{"url_path":"/sec/twg/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 Operating and Financial","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1978057/0001213900-26-057962-index.html","accession_number":"0001213900-26-057962","cik":"0001978057","ticker":"TWG","issuer_name":"Top Wealth Group Holding Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1978057/0001213900-26-057962-index.html","primary_entity_key":"0001978057","primary_entity_name":"Top Wealth Group Holding Ltd"},"word_count":4362,"has_tables":true,"body_markdown":"**Item 5. Operating and Financial\nReview and Prospects**\n\n \n\n*You should read the following discussion and\nanalysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the\nrelated notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties.\nOur actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements\nas a result of various factors, including those set forth under “Item 3. Key Information — 3.D. Risk Factors”\nand elsewhere in this annual report.* \n\n \n\n**Key Factors Affecting Our Business**\n\n \n\nWe believe that our performance is principally\naffected by the following key factors:\n\n \n\n \n●\n*Demographic and macroeconomic\ntrends. *Ever-growing numbers of global high-net-worth individuals and increasing demands for quality lifestyles: The substantial\nrise in the global economy over the years resulted in an apparent increase in the growth of ultra-high-net-worth individuals\nworldwide, with the number hitting record highs annually. As caviar turns to be synonymous with luxury in Western culture, it has\nlong been favored by the ultra-wealthy class, which ensures the stability of the demand side. Besides, driven by the popularization\nof quality lifestyle, the growing number of high-net-worth individuals, who have cultivated full awareness of caviar’s health\nbenefits and skincare functions, are projected to generate more demands for caviar products in the foreseeable future.\n\n \n\nDownstream consumption demands to be\nextensive and diversified: As caviar is proven to be an excellent source of omega-3 and six fatty acids, and other vitamins and minerals,\nthe nutrition benefits of caviar got highly recognized by the market worldwide. The diversification of downstream consumption demands\nis expanding the caviar’s application in the nutraceutical, cosmeceutical and pharmaceutical industries.\n\n \n\nCurrently, except for food garnish\nand other edible uses, caviar is gradually applied for skin moisturizing, skin texture improvement and obesity treatment, etc. This wide\nrange of benefits for caviar in the cosmetic and pharmaceutical sectors is projected to continue to boost demand in the future years.\n\n \n\n \n*●*\n*Expansion into major\nconsumer market in Europe and United States. *Our ability to expand our global market presence in developed markets\nwith a strong consumer base, such as Europe, the United States, Japan, Dubai, Australia and Southeast Asia (collectively, the\n“**Target Regions**”). We intend to establish representative offices at each of the Target Regions to access the local\nconsumers. We currently plan to recruit local sales and marketing staff to conduct marketing activities in such regions, ranging\nfrom (i) conducting product promotion; (ii) brand building; (iii) maintaining regular communication with local customers;\n(iv) collecting feedbacks from local consumers on our products; and (v) maintaining regular communication and interaction\nwith different industry players, so we can stay abreast of the latest trend and development of local consumers’ tastes.\n\n \n\n \n●\n*Our ability to successfully\nexecute our strategies and implement our initiatives. *Our performance will continue to depend on our ability to successfully\nexecute our strategies and to implement our current and future initiatives. The key strategies include pursuing new customers in\nmajor markets in Europe and the United States including:\n\n \n\n \n●\nmaintaining the popularity,\nattractiveness, diversity and quality of our wine and caviar products;\n\n \n\n \n●\nmaintaining or improving\ncustomers’ satisfaction with the quality of our wine and caviar products;\n\n \n\n \n●\noffering and maintaining\na wide selection of high-quality wine and caviar products;\n\n \n\n \n●\nincreasing brand awareness\nthrough marketing and brand promotion activities;\n\n \n\n \n●\npreserving our reputation\nand goodwill in the event of any negative publicity, internet and data security, product quality, price authenticity, or other issues\naffecting us or the wine and caviar industry;\n\n \n\n \n●\nour ability to enter into\nsales distribution agreements in the jurisdictions we planned to expand to and distribute our products to our end-users and\nstrategic partners overseas through a third party logistics company;\n\n \n\n \n●\nour ability to launch successful\nmarketing and sales activities to sell our products;\n\n \n\n \n●\nour ability to enter into\nsupply agreements with new potential suppliers and maintain relationship with our existing suppliers at competitive prices;\n\n \n\n \n●\nour ability to raise additional\nfunds for operations; and\n\n \n\n \n●\nour ability to enhance\nour operational efficiency.\n\n \n\n62\n\n \n\n \n\n**Results of Operations**\n\n \n\n**Comparison of the Year Ended December\n31, 2025 and December 31, 2024  **\n\n \n\nThe following financial data are derived from,\nand should be read in conjunction with, our consolidated financial statements for the year ended December 31, 2025.\n\n \n\nA summary of the Company’s operating results\nfor the year ended December 31 2025 and 2024 are as follows:\n\n \n\n  \nYear ended Dec 31  \n   \n  \n\n  \n2025  \n2024  \nChange \n\n  \nUSD  \nUSD  \nUSD  \n% \n\nRevenue \n 9,129,706  \n 4,747,580  \n 4,382,126  \n 92.30 \n\nCost of Sales \n (2,320,055) \n (2,240,867) \n 79,188  \n 3.54 \n\nGross Profit \n 6,809,651  \n 2,506,713  \n 4,202,938  \n 167.67 \n\nOther income \n -  \n 87  \n (87) \n (100.00)\n\nProvision for inventory impairment \n -  \n (1,504,397) \n (1,504,397) \n (100.00)\n\nAdministrative Expenses \n (1,210,350) \n (1,602,251) \n (391,901) \n (24.46)\n\nSelling Expenses \n (2,409,355) \n (1,419,667) \n 989,689  \n 69.71 \n\nProfit (loss) before tax \n 3,189,946  \n (2,019,515) \n 6,177,120  \n 257.96 \n\n  \n\nAs of December 31, 2025, the Company operated\nin Hong Kong through its subsidiaries, which primarily engaged in trading of caviars, wine and health supplement.\n\n \n\nManagement determined that the Company functions\nas a single operating segment, and thus reports as a single reportable segment. This determination is based on rules prescribed by GAAP\napplied to the manner in which management operates the Company. The chief operating decision maker is responsible for allocating resources\nto its operations and assessing performance and obtains financial information, being the consolidated balance sheets, consolidated statements\nof operations, and consolidated statements of cash flows, about the Company as a whole.\n\n \n\nAn analysis is set out below:\n\n \n\n  \nYear ended Dec 31  \n   \n  \n\n  \n2025  \n2024  \nChange \n\n  \nUSD  \nUSD  \nUSD  \n% \n\nRevenue from caviar \n 1,629,706  \n 4,747,580  \n (3,117,874) \n (65.67)\n\nRevenue from wine \n 6,000,000  \n -  \n 6,000,000  \n 100.00 \n\nRevenue from health supplement \n 1,500,000  \n -  \n 1,500,000  \n 100.00 \n\n  \n 9,129,706  \n 4,747,580  \n 4,382,126  \n 92.30)\n\n  \n\nOur revenue increased by USD4,382,126, or 92.30%,\nfrom USD4,747,580 for the year ended December 31, 2024 to USD9,129,706 for the year ended December 31, 2025, primarily due to new products\nstreams, that is, the trading of wine and food supplements.\n\n \n\nThe decrease in revenue from caviar decreased\nby 65.67% or US$3,117,874 was mainly due to the fact that the board is more cautious in the caviar business.\n\n \n\n63\n\n \n\n \n\n**Cost of sales**\n\n \n\nOur cost of sales mainly comprised of purchase\ncosts for caviar, wine and food supplement. For the year ended December 31 2024, our cost of sales amounted to USD2,320,055, an increase\nof USD79,188, or 3.53%, from USD2,240,867 for the year ended December 31 2024. Cost of sales increased in less percentage compare to increased\nin sales as the Company achieved higher gross margin that the Company targeted on more profitable products.\n\n  \n\n**Gross Profit and Gross Margin**\n\n \n\n  \nFor the Year Ended\n31 December  \n   \n  \n\n  \n2025  \n2024  \nYear on year change \n\n  \nUSD  \nUSD  \nUSD  \n% \n\nGross profit of caviar \n 1,159,715  \n 2,506,713  \n (1,346,998) \n (53.7)\n\nGross profit of wine \n 4,600,000  \n -  \n 4,600,000  \n 100.0 \n\nGross profit of health supplement \n 1,049,936  \n -  \n 1,049,936  \n 100.0 \n\nGross Profit \n 6,809,651  \n 2,506,713  \n 4,302,938  \n 171.7 \n\nGross margin of caviar \n 71.2% \n 52.8% \n -  \n 18.4%\n\nGross margin of wine \n 76.7% \n -  \n -  \n 76.7%\n\nGross margin of health supplement \n 70.0% \n    \n    \n 70.0%\n\nGross Margin \n 74.6% \n 52.8% \n -  \n 21.8%\n\n  \n\nOur gross margin for the year\nended December 31, 2025 was 73.5% as compared to 52.8% for the year ended December 31, 2024. In 2023, the Company has carried out Christmas\nquick sale promotion. This diluted the over gross margin of 2023.\n\n \n\n**Provision for inventory impairment**\n\n \n\nSince the exit of the sales team, the revenue\nin the latter half of 2024 drop significantly that there was substantially unsold inventory that expired within 6 months as of December\n31, 2024. There were no such expiry of inventory in 2025.\n\n \n\n**Administrative and Selling Expenses**\n\n \n\nOur Company’s administrative expenses came\nin at US1,602,251 and USD1,846,759 for the year ended December 31, 2024 and 2023 respectively, representing approximately 65.4% and 10.9%\nof our total revenue for the corresponding period.\n\n \n\nOur administrative expenses for the year ended\nDecember 31, 2024 primarily consist of (i) professional fee; (ii) staff cost; (iii) depreciation; (iv) rental fee;\n(v) travelling and entertainment; (vi) office supplies and upkeep and (vii) miscellaneous expenses. The following table\nsets forth the breakdown of our administrative expenses for the year ended December 31, 2024 and 2023.\n\n \n\n  \nYear ended December 31 \n\n  \n2025  \n2024 \n\n  \nUSD  \n%  \nUSD  \n% \n\nStaff cost \n 390,686  \n 32.3  \n 753,367  \n 47.0 \n\nNED fees \n 40,224  \n 3.3  \n 41,087  \n 2.6 \n\nDepreciation \n -  \n -  \n 61,879  \n 3.9 \n\nOperating lease payment \n 92,983  \n 7.7  \n 71,538  \n 4.5 \n\nOffice supplies and upkeep expenses \n 3,150  \n 0.3  \n 24,581  \n 1.5 \n\nProfessional fees \n 643,907  \n 53.2  \n 190,000  \n 11.9 \n\nEntertainment \n -  \n -  \n 333,557  \n 20.8 \n\nTravelling expense \n 31,741  \n 2.6  \n 27,262  \n 1.7 \n\nSample and scrap inventory \n -  \n -  \n 13,110  \n 0.8 \n\nMiscellaneous \n 7,659  \n 0.6  \n 85,870  \n 5.4 \n\n  \n 1,210,350  \n 100.0  \n 1,602,251  \n 100.0 \n\n \n\n64\n\n \n\n \n\nThe decrease in administrative expenses during\nthe year ended December 31, 2025 was primarily due to decrease in staff cost and entertainment. Professional fees in 2025 mainly\nincluded legal, audit, and consulting fees of approximately USD643,907 .\n\n \n\nOur selling expense in 2025 primarily consists\nof marketing campaign paid to a marketing agency as follows:\n\n \n\n  \nYear ended December 31 \n\n  \n2025  \n2024 \n\n  \nUSD  \n%  \nUSD  \n% \n\nMarketing expense \n 1,255,746  \n 93.6  \n 976,494  \n 68.8 \n\nPromotion fees \n 100,000  \n 4.2  \n 178,846  \n 12.6 \n\nSub-contractor expense \n 967,659  \n 40.2  \n 251,955  \n 17.7 \n\nMiscellaneous\n \n 85,890  \n 3.6  \n 12,372  \n 0.9 \n\n  \n 2,409,355  \n 100.0  \n 1,419,667  \n 100.0 \n\n \n\nMarketing expense was mainly the Company engaged\nan advertising agent to roll out a series of advertising campaigns. The promotional fees and sub-contractors expenses in 2024 were mainly\npromotional events and booth incurred to promote the Company’s Imperia Caviar brand. The promotion fees were wine distributed to\npotential customers for pitching new business partners. Sub-contractor expense represents incentive shares issued to curtained advisors\nfor the advising on the Company caviar business and exploring of new regions and line of caviar business for the period from June 6,\n2025 to June 5, 2026.\n\n \n\n**Comparison of the Year Ended December 31,\n2024 and December 31, 2023** \n\n \n\nThe following financial data are derived from,\nand should be read in conjunction with, our consolidate financial statements for the year ended December 31, 2024.\n\n \n\nA summary of the Company’s operating results\nfor the year ended December 31 2024 and 2023 are as follows:\n\n \n\n  \nYear ended Dec 31  \n   \n  \n\n  \n2024  \n2023  \nChange \n\n  \nUSD  \nUSD  \nUSD  \n% \n\nRevenue \n 4,747,580  \n 16,943,287  \n (12,195,707) \n (72)\n\nCost of Sales \n (2,240,867) \n (11,556,006) \n (9,315,139) \n (81)\n\nGross Profit \n 2,506,713  \n 5,387,281  \n (2,880,568) \n (53)\n\nOther income \n 87  \n 2  \n 85  \n 4,250 \n\nProvision for inventory impairment \n (1,504,397) \n -  \n 1,504,397  \n 100 \n\nAdministrative Expenses \n (1,602,251) \n (1,846,759) \n 244,508  \n (13)\n\nSelling Expenses \n (1,419,667) \n (495,276) \n 924,391  \n 187 \n\n(Loss)/profit before tax \n (2,019,515) \n 3,045,248  \n (5,064,763) \n (166)\n\n \n\nAs of December 31, 2024, the Company operated\nin Hong Kong through its subsidiaries, which primarily engaged in trading of caviars.\n\n \n\nManagement determined that the Company functions\nas a single operating segment, and thus reports as a single reportable segment. This determination is based on rules prescribed by GAAP\napplied to the manner in which management operates the Company. The chief operating decision maker is responsible for allocating resources\nto its operations and assessing performance and obtains financial information, being the consolidated balance sheets, consolidated statements\nof operations, and consolidated statements of cash flows, about the Company as a whole.\n\n \n\nOur revenue decreased by USD12,195,707, or 72%,\nfrom USD16,943,287 for the year ended December 31 2023 to USD4,747,580 for the year ended December 31, 2024, primarily due to the resignation\nof the sales team that they were unsatisfactory with the remuneration package after the IPO of the Comp An analysis is set out below:\n\n \n\n  \nYear ended Dec 31  \n   \n  \n\n  \n2024  \n2023  \nChange \n\n  \nUSD  \nUSD  \nUSD  \n% \n\nRevenue from caviar \n 4,747,580  \n 12,483,195  \n (7,735,615) \n (62)\n\nRevenue from wine \n -  \n 4,460,092  \n (4,460,092) \n (100)\n\n  \n 4,747,580  \n 16,943,287  \n (12,195,707) \n (72)\n\n \n\nThe trading of wine was incidental in year ended\nDecember 31, 2023 that was used as part of the Christmas promotional sales bundle. There was no such activities in year ended December\n31, 2024.\n\n \n\n65\n\n \n\n \n\n**Cost of sales**\n\n \n\nOur cost of sales mainly comprised of purchase\ncosts for caviar and wine. For the year ended December 31 2024, our cost of sales amounted to USD2,240,867, a decrease of USD 9,315,139,\nor 81%, from USD11,556,006 for the year ended December 31 2023. This decrease was in line with the decrease in revenue.\n\n  \n\n**Gross Profit and Gross Margin**\n\n \n\n  \nFor the Year Ended\n31 December  \n   \n  \n\n  \n2024  \n2023  \nYear on year change \n\n  \nUSD  \nUSD  \nUSD  \n% \n\nGross profit of caviar \n 2,506,713  \n 4,957,157  \n (2,450,444) \n (49.4)\n\nGross profit of wine \n -  \n 430,124  \n (430,124) \n 100.0 \n\nGross Profit \n 2,506,713  \n 5,387,281  \n (2,880,568) \n (53.5)\n\nGross profit of caviar \n 52.8% \n 39.7% \n -  \n 13.1%\n\nGross profit of wine \n -% \n 9.64  \n -  \n   \n\nGross Margin \n 52.8% \n 31.8% \n -  \n 21.0%\n\n  \n\nOur gross profit margin for the year ended December\n31, 2024 was 52.8% as compared to 31.8% for the year ended December 31, 2023. In 2023, the Company has carried out Christmas quick sale\npromotion. This diluted the over gross margin of 2023.\n\n \n\n**Provision for inventory impairment**\n\n \n\nSince the exit of the sales team, the revenue\nin the latter half of 2024 drop significantly that there was substantially unsold inventory that expired within 6 months from the day\nof this report.  \n\n \n\n**Administrative and Selling Expenses**\n\n \n\nOur Company’s administrative expenses came\nin at US1,602,251 and USD1,846,759 for the year ended December 31, 2024 and 2023 respectively, representing approximately 65.4% and 10.9%\nof our total revenue for the corresponding period.\n\n \n\nOur administrative expenses for the year ended\nDecember 31, 2024 primarily consist of (i) professional fee; (ii) staff cost; (iii) depreciation; (iv) rental fee;\n(v) travelling and entertainment; (vi) office supplies and upkeep and (vii) miscellaneous expenses. The following table\nsets forth the breakdown of our administrative expenses for the year ended December 31, 2024 and 2023.\n\n \n\n  \nYear ended December 31 \n\n  \n2024  \n2023 \n\n  \nUSD  \n%  \nUSD  \n% \n\nStaff cost \n 753,367  \n 47.0  \n 444,388  \n 24.1 \n\nNED fees \n 41,087  \n 2.6  \n -  \n - \n\nDepreciation \n 61,879  \n 3.9  \n 233,659  \n 12.7 \n\nOperating lease payment \n 71,538  \n 4.5  \n 86,038  \n 4.7 \n\nOffice supplies and upkeep expenses \n 24,581  \n 1.5  \n 9,793  \n 0.5 \n\nProfessional fees \n 190,000  \n 11.9  \n 921,110  \n 49.9 \n\nEntertainment \n 333,557  \n 20.8  \n 76,342  \n 4.1 \n\nTravelling expense \n 27,262  \n 1.7  \n 36,545  \n 1.9 \n\nSample and scrap inventory \n 13,110  \n 0.8  \n 14,977  \n 0.8 \n\nMiscellaneous \n 85,870  \n 5.4  \n 23,907  \n 1.3 \n\n  \n 1,602,251  \n 100.0  \n 1,846,759  \n 100.0 \n\n \n\nThe decrease in administrative expenses during\nthe year ended December 31, 2024 was primarily due to decrease in professional fees. Professional fees in 2024 is mainly audit fee\nwhile it included legal, audit, and consulting fees of approximately USD921,110. The increase in staff cost for the year ended December\n31 2024 compared to December 31 2023 was mainly due to the increase in pay scale after IPO. The lower depreciation expense was\ndue to the renovation of our office was fully depreciated in 2023.\n\n \n\n66\n\n \n\n \n\nOur selling expense in 2024 primarily consists\nof marketing campaign paid to a marketing agency as follows:\n\n \n\n  \nYear ended December 31 \n\n  \n2024  \n2023 \n\n  \nUSD  \n%  \nUSD  \n% \n\nMarketing expense \n 976,494  \n 68.8  \n 495,276  \n 100 \n\nPromotion fees \n 178,846  \n 12.6  \n -  \n - \n\nSub-contractor expense \n 251,955  \n 17.7  \n -  \n - \n\nMiscelleneous \n 12,372  \n 0.9  \n -  \n - \n\n  \n 1,419,667  \n 100.0  \n 495,276  \n 100 \n\n \n\nThe increase in selling expenses for the year\nended December 31 2024 compared to the corresponding period in 2023 was mainly due to the Company engaged an advertising agent to\nroll out a series of advertising campaigns. The promotional fees and sub-contractors expenses in 2024 were mainly promotional events and\nbooth incurred to promote the Company’s Imperia Caviar brand.\n\n \n\n**Liquidity and Capital Resources**\n\n \n\nOur liquidity and working capital requirements\nprimarily related to our operating expenses. Historically, we have met our working capital and other liquidity requirements primarily\nthrough cash generated from our operations. Going forward, we expect to fund our working capital and other liquidity requirements from\nvarious sources, including but not limited to cash generated from our operations, loans from banking facilities, the net proceeds from\nthe securities offering from the listing and other equity and debt financings as and when appropriate.\n\n \n\n**Cash flows** \n\n \n\nThe following table summarizes our cash flows\nfor the years ended December 31, 2025, 2024 and 2023:\n\n \n\n  \nYear ended December 31 \n\n  \n2025  \n2024  \n2023 \n\n  \nUSD  \nUSD  \nUSD \n\nCash and cash equivalents at beginning of the year \n 42,380  \n 134,350  \n 217,384 \n\n  \n    \n    \n   \n\nNet cash (used in) provided by operating activities \n (6,194,419) \n 887,554  \n (863,616)\n\nNet cash provided by (used in) investing activities \n 4,099,851  \n (15,888,928) \n — \n\nNet cash provided by financing activities \n 4,439,346  \n 14,909,404  \n 780,582 \n\n  \n    \n    \n   \n\nNet increase (decrease) in cash and cash equivalents \n 2,344,778  \n (91,970) \n (83,034)\n\n  \n    \n    \n   \n\nCash and cash equivalents as at end of the year \n 2,387,158  \n 42,380  \n 134,350 \n\n \n\n67\n\n \n\n \n\nFor the year ended December 31, 2025, our\nnet cash used in operating activities was USD6,194,419 and is mainly comprised of increase in accounts receivable of US$7,685,757 due\nto increase in revenue around the year end and the increase in inventory to cope with increasing sales volume.\n\n \n\nFor the year ended December 31, 2024, our\nnet cash provided by operating activities was USD887,554 and is mainly comprised of decrease in accounts receivable that the promotional\nsales in 2023 Christmas were collected during 2024. For the year ended December 31, 2023, our net cash used in operating activities\nwas USD863,616 and is mainly comprised of increase in accounts receivable as there were promotional sales for the Christmas of 2023.\n\n \n\nFor the year ended December 2025, the cash inflow\nfrom investing activities was mainly due to the Company got return of fund for potential acquisition being cancelled.\n\n \n\nFor the year ended December 2024, the cash outflow\nfrom investing activities were mainly due to the Company paid certain long term assets such as the potential acquisition of certain fish\nfarms and media company to promote the Company’s product and image. For the year ended December 31 2023, there was no cash\nflowa from investing activities\n\n \n\nFor the year ended December 2025, the cash provided\nby financing activities were mainly attributable to the net proceeds from the  issuance of 720,000 units of Class A ordinary shares\nand 720,000 units for each of Series A and Series B Warrants for Class A ordinary shares. For the year ended December 2024, the cash provided\nby financing activities were mainly attributable to the net proceeds from the IPO and second public placement in 2024, totally USD15,687,297.\nFor the year ended December 31 2023, the cash provided by financing activities were attributable to standby bridging loan facilities\nprovided by a third party and also minority shareholder.\n\n \n\n**Working Capital**\n\n \n\nWe believe that our Company has sufficient working\ncapital for our requirements for at least the next 12 months from the date of this annual report, in the absence of unforeseen circumstances,\ntaking into account the financial resources presently available to us, including cash and cash equivalents on hand, cash flows from our\noperations and the estimated net proceeds from the IPO offering.\n\n \n\n**Capital Expenditures**\n\n \n\n**Historical capital expenditures**\n\n \n\nOur capital expenditures for the years ended\nDecember 31, 2025, 2024 and 2023 were nil, nil and nil respectively. The capital expenditures incurred in the year ended December 31 2022\nare related to purchase of office equipment and leasehold improvement. We principally funded our capital expenditures through cash flows\nfrom operations.\n\n \n\n68\n\n \n\n \n\n**Off-Balance Sheet Transactions**\n\n \n\nAs of December 31, 2025, we have no significant\noff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes\nin our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are\nmaterial to our stockholders.\n\n \n\n**Critical Accounting Policies and Estimates**\n\n \n\nOur financial statements and accompanying notes\nhave been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires\nus to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure\nof contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed\nto be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets\nand liabilities that are not readily apparent from other sources. We have identified certain accounting policies that are significant\nto the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition\nand results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions\nand results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to\nmake estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates\nare particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting\nthe estimate may differ significantly from management’s current judgments.\n\n \n\nThe following critical accounting policies rely\nupon assumptions and estimates and were used in the preparation of our unaudited interim condensed consolidated financial statements:\n\n \n\n**Use of Estimates**\n\n \n\nThe preparation of the consolidated financial\nstatements in conformity with US GAAP requires management to make estimates and assumptions that affect the recorded amounts of assets,\nliabilities, shareholders’ equity, revenues and expenses during the reporting period, and the disclosure of contingent liabilities\nat the date of the consolidated financial statements.\n\n \n\nOn an ongoing basis, management reviews its estimates\nand if deemed appropriate, those estimates are adjusted. The most significant estimates include allowance for uncollectible accounts\nreceivable, inventory valuation, useful lives and impairment for property and equipment, valuation allowance for deferred tax assets,\naccruals for potential liabilities and contingencies. Actual results could vary from the estimates and assumptions that were used.\n\n \n\n**Revenue Recognition**  \n\n \n\nThe Company recognizes revenue in accordance\nwith Accounting Standards Update 2014-09, “Revenue from contracts with customers,” (Topic 606). Revenue is recognized\nwhen a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing,\nand uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the\nconsideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order\nto determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised\ngoods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the\ntransaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance\nobligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company’s\nmain revenue stream is from sales of products. The Company recognizes as revenues the amount of the transaction price that is allocated\nto the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s\nperformance obligations are transferred to customers at a point in time, typically upon delivery.\n\n \n\n69\n\n \n\n \n\nThe Company has twos major stream of revenues,\nthey are, the sale of wine and caviar products in Hong Kong.\n\n \n\n**Foreign Currency Translation**\n\n \n\nThe Company’s principal country of operations\nis Hong Kong. The financial position and results of its operation are determined using Hong Kong Dollars (“HK$”),\nthe local currency, as the functional currency. The Company’s consolidated financial statements are reported using U.S. Dollar\n(“US$” or “$”).\n\n \n\nThe following table outlines the currency exchange\nrates that were used in preparing the accompanying consolidated financial statements:\n\n \n\n  \nDecember 31,\n2025  \nDecember 31,\n2024 \n\nUSD to HK$ /Year End \n 7.8  \n 7.8 \n\n \n\n  \nDecember 31, \n\n  \n2025  \n2024  \n2023 \n\nUSD to HK$ Average Rate \n 7.8  \n 7.8  \n 7.8 \n\n** **\n\n**Fair Value Measurements*** *— Fair\nvalue is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants\nat the measurement date. Inputs used to measure fair value are classified using the following hierarchy:\n\n \n\n \n●\nLevel 1. Unadjusted quoted\nprices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement\ndate.\n\n \n\n \n●\nLevel 2. Inputs other than\nquoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration\nwith observable market data.\n\n \n\n \n●\nLevel 3. Inputs are unobservable\nfor the asset or liability and include situations in which there is little, if any, market activity for the asset or liability. The\ninputs used in the determination of fair value are based on the best information available under the circumstances and may require\nsignificant management judgment or estimation.\n\n \n\nThe Company’s financial instruments include\ncash and cash equivalents, accounts receivable, accounts payable and accrued expenses reflected as current assets and current liabilities.\nDue to the short-term nature of these instruments, management considers their carrying value to approximate their fair value.\n\n \n\n**New accounting standards**\n\n \n\nOn December 14, 2023, the FASB issued ASU 2024-09,\n“Income Taxes (Topic 740): Improvements to Income Tax Disclosures” to enhance the transparency and decision usefulness of\nincome tax disclosures. The amendments require that public business entities on an annual basis (1) disclose specific categories in the\nrate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of\nthose reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pre-tax income or loss by the applicable\nstatutory income tax rate). In addition, public business entities are required to provide certain qualitative disclosures about the rate\nreconciliation and the amount of income taxes paid (net of refunds received) disaggregated (1) by federal (national), state, and foreign\ntaxes and (2) by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent\nof total income taxes paid (net of refunds received). For public business entities, the standard is effective for annual periods beginning\nafter December 15, 2024. The amendments in this ASU require a cumulative effect adjustment to the opening balance of retained earnings\n(or other appropriate components of equity or net assets) as of the beginning of the annual reporting period in which an entity adopts\nthe amendments. The Company is evaluating the impact of this standard on the Company’s consolidated financial statements.\n\n \n\nWe have evaluated all the recently issued, but\nnot yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting\nbodies through the date of this report and do not believe the future adoption of any such standards will have a material impact on our\nconsolidated financial statements.\n\n \n\n70"}