{"url_path":"/sec/hgyn/10-k/2026/item-1","section_key":"item-1","section_title":"Item 1 **","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-08","source_url":"https://www.sec.gov/Archives/edgar/data/1324759/0001493152-26-021954-index.html","accession_number":"0001493152-26-021954","cik":"0001324759","ticker":"HGYN","issuer_name":"HONG YUAN HOLDING GROUP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1324759/0001493152-26-021954-index.html","primary_entity_key":"0001324759","primary_entity_name":"HONG YUAN HOLDING GROUP"},"word_count":2488,"has_tables":true,"body_markdown":"**Item\n1**\n**Business.**\n\n \n\n**Our\nCompany**\n\n \n\nHong\nYuan Holding Group (“We”, “the Company”, “Hong Yuan”, Us” or “Our”) was incorporated\non September 29, 2001, in the State of Nevada under the name of Biocorp North America Inc. On March 18, 2005, we filed an amendment to\nour certificate of incorporation to change our name to Cereplast, The Company is a development-stage enterprise devoting substantial\nefforts to establishing a new business, financial planning, raising capital, and researching products that may become part of the Company’s\nproduct portfolio. The Company has not realized significant sales since inception. A development stage company is defined as one in which\nall efforts are devoted substantially to establishing a new business and, even if planned principal operations have commenced, revenues\nare insignificant.\n\n \n\n**History**\n\n \n\nOn\nFebruary 10, 2014, the Company filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code\nin the United States Bankruptcy Court for the Southern District of Indiana (the “Bankruptcy Court “). On February 14, 2014,\nthe Company filed a motion in the Bankruptcy Court seeking to convert the Company’s Chapter 11 Case to a Chapter 7 bankruptcy case.\nOn March 27, 2014, the court granted the Company’s motion, and on that date, the Company’s Chapter 11 Case was converted\nto a Chapter 7 case. As a result, the Company adopted a liquidation basis of accounting for its discontinued operations, in accordance\nwith ASC 205-30, “Presentation of Financial Statements – Liquidation Basis of Accounting.” Consequently, the accumulated\ndeficit generated prior to the bankruptcy proceedings remained unadjusted.\n\n \n\nOn\nJanuary 31, 2014, the Board of Directors of Cereplast, Inc. (the “Company”) approved a 1-for-50 reverse split (the “Reverse\nSplit) which the shareholders previously approved on April 5, 2013, and previously disclosed on Current Report Form 8-K filed on April\n5, 2013.\n\n \n\nOn\nFebruary 3, 2014, Cereplast, Inc. (the “Company”) filed a Certificate of Amendment to its Articles of Incorporation to effect\nthe reverse split (the “Reverse Split”), effective as of February 21, 2014.\n\n \n\nOn\nMarch 22, 2019, the Eighth Judicial District Court of Nevada appointed Custodian Ventures, LLC, as custodian for Cereplast, Inc., after\nproper notice had been given to the officers and directors of Cereplast, Inc. There was no opposition.\n\n \n\nOn\nJune 04, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as President, Secretary, Treasurer,\nand Director.\n\n \n\nOn\nOctober 4, 2019, the Company issued 50,000,000 shares of common stock to Custodian Ventures, LLC at par for shares valued at $50,000\nin exchange for settlement of a portion of a related party loan for amounts advanced to the Company for $20,100, and a note receivable\ndue to the Company for $29,900. The note bears an interest of 3% and matures in 180 days following written demand by the holder.\n\n \n\nOn\nApril 14, 2020, Custodian Ventures elected to convert the total amount of the 510 shares of Series A preferred stock into 510 shares\nof common stock.\n\n \n\nOn\nApril 15, 2020, the Board of directors of the Company approved the withdrawal of the certificate of designation of 5,000,000 shares of\nSeries A Preferred stock filed with the Nevada Secretary of State on August 24, 2012, as amended by the Amendment to Certificate of Designation\nafter issuance of Class or Series filed with the Nevada Secretary of State on April 13, 2020.\n\n \n\nOn\nMay 1, 2020, the Company created 5,000,000 shares of Series A-1 Preferred Stock with a par value of $0.001. On May 4, 2020, the Company\nissued 5,000,000 shares of the Series A-1 Preferred stock, valued at $5,000, to Custodian Ventures LLC as repayment for funds loaned\nto the Company.\n\n \n\nA\nchange of control of the Company was completed on November 3, 2020, when control was acquired through the sale of 50,000,000 common shares\nand 5,000,000 in Series A-1 Preferred Shares from Custodian Ventures, LLC to Xudong Li. After November 3, 2020, the Company’s operations\nwere determined and structured by the new major shareholder.\n\n \n\nOn\nNovember 18, 2020, the Company filed an amendment to its certificate of incorporation to change its name to Hong Yuan Holding Group.\n\n \n\nOn\nOctober 1, 2024, The Company entered into an agreement to acquire from Xudong Li (the majority shareholder of the Company) 100% equity\ninterest of Hongyuan International Holding Group Co., Ltd. (“Hongyuan HK”) in exchange for HK $500,000 (approximately $64,103)\nor issuing the equivalent value of the Company’s common stocks, payable upon the completion of changing registered owner with the\nAdministration for Industrial and Commerce. Hongyuan HK was established in Hong Kong on July 28, 2021.\n\n \n\n4\n\n \n\n \n\nAlso\non October 1, 2024, Hongyuan HK entered into a series of agreements including a Shareholders’ Voting Rights Entrustment Agreement,\nan Exclusive Management Consulting and Service Agreement and a Share Pledge Agreement (collectively the “Agreements”) with\nFengcuiyuan Chang Technology Development Co., Ltd (“Fengcuiyuan”) and its registered owners (the “Transaction”).\nFengcuiyuan is a corporation formed under the laws of the PRC on September 3, 2021, in which Xudong Li (the majority shareholder of the\nCompany) controls 95% of its equity interest. Fengcuiyuan owns 98% of Rongcheng (Sichuan) Supply Chain Management Co., Ltd (“Rongcheng”),\na corporation formed under the laws of the PRC located in Chengdu, Sichuan, China, incorporated on April 17, 2024. On November 12, 2024,\nChongqing Xuchang Qingrong Trading Co., Ltd. (“Xuchang”) located in Chongqing, Sichuan, China, was formed as a 55% subsidiary\nof Rongcheng.\n\n \n\nAccording\nto the Agreements, Hongyuan HK assumed financial and operating control of Fengcuiyuan. As a result, Hongyuan HK has been determined to\nhave a controlling financial interest in Fengcuiyuan, requiring Hongyuan HK to consolidate the financial statements of Fengcuiyuan and\nits subsidiaries, and ultimately consolidate with its parent company, Hong Yuan. The Transaction was accounted for as a reorganization\nof entities under common control. As the combining entities have been under common control since September 2021, the consolidated financial\nstatements of the Company recognized the assets and liabilities received in the reorganization at their historical carrying amounts,\nas reflected in the historical financial statements of each entity.\n\n \n\n**Business**\n\n \n\nThe\nCompany, through its subsidiary and the Agreements with Fengcuiyuan, focuses on supply chain management services, primarily engaged in\nthe wholesale and internet sales of fast-moving consumer goods, including food, daily necessities, and electronic products, across various\nfields such as pre-packaged food, agricultural by-products, and household goods.\n\n \n\nSupply\nchain companies help optimize all the activities involved in procuring raw materials and transforming them into products, as well as\nmanaging logistics, storage, sales, and shipping those products to consumers, all of which is done using technology such as artificial\nintelligence, IoT, blockchain, and robots.\n\n \n\n**What\nis the supply chain?**\n\n \n\nThe\nsupply chain is a series of interconnected steps and processes that a product undergoes to reach a consumer, from its creation to its\ndelivery. It often entails a network of companies and people that are involved in obtaining the raw materials of the product, making\nand storing the product and then selling and distributing the product.\n\n \n\n**What\nis a supply chain company?**\n\n \n\nA\nsupply chain company specializes in helping other companies manage and optimize their supply chain operations, providing a range of services\nto improve their efficiency, cost-effectiveness, and productivity. These include inventory management, freight transportation, warehousing,\nand more.\n\n \n\n**What\nis supply chain management?**\n\n \n\nSupply\nchain management is the handling of the production and distribution process of goods and services.\n\n \n\nWe\ndevelop and operate offline brand-authorized stores, primarily selling a range of Baijiu products at various price points, along with\nclassic red wine brands, renowned cigarettes and teas, local specialties, beverages, and mid-to-high-end gifts. At the same time, goods\nare also provided to cooperative e-commerce platforms.\n\n \n\nBefore\nDecember 31, 2024, the primary focus will be on distributing products of well-known brands. After the successful registration of our\nown brand in March 2025, we have established contract manufacturing cooperation with well-known liquor manufacturers and are currently\nin production.\n\n \n\nAs\nof December 31, 2024, the store in Chongqing had already opened.\n\n \n\nCurrently,\nthe stores in Chongqing and Jiangyou are operational, while the Leshan store is in the process of selecting a site and undergoing decoration.\nBefore December 31, 2024, the store will be invested in and hold a 55% stake by Rongcheng (Sichuan) Supply Chain Management Co., LTD.\nIn June 2025, we changed our business model. We still fund the opening of stores, but we no longer hold shares in the stores. The investment\nfunds for the stores will be recovered as loans in the future from the stores’ profits.\n\n \n\nCustomer\nacquisition is a part of our business model. We provide funds to invest in the establishment of stores and are responsible for their\noperation. Regional service partners are responsible for finding store partners and store members. During the operation of the store,\nwe help service partners attract consumers and develop them into loyal members by sharing stock growth dividends, quality commitments,\nprice commitments, and after-sales commitments, among other benefits. This enables us to gather the basic purchasing needs of members\nwithin the store.\n\n \n\nSupply\nChain Management Co., Ltd. is 98% controlled by Fengcui Yuanchang Technology Development Co., LTD. Fengcui Yuanchang Technology Development\nCo., Ltd. is 100% controlled by Hongyuan HK, and Hongyuan HK is 100% owned by the HGYN.Changshunyuan E-commerce (Sichuan) Co., Ltd. is\na client of Rongcheng (Sichuan) Supply Chain Management Co., Ltd.\n\n \n\n5\n\n \n\n \n\n**Products**\n\n \n\nThe\nmid-to-low-end white and red wines that are popular on the market from major brands, will gradually introduce new product categories\nin the future, such as tea, beverages, rice, cooking oil etc, which are closely related to People’s Daily lives. Chinese liquor\nand wine partner brands: Moutai, Wuliangye, Luzhou Laojiao, Jiannanchun, Shede, Xijiu, Langjiu, Jinsha, Jingjiu, Fenjiu, ShixianTaibai,\nJiang Xiaobai, Great Wall, Tredo, Ailisong, Claire Valley.....\n\n \n\nTea\nand beverages: The strategic cooperation brands are Zhongcha and Nongfu Spring. We have carefully selected over ten premium tea varieties\nsuch as ZhongchaDianhong Special Grade, ZhongchaZijuan, Zhongcha Qianli Jiangshan, ZhongchaDashu Jinzhen, Zhongcha Amber Golden Bud,\nZhongcha Lianhua Feng Da Hong Pao, ZhongchaMatouyan Cinnamon, ZhongchaZhangtangjian Old Fir Narcissus, ZhongchaXixiangying White Tea,\nand Zhongcha Jinhua Xiangyuan, as well as over ten best-selling beverages under Nongfu Spring brand.\n\nCigarettes,\nlocal specialties and seasonal products, Northeast rice\n\n \n\nMid-to-high-end\ngifts: Dozens of world-renowned cosmetic brands such as Chanel, Lancome, La Mer, SK-II, etc\n\n \n\nFirst-\nand second-tier brands: The company has the resources to cooperate with manufacturers or first-level distributors of first- and second-tier\nbrands, effectively reducing the costs of intermediate links and building a solid profit foundation and price competitiveness for the\nbusiness model.\n\n \n\nThird-tier\nbrands: Integrate upstream resources and directly establish direct procurement methods with manufacturers of third-tier brands.\n\n \n\nPrivate\nLabel: Based on market orientation, selecting high-quality factories with excellent business reputation and a complete quality assurance\nsystem, establishing strategic OEM partnerships, and carrying out contract manufacturing.\n\n \n\n**Main\nsales channels**\n\n \n\n1.\nPartners and Members: The company mainly sells to members and partners through store service providers\n\n \n\nBy\noffering high-quality, reasonably priced products with good services, we attract and convert a large number of partners and members to\njoin. Through a value-sharing plan, our user stickiness is strong, and the customer life value is higher than that of similar competitors\nin the market.\n\n \n\nBy\nadhering to the zero-cost and worry-free return and exchange policy, we maximize the protection of consumers’ rights and interests,\nsignificantly enhancing their satisfaction and willingness to repurchase.\n\n \n\n2.\nOther trading companies: Select high-quality e-commerce platforms or companies and establish long-term, stable cooperative relationships.\n\n \n\n**Analysis\nof the Current Alcoholic Market and Competition**\n\n \n\nChannel\nTransformation and Price System Impact\n\n \n\n1.The\nlow-price dumping by e-commerce and new retail has squeezed the profits of distribution channels.\n\n \n\nFirst\n- and second- tier brands are facing price shocks through online channels. The main reason is that e-commerce platforms (such as Tmall\nand JD.com) and chain systems, leveraging their advantages in establishing a comprehensive supply chain system on a large scale, offer\nlow-price promotions to famous first- and second-tier wines.\n\n \n\n2.\nData from 2025 shows that the online sales of alcoholic beverages have exceeded 30-billion-yuan, accounting for 29% of the total industry\nscale. The annual growth rate of GMV in live-streaming sales has reached 137%, putting pressure on the prices of traditional distribution\nsystems and compressing the profit margins of traditional distribution levels.\n\n \n\n3.\nThird - and fourth-tier brands rely on non-standard channels, resulting in price chaos.\n\n \n\nSmall\nand medium-sized brands generally rely too heavily on live-stream sales (accounting for over 30%) and private domain sales, with fragmented\npricing strategies. This has led to a loss of pricing power in terminal stores, making it difficult to maintain consumer loyalty. For\ninstance, the online sales growth rate of regional liquor enterprises has reached 2.3 times that of national brands, but they lack a\nunified price control mechanism, making it difficult for terminal stores to stabilize their customer base.\n\n \n\nConsumption\nUpgrade and Evolution of Brand Landscape\n\n \n\n1.\nThe increase in brand concentration squeezes the survival of non-branded products.\n\n \n\nThe\nupgrading of consumption has highlighted the Matthew effect in the industry: In 2024, the profit share of CR6 liquor enterprises (such\nas Moutai and Wuliangye) reached 86%, a 31% increase compared to ten years ago. The market share of small and medium-sized brands has\nshrunk to less than 15%.\n\n \n\n2.\nConsumers’ demand for brand endorsement has intensified. Leading brands build barriers through quality and cultural ips (for instance,\nthe premium of Moutai’s zodiac wine exceeds 50%). At the same time, small and medium-sized liquor enterprises compete in a differentiated\nway by relying on the differentiation of aroma types and cost performance (the market size of plain bottle liquor has exceeded 150 billion\nyuan).\n\n \n\n6\n\n \n\n \n\nTerminal\nEcosystem: Survival Pressure and Transformation Challenges\n\n \n\n1.\nThe continuous increase in costs and the lack of specialization have accelerated the bankruptcy and closure of stores. Individual brick-and-mortar\nstores are facing dual pressures:\n\n \n\nLabor\ncosts are on the rise: By 2025, the average annual increase in labor costs in the service sector is projected to be 12%. Coupled with\nthe rent increase, the gross profit margin of individual stores is compressed to 15%-20%.\n\n \n\n2.\nBackward business model: Over 70% of individual stores are family-run, lacking digital tools and professional product selection capabilities,\nand their survival space is continuously narrowing. By 2025, approximately 50.9% of alcohol retailers experienced a decline in sales,\nforcing them to transform their channels towards a chain operation and O2O model.\n\n \n\nIndustry\nVolume-Price Paradox: The Truth of Structural Growth\n\n \n\nThe\nalcohol industry has entered a stage of structural growth, presenting a new normal of “volume reduction and price increase”:\nhigh-end positioning and price increase strategies have driven sales growth, with annual sales increasing at a rate of 20% to 30% year\nby year. In comparison, sales volume has decreased at a rate of 10% to 15% annually.\n\n \n\n**Employees**\n\n \n\nWe\ncurrently have 10 full-time employees, including one executive, two in finance, and seven in operations, sales, and marketing.\n\n \n\nMr.\nXudong has been a director and officer of the Company since 2020 and its principal shareholder."}