{"url_path":"/sec/ifbd/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/A","doc_date":"2026-06-12","source_url":"https://www.sec.gov/Archives/edgar/data/1815566/0001731122-26-000847-index.html","accession_number":"0001731122-26-000847","cik":"0001815566","ticker":"IFBD","issuer_name":"Infobird Co., Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1815566/0001731122-26-000847-index.html","primary_entity_key":"0001815566","primary_entity_name":"Infobird Co., Ltd"},"word_count":4933,"has_tables":true,"body_markdown":"**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\n*You should read the following\ndiscussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements\nand the related notes included elsewhere in this annual report on Form 20-F. This discussion and other parts of this annual report on\nForm 20-F may contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties\nand assumptions. Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking\nstatements as a result of various factors, including those set forth under “Item 3. Key Information-D. Risk Factors” or in\nother parts of this annual report on Form 20-F. You should carefully read the “Risk Factors” section of this annual report\non Form 20-F in “Item 3. Key Information—D. Risk Factors” to gain an understanding of the important factors that could\ncause actual results to differ materially from our forward-looking statements.*\n\n \n\n**A. Operating results**\n\n \n\n**Overview**\n\n \n\nPure Tech and its subsidiaries\nare a technology company specializing in digital advertising and marketing campaign for customers. With Pure Tech’s digital technologies,\nwe strive to develop effective and efficient online marketing strategies for customers. Based on the software and technology advantages\nbuilt by years of research and development investments, as well as years of accumulated experience in digital marketing and intelligent\ncustomer service, our Group plans to vertically expands the market in the maternal and infant vertical field within the same industry,\nexplores more customer opportunities, and enhances the company’s value and competitiveness in the industry.\n\n \n\nOur current emphasis and goals\nprimarily include implementing precision targeting and personalized audience engagement through data analytic and online multi-platforms\nvia our Acquisitions. Our service portfolio includes social media marketing, search engine optimization, and strategic content distribution,\nall designed to optimize customer acquisition, campaign performance, and conversion rate enhancement.\n\n \n\n**Key Factors that Affect Operating Results**\n\n \n\nOur management team monitors the following key operating\nmetrics:\n\n \n\n81\n\n \n\n \n\n*Customer concentration*\n\n \n\nOur customers are highly concentrated,\nand our revenue is highly affected by the number of our customers and the average revenue per customer. For the year ended December 31,\n2025, two customers accounted for 80.7% and 11.3% of the Company’s total revenues, respectively. For the year ended December 31,\n2024, two customers accounted for 71.8% and 26.0% of the Company’s total revenues, respectively. For the year ended December 31,\n2023, two customers accounted for 64.3% and 35.7% of the Company’s total revenues, respectively. For the year ended December 31,\n2022, none of customer accounted for more than 10.0% of the Company’s total revenues. As of December 31, 2025, two customers\naccounted for 86.0% and 11.4% of the total balance of accounts receivable, respectively. As of December 31, 2024, two customers accounted\nfor 52.3% and 46.8% of the total balance of accounts receivable. As of December 31, 2023, one customer accounted for 100.0% of the total\nbalance of accounts receivable.\n\n \n\n*Our ability to compete effectively*\n\n \n\nOur business and results of operations\ndepend on our ability to compete effectively in the industry in which we operate. Our competitive position may be affected by, among other\nthings, the scope of our products, the quality of our solutions and our ability to customize our products to meet customers’ business\nneeds. We believe that our proprietary technologies and research and development capabilities help us to develop products tailored to\nour customers and we are able to retain and develop business with existing customers and to attract new customers. However, if are unable\nto keep up with our product development or innovation, we might not be able to develop new customers or expand our business effectively.\nIn addition, we are subject to competition from within our industry. Increased competition could materially and adversely affect our business\nand results of operations.\n\n \n\n**Key Components of Our Results of Operations**\n\n \n\nRevenues consist of revenues\nfrom digital advertising and marketing campaign services and business integration solution services.\n\n  \n\n*Revenue from digital advertising\nand marketing campaign services*\n\n* *\n\nAfter the Acquisition in November\n2024, we became to provide digital advertising and marketing campaign services to our customers and expected to expand the market in the\nmaternal and infant vertical field, explore more customer opportunities and enhances our company’s value and competitiveness in\nthe industry. All of revenues from digital advertising and marketing campaign services were generated from Mainland China.\n\n \n\n*Revenue from business integration\nservices*\n\n* *\n\nSince 2020, we provide business\nintegration services to our customers and expect to expand our customer base from such services and develop the customers to become subscribers\nto SaaS services with software upgrades and continued services once they become more familiar with our products. The services include\nsales of our software license or development of customized software to fit the customers’ need and sales of hardware integrated\nwith our software.\n\n \n\nRevenue categories are summarized as follows:\n\n \n\n \n \nFor the Years Ended December 31,\n \n2025 Change\n\n \n \n2025\n \n%\n \n2024\n \n%\n \n%\n\n \n \n \n \n \n \n \n \n \n \n \n\nBusiness integration services\n \n$\n—\n \n \n \n—\n%\n \n$\n20,000\n \n \n \n1.4\n%\n \n \n(100.0\n)%\n\nDigital advertising and marketing campaign services\n \n \n8,706,740\n \n \n \n100.0\n%\n \n \n1,417,848\n \n \n \n98.6\n%\n \n \n535.2\n%\n\nTotal operating revenues\n \n$\n8,706,740\n \n \n \n100.0\n%\n \n$\n1,437,848\n \n \n \n100.0\n%\n \n \n526.3\n%\n\n \n\n82\n\n \n\n \n\n \n \nFor the Years Ended December 31,\n \n2024 Change\n\n \n \n2024\n \n%\n \n2023\n \n%\n \n%\n\n \n \n \n \n \n \n \n \n \n \n \n\nBusiness integration services\n \n$\n20,000\n \n \n \n1.4\n%\n \n$\n280,000\n \n \n \n100.0\n%\n \n \n(92.9\n)%\n\nDigital advertising and marketing campaign services\n \n \n1,417,848\n \n \n \n98.6\n%\n \n \n—\n \n \n \n—\n%\n \n \n100.0\n%\n\nTotal operating revenues\n \n$\n1,437,848\n \n \n \n100.0\n%\n \n$\n280,000\n \n \n \n100.0\n%\n \n \n413.5\n%\n\n \n\n*Cost\nof revenues*\n\n \n\nCost\nof revenues consists primarily of direct media costs from digital advertising and marketing campaign services and personnel costs (including\nsalaries, social insurance and benefits) for employees involved with the Company’s operations and product support from business\nintegration services.\n\n \n\nCost\nof revenues from revenue categories are summarized as follows:\n\n \n\n \n \nFor the Years Ended December 31,\n \n2025 Change\n\n \n \n2025\n \n%\n \n2024\n \n%\n \n%\n\n \n \n \n \n \n \n \n \n \n \n \n\nBusiness integration services\n \n$\n—\n \n \n \n—\n%\n \n$\n18,400\n \n \n \n2.2\n%\n \n \n(100.0\n)%\n\nDigital advertising and marketing campaign services\n \n \n6,138,198\n \n \n \n100.0\n%\n \n \n826,836\n \n \n \n97.8\n%\n \n \n642.4\n%\n\nTotal cost of revenues\n \n$\n6,138,198\n \n \n \n100.0\n%\n \n$\n845,236\n \n \n \n100.0\n%\n \n \n626.2\n%\n\n \n\n \n \nFor the Years Ended December 31,\n \n2024 Change\n\n \n \n2024\n \n%\n \n2023\n \n%\n \n%\n\n \n \n \n \n \n \n \n \n \n \n \n\nBusiness integration services\n \n$\n18,400\n \n \n \n2.2\n%\n \n$\n125,271\n \n \n \n100.0\n%\n \n \n(85.3\n)%\n\nDigital advertising and marketing campaign services\n \n \n826,836\n \n \n \n97.8\n%\n \n \n—\n \n \n \n—\n%\n \n \n100.0\n%\n\nTotal cost of revenues\n \n$\n845,236\n \n \n \n100.0\n%\n \n$\n125,271\n \n \n \n100.0\n%\n \n \n574.7\n%\n\n \n\n*Operating\nexpenses*\n\n \n\nOur\noperating expenses consist of selling expenses, general and administrative expenses, and research and development expenses.\n\n \n\nSelling\nexpenses consist of personnel costs (including salaries, social insurance, and benefits), office and travel expenses for employees associated\nwith our sales and marketing organizations, and costs of marketing activities. Marketing activities include both online and offline marketing\ninitiatives, including digital advertising, such as search engines, paid social, email and product marketing, content marketing, web marketing\nand optimization. We focus our sales and marketing efforts on generating awareness of our services and products, establishing and promoting\nour brand, and cultivating a community of customers.\n\n \n\nGeneral\nand administrative expenses consist primarily of rent, office expenses and personnel costs (including salaries, social insurance, and\nbenefits) for our executive, finance, legal, human resources, and other administrative employees. In addition, general and administrative\nexpenses include amortization expense from land used rights and bad debt expenses.\n\n \n\nResearch\nand development expenses consist primarily of salaries and other compensation-related expenses for our research and product development\npersonnel, as well as office rental, depreciation, amortization and related expenses for our research and product development team. We\nfocus our research and development efforts on the continued development of our services and products, including the development and deployment\nof new features and functionality and enhancements to our software architecture and integration across our services and products.\n\n \n\n83\n\n \n\n \n\n**Impact of Foreign Currency Fluctuation**\n\n \n\nSee “Item 11. Quantitative\nand Qualitative Disclosures About Market Risk-Foreign Exchange Risk.”\n\n \n\n**Results of Operations**\n\n \n\nComparison of Years Ended December 31, 2025 and 2024\nand Comparison of Years Ended December 31, 2024 and 2023\n\n \n\n  \nFor the Years Ended December 31, \n2025\nChange \nFor the Years Ended December 31, \n2024\nChange\n\n  \n2025 \n2024 \n% \n2024 \n2023 \n%\n\n  \n  \n  \n  \n  \n  \n \n\nRevenues \n$8,706,740  \n$1,437,848  \n 505.5% \n$1,437,848  \n$280,000  \n 413.5%\n\nCost of revenues \n 6,138,198  \n 845,236  \n 626.2% \n 845,236  \n 125,271  \n 574.7%\n\nGross profit \n 2,568,542  \n 592,612  \n 333.4% \n 592,612  \n 154,729  \n 283.0%\n\nSelling expenses \n 1,504,483  \n 438,596  \n 243.0% \n 438,596  \n —  \n 100.0%\n\nGeneral and administrative expenses \n 2,612,675  \n 1,873,646  \n 39.4% \n 1,873,646  \n 3,311,155  \n (43.4)%\n\nResearch and development expenses \n 97,518  \n 15,074  \n 546.9% \n 15,074  \n —  \n 100.0%\n\nImpairment of goodwill \n 51,186,782  \n —  \n 100.0% \n —  \n —  \n —%\n\nLoss from operations \n (52,832,916) \n (1,734,704) \n 2945.6% \n (1,734,704) \n (3,156,426) \n (45.0)%\n\nOther income (expense), net \n (792,180) \n (344,783) \n 129.8% \n (344,783) \n (18,282,360) \n (98.1)%\n\n(Benefit)/Provision for income taxes \n —  \n 21,008  \n (100.0)% \n 21,008  \n —  \n 100.0%\n\nNet loss from continuing operations \n$(53,625,096) \n$(2,100,495) \n 2453.0% \n$(2,100,495) \n$(21,438,786) \n (90.2)%\n\nNet income (loss) income from\ndiscontinued operations \n —  \n —  \n —% \n —  \n 18,570,629  \n (100.0)%\n\nNet loss \n$(53,625,096) \n$(2,100,495) \n 2453.0% \n$(2,100,495) \n$(2,868,157) \n (26.8)%\n\n  \n\n**Revenues**\n\n \n\nOur total revenues for the years\nended December 31, 2025, 2024 and 2023 were approximately $8.7 million, $1.4 million and $0.3 million, respectively.\n\n \n\nDigital advertising and marketing\ncampaign services increased by approximately $7.3 million, or 505.5%, to approximately $8.7 million for the year ended December 31, 2025\nfrom $1.4 million for the year ended December 31, 2024. The increase of approximately $7.3 million was driven by a full year of contribution\nfrom the business acquired in November 2024, compared to just one month of operations in the prior year. Business integration services\ndecreased by approximately $0.02 million, or 100.0%, to nil for the year ended December 31, 2025 from $0.02 million for the year ended\nDecember 31, 2024. The decrease of approximately $0.02 million was mainly due to our less competitiveness in the market.\n\n \n\nDigital advertising and marketing\ncampaign services increased by approximately $1.4 million, or 100.0%, to approximately $1.4 million for the year ended December 31, 2024\nfrom nil for the year ended December 31, 2023. The increase of approximately $1.4 million was mainly because of the new business we carried\nout after the acquisition in November 2024. Business integration services decreased by approximately $0.26 million, or 92.9%, to approximately\n$0.02 million for the year ended December 31, 2024 from $0.28 million for the year ended December 31, 2023. The decrease of approximately\n$0.26 million was mainly due to our less competitiveness in the market.\n\n \n\n84\n\n \n\n \n\n**Cost of Revenues**\n\n \n\nOur cost of revenues for the\nyears ended December 31, 2025, 2024 and 2023 was approximately $6.1 million, $0.8 million, and $0.1 million, respectively.\n\n \n\nThe cost of digital advertising\nand marketing campaign services consists primarily of direct media costs, which increased by approximately $5.3 million, or 626.2%, to\napproximately $6.1 million for the year ended December 31, 2025 from $0.8 million for the year ended December 31, 2024. The increase of\napproximately $5.3 million was mainly in line with the increase trend of revenue. The cost of business integration services consists primarily\nof direct media costs decreased by $18,400, or 100.0%, to nil for the year ended December 31, 2025 from $18,400 for the year ended December\n31, 2024. The decrease of $18,400 was also mainly in line with the decrease trend of revenue.\n\n \n\nThe cost of digital advertising\nand marketing campaign services consists primarily of direct media costs, which increased by approximately $0.8 million, or 100.0%, to\napproximately $0.8 million for the year ended December 31, 2024 from nil for the year ended December 31, 2023. The increase of approximately\n$0.8 million was mainly because of the new business we carried out after the acquisition in November 2024. The cost of business integration\nservices consists primarily of direct media costs decreased by approximately $0.1 million, or 85.3%, to approximately $0.02 million for\nthe year ended December 31, 2024 from approximately $0.12 million for the year ended December 31, 2023. The decrease of approximately\n$0.1 million was mainly in line with the decrease trend of revenue.\n\n \n\n**Gross Profit**\n\n \n\nOur gross profit for the years\nended December 31, 2025, 2024 and 2023 was approximately $2.9 million, $0.6 million, and $0.2 million, respectively. Our gross profit\nfrom our major revenue categories are summarized as follows:\n\n \n\n \n \nFor the Years Ended December 31, 2025\n \nFor the Years Ended December 31, 2024\n \nChange\n \nPercentage Change\n\n \n \n \n \n \n \n \n \n \n\nDigital advertising and marketing campaign services\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nGross profit\n \n$\n2,568,542\n \n \n$\n591,012\n \n \n$\n1,975,930\n \n \n \n334.6\n%\n\nGross margin\n \n \n29.5\n%\n \n \n41.7\n%\n \n \n(12.2\n)%\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nBusiness integration services\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nGross profit\n \n$\n—\n \n \n$\n1,600\n \n \n$\n(1,600\n)\n \n \n(100.0\n)%\n\nGross margin\n \n \n—\n%\n \n \n8.0\n%\n \n \n(8.0\n)%\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nTotal\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nGross profit\n \n$\n2,568,542\n \n \n$\n592,612\n \n \n$\n2,274,994\n \n \n \n333.4\n%\n\nGross margin\n \n \n29.5\n%\n \n \n41.2\n%\n \n \n(11.7\n)%\n \n \n \n \n\n \n\n \n \nFor the Years Ended December 31, 2024\n \nFor the Years Ended December 31, 2023\n \nChange\n \nPercentage Change\n\n \n \n \n \n \n \n \n \n \n\nDigital advertising and marketing campaign services\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nGross profit\n \n$\n591,012\n \n \n$\n—\n \n \n$\n591,012\n \n \n \n100.0\n%\n\nGross margin\n \n \n41.7\n%\n \n \n—\n%\n \n \n41.7\n%\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nBusiness integration services\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nGross profit\n \n$\n1,600\n \n \n$\n154,729\n \n \n$\n(153,129\n)\n \n \n(99.0\n)%\n\nGross margin\n \n \n8.0\n%\n \n \n55.3\n%\n \n \n(47.3\n)%\n \n \n \n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nTotal\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nGross profit\n \n$\n592,612\n \n \n$\n154,729\n \n \n$\n437,883\n \n \n \n283.0\n%\n\nGross margin\n \n \n41.2\n%\n \n \n55.3\n%\n \n \n(14.1\n)%\n \n \n \n \n\n \n\n85\n\n \n\n \n\nThe\ngross profit margin for the three years ended December 31, 2025, 2024 and 2023 were approximately 29.5%, 41.2% and 55.3%.\n\n \n\n** Selling expenses**\n\n \n\nSelling expenses were approximately\n$1.5 million, $0.4 million and nil for the years ended December 31, 2025, 2024 and 2023, respectively.\n\n \n\nFor the year ended December 31,\n2025, selling expenses increased by approximately $1.1 million, or 243.0% compared to the year ended December 31, 2024. The increase was\nmainly attributable to our intensified marketing activities aimed at expanding market presence and visibility.\n\n \n\nFor the year ended December 31,\n2024, selling expenses increased by approximately $0.4 million, or 100.0% compared to the year ended December 31, 2023. The increase was\nmainly attributable to the needs to develop our new business after the acquisition in November 2024.\n\n \n\n**General and Administrative Expenses**\n\n \n\nGeneral and administrative expenses\nwere approximately $2.6 million, $1.9 million and $3.3 million for the years ended December 31, 2025, 2024 and 2023, respectively, including\nallowance of credit losses and other general and administrative expenses.\n\n \n\nFor the year ended December 31,\n2025, general and administrative expenses increased by $0.7 million, or 39.4% to $2.6 million for the year ended December 31, 2025 compared\nto the year ended December 31, 2024, which was mainly due to due to higher personnel and rental costs associated with new business operations\ninitiated the following acquisition in November 2024.\n\n \n\nFor the year ended December 31,\n2024, general and administrative expenses decreased by $1.4 million, or 43.4% to $1.9 million for the year ended December 31, 2024 compared\nto the year ended December 31, 2023. Specifically, the allowance of credit losses decreased by $1.9 million, or 100.0% to nil for the\nyear ended December 31, 2024 from $1.9 million for the year ended December 31, 2023, which was mainly due to our expectation of uncollectible\nreceivables, and other general and administrative expenses increased by approximately $0.5 million, or 31.7%, to approximately $1.9 million\nfor the year ended December 31, 2024 from approximately $1.4 million for the year ended December 31, 2023, which was mainly due to more\npersonnel costs and SEC filings and other relevant fees of our acquisition in November 2024.\n\n  \n\n**Impairment of goodwill**\n\n** **\n\nThe Company recognized an impairment\nloss on goodwill of $51,186,782 during the year ended December 31, 2025 due to the assessment of the operating results and the decrease\nof birth rate in China. For the years ended December 31, 2024 and 2023, impairment of goodwill were both nil.\n\n \n\n**Other income (expense), net**\n\n \n\nTotal other income (expenses),\nnet were approximately $(0.8) million, $(0.3) million and $(18.3) million for the years ended December 31, 2025, 2024 and 2023, respectively.\n\n \n\nFor the year ended December 31,\n2025, other expenses, net increased by approximately $0.5 million, or 129.8% compared to the year ended December 31, 2024. The increase\nwas mainly due to interest expense of approximately $0.5 million incurred on the conversion of convertible bonds in January 2025.\n\n \n\n86\n\n \n\n \n\nFor the year ended December 31,\n2024, other expenses, net decreased by approximately $18.0 million, or 98.1% compared to the year ended December 31, 2023. The decrease\nwas mainly due to the impairment of due from discontinued operations decreased about $17.6 million.\n\n \n\n**(Benefit of) provision for income taxes**\n\n \n\nWe recorded income tax of nil,\n$21,008 and nil for the years ended December 31, 2025, 2024 and 2023. We started digital advertising and marketing campaign services in\nMainland China in 2024 and generated taxable income after the consideration of the differences between accounting policy and tax policy.\n\n \n\n**Net loss from continuing operations**\n\n \n\nOur net loss from continuing\noperations was approximately $53.6 million for the year ended December 31, 2025, increased by $51.5 million, or 2,453.0%, from net loss\nfrom continuing operations of approximately $2.1 million for the year ended December 31, 2024. Such change was the result of the combination\nof the changes as discussed above.\n\n \n\nOur net loss from continuing\noperations was approximately $2.1 million for the year ended December 31, 2024, decreased by $19.3 million, or 90.2%, from net loss from\ncontinuing operations of approximately $21.4 million for the year ended December 31, 2023. Such change was the result of the combination\nof the changes as discussed above.\n\n  \n\n**Net income (loss) from discontinued operations**\n\n** **\n\nOur net income from discontinued\noperations was approximately $18.6 million for the year ended December 31. On August 11, 2023, we entered into an equity transfer agreement\n(the “Agreement”) with CRservices, a shareholder of the Company, pursuant to which, we agreed to sell all the issued shares\nof Infobird HK, a limited company incorporated under the laws of Hong Kong and a wholly owned subsidiary of us, for a consideration of\nHK$10,000. On the same day, we discontinued our SaaS services in the mainland of China. As a result, the result of operations for the\nour mainland China SaaS services business are reported as discontinued operations under the guidance of ASC 205, and our net income from\ndiscontinued operations was both nil for the years ended December 31, 2025 and 2024.\n\n \n\n**Net loss**\n\n \n\nOur net loss was approximately\n$53.6 million for the year ended December 31, 2025, increased by $51.5 million, or 2,453.0%, from net loss of approximately $2.1 million\nfor the year ended December 31, 2024. Such change was the result of the combination of the changes as discussed above.\n\n \n\nOur net loss was approximately\n$2.1 million for the year ended December 31, 2024, decreased by $0.8 million, or 26.8%, from net loss of approximately $2.9 million for\nthe year ended December 31, 2023. Such change was the result of the combination of the changes as discussed above.\n\n \n\n**Cash equivalents and short-term investments**\n\n \n\nAs of December 31, 2025, we had\ncash and cash equivalents amounted of approximately $5.1 million, compared to approximately $4.7 million as of December 31, 2024.\n\n \n\n**B. Liquidity and capital resources**\n\n \n\nIn assessing our liquidity, we\nmonitor and analyze our cash on-hand and our operating expenditure commitments. Our liquidity needs are to meet our working capital requirements\nand operating expense obligations. To date, we financed our operations through internally generated\ncash, short-term loans and payable from related parties and equity financing. Our working capital was approximately $ 4.73 million\nat December 31, 2025. We will not require any fund over the next twelve months upon issuance of\nthis consolidated financial statements to operate at its current level, either from operating activities or funding.\n\n \n\n87\n\n \n\n \n\nIf\nwe are unable to realize its assets within the normal operating cycle of a twelve (12) month period, we may have to consider supplementing\nits available sources of funds through the following sources:\n\n \n\n \n●\nother available sources of financing from PRC banks and other financial institutions;\n\n \n●\nfinancial support from the Company’s related parties and shareholders; and\n\n \n●\nissuance of convertible debt.\n\n \n\nBased\non the above considerations, our management is of the opinion that it has sufficient funds to meet our working capital requirements and\ndebt obligations as they become due over the next twelve (12) months.\n\n \n\nThe\nfollowing summarizes the key components of our cash flows for the years ended December 31, 2025, 2024 and 2023:\n\n \n\n \n \nFor the Years Ended December 31,\n\n \n \n2025\n \n2024\n \n2023\n\nNet cash provided by (used in) operating activities from continuing operations\n \n$\n(521,734\n)\n \n$\n3,251,888\n \n \n$\n(5,335,062\n)\n\nNet cash provided by (used in) operating activities from discontinued operations\n \n \n—\n \n \n \n—\n \n \n \n2,615,101\n \n\nNet cash used in investing activities from continuing operations\n \n \n—\n \n \n \n(4,269,886\n)\n \n \n(47,387,762\n)\n\nNet cash provided by (used in) investing activities from discontinued operations\n \n \n—\n \n \n \n—\n \n \n \n14,054\n \n\nNet cash provided by financing activities from continuing operations\n \n \n645,024\n \n \n \n5,697,396\n \n \n \n52,567,008\n \n\nNet cash (used in) provided by financing activities from discontinued operations\n \n \n—\n \n \n \n—\n \n \n \n(2,997,269\n)\n\nEffect of exchange rate change\n \n \n296,302\n \n \n \n(38,332\n)\n \n \n(28,715\n)\n\nNet change in cash\n \n$\n419,592\n \n \n$\n4,641,066\n \n \n$\n(552,645\n)\n\n \n\n**Operating activities**\n\n \n\nNet\ncash provided by operating activities from continuing operations was approximately $0.5 million for the year ended December 31, 2025,\nwhich was primarily attributable to net loss from continuing operations of approximately $53.6 million and various non-cash items of\napproximately $52.1 million, such as impairment of goodwill and imputed interest expense. The cash inflows were also attributable to\nthe decrease of notes receivable by amount of $0.4 million, increase of accounts payable by amount of $0.4 million.\n\n \n\nNet\ncash provided by operating activities from continuing operations was approximately $3.3 million for the year ended December 31, 2024,\nwhich was primarily attributable to net loss from continuing operations of approximately $2.1 million and decrease of other receivable\nof approximately $4.9 million.\n\n \n\nNet\ncash used in operating activities from continuing operations was approximately $5.3 million for the year ended December 31, 2023, which\nwas primarily attributable to net loss from continuing operations of approximately $21.4 million and various non-cash items of approximately\n$16.1 million, such as provision for expected credit loss account and imputed interest expense. The cash outflow was also attributable\nto the increase of due from discontinued operations by amount of $2.6 million during 2023.\n\n \n\n88\n\n \n\n \n\n**Investing activities**\n\n \n\nNet\ncash used in investing activities was nil for the year ended December 31, 2025 as there were no investing activities during the period.\n\n \n\nNet\ncash used in investing activities was approximately $4.3 million for the year ended December 31, 2024 was primarily attributable to the\ncash deposit in escrow account of approximately $5.1 million, loan to third party of $7.5 million, acquisitions of property, plant and\nequipment of approximately $0.8 million and cash received from escrow account of $5 million.\n\n \n\nNet\ncash used in investing activities was approximately $47.4 million for the year ended December 31, 2023 was attributable to the cash deposit\nin escrow account.\n\n \n\n**Financing\nactivities**\n\n \n\nNet cash provided by financing\nactivities from continuing operations was approximately $0.6 million for the year ended December 31, 2025 and was attributable to additional\nshort-term bank loans of approximately $0.6 million.\n\n \n\nNet cash provided by financing\nactivities from continuing operations was approximately $5.7 million for the year ended December 31, 2024 and was attributable to proceeds\nfrom issuance of common stock under F3 of approximately $5.7 million.\n\n \n\nNet cash provided by financing\nactivities from continuing operations was approximately $52.6 million for the year ended December 31, 2023 and was primarily attributable\nto the proceeds from issuance of ordinary shares and convertible bonds in 2023, which were approximately $49.5 million and $2.9 million,\nrespectively.\n\n \n\n**Commitments\nand Contingencies**\n\n \n\n**Capital\nexpenditures**\n\n \n\nOur capital expenditures were\nnil and $0.8 million for the years ended December 31, 2025 and 2024, respectively, which incurred primarily in connection with payment\nof property and equipment and software. We intend to fund our future capital expenditures with our existing cash balance, bank loans and\nnet proceeds from our F-3 offering.\n\n \n\n**Lease commitments**\n\n \n\nWe leases\noffice space under non-cancelable operating lease agreements, which end at various dates in 2027. As of December 31, 2025, our operating\nleases had a weighted average remaining lease term of 1.50 years and a weighted average discount rate of 3.66%. Future lease payments\nunder operating leases as of December 31, 2025 were as follows:\n\n  \n\n****\n\n \n \nDecember 31, 2025\n\n \n \n \n\n2026\n \n \n268,275\n \n\n2027\n \n \n104,725\n \n\nThereafter\n \n \n—\n \n\nTotal undiscounted lease payments\n \n$\n373,000\n \n\nLess imputed interest\n \n \n9,172\n \n\nTotal lease liabilities\n \n$\n363,828\n \n\n****\n\n** **\n\n****\n\n89\n\n \n\n** **\n\n**Contingencies**\n\n \n\nFrom\ntime to time, we are party to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well\nas the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be\nmaterial to the consolidated financial statements.\n\n \n\n**Critical Accounting Policies and Estimates**\n\n \n\nThe discussion and analysis of\nour financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with\nthe accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make\nestimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions\nare affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates\nand assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.\nPlease refer to NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES of our consolidated financial statements for details.\n\n \n\n**Use of Estimates and Assumptions**\n\n \n\nThe preparation of consolidated\nfinancial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts\nof assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements\nand the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s\nconsolidated financial statements mainly include, but are not limited to, impairment assessment of goodwill, determination of incremental\nborrowing rate for leases, valuation allowance for deferred tax assets, allowance for credit losses, standalone selling price of each\ndistinct performance obligation in revenue recognition.\n\n \n\nManagement bases the estimates\non historical experience and on various other assumptions as discussed elsewhere to the consolidated financial statements that are believed\nto be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. On an\nongoing basis, management evaluates its estimates based on information that is currently available. Changes in circumstances, facts and\nexperience may cause the Company to revise its estimates. Changes in estimates are recorded in the period in which they become known.\nActual results could materially differ from these estimates.\n\n \n\n**Recent Accounting Pronouncements**\n\n \n\nSee note 2 of our notes to the\nconsolidated financial statements for a discussion of recently issued accounting standards.\n\n \n\n**C. Research and development, patents and licenses, etc.**\n\n \n\n**Research and Development**\n\n \n\nAfter the Sale in August 2023\nand the Acquisition in December 2024, we became to invest resources in research and development of our digital advertising and marketing\ncampaign services to develop our new business. For the years ended December 31, 2025, 2024 and 2023, research and development expenses\nwere approximately $0.1 million, $0.0 million, and nil, respectively.\n\n \n\n**Intellectual Property**\n\n \n\nOur success and future revenue\ngrowth depend, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark and trade\nsecret laws, as well as confidentiality procedures, to protect our proprietary technologies and processes.\n\n \n\n90\n\n \n\n \n\nWe believe that the core of our\nbusiness is comprised of our proprietary technologies, including our patented VoIP and other internet technologies and software copyrights.\nAs a result, we strive to maintain a robust intellectual property portfolio. Our success and future revenue growth may depend, in part,\non our ability to protect our intellectual property as products and services that are material to our operating results incorporate patented\ntechnology.\n\n \n\nWe have pursued rights in intellectual\nproperty since our founding and we focus our intellectual property efforts in China. Our patent strategy is designed to provide a balance\nbetween the need for coverage in our strategic market and the need to maintain reasonable costs.\n\n \n\nWe believe our rights to patents,\ncopyrights, trademarks and other intellectual property rights serve to distinguish and protect our products from infringement and contribute\nto our competitive advantages. As of December 31, 2025, we had rights to 1 patent, 43 software copyrights, and 1 registered trademark.\n\n \n\nWe cannot assure you that any\npatents or copyrights will be issued from any of our pending applications. In addition, any rights granted under any of our existing or\nfuture patents, copyrights or trademarks may not provide meaningful protection or any commercial advantage to us. With respect to our\nother proprietary rights, it may be possible for third parties to copy or otherwise obtain and use proprietary technology without authorization\nor to develop similar technology independently. We may in the future initiate claims or litigation against third parties to determine\nthe validity and scope of proprietary rights of others. In addition, we may in the future initiate litigation to enforce our intellectual\nproperty rights or to protect our trade secrets. Additional information about the risks relating to our intellectual property is provided\nunder “Item 3. Key Information—D. Risk Factors—Risks Related to Intellectual Property.”\n\n \n\n**D. Trend information**\n\n \n\nOther than as described elsewhere\nin this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have\na material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that\nwould cause our reported financial information not necessarily to be indicative of future operating results or financial condition.\n\n \n\n**E. Critical Accounting Estimates**\n\n \n\nSee “Critical Accounting Policies and Estimates” above."}