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;
● No longer considered as “valuable securities”, as detailed below;
● Limited news and analytical coverage; and
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
18
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:
● Changes in our projected operating and financial performance;
● We or our competitors announce the launch of new products and services;
● Our ability to continuously innovate and promptly bring products to market;
● Negative publicity about us, our products or our industry;
● Changes in senior management or key personnel;
● Overall economic, political, regulatory, industry and market conditions;
● Natural disasters or major catastrophic events; and
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.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Administration
The Board of Directors of
our company is responsible for overseeing cybersecurity-related risks. The Board shall: (i) monitor the disclosure of cybersecurity matters
in current or periodic reports; (ii) review quarterly updates on significant cybersecurity incidents or major threat risks submitted by
management, along with any resulting disclosure issues; and (iii) examine cybersecurity disclosures in the annual report (Form 10-K) filed
by management.
At the managerial level,
our cybersecurity team is responsible for monitoring and mitigating cybersecurity risks, including those associated with third-party service
providers. The team investigates and responds to any suspicious activities within our data environment. Upon identifying significant cybersecurity
threats or incidents, our cybersecurity team reports them to the head of the Information Technology and Cybersecurity Department, who
assumes responsibility for managing risks related to such major cybersecurity incidents and oversees preventive, mitigation, and remediation
measures. The head of our IT and Cybersecurity functions must report the status of significant cybersecurity threats, major cybersecurity
incidents, or other relevant risks to the Board of Directors and, when necessary, discuss disclosure matters with the Board regarding
critical cybersecurity threats or incidents. The head of IT and Cybersecurity functions possesses extensive experience in cybersecurity,
with specialized expertise in cybersecurity risk management and compliance.
In the event of a cybersecurity
incident, our cybersecurity team will immediately assemble personnel to conduct an internal assessment. If further analysis determines
that the incident may constitute a major cybersecurity breach, our cybersecurity team will promptly report the incident and evaluation
results to the heads of our IT and cybersecurity departments, and engage external legal counsel for consultation when appropriate. Prior
to public disclosure, our management team must prepare disclosure materials regarding the cybersecurity incident for review and approval
by the board of directors.
Risk Management and Strategies
We have implemented comprehensive
procedures to ensure effectiveness in cybersecurity management, policies, governance, and reporting of cybersecurity risks. Additionally,
we have integrated cybersecurity risk management into our overall enterprise risk management system.
We have established a comprehensive
cybersecurity threat defense system to address both internal and external threats. This system covers multiple layers including network
security, host security, and application security, integrating systematic capabilities such as threat defense, monitoring, analysis, response,
deception, and countermeasures. We are committed to managing cybersecurity risks and protecting sensitive information through various
approaches, including technical safeguards, procedural requirements, a robust program for monitoring our enterprise networks and applications,
continuous testing of internal and external security vendors across all aspects of security posture, a well-established incident response
program, and regular employee training. Our cybersecurity team conducts regular monitoring of application operations, platform status,
and infrastructure health to enable rapid response to potential issues, including emerging cybersecurity threats.
As of the reporting date
of this annual report, we have not experienced any major cybersecurity incidents, nor have we identified any significant cybersecurity
threats that have affected or could reasonably affect the Company, its business strategies, operational results, or financial condition.
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Governance
Our cybersecurity risk assessment
and management processes are implemented and maintained by a third-party service provider reporting to the Company’s management. Management
is also responsible for integrating cybersecurity considerations into our overall risk management strategy, communicating key priorities
to employees, approving budgets, helping to prepare for cybersecurity incidents, approving cybersecurity processes, reviewing security
assessments and making required disclosures. Management participates in cybersecurity incident response efforts by being a member of the
incident response team and helping direct our response to cybersecurity incidents.
Our board of directors addresses
our cybersecurity risk management as part of its general oversight function. The Audit Committee of the board of directors is responsible
for overseeing our cybersecurity risk management processes, including oversight and mitigation of risks from cybersecurity threats.
ITEM 2. PROPERTIES
One of our primary office
locations is situated at 2506 Lake Towuka Post Office Box, California, with postal code 91610, and telephone number (310) 290-5383. The
cost of this office space is provided by our sponsor Bengochea SPAC Sponsors I LLC as part of the $12,000 monthly office space and related
service fees we pay to them.
In addition, we have offices
in Zhuhai, Guangdong and Daqing, Heilongjiang, China, and have established a production base in Duerbote Mongolian Autonomous County,
Daqing City, Heilongjiang Province.
Property Name Address Area Use Own/Lease Lease Expiration
We believe our existing facilities
are generally adequate to meet current needs, but anticipate that additional space will be sought in response to future growth requirements.
ITEM 3. LEGAL PROCEEDINGS
We have a limited operating
history. Currently, we are not involved in, nor are we aware of any threats of, legal or administrative proceedings that, in management’s
opinion, would have a material adverse effect on our business, financial condition, cash flow, or operating results. However, as our business
grows, we may from time to time become involved in legal or administrative proceedings in the ordinary course of business, including those
related to intellectual property infringement, third-party license violations, contract disputes, and labor or employment claims. Any
such proceedings, if significant, could have a material adverse effect on our business, financial condition, cash flow, or operating results.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Our Common Stock is listed
on the Nasdaq Stock Market LLC (the “Nasdaq”) under the symbol “UCFI”. On October 1, 2025, the day on which the
Trading Halt occurred, the intraday trading price of our Common Stock was $5.51.
Stockholders of Record
As of March 31, 2026, we have issued and held a total of 52,234,983 ordinary
shares (including shares held by our entity), which are held by eleven (11) registered holders. The number of registered holders is determined
based on records of our transfer agents and excludes beneficial owners holding ordinary shares under the names of securities brokers,
dealers, or registered settlement institutions.
Dividend Policy
As of the reporting date of
this annual report, we have neither declared nor paid cash dividends, nor have we made any distributions. We do not intend to announce
dividends or make distributions in the near future. Any decision regarding the payment of dividends on our common stock will be made solely
by our Board of Directors and shall be governed by applicable laws, depending on our financial condition, operating results, capital requirements,
overall business performance, and other factors deemed relevant by the Board.
As a holding company, we may
rely on dividends from subsidiaries to meet cash needs, including any dividends paid to their shareholders. Our subsidiaries’ ability
to pay dividends or make distributions to us may be restricted by applicable laws and regulations, their own liabilities, and the instruments
used to manage such liabilities. The primary limitations on our mainland China subsidiaries’ ability to pay dividends to overseas entities
include: (i) Mainland China subsidiaries may only pay dividends from their accumulated after-tax profits after meeting statutory conditions
and procedures (if any) determined under mainland China accounting standards and regulations; (ii) Each mainland China subsidiary must
annually (if any) set aside at least 10% of its after-tax profits to replenish specific reserve funds until the cumulative amount reaches
50% of its registered capital; (iii) Mainland China subsidiaries must complete specific procedures related to foreign exchange controls
before paying foreign currency dividends; and (iv) When paying dividends, mainland China subsidiaries must withhold taxes at a rate not
exceeding 10%. Under British Virgin Islands law, although there are no foreign exchange control regulations or currency restrictions,
we are still subject to certain limitations on dividend distributions to shareholders under British Virgin Islands law, namely that dividends
can only be paid from profit or equity premium accounts, and provided that, in no event, dividend payments would result in our inability
to repay maturing debts in daily operations after the dividend payment date.
Warrant Holders of Record
As of March 31, 2026,
we have issued and held a total of 9,357,000 shares of warrants (including shares held by our entity), which are held by fifteen
(15) registered holders. The number of registered holders is determined based on records of our transfer agents and excludes
beneficial owners holding warrant shares under the names of securities brokers, dealers, or registered settlement institutions.
Unregistered Sales of Equity Securities; Use
of Proceeds from Registered Offerings
None.
Purchases of Equity Securities by the Issuer
and Affiliated Purchasers
None.
ITEM 6. RESERVED
None.
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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