{"url_path":"/sec/wyhg/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND","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":7676,"has_tables":true,"body_markdown":"**Item 5. OPERATING AND FINANCIAL REVIEW AND\nPROSPECTS**\n\n** **\n\nThe following discussion of our financial condition\nand results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related\nnotes included in this annual report. This annual report contains forward-looking statements. In evaluating our business, you should carefully\nconsider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report.\nWe caution you that our businesses and financial performance are subject to substantial risks and uncertainties.\n\n \n\n**A. Operating Results**\n\n \n\nThe following table sets forth a summary of our\nconsolidated results of operations for the years indicated. This information should be read together with our consolidated financial\nstatements and related notes included elsewhere in this annual report. The operating results in any year are not necessarily indicative\nof the results that may be expected for any future period.\n\n** **\n\n**Comparison of Results of Operations for\nthe Fiscal Years Ended December 31, 2025 and 2024**\n\n** **\n\n  \nFor the fiscal years ended\n\nDecember 31,  \nChange \n\n  \n2025  \n2024  \nAmount  \n% \n\nNet revenues \n$135,192,629  \n$144,629,055  \n$(9,436,426) \n (6.52)\n\nCost of revenues \n (95,666,223) \n (99,833,630) \n 4,167,407  \n (4.17)\n\nGross profit \n 39,526,406  \n 44,795,425  \n (5,269,019) \n (11.76)\n\nOperating expenses: \n    \n    \n    \n   \n\nSelling expenses \n (19,407,502) \n (19,672,532) \n 265,030  \n (1.35)\n\nGeneral and administrative expenses \n (5,404,193) \n (4,379,642) \n (1,024,551) \n 23.39 \n\nResearch and development expenses \n (4,127,391) \n (4,973,452) \n 846,061  \n (17.01)\n\nTotal operating expenses \n (28,939,086) \n (29,025,626) \n 86,540  \n (0.30)\n\nIncome from operations \n 10,587,320  \n 15,769,799  \n (5,182,479) \n (32.86)\n\nOther income (expenses): \n    \n    \n    \n   \n\nInterest income \n 84,479  \n 179,412  \n (94,933) \n (52.91)\n\nInterest expense \n (1,065,858) \n (1,064,745) \n (1,113) \n 0.10 \n\nOther income, net \n 538,616  \n 58,766  \n 479,850  \n 816.54 \n\nOther expense, net \n (1,027,230) \n (2,839,598) \n 1,812,368  \n (63.82)\n\nExchange loss \n (21,087) \n (3,298) \n (17,789) \n 539.39 \n\nTotal other expenses \n (1,491,080) \n (3,669,463) \n 2,178,383  \n (59.37)\n\nIncome before income tax \n 9,096,240  \n 12,100,336  \n (3,004,096) \n (24.83)\n\nIncome tax expense \n (1,182,352) \n (850,633) \n (331,719) \n 39.00 \n\nNet income \n$7,913,888  \n$11,249,703  \n$(3,335,815) \n (29.65)\n\n** **\n\n75\n\n \n\n \n\n**Comparison of Results of Operations for\nthe Fiscal Years Ended December 31, 2024 and 2023**\n\n** **\n\n  \nFor the fiscal years ended\nDecember 31,  \nChange \n\n  \n2024  \n2023  \nAmount  \n% \n\nNet revenues \n$144,629,055  \n$134,068,317  \n$10,560,738  \n 7.88 \n\nCost of revenues \n (99,833,630) \n (86,972,132) \n (12,861,498) \n 14.79 \n\nGross profit \n 44,795,425  \n 47,096,185  \n (2,300,760) \n (4.89)\n\nOperating expenses: \n    \n    \n    \n   \n\nSelling expenses \n (19,672,532) \n (19,550,604) \n (121,928) \n 0.62 \n\nGeneral and administrative expenses \n (4,379,642) \n (4,075,896) \n (303,746) \n 7.45 \n\nResearch and development expenses \n (4,973,452) \n (4,250,451) \n (723,001) \n 17.01 \n\nTotal operating expenses \n (29,025,626) \n (27,876,951) \n (1,148,675) \n 4.12 \n\nIncome from operations \n 15,769,799  \n 19,219,234  \n (3,449,435) \n (17.95)\n\nOther income (expenses): \n    \n    \n    \n   \n\nInterest income \n 179,412  \n 178,758  \n 654  \n 0.37 \n\nInterest expense \n (1,064,745) \n (995,345) \n (69,400) \n 6.97 \n\nOther income, net \n 58,766  \n 208,908  \n (150,142) \n (71.87)\n\nOther expense, net \n (2,839,598) \n (2,111,109) \n (728,489) \n 34.51 \n\nExchange loss \n (3,298) \n (11,651) \n 8,353  \n (71.69)\n\nTotal other expenses \n (3,669,463) \n (2,730,439) \n (939,024) \n 34.39 \n\nIncome before income tax \n 12,100,336  \n 16,488,795  \n (4,388,459) \n (26.61)\n\nIncome tax expense \n (850,633) \n (2,478,882) \n 1,628,249  \n (65.68)\n\nNet income \n$11,249,703  \n$14,009,913  \n$(2,760,210) \n (19.70)\n\n \n\n**Net Revenues**\n\n \n\nOur revenue is reported net of all value-added\ntaxes (“VAT”). We derived revenue primarily from sales of cured meat products, snack products and frozen meat products.\n\n \n\nThe following table sets forth the breakdown of\nour revenues by category for the fiscal years indicated.\n\n \n\n  \nFor the fiscal years ended December 31,  \n  \n\n  \n2025  \n2024  \nChanges \n\n  \nAmount  \n%  \nAmount  \n%  \nAmount  \n% \n\nCured Meat Products \n   \n   \n   \n   \n   \n  \n\n– Cured Pork Sausages \n$53,856,546  \n 39.84  \n$56,415,055  \n 39.01  \n$(2,558,509) \n (4.54)\n\n– Cured Pork Meat \n 14,521,670  \n 10.74  \n 16,558,601  \n 11.45  \n (2,036,931) \n (12.3)\n\n– Other Cured Meat Products \n 11,601,643  \n 8.58  \n 13,042,373  \n 9.02  \n (1,440,730) \n (11.05)\n\nSnack Products \n 47,499,585  \n 35.13  \n 50,541,248  \n 34.95  \n (3,041,663) \n (6.02)\n\nFrozen Meat Products \n 7,713,185  \n 5.71  \n 8,071,778  \n 5.57  \n (358,593) \n (4.44)\n\nTotal revenues \n$135,192,629  \n 100.00  \n$144,629,055  \n 100.00  \n$(9,436,426) \n (6.52)\n\n \n\nCompared with net revenue for the fiscal year\nended December 31, 2024, our net revenue decreased by $9.44 million, or 6.52%, for the fiscal year ended December 31, 2025,\nwhich was primarily attributable to a $6.04 million decrease in sales of cured meat products, a $3.04 million decrease in sales\nof snack products, and a $0.36 million decrease in sales of frozen meat products.\n\n \n\n76\n\n \n\n \n\nRevenue from sales of cured meat products decreased\nby $6.04 million, to $79.98 million for the fiscal year ended December 31, 2025 from $86.02 million for the fiscal year ended December\n31, 2024. The average per unit sales price decreased from $6.79 per kilogram for the fiscal year ended December 31, 2024 to $6.08 per\nkilogram for the fiscal year ended December 31, 2025, which resulted in a decrease of $7.85 million in revenue. The decrease was partially\noffset by the increase in sales volume of cured meat products, which increased from 12,873 tons for the fiscal year ended December 31,\n2024 to 13,156 tons for the fiscal year ended December 31, 2025. The increase in sales volume resulted in an increase of $1.72 million\nin revenue. In addition, the decrease was partially offset by a slight change in the average exchange rate used to translate the statements\nof operations, which changed from RMB7.1957 to $1.00 for the fiscal year ended December 31, 2024 to RMB7.1875 to $1.00 for the fiscal\nyear ended December 31, 2025, resulting in an additional $0.09 million increase in revenue.\n\n \n\nRevenue from sales of snack products decreased\nby $3.04 million, to $47.50 million for the fiscal year ended December 31, 2025 from $50.54 million for the fiscal year ended December\n31, 2024. The average per unit sales price decreased from $7.48 per kilogram for the fiscal year ended December 31, 2024 to $6.88 per\nkilogram for the fiscal year ended December 31, 2025, which resulted in a decrease of $3.37 million in revenue. The decrease was partially\noffset by the increase in sales volume of snack products, which increased from 6,863 tons for the fiscal year ended December 31, 2024\nto 6,904 tons for the fiscal year ended December 31, 2025. The increase in sales volume resulted in an increase of $0.28 million in revenue.\nIn addition, the decrease was partially offset by a slight change in the average exchange rate used to translate the statements of operations,\nwhich changed from RMB7.1957 to $1.00 for the fiscal year ended December 31, 2024 to RMB7.1875 to $1.00 for the fiscal year ended December\n31, 2025, resulting in an additional $0.05 million increase in revenue.\n\n \n\nRevenue from sales of frozen meat products decreased\nby $0.36 million, to $7.71 million for the fiscal year ended December 31, 2025 from $8.07 million for the fiscal year ended December 31,\n2024. The sales volume of frozen meat products decreased from 1,836 tons for the fiscal year ended December 31, 2024 to 1,681 tons for\nthe fiscal year ended December 31, 2025. The decrease in sales volume resulted in a decrease of $0.71 million in revenue. The decrease\nwas partially offset by the increase in the average per unit sales price from $4.47 per kilogram for the fiscal year ended December 31,\n2024 to $4.59 per kilogram for the fiscal year ended December 31, 2025, which resulted in an increase of $0.34 million in revenue. In\naddition, the decrease was partially offset by a slight change in the average exchange rate used to translate the statements of operations,\nwhich changed from RMB7.1957 to $1.00 for the fiscal year ended December 31, 2024 to RMB7.1875 to $1.00 for the fiscal year ended December\n31, 2025, resulting in an additional $0.01 million increase in revenue.\n\n \n\n  \nFor the fiscal years ended December 31,  \n  \n\n  \n2024  \n2023  \nChanges \n\n** **** **\n**Amount**** **** **\n**%**** **** **\n**Amount**** **** **\n**%**** **** **\n**Amount**** **** **\n**%**** **\n\nCured Meat Products \n   \n   \n   \n   \n   \n  \n\n– Cured Pork Sausages \n$56,415,055  \n 39.01  \n$48,589,050  \n 36.24  \n$7,826,005  \n 16.11 \n\n– Cured Pork Meat \n 16,558,601  \n 11.45  \n 21,972,199  \n 16.39  \n (5,413,598) \n (24.64)\n\n– Other Cured Meat Products \n 13,042,373  \n 9.02  \n 12,714,581  \n 9.48  \n 327,792  \n 2.58 \n\nSnack Products \n 50,541,248  \n 34.95  \n 43,635,556  \n 32.55  \n 6,905,692  \n 15.83 \n\nFrozen Meat Products \n 8,071,778  \n 5.57  \n 7,156,931  \n 5.34  \n 914,847  \n 12.78 \n\nTotal revenues \n$144,629,055  \n 100.00  \n$134,068,317  \n 100.00  \n$10,560,738  \n 7.88 \n\n \n\nCompared with net revenue for the fiscal year\nended December 31, 2023, our net revenue increased by $10.56 million, or 7.88%, for the fiscal year ended December 31,\n2024, which was primarily attributable to a $2.74 million increase in sales of cured meat products, a $6.91 million increase\nin sales of snack products, and a $0.91 million increase in sales of frozen meat products, mainly driven by increased promotion of\nsnack products through direct stores and e-commerce channels.\n\n \n\n77\n\n \n\n \n\nRevenue from sales of cured meat products increased\nby $2.74 million, to $86.02 million for the fiscal year ended December 31, 2024 from $83.28 million for the fiscal\nyear ended December 31, 2023. The sales volume of cured meat products increased from 10,956 tons for the fiscal year ended December\n31, 2023 to 12,873 tons for the fiscal year ended December 31, 2024. The increase in sales volume resulted in an increase of $14.57 million\nin revenue. The increase was partially offset by the decrease in the currency exchange rates applied to statements of operations from\nRMB7.0809 to $1.00 for the fiscal year ended December 31, 2023 to RMB7.1957 to $1.00 for the fiscal year ended December 31, 2024, which\ncaused a decrease of $1.39 million in revenue. In addition, the increase was partially offset by the decrease in the average unit sales\nprice from $8.00 per kilogram for the fiscal year ended December 31, 2023 to $6.79 per kilogram for the fiscal year ended December 31,\n2024, which resulted in a decrease of $10.44 million in revenue.\n\n \n\nRevenue from sales of snack products increased\nby $6.91 million, to $50.54 million for the fiscal year ended December 31, 2024 from $43.63 million for the fiscal\nyear ended December 31, 2023. The sales volume of snack products increased from 5,785 tons for the fiscal year ended December 31,\n2023 to 6,864 tons for the fiscal year ended December 31, 2024. The increase in sales volume resulted in an increase of $8.13 million\nin revenue. The increase was partially offset by the decrease in the currency exchange rates applied to statements of operations from\nRMB7.0809 to $1.00 for the fiscal year ended December 31, 2023 to RMB7.1957 to $1.00 for the fiscal year ended December 31,\n2024, which caused a decrease of $0.81 million in revenue. In addition, the increase was partially offset by the decrease in the\naverage unit sales price from $7.94 per kilogram for the fiscal year ended December 31, 2023 to $7.48 per kilogram for the fiscal\nyear ended December 31, 2024, which resulted in a decrease of $0.41 million in revenue.\n\n \n\nRevenue from sales of frozen meat products increased\nby $0.91 million, to $8.07 million for the fiscal year ended December 31, 2024 from $7.16 million for the fiscal year\nended December 31, 2023. The sales volume of frozen meat products increased from 1,520 tons for the fiscal year ended December 31,\n2023 to 1,836 tons for the fiscal year ended December 31, 2024. The increase in sales volume resulted in an increase of $1.48 million\nin revenue. The increase was partially offset by the decrease in the currency exchange rates applied to statements of operations from\nRMB7.0809 to $1.00 for the fiscal year ended December 31, 2023 to RMB7.1957 to $1.00 for the fiscal year ended December 31,\n2024, which caused a decrease of $0.13 million in revenue. In addition, the increase was partially offset by the decrease in the\naverage unit sales price from $4.95 per kilogram for the fiscal year ended December 31, 2023 to $4.47 per kilogram for the fiscal\nyear ended December 31, 2024, which resulted in a decrease of $0.44 million in revenue.\n\n \n\n**Cost of Revenues**\n\n \n\nOur cost of revenue consists primarily of (i) cost\nof materials purchased from suppliers, (ii) sales taxes and additional taxes, and (iii) depreciation expenses of the property,\nplant and equipment.\n\n \n\nOur cost of revenue decreased by 4.17% from $99.83\nmillion for the fiscal year ended December 31, 2024 to $95.67 million for the fiscal year ended December 31, 2025, which was primarily\nattributable to a reduction in unit production costs, which drove the overall decline in total cost of revenue.\n\n \n\n78\n\n \n\n \n\nCost of revenue of cured meat products decreased\nby $2.65 million, to $57.14 million for the fiscal year ended December 31, 2025 from $59.79 million for the fiscal year ended December\n31, 2024. The decrease was mainly attributable to lower unit production costs. The average unit cost decreased from $4.97 per kilogram\nfor the fiscal year ended December 31, 2024 to $4.34 per kilogram for the fiscal year ended December 31, 2025, resulting in a $3.94 million\nreduction in cost of revenue. The decrease was partially offset by the increase in the currency exchange rates applied to statements of\noperations from RMB7.1957 to $1.00 for the fiscal year ended December 31, 2024 to RMB7.1875 to $1.00 for the fiscal year ended December\n31, 2025, which caused an increase of $0.06 million in cost of revenue. In addition, the decrease was partially offset by an increase\nin sales volume. The sales volume of cured meat products increased from 12,873 tons for the fiscal year ended December 31, 2024 to 13,156\ntons for the fiscal year ended December 31, 2025. The increase in sales volume resulted in an increase of $1.23 million in cost of revenue.\n\n \n\nCost of revenue of snack products decreased by\n$1.19 million, to $34.06 million for the fiscal year ended December 31, 2025 from $35.24 million for the fiscal year ended December 31,\n2024. The decrease was mainly attributable to lower unit production costs. The average unit cost decreased from $5.13 per kilogram for\nthe fiscal year ended December 31, 2024 to $4.93 per kilogram for the fiscal year ended December 31, 2025, resulting in a $1.43 million\nreduction in cost of revenue. The decrease was partially offset by the increase in the currency exchange rates applied to statements of\noperations from RMB7.1957 to $1.00 for the fiscal year ended December 31, 2024 to RMB7.1875 to $1.00 for the fiscal year ended December\n31, 2025, which caused an increase of $0.04 million in cost of revenue. In addition, the decrease was partially offset by an increase\nin sales volume. The sales volume of snack products increased from 6,864 tons for the fiscal year ended December 31, 2024 to 6,904 tons\nfor the fiscal year ended December 31, 2025. The increase in sales volume resulted in an increase of $0.2 million in cost of revenue.\n\n \n\nCost of revenue of frozen meat products decreased\nby $0.33 million, to $4.47 million for the fiscal year ended December 31, 2025 from $4.80 million for the fiscal year ended December 31,\n2024. The decrease was primarily due to the decrease in sales volume from 1,836 tons for the fiscal year ended December 31, 2024 to 1,681\ntons for the fiscal year ended December 31, 2025, which resulted in a decrease of $0.41 million in cost of revenue. The decrease was partially\noffset by the increase in the currency exchange rates applied to statements of operations from RMB7.1957 to $1.00 for the fiscal year\nended December 31, 2024 to RMB7.1875 to $1.00 for the fiscal year ended December 31, 2025, which caused an increase of $0.01 million in\ncost of revenue. In addition, the decrease was partially offset by an increase in the average unit cost from $2.61 per kilogram for the\nfiscal year ended December 31, 2024 to $2.66 per kilogram for the fiscal year ended December 31, 2025, which caused an increase of $0.07\nmillion in cost of revenue.\n\n \n\nOur cost of revenue increased by 14.79% from $86.97 million\nfor the fiscal year ended December 31, 2023 to $99.83 million for the fiscal year ended December 31, 2024, which was primarily\nattributable to an increase in sales volume resulting in a corresponding increase in costs.\n\n \n\n79\n\n \n\n \n\nCost of revenue of cured meat products increased\nby $4.91 million, to $59.79 million for the fiscal year ended December 31, 2024 from $54.88 million for the fiscal\nyear ended December 31, 2023. The increase was mainly due to the increase in sales volume as discussed above, which resulted in an\nincrease of $9.61 million in cost of revenue. The increase was partially offset by the decrease in the currency exchange rates applied\nto statements of operations from RMB7.0809 to $1.00 for the fiscal year ended December 31, 2023 to RMB7.1957 to $1.00 for the fiscal year\nended December 31, 2024, which caused a decrease of $0.97 million in cost of revenue. In addition, the increase was partially offset by\nthe decrease in the average unit cost from $5.27 per kilogram for the fiscal year ended December 31, 2023 to $4.97 per kilogram for the\nfiscal year ended December 31, 2024, which caused a decrease of $3.73 million in cost of revenue.\n\n \n\nCost of revenue of snack products increased by\n$7.21 million, to $35.24 million for the fiscal year ended December 31, 2024 from $28.03 million for the fiscal year\nended December 31, 2023. The increase was primarily due to the increase in sales volume as discussed above, which resulted in an\nincrease of $5.63 million in cost of revenue. In addition, the increase in the average unit cost from $5.10 per kilogram for the fiscal\nyear ended December 31, 2023 to $5.22 per kilogram for the fiscal year ended December 31, 2024 caused an increase of $2.16 million in\ncost of revenue. The increase was partially offset by the decrease in the currency exchange rates applied to statements of operations\nfrom RMB7.0809 to $1.00 for the fiscal year ended December 31, 2023 to RMB7.1957 to $1.00 for the fiscal year ended December 31,\n2024, which caused a decrease of $0.57 million in cost of revenue.\n\n \n\nCost of revenue of frozen meat products increased\nby $0.74 million, to $4.80 million for the fiscal year ended December 31, 2024 from $4.06 million for the fiscal year\nended December 31, 2023. The increase was primarily due to the increase in sales volume as discussed above, which resulted in an\nincrease of $0.85 million in cost of revenue. The increase was partially offset by the decrease in the currency exchange rates applied\nto statements of operations from RMB7.0809 to $1.00 for the fiscal year ended December 31, 2023 to RMB7.1957 to $1.00 for the fiscal\nyear ended December 31, 2024, which caused a decrease of $0.08 million in cost of revenue. In addition, the increase was partially\noffset by the decrease in the average unit cost from $2.81 per kilogram for the fiscal year ended December 31, 2023 to $2.65 per\nkilogram for the fiscal year ended December 31, 2024, which caused a decrease of $0.03 million in cost of revenue.\n\n** **\n\n**Gross profit and gross profit margin**\n\n \n\nGross profit represents our revenue less cost\nof revenues. Our gross profit margin represents our gross profit as a percentage of our revenue. For the fiscal years ended December 31,\n2025 and 2024, our gross profit was $39.53 million and $44.80 million, respectively, and our gross profit margins were 29.24%\nand 30.97%, respectively.\n\n \n\nThe following table sets forth our gross profit\nand gross profit margin by sales category for the years indicated.\n\n \n\n  \nFor the fiscal years ended December 31,  \n  \n\n  \n2025  \n2024  \nChanges \n\n  \nGross \n\nprofit  \nGross profit\nmargin  \nGross\n\nprofit  \nGross profit\nmargin  \nGross\n\nprofit \n\n  \nAmount  \n%  \nAmount  \n%  \nAmount  \n% \n\nCured Meat Products \n   \n   \n   \n   \n   \n  \n\n– Cured Pork Sausages \n$15,431,578  \n 28.65  \n$17,982,499  \n 31.88  \n$(2,550,921) \n (14.19)\n\n– Cured Pork Meat \n 4,163,137  \n 28.67  \n 5,310,602  \n 32.07  \n (1,147,465) \n (21.61)\n\n– Other Cured Meat Products \n 3,245,546  \n 27.97  \n 2,928,595  \n 22.45  \n 316,951  \n 10.82 \n\nSnack Products \n 13,442,559  \n 28.30  \n 15,297,654  \n 30.27  \n (1,855,095) \n (12.13)\n\nFrozen Meat Products \n 3,243,586  \n 42.05  \n 3,276,075  \n 40.59  \n (32,489) \n (0.99)\n\nTotal \n$39,526,406  \n 29.24  \n$44,795,425  \n 30.97  \n$(5,269,019) \n (11.76)\n\n \n\nFor the fiscal years ended December 31,\n2024 and 2023, our gross profit was $44.80 million and $47.10 million, respectively, and our gross profit margins were 30.97%\nand 35.13%, respectively.\n\n \n\n80\n\n \n\n \n\nThe following table sets forth our gross profit\nand gross profit margin by sales category for the years indicated.\n\n \n\n  \nFor the fiscal years ended December 31,  \n  \n\n  \n2024  \n2023  \nChanges \n\n  \nGross\n\nprofit  \nGross profit\nmargin  \nGross\n\nprofit  \nGross profit\nmargin  \nGross\n\nprofit \n\n  \nAmount  \n%  \nAmount  \n%  \nAmount  \n% \n\nCured Meat Products \n   \n   \n   \n   \n   \n  \n\n– Cured Pork Sausages \n$17,982,499  \n 31.88  \n$16,048,869  \n 33.03  \n$1,933,630  \n 12.05 \n\n– Cured Pork Meat \n 5,310,602  \n 32.07  \n 8,725,007  \n 39.71  \n (3,414,405) \n (39.13)\n\n– Other Cured Meat Products \n 2,928,595  \n 22.45  \n 3,617,672  \n 28.45  \n (689,077) \n (19.05)\n\nSnack Products \n 15,297,654  \n 30.27  \n 15,611,235  \n 35.78  \n (313,581) \n (2.01)\n\nFrozen Meat Products \n 3,276,075  \n 40.59  \n 3,093,402  \n 43.22  \n 182,673  \n 5.91 \n\nTotal \n$44,795,425  \n 30.97  \n$47,096,185  \n 35.13  \n$(2,300,760) \n (4.89)\n\n \n\nCompared with the fiscal year ended December 31,\n2024, our gross profit for the fiscal year ended December 31, 2025 decreased by $5.27 million, or 11.76%, and the gross profit margin\ndecreased from 30.97% to 29.24%, primarily due to a $3.38 million decrease in gross profit from sales of cured meat products, a $1.86\nmillion decrease in gross profit from sales of snack products, and a $0.03 million decrease in gross profit from sales of frozen meat\nproducts.\n\n \n\nCompared with the fiscal year ended December 31,\n2023, our gross profit for the fiscal year ended December 31, 2024 decreased by $2.30 million, or 4.89%, and the gross profit margin decreased\nfrom 35.13% to 30.97%, primarily due to a $2.17 million decrease in gross profit from sales of cured meat products and a $0.31 million\ndecrease in gross profit from sales of snack products, partially offset by a $0.18 million increase in gross profit from sales of frozen\nmeat products.\n\n \n\n**Operating expenses**\n\n \n\nThe following table sets forth the breakdown of\nour operating expenses for the fiscal years ended December 31, 2025 and 2024.\n\n \n\n  \nFor the fiscal years ended December 31,  \n  \n\n  \n2025  \n2024  \nChanges \n\n  \nAmount  \n% of\nrevenues  \nAmount  \n% of\nrevenues  \nAmount  \n% \n\nSelling expenses \n 19,407,502  \n 14.36  \n 19,672,532  \n 13.60  \n (265,030) \n (1.35)\n\nGeneral and administrative expenses \n 5,404,193  \n 4.00  \n 4,379,642  \n 3.03  \n 1,024,551  \n 23.39 \n\nResearch and development\nexpenses \n 4,127,391  \n 3.05  \n 4,973,452  \n 3.44  \n (846,061) \n (17.01)\n\nTotal operating expenses \n$28,939,086  \n 21.41  \n$29,025,626  \n 20.07  \n$(86,540) \n (0.30)\n\n \n\n81\n\n \n\n \n\nThe following table sets forth the breakdown of\nour operating expenses for the fiscal years ended December 31, 2024 and 2023.\n\n \n\n  \nFor the fiscal years ended December 31,  \n  \n\n  \n2024  \n2023  \nChanges \n\n  \nAmount  \n% of\nrevenues  \nAmount  \n% of\nrevenues  \nAmount  \n% \n\nSelling expenses \n 19,672,532  \n 13.60  \n 19,550,604  \n 14.58  \n 121,928  \n 0.62 \n\nGeneral and administrative expenses \n 4,379,642  \n 3.03  \n 4,075,896  \n 3.04  \n 303,746  \n 7.45 \n\nResearch and development\nexpenses \n 4,973,452  \n 3.44  \n 4,250,451  \n 3.17  \n 723,001  \n 17.01 \n\nTotal operating expenses \n$29,025,626  \n 20.07  \n$27,876,951  \n 20.79  \n$1,148,675  \n 4.12 \n\n** **\n\n**Selling expenses**\n\n \n\nSelling expenses mainly include (i) advertising\ncosts, (ii) salaries and commissions of sales and marketing staff, (iii) transportation fees and delivery fees for e-commerce\nplatforms, (iv) space occupancy expenses, such as counters in supermarkets, and (v) service fees for e-commerce platforms such\nas TikTok, JD.com, and Pinduoduo.\n\n \n\nOur selling expenses decreased by 1.35%, from\n$19.67 million for the fiscal year ended December 31, 2024 to $19.41 million for the year ended December 31, 2025,\nwhich was primarily attributable to a decrease in advertising costs of $0.20 million.\n\n \n\nOur selling expenses increased by 0.62%, from\n$19.55 million for the fiscal year ended December 31, 2023 to $19.67 million for the year ended December 31, 2024,\nwhich was primarily attributable to an increase in advertising costs of $0.11 million.\n\n** **\n\n**General and administrative expenses**\n\n \n\nGeneral and administrative expenses mainly consist\nof (i) salaries, welfare and insurance expenses for our administrative personnel; (ii) depreciation and amortization; (iii) lease\nexpenses relating to leased properties used for administrative and factory purposes; (iv) entertainment expenses incurred in business\noperations; and (v) other expenses, which primarily include travel, office expenses, and other miscellaneous expenses for administrative\npurposes.\n\n \n\nOur general and administrative expenses increased\nby 23.39%, from $4.38 million for the fiscal year ended December 31, 2024 to $5.40 million for the fiscal year ended December 31,\n2025, which was primarily attributable to an increase in depreciation of $0.99 million.\n\n** **\n\nOur general and administrative expenses increased\nby 7.45%, from $4.08 million for the fiscal year ended December 31, 2023 to $4.38 million for the fiscal year ended December 31,\n2024, which was primarily attributable to expense in connection with the Company’s initial public offering.\n\n \n\n82\n\n \n\n \n\n**Research and development expenses**\n\n \n\nOur research and development expenses primarily\ncomprise costs of materials used for experiments, employee salaries and welfare expenses, and depreciation expenses related to research\nand development activities.\n\n \n\nOur research and development expenses decreased\nby 17.01%, from $4.97 million for the fiscal year ended December 31, 2024 to $4.13 million for the fiscal year ended December 31,\n2025, which was primarily attributable to a decrease in costs associated with new research and development cooperation projects of $0.69 million.\n\n \n\nOur research and development expenses increased\nby 17.01%, from $4.25 million for the fiscal year ended December 31, 2023 to $4.97 million for the fiscal year ended December 31,\n2024, which was primarily attributable to costs associated with a new research and development cooperation project of $0.69 million.\n\n \n\n**Other income (expenses)**\n\n \n\nOther income (expenses) primarily consists of\n(i) government subsidies provided as incentives from mainland China local government to encourage the expansion of local business;\n(ii) interest income on bank deposits, interest expense on short-term bank borrowings, interest expense on lease liabilities, which\nis non-cash and calculated as the difference between lease payments and the net present value of the lease payment over the entire term\nof the lease; (iii) foreign exchange gains or losses; and (iv) loss on disposal of fixed assets.\n\n \n\nOur total other expenses decreased from $3.67 million\nfor the fiscal year ended December 31, 2024 to $1.49 million for the year ended December 31, 2025, which was primarily\nattributable to a decrease in other expenses of $2.1 million, mainly resulting from a reduction in donation expenses.\n\n \n\nOur total other expenses increased from $2.73 million\nfor the fiscal year ended December 31, 2023 to $3.67 million for the year ended December 31, 2024, primarily due to (i) a\ndecrease in other income of $0.15 million, mainly resulting from a reduction in government subsidies and rewards; and (ii) an\nincrease in other expenses of $0.73 million, due to the disposal of old equipment.\n\n** **\n\n**Income tax expenses**\n\n* *\n\n*Hong Kong*\n\n \n\nIn accordance with the relevant tax laws and regulations\nof Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate\non taxable income. From the year of assessment 2018/2019 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to\nHK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000.\n\n* *\n\n83\n\n \n\n \n\n*Mainland China*\n\n \n\nGenerally, subsidiaries that are considered mainland\nChina resident enterprises under mainland China tax laws are subject to enterprise income tax on their worldwide taxable income as determined\nunder mainland China tax laws and accounting standards at a rate of 25%.\n\n \n\nIn accordance with the implementation rules of\nthe EIT Law, a qualified HNTE is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years.\nAn entity may re-apply for the HNTE certificate when the prior certificate expires. Our subsidiary, Wing Yip GD, was qualified as an HNTE\nin 2019. Therefore, Wing Yip GD was eligible to enjoy a preferential tax rate of 15% for years 2019, 2020, and 2021, to the extent\nit had taxable income under the EIT Law. For fiscal year 2022, Wing Yip GD’s income tax rate was 25%, as it did not re-apply for\nthe HNTE certificate by the end of December 2022, and could not enjoy such tax incentives starting in 2022. Wing Yip GD re-applied\nfor the HNTE certificate in September 2023 and qualified as an HNTE in December 2023. Therefore, Wing Yip GD is eligible to\nenjoy a preferential tax rate of 15% for the years 2023, 2024 and 2025, to the extent it had taxable income under the EIT Law.\n\n \n\nOur income tax expense increased from $0.85 million\nfor the fiscal year ended December 31, 2024 to $1.18 million for the fiscal year ended December 31, 2025, which was primarily\nattributable to the significant reduction in donation expenses.\n\n \n\nOur income tax expense decreased from $2.48 million\nfor the fiscal year ended December 31, 2023 to $0.85 million for the fiscal year ended December 31, 2024, which was primarily\nattributable to additional deductions for research and development expenses that increased tax benefits.\n\n \n\n**Net income**\n\n \n\nAs a result of the foregoing, our net income decreased\nby 29.65%, from net income of $11.25 million for the fiscal year ended December 31, 2024 to $7.91 million for the fiscal year ended December\n31, 2025. Our net income decreased by 19.70%, from net income of $14.01 million for the fiscal year ended December 31, 2023 to $11.25\nmillion for the fiscal year ended December 31, 2024.\n\n** **\n\n**B. Liquidity and Capital Resources**\n\n \n\nAs of December 31, 2025, we had $85.27 million\nin cash, compared to $87.93 million in cash as of December 31, 2024. Our cash primarily consists of cash on deposit with banks.\nOur principal sources of cash come from our operations and bank loans. Most of our cash resources are used to pay for the procurement\nof raw materials, purchases of equipment and property, payroll, and operating expenses. Currently, we are working to improve our liquidity\nand capital sources primarily through cash flows from operations, debt financing, and financial support from the principal shareholder\nor external investors. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business\nactivities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result\nin additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations, and the instruments\ngoverning such debt could provide for operating and financing covenants that could restrict our operations. There can be no assurance\nthat we will be able to raise additional capital. If we are unable to raise additional capital when required, or if we cannot expand our\noperations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations,\nfinancial condition, and cash flows would be adversely affected.\n\n** **\n\n84\n\n \n\n \n\n**Indebtedness.**As of December 31,\n2025, we had loans outstanding totaling $28.80 million. Besides these loans, we did not have any debts, finance leases or purchase\ncommitments, guarantees, or other material contingent liabilities.\n\n** **\n\n**Off-Balance Sheet Arrangements.**We\nhave not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. Furthermore,\nwe do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity\nor market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that we provide financing,\nliquidity, market risk or credit support to, or engage in hedging or research and development services with.\n\n** **\n\n**Capital Resources.**The primary drivers\nand material factors impacting our liquidity and capital resources include our ability to generate sufficient cash flows from operations,\nthe renewal of commercial bank loans, and proceeds from equity and debt financing, to support our future growth and expansion plans.\n\n** **\n\n**Working Capital.**Total working capital\nas of December 31, 2025 amounted to $104.47 million, compared to $81.23 million as of December 31, 2024.\n\n** **\n\n**Capital Needs.**Our capital needs\ninclude daily working capital requirements and capital expenditures to finance the expansion of our business. Our management believes\nthat income generated from our current operations can satisfy our daily working capital needs for at least the next 12 months. We\nmay also raise additional capital through public offerings or private placements to finance our business development and to consummate\nany merger or acquisition, if necessary.\n\n** **\n\n**Cash Flows**\n\n** **\n\n**For the Fiscal Years Ended December 31,\n2025 and 2024**\n\n \n\nThe following table sets forth a summary of our\ncash flows for the fiscal years indicated:\n\n \n\n  \nFor the fiscal years ended\nDecember 31, \n\n  \n2025  \n2024 \n\nNet cash provided by (used in) operating activities \n$(13,153,326) \n$12,483,808 \n\nNet cash used in investing activities \n (4,547,578) \n (10,103,026)\n\nNet cash provided by financing activities \n 7,496,935  \n 4,414,498 \n\nEffect of exchange rate changes on cash held in foreign currencies \n 6,775,569  \n (8,950,790)\n\nNet decrease in cash \n (3,428,400) \n (2,155,510)\n\nCash at beginning of the year \n 88,808,084  \n 90,963,594 \n\nCash at end of the year \n$85,379,684  \n$88,808,084 \n\n \n\n**For the Fiscal Years Ended December 31,\n2024 and 2023**\n\n \n\nThe following table sets forth a summary of our\ncash flows for the fiscal years indicated:\n\n \n\n  \nFor the fiscal years ended\nDecember 31, \n\n  \n2024  \n2023 \n\nNet cash provided by operating activities \n$12,483,808  \n$17,651,626 \n\nNet cash used in investing activities \n (10,103,026) \n (222,166)\n\nNet cash provided by financing activities \n 4,414,498  \n 6,126,623 \n\nEffect of exchange rate changes on cash held in foreign currencies \n (8,950,790) \n 13,817 \n\nNet (decrease) increase in cash \n (2,155,510) \n 23,569,900 \n\nCash at beginning of the year \n 90,963,594  \n 67,393,694 \n\nCash at end of the year \n$88,808,084  \n$90,963,594 \n\n \n\n85\n\n \n\n \n\n**Operating activities**\n\n \n\nFor the fiscal year ended December 31, 2025,\nour net cash used in operating activities was $13.15 million, which was primarily attributable to (i) depreciation of property\nand equipment of $5.74 million; (ii) an increase in inventories of $1.38 million, due to an increase in raw materials;\n(iii) an increase in prepaid expenses and other current assets of $26.07 million, mainly due to $12.87 million for prepaid AI\nexpenses and $15.16 million for prepaid advertising and promotion expenses in the current period; and (iv) a decrease in notes payable\nof $2.57 million due to repayment.\n\n \n\nFor the fiscal year ended December 31, 2024,\nour net cash provided by operating activities was $12.48 million, which was primarily attributable to (i) depreciation of property\nand equipment of $4.42 million; (ii) an increase in inventories of $1.88 million, due to an increase in raw materials;\n(iii) an increase in prepaid expenses and other current assets of $3.86 million, mainly due to prepaid rental expenses of $3.53 million\nin 2024; and (iv) an increase in notes payable of $2.93 million.\n\n \n\nFor the fiscal year ended December 31, 2023,\nour net cash provided by operating activities was $17.65 million, which was primarily attributable to (i) depreciation of property\nand equipment of $3.02 million and a disposal loss of $2.01 million; (ii) a decrease in inventories of $1.15 million,\ndue to an increase in the number of orders that resulted in more raw materials being produced into finished products and sold; (iii) a\ndecrease in prepaid expenses and other current assets of $1.14 million, mainly due to a decrease in prepaid decoration expenses of\n$0.4 million and a decrease in VAT deductibles of $1.13 million in 2023; and (iv) an increase in accounts receivable of\n$3.31 million, which was mainly due to the significant increase in sales to the top ten customers in the fourth quarter of 2023 compared\nto the fourth quarter of 2022, as the Company offered such customers payment terms with a credit period of 90 days.\n\n \n\n**Investing activities**\n\n \n\nFor the fiscal year ended December 31, 2025,\nour net cash used in investing activities was $4.55 million, which was primarily attributable to the purchase of property and equipment\nof $4.54 million and the purchase of intangible assets of $0.01 million.\n\n \n\nFor the fiscal year ended December 31, 2024,\nour net cash used in investing activities was $10.10 million, which was primarily attributable to the purchase of property and equipment\nof $11.50 million and the purchase of intangible assets of $0.55 thousand.\n\n \n\nFor the fiscal year ended December 31, 2023,\nour net cash used in investing activities was $0.22 million, which was primarily attributable to the purchase of property and equipment\nof $0.21 million and the purchase of intangible assets of $0.01 million.\n\n** **\n\n**Financing activities**\n\n \n\nFor the fiscal year ended December 31, 2025,\nour net cash provided by financing activities was $7.50 million, which was attributable to the proceeds received from the issuance of\nordinary shares, net of offering costs, of $1.13 million; the proceeds received from short-term loans, which amounted to $13.16 million;\nand the proceeds received from long-term loans, which amounted to $15.44 million, as offset by repayment of short-term loans of $9.15\nmillion and repayment of long-term loans of $13.08 million.\n\n \n\nFor the fiscal year ended December 31, 2024,\nour net cash provided by financing activities was $4.41 million, which was attributable to the proceeds received from the issuance\nof ordinary shares, net of offering costs, of $6.23 million, the proceeds received from short-term loans, which amounted to $7.12 million,\nand the proceeds received from long-term loans, which amounted to $0.65 million, as offset by repayment of short-term loans of $6.71 million\nand repayment of long-term loans of $2.88 million.\n\n \n\nFor the fiscal year ended December 31, 2023,\nour net cash provided by financing activities was $6.13 million, which was attributable to the proceeds received from short-term\nloans, which amounted to $6.48 million, and the proceeds received from long-term loans, which amounted to $4.65 million, as\noffset by repayment of short-term loans of $3.80 million, repayment of long-term loans of $0.59 million, and deferred offering\ncosts of $0.61 million.\n\n \n\n86\n\n \n\n \n\n**Contractual obligations**\n\n \n\nThe following table sets forth our contractual\nobligations as of December 31, 2025:\n\n \n\nContractual obligations \nTotal  \nLess than\n1 year  \n1 to 2\nyears  \n3 to 5\nyears \n\nShort-term bank loans \n$11,010,854  \n$11,010,854  \n —  \n — \n\nLong-term loans due within one year \n 3,818,049  \n 3,818,049  \n —  \n — \n\nLong-term loans \n 13,974,489  \n —  \n 13,974,489  \n — \n\nOperating lease commitments \n 40,680  \n 37,113  \n 3,567  \n — \n\nOperating lease obligations \n 15,951  \n 10,075  \n 5,876  \n — \n\nTotal \n$28,860,023  \n$14,876,091  \n$13,983,932  \n$— \n\n \n\nOther than as shown above, we did not have any\nsignificant capital and other commitments, long-term obligations, or guarantees as of December 31, 2025.\n\n** **\n\n**Off-Balance Sheet Arrangements**\n\n \n\nWe did not have any off-balance sheet arrangements\nas of December 31, 2025.\n\n** **\n\n**Inflation**\n\n \n\nInflation does not materially affect our business\nor the results of our operations.\n\n** **\n\n**Seasonality**\n\n \n\nWe have not experienced, and do not expect to\nexperience, any seasonal fluctuations in our results of operations for our business.\n\n \n\n**C. Research and Development, Patents\nand Licenses, etc.**\n\n \n\nSee “Item 4. Information on the Company—B.\nBusiness Overview—Intellectual Property” and “Item 4. Information on the Company—B. Business Overview—Research\n& Development.”\n\n \n\n**D. Trend Information**\n\n \n\nOther than as disclosed elsewhere in this annual\nreport, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect\non our net revenue, income from continuing operations, profitability, liquidity, or capital resources, or that would cause reported financial\ninformation not necessarily to be indicative of future operating results or financial condition.\n\n** **\n\n**E. Critical Accounting Estimates**\n\n \n\nOur discussion and analysis of our financial condition\nand results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance\nwith U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities\nand revenues and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to\ndisclose the reported amounts of revenues and expenses incurred during the financial reporting period. The most significant estimates\nand assumptions include inventory reserve provision, useful lives and impairment of long-lived\nassets, valuation allowance for deferred tax assets, and allowance for credit losses. We continue\nto evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as\nthe basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since\nthe use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some\nof our accounting policies require higher degrees of judgment than others in their application. We believe the critical accounting policies\nas disclosed in this annual report reflect the more significant judgments and estimates used in the preparation of our consolidated financial\nstatements.\n\n \n\n87\n\n \n\n \n\nThe following critical accounting policies rely\nupon assumptions and estimates and were used in the preparation of our consolidated financial statements:\n\n** **\n\n**Use of estimates**\n\n \n\nIn preparing the consolidated financial statements\nin conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities\nand disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses\nduring the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant\nestimates required to be made by management include, but are not limited to, the valuation of accounts receivable and inventories, useful\nlives of property, plant and equipment and land use rights, the recoverability of long-lived assets, and realization of deferred tax assets.\nActual results could differ from those estimates.\n\n** **\n\n**Accounts receivable**\n\n \n\nAccounts receivable are recorded at the gross\nbilling amount less an allowance for any uncollectible accounts due from customers. Accounts receivable do not bear interest.\n\n \n\nWe maintain an allowance for credit losses, which\nreflects our best estimate of amounts that potentially will not be collected. We determine the allowance for credit losses taking into\nconsideration various factors, including, but not limited to, historical collection experience and creditworthiness of the debtors, as\nwell as the age of the individual receivables balance. We establish a provision for doubtful receivables when there is objective evidence\nthat we may not be able to collect amounts due. Our allowance for uncollectible balances as of December 31, 2025 and 2024 are disclosed\nin Note 2 of our accompanying consolidated financial statements.\n\n** **\n\n**Inventories**\n\n \n\nInventories primarily consist of raw materials,\nfinished goods, goods shipped in transit and work in process. Inventory costs include the purchase price and other expenditures that are\ndirectly attributable to bringing the inventories to their present location and condition. Cost of inventories is computed using the weighted\naverage cost method. Allowances for obsolescence are also assessed based on expiration dates, as applicable, taking into consideration\nhistorical and expected future product sales.\n\n \n\n**Revenue recognition**\n\n \n\nWe adopted ASC Topic 606 Revenue from Contracts\nwith Customers (“ASC 606”) on April 1, 2019. Accordingly, the consolidated financial statements for the six months\nended June 30, 2024, and the years ended December 31, 2025, 2024 and 2023 are presented under ASC 606. Under ASC 606,\nrevenue is recognized when control of promised goods or services is transferred to our customers in an amount of consideration to which\nwe expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, we perform\nthe following five steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in\nthe contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant\nfuture reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and\n(v) recognize revenue when (or as) we satisfy the performance obligation. VAT that we collect concurrent with revenue-producing activities\nis excluded from revenue.\n\n \n\n88\n\n \n\n \n\nWe follow the requirements of Topic 606-10-55-36\nthrough -40, *Revenue from Contracts with Customers, Principal Agent Considerations*, in determining the gross versus net revenue\nrecognition for performance obligation(s) in the contract with a customer. Revenue recorded with us acting in the\ncapacity of a principal is reported on a gross basis equal to the full amount of consideration to which we expect to be\nentitled in exchange for the good or service transferred. Revenue recorded with us acting in the capacity of an agent is reported on a\nnet basis, exclusive of any consideration provided to the principal party in the transaction.\n\n \n\nThe principal versus agent evaluation is a matter\nof judgment that depends on the facts and circumstances of the arrangement and is dependent on whether we control the good or service\nbefore it is transferred to the customer or whether we are acting as an agent of a third party. This evaluation is performed separately\nfor each performance obligation identified. For the fiscal years ended December 31, 2025, 2024 and 2023, there was no revenue\nrecognized on a net basis where we are acting as an agent.\n\n \n\nFor the fiscal years ended December 31,\n2025, 2024 and 2023, our revenues were primarily derived from (i) sales of products through offline channels, including sales of\ncured meat products, snack products and frozen meat products to distributors, and sales of cured meat products and snack products in stores,\nand (ii) sales of cured meat products and snack products primarily through online platforms such as TikTok, JD.com, and Pinduoduo.\n\n* *\n\n*Revenue from sales of products through offline\nchannels*\n\n \n\nWe generate revenue from the sale of cured meat\nproducts, snack products and frozen meat products to customers. We enter into contracts with customers as a principal. The contracts contain\na single performance obligation with a standard quality guarantee, which is to transfer the products or accessories to the customers in\nexchange for consideration. The terms of pricing and payment stipulated in the contract are fixed. Usually, we offer a credit term within 30-90 days\nfor business customers. We recognize revenue at a point in time when control of the products has been transferred to customers. The transfer\nof control is considered complete when products have been accepted and received by customers. In the normal course of business, our products\nare sold with no right of return unless the item is defective.\n\n  \n\n*Revenue from sales of products through online\nplatforms*\n\n \n\nIn accordance with ASC 606, our Group, as\na principal, obtains control of specified goods or services before they are transferred to the customers, fulfills the promise to provide\nthe specified products to the customer, bears the risk of loss due to factors including physical damage, obsolescence and expiration either\nbefore the specified products have been sold to the customers or upon return, and determines the selling price for each product at its\nsole discretion. Therefore, revenue is recognized in the gross amount of consideration to which it expects to be entitled in exchange\nfor the specified products transferred.\n\n \n\nOur Group recognizes revenue net of discounts\nand return allowances when the products are delivered and title is passed to customers. For sales of products through online platforms,\nwe estimate the possibility of return based on historical experience. As of December 31, 2025 and 2024, liabilities for return allowances\nwere not material to the consolidated financial statements.\n\n* *\n\n89\n\n \n\n* *\n\n*Disaggregation of Revenues*\n\n \n\nWe disaggregate our revenue from contracts by\nproduct types, as we believe it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected\nby economic factors. Our disaggregation of revenue for the fiscal years ended December 31, 2025, 2024 and 2023 is disclosed\nin Note 2 of the accompanying consolidated financial statements."}