by 44.4% year-on-year, and gross profit increased by 40.8% year-on-year[98] - Operating loss significantly narrowed by 76.1%, and loss for the period decreased by 91.3%[98] Interim Condensed Consolidated Statement of Comprehensive Income ZuLong Entertainment's H1 2025 total comprehensive loss was RMB 45,370 thousand, a significant narrowing from RMB 116,623 thousand in the prior year, primarily due to reduced loss for the period, partially offset by other comprehensive loss from currency translation differences Comprehensive Income Overview ZuLong Entertainment's H1 2025 total comprehensive loss was RMB 45,370 thousand, a significant narrowing from RMB 116,623 thousand in the prior year, primarily due to reduced loss for the period, partially offset by other comprehensive loss from currency translation differences Interim Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30, 2025, RMB thousands) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Loss for the period | (11,730) | (134,041) | | Other comprehensive (loss) / income (net of tax): | | | | Items that may be reclassified to profit or loss: Currency translation differences | (2,484) | 3,145 | | Items that will not be reclassified to profit or loss: Currency translation differences | (31,156) | 14,273 | | Total comprehensive loss for the period | (45,370) | (116,623) | - Total comprehensive loss for the period was RMB 45,370 thousand, a significant decrease from RMB 116,623 thousand in the prior year[99] - Currency translation differences resulted in other comprehensive loss of RMB 33,640 thousand[99] Interim Condensed Consolidated Statement of Financial Position As of June 30, 2025, ZuLong Entertainment's total assets increased, alongside a significant rise in total liabilities, leading to an increased gearing ratio Statement of Financial Position Overview As of June 30, 2025, ZuLong Entertainment's total assets increased to RMB 2,704,346 thousand, with both non-current and current assets showing increases. Total liabilities also grew significantly, leading to an increased gearing ratio Interim Condensed Consolidated Statement of Financial Position (As of June 30, 2025, RMB thousands) | Indicator | As of June 30, 2025 (Unaudited) | As of December 31, 2024 (Audited) | | :--- | :--- | :--- | | Assets | | | | Non-current assets | 875,849 | 776,281 | | Current assets | 1,828,497 | 1,822,079 | | Total assets | 2,704,346 | 2,598,360 | | Equity and Liabilities | | | | Equity attributable to owners of the Company | 2,063,031 | 2,105,284 | | Non-current liabilities | 137,339 | 26,718 | | Current liabilities | 503,976 | 466,358 | | Total liabilities | 641,315 | 493,076 | | Total equity and total liabilities | 2,704,346 | 2,598,360 | - Total assets increased by 4.08% year-on-year to RMB 2,704,346 thousand[101] - Non-current liabilities significantly increased by 414.1% to RMB 137,339 thousand, primarily due to an increase in lease liabilities[102] - Total liabilities increased by 30.06% to RMB 641,315 thousand[102] Interim Condensed Consolidated Statement of Changes in Equity As of June 30, 2025, ZuLong Entertainment's total equity decreased from RMB 2,105,284 thousand at the beginning of the period to RMB 2,063,031 thousand, primarily due to loss for the period and currency translation differences, partially offset by share-based payments and restricted share unit vesting Equity Changes Overview As of June 30, 2025, ZuLong Entertainment's total equity decreased from RMB 2,105,284 thousand at the beginning of the period to RMB 2,063,031 thousand, primarily due to loss for the period and currency translation differences, partially offset by share-based payments and restricted share unit vesting Interim Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30, 2025, RMB thousands) | Indicator | Share Capital | Share Premium | Other Reserves | Accumulated Losses | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of January 1, 2025 | 55 | 6,980,625 | (1,588,338) | (3,287,058) | 2,105,284 | | Loss for the period | – | – | – | (11,730) | (11,730) | | Currency translation differences | – | – | (33,640) | – | (33,640) | | Share-based payments | – | – | 4,018 | – | 4,018 | | Vesting of restricted share units | – | 13,423 | (13,423) | – | – | | Share repurchase | – | – | (901) | – | (901) | | Balance as of June 30, 2025 | 55 | 6,994,048 | (1,632,284) | (3,298,788) | 2,063,031 | - Total equity decreased by RMB 42,253 thousand, primarily due to a loss for the period of RMB 11,730 thousand and other comprehensive loss from currency translation differences of RMB 33,640 thousand[105] - Share-based payments increased by RMB 4,018 thousand, and vesting of restricted share units led to an increase in share premium of RMB 13,423 thousand while other reserves decreased by the same amount[105] Interim Condensed Consolidated Statement of Cash Flows ZuLong Entertainment's H1 2025 net decrease in cash and cash equivalents was RMB 170,003 thousand, primarily due to a significant increase in net cash used in investing activities, despite a reduction in net cash used in operating activities Cash Flow Overview ZuLong Entertainment's H1 2025 net decrease in cash and cash equivalents was RMB 170,003 thousand, primarily due to a significant increase in net cash used in investing activities, despite a reduction in net cash used in operating activities Interim Condensed Consolidated Statement of Cash Flows (For the six months ended June 30, 2025, RMB thousands) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Net cash used in operating activities | (36,079) | (68,313) | | Net cash (used in) / generated from investing activities | (117,721) | 112,712 | | Net cash used in financing activities | (16,203) | (43,549) | | Net (decrease) / increase in cash and cash equivalents | (170,003) | 850 | | Cash and cash equivalents at end of period | 261,653 | 558,478 | - Net cash used in operating activities decreased by 47.1% to RMB 36,079 thousand[108] - Investing activities shifted from a net inflow in the prior year to a net outflow of RMB 117,721 thousand, primarily due to increased purchases of time deposits and financial assets measured at fair value through profit or loss[108] - Net cash used in financing activities decreased by 62.8% to RMB 16,203 thousand[109] Notes to the Interim Condensed Consolidated Financial Information This section provides detailed notes on ZuLong Entertainment's interim financial information, covering general data, accounting policies, risk management, and specific financial line items General Information ZuLong Entertainment Inc. was incorporated in the Cayman Islands and primarily engages in mobile game development and operations in China and other countries. This interim condensed consolidated financial information is unaudited and was approved by the Board of Directors on August 22, 2025 - The company was incorporated on January 2, 2020, under the Companies Act of the Cayman Islands, and its shares have been listed on the Main Board of the Stock Exchange since July 15, 2020[111] - The Group primarily engages in mobile game development and operations in China and other countries and regions[111] - The interim condensed consolidated financial information for the six months ended June 30, 2025, is unaudited and was approved by the Board of Directors on August 22, 2025[111][112] Basis of Preparation This interim condensed consolidated financial information is prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and should be read in conjunction with the Group's consolidated financial statements for the year ended December 31, 2024 - This interim condensed consolidated financial information is prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting"[113] - It should be read in conjunction with the Group's consolidated financial statements for the year ended December 31, 2024, prepared in accordance with International Financial Reporting Standards[113] Accounting Policies The accounting policies adopted by the Group are consistent with those in the 2024 financial statements. New and revised standards first adopted on January 1, 2025, had no significant impact on the interim financial information, but IFRS 18 is expected to have widespread effects on future presentation and disclosures - The accounting policies adopted are consistent with those set out in the 2024 financial statements[115] - IAS 21 (amended) "Lack of Exchangeability," first adopted for the reporting period beginning January 1, 2025, had no significant impact on the interim condensed consolidated financial information[116] - IFRS 18 "Presentation and Disclosure in Financial Statements" (effective January 1, 2027) is expected to have widespread effects on presentation and disclosures, particularly concerning the statement of profit or loss and management-defined performance measures[118] Critical Accounting Estimates and Judgments The preparation of interim financial statements requires management to make significant judgments, estimates, and assumptions, with the primary sources of estimation uncertainty being the same as those applied in the 2024 financial statements - The preparation of interim financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expenses[120] - The primary sources of estimation uncertainty are the same as those applied in the company's 2024 financial statements[120] Financial Risk Management ZuLong Entertainment faces market, credit, and liquidity risks, managing liquidity by maintaining sufficient cash and cash equivalents. Fair value measurements of the company's financial instruments primarily use Level 3 inputs, including wealth management products, preference shares, and fund investments - The Group's operations are exposed to various financial risks: market risk (including foreign exchange risk, price risk, cash flow, and fair value interest rate risk), credit risk, and liquidity risk[123] - The Group aims to maintain sufficient cash and cash equivalents to preserve financial flexibility[124] Financial Liabilities by Maturity (As of June 30, 2025, RMB thousands) | Maturity | Within 1 Year | 1 to 2 Years | 2 to 5 Years | Over 5 Years | Total Contractual Cash Flows | | :--- | :--- | :--- | :--- | :--- | :--- | | Accounts payable and other payables | 142,037 | – | – | – | 142,037 | | Lease liabilities | 29,841 | 29,537 | 90,382 | – | 149,760 | | Total | 171,878 | 29,537 | 90,382 | – | 291,797 | - As of June 30, 2025, the Group's financial assets measured at fair value totaled RMB 693,693 thousand, primarily Level 3 instruments, including investments in wealth management products, other funds, structured investments, private equity funds, venture capital funds, preference shares, and other ordinary share investments[126] - Fair value measurements of Level 3 instruments use significant unobservable inputs such as expected return rates, expected volatility, risk-free rates, and discounts for lack of marketability[136] Financial Risk Factors ZuLong Entertainment's business faces market risks (including foreign exchange, price, interest rate risks), credit risk, and liquidity risk - The Group's operations are exposed to various financial risks: market risk (including foreign exchange risk, price risk, cash flow, and fair value interest rate risk), credit risk, and liquidity risk[123] Liquidity Risk ZuLong Entertainment manages liquidity risk by maintaining sufficient cash and cash equivalents and has analyzed the contractual maturities of its financial liabilities - The Group aims to maintain sufficient cash and cash equivalents to preserve financial flexibility[124] Analysis of the Group's Financial Liabilities by Relevant Maturity Group (As of June 30, 2025, RMB thousands) | | Within 1 Year | 1 to 2 Years | 2 to 5 Years | Over 5 Years | Total Contractual Cash Flows | | :--- | :--- | :--- | :--- | :--- | :--- | | Accounts payable and other payables | 142,037 | – | – | – | 142,037 | | Lease liabilities | 29,841 | 29,537 | 90,382 | – | 149,760 | | Total | 171,878 | 29,537 | 90,382 | – | 291,797 | Fair Value Estimation ZuLong Entertainment's financial instrument fair value measurements primarily use Level 3 inputs, including wealth management products, preference shares, and fund investments, with valuation managed by an internal team and external experts as needed Financial Assets Measured at Fair Value (As of June 30, 2025, RMB thousands) | | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Current: Wealth management product investments | – | – | 201,846 | 201,846 | | Current: Other fund investments | – | – | 193,748 | 193,748 | | Current: Structured investments | – | – | 58,422 | 58,422 | | Non-current: Private equity and venture capital fund investments | – | – | 151,789 | 151,789 | | Non-current: Structured investments | – | – | 50,647 | 50,647 | | Non-current: Preference share investments | – | – | 28,484 | 28,484 | | Total | – | – | 693,693 | 693,693 | - Significant unobservable inputs used for Level 3 instrument fair value measurements include expected return rates, expected volatility, risk-free rates, and discounts for lack of marketability[136] - The Group has a team managing the valuation of Level 3 instruments, determining fair value using valuation techniques at least annually, and seeking assistance from external valuation experts when necessary[132] Segment Information and Revenue ZuLong Entertainment operates its business as a single segment. In H1 2025, total online game revenue was RMB 634,366 thousand, with integrated game publishing and operations contributing the most, and Mainland China being the largest market. Contract liabilities primarily arise from unamortized revenue from in-game virtual item sales - The Group's business is operated and managed as a single segment, thus no segment information is presented[139] Online Game Revenue Breakdown (For the six months ended June 30, 2025, RMB thousands) | Revenue Source | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Development and licensing | 55,146 | 62,015 | | Integrated game publishing and operations | 579,036 | 376,527 | | Others | 184 | 890 | | Total | 634,366 | 439,432 | Revenue by Geographical Location (For the six months ended June 30, 2025, RMB thousands) | Geographical Location | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Mainland China | 511,688 | 303,983 | | Regions outside Mainland China | 122,678 | 135,449 | | Total | 634,366 | 439,432 | - Contract liabilities primarily refer to unamortized revenue from sales of in-game virtual items, non-refundable fixed licensing fees, and pre-collected revenue sharing[148] Other Income ZuLong Entertainment's H1 2025 other income was RMB 4,038 thousand, primarily from interest income on other financial assets measured at amortized cost, partially offset by reduced government grants Other Income Breakdown (For the six months ended June 30, 2025, RMB thousands) | Income Source | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Interest income from other financial assets measured at amortized cost | 3,458 | – | | Government grants | 580 | 1,750 | | Total | 4,038 | 1,750 | - Other income increased by 135.3% year-on-year, primarily due to increased interest income from financial assets[150] Other Net Gains ZuLong Entertainment's H1 2025 other net gains significantly increased to RMB 39,257 thousand, primarily benefiting from substantial net foreign exchange gains Other Net Gains Breakdown (For the six months ended June 30, 2025, RMB thousands) | Gain Source | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Gains on financial assets measured at fair value through profit or loss | 11,789 | 10,784 | | Net foreign exchange gains / (losses) | 26,635 | (9,597) | | Others | 833 | 2,617 | | Total | 39,257 | 3,804 | - Other net gains increased by 934.2% year-on-year, primarily contributed by net foreign exchange gains[151] Expenses by Nature ZuLong Entertainment's H1 2025 total expenses were RMB 714,422 thousand, with employee benefit expenses, promotion and advertising expenses, and commissions from distribution channels being the main components Expenses by Nature (For the six months ended June 30, 2025, RMB thousands) | Expense Nature | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Employee benefit expenses | 276,378 | 274,568 | | Promotion and advertising expenses | 186,676 | 144,971 | | Commissions from distribution channels and payment channels | 135,196 | 86,444 | | Outsourced technical services | 34,735 | 29,949 | | Depreciation and amortization expenses | 26,748 | 25,438 | | Commissions from IP holders | 19,872 | 9,600 | | Bandwidth and server hosting fees | 13,351 | 11,820 | | Total | 714,422 | 598,955 | - Total expenses increased by 19.28% year-on-year, primarily due to increased promotion and advertising expenses and commissions from distribution channels[152] Net Finance Income ZuLong Entertainment's H1 2025 net finance income was RMB 23,642 thousand, a slight decrease from the prior year, primarily contributed by interest income, and also including interest expenses on lease liabilities Net Finance Income Breakdown (For the six months ended June 30, 2025, RMB thousands) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Finance income: Interest income | 24,053 | 26,013 | | Finance costs: Interest expense on lease liabilities | (201) | (962) | | Finance costs: Others | (210) | (480) | | Net finance income | 23,642 | 24,571 | - Net finance income decreased by 3.78% year-on-year, primarily consisting of interest income[154] Income Tax Expense ZuLong Entertainment's H1 2025 income tax expense was RMB 1,633 thousand, an increase from the prior year, primarily due to the partial utilization of deferred tax assets. Several of the company's subsidiaries in Mainland China enjoy preferential tax rates as high-tech enterprises or small and micro enterprises Income Tax Expense Analysis (For the six months ended June 30, 2025, RMB thousands) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Current income tax expense | 591 | 1,327 | | Deferred income tax expense / (credit) | 1,042 | (167) | | Total | 1,633 | 1,160 | - Income tax expense increased by 45.5% year-on-year, primarily due to the partial utilization of deferred tax assets related to promotion and advertising expenses from prior periods[155] - Tianjin ZuLong and Beijing Fantasy Mermaid Technology Co., Ltd. are recognized as high-tech enterprises, enjoying a preferential income tax rate of 15%[158][159] - Some subsidiaries are recognized as small and micro enterprises, with only 25% of their taxable profits subject to a preferential corporate income tax rate of 20%[159] Loss Per Share ZuLong Entertainment's H1 2025 basic and diluted loss per share were both RMB 0.01, a significant narrowing from RMB 0.17 in the prior year, reflecting an improvement