{"url_path":"/sec/epow/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 ** **OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1780731/0001213900-26-056928-index.html","accession_number":"0001213900-26-056928","cik":"0001780731","ticker":"EPOW","issuer_name":"E-Power Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1780731/0001213900-26-056928-index.html","primary_entity_key":"0001780731","primary_entity_name":"E-Power Inc."},"word_count":10136,"has_tables":true,"body_markdown":"**ITEM 5.** **OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\n*The following discussion of the Company’s\nfinancial condition and results of operations is based upon and should be read in conjunction with the Company’s consolidated financial\nstatements and their related notes included elsewhere in this annual report. This annual report contains forward-looking statements. See\n“Forward-Looking Information” in this annual report. In evaluating our business, you should carefully consider the information\nprovided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. The Company cautions you\nthat its businesses and financial performance are subject to substantial risks and uncertainties.*\n\n \n\n**Overview**\n\n \n\nThe VIE, or SDH, started operating as a consulting\ncompany providing enterprise services to small and medium-sized enterprises in the PRC in December 2014, and launched its knowledge sharing\nand enterprise service platform in May 2016.\n\n \n\nBeginning in fiscal year 2022, the Company commenced the transition\nof its core business from knowledge sharing and enterprise services to sales of graphite anode material products. In April 2022, the Company\nentered into the graphite anode material manufacturing and sales business through a joint venture, Sunrise Guizhou, of which the Company\ncurrently owns 39.35% through Zhuhai Zibo, the Company’s wholly owned subsidiary. The Company consolidates Sunrise Guizhou’s\nfinancial statement because it owns a majority of seats on its board of directors and controls its financial and operating policies pursuant\nto an agreement among its funding shareholders. Sunrise Guizhou is located at Yilong New District, Xingyi City, Qian Southwest State,\nGuizhou Province, China. The land use of Sunrise Guizhou’s graphite anode manufacturing site is 401,545 square meters. Sunrise Guizhou\nbegan construction of the manufacturing plant in April 2022, and the first and second phase construction of (30,000 tons annual manufacturing\ncapacity) of the manufacturing plant has been completed. The third phase of construction of the manufacturing plant (20,000 tons annual\nmanufacturing capacity) was approved by the board of the directors of the Company in March 2023, and remains under construction.\n\n \n\n68\n\n \n\n \n\n**Results of Operations**\n\n \n\nThe following table summarizes the results of\nthe Company’s operations during the years ended December 31, 2025, 2024 and 2023, respectively, and provides information regarding\nthe amounts in U.S. dollar and percentage increase or decrease during such periods.\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nREVENUES, NET \n   \n   \n  \n\nProducts \n$46,342,154  \n$64,365,362  \n$44,384,004 \n\nServices \n 73,978  \n 632,379  \n 666,401 \n\nTotal revenues \n 46,416,132  \n 64,997,741  \n 45,050,405 \n\n  \n    \n    \n   \n\nCOSTS OF REVENUES \n    \n    \n   \n\nProducts \n 52,252,338  \n 70,782,649  \n 57,172,626 \n\nServices \n 11,278  \n 12,672  \n 281,030 \n\nTotal cost of revenues \n 52,263,616  \n 70,795,321  \n 57,453,656 \n\n  \n    \n    \n   \n\nGROSS LOSS \n (5,847,484) \n (5,797,580) \n (12,403,251)\n\n  \n    \n    \n   \n\nOPERATING EXPENSES \n    \n    \n   \n\nSelling expenses \n 895,099  \n 899,760  \n 742,167 \n\nGeneral and administrative expenses \n 7,329,317  \n 7,391,664  \n 13,040,038 \n\nResearch and development expenses \n 1,955,588  \n 2,507,324  \n 1,193,082 \n\nImpairment of intangible assets \n -  \n -  \n 3,151,467 \n\nTotal operating expenses \n 10,180,004  \n 10,798,748  \n 18,126,754 \n\n  \n    \n    \n   \n\nLOSS FROM OPERATIONS \n (16,027,488) \n (16,596,328) \n (30,530,005)\n\n  \n    \n    \n   \n\nOTHER (EXPENSES) INCOME \n    \n    \n   \n\nInvestment income (losses) \n 146,361  \n 198,176  \n (1,170,974)\n\nInterest expense, net \n (4,566,816) \n (2,018,680) \n (2,162,109)\n\nShare subscription discount expenses \n (6,534,936) \n -  \n - \n\nOther income, net \n 323,111  \n 441,231  \n 942,138 \n\nTotal other expenses, net \n (10,632,280) \n (1,379,273) \n (2,390,945)\n\n  \n    \n    \n   \n\nLOSS BEFORE INCOME TAXES \n (26,659,768) \n (17,975,601) \n (32,920,950)\n\n  \n    \n    \n   \n\nIncome taxes provision (benefit) \n (387) \n 5,563  \n (226)\n\n  \n    \n    \n   \n\nNET LOSS \n (26,659,381) \n (17,981,164) \n (32,920,724)\n\nLess: net loss attributable to non-controlling interests \n (10,023,801) \n (6,204,728) \n (8,688,144)\n\nNET LOSS ATTRIBUTABLE TO E-POWER INC. ORDINARY SHAREHOLDERS \n$(16,635,580) \n$(11,776,436) \n (24,232,580)\n\n  \n    \n    \n   \n\nOTHER COMPREHENSIVE LOSS \n    \n    \n   \n\nForeign currency translation adjustment \n 656,394  \n (962,919) \n (1,165,807)\n\nTOTAL COMPREHENSIVE LOSS \n (26,002,987) \n (18,944,083) \n (34,086,531)\n\nLess: comprehensive loss attributable to non-controlling interests \n (9,562,787) \n (6,579,590) \n (9,220,222)\n\nCOMPREHENSIVE LOSS ATTRIBUTABLE TO ORIDNARY SHAREHOLDERS OF E-POWER INC. \n$(16,440,200) \n$(12,364,493) \n (24,866,309)\n\n  \n    \n    \n   \n\nLOSS PER SHARE \n    \n    \n   \n\nBasic and diluted - Class A and Class B ordinary shares \n$(0.57) \n$(0.48) \n$(1.08)\n\n  \n    \n    \n   \n\nWEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING \n    \n    \n   \n\nBasic and diluted - Class A and Class B ordinary shares \n 29,043,280  \n 26,404,589  \n 25,622,195 \n\n \n\n69\n\n \n\n \n\n**Year Ended December 31, 2025 Compared to Year Ended December 31,\n2024**\n\n* *\n\n**Revenues, net**\n\n** **\n\nRevenues for the years ended December 31, 2025 and 2024,\nexpressed in U.S. dollars, were derived from the following sources:\n\n \n\n  \nFor the years ended December 31,  \nChange \n\n  \n2025  \n%  \n2024  \n%  \nAmount  \n% \n\n  \nUS$  \nUS$  \nUS$ \n\nGraphite anode material business \n$46,342,154  \n 99.84% \n$64,365,362  \n 99.03% \n$(18,023,208) \n (28.00)%\n\nKnowledge sharing and enterprise business \n 73,978  \n 0.16% \n 632,379  \n 0.97% \n (558,401) \n (88.30)%\n\nRevenues, net \n$46,416,132  \n 100.00% \n$64,997,741  \n 100.00% \n$(18,581,609) \n (28.59)%\n\n \n\nRevenues decreased by $18,581,609, or 28.59%,\nfrom $64,997,741 for the year ended December 31, 2024, to $46,416,132 for the year ended December 31, 2025. Revenues from graphite anode\nmaterial sales business accounted for 99.84% and 99.03% of net revenues for the year ended December 31, 2025 and 2024, respectively. Revenue\nfrom knowledge sharing and enterprise business accounted for 0.16% and 0.97% of net revenues for the years ended December 31, 2025 and\n2024, respectively.\n\n \n\n*Revenues from graphite anode material sales*\n\n* *\n\nThe Company’s products include various artificial\ngraphite anode material products. Artificial graphite is made of petroleum coke, needle coke and pitch coke as the main material, and\nformed after crushing, shaping, granulation and graphitization. The Company markets its graphite anode products through a direct sales\nchannel, through its sales department consists of five experienced employees, who report directly to the CEO. The Company’s customers\nwere manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric\nships, and smart consumer electronics.\n\n \n\nRevenues decreased by $18,023,208, or 28.00%,\nfrom $64,365,362 for the year ended December 31, 2024, to $46,342,154 for the year ended December 31, 2025. For the year ended December\n31, 2025, we had supplied 37,065 tons of products to 35 customers , as compared to 37,065 tons to 26 customers for the year ended December\n31, 2024. However, the average selling price of the graphite anode materials decreased by RMB 7,426 per ton, or 45.24% from RMB 16,412\nper ton for the year ended December 31, 2024, to RMB 8,986 per ton for the year ended December 31, 2025.\n\n* *\n\n*Revenues from knowledge sharing and enterprise business*\n\n* *\n\nRevenues from knowledge sharing and enterprise\nbusiness decreased by $558,401, or 88.30%, from $632,379 for the year ended December 31, 2024, to $73,978 for the year ended December\n31, 2025.\n\n \n\nThe revenue decrease of knowledge sharing\nand enterprise business for the year ended December 31, 2025 was due to the decrease in the revenue of other services, which\nincluded rental and consultation services. Revenues from other services decreased by $558,401, or 88.30% from $632,379 for the year\nended December 31, 2024, to $73,978 for the year ended December 31, 2025, primarily due to decreased demand for such\nservices. \n\n \n\n**Costs of revenues**\n\n \n\nThe following table sets forth the breakdown of\nthe cost of revenues, expressed in U.S. dollars, for the years ended December 31, 2025 and 2024:\n\n* *\n\n** **** **\n**For\nthe years ended December 31,**** **** **\n**Change**** **\n\n  \n2025  \n%  \n2024  \n%  \nAmount  \n% \n\n  \nUS$  \nUS$  \nUS$ \n\nCost of goods sold \n$52,252,338  \n 99.98% \n$70,782,649  \n 99.98% \n$(18,530,311) \n (26.18)%\n\nService costs \n 11,278  \n 0.02% \n 12,672  \n 0.02% \n (1,394) \n (11.00)%\n\nTotal costs of revenues \n$52,263,616  \n 100.00% \n$70,795,321  \n 100.00% \n$(18,531,705) \n (26.18)%\n\n* *\n\n70\n\n \n\n* *\n\n*Cost of goods sold*\n\n* *\n\nThe cost of goods sold decreased by $18,530,311,\nor 26.18%, from $70,782,649 for the year ended December 31, 2024, to $52,252,338 for the year ended December 31, 2025. The decrease of\nthe cost of goods sold was mainly due to the decreased sale of the graphite anode materials. In the meantime, the average cost per ton\nof the graphite anode materials decreased by $1,096 per ton, or 46.30% from $2,368 per ton for the year ended December 31, 2024 to $1,272\nper ton for the year ended December 31, 2025. Moreover, the impairment of inventory increased by $1,160,102, or 29.30%, from $3,959,304\nfor the year ended December 31, 2024, to $5,119,406 for the year ended December 31, 2025.\n\n \n\n*Service costs*\n\n* *\n\nThe service costs for knowledge sharing and enterprise\nbusiness primarily included (1) labor costs; (2) depreciation; and (3) professional and consulting fees paid to third parties for the\nconsulting services. Service costs decreased by $1,394, or 11.00%, for the year ended December 31, 2025 compared to the same period in\n2024, which was immaterial.\n\n* *\n\n**Gross loss**\n\n \n\nAs a result of the foregoing, we reported a gross\nloss of $5,847,484 for the year ended December 31, 2025 and a negative gross margin. The negative gross margin was due to the $5,910,184\ngross loss of the graphite anode material sales business, mainly due to the decrease in the sales price of our products, attributing to\nmanufacturing overcapacity and a high level of competition in the industry. Furthermore, the raw material costs and graphitization outsourcing\ncost did not decrease proportionately to the decrease in the sales prices of graphite anode material. Additionally, a $5,119,406 impairment\nof inventory of graphite anode material was recorded due to decreasing sales prices. The gross loss was partially offset by a gross profit\nof $62,700 from the knowledge sharing and enterprise business.\n\n** **\n\n**Operating expenses**\n\n** **\n\nThe following table sets forth the breakdown of\nthe operating expenses, expressed in U.S. dollars, for the years ended December 31, 2025 and 2024:\n\n* *\n\n  \nFor the years ended December 31,  \nChange \n\n  \n2025  \n%  \n2024  \n%  \nAmount  \n% \n\n  \nUS$  \nUS$  \n\n**US$**\n\n \n\nSelling expenses \n$895,099  \n 8.79% \n$899,760  \n 8.33% \n$(4,661) \n (0.52)%\n\nGeneral and administrative expenses \n 7,329,317  \n 72.00% \n 7,391,664  \n 68.45% \n (62,347) \n (0.84)%\n\nResearch and development expenses \n 1,955,588  \n 19.21% \n 2,507,324  \n 23.22% \n (551,736) \n (22.00)%\n\nTotal operating expenses \n$10,180,004  \n 100.00% \n$10,798,748  \n 100.00% \n$(618,744) \n (5.73)%\n\n \n\n71\n\n \n\n \n\n*Selling expenses*\n\n* *\n\nThe selling expenses decreased by $4,661 or 0.52%,\nfrom $899,760 for the year ended December 31, 2024, to $895,099 for the year ended December 31, 2025. The decrease was immaterial.\n\n \n\n*General and administrative expenses*\n\n* *\n\nThe general and administrative expenses\ndecreased by $62,347, or 0.84%, from $7,391,664 for the year ended December 31, 2024 to $7,329,317 for the year ended December 31,\n2025. Such decrease was primarily due to (1) a decrease in share-based compensation of $649,090, as more share-based compensation\nexpenses were recorded in the earlier vesting periods in a cliff vesting schedule; (2) a decrease in operation tax expenses\nof $258,626 as the Company had tax planning on property tax, which was charged less based on the rental income model; offset by (3)\nan increase in professional service fees of $455,184 for more legal, consultation and advisory services; (4) an increase in\ndepreciation and amortization expenses of $218,034, as the administrative and dormitory buildings were recorded in plant, property\nand equipment in the year ended December 31, 2024 and depreciated more months in the year ended December 31, 2025; (5) an increase\nin travel expenses of $127,609 as the management incurred more international travel expenses to expand the Company’s business\nin the United States.\n\n \n\n*Research and development expenses*\n\n* *\n\nResearch and development expenses decreased by $551,736, or 22.00%,\nfrom $2,507,324 for the year ended December 31, 2024 to $1,955,588 for the year ended December 31, 2025. Research and development expenses\nfor the year ended December 31, 2025 and 2024 were mainly associated with the research development activities of graphite anode material\nbusiness and knowledge sharing and enterprise business, including technology service, technical service, purchasing laboratory chemical\nmaterial collaterals. The decrease was primarily due to (1) a decrease in a technology development service fee of $972,803 which was associated\nwith the ongoing development and upgrade of Shidong APP commenced in the year ended December 31, 2024; offset by (2) an increase in material\ninput of $412,924 for more research and development programs in the year ended December 31, 2025.\n\n \n\n**Other expenses, net**\n\n \n\nThe total net other expenses were\n$10,632,280 for the year ended December 31, 2025. Such expenses for the year ended December 31, 2025 primarily consisted of share\nsubscription discount expenses of $6,534,936, and interest expense of $4,566,816, which was partially offset by investment income of\n$146,361 and the other income of $323,111.\n\n \n\nWhen ordinary shares are issued for cash in an arm’s-length\nfinancing transaction with an unrelated party, the Company evaluates transactions in which the issuance date fair value of the equity\ninstruments issued exceeds the value of the consideration received if there are no other transaction elements. In absence of (i) a share-based\npayment for goods or services received, (ii) a payment for an asset or (iii) a dividend to existing shareholders, any difference between\nthe fair value and the gross proceeds is attributable to an expense. The share subscription discount expenses were $6,534,936 for the\nyear 2025; Interest expense was mainly attributable to various debt financings of the graphite anode material sales business; investment\nincome of $146,361 was attributed to the equity pickup of equity method investment; the other income of $323,111 was mainly $671,383 from\nwasted residual sales, offset by $318,664 of fine and late payment fee on litigation charges, social security and land use right and property\ntax.\n\n \n\nThe total net other expenses were $1,379,273 for\nthe year ended December 31, 2024. Such expenses for the year ended December 31, 2024 primarily consisted of interest expense of $2,018,680,\nwhich was partially offset by investment income of $198,176 and the other income of $441,231. Interest expense was mainly attributable\nto various debt financings of the graphite anode material sales business; investment income of $198,176 was attributed to the equity pickup\nof equity method investment; the other income of $441,231 was mainly $542,001 for inventory count surplus and $326,338 from wasted residual\nsales, offset by $467,194 of fine and late payment fee on social security and land use right and property tax.\n\n** **\n\n72\n\n \n\n** **\n\n**Income taxes provision**\n\n** **\n\n*Cayman Islands*\n\n \n\nThe Cayman Islands currently levies no taxes on\nindividuals or corporations based upon profits, income, gains, or appreciation and there is no taxation in the nature of inheritance tax\nor estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties\nwhich may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. No stamp\nduty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those\nwhich hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman\nIslands.\n\n \n\nPayments of dividends and capital in respect of\nour Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend\nor capital to any holder of our ordinary shares, as the case may be, nor will gains derived from the disposal of our ordinary shares be\nsubject to Cayman Islands income or corporation tax.\n\n \n\n*The United States*\n\n \n\nThe Company’s subsidiary,\nAlchemistica, was incorporated in the U.S. and is subject to federal income tax rate of 21%. Net operating losses incurred in\ntaxable years beginning after December 31, 2017, may be carried forward indefinitely but are subject to an 80% taxable income\nlimitation.\n\n \n\n*Hong Kong*\n\n \n\nIn accordance with the relevant tax laws and regulations\nof Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income.\nFrom year of assessment of 2019/2020 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5%\non any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits\narising in or derived from Hong Kong for the fiscal years ended December 31, 2025, 2024 and 2023, and accordingly no provision for Hong\nKong profits tax has been made in these periods.\n\n \n\n*Mainland China*\n\n \n\nThe Company’s PRC subsidiaries were\nincorporated in Mainland China, and are subject to the Mainland China Enterprise Income Tax Laws (“EIT Laws”) with the\nstatutory income tax rate of 25% with the following exceptions.\n\n \n\nIn accordance with the implementation rules of\nEIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of\n15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate\nexpires. SDH was eligible to enjoy a preferential tax rate of 15% from 2021 to 2023, to the extent it had taxable income under the EIT Law.\nSunrise Guizhou is eligible to enjoy a preferential tax rate of 15% from 2024 to 2026, to the extent it has taxable income under the EIT\nLaw.\n\n  \n\nFor qualified small and low-profit enterprises,\nfrom January 1, 2023 to December 31, 2027, 25% of the first RMB 3.0 million of the assessable profit before tax is subject to the tax\nrate of 20%. For the years ended December 31, 2025, 2024 and 2023, some PRC subsidiaries are qualified small and low-profit enterprises\nas defined, and thus are eligible for the above preferential tax rates for small and low-profit enterprises.\n\n \n\n**Net loss**\n\n** **\n\nAs a result of the foregoing, the Company reported\na net loss of $26,659,381 for the year ended December 31, 2025, compared to $17,981,164 for the year ended December 31, 2024.\n\n \n\n73\n\n \n\n \n\n**Net loss attributable to non-controlling\ninterest**\n\n \n\nNon-controlling interests are recognized to reflect\nthe portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. As of December\n31, 2025, for the Company’s consolidated subsidiaries, the VIE and VIE’ s subsidiaries, non-controlling interests represent:\na) a non-controlling shareholder’s 49% ownership interest in GMB (Beijing), GMB Consulting and Shidong Yike; b) a non-controlling\nshareholder’s 59.20% ownership interest in Sunrise Guizhou; c) a non-controlling shareholder’s 49% ownership interest in GMB\nCulture, which has a subsidiary called GMB Technology; d) a non-controlling shareholder’s 25% ownership interest in Shidong Cloud,\nand e) a non-controlling shareholder’s 29% ownership interest in Alchemistica.\n\n** **\n\n**Year Ended December 31, 2024 Compared to Year Ended\nDecember 31, 2023**\n\n* *\n\n**Revenues, net**\n\n** **\n\nRevenues for the years ended December 31, 2024 and 2023,\nexpressed in U.S. dollars, were derived from the following sources:\n\n \n\n  \nFor the years ended December 31,  \nChange \n\n  \n2024  \n%  \n2023  \n%  \nAmount  \n% \n\n  \nUS$  \nUS$  \nUS$ \n\nGraphite anode material business \n$64,365,362  \n 99.03% \n$44,384,004  \n 98.52% \n$19,981,358  \n 45.02%\n\nKnowledge sharing and enterprise business \n 632,379  \n 0.97% \n 666,401  \n 1.48% \n (34,022) \n (5.11)%\n\nRevenues, net \n$64,997,741  \n 100.00% \n$45,050,405  \n 100.00% \n$19,947,336  \n 44.28%\n\n \n\nRevenues increased by $19,947,336, or 44.28%,\nfrom $45,050,405 for the year ended December 31, 2023, to $64,997,741 for the year ended December 31, 2024. Revenues from graphite anode\nmaterial sales business accounted for 99.03% and 98.52% of net revenues for the year ended December 31, 2024 and 2023, respectively. Revenue\nfrom knowledge sharing and enterprise business accounted for 0.97% and 1.48% of net revenues for the years ended December 31, 2024 and\n2023, respectively.\n\n \n\n*Revenues from graphite anode material sales*\n\n* *\n\nThe Company’s products include various artificial\ngraphite anode material products. Artificial graphite is made of petroleum coke, needle coke and pitch coke as the main material, and\nformed after crushing, shaping, granulation and graphitization. The Company markets its graphite anode products through a direct sales\nchannel, through its sales department consists of five experienced employees, who report directly to the CEO. The Company’s customers\nwere manufacturers of industrial and consumer energy storage lithium-ion batteries, such as batteries for electric vehicles and electric\nships, and smart consumer electronics.\n\n \n\nRevenues increased by $19,981,358, or 45.02%,\nfrom $44,384,004 for the year ended December 31, 2023, to $64,365,362 for the year ended December 31, 2024. For the year ended December\n31, 2024, we had supplied 28,221 tons of products to 26 customers , as compared to 12,513 tons to 23 customers for the year ended December\n31, 2023. However, the average selling price of the graphite anode materials decreased by RMB 8,588 per ton, or 34.35% from RMB 25,000\nper ton for the year ended December 31, 2023, to RMB 16,412 per ton for the year ended December 31, 2024.\n\n* *\n\n*Revenues from knowledge sharing and enterprise business*\n\n* *\n\nRevenues from knowledge sharing and enterprise\nbusiness decreased by $34,022, or 5.11%, from $666,401 for the year ended December 31, 2023, to $632,379 for the year ended December 31,\n2024.\n\n \n\nThe revenue decrease of knowledge sharing and\nenterprise business for the year ended December 31, 2024 was brought by the decrease in the revenue of other services, which included\nhealth services and rental services. Revenues from other services decreased by $59,091, or 33.61% from $175,812 for the year ended December\n31, 2023, to $116,721 for the year ended December 31, 2024, primarily due to decreased demand for such services. \n\n \n\n**Costs of revenues**\n\n \n\nThe following table sets forth the breakdown of\nthe cost of revenues, expressed in U.S. dollars, for the years ended December 31, 2024 and 2023:\n\n* *\n\n  \nFor the years ended December 31,  \n**Change** \n\n  \n2024  \n%  \n2023  \n%  \nAmount  \n% \n\n  \nUS$  \nUS$  \nUS$ \n\nCost of goods sold \n$70,782,649  \n 99.98% \n$57,172,626  \n 99.51% \n$13,610,023  \n 23.81%\n\nService costs \n 12,672  \n 0.02% \n 281,030  \n 0.49% \n (268,358) \n (95.49)%\n\nTotal costs of revenues \n$70,795,321  \n 100.00% \n$57,453,656  \n 100.00% \n$13,341,665  \n 23.22%\n\n* *\n\n74\n\n \n\n* *\n\n*Cost of goods sold*\n\n* *\n\nThe cost of goods sold increased by $13,610,023,\nor 23.81%, from $57,172,626 for the year ended December 31, 2023, to $70,782,649 for the year ended December 31, 2024. The increase of\nthe cost of goods sold was mainly due to the increased sale of the graphite anode materials. In the meantime, the average cost per ton\nof the graphite anode materials decreased by $1,623 per ton, or 40.67% from $3,991 per ton for the year ended December 31, 2023 to $2,368\nper ton for the year ended December 31, 2024. Moreover, the impairment of inventory decreased by $3,279,515, or 45.30%, from $7,238,819\nfor the year ended December 31, 2023, to $3,959,304 for the year ended December 31, 2024.\n\n \n\n*Service costs*\n\n* *\n\nThe service costs for knowledge sharing and enterprise\nbusiness primarily included (1) labor costs; (2) depreciation; and (3) professional and consulting fees paid to third parties for the\nconsulting services. Service costs decreased by $268,358, or 95.49% for the year ended December 31, 2024 compared to the same period in\n2023, mainly due to the decrease in staff headcounts and associated expenditure.\n\n* *\n\n**Gross loss**\n\n \n\nAs a result of the foregoing, we reported a gross\nloss of $5,797,580 for the year ended December 31, 2024 and a negative gross margin. The negative gross margin was due to the $6,417,287\ngross loss of the graphite anode material sales business mainly due to the decrease in the sales price of our products, attributing to\nmanufacturing overcapacity and a high level of competition in the industry. Furthermore, the raw material costs and graphitization outsourcing\ncost did not decrease proportionately to the decrease in the sales prices of graphite anode material. Additionally, a $3,959,304 impairment\nof inventory of graphite anode material was recorded due to decreasing sales prices. The gross loss was partially offset by a gross profit\nof $619,707 from the knowledge sharing and enterprise business.\n\n** **\n\n**Operating expenses**\n\n** **\n\nThe following table sets forth the breakdown of\nthe operating expenses, expressed in U.S. dollars, for the years ended December 31, 2024 and 2023:\n\n* *\n\n  \nFor the years ended December 31,  \nChange \n\n  \n2024  \n%  \n2023  \n%  \nAmount  \n% \n\nSelling expenses \n$899,760  \n 8.33% \n$742,167  \n 4.09% \n$157,593  \n 21.23%\n\nGeneral and administrative expenses \n 7,391,664  \n 68.45% \n 13,040,038  \n 71.94% \n (5,648,374) \n (43.32)%\n\nResearch and development expenses \n 2,507,324  \n 23.22% \n 1,193,082  \n 6.58% \n 1,314,242  \n 110.16%\n\nImpairment of intangible assets \n -  \n -  \n 3,151,467  \n 17.39% \n (3,151,467) \n (100.00)%\n\nTotal costs and operating expenses \n$10,798,748  \n 100.00% \n$18,126,754  \n 100.00% \n$(7,328,006) \n (40.43)%\n\n \n\n*Selling expenses*\n\n* *\n\nThe selling expenses increased by $157,593 or\n21.23%, $742,167 for the year ended December 31, 2023, to $899,760 for the year ended December 31, 2024. The increase was primarily due\nto the expansion of graphite anode material business.\n\n \n\n*General and administrative expenses*\n\n* *\n\nThe general and administrative expenses decreased\nby $5,648,374, or 43.32%, from $13,040,038 for the year ended December 31, 2023 to $7,391,664 for the year ended December 31, 2024. Such\ndecrease was primarily due to (1) an decrease in credit loss of $3,314,179, which was mainly due to lower provision on credit loss in\nthe knowledge sharing and enterprise service business for the year ended December 31, 2024; (2) a decrease in share-based compensation\nof $1,170,868 as more share-based compensation expenses were recorded in the earlier vesting periods in a cliff vesting schedule in 2023;\n(3) a decrease in salary and welfare expenses of $1,061,790 as the Company reduced staff number in knowledge sharing and enterprise service\nbusiness.\n\n \n\n75\n\n \n\n \n\n*Research and development expenses*\n\n* *\n\nResearch and development expenses increased by\n$1,314,242 or 110.16%, from $1,193,082 for the year ended December 31, 2023 to $2,507,324 for the year ended December 31, 2024. Research\nand development expenses for the year ended December 31, 2024 and 2023 were mainly associated with the research development activities\nof graphite anode material business, including technology service, technical service, purchasing laboratory chemical material collaterals.\nThe increase was primarily due to (1) an increase in technology development service fee of $972,803; (2) an increase in salary and welfare\nof $141,500 for research and development personnels; and (3) an increase of $238,891 in office miscellaneous expenses and depreciation\nexpense of plant, property and equipment associated with research and development.\n\n \n\n*Impairment of intangible assets*\n\n* *\n\nImpairment of intangible assets decreased by $3,151,467,\nor 100%, from $3,151,467 for the year ended December 31, 2023 to $nil for the year ended December 31, 2024. The impaired intangible assets\nfor the year ended December 31, 2023 was associated with certain copyrights of graphite anode material business. The Company reviewed\nits copyright of graphite anode material business for impairment as the copyrights became obsolete, which indicated that the carrying\namount of copyrights might no longer be recoverable as of December 31, 2023.\n\n \n\n**Other expenses, net**\n\n \n\nThe total net other expenses were $1,379,273 for\nthe year ended December 31, 2024. Such expenses for the year ended December 31, 2024 primarily consisted of interest expense of $2,018,680,\nwhich was partially offset by investment income of $198,176 and the other income of $441,231. Interest expense was mainly attributable\nto various debt financings of the graphite anode material sales business; investment income of $198,176 was attributed to the equity pickup\nof equity method investment; the other income of $441,231 was mainly $542,001 for inventory count surplus and $326,338 from wasted residual\nsales, offset by $467,194 of fine and late payment fee on social security and land use right and property tax.\n\n \n\nThe total net other expenses were $2,390,945 for\nthe year ended December 31, 2023. Such expenses for the year ended December 31, 2023 primarily consisted of investment loss of $1,170,974\nand interest expense of $2,162,109, which was partially offset by the other income of $942,138. Investment loss of $1,170,974 was mainly\nattributed to the impairment loss of $1,450,381 on long-term investments that do not have readily determinable fair values. Interest expense\nwas mainly attributable to various means of debt financing on the graphite anode material sales business. Other income of $942,138 was\nmainly $380,164 for government subsidy and $390,714 for wasted residual sales. \n\n** **\n\n**Income taxes provision**\n\n** **\n\n*Cayman Islands*\n\n \n\nThe Cayman Islands currently levies no taxes on\nindividuals or corporations based upon profits, income, gains, or appreciation and there is no taxation in the nature of inheritance tax\nor estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties\nwhich may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. No stamp\nduty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those\nwhich hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman\nIslands.\n\n \n\nPayments of dividends and capital in respect of\nour ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend\nor capital to any holder of our ordinary shares, as the case may be, nor will gains derived from the disposal of our ordinary shares be\nsubject to Cayman Islands income or corporation tax.\n\n \n\n*Hong Kong*\n\n \n\nIn accordance with the relevant tax laws and regulations\nof Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income.\nFrom year of assessment of 2019/2020 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5%\non any part of assessable profits over HK$2,000,000. However, the Company’s HK subsidiary did not generate any assessable profits\narising in or derived from Hong Kong for the fiscal years ended December 31, 2024, 2023 and 2022, and accordingly no provision for Hong\nKong profits tax has been made in these periods.\n\n \n\n*China*\n\n \n\nThe Company’s subsidiaries are incorporated\nin Mainland China, and are subject to the Mainland China Enterprise Income Tax Laws (“EIT Laws”) with the statutory income\ntax rate of 25% with the following exceptions.\n\n \n\n76\n\n \n\n \n\nIn accordance with the implementation rules of\nEIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of\n15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate\nexpires. SDH is eligible to enjoy a preferential tax rate of 15% from 2021 to 2023, to the extent it has taxable income under the EIT Law.\nSunrise Guizhou is eligible to enjoy a preferential tax rate of 15% from 2024 to 2026, to the extent it has taxable income under the EIT\nLaw.\n\n  \n\nFor qualified small and low-profit enterprises,\nfrom January 1, 2022 to December 31, 2022, 12.5% of the first RMB 1.0 million of the assessable profit before tax is subject to a preferential\ntax rate of 20% and the 25% of the assessable profit before tax exceeding RMB 1.0 million but not exceeding RMB 3.0 million is subject\nto a preferential tax rate of 20%. From January 1, 2023 to December 31, 2027, 25% of the first RMB 3.0 million of the assessable profit\nbefore tax is subject to the tax rate of 20%. For the years ended December 31, 2024, 2023 and 2022, some PRC subsidiaries are qualified\nsmall and low-profit enterprises as defined, and thus are eligible for the above preferential tax rates for small and low-profit enterprises.\n\n \n\n**Net loss**\n\n** **\n\nAs a result of the foregoing, the Company reported\na net loss of $17,981,164 for the year ended December 31, 2024, compared to $32,920,724 for the year ended December 31, 2023.\n\n \n\n**Net loss attributable to non-controlling\ninterest**\n\n \n\nNon-controlling interests are recognized to reflect\nthe portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. As of December\n31, 2024, for the Company’s consolidated subsidiaries, the VIE and VIE’ s subsidiaries, non-controlling interests represent:\na) a non-controlling shareholder’s 49% ownership interest in GMB (Beijing), GMB Consulting and Shidong Yike; b) a non-controlling\nshareholder’s 59.20% ownership interest in Sunrise Guizhou; c) a non-controlling shareholder’s 49% ownership interest in GMB\nCulture, which has a subsidiary called GMB Technology; and d) a non-controlling shareholder’s 25% ownership interest in Shidong\nCloud, and 40% ownership interest in Shidong Trading.\n\n** ** \n\n**Net loss attributable to ordinary shareholders**\n\n \n\nNet loss attributable to shareholders was $11,776,436\nfor the year ended December 31, 2024, compared to $24,232,580 for the year ended December 31, 2023.\n\n \n\n**Liquidity and Capital Resources**\n\n** **\n\nAs reflected in the consolidated financial statements,\nthe Company incurred net loss of $26,659,381 for the year ended December 31, 2025. Net cash used in operating activities was $25,160,584\nfor the year ended December 31, 2025. The working capital deficit was $28,422,197 as of December 31, 2025.\n\n \n\nAs of December 31, 2025, GIOP BJ\ndidn’t comply with the financial covenants as required by a short-term loan agreement in the principal amount of $1,000,987\nwith Industrial Bank Co., Ltd. (“Industrial Bank”). The term of the loan was from June 25, 2025 to June 24, 2026. The\nfinancial covenants of the loan agreement required GIOP BJ to maintain: (1) current assets of not less than RMB25,000,000; (2) net\nassets of not less than RMB8,000,000; (3) an asset liability ratio of not more than 80%; and (4) a current ratio of not less than\n100%. As of December 31, 2025, GIOP BJ did not meet the above requirements; however, Industrial Bank had not declared the agreement\nin default as a result of the breach of the financial covenants, nor has it done so as of the date of this annual report.\n\n \n\nIn addition, as of December 31, 2025,\nSunrise Guizhou didn’t comply with the financial covenants as required by three long-term loan agreements in an aggregate\namount of $68,917,581 with China Construction Bank (“CCB”) Qianxinan Branch. The financial covenants of the long-term\nloan agreements required Sunrise Guizhou to maintain an asset liability ratio of not more than 70% and continuous profitability\nduring the loan periods pursuant to certain conditions designated in the loan agreements. Sunrise Guizhou obtained a written consent\nand the waiver of the financial covenants on September 30, 2024 and December 8, 2025, respectively. As of the date of this annual\nreport, CCB has not declared the agreement in default as a result of the breaches of the financial covenants.\n\n \n\nThese adverse conditions and events raised substantial\ndoubt about the Company’s ability to continue as a going concern. For the next 12 months from the issuance date of this report,\nthe Company plans to continue implementing various measures to boost revenue and control cost and expenses. In assessing its liquidity,\nmanagement monitors and analyzes the Company’s cash on-hand, its ability to generate sufficient revenue sources and ability to obtain\nadditional financial support in the future, and its operating and capital expenditure commitments. The Company intends to finance its\nfuture working capital requirements and capital expenditures from financing activities for the cash shortfalls and the negative operating\ncash flows. The Company expects continued capital financing through debt or equity issuances to support its working capital requirements.\n\n \n\nAs of December 31, 2025, the Company had cash,\ncash equivalents and restricted cash of $28,150,101. The management believes that it may be able to continue to borrow from banks based\non past experiences and the Company’s credit history when necessary.\n\n \n\nCurrently, the Company is working to improve its\nliquidity and capital sources primarily through cash flows from operation, debt financing, and financial support from its principal shareholder.\nIn order to fully implement its business plans and sustain continued growth, the Company may also seek equity financing from outside investors\nwhen necessary.\n\n \n\n77\n\n \n\n \n\nOn March 30, 2026, Sunrise Guizhou entered\ninto a line of credit financing contract with Bank of China (“Bank of China”) Xingren Branch for a revolving line credit\nof RMB 7,000,000 ($1,000,987) for a term from March 30, 2026 to March 30, 2029. Sunrise Guizhou fully utilized the line of credit\nfor a short term loan with the interest rate of one year loan prime rate from March 30, 2026 to March 29, 2027. Mr. Haiping Hu was\nthe guarantor of the revolving line of credit. Sunrise Guizhou also pledged its manufacturing facilities of RMB 13,901,944, or\n$1,987,952 for guaranty and secure the revolving line of credit.\n\n \n\nIn January, 2026, Sunrise Guizhou entered\ninto a factoring agreement, which is in essence of loan, with CCB Qianxinan Branch and CCB’s affiliates for supplier payment\nfor a period from January 2026 to January 2027. The loan was guaranteed by Mr. Haiping Hu and Zhuhai Zibo. Sunrise Guizhou also\npledged its buildings and land use rights of its manufacturing facilities to CCB. As of the date of this annual report, the loan balance is RMB 97,000,000, or $13,870,816.\n\n \n\nThe Company can make no assurances that required\nfinancings will be available for the amounts needed, or on terms commercially acceptable to the Company, if at all. If one or all of these\nevents does not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfall, there would likely be\na material adverse effect on the Company and its consolidated financial statements.\n\n \n\nThe consolidated financial statements have been\nprepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result\nfrom the outcome of this uncertainty.\n\n** **\n\nIf the Company experiences an adverse operating\nenvironment or incurs unanticipated capital expenditure requirements, or if the Company accelerates its growth, then additional financing\nmay be required. No assurance can be given, however, that additional financing, if required, would be on favorable terms or available\nat all. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves\nthe sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant\ndilution to the existing shareholders.\n\n \n\nSubstantially all of the Company’s operations\nare conducted in the PRC and all of the revenues and the vast majority of expenses, cash and cash equivalents are denominated in RMB.\nAs of December 31, 2025, 75.27% of cash, cash equivalents and restricted cash were held in China, and held by its subsidiaries, the VIE\nand the VIE’s subsidiaries and denominated in Renminbi, while 23.61% of cash, cash equivalents and restricted cash were held in\nHong Kong by the Company, SDH New Energy and GMB HK in US dollars. Although the Company consolidates the results of the VIE and its subsidiaries,\nthe Company only has access to the assets or earnings of the VIE and their subsidiaries through the contractual arrangements with the\nVIE and its shareholders. See “Business — Contractual Arrangements between GIOP BJ, SDH and Its Shareholders.”** **\n\n \n\nA majority of the future revenues are likely to\ncontinue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, Renminbi may be converted into foreign exchange\nfor current account items, including profit distributions, interest payments and trade-and service-related foreign exchange\ntransactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled.\nTherefore, PRC subsidiaries are allowed to pay dividends in foreign currencies to the Company without prior SAFE approval by following\ncertain routine procedural requirements. However, approval from or registration with competent government authorities is required where\nthe Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans\ndenominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account\ntransactions in the future.\n\n \n\nAs of December 31, 2025, the following\namounts, expressed in U.S. dollars, were outstanding balances of cash, cash equivalents and restricted cash in each\njurisdiction:\n\n \n\n  \nCash and cash equivalents  \nRestricted cash  \nTotal \n\nMainland China \n$14,877,066  \n$6,311,630  \n$21,188,696 \n\nHong Kong \n 6,647,378  \n -  \n 6,647,378 \n\nThe United States \n 314,027  \n -  \n 314,027 \n\nBalance at end of the year \n$21,838,471  \n$6,311,630  \n$28,150,101 \n\n \n\n78\n\n \n\n \n\n**Cash Flows**\n\n \n\nThe following table sets forth a summary of cash\nflows, expressed in U.S. dollars, for the periods indicated:\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\nNet cash used in operating activities \n$(25,160,584) \n$(5,352,157) \n$(7,282,995)\n\nNet cash (used in) provided by investing activities \n (11,221,084) \n 632,461  \n (7,003,035)\n\nNet cash provided by financing activities \n 54,460,285  \n 10,631,669  \n 13,679,267 \n\nEffect of foreign exchange rate on cash, cash equivalents and restricted cash \n 710,900  \n (172,056) \n (66,587)\n\nNet increase (decrease) in cash, cash equivalents and restricted cash \n$18,789,517  \n$5,739,917  \n$(673,350)\n\n \n\n**Operating Activities **\n\n \n\nNet cash used in operating activities amounted\nto $25,160,584 for the year ended December 31, 2025. It was primarily due to the following: a) net loss of $26,659,381, adjusted by depreciation\nand amortization of $5,683,727, interest expenses of $1,117,115, impairment of inventory of $5,119,406, and share subscription discount\nexpenses of $6,534,936; increased by b) accounts receivable of $19,043,753, due to the collection of accounts receivable for sales of graphite\nanode products; offset by c) accounts payable of $12,490,727 and notes payable of $10,732,066 for purchasing raw materials of graphite\nanode business; d) inventories of $10,638,275 for more inventory purchases of raw materials, work in progress and finished goods; and e)\nprepaid expenses and other current assets of $1,810,711, due to an increase in input VAT of $1,598,961.\n\n \n\nNet cash used in operating activities amounted\nto $5,352,157 for the year ended December 31, 2024. It was primarily due to the following: a) net loss of $17,981,164, adjusted by depreciation\nand amortization of $5,096,445, share-based compensation of $972,743, interest expenses of $166,999, impairment of inventory of $3,959,304,\nand amortization of finance lease right-of-use asset of $622,203; increased by b) accounts payable of $17,837,613 for raw materials of\ngraphite anode business; c) notes payable of $12,230,606 for raw materials of graphite anode business; and d) deferred revenue of $1,154,441\nfor the consideration received prior to the goods sold; offset by e) accounts receivable of $20,706,075 due to the expansion on sales\nof graphite anode products; f) inventories of $6,241,347 for more inventory purchase on raw materials, work in progress and finished goods\ndue to expansion of graphite anode business; and g) prepaid expenses and other current assets of $1,309,420 due to increase on advance\nto supplier of $1,624,412.\n\n \n\nNet cash used in operating activities amounted\nto $7,282,995 for the year ended December 31, 2023. It was primarily due to the following: a) net loss of $32,920,724, adjusted by depreciation\nand amortization of $3,953,328, share-based compensation of $2,145,801, interest expenses of $575,075, investment losses of $1,170,974,\nbad debt expense of $3,428,033, impairment of inventory of $7,238,819, impairment of intangible assets of $3,151,467, and amortization\nof finance lease right-of-use asset of $338,627; increased by b) prepaid expenses and other current assets of $6,157,166 due to decrease\non tax prepayment of $2,495,656 and advance to supplier of $2,314,788; c) accounts payable of $6,133,132 for finished goods and raw materials\nof graphite anode business; offset by d) accounts receivable of $4,074,715 due to sales of graphite anode products; and e) inventories\nof $5,095,430 for raw materials, work in progress and finished goods of the graphite anode sales business. \n\n \n\n**Investing Activities**\n\n \n\nNet cash used in investing activities amounted\nto $11,221,084 for the year ended December 31, 2025. It was primarily due to purchase of plant, property and equipment of $6,392,748 and\nland use right of $3,677,693.\n\n \n\n79\n\n \n\n \n\nNet cash provided by investing activities amounted\nto $632,461 for the year ended December 31, 2024. It was primarily due to the following: a) redemption of the short-term investment in\nthe Viner Total Investment Fund for a cash collection of $2,371,942; and b) redemption of the prepayment for investment in the Zhejiang\nWangxin Health Technology Co., Ltd. for a cash collection of $708,757; partially offset by c) purchase of plant, property and equipment\nof $2,464,915.\n\n \n\nNet cash used in investing activities amounted\nto $7,003,035 for the year ended December 31, 2023. It was primarily due to the following: a) purchase of plant, property and equipment\nof $5,472,778; b) consideration installment paid for the prior year’s asset acquisition of $706,125, and c) prepayment for finance\nlease right-of-use assets of $1,029,195 and deposit paid for finance lease of $655,990, both of which were associated with a finance lease\ncontract for graphite anode material manufacturing facilities; offset by d) redemption of the short-term investment Viner Total Investment\nFund for a cash collection of $878,000.\n\n \n\n**Financing Activities**\n\n \n\nNet cash provided by financing activities\namounted to $54,460,285 for the year ended December 31, 2025, representing: a) proceeds from short-term and long-term loans of\n$5,704,348 and $41,133,113, respectively; b) proceeds from the issuance of Class A ordinary shares and the November 2025 Warrants of $7,643,162; c)\nproceeds from an advance capital subscription of $9,739,130 from a non-controlling interest investor in Sunrise Guizhou; and d)\nproceeds of loans from related parties of $918,261; partially offset by e) repayments on short-term and long-term loans of\n$1,669,565 and $632,239, respectively; f) repayments on the debt financing from sale and leaseback contracts of $3,278,572; g)\nrepayments on loans from related parties of $3,252,870; and h) repayments on finance lease liabilities of $1,944,483 associated with\nfinance lease contracts for graphite anode material manufacturing facilities.\n\n \n\nNet cash provided by financing activities amounted\nto $10,631,669 for the year ended December 31, 2024, representing: a) proceeds from a short-term and a long-term loan of $1,667,663 and\n$27,876,982, respectively; and b) proceeds of loans from related parties of $9,145,337; partially offset by c) repayments on a short-term\nand a long-term loan of $6,948,594 and $4,526,391, respectively; d) prepayment on acquisition cost of long-term loans from CCB for $1,255,027;\ne) repayments on the debt financing from sale and leaseback contracts of $4,692,271; f) repayments on loans from related parties of $8,797,497;\nand g) repayments on finance lease liabilities of $2,571,592 associated with finance lease contracts for graphite anode material manufacturing\nfacilities.\n\n \n\nNet cash provided by financing activities amounted\nto $13,679,267 for the year ended December 31, 2023, representing a) proceeds from a short-term and a long-term loan of $7,061,249 and\n$4,236,750, respectively; b) proceeds from the debt financing from sale and leaseback contracts, net of issuance cost, of $4,825,658;\nand c) proceeds of loans from related parties of 3,867,883; offset by d) repayments on the debt financing from sale and leaseback contracts\nof $4,782,564; and e) repayments on finance lease liabilities of $1,282,358 associated with a finance lease contract for graphite anode\nmaterial manufacturing facilities.\n\n \n\n**Trend Information**\n\n** **\n\nOther than as disclosed elsewhere in this annual\nreport, the Company is not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material\neffect on net revenues, incomes from operations, profitability, liquidity or capital resources, or that would cause reported financial\ninformation not necessarily to be indicative of future operating results or financial condition.\n\n \n\n**Off-Balance Sheet Arrangements**\n\n \n\nThe Company did not have any off-balance sheet\narrangements as of December 31, 2025.\n\n \n\n80\n\n \n\n \n\n**Contingencies**\n\n** **\n\nThe Company may from time to time be involved in various legal proceedings,\nclaims and other disputes arising from the commercial operations, projects, employees and other matters which, in general, are subject\nto uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should\nbe accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The following are legal proceedings for the\nfiscal year ended December 31, 2025 for which the Company has determined material.\n\n \n\nOn March 17, 2025, Beijing Xindahang Technology Co., Ltd. (“Xindahang”)\nbrought a claim against Sunrise Guizhou in the Daxing’s People’s Court of Beijing City, alleging breach of contract arising\nfrom Sunrise Guizhou’s alleged failure to pay financial advisory service fees of RMB2,145,000 (or $306,731). The financial advisory\nservice was associated with Sunrise Guizhou’s share issuance to Xinyang Partnership and the fee was 3% of the total proceeds received.\nOn December 26, 2025, a judgment was made by the Court, which ruled in Xindahang’s favor. Sunrise Guizhou filed an appeal with\nBeijing Second Intermediate People's Court on January 7, 2026. On April 30, 2026, the court made the decision that the appeal was rejected\nand the original judgement was upheld. \n\n \n\nOn August 22, 2025, the supplier of Sunrise Guizhou, Hubei Jinhua New\nMaterial Technology Co., Ltd. (“Hubei Jinhua”) brought a claim for a breach of contract against Sunrise Guizhou in the Xianfeng’s\nPeople’s Court of (the “Hubei Province Court”), alleging that Sunrise Guizhou failed to pay the goods purchased with\nan aggregated price of RMB20,541,007 ($2,867,414). RMB20,978,100 ($2,928,430) in a bank account of Sunrise Guizhou was frozen by Hubei\nJinhua for the unpaid purchase price, its interests, legal fees, and litigation charges. On November 27, 2025, a judgment was made by\nthe Hubei Province Court, which ruled in Hubei Jinhua’s favor. On January 23, 2026, Sunrise Guizhou appealed to the Enshi Tujia\nand Miao Autonomous Prefecture Intermediate People’s Court. On March 4, 2026, Sunrise Guizhou’s appeal was rejected and the\noriginal judgment was upheld. Sunrise Guizhou has paid Hubei Jinhua as of the date of this annual report, and the freeze on the bank account has been lifted.\n\n \n\nOn September 8, 2025, Zibo Caijin Holding\nGroup Co., Ltd. (“Zibo Caijin”) brought a civil claim against the VIE in Zhangdian District People’s Court of Zibo\nCity (“Zhangdian District Court”), Shandong Province, alleging that the VIE failed to relocate its address to Zibo City\nand should return the government relocation subsidy and its interest for a total amount of RMB 23,813,452 ($3,405,278). Zibo Caijin\nalso alleged that Mr. Haiping Hu and Zhuhai Investment should assume joint and several liability pursuant to a personal\nguaranty. The Company disputed the Zibo Caijin’s claim, as the VIE has been relocated to Zibo City and registered with\nthe local bureau. No judgment has been made by Zhangdian District Court as of the date of this annual report. The\nVIE’s portion in the investment of Jiazhong and Jinshuibanlv had been frozen by Zibo Caijin on January 19, 2026 for a\nperiod of three years. The Company cannot predict the outcome or impact from the foregoing proceeding.\n\n \n\nOn September 29, 2025, Sunrise Guizhou brought\na civil claim in Anlong County People’s Court against Ms. Huiyu Du, the former legal representative of Sunrise Guizhou, for a loss\nof RMB 43,930,640 ($6,281,998) that resulted from her misconduct and decision-making mistakes during her employment. Regarding the former\nmanagement officials’ misconduct, Sunrise Guizhou also filed a criminal complaint with the local public security authorities. On\nFebruary 9, 2026, the case was accepted by the Anlong County Public Security Bureau. Since the case was suspected of involving a criminal offense and had been\naccepted by the Anlong County Public Security Bureau for investigation, the Anlong County People’s Court made the decision to dismiss\nthe lawsuit on April 20, 2026. This case is still under criminal investigation as of the\ndate of this annual report. Sunrise Guizhou intends to vigorously claim its rights in these matters; however, the Company cannot predict\nthe outcome or impact from such proceedings.\n\n \n\nOn November 17, 2025, Zibo Caijin brought\nanother civil claim against the VIE in Zhangdian District People’s Court of Zibo City, Shandong Province, alleging that the\nVIE should compensate Zibo Caijin’s losses by returning the consultation service revenue of RMB 50,000,000 ($7,149,905). The\nconsultation revenue was associated with services provided to Zibo Caijin on investment referrals, initial public offering\nconsultations, investment and financing consultation services during the fiscal year ended December 31, 2020. Zibo Caijin also\nalleged that Mr. Haiping Hu and Zhuhai Investment should assume joint and several liability, as Mr. Haiping Hu and Zhuhai Investment\nguaranteed that the VIE and its subsidiaries in Zibo City would be able to pay local taxes for an aggregate amount of RMB 50,000,000\nfrom the year 2021 to 2026. The VIE disputed Zibo Caijin’s claim, as Zibo Caijin had acknowledged the services and confirmed\nthe receipt of the services in writing during the year 2020. The title to the VIE’s building, with a cost of RMB 19,519,182, or\n$2,791,206, had been frozen by Zibo Caijin, and the VIE is prohibited from transferring the title commencing\non January 19, 2026 for a period of three years. No judgement has been made by the Zhangdian District People’s Court as of the date of this annual report.\nThe Company cannot predict the outcome or impact from the foregoing proceeding.\n\n \n\nIn addition to the aforementioned lawsuits,\nthe Company is also a party to several legal proceedings or claims that the Company believes are immaterial. Litigation liabilities\nin an aggregate amount of $726,580 with respect to such legal proceedings and claims have been recorded in accrued expenses and\nother current liabilities as of December 31, 2025. The outcomes of such legal proceedings cannot be predicted as of the date of this annual report and the\nCompany does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of\noperations or liquidity.  \n\n** **\n\n81\n\n \n\n** **\n\n**Inflation**\n\n \n\nInflation does not materially affect the Company’s\nbusiness or the results of its operations.\n\n \n\n**Seasonality**\n\n** **\n\nThe nature of the Company’s business does\nnot appear to be affected by seasonal variations.\n\n \n\n**Critical Accounting Estimates**\n\n** **\n\nThe Company prepares the consolidated financial\nstatements in accordance with U.S. GAAP. These accounting principles require the Company to make judgments, estimates and assumptions\non the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses\nduring each fiscal period. The Company continually evaluate these judgments and estimates based on the own historical experience, knowledge\nand assessment of current business and other conditions, the expectations regarding the future based on available information and assumptions\nthat the Company believe to be reasonable.\n\n \n\nThe selection of critical accounting policies, the judgments and other\nuncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions\nare factors that should be considered when reviewing the Company’s financial statements. Our critical accounting policy and practice\nfor the year ended December 31, 2025 is the warrant recognition. Our critical accounting policies and practices for the year ended December\n31, 2024 and 2023 include the following: (i) revenue recognition, (ii) leases, (iii) asset acquisition, (iv) income taxes, (v) the accretion\nto the redemption value of redeemable non-controlling interests, and (vi) extinguishment of redeemable non-controlling interests.\nFor further information on these accounting policies, see Note 2 to our consolidated financial statements included elsewhere in this annual\nreport.\n\n \n\nWe consider an accounting estimate to be critical\nif: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate\nwas made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that\nwe reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.\nSuch critical estimates are discussed below.\n\n** **\n\n**Critical Accounting Estimates for the years\nended December 31, 2025, 2024 and 2023**\n\n \n\n*Impairment of long-lived assets*\n\n \n\nLong-lived assets, including plant, property and\nequipment, intangible asset, land use rights and finance lease right-of-use assets, are reviewed for impairment whenever events or changes\nin circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. When these events occur, the Company\nmeasures impairment by comparing the carrying value of the long-lived assets or assets group to the estimated undiscounted future cash\nflows expected to result from the use of the assets or asset group and their eventual disposition. If the sum of the expected undiscounted\ncash flow is less than the carrying amount of the assets or assets group, the Company would recognize an impairment loss based on the\nfair value of the assets or assets group, which is the excess of carrying amount over the fair value of the assets, using the expected\nfuture discounted cash flows. Impairments charges for long-lived assets were $nil, $nil, and $3,151,467 recorded in the Company’s\nconsolidated statements of operations and comprehensive loss for the years ended December 31, 2025, 2024 and 2023, respectively.\n\n \n\n82\n\n \n\n \n\n**Critical Accounting Estimates for the years\nended December 31, 2024 and 2023**\n\n \n\n*Allowance for credit loss*\n\n \n\nAccounts receivables mainly represent amounts\ndue from clients in the ordinary course of business and are recorded net of allowance for doubtful accounts.\n\n \n\nOn January 1, 2023, the\nCompany adopted ASC 326 Financial Instruments – Credit Losses (“ASC 326”) using the modified retrospective approach\nthrough a cumulative-effect adjustment to the accumulated deficit. Upon adoption, the Company changed its impairment model to utilize\na current expected credit losses model in place of the incurred loss methodology for financial instruments measured at amortized cost.\nThe Company had not recorded an adjustment to the opening accumulated deficit as of January 1, 2023 due to immaterial cumulative impact\nof adopting ASC 326. \n\n \n\nThe Company used an expected\ncredit loss model for the impairment of financial instruments mentioned above as of period ends. For the allowance of the accounts receivable,\nthe Company believes the aging of accounts receivable is a reasonable parameter to estimate expected credit loss, and determines expected\ncredit losses for accounts receivables using an aging schedule as of period ends. The expected credit loss rates under each aging schedule\nwere developed on the basis of the average historical loss rates from previous years, and adjusted to reflect the effects of those differences\nin current conditions and forecasted changes. The Company measured the expected credit losses of accounts receivable on a collective basis.\nWhen an accounts receivable does not share risk characteristics with other accounts receivables, management will evaluate such accounts\nreceivable for expected credit loss on an individual basis. Doubtful accounts balances are written off and deducted from allowance for\ncredit loss, when receivables are deemed uncollectible, after all collection efforts have been exhausted and the potential for recovery\nis considered remote. The allowance for credit loss was $7,909,571 and $8,016,322, as of December 31, 2024 and 2023, respectively.\n\n \n\n*Impairment of inventories*\n\n \n\nThe cost of inventories is calculated using the\nweighted average method. Inventory shall be measured at the lower of cost and net realizable value. Net realizable value is estimated\nselling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. When\nevidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings\nin the period in which it occurs. The impairment of inventories provided for lower of cost and net realizable value was $3,959,304 and\n$7,238,819 for the years ended December 31, 2024 and 2023, respectively.\n\n \n\n83\n\n \n\n \n\n*Impairment of long-term investments*\n\n \n\nFor other equity investments that do not have\nreadily determinable fair values and over which the Company has neither significant influence nor control through investments in common\nstock or in-substance common stock, the Company accounts for these investments at cost minus any impairment, if necessary.\n\n \n\nThe Company continually reviews its investments\nin equity investees to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors\nthe Company considers in its determination are the length of time that the fair value of the investment is below the Company’s carrying\nvalue; the financial condition, operating performance and the prospects of the equity investee. If the decline in fair value is deemed\nto be other than temporary, the carrying value of the equity investee is written down to fair value. Impairment charges for long-term\ninvestments were $nil and $1,450,381 recorded in the Company’s consolidated statements of operations and comprehensive loss for\nthe years ended December 31, 2024 and 2023, respectively.\n\n \n\n*Valuation allowance on deferred tax assets*\n\n \n\nDeferred tax assets and liabilities are measured\nusing enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered\nor settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including\nthe enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.\nValuation allowance on deferred tax assets was $10,693,306 as of December 31, 2024.\n\n \n\n*Accretion to the redemption value of redeemable\nnon-controlling interests*\n\n* *\n\nOn June 13, 2022, New Kinetic Partnership subscribed 22.8395% of the\npreferred shares of Sunrise Guizhou, at total cash consideration of RMB200,000,000, $29,467,667. The preferred shares held by the non-controlling\nshareholder of Sunrise Guizhou could be redeemed by the non-controlling shareholder upon the occurrence of certain events that are not\nsolely within the control of the Company, due to the probability of being redeemed, the Company adjusts the carrying amount of the mezzanine\nequity to equal the redemption value at the end of each reporting period as if it was the redemption date for the redeemable non-controlling\ninterest. These shares are accounted for as redeemable non-controlling interests. The redeemable non-controlling interests will be recorded\nat redemption value. The Company accounts for the changes in accretion to the redemption value in accordance with ASC 480, Distinguishing\nLiabilities from Equity. Accretion on redeemable non-controlling interest was $983,927 and $3,314,857 for the years ended December 31,\n2024 and 2023, respectively.\n\n \n\n*Extinguishment of redeemable non-controlling\ninterests*\n\n \n\nThe Company assesses whether an amendment to the\nterms of its redeemable non-controlling interests is an extinguishment or a modification based on a qualitative evaluation of the amendment.\nIf the amendment adds, removes, significantly changes to a substantive contractual term or to the nature of the overall instrument, the\namendment results in an extinguishment of the redeemable non-controlling interests. The Company also assesses if the change in terms results\nin value transfer between redeemable non-controlling interests and ordinary shareholders. When redeemable non-controlling interests are\nextinguished, the difference between the carrying amount and the fair value of the redeemable non-controlling interests is recorded against\nequity.\n\n \n\nOn June 18, 2024, the New Kinetic Partnership\namended the terms of the investment agreement to waive their preferential rights in dividend and liquidation, and remove the redemption\nevents related to completion of an IPO and meeting performance commitment. In addition, the Company, including Zhuhai Zibo, the controlling\nshareholder of Sunrise Guizhou, is excluded from the redemption obligor and certain shareholders of Sunrise Guizhou become the sole obligor\nof the redemption. As a result of the amendments, the Company reclassified the equity interest held by New Kinectic Partnership from mezzanine\nequity to non-controlling interests.\n\n \n\n84"}