Exhibit 99.1
CHANSON INTERNATIONAL HOLDING AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Long term loan to a third-party, current | ||||||||
| Prepaid expenses and other current assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Operating lease right-of-use assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Long term security deposits | ||||||||
| Long term debt investment | ||||||||
| Long term prepaid expenses | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Current portion of long-term bank loans | ||||||||
| Accounts payable | ||||||||
| Due to a related party | ||||||||
| Taxes payable | ||||||||
| Deferred revenue | ||||||||
| Operating lease liabilities, current | ||||||||
| Other current liabilities | ||||||||
| | | |||||||
| NON-CURRENT LIABILITIES | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Long-term bank loans | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 15) | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Ordinary shares, $ | ||||||||
| Class A ordinary share, $ | ||||||||
| Class B ordinary share, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| (Accumulated deficit) retained earnings | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | | $ | | ||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-1
CHANSON INTERNATIONAL HOLDING AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUE | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Other (expense) income, net | ( | ) | ||||||
| Interest income from long term debt investment | ||||||||
| Total other income, net | ||||||||
| (LOSS) PROFIT BEFORE INCOME TAX EXPENSE | ( | ) | ||||||
| INCOME TAX EXPENSE | ( | ) | ( | ) | ||||
| NET (LOSS) INCOME | ( | ) | ||||||
| Foreign currency translation gain | ||||||||
| TOTAL COMPREHENSIVE (LOSS) INCOME | $ | ( | ) | $ | ||||
| (Loss) earnings per ordinary share - basic and diluted | $ | ( | ) | $ | ||||
| Weighted average shares - basic and diluted * | ||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
CHANSON INTERNATIONAL HOLDING AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Ordinary Shares * | Additional | (Accumulated Deficit) | Accumulated Other | Total | ||||||||||||||||||||||||||||||||
| Class
A Shares | Amount | Class B Shares | Amount | Paid-in Capital | Statutory Reserve | Retained Earnings | Comprehensive Loss | Shareholders’ Equity | ||||||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Conversion of Class B ordinary shares into Class A ordinary shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Issuance of the Equity Security Units ^ | - | |||||||||||||||||||||||||||||||||||
| Share issuance for warrants exercised | - | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| * | |
| ^ | The Equity Security Units issued on June 13, 2025 (see Note 14) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
CHANSON INTERNATIONAL HOLDING AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Depreciation and amortization | ||||||||
| Write off of bad debts | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Accrued interest income from long term debt investment | ( | ) | ( | ) | ||||
| Interest income from loan to a third-party | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Long term security deposits | ||||||||
| Long term prepaid expenses | ||||||||
| Accounts payable | ||||||||
| Taxes payable | ( | ) | ||||||
| Deferred revenue | ||||||||
| Other current liabilities | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Interest income received from long term debt investment | ||||||||
| Repayment from loans to third parties | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sales of the Equity Security Units, net of issuance costs | ||||||||
| Proceeds from short-term bank loans | ||||||||
| Repayments of short-term bank loans | ( | ) | ||||||
| Proceeds from long-term bank loans | ||||||||
| Payments made to a related party | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate fluctuation on cash and cash equivalents | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash operating, investing and financing activities | ||||||||
| Property and equipment acquired in settlement of the amount due from a related party | $ | $ | ||||||
| Reduction of right-of-use assets and operating lease obligations due to early termination of lease agreement | $ | $ | ||||||
| Right of use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
CHANSON INTERNATIONAL HOLDING AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Chanson International Holding (“Chanson
International,” or the “Company”), formerly known as RON Holding Limited, was incorporated under the laws of the Cayman
Islands on July 26, 2019 as a holding company. Chanson International owns
Chanson International, Deen Global, and Jenyd are currently not engaging in any active business operations and merely acting as holding companies.
Xinjiang United Family Trading Co., Ltd. (“Xinjiang
United Family”), is a company incorporated on August 7, 2009 in the People’s Republic of China (the “PRC”), with
a registered capital of RMB
Xinjiang United Family operates a bakery chain in China’s Xinjiang autonomous region under the brand name of “George●Chanson.” The chain currently consists of five directly-owned high-end bakery stores in the City of Urumqi and 55 bakery stores organized as individually-owned businesses known as the United Family Group (each a “UFG entity” and, collectively, the “UFG entities”) in Xinjiang region. The UFG entities are owned by the original shareholders of Xinjiang United Family but operated under a series of contractual agreements signed between the owners of these UFG entities and Xinjiang United Family.
On April 17, 2015, Xinjiang United Family incorporated a wholly-owned subsidiary, George Chanson (NY) Corp. (“Chanson NY”), in the State of New York, which owns and operates Chanson 23rd Street LLC (“Chanson 23rd Street”), a modern European-style café and eatery that specializes in the art of making French-style viennoiseries and pastries in the heart of Manhattan’s Flatiron District. On February 20, 2020, the Company’s Chairman, Mr. Gang Li, formed Chanson 355 Greenwich LLC (“Chanson Greenwich”), a New York limited liability company, and subsequently assigned his membership interests in Chanson Greenwich to Chanson NY on September 28, 2020. After the transfer, Chanson Greenwich became a wholly owned subsidiary of Chanson NY. Chanson Greenwich is another boutique café in Manhattan opened in December 2021 and closed in the second half of fiscal year 2023. On April 21, 2021, Chanson NY formed a wholly owned subsidiary, Chanson Management LLC, a Delaware limited liability company. On August 5, 2021, Chanson NY formed a wholly owned subsidiary, Chanson 1293 3rd Ave LLC (“Chanson 3rd Ave”), a New York limited liability company. On March 21, 2022, Chanson NY formed a wholly owned subsidiary, Chanson 2040 Broadway LLC (“Chanson Broadway”), a New York limited liability company. Chanson 3rd Ave and Chanson Broadway are another two boutique cafés opened in March 2023 and July 2023, respectively.
Reorganization
In connection with its initial public offering, the Company has undertaken a reorganization of its legal structure (the “Reorganization”). The Reorganization involved the incorporation of Chanson International, Deen Global, and Jenyd, the entry into a Share Transfer Agreement to transfer the ownership interest in Xinjiang United Family from its original shareholders to Jenyd, and the signing of a series of contractual agreements between Xinjiang United Family and the owners of the UFG entities. After the Reorganization, Chanson International became the ultimate holding company of Xinjiang United Family and Xinjiang United Family became the primary beneficiary of the UFG entities through the VIE Agreements, as further discussed below.
F-5
Xinjiang United Family entered into a series of contractual arrangements with the owners of the 22 UFG entities on May 2, 2020, and with the owners of three newly established UFG entities in fiscal year 2020, five newly established UFG entities in fiscal year 2021, one newly established UFG entity in fiscal year 2022, nine newly established UFG entity in fiscal year 2023, twenty newly established UFG entities in fiscal year 2024, and five newly established UFG entities in fiscal year 2025, respectively. Three of these UFG entities were closed in fiscal year 2021, three of these UFG entities were closed in fiscal year 2023, two of these UFG entities were closed in fiscal year 2024 and two of these UFG entities were closed in fiscal year 2025. These agreements include Exclusive Service Agreements, Pledge Agreements, Call Option Agreements, Operating Rights Proxy and Powers of Attorney Agreements and Spousal Consents (collectively, the “VIE Agreements”). Pursuant to the above VIE Agreements, Xinjiang United Family has the exclusive right to provide the UFG entities with consulting services related to business operations including operational and management consulting services. The VIE Agreements obligate Xinjiang United Family to absorb all of the risk of loss from business activities of these UFG entities and entitle Xinjiang United Family to receive all of their residual returns. In essence, Xinjiang United Family has gained the power to direct activities of the UFG entities that most significantly impact their economic performance, and the right to receive benefits from the UFG entities that could potentially be significant to them. Therefore, the Company believes that Xinjiang United Family has a controlling financial interest in and is the primary beneficiary of the UFG entities and these UFG entities should be considered as Variable Interest Entities (“VIEs”) under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 Consolidation. Hereinafter, the five bakery stores directly owned by Xinjiang United Family and the UFG entities controlled through the VIE Agreements are collectively referred to as the “PRC Stores.”
The Company, together with its wholly owned subsidiaries are under common control by the same shareholders before and after the Reorganization and therefore the consolidation of the Company and its subsidiaries has been accounted for at historical cost.
F-6
After the Reorganization, the unaudited condensed consolidated financial statements of the Company include the following entities:
| Name of Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Principal Activities | ||||
| Chanson International | ||||||||
| Deen Global | ||||||||
| Jenyd | ||||||||
| Xinjiang United Family | ||||||||
| 55 UFG entities | ||||||||
| Chanson NY | ||||||||
| Chanson 23rd Street | ||||||||
| Chanson Greenwich | ||||||||
| Chanson Management LLC | ||||||||
| Chanson 3rd Ave | ||||||||
| Chanson Broadway |
F-7
The VIE contractual arrangements
The UFG entities are controlled by the Company through contractual arrangements in lieu of direct equity ownership by the Company or any of its subsidiaries.
A VIE is an entity that either has a total equity investment that is insufficient to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity, or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary of, and must consolidate, the VIE.
Xinjiang United Family is deemed to have a controlling financial interest in and be the primary beneficiary of the UFG entities because it has both of the following characteristics:
| ● | The power to direct activities at the UFG entities that most significantly impact such entities’ economic performance, and |
| ● | The obligation to absorb losses of, and the right to receive benefits from, the UFG entities that could potentially be significant to such entities. |
Pursuant to the contractual arrangements with the UFG entities, the UFG entities pay service fees equal to all of their net profit after tax payments to Xinjiang United Family. At the same time, Xinjiang United Family is obligated to absorb all of their losses. Such contractual arrangements are designed so that the operation of the UFG entities is for the benefit of Xinjiang United Family and, ultimately, the Company.
Risks associated with the VIE structure
The Company believes that the contractual arrangements with the UFG entities and their respective owners are in compliance with PRC laws and regulations and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce such contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:
| ● | revoke the business and operating licenses of the Company’s PRC subsidiary and the UFG entities; |
| ● | discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiary and the UFG entities; |
| ● | limit the Company’s business expansion in China by way of entering into contractual arrangements; |
| ● | impose fines or other requirements with which the Company’s PRC subsidiary and the UFG entities may not be able to comply; |
| ● | require the Company or the Company’s PRC subsidiary and the UFG entities to restructure the relevant ownership structure or operations; or |
| ● | restrict or prohibit the Company’s use of the proceeds from its public offering to finance the Company’s business and operations in China. |
F-8
The Company’s ability to conduct its consulting services business may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, the Company may not be able to consolidate the UFG entities in its unaudited condensed consolidated financial statements as it may lose the ability to direct activities of the UFG entities and receive economic benefits from the UFG entities. The Company, however, does not believe such actions would result in the liquidation or dissolution of the Company and its PRC subsidiary and the UFG entities. The financial position, operation, and cash flow of the UFG entities are material to total assets and liabilities presented on the unaudited condensed consolidated balance sheets and revenue, expenses, and net income (loss) presented on the consolidated statements of operations and other comprehensive income (loss) as well as the cash flows from operating, investing, and financing activities presented on the unaudited condensed consolidated statements of cash flows.
The Company did not provide any financial support
to the UFG entities for the six months ended June 30, 2025 and 2024. The Company had
| June 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| Current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities | $ | $ | ||||||
| Non-current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net revenue | $ | $ | ||||||
| Net income | $ | $ | ||||||
F-9
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal years ended December 31, 2024, 2023 and 2022. Operating results for the six-month period ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries and the VIEs. All intercompany balances and transactions are eliminated upon consolidation.
Uses of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the assessment of the current expected credit losses for receivables, valuation of inventories, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, realization of deferred tax assets and revenue recognition. Actual results could differ from those estimates.
Cash and cash equivalents
Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains a significant amount of its bank accounts in the PRC. The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents.
Accounts receivable
Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for credit losses, as necessary. Accounts are written off against the allowance after efforts at collection prove unsuccessful. As of June 30, 2025 and December 31, 2024, the allowance for credit losses was both $.
Credit Losses
On January 1, 2023, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with a current expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements as of January 1, 2023.
F-10
The Company’s account receivables and other receivables included in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets are within the scope of ASC Topic 326. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses based upon assessment of various factors, including historical experience, the age of the accounts receivable and other receivables balances, credit-worthiness of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the customers and other debtors. The Company also provides specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.
ASC Topic 326 is also applicable to short-term and long-term loans to third parties. Management estimates the allowance for credit losses on loans not sharing similar risk characteristics on an individual basis. The key factors considered when determining the above allowances for credit losses include estimated loan collection schedule, discount rate, and assets and financial performance of the borrowers.
Current expected credit losses are recorded as allowance for credit losses on the unaudited consolidated statements of operations and comprehensive income (loss). After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amounts previously reserved for, the Company will reduce the specific allowance for credit losses.
Leases
Lessee accounting
The Company follows FASB ASC No. 842, Leases (“Topic 842”). The Company leases office spaces, bakery store facilities, employee dormitories, and a vehicle, which are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The ROU asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All ROU assets are reviewed for impairment annually. There was no impairment for ROU lease assets as of June 30, 2025 and December 31, 2024.
In response to the large volume of anticipated lease concessions to be granted related to the effects of the COVID-19 pandemic, and the resultant expected cost and complexity of applying the lease modification requirements in Topic 842, the FASB issued Staff Q&A—Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic in April 2020 as interpretive guidance to provide clarity in response to the crisis. The FASB staff indicated that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how they would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Consequently, for such lease concessions, an entity will not need to reassess each existing contract to determine whether enforceable rights and obligations for concessions exist and an entity can elect to apply or not to apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
F-11
Due to the COVID-19 pandemic, the Company renegotiated
the leases for some of its PRC stores and New York stores. Based on the nature of the agreements reached with the landlords, the Company
has accounted for rent concessions as if they were part of the enforceable rights and obligations of the existing lease contracts and
did not account for the concessions as lease modifications. As of the date of this report, the Company has received a total of lease concessions
amounting to $
Inventories
Inventories of the Company consist of ingredient materials, finished goods, packaging materials, and other materials. Inventories are stated at the lower of cost or net realizable value, on a weighted average basis. Costs include the cost of ingredient materials, direct labor, and related production overhead. Any excess of the cost over the net realizable value of each item of inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. The Company periodically evaluates inventories for their net realizable value adjustments and reduces the carrying value of those inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and expiration dates, as applicable, taking into consideration historical and expected future product sales. For the six months ended June 30, 2025 and 2024, no inventory reserve was recorded because no slow-moving, obsolete, or damaged inventory was identified.
Property and equipment
Property and equipment are stated at cost less
accumulated depreciation and amortization.
| Useful life | ||
| Building | ||
| Bakery production equipment | ||
| Office equipment and furniture | ||
| Automobiles | ||
| Leasehold improvement |
Expenditures for repair and maintenance, which do not materially extend the useful lives of the assets, are charged to expenses as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations and comprehensive income (loss) in other income or expenses.
Intangible assets
Intangible assets consist primarily of purchased
software. Intangible assets are stated at cost less accumulated amortization, which are amortized using the straight-line method with
the estimated useful lives of
Impairment of long-lived assets
Long-lived assets with finite lives, primarily property and equipment, and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no impairments of these assets as of June 30, 2025 and December 31, 2024.
F-12
Revenue recognition
The Company follows ASC 606, Revenue from Contracts with Customers (“ASC 606”), for revenue recognition. ASC 606 establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized, as performance obligations are satisfied.
The Company currently generates its revenue through its bakery/café stores as well as through online sales. The Company recognizes revenue from bakery/café sales upon delivery of the related food and other products to the customer and fulfillment of all performance obligations. Revenue is recognized net of any discounts, sales incentives, sales taxes, and value added taxes that are collected from customers and remitted to tax authorities.
In the PRC Stores, the Company sells membership cards that do not have an expiration date and from which the Company does not deduct non-usage fees from outstanding card balances. Membership cards are reloadable and redeemable at any of the Company’s store locations. Amounts loaded into these cards are initially recorded as deferred revenue. When membership cards are redeemed at stores, the Company recognizes revenue and reduces the deferred revenue. While the Company continues to honor all membership cards presented for payments, management determines the likelihood of redemption to be remote for certain cards with long periods of inactivity (“breakage”), which is five years after the last usage, based upon the Company’s historical redemption patterns. Membership card breakage is recorded as revenue in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Membership card breakage was immaterial for the six months ended June 30, 2025 and 2024.
In the PRC Stores, the Company maintains a customer loyalty program in which customers earn free cash vouchers when purchasing or reloading membership cards at certain amount. These cash vouchers typically do not expire, except for certain vouchers given out at special occasions, which usually state an expiration date and can only be exchanged for certain seasonal products or specialty cakes. The Company establishes corresponding liabilities in deferred revenue for the membership cards and the free cash vouchers upon issuance. The Company allocates the consideration received proportionately between the membership cards and cash vouchers based on their face values. Revenue is recognized at the allocated amount upon redemption of membership cards and cash vouchers, at which point, the Company delivers products to customers and reduces the deferred revenue. Unredeemed cash vouchers will be recognized as revenue upon their expiration dates, if any, or five years after their issuance if there are no stated expiration dates, when management determines the likelihood of redemption to be remote.
Contract balances and remaining performance obligations
Contract balances typically arise when a difference
in timing between the transfer of control to the customer and receipt of consideration occurs. The Company did not have contract assets
as of June 30, 2025 and December 31, 2024. The Company’s contract liabilities, which are reflected in its unaudited condensed consolidated
balance sheets as deferred revenue of $
Disaggregation of revenue
The Company disaggregates its revenue by geographic areas, as the Company believes it best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the six months ended June 30, 2025 and 2024 is disclosed in Note 16 of the unaudited condensed consolidated financial statements.
F-13
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, other current assets, current portion of long-term loan to a third party, short-term bank loans, accounts payable, due to a related party, taxes payable, current portion of long-term bank loans, current portion of operating lease liabilities, current and other current liabilities, approximates the fair value of the respective assets and liabilities as of June 30, 2025 and December 31, 2024 based upon the short-term nature of the assets and liabilities. The fair value of long-term debt investment and long-term bank loans, as well as non-current portion of operating lease liabilities approximates their recorded values as their stated interest rates approximate the rates currently available.
Foreign currency translation
The functional currency of the Company’s PRC subsidiary and the UFG entities is the Chinese Yuan (“RMB”) and the functional currency of the Company’s U.S. subsidiaries is the U.S. Dollars (“US$”). RMB amounts in the Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency US$. Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
| For the Six Months Ended June 30, | For the Year Ended December 31, | ||||||||
| 2025 | 2024 | 2024 | |||||||
| Period/Year-end spot rate | US$ | US$ | US$ | ||||||
| Average rate | US$ | US$ | US$ | ||||||
F-14
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized
is the largest amount of tax benefit that is greater than
The Company’s operating subsidiary in China is subject to the income tax laws of the PRC. The Company’s operating subsidiaries in United States are subject to the tax law of the United States. As of June 30, 2025, for the tax years ended December 31, 2020 through December 31, 2024, the Company’s PRC subsidiaries remained open for statutory examination by PRC tax authorities, and for the tax years ended December 31, 2022 through December 31, 2024, the Company’s United States subsidiaries remained open for statutory examination by U.S. tax authorities.
Value added tax (“VAT”)
The Company’s subsidiary Xinjiang United
Family and its five branch offices are general tax payers. The applicable VAT rate is
Warrant accounting
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent interim period end date while the warrants are outstanding.
F-15
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations and comprehensive income (loss).
As the warrants issued meet the criteria for equity classification under ASC 815, therefore, the warrants are classified as equity.
Earnings (Loss) per share
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, Earnings per Share (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average ordinary shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of June 30, 2025 and December 31, 2024, there were no dilutive shares.
Comprehensive income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive gain. The foreign currency translation gain resulting from the translation of the financial statements expressed in RMB to US$ is reported in other comprehensive gain in the unaudited condensed consolidated statements of operations and comprehensive income (loss).
Statement of cash flows
In accordance with ASC 230, “Statement of Cash Flows”, cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Segment reporting
In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The Company adopted this ASU commencing January 1, 2024 retrospectively to all periods presented in the unaudited condensed consolidated financial statement and the adoption of the ASU does not have a material effect on its unaudited condensed consolidated financial statements.
The Company uses the management approach in determining its operating segments. The management approach considers the internal reporting used by the Company’s CODM. The Company’s CODM has been identified as the Chief Executive Officer (“CEO”) who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Company. Management, including the CODM, reviews operation results by locations. Based on management’s assessment, the Company has determined that it has two operating segments, China and the United States and others.
F-16
Risks and uncertainties
Political and economic risk
The operations of the Company are located in the PRC and United States. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC and United States, as well as by the general state of the PRC and United States economy. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in the PRC and United States. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, such experience may not be indicative of future results.
Foreign currency exchange risk
A majority of the Company’s revenue and expense transactions are denominated in RMB and most of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to effect the remittance.
Credit risk
As of June 30, 2025 and December 31, 2024, $
As of June 30, 2025 and December 31, 2024, $
As of June 30, 2025 and December 31, 2024, the
Company had long term debt investment of $
For the six months ended June 30, 2025 and 2024, the Company’s substantial assets were located in the PRC and the U.S. and the Company’s substantial revenue was derived from its subsidiaries and the UFG entities located in the PRC and the U.S.
Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.
F-17
Concentrations
As of June 30, 2025, the Company’s cash
balance was concentrated in two bank accounts, representing
No single customer accounted for more than 10% of the Company’s revenue for the six months ended June 30, 2025 and 2024.
As of June 30, 2025, no customer accounted for
more than 10% of the Company’s total accounts receivable balance. As of December 31, 2024, one customer accounted
For the six months ended June 30, 2025, one supplier
accounted for
As of June 30, 2025, no supplier accounted for
more than 10% of the Company’s total accounts payable balance. As of December 31, 2024, one supplier accounted for
Recent accounting pronouncements
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This ASU requires entities to 1. disclose amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and, (e) depreciation, depletion, and amortization recognized as part of oil-and gas-producing activities, 2. include certain amounts that are already required to be disclosed under current Generally Accepted Accounting Principles in the same disclosures as other disaggregation requirements, 3. disclose a qualitative description of the amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, and 4. disclose the total amount of selling expenses, in annual reporting periods, an entity’s definition of selling expense. The ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Additionally, in January 2025, the FASB issued ASU No. 2025-01 to clarify the effective date of ASU 2024-03. The standard provides guidance to expand disclosures related to the disaggregation of income statement expenses. The standard requires, in the notes to the financial statements, disclosure of specified information about certain costs and expenses which includes purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company plans to adopt this guidance effective January 1, 2027 and the Company is currently evaluating the impact of adopting this ASU on its financial statements.
Except for the above-mentioned pronouncement, there are no new recently issued accounting standards that will have material impact on the Company’s unaudited condensed consolidated financial position, statements of operations, and cash flows.
NOTE 3 — ACCOUNTS RECEIVABLE, NET
The Company’s accounts receivable primarily
include balance generated from selling bakery products to local corporate customers, billed but has not been collected as of the balance
sheet dates.
| June 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ||||||||
| Total accounts receivable, net | $ | $ | ||||||
F-18
NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET
Prepaid expenses and other current assets consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Advance to suppliers (1) | $ | $ | ||||||
| Prepaid expenses (2) | ||||||||
| Other receivables (3) | ||||||||
| Less: allowance for credit losses | ||||||||
| Total prepaid expenses and other current assets, net | $ | $ | ||||||
| (1) |
| (2) |
| (3) |
NOTE 5 — INVENTORIES
Inventories consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Ingredient materials | $ | $ | ||||||
| Package and other materials | ||||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
NOTE 6 — LONG TERM LOAN TO A THIRD-PARTY
Long term loan to a third-party consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Long term loan to a third-party | $ | $ | ||||||
| Total long term loan to a third-party | $ | $ | ||||||
| Current portion of loan to a third-party | ||||||||
| Non-current portion of loan to a third-party | ||||||||
F-19
On April 3, 2023, the Company entered a loan agreement
with Liberty Asset Management Capital Limited (the “Borrower”) to lend the Borrower $
NOTE 7 — LEASES
The Company leases office spaces, bakery store
facilities, employee dormitories and a vehicle under non-cancelable operating leases, with terms ranging from
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The table below presents the operating lease related assets and liabilities recorded on the balance sheets.
| June 30, 2025 | December 31, 2024 | |||||||
| ROU lease assets | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of June 30, 2025 and December 31, 2024:
| June 30, 2025 | December 31, 2024 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * |
During the six months ended June 30, 2025 and
2024, the Company incurred total operating lease expenses of $
F-20
The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2025:
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
NOTE 8 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Building (1) | $ | $ | ||||||
| Bakery production equipment | ||||||||
| Automobiles | ||||||||
| Office equipment and furniture | ||||||||
| Leasehold improvements | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
| (1) |
Loss on disposal of property and equipment was
$
Depreciation expenses were $
NOTE 9 — INTANGIBLE ASSETS, NET
Intangible assets, net, consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Intangible assets | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
Amortization expenses were $
F-21
Amortization of intangible assets attributable to future periods as of June 30, 2025 is as follows:
| Twelve months ended June 30: | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 10 — LONG TERM DEBT INVESTMENT
On March 31, 2023, the Company entered into a
NOTE 11 — LOANS
Short-term bank loans
Short-term bank loans consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Huaxia Bank (1) | $ | $ | ||||||
| Bank of China (2) | ||||||||
| Total short-term bank loans | $ | $ | ||||||
| (1) |
| (2) |
F-22
Long-term bank loans
Long-term bank loans consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Tianshan Rural Commercial Bank (1) | $ | $ | ||||||
| Bank of China (2) | ||||||||
| Total long-term bank loans | $ | $ | ||||||
| Long-term bank loans - current | $ | $ | ||||||
| Long-term bank loans - non-current | $ | $ | ||||||
| (1) | On January 22, 2025, Xinjiang United Family entered into a loan agreement with Tianshan Rural Commercial Bank to borrow RMB
On March 24, 2025, Xinjiang United Family entered into another loan agreement with Tianshan Rural Commercial Bank to borrow RMB |
| (2) |
The future maturities of long-term bank loans as of June 30, 2025 were as follows:
| Twelve months ended June 30: | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total | $ | |||
For the above-mentioned short-term and long-term
bank loans, the Company recorded interest expenses of $
F-23
NOTE 12 — RELATED PARTY TRANSACTIONS
| a. | Due to a related party |
As of June 30, 2025, due to a related party of
$
| b. | Other related party transactions |
Several related parties provided guarantees in connection with the Company’s short-term and long-term bank loans (see Note 11).
Pursuant to a Premises Use Agreement dated April
30, 2020 and a Supplemental Agreement dated June 18, 2020, Urumqi Plastic Surgery Hospital Co., Ltd., a PRC company controlled by Mr.
Gang Li, provided approximately
NOTE 13 — TAXES
| (a) | Corporate Income Taxes (“CIT”) |
Cayman Islands
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares, as the case may be, nor will gains derived from the disposal of our ordinary shares be subject to Cayman Islands income or corporation tax.
British Virgin Islands
Deen Global is incorporated in the BVI as an offshore holding company and is not subject to tax on income or capital gain under the laws of BVI.
Hong Kong
Jenyd is incorporated in Hong Kong and is subject
to profit taxes in Hong Kong at a rate of
F-24
PRC
Under the Enterprise Income Tax (“EIT”)
Law of the PRC, domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified
The UFG entities are individually-owned businesses,
which are not subject to the EIT Law of the PRC, but the Individual Income Tax. The Measures for Individual Income Tax Calculation of
Individual Industrial and Commercial Households, or the “Measures,” were adopted by the State Administration of Taxation on
December 19, 2014 and promulgated on December 27, 2014, and amended on June 15, 2018. According to Article 7 of the Measures, for the
income from production and operation of individually-owned businesses, the amount of taxable income shall be the balance of the total
income of each tax year after deducting costs, expenses, taxes, losses and other expenditures, and allowable compensation for losses in
previous years. Income tax for an individually-owned business can generally be assessed on an actual basis or a deemed basis, which the
UFG entities apply. Therefore, income tax for the UFG entities is levied as a fixed-rate income tax at
United States
The Company’s subsidiaries in the U.S. are
subject to a U.S. federal corporate income tax rate of
(Loss) income before provision for income taxes is attributable to the following geographic locations for the six months ended June 30, 2025 and 2024:
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cayman Islands | $ | ( | ) | $ | ||||
| PRC | ||||||||
| United States | ( | ) | ( | ) | ||||
| Total (loss) income before income taxes | $ | ( | ) | $ | ||||
F-25
The components of the income tax provision were as follows:
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Current tax provision | ||||||||
| Cayman Islands | $ | $ | ||||||
| BVI | ||||||||
| Hong Kong | ||||||||
| PRC | ||||||||
| United States | ||||||||
| $ | $ | |||||||
| Deferred tax provision | ||||||||
| Cayman Islands | $ | $ | ||||||
| BVI | ||||||||
| Hong Kong | ||||||||
| PRC | ||||||||
| United States | ||||||||
| Income tax provisions | $ | $ | ||||||
Reconciliation of the differences between the income tax provision computed based on PRC statutory income tax rate and the Company’s actual income tax provision for the six months ended June, 2025 and 2024 are as follows:
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Income tax (benefit) expense computed based on PRC statutory rate | $ | ( | ) | $ | ||||
| Favorable tax rate and tax exemption impact in PRC entities (a) | ( | ) | ( | ) | ||||
| Effect of rate differential for non-PRC entities | ( | ) | ||||||
| Change in valuation allowance | ||||||||
| Total income tax provisions | $ | $ | ||||||
| (a) |
The Company’s deferred tax assets, net was comprised of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Net operating loss | $ | $ | ||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets, net | $ | $ | ||||||
F-26
The Company’s operations in the U.S. incurred
a cumulative net operating loss (“NOL”) which may reduce future federal taxable income. As of December 31, 2024, the cumulative
NOL was $
The Company periodically evaluates the likelihood
of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the
extent it believes a portion will not be realized. Management considers new evidence, both positive and negative, that could affect the
Company’s future realization of deferred tax assets including its recent cumulative earnings experience, expectation of future income,
the carry forward periods available for tax reporting purposes and other relevant factors. The Company determined that it is more likely
than not its deferred tax assets could not be realized due to uncertainty on future earnings in the U.S. operations. The Company provided
a
| (b) | Taxes payable |
Taxes payable consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Income tax payable | $ | $ | ||||||
| Value added tax payable | ||||||||
| Other taxes payable | ||||||||
| Total taxes payable | $ | $ | ||||||
NOTE 14 — SHAREHOLDERS’ EQUITY
Ordinary Shares
Chanson International (formerly known as RON Holding
Limited) was incorporated under the laws of the Cayman Islands on July 26, 2019.
On March 27, 2021, the Company’s shareholders
and board of directors approved
F-27
On March 12, 2025, the
Company’s shareholders resolved to increase the authorized share capital from US$
Initial Public Offering
On April 3, 2023, the Company closed its IPO of
Representative Warrants
In connection with the Company’s IPO, the
Company agreed to issue warrants to the representative of several underwriters (“Representative warrants”), exercisable for
a period of four and a half years commencing six months from the date of commencement of sales of the offering, to purchase
Conversion of Ordinary Shares
On February 5, 2024, the Company’s shareholder
Haily Global Limited elected to convert
Issuance of Ordinary Shares
On September 13, 2024, the Company entered into
a securities purchase agreement (the “Purchase Agreement”) with certain investors identified therein for a best efforts follow-on
public offering (the “Offering”) of (i)
F-28
Issuance of the Equity Security Units
On June 13, 2025, the Company priced a best-efforts
public offering for the sale of units as described below. The offering was comprised of
As a result, the Company had
Statutory Reserve
The Company’s PRC subsidiary is required
to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based
on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations
to the statutory surplus reserve are required to be at least
Restricted net assets
The Company’s PRC subsidiary and the UFG
entities are restricted in their ability to transfer a portion of their net assets, equivalent to their statutory reserves and their share
capital to the Company in the form of loans, advances, or cash dividends. The payment of dividends by entities organized in China is subject
to limitations, procedures, and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits
as determined in accordance with accounting standards and regulations in China. As of June 30, 2025 and December 31, 2024, the total restricted
net assets amounted to $
F-29
NOTE 15 — COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of June 30, 2025 and December 31, 2024, there were no legal claims and litigation against the Company.
NOTE 16 — SEGMENT REPORTING
In accordance with ASC 280, Segment Reporting,
operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated
regularly by the (the “CODM”), or decision-making group, in deciding how to allocate resources
and in assessing performance.
The following table presents the segment information for the six months ended June 30, 2025 and 2024, respectively:
| For the Six Months Ended June 30, 2025 | ||||||||||||
| China | United States and others | Total | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Less: | ||||||||||||
| Cost of revenue | ||||||||||||
| Selling expenses | ||||||||||||
| General and administrative expenses | ||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ||||||
| Other (expense) income, net | ( | ) | ( | ) | ||||||||
| Interest income from long term debt investment | ||||||||||||
| Profit (loss) before income tax expense | ( | ) | ( | ) | ||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | |||||
| Depreciation | $ | $ | $ | |||||||||
| Capital expenditures | $ | $ | $ | |||||||||
F-30
| For the Six Months Ended June 30, 2024 | ||||||||||||
| China | United States and others | Total | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Less: | ||||||||||||
| Cost of revenue | ||||||||||||
| Selling expenses | ||||||||||||
| General and administrative expenses | ||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||
| Interest (expense) income, net | ( | ) | ( | ) | ||||||||
| Other (expense) income, net | ( | ) | ||||||||||
| Interest income from long term debt investment | ||||||||||||
| Profit (loss) before income tax expense | ( | ) | ||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||
| Net income (loss) | $ | $ | ( | ) | $ | |||||||
| Depreciation | $ | $ | $ | |||||||||
| Capital expenditures | $ | $ | $ | |||||||||
| June 30, 2025 | December 31, 2024 | |||||||
| Total assets: | ||||||||
| China | $ | $ | ||||||
| United States | ||||||||
| Total assets | $ | $ | ||||||
| Total liabilities: | ||||||||
| China | $ | $ | ||||||
| United States | ||||||||
| Total liabilities | $ | $ | ||||||
NOTE 17 — SUBSEQUENT EVENTS
On August 1, 2025, the Company’s board of
directors approved a 1-for-80 reverse stock split of its ordinary shares, which became effective on August 18, 2025. As a result of the
reverse split, each of the
The Company evaluated the subsequent events through September 4, 2025, which is the date of the issuance of these unaudited condensed consolidated financial statements, and concluded that there are no additional subsequent events except disclosed above that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
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