Quanome Technologies, Inc.: Form 10-K for the period ended Jun 30, 2026

Overview

Our business currently consists of three principal areas of focus: (i) our established, revenue-generating pharmaceutical distribution operations through Hupan Pharmaceutical; (ii) our recently initiated strategic focus on quantum-related and certain other advanced technology activities, which remains in the development and evaluation stage and has not generated revenue as of the date of this report; and (iii) our recently initiated efforts to provide dedicated AI compute capacity and managed inference services, which remain in the preliminary stage and have not resulted in executed customer contracts or generated revenue as of the date of this report.

Prior to February 12, 2026, in addition to engaging in the distribution of pharmaceutical products through Hupan Pharmaceutical, we also operated as a U.S.-based integrated cross-border supply chain solutions provider with a strategic focus on the Asian market. On February 12, 2026, we transferred the operations of ABL Chicago to an unrelated third party, which obtained operational control and substantially all economic interests associated with the business. Following the transfer, we ceased substantive involvement in ABL Chicago’s cross-border freight forwarding and logistics business.

Our revenue from continuing pharmaceutical operations was primarily derived from selling infusion products, foods for special medical purposes, and specialty pharmaceuticals to hospitals, pharmaceutical distributors and other healthcare providers.

The Company is evaluating opportunities to reposition its business from traditional pharmaceutical distribution services toward quantum-related technologies and applications, including those involving quantum computing, artificial intelligence, advanced simulation and intelligent systems. The Company intends to conduct these activities through its subsidiary, Quantum Nexus. As part of this strategic initiative, the Company is evaluating and developing computational capabilities through Quantum Nexus that may have applications across various industries, including therapeutic discovery, healthcare, advanced materials, energy and cybersecurity. The Company may also pursue collaborations, acquisitions or other strategic transactions involving technology providers, laboratories, research teams and other parties engaged in these or related fields. As of the date of this report, the Company has not entered into any definitive agreement with respect to any such transaction, and there can be no assurance that any transaction will be consummated or, if consummated, as to its timing or terms. As of the date of this report, the Company has not generated any revenue from these activities.

To align with this strategic direction, effective August 3, 2026, the Company changed its corporate name from Lakeside Holding Limited to Quanome Technologies, Inc. Beginning with the opening of trading on August 4, 2026, the Company’s common stock began trading on the Nasdaq Capital Market under the Company’s new corporate name and the new ticker symbol “QNME.”

In addition to our initiatives in quantum-related technologies and applications, the Company is actively exploring the deployment of dedicated AI compute and inference capabilities. Beginning in September 2026, the Company, through its indirectly wholly owned subsidiary, XDT Infrastructure I, LLC, a Delaware limited liability company (“XDT”), commenced activities relating to the provision of artificial intelligence compute capacity and managed inference services. Under this business model, the Company’s subsidiary procures, owns and operates servers and related computing infrastructure for its own account, and makes capacity on that infrastructure available to customers as a service. Capacity allocated to a customer is logically and operationally segregated from capacity allocated to other customers, with the level of segregation depending on the applicable customer arrangement. Customers may specify the artificial intelligence models to be deployed on the capacity allocated to them, subject to technical compatibility, licensing and other applicable requirements, as well as the Company’s operation of the underlying infrastructure. XDT’s role is primarily to provide and operate the underlying computing infrastructure and managed inference environment. As of the date of this report, the Company does not plan to develop or train proprietary AI models and does not use customer-provided content to train models unless separately authorized by the applicable customer.

Our Solutions and Services

Pharmaceutical Distribution

Subsequent to the disposal of ABL Chicago, substantially all of our business is operated through Hupan Pharmaceutical. Our current operations are positioned in the midstream segment of the pharmaceutical industrial ecosystem, operating between upstream pharmaceutical manufacturers and downstream medical end customers. We do not manufacture the products that we distribute. We source products from multiple manufacturers and suppliers, and distribute them primarily to hospitals, pharmaceutical distributors and other healthcare providers. Our principal product categories currently include infusion products, foods for special medical purposes, and specialty pharmaceuticals.

Our distribution activities generally involve identifying products suitable for our customer base, coordinating procurement from manufacturers and suppliers, arranging orders and facilitating delivery through logistics and warehousing service providers. Our ability to conduct these activities depends on our relationships with manufacturers, suppliers, agents, customers and other service providers involved in the distribution process.

We conduct sales primarily through agents who assist with customer development, order coordination and ongoing customer relationships. Our sales process may involve hospital procurement procedures, distributor purchase orders, government or regional bidding programs and other applicable procurement arrangements. During the fiscal year ended June 30, 2026, we recognized revenue from more than 60 customers, approximately four of whom accounted for more than 10% of our total revenue each.

Changes in procurement prices, bidding cycles, hospital demand, government price controls, healthcare reforms, and product availability may lead to fluctuations in our revenue and gross profit margins. In addition, market price competition and participation in government procurement programs may compress profit margins. Because profitability varies among our product categories, adjusting the revenue mix of our product offerings may partially offset such margin pressure.

Meanwhile, we expect to capture additional business growth opportunities and access new business segments in response to industry developments, such as population aging, increased sales volume of innovative and biologic drugs, rising demand for hospital supply, processing and distribution services, expansion of primary medical institutions and direct-to-patient specialty pharmacies, growing demand for professional pharmaceutical logistics services, and consolidation in the pharmaceutical distribution industry. Our ability to pursue these opportunities will depend on, among other factors, customer demand, regulatory requirements, supplier relationships, available capital and our operational capabilities.

Competition

The pharmaceutical distribution industry in China is competitive, with participants operating across the upstream, midstream and downstream segments of the pharmaceutical supply chain. We may compete with national and regional pharmaceutical distributors, wholesalers, specialized distribution and logistics service providers and other companies offering similar products or services. Competition is generally based on factors including product availability and breadth, pricing, supplier and customer relationships, access to hospitals and other healthcare institutions, geographic coverage, procurement and bidding capabilities, logistics and fulfillment capabilities, regulatory qualifications, financial resources, service quality and reputation. Certain competitors may have greater financial resources, broader distribution networks, stronger purchasing power or more established supplier and customer relationships than we do. Our ability to compete depends on, among other things, our ability to maintain relationships with suppliers and customers, secure suitable products on commercially acceptable terms, provide reliable services and respond to changes in market demand and applicable healthcare and procurement policies.

Sales and Marketing

We market and sell products primarily through our sales personnel and agents, who are responsible for customer development, order coordination and maintaining relationships with existing and prospective customers. Our sales and marketing efforts are focused on maintaining long-term relationships with existing customers, understanding their product and procurement needs, identifying potential new customers and expanding sales opportunities within our existing customer base.

Seasonality

We have not experienced material seasonality in our pharmaceutical distribution business, although our results may fluctuate from period to period due to procurement cycles, customer demand, product availability and other factors.

AI Compute Capacity and Managed Inference Services

Beginning in September 2026, the Company, through its indirectly wholly owned subsidiary, XDT Infrastructure I, LLC, a Delaware limited liability company, commenced activities relating to the provision of artificial intelligence compute capacity and managed inference services. These activities remain in an early stage and have not resulted in executed customer contracts or generated revenue as of the date of this report.

Under this business model, the Company’s subsidiary procures, owns and operates servers and related computing infrastructure for its own account, and makes capacity on that infrastructure available to customers as a service. Capacity allocated to a customer is logically and operationally segregated from capacity allocated to other customers, with the level of segregation depending on the applicable customer arrangement. Customers may specify the artificial intelligence models to be deployed on the capacity allocated to them, which may include customer-provided or appropriately licensed third-party models, subject to technical compatibility, licensing and other applicable requirements, while XDT operates the underlying computing infrastructure and managed inference environment.

The Company’s current business model is generally structured around infrastructure capacity. XDT manages the underlying servers, hardware environment and related operational infrastructure, deploys or supports deployment of customer-selected models, and makes the resulting inference capacity available to customers through a managed application programming interface, or API. Customers are generally entitled to the outputs generated by the capacity allocated to them during the applicable service period.

The Company’s principal service commitment under this model is focused on the availability and operation of the dedicated computing infrastructure rather than a guaranteed amount of token output, throughput or latency. Actual token generation and inference performance may vary depending on a number of factors, including the hardware configuration, model architecture, model size, software stack, customer workload, networking conditions and other technical factors. Accordingly, the Company does not currently intend to guarantee a specified quantity of tokens or a particular level of model performance unless otherwise expressly agreed with a customer.

The Company expects this business to generate revenue primarily through fees for compute capacity and related managed infrastructure services, which may include server operation, hosting, model deployment support, API access, monitoring and related technical services. The Company may in the future expand the scope of these services to include additional model optimization, inference management, software orchestration or other AI infrastructure services, depending on customer demand and the availability of suitable computing resources. As of the date of this report, the Company does not plan to develop or train proprietary AI models and does not use customer-provided content to train models unless separately authorized by the applicable customer.

Depending on the applicable customer arrangement and the infrastructure available from upstream providers, customer workloads may be deployed either on dedicated capacity with physical segregation or on shared infrastructure with logical segregation. In a dedicated configuration, the computing resources allocated to a customer may be deployed on dedicated nodes, GPUs and local storage, and may also be housed in dedicated racks or cages with separate network and storage resources and applicable physical access controls. In a shared configuration, customer workloads may operate on shared underlying hardware but are segregated through measures such as separate credentials, resource quotas, logging and defined storage scopes. The applicable segregation model is determined by the relevant customer agreement and available infrastructure arrangements. The use of dedicated or physically segregated infrastructure does not affect ownership of customer data, which remains with the applicable customer.

As of the date of this annual report, the Company has entered into an agreement to purchase 32 servers designed for high-performance artificial intelligence computing workloads. The Company has not yet generated any revenue from this business and has no executed customer contract as of the date of this annual report. The Company is evaluating customer opportunities, negotiating capacity arrangements, and expanding its technical team and infrastructure capabilities. The business remains at an early stage, and there can be no assurance that the Company will be able to scale these operations, secure sufficient computing resources, attract customers or generate meaningful revenue from this business.

Initiatives in Quantum-Related Technologies and Applications

Starting in the second half of 2026, through our wholly owned subsidiary, Quantum Nexus, we began evaluating opportunities involving the implementation of our quantum application strategy by leveraging third-party technology and development resources to evaluate and develop quantum-related and certain other advanced technology activities across various industries. These activities remain in the development and evaluation stage.

In August 2026, we announced the establishment of our Global Quantum Council and Scientific Advisory Network as part of our broader strategy to expand our access to scientific and technical expertise and identify potential opportunities involving quantum science and related advanced technologies. Through these advisory platforms, we intend to deepen our understanding of emerging technologies, support scientific evaluation and explore potential research collaborations, strategic partnerships, commercial initiatives and investment opportunities. We have begun identifying potential subject matter experts in these areas and expect to formalize certain relationships over time. The Global Quantum Council and Scientific Advisory Network are advisory initiatives and do not, by themselves, constitute separate operating businesses.

As of the date of this report, we have not generated any revenue from these activities. We will continue to assess the technologies, potential use cases, market opportunities and resources that may be required to pursue this strategy. There can be no assurance that our evaluation and development efforts will result in a commercially viable business, product or service.

Our Operations in the PRC

As of the date of this report, substantially all of our business is operated through Hupan Pharmaceutical, our operating subsidiary in the PRC, which is wholly owned by Sichuan Hupan, our intermediate holding company in the PRC. Such structure involves unique legal and operational risks to investors in our common stock. In particular, the PRC government has significant authority to exert influence on the ability of a company with substantive operations in the PRC, such as us, to conduct its business, accept foreign investments or list on a U.S. or other foreign exchanges. For example, we face risks associated with regulatory approvals of offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. Such risks could result in a material change in our operations and/or the value of our common stock or could significantly limit or completely hinder our ability to offer or continue to offer our common stock to investors and cause the value of such common stock to significantly decline or become worthless.

The PRC government has significant oversight over the conduct of our PRC business, and its laws, regulations and policies may intervene or influence our operations at any time, which could result in a material change in our operations and in the value of the securities we are registering, and could cause the value of our securities to significantly decline or become worthless. The PRC government has recently published new policies that affected certain industries with respect to matters such as cybersecurity, data privacy, antitrust and competition, foreign investments, and overseas listings, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition and results of operations. Furthermore, the PRC regulatory authorities have recently issued new laws and regulations to exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in PRC-based companies. Any such action, once taken by the PRC regulatory authorities, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

Our ability to transfer cash within our corporate group and to distribute earnings to our shareholders is subject to applicable PRC laws and regulations governing foreign exchange and cross-border remittances. As a Nevada holding company, we may rely on dividends and other distributions from Hupan Pharmaceutical to fund our operations, satisfy our cash and financing requirements and make distributions to our shareholders. The ability of Hupan Pharmaceutical to make such distributions may also be subject to restrictions under applicable debt arrangements, if any. Accordingly, our ability to transfer funds from our PRC subsidiary to Quanome or to U.S. investors may be limited.

We are subject to a number of prohibitions, restrictions and potential delisting risks under the HFCAA. Pursuant to the HFCAA and related regulations, if we have filed an audit report issued by a registered public accounting firm that the PCAOB has determined that it is unable to inspect and investigate completely, the SEC will identify us as a “Commission-identified Issuer,” and the trading of our securities on any U.S. national securities exchange, as well as any over-the-counter trading in the United States, will be prohibited if we are identified as a Commission-identified Issuer for two consecutive years. Our independent registered public accounting firm is headquartered in Denver, Colorado, and has been inspected by the PCAOB on a regular basis. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, you may be deprived of the benefits of such inspection which could result in limitation or restrictions on our access to the U.S. capital markets and trading of our securities.

Cash Transfer and Dividend Distribution

Quanome may transfer cash to its PRC and Cayman Islands subsidiaries through capital contributions, intra-group loans and other permissible arrangements. In particular, Quanome may transfer funds to Sichuan Hupan, our wholly owned intermediate holding company in the PRC, which may in turn transfer such funds to Hupan Pharmaceutical, our PRC operating subsidiary, through capital contributions, intra-group loans or other permissible arrangements to fund Hupan Pharmaceutical’s operations and working capital needs. Cash may also be transferred through our organization by way of intra-group transactions to pay for services or goods provided, subject to applicable laws and regulations. If Hupan Pharmaceutical realizes accumulated after-tax profits, it may, upon satisfaction of applicable statutory conditions and procedures, pay dividends or make other distributions to Sichuan Hupan as its shareholder. Sichuan Hupan may, in turn, subject to applicable PRC laws and foreign exchange requirements, pay dividends or make other distributions to Quanome. Similarly, our Cayman Islands subsidiaries may, subject to applicable laws and the availability of legally distributable funds, make dividends or other distributions to Quanome. With legally available funds, Quanome may pay dividends or make other distributions to its stockholders, including U.S. investors and service any debt it may have incurred.

As of the date of this report, Quanome has provided approximately US$12.7 million in aggregate funding to its PRC subsidiaries. A portion of such funding was retained by Sichuan Hupan, and a portion was transferred to Hupan Pharmaceutical, in each case to support the daily operations and working capital needs of the PRC subsidiaries. Quanome has not transferred any cash to its Cayman Islands subsidiaries. As of the date of this report, other than the cash funding described above, no assets were transferred between Quanome and any of its subsidiaries. No subsidiaries paid any dividends or made any other distributions to Quanome, and Quanome did not pay any dividends or make any other distributions to its stockholders, including U.S. investors. Quanome and its subsidiaries currently do not maintain a formal cash management policy governing transfers of funds within the organization.

Under PRC laws and regulations, we are subject to restrictions on foreign exchange and cross-border cash transfers, including to U.S. investors. Our ability to distribute earnings to Quanome and U.S. investors is also limited. Quanome is a Nevada holding company, and it may rely on dividends and other distributions on equity paid by its PRC subsidiaries for its cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its shareholders and service any debt it may incur. When the PRC subsidiaries incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to Quanome. Under PRC laws and regulations, the PRC subsidiaries may pay dividends only out of their respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a PRC company is required to set aside at least 10% of its after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a PRC company may allocate a portion of its after-tax profits based on PRC accounting standards to a staff welfare and bonus fund. These reserve fund and staff welfare and bonus fund cannot be distributed to Quanome as dividends. In addition, our PRC operating subsidiary generate its revenue primarily in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of the PRC subsidiaries to pay dividends to Quanome.

Employees

Our people are key to our success. As of June 30, 2026, we had a total workforce of 27 full-time employees across various functions. On occasion, we engage independent contractors to support our efforts. None of our employees are represented by labor unions or work under any collective bargaining agreements. We have not experienced any work stoppages, and we believe that our employee relations are strong.

We work diligently to create an equitable and inclusive work environment for our diverse group of people who are young, energetic, highly educated and multi-lingual. We provide equal opportunities for growth, success, promotion, learning and development, and aim to achieve parity in the way we organize and manage operations. We are focused on building support across all functions and individuals, ensuring everyone has a voice, and treats each other with respect.

Government Regulations

As a company with business operations in the United States and China, subsidiaries organized in other jurisdictions, including the Cayman Islands, and potential customers, suppliers, service providers and other counterparties located in various countries and regions, our operations are substantially governed by applicable U.S. federal and state laws and regulations and applicable PRC laws and regulations, and may also be subject to the laws and regulations of other jurisdictions depending on the nature and location of the relevant activities and counterparties. We are required to obtain certain licenses, permits and approvals from the relevant governmental authorities in order to operate our business, including, where applicable, licenses and approvals relating to the distribution of pharmaceutical products in China, such as the Pharmaceutical Operation License. Our developing artificial intelligence infrastructure and managed inference activities may also be subject to U.S. export control, sanctions, data protection, cybersecurity and other regulatory requirements, depending on the technologies involved, the jurisdictions and industries of our customers, suppliers and other counterparties, and the applicable end users and end uses. To the extent material to our understanding, as of the date of this report, we believe that we have obtained all licenses, permits and approvals from the relevant governmental authorities necessary for our existing business operations in the jurisdictions in which we currently conduct material operations. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, and the promulgation of new laws and regulations and amendment to the existing ones, we may be required to obtain additional licenses, permits, registrations, filings or approvals for our business operations in the future. We cannot assure you that we will be able to obtain, in a timely manner or at all, or maintain such licenses, permits or approvals, and we or the affiliated entities may also inadvertently conclude that such permissions or approvals are not required. Any lack of or failure to maintain requisite approvals, licenses or permits applicable to us or the affiliated entities may have a material adverse impact on our business, results of operations, financial condition and prospects and cause the value of any securities we offer to significantly decline or become worthless.

This section provides an overview of the key regulations and legal considerations that we believe are material to an understanding of our current business. To the extent material to our understanding, we do not believe any current governmental regulations impose material restraints on our business operations as of the date of this annual report. We further acknowledge that, in the course of our operations, we are committed to complying with applicable laws and regulations in the jurisdictions in which we operate, including applicable data protection laws and regulations that govern the privacy and security of the data we handle.

Permissions Required for Our PRC Operations

As of the date of this report, we believe Hupan Pharmaceutical has obtained all of the material licenses, permits, filings and qualifications required for its current business operations. Each such license, permit, filing, and qualification remains in full force and effect, and none has been denied, revoked, suspended or, to our knowledge, is subject to any pending revocation or suspension proceeding. These licenses, permits and filings include the business license (营业执照), the Drug Business License (药品经营许可证), the Medical Device Business License (医疗器械经营许可证), the Class II Medical Device Business Filing Certificate (第二类医疗器械经营备案凭证) and the Food Business License (食品经营许可证), among others. Sichuan Hupan holds a business license and, as an intermediate holding company that does not conduct operating activities, is not required to hold additional operating licenses or permits. Our subsidiaries do not develop, manufacture or hold marketing authorization for any of the products they distribute; accordingly, drug registration certificates, drug marketing authorization holder status and drug manufacturing licenses are held by, and remain the responsibility of, the manufacturers and marketing authorization holders from which they source. Given the changes and developments of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we or our subsidiaries may be required to obtain additional licenses, permits or approvals or complete additional filings for business operations in the future, including if we expand the range of products we distribute or the geographic scope of our operations. If any of our subsidiaries is found to be in violation of any existing or future laws or regulations, or fails to obtain or maintain any of the required permits or approvals in a timely manner, or at all, the competent regulatory authorities would have discretion to take action regarding such violations or failures.

PRC Cybersecurity Review

On December 28, 2021, the CAC and 12 other PRC government authorities jointly published the amended Cybersecurity Review Measures, which came into effect on February 15, 2022. The final Cybersecurity Review Measures provide that a “network platform operator” that possesses personal information of more than one million users and seeks a listing in a foreign country must apply for a cybersecurity review. Further, the competent PRC governmental authorities have the authority to initiate a cybersecurity review even without a specific application against a company if they determine certain network products, services or data processing activities of such company affect or may affect national security.

As of the date of this report, neither we nor any of our PRC subsidiaries has been notified by any PRC regulatory authority that it is a “critical information infrastructure operator,” a “network platform operator” or a “data processor” subject to cybersecurity review, and neither we nor any of our PRC subsidiaries has applied for or been required to apply for a cybersecurity review. We do not believe that Hupan Pharmaceutical is required to apply for a cybersecurity review in connection with any future offering under this registration statement or supplements because it is not a network platform operator and has not processed, and does not expect in the foreseeable future to process, the personal information of more than one million users. No cybersecurity review has been applied for and denied. This conclusion is subject to uncertainty as to how the Cybersecurity Review Measures and the Regulation on Network Data Security Management (the “Network Data Regulations”) will be interpreted and enforced.

CSRC Filing Requirements

The Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, together with five supporting guidelines, promulgated by the CSRC, became effective on March 31, 2023 (the “Trial Measures”). Under the Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, directly or indirectly, are required to complete a filing procedure with the CSRC and report relevant information.

Under the Trial Measures, an overseas offering and listing by an issuer is deemed an indirect overseas offering and listing by a PRC domestic company where both of the following conditions are met: (i) 50% or more of any of the issuer's operating revenue, total profit, total assets or net assets, as reflected in its audited consolidated financial statements for the most recently completed fiscal year, is attributable to PRC domestic companies; and (ii) the principal parts of the issuer's business activities are conducted in mainland China, its principal place of business is located in mainland China, or the majority of the senior management personnel responsible for its business operations are PRC citizens or have their usual places of residence in mainland China. The second condition is satisfied if any one of its three limbs is met.

As of the date of this annual report, based on our current business operations, financial position and management structure, we do not believe that we are subject to the CSRC filing requirements under the Trial Measures. However, if we continue to maintain operations in mainland China, we will reassess the applicability of these requirements in connection with any future overseas securities offering. Other than the governmental permissions and licenses required for our PRC subsidiaries as described above, we do not currently believe that we are required to obtain any additional permissions or approvals from the CSRC, the CAC or any other PRC governmental authority in connection with our current operations. We have obtained all requisite permissions and approvals from, and completed all necessary filings with, the competent PRC authorities that are explicitly required under currently effective PRC laws, regulations and rules, and no such permission, approval or filing has been denied.

If we or our PRC subsidiaries (i) fail to obtain or maintain any required permission or approval, (ii) inadvertently conclude that a permission, approval or filing is not required, or (iii) become subject to additional regulatory requirements as a result of changes in our business operations, applicable laws, regulations or their interpretation, we may be unable to satisfy such requirements in a timely manner or at all, and any permission or approval previously obtained may be rescinded. In such circumstances, we and our PRC subsidiaries could be subject to fines, monetary penalties, orders to rectify, warnings, confiscation of income, suspension or revocation of licenses, restrictions or suspension of operations, and other regulatory, civil or criminal liabilities.

We could also face delays or restrictions in completing future overseas securities offerings, be required to delist our securities from a U.S. exchange, or be prohibited from offering securities to foreign investors. Any of these outcomes could materially and adversely affect our operations, financial condition and the value of our securities, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause the value of our securities to significantly decline or become worthless.

Regulatory Requirements on PRC Foreign Exchange and Cross-Border Transfers

Capital contributions to PRC subsidiaries that are foreign-invested enterprises may be subject to applicable corporate registration, foreign exchange registration and other procedures with the relevant PRC authorities or qualified banks. Loans by an offshore parent to its PRC subsidiaries may constitute foreign debt under PRC law and are subject to applicable statutory limits, foreign exchange registration and other requirements. Accordingly, if our PRC subsidiaries require additional funding from us in the future, including funding derived from the proceeds of any offering under this registration statement, our ability to provide such funding may depend on our completion of applicable registrations, filings and other procedures under PRC law.

Regulations Relating to Labor and Employment

Pursuant to federal and state laws, we adhere to labor and employment laws at the federal and state levels. This includes fair employment practices, wage and hour regulations, worker safety, and anti-discrimination law. We are committed to providing a fair and inclusive workplace environment that respects the rights of our employees and fosters a culture of diversity and equality.

Regulations Relating to Data Protection and Security

Across our various business lines, including pharmaceutical distribution, healthcare, artificial intelligence infrastructure and other technology-related activities, data protection, cybersecurity and information governance have become increasingly important regulatory considerations. Our current operations are primarily conducted in mainland China, and our collection, use, storage, transfer and other processing of personal information may be subject to applicable PRC data protection, cybersecurity and data security laws and regulations. See “—PRC Cybersecurity Review.”

As our business expands into additional jurisdictions or involves customers, suppliers, service providers or other counterparties located outside China, we may also become subject to data protection and privacy requirements in those jurisdictions. Depending on the nature and geographic scope of our activities, other privacy and data protection laws may also apply. For example, the General Data Protection Regulation (the “GDPR”) may require covered businesses to provide specified notices regarding the processing of personal data, establish a lawful basis for such processing, implement appropriate data protection and security measures, and honor certain rights of individuals, including rights of access, correction and deletion. In certain circumstances, the GDPR may also impose restrictions or additional requirements on transfers of personal data outside the European Economic Area. As another example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”), imposes obligations on covered businesses that collect or process personal information of California residents and provides consumers with rights relating to access, deletion, correction, use and disclosure of sensitive personal information, and the sale or sharing of personal information. The CCPA also imposes requirements relating to privacy notices, data minimization, purpose limitation and the handling of consumer requests, and certain covered businesses may be subject to additional cybersecurity audit, risk assessment and automated decisionmaking requirements under implementing regulations.

Regulations Relating to Distribution of Pharmaceutical Products in China

According to the “Regulations on the Supervision and Administration of the Quality of Pharmaceutical Operation and Use” implemented by the State Administration for Market Regulation of China in January 2024, the entity which is engaged in pharmaceutical wholesale or retail activities within the territory of the People’s Republic of China should obtain the Pharmaceutical Operation License. The local departments of the National Medical Products Administration pharmaceutical and the State Administration for Market shall supervise the daily operation of those entities through regular and casual inspections. Those inspections are aiming at the whether the purchase, storage, sales and other operating activities of the pharmaceutical selling entities are compliant with the related regulations. In August 2025, Hubei Pharmaceutical passed an on-site inspection from Hubei Administration for Market.

Regulations Relating to Quantum Computing and Artificial Intelligence

Our emerging quantum-related and certain other advanced technology activities may be conducted through Quantum Nexus, our Cayman Islands subsidiary, and our AI-related activities are conducted through our U.S. subsidiaries. These activities may be subject to various laws and regulations applicable to technology companies, depending on the nature and location of the activities conducted. These may include laws and regulations relating to data privacy and security, intellectual property, consumer protection, cybersecurity, export controls and restrictions on the transfer or use of certain technologies. The applicability of particular requirements may depend on multiple factors, including the types of technologies or applications involved, the categories of information collected or processed, the location from which such information is collected, the location of users or other data subjects, the jurisdictions in which the relevant activities are conducted, and the industries in which the technologies are deployed.

Because our quantum-related and certain other advanced technology activities remain in the development and evaluation stage, and our AI compute capacity and managed inference services are at an early stage of development and have not yet generated customer revenue, we do not currently believe that such activities require any material governmental licenses or approvals beyond those generally applicable to our operations. However, as we further develop or commercialize technologies or applications, enter into collaborations, collect or process additional categories of information, or expand into new industries or jurisdictions, including through Quantum Nexus, we may become subject to additional U.S. federal, state, foreign or other regulatory requirements. Compliance with such requirements could increase our costs, restrict certain activities or require us to modify our technologies, data practices, business arrangements or proposed commercial activities.

We intend to evaluate applicable regulatory requirements in light of the specific jurisdictions, customer requirements and use cases involved as commercial relationships are established. In addition, as we further develop or commercialize quantum-related technologies or applications, expand our AI infrastructure and managed inference services, enter into collaborations, collect or process additional categories of information, or expand into new industries or jurisdictions, we may become subject to additional U.S. federal, state, foreign or other regulatory requirements. Compliance with such requirements could increase our costs, restrict certain activities or require us to modify our technologies, data practices, business arrangements or proposed commercial activities.

Regulations Relating to Export Controls and Trade Compliance

Our artificial intelligence infrastructure business involves the procurement, ownership and operation of high-performance computing equipment, including servers incorporating advanced graphics processing units, or GPUs. Certain of these items, as well as related software and technology, may be subject to U.S. export control laws and regulations, including the Export Administration Regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security, or BIS.

Depending on the classification of the applicable hardware, software or technology, the location, nationality or ownership of the customer or end user, the destination of the relevant equipment or services, the intended end use and other transaction-specific factors, certain exports, reexports, transfers or other transactions involving advanced computing items may require a license, license exception, authorization, certification, customer or end-user diligence, recordkeeping or other compliance measures. These requirements may also affect our ability to provide access to computing capacity to certain customers outside the United States or to customers whose ownership, ultimate parent, end users or intended uses present heightened export-control concerns.

As we develop this business, we expect to evaluate applicable export-control requirements on a transaction-by-transaction basis, including the classification of relevant equipment, customer and beneficial ownership information, end-user and end-use restrictions, geographic location and any applicable licensing or authorization requirements. We may also be required to obtain or maintain information or certifications from customers, suppliers or other parties in our supply chain in order to support such compliance.

U.S. export-control requirements applicable to advanced computing and artificial intelligence technologies continue to evolve. Changes in these requirements, or the imposition, denial or delay of any required license or authorization, could restrict the customers, jurisdictions or uses we are able to serve, delay deployment of equipment, increase compliance costs or require us to modify our commercial arrangements, customer screening procedures or operations.

Corporate Information

Quanome Technologies, Inc. (formerly Lakeside Holding Limited) was incorporated under the laws of the State of Nevada on August 28, 2023. On July 31, 2026, Quanome filed with the Secretary of State of the State of Nevada a Certificate of Amendment to change its name from “Lakeside Holding Limited” to “Quanome Technologies, Inc.” (the “Name Change Amendment”). The Name Change Amendment became effective at 5:00 p.m. Eastern Time on August 3, 2026. Beginning with the opening of trading on August 4, 2026, the Company’s common stock began trading on The Nasdaq Capital Market under the Company’s new corporate name, Quanome Technologies, Inc., and the new ticker symbol “QNME” (the “Symbol Change”). The CUSIP number for the Company’s common stock did not change in connection with the Name Change Amendment or the Symbol Change.

Hupan Pharmaceutical and Sichuan Hupan Jincheng Enterprise Management Co., Ltd (“Sichuan Hupan”) was incorporated in the People’s Republic of China on November 21, 2024 and July 10, 2024, respectively. Smart Reserve Holding LTD, Smart Reserve Inc and Quantum Nexus Technologies Ltd. were incorporated in the Cayman Islands on September 16, 2025, September 25, 2025 and May 15, 2026, respectively. XDT, Inc., XDT US HoldCo, LLC, XDT Infrastructure I, LLC, and XDT Infrastructure II, LLC were incorporated in the State of Delaware on September 10, 2026. Quanome Technologies, Inc. (formerly Lakeside Holding Limited) is a holding company, and Hupan Pharmaceutical, Smart Reserve Holding LTD, Smart Reserve Inc, Quantum Nexus Technologies Ltd., XDT Infrastructure I, LLC, and XDT Infrastructure II, LLC are our operating subsidiaries through which all of our business is conducted. Our principal executive office is located at 112W 34th St, FL 18, Room 18022, New York, NY 10120, and our telephone number is (778) 888-7232.

Available Information

Our website address is https://quanometech.com. The information on, or that can be accessed through, our websites is not part of this report and is not incorporated by reference herein. We have included our website address as inactive textual reference only.

We are a smaller reporting company and are not required to provide the information required under this item. However, we believe this information may be valuable to our shareholders for this filing. We reserve the right to not provide risk factors in our future filings. Our primary risk factors and other considerations include:

Risks Related to Our Business and Development

Our pharmaceutical distribution business depends on our relationships with manufacturers, suppliers and other business partners and our ability to maintain an adequate supply of products.

We rely on pharmaceutical manufacturers, suppliers, agents, logistics providers and other third parties to obtain and distribute the products we sell. Our ability to maintain or expand our pharmaceutical distribution business depends in part on maintaining these relationships and obtaining products on commercially acceptable terms. We may experience interruptions or changes in product supply as a result of manufacturing constraints, changes in supplier relationships, product shortages, regulatory actions, changes in pricing or commercial terms, logistics disruptions or other factors beyond our control. If we are unable to obtain sufficient quantities of products, maintain important supplier relationships or secure alternative sources on acceptable terms, our ability to satisfy customer demand and our revenue and profitability could be adversely affected.

We face competition and changes in customer demand, procurement practices and pricing that could adversely affect our revenue and profitability.

The pharmaceutical distribution industry in China is competitive, and we compete with national and regional pharmaceutical distributors, wholesalers and other companies offering similar products and services. Certain competitors may have greater financial resources, broader product portfolios and distribution networks, stronger purchasing power or more established relationships with manufacturers, hospitals and other customers. In addition, our results may be affected by changes in hospital and customer demand, procurement and bidding cycles, government or regional procurement programs, competitive pricing and changes in our product mix. We may also depend on significant customers for a portion of our revenue, and the loss or reduction of purchases by such customers could adversely affect our results. If we are unable to maintain customer relationships, compete effectively, participate successfully in applicable procurement processes or manage pricing and margin pressure, our business, financial condition and results of operations could be materially and adversely affected.

We may not be successful in expanding into new business areas or markets, and such expansion may expose us to additional operational, regulatory and execution risks.

Our current operating business is primarily focused on pharmaceutical distribution through Hupan Pharmaceutical. We continue to evaluate opportunities to expand and diversify our business, including into areas in which we have limited or no prior operating experience. As part of these initiatives, we expect to develop computational capabilities through Quantum Nexus that may have applications in therapeutic discovery, and we may pursue collaborations, acquisitions or other strategic transactions involving laboratories and research teams engaged in therapeutic discovery and clinical research. We have not generated any revenue from these activities and, as of the date of this report, have not entered into any definitive agreement with respect to any such transaction.

Our ability to successfully enter and develop these or other new business areas is uncertain. We may lack relevant industry experience, technical capabilities, personnel, customer relationships or regulatory expertise, and we may be unable to identify or successfully complete suitable collaborations, acquisitions or other strategic transactions. Any expansion may require significant capital and management resources and may expose us to additional regulatory, technological, competitive and operational risks. There can be no assurance that any such initiative will be successfully implemented, generate revenue or achieve profitability. If we are unable to successfully execute our expansion or diversification initiatives, our business, financial condition, results of operations and prospects could be materially adversely affected.

Our long-term growth and competitiveness are highly dependent on our ability to control costs.

Our ability to grow our business and improve profitability depends in part on our ability to effectively manage operating costs while maintaining the quality and reliability of our products and services. In addition, our evaluation and potential development of new business initiatives may require substantial additional expenditures before generating any revenue, if at all. Such initiatives may require investments in technology, specialized personnel, research capabilities, professional services, regulatory compliance and infrastructure, and we may not be able to accurately estimate or control these costs.

If our operating expenses increase more rapidly than our revenues, if we are unable to achieve expected efficiencies, or if we incur significant costs in connection with new business initiatives that do not result in commercially successful operations, our margins, liquidity, financial condition and results of operations could be materially adversely affected.

Any failure to obtain or maintain requisite approvals, licenses, permits or other regulatory authorizations applicable to our business could materially adversely affect our business, financial condition and results of operations.

Our current pharmaceutical distribution and related activities are subject to various licensing, permitting, filing and other regulatory requirements in the jurisdictions in which we operate. We are required to obtain and maintain applicable approvals, licenses and permits and to comply with laws and regulations governing, among other matters, pharmaceutical distribution, product quality, business operations and other related activities. These requirements may change from time to time, and the interpretation or enforcement of applicable laws and regulations may also evolve.

Any expansion into new business areas may subject us to additional regulatory regimes and require additional approvals, licenses, registrations or permits. Because these initiatives remain preliminary, we cannot currently determine the full scope of requirements that may apply. If we fail to obtain or maintain any required authorization, we could face fines, penalties, operational restrictions, increased compliance costs or suspension of operations, any of which could materially adversely affect our business, financial condition and results of operations.

Failure to renew our current leases or locate desirable premises for our facilities, or challenges on the use of certain leased properties by us or our service providers, could materially and adversely affect our business, financial condition and results of operations.

We lease properties used in our pharmaceutical distribution operations, and certain service providers may also lease premises used for storage, transportation or distribution. If we or our service providers are unable to renew existing leases on commercially reasonable terms, we may need to relocate affected operations, resulting in disruption, additional costs or delays. As our business develops, we may also need additional warehousing or distribution capacity, and suitable premises may not be available on acceptable terms or within the required timeframe. Any resulting disruption or increase in occupancy costs could materially adversely affect our business, financial condition and results of operations.

None of our service agreements with our customers is on an exclusive basis.

Our customers may purchase pharmaceutical products or obtain related distributions from other suppliers in addition to or instead of us. Although we have established relationships with certain major customers, there can be no assurance that they will continue to purchase from us at historical levels or at all. Any reduction in purchases by major customers could materially and adversely affect our business, financial condition and results of operations.

We may be subject to potential liability in connection with pending or threatened legal proceedings and other matters, which could adversely affect our business, financial condition or results of operations.

From time to time, we may become a party to various legal or administrative proceedings arising in the ordinary course of our business. We may also be subject to potential liabilities in connection with pending or threatened legal proceedings arising from breach of contract claims and other matters. These proceedings, investigations, claims and complaints could be initiated or asserted under or on the basis of a variety of laws in different jurisdictions, including data protection and privacy laws, trucker or consumer protection laws, labor and employment laws, transportation laws, advertising laws, intellectual property laws, securities laws, tort laws, contract laws and property laws. There is no guarantee that we will be successful in defending ourselves in legal and administrative actions or in asserting our rights under these various laws. If we fail to defend ourselves in these actions, we may be subject to restrictions, fines or penalties that will materially and adversely affect our business, financial condition and results of operations. Even if we are successful in the attempt to defend ourselves in legal and regulatory actions or to assert our rights under various laws and regulations, the process of communicating with relevant regulators, defending ourselves and enforcing our rights against the various parties involved may be expensive and time-consuming. These actions could expose us to negative publicity, substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business.

Our newly launched AI compute and managed inference business is at an early stage and may not develop as expected.

Beginning in September 2026, we commenced activities relating to the provision of artificial intelligence compute capacity and managed inference services through our indirectly owned subsidiary XDT Infrastructure I, LLC. This business is at an early stage, and our operating model, customer base, pricing structure, infrastructure requirements and service capabilities are still developing. We have limited operating history in this area and may encounter difficulties in acquiring and deploying computing resources, attracting and retaining customers, managing technical operations, controlling costs and scaling the business. We may also be required to make significant expenditures before generating meaningful or recurring revenue. If we are unable to successfully develop and commercialize this business, our results of operations and financial condition could be adversely affected.

Our ability to provide AI compute services depends on the availability, performance and cost of specialized computing infrastructure.

Our business depends on access to servers, graphics processing units, networking equipment, hosting capacity and related infrastructure. Specialized computing hardware may be expensive, subject to supply constraints, technological obsolescence or extended procurement lead times. Increases in hardware, hosting, electricity, networking, maintenance or other infrastructure costs could reduce our margins or limit our ability to expand capacity. In addition, hardware failures, shortages of replacement components or delays in deploying additional capacity could affect our ability to serve existing or prospective customers.

Interruptions, failures or security incidents affecting our infrastructure or service providers could disrupt our operations.

Our new service line depends on the continuous availability of servers, data center facilities, power, networking, software systems, APIs and other infrastructure operated by us or third-party service providers. Such infrastructure may be affected by hardware failures, software errors, power outages, network disruptions, cyberattacks, human error, natural disasters or other events. Even where customer environments are physically or logically segregated, a failure affecting underlying infrastructure may interrupt customer access or reduce service availability. Any prolonged or repeated interruption could result in contractual claims, service credits, customer loss and reputational damage.

We may depend on third-party technology, software, models and infrastructure that we do not control.

Our services may rely on third-party hardware, software frameworks, model architectures, APIs, hosting providers or other technology. We may be required to comply with applicable license terms, usage restrictions and technical requirements imposed by such third parties. If a third party modifies or terminates our access to its technology, changes its pricing or licensing terms, experiences service interruptions, or determines that our use is inconsistent with its terms, our ability to provide services to customers may be adversely affected. We may also incur additional costs to replace or modify affected technology.

Our use and deployment of customer-selected artificial intelligence models may expose us to intellectual property, licensing and other legal risks.

Under our current service plan, customers may request that specific artificial intelligence models, software or other technology be deployed on infrastructure allocated to them. We may not independently verify all intellectual property rights, licenses or restrictions applicable to customer-selected models or related software. If a model, dataset, software component or other technology is used without sufficient authorization, we could become involved in intellectual property, contractual or other disputes. We may also face uncertainty regarding ownership or permitted use of model outputs, fine-tuned models, configuration files or other technology generated or modified through our services.

Our business may be subject to evolving export control, sanctions, data protection, cybersecurity and other regulatory requirements, which could restrict our ability to provide AI computing services to certain customers or in certain jurisdictions.

As of the date of this annual report, we have not generated revenue from this new service line, nor have we engaged any customers. We cannot assure you that the future provision of advanced computing infrastructure, artificial intelligence-related services, software and technical access will not subject to export control, sanctions, data protection, cybersecurity and other regulatory requirements in the jurisdictions in which we and our customers operate.

In particular, certain high-performance GPUs, servers incorporating such GPUs, related software and technology, and certain transactions involving advanced computing capabilities are subject to U.S. export controls administered by the U.S. Department of Commerce’s Bureau of Industry and Security. Depending on the applicable hardware or technology, destination, customer, ultimate parent, end user and intended end use, applicable requirements may restrict or prohibit certain transactions, require governmental licenses or other authorizations, or require enhanced customer screening, end-user and end-use diligence, certifications, recordkeeping, technical controls or contractual restrictions. Export-control requirements may also affect our ability to provide remote access to computing capacity or related services to certain customers, users or jurisdictions.

U.S. export-control requirements relating to advanced computing, artificial intelligence and semiconductor technologies have changed significantly in recent years and may continue to change. Such requirements could limit the equipment we are able to deploy, the customers or jurisdictions we are able to serve, the manner in which customers may access or use our computing infrastructure, or our ability to obtain or maintain equipment and services from suppliers. They may also require us to modify customer onboarding, know-your-customer and beneficial ownership procedures, technical access controls, contractual arrangements, or other aspects of our operations. Similar restrictions may arise under applicable sanctions regimes or foreign laws.

Because we have not yet engaged customers for this service line, we have not yet fully evaluated the regulatory requirements that may apply to particular customer arrangements, jurisdictions or use cases. We expect to conduct such assessments based on the location and ownership of the customer and end users, the nature and classification of the applicable equipment or technology, the intended use of the computing capacity and other relevant circumstances. We cannot assure you that required licenses or authorizations, if any, will be available or obtained on acceptable terms or within the required timeframe.

Any failure or perceived failure to comply with applicable export control, sanctions, data protection, cybersecurity or other regulatory requirements could result in governmental investigations, civil or criminal penalties, denial or suspension of export privileges, restrictions on our operations, contractual liability, reputational harm or increased compliance costs. Regulatory requirements relating to artificial intelligence, advanced computing and cross-border technology access continue to evolve, and compliance may require additional screening, technical controls, contractual restrictions and other measures. Failure to comply with applicable requirements could result in penalties, restrictions on our operations or reputational harm.

Rapid technological change could impair the value of our infrastructure and require significant additional investment.

Artificial intelligence hardware, model architectures and inference technologies are evolving rapidly. New generations of processors, networking technologies, model optimization techniques or software frameworks may make our existing infrastructure less competitive or economically efficient. We may need to upgrade, replace or reconfigure hardware and software sooner than anticipated in order to remain competitive. Such investments may be substantial and may not generate sufficient returns before becoming obsolete.

Our emerging quantum- and certain other advanced technology activities may become subject to an evolving and potentially complex regulatory framework, which could increase our costs or restrict our activities.

Our quantum- and certain other advanced technology activities remain in the development and evaluation stage. As we further develop these activities, we may become subject to a variety of U.S. federal and state, foreign and other laws, regulations and governmental policies relating to, among other matters, artificial intelligence, quantum technologies, data privacy and security, cybersecurity, intellectual property, consumer protection, export controls and the transfer or use of certain technologies. The laws and regulations applicable to these activities may depend on a number of factors, including the nature of the technologies and applications we develop or use, the types of information we collect or process, where such information is collected or processed, the location of users or other data subjects, the jurisdictions in which we or our subsidiaries conduct activities, the industries in which our technologies may be applied, and the nature of our relationships with technology providers, research institutions and other collaborators. As a result, the regulatory requirements applicable to our activities may change as our business develops.

Laws, regulations and governmental policies relating to emerging technologies continue to evolve, and their interpretation and application may be uncertain. New or changing requirements could require us to obtain licenses, approvals or other authorizations, modify our technologies or data practices, impose limitations on collaborations or cross-border activities, increase compliance costs or restrict our ability to develop or commercialize certain applications. We may also incorrectly determine that a particular law, regulation or licensing requirement does not apply to us. Any failure to identify or comply with applicable requirements, or any significant change in the regulatory framework applicable to our activities, could delay or limit our development efforts, increase our costs and materially and adversely affect our business, financial condition, results of operations and prospects.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws could adversely affect our business, results of operations, financial condition and reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in the jurisdictions in which we operate or may operate, including the U.S. Foreign Corrupt Practices Act, or the FCPA, to the extent applicable. The FCPA generally prohibits corrupt payments or offers of value to foreign officials for the purpose of obtaining or retaining business and also imposes certain books, records and internal controls requirements. As we evaluate potential expansion into new business areas or jurisdictions, including the possibility of conducting or generating revenue from U.S.-related business activities in the future, we may become subject to additional compliance obligations under U.S. and other applicable laws. Any non-compliance could result in investigations, fines, penalties, remedial measures, legal expenses or reputational harm, which could materially and adversely affect our business, results of operations and financial condition.

If we fail to implement and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of our common stock may be materially and adversely affected.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Based on management’s evaluation as of June 30, 2026, our internal control over financial reporting was not effective due to material weaknesses relating to (i) inadequate segregation of duties and effective risk assessment and (ii) insufficient written policies and procedures for accounting and financial reporting under U.S. GAAP and SEC requirements.

We are taking steps to remediate these material weaknesses, including hiring additional accounting personnel with U.S. GAAP and SEC reporting experience, implementing formal period-end financial reporting procedures and controls, and enhancing our internal audit function and Sarbanes-Oxley compliance processes. However, the implementation of these measures is ongoing, and we cannot assure you that they will be sufficient to remediate the identified material weaknesses or prevent additional deficiencies in the future.

If we are unable to remediate these material weaknesses or otherwise maintain effective internal control over financial reporting, we may be unable to produce timely and accurate financial statements, investors may lose confidence in our financial reporting, and we may become subject to regulatory scrutiny or additional compliance costs, any of which could materially adversely affect our business, financial condition, results of operations and the market price of our common stock.

Our insurance coverage may not be sufficient, which could expose us to significant costs and business disruptions.

We have obtained or caused relevant counterparties to obtain insurance to cover certain potential risks and liabilities. There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

Risks Related to Our Business Operations in the PRC

The PRC government may exert significant influence over our PRC subsidiaries’ operations, which could result in a material change in our operations and/or in the value of the securities we are registering, and could cause the value of our securities to significantly decline or become worthless.

Our operating subsidiary, Hupan Pharmaceutical, is a China-based company and has business operations in the PRC. Accordingly, the PRC government has significant oversight, control and discretion over the conduct of Hupan Pharmaceutical’s business and may intervene or influence our operations at any time. The PRC government has recently published new policies that significantly affected certain industries, and we cannot rule out the possibility that it will in the future do the same regarding Hupan Pharmaceutical’s industry, including policies that could require us to seek permission from the PRC authorities to continue to operate our PRC business.

In February 2023, the China Securities Regulatory Commission (the “CSRC”) released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (the “Trial Measures”), which came into effect on March 31, 2023. The Trial Measures comprehensively improve and reform the existing regulatory regime for overseas offering and listing of PRC domestic companies’ securities and regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime.

In February 2023, the CSRC and other PRC governmental authorities jointly issued the Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality Provisions”), which came into effect on March 31, 2023. According to the Confidentiality Provisions, PRC domestic companies that directly or indirectly conduct overseas offerings and listings shall strictly abide by the laws and regulations on confidentiality when providing or publicly disclosing, whether directly or through their overseas listed entities, materials to securities services providers. In the event such materials contain state secrets or working secrets of government agencies, PRC domestic companies shall first obtain approval from authorities, and file with the secrecy administrative department at the same level with the approving authority; in the event that such materials, if divulged, will jeopardize national security or public interest, PRC domestic companies shall comply with procedures stipulated by national regulations.

Following the disposition of our U.S. business in February 2026, a substantial majority of our current revenue is derived from its PRC operations. We intend to develop additional business lines through subsidiaries in the Cayman Islands. However, these planned businesses remain subject to development and commercialization risks, and there can be no assurance that we will successfully establish meaningful operations or generate material revenue outside China.

If (i) we mistakenly conclude that certain regulatory filings, permissions and approvals are not required, (ii) applicable laws, regulations, or interpretations change, or (iii) we are required to obtain such filings, permissions or approvals in the future, we may be unable to obtain them in a timely manner, or at all, and such filings, permissions or approvals may be denied or rescinded even if obtained. We may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies if we are unable to comply with such requirements, which may result in fines and penalties, restrictions on our operations, having to delist from a stock exchange outside of China, the halting of securities offerings to foreign investors and/or other actions that could materially and adversely affect our operations.

Any such actions or sanctions, once taken by the PRC government, could significantly limit, delay or hinder our ability to offer or continue to offer securities to investors, could result in a material change in our operations and/or in the value of the securities we are registering, and could cause the value of our securities to significantly decline or become worthless. We currently expect to fund our operations primarily through cash generated from our existing business operations and, as appropriate, through future capital raising activities. To the extent additional capital is required to support the research and development, commercialization or expansion of our planned quantum-enabled artificial intelligence, post-quantum cryptography or other new business initiatives, including any strategic acquisitions or collaborations, our ability to successfully pursue such initiatives may depend in part on our ability to access the capital markets. If governmental actions or regulatory restrictions were to limit, delay or prevent us from conducting future securities offerings, our ability to obtain additional financing could be adversely affected, which could in turn delay or limit the development, commercialization or expansion of our planned new business activities.

Changes in political, economic and other policies of the PRC government could have a material adverse effect on the overall economic growth of the PRC, which could reduce the demand for products offered by Hupan Pharmaceutical, and therefore adversely affect our financial results.

The PRC government has implemented various measures to promote economic development and regulate the allocation of resources. Although some of these measures may benefit the PRC economy generally, they may adversely affect Hupan Pharmaceutical’s medical product wholesale and distribution operations.

Hupan Pharmaceutical’s ability to maintain and grow its business in the PRC depends on a number of factors beyond our control, including macroeconomic and market conditions, demand for medical and healthcare products, changes in healthcare and pharmaceutical distribution policies, product pricing and reimbursement policies, procurement practices, import and export requirements, supply chain conditions, tax policies and the interpretation and enforcement of applicable laws and regulations. Changes in government procurement programs, centralized purchasing policies, distribution licensing requirements or restrictions on the sale, storage, transportation or importation of medical products could affect the products Hupan Pharmaceutical is permitted to distribute, the prices and margins at which it operates, and its ability to maintain relationships with suppliers and customers.

If Hupan Pharmaceutical is unable to adapt to these regulatory, policy or market developments in a timely and effective manner, our results of operations, financial condition and prospects could be materially and adversely affected.

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.

The PRC legal system is a civil law system based on written codes and statutes. Unlike the common law system, prior court decisions may be cited as persuasive authority, but have limited precedential value. Since the late 1970s, the PRC government has promulgated a comprehensive system of laws, rules and regulations governing economic matters in general. In particular, as a result of the recency of implementation of certain laws and regulations, the non-precedential nature of court decisions, and the discretion regulators have in interpretation and enforcement of such laws, rules and regulations, the PRC legal system involves significant uncertainties, and can be inconsistent in its implementation, interpretation and enforcement. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we may experience. These uncertainties may impede our ability to enforce our contracts and could materially and adversely affect our business, financial condition and results of operation.

The PRC legal system is based in part on government policies and internal rules which may be amended from time to time with little advance notice and which may not be timely published or otherwise made publicly available. Rules and regulations in China can change quickly, and amendments may in certain circumstances be given retroactive effect. We may not be aware of our violation of these policies and rules until after the occurrence of the violation, and we may be found to be in violation if we fail to adapt to these regulatory developments in a timely and effective manner. Such potential violations, including violations concerning the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations. As a result, sudden or unexpected changes in laws and regulations in the PRC with little advance notice could result in a material change in our operations and/or the value of the securities we are registering for sale, and could cause the value of our securities to significantly decline or become worthless.

Failure to obtain, renew or maintain the licenses, permits and filings required for our business operations, or to comply with the conditions and scope limitations attached to them, could materially and adversely affect our business, financial condition and results of operations.

The distribution of pharmaceuticals, medical devices and foods for special medical purposes in the PRC is a licensed activity, and each of the product categories we distribute is administered under a separate regulatory regime. Hupan Pharmaceutical currently holds a Drug Business License (药品经营许可证), a Medical Device Business License (医疗器械经营许可证), a Class II Medical Device Business Filing Certificate (第二类医疗器械经营备案凭证), and a Food Business License (食品经营许可证), in addition to its business license. Each of these licenses has a term of five years and must be renewed in advance of its expiration in accordance with applicable statutory procedures.

Each license and filing authorizes only the categories of products specified on its face, and in certain cases the mode of operation, the scope of business and the registered premises and storage facilities. If Hupan Pharmaceutical distributes a product outside the authorized scope of the relevant license or filing, changes its premises, warehouses or cold-chain facilities, changes its legal representative or responsible personnel, or otherwise alters particulars recorded on a license or filing without obtaining the required amendment or completing the required updating procedures, it may be found to be in violation of applicable requirements.

We cannot assure you that Hupan Pharmaceutical will be able to renew any of its licenses or filings on a timely basis, on comparable terms, or at all, or that the authorities will not narrow the scope of any license upon renewal. If Hupan Pharmaceutical fails to obtain, renew or maintain any required license, permit or filing, operates outside its authorized scope, or is found to be in violation of applicable requirements, it could be subject to warnings, orders to rectify, fines, confiscation of products and of income derived from the relevant operations, suspension of operations, and suspension or revocation of the relevant license or filing. Because substantially all of our revenue depends on products that may only be distributed under these licenses, the loss, suspension or non-renewal of any one of them, or a narrowing of its authorized scope, could require us to cease distributing an entire product category. In addition, changes in the interpretation or enforcement of applicable requirements, in the risk classification of a medical device Hupan Pharmaceutical distributes, in the licensing items applicable to foods for special medical purposes, or in centralized procurement, tender qualification or product pricing and reimbursement policies could require Hupan Pharmaceutical to obtain additional licenses or complete additional filings, or could restrict the products Hupan Pharmaceutical is permitted to distribute. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.

Restrictions on the ability of our PRC subsidiaries to make dividends and other distributions to us could limit our ability to fund our operations and make distributions to shareholders.

We are a Nevada holding company that conducts substantially all of our business through our PRC operaing subsidiary. As a holding company, we may rely on dividends and other distributions from Hupan Pharmaceutical to satisfy our cash and financing requirements, including funding our operations, pursuing strategic growth initiatives, servicing any indebtedness and making distributions to Quanome’s shareholders.

Under applicable PRC laws and regulations, dividends and other distributions by our PRC subsidiary are subject to various restrictions and procedures, including those relating to foreign exchange registration and the conversion of Renminbi into foreign currencies. In addition, Hupan Pharmaceutical may make distributions to us only out of its accumulated after-tax profits, if any, as determined in accordance with PRC accounting standards and regulations. PRC laws also require enterprises to set aside a portion of their after-tax profits each year to fund certain statutory reserve funds before they may distribute dividends. These reserve funds are not distributable as cash dividends.

Furthermore, if Hupan Pharmaceutical incurs debt in the future, the instruments governing such indebtedness may restrict its ability to pay dividends or make other distributions to us. Any limitation on the ability of Hupan Pharmaceutical to transfer funds to us could adversely affect our liquidity and our ability to fund our operations, pursue acquisitions or other strategic transactions, support the development and commercialization of new business initiatives or make distributions to Quanome’s shareholders.

As a result, there can be no assurance that our PRC subsidiary will be able to make dividends or other distributions to us in the amounts or at the times we anticipate, or at all. Any restrictions on cash transfers within our corporate group could materially and adversely affect our business, financial condition, results of operations and the value of our securities.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies may restrict or delay us from using the proceeds of future offerings to make loans or additional capital contributions to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business.

Any funds we provide to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, may be subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries may require registration with the State Administration for Market Regulation (the “SAMR”) or its local counterpart and registration with a local bank authorized by SAFE. In addition, (i) any foreign loan procured by our PRC subsidiaries is required to be registered with SAFE or its local branches, and (ii) any of our PRC subsidiaries may not procure loans which exceed the difference between its total investment amount and registered capital or, as an alternative, they may only procure loans subject to the calculation approach and limitation as provided by the People’s Bank of China.

Under applicable SAFE regulations, Renminbi converted from the foreign-currency-denominated capital of a foreign-invested enterprise may not be used for expenditures beyond the enterprise’s business scope, may not be used to provide entrusted loans or to repay loans between non-financial enterprises, and may not be lent to non-affiliated entities. Foreign-invested enterprises may settle their foreign exchange capital and convert foreign debt into Renminbi on a discretionary basis, and non-investment foreign-invested enterprises may use capital funds to make domestic equity investments provided that the investment does not fall within the negative list for foreign investment. Interpretation and application of these requirements continue to evolve, and violations may result in monetary or other penalties.

Historically, we have provided funding to a PRC subsidiary through capital contributions. We currently have no plans to provide additional funding to our PRC subsidiaries. However, if our PRC subsidiaries require additional funding from Quanome in the future, including funding derived from proceeds of any offering under this registration statement, our ability to provide such funding may depend on the completion of applicable registrations, filings, reporting and other procedures under PRC law. We cannot assure you that we will be able to complete any such required procedures on a timely basis, or at all. Any failure or delay in completing applicable procedures, or any restrictions on the conversion or use of such funds, could restrict or delay our ability to use proceeds from future offerings to fund or expand the operations of our PRC subsidiaries and could materially and adversely affect our liquidity, business and results of operations.

Regulatory restrictions on currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes regulatory restrictions on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China, and requires approval or registration in accordance with regulatory requirements. Substantially all of our revenues are denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE, provided that certain procedural requirements are complied with and supporting documentation is presented to designated banks. Approval from, or registration with, appropriate government authorities is, however, required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital account items, such as the repayment of loans denominated in foreign currencies or the repatriation of investment. As a result, we may not be able to convert Renminbi into U.S. dollars, or to remit funds out of China, in a timely manner or at all. The PRC government may at its discretion further restrict access to foreign currencies for current account or capital account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, service any foreign currency-denominated obligations or fund business activities outside the PRC.

Implementation of the labor laws and regulations in the PRC may adversely affect our business and results of operations, and failure to fully comply with PRC labor-related laws may expose us to potential liabilities and penalties.

Pursuant to the PRC Labor Contract Law, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. It is uncertain as to how the labor contract law and its implementation rules will affect Hupan Pharmaceutical’s current employment policies and practices. Hupan Pharmaceutical’s employment policies and practices may violate the labor contract law or its implementation rules, and we may thus be subject to related penalties, fines or legal fees.

Compliance with the labor contract law and its implementation rules may increase the operating expenses. In the event that Hupan Pharmaceutical decides to terminate some of its employees or otherwise change its employment or labor practices, the labor contract law and its implementation rules may also limit its ability to effect those changes in a desirable or cost-effective manner, which could adversely affect its business and results of operations. According to the Social Insurance Law, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance and maternity insurance, and the employers must, together with their employees or separately, pay the social insurance premiums for such employees. The PRC government’s enhanced measures relating to social insurance collection may lead to stricter enforcement.

As the interpretation and implementation of these laws and regulations are still evolving, there can be no assurance that Hupan Pharmaceutical’s employment practice policy will at all times be deemed to be in full compliance with labor-related laws and regulations in the PRC, which may subject Hupan Pharmaceutical to labor disputes or government investigations. If Hupan Pharmaceutical is deemed to have violated relevant labor laws and regulations, it could be required to provide additional compensation to its employees, and, therefore, our financial condition and results of operations could be materially and adversely affected.

Fluctuations in exchange rates may result in foreign currency exchange losses.

The change in the value of the Renminbi against other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and the PRC’s foreign exchange policies, as well as supply and demand in the local market. We are exposed to the risks of market forces or government policies and their impact on the exchange rate between Renminbi or other currencies in the future. Subsequent to the disposal of our U.S. logistics business in February 2026 and as of the date of this report, most of our revenue and costs are denominated in Renminbi and most of our cash are also denominated in Renminbi. Any significant fluctuations in the value of the Renminbi may materially and adversely affect our liquidity and cash flows.

Changes in the relations between the PRC and the United States may affect our business, financial condition and results of operations.

Due to Hupan Pharmaceutical’s operations in the PRC, our business, results of operations and financial condition may be influenced to a certain degree by changes in government relations between the PRC and the United States or other governments. There is significant uncertainty about the future relationship between the United States and the PRC with respect to trade policies, treaties, government regulations and tariffs.

The PRC’s political relationships with those foreign countries and regions may affect our current and future relationships with third parties. There can be no assurance that our existing or potential collaborators will not alter their perception of us or their preferences as a result of adverse changes to the state of political relationships between the PRC and the relevant foreign countries or regions, and such alteration may cause a decline in the demand for Hupan Pharmaceutical’s products, and adversely affect our business, financial condition, results of operations, cash flows and prospects.

In July 2021, the PRC government provided new guidance on the PRC-based companies raising capital outside of the PRC, including through arrangements called variable interest entities (“VIEs”). In light of such developments, the SEC has imposed enhanced disclosure requirements on the PRC-based companies seeking to register securities with the SEC. Although Hupan Pharmaceutical is our wholly-owned subsidiary and we do not have a VIE structure, due to operations in the PRC, any future PRC, U.S. or other rules and regulations that place restrictions on capital raising or other activities by companies with operations in the PRC could affect our business and results of operations. Changes in the state of relations between the PRC and the United States or other governments are difficult to predict and could adversely affect our operations and our business in the PRC and United States.

You may experience difficulties in effecting service of legal process upon, enforcing foreign judgments against, or bringing original actions in the PRC against us or certain of our directors and officers, and your ability to protect your interests through the U.S. courts may be limited.

A substantial portion of our operations and assets are located in the PRC. In addition, two of our directors and executive officers reside in the PRC. Mr. Long Yi is a foreign citizen residing in the PRC, and Ms. Zhengyi (Janice) Fang is a PRC national residing in the PRC. Substantially all or a significant portion of the assets of such individuals may be located outside the United States. As a result, it may be difficult or costly for investors to effect service of process within the United States upon us or such persons, or to bring actions in the United States against us or such persons based on the civil liability provisions of the U.S. federal securities laws or the securities laws of any state in the United States.

Even if an investor successfully obtains a judgment against us or any of our directors or officers in a U.S. court, the investor may not be able to enforce that judgment against assets located in the PRC. The recognition and enforcement of foreign judgments in the PRC are governed by the PRC Civil Procedure Law. PRC courts may recognize and enforce a foreign judgment pursuant to an applicable treaty or on the basis of reciprocity, subject to the satisfaction of applicable statutory requirements and public-policy considerations. The PRC and the United States do not currently have a bilateral treaty providing for the reciprocal recognition and enforcement of civil and commercial judgments. Accordingly, there is substantial uncertainty as to whether, and under what circumstances, a PRC court would recognize or enforce a judgment rendered by a U.S. court against us or our directors or officers, particularly a judgment predicated upon the civil liability provisions of U.S. federal or state securities laws.

There is also uncertainty as to whether PRC courts would entertain an original action brought in the PRC against us or our directors or officers based solely upon U.S. federal or state securities laws. Investors seeking to bring such an action in the PRC may be required to establish an independent cause of action under PRC law, satisfy applicable jurisdictional and procedural requirements, arrange for the translation, notarization and authentication of evidence generated outside the PRC, and incur significant legal fees and other costs. Such proceedings may be time-consuming, and the remedies available under PRC law may differ from, or be more limited than, the remedies available under U.S. securities laws.

Accordingly, investors may face significant practical and legal obstacles, as well as substantial costs and delays, in pursuing claims against us or our directors and officers and in enforcing judgments against assets located in the PRC. As a result, your ability to protect your interests and obtain an effective remedy for violations of U.S. federal or state securities laws may be materially limited.

We may be required to complete filing procedures with the CSRC in connection with future offerings of our securities under this registration statement, and we cannot assure you that we will be able to complete such filings in a timely manner or at all.

On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, together with five supporting guidelines, which became effective on March 31, 2023. The Trial Measures establish a filing-based regulatory regime for direct and indirect overseas securities offerings and listings by PRC domestic companies, including certain subsequent offerings conducted by companies that are already listed on an overseas stock exchange.

Under the Trial Measures, an overseas offering and listing by an issuer will be deemed an indirect overseas offering and listing by a PRC domestic company if both of the following conditions are satisfied: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets, as reflected in its audited consolidated financial statements for the most recently completed fiscal year, is attributable to PRC domestic companies; and (ii) the principal parts of the issuer’s business activities are conducted in mainland China, its principal place of business is located in mainland China, or the majority of the senior management personnel responsible for its business operations and management are PRC citizens or have their usual places of residence in mainland China. The determination is made based on the substance of the issuer’s activities and other relevant facts and circumstances.

We are filing the registration statement of which this report forms a part to register securities that we may offer and sell from time to time. We believe that the filing or effectiveness of this registration statement, by itself, does not constitute a completed overseas securities offering requiring a filing with the CSRC under the Trial Measures. However, the CSRC or other relevant PRC governmental authorities may reach a different conclusion.

If, at the time of a future offering or takedown under this registration statement, our operations satisfy the criteria for an indirect overseas offering and listing by a PRC domestic company under the Trial Measures, including because our PRC operations continue to account for 50% or more of one or more of the applicable financial measures and the other applicable condition is also satisfied, such offering may be regarded as a subsequent overseas securities offering in the same overseas market. In that event, we may be required to complete a filing with the CSRC within three working days after the completion of such offering. The applicable filing requirements may depend on the structure, timing and terms of the particular offering, as well as the facts and circumstances existing at that time.

There remain uncertainties regarding the interpretation, implementation and enforcement of the Trial Measures and the related guidance. We cannot assure you that the CSRC or other relevant PRC governmental authorities will agree with our determination that no filing is required in connection with the filing of this registration statement, or that any future offering under this registration statement will not require a CSRC filing. If a filing is required in connection with a future offering, we cannot assure you that we will be able to complete it in a timely manner or at all.

If we fail to complete any required CSRC filing, or if the CSRC determines that we have conducted an overseas securities offering without satisfying the applicable filing requirements, we may be subject to regulatory actions, including orders to rectify, warnings and monetary penalties. Such actions could delay or prevent us from completing future offerings under this registration statement, limit our ability to raise capital, materially and adversely affect our business, financial condition and results of operations, and cause the value of our securities to decline significantly or become worthless.

Compliance with the PRC’s laws, regulations and guidelines relating to data security, cybersecurity and privacy and any other future laws and regulations may entail significant expenses and could affect our business.

The PRC has implemented or will implement rules and is considering a number of additional proposals relating to data protection. The Data Security Law provides that the data processing activities must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and prohibits entities in the PRC from transferring data stored in the PRC to foreign law enforcement agencies or judicial authorities without prior approval by the PRC government. Additionally, the PRC’s Cybersecurity Law and the Administrative Measures for the Hierarchical Protection of Information Security require companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on their networks. Under the rules, regulations and guidelines relating to the multi-level protection scheme, entities operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level of the entity’s information and network systems.

Recently, the Cybersecurity Administration of China (“CAC”) has taken action against several PRC internet companies in connection with their initial public offerings on U.S. securities exchanges for alleged national security risks and improper collection and use of the personal information of PRC data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Cybersecurity Review Measures, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.”

Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators procuring network products and services, and online platform operators (as opposed to “data processors” in the Revised Draft CAC Measures) carrying out data processing activities which affect or may affect national security, shall conduct a cybersecurity review pursuant to the provisions therein. In addition, online platform operators possessing personal information of more than one million users seeking to be listed on foreign stock markets must apply for a cybersecurity review.

On September 24, 2024, the State Council of the PRC published the Network Data Regulations, which became effective on January 1, 2025. The Network Data Regulations provide detailed implementing rules and guidance on various aspects of data compliance requirements under the existing data protection framework pillars of the Cybersecurity Law, the PRC Data Security Law and the PRC Personal Information Protection Law. The Network Data Regulations supplement the requirements on several aspects of the PRC Personal Information Protection Law regarding notification, consent, and the exercise of personal rights, provide more detail on compliance requirements for processors of important data, and also provide more guidance to streamline cross-border data transfers.

As of the date of this report, neither we nor Hupan Pharmaceutical has received any notice from any PRC regulatory authority identifying us as a “critical information infrastructure operator,” “online platform operator” or “data processor,” or requiring us to go through the cybersecurity review procedures pursuant to the Cybersecurity Review Measures and Regulation on Network Data Security Management (the “Network Data Regulations”). Based on our understanding of the Cybersecurity Review Measures, and the Network Data Regulations, we believe it is unlikely that Hupan Pharmaceutical will become subject to cybersecurity review by the CAC for issuing securities to foreign investors because: (i) the business customer information Hupan Pharmaceutical handles in its business operations, either by its nature or in scale, does not normally trigger significant concerns over PRC national security and (ii) Hupan Pharmaceutical has not processed, and does not anticipate to process in the foreseeable future, personal information for more than one million users or persons. However, there remains uncertainty as to how the Cybersecurity Review Measures, and the Network Data Regulations, if enacted as currently proposed, will be interpreted or implemented. Furthermore, there remains uncertainty as to whether the PRC regulatory authorities may adopt new laws, regulations, rules, or detailed implementation and interpretation in relation, or in addition, to the Revised CAC Measures and the Draft Management Regulations. While we intend to closely monitor the evolving laws and regulations in this area and take all reasonable measures to mitigate compliance risks, we cannot guarantee that Hupan Pharmaceutical’s business and operations will not be adversely affected by the potential impact of the Cybersecurity Review Measures, the Network Data Regulation or other laws and regulations related to cybersecurity, privacy and data security.

Furthermore, the Personal Information Protection Law provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in the PRC, and the processing of personal information of persons in the PRC outside of the PRC if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in the PRC. The Personal Information Protection Law also provides that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to be set by PRC cyberspace regulators are also required to store in the PRC personal information generated or collected in the PRC, and to pass a security assessment administered by PRC cyberspace regulators for any export of such personal information. Lastly, the Personal Information Protection Law contains proposals for significant fines for serious violations of up to approximately $7.2 million or 5% of annual revenues from the prior year and may also be ordered to suspend any related activity by competent authorities. Neither we nor Hupan Pharmaceutical currently maintain, or intend to maintain in the future, personally identifiable health information of patients in the PRC.

Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation or changes in enforcement. Compliance with the PRC’s new Cyber Security Law and Data Security Law could significantly increase the cost to us of conducting our business, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by PRC government authorities and private claims or litigation, any of which could adversely affect our business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law, the Cybersecurity Review Measures and the recent PRC government actions could adversely affect our ability, on favorable terms, to raise capital.

The enacted “Holding Foreign Companies Accountable Act” and the “Accelerating Holding Foreign Companies Accountable Act” call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors. These developments could add uncertainties to the market for our common stock.

The HFCAA requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trading on a national exchange or through other methods. In December 2022, the Accelerating Holding Foreign Companies Accountable Act amended the HFCAA by decreasing the number of non-inspection years from three to two, thus reducing the time period before our common stock may be prohibited from trading or delisted if the PCAOB were to determine that it could not inspect our auditor.

In March 2021, the SEC adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the HFCAA. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. In December 2021, the SEC adopted amendments finalizing such rules to require that any such identified registrant is required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and to also required to disclose in the registrant’s annual report the audit arrangements of, and governmental influence on, such a registrant.

In December 2021, the PCAOB issued a Determination Report which found that the PCAOB was then unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC, because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. The PCAOB has made such designations as mandated under the HFCAA. Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions in the future.

In August 2022, the CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol (the “Protocol”), governing inspections and investigations of audit firms based in mainland China and Hong Kong. Pursuant to the Protocol, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. In December 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. While vacating those determinations, the PCAOB noted that, should it encounter any impediment to conducting an inspection or investigation of auditors in mainland China or Hong Kong as a result of a position taken by any authority there, the PCAOB will consider the need to issue a new determination. Notwithstanding the foregoing, if the PCAOB is not able to inspect and investigate completely our auditor’s work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA.

Our auditor, ZH CPA, LLC, an independent public accounting firm registered with the PCAOB, is headquartered in Denver, Colorado. Our auditor is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, you may be deprived of the benefits of such inspection which could result in limitation or restrictions on our access to the U.S. capital markets and trading of our securities.

Risks Related to Our Securities

If we are unable to regain and maintain compliance with Nasdaq listing standards, our common stock could be delisted, which could adversely affect the liquidity of our common stock and our ability to raise capital.

On January 7, 2026, we received notice from Nasdaq that we were not in compliance with the minimum bid price requirement because the closing bid price of our common stock had remained below $1.00 per share for 30 consecutive business days. On July 9, 2026, the Company received a second notice (the “Second Notice”) from Nasdaq indicating that, while the Company has not yet regained compliance with the bid price requirement, the Staff has determined that the Company is eligible for an additional 180 calendar day period, or until January 4, 2027 (the “Second Compliance Period”), to regain compliance. According to the Second Notice, the Staff’s determination was based on (i) the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market, with the exception of the bid price requirement, and (ii) the Company’s written notice of its intention to cure the deficiency during the Second Compliance Period by effecting a reverse stock split, if necessary. However, there can be no assurance that we will be able to regain or maintain compliance with Nasdaq’s listing requirements.

If our common stock is delisted from Nasdaq, the market liquidity of our common stock could be materially adversely affected, and our ability to raise capital on favorable terms, or at all, could be impaired. Delisting could also adversely affect investor confidence, analyst coverage, and business development opportunities. In addition, our common stock could become subject to the SEC’s penny stock rules, which may further reduce trading activity and limit investors’ ability to buy or sell our common stock.

If you purchase our securities, you may experience future dilution as a result of future equity offerings or other prior equity issuances.

We may seek additional capital in the future due to market conditions, strategic opportunities or other considerations, even if we believe we have sufficient funds for our current operating plans. To raise additional capital, we may issue additional shares of our common stock or securities convertible into, exchangeable for, or exercisable for our common stock. We cannot assure you that future issuances will be made at a price equal to or greater than the price paid by investors in this offering, and investors in future financings may receive rights, preferences or privileges senior to those of existing stockholders.

In addition, as of the date of this report, we have outstanding warrants to purchase shares of our common stock. Certain of these warrants contain anti-dilution and price-adjustment provisions that may, under specified circumstances, reduce the applicable exercise price and increase the number of shares issuable upon exercise. The exercise of such warrants, or adjustments pursuant to their terms, could result in additional dilution to our stockholders.

The market price of our common stock and the trading volume of our common stock have been and may continue to be volatile, and such volatility could cause the market price of our common stock to decrease.

Between September 24, 2025, and September 24, 2026, the market price of our common stock fluctuated from a low of $0.2504 per share to a high of $1.68 per share, and our stock price continues to fluctuate. The market price and trading volume of our common stock may continue to fluctuate in response to numerous factors, some of which are beyond our control, such as:

• our ability to maintain or increase sales of our products;
• our ability to maintain and expand relationships with pharmaceutical manufacturers and suppliers;
• changes in supply terms, pricing arrangements, product availability, or procurement costs;
• announcements by us or our competitors regarding acquisitions, strategic alliances, new products, or other business developments;
• changes in reimbursement policies, healthcare regulations, or governmental oversight affecting our products or customers;
• developments concerning regulatory oversight and approvals;
• changes in earnings estimates or recommendations by securities analysts, if our common stock is covered by analysts;
• successes or challenges in our collaborative arrangements or alternative funding sources;
• developments affecting the pharmaceutical distribution, healthcare, and life sciences industries;
• actual or perceived changes in the interpretation or enforcement of laws, regulations, and governmental policies in China that affect our business, industry, or corporate structure;
• adverse effects on our business condition and results of operations from general economic and market conditions and overall fluctuations in the United States and international markets;
• future issuances of common stock or other securities;

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• the addition or departure of key personnel; and
• general market conditions and other factors, including factors unrelated to our operating performance.

Further, the stock market in general, and the securities of smaller-cap healthcare and pharmaceutical companies in particular, have experienced significant price and volume volatility. Continued market fluctuations could result in substantial volatility in the market price of our common stock, which could cause investors to lose some or all of their investment.

Risk Management and strategy

As part of our broader risk management system and processes, we maintain procedures for identifying, assessing, and managing material risks from cybersecurity threats that is designed to protect the confidentiality, integrity, and availability of our critical systems and information.

We track and log security incidents across our company and our customers to remediate and resolve any such incidents. Significant incidents, if any, shall be reviewed by chief executive officer and chief financial officer, with the assistance from our information technology department, to assess and determine its materiality or potentiality of becoming material. Our senior management makes the final materiality determinations and disclosure and other compliance decisions.

As of the date of this annual report, we have not experienced any material cybersecurity incidents or identified any material cybersecurity threats that have affected or are reasonably likely to materially affect us, our business strategy, results of operations or financial condition.

Governance

Our board of directors does not have a standing risk management committee, but rather directly administers its oversight function as a whole. Our board of directors will (i) lead in a direction that minimizes the risk of unauthorized and malicious use, disclosure, potential theft, alteration or damaging effects of our operations while concurrently enabling the sharing of information in cyberspace, and (ii) ensure that risks to the confidentiality, integrity or availability of Company-owned information assets are managed appropriately, and (iii) review disclosure concerning cybersecurity matters in our annual report on 10-K presented by our chief executive officer, chief financial officer, and other personnel in charge of cybersecurity matters.

We lease two premises with a gross floor area of approximately 599 square meters in Wuhan, Hubei Province, China, for the daily business activities and office use of our pharmaceutical distribution and supply chain service, with lease terms from January 1, 2025 to December 31, 2029, and from March 22, 2026 to March 21, 2027, respectively. Our executive office is located at 112W 34th St, FL 18, Room 18022, New York, NY 10120 with lease terms from September 1, 2026 to August 31, 2027.

We may add additional offices as we expand our business to other states and countries. We believe that our facilities are sufficient for our current needs and that, should it be needed, additional facilities will be available to accommodate the expansion of our business.

From time to time, we may be subject to legal proceedings, investigations and claims incidental to the conduct of our business. We are currently not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. All amounts included herein with respect to the years ended June 30, 2026 and 2025 are derived from our consolidated financial statements included elsewhere in this annual report. Our financial statements have been prepared in accordance with the U.S. GAAP.

Overview

Prior to February 12, 2026, we operated as a U.S.-based integrated cross-border supply chain solutions provider with a strategic focus on the Asian market, including China, through ABL Chicago, and were also engaged in the distribution of pharmaceutical products in China through Hupan Pharmaceutical. On February 12, 2026, we transferred the operations of ABL Chicago to an unrelated third party, which obtained operational control and substantially all economic interests associated with the business. Following the transfer, we ceased substantive involvement in ABL Chicago’s operations. Accordingly, the operations of ABL Chicago were classified as discontinued operations in our consolidated financial statements. The disposal represents a strategic shift in our business operations and allows management to further streamline resources and focus on the development and expansion of our pharmaceutical distribution business.

Our continuing operations are focused on the distribution of pharmaceutical products in China through Hupan Pharmaceutical. Revenue from continuing pharmaceutical operations was primarily derived from infusion products, specialty prescription drugs, and medical nutrition products. We procure products from manufacturers, store the products at designated warehouses, and distribute them to hospitals, distributors and other healthcare providers, primarily through agents. The Company operates within a highly regulated healthcare environment and generates revenue through sales to distributors, hospitals, and clinics.

Beginning in September 2026, the Company, through its indirectly wholly owned subsidiary, XDT Infrastructure I, LLC, a Delaware limited liability company, commenced activities relating to the provision of artificial intelligence compute capacity and managed inference services. Under this business model, the Company’s subsidiary procures, owns and operates servers and related computing infrastructure for its own account, and makes capacity on that infrastructure available to customers as a service. Capacity allocated to a customer is logically and operationally segregated from capacity allocated to other customers, with the level of segregation depending on the applicable customer arrangement. Customers may specify the artificial intelligence models to be deployed on the capacity allocated to them, subject to technical compatibility, licensing and other applicable requirements, as well as the Company’s operation of the underlying infrastructure. XDT’s role is primarily to provide and operate the underlying computing infrastructure and managed inference environment. As of the date of this report, the Company does not plan to develop or train proprietary AI models and does not use customer-provided content to train models unless separately authorized by the applicable customer.

The Company continually evaluates potential opportunities to expand and diversify its business operations. Smart Reserve Holding LTD and Smart Reserve Inc were formed in connection with the Company’s preliminary evaluation of potential opportunities relating to digital asset business activities. As of the date of this report, the Company has not commenced any such business and has not adopted any concrete operational plan relating thereto. Any future expansion initiatives may be affected by factors including market conditions, capital availability, regulatory developments, operational execution, technological requirements, and management resources.

The Company’s results of operations for the period reflect the performance of its continuing pharmaceutical distribution business, and accordingly, prior period results have been recast to present the disposed business as discontinued operations where applicable. Management evaluates the performance of the continuing operations based on revenue growth, gross margin, operating efficiency, and working capital.

Key Factors Affecting Our Results of Operations

We believe the most significant factors that affect our business and results of operations include the following:

Regulatory Environment in China

The pharmaceutical industry in China is subject to extensive government regulation, including pricing controls, tendering processes, and reimbursement policies. Government initiatives, such as centralized procurement programs and healthcare reforms, may affect product pricing, sales volumes, and margin levels.

Supplier and Manufacturer Relationships

The Company relies on relationships with pharmaceutical manufacturers and suppliers for product sourcing. Changes in supply terms, pricing arrangements, or product availability may impact revenue and gross margins.

Customer Concentration and Hospital Demand

A significant portion of the Company’s sales is generated from hospitals and large distributors. Purchasing patterns, tender cycles, and changes in hospital demand or procurement policies can lead to fluctuations in revenue. During the year ended June 30, 2026, we have generated revenue from the distribution of pharmaceutical products from 63 customers, of which, four customers took over 10% of the revenue.

Pricing Pressure and Competition

The Company operates in a competitive market with pressure from both domestic and international pharmaceutical distributors. Competitive pricing dynamics and participation in government bidding processes may compress margins.

Product types and composition

During the year ended June 30, 2026, the pharmaceutical products we distribute mainly consist of infusion drugs, specialty foods, and therapeutic drugs. The profitability level of different products varies, and the proportion of various products affects our gross profit level.

Accounts receivable collection

The current payment term provided by us to our main customers is between 0-90 days; while the payment term from the supplier is 60 days. There is also a situation of prepaying payment to the supplier. If the accounts receivable cannot be collected in a timely manner or there are identifiable uncollectible balances, our cash flow in operating activities may be negatively affected.

Foreign Currency Fluctuations

As the Company operates primarily in China while reporting in United States Dollar (“USD”), fluctuations in foreign exchange rates, particularly between the Renminbi and the reporting currency, may impact reported revenue and profitability.

Key Components of Results of Operations

Revenues. We currently generate revenue from the distribution of pharmaceutical and medical products. We purchase products from manufacturers, receive and hold the products at designated warehouses, and deliver them to customers’ warehouses or other designated locations. Revenue is recognized at a point in time when control of the products is transferred to and accepted by the customers.

Prior to the disposition of our cross-border logistics business in February 2026, we also generate revenues primarily by providing customized cross-border ocean freight solutions and airfreight solutions to customers that specifically cater to their requirements and needs in transporting goods into the U.S. Under the service agreements with our customers, we offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.

Cost of Revenues. Our cost of revenues from the distribution of pharmaceutical and medical products comprises cost of pharmaceutical products from manufacturers. Our cost of revenues from customized cross-border ocean and air freight solutions mainly comprises transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation which includes operating and financing lease-related costs, depreciation expenses of property and equipment and other miscellaneous expenses.

Selling Expenses. Our selling expenses primarily include salaries expense, advertising expenses, marketing expense of a system, entertainment expenses and traveling expense of sales team engaged in developing potential customers and maintaining customer relationships and transportation cost for selling pharmaceutical products.

General and Administrative Expenses. Our general and administrative expenses primarily include salaries and staff benefits, repair and maintenance expenses, depreciation on property and equipment, amortization on intangible assets, lease expenses on office premises, travelling and entertainment expenses, bank charges, legal and professional fees, insurance expenses and other office expenses.

Write-off of supplier advance: The expense consists of the write-off of an advance payment made to a supplier for inventory intended for a new business initiative.

Provision of allowance for expected credit loss on loan receivable: The expense consists of the allowance recognized for expected credit losses on loans receivable from third parties, based on the borrowers’ creditworthiness, repayment history, current financial condition and relevant economic factors.

Other Income. Our other income primarily consists of interest income in connection with third-party loan.

Interest Expenses. Our interest expenses primarily consist of the interest expenses incurred for convertible debts and other loans.

Income Tax Expenses. Our income tax expenses consist primarily of PRC enterprise income tax.

Results of Operations

Continuing Operation

Our continuing operations are focused on the distribution of pharmaceutical products in China. Revenue from continuing pharmaceutical operations was primarily derived from infusion products, specialty prescription drugs, and medical nutrition products. The Company operates within a highly regulated healthcare environment and generates revenue through sales to hospitals through agent, and other healthcare providers.

Discontinued Operation

ABL Chicago is a U.S.-based integrated cross-border supply chain solution provider with a strategic focus on the Asian market including China. We primarily provide customized cross-border ocean freight solutions and airfreight solutions in the U.S. that specifically cater to our customers’ requirements and needs in transporting goods into the U.S. We offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.

On February 12, 2026, the sale of 100% of the issued and outstanding shares of ABL Chicago was duly approved and adopted by the Company’s shareholders. Accordingly, the Company consummated the transfer of the ABL Chicago business. Immediately prior to the Transaction, the Company forgave $3,402,808 of amounts due from ABL Chicago. The Company recorded a gain on the sale of the ABL Chicago business in the amount of $2,556,315 as follows:

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The following table summarizes the results of consolidated statements of operations and comprehensive loss for the years ended June 30, 2026 and 2025 in U.S. dollars.

For the Year Ended June 30, 2026 Compared to the Year Ended June 30, 2025

The following table summarizes our consolidated results of operations and percentages of certain items in relation to total revenues for the years ended June 30, 2026 and 2025, and provides information regarding the dollar and percentage increase or (decrease) during such periods. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.

Revenues

Revenue from the distribution of pharmaceutical products increased by approximately $3.1 million, or 111.8%, from approximately $2.8 million for the year ended June 30, 2025 to approximately $5.9 million for the year ended June 30, 2026. The increase was primarily attributable to higher sales of infusion products, an increase in the number of active customers from 8 to 12, and the inclusion of a full year of operations for the year ended June 30, 2026. The Company commenced its pharmaceutical distribution operations in December 2024; accordingly, the results for the year ended June 30, 2025 reflected only a partial year of operations.

Infusion products accounted for approximately 91.1% and 82.9% of pharmaceutical distribution revenue for the years ended June 30, 2026 and 2025, respectively. Revenue from infusion products increased by approximately $3.0 million, from approximately $2.3 million in fiscal 2025 to approximately $5.3 million for the year ended June 30, 2026. The increase was primarily driven by higher sales volumes and new customer acquisitions.

Cost of Revenues and Gross Profit

Cost of revenue from the distribution of pharmaceutical products increased by approximately $1.3 million, or 109.2%, from approximately $1.2 million for the year ended June 30, 2025 to approximately $2.5 million for the year ended June 30, 2026. The increase was primarily driven by higher sales volume, consistent with the significant growth in revenue during the period as the Company continued to expand its pharmaceutical distribution operations.

Gross profit margin increased from approximately 56.1% for the year ended June 30, 2025 to approximately 56.7% for the year ended June 30, 2026. The increase in gross margin was primarily attributable to changes in supplier incentives, specifically a growth in purchase rebates offered by suppliers in the current period compared to the prior-year period.

Selling Expenses

Our selling expenses amounted to approximately $2.6 million for the year ended June 30, 2026, compared to approximately $0.4 million for the same period in 2025. The increase was primarily attributable to: (i) an approximately $1.0 million increase in advertising expenses to increase market awareness, promote our products and support the growth of our pharmaceutical distribution business; (ii) an approximately $0.6 million increase in market research and business development expenses incurred to identify prospective customers and develop customer relationships; (iii) an approximately $0.1 million increase in business entertainment expenses; and (iv) an approximately $0.3 million increase in salaries and related costs resulting from the expansion of our sales team.

General and Administrative Expenses

Our general and administrative expenses increased by approximately $3.1 million, or 117.6%, from approximately $2.6 million for the year ended June 30, 2025, to approximately $5.7 million for the year ended June 30, 2026. The increase was mainly due to an increase in our professional expense.

Our professional fees increased by approximately $3.1 million, or 247.4%, from approximately $1.2million for the year ended June 30, 2025, to approximately $4.3 million for the year ended June 30, 2026. Our professional fee represented 75.9% and 47.6% of our total general and administrative expenses for the year ended June 30, 2026 and 2025, respectively. The increase was primarily due to advisory and consulting expenses for strategic planning initiatives. These costs included external support for market assessments, financial and operational due diligence, and the development of long-term strategic plans to guide future growth.

Write-off of supplier advance

During the year ended June 30, 2026, the Company made an advance payment of $2,947,635 (RMB 20,000,000) to a supplier for the purchase of inventory intended for a new business initiative. The supplier subsequently failed to fulfill its obligations under the purchase agreement. As a result, the Company did not receive the inventory and was unable to recover the advance payment. Accordingly, the Company determined that the advance was not recoverable and wrote off the full amount, recognizing a loss of $2,859,594 (RMB 20,000,000) in write-off of supplier advance in the consolidated statement of operations for the year ended June 30, 2026.

Provision of allowance for expected credit loss on loan receivable

During the year ended June 30, 2026, the Company recognized an expected credit loss of approximately $2.3 million on loans to third parties. The provision was recorded based on management’s assessment of the borrowers’ creditworthiness, repayment history, current financial condition, and other relevant economic factors. The Company will continue to monitor the collectability of these loans and update its expected credit loss estimates as additional information becomes available.

Other Income, net

Our other income, net, increased by $262,082, or 789.0%, from $33,217 for the year ended June 30, 2025, to $295,299 for the year ended June 30, 2026. The increase was primarily due to an increase in interest income in connection with a third-party loan.

Interest Expenses

Our interest expenses decreased by $79,597, or 34.7%, from $229,254 for the year ended June 30, 2025, to $149,657 for the year ended June 30, 2026. The decrease in interest expense was mainly due to reduced interest expense related to the convertible note following partial conversion of the note for the year ended June 30, 2026.

Loss Before Income Taxes

We had a net loss before income taxes of approximately $10.0 million and approximately $1.7 million for the years ended June 30, 2026 and 2025, respectively. The increase in loss before income taxes was primarily attributable to higher operating expenses, including the write-off of a supplier advance and the provision for expected credit losses on third-party loans, partially offset by an increase in gross profit from the pharmaceutical distribution business.

Income Tax Expense

We had income tax expenses of $91,711 and $212,296 for the years ended June 30, 2026 and 2025, respectively. A current income tax provision of $174,611 was recognized for a subsidiary with net assessable income while no current income tax provision was recognized for subsidiaries in net operating loss for the year ended June 30, 2026.

Based on management’s assessment of future taxable income, the Company determined that it was no longer more likely than not that sufficient future taxable income would be available to utilize the deferred tax benefits. As a result, the Company recorded a full valuation allowance against its DTAs and did not recognize any deferred tax assets. We recognized a deferred income tax credit of $82,900 due to credit loss allowance and amortization of intangible assets, resulting in a net income tax credit of $91,711 for the year ended June 30, 2026.

A current income tax provision of $233,855 was recognized for a subsidiary with net assessable income while no current income tax provision was recognized for subsidiaries in net operating loss for the year ended June 30, 2025. We recognized a deferred income tax credit of $21,559 due to amortization of intangible assets and credit loss allowance, resulting in a net income tax expense of $212,296 for the year ended June 30, 2025.

Net loss from continuing operation

As a result of the foregoing, we had a net loss of approximately $10.1 million and approximately $1.9 million for the year ended June 30, 2026 and 2025, respectively.

Result of Discontinued Operation

Net income (loss) from discontinued operations for the period from July 1, 2025 to date of disposal and for the year ended June 30, 2025 is as follows:

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We recognized income from discontinued operations, net of income taxes, of approximately $0.7 million for the period from July 1, 2025 to date of disposal, compared with a net loss of approximately $3.3 million for the year ended June 30, 2025, representing an improvement of approximately $4.0 million. It was primarily attributable to a gain of approximately $2.6 million recognized upon the sale of the ABL Chicago business on February 12, 2026, as well as a decrease of approximately $1.7 million in the loss from operations.

Revenue from discontinued operations decreased by approximately $4.3 million, or 28.9%, from approximately $15.0 million for the year ended June 30, 2025 to approximately $10.7 million for the period from July 1, 2025 to date of disposal. Cost of revenue decreased by approximately $3.9 million, or 28.7%, while operating expenses decreased by approximately $2.1 million, or 44.5%. These decreases primarily reflected the shorter operating period resulting from the disposition of the ABL Chicago business on February 12, 2026. Prior to the disposition, the discontinued business generated an operating loss of approximately $1.8 million during the period from July 1, 2025 to date of disposal, compared with approximately $3.5 million for the full year ended June 30, 2025. After giving effect to the gain on disposal and other expenses of approximately $0.2 million, income from discontinued operations before income taxes was approximately $0.7 million for period from July 1, 2025 to date of disposal.

Liquidity and Capital Resources

The following table summarizes our total current assets, current liabilities and working capital from continuing operations as of June 30, 2026 and 2025, respectively:

As of June 30, 2026, we had a cash balance of approximately $0.7 million. Our current assets were approximately $11.0 million, and our current liabilities were approximately $4.5 million, resulting in a current ratio of 2.46 and working capital surplus of approximately $6.5 million. Total stockholders’ equity as of June 30, 2026 was approximately $7.0 million.

As of June 30, 2026 and 2025, we had accounts receivable net of allowance of approximately $1.1 million and approximately $1.4 million, respectively. We periodically review our accounts receivable and allowance level to ensure our methodology for determining allowances is reasonable and to accrue additional allowances if necessary. For accounts receivable as of June 30, 2026 and 2025, we provided a credit loss allowance of $95,494 and $33,039, respectively.

As of June 30, 2026, our liquidity position is significantly influenced by a material loan receivable from an unaffiliated third party. The gross principal balance is governed by a loan agreement dated July 3, 2025, bearing interest at 4.35% per annum with a maturity date of July 8, 2027.

As of June 30, 2026, the carrying value of this receivable was approximately $9.4 million, net of an allowance for credit losses of approximately $2.3 million. This net balance represents 65.2% of our total current assets, constituting a significant concentration of credit risk.

Our ability to fund future operating activities and working capital requirements is partially dependent on the timely collection of this principal and interest. While we continue to monitor the counterparty’s creditworthiness and currently believe they maintain the financial capacity to meet their obligations, the recorded allowance reflects our estimate of expected credit losses under the CECL (Current Expected Credit Loss) model. Any material default or significant delay in payment by this third party could adversely impact our short-term liquidity and necessitate alternative financing. There can be no assurance that the balance will be collected in full in accordance with its contractual terms.

In assessing our liquidity, we monitor and analyze our cash on hand, our ability to generate sufficient revenues sources in the future, and our operating and capital expenditure commitments. Historically, we have funded our working capital needs primarily through operations, issuances of convertible debts, private placements, loans, initial public offerings and working capital loans from stockholders. Our working capital requirements are influenced by the efficiency of our operations, the volume and dollar value of our revenue contracts, the progress in the execution of customer contracts, and the timing of accounts receivable collections.

Cash Flows

The following table sets forth a summary of our cash flows from continuing operations for the periods indicated:

Operating Activities - continuing operations

Net cash used in operating activities was $3,183,694 for the year ended June 30, 2026, primarily reflecting a net loss from continuing operations of $10,138,418, adjusted for non-cash items of $8,430,011 and changes in working capital deficits of $1,475,287. The non-cash items primarily included $94,413 straight-line lease expense related to operating leases, $3,254,580 stock-based compensation for consulting expenses, $52,012 depreciation, $109,753 amortization of discount and bond issuance cost, $85,484 amortization of intangible assets, $2,859,594 write-off of supplier advance, $268,711 interest income from third-party loan, $2,256,647 from provision of allowance for expected credit loss on loan receivable, $58,801 from provision of allowance for expected credit loss on accounts receivable and a decrease of $82,900 from deferred tax liabilities. The adjustments for changes in working capital mainly included a decrease of $279,861 in accounts receivable due to a decrease of revenues near period end, an increase of $2,840,631 in prepayment, deposit and other receivable and a payment of $82,497 for operating lease liabilities, partially offset by a decrease of $411,766 in accounts payable, a decrease of $66,732 in note receivable, an increase of $745,330 in refund liabilities, an increase of $154,119 in income tax payable, and an increase of $772,122 in accrued liabilities and other payables, an increase in inventory of $91,890, an increase in right of return asset of $341,296 and an increase in due to related party of $220,220.

Net cash used in operating activities was $778,830 for the year ended June 30, 2025, including net loss from continuing operations of $1,898,782, adjusted for non-cash items for $311,581 and changes in working capital surplus of $808,371. The non-cash items primarily included $80,419 straight-line lease expense of operating leases, $15,809 depreciation expense, $53,427 amortization of intangible asset, $39,804 interest expense of convertible notes, $138,994 amortization of discount and bond issuance cost, $32,807 provision of allowance for expected credit loss on accounts receivable, $28,120 uncollected interest income from a third-party loan and a decrease of $21,559 from deferred tax liabilities. The adjustments for changes in working capital mainly included an increase of $1,450,463 in accrued expense and other payable, an increase of $233,078 in income tax payable, an increase of $1,018,228 in accounts payable and an increase of $15,355 in contract liabilities, partially offset by an increase of $1,439,727 in accounts receivable, an increase of $96,534 in inventories, an increase of $150,919 in prepayment, deposit and other receivable, an increase in right of return asset of $141,687 and a decrease of $91,969 in operating lease liabilities.

The $2,404,864 increase in cash used in operating activities for the year ended June 30, 2026, compared to the prior year, was primarily due to an increase in advance deposits of $2,689,712 to suppliers.

Investing Activities - continuing operations

Net cash used in investing activities was $9,152,409 and $330,793 for the years ended June 30, 2026 and 2025, respectively. Net cash used in investing activities for the year ended June 30, 2026, was primarily attributable to loans of $9,150,361 to a third party. The cash used in the same period of last year was primarily attributable to net cash payments of $276,356 for intangible assets through the acquisition of 100% equity interest in Hupan Pharmaceutical.

Financing Activities - continuing operations

Net cash provided by financing activities was $7,767,642 and $8,581,938 for the years ended June 30, 2026 and 2025. The increase was primarily due to proceeds from private placement of financing activities compared with the prior period. During the year ended June 30, 2026, we generated cash inflows from private placements of $8,236,231, which were partially offset by $432,948 in principal repayments of convertible debt. During the year ended June 30, 2025, we had the net proceeds of $5,351,581 from the offering and net proceeds of $1,170,513 from issuance of convertible note and advances of $2,999,700 from Hupan Pharmaceutical prior to acquisition, partly offset by repayment of $805,946 to shareholders, during the year ended June 30, 2025.

Cash Flows from Discontinued Operations

Cash flows from discontinued operations are associated with the disposal of ABL Chicago. Cash used in operations of approximately $141,188 and approximately $2.6 million for the years ended June 30, 2026 and 2025. Net loss of ABL Chicago were the primary components of operating cash flows for the years ended June 30, 2026 and 2025. Cash used in investing activities of approximately $0.4 million for the year ended June 30, 2025, which is related to loan to related parties. Cash provided by financing activities of approximately $1.4 million for the year ended June 30, 2026 due to loan borrowing. Cash used in financing activities of approximately $0.4 million for the year ended June 30, 2025 due to advances to related parties. See Note 17. “Discontinued Operations” to our consolidated financial statements for additional information.

Capital Expenditure

Our capital expenditures are incurred primarily in connection with the purchase of fixed assets, including machinery and equipment, furniture and fixtures, leasehold improvement and vehicles. Our capital expenditures amounted to 2,048 and $71,177 for the years ended June 30, 2026 and 2025, respectively.

We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We intend to fund our future capital expenditures with our existing cash balance, proceeds of loans and issuance of convertible debts and private placement offering.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, costs and expenses, and any related disclosures. Actual results could materially differ from those estimates. Critical accounting policy is both material to the presentation of financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on financial condition or results of operations. Accounting estimates and assumptions may become critical when they are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.

Critical accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting estimate were made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. The management of the Company believes the following critical accounting estimate is the most significantly affected by judgments and assumptions used in the preparation of our consolidated financial statements.

Common Stock Warrants Instruments

The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own ordinary shares and whether the instrument 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 quarterly period end date while the instruments are outstanding. The Company determined, upon further review of the warrant agreement and the convertible debt agreement, that the common stock warrants are qualified for equity accounting treatment. The fair value of equity-classified warrants is estimated as of the date of issuance using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model includes various assumptions, including the fair market value of our common stock, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control.

Allowance of expected credit losses on loan receivable from third parties

The Company accounts for its allowance for credit losses on loan receivables in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 326, Financial Instruments—Credit Losses (“ASC 326”). The Company assesses the credit risk of its third-party loan receivables at each reporting date to ensure that the allowance reflects management’s current estimate of expected credit losses over the contractual life of the instrument.

The measurement of the allowance for expected credit losses is primarily determined using a Probability of Default (“PD”) and Loss Given Default (“LGD”) methodology. This assessment considers whether the borrower meets its contractual obligations and involves an evaluation of the borrower’s historical performance, current financial condition, and the value of any underlying collateral.

The PD × LGD model includes various assumptions, including the selection of forward-looking macroeconomic forecasts (such as interest rate environments), the borrower’s credit rating, and estimated recovery rates. This assessment, which requires the use of significant professional judgment, is conducted at the time of loan inception and as of each subsequent quarterly period end date while the loan is outstanding. These assumptions reflect management’s best estimates based on current and supportable information, but they involve inherent uncertainties based on economic and market conditions generally outside of the Company’s control. Changes in these estimates are recognized in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) in the period in which they occur.

Refer to Notes 2 to the consolidated financial statements included in this report for further discussion of our significant accounting policies and the effect on our consolidated financial statements.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued, see Note 2 - Summary Of Significant Accounting Policies in the note of financial statement.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.

Based upon this evaluation, our management concluded that as of June 30, 2026, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2026, based on the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework). Based on this evaluation under the 2013 Framework, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting was not effective as of June 30, 2026 due to the following material weaknesses:

• We are lacking adequate segregation of duties and effective risk assessment; and
• We are lacking sufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both the U.S. GAAP, and SEC guidelines.

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We plan to address the weaknesses identified above by implementing the following measures:

(i) Continuously hiring additional accounting staffs with comprehensive knowledge of U.S. GAAP and SEC reporting requirements;

(ii) Designing and implementing formal procedures and controls supporting the Company’s period-end financial reporting process, such as controls over the preparation and review of account reconciliations and disclosures in the consolidated financial statements; and

(iii) Ameliorating our internal audit to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of internal controls related to financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of the fiscal year ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.