HONG YUAN HOLDING GROUP 10-K

Item 1 Business. Our Company Hong Yuan Holding Group (“We”, “the Company”, “Hong Yuan”, Us” or “Our”) was incorporated on September 29, 2001, in the State of Nevada under the name of Biocorp North America Inc. On March 18, 2005, we filed an amendment to our certificate of incorporation to change our name to Cereplast, The Company is a development-stage enterprise devoting substantial efforts to establishing a new business, financial planning, raising capital, and researching products that may become part of the Company’s product portfolio. The Company has not realized significant sales since inception. A development stage company is defined as one in which all efforts are devoted substantially to establishing a new business and, even if planned principal operations have commenced, revenues are insignificant. History On February 10, 2014, the Company filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Indiana (the “Bankruptcy Court “). On February 14, 2014, the Company filed a motion in the Bankruptcy Court seeking to convert the Company’s Chapter 11 Case to a Chapter 7 bankruptcy case. On March 27, 2014, the court granted the Company’s motion, and on that date, the Company’s Chapter 11 Case was converted to a Chapter 7 case. As a result, the Company adopted a liquidation basis of accounting for its discontinued operations, in accordance with ASC 205-30, “Presentation of Financial Statements – Liquidation Basis of Accounting.” Consequently, the accumulated deficit generated prior to the bankruptcy proceedings remained unadjusted. On January 31, 2014, the Board of Directors of Cereplast, Inc. (the “Company”) approved a 1-for-50 reverse split (the “Reverse Split) which the shareholders previously approved on April 5, 2013, and previously disclosed on Current Report Form 8-K filed on April 5, 2013. On February 3, 2014, Cereplast, Inc. (the “Company”) filed a Certificate of Amendment to its Articles of Incorporation to effect the reverse split (the “Reverse Split”), effective as of February 21, 2014. On March 22, 2019, the Eighth Judicial District Court of Nevada appointed Custodian Ventures, LLC, as custodian for Cereplast, Inc., after proper notice had been given to the officers and directors of Cereplast, Inc. There was no opposition. On June 04, 2019, the Company filed a certificate of revival with the state of Nevada, appointing David Lazar as President, Secretary, Treasurer, and Director. On October 4, 2019, the Company issued 50,000,000 shares of common stock to Custodian Ventures, LLC at par for shares valued at $50,000 in exchange for settlement of a portion of a related party loan for amounts advanced to the Company for $20,100, and a note receivable due to the Company for $29,900. The note bears an interest of 3% and matures in 180 days following written demand by the holder. On April 14, 2020, Custodian Ventures elected to convert the total amount of the 510 shares of Series A preferred stock into 510 shares of common stock. On April 15, 2020, the Board of directors of the Company approved the withdrawal of the certificate of designation of 5,000,000 shares of Series A Preferred stock filed with the Nevada Secretary of State on August 24, 2012, as amended by the Amendment to Certificate of Designation after issuance of Class or Series filed with the Nevada Secretary of State on April 13, 2020. On May 1, 2020, the Company created 5,000,000 shares of Series A-1 Preferred Stock with a par value of $0.001. On May 4, 2020, the Company issued 5,000,000 shares of the Series A-1 Preferred stock, valued at $5,000, to Custodian Ventures LLC as repayment for funds loaned to the Company. A change of control of the Company was completed on November 3, 2020, when control was acquired through the sale of 50,000,000 common shares and 5,000,000 in Series A-1 Preferred Shares from Custodian Ventures, LLC to Xudong Li. After November 3, 2020, the Company’s operations were determined and structured by the new major shareholder. On November 18, 2020, the Company filed an amendment to its certificate of incorporation to change its name to Hong Yuan Holding Group. On October 1, 2024, The Company entered into an agreement to acquire from Xudong Li (the majority shareholder of the Company) 100% equity interest of Hongyuan International Holding Group Co., Ltd. (“Hongyuan HK”) in exchange for HK $500,000 (approximately $64,103) or issuing the equivalent value of the Company’s common stocks, payable upon the completion of changing registered owner with the Administration for Industrial and Commerce. Hongyuan HK was established in Hong Kong on July 28, 2021. 4 Also on October 1, 2024, Hongyuan HK entered into a series of agreements including a Shareholders’ Voting Rights Entrustment Agreement, an Exclusive Management Consulting and Service Agreement and a Share Pledge Agreement (collectively the “Agreements”) with Fengcuiyuan Chang Technology Development Co., Ltd (“Fengcuiyuan”) and its registered owners (the “Transaction”). Fengcuiyuan is a corporation formed under the laws of the PRC on September 3, 2021, in which Xudong Li (the majority shareholder of the Company) controls 95% of its equity interest. Fengcuiyuan owns 98% of Rongcheng (Sichuan) Supply Chain Management Co., Ltd (“Rongcheng”), a corporation formed under the laws of the PRC located in Chengdu, Sichuan, China, incorporated on April 17, 2024. On November 12, 2024, Chongqing Xuchang Qingrong Trading Co., Ltd. (“Xuchang”) located in Chongqing, Sichuan, China, was formed as a 55% subsidiary of Rongcheng. According to the Agreements, Hongyuan HK assumed financial and operating control of Fengcuiyuan. As a result, Hongyuan HK has been determined to have a controlling financial interest in Fengcuiyuan, requiring Hongyuan HK to consolidate the financial statements of Fengcuiyuan and its subsidiaries, and ultimately consolidate with its parent company, Hong Yuan. The Transaction was accounted for as a reorganization of entities under common control. As the combining entities have been under common control since September 2021, the consolidated financial statements of the Company recognized the assets and liabilities received in the reorganization at their historical carrying amounts, as reflected in the historical financial statements of each entity. Business The Company, through its subsidiary and the Agreements with Fengcuiyuan, focuses on supply chain management services, primarily engaged in the wholesale and internet sales of fast-moving consumer goods, including food, daily necessities, and electronic products, across various fields such as pre-packaged food, agricultural by-products, and household goods. Supply chain companies help optimize all the activities involved in procuring raw materials and transforming them into products, as well as managing logistics, storage, sales, and shipping those products to consumers, all of which is done using technology such as artificial intelligence, IoT, blockchain, and robots. What is the supply chain? The supply chain is a series of interconnected steps and processes that a product undergoes to reach a consumer, from its creation to its delivery. It often entails a network of companies and people that are involved in obtaining the raw materials of the product, making and storing the product and then selling and distributing the product. What is a supply chain company? A supply chain company specializes in helping other companies manage and optimize their supply chain operations, providing a range of services to improve their efficiency, cost-effectiveness, and productivity. These include inventory management, freight transportation, warehousing, and more. What is supply chain management? Supply chain management is the handling of the production and distribution process of goods and services. We develop and operate offline brand-authorized stores, primarily selling a range of Baijiu products at various price points, along with classic red wine brands, renowned cigarettes and teas, local specialties, beverages, and mid-to-high-end gifts. At the same time, goods are also provided to cooperative e-commerce platforms. Before December 31, 2024, the primary focus will be on distributing products of well-known brands. After the successful registration of our own brand in March 2025, we have established contract manufacturing cooperation with well-known liquor manufacturers and are currently in production. As of December 31, 2024, the store in Chongqing had already opened. Currently, the stores in Chongqing and Jiangyou are operational, while the Leshan store is in the process of selecting a site and undergoing decoration. Before December 31, 2024, the store will be invested in and hold a 55% stake by Rongcheng (Sichuan) Supply Chain Management Co., LTD. In June 2025, we changed our business model. We still fund the opening of stores, but we no longer hold shares in the stores. The investment funds for the stores will be recovered as loans in the future from the stores’ profits. Customer acquisition is a part of our business model. We provide funds to invest in the establishment of stores and are responsible for their operation. Regional service partners are responsible for finding store partners and store members. During the operation of the store, we help service partners attract consumers and develop them into loyal members by sharing stock growth dividends, quality commitments, price commitments, and after-sales commitments, among other benefits. This enables us to gather the basic purchasing needs of members within the store. Supply Chain Management Co., Ltd. is 98% controlled by Fengcui Yuanchang Technology Development Co., LTD. Fengcui Yuanchang Technology Development Co., Ltd. is 100% controlled by Hongyuan HK, and Hongyuan HK is 100% owned by the HGYN.Changshunyuan E-commerce (Sichuan) Co., Ltd. is a client of Rongcheng (Sichuan) Supply Chain Management Co., Ltd. 5 Products The mid-to-low-end white and red wines that are popular on the market from major brands, will gradually introduce new product categories in the future, such as tea, beverages, rice, cooking oil etc, which are closely related to People’s Daily lives. Chinese liquor and wine partner brands: Moutai, Wuliangye, Luzhou Laojiao, Jiannanchun, Shede, Xijiu, Langjiu, Jinsha, Jingjiu, Fenjiu, ShixianTaibai, Jiang Xiaobai, Great Wall, Tredo, Ailisong, Claire Valley..... Tea and beverages: The strategic cooperation brands are Zhongcha and Nongfu Spring. We have carefully selected over ten premium tea varieties such as ZhongchaDianhong Special Grade, ZhongchaZijuan, Zhongcha Qianli Jiangshan, ZhongchaDashu Jinzhen, Zhongcha Amber Golden Bud, Zhongcha Lianhua Feng Da Hong Pao, ZhongchaMatouyan Cinnamon, ZhongchaZhangtangjian Old Fir Narcissus, ZhongchaXixiangying White Tea, and Zhongcha Jinhua Xiangyuan, as well as over ten best-selling beverages under Nongfu Spring brand. Cigarettes, local specialties and seasonal products, Northeast rice Mid-to-high-end gifts: Dozens of world-renowned cosmetic brands such as Chanel, Lancome, La Mer, SK-II, etc First- and second-tier brands: The company has the resources to cooperate with manufacturers or first-level distributors of first- and second-tier brands, effectively reducing the costs of intermediate links and building a solid profit foundation and price competitiveness for the business model. Third-tier brands: Integrate upstream resources and directly establish direct procurement methods with manufacturers of third-tier brands. Private Label: Based on market orientation, selecting high-quality factories with excellent business reputation and a complete quality assurance system, establishing strategic OEM partnerships, and carrying out contract manufacturing. Main sales channels 1. Partners and Members: The company mainly sells to members and partners through store service providers By offering high-quality, reasonably priced products with good services, we attract and convert a large number of partners and members to join. Through a value-sharing plan, our user stickiness is strong, and the customer life value is higher than that of similar competitors in the market. By adhering to the zero-cost and worry-free return and exchange policy, we maximize the protection of consumers’ rights and interests, significantly enhancing their satisfaction and willingness to repurchase. 2. Other trading companies: Select high-quality e-commerce platforms or companies and establish long-term, stable cooperative relationships. Analysis of the Current Alcoholic Market and Competition Channel Transformation and Price System Impact 1.The low-price dumping by e-commerce and new retail has squeezed the profits of distribution channels. First - and second- tier brands are facing price shocks through online channels. The main reason is that e-commerce platforms (such as Tmall and JD.com) and chain systems, leveraging their advantages in establishing a comprehensive supply chain system on a large scale, offer low-price promotions to famous first- and second-tier wines. 2. Data from 2025 shows that the online sales of alcoholic beverages have exceeded 30-billion-yuan, accounting for 29% of the total industry scale. The annual growth rate of GMV in live-streaming sales has reached 137%, putting pressure on the prices of traditional distribution systems and compressing the profit margins of traditional distribution levels. 3. Third - and fourth-tier brands rely on non-standard channels, resulting in price chaos. Small and medium-sized brands generally rely too heavily on live-stream sales (accounting for over 30%) and private domain sales, with fragmented pricing strategies. This has led to a loss of pricing power in terminal stores, making it difficult to maintain consumer loyalty. For instance, the online sales growth rate of regional liquor enterprises has reached 2.3 times that of national brands, but they lack a unified price control mechanism, making it difficult for terminal stores to stabilize their customer base. Consumption Upgrade and Evolution of Brand Landscape 1. The increase in brand concentration squeezes the survival of non-branded products. The upgrading of consumption has highlighted the Matthew effect in the industry: In 2024, the profit share of CR6 liquor enterprises (such as Moutai and Wuliangye) reached 86%, a 31% increase compared to ten years ago. The market share of small and medium-sized brands has shrunk to less than 15%. 2. Consumers’ demand for brand endorsement has intensified. Leading brands build barriers through quality and cultural ips (for instance, the premium of Moutai’s zodiac wine exceeds 50%). At the same time, small and medium-sized liquor enterprises compete in a differentiated way by relying on the differentiation of aroma types and cost performance (the market size of plain bottle liquor has exceeded 150 billion yuan). 6 Terminal Ecosystem: Survival Pressure and Transformation Challenges 1. The continuous increase in costs and the lack of specialization have accelerated the bankruptcy and closure of stores. Individual brick-and-mortar stores are facing dual pressures: Labor costs are on the rise: By 2025, the average annual increase in labor costs in the service sector is projected to be 12%. Coupled with the rent increase, the gross profit margin of individual stores is compressed to 15%-20%. 2. Backward business model: Over 70% of individual stores are family-run, lacking digital tools and professional product selection capabilities, and their survival space is continuously narrowing. By 2025, approximately 50.9% of alcohol retailers experienced a decline in sales, forcing them to transform their channels towards a chain operation and O2O model. Industry Volume-Price Paradox: The Truth of Structural Growth The alcohol industry has entered a stage of structural growth, presenting a new normal of “volume reduction and price increase”: high-end positioning and price increase strategies have driven sales growth, with annual sales increasing at a rate of 20% to 30% year by year. In comparison, sales volume has decreased at a rate of 10% to 15% annually. Employees We currently have 10 full-time employees, including one executive, two in finance, and seven in operations, sales, and marketing. Mr. Xudong has been a director and officer of the Company since 2020 and its principal shareholder. Item 1A. Risk Factors This item is inapplicable because we are a “smaller reporting company” as defined in Exchange Act Rule 12b-2.