UCFI Cn Healthy Food Tech Group Corp. - 10-K

ITEM 1A. RISK FACTORS

There are many factors that affect our business and results of operations, some of which are beyond our control. The following is a description of some important factors that may cause the actual results of operations in future periods to differ materially from those currently expected or desired.

Risks Related to the Trading Halt

As of October 1, 2025, in accordance with Nasdaq’s oral notice, our securities have been suspended from trading on Nasdaq. As of the date of this annual report, our securities have not resumed trading on Nasdaq, which may have a material adverse impact on the value or liquidity of investors holding our securities.

As disclosed in our Form 8-K filing with the U.S. Securities and Exchange Commission (SEC) on October 6, 2025, following Nasdaq’s listing on October 1, 2025, Nasdaq notified the Company that it had received notification from China Securities Regulatory Commission (“CSRC”) officials stating that Nasdaq’s CSRC review process for the Company’s U.S. listing had not been completed. Consequently, Nasdaq suspended trading of the Company’s common stock and warrants while requiring clarification on these matters (the “Trading Halt”). The Company asserts that it has fulfilled its obligations to the CSRC and has obtained legal opinions from its Chinese securities legal counsel regarding this matter. Additional documentation has been submitted to Nasdaq. However, as of the date of this annual report, the Trading Halt remains in effect.

If the Trading Halt persists, or if our securities are ultimately delisted from Nasdaq, our investors may face significant adverse consequences due to their holdings, including:

Limited market quotes for our securities;

Designating our common shares as “underweight stocks” will require brokers dealing in our shares to comply with stricter regulations and may result in reduced trading activity in our secondary securities market.

No longer considered as “valuable securities”, as detailed below;

Limited news and analytical coverage; and

Reduced capacity to issue additional securities or secure additional financing in the future.

The National Securities Market Improvement Act of 1996, a federal statute, prohibits or takes precedence over state regulations regarding the sale of certain securities (referred to as “regulated securities”). While states are prioritarily deprived of regulatory authority over securities sales, this federal law does allow states to investigate companies when fraud is suspected. If fraudulent activities are identified, states may impose oversight or prohibit the sale of regulated securities under specific circumstances. Although no state has utilized these powers to restrict securities issued by blank check companies (with the exception of Idaho), securities regulators in some states maintain negative views toward such entities and may employ or threaten to employ these authorities to hinder the sale of blank check company securities within their jurisdictions. Furthermore, if we delist from NASDAQ, our securities will cease to be regulated securities and will fall under the jurisdiction of the states where we offer them.

Should Nasdaq ultimately decide to delist our securities, we may face shareholder lawsuits, which would have a significant adverse impact on our operations.

Should Nasdaq ultimately decide to delist our securities, this action is likely to negatively impact their price performance and impair shareholders’ ability to trade them. In the event of delisting, we cannot guarantee that any measures taken to meet listing requirements will result in securities relisting, stabilize market prices, enhance liquidity, or prevent future violations of Nasdaq’s listing standards.

Furthermore, if our securities are not listed on NASDAQ or delisted from NASDAQ for any reason and are traded on the Over-the-Counter Bulletin Board—an automated quotation system for stock trading between non-national stock exchanges—our securities may face greater liquidity and pricing constraints compared to listings on NASDAQ or other national stock exchanges. Should our securities experience liquidity shortages, shareholders may struggle to trade their holdings unless market conditions can be restored. Conversely, if investors are unable to trade our securities, this could severely impact our capacity to raise additional capital.

If any of our shareholders initiate legal proceedings against us, we may incur substantial costs in litigation defense. Such lawsuits may also divert the time and attention of our management, preventing them from focusing on our business operations, thereby severely impairing our business performance, profitability, and reputation.

According to China law, the business merger with IRON HORSE that we completed on September 30, 2025 requires filing with the China Securities Regulatory Commission. As of now, we cannot predict when we will complete such filings.

The Regulations on Foreign Investors’ Acquisition of Domestic Companies, commonly referred to as the M&A Rules, were promulgated in 2006 by six different China regulatory authorities and revised in 2009. On the surface, they require offshore special purpose vehicles controlled by China companies or individuals to obtain approval from the China Securities Regulatory Commission (CSRC) before listing their securities on overseas stock exchanges through acquisitions of domestic companies or assets in China. The interpretation and application of these provisions remain unclear, and our offshore issuance may ultimately require approval from the CSRC. If such approval is required, we face uncertainties regarding our ability to obtain it and the potential timeframes involved. Furthermore, even if approved by the CSRC, such approval may be revoked. Any failure to obtain or delay obtaining CSRC approval for our listing, or any revocation of such approval, may subject us to sanctions from the CSRC or other China regulatory authorities. These sanctions may include fines and penalties affecting our operations in China, restrictions or constraints on our ability to distribute dividends overseas, and other forms of sanctions that could have significant adverse impacts on our business, financial condition, and operating performance.

In addition, the Chinese government has recently attempted to impose greater supervision and control over overseas issuances or foreign investments by China issuers. Among other measures, the Guidelines (definitions provided below) emphasize the need to strengthen cross-border regulatory cooperation, as well as the management and supervision of China issuers, and to establish a comprehensive regulatory framework to apply China capital market laws and regulations overseas. On February 17, 2023, the China Securities Regulatory Commission (CSRC) promulgated the “Interim Measures for the Administration of Overseas Securities Issuance and Listing by Domestic Companies,” also known as the “Overseas Listing Filing Rules,” which came into effect on March 31, 2023. According to the Overseas Listing Filing Rules, China domestic companies issuing or listing stocks, depositary receipts, convertible corporate bonds, or other equity securities in overseas stock markets, whether directly or indirectly through offshore holding companies, must file with the CSRC. If a China domestic company intends to complete an overseas (i) initial public offering and listing or (ii) listing under the name of an overseas enterprise through one or more acquisitions, stock swaps, stock transfers, or other means, based on the equity, assets, income, or other similar rights of the relevant China domestic company, the issuer (if the issuer is a China domestic company) or its designated major China domestic operating entity (if the issuer is an offshore holding company) must report to the entity within three working days after the issuer submits application documents related to the initial public offering and/or listing, or after the first announcement of the relevant transaction (if no application documents are required). The determination of whether any issuance or listing is “indirect” will be based on the principle of “substance over form.” If the issuer meets the following two conditions, the issuer’s issuance or listing will be considered an overseas indirect issuance or listing of a China domestic company: (i) The revenue, profit, total assets, or net assets of the China domestic company in the most recent fiscal year account for more than 50% of the relevant line items in the issuer’s audited consolidated and consolidated financial statements for that year; and (ii) The majority of senior executives responsible for its business operations and management are Chinese citizens or have a general residence in China, or if its principal place of business is in China, or if its business operations are primarily conducted in China. In addition, according to the “Overseas Listing Filing Rules” and a set of Q&As published on the official website of the China Securities Regulatory Commission (CSRC) related to the release of the “Overseas Listing Application Rules,” if any regulatory authority with jurisdiction over the relevant industries and sectors explicitly requires (in the form of institutional rules) that a China domestic company must fulfill regulatory procedures before listing overseas, the company must obtain regulatory opinions, approvals, and other documents from the competent authority prior to submitting filings to the CSRC, and complete any required filings. After obtaining filing with the China Securities Regulatory Commission (CSRC) and before the completion of this issuance and/or listing, if any of the following material events occurs, the reporting entity shall promptly report to the CSRC within three working days and update the CSRC filing: (i) significant changes in the issuer’s main business, licenses, or qualifications; (ii) changes in the issuer’s control or any major changes in the issuer’s equity structure; and (iii) any major changes to the issuance and listing plan. Once listed overseas, the reporting entity shall also be required to report to the CSRC within three working days after any of the following material events occur and are announced to the CSRC: (i) changes in the issuer’s control; (ii) investigations, sanctions, or other measures taken by foreign securities regulatory authorities or relevant competent authorities against the issuer; (iii) changes in listing status or transfer of the Listing Committee; and (iv) voluntary or compulsory delisting of the issuer. In addition, if the issuer completes any overseas follow-on issuance in the same overseas market where the public offering and listing were completed, it must file with the CSRC within three working days. Failure to comply with applicable filing requirements may result in fines imposed on the relevant China domestic company, its controlling shareholders, and other responsible persons.

In accordance with the “Overseas Listing Filing Rules”, the “Notice on Domestic Companies’ Overseas Fundraising Listing Filing Management” issued by the China Securities Regulatory Commission (CSRC) on February 17, 2023, the “Notice on Overseas Listing Filing”, and a series of Q&A published on the CSRC’s official website, we were required to complete filing procedures related to this corporate merger with the CSRC before listing our securities on NASDAQ, in compliance with the “Overseas Listing Application Rules”. We submitted the necessary documents pertaining to the merger to the CSRC on December 21, 2024. On March 19, 2025, the CSRC requested supplementary materials, which we subsequently provided on April 2, 2025. Although this step was mandatory, uncertainties remain regarding the timely completion of the application process and its impact on our NASDAQ listing. Failure to comply with filing requirements or subsequent revocation of approvals could significantly adversely affect our business operations, financial condition, and operational activities. As of the date of this annual report disclosure, we have not yet received the filing notification from the CSRC.

Our limited operational history introduces uncertainty regarding our capacity expansion, ability to meet customer demands, and potential for sustainable growth.

The Group currently operates under a relatively new business structure that includes several subsidiaries established in recent years, although some operational entities have longer histories. However, our existing structure and integration strategy were formally established during the restructuring completed in early 2024, alongside CFI’s business merger with Iron Horse finalized on September 30,2025. These factors may result in insufficient historical data or references for assessing our ability to meet market demands, expand production capacity, and achieve profitability. Given our limited operational history, we face challenges in forecasting future revenues, accurately budgeting expenditures, and identifying emerging trends that could impact business operations.

Risks Related to Doing Business in the PRC

Failure to comply with the Chinese government’s complex regulatory requirements and significant oversight on our business operations may result in substantial adverse impacts on our operations and securities value.

Our facilities are located within the territory of the People’s Republic of China, which requires us to comply with various government and regulatory requirements applicable to our operational locations, including those implemented by various local and municipal authorities and government branches. The Chinese government holds considerable power to influence and intervene in the operations of offshore holding companies, such as CFI. Therefore, our business, financial condition, operational results, and future prospects may be significantly affected by the overall political, economic, and social conditions in China. China’s economic structure differs from that of most developed countries in multiple aspects, including the level of government involvement, development stage, growth rate, foreign exchange controls, and resource allocation. Although the Chinese government has taken measures aimed at promoting market-driven economic reforms, divesting state ownership of productive assets, and improving corporate governance, a significant portion of productive assets in China remains under government ownership. Additionally, the Chinese government continues to play a significant role in shaping industrial development through the implementation of industrial policies. It also maintains substantial control over the Chinese economy by allocating resources, regulating foreign currency debt payments, formulating monetary policies, and providing preferential treatment to specific industries or enterprises. Furthermore, certain regulations (i) on the measures we operate and (ii) on overseas offerings by Chinese issuers and foreign investments may severely restrict or completely hinder our ability to issue or continue issuing securities to investors, leading to significant depreciation or complete loss of value of such securities.

In addition, the Chinese government has considerable control over numerous sectors of the China economy through regulation and state ownership. Our operational capabilities in China are susceptible to significant disruptions from legislative and regulatory changes, including issues related to securities regulation, data protection, cybersecurity, taxation, foreign investment restrictions, and mergers and acquisitions.

The central and local governments of the People’s Republic of China may implement new and stricter regulations or reinterpret existing ones, which will require us to incur additional expenses and efforts to ensure compliance with these directives or interpretations. As a result, we may face substantial government and regulatory requirements in the China provinces where we operate, and may be subject to supervision by various political and regulatory entities, including numerous local and municipal institutions and government branches. We may incur higher costs for complying with existing and newly enacted laws and regulations, or face penalties for non-compliance. If the Chinese government attempts to strengthen oversight and control over overseas issuances and/or foreign investments targeting issuers within China, such actions may severely restrict or completely hinder our ability to issue or continue issuing securities to investors, leading to significant depreciation or total loss of such securities’ value.

China’s economy has experienced significant growth over the past few decades; however, this growth has been uneven across different geographical regions and various economic sectors. The Chinese government has implemented a series of measures aimed at promoting economic growth and strategic resource allocation. While some of these measures may benefit the overall Chinese economy, they could also have negative impacts on our operations. A slowdown in China’s economy may lead to reduced demand for our products, thereby having a significant and adverse impact on our business and operational results.

The uncertainty regarding the legal system partly stems from both published and unpublished government policies, as well as the potential rapid changes in Chinese mainland laws and regulations, which may adversely affect us.

We primarily conduct business through China mainland subsidiaries. Our operations in mainland China are governed by local laws and regulations. Our mainland subsidiaries are subject to the laws and regulations applicable to foreign investment in mainland China. The legal system in mainland China is based on a civil law system with a codified legal framework. Unlike the common law system, under the civil law system, previous court judgments can be cited as references, but their case law value is limited.

Over the past few decades, laws and regulations in mainland China have significantly strengthened the protection of various forms of foreign investment in the mainland. However, due to the relatively recent enactment of certain laws and regulations, as well as the limited number of published judicial rulings that lack binding force, there remains uncertainty in the interpretation and enforcement of these legal provisions.

In addition, the legal system of the Chinese mainland is to some extent based on government policies, some of which are not disclosed or are not disclosed in a timely manner, and may change rapidly without prior notice. Therefore, we may not be aware of our own potential policy and rule violations.

The Chinese government imposes complex regulatory requirements on our business operations and has recently enacted multiple regulations to strengthen oversight of overseas issuance activities and foreign investments in domestic issuers. These measures, along with potential future tightening controls, could severely restrict or even completely hinder our ability to issue securities to investors or continue issuing new securities, potentially causing significant value depreciation or rendering such securities worthless.

The U.S. Securities and Exchange Commission (SEC) may impose additional disclosure requirements and strengthen regulatory scrutiny for companies with significant business operations in China, which could increase our compliance costs, subject us to additional disclosure requirements, and/or suspend or terminate our future securities offerings, thereby making financing more difficult.

On July 30, 2021, in response to recent regulatory developments in China and measures taken by the Chinese government, the Chairman of the U.S. Securities and Exchange Commission (SEC) issued a statement requiring SEC staff to seek additional disclosures from overseas issuers related to companies operating within China before the registration statements of overseas issuers take effect. Therefore, the issuance of our securities may need to comply with additional disclosure requirements and reviews imposed by the SEC or other U.S. regulatory authorities on companies conducting business within China, which could increase our compliance costs, subject us to additional disclosure requirements, and/or result in the suspension or termination of our future securities offerings, thereby making financing more difficult.

The Chinese government has recently issued new policies affecting specific industries, and there is no guarantee that regulations or policies that may adversely affect our business, financial condition, and operating performance will not be introduced in the future. In addition, if China adopts stricter standards in specific areas such as corporate social responsibility or environmental protection, we may incur higher compliance costs or face additional restrictions in operations.

We operate in a highly regulated environment and are subject to extensive regulations in China, which affect our operations and may lead to significant changes in our operations and common stock value.

The environment in which we operate is subject to high regulation. Specifically, our operational activities are constrained by extensive regulations in China, including but not limited to those concerning healthy food, mandatory product certification, defective product recalls, and product liability and consumer protection laws. Multiple Chinese regulatory authorities oversee different aspects of our operations, including but not limited to:

Mandatory product certification;

Product liability;

Environmental protection system; and

Safety production and occupational health requirements.

We have an obligation to obtain various government approvals, licenses, permits, and registrations related to business operations, and to comply with mandatory standards and regulations pertaining to manufacturing processes and products. However, the interpretation of these regulations may change, and new regulations may be introduced, which could disrupt or restrict our operations, weaken our competitiveness, or result in high compliance costs. Additionally, the submission of certain documents to government agencies is mandatory. As we expand our sales and distribution networks and add retail stores in China, we cannot guarantee that these filings will be completed in a timely manner. If any of our existing or future branches fail to complete the necessary filings, they may be ordered to immediately rectify violations or face fines of up to 10,000 RMB. We cannot guarantee that we have met or will continue to meet all applicable laws and regulations. Furthermore, the Chinese government imposes restrictions on foreign ownership.

Therefore, future government actions, including interventions or influences on any decisions we make at any point in time, or controls on overseas securities offerings and foreign investments by issuers within China, may force us to make significant operational adjustments, potentially limit or completely hinder our ability to issue or continue issuing securities to investors, and/or may result in a substantial decline in the value of such securities or render them worthless.

Our board of directors is typically responsible for monitoring risks arising from cybersecurity threats (if any). Since our initial public offering (IPO), we have not encountered any cybersecurity incidents.

The Group collects and stores certain business and operational data, including information about its distributors and suppliers. Although we do not collect consumer or retail customer data, we are still subject to the data protection and cybersecurity laws and regulations applicable in China and any other jurisdictions where we operate. These laws regulate the collection, storage, use, and security of data and impose significant compliance obligations.

Although we have implemented data security measures to protect sensitive business information and comply with applicable laws, our systems remain vulnerable to cyberattacks such as hacker intrusions, malware, or phishing attacks. These threats may lead to unauthorized access, data breaches, or business disruptions. Cyberattacks targeting our contractors or third-party service providers could further increase the risk of data loss or misuse.

Data protection regulations in China and globally are becoming increasingly stringent and complex, with new requirements constantly being introduced, such as China’s Personal Information Protection Law (PIPL) and Data Security Law. Failure to comply with these or other evolving data protection laws may result in substantial fines, penalties, operational restrictions, and reputational damage.

Compliance with these laws requires sustained investments in security infrastructure, training programs, and monitoring systems. Furthermore, future regulatory changes in data protection laws—such as stricter requirements for data retention, transmission, or storage—may incur additional costs or operational adjustments. Failure to comply could result in investigations, enforcement actions, or restrictions on our data collection and usage capabilities, potentially harming our business operations, financial health, and overall performance.

While we are committed to complying with applicable data protection laws, uncertainties in their interpretation and enforcement, along with potential cybersecurity risks, may adversely affect our operations and reputation. Any significant data breach or failure to comply with data protection regulations could have substantial negative impacts on our business.

As of the reporting date of this annual report, we have not received any notification from authorities identifying us as operators of critical information infrastructure, or requiring us to undergo cybersecurity reviews or network data security reviews by the Cyberspace Administration of China, or obtaining licenses from the Cyberspace Administration of China. Given that we are not (i) engaged in activities that affect or may affect national security; (ii) operators of critical information infrastructure procuring network products and services that may affect national security; or (iii) operators of network platforms holding personal information data of over one million users. However, there remains uncertainty regarding how the “Cybersecurity Review Measures” and the “Security Review Draft” will be interpreted or implemented, and whether China regulatory authorities (including the Cyberspace Administration of China) will issue new laws, regulations, rules, or detailed implementation guidelines or interpretations related to the “Cybersecurity Review Measures” and the “Security Review Draft.” If any such new laws, regulations, rules, implementation guidelines, or interpretations come into effect, we expect to take all reasonable measures and actions to ensure compliance and minimize any adverse impacts caused by such laws.

Exchange rate fluctuations may result in foreign exchange conversion losses.

The exchange rate fluctuations of the RMB against the US dollar and other currencies are influenced by changes in Chinese government policies and largely depend on domestic and international economic and political conditions as well as supply and demand conditions in local markets. In July 2005, the Chinese government changed its decades-long policy of pegging the RMB to the US dollar, after which the RMB appreciated by more than 20% against the US dollar over the next three years. From July 2008 to June 2010, this appreciation trend ceased, and the RMB-to-US-dollar exchange rate remained within a narrow range. Since June 2010, the RMB-to-US-dollar exchange rate has experienced fluctuations, sometimes with significant and unpredictable volatility. With the development of foreign exchange markets and the advancement of interest rate liberalization and RMB internationalization, the Chinese government may announce further adjustments to the exchange rate regime in the future, and we cannot guarantee that the RMB will not appreciate or depreciate substantially against the US dollar. It is difficult to predict how market forces or China and the US government’s policies will affect the RMB-to-US-dollar exchange rate in the future.

Any depreciation of the Renminbi may adversely affect the value of our shares and dividends paid in foreign currencies. Additionally, we face challenges in identifying cost-effective tools to reduce foreign currency risk exposure. These factors could significantly impact our business operations, financial position, operational performance, and future prospects, while diminishing the foreign currency value of our shares and the dividends paid in foreign currencies.

Risks Related to Intellectual Property and Legal Litigation

We may face intellectual property infringement claims, which could entail substantial defense costs and potentially disrupt our business operations.

We cannot be certain that any aspect of our operations or business will not infringe upon or otherwise violate trademarks, patents, copyrights, proprietary technologies, or other intellectual property held by third parties in the past or in the future. In the future, we may from time to time face legal proceedings, claims, or penalties related to intellectual property rights held by others. Additionally, there may be third-party trademarks, patents, copyrights, proprietary technologies, or other intellectual property rights that we may have infringed without knowledge. The rights holders of such intellectual property may assert their rights against us in China, the United States, or other jurisdictions. If any third party files an infringement lawsuit, regardless of the validity of their claims, we may be forced to divert management time and other resources from our business and operations to address these lawsuits.

In addition, the application and interpretation of China’s intellectual property laws, as well as the procedures and standards for granting trademarks, patents, copyrights, know-how, or other intellectual property rights in China, continue to evolve and remain uncertain. We cannot guarantee that Chinese courts or regulatory authorities will endorse our analysis. If we are found to have infringed upon others’ intellectual property rights, we may face legal liabilities and penalties for the infringement, be prohibited from using such intellectual property rights, and may also be required to pay licensing fees or develop our own alternatives. Consequently, our business and operational performance may suffer significant adverse impacts.

We may not be able to prevent others from unauthorized use of our intellectual property rights, which could harm our business and competitive position.

We believe our trademarks, domain names, proprietary technologies, and similar intellectual property rights are crucial to our success. We rely on a combination of intellectual property laws and contractual arrangements, including confidentiality and non-compete agreements with employees and other personnel, to protect our proprietary rights. Despite these measures, any of our intellectual property rights may still be challenged, invalidated, circumvented, or infringed upon, or they may not be sufficient to provide us with a competitive advantage. For example, we regularly file trademark registration applications in China, but these applications may be delayed or unsuccessful and may be challenged by third parties. Due to China’s “first-to-file” trademark registration system and the existence of similar registered trademarks in the same categories, we may not be able to successfully register trademarks in these categories and face the risk of being deemed to infringe on third-party trademark rights. Additionally, for trademarks we have not registered in China, we may not be able to prevent third parties from using our brand. Other parties are also using trademarks similar to ours. We consider our trademarks to be essential to our business. We are filing revocation applications against certain existing trademarks held by third parties on grounds of insufficient use. However, we cannot guarantee the success of these applications or the successful registration of our trademarks.

If any third party files a trademark infringement lawsuit against us for using any unregistered trademarks, we may face civil and administrative liabilities under China’s Trademark Law. We may also be ordered to cease any products accused of or found to infringe upon the legitimate rights and interests of third parties, or to redesign our products or processes to avoid infringement claims, and to compensate such third parties for losses up to RMB 5 million, as well as be ordered to eliminate any negative impacts. Additionally, we may face various administrative liabilities, including but not limited to: if the illegal gains exceed RMB 50,000, a fine of up to five times the illegal gains may be imposed; if the illegal gains are less than RMB 50,000, a fine of RMB 250,000 may be imposed. Any such liabilities may disrupt our business operations and have a material adverse impact on our reputation, financial condition, and operating performance. Even if we successfully defend against such claims, legal proceedings may still result in substantial costs and divert management attention.

Meanwhile, intellectual property protection in China remains an evolving legal field. We cannot predict the future developments in this legal domain, including the enactment of new laws, amendments to existing laws, or their interpretations. As a result, we may fail to adequately protect our intellectual property rights, which could adversely affect our revenue and competitive position.

In China, the protection and enforcement of intellectual property rights often face difficulties. The application of relevant laws and regulations depends on judicial interpretations and enforcement, but due to the lack of clear legal guidance, their application may not be consistent. Counterparties may violate confidentiality and non-compete agreements, and we may not have sufficient remedies to address such breaches. As a result, we may not be able to effectively protect our intellectual property rights or enforce our contractual rights in China. Preventing unauthorized use of our intellectual property is both difficult and costly, and the measures we take may not be sufficient to prevent intellectual property theft. If we resort to litigation to enforce our intellectual property rights, such lawsuits may incur substantial costs and divert our management and financial resources. We cannot guarantee success in such lawsuits. Additionally, our trade secrets may be disclosed, obtained by competitors in other ways, or independently discovered by competitors. If our employees or consultants use intellectual property owned by others while working for us, it may lead to disputes regarding related proprietary technology and invention rights. Any failure in protecting or enforcing our intellectual property rights may have a significant adverse impact on our business, financial condition, and operating results.

We may not be able to adequately acquire or maintain our proprietary and intellectual property rights in data or technology.

We cannot guarantee that our employees, consultants, or other relevant parties will comply with confidentiality, non-disclosure, or invention transfer agreements, nor can we ensure the validity of such agreements in controlling access to and distribution of our products/services, specific aspects thereof, or proprietary information. Additionally, we may face third-party challenges to our ownership of intellectual property rights or inventorship claims that we assert as our own. For instance, such challenges might invalidate agreements signed with employees or consultants requiring intellectual property transfers to us, or conflict with their prior contractual obligations to transfer inventions to other employers, former employers, or third parties. While we rely on employment-related work clauses to establish ownership of intellectual property created by employees, certain types of intellectual property may require separate documentation to legally transfer ownership rights to us.

As our patents may expire without extension options, our patent applications could be denied approval. Our patent rights may face challenges including challenges, circumvention, invalidation, or restricted scope, potentially compromising their effectiveness in protecting our interests. More critically, we might fail to prevent others from developing or utilizing competing technologies, which could significantly adversely impact our business operations, financial health, and operational performance.

As of the date of this annual report release, we have registered 13 patents, 85 trademarks, and 6 software program copyrights in the Chinese mainland. Even if our patent applications are approved and we obtain corresponding patents, there remains uncertainty regarding whether these patents may face opposition, circumvention, or invalidation in the future. Additionally, rights under granted patents may not provide us with substantial protection or competitive advantages. The legal measures offered by these protections are limited, and competitors or others may acquire or utilize our intellectual property and proprietary information. Claims under any patent may not be sufficiently broad to prevent others from developing technologies similar to ours or achieving effects comparable to ours. Furthermore, others’ intellectual property may also prevent us from licensing or utilizing our patents. In the fields where we have developed and are developing products, there exists a significant number of patents owned by others and pending patent applications. These patents and patent applications may claim priority over our patent applications and may result in the invalidation of our patent applications. Finally, in addition to individuals who may claim priority, any of our existing patents or pending patent applications may be challenged by others if deemed invalid or unenforceable. Our success depends in part on our ability to acquire, maintain, expand, enforce, and defend the scope of our intellectual property. The patent application process is both costly and time-consuming. We may struggle to file, apply for, maintain, enforce, or license all necessary or desirable patents at reasonable costs, within reasonable timelines, or across jurisdictions where commercial protection holds value. In some cases, we might even fail to secure any protection for our proprietary rights. Any failure to obtain or sustain patent protection and other intellectual property safeguards for our products could significantly harm our business operations, financial health, and overall performance.

In addition to patented technologies, we also rely on our non-patented know-how, trade secrets, processes, and specialized expertise.

We rely on proprietary information—including trade secrets, technical know-how, and confidential data—to protect intellectual property that may not qualify for patents or where non-disclosure is deemed more appropriate. To safeguard such information, we typically enter into confidentiality agreements with employees, consultants, contractors, scientific advisors, and third parties, or incorporate non-disclosure clauses into consulting, service, or employment contracts. However, we cannot guarantee that all potential contacts with our trade secrets or proprietary information have signed such agreements. Even when agreements exist, they may be breached or fail to effectively prevent leaks, third-party infringement, or unauthorized use. Additionally, these agreements often have limited durations and may lack adequate remedies for unauthorized disclosures. Our protection capabilities for trade secrets used by third-party manufacturers and suppliers remain limited, and unauthorized leaks could result in loss of future protection. Furthermore, our proprietary information may be accessed by competitors or third parties conducting independent research. Disputes over ownership of technical know-how and inventions may arise when our employees, consultants, contractors, or third parties utilize third-party intellectual property while working for us. To enforce and define the scope of our proprietary rights, time-consuming and costly litigation may be required. Failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position. Furthermore, in certain markets where we operate, laws governing trade secret rights may provide minimal or no protection for our trade secrets. If any of our trade secrets are legally obtained or independently developed by competitors or third parties, we will have no legal means to prevent their use in competition. Any disclosure of trade secrets to competitors or third parties—whether lawful or not—along with their independent exploitation, could significantly impair our business operations, financial performance, and overall financial health.

We rely on physical and electronic security measures to protect our proprietary information, but we cannot guarantee that these safeguards provide adequate protection or that they will never be breached. There remains a risk that third parties may gain unauthorized access to our proprietary information, potentially leading to misuse or disclosure that could undermine our competitive advantage. We may fail to detect or prevent unauthorized access or use of our information by third parties, may not take appropriate and timely measures to mitigate damage, or may not be able to mitigate or remedy such damage.

Furthermore, third parties may independently discover our trade secrets and proprietary information. If any of our trade secrets are legally obtained or independently developed by competitors or third parties, we will have no legal right to prevent them from using such information to compete with us. Should any of our trade secrets be disclosed to competitors or third parties, or if they are independently developed by such entities, our competitive position would suffer significant adverse effects.

If our trademarks and trade names are not adequately protected, we may fail to establish brand awareness in target markets, and our business operations could be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, diluted, circumvented, or deemed generic names, or may be determined to infringe, misappropriate, or violate other trademarks. We may not be able to protect the rights of these trademarks and trade names, which are crucial for establishing recognition among potential partners or customers in target markets. During trademark registration procedures, our applications may be rejected. Although we have the opportunity to respond to such rejections, we may not be able to overcome them. If our trademarks are successfully challenged, we may be forced to rebrand our products, which could lead to loss of brand recognition and may require us to invest resources in promoting and marketing the new brand. Additionally, third parties may oppose pending trademark applications and seek to revoke registered trademarks. Opposition or revocation proceedings may be initiated against our trademarks, and our trademarks may not be preserved in these proceedings. Furthermore, in many countries, owning and maintaining trademark registrations may not provide adequate defense against subsequent infringement claims by prior trademark owners. Some trademarks used in other parts of the world under the “CFI” brand have not been registered in China. If we inadvertently use these trademarks in China, we may face litigation or claims, which could result in substantial costs, negative publicity, and divert resources and management attention.

We may fail to acquire, protect, or enforce our rights to trademarks and trade names that are critical for establishing brand recognition among potential partners or customers in target markets. Competitors or third parties may sometimes adopt similar trade names or trademarks, which could hinder our ability to build brand identity and lead to market confusion. Additionally, owners of other registered trademarks or trademarks containing variants of our registered or unregistered trademarks and trade names may file potential claims for infringement, misappropriation, dilution, or other violations. Our efforts to obtain, enforce, or protect exclusive rights related to trademarks, trade names, domain names, or other intellectual property may prove futile, resulting in substantial costs, resource allocation inefficiencies, and adverse impacts on our business operations, financial health, operational performance, and future prospects.

Risks Associated with Our Securities

The sale of our securities by our holders may result in a significant decline in the market price of our securities, even if our business operations are performing well.

Under the Lock-up Agreement executed during the merger between CFI and Iron Horse, major shareholders of CFI and relevant securities holders will be subject to restrictions on selling any CFI common shares they receive or hold upon agreement, with these restrictions expiring six months after the agreement takes effect. Upon expiration of the lock-up period and upon either the effectiveness of CFI’s registration statements submitted under the Registration Rights Agreement or compliance with Rule 144 requirements, certain CFI shareholders may sell substantial quantities of CFI common shares through public markets or private negotiations. Such transactions could exacerbate stock price volatility or exert significant downward pressure on CFI’s common stock prices.

The trading prices of our common shares and warrants may experience significant fluctuations, which could be influenced by various factors beyond our control, including but not limited to:

Actual or expected fluctuations in our financial condition or operating performance;

Differences between our financial performance and the expectations of securities analysts;

Changes in our projected operating and financial performance;

Changes in laws and regulations affecting our business, customers, suppliers, or our industry;

We or our competitors announce the launch of new products and services;

Our ability to continuously innovate and promptly bring products to market;

We are involved in actual or potential litigation or regulatory investigations;

Negative publicity about us, our products or our industry;

Changes in senior management or key personnel;

We or our competitors announce new investments, acquisitions, strategic partnerships, or joint ventures;

Our sale of securities by us, our shareholders, or warrant holders, and expectations regarding the lifting of lock-up periods;

Overall economic, political, regulatory, industry and market conditions;

Natural disasters or major catastrophic events; and

Other events or factors, including those caused by war, terrorist incidents, natural disasters, pandemics or responses to these events.

These and other factors may cause significant fluctuations in the market prices and demand for our common stock and warrants, which could limit or prevent investors from easily selling their shares and potentially negatively impact the liquidity of our common stock and warrants in other ways.

Warrants can be converted into common stock, which increases the number of shares available for resale in the open market and results in diluted shareholder equity.

Under the terms of the warrant agreements governing these securities, a total of 2,457,000 warrants may be exercised. The outstanding warrants represent approximately 4.7% of our currently outstanding common shares. The exercise price of the warrants is set at $11.50 per share, subject to adjustment. If exercised, such warrants will trigger additional common share issuance, resulting in diluted equity for existing shareholders and increased share availability for resale in the open market. Significant sell-offs of these warrants or the possibility of their exercise may adversely affect the market price of common shares. However, there is no guarantee that these warrants will remain in the money before maturity, and they may become worthless upon expiration.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of CFI’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2025 and 2024, and the notes related thereto which are included elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements”, “Risk Factors”, and elsewhere in this Report.

In this section, “we”, “us”, “our” and “CN Healthy” refer to CN Healthy Food Tech Group Corp., a holding company, and its wholly owned subsidiaries.

Overview

On September 30, 2025, Iron Horse announced the completion of its business merger with Rosy Sea, a company based in the British Virgin Islands. Rosy Sea is the parent company of CFI. The merged new company will be renamed as CN Healthy Food Tech Group Corp. and listed on the NASDAQ market on October 1, 2025 under the stock codes “UCFI” and “UCFIW”.

CN Healthy Food Tech Group Corp. is a comprehensive enterprise integrating grain biotechnology and health product research and development, production, and sales, focusing on the deep processing of grain raw materials into green ecological products. Our corporate vision is to create a healthy world through AI technology and biotechnology. The product advocates a green, healthy, international, and popular consumption concept, which is widely welcomed by the market. The group is based on the “big health food industry”, mainly engaged in the distribution of natural grain health food channels, providing safe and reliable nutritional protection for health conscious consumers.

Our business began in May 2024, and by December 31, 2025, our main products include cordyceps peptide selenium powder, Baofei granule extract plant drink, Yancui peptide selenium powder, Ganoderma lucidum and matsutake peptide selenium powder, ginseng peptide selenium powder, collagen peptide prebiotic drink, plant essential oil, and Shangshangyi Congee. We manage our business in two operational departments: offline dealer sales and online live streaming sales. Among them, offline dealer sales mainly rely on our extensive dealer channels for distribution, and online live sales mainly sell goods and services through digital coupons through e-commerce and social platforms such as Douyin, Meituan, Kuaishou, etc. As of December 31, 2025 and 2024, offline dealer sales accounted for approximately 86.2% and 94.0% of the consolidated revenue, respectively, while online live streaming sales accounted for approximately 13.8% and 6.0% of the comprehensive revenue, respectively.

Recent Developments

After our company was listed on the NASDAQ Stock Exchange (hereinafter referred to as “NASDAQ”) on October 1, 2025, we received a notification from NASDAQ that they have received a notification from the staff of the China Securities Regulatory Commission (hereinafter referred to as “CSRC”) that the review process for our company’s listing in the United States has not been completed. Accordingly, Nasdaq has suspended the trading of our common stock and warrants, pending Nasdaq’s verification and clarification of the relevant matters with our company. As of the date of issuance of this report, our company has submitted relevant supporting documents to NASDAQ and is awaiting further notification from NASDAQ.

We need to complete the filing procedures related to this corporate merger with the China Securities Regulatory Commission in accordance with the requirements of the “Overseas Listing Application Rules” before its securities are listed on NASDAQ. We submitted the necessary documents related to this corporate merger to the China Securities Regulatory Commission on December 21, 2024. On March 19, 2025, the China Securities Regulatory Commission requested supplementary materials, and we subsequently submitted the supplementary materials on April 2, 2025. As of the date of disclosure of this year’s report, we have not yet obtained the filing notice from the China Securities Regulatory Commission.

We issued an interest-free promissory note of $1,000,000 to non-affiliated lender Jiao Yanjun on September 29, 2025. On September 30, 2025, an interest-free promissory note for $2,018,000 was issued to Underwriter D. Boral Capital, LLC. On September 30, 2025, an interest-free promissory note of $1,421,343 was issued to the Sponsor Bengochea SPAC Sponsors I LLC. The promissory note company has repaid $1,014,000 in the current year, and as of December 31, 2025, the outstanding balance of the promissory note is $454,690. The three notes have all matured, and as of December 31, 2025, a default interest of de minimis has been incurred, which is relatively insignificant compared to the overall financial statements. The company is currently negotiating with all parties to extend the expiration date.

We have established our own production base in September 2025 and officially put it into operation in October. This production base focuses on producing high-end health foods, including Yancui Peptide Selenium Powder, Lingzhi Matsutake Peptide Selenium Powder, and Shanshen Peptide Selenium Powder. Our core products are gradually being self-produced and sold, providing a stable foundation for long-term sustainable operation.

Components of Operating Results

Revenue

Revenue represents the sales of inventories and digital coupons to customers where our performance obligation to transfer a promised good or service to a customer is satisfied at a point in time, when ownership and control have been transferred to the customer. Revenue is reported net of variable consideration, including applicable discounts, estimated returns, allowances, estimated refunds, and service fees.

Revenue from our wholesale distribution segment is comprised of sales of inventories to distributors, and includes shipping and handling charges billed to the distributor. We have determined that distributor agreements that include a minimum purchase volume do not create a material right that gives right to a separate performance obligation as there are no discounts or other incentives provided to the distributor associated with the distribution agreement, or with the minimum purchase volume. Our performance obligation is created as new orders are received from a distributor. We are not obligated to transfer any products until a distributor submits an order specifying the quantity of products it wishes to purchase, which represents an option to purchase additional goods, not variable consideration. As a result, the Company recognizes revenue at the time control of the products ordered transfers to the distributor.

We determined that any variable consideration related to a potential shortfall to a minimum purchase volume at the end of the distributor agreements was deemed to be fully constrained at inception and therefore excluded from the initial transaction price due to the high degree of uncertainty and risk associated with these potential payments as we could not assert that it was probable that a significant reversal in the amount of revenue recognized would not occur. We will recognize any remaining revenue associated with a shortfall to a minimum purchase volume during the period we can assert that it is probable that a significant reversal in the amount of revenue recognized would not occur. We review our variable consideration estimates at the end of each quarter. As of December 31, 2025 and 2024, we could not assert that it was probable that a significant reversal in the amount of revenue recognized would not occur for a potential shortfall to the minimum purchase volume at the end of the in place distributor agreements, which have a remaining term of twelve months.

Additionally, if the minimum purchase volume is not met, we may reassess whether to renew the distribution agreement or maintain the distributor at their current tier, ensuring alignment with our strategic objectives and market conditions.

Revenue from our live-stream sales segment is comprised of sales of digital coupons to customers for goods or services (or for discounts on goods or services) to be provided by third-party merchants. We determined that we are the principal in these transactions as we have complete discretion in establishing the pricing of the digital coupons.

Cost of Revenues

Cost of revenue consists primarily of the cost of inventories where the performance obligation to transfer a promised good or service to the customer is satisfied as of period end.

Operating Expenses

Operating expenses are recorded when incurred and consist of three components — selling expenses, general and administrative expenses and research and development expenses.

Selling Expenses consist primarily of advertising costs on social networking sites and affiliate programs, offline marketing costs, such as television, and online marketing costs, such as search engine marketing.

General and Administrative Expenses consist primarily of compensation expense, including employee benefits, for employees involved in customer service, operations, technology, as well as general corporate functions, such as finance, legal, and human resources. Additional costs include depreciation and amortization, amortization of shares issued for services to certain consultants, rent, utilities, professional fees, travel and entertainment, recruiting, maintenance, certain technology costs and other general corporate costs.

Research and Development Expenses consist primarily of compensation expense, including employee benefits, material costs, testing costs and other expenses related to our investment in the development of new products and services.

Other Income, net

Other income consists primarily of interest income from bank deposits.

Comprehensive Income

Comprehensive income consists of two components, net income and other comprehensive income. The foreign currency translation adjustment results from the translation of the financial statements from an entities functional currency to our reporting currency is reported in other comprehensive income.

Key Factors Affecting Our Performance

Our results of operations and our ability to grow our business over time could be impacted by a number of factors and trends that affect our industry generally, as well as new offerings of products and services we may acquire or seek to acquire in the future. Additionally, our business is concentrated in certain markets, putting us at risk of region-specific disruptions such as adverse economic, regulatory, political, weather and other conditions. See “Risk Factors” elsewhere in this Report for further discussion of risks affecting our business. We believe the factors discussed below are key to our success.

Attracting and Retaining Customers

Our wholesale distribution segment depends on our ability to attract and retain individual distributors to comprise our entire distribution network. Recruiting, onboarding, and training new distributors can be time-consuming and costly, impacting our ability to replace distributors that are underperforming, expand our market share, maintain positive relationships with the end consumer of our products, and sustain financial stability.

Our live-stream sales segment depends on our ability to attract and retain local merchants who are willing to offer us digital coupons to the local merchants’ experiences. Merchants can cancel their unsold digital coupon offerings at any time, and their willingness to continue offering the digital coupons through our live-stream offerings depends on the effectiveness and reach of our live-stream offerings. We are focused on improving the live-stream offerings and merchant value proposition by exploring opportunities to better balance the needs of the local merchant partners, end customers, and CN Healthy.

To grow our business, we must continue to acquire new distributors and local merchants and successfully engage and retain them, including assisting our distributors to engage and retain customers for the distributor’s business. Our marketing strategy aims to preserve liquidity and achieve profitability, while simultaneously attracting long-term customers to fuel a return to growth. We utilize both digital and offline channels to attract new visitors to our website and subsequently convert them into customers. Our marketing costs are largely composed of advertising. At any given time, our advertising efforts may include, social media marketing, keyword search campaigns, affiliate programs, partnerships, campaigns with celebrities and influencers, display advertising, television, radio, video, content, direct mail, email, mobile “push” communications, SMS, and search engine optimization. We expect our marketing expenses to vary from period to period.

Inventory Management

Since our own production base was put into operation in October 2025, our core products have gradually achieved self production and self sales, and the proportion of self production is expected to gradually increase. At present, we still have some products manufactured through OEM or purchased from suppliers. We consider the cooperating manufacturers and suppliers as key partners in the product development process, who are crucial to the group’s supply chain and provide important products to support the group’s continued operation and development. The procurement department rigorously screens suppliers through on-site assessments of their scale, technical capabilities, production capacity, and delivery cycles to ensure they meet the group’s quality standards.

Supplier Arrangement

Since our own production base was put into operation in October 2025, it has solved the supply problems of three main products, ensuring the stability and timeliness of product delivery. With the release of internal production capacity, our dependence on a single or a few external suppliers and the risk of supplier concentration have been effectively alleviated, reflected in a decrease in the number and proportion of suppliers with procurement volume exceeding 10%. This structural optimization has reduced our dependence on specific suppliers and effectively dispersed the risk of supply chain disruptions that may arise from single supplier production capacity, quality, or delivery issues.

Impact of Macroeconomic Conditions

We may be impacted by adverse consequences of the macroeconomic environment, including but not limited to, global economics and geopolitical uncertainty, higher labor costs, labor shortages, government regulations, trade restrictions and tariffs, supply chain challenges and resulting changes in consumer and merchant behavior. We cannot predict whether, or when, such circumstances may improve or worsen or what impact such circumstances could have on our business.

Increasing prices in the component materials for our inventories that we source from our suppliers may impact the availability, the quality and the price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality of products as they may substitute lower cost materials to maintain pricing levels.

A discrete event impacting a specific supplier, customer, industry or region in which we have a concentrated exposure could negatively impact our results of operations.

Foreign Currency Translation Risk

Our reporting currency is the U.S. dollar and our operations in the PRC use its local currency as the functional currency. Substantially all of our revenue and expenses are in the Chinese Renminbi (“RMB”). We are subject to the effects of exchange rate fluctuations with respect to any such currency. For example, the value of the RMB depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market.

The consolidated income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations.

Results of Operations

The following table summarizes our results of operations for years ended December 31, 2025 and 2024:

For the Years Ended

December 31

Change

Revenues, net

Costs of revenue

Gross profit

Total operating expenses

Operating income

Total other income, net

Income before income taxes

Provision for income tax

Net income

Other comprehensive income (loss)

Comprehensive income

Revenue

Total revenue for the year ended December 31, 2025 was $27.8 million, compared to $11.3 million for the same period in 2024, an increase of $16.5 million, or 144.6%. Growth for the period was driven by our life cycle with four additional months of revenue generating activities during the year ended December 31, 2025 as compared to the same period in 2024. We also implemented strategic promotional campaigns and new product launches to reach new customers and increase business with existing customers to drive revenue growth.

Cost of Revenue

Total cost of revenue for the year ended December 31, 2025 was $9.3 million, compared to $3.8 million for the same period in 2024, an increase of $5.5 million, or 145.7%. The increase was primarily driven by a 126.0% increase in revenue from our wholesale distribution segment and the introduction of digital coupons for goods from our live-stream sales segment during 2025. These increases were partially offset by costs savings attributed to bringing production in-house during the fourth quarter of 2025.

Operating Expenses

Total operating expenses for the year ended December 31, 2025 were $6.6 million, compared to $2.0 million for the same period in 2024, an increase of $4.6 million, or 231.6%. The increase was attributable to our focus to scale and grow our business as business operations generated cash flows enabling us to hire additional employees, establish a sales and marketing function, and establish a research and development function that facilitated additional growth in both our customer base and our product offerings. Our operating expenses also increased as a result of certain costs associated with the Business Combination and costs attributed to becoming a public company during September 2025 including, $2.0 million of expenses associated with management advisory services, $0.34 million of additional insurance expense, and $0.09 million of additional audit fees incurred during the year ended December 31, 2025 that were not incurred during the same period in 2024.

Other Income, net

Total other income, net for the year ended December 31, 2025 was $0.5 million, compared to less than $0.1 million for the same period in 2024, an increase of $0.5 million, or 706.9%. The increase was primarily driven by increased cash balances from operations to hold in deposit accounts and generate interest income.

Provision for Income Tax

The provision for income tax for the year ended December 31, 2025 was $3.9 million, compared to $1.6 million for the same period in 2024, an increase of $2.3 million, or 142.3%. The increase in the provision for income tax was attributable to the increase in revenue, offset by the increase in cost of revenue, operating expenses and other income.

Liquidity and Capital Resources

Overview

Historically, our primary uses of cash have been to finance working capital needs and to make deposits with certain of our suppliers. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.

We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all.

Our primary sources of liquidity have been cash provided by operating activities, our cash and cash equivalents, which have historically been sufficient to meet our working capital and substantially all of our capital expenditure requirements.

As of December 31, 2025, our cash and cash equivalents totaled $33,013,749 and a net working capital surplus of $12,280,831. As of December 31, 2025, the majority of our cash and cash equivalents were held in the PRC.

We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs over at least the next twelve months, though we may require additional capital resources in the future. Additionally, if the wholesale distribution segment and live-stream sales segment revenue mix changes, the operating cash flow generated from the wholesale distribution segment may not be sufficient to cover operating costs and additional capital resources may be required in the future. We may elect to raise additional capital through the sale of equity to fund our future needs beyond the next twelve months or through the acquisition of a debt facility.

Cash Flows Summary

The following table summarizes our net cash flows from operating, investing and financing activities:

For the Years Ended

December 31

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Cash flows (used in) provided by operating activities

For the year ended December 31, 2025, operating activities used $9.0 million in cash and cash equivalents, primarily resulting from a net income of $8.4 million, non-cash adjustments totaling approximately $2.8million, and a net cash outflow from changes in operating assets and liabilities of $20.2 million. Net cash used in changes in operating assets and liabilities was driven primarily by a decrease in advances from customers of $21.2 million, an increase in prepayments and other current assets of $1.2 million, a decrease in accounts payable of $0.6 million, an increase in inventories of $0.2 million, and a decrease in accrued expenses and other current liabilities of $0.2 million. These outflows were partially offset by an increase in income tax payable of $0.2 million.

For the year ended December 31, 2024, operating activities provided $42.1 million in cash and cash equivalents, primarily resulting from a net income of $4.0 million, non-cash adjustments totaling $0.3 million, and a net cash inflow from changes in operating assets and liabilities of $37.8 million. Net cash provided by changes in operating assets and liabilities was driven primarily by an increase to advances from customers of $38.3 million, an increase in income tax payable of $0.9 million, an increase in accounts payable of $0.6 million, and an increase in accrued expenses and other current liabilities of $0.8 million. These inflows were primarily offset by an increase in prepayments and other current assets of $1.4 million and an increase in inventories of $1.4 million

Cash flows used in investing activities

During the year ended December 31, 2025, net cash used in investing activities was $0.9 million, of which $0.7 million was attributed to the purchase of property and equipment, $0.1 million was attributed to the acquisition of intangible assets and less than $0.1 million was attributed to long term investment.

During the year ended December 31, 2024, net cash used in investing activities of approximately less than $0.1 million was primarily attributable to a loan made and repaid to our construction developer for RMB 20 million (approximately $2.8 million at December 31, 2024) and a purchase of an intangible asset of approximately less than $0.1 million.

Cash flows provided by financing activities

During the year ended December 31, 2025, net cash provided by financing activities was less than $0.1 million, of which $1.0 million was attributed to consummation of Business combination and partially offset by a repayment of a promissory note to a related party of $1.0 million.

During the year ended December 31, 2024, the cash provided by financing activities was nil.

Holding Company Structure

We face various risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our common stock, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks relating to doing business in China, see “ Risk Factors - Risks Related to Doing Business in the PRC ” in this Report.

The PRC government’s significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly decline or become worthless. For more details, see “ Risk Factors - Risks Relating to Doing Business in the PRC - Chinese regulatory authorities could disallow our holding company structure, which may result in a material change in our operations and/or a material change in the value of New CFI’s securities, including that it could cause the value of such securities to significantly decline ” in this Report “ Risk Factors - The Company and CFI have concluded, based on advice received from CFI’s legal counsel in the PRC, that CFI has made all necessary filings with the CSRC under applicable PRC securities laws, and that there are no material legal impediments under currently effective PRC securities laws that would prevent the completion of the Business Combination and the combined company’s listing on a U.S. national securities exchange. If the relevant PRC governmental authorities, including the CSRC, reach a different conclusion about the transaction or the applicability or scope of current PRC laws and regulations, the Company could be subject to legal sanctions or penalties ” in our Current Report on Form 8-K, as filed with the SEC on October 6, 2025.

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and cause our Common Stock to decrease in value or become worthless. For more details, see “ Risk Factors - Risks Relating to Doing Business in the PRC - Uncertainties with respect to the legal system and changes in laws and regulations in mainland China could adversely affect us in this Report.

Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries

We refer to our subsidiaries domiciled in the PRC as the “PRC Subsidiaries” and the parent company of the PRC Subsidiaries domiciled in Hong Kong as “CFI HK”.

As of December 31, 2025, there were no capital contributions made to our PRC Subsidiaries, neither directly nor through intermediate holding companies.

To date, there have not been any dividends or other distributions from our PRC Subsidiaries to our intermediate holding companies located outside of mainland China. Our intermediate holding companies may rely on dividends and other distributions on equity paid by our PRC Subsidiaries for their cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to their stockholders, subject to our charter and M&A and BVI law or HK law (as applicable) or to service any expenses and other obligations it may incur.

Within our direct holding structure, the cross-border transfer of funds from CFI HK to its PRC Subsidiaries is permitted under laws and regulations of the PRC currently in effect. Specifically, CFI HK is permitted to provide funding to its PRC Subsidiaries in the form of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits on CFI HK’s ability to make capital contributions to its PRC Subsidiaries under the PRC law and regulations. However, the PRC Subsidiaries may only procure stockholder loans from CFI HK in an amount equal to the difference between its registered capital and total investment amount as recorded in the Chinese Foreign Investment Comprehensive Management Information System or 2.5 times of its net assets, at the discretion of such PRC Subsidiaries.

For additional information, see “ Risk Factors - Risks Related to Doing Business in the PRC - PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of our offshore financing to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business ” in this Report.

The PRC Enterprise Income Tax Law (the “EIT Law”) and its implementation rules provide that a withholding tax will be applicable to dividends payable by PRC companies at a rate of 10% to non-PRC-resident enterprises, unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by CFI HK from our PRC Subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC Subsidiaries.

If we or CFI HK is classified as a PRC resident enterprise for PRC enterprise income tax purposes because the PRC tax authorities determined that either we or CFI HK has an actual management body located within the territory of China, we will be subject to a uniform 25% enterprise income tax rate on our worldwide income, which would materially reduce net income.

For additional information, see “ Risk Factors - Risks Related to Doing Business in the PRC - Under the PRC Enterprise Income Tax Law, New CFI may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to New CFI and its non-PRC shareholders and have a material adverse effect on its results of operations and the value of your investment” in this Report.

There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us or our PRC Subsidiaries to transfer cash. Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland China, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends. For details regarding the restrictions on our ability to transfer cash between us, and our subsidiaries, see “ Risk Factors - Risks Related to Doing Business in the PRC - Restrictions on the remittance of Renminbi into and out of China and governmental control of currency conversion may limit our ability to pay dividends and other obligations and affect the value of your investment ” in this Report.

We currently do not have cash management policies that dictate how funds are transferred between our holding company and our subsidiaries.

Restrictions on Our Ability to Transfer Cash Out of the PRC and to U.S. Investors

Our PRC Subsidiaries ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC Subsidiaries to pay dividends to its shareholders only out of its accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, under PRC law, our PRC Subsidiaries are required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC Subsidiaries incur debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to CFI HK.

To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC Subsidiaries’ dividends and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.

For additional information, see “Risk Factors - Risks Related to Doing Business in the PRC - Restrictions on the remittance of Renminbi into and out of China and governmental control of currency conversion may limit our ability to pay dividends and other obligations and affect the value of your investment” in our Report.

Commitments and Contingencies

Legal Proceedings

The Company is periodically involved in legal proceedings, legal actions, and claims arising in the normal course of business, including proceedings relating to intellectual property, safety and health, employment and other matters. Management believes that the outcome of such legal proceedings, legal actions, and claims will not have a significant adverse effect, individually, or in the aggregate, on the Company’s financial position, results of operations or cash flows. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Commitments

Our contractual obligations consist of annual lease payments of $247,541 on a lease that terminates on December 31, 2027.

Government Contribution Plan

Pursuant to the laws applicable to companies organized under the laws of the PRC, the PRC Subsidiaries are required to participate in a government-mandated multi-employee defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the PRC Subsidiaries to pay to the local labor bureau a monthly contribution rate based on the monthly basic compensation of qualified employees. The relevant local bureau is responsible for meeting all retirement benefit obligations and there are no further commitments beyond the monthly contribution for the PRC Subsidiaries.

Going Concern

As of December 31, 2025, despite the following circumstances—the Nasdaq trading suspension has lasted for more than five months with no clear recovery date, three outstanding promissory notes are in default, and the filing result with the China Securities Regulatory Commission (CSRC) remains pending—the company maintains sufficient cash on hand, amounting to $33 million, which is adequate to cover all its debts. The company is currently engaged in constructive negotiations with creditors to resolve the promissory note defaults, and communication regarding the CSRC filing is progressing in an orderly manner. In addition, the company has demonstrated strong operating performance, with continued growth in revenue and net profit. Its own production base has commenced operations, reducing reliance on external suppliers, and overall operations remain stable. Based on the above, management has assessed that there are no material doubts regarding the company’s ability to continue as a going concern.

Off-Balance Sheet Financing Arrangements

As of December 31, 2025, we did not have any off-balance sheet arrangements.

Related Party Transactions

On May 30, 2024, the stockholder of Rosy Sea contributed to the Company (i) a building with a gross floor area of 4,032.36 square meters and (ii) a land use right for 18,000 square meters that expire in September 2056, both of which are located in Deliger Industrial Park, Duerbot Mongolian Autonomous County, Daqing City, Heilongjiang Province. These building and land use rights (collectively, the “Contributed Assets”) were recorded on the contribution date at fair value of RMB 30,310,000 ($4,189,937 at May 30, 2024 and $4,332,228 at December 31, 2025) and RMB 19,860,000 ($2,745,369 at May 30, 2024 and $2,838,603 at December 31, 2025), respectively.

At Closing, compensation of $2,000,000, as provided in the Amended BCA, was accounted for as transaction costs related to the Business Combination and charged to additional paid-in capital and was payable to the Sponsor, a shareholder of the Company. The Company included $1,000,000 in accrued expenses and other current liabilities, included $900,000 as part of a promissory note that was entered into with the Sponsor, and paid $100,000 at Closing. During the year ended December 31, 2025, the Company made repayments totaling $1,014,000 on the promissory note with the Sponsor. As of December 31, 2025, $1,000,000 of unpaid compensation owed to the Sponsor was included as a component of accrued expenses and other current liabilities and $454,690 remains outstanding under the promissory notes with the Sponsor.

Critical Accounting Policies and Estimates

An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain 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 consolidated financial statements. For a description of our significant accounting policies, see Note 2 to our consolidated financial statements for the years end December 31, 2025 and 2024, and the related notes thereto which are included elsewhere in this Report.

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires management to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this Report. When reviewing our consolidated financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Revenue Recognition

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

ASC 606 requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

In accordance to ASC 606, the Company recognizes revenue when it transfers its goods and services 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 primarily to its customers in PRC, as 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, which the Company has control of the goods and has the ability to direct the use of goods to obtain substantially all the benefits. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual goods or services to customers, and there is no separately identifiable other promises in the contracts. The Company’s revenue streams are recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at the time of shipment for the wholesale distribution segment and the time of digital coupon redemption for the live-stream sales segment. The Company’s sales are net of value added tax (“VAT”) in respect of product sales.

We make significant estimates related to revenue recognition including estimates for refund reserves for digital coupons that will be refunded as a result of customer dissatisfaction with goods or services received, services fees paid to the live-stream platforms for digital coupons redeemed, and an allowance for inventories that will be returned. We estimate refunds, service fees and returns allowance using historical refund, service fee, and redemption experience. We also consider trends when making those estimates that could be driven by changes to our policies, or in general, economic conditions that may impact customer behavior. We reevaluate our estimate as facts and circumstances change and at the end of each quarter. These estimate rely on judgments regarding future expectations of customer behavior. While the basis of our estimates is historical data, customer behavior may not always be predictable. If actual refunds and returns differ from our estimates, the effects could be material to the consolidated financial statements.

We evaluate our variable consideration estimates related to the potential shortfall to a minimum purchase volume at the end of our distributor agreements and recognize revenue in the period we can assert it is probable that a significant reversal in the amount of revenue recognized would not occur.

Contract Assets and Liabilities

Payment terms are established based upon credit approvals. Contract assets are recognized for contacts where our performance obligation is satisfied prior to where payment has been received in related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of when our performance obligation is satisfied. The contract liability balance can vary significantly depending on the timing when an order is placed and when shipment, delivery, and digital coupon redemption occurs. As of December 31, 2025 and 2024, other than accounts receivable and advances from customers, the Company had no other material contract assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheets. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in general and administrative expense when incurred.

The Company generally warrants that its products will substantially conform to the agreed-upon specifications. The Company’s liability is limited to either a credit equal to the purchase price or replacement of the defective part. Returns and refunds have historically been immaterial. As such, the Company does not record a specific return or refund reserve and does not consider activities related to such activities to be a separate performance obligation.

Inventories

Inventory consists of finished goods and is stated at the lower of cost or net realizable value. Cost is determined using a first-in, first-out methodology. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Provisions for inventory write-downs are included in the cost of revenues in the consolidated statements of income. Inventories are carried at this lower cost basis until sold or scrapped.

Valuation of Contributed Assets

The fair value of the Contributed Assets from the stockholder of Rosy Sea was determined by our board of directors, after considering a third-party valuation and input from management, as there is no public trading market for the Contributed Assets.

The cost approach was determined to be the most appropriate valuation methodology as relevant financial data, valuation information, and appraisal data for these Contributed Assets was readily available. The cost approach estimates fair value based on the expected cost to replace or reproduce the assets and relies on assumptions regarding the occurrence and extent of any physical, functional and/or economic obsolescence. The fair value is calculated by multiplying the replacement cost of the Contributed Assets by the condition rate

The replacement cost of the Contributed Assets considered the cost to reacquire the asset as of the contribution date, including all reasonable and necessary expenses, capital cost and profit.

The condition rate refers to the ratio obtained by subtracting physical depreciation, functional depreciation, and economic depreciation from the asset’s replacement cost and then dividing that difference by the replacement cost, were:

Physical depreciation refers to the loss in value of an asset due to wear and tear and natural forces affecting the physical performance of the asset.

Functional depreciation is caused by technological advancements that make an asset’s functions relatively obsolete.

Economic depreciation refers to the loss in value due to external conditions causing the asset to become idle or decrease in earnings.

Impairment of Long-lived and Intangible Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. Identified intangible assets are reviewed for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company has determined there have been no events and circumstances that indicate possible impairment since inception on its long-lives and intangible assets.

Warrants

We account for warrants as either equity-classified or liability classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing liabilities from equity (“ASC 480”), and ASC 815 Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance, modification, and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the liability-classified warrants are recognized as a non-cash gain or loss on the accompanying consolidated statements of operations and comprehensive loss. We assess the classification of our warrants at each reporting date to determine whether a change in classification between equity and liability is required.

Income Taxes

We account for income taxes using the asset and liability method and assess whether it is more likely than not that the deferred tax assets will be realized. We are also subject to taxation in the United States, BVI, Hong Kong, and the PRC. Significant judgment is required in determining the worldwide provision for income taxes and recording the related income tax assets and liabilities.

To assess whether it is more likely than not that deferred tax assets will be realized and whether a valuation allowance needs to be recorded against them, we consider the following four sources of taxable income for each tax jurisdiction: (a) future reversals of existing taxable temporary differences, (b) projected future earnings, (c) taxable income in carryback years, and (d) tax planning strategies.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rate could be adversely affected by earnings being lower than anticipated in countries where it has lower statutory rates and higher than anticipated in countries where it has higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of deferred tax assets and liabilities, by changes in the measurement of certain tax positions, by changes affecting transfer pricing or by changes in the relevant laws, regulations, principles and interpretations.

The Company’s operating subsidiaries in China are subject to the income tax laws of the PRC. No significant income was generated outside the PRC for the years ended December 31, 2025 and 2024.

Contingencies

We are involved in legal proceedings regarding contractual and employment relationships and a variety of other matters. We record contingent liabilities when a loss is assessed to be probable and its amount is reasonably estimable. If it is reasonably possible that a material loss could occur through ongoing litigation, we provide disclosure in the footnotes to our financial statements. Assessing probability of loss and estimating the amount of probable losses requires analysis of multiple factors, including in some cases judgments about the potential actions of third-party claimants and courts. Should we experience adverse court judgments or should negotiated outcomes differ to our expectations with respect to such ongoing litigation it could have a material adverse effect on our results of operations, financial position, and cash flows.

Recently Issued Accounting Standards

See Note 2 to our consolidated financial statements for the year ended December 31, 2025 and 2024 included elsewhere in this Report for a description of recent accounting pronouncements applicable to our consolidated financial statements.