{"url_path":"/sec/cdtg/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1793895/0001731122-26-000740-index.html","accession_number":"0001731122-26-000740","cik":"0001793895","ticker":"CDTG","issuer_name":"CDT Environmental Technology Investment Holdings Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1793895/0001731122-26-000740-index.html","primary_entity_key":"0001793895","primary_entity_name":"CDT Environmental Technology Investment Holdings Ltd"},"word_count":23684,"has_tables":true,"body_markdown":"**ITEM 3. KEY INFORMATION**\n\n \n\n**A. [Reserved]**\n\n \n\n**B. Capitalization and Indebtedness**\n\n \n\nNot applicable.\n\n \n\n**C. Reasons for the Offer and Use of Proceeds**\n\n \n\nNot applicable.\n\n \n\n**D. Risk Factors**\n\n \n\n**Risks Related to Our Business**\n\n \n\n**We have identified conditions and events that\nraise substantial doubt about our ability to continue as a going concern.**\n\n** **\n\n** **In\nconnection with our assessment of going concern considerations, management has identified conditions that raise substantial doubt about\nthe Company’s ability to continue as a going concern. As of December 31, 2025, we incurred a net loss of $10,366,087 and had\nnegative cash flows from operating activities of $1,490,957. These factors may raise a doubt regarding the Company’s ability to\ncontinue as a going concern for at least 12 months from the date when these financial statements are available to be filed with the SEC.\n\nThe Company\nengages in installing sewage treatment systems and providing sewage treatment services in both urban and rural areas. Our\nbusiness is capital intensive. Working capital was approximately $26.41 million as of December 31, 2025, as compared to approximately\n$26.0 million as of December 31, 2024. As of December 31, 2025, cash on-hand balance was approximately $66,686. In addition to cash on-hand,\nthe Company also has other current assets mainly composed of accounts receivable and contract assets. The Company had accounts receivable,\nnet, of approximately $44.13 million, and contract assets – current of approximately $39.31 million as of December 31, 2025, all\nof which are short-term in nature and should be collected and utilized within the Company’s operating cycle to be used to support\nthe Company’s working capital needs.\n\n Although\nthe Company believes that it can realize its current assets in the normal course of business, its ability to repay its current obligations\nwill depend on the future realization of its current assets. Management has considered historical experience, the economic environment,\ntrends in the sewage treatment industry, and the expected collectability of accounts receivable and contract assets as of December 31,\n2025. The Company expects to realize these outstanding balances, net of allowance within the normal operating cycle of twelve-months.\nAs of the date of the filing of this Annual Report on Form 20-F, the Company has received approximately $1.90 million of its accounts\nreceivable. If the Company is unable to realize its current assets within the normal twelve-month operating cycle, the Company may have\nto consider supplementing its available sources of funds through the following:\n\n \n\n \n●\nFinancing\nfrom the Company’s officers/shareholders; and\n\n \n\n \n●\nOther\navailable sources of financing from PRC banks, other financial institutions and related parties, given the Company’s credit\nhistory.\n\n \n\n1\n\n \n\n \n\nIn view of these\nmatters, continuation as a going concern is dependent upon our continued operations, which in turn is dependent upon our ability to meet\nour financial requirements and the success of our future operations. The financial statements do not include any adjustments to the amount\nor the classification of assets and liabilities that may be necessary should we not continue as a going concern. If we are unable to continue\nas a going concern, we may be forced to liquidate our assets, potentially at less than their carrying value, which could result in a substantial\nor complete loss of investor capital. Future SEC filings may also contain statements expressing doubt about our ability to continue as\na going concern, which could deter investors or other financing sources from providing funding on favorable terms, if at all.\n\n \n\n**We have a significant amount\nof accounts receivable, which could become uncollectible.**\n\n** **\n\nAs of April 30, 2026, we have collected\napproximately $1.9 million, which represented 2.8%, of our December 31, 2025 accounts receivable balance of approximately $44.1 million\nor 4.3% excluding the allowance for credit losses. Additionally, as of April 30, 2026, we had collected approximately 0.0% of the outstanding\nbalances from our five major customers as of December 31, 2025. All five of our major customers are projects funded by local governments\nand are awaiting inspection reports and payment approvals. Based on our historical collection patterns, we believe the collectability\nof our accounts receivable is probable. Our historical collection rates for progress billings related to sewage treatment systems revenues\nwere 99.3%, 99.8%, 98.4%, 72.8%, 75.6%, 52.4%, 9.9% and 3.1% for the years 2018, 2019, 2020, 2021, 2022, 2023, 2024, and 2025, respectively.\nThe liquidity of our operations highly depends on the timing of payments from our major customers. Any delay in payment from them could\nmaterially impact our operations and liquidity.\n\n  \n\n**We may require additional\nfinancing in the future and our operations could be curtailed if we are unable to obtain required additional financing when needed.**\n\n \n\nIn addition to the net proceeds\nraised in our initial public offering and subsequent offerings, we may need to obtain additional debt or equity financing to fund future\ncapital expenditures. We anticipate seeking additional financing in the immediate future. Any additional equity financing may result in\ndilution to the holders of our outstanding Class A ordinary shares. Additional debt financing may impose affirmative and negative covenants\nthat restrict our freedom to operate our business. We cannot guaranty that we will be able to obtain additional financing on terms that\nare acceptable to us, or any financing at all, and the failure to obtain sufficient financing could adversely affect our business operations.\n\n \n\nWe anticipate that our current\ncash resources, including the approximately $6.3 million in net proceeds from our offering completed in April 2026, will be sufficient\nfor us to execute our current business plan for at least twelve months from the date these financial statements are issued. While the\nnet proceeds from this offering were originally intended to fund our new energy initiatives, they are currently being applied to support\nour ongoing operations. We will need to obtain additional debt or equity financing to fund future capital expenditures, particularly in\nconnection with our planned new energy projects. We believe that securing additional sources of financing is possible, but there is no\nassurance of our ability to secure such financing on terms acceptable to us, or at all. A failure to obtain additional financing could\nprevent us from making necessary expenditures for advancement and growth, including the development of our new energy business, and our\noperations could be curtailed. If we raise additional financing by selling equity or convertible debt securities, the relative equity\nownership of our existing investors could be diluted, or the new investors could obtain terms more favorable than previous investors.\nIf we raise additional funds through debt financing, we could incur significant borrowing costs and be subject to adverse consequences\nin the event of a default. Any equity capital raised may result in substantial dilution in the number of outstanding Class A ordinary\nshares.\n\n \n\n**We have a limited operating\nhistory. There is no assurance that our future operations will be profitable operations. If we cannot generate sufficient revenues to\noperate profitably, we may suspend or cease operations.**\n\n \n\nGiven our limited operating history,\nthere can be no assurance that we can build our business such that we can earn a significant profit or any profit at all. The future of\nour business will depend upon our ability to obtain and retain customers and when needed, obtain sufficient financing and support from\ncreditors, while we strive to achieve and maintain profitable operations. The likelihood of success must be considered in light of the\nproblems, expenses, difficulties, complications and delays encountered in connection with the operations that we undertake. There is no\nhistory upon which to base any assumption that our business will prove to be successful, and there is significant risk that we will not\nbe able to generate the sales volumes and revenues necessary to achieve profitable operations. To the extent that we cannot achieve our\nplans and generate revenues which exceed expenses on a consistent basis, our business, results of operations, financial condition and\nprospects will be materially adversely affected.\n\n \n\n2\n\n \n\n \n\nOur management team has limited\npublic company experience. We have never operated as a public company in the United States and several of our senior management positions\nare currently held by employees who have been with us for a short period of time. Our entire management team, as well as other Company\npersonnel, will need to devote substantial time to compliance, and may not effectively or efficiently manage our transition into a public\ncompany. If we are unable to effectively comply with the regulations applicable to public companies or if we are unable to produce accurate\nand timely financial statements, which may result in material misstatements in our financial statements or possible restatement of financial\nresults, our stock price may be materially adversely affected, and we may be unable to maintain compliance with the listing requirements\nof Nasdaq. Any such failures could also result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of\ninvestor confidence, delisting of our securities, harm to our reputation and diversion of financial and management resources from the\noperation of our business, any of which could materially adversely affect our business, financial condition, results of operations and\ngrowth prospects. Additionally, the failure of a key employee to perform in his or her current position could result in our inability\nto continue to grow our business or to implement our business strategy.\n\n \n\n**Future sales of a substantial\nnumber of our Class A ordinary shares by our existing shareholders in addition to the shares offered by this prospectus could cause our\nstock price to decline.**\n\n \n\nAs of April 30, 2026, there were\n75,525,000 of our Class A ordinary shares outstanding. On February 13, 2025, the Board of Directors of the Company adopted the 2025 Equity\nIncentive Plan (the “2025 Plan”), which authorizes the issuance of up to 1,500,000 Class A ordinary shares. In connection\nwith the 2025 Plan, we filed a registration statement on Form S-8 with the SEC on February 14, 2025. As of March 28, 2025, all 1,500,000\nClass A ordinary shares registered under the Form S-8 have been issued. Subject to any applicable lock-up agreements, pursuant to Rule\n144 under the Securities Act as in effect on the date hereof, or Rule 144, a person who holds restricted Class A ordinary shares (assuming\nthere are any restricted shares) and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially\nowned these restricted shares for at least six months, would be entitled to sell an unlimited number of Class A ordinary shares, provided\ncurrent public information about us is available. In addition, under Rule 144, a person who holds restricted shares in us and is not one\nof our affiliates at any time during the three months preceding a sale, and who has beneficially owned these restricted shares for at\nleast one year, would be entitled to sell an unlimited number of shares without regard to whether current public information about us\nis available. It is conceivable that following the holding period, many shareholders may wish to sell some or all of their shares. If\nour shareholders sell substantial amounts of our Class A ordinary shares in the public market at the same time, the market price of our\nClass A ordinary shares could decrease significantly due to an imbalance in the supply and demand of our Class A ordinary shares. Even\nif they do not actually sell the Class A ordinary shares, the perception in the public market that our shareholders might sell significant\nClass A ordinary shares could also depress the market price of our Class A ordinary shares.\n\n \n\n**We operate in highly competitive\nmarkets and the size and resources of many of our competitors may allow them to compete more effectively than we can, preventing us from\nachieving profitability.**\n\n \n\nThe markets we compete in are highly\ncompetitive. Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow our market\nshare, any of which could substantially harm our business and results of operations. We compete for customers primarily on the basis of\nour brand name, price and the range of products and services that we offer. Across our business, we face competitors who are constantly\nseeking ideas which will appeal to customers and introducing new products that compete with our products. Many of our competitors have\nsignificant competitive advantages, including longer operating histories, larger and broader customer bases, less-costly production, more\nestablished relationships with a broader set of suppliers and customers, greater brand recognition and greater financial, research and\ndevelopment, marketing, distribution and other resources than we do. We cannot assure that we will be able to successfully compete against\nnew or existing competitors. If we fail to maintain our reputation and competitiveness, customers demand for our products and projects\ncould decline.\n\n \n\n3\n\n \n\n \n\nIn addition to existing competitors,\nnew participants with a popular product idea could gain access to customers and become a significant source of competition in a short\nperiod of time. These existing and new competitors may be able to respond more rapidly than us to changes in customer preferences. Our\ncompetitors’ products may achieve greater market acceptance than our products and potentially reduce demand for our products, lower\nour revenues and lower our profitability.\n\n \n\n**Any decline in the availability\nor increase in the cost of raw materials could materially impact our earnings.**\n\n \n\nOur products and project installation\noperations depend heavily on the ready availability of various raw materials. The availability of raw materials may decline, and their\nprices may fluctuate greatly. If our suppliers are unable or unwilling to provide us with raw materials on terms favorable to us, we may\nbe unable to produce certain products. The inability to produce certain products or installation projects for customers could result in\na decrease in profit and damage to our reputation. In the event our raw material costs increase, we may not be able to pass these higher\ncosts on to our customers in full or at all.\n\n \n\n**Our revenue will decrease\nif the industries in which we and our customers operate experience a protracted slowdown.**\n\n \n\nWe are subject to general changes\nin economic conditions impacting the economy. If the industries in which we and our customers operate do not grow or if there is a contraction\nin these industries, including if government spending is affected, demand for our business will decrease. Demand for our business is typically\naffected by a number of overarching economic factors, including interest rates, environmental laws and regulations, government spending,\nincluding the availability and magnitude of private and governmental investment in infrastructure projects and the health of the overall\neconomy. If there is a decline in economic activity in China and the markets in which we operate or a protracted slowdown in industries\nupon which we rely for our sales, demand for our projects, products and our revenue will likewise decrease which would have a materially\nadverse effect on our business.\n\n \n\n**Our business depends in large\npart on the success of our vendors and outsourcers, and our brand and reputation may be harmed by actions taken by third parties that\nare outside of our control. In addition, any material failure, inadequacy, or interruption resulting from such vendors or outsourcers\ncould harm our ability to effectively operate our business.**\n\n \n\nWe rely on vendor and outsourcing\nrelationships with third parties for services and systems including manufacturing and logistics. We outsource manufacturing of our integrated\nrural sewage treatment system primarily to three vendors in the Jiangsu and Fujian provinces. Any shortcoming of a vendor or an outsourcer,\nparticularly an issue affecting the quality of these services or systems, may be attributed by customers to us, thus damaging our reputation\nand brand value, and potentially affecting our results of operations. In addition, problems with transitioning these services and systems\nto or operating failures with these vendors and outsourcers could cause delays in product sales, and reduce efficiency of our operations,\nand significant capital investments could be required to remediate the problem.\n\n \n\n4\n\n \n\n \n\n**We primarily rely on a limited\nnumber of vendors, and the loss of any such vendor could harm our business.**\n\n \n\nFor the year ended December 31,\n2025, three vendors accounted for 26.0%, 25.2%, and 16.6%, respectively of our total purchases, and two vendors accounted for 24.9% and\n14.5%, respectively, of our accounts payable. For the year ended December 31, 2024, three vendors accounted for 31.1%, 14.8%, and 14.7%,\nrespectively of our total purchases, and three vendors accounted for 17.8%, 15.2%, and 11.2%, respectively, of our accounts payable. For\nthe year ended December 31, 2023, one vendor accounted for 27.3% of our total purchases, and no vendors accounted for more than 10.0%\nof our accounts payable. We generally do not have long term agreements or arrangements with our vendors. Our decision in choosing vendors\nis typically based on the compressive consideration of multiple factors including, among others, pricing, location, delivery terms and\nline of credit. Our vendors generally provide us with standard parts used in sewage treatment and integrated sewage treatment equipment.\nAny difficulty in replacing such vendors could negatively affect our performance. If we are prevented or delayed in obtaining products,\nor components for products, due to political, civil, labor or other factors beyond our control that affect our vendors, including natural\ndisasters or pandemics, our operations may be substantially disrupted, potentially for a significant period of time. Such delays could\nsignificantly reduce our revenues and profitability and harm our business while alternative sources of supply are secured.\n\n \n\n**Our dependence on a limited\nnumber of customers could adversely affect our business and results of operations.**\n\n \n\nOne or a few customers have in\nthe past, and may in the future, represent a substantial portion of our total revenues in any one year or over a period of several years.\nFor example, for the year ended December 31, 2025, three customers accounted for 46.6%, 20.3%, and 12.1%, respectively, of our total revenues,\nand five customers accounted for 17.4%, 15.3%, 14.6%, 11.9% and 10.9%, respectively, of our accounts receivable. For the year ended December\n31, 2024, five customers accounted for 22.1%, 21.1%, 15.9%, 13.7% and 12.2%, respectively, of our total revenues, and four customers accounted\nfor 25.0%, 16.3%, 14.3%, and 13.1%, respectively, of our accounts receivable. For the year ended December 31, 2023, two customers accounted\nfor 23.4% and 10.2%, respectively, of our total revenues, and two customers accounted for 13.0% and 12.3%, respectively, of our accounts\nreceivable.\n\n \n\nOur accounts receivable increased\nby approximately $12.1 million during the year ended December 31, 2025. The increase was primarily due to a longer collection cycle for\nthe year ended December 31, 2025, driven by delays in the government billing approval process as a result of the ongoing economic downturn\nin the PRC. A significant change in the liquidity or financial position of any of our significant customers could have a material impact\non the collectability of our accounts receivable and our future operating results. The liquidity of our operations highly depends on the\ntiming of payments from our major customers, and should any delay of payment from them occur, our operations and liquidity may be impacted.\nAny decreased collectability of accounts receivable, bankruptcy, or early termination of agreements due to deterioration in economic conditions\ncould also negatively impact our results of operations. \n\n \n\nFor the fiscal\nyear ended December 31, 2025, 46.6% of our total revenue was derived from the Xiamen Xinglin Pipeline Network Renovation Project. We expect\nthis percentage to decline following the completion of this project. We entered into an agreement for this project in July 2025, with\na total contract value of RMB 87 million (approximately US$12.1 million). We commenced preliminary construction and material procurement\nin August 2025, and we expect to complete the entire project by December 2026. The key terms of our agreement for this project include\nproject name and location, construction period, price and payment terms, quality, safety and construction requirements, and default provisions.\n\n \n\nFor the fiscal\nyear ended December 31, 2025, 20.3% of our total revenue was derived from Phase VI of the Jimei Guankou Project. We entered into an agreement\nfor this project in February 2025, with a total contract value of RMB 30 million (approximately US$4.17 million). We expect to complete\nthis project by August 2026. The key terms of our agreement for this project include project name and location, construction period, price\nand payment terms, quality, safety and construction requirements, and default provisions.\n\n \n\nFor the fiscal year ended December 31, 2025, 12.1% of\nour total revenue was derived from the Xinjiang Project. We expect this percentage to decline following the completion of this project.\nWe entered into an agreement for the Xinjiang Project in August 2024, with a total contract value of RMB 66 million (approximately US$9.18\nmillion). We commenced preliminary construction and material procurement in August 2024, and the project was completed in December 2025.\nThe key terms of our agreement for the Xinjiang Project include project name and location, construction period, price and payment terms,\nquality, safety and construction requirements, and default provisions.\n\n \n\n5\n\n \n\n \n\n**We face substantial inventory\nrisk, which if such risk is not addressed could have a material adverse effect on our business.**\n\n \n\nWe must order materials for our\nproducts and projects and build inventory in advance of production. We typically acquire materials through a combination of purchase orders,\nsupplier contracts and open orders, in each case based on projected demand.\n\n \n\nAs our markets are competitive\nand subject to technology and price changes, there is a risk that we will forecast incorrectly and order or produce incorrect amounts\nof products or not fully utilize purchase commitments. If we were unsuccessful in accurately quantifying appropriate levels of inventory,\nour business, financial condition and results of operation may be materially and adversely affected.\n\n \n\n**Any disruption in the supply\nchain of raw materials and our products could adversely impact our ability to produce and deliver products which could have a material\nadverse effect on our business.**\n\n \n\nIn order to optimize our product\nmanufacturing, we must manage our supply chain for raw materials and delivery of our products. Supply chain fragmentation and local protectionism\nwithin China further complicates supply chain disruption risks. Local administrative bodies and physical infrastructure built to protect\nlocal interests may pose transportation challenges for raw material transportation as well as product delivery. In addition, profitability\nand volume could be negatively impacted by limitations inherent within the supply chain, including competitive, governmental, legal, natural\ndisasters, and other events that could impact both supply and price. Any of these occurrences could cause significant disruptions to our\nsupply chain, manufacturing capability and distribution system that could adversely impact our ability to produce and deliver products.\nIf we were unsuccessful in maintaining efficient operation of our supply chain, our business, financial condition and results of operation\nmay be materially and adversely affected.\n\n \n\n**Our return on investment\nin client projects may be different from our projections.**\n\n \n\nOur return on investment in client\nprojects typically takes some time to materialize. At the initial stages of project investment and construction, the depreciation of fixed\nassets may negatively affect our operating results. In addition, the projects may be subject to changes in market conditions during the\ninstallation and implementation phases. Changes in industry policy, the progress of the projects, project management, raw materials supply,\nmarket conditions and other variables may affect the profitability and the time in which we profit on projects, which may be different\nfrom our initial forecast, thus affecting the actual return on investment of the projects.\n\n \n\n**Issues or defects with products\nmay lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products, or regulatory\nactions by governmental authorities that could divert resources, affect business operations, decrease sales, increase costs, and put us\nat a competitive disadvantage, any of which could have a significant adverse effect on our financial condition.**\n\n \n\n6\n\n \n\n \n\nWe may experience issues or defects\nwith products that may lead to product liability, personal injury or property damage claims, recalls, withdrawals, replacements of products,\nor regulatory actions by governmental authorities. Any of these activities could result in increased governmental scrutiny, harm to our\nreputation, reduced demand by customers for our products, decreased willingness by our service providers to provide support for those\nproducts, absence or increased cost of insurance if insurance is available, or additional safety and testing requirements. Such results\ncould divert development and management resources, adversely affect our business operations, decrease sales, increase legal fees and other\ncosts, and put us at a competitive disadvantage compared to other companies not affected by similar issues with products, any of which\ncould have a significant adverse effect on our financial condition and results of operations.\n\n \n\n**Our future growth depends\nin part on new products and new technology innovation, and failure to invent and innovate could adversely impact our business prospects.**\n\n \n\nOur future growth depends in part\non maintaining our current products in new and existing markets, as well as our ability to develop new products and technologies to serve\nsuch markets. To the extent that competitors develop competitive products and technologies, or new products or technologies that achieve\nhigher customer satisfaction, our business prospects could be adversely impacted. In addition, regulatory approvals for new products or\ntechnologies may be required, these approvals may not be obtained in a timely or cost effective manner, adversely impacting our business\nprospects.\n\n \n\n**Changes in demand for our\nproducts and business relationships with key customers and vendors may negatively affect operating results.**\n\n \n\nTo achieve our objectives, we must\ndevelop and sell products that are subject to the demands of our customers. This is dependent on several factors, including managing and\nmaintaining relationships with key customers, responding to the rapid pace of technological change and obsolescence, which may require\nincreased investment by us or result in greater pressure to commercialize developments rapidly or at prices that may not fully recover\nthe associated investment, and the effect on demand resulting from customers’ research and development, capital expenditure plans\nand capacity utilization. If we are unable to keep up with our customers’ demands, our sales, earnings and operating results may\nbe negatively affected.\n\n \n\n**We may be unable to deliver\nour backlog on time, which could affect future sales and profitability and our relationships with customers.**\n\n \n\nOur ability to meet customer delivery\nschedules for backlog is dependent on a number of factors including sufficient manufacturing capacity, adequate supply channel access\nto raw materials and other inventory required for production, an adequately trained and capable workforce, engineering expertise for certain\nprojects and appropriate planning and scheduling of manufacturing resources. Failure to deliver in accordance with customer expectations\ncould subject us to contract cancellations and financial penalties, and may result in damage to existing customer relationships and could\nhave a material adverse effect on our business, financial condition and results of operations.\n\n \n\n**Our future success depends\nin part on our ability to retain key executives and to attract, retain and motivate qualified personnel.**\n\n \n\nWe are highly dependent on the\nprincipal members of our executive team listed in “Item 6. Directors, Senior Management and Employees” located elsewhere in\nthis annual report, the loss of whose services may adversely impact the achievement of our objectives. Recruiting and retaining other\nqualified employees for our business, including technical personnel, will also be critical to our success. Competition for skilled personnel\nis intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition\namong numerous companies for individuals with similar skill sets. The inability to recruit or loss of the services of any executive or\nkey employee could adversely affect our business.\n\n \n\n7\n\n \n\n \n\n**We will need to expand our\norganization, and we may experience difficulties in managing this growth, which could disrupt our operations.**\n\n \n\nAs of December 31, 2025, we had\n68 employees, of whom 64 were full-time employees, 4 were part-time employees  and all were located in China. As our Company matures,\nwe expect to expand our employee base. In addition, we intend to grow by expanding our business, increasing market penetration of our\nexisting products, developing new products and increasing our targeting of certain markets in China. Future growth would impose significant\nadditional responsibilities on our management, including the need to develop and improve our existing administrative and operational systems\nand our financial and management controls and to identify, recruit, maintain, motivate, train, manage and integrate additional employees,\nconsultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day\nactivities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion\nof our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities,\nloss of employees and reduced productivity among remaining employees. Future growth could require significant capital expenditures and\nmay divert financial resources from other projects, such as the development of our existing or future product candidates. If our management\nis unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and grow revenue could\nbe reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to compete effectively\nwill depend, in part, on our ability to effectively manage any future growth.\n\n \n\n**Failure of beneficial owners\nof our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits,\nrestrict our overseas and cross-border investment activities and subject us to liability under PRC law.**\n\n \n\nThe SAFE Circular 37 requires PRC\nresidents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their direct establishment\nor indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally\nowned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special\npurpose vehicle”, or SPV. The term “control” under SAFE Circular 37 is broadly defined as the operation rights, beneficiary\nrights or decision-making rights acquired by the PRC residents in the offshore SPVs by such means as acquisition, trust, proxy, voting\nrights, repurchase, convertible bonds or other arrangements. SAFE Circular 37 further requires amendment to the registration in the event\nof any significant changes with respect to the SPV, such as increase or decrease of capital contributed by PRC individuals, share transfer\nor exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a SPV fails to fulfill\nthe required SAFE registration, the PRC subsidiaries of that SPV may be prohibited from making profit distributions to the offshore parent\nand from carrying out subsequent cross-border foreign exchange activities, and the SPV may be restricted in its ability to contribute\nadditional capital into its PRC subsidiaries. Further, failure to comply with the various SAFE registration requirements described above\ncould result in liability under PRC law for foreign exchange evasion.\n\n \n\nThese regulations apply to our\ndirect and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the\nfuture if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different views and procedures\non the application and implementation of SAFE regulations, and there remains uncertainty with respect to its implementation. We cannot\nassure you that these direct or indirect shareholders of our company who are PRC residents will be able to successfully update the registration\nof their direct and indirect equity interest as required in the future. If they fail to update the registration, our PRC subsidiaries\ncould be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange\nactivities, including restricting our PRC subsidiaries’ ability to distribute dividends to, or obtain loans denominated in foreign\ncurrencies from, our company, or prevent us from contributing additional capital into our PRC subsidiaries. As a result, our business\noperations and our ability to make distributions to you could be materially and adversely affected. In addition, non-U.S. shareholders\nmay experience unfavorable tax consequences if such non-U.S. shareholders are determined to be a resident enterprise for PRC tax purposes.\nSee “Item 4. Information on the Company-Regulation-Legal Regulations on Tax in the PRC” and “Item 10. Additional Information-E.\nTaxation- PRC Taxation” for further information.\n\n \n\n8\n\n \n\n \n\n**Failure to make adequate\ncontributions to various employee benefits plans as required by PRC regulations may subject us to penalties.**\n\n \n\nCompanies operating in China are\nrequired to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and\nother welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including\nbonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where they\noperate their businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in\nChina given the different levels of economic development in different locations. If we fail to make contributions to various employee\nbenefit plans and to comply with applicable PRC labor-related laws in the future, we may be subject to late payment penalties. We may\nbe required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines\nin relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.\n\n \n\n**We do not have business insurance\ncoverage. Any future business liability, disruption or litigation we experience might divert management focus from our business and could\nsignificantly impact our financial results.**\n\n \n\nAvailability of business insurance\nproducts and coverage in China is limited, and most such products are expensive in relation to the coverage offered. We have determined\nthat the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurance on commercially reasonable\nterms make it impractical for us to maintain such insurance. As a result, we do not have any business liability, disruption or litigation\ninsurance coverage for our operations in China. Accordingly, a business disruption, litigation or natural disaster may result in substantial\ncosts and divert management’s attention from our business, which would have an adverse effect on our results of operations and financial\ncondition.\n\n \n\n**Risks Related to Intellectual\nProperty**\n\n \n\n**If we are not able to adequately\nprotect our proprietary intellectual property and information, and protect against third party claims that we are infringing on their\nintellectual property rights, our results of operations could be adversely affected.**\n\n \n\nThe value of our business depends\nin part on our ability to protect our intellectual property and information, including our patents, trade secrets, and rights under agreements\nwith third parties, in China and around the world, as well as our customer, employee, and customer data. Third parties may try to challenge\nour ownership of our intellectual property in China and around the world. Further, our business is subject to the risk of third parties\ncounterfeiting our products or infringing on our intellectual property rights. The steps we have taken may not prevent unauthorized use\nof our intellectual property. We may need to resort to litigation to protect our intellectual property rights, which could result in substantial\ncosts and diversion of resources. If we fail to protect our proprietary intellectual property and information, including with respect\nto any successful challenge to our ownership of intellectual property or material infringements of our intellectual property, this failure\ncould have a significant adverse effect on our business, financial condition, and results of operations.\n\n \n\n9\n\n \n\n \n\n**If we are unable to adequately\nprotect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive\nposition could be harmed or we could be required to incur significant expenses to enforce or defend our rights.**\n\n \n\nOur commercial success will depend\nin part on our success in obtaining and maintaining issued patents, and other intellectual property rights in China and elsewhere and\nprotecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors\nmay be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage\nwe may have, which could harm our business and ability to achieve profitability. The core of our business is our proprietary systems and\ntechnology, together with our experience and expertise in waste treatment services, particularly in rural sewage treatment and septic\ntank treatment. As of December 31, 2025, we had 2 invention patents, 36 utility model patents and 3 trademarks. We are continually working\nto upgrade our quick separation technology and septic tank treatment systems through independent research and development and partnerships\nwith third-party institutions to further develop our mobile septic tank treatment system.\n\n \n\nWe cannot provide any assurances\nthat any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with\na scope sufficient to protect our products, any additional features we develop for our products or any new products. Other parties may\nhave developed technologies that may be related or competitive to our system, may have filed or may file patent applications and may have\nreceived or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices\nor by claiming subject matter that could dominate our patent position. Our patent position may involve complex legal and factual questions,\nand, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents,\nif issued, may be challenged, deemed unenforceable, invalidated or circumvented. Proceedings challenging our patents could result in either\nloss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or\npatent application. In addition, such proceedings may be costly. Thus, any patents that we may own may not provide any protection against\ncompetitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought\nby us, which in turn could affect our ability to commercialize our products.\n\n \n\nThough an issued patent is presumed\nvalid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate\nproprietary protection or competitive advantages against competitors with similar products. Competitors could purchase our products and\nattempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual\nproperty rights, design around our patents, or develop and obtain patent protection for more effective technologies, designs or methods.\nWe may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers,\nvendors, former employees and current employees.\n\n \n\nOur ability to enforce our patent\nrights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components that\nare used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or\npotential competitor’s product. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if\nwe were to prevail may not be commercially meaningful.\n\n \n\nIn addition, proceedings to enforce\nor defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings\ncould also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are\ninvalid or otherwise unenforceable. If any of our patents covering our products are invalidated or found unenforceable, or if a court\nfound that valid, enforceable patents held by third parties covered one or more of our products, our competitive position could be harmed\nor we could be required to incur significant expenses to enforce or defend our rights.\n\n \n\nThe degree of future protection\nfor our proprietary rights is uncertain, and we cannot ensure that:\n\n \n\n \n●\nany of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our products;\n\n \n\n10\n\n \n\n \n\n \n●\nany of our pending patent applications will be issued as patents;\n\n \n\n \n●\nwe will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire;\n\n \n\n \n●\nwe were the first to make the inventions covered by each of our patents and pending patent applications;\n\n \n\n \n●\nwe were the first to file patent applications for these inventions;\n\n \n\n \n●\nothers will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable;\n\n \n\n \n●\nany patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;\n\n \n\n \n●\nwe will develop additional proprietary technologies or products that are separately patentable; or\n\n \n\n \n●\nour commercial activities or products will not infringe upon the patents of others.\n\n \n\nWe rely, in part, upon unpatented\ntrade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. Further,\nour trade secrets could otherwise become known or be independently discovered by our competitors.\n\n \n\n**Litigation or other proceedings\nor third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us\nfrom selling our products or affect our stock price.**\n\n \n\nOur commercial success will depend\nin part on not infringing the patents or violating the other proprietary rights of others. Significant litigation regarding patent rights\noccurs in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have\nmade substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply\nfor and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our products. We do not\nalways conduct independent reviews of patents issued to third parties. In addition, patent applications in China and elsewhere can be\npending for many years before issuance, or unintentionally abandoned patents or applications can be revived, so there may be applications\nof others now pending or recently revived patents of which we are unaware. These applications may later result in issued patents, or the\nrevival of previously abandoned patents, that will prevent, limit or otherwise interfere with our ability to make, use or sell our products.\nThird parties may, in the future, assert claims that we are employing their proprietary technology without authorization, including claims\nfrom competitors or from non-practicing entities that have no relevant product revenue and against whom our own patent portfolio may have\nno deterrent effect. As we continue to commercialize our products in their current or updated forms, launch new products and enter new\nmarkets, we expect competitors may claim that one or more of our products infringe their intellectual property rights as part of business\nstrategies designed to impede our successful commercialization and entry into new markets. The large number of patents, the rapid rate\nof new patent applications and issuances, the complexities of the technology involved, and the uncertainty of litigation may increase\nthe risk of business resources and management’s attention being diverted to patent litigation. We have, and we may in the future,\nreceive letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their\npatents.\n\n \n\nMoreover, we may become party to\nfuture adversarial proceedings regarding our patent portfolio or the patents of third parties. Patents may be subjected to opposition,\npost-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices. The legal threshold\nfor initiating litigation or contested proceedings may be low, so that even lawsuits or proceedings with a low probability of success\nmight be initiated. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these proceedings\nmay have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. We may also occasionally\nuse these proceedings to challenge the patent rights of others. We cannot be certain that any particular challenge will be successful\nin limiting or eliminating the challenged patent rights of the third party.\n\n \n\nAny lawsuits resulting from such\nallegations could subject us to significant liability for damages and invalidate our proprietary rights. Any potential intellectual property\nlitigation also could force us to do one or more of the following:\n\n \n\n11\n\n \n\n \n\n \n●\nstop making, selling or using products or technologies that allegedly infringe the asserted intellectual property;\n\n \n\n \n●\nlose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses;\n\n \n\n \n●\npay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing;\n\n \n\n \n●\npay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;\n\n \n\n \n●\nredesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible; and\n\n \n\n \n●\nattempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.\n\n \n\nAny litigation or claim against\nus, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources,\ndivert the attention of management from our core business and harm our reputation. If we are found to infringe the intellectual property\nrights of third parties, we could be required to pay substantial damages (which may be increased up to three times of awarded damages)\nand/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products\nto avoid infringement. Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would\nbe able to redesign our products in a way that would not infringe the intellectual property rights of others. We could encounter delays\nin product introductions while we attempt to develop alternative methods or products. If we fail to obtain any required licenses or make\nany necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize\none or more of our products.\n\n \n\n**If we are unable to protect\nthe confidentiality of our trade secrets, our business and competitive position could be harmed.**\n\n \n\nIn addition to patent protection,\nwe also rely upon trade secret protection as well as non-disclosure agreements with our employees, consultants and third parties, and\nmay in the future rely on copyright and/or trademark protection, to protect our confidential and proprietary information. In addition\nto contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and\ntechnological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee\nor third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent\nan employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such\nmisconduct may not provide an adequate remedy to protect our interests fully. Unauthorized parties may also attempt to copy or reverse\nengineer certain aspects of our products that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated\na trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted\nsecurity measures, trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary\namong different jurisdictions. In addition, trade secrets may be independently developed by others in a manner that could prevent legal\nrecourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated,\nor if any such information was independently developed by a competitor, our business and competitive position could be harmed.\n\n \n\n**Third parties may assert\nownership or commercial rights to inventions we develop, which could have a material adverse effect on our business.**\n\n \n\nThird parties may in the future\nmake claims challenging the inventorship or ownership of our intellectual property. Any infringement claims or lawsuits, even if not meritorious,\ncould be expensive and time consuming to defend, divert management’s attention and resources, require us to redesign our products\nand services, if feasible, require us to pay royalties or enter into licensing agreements in order to obtain the right to use necessary\ntechnologies, and/or may materially disrupt the conduct of our business.\n\n \n\n12\n\n \n\n \n\nIn addition, we may face claims\nby third parties that our agreements with employees, contractors or third parties obligating them to assign intellectual property to us\nare ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes\nregarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such\nintellectual property. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded\nfrom using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome could harm our\nbusiness and competitive position.\n\n \n\n**Third parties may assert\nthat our employees or contractors have wrongfully used or disclosed confidential information or misappropriated trade secrets, which could\nresult in litigation.**\n\n \n\nWe may employ individuals who previously\nworked with other companies, including our competitors or potential competitors. Although we try to ensure that our employees and contractors\ndo not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees\nor contractors have inadvertently or otherwise used or disclosed intellectual property or personal data, including trade secrets or other\nproprietary information, of a former employer or other third party. Litigation may be necessary to defend against these claims. If we\nfail in defending any such claims or settling those claims, in addition to paying monetary damages or a settlement payment, we may lose\nvaluable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result\nin substantial costs and be a distraction to management and other employees.\n\n \n\n**Our computer systems and\noperations may be vulnerable to security breaches, which could adversely affect our business.**\n\n \n\nWe believe the safety of our computer\nnetwork and our secure transmission of information over the internet will be essential to our operations and our services. Our network\nand our computer infrastructure are potentially vulnerable to physical breaches or to the introduction of computer viruses, abuse of use\nand similar disruptive problems and security breaches that could cause loss (both economic and otherwise), interruptions, delays or loss\nof services to our users. It is possible that advances in computer capabilities or new technologies could result in a compromise or breach\nof the technology we use to protect user transaction data. A party that is able to circumvent our security systems could misappropriate\nproprietary information, cause interruptions in our operations or utilize our network without authorization. Security breaches also could\ndamage our reputation and expose us to a risk of loss, litigation and possible liability. We cannot guarantee you that our security measures\nwill prevent security breaches.\n\n \n\n**Risks Related to Doing Business in China**\n\n \n\n**We are based in, and our\noperations are located in, China through our subsidiaries. Our ability to operate in China may be impaired by changes in Chinese laws\nand regulations, including those relating to taxation, environmental regulation, restrictions on foreign investment, and other matters.**\n\n \n\nBecause our operations are conducted\nin China through our subsidiaries, the Chinese government may exercise significant oversight and discretion over the conduct of our business,\nmay intervene in or influence our operations at any time, and may exert more control over\nofferings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations\nand/or the value of our Class A ordinary shares. The Chinese government has exercised and continues to exercise substantial control over\nvirtually every sector of the Chinese economy through regulation and state ownership. The central Chinese government or local governments\nhaving jurisdiction within China may impose new, stricter regulations, or interpretations of existing regulations, that would require\nadditional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. As such, our subsidiaries\nin the PRC may be subject to governmental and regulatory interference in the provinces in which they operate. We could also be subject\nto regulation by various political and regulatory entities, including local and municipal agencies and other governmental subdivisions.\nOur ability to operate in China may be impaired by any such laws or regulations, or any changes in laws and regulations in the PRC. We\nmay incur increased costs necessary to comply with existing and future laws and regulations or penalties for any failure to comply.\n\n \n\nThe Chinese government recently\npromulgated a series of new statements and actions to regulate business operations in China. For example, Cybersecurity Review Measures\nwas released on December 28, 2021 and became effective on February 15, 2022, and provides that critical information infrastructure operators,\nor CIIOs, that intend to purchase Internet products and online platform operators engaging in data processing activities that affect or\nmay affect national security must be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity\nReview Measures, a cybersecurity review assesses potential national security risks that may arise in connection with any procurement of\ndata processing. The Cybersecurity Review Measures further\n\n \n\n13\n\n \n\nrequires that an online platform operator that possess personal data of more than one million users shall declare to the Office of Cybersecurity\nReview for cybersecurity review before listing in a foreign country. As of the date of this annual report, we have not received any notice\nfrom any authorities identifying us as a CIIO or an online platform operator or requiring us to go through cybersecurity review by the\nCyberspace Administration of China (the “CAC”). There remains uncertainty, however, as to how the Cybersecurity Review Measures\nwill be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules,\nor detailed implementations and interpretations related to the Cybersecurity Review Measures. If any such new laws, regulations, rules,\nor implementations and interpretations come into effect, we will take all reasonable measures and actions to comply with them and to minimize\nany adverse effects on our business. We cannot guarantee, however, that we will not be subject to cybersecurity review in the future.\nIf such review is or becomes necessary, we may be required to suspend our operations or experience other disruption to our operations.\nCybersecurity review could also result in negative publicity with respect to our Company and diversion of our managerial and financial\nresources, which could materially and adversely affect our business, financial conditions, and results of operations.\n\n \n\n**Regulatory bodies of the\nUnited States may be limited in their ability to conduct investigations or inspections of our operations in China.**\n\n \n\nFrom time to time, we may receive\nrequests from certain U.S. agencies to investigate or inspect our operations or to otherwise provide information. While we will comply\nwith requests from these regulators, there is no guarantee that such requests will be honored by those entities that provide services\nto us or with which we associate, especially for any such entities that are located in China. Furthermore, an on-site inspection of our\nfacilities by any of these regulators may be limited or entirely prohibited. Such inspections, though permitted by us and our affiliates,\nare subject to the unpredictability of the Chinese enforcement and other government agencies and may therefore be impossible to facilitate.\n\n \n\nOur current auditor, Enrome LLP,\nis PCAOB registered and based in Singapore. Under the HFCAA, the PCAOB is permitted to inspect our current independent public accounting\nfirm. In addition, on December 16, 2021, the PCAOB issued a determination report which found that the PCAOB was unable to inspect or investigate\ncompletely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China; and (2) Hong\nKong, a Special Administrative Region of the PRC, because of positions taken by PRC authorities in those jurisdictions, which determinations\nwere vacated by the PCAOB on December 15, 2022. Enrome LLP is not headquartered in mainland China or Hong Kong and was not identified\nby the PCAOB in its report as a firm subject to the PCAOB’s determinations, which determinations were vacated by the PCAOB on December\n15, 2022. However, if the PCAOB later determined that it cannot inspect or fully investigate our auditor, trading in our securities may\nbe prohibited under the HFCAA, and, as a result, Nasdaq may determine to delist our securities.\n\n \n\n**Changes in China’s\neconomic, political or social conditions or government policies could have a material adverse effect on our business and operations.**\n\n \n\nAll of our assets and operations\nare located in China through our subsidiaries. Accordingly, our business, financial condition, results of operations and prospects may\nbe influenced to a significant degree by political, economic and social conditions in China generally and therefore by the significant\ndiscretion of Chinese governmental authorities. The Chinese economy differs from the economies of most developed countries in many respects,\nincluding the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.\nAlthough the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction\nof state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial\nportion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant\nrole in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over\nChina’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary\npolicy, and providing preferential treatment to particular industries or companies. The increased global focus on environmental and social\nissues and China’s potential adoption of more stringent standards in these areas may adversely impact the operations of China-based\nissuers, including us.\n\n \n\n14\n\n \n\n \n\nWhile the Chinese economy has experienced\nsignificant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate\nof growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government\nor in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments\ncould adversely affect our business and operating results, lead to a reduction in demand for our services and adversely affect our competitive\nposition. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources.\nSome of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition\nand results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition,\nin the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic\ngrowth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results.\n\n \n\n**If we become subject to the\nrecent scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources\nto investigate and resolve the matter which could harm our business operations and our reputation and could result in a loss of your investment\nin our Class A ordinary shares, especially if such matter cannot be addressed and resolved favorably.**\n\n \n\nRecently, U.S. public companies\nthat have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by\ninvestors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around\nfinancial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance\npolicies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative\npublicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases, has become virtually\nworthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and\nexternal investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity\nwill have on us or our business. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true\nor untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation may\nbe a major distraction to our management. If such allegations are not proven to be groundless, our business operations will be severely\nhindered and your investment in our Class A ordinary shares could be rendered worthless.\n\n \n\n**Uncertainties with respect\nto China’s legal system could adversely affect us.**\n\n \n\nThe PRC legal system is a civil\nlaw system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for\nreference but have limited precedential value.\n\n \n\nIn 1979, the PRC government began\nto promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation\nover the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However,\nPRC law still restricts certain foreign investments in China, and such laws are continually evolving, as more fully described under “Item\n4. Information on the Company-B. Business Overview-Regulation-Regulations Relating to Foreign Investment”. China has not developed\na fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities\nin China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative\nand court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may\nbe difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties\nmay affect our judgment on the relevance of legal requirements and our ability to enforce our contractual arrangements and rights or tort\nclaims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts\nto extract payments or benefits from us.\n\n \n\nFurthermore, the PRC legal system\nis based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a\nretroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation.\nIn addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources\nand management attention. Further, such evolving laws and regulations and the inconsistent enforcement thereof could also lead to failure\nto obtain or maintain licenses and permits to do business in China, which would adversely affect us.\n\n \n\n15\n\n \n\n \n\n**It may be difficult for overseas\nregulators to conduct investigation or collect evidence within China.**\n\n \n\nShareholder claims or regulatory\ninvestigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For\nexample, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation\ninitiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory\nauthorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities\nregulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore,\naccording to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator\nis allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation\nof or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly\nconduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your\ninterests. See also “Item 3. Key Information-D. Risk Factors-Risks Related to our Ordinary Shares-You may face difficulties in protecting\nyour interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands\nlaw” for risks associated with investing in us as a Cayman Islands company.\n\n \n\n**Changes in international\ntrade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China and may have a material\nadverse effect on our business.**\n\n \n\nPolitical events, international\ntrade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and could have a\nmaterial adverse effect on us and our customers, service providers, and other partners. International trade disputes could result in tariffs\nand other protectionist measures that could adversely affect our business. Tariffs could increase the cost of the goods and products which\ncould affect customers’ spending levels. In addition, political uncertainty surrounding international trade disputes and the potential\nof the escalation to trade war and global recession could have a negative effect on customer confidence, which could adversely affect\nour business. We may have also access to fewer business opportunities, and our operations may be negatively impacted as a result. In addition,\nthe current and future actions or escalations by either the United States or China that affect trade relations may cause global economic\nturmoil and potentially have a negative impact on our markets, our business, or our results of operations, and we cannot provide any assurances\nas to whether such actions will occur or the form that they may take. Escalation of U.S.-China trade tensions could slow China’s\neconomic growth, potentially reducing local government fiscal capacity for rural environmental infrastructure projects. Delays in policy\nimplementation, subsidies, or project approvals may adversely affect the Company’s revenue recognition and cash flow.\n\n \n\n**Our current sewage treatment\nsystem customers are primarily state-owned companies in China and the end users of our system are primarily local governments in China,\nand the payment approval process from local governments is complex, which may increase our days sales outstanding and could impact our\nliquidity should any major delay of payment from our major customers occur.**\n\n \n\nOur current sewage treatment system\ncustomers are primarily state-owned companies in China and the end users of our system are primarily local governments in China. The payment\napproval process from local governments is complex as it requires us to go through several procedures and typically takes a longer period\nof time as all of the proper inspection documents must be provided in order for funds to be released. In addition, there are other contractors\nalso working on the job sites for the non-sewage treatment related sections and the inspectors sometimes require the other contractors\nto complete their sections before the full projects can be inspected. As a result, our days sales outstanding rose from 171 days at December\n31, 2017 to 180 days at December 31, 2018 to 306 days at December 31, 2019 to 615 days at December 31, 2020, decreased to 204 days at\nDecember 21, 2021, then increased to 220 days at December 31, 2022, then increased to 262 days at December 31, 2023, then to 455 days\nat December 31, 2024 and then to 894 days at December 31, 2025. The liquidity of our operations highly depends on the timing of payment\nfrom our major customers, and should any major delay of payment from them occur, our operations and liquidity may be impacted.\n\n \n\n16\n\n \n\n \n\n**You may experience difficulties\nin effecting service of legal process, enforcing foreign judgments, including those obtained in the U.S., or bringing actions in China\nagainst us or our management based on foreign laws.**\n\n \n\nWe, CDT Cayman, are a holding company\nincorporated under the laws of the Cayman Islands. We, CDT Cayman, through our subsidiaries, conduct all of our operations in China and\nall of our assets are located in China. In addition, all our senior employees reside within China for a significant portion of the time\nand most are PRC residents. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons\ninside mainland China, including our management. In addition, China does not have treaties providing for the reciprocal recognition and\nenforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement\nin China of judgments of a court in any of these non-PRC jurisdictions, including the U.S., in relation to any matter not subject to a\nbinding arbitration provision may be difficult or impossible.\n\n \n\n**We may rely on dividends\nand other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation\non the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.**\n\n \n\nWe, CDT Cayman, are a Cayman Islands\nholding company and we may rely on dividends and other distributions on equity from our PRC subsidiaries for our cash requirements, including\nfor services of any debt we may incur. To date, we, CDT Cayman and our subsidiaries, have been funded through our initial public offering\nand subsequent offerings, shareholder capital contributions, bank loans, third party loans and related party loans. As of December 31,\n2025, these consisted of shareholder capital contributions of $14.35 million, which are reflected as par value and additional paid-in\ncapital in the consolidated financial statements included elsewhere in this annual report (see the consolidated statements of change in\nshareholders’ equity on page F-5 of the consolidated financial statements included elsewhere in this annual report), proceeds\nfrom initial public offering which was completed on April 22, 2024, of 1,500,000 ordinary shares at an initial public offering price of\n$4.00 per share, resulting in net proceeds to us of approximately $4.3 million after deducting offering expenses, proceeds from share\nsubscription agreements of $0.6 million from the issuance of 1,200,000 Class A ordinary shares in December 2025, bank loans of approximately\n$1.5 million (see pages F-24 and F-25 of Note 10 of the notes to the consolidated financial statements included elsewhere in this annual\nreport), third party loans of approximately $2.06 million (see page F-26 of Note 10 of the notes to the consolidated financial statements\nincluded elsewhere in this annual report) and related party loans of approximately $2.56 million (see F-23 of Note 9 of the notes to the\nconsolidated financial statements included elsewhere in this annual report). See the consolidated statements of change in shareholders’\nequity on page F-5 and Notes 9 and 10 on pages F-22 through F-23, and pages F-24 through F-26 of the notes to the consolidated financial\nstatements included elsewhere in this annual report. We may in the future also rely on dividends and other distributions on equity from\nour PRC subsidiaries. Our PRC subsidiaries’ ability to distribute dividends is based upon its distributable earnings. Current PRC\nregulations permit our PRC subsidiaries to pay dividends to its respective shareholders only out of their accumulated profits, if any,\ndetermined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside\nat least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered\ncapital. Each of our PRC subsidiaries as a Foreign-Invested Enterprise (“FIE”) is also required to further set aside a portion\nof its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at its discretion.\nThese reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments\ngoverning the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC\nsubsidiaries to distribute dividends or other payments to their respective shareholders could materially and adversely limit our ability\nto grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our\nbusiness.\n\n \n\n17\n\n \n\n \n\nIn addition, the Enterprise Income\nTax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese\ncompanies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central\ngovernment and governments of other countries or regions where the non-PRC resident enterprises are incorporated.\n\n \n\n**Fluctuations in exchange\nrates could have a material and adverse effect on our results of operations and the value of your investment.**\n\n \n\nThe value of the Renminbi against\nthe U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions\nin China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging\nthe value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three\nyears. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained\nwithin a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably.\nOn November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year review of the basket\nof currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, Renminbi is determined\nto be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese\nyen and the British pound. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi\ninternationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure\nyou that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult\nto predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in\nthe future.\n\n \n\nSignificant revaluation of the\nRenminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars into\nRenminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount\nwe would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments\nfor dividends on our Class A ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would\nhave a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the Renminbi\nrelative to U.S. dollars would affect our financial results reported in U.S. dollar terms regardless of any underlying change in our business\nor results of operations.\n\n \n\nVery limited hedging options are\navailable in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in\nan effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future,\nthe availability and effectiveness of these hedges may be limited, and we may not be able to adequately hedge our exposure, or at all.\nIn addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi\ninto foreign currency.\n\n \n\n**Changes in China’s\nenvironmental laws and policies may affect our financial condition.**\n\n \n\nOur products and projects are mainly\nused in the fields of rural sewage treatment and septic tank treatment in urban and rural areas. We believe our business is in line with\nChina’s current focus on environmental protection policies, particularly the Water Pollution Prevention and Control Action Plan,\nalso known as the Water Ten Plan. However, should China alter its environmental policies towards less regulation, we believe demand for\nour products could decrease, adversely impacting our results of operations, cash flows and financial position.\n\n \n\n18\n\n \n\n \n\n**Governmental control of currency\nconversion may limit our ability to utilize our earnings effectively and affect the value of your investment.**\n\n \n\nThe PRC government imposes controls\non the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency into or out of China,\nwhich essentially may restrict the ability to transfer funds into or out of China. We receive all of our revenues in Renminbi through\nour subsidiaries. Under our current corporate structure, we, CDT Cayman, a Cayman Islands holding company, may rely on dividend payments\nfrom our PRC subsidiaries to fund any cash and financing requirements we may have. To date, we, CDT Cayman and our subsidiaries, have\nbeen funded through our initial public offering and subsequent offerings, shareholder capital contributions, bank loans, third party loans\nand related party loans. As of December 31, 2025, these consisted of shareholder capital contributions of $14.35 million, which are reflected\nas par value and additional paid-in capital in the consolidated financial statements included elsewhere in this annual report, proceeds\nfrom our initial public offering, which was completed on April 22, 2024, of 1,500,000 ordinary shares at an initial public offering price\nof $4.00 per share, resulting in net proceeds to us of approximately $4.3 million after deducting offering expenses, proceeds from share\nsubscription agreements of $0.6 million from the issurance of 1,200,000 Class A ordinary shares in December 2025, bank loans of $1.5 million,\nthird party loans of $2.06 million and related party loans of $2.56 million. See the consolidated statements of change in shareholders’\nequity on page F-5 and Notes 9 and 10 on pages F-23 through F-26 of the notes to the consolidated financial statements included elsewhere\nin this annual report. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions,\ninterest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval\nof the SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval\nof SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval\nfrom or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted\nout of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain\nSAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective debt in a currency other than\nRenminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi.\nThe PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the\nforeign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may\nnot be able to pay dividends in foreign currencies to our shareholders.\n\n \n\n**Certain PRC regulations may\nmake it more difficult for us to pursue growth through acquisitions.**\n\n \n\nAmong other things, the Regulations\non Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies\nin 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign\ninvestors more time-consuming and complex. Such regulation requires, among other things, that the State Council’s Anti-Monopoly\nEnforcement Agency (which is the SAMR) be notified in advance of any change-of-control transaction in which a foreign investor acquires\ncontrol of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions\non Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council in 2024, are triggered. Moreover,\nthe Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress which became effective in 2022 requires\nthat transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the SAMR before\nthey can be completed. In addition, Measures for the Security Review of Foreign Investment which became effective on January 18, 2021\nrequire that foreign investors acquiring PRC companies engaged in military related or certain other industries that are crucial to national\nsecurity shall actively file applications with the office of the working mechanism before consummation of any such acquisition. We may\npursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these\nregulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or\nclearance from the office of the working mechanism, may delay or inhibit our ability to complete such transactions, which could affect\nour ability to expand our business or maintain our market share.\n\n \n\n**PRC regulations relating\nto the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC\nsubsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’\nability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.**\n\n \n\n19\n\n \n\n \n\nIn July 2014, SAFE promulgated\nthe SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’\nFinancing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the\npromulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register\nwith SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable\nto our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.\n\n \n\nUnder SAFE Circular 37, PRC residents\nwho make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore SPVs will be required\nto register such investments with the SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder\nof a SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material\nchange. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with\nthe local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed\nregistration, failure in the completion or update of such registration by any PRC shareholder of such SPV will affect the procedure of\ntransferring any dividend he obtains from the listed company back to China. On February 13, 2015, the SAFE promulgated a Notice on Further\nSimplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Circular 13, which became effective on\nJune 1, 2015. Under SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments and outbound\noverseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of the SAFE.\nThe qualified banks will directly examine the applications and accept registrations under the supervision of the SAFE.\n\n \n\nWe cannot assure you that all of\nour shareholders that may be subject to SAFE regulations have completed all necessary registrations with the local SAFE branch or qualified\nbanks as required by SAFE Circular 37, and we cannot assure you that these individuals may continue to make required filings or updates\non a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of\nall PRC residents holding direct or indirect interest in our company. When a registered overseas special purpose company changes basic\ninformation such as its Chinese resident individual shareholders, name or operating terms, or changes important matters such as capital\nincrease, capital reduction, equity transfer or replacement, merger or division of Chinese resident individual shareholders, it shall\npromptly go through the registration formalities for changes in foreign exchange for overseas investment with the SAFE. According to the\nprovisions of SAFE Circular 37, except for Yunwu Li, no other relevant personnel of this listing are required to register foreign exchange\nor foreign exchange changes. As of the date of this annual report, to our knowledge, Yunwu Li, our chief executive officer and chairman\nof our board of directors and chairman of the board of directors and general manager of Shenzhen CDT, had completed the foreign exchange\nregistration, but had not completed the related change registration and remains in the process of completing such registration. The completion\nof Yunwu Li’s change registration will affect the procedure of transferring any dividends he obtains from CDT Cayman to China. However,\nthe net proceeds from our initial public offering which must be remitted to China will not be affected since Shenzhen CDT previously completed\nthe foreign direct investment foreign exchange registration in 2016. Any failure or inability by such individuals to comply with the SAFE\nregulations may subject us to fines or legal sanctions.\n\n \n\nFurthermore, as these foreign exchange\nregulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these\nregulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented\nby the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to\nour foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect\nour financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that\nwe or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings\nand registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and\ncould adversely affect our business and prospects.\n\n \n\n20\n\n \n\n \n\n**We face uncertainty with\nrespect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.**\n\n \n\nOn February 3, 2015, the State\nTaxation Administration (the “SAT”) issued the Announcement of the State Administration of Taxation on Several Issues Relating\nto Enterprise Income Tax on Transfers of Assets between Non-resident Enterprises, or SAT Circular 7, which was partially abolished on\nDecember 29, 2017. SAT Circular 7 extends its tax jurisdiction to transactions involving transfer of taxable assets through the offshore\ntransfer of a foreign intermediate holding company. In addition, SAT Circular 7 has introduced safe harbors for internal group restructurings\nand the purchase and sale of equity through a public securities market. SAT Circular 7 also brings challenges to both foreign transferor\nand transferee (or other person who is obligated to pay for the transfer) of taxable assets.\n\n \n\nOn October 17, 2017, the SAT issued\nthe Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at\nSource, or SAT Circular 37, which was revised on June 15, 2018. The SAT Circular 37 further clarifies the practice and procedure of withholding\nof non-resident enterprise income tax.\n\n \n\nWhere a non-resident enterprise\ntransfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer,\nthe non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such\nIndirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard\nthe existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing,\navoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and\nthe transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a\nrate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to\npenalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.\n\n \n\nWe face uncertainties as to the\nreporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring,\nsale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company\nis transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under\nSAT Circular 7 and/or SAT Circular 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC\nsubsidiaries may be requested to assist in the filing under SAT Circular 7 and/or SAT Circular 37. As a result, we may be required to\nexpend valuable resources to comply with SAT Circular 7 and/or SAT Circular 37 or to request the relevant transferors from whom we purchase\ntaxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have\na material adverse effect on our financial condition and results of operations.\n\n \n\n**Additional factors outside\nof our control related to doing business in China could negatively affect our business.**\n\n \n\nAdditional factors that could negatively\naffect our business include a potential significant revaluation of the Renminbi, which may result in an increase in the cost of producing\nproducts in China, labor shortages and increases in labor costs in China as well as difficulties in moving products manufactured in China\nout of the country, whether due to port congestion, labor disputes, slowdowns, product regulations and/or inspections or other factors.\nProlonged disputes or slowdowns can negatively impact both the time and cost of transporting goods. Natural disasters or health pandemics\nimpacting China can also have a significant negative impact on our business. Further, the imposition of trade sanctions or other regulations\nagainst products imported by us from, or the loss of “normal trade relations” status with, China, could significantly increase\nour cost of products exported outside of China and harm our business.\n\n \n\n**The joint statement by the\nSEC and PCAOB, rule changes adopted by Nasdaq, and the HFCAA all call for additional and more stringent criteria to be applied to emerging\nmarket companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.**\n\n \n\nOn April 21, 2020, then SEC Chairman\nJay Clayton and then PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting\nthe risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint\nstatement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher\nrisks of fraud in emerging markets.\n\n \n\n21\n\n \n\n \n\nOn May 18, 2020, Nasdaq filed three\nproposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”,\n(ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii)\napply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.\n\n \n\nOn May 20, 2020, the U.S. Senate\npassed the HFCAA requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to\naudit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect\nthe company’s auditors for two consecutive years, the issuer’s securities will be prohibited to trade on a U.S. securities\nexchange or U.S. over-the-counter market. On December 2, 2020, the U.S. House of Representatives approved the HFCAA. On December 18, 2020,\nthe HFCAA was signed into law. Additionally, in July 2020, the U.S. President’s Working Group on Financial Markets issued recommendations\nfor actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese\ncompanies listed on U.S. securities exchanges and their audit firms, in an effort to protect investors in the United States. In response,\non November 23, 2020, the SEC issued guidance highlighting certain risks, and their implications to U.S. investors, associated with investments\nin China-based issuers and summarizing enhanced disclosures the SEC recommends China-based issuers make regarding such risks.\n\n \n\nOn December 2, 2021, the SEC adopted\nfinal amendments to its rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA, which\ntook effect on January 10, 2022. We will be required to comply with these rules if the SEC identifies us as having a “non-inspection”\nyear, as defined in the rules. Under the HFCAA, our securities would be prohibited from trading on the Nasdaq or other U.S. securities\nexchange or any U.S. over-the-counter market if our auditor is not inspected by the PCAOB for two consecutive years, and this ultimately\ncould result in our shares being delisted. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable\nAct, which, was enacted on December 29, 2022 under the Consolidated Appropriations Act, 2023, as\nfurther described below, and amended the HFCAA to require the SEC to prohibit an issuer’s securities from trading on any\nU.S. securities exchange or any U.S. over-the-counter market if its auditor is not subject\nto PCAOB inspections for two consecutive years instead of three consecutive years, meaning the number of “non-inspection”\nyears was decreased from three to two, and thus, this reduced the time before securities would be prohibited from trading or delisted.\nOn September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining,\nas contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located\nin a non-U.S. jurisdiction because of a position taken by one or more authorities in any non-U.S. jurisdiction.\n\n \n\nOn December 16, 2021, the PCAOB\nissued a determination report which found that the PCAOB was unable to inspect or investigate completely registered public accounting\nfirms headquartered in: (1) mainland China of the People’s Republic of China; and (2) Hong Kong, a Special Administrative Region\nof the PRC, because of positions taken by PRC authorities in those jurisdictions, which determinations were vacated by the PCAOB on December\n15, 2022. Our current auditor, Enrome LLP, is not headquartered in mainland China or Hong Kong and was not identified by the PCAOB\nin its report on December 16, 2021 as a firm subject to the PCAOB’s determinations, which determinations were vacated by the PCAOB\non December 15, 2022.\n\n \n\nOn August 26, 2022, the PCAOB signed\na Statement of Protocol, or SOP, Agreement with the CSRC and China’s Ministry of Finance. The SOP, together with two protocol agreements\ngoverning inspections and investigation, establishes a specific, accountable framework to make possible complete inspections and investigations\nby the PCAOB of audit firms based in China and Hong Kong, as required under U.S. law.\n\n \n\n22\n\n \n\n \n\nOn December 15, 2022, the PCAOB\nannounced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered\nin mainland China and Hong Kong completely in 2022. The PCAOB vacated its previous 2021 determinations that the PCAOB was unable to inspect\nor investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB\nwill continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China\nand Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. The PCAOB continues\nto demand complete access in mainland China and Hong Kong moving forward and has resumed regular inspections since March 2023. The PCAOB\nis continuing pursuing ongoing investigations and may initiate new investigations as needed. The PCAOB has indicated that it will act\nimmediately to consider the need to issue new determinations with the HFCAA if needed. Notwithstanding the foregoing, in the event it\nis later determined that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could cause\nour securities to be delisted from the stock exchange. The delisting of our shares, or the threat of their being delisted, may materially\nand adversely affect the value of your investment.\n\n \n\nOn\nDecember 29, 2022, the U.S. President signed into law the Consolidated Appropriations Act, 2023, which, among other things, amended the\nHFCAA to reduce the number of consecutive non-inspection years that would trigger the trading prohibition under the HFCAA from three years\nto two years (originally such threshold under the HFCAA was three consecutive years), and so that any non-U.S. jurisdiction could be the\nreason why the PCAOB does not have complete access to inspect or investigate a company’s public accounting firm (originally the\nHFCAA only applied if the PCAOB’s ability to inspect or investigate was due to a position taken by an authority in the jurisdiction\nwhere the relevant public accounting firm was located). As noted above, on December 15, 2022, the PCAOB vacated its previous 2021 determinations\nthat it was unable to inspect and investigate completely PCAOB-registered public accounting firms headquartered in mainland China and\nHong Kong.\n\n \n\nIf the PCAOB in the future again\ndetermines that it is unable to inspect and investigate completely auditors in mainland China and Hong Kong, then the lack of access to\nthe PCAOB inspection in China would prevent the PCAOB from fully evaluating audits and quality control procedures of the auditors based\nin China. As a result, investors could be deprived of the benefits of such PCAOB inspections, if the PCAOB in the future again determines\nthat it is unable to inspect and investigate completely auditors in mainland China and Hong Kong. The inability of the PCAOB to conduct\ninspections of auditors in China would make it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures\nor quality control procedures, which could cause existing and potential investors in our stock to lose confidence in our audit procedures\nand reported financial information and the quality of our financial statements. Although our auditor was not identified by the\nPCAOB in its report as a firm subject to the PCAOB’s determinations, which determinations were vacated by the PCAOB on December\n15, 2022, should the PCAOB be unable to fully conduct an inspection of our auditor’s work papers in China, this could adversely\naffect us and our securities for the reasons noted above.\n\n \n\nOur auditor, the independent registered\npublic accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded\npublicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB\nconducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our current auditor\nis headquartered in Singapore, and is currently subject to PCAOB inspections and the PCAOB is able to inspect our auditors in relation\nto our financial statements. However, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent\ncriteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of\npersonnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.\n\n \n\n23\n\n \n\n \n\n**All of our operations are located in China through\nour subsidiaries. Our ability to operate in China may be impaired by changes in Chinese laws and regulations, including those relating\nto taxation, environmental regulation, restrictions on foreign investment, and other matters.**\n\n \n\n* *We, CDT Cayman, are\na Cayman Islands holding company. All of our operations are located in China through our subsidiaries. The Chinese government has exercised\nand continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership.\nOur ability to operate in China may be impaired by changes in laws and regulations in the PRC. The PRC government recently promulgated\na series of new statements and actions to regulate business operations in China.\n\n \n\nAccording to the Notice on the\nFiling Management Arrangements for Overseas Issuance and Listing of Domestic Enterprises which was promulgated by CSRC on February 17,\n2023, PRC domestic enterprises that fall within the scope of filing and have been listed overseas or met the following circumstances as\nof the effective date of the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the\n“Trial Measures”), are “existing enterprises”: before the effective date of the Trial Measures (March 31, 2023),\nthe application for indirect overseas offering and listing had been approved by the overseas regulators or overseas stock exchanges (such\nas a hearing has been passed in the Hong Kong market, or a registration statement has become effective in the U.S. market, etc.), and\nit would not have been required to undergo the offering and listing supervision procedures of the overseas regulatory securities or overseas\nstock exchanges again (such as a re-hearing in the Hong Kong market, etc.), and the overseas offering and listing would have been completed\nby September 30, 2023. Existing enterprises are not required to file with the CSRC immediately, and filings with the CSRC should be made\nas required if they involve refinancings and other filing matters. Moreover, PRC domestic enterprises that have submitted valid applications\nfor overseas offering and listing but have not been approved by overseas regulatory authorities or overseas stock exchanges at the effective\ndate of the Trial Measures could reasonably arrange the timing of filing applications with the CSRC and complete the filing with the CSRC\nbefore the overseas offering and listing.\n\n \n\nWe are not classified as an existing\nenterprise. We therefore were required to file with the CSRC and had to complete the filing with the CSRC in accordance with the Trial\nMeasures in connection with our initial public offering. On August 2, 2023, we submitted our filing materials and applied for registration\nto the CSRC in accordance with the requirements of the Trial Measures. We have completed the filing with the CSRC and obtained the required\nFiling Notice from the CSRC regarding our initial public offering on November 28, 2023, which serves as notification from the CSRC of\nour completion of the required filing procedures with the CSRC for our initial public offering. The main contents of the Filing Notice\nare as follows: (1) we proposed to issue not more than 2,300,000 ordinary shares (exclusive of the ordinary shares underlying the representative’s\nwarrants) and list them on the Nasdaq Stock Market LLC in the United States; (2) from the date of issuance of the Filing Notice to the\ncompletion of our initial public offering, we were to, in accordance with the relevant provisions of the overseas offering and listing\nof domestic enterprises, report any major event to the CSRC through its filing management information system; (3) we were to, within 15\nworking days after completion of the offering, report the issuance and listing of our shares in connection with the offering through the\nCSRC’s filing management information system, which report has been filed with the CSRC; and (4) if we failed to complete the offering\nwithin 12 months of the issuance date of the Filing Notice and intended to continue to proceed with the offering, we would have been required\nto update the filing materials with the CSRC.\n\n \n\nWhile we have completed the filing\nwith the CSRC as required under the Trial Measures, we believe that, as of the date hereof, neither we nor our PRC subsidiaries are currently\nrequired to obtain any other permission from any PRC authorities to operate our business or to issue our Class A ordinary shares to foreign\ninvestors. This understanding specifically includes permissions from the CAC in relation to our PRC subsidiaries’ operations. To\ndate, we have not obtained nor have we been denied any such permissions or approvals in connection with our initial public offering, apart\nfrom the aforementioned CSRC filing.\n\n \n\nGovernmental actions in China,\nincluding any decision to intervene or influence our operations at any time or to exert control over an offering of securities conducted\noverseas and/or foreign investment in China-based issuers, may cause us to make material changes to our operations, may limit or completely\nhinder our ability to offer or continue to offer securities to investors, and/or may cause the value of such securities to significantly\ndecline or be worthless.\n\n \n\n24\n\n \n\n \n\n**Risks Related to our Class A Ordinary Shares**\n\n \n\n**If we fail to implement and\nmaintain an effective system of internal control, we may be unable to accurately report our operating results, meet our reporting obligations\nor prevent fraud.**\n\n \n\nPrior to our initial public offering,\nwe were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures.\nOur management has not completed an assessment of the effectiveness of our internal control over financial reporting, and our independent\nregistered public accounting firm has not conducted an audit of our internal control over financial reporting.\n\n \n\nIn the course of auditing our consolidated\nfinancial statements as of and for the year ended December 31, 2025, we and our independent registered public accounting firm identified\ntwo material weaknesses in our internal control over financial reporting as well as other control deficiencies. As defined in standards\nestablished by the Public Company Accounting Oversight Board (United States), a “material weakness” is a deficiency, or a\ncombination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material\nmisstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses\nidentified relate to (1) our lack of sufficient skilled staff with U.S. GAAP knowledge and the SEC reporting knowledge for the purpose\nof financial reporting as well as the lack in formal accounting policies and procedures manual to ensure proper financial reporting in\naccordance with U.S. GAAP and SEC reporting requirements; and (2) our lack of internal audit function to establish formal risk assessment\nprocess and internal control framework.\n\n \n\nWe are now a public company in\nthe United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we include a\nreport of management on our internal control over financial reporting in our annual reports on Form 20-F. Once we cease to be an “emerging\ngrowth company” as such term is defined under the JOBS Act, our independent registered public accounting firm must attest to and\nreport on the effectiveness of our internal control over financial reporting. Our independent registered public accounting firm, after\nconducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the\nlevel at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently\nfrom us. In addition, our reporting obligations may place a significant strain on our management, operational and financial resources\nand systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.\n\n \n\nDuring the course of documenting\nand testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we\nmay identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the\nadequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time,\nwe may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with\nSection 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment,\nwe could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause\ninvestors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, and harm our\nresults of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud\nor misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations\nand civil or criminal sanctions.\n\n \n\n25\n\n \n\n** **\n\n**In the event that we are unable to regain\ncompliance with Nasdaq’s continued listing standards, Nasdaq may delist our Class A ordinary shares from trading, in which case\nthe liquidity and market price of our Class A ordinary shares could decline.**\n\n** **\n\nOur Class A ordinary shares are\ncurrently listed on The Nasdaq Capital Market. In order to maintain this listing, we must satisfy minimum financial and other requirements.\nOn June 18, 2025, we received a notification letter from Nasdaq’s Listing Qualifications Department indicating that we are not in\ncompliance with Nasdaq Listing Rule 5550 (a)(2), because the minimum bid price of our Class A ordinary shares on the Nasdaq Capital Market\nhas closed below $1.00 per share for 30 consecutive business days. The notification letter has no immediate effect on the Nasdaq listing\nor trading in our Class A ordinary shares. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had 180 calendar days, or until December\n15, 2025, to regain compliance with the minimum $1.00 bid price per share requirement. We received notice on December 22, 2025 from the Nasdaq’s\nListing Qualifications Department which resulted in an additional 180-day period, or until June 15, 2026, within which to regain\ncompliance with the $1.00 minimum bid price requirement.\n\n \n\nWhile we intend to engage in efforts to regain compliance,\nand thus maintain our listing, including by carrying out a reverse stock split, if necessary, there can be no assurance that we will be\nable to regain compliance during the applicable time periods set forth above. If we fail to continue to meet all applicable listing requirements\nin the future and Nasdaq determines to delist our Class A ordinary shares, the delisting could substantially decrease trading in our Class\nA ordinary shares and adversely affect the market liquidity of our Class A ordinary shares; adversely affect our ability to obtain financing\non acceptable terms, if at all; and may result in the potential loss of confidence by investors, suppliers, customers, employees, and\nfewer business development opportunities. Additionally, the market price of our Class A ordinary shares may decline further, and shareholders\nmay lose some or all of their investment.\n\n \n\n**An active trading market\nfor our Class A ordinary shares may not be sustained.**\n\n \n\nOur Class A ordinary shares have\nbeen listed on Nasdaq only since April 18, 2024, and we cannot assure you that an active trading market for our Class A ordinary shares\nwill be sustained or maintained. The lack of an active trading market may impair the value of your shares and your ability to sell your\nshares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling our Class\nA ordinary shares and entering into strategic partnerships or acquiring other complementary products, technologies or businesses by using\nour Class A ordinary shares as consideration. In addition, if we fail to satisfy exchange listing standards, we could be delisted, which\nwould have a negative effect on the price of our Class A ordinary shares.\n\n \n\nWe expect that the price of our\nClass A ordinary shares will fluctuate substantially and you may not be able to sell your shares at or above the price you purchased your\nshares at.\n\n \n\nThe market price of our Class A\nordinary shares is likely to be highly volatile and may fluctuate substantially due to many factors, including:\n\n \n\n \n●\nthe volume and timing of sales of our products;\n\n \n\n \n●\nthe introduction of new products or product enhancements by us or others in our industry;\n\n \n\n \n●\ndisputes or other developments with respect to our or others’ intellectual property rights;\n\n \n\n \n●\nour ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis;\n\n \n\n \n●\nproduct liability claims or other litigation;\n\n \n\n \n●\nvariations in our results of operations or those of others in our industry;\n\n \n\n \n●\nmedia exposure of our products or of those of others in our industry;\n\n \n\n \n●\nchanges in governmental regulations or in reimbursement;\n\n \n\n \n●\nchanges in earnings estimates or recommendations by securities analysts; and\n\n \n\n \n●\ngeneral market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.\n\n \n\nIn recent years, the stock markets\ngenerally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance\nof those companies. Broad market and industry factors may significantly affect the market price of our Class A ordinary shares, regardless\nof our actual operating performance.\n\n \n\n26\n\n \n\n \n\nIn addition, in the past, class\naction litigation has often been instituted against companies whose securities have experienced periods of volatility in market price.\nSecurities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such\nlitigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s\nattention and resources from our business.\n\n \n\n**Our Class A ordinary shares\nare subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions\nin our Class A ordinary shares cumbersome and may reduce the value of an investment in our Class A ordinary shares.**\n\n \n\nRule 15g-9 under the Exchange\nAct establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a\nmarket price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any\ntransaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account\nfor transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting\nforth the identity and quantity of the penny stock to be purchased.\n\n \n\nIn order to approve a person’s\naccount for transactions in penny stocks, the broker or dealer must: (a) obtain financial information, investment experience, and investment\nobjectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and\nthat the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in\npenny stocks.\n\n \n\nThe broker or dealer must also\ndeliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market,\nwhich, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms\nthat the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less\nwilling to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors\nto dispose of our Class A ordinary shares and cause a decline in the market value of our Class A ordinary shares.\n\n \n\nDisclosure also has to be made\nabout the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both\nthe broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to\nan investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price\ninformation for the penny stock held in the account and information on the limited market in penny stocks.\n\n \n\n**A significant portion of\nour total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause\nthe market price of our Class A ordinary shares to drop significantly, even if our business\nis doing well.**\n\n \n\nSales of a substantial number of\nour Class A ordinary shares in the public market could occur at any time. As of April 30, 2026, there are 75,525,000 outstanding Class\nA ordinary shares. Of that amount, 7,238,272.8 shares are currently restricted as a result of securities laws and/or lock-up agreements,\nbut will be able to be sold in the future subject to securities laws and/or lock-up agreements. If held by one of our affiliates, the\nresale of those securities will be subject to volume limitations under Rule 144 of the Securities Act.\n\n \n\n**Our directors, officers and\nprincipal shareholders may have significant voting power and may take actions that may not be in the best interests of our other shareholders.**\n\n****\n\n \n\nAs of the date of this annual report,\nour directors, officers and principal shareholders holding 5% or more of our Class A ordinary shares, collectively, control approximately\n6.06% of our outstanding Class A ordinary shares. On November 26, 2025, our shareholders resolved to consolidate our authorized share\ncapital (“Share Consolidation”) that with effect as of the date within one (1) calendar year after November 26, 2025 to be\ndetermined by the Board, every twenty five (25) issued and unissued existing Class A ordinary shares of US$0.0025 par value each be consolidated\ninto one (1) Class A ordinary share of US$0.0625 par value each; and every twenty five (25) issued and unissued existing Class B ordinary\nshares of US$0.0025 par value each be consolidated into one (1) Class B ordinary share of US$0.0625 par value each, such that the authorized\nshare capital of the Company shall become US$250,000 divided into (a) 3,760,000 Class A ordinary shares of par value US$0.0625 each and\n(b) 240,000 Class B ordinary shares of par value US$ 0.0625 each.\n\n \n\nAs of the date of this annual report,\nthe Board has not determined the effective date of the above Share Consolidation and therefore the Share Consolidation has not taken effect.\nIf our Board of Directors decides to implement the Share Consolidation and Mr. Li’s Class A ordinary shares convert to Class B ordinary\nshares, Mr. Li will control approximately 56.3% of ordinary shares. As a result, Mr. Li would be able to control the management and affairs\nof our Company and most matters requiring shareholder approval, including the election of directors and approval of significant corporate\ntransactions. The interests of these shareholders may not be the same as or may even conflict with your interests. For example, these\nshareholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders,\nwhich could deprive our shareholders of an opportunity to receive a premium for their Class A ordinary shares as part of a sale of us\nor our assets, and might affect the prevailing market price of our Class A ordinary shares due to investors’ perceptions that conflicts\nof interest may exist or arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.\n\n \n\n27\n\n \n\n \n\n**We expect to incur significant\nadditional costs as a result of being a public company, which may adversely affect our business, financial condition and results of operations.**\n\n \n\nAs a public company, we expect\nto incur significant additional costs associated with corporate governance requirements, including rules and regulations of the SEC, under\nthe Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Exchange Act, as well as the rules\nof the Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs\nand make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to obtain and\nmaintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain\nqualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of\nbecoming a publicly traded company may adversely affect our business, financial condition and results of operations.\n\n \n\n**Our disclosure controls and\nprocedures may not prevent or detect all errors or acts of fraud.**\n\n \n\nWe are subject to the periodic\nreporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide reasonable assurance that\ninformation we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded,\nprocessed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure\ncontrols and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives\nof the control system are met.\n\n \n\nThese inherent limitations include\nthe realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,\ncontrols can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override\nof the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur\nand not be detected.\n\n \n\n**Because we do not anticipate\npaying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.**\n\n \n\nWe have never declared or paid\ncash dividends. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.\nAs a result, capital appreciation, if any, of our Class A ordinary shares will be your sole source of gain for the foreseeable future.\n\n \n\n**Securities analysts may not\npublish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading\nvolume to decline.**\n\n \n\nThe trading market for our Class\nA ordinary shares will be influenced to some extent by the research and reports that industry or financial analysts publish about us and\nour business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts\nwho publish information about our Class A ordinary shares will have had relatively little experience with us or our industry, which could\naffect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event\nwe obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue\nan adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or\nfail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading\nvolume to decline and result in the loss of all or a part of your investment in us.\n\n \n\n28\n\n \n\n \n\n**The economic substance legislation\nof the Cayman Islands may impact us and our operations.**\n\n \n\nThe Company is subject to Cayman\nIslands economic substance legislation (“ESA”) requiring that, where the Company carries on a relevant activity (as defined\nin the ESA), it must maintain economic substance within the Cayman Islands, including adequate premises and employees within the Cayman\nIslands. As an entity subject to the ESA, the Company is required to assess its operations to determine the required compliance (if any)\nwith the ESA, to file an annual notification with the Cayman Islands Registrar of Companies disclosing whether the Company is carrying\nout any relevant activities within the meaning of the ESA and an annual return with the Department of International Tax Co-Operation.\nWhere applicable, the Company must establish that its operations satisfy the economic substance requirements of the ESA. The Company is\nrequired to monitor its operations to ensure it remains in compliance with all requirements under the ESA. Failure to satisfy these requirements\nmay subject the Company to penalties under the ESA.\n\n \n\n**You may face difficulties\nin protecting your interests, and your ability to protect your rights through the U.S. courts may be limited, because we are incorporated\nunder Cayman Islands law.**\n\n \n\nWe are an exempted company incorporated\nunder the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies\nAct (as revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against our\ndirectors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large\nextent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited\njudicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority,\nbut are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under\nCayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United\nStates. In particular, the Cayman Islands have a less developed body of securities laws than the United States. Some U.S. states, such\nas Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman\nIslands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.\n\n \n\nShareholders of Cayman Islands\nexempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and\narticles of association and register of mortgages) or to obtain copies of lists of shareholders of these companies. Our directors have\ndiscretion under our second amended and restated memorandum and articles of association to determine whether or not, and under what conditions,\nour corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders unless required\nby the Companies Act of the Cayman Islands or other applicable law or authorized by the directors or by ordinary resolution. This may\nmake it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit\nproxies from other shareholders in connection with a proxy contest.\n\n \n\nCertain corporate governance practices\nin the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions\nsuch as the United States. To the extent we choose to follow home country practices with respect to corporate governance matters, our\nshareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.\n\n \n\nAs a result of all of the above,\nour public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of\nthe board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.\n\n \n\n**Certain judgments obtained\nagainst us by our shareholders may not be enforceable.**\n\n \n\nWe, CDT Cayman, are a Cayman Islands\nholding company and all of our assets are located outside of the United States. All of our current operations are conducted in China through\nour subsidiaries. In addition, most of our current directors and officers are nationals and residents of countries other than the United\nStates. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible\nfor you to bring an action against us or against these individuals in the United States in the event that you believe that your rights\nhave been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind,\nthe laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors\nand officers.\n\n \n\n29\n\n \n\n \n\n**We are an emerging growth\ncompany within the meaning of the Securities Act and will take advantage of certain reduced reporting requirements.**\n\n \n\nWe are an “emerging growth\ncompany,” as defined in the JOBS Act, and we are taking advantage of certain exemptions from requirements applicable to other public\ncompanies that are not emerging growth companies, including, most significantly, not being required to comply with the auditor attestation\nrequirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, as long\nas we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may\ndeem important.\n\n \n\nThe JOBS Act also provides that\nan emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private\ncompany is otherwise required to comply with such new or revised accounting standards. We do not plan to “opt out” of such\nexemptions afforded to an emerging growth company. As a result of this election, our financial statements may not be comparable to those\nof companies that comply with public company effective dates.\n\n \n\n**We qualify as a foreign private\nissuer and, as a result, we will not be subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that permit\nless detailed and less frequent reporting than that of a U.S. domestic public company.**\n\n \n\nWe report under the Exchange Act\nas a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are\nexempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of\nthe Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange\nAct; and (ii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited\nfinancial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In addition,\nour officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions\nof Section 16 of the Exchange Act and the rules thereunder. Moreover, foreign private issuers are not required to file their annual report\non Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are non-accelerated filers are required\nto file their annual report on Form 10-K within 90 days after the end of each fiscal year. Foreign private issuers also are exempt from\nRegulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the\nabove, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.\n\n \n\nIf we lose our status as a foreign\nprivate issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers,\nwhich are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our\ncorporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities\nlaws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than\nthe cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase\nour legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were\nrequired to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for\nus to obtain and maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage\nor incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract\nand retain qualified members of our board of directors.\n\n \n\n30\n\n \n\n \n\n**As a foreign private issuer,\nwe are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq\ncorporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied\nfully with corporate governance listing standards.**\n\n \n\nAs a foreign private issuer, we\nare permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain governance\nmatters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate governance\nlisting standards.\n\n \n\nWe do not follow Nasdaq’s\nrequirements regarding shareholder approval for certain issuances of securities under Nasdaq Listing Rule 5635. Under our memorandum and\narticles of association, our board of directors is authorized to issue securities including in connection with certain events such as\nthe acquisition of shares or assets of another company, the establishment of or amendments to equity-based compensation plans for employees,\na change of control of us, rights issues at or below market price, certain private placements and issuance of convertible notes, and the\nissuance of 20% or more of our outstanding Class A ordinary shares, subject to the provisions of the memorandum and articles of association.\n\n \n\nOther than those described above,\nthere are no significant differences between our corporate governance practices and those followed by U.S. domestic companies under Nasdaq\ncorporate governance listing standards. We may in the future decide to use the foreign private issuer exemption with respect to some or\nall the other Nasdaq corporate governance rules. As a result, to the extent that we follow other home country practices, our shareholders\nmay be afforded less protection than they otherwise would under the Nasdaq corporate governance listing standards applicable to U.S. domestic\nissuers. We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.\n\n \n\n**There can be no assurance\nthat we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could\nresult in adverse U.S. federal income tax consequences to U.S. holders of our Class A ordinary shares.**\n\n \n\nA non-U.S. corporation will be\na PFIC for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of “passive”\nincome; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is\nattributable to assets that produce passive income or are held for the production of passive income, or the asset test. Based on our current\nand expected income and assets, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However,\nno assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry\nmade on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that\nthe Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations\nin the market price of our Class A ordinary shares may cause us to become a PFIC for the current or subsequent taxable years because the\nvalue of our assets for the purpose of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined\nby reference to the market price of our Class A ordinary shares. The composition of our income and assets may also be affected by how,\nand how quickly, we use our liquid assets. If we were to be or become a PFIC for any taxable year during which a U.S. Holder holds our\nClass A ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10. Additional\nInformation-E. Taxation-Passive Foreign Investment Company Consequences.”\n\n \n\n**We may lose our foreign private\nissuer status in the future, which could result in significant additional costs and expenses.**\n\n \n\nAs discussed above, we are a foreign\nprivate issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of\nthe Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most\nrecently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Class\nA ordinary shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary\nto maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file\nwith the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the\nforms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers,\ndirectors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of\nthe Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the\nNasdaq rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting\nand other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain\na listing on a U.S. securities exchange.\n\n \n\n31\n\n \n\n \n\n**The price of our Class A\nordinary shares could be subject to rapid and substantial volatility, and such volatility may make it difficult for prospective investors\nto assess the rapidly changing value of our Class A ordinary shares.**\n\n \n\nThere have been instances of extreme\nstock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially\namong those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we\nmay experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization\ncompanies. In particular, our Class A ordinary shares may be subject to rapid and substantial price volatility, low volumes of trades\nand large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating\nperformance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of\nour Class A ordinary shares.\n\n \n\nIn addition, if the trading volumes\nof our Class A ordinary shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Class\nA ordinary shares. This low volume of trades could also cause the price of our Class A ordinary shares to fluctuate greatly, with large\npercentage changes in price occurring in any trading day session. Holders of our Class A ordinary shares may also not be able to readily\nliquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general\neconomic and political conditions may also adversely affect the market price of our Class A ordinary shares. As a result of this volatility,\ninvestors may experience losses on their investment in our Class A ordinary shares. A decline in the market price of our Class A ordinary\nshares also could adversely affect our ability to issue additional Class A ordinary shares and our ability to obtain additional financing\nin the future. No assurance can be given that an active market in our Class A ordinary shares will be sustained, and thus holders of our\nClass A ordinary shares may be unable to readily sell the shares they hold or may not be able to sell their shares at all."}