{"url_path":"/sec/wyhg/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1999860/0001213900-26-056618-index.html","accession_number":"0001213900-26-056618","cik":"0001999860","ticker":"WYHG","issuer_name":"Wing Yip Food Holdings Group Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1999860/0001213900-26-056618-index.html","primary_entity_key":"0001999860","primary_entity_name":"Wing Yip Food Holdings Group Ltd"},"word_count":26796,"has_tables":true,"body_markdown":"**Item 3. KEY INFORMATION**\n\n** **\n\nA. [Reserved]\n\n \n\nB. Capitalization and Indebtedness\n\n \n\nNot applicable.\n\n \n\nC. Reasons for the Offer and Use of Proceeds\n\n \n\nNot applicable.\n\n \n\nD. Risk Factors\n\n** **\n\n**Risks Relating to Doing Business in Mainland\nChina**\n\n** **\n\n**Joint statement by the SEC and the PCAOB\nproposed rule changes submitted by Nasdaq, and the newly enacted Consolidated Appropriations Act all call for additional and more\nstringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors\nwho are not inspected by the PCAOB. **\n\n \n\nOn April 21, 2020, SEC Chairman Jay Clayton\nand PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks\nassociated with investing in companies based in or that have substantial operations in emerging markets, including China. The joint statement\nemphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks\nof fraud in emerging markets.\n\n \n\nOn May 18, 2020, Nasdaq filed three proposals\nwith the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a “Restrictive Market,”\n(ii) adopt a new requirement relating to the qualification of management or the board of directors for Restrictive Market companies,\nand (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s\nauditor.\n\n \n\nOn May 20, 2020, the U.S. Senate passed\nthe Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government\nif the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB\nis unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade\non a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable\nAct. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.\n\n \n\nOn March 24, 2021, the SEC announced the\nadoption of interim final amendments to implement the submission and disclosure requirements of the Holding Foreign Companies Accountable\nAct. In the announcement, the SEC clarifies that before any issuer will have to comply with the interim final amendments, the SEC must\nimplement a process for identifying covered issuers. The announcement also states that the SEC staff is actively assessing how best to\nimplement the other requirements of the Holding Foreign Companies Accountable Act, including the identification process and the trading\nprohibition requirements.\n\n \n\n1\n\n \n\n \n\nOn September 22, 2021, the PCAOB adopted\na final rule implementing the Holding Foreign Companies Accountable Act, which provides a framework for the PCAOB to use when determining,\nas contemplated under the Holding Foreign Companies Accountable Act, whether the board of directors of a company is unable to inspect\nor investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more\nauthorities in that jurisdiction.\n\n \n\nOn June 22, 2021, the U.S. Senate passed\nthe Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, the Consolidated Appropriations Act was signed\ninto law by President Biden, which contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable\nAct and amended the Holding Foreign Companies Accountable Act by requiring the SEC to prohibit an issuer’s securities from trading\non any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years, instead of three.\n\n \n\nOur auditor, Audit Alliance LLP, the independent\nregistered public accounting firm that issues the audit report included in this annual report, as an auditor of companies that are traded\npublicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which\nthe PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is headquartered\nin Singapore, and has been inspected by the PCAOB. Audit Alliance LLP is subject to U.S. laws under which the PCAOB conducts regular inspections\nto assess compliance with applicable professional standards with the last inspection on September 27, 2024. On August 26, 2022,\nthe PCAOB signed SOP Agreements with the China Securities Regulatory Commission (the “CSRC”) and the Ministry of Finance of\nthe PRC. The SOP Agreements established a specific, accountable framework to make possible complete inspections and investigations by\nthe PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. On December 15, 2022, the PCAOB\nannounced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered\nin mainland China and Hong Kong completely in 2022. The PCAOB vacated its previous 2021 determination that the PCAOB was unable to\ninspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether\nthe PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in\nmainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control.\nThe PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward. The PCAOB has indicated that it\nwill act immediately to consider the need to issue new determinations with the Holding Foreign Companies Accountable Act if needed. If\nthe PCAOB in the future again determines that it is unable to inspect and investigate completely auditors in mainland China and Hong Kong,\nthen the companies audited by those auditors would be subject to a trading prohibition on U.S. markets pursuant to the Holding Foreign\nCompanies Accountable Act and the Consolidated Appropriations Act. Furthermore, the Accelerating Holding Foreign Companies Accountable\nAct, which requires the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not\nsubject to PCAOB inspections for two consecutive years, may result in the delisting of our Company in the future if the PCAOB is\nunable to inspect our accounting firm at such future time.\n\n** **\n\n**The regulatory authorities of mainland China\nexert substantial influence over the manner in which we must conduct our business, and may intervene or influence our operations at any\ntime within their scope of authorities as prescribed by law, or may exert more control over offerings conducted overseas and/or foreign\ninvestment in China-based issuers, which could result in a material change in our operations, significantly limit or completely hinder\nour ability to offer or continue to offer securities to investors and, and cause the value of our ADSs to significantly decline or be\nworthless.**\n\n \n\nThe regulatory authorities of mainland China have exercised, and continue to exercise, substantial influence over the economy of mainland\nChina through regulation and may intervene with or control, within their scope of authorities as prescribed by law, our operations to\nfurther regulatory, political and societal goals. The regulatory authorities of mainland China have recently published new policies that\nsignificantly affected certain industries, such as the cryptocurrency industry and the education industry. As of the date of this annual\nreport, we have not been affected by any newly published policies concerning our industry or our business operations that have limited\nor may limit our business operations to a significant degree, however, to the extent that the regulatory authorities of mainland China\npublish any policies in the future that concern and affect the food industry that our subsidiaries operate in, the ability of our PRC\nsubsidiaries to continue operating their business or serving their customers in mainland China may be severely restricted. We cannot assure\nyou that government authorities in mainland China will not introduce any enhanced regulation over the industry our PRC subsidiaries operate\nin that may lead to our inability to operate in mainland China at all. Additionally, our PRC subsidiaries’ ability to operate in\nmainland China may also be harmed by changes in laws and regulations, including those relating to taxation, environmental regulation,\nland use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations\nor interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance\nwith such regulations or interpretations. Accordingly, government actions in the future, including any decision to strengthen overall\nregulation over the food industry, could have a significant effect on the industry in which our PRC subsidiaries operate. In any of these\nevents, our PRC subsidiaries’ ability to continue their operations may be significantly impacted, and the value of our ADSs may\nsignificantly decline or become worthless. Furthermore, the regulatory authorities of mainland China have indicated an intent to exert\nmore regulatory oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. If\nwe are subject to these actions because of our noncompliance with the applicable laws or rules, our ability to offer or continue to offer\nsecurities to investors could be significantly limited or completely hindered, and the value of our ADSs could significantly decline or\nbecome worthless.\n\n** **\n\n2\n\n \n\n** **\n\n**U.S. regulatory bodies may be limited\nin their ability to conduct investigations or inspections of the operations of our operating subsidiaries in mainland China.**\n\n \n\nThe SEC, the U.S. Department of Justice and\nother U.S. authorities may also have difficulties in bringing and enforcing actions against us or our directors or executive officers\nin mainland China. The SEC has stated that there are significant legal and other obstacles to obtaining information needed for investigations\nor litigation in mainland China. Mainland China adopted a revised securities law that became effective on March 1, 2020, Article 177\nof which provides, among other things, that no overseas securities regulator is allowed to directly conduct investigation or evidence\ncollection activities within the territory of mainland China. Further, the Trial Administrative Measures of Overseas Securities Offering\nand Listing by Domestic Companies (the “Trial Administrative Measures”) provide that overseas securities regulatory authorities\nmay conduct investigations or evidence collection relating to mainland China companies’ overseas offering and listing activities\nthrough the assistance of the CSRC under relevant cross-border securities regulatory cooperation mechanisms. Accordingly, without\nregulatory cooperation between the U.S. and China, no entity or individual in mainland China may provide documents and information relating\nto securities business activities to overseas regulators when it is under direct investigation or evidence discovery conducted by overseas\nregulators, which could present significant legal and other obstacles to obtaining information needed for investigations and litigation\nconducted outside of mainland China.\n\n** **\n\n**Changes in application and interpretation\nwith respect to the applicable legal laws/regulations, and economic policies for our PRC subsidiaries, could result in a material change\nin our operations and/or the value of the securities we are registering for sale.**\n\n \n\nThe legal system of mainland China is based on\nwritten statutes and their legal interpretations by the Standing Committee of the National People’s Congress, or the SCNPC. Previous\ncourt decisions may be cited for reference but have limited precedential value. Since 1979, the regulatory authority of mainland China\nhas been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations\ndealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However,\nas these laws and regulations are relatively new, and due to the non-binding nature of the court decisions, as mainland China is not a\ncommon law country, the interpretation and application of these laws and regulations are subject to change, which could result in a material\nchange in our operations and/or the value of our ADSs.\n\n \n\nWhile the economy of mainland China has experienced\nsignificant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any changes\nin economic conditions in mainland China, in the policies of the regulatory authority, or in the laws and regulations in mainland China\ncould have a material adverse effect on the overall economic growth of mainland China. Such developments could adversely affect our business\nand operating results, reduce demand for our products, and weaken our competitive position. The regulatory authority of mainland China\nhas implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit\nthe overall economy of mainland China, but may have a negative effect on us. For example, our financial condition and results of operations\nmay be adversely affected by government supervision over capital investments or changes in tax regulations. In addition, in the past the\nregulatory authority of mainland China has implemented certain measures, including interest rate adjustments, to adjust the pace of economic\ngrowth. These measures may affect economic activities in mainland China, which impact our business and operating results.\n\n** **\n\n**Recent greater oversight by the Cyberspace\nAdministration of China, or the CAC, over data security and cybersecurity, particularly for companies seeking to list on a foreign exchange,\ncould adversely impact our business.**\n\n \n\nOn November 7, 2016, the PRC Cybersecurity Law\nwas promulgated by the SCNPC, becoming effective on June 1, 2017, and was subsequently amended on October 28, 2025, with the revised provisions\nentering into force on January 1, 2026. The PRC Cybersecurity Law reinforces the mandatory cybersecurity protection obligations for network\nconstructors, operators, and service providers. The updated legislation places a heightened emphasis on strengthening network information\nmanagement, implementing a graded cybersecurity protection system, and enhancing capabilities for monitoring, defending against, and responding\nto cybersecurity risks and incidents. Furthermore, the amendments clarify and tighten requirements regarding data localization for critical\ninformation infrastructure and subject cross-border data flows to more robust security assessments.\n\n \n\nOn June 10, 2021, the SCNPC promulgated the PRC\nData Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities\nand individuals carrying out data activities and introduces a data classification and hierarchical protection system based on the importance\nof data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate\nrights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The\nPRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and\nimposes export restrictions on certain data and information. In early July 2021, regulatory authorities in China launched cybersecurity\ninvestigations with regard to several China-based companies that are listed in the United States.\n\n \n\n3\n\n \n\n \n\nOn November 14, 2021, the CAC published the\nRegulations for the Administration of Network Data Security (Draft for Comments) (the “Data Security Administration Draft”),\nwhich provides that data processing operators engaging in data processing activities that affect or may affect national security must\nbe subject to network data security review by the CAC. According to the Data Security Administration Draft, data processing operators\nwho possess personal data of at least one million users or collect data that affects or may affect national security must be subject to\nnetwork data security review by the CAC. The official version of the Regulation for the Administration of Network Data Security (the\n“Network Data Security Regulation”) was promulgated on September 24, 2024 and came into effect on January 1, 2025, which deletes\nthe requirement for a mandatory application of cybersecurity review for data processing operators who possess personal data of at least\none million users, as stated above. Instead, it requires that a network data handler who carries out network data processing activities\nthat affect or may affect national security, shall undergo a national security review in accordance with relevant national regulations.\n\n \n\nOn December 28, 2021, the CAC and other relevant\nregulatory authority jointly promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. The Cybersecurity\nReview Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase\nInternet products and services, net platform operators engaging in data processing activities that affect or may affect national security\nmust be subject to cybersecurity review by the Cybersecurity Review Office of the PRC. According to the Cybersecurity Review Measures,\na cybersecurity review assesses potential national security risks that may be brought about by any procurement, data processing, or overseas\nlisting. The Cybersecurity Review Measures require that an online platform operator which possesses the personal information of at least\none million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries.\n\n \n\nAs of the date of this annual report, neither\nwe nor our operating subsidiaries have been involved in any investigations on cybersecurity review initiated by any regulatory authority,\nnor has any of them received any inquiry, notice, or sanction. Further, we believe that our operations and listing will not be affected\nby both the Cybersecurity Review Measures or the Network Data Security Regulation, given that: (i) as a company that mainly manufactures\nand sells processed meat and protein products, our operating subsidiaries in mainland China are unlikely to be classified as critical\ninfrastructure information operations, or CIIOs, by the regulatory agencies; (ii) while we operate an online shopping platform (shop.wingyip-food.com),\nour customers are enterprises who are our dealers and we do not have individual customers on our shopping platform; as a result, we possess\npersonal data of far fewer than one million individual clients in our business operations as of the date of this annual report, and do\nnot anticipate that we will be collecting over one million users’ personal information in the near future, which we understand might\notherwise subject us to the Cybersecurity Review Measures; and (iii) since we are in the meat processing industry, data processed\nin our business is unlikely to have a bearing on national security and therefore is unlikely to be classified as core or important data\nby the authorities. However, the relevant regulatory authorities of mainland China may take a view that is contrary to or otherwise different\nfrom the opinion stated above. The enforcement as to how the Cybersecurity Review Measures and the Network Data Security Regulation will\nbe interpreted or implemented will still require further clarification, and whether the regulatory agencies of mainland China, including\nthe CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures\nand the Network Data Security Regulation. If any such new laws, regulations, rules, or implementation and interpretation come into effect\nand may have an adverse effect on us, we will take all reasonable measures and actions to comply and to minimize the adverse effect of\nsuch laws on us. We cannot guarantee, however, that we will not be subject to cybersecurity review in the future. During such review,\nwe may be required to suspend our operating subsidiaries’ operation or experience other disruptions to their operations. Cybersecurity\nreview could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which\ncould materially and adversely affect our business, financial condition, and results of operations.\n\n** **\n\n**Due to the differences in the legal systems\nof different countries, you may find it difficult in effecting service of legal process, enforcing foreign judgments, or bringing actions\nin mainland China against us or our management based on foreign laws, compared to doing so in your home country against a domestic company.**\n\n \n\nAs a holding company incorporated under the laws\nof Hong Kong, we conduct substantially all our operations in mainland China and a majority of our assets are located in mainland\nChina. In addition, all of our officers and directors reside outside the U.S. As a result, it may be time-consuming and costly for\nyou to effect service of process upon those persons outside the U.S. It may be difficult for you to enforce judgments obtained in\nU.S. courts based on civil liability provisions of the U.S. federal securities laws against us and our officers and directors,\nas none of them currently resides in the U.S. or has substantial assets in the U.S. In addition, there is uncertainty as to\nwhether the judicial branch outside the U.S. would recognize or enforce judgments of U.S. courts against us or such persons\npredicated upon the civil liability provisions of the securities laws of the U.S. or any state.\n\n \n\n4\n\n \n\n \n\nThe recognition and enforcement of foreign judgments\nin mainland China are provided for under the PRC Civil Procedures Law. Courts of mainland China may recognize and enforce foreign judgments\nin accordance with the requirements of the PRC Civil Procedures Law based either on treaties between mainland China and the country where\nthe judgment is made or on principles of reciprocity between jurisdictions. Mainland China does not have any treaties or other forms of\nwritten arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition,\naccording to the PRC Civil Procedures Law, the mainland China courts will not enforce a foreign judgment against us or our directors and\nofficers if they decide that the judgment violates the basic principles of mainland China laws or national sovereignty, security, or public\ninterest. As a result, it is uncertain whether and on what basis a mainland China court would enforce a judgment rendered by a court in\nthe United States.\n\n** **\n\n**Increases in labor costs in mainland China\nmay adversely affect our business and our profitability.**\n\n \n\nChina’s economy has experienced increases\nin labor costs in recent years. The overall economy and the average wage in mainland China are expected to continue to grow. The\naverage wage level for our employees has also increased in recent years. We expect that our labor costs, including wages and employee\nbenefits, will continue to increase. Unless we are able to pass on these increased labor costs to our customers by increasing prices for\nour products or services, our profitability and results of operations may be materially and adversely affected.\n\n \n\nIn addition, we have been subject to stricter\nregulatory requirements in terms of entering into labor contracts with our employees and paying various statutory employee benefits, including\npensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance to designated\ngovernment agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law, or the “Labor Contract Law,”\nthat became effective in January 2008 and its amendments that became effective in July 2013 and its implementing rules that\nbecame effective in September 2008, employers are subject to stricter requirements for labor protection in terms of signing labor\ncontracts, minimum wages, paying remuneration, determining the term of employees’ probation, and unilaterally terminating labor\ncontracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the Labor\nContract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner,\nwhich could adversely affect our business and results of operations.\n\n \n\nAs the interpretation and implementation of labor-related\nlaws and regulations are still evolving, we cannot assure you that our employment practice does not and will not violate labor-related\nlaws and regulations in mainland China, which may subject us to labor disputes or government investigations. If we are deemed to have\nviolated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business,\nfinancial condition and results of operations could be materially and adversely affected.\n\n** **\n\n**Our operating subsidiaries in mainland China\nhave not made adequate social insurance and housing provident fund contributions for all employees as required by the mainland China regulations,\nwhich may subject us to penalties.**\n\n \n\nAccording to the PRC Social Insurance Law and\nthe Administrative Regulations on the Housing Funds, companies operating in mainland China are required to participate in pension insurance,\nwork-related injury insurance, medical insurance, unemployment insurance, maternity insurance (collectively known as “social insurance”),\nand housing provident funds plans, and the employers must pay all or a portion of the social insurance premiums and housing provident\nfunds for their employees. For more details, see “Item 4. Information on the Company — B. Business Overview — Regulations — Laws\nand Regulations on Labor and Work Safety — Regulations on Social Insurance and Housing Provident Fund.” The requirement\nof social insurance and housing provident fund has not been implemented consistently by the local governments in mainland China given\nthe different levels of economic development in different locations. As of the date of this annual report, our operating subsidiaries\nin mainland China have not made adequate social insurance and housing provident fund contributions for all employees. Our operating subsidiaries\nin mainland China may be required to make up the social insurance contributions as well as to pay late fees at the rate of 0.05% per day\nof the outstanding amount from the due date. If they fail to make up for the shortfalls within the prescribed time limit, the relevant\nadministrative authorities will impose a fine of one to three times the outstanding amount upon our PRC subsidiaries. With respect to\nhousing provident fund plans, our operating subsidiaries in mainland China may be required to pay and deposit housing provident funds\nin full and on time within the prescribed time limit. If our operating subsidiaries in mainland China fail to do so, relevant authorities\ncould file applications to competent courts for compulsory enforcement of payment and deposit. As of the date of this annual report, our\noperating subsidiaries in mainland China have not received any notice from local authorities or any claim or request from the employees\nin this regard. However, if the relevant mainland China authorities determine that our operating subsidiaries in mainland China shall\nmake supplemental social insurance and housing fund contributions or that our operating subsidiaries in mainland China are subject to\nfines and legal sanctions in relation to their failure to make social insurance and housing fund contributions in full for their employees,\ntheir business, financial condition, and results of operations may be adversely affected.\n\n** **\n\n5\n\n \n\n** **\n\n**Failure to adapt to changes in laws and\nregulations governing the meat processing industry on a timely basis may result in fines, create limitations or uncertainties with respect\nto our operating subsidiaries’ business activities, make it difficult for them to obtain or maintain the necessary approvals, permits\nor licenses or render their operations non-compliant, any of which could materially and adversely affect our operating subsidiaries’\nbusiness.**\n\n \n\nThe meat processing industry in mainland China\nis fragmented and evolving, and the laws and regulations governing the industry are still developing. There are substantial uncertainties\nas to the legal system and the interpretation and implementation of the laws and regulations of mainland China applicable to the industry.\n\n \n\nAny significant changes to the laws, regulations\nand government policies governing the meat processing industry could impose substantial costs on us, create limitations or uncertainties\nregarding the way our operating subsidiaries conduct or expand their business, or affect our rights or obligations under our existing\nagreements with investors, target companies or other parties as well as the extent to which we can engage in, or charge fees for our business.\n\n \n\nWe will continue to monitor any new rules in\nthis area to ensure that we remain in compliance with relevant laws and regulations. Any failure to adapt to and other changes in applicable\nlaws, regulations and other government policies on a timely basis may result in fines, restrictions on our operating subsidiaries’\nbusiness activities or revocations of approvals, permits or licenses, or render our operating subsidiaries’ operations to be non-compliant, any\nof which would have a material adverse effect on our business, financial condition and results of operations.\n\n** **\n\n**Regulations in mainland China relating to\noffshore investment activities by mainland China residents may limit our PRC subsidiaries’ ability to increase their registered\ncapital or distribute profits to us, or otherwise expose us or our shareholders who are mainland China residents to liabilities or penalties.**\n\n \n\nOn July 4, 2014, the PRC State Administration\nof Foreign Exchange (“SAFE”) issued the Circular on Issues Concerning Foreign Exchange Control over the Overseas Investment\nand Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or “SAFE Circular 37.” According\nto SAFE Circular 37, prior registration with the local SAFE branch is required for PRC residents (including mainland China individuals\nand mainland China corporate entities as well as foreign individuals that are deemed to be mainland China residents for foreign exchange\nadministration purpose), in connection with their direct or indirect contribution of domestic assets or interests to offshore special\npurpose vehicles, or “SPVs.” SAFE Circular 37 further requires amendments to the SAFE registrations in the event of any changes\nwith respect to the basic information of the offshore SPV, such as change of a PRC individual shareholder, name and operation term, or\nany significant changes with respect to the offshore SPV, such as an increase or decrease of capital contribution, share transfer or exchange,\nor mergers or divisions. SAFE Circular 37 is applicable to our shareholders who are mainland China residents and may be applicable to\nany offshore acquisitions that we make in the future. In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving\nForeign Exchange Administration Policy on Direct Investment, or “SAFE Notice 13,” effective in June 2015. Under SAFE\nNotice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments,\nincluding those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly\nexamine the applications and accept registrations under the supervision of SAFE.\n\n \n\nIn addition to SAFE Circular 37 and SAFE Notice\n13, our ability to conduct foreign exchange activities in mainland China may be subject to the interpretation and enforcement of the Implementation\nRules of the Administrative Measures for Individual Foreign Exchange promulgated by SAFE in January 2007 (as amended and supplemented,\nthe “Individual Foreign Exchange Rules”). Under the Individual Foreign Exchange Rules, any mainland China individual seeking\nto make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the\nappropriate registrations in accordance with SAFE provisions, the failure of which may subject such mainland China individual to warnings,\nfines, or other liabilities.\n\n \n\n6\n\n \n\n \n\nAs of the date of this annual report, our majority\nshareholder and shareholders who are directors and/or executives of our Company and known to us as mainland China residents have completed\nthe registrations under the SAFE Circular 37 and SAFE Notice 13. However, we may not be informed of the identities of all the mainland\nChina residents holding direct or indirect interest in our Company, and we have no control over any of our future beneficial owners. Thus,\nwe cannot provide any assurance that our current or future beneficial owners who are mainland China resident will comply with our request\nto make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations.\nSuch failure or inability of our mainland China residents beneficial owners to comply with these SAFE regulations may subject us or our\nmainland China resident beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our\nPRC subsidiaries’ ability to distribute dividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being\nable to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you\ncould be materially and adversely affected.\n\n** **\n\n**Mainland China regulation of parent/subsidiary\nloans and direct investment by offshore holding companies to PRC subsidiaries may delay or prevent us from using the proceeds raised in\nfuture offerings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect\nour liquidity and our ability to fund and expand our business.**\n\n \n\nAny funds we transfer to our operating subsidiaries\nin mainland China, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with\nrelevant governmental authorities in mainland China. According to the relevant regulations on foreign-invested enterprises, or “FIEs,”\nin mainland China, trans-border shareholder loans to our PRC subsidiary, Wing Yip GD, which is a FIE, are subject to registration with\nSAFE or its local branches in advance. There is, in effect, no statutory limit on the amount of capital contributions that we can make\nto our operating subsidiaries in mainland China, and we are allowed to make capital contributions to our operating subsidiaries in mainland\nChina by subscribing to their initial registered capital and increased registered capital, provided that the operating subsidiaries in\nmainland China complete the relevant filing and registration procedures.\n\n \n\nOn the other hand, any foreign loan provided by\nus to our operating subsidiaries in mainland China is required to be registered with SAFE or its local branches or filed with SAFE in\nits information system, and our operating subsidiaries in mainland China may not procure foreign loans which exceed the difference between\nits total investment amount and registered capital (the “Current Foreign Debt Mechanism”) or, as an alternative, only procure\nloans subject to the calculation approach and limitations as provided in the Circular on Matters concerning the Macro-Prudential Management\nof Full-Covered Cross-Border Financing of the People’s Bank of China (“PBOC”), or “PBOC Notice No. 9”\n(the “PBOC Notice No. 9 Mechanism”). Accordingly, as of the date of this annual report, the upper limit of the outstanding\namount of the loans shall be 350% of the net assets of our relevant PRC subsidiaries. According to PBOC Notice No. 9, after a transition\nperiod of one year since its promulgation, PBOC and SAFE will determine the cross-border financing administration mechanism for the FIEs\nafter evaluating the overall implementation of PBOC Notice No. 9. As of the date of this annual report, neither PBOC nor SAFE has\npromulgated and made public any material changes to PBOC Notice No. 9. It is uncertain which mechanism will be adopted by PBOC and\nSAFE in the future and what statutory limits will be imposed on us when providing loans to our operating subsidiaries in mainland China.\nCurrently, our operating subsidiaries in mainland China have the flexibility to choose between the Current Foreign Debt Mechanism and\nthe PBOC Notice No. 9 Mechanism. However, if a more stringent foreign debt mechanism becomes mandatory, our ability to provide loans\nto our operating subsidiaries in mainland China may be significantly limited, which may adversely affect our business, financial condition,\nand results of operations.\n\n \n\nIf we seek to make capital contributions to our\noperating subsidiaries in mainland China or provide any loan to our operating subsidiaries in mainland China in the future, we may not\nbe able to obtain the required government approvals or complete the required registrations on a timely basis, if at all. If we fail to\nreceive such approvals or complete such registrations, our ability to use the proceeds raised in future offerings and to capitalize our\noperating subsidiaries in mainland China may be negatively affected, which could adversely affect our liquidity and our ability to fund\nand expand our business.\n\n \n\n7\n\n \n\n \n\nOn March 30, 2015, SAFE promulgated the Circular\non Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or “SAFE\nCircular 19,” effective as of June 1, 2015, as amended by Circular of the State Administration of Foreign Exchange on Reforming\nand Regulating Policies on the Control over Foreign Exchange Settlement under the Capital Account, or “SAFE Circular 16,”\neffective on June 9, 2016. SAFE Circular 19 and SAFE Circular 16 allow FIEs to settle their foreign exchange capital at their discretion,\nbut prohibit FIEs from using the RMB fund converted from their foreign exchange capitals for (i) expenditures beyond the enterprise’s\nbusiness scope or expenditures prohibited by laws and regulations; (ii) investments in securities or other investments than principal-secured\nproducts issued by banks; (iii) granting loans to non-affiliated enterprises, except where it is expressly permitted in the business\nlicense providing entrusted loans, or repaying loans between non-financial enterprises; and (iv) construction or purchase of real\nestate for purposes other than self-use (except for real estate enterprises). On October 23, 2019, SAFE promulgated the Circular\nof the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-Border Trade and Investment, or “SAFE\nCircular 28,” which removes the restrictions on domestic equity investments by non-investment foreign-invested enterprises with\ntheir capital funds, provided that certain conditions are met. The use of such RMB capital may not be altered without SAFE’s approval,\nand such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used.\n\n \n\nAs a result, we will be required to apply RMB\nfunds converted from the net proceeds we receive from future offerings within the business scopes of our PRC subsidiaries. Violations\nof these Circulars could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 could potentially limit our\nability to use RMB converted from the net proceeds of future offerings to fund the establishment of new entities in mainland China by\nour operating subsidiaries in mainland China or to invest in or acquire any other mainland China companies through our operating subsidiaries\nin mainland China, which may adversely affect our business, financial condition, and results of operations.\n\n** **\n\n**Fluctuations in exchange rates could have\na material and adverse effect on our results of operations and the value of your investment.**\n\n \n\nThe value of the RMB against the U.S. dollar\nand other currencies may fluctuate and is affected by, among other things, changes in economic conditions in mainland China and by mainland\nChina’s foreign exchange policies. On July 21, 2005, the mainland China regulatory authority changed its decade-old policy\nof pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following\nthree years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar\nremained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably.\nIt is difficult to predict how market forces or mainland China or U.S. government policy may impact the exchange rate between the\nRMB and the U.S. dollar in the future.\n\n \n\nOur business is conducted in mainland China, and\nour books and records are maintained in RMB, which is the currency of mainland China. The financial statements that we file with\nthe SEC and provide to our shareholders are presented in U.S. dollars. Changes in the exchange rates between the RMB and U.S. dollar\naffect the value of our assets and the results of our operations, when presented in U.S. dollars. Any significant revaluation of\nthe RMB may materially and adversely affect our cash flows, revenue, and financial condition.\n\n \n\n8\n\n \n\n \n\nVery limited hedging options are available in\nmainland China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an\neffort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into more hedging transactions in the future,\nthe availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In\naddition, our currency exchange losses may be magnified by mainland China exchange administration regulations that affect our ability\nto convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.\n\n** **\n\n**Under the PRC Enterprise Income Tax Law,\nwe may be classified as a mainland China “resident enterprise” for mainland China enterprise income tax purposes. Such classification\nwould likely result in unfavorable tax consequences to us and our non-Chinese-mainlander shareholders and have a material adverse effect\non our results of operations and the value of your investment.**\n\n \n\nUnder the PRC Enterprise Income Tax Law, or the\n“EIT Law,” that became effective in January 2008, an enterprise established outside mainland China with “*de\nfacto* management bodies” within mainland China is considered a “resident enterprise” for mainland China enterprise\nincome tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation\nrules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and\ncontrol over the manufacturing and business operations, personnel and human resources, finances, and properties of an enterprise. In addition,\na circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation, or the “SAT,” specifies\nthat certain offshore incorporated enterprises controlled by mainland China enterprises or mainland China enterprise groups will be classified\nas mainland China resident enterprises if the following are located or resident in mainland China: senior management personnel and departments\nthat are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting\nbooks, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors\nhaving voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011,\nto provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled\noffshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination\nof resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore\nenterprises controlled by mainland China enterprises or mainland China enterprise groups, not those controlled by mainland China individuals\nor foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general\nposition on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises,\nregardless of whether they are controlled by mainland China enterprises, mainland China enterprise groups, or by mainland China or foreign\nindividuals.\n\n \n\nIf the mainland China tax authorities determine\nthat the actual management organ of Wing Yip is within the territory of China, Wing Yip may be deemed to be a mainland China resident\nenterprise for mainland China enterprise income tax purposes and a number of unfavorable mainland China tax consequences could follow.\nFirst, we will be subject to the uniform 25% enterprise income tax on our worldwide income, which could materially reduce our net income.\nIn addition, we will also be subject to mainland China enterprise income tax reporting obligations. Finally, dividends payable by us to\nour investors and gains on the sale of the ADSs may become subject to mainland China withholding tax, at a rate of 10% in the case of\nnon-Chinese-mainlander enterprises or 20% in the case of non-mainland individuals (in each case, subject to the provisions of any applicable\ntax treaty), if such gains are deemed to be from sources of mainland China. It is unclear whether non-mainland shareholders of our Company\nwould be able to claim the benefits of any tax treaties between their country of tax residence and mainland China in the event that we\nare treated as a mainland China resident enterprise. Any such tax may reduce the returns on your investment in the ADSs. Although up to\nthe date of this annual report, Wing Yip has not been notified or informed by the mainland China tax authorities that it has been deemed\nto be a resident enterprise for the purpose of the EIT Law, we cannot assure you that it will not be deemed to be a resident enterprise\nin the future.\n\n** **\n\n**We face uncertainty with respect to indirect\ntransfers of equity interests in mainland China resident enterprises by their non-Chinese-mainlander holding companies.**\n\n \n\nIn February 2015, SAT issued a Public Notice\nRegarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or “SAT Circular\n7.” SAT Circular 7 provides comprehensive guidelines relating to indirect transfers of mainland China taxable assets (including\nequity interests and real properties of a mainland China resident enterprise) by a non-resident enterprise. In addition, in October 2017,\nSAT issued an Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or “SAT Circular\n37,” effective in December 2017, which, among others, amended certain provisions in SAT Circular 7 and further clarify the\ntax payable declaration obligation by non-resident enterprise. The indirect transfer of an equity interest and/or real properties in a\nmainland China resident enterprise by an overseas holding company will be deemed a direct transfer of mainland China taxable assets and\nsubject to enterprise income taxes, unless such transactions are for a reasonable commercial purpose.\n\n \n\n9\n\n \n\n \n\nSAT Circular 7 provides clear criteria for an\nassessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale\nof equity through a public securities market. As stipulated in SAT Circular 7, indirect transfers of mainland China taxable assets are\nconsidered as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following situations:\ni) the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor and\nthe transferee are both 80% or above directly or indirectly owned by the same party; iii) the percentage in bullet point i) and ii)\nshall be 100% if over 50% the share value of a foreign enterprise is directly or indirectly derived from real properties in mainland China.\nFurthermore, SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay\nfor the transfer) of taxable assets. Where a non-resident enterprise transfers mainland China taxable assets indirectly by disposing of\nthe equity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or\ntransferee, or the mainland China entity that directly owns the taxable assets, may report such indirect transfer to the relevant tax\nauthority and the mainland China tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial\npurpose and was established for the purpose of reducing, avoiding, or deferring mainland China tax. As a result, gains derived from such\nindirect transfer may be subject to mainland China enterprise income tax, and the transferee or other person who is obligated to pay for\nthe transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a mainland\nChina resident enterprise.\n\n \n\nAccording to SAT Circular 37, where the non-resident\nenterprise fails to declare the tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay the tax\ndue within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified\nby the tax authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before the tax authority\norders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.\n\n \n\nWe face uncertainties as to the reporting and\nassessment of reasonable commercial purposes and future transactions where mainland China taxable assets are involved, such as offshore\nrestructuring and investments. In the event of being assessed as having no reasonable commercial purposes in an indirect transfer transaction,\nwe may be subject to filing obligations or taxed if we are a transferor in such transactions, and may be subject to withholding obligations\n(to be specific, a 10% withholding tax for the transfer of equity interests) if we are a transferee in such transactions, under SAT Circular\n7 and SAT Circular 37. For transfer of shares by investors who are non-mainland resident enterprises, our operating subsidiaries in China\nmay be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable resources to comply\nwith the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or\nto establish that we should not be taxed under these circulars, which may have a material adverse effect on our financial condition and\nresults of operations.\n\n** **\n\n**Our PRC subsidiaries are subject to certain\nlimitations and restrictions on paying dividends or making other payments to us, which may have a material adverse effect on our ability\nto conduct our business.**\n\n \n\nWe are a holding company incorporated in Hong Kong.\nWe may need dividends and other distributions on equity from our operating subsidiaries in mainland China to satisfy our liquidity requirements.\nCurrent mainland China regulations permit our operating subsidiaries in mainland China to pay dividends to us only out of their respective\naccumulated profits, if any, determined in accordance with mainland China accounting standards and regulations. In addition, our operating\nsubsidiaries in mainland China are required to set aside at least 10% of its respective accumulated profits each year, if any, to fund\ncertain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our operating subsidiaries\nin mainland China may also allocate a portion of their respective after-tax profits based on mainland China accounting standards to employee\nwelfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. These limitations on the ability\nof our operating subsidiaries in mainland China to pay dividends or make other distributions to us could materially and adversely limit\nour ability to grow, make investments, or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and\nconduct our business.\n\n \n\n10\n\n \n\n \n\nIn response to the persistent capital outflow\nand Renminbi’s depreciation against U.S. dollar in the fourth quarter of 2016, the PBOC and SAFE implemented a series of capital\nadministration measures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions,\ndividend payments and shareholder loan repayments. For instance, PBOC issued the Circular on Further Clarification of Relevant Matters\nRelating to Offshore RMB Loans Provided by Domestic Enterprises, or “PBOC Circular 306,” on November 26, 2016, which\nprovides that offshore RMB loans provided by a domestic enterprise to offshore enterprises with which it has an equity relationship shall\nnot exceed 30% of the domestic enterprise’s most recent audited owner’s equity. PBOC Circular 306 may constrain our PRC subsidiaries’\nability to provide offshore loans to us. The Circular of the State Administration of Foreign Exchange on Further Advancing Foreign Exchange\nAdministration Reform to Enhance Authenticity and Compliance Reviews, promulgated by SAFE in January 2017, provides for several capital\nadministration measures with respect to outbound remittances of profits from domestic entities to offshore entities, including the following:\nwhen a bank handles the remittances of profits of an amount exceeding the equivalent of US$50,000 for a domestic entity, the resolutions\nof the board of directors on profit distributions, the original tax filing forms and the audited financial statements should be verified\nin accordance with the principle of genuine transaction, and the domestic entity should hold income to account for previous years’\nlosses before remittances of profits. In addition, the domestic entity is required to make a detailed description of sources and use arrangements\nof capital, as well as proof of board resolutions, contracts, etc., when completing the registration procedures in connection with an\noutbound investment. The mainland China regulatory authority may continue to strengthen its capital administration, and our PRC subsidiaries’\ndividends and other distributions may be subjected to tighter scrutiny in the future. Any limitation on the ability of our PRC subsidiaries\nto pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions\nthat could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. See also “—Under the\nPRC Enterprise Income Tax Law, we may be classified as a mainland China ‘resident enterprise’ for mainland China enterprise\nincome tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-mainland shareholders and\nhave a material adverse effect on our results of operations and the value of your investment.”\n\n** **\n\n**Limitations and restrictions on currency\nconversion may affect the value of your investment and our payment of dividends.**\n\n \n\nThe mainland China government regulates and imposes\ncertain restrictions on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of\nmainland China. We receive substantially all of our revenue in the RMB. Under our current corporate structure, Wing Yip may rely\non dividend payments from our operating subsidiaries in mainland China to fund any cash and financing requirements we may have. Under\nexisting mainland China foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related\nforeign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural\nrequirements. Therefore, our operating subsidiaries in mainland China are able to pay dividends in foreign currencies to us without prior\napproval from SAFE, subject to the condition that the remittance of such dividends outside of mainland China complies with certain procedures\nunder mainland China foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate shareholders\nof our corporate shareholders who are mainland China residents. Approval from or registration with appropriate government authorities\nis, however, required where the RMB is to be converted into foreign currency and remitted out of mainland China to pay capital expenses\nsuch as the repayment of loans denominated in foreign currencies. The government may also at its discretion restrict access in the future\nto foreign currencies for current account transactions, within its scope of authority as prescribed by law. If the foreign exchange administration\nsystem prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demand, we may not be able to pay dividends\nin foreign currencies to our shareholders.\n\n** **\n\n**There are uncertainties under the EIT Law\nrelating to the withholding tax liabilities of our operating subsidiaries in mainland China, and dividends payable by our operating subsidiaries\nin mainland China to us may not qualify to enjoy certain treaty benefits.**\n\n \n\nUnder the EIT Law and its implementation rules,\nthe profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside\nmainland China, will be subject to a withholding tax rate of 10%. Pursuant to the Arrangement between mainland China and the Hong Kong\nSpecial Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the “Double Tax Avoidance Arrangement,”\na withholding tax rate of 10% may be lowered to 5% if the mainland China enterprise is at least 25% held by a Hong Kong enterprise\nfor at least 12 consecutive months prior to distribution of the dividends and is determined by the relevant mainland China tax authority\nto have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement and other applicable mainland China laws.\n\n \n\n11\n\n \n\n \n\nHowever, based on the Circular on Certain Issues\nwith Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the “SAT Circular 81,” which became effective on\nFebruary 20, 2009, if the relevant mainland China tax authorities determine, in their discretion, that a company benefits from such\nreduced income tax rate due to a structure or arrangement that is primarily tax-driven, such mainland China tax authorities may adjust\nthe preferential tax treatment. According to Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties,\nwhich became effective as of April 1, 2018, when determining an applicant’s status as the “beneficial owner” regarding\ntax treatments in connection with dividends, interests, or royalties in the tax treaties, several factors will be taken into account.\nSuch factors include whether the business operated by the applicant constitutes actual business activities, and whether the counterparty\ncountry or region to the tax treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low\nrate. This circular further requires any applicant who intends to be proved of being the “beneficial owner” to file relevant\ndocuments with the relevant tax authorities. Wing Yip GD is wholly owned by us, as a Hong Kong holding company. However, we cannot\nassure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant\nmainland China tax authority or we will be able to complete the necessary filings with the relevant mainland China tax authority and enjoy\nthe preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement with respect to dividends to be paid by our PRC\nsubsidiaries to us, in which case, we would be subject to the higher withdrawing tax rate of 10% on dividends received.\n\n** **\n\n**If we become directly subject to the scrutiny,\ncriticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate\nand resolve the matter which could harm our operating subsidiaries’ business operations, the ADS price, and our reputation.**\n\n \n\nU.S. public companies that have substantially\nall of their operations in mainland China have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial\ncommentators, and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial\nand accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance\npolicies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative\npublicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become\nvirtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal\nand external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity\nwill have on us, our business, and the price of the ADSs. If we become the subject of any unfavorable allegations, whether such allegations\nare proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our Company.\nThis situation will be costly and time-consuming and distract our management from developing our business. If such allegations are not\nproven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value\nof the ADSs.\n\n** **\n\n**We are required to fulfill the Trial Administrative\nMeasures filing procedures and report relevant information to the CSRC; and, since further interpretation and implementation of the new\nregulations are still required, we cannot assure you that we will be able to complete the filings for any future offerings, and fully\ncomply with the relevant new rules on a timely basis, if at all.**\n\n \n\nOn July 6, 2021, the General Office of the\nCentral Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Strictly\nand Lawfully Cracking Down Illegal Securities Activities to crack down on illegal activities in the securities market and promote the\nhigh-quality development of the capital market (the “Opinions”), which, among other things, requires the relevant governmental\nauthorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based\ncompanies listed overseas, and to establish and improve the system of extraterritorial application of the securities laws of mainland\nChina.\n\n \n\n12\n\n \n\n \n\nOn December 24, 2021, the CSRC published\nthe Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for\nComment) (the “Draft Administrative Provisions”) and the Administrative Measures for the Filing of Overseas Securities Offering\nand Listing by Domestic Companies (Draft for Comment) (the “Draft Filing Measures”). The Draft Administrative Provisions and\nthe Draft Filing Measures lay out requirements for filing and include unified regulation management, strengthening regulatory coordination,\nand cross-border regulatory cooperation.\n\n \n\nOn February 17, 2023, the CSRC promulgated\nthe Trial Administrative Measures, which came into force on March 31, 2023. On the same date, the CSRC circulated the Guidance Rules\non CSRC’s official website. The Trial Administrative Measures refine the regulatory system by subjecting both direct and indirect\noverseas offering and listing activities to the CSRC filing-based administration. The Trial Administrative Measures, together with the\nrelevant guidance rules reiterate the basic principles of the Draft Administrative Provisions and Draft Filing Measures and impose substantially\nthe same requirements for the overseas securities offering and listing by domestic enterprises, and clarified and emphasized several aspects,\nwhich include, but are not limited to: (i) comprehensive determination of the “indirect overseas offering and listing by domestic\ncompanies of mainland China” in compliance with the principle of “substance over form” and particularly, an issuer will\nbe required to undertake the filing procedures under the Trial Administrative Measures if the following criteria are met at the same time:\na) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets, as documented in its audited consolidated\nfinancial statements for the most recent accounting year, is accounted for by mainland China companies, and b) the main parts of the issuer’s\nbusiness activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers\nin charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China; (ii) a negative list\nof types of issuers banned from listing or offering overseas, such as issuers under investigation for crimes or major violations of the\nlaw, or whose overseas offering and listing may endanger national security, or whose controlling shareholders have been recently convicted\nof bribery and corruption; (iii) issuers’ compliance with foreign investment, network security, data security, and other national\nsecurity laws, regulations and relevant provisions; (iv) issuers’ filing and reporting obligations, such as the obligation\nto file with the CSRC after it submits an application for initial public offering to competent overseas regulators, and the obligation\nto file with the CSRC after it completes subsequent offerings in the same overseas market and to report to the CSRC on material events\nincluding change of control or voluntary or mandatory delisting of the issuer; and (v) the CSRC’s authority to fine both issuers\nand their relevant shareholders for failure to comply with the Trial Administrative Measures, including failure to comply with the filing\nprocedures or filing with materials on false, misleading statements or material omissions. As the Trial Administrative Measures are newly-issued,\nthere remains uncertainty regarding their interpretation and implementation. Therefore, we cannot assure you that we will be able to complete\nthe filings for any future offerings and fully comply with the relevant new rules on a timely basis, if at all.\n\n** **\n\n**The M&A Rules and certain other\nmainland China regulations establish complex procedures for some acquisitions of mainland China companies by foreign investors, which\ncould create certain obstacles for us to pursue growth through acquisitions in mainland China.**\n\n \n\nThe Regulations on Mergers and Acquisitions of\nDomestic Companies by Foreign Investors, or the “M&A Rules,” and regulations and rules concerning mergers and acquisitions\nestablished additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming\nand complex. For example, the M&A Rules require that the Ministry of Commerce be notified in advance of any change-of-control\ntransaction in which a foreign investor takes control of a mainland China enterprise, if (i) any important industry is concerned,\n(ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction\nwill lead to a change in control of a domestic enterprise which holds a famous trademark or Chinese time-honored brand. Mergers or acquisitions\nthat allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance\nto the Ministry of Commerce when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings,\nor the “Prior Notification Rules,” issued by the State Council in August 2008 is triggered. In addition, the security\nreview rules issued by the Ministry of Commerce that became effective in September 2011 specify that mergers and acquisitions\nby foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign\ninvestors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict\nreview by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring\nthe transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary\nbusinesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions\ncould be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local\ncounterparts may delay or inhibit our ability to complete such transactions. We do not believe our business would be deemed to be in an\nindustry that raises “national defense and security” or “national security” concerns. The Ministry of Commerce\nor other government agencies, however, may publish explanations in the future determining that our business is in an industry subject\nto the security review, in which case our future acquisitions in mainland China, including those by way of entering into contractual control\narrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand\nour market share through future acquisitions would as such be materially and adversely affected.\n\n** **\n\n13\n\n \n\n** **\n\n**To the extent cash or assets in the business\nis in mainland China or Hong Kong or an entity incorporated in mainland China or Hong Kong, the funds or assets may not be available\nto fund operations or for other use outside of mainland China or Hong Kong due to the imposition of restrictions and limitations\non the ability of us or our subsidiaries by the mainland China regulatory authority within their scope of authority to transfer cash or\nassets**.\n\n \n\nThe transfer of funds and assets among Wing Yip\nand its subsidiaries in mainland China is subject to certain limitations and restrictions. The mainland China regulatory authority imposes\ncertain regulations and restrictions on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland\nChina. See “Item 3. Key Information — D. Risk Factors — Limitations and restrictions on currency\nconversion may affect the value of your investment and our payment of dividends.” In addition, the PRC EIT Law and its implementation\nrules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-mainland resident\nenterprises, unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or\nregions where the non-mainland resident enterprises are tax residents. See “Item 3. Key Information — Item D. Risk Factors — Our\nPRC subsidiaries are subject to certain limitations and restrictions on paying dividends or making other payments to us, which may have\na material adverse effect on our ability to conduct our business.”\n\n \n\nAs of the date of this annual report, there are\nno restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong\n(including funds from Hong Kong to mainland China), except for the transfer of funds involving money laundering and criminal activities.\nHowever, there is no guarantee that the Hong Kong government will not promulgate new laws or regulations that may impose such restrictions\nin the future.\n\n \n\nAs a result of the above, to the extent cash or\nassets in the business is in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not\nbe available to fund operations or for other use outside of mainland China or Hong Kong due to the imposition of restrictions and\nlimitations on the ability of us or our subsidiaries by the mainland China regulatory authority to transfer cash or assets.\n\n** **\n\n**We rely on dividends and other distributions\non equity paid by our operating subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability\nof our operating subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.**\n\n \n\nWe are a holding company, and we rely on dividends\nand other distributions on equity paid by our operating subsidiaries for our cash and financing requirements, including the funds necessary\nto pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our operating subsidiaries incur\ndebt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions\nto us. In addition, the mainland China tax authorities may require our mainland China subsidiaries to adjust their taxable income in a\nmanner that would materially and adversely affect their ability to pay dividends and other distributions to us.\n\n \n\nUnder laws and regulations of mainland China,\nour PRC subsidiaries may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with accounting\nstandards and regulations of mainland China. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax\nprofits each year, after making up for previous year’s accumulated losses, if any, to fund certain statutory common reserves, and\nmay stop setting aside such after-tax profits after the aggregate amount of such funds reaches 50% of its registered capital. And for\nthe purpose of avoiding misunderstanding, this portion of such operating subsidiaries’ respective statutory common reserves are\nprohibited from being distributed to their shareholders as dividends except in the event of liquidation. If the shareholders’ meeting\nor the board of directors distributes the profits to the shareholders by violating the above-mentioned provisions before the losses are\nmade up and the statutory common reserves are drawn, the profits distributed shall be refunded to the company.\n\n** **\n\n14\n\n \n\n** **\n\n**Risks Relating to Our Business**\n\n** **\n\n**We are subject to risks related to supply\nchain disruptions.**\n\n \n\nOur operating subsidiaries must manage the supply\nchain for raw materials and the delivery services they rely upon for our products. Any supply chain fragmentation and local protectionism\nwithin the PRC may complicate supply chain disruption risks. Local administrative bodies and physical infrastructure built to protect\nlocal interests pose transportation challenges for raw material transportation as well as product delivery. In addition, profitability\nand sales volume could be negatively impacted by limitations inherent within the supply chain, including competitive, governmental, and\nlegal impediments, natural disasters, and other events that could impact both supply and price of our products. As of the date of this\nannual report, our operating subsidiaries’ business and operations have not been materially impacted by any supply chain disruptions.\nHowever, any of these occurrences could cause significant disruptions to our supply chain, production capability and distribution system\nthat could adversely impact our ability to produce and deliver products, and materially affect our outlook or business goals.\n\n** **\n\n**We face increasing competition in our business,\nwhich may adversely affect our market share and profitability.**\n\n \n\nThe meat processing industry is highly competitive\nin mainland China. Competition exists both in the purchase of raw meat and processing techniques and in the sale of processed meat products.\nWe face competition from a number of meat processing companies in mainland China.\n\n \n\nThe principal competitive factors in the meat\nprocessing industry are operating efficiency, availability, quality and cost of raw materials, cost of labor, product price and quality,\nfood safety, product distribution, technological innovations, and brand loyalty. Our ability to be an effective competitor depends on\nour ability to compete on the basis of these characteristics. In addition, some of our competitors may have greater financial and other\nresources than us. We may be unable to compete effectively with these companies, and if we are unable to remain competitive with these\nmeat processing companies in the future, our market share and profitability may be adversely affected.\n\n** **\n\n**We generally do not enter into long-term\ncontracts with our distributor customers.**\n\n \n\nWe, through the operating subsidiaries,\ntypically do not enter into long-term agreements with our major customers. Instead, we have annual distribution agreements with our\ndistributors. The distribution agreement usually specifies that we deliver the ordered products to the distributor customers at our\ncosts and we usually grant distributors a credit term of one to three months after products delivery, after which time, payment\nin full is required. We also set an annual minimum sales target with the distributor customer, based on the distributor’s\nsales performance in the previous period. We incentivize distributors to achieve progressive sales targets through incentive\nprograms, often in the form of rebates calculated based on sales amounts exceeding the sales targets. See “Item 4. Information\non the Company — B. Business Overview — Distribution — Distributors.” As such, our\nGroup may not experience a continuous and steady source of revenue generated from our business.\n\n \n\nThere is no guarantee that our distributor customers\nwill continue to give us their orders or that the level of their orders with us will be maintained. If our distributor customers decide\nto source similar products from other suppliers or reduce their orders with us and we are unable to secure sufficient additional orders\nto replace these lost and/or replaced orders, our revenue and financial performance will be adversely affected.\n\n** **\n\n**Our results of operations may be adversely\naffected by fluctuations in market prices for raw meat materials.**\n\n \n\nOur operating margins depend on, among other factors,\nthe purchase price of raw materials, primarily raw meat materials, such as pork, beef, and poultry. These prices may vary significantly during\nshort periods of time, due to raw meat materials supply and demand. The supply and market for raw materials depend on a number of\nfactors that we have little or no control over, including the cost of animal feed ingredients, such as grain, corn, and\nsoybeans, outbreaks of livestock diseases, and economic and weather conditions. Raw materials accounted for 89.90%, 89.23% and 88.69%,\nof the total cost of products sold during the fiscal years ended December 31, 2025, 2024 and 2023, respectively. Market\nprices for raw meat materials remain volatile. High prices for raw meat materials may have a material adverse\neffect on our operating results.\n\n \n\nWe may be unable to pass on all or part of any\nincreased costs we experience from time to time to consumers of our products directly, in a timely manner, or at all. Additionally, if\nwe do not attract and maintain contracts or business relationships with raw meat materials suppliers on favorable terms, our production\noperations could be disrupted, adversely affecting us.\n\n** **\n\n15\n\n \n\n** **\n\n**Market demand for our products may fluctuate.**\n\n \n\nOur Group faces competition from producers of\nalternative meats and protein sources, including pork, beef, chicken, fish, and plant-based proteins. The factors on which the Company\ncompetes include:\n\n \n\n \n●\nprice;\n\n \n\n \n●\nproduct quality and attributes;\n\n \n\n \n●\nbrand identification;\n\n \n\n \n●\nbreadth of product line; and\n\n \n\n \n●\ncustomer service.\n\n \n\nDemand for our products is also affected by competitors’\npromotional spending, the effectiveness of the Group’s advertising and marketing programs, and consumer perceptions. Failure to\nidentify and react to changes in food attitudes and trends, such as concerns regarding sustainability of product sources and animal welfare,\ncould lead to, among other things, reduced demand for the Group’s brands and products. The Company may be unable to compete successfully\non any or all of these factors in the future.\n\n** **\n\n**Failure to continually innovate and successfully\nlaunch new products and maintain our brand image through marketing investment could adversely impact our operating results.**\n\n \n\nOur financial success is dependent on anticipating\nchanges in consumer preferences, purchasing behaviors and dietary habits and successfully developing and launching new products and product\nextensions that consumers want in the channels where they shop. We devote significant resources to new product development and product\nextensions. However, we may not be successful in developing innovative new products or our new products may not be commercially successful.\nTo the extent we are not able to effectively gauge the direction of our key markets and successfully identify, develop, manufacture and\nmarket new or improved products in these changing markets, such as adapting to emerging e-commerce channels, our financial results and\nour competitive position will suffer. In addition, our introduction of new products or product extensions may generate litigation or other\nlegal proceedings against us by competitors claiming infringement of their intellectual property or other rights, which could negatively\nimpact our results of operations.\n\n \n\nWe also seek to maintain and extend the image\nof our brands through marketing investments, including advertising, consumer promotions and trade spend. Due to inherent risks in the\nmarketplace associated with advertising, promotions and new product introductions, including uncertainties about trade and consumer acceptance,\nour marketing investments may not prove successful in maintaining or increasing our market share and could result in lower sales and profits.\nContinuing global focus on health and wellness, including weight management, and increasing media attention to the role of food marketing\ncould adversely affect our brand image or lead to stricter regulations and greater scrutiny of food marketing practices.\n\n \n\nOur success in maintaining, extending and expanding\nour brand image also depends on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social\nmedia and online dissemination of advertising campaigns. The growing use of social and digital media increases the speed and extent that\ninformation or misinformation and opinions can be shared. Negative posts or comments about us, our brands or our products on social or\ndigital media could seriously damage our reputation and brand image.\n\n \n\nWe are subject to a variety of legal and regulatory\nrestrictions on how and to whom we market our products, which may limit our ability to maintain or extend our brand image. If we do not\nmaintain or extend our brand image, then our product sales, financial condition and results of operations could be materially and adversely\naffected.\n\n** **\n\n16\n\n \n\n** **\n\n**Any perceived or real health risks related\nto the food industry could adversely affect our ability to sell our products. If our products become contaminated, we may be subject to\nproduct liability claims and product recalls.**\n\n \n\nWe are subject to general risks of the food industry,\nincluding risks posed by the following:\n\n \n\n \n●\nfood spoilage or food contamination;\n\n \n\n \n●\nconsumer product liability claims;\n\n \n\n \n●\nproduct tampering;\n\n \n\n \n●\nthe possible unavailability and expense of product liability insurance; and\n\n \n\n \n●\nthe potential cost and disruption of a product recall.\n\n \n\nOur products may in the future be exposed to contamination\nby organisms that may produce food-borne illnesses, such as E. coli, listeria monocytogenes, and salmonella. These organisms are generally\nfound in the environment and, as a result, there is a risk that they could be present in our products. These pathogens can also be introduced\nto our products through tampering or as a result of improper handling at the further processing, food service, or consumer level. Once\ncontaminated products have been shipped for distribution, illness or death may result if the products are not properly prepared prior\nto consumption or if the pathogens are not eliminated in further processing.\n\n \n\nOur systems designed to monitor food safety risks\nthroughout all stages of our processes may not eliminate the risks related to food safety. As a result, we may voluntarily recall, or\nbe required to recall, our products if they are or may be contaminated, spoiled, or inappropriately labeled.\n\n \n\nWe may be subject to significant liability in\nthe jurisdictions in which our products are sold if the consumption of any of our products causes injury, illness, or death. Such liability\nmay result from proceedings filed by the distributor customers, consumer agencies, and individual consumers. We may\nhave to pay significant damages and such liability may be in excess of applicable liability insurance policy limits. Adverse publicity\nconcerning any perceived or real health risk associated with our products could also cause customers to lose confidence in the safety\nand quality of our food products, which could adversely affect our ability to sell our products. We could also be adversely affected by\nperceived or real health risks associated with similar products produced by others to the extent that such risks cause customers to lose\nconfidence in the safety and quality of such products generally.\n\n** **\n\n**Changes in consumer preferences could adversely\naffect our business.**\n\n \n\nThe food industry, in general, is subject to changing\nconsumer trends, demands, and preferences. We may fail to anticipate, identify, or respond to changes in consumer preferences and needs\non a timely basis, and as a result, may be unable to continue to gain market receptiveness and market share for our products. Consumer\npreferences and demands for products and brands change from time to time for various reasons, such as the emergence of competitive products\nand brands that our competitors may be able to introduce that are more appealing to consumers, or a general decrease in demand for certain\nproducts sold by us. Any change in consumer preferences could require us to change our pricing, marketing, or promotional strategies.\nAny change in our strategy or any failure to respond effectively to changes in consumer preferences and needs could adversely affect our\nbusiness and the results of operations.\n\n** **\n\n**Our business depends significantly on the\nmarket recognition of our “Wing Yip” (“荣业”) brand.**\n\n \n\nWe believe that our business growth depends significantly\non our flagship brand name “Wing Yip” (“荣业”) and the reputation for trustworthy and quality products\nassociated with our brand. We believe that the market recognition of our brand plays a vital role in influencing consumer decisions in\npurchasing our products, and our continued growth will depend largely on our ability to protect and enhance the value of our brand. We\nhave invested significant effort and resources to establish brand recognition through various channels and have received various awards\nand recognitions for our brand. As we continue to expand our sales network, our ability to market, protect, and enhance our brand will\nremain critical to the success of our business. Any incident that erodes consumer trust in our brand could significantly reduce our brand\nvalue and, hence, affect our business, results of operations, and prospects.\n\n** **\n\n17\n\n \n\n** **\n\n**We may not be able to prevent unauthorized\nuse of our intellectual property, which could reduce demand for our products, adversely affect our revenues and harm our competitive position.**\n\n \n\nAs of the date of this annual report, we have\nregistered various intellectual property rights in the PRC, which includes trademarks, invention patents, utility model patents, software\ncopyrights and certain domain names. We cannot assure you that the steps we have taken or will take in the future to protect our intellectual\nproperty or prevent piracy will prove to be sufficient. Current or potential competitors may use our intellectual property without our\nauthorization in the development of products that are substantially equivalent or superior to it, which could reduce demand for our products,\nadversely affect our revenues and harm its competitive position. Even if we were to discover evidence of infringement or misappropriation,\nour recourse against such competitors may be limited or could require us to pursue litigation against the infringing parties, which could\ninvolve substantial costs and diversion of management’s attention from the operation of our business and have an adverse effect\non our financial performance. Please refer to “Item 4. Information on the Company — B. Business Overview— Intellectual\nProperty” of this annual report for further details of our intellectual property rights.\n\n** **\n\n**We may face intellectual property infringement\nclaims against us, which could be time-consuming and costly to defend and may result in the loss of significant rights by us.**\n\n \n\nIntellectual property litigation is expensive\nand time-consuming and could divert resources and management attention from the operation of our business even if the claim is without\nmerit. We cannot assure you that such infringement claims will not be asserted against us in the future. If there is a successful claim\nof infringement, we may be required to alter our services, cease certain activities, pay substantial royalties and damages to, and obtain\none or more licenses from, third parties. We may not be able to obtain those licenses on commercially acceptable terms, or at all. Any\nof those consequences could cause us to lose revenues, impair our client relationships and harm our reputation.\n\n** **\n\n**Our operating subsidiaries’ operations\nmay be adversely affected by the disruption of logistics services or poor handling of products by third-party logistics service providers.**\n\n \n\nOur operating subsidiaries rely on third-party\nlogistics service providers to provide a range of transportation and logistics services for the delivery of products to our physical stores,\nwarehouses, and/or our customers. The shelf life of our processed meat and protein products is generally between 90 to 360 days.\nAny failure to provide on-time delivery or failure to maintain our operating subsidiaries’ products in good condition during delivery\nmay have a material adverse impact on our operating subsidiaries’ business operations and our reputation. In such event, our operating\nsubsidiaries may be unable to seek full recourse against the logistics service providers in default under the terms of the service contracts\nor enforce in full any judgments obtained.\n\n** **\n\n**We depend on our founding members and other\nkey personnel, and the loss of their services could have a material adverse effect on our business, results of operations, and financial\ncondition.**\n\n \n\nThe success of our Company is attributable to\nthe contribution and experience of our key management team, headed by our director and chairman of the board of directors, Mr. Xiantao\nWang. He is responsible for implementing overall business strategies and identifying business opportunities. The key management team also\nincludes our executive director, CEO Ms. Tingfeng Wang and CFO Mr. Haobo Ye. Please refer to “Item 6. Directors, Senior Management\nand Employees — A. Directors and Senior Management” of this annual report, for further details of our directors and executive\nofficers. As such, our continued success is dependent on our ability to retain the services of our key management team, which has collectively\namassed over 47 years of experience in the meat processing industry and contributed to the financial and operational aspects of our\nbusiness. We do not maintain key person life insurance. Our management team currently has no immediate plans to cease providing services\nto our Company, but our founders and other key personnel are not obligated to remain employed with us. In addition, our other key personnel\nmay leave us in the future, and we cannot predict the impact that the departure of any key personnel will have on our ability to achieve\nour investment objectives. The loss of the services of any of them could have a material adverse effect on our revenues, net income, and\ncash flow.\n\n \n\n18\n\n \n\n \n\nIn order to recruit and retain existing and future\nsenior professionals and other key personnel, we may need to increase the level of compensation that we pay to them. Accordingly, as we\npromote or hire new senior professionals and other key personnel over time or attempt to retain the services of certain of our key personnel,\nwe may increase compensation we pay to these individuals, which could cause our total employee compensation and benefits expense as a\npercentage of our total revenue to increase and adversely affect our profitability.\n\n** **\n\n**We are dependent on the mainland China market.**\n\n \n\nWe are dependent on the mainland China market,\nas substantially all of our customers are located in mainland China. We anticipate that the mainland China market will continue to be\na significant sales and production base for our Group in the near future and we are therefore susceptible to the market conditions in\nmainland China. Any adverse changes in the economic conditions in mainland China will affect consumers’ spending patterns and\npurchasing power and may negatively impact the demand for our products resulting in our revenue, future performance and profitability\nbeing materially and adversely affected.\n\n** **\n\n**Any failure to obtain or renew approvals,\nlicenses, permits, and quality/product certifications for certain markets required for our operating subsidiaries’ operations could\nmaterially and adversely affect our business and results of operations.**\n\n \n\nOur operating subsidiaries’ business is\nregulated by various laws and regulations in mainland China, which, among other things, require them to complete certain registrations\nand obtain various licenses, permits, and quality/product certificates for our operations. For details, see “Item 4. Information\non the Company — B. Business Overview — Licenses, Awards and Certificates,” and “Item 4. Information\non the Company — B. Business Overview — Regulations.”\n\n \n\nMost of the licenses needed for our operating\nsubsidiaries’ operations are subject to examinations or verifications by relevant authorities and are valid only for a fixed period\nof time, subject to renewal and accreditation. Compliance with the relevant laws and regulations may require substantial expenses, and\nany non-compliance with such laws and regulations may expose our operating subsidiaries to liabilities. In case of any non-compliance,\nour operating subsidiaries may have to incur significant expenses and divert substantial management time to remedy any deficiencies. There\ncan be no assurance that our operating subsidiaries will be able to obtain or renew all of the approvals, licenses, permits, and certifications\nrequired for our operating subsidiaries’ existing business operations upon expiration in a timely manner or at all. If our operating\nsubsidiaries cannot obtain or maintain all licenses required to operate our operating subsidiaries’ business, planned new business\noperations and expansion may be delayed, and our operating subsidiaries’ ongoing business could be interrupted. Our operating subsidiaries\nmay also be subject to prosecutions and penalties.\n\n** **\n\n**We face risks related to natural disasters,\nhealth epidemics, and other outbreaks, which could significantly disrupt our operations.**\n\n \n\nOur business may be adversely affected by instability,\ndisruption, or destruction in a geographic region of China in which our operating subsidiaries operate, regardless of cause, including\ninternational supply chain disruptions or delays, war, terrorism, riot, civil insurrection, or social unrest, and natural or manmade disasters,\nincluding famine, flood, fire, earthquake, storm or pandemic events and spread of disease (including the COVID-19 pandemic). Such events\nmay cause our customers to suspend their decisions to purchase our products, as well as give rise to sudden significant changes in regional\nand global economic conditions and cycles. These events also pose significant risks to our personnel, physical facilities, and operations,\nwhich could materially adversely affect our financial results.\n\n** **\n\n19\n\n \n\n** **\n\n**Outbreaks of disease among livestock and\npoultry flocks could harm the Company’s revenues and operating margins.**\n\n \n\nThe Company is subject to risks associated with\nthe outbreak of disease in pork and beef livestock, and poultry flocks, including African swine fever (ASF), Bovine Spongiform Encephalopathy\n(BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease\n(FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of such diseases could adversely\naffect the Company’s supply of raw materials, increase the cost of production, reduce utilization of the Company’s harvest\nfacilities, and reduce operating margins. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell\nproducts within mainland China.\n\n \n\nIn recent years, the outbreak of ASF has\nimpacted hog herds in China, Asia, and Europe. If an outbreak of ASF were to occur in China again in the future, the Company’s supply\nof hogs and pork could be materially impacted.\n\n \n\nThe Company has developed business continuity\nplans for various disease scenarios and will continue to update these plans as necessary. The Company also regularly engages in meat raw\nmaterial stockpiling, ensuring ample inventory preparedness to withstand negative external influences. There can be no assurance given,\nhowever, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating\nresults.\n\n** **\n\n**We are subject to risks of loss of proprietary\ninformation.**\n\n \n\nOur ability to compete successfully and/or to\nachieve future growth in sales will depend, in part, on our ability to protect our proprietary information relating to our product development,\nproduction, and marketing of processed meat products. Our directors and executive officers and all other employees, who may come into\npossession of such proprietary information including our technical know-how and our customer database in the course of their employment\nwith us, are under an obligation to maintain confidentiality on any such information during their term of employment with us, as well\nas for a prescribed period after the cessation of their employment. However, there is no assurance that such confidentiality obligations\nwill not be breached. In the event of a disclosure of our proprietary information by any employee in breach of their confidentiality obligations,\nin particular, where disclosure is made to third parties who may be our competitors or prospective competitors, our ability to compete\nagainst such parties may be materially and adversely affected. This would, in turn, have a material adverse impact on our business and\nprofitability as well as our prospects.\n\n** **\n\n20\n\n \n\n** **\n\n**We may be harmed by negative publicity.**\n\n \n\nWe operate in a highly competitive industry, and\nthere are other companies in the market that offer similar products. We rely on the positive feedback of our loyal customers to expand\nour customer base. Thus, customer satisfaction is critical to the success of our business, as this will also result in potential referrals\nfrom our existing customers. If we fail to meet our customers’ expectations, there may be negative feedback regarding our products,\nwhich may have an adverse impact on our business and reputation. In the event we are unable to maintain a high level of customer satisfaction\nor any customer dissatisfaction is inadequately addressed, our business, financial condition, results of operations, and prospects may\nalso be adversely affected.\n\n \n\nOur reputation may also be adversely affected\nby negative publicity in reports and publications such as major newspapers and forums, or any other negative publicity or rumors. There\nis no assurance that we will not experience negative publicity in the future or that such negative publicity will not have a material\nand adverse effect on our reputation or prospects. This may result in our inability to attract new customers or retain existing customers\nand may in turn adversely affect our business and the results of operations.\n\n** **\n\n**We may be affected by adverse changes in\ntaxation law, tax treaties and in the practices of tax authorities.**\n\n \n\nChanges in taxation legislation, tax treaties\nand in the practices of tax authorities can affect investment behavior which can have the effect of making specific kinds of investment\nproducts either more or less attractive to existing or potential investors.\n\n \n\nWe cannot predict the impact of future changes\nto tax legislation, tax treaties and the practices of tax authorities on our business or on the attractiveness of our investment projects.\nAmendments to existing tax legislation (in particular if there is a withdrawal of any available tax relief or an increase in tax rates)\nand tax treaties or the introduction of new rules and new tax treaties or changes in the practices of tax authorities may affect\nthe investment decisions of either existing or potential investors. Changes from time to time in the interpretation of existing tax laws,\namendments to existing tax rates, the introduction of new tax legislation and tax treaties, a change in the interpretation of tax legislation,\nany change in the enforcement of such legislation or any particular change in our tax treatment could have a material adverse effect on\nour business, growth prospects, fee income, results of operations and/or financial condition.\n\n** **\n\n**Our current insurance policies may not provide\nadequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.**\n\n \n\nWe believe we maintain insurance coverage that\nis customary for businesses of our size and type. However, we may be unable to insure against certain types of losses or claims, or the\ncost of such insurance may be prohibitive. Uninsured losses or claims, if they occur, could have a material adverse effect on our reputation,\nbusiness, results of operations, financial condition, or prospects.\n\n** **\n\n**We might face risks related to compliance\nwith environmental regulations in mainland China, including waste disposal, water usage, emissions standards, and other environmental\nguidelines. Changes in regulations or failure to comply could result in fines, legal actions, or operational constraints.**\n\n \n\nWe are subject to various domestic environmental\nlaws and regulations that govern the discharge of pollutants and disposal of wastes, and which may require that we investigate and remediate\nthe effects of the release or disposal of materials at sites associated with past and present operations. We could incur substantial cleanup\ncosts, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities\nunder these laws or non-compliance with environmental permits required at our facilities. We also could be subject to future laws and\nregulations that govern greenhouse gas emissions and various matters related to climate change and other air emissions, which could increase\nour operating costs.\n\n \n\n21\n\n \n\n \n\nWe believe that we operate our businesses in compliance\nin all material respects with applicable environmental laws and regulations. As of the date of this annual report, none of the operating\nsubsidiaries have received any notifications of noncompliance of any environmental regulations from relevant governmental authorities\nin mainland China. However, we may be involved in lawsuits and other proceedings involving alleged violations of, or liabilities\narising from, environmental laws. When our liability is probable and we can reasonably estimate our costs, we record environmental liabilities\nin our financial statements. However, in many cases, we are not able to determine whether we are liable or if liability is probable or\nto reasonably estimate the loss or range of loss. Estimates of our liability remain subject to additional uncertainties, including the\nnature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and\nthe extent of our responsibility for the remediation. We have taken, and expect to take all reasonable measures to control any probable\ncontamination, however, future developments, administrative actions or liabilities relating to environmental matters, could have a material\nadverse effect on our financial condition or results of operations.\n\n** **\n\n**Risks Relating to the ADSs and the Trading\nMarket**\n\n** **\n\n**The voting rights of holders of ADSs are\nlimited by the terms of the deposit agreement, and you may not be able to exercise your right to direct how the Ordinary Shares which\nare represented by your ADSs are voted.**\n\n \n\nHolders of ADSs do not have the same rights as\nour registered shareholders. As a holder of the ADSs, you will not have any direct right to attend general meetings of our shareholders\nor to cast any votes at such meetings. As an ADS holder, you will only be able to exercise the voting rights attached to the Ordinary\nShares which are represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions\nof the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary, as the holder\nof the Ordinary Shares underlying your ADSs. Where any matter is to be put to a vote at a general meeting, then upon receipt of your voting\ninstructions, the depositary will try, as far as is practicable, to vote the underlying Ordinary Shares which are represented by your\nADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions, the depositary\nwill try to vote the underlying Ordinary Shares in accordance with these instructions. If we do not instruct the depositary to ask for\nyour instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not\nbe able to directly exercise your right to vote with respect to the underlying Ordinary Shares represented by your ADSs, unless you cancel\nthe ADSs and withdraw the shares and become the registered holder of such Ordinary Shares prior to the record date for the general meeting.\nUnder our articles of association, the minimum notice period required to be given by our Company to our registered shareholders to convene\na general meeting will be 14 clear days, (or, in respect of an annual general meeting, 21 clear days). When a general meeting\nis convened, you may not receive sufficient advance notice of the meeting to withdraw the Ordinary Shares underlying your ADSs and become\nthe registered holder of such shares to allow you to attend the general meeting and to vote directly with respect to any specific matter\nor resolution to be considered and voted upon at the general meeting. In addition, under our articles of association, for the purposes\nof determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of\nmembers and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record\ndate may prevent you from withdrawing the Ordinary Shares underlying your ADSs and becoming the registered holder of such shares prior\nto the record date, so that you would not be able to attend the general meeting or to vote directly.  If we ask for your instructions,\nthe depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the\ndepositary at least 30 business days’ prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will\nreceive the voting materials in time to ensure that you can instruct the depositary to vote the underlying Ordinary Shares represented\nby your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their\nmanner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the Ordinary\nShares underlying your ADSs are voted and you may have no legal remedy if the Ordinary Shares underlying your ADSs are not voted as you\nrequested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders’ meeting. Except in limited\ncircumstances, the depositary for the ADSs will give us a discretionary proxy to vote the Ordinary Shares underlying your ADSs if you\ndo not vote at shareholders’ meetings, which could adversely affect your interests.\n\n** **\n\n22\n\n \n\n** **\n\n**You may experience dilution of your holdings\ndue to inability to participate in rights offerings.**\n\n \n\nWe may, from time to time, distribute rights to\nour shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders\nof ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration\nunder the Securities Act of 1933, as amended (the “Securities Act”) with respect to all holders of ADSs, or are registered\nunder the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to\nthird parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act,\nand we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to\nhave a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and\nmay experience dilution of their holdings as a result.\n\n** **\n\n**Future issuances of the ADSs or Ordinary\nShares or securities convertible into, or exercisable or exchangeable for, our Ordinary Shares, or the expiration of lock-up agreements\nthat restrict the issuance of new ADSs or Ordinary Shares or the trading of outstanding ADSs or Ordinary Shares, could cause the market\nprice of the ADSs to decline and would result in the dilution of your holdings.**\n\n \n\nFuture issuances of the ADSs or our Ordinary Shares\nor securities convertible into, or exercisable or exchangeable for, our Ordinary Shares, or the expiration of lock-up agreements that\nrestrict the issuance of new ADSs or Ordinary Shares or the trading of outstanding ADSs or Ordinary Shares, could cause the market price\nof the ADSs to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up\nagreements, on the price of the ADSs. In all events, future issuances of the ADSs or our Ordinary Shares would result in the dilution\nof your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties\nwill sell their securities when the lock-ups expire, could adversely affect the market price of the ADSs.\n\n** **\n\n**You may be subject to limitations on transfer\nof your ADSs.**\n\n \n\nYour ADSs are transferable on the books of the\ndepositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the\nperformance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with\ncorporate action events such as a rights offering. The depositary may also close its books in emergencies, and on weekends and public\nholidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books\nof the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law\nor of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.\n\n** **\n\n**ADSs holders may not be entitled to a jury\ntrial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in\nany such action.**\n\n \n\nThe deposit agreement governing the ADSs representing\nour Ordinary Shares provides that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal\nor state courts in the City of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreement\nand in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against\nus or the depositary arising out of or relating to our Ordinary Shares, the ADSs or the deposit agreement, including any claim under the\nU.S. federal securities laws.\n\n \n\n23\n\n \n\n \n\nIf we or the depositary opposed a jury trial demand\nbased on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in\naccordance with the applicable U.S. state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury\ntrial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States\nSupreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under\nthe laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual pre-dispute\njury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right\nto a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult\nlegal counsel regarding the jury waiver provision before investing in the ADSs.\n\n \n\nIf you or any other holders or beneficial owners\nof ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including\nclaims under U.S. federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with\nrespect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit\nis brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable\ntrial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury\nwould have had, including results that could be less favorable to the plaintiff(s) in any such action.\n\n \n\nNevertheless, if the foregoing jury trial waiver\nprovision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury\ntrial. No condition, stipulation or provision of the deposit agreement or ADSs shall relieve us or the depositary from our respective\nobligations to comply with the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).\n\n** **\n\n**Your rights to pursue claims against the\ndepositary as a holder of ADSs are limited by the terms of the deposit agreement.**\n\n \n\nUnder the deposit agreement, any action or proceeding\nagainst or involving the depositary, arising out of or based upon the deposit agreement or the transactions contemplated thereby or by\nvirtue of owning the ADSs may only be instituted in a state or federal court in New York, New York, and you, as a holder of our ADSs,\nwill have irrevocably waived any objection which you may have to the laying of venue of any such proceeding, and irrevocably submitted\nto the exclusive jurisdiction of such courts in any such action or proceeding.\n\n \n\nThe depositary may, in its sole discretion, require\nthat any dispute or difference arising from the relationship created by the deposit agreement be referred to and finally settled by arbitration\nconducted under the terms described in the deposit agreement, which may include claims arising under the federal securities laws, although\nthe arbitration provisions of the deposit agreement do not preclude you from pursuing claims under the Securities Act or Exchange Act\nin state or federal courts. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or\nbeneficial owner of ADSs or by us or the depositary of compliance with the Securities Act and the Exchange Act. The state and federal\ncourts sitting in New York generally respect the contractual decision of the parties to submit their disputes to arbitration and\nsuch arbitration provisions are generally enforceable under the U.S. federal laws and the laws of the State of New York, subject\nto certain exceptions, such as corruption, fraud or undue means. Therefore, we believe that the arbitration provision in the deposit agreement\nis enforceable under the U.S. federal laws and the laws of the State of New York.\n\n** **\n\n**The deposit agreement may be amended or\nterminated without your consent.**\n\n \n\nWe and the depositary may amend or terminate the\ndeposit agreement without your consent. Such amendment or termination may be done in favor of our Company. Holders of the ADSs, subject\nto the terms of the deposit agreement, will receive notice in the event of an amendment that prejudices a substantial existing right or\na termination. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement\nas amended. The deposit agreement may be terminated at any time upon a prior written notice. Upon the termination of the deposit agreement,\nour Company will be discharged from all obligations under the deposit agreement, except for our obligations to the depositary thereunder.\n\n** **\n\n24\n\n \n\n** **\n\n**Holders or beneficial owners of the ADSs\nhave limited recourse if we or the depositary fail to meet our respective obligations under the deposit agreement.**\n\n \n\nThe deposit agreement expressly limits the obligations\nand liability of us and the depositary. For example, the depositary is not liable if any of us or our respective controlling persons or\nagents are prevented or forbidden from, or subjected to any civil or criminal penalty or restraint on account of, or delayed in, doing\nor performing any act or thing required by the terms of the deposit agreement and any ADR, by reason of any provision of any present or\nfuture law or regulation of the United States or any state thereof, Hong Kong or any other country, or of any other governmental\nauthority or regulatory authority or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason\nof any provision, present or future, of our articles of association, or any provision of or governing any deposited securities, or by\nreason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation,\ncurrency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure).\n\n \n\nIn addition, the depositary and any of its agents\nalso disclaim any liability for (i) any failure to carry out any instructions to vote, the manner in which any vote is cast or the\neffect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any\nrights to lapse in accordance with the provisions of the deposit agreement, (ii) the failure or timeliness of any notice from us,\nthe content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, (iii) any\ninvestment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the deposited securities\nor the credit-worthiness of any third party, (iv) any tax consequences that may result from ownership of ADSs, ordinary shares or\ndeposited securities, or (v) any acts or omissions made by a successor depositary whether in connection with a previous act or omission\nof the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary, provided that in\nconnection with the issue out of which such potential liability arises the depositary performed its obligations without gross negligence\nor willful misconduct while it acted as depositary. These provisions of the deposit agreement will limit the ability of holders or beneficial\nowners of the ADSs to obtain recourse if we or the depositary fail to meet our respective obligations under the deposit agreement.\n\n** **\n\n**The depositary for the ADSs will give us\na discretionary proxy to vote our Ordinary Shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited\ncircumstances, which could adversely affect your interests.**\n\n \n\nUnder the deposit agreement for the ADSs, if you\ndo not vote, the depositary will give us a discretionary proxy to vote our Ordinary Shares underlying your ADSs at shareholders’\nmeetings, unless:\n\n \n\n \n●\nwe have instructed the depositary that we do not wish a discretionary proxy to be given;\n\n \n\n \n●\nwe are aware or should reasonably be aware that there is substantial opposition from holders against the outcome for which we would vote; or\n\n \n\n \n●\nthe outcome for which we would otherwise vote on would materially and adversely affect the rights of shareholders.\n\n \n\nThe effect of this discretionary proxy is that\nif you do not vote at shareholders’ meetings, you cannot prevent our Ordinary Shares underlying your ADSs from being voted, except\nunder the circumstances described above. This may make it more difficult for shareholders to influence the management of our Company.\nHolders of our Ordinary Shares are not subject to this discretionary proxy.\n\n** **\n\n25\n\n \n\n** **\n\n**If we fail to implement and maintain an\neffective system of internal controls or fail to remediate the material weaknesses in our internal control over financial reporting that\nhave been identified, we may fail to meet our reporting obligations or be unable to accurately report our results of operations or prevent\nfraud, and investor confidence and the market price of the ADSs may be materially and adversely affected.**\n\n \n\nIn preparing our consolidated financial statements\nas of and for the fiscal year ended December 31, 2025, we and our independent registered public accounting firm have identified\nmaterial weaknesses in our internal control over financial reporting, as defined in the standards established by the PCAOB, and other\ncontrol deficiencies. The material weaknesses identified included (i) the lack of formal internal control policies and internal independent\nsupervision functions to establish formal risk assessment process and internal control framework over financing reporting; and (ii) the\nlack of accounting staff and resources with appropriate knowledge of generally accepted U.S. accounting principles (“U.S. GAAP”)\nand SEC reporting and compliance requirements to design and implement formal period-end financial reporting policies and procedures to\naddress complex U.S. GAAP technical accounting issues in accordance with U.S. GAAP and the SEC requirements. Following the identification\nof the material weaknesses and control deficiencies, we have taken the following remedial measures: (i) hiring additional qualified\naccounting and financial personnel with appropriate knowledge and experience in U.S. GAAP accounting and SEC reporting; and (ii) organizing\nregular training for our accounting staff, especially training related to U.S. GAAP and SEC reporting requirements. We also plan\nto adopt additional measures to improve our internal control over financial reporting, including, among others, creating U.S. GAAP\naccounting policies and a procedures manual, which will be maintained, reviewed, and updated, on a regular basis, to the latest U.S. GAAP\naccounting standards, and establishing an audit committee and strengthening corporate governance. However, the implementation of these\nmeasures may not fully address the material weaknesses in our internal control over financial reporting. Our failure to correct the material\nweaknesses or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in\nour financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory\nfilings on a timely basis. As a result, our business, financial condition, results of operations and prospects, and the trading price\nof the ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders\nour ability to prevent fraud.\n\n \n\nWe are subject to reporting obligations under\nU.S. securities laws. The SEC adopted rules pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring every public company to\ninclude a management report on such company’s internal control over financial reporting in its annual report, which contains management’s\nassessment of the effectiveness of its internal control over financial reporting. In addition, if we cease to be an “emerging growth\ncompany” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on\nthe effectiveness of our internal control over financial reporting on an annual basis. Our management may conclude that our internal control\nover financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting\nis effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that\nis qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or\nreviewed, or if it interprets the relevant requirements differently from us. In addition, we are now a public company in the United States\nsubject to the Sarbanes-Oxley Act of 2002, our reporting obligations may place a burden on our management, operational and financial resources\nand systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.\n\n** **\n\n**Our holding company structure and potential\nrestrictions on the payment of dividends could materially adversely affect our market price.**\n\n \n\nWing Yip is a holding company with no direct business\noperations other than its ownership of the capital stock of its subsidiaries and equity investees. Wing Yip’s principal assets are\nthe equity interests it directly or indirectly holds in its operating subsidiaries. As a holding company, Wing Yip’s ability to\npay dividends and meet its other obligations depends upon the amount of distributions, if any, received from its operating subsidiaries\nand other holdings and investments. Wing Yip’s operating subsidiaries and other holdings and investments, from time to time, may\nbe subject to restrictions on their ability to make distributions to Wing Yip, including, but not limited to, as a result of restrictive\ncovenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other currency,\nand other regulatory restrictions. For example, legal restrictions permit payments of dividends by our business entities in mainland China\nonly out of their retained earnings, if any, determined in accordance with relevant accounting standards and regulations of mainland China.\nUnder mainland China law, such entities are also required to set aside a portion of their net income each year to fund certain reserve\nfunds. These reserves are not distributable as cash dividends. The foregoing restrictions may also affect Wing Yip’s ability to\nfund the operations of one subsidiary with dividends and other payments received from another subsidiary. Distributions may also be limited\nfrom time to time by reason of the current cash requirements of Wing Yip’s operating subsidiaries. Such restrictions on payments\ninvolving entities organized in mainland China could adversely affect our liquidity, our business results, and thus, the price of the\nADSs.\n\n \n\n26\n\n \n\n \n\nIn addition, were we able to declare dividends,\nsuch dividends could only be paid by us out of our distributable profits (that is, our accumulated realized profits less our accumulated\nrealized losses) permitted under Hong Kong law. Dividends cannot be paid out of our share capital. To the extent profits are distributed\nas dividends, such a portion of profits will not be available to be reinvested in our operations. See “Item 8. FINANCIAL INFORMATION\n- A. Consolidated Statements and Other Financial Information – Dividend Policy.” Dividends must be paid in accordance with\nthe procedures and requirements specified in our articles of association. When recommending dividends, our directors must act in the general\ninterest of all classes of shareholders and must not favor any one class at the expense of another in accordance with Hong Kong law.\nThe payment and the amount, form, and frequency of any future dividends will depend on our results of operations, cash flows, financial\ncondition, statutory, regulatory, and contractual restrictions on the payment of dividends by us, future prospects, and other factors\nthat our directors may consider relevant. Our board of directors has discretion as to whether to distribute dividends and determine new\ndividend policies, subject to certain requirements of Hong Kong law. Holders of the ADSs will be entitled to receive dividends pro\nrata according to the amounts paid up or credited as paid up on the Ordinary Shares.\n\n** **\n\n**We may need to raise additional funds to\nsupport our business operations or to finance future acquisitions, including through the issuance of equity or debt securities, which\ncould have a material adverse effect on our ability to grow our business.**\n\n \n\nIf we do not generate sufficient cash from operations\nor do not otherwise have sufficient cash and cash equivalents to support our business operations or to finance future acquisitions, we\nmay need to raise additional capital through the issuance of debt or equity securities. We may not be able to raise cash in future financing\non terms acceptable to us, or at all.\n\n \n\nFinancings, if available, may be on terms that\nare dilutive to our shareholders, and the prices at which new investors would be willing to purchase our securities may be lower than\nthe current price of the ADSs. The holders of new securities may also receive rights, preferences or privileges that are senior to those\nof existing holders of the ADSs. If new sources of financing are required but are insufficient or unavailable, we would be required to\nmodify our plans to the extent of available funding, which could harm our ability to grow our business.\n\n** **\n\n**We are a Hong Kong company and it may\nbe difficult for you to enforce judgments outside Hong Kong against us or certain of our directors or officers who reside in Hong Kong.**\n\n \n\nWe are a holding company incorporated under the\nlaws of Hong Kong. As a result, the rights of holders of our Ordinary Shares will be governed by Hong Kong law, and our articles\nof association, as may be amended from time to time. The rights of shareholders under Hong Kong law may differ from the rights of\nshareholders of companies incorporated in other jurisdictions. All of our directors and officers reside outside the United States\nand our material assets are located outside the United States. As a result, it may be difficult for investors to effect service of\nprocess on those persons in the United States or to enforce in the United States judgments obtained in United States courts\nagainst us or those persons based on the civil liability provisions of the United States securities laws. Even if investors are successful\nin realizing judgments against such persons in courts of the United States, the laws of Hong Kong or mainland China may render\nsuch investors unable to enforce the judgment against our assets or the assets of our officers and directors. Also, investors may have\ndifficulty in bringing an original action based upon the United States federal securities laws against such persons in mainland China\ncourts. Additionally, there is uncertainty as to whether the courts in Hong Kong will enforce judgments obtained in other jurisdictions,\nincluding the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain\nactions in Hong Kong against us or our directors or officers under the securities laws of other jurisdictions.\n\n \n\nFurthermore, we have been advised by our counsel\nas to the laws of Hong Kong, Patrick Mak & Tse, that in Hong Kong, foreign judgments can be enforced under the Foreign\nJudgments (Reciprocal Enforcement) Ordinance or under common law. The Foreign Judgments (Reciprocal Enforcement) Ordinance is a registration\nscheme for the recognition and enforcement of foreign judgments based on reciprocity, but the United States is not a designated country\nunder the Foreign Judgments (Reciprocal Enforcement) Ordinance. As a result, a judgment rendered by a court in the United States,\nincluding as a result of administrative actions brought by regulatory authorities, such as the SEC, and other actions, will not be enforced\nby the Hong Kong courts under the statutory regime. In addition, the Supreme People’s Court of the PRC and the Government of\nHong Kong have entered into the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial\nMatters by the Courts of the Mainland and of the Hong Kong Special Administrative Region pursuant to Choice of Court Agreements between\nParties Concerned,” or the Arrangement. The Mainland Judgements (Reciprocal Enforcement) Ordinance gave effect to the Arrangement\nand is a registration scheme for recognition and enforcement of mainland China judgements based on reciprocity. Other than the Arrangement,\nHong Kong has not entered into any multilateral convention or bilateral treaty regarding the recognition and enforcement of foreign\njudgments. Accordingly, any judgments rendered by a court in the United States will need to be enforced under common law. In a common\nlaw action for enforcement of a foreign judgment, the judgment creditor has to prove, among other things, that the foreign judgment is a final\njudgment conclusive upon the merits of the claim. Such a judgment must be for a fixed sum and must also come from a “competent”\ncourt (as determined by the private international law rules applied by the Hong Kong SAR courts). \n\n** **\n\n27\n\n \n\n \n\n**We have provisions in our articles of association\nthat may discourage a change of control.**\n\n \n\nOur articles of association contain provisions\nthat could delay or prevent a change of control of our Company that a shareholder might consider favorable. These provisions include,\namong others:\n\n \n\n \n●\nsubject to the prior approval of our shareholders, our board of directors is permitted to issue any shares and to fix the price, rights, preferences and restrictions of any such shares, provided that, among other things, no shares shall be issued to transfer a controlling interest in the Company without the prior approval of our shareholders in general meeting;\n\n \n\n \n●\nprovisions that limit the ability of shareholders to requisition and convene general meetings of shareholders;\n\n \n\n \n●\nthe approval of a majority of not less than three-fourths of the votes cast by our shareholders, being entitled so to do, voting in person or by proxy, is required to effect amendments to our articles of association; and\n\n \n\n \n●\nthe requirement for shareholders wishing to propose a person for election as a director to give the Company advance written notice of nomination of such person for the election of director.\n\n \n\nThese provisions could make it more difficult\nfor a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result,\nshareholders may be limited in their ability to obtain a premium for their shares.\n\n** **\n\n**We are an “emerging growth company”\nwithin the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging\ngrowth companies, this could make it more difficult to compare our performance with other public companies.**\n\n \n\nWe are an “emerging growth company”\nwithin the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth\ncompanies from being required to comply with new or revised financial accounting standards until private companies (that is, those that\nhave not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act)\nare required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out\nof the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election\nto opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued\nor revised, and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new\nor revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements\nwith another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the\nextended transition period difficult or impossible because of the potential differences in accountant standards used.\n\n** **\n\n**We incur substantial increased costs as\na result of being a public company in the U.S.**\n\n \n\nThe Sarbanes-Oxley Act of 2002, as well\nas rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public\ncompanies. Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate\nactivities more time-consuming and costlier. In addition, we incur additional costs associated with our public company reporting requirements.\nIt may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers.\n\n \n\n28\n\n \n\n \n\nWe are an “emerging growth company,”\nas defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year\n(a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross\nrevenue of at least US$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market\nvalue of the ADSs that is held by non-affiliates exceeds US$700 million as of the end of the second quarter of that fiscal year,\nand (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period.\nAn emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally\nto public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment\nof the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting\nstandards until such time as those standards apply to private companies.\n\n \n\nAfter we are no longer an “emerging growth\ncompany,” or until five years following the completion of our initial public offering, whichever is earlier, we expect to incur\nsignificant additional expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404\nand the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number\nof independent directors and adopt policies regarding internal controls and disclosure controls and procedures.\n\n \n\nWe are currently evaluating and monitoring developments\nwith respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional\ncosts we may incur or the timing of such costs.\n\n** **\n\n**Substantial future sales of the ADSs or\nthe anticipation of future sales of the ADSs in the public market could cause the price of the ADSs to decline.**\n\n \n\nSales of substantial amounts of the ADSs in the\npublic market, or the perception that these sales could occur, could cause the market price of the ADSs to decline. As of the date of\nthis annual report, 50,330,928 of our Ordinary Shares are issued and outstanding. Among these shares, 2,357,500 are in the form of ADSs.\nAll our ADSs are freely tradable without restriction or additional registration under the Securities Act. The remaining Ordinary Shares\noutstanding are available for sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities\nAct. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or\nthe availability of these securities for future sale will have on the market price of the ADSs.\n\n** **\n\n**If securities or\nindustry analysts do not publish research or reports about our business, or if they publish a negative report regarding the ADSs, the\nprice of the ADSs and trading volume could decline.**\n\n \n\nAny trading market for\nthe ADSs may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not\nhave any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of the ADSs would likely decline.\nIf one or more of these analysts cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in\nthe financial markets, which could cause the price of the ADSs and the trading volume to decline.\n\n** **\n\n**If we cease to qualify as a foreign private\nissuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic\nissuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.**\n\n \n\nAs a foreign private issuer, we are exempt from\nthe rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and\nprincipal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.\nIn addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently\nor as promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information\nthat United States domestic issuers are required to disclose. While we currently are a foreign private issuer, we may cease to qualify\nas a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse\neffect on our results of operations.\n\n** **\n\n29\n\n \n\n** **\n\n**Because we are a foreign private issuer\nand are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than\nyou would have if we were a domestic issuer.**\n\n \n\nNasdaq listing rules require listed companies\nto have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to,\nand we may follow home country practice in lieu of the above requirements, or we may choose to comply with the above requirement within\none year of listing. We are not required by the corporate governance practice in our home country to have a majority of our board of directors\nconsisting of independent directors. Thus, although a director must act in the best interests of the Company, it is possible that fewer\nboard members will be exercising independent judgment and, as a result, the level of board oversight on the management of our Company\nmay be less than if a majority of our board consisted of independent directors. In addition, Nasdaq listing rules also require U.S. domestic\nissuers to have a compensation committee, a nominating/corporate governance committee composed entirely of independent directors, and\nan audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. Nasdaq listing\nrules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to\nvote on all equity compensation plans and material revisions to those plans, certain ordinary share issuances.\n\n \n\nHowever, the Nasdaq rules permit a foreign private issuer like us to\nfollow the corporate governance practices of its home country. Certain corporate governance practices in Hong Kong, which is our home\ncountry, may differ significantly from Nasdaq corporate governance listing standards. A Hong Kong company is required to have annual general\nmeetings in respect of each financial year, unless (i) everything that is required to be done at the meeting is done by a written resolution\nand copies of the documents required to be laid or produced at the meeting are provided to each member of the company on or before the\ncirculation date of the written resolution; (ii) the company is a single member company; (iii) the company has dispensed with the holding\nof annual general meetings by a written resolution or a resolution at a general meeting passed by all members under section 613 of the\nCompanies Ordinance (Cap. 622) (in which case the company is required to deliver a copy of the resolution to the Registrar of Companies\nwithin 15 days after it has been passed); or (iv) the company is a dormant company. Shareholders of Hong Kong companies like us have no\ngeneral rights under Hong Kong law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors\nhave discretion under our articles of association to determine whether, and under what conditions, our corporate records may be inspected\nby our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain\nthe information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection\nwith a proxy contest. To the extent we choose to follow home country practice with respect to corporate governance matters, our shareholders\nmay be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers. For details\nas to the corporate governance matters for which we have elected to follow our home country practices, rather than Nasdaq listing standards,\nplease see “Item 16.G—Corporate Governance.”\n\n \n\n**Although as a foreign private issuer we\nare exempt from certain corporate governance standards applicable to U.S. issuers, if we cannot continue to satisfy the listing requirements\nand other rules of Nasdaq, our securities may not be listed or may be delisted, which could negatively impact the price of our securities\nand your ability to sell them.**\n\n \n\nIn order to maintain our listing on Nasdaq, we\nare required to comply with certain rules of Nasdaq, including those regarding minimum shareholders’ equity, minimum share\nprice, minimum market value of publicly held shares, and various additional requirements. Even if we initially met the listing requirements\nand other applicable rules of Nasdaq, we may not be able to continue to satisfy these requirements and applicable rules. If we are\nunable to satisfy the Nasdaq criteria for maintaining our listing, our securities could be subject to delisting.\n\n \n\nIf Nasdaq does not list our securities, or subsequently\ndelists our securities from trading, we could face significant consequences, including:\n\n \n\n \n●\na limited availability for market quotations for our securities;\n\n \n\n \n●\nreduced liquidity with respect to our securities;\n\n \n\n \n●\na determination that the ADSs is a “penny stock,” which will require brokers trading in the ADSs to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the ADSs;\n\n \n\n \n●\nlimited amount of news and analyst coverage; and\n\n \n\n \n●\na decreased ability to issue additional securities or obtain additional financing in the future.\n\n** **\n\n**Our board of directors may decline to register\ntransfers of Ordinary Shares in certain circumstances.**\n\n \n\nExcept in connection with the settlement of trades,\ntransactions or transfers of Ordinary Shares entered into through the facilities of a stock exchange or automated quotation system on\nwhich our Ordinary Shares are listed or traded from time to time, our board of directors may, in its sole discretion, decline to register\nany transfer of any Ordinary Share which is not fully paid up or on which we have a lien. Our directors may also decline to register any\ntransfer of any Ordinary Share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares\nor ADSs to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor\nto make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer\nis properly stamped, if required; (iv) except in the case of a transfer to executors, administrators or trustees of the estate of\na deceased shareholder, in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred\ndoes not exceed three; (v) the shares transferred are free of any lien in favor of us; and (vi) a fee of such maximum sum as\nthe Korea Exchange (“KRX”) or Nasdaq may determine to be payable, or such lesser sum as our board of directors may from time\nto time require, is paid to us in respect thereof.\n\n \n\n30\n\n \n\n \n\nIf our directors refuse to register a transfer\nof Ordinary Shares, they shall, within one month after the date on which the instrument of transfer was lodged with the Company, send\nto each of the transferor and the transferee notice of such refusal. The registration of transfers of shares may, after notice has been\ngiven by advertisement in an appointed newspaper and in accordance with the requirements of any stock exchange on which our shares or\nADSs are listed or by electronic means as may be accepted by such stock exchange(s), be suspended and our register of members closed at\nsuch times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of\ntransfers shall not be suspended nor the register of members closed for more than 30 days in any year.\n\n \n\nThis, however, is unlikely to affect market transactions\nof the ADSs purchased by investors in the public offering. The ADSs are listed on Nasdaq, and the legal title to such ADSs trading on\nNasdaq remain with the Depository Trust Company (“DTC”). All market transactions with respect to the ADSs are conducted through\nthe DTC systems.\n\n** **\n\n**Because we are an “emerging growth\ncompany,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence\nin us and the ADSs.**\n\n \n\nFor as long as we remain an “emerging growth\ncompany,” as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements\nthat are applicable to other public companies that are not “emerging growth companies”, including, but not limited to, not\nbeing required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations\nregarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of shareholder approval\nof any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be\nleft without information or rights available to shareholders of more mature companies. If some investors find our Ordinary Shares less\nattractive as a result, there may be a less active trading market for the ADSs and the ADSs price may be more volatile.\n\n** **\n\n**If we are classified as a passive foreign\ninvestment company, United States taxpayers who own the ADSs may have adverse United States federal income tax consequences.**\n\n \n\nA non-U.S. corporation such as ourselves\nwill be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either\n\n \n\n \n●\nAt least 75% of our gross income for the year is passive income; or\n\n \n\n \n●\nThe average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.\n\n \n\nPassive income generally includes dividends, interest,\nrents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition\nof passive assets.\n\n \n\nIf we are determined to be a PFIC for any taxable\nyear (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds the ADSs, the U.S. taxpayer may\nbe subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.\n\n \n\nBased on our operations and the composition of\nour assets we do not expect to be treated as a PFIC under the current PFIC rules. It was determined we are not a PFIC for the current\nyear. However, we must make a separate determination each year as to whether we are a PFIC, and there can be no assurance with respect\nto our status as a PFIC for any future taxable year. Depending on the amount of assets held for the production of passive income, it is\npossible that, for any subsequent taxable year, more than 50% of our assets may be assets held for the production of passive income. We\nwill make this determination following the end of any particular tax year. In addition, because the value of our assets for purposes of\nthe asset test will generally be determined based on the market price of the ADSs, our PFIC status will depend in large part on the market\nprice of the ADSs. Accordingly, fluctuations in the market price of the ADSs may cause us to become a PFIC. In addition, the application\nof the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how,\nand how quickly, we spend our liquid assets. We are under no obligation to take steps to reduce the risk of our being classified as a\nPFIC, and as stated above, the determination of the value of our assets will depend upon material facts (including the market price of\nthe ADSs from time to time) that may not be within our control. If we are a PFIC for any year during which you hold the ADSs, we will\ncontinue to be treated as a PFIC for all succeeding years during which you hold the ADSs. If we cease to be a PFIC and you did not previously\nmake a timely “mark-to-market” election as described below, you still may avoid some of the adverse effects of the PFIC regime\nby making a “purging election” (as described below) with respect to the ADSs.\n\n \n\n31\n\n \n\n** **\n\nFor a more detailed discussion of the application\nof the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see “Item 10.\nAdditional Information—E. Taxation — United States Federal Income Taxation — Passive Foreign\nInvestment Company (“PFIC”) Consequence.” \n\n** **\n\n**The price of the ADSs could be subject to\nrapid and substantial volatility.**\n\n \n\nThere have been instances of extreme stock price\nrun-ups followed by rapid price declines and strong stock price volatility, especially among those with relatively smaller public floats.\nAs a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme\nprice run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, the ADSs may be subject to\nrapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any\nstock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult\nfor prospective investors to assess the rapidly changing value of the ADSs.\n\n \n\nIn addition, if the trading volumes of the ADSs\nare low, persons buying or selling in relatively small quantities may easily influence prices of the ADSs. This low volume of trades could\nalso cause the price of the ADSs to fluctuate greatly, with large percentage changes in price occurring in any trading day session.\nHolders of the ADSs may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low\nvolume trading. Broad market fluctuations and general economic conditions may also adversely affect the market price of the ADSs. As a\nresult of this volatility, investors may experience losses on their investment in the ADSs. A decline in the market price of the ADSs\nalso could adversely affect our ability to issue additional ADSs or other of our securities and our ability to obtain additional financing\nin the future. No assurance can be given that an active market in the ADSs will develop or be sustained. If an active market does not\ndevelop, holders of the ADSs may be unable to readily sell the ADSs they hold or may not be able to sell their ADSs at all.\n\n** **\n\n**We are traded on more than one market and\nthis may result in price variations and adversely affect the liquidity and value of the ADSs and potentially facilitate market manipulation.**\n\n \n\nOur Ordinary Shares have traded on the Korea Securities\nDealers Automated Quotations (“KOSDAQ”) of KRX since 2018 and, our ADSs have traded on the Nasdaq Capital Market since November\n2024. Trading in our ADSs or Ordinary Shares on these markets takes place in different currencies (U.S. dollars on the Nasdaq Capital\nMarket and Korean won on the KOSDAQ), and at different times (resulting from different time zones, different trading days and different\npublic holidays in the United States and South Korea). The trading prices of our Ordinary Shares and the ADSs on these two markets may\ndiffer due to these and other factors. Any decrease in the price of our Ordinary Shares on the KOSDAQ could cause a decrease in the trading\nprice of the ADSs on the Nasdaq Capital Market. Investors could seek to sell or buy our Ordinary Shares to take advantage of any price\ndifferences between the markets through a practice referred to as arbitrage. Arbitrage can disrupt markets and reduce liquidity. It may\nfacilitate market manipulation and harm long-term shareholders by increasing trading costs and spreading false information. Additionally,\nit can fragment markets, making it harder for investors to achieve best execution and eroding market efficiency.\n\n \n\n**We have received a minimum bid price deficiency\nnotice from Nasdaq and may be delisted if we fail to regain compliance, which would materially harm our shareholders and our business.**\n\n** **\n\nOn December 22, 2025, we received a letter from\nthe Listing Qualifications staff of The Nasdaq Stock Market notifying us that based on the closing bid price of our ADSs for the period\nfrom November 7, 2025 to December 19, 2025, we no longer meet the continued listing requirement of Nasdaq under Nasdaq Listing Rules 5550(a)(2),\nto maintain a minimum bid price of $1 per ADS. Nasdaq has provided us with a 180 calendar days compliance period, or until June 22, 2026,\nin which to regain compliance with Nasdaq continued listing requirements. Although we will use all reasonable efforts to achieve compliance\nwith Rule 5550(a)(2), there can be no assurance that we will be able to regain compliance with that rule or will otherwise be in compliance\nwith other Nasdaq continued listing requirements.\n\n \n\n32\n\n \n\n \n\nIf we are unable to regain compliance with the\nminimum bid price requirement, our ADSs may be delisted from Nasdaq. Delisting would have significant adverse consequences for our shareholders,\nincluding reduced liquidity, decreased market price for our ADSs, limited ability to issue additional ADSs or obtain additional financing\nin the future, and reduced analyst and investor interest in our Company. Additionally, delisting could harm our reputation with customers,\nsuppliers, and business partners, and could make it more difficult to attract and retain qualified employees and management.\n\n** **\n\n**Nasdaq’s newly amended Low Price Requirement\nmay result in immediate suspension and delisting of our ADSs without a cure period if our share price falls to $0.10 or less for 10 consecutive\ntrading days.**\n\n \n\nOn August 22, 2025, Nasdaq filed a proposed rule\nchange to raise the consequences of failing to satisfy the Low Price Requirement, which was approved by the SEC on an accelerated basis\nand became operative on January 19, 2026. Under the amended Low Price Requirement, a failure to meet the continued listing requirement\nfor minimum bid price shall be determined to exist if a company’s security has a closing bid price of $0.10 or less for 10 consecutive\ntrading days, regardless of whether the company is under any compliance period specified in Nasdaq Rule 5810(c)(3)(A), and upon such failure,\na delisting determination will be issued under Nasdaq Rule 5810, the security shall be immediately suspended from trading, and the company\nshall be ineligible for any compliance period otherwise described in Nasdaq Rule 5810(c)(3)(A). In addition, a request for a hearings\npanel review will not stay the trading suspension.\n\n \n\nGiven that we are currently subject to a minimum\nbid price deficiency notice, if the price of our ADSs deteriorates further and falls to $0.10 or less for 10 consecutive trading days\nafter January 19, 2026, we would be immediately suspended from trading and delisted without any opportunity to cure the *deficiency*\nor stay the suspension pending a hearing. Nasdaq has observed deep financial or operational distress from companies whose security’s\nprice drops to $0.10 or less for 10 consecutive trading days, and these financial or operational issues are generally not temporary. This\naccelerated delisting mechanism creates significant uncertainty for our shareholders and could result in the sudden and complete loss\nof a public trading market for our ADSs.\n\n \n\n**If we fail to maintain\nour Nasdaq listing, we may face increased regulatory burdens and reduced investor protections on over-the-counter markets.**\n\n \n\nIf our ADSs are delisted\nfrom Nasdaq, they would likely trade, if at all, on over-the-counter markets such as the OTCQX, OTCQB or OTC Pink marketplaces. These\nalternative markets are generally considered to be less efficient and less liquid than Nasdaq. Trading on the over-the-counter markets\ncould subject our ADSs and our shareholders to additional risks, including limited availability of market quotations, reduced liquidity,\ndecreased market-making activity, reduced analyst coverage, and decreased ability to issue additional ADSs or obtain additional financing.\nAdditionally, the price of our ADSs on these markets may be more volatile than on Nasdaq, and shareholders may find it more difficult\nto dispose of or obtain accurate price information about our ADSs.\n\n \n\n**Nasdaq has proposed\na new $5 million minimum market value continued listing requirement that, if approved, could result in immediate suspension and delisting\nof our ADSs without any cure period or opportunity to regain compliance.**\n\n \n\nOn January 13, 2026,\nNasdaq proposed new listing rules requiring companies on the Nasdaq Global and Capital Markets to maintain a minimum market value of listed\nsecurities of at least $5 million. Under this proposal, if our market value falls below $5 million for 30 consecutive business days, our\nADSs would be immediately suspended from trading and delisted from Nasdaq, with no cure period, no compliance period, and no stay of suspension\nduring any appeal.\n\n \n\nThis proposed rule\nrepresents a fundamental departure from Nasdaq’s traditional approach to listing deficiencies. Unlike other continued listing\nrequirements that provide companies with 180 days or more to regain compliance, the proposed market value requirement would result\nin immediate and irreversible consequences. While we could request a hearing before a Nasdaq Listing Qualifications Hearings Panel\nto appeal a delisting determination, such a request would not prevent the immediate suspension of our ADSs from trading.\nFurthermore, the Hearings Panel would have extremely limited discretion and could only reverse the delisting decision if it\ndetermines that the initial determination was in error, and the Hearings Panel could not consider evidence that we had subsequently\nregained compliance or grant us additional time to do so.\n\n \n\n33\n\n \n\n \n\nNasdaq’s proposal\nreflects its belief that once a company’s market value falls below $5 million, the challenges facing that company are generally\nnot temporary and are so severe that the company is unlikely to regain and sustain compliance for the long term. Nasdaq further believes\nit is difficult to maintain fair and orderly markets for such low-value companies. The SEC must decide on the proposal within 45 days\nof publication in the Federal Register, unless it extends the review period, creating uncertainty regarding whether and when this rule\nmay become effective.\n\n \n\nGiven that we are currently\nsubject to a minimum bid price deficiency notice and our ADSs have experienced price volatility, there is a risk with our market value\nfalling below $5 million. Our market value is calculated as our consolidated closing bid price multiplied\nby our total listed ADSs. Factors that could cause our market value to fall below the proposed threshold include continued stock\nprice decline, lack of investor interest, adverse market conditions, negative developments in our business operations, dilutive financing\ntransactions, or broader market volatility affecting microcap companies. If we are simultaneously addressing our existing minimum bid\nprice deficiency when the proposed rule becomes effective, we could face multiple overlapping listing threats that compound the risk of\ndelisting.\n\n \n\nThis proposal is part\nof a broader trend of Nasdaq tightening listing standards for small issuers, including recent rules granting Nasdaq discretion to deny\ninitial listings based on susceptibility to manipulative trading and other market value-based requirements. This increasingly stringent\nregulatory environment creates greater challenges for microcap companies like us to maintain public listings.\n\n \n\nIf the proposed $5 million\nmarket value continued listing requirement is approved and we subsequently fail to maintain the required market value for 30 consecutive\nbusiness days, our ADSs would be immediately suspended and delisted from Nasdaq with no opportunity to cure the deficiency, which would\nhave severe adverse consequences for our business, our ability to raise capital, and the liquidity and value of our shareholders’\ninvestments.\n\n \n\n**Geopolitical conflicts involving Iran, military\nactions in the Middle East, and the war in Ukraine may adversely affect global economic conditions and cause significant volatility in\nthe trading price of our ADSs.**\n\n** **\n\nThe heightened military conflict involving the\nUnited States, Israel, and Iran, which escalated significantly in February 2026, has led to profound instability in global financial and\nenergy markets. These events, including the closure of strategic airspaces and critical maritime routes such as the Strait of Hormuz and\nthe Red Sea, have contributed to a dramatic increase in the price of oil and gas and created widespread market uncertainty. The ongoing\ndisruptions caused by these military actions, and the potential for further escalation, could result in protracted and severe damage to\nthe global economy and investment climate.\n\n \n\nFurthermore, the continuing war in Ukraine and\nthe resulting sanctions levied by the United States, the European Union, and other nations against Russia continue to impact global financial\nmarkets. The extent and duration of these military actions in the Middle East and Eastern Europe, as well as the resulting sanctions and\nmarket disruptions, are impossible to predict but are expected to remain substantial.\n\n \n\nSuch geopolitical instability often leads to broad\nsell-offs in the equity markets and heightened investor sensitivity to risk. Consequently, these developments may materially and adversely\naffect the market price of our ADSs, regardless of our actual operating performance. We cannot predict the ultimate progress or outcome\nof these situations, and any prolonged unrest or intensified military activities could have a material adverse effect on the global economy,\nwhich in turn could negatively impact our financial condition and the value of our securities.\n\n \n\n34"}