Company: QSJC
Filing Date: 2025-03-26
Form Type: 10-K
Source: 0001683168-25-001892
Chunk: 32

Company: TANCHENG GROUP CO., LTD.
Filing Date: 2025-03-26
Form: 10-K
Item: Item 1
Chunk 32
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 and the diversion of resources, which could adversely affect our results
of operations and financial condition.

Our outsourcing processing model presents
several risk factors, including quality control, supply chain, financial, and intellectual property risks.

Our cultural products are mainly produced through
outsourcing processing. We are responsible for key aspects such as product research and development, design, quality control, sales, and
customer service. The outsourcing processing vendors, on the other hand, are responsible for material procurement and production, and
then deliver the finished products to us. At present, our outsourcing processing vendors are not long-term partners.

There are potential risks associated with the
outsourcing processing model such as quality control, supply chain, financial, and intellectual property risks. Any unexpected changes
in the outsourcing processing vendors’ supply timeliness and product quality may have a certain adverse impact on our operations.
This could include delays in product delivery or quality issues that may lead to product recalls or negative customer feedback. Any disruptions
in the supply chain could have a significant impact on our ability to meet customer demand. Outsourcing processing typically involves
additional costs, such as transportation and fees paid to the outsourcing processing vendors. If the cost of outsourcing processing exceeds
the expected revenue, it could lead to financial losses. We are also sharing our intellectual property and trade secrets with third-party
entities. If the outsourcing processing vendors fail to protect this sensitive information, it could lead to lost revenue and damage to
our competitive advantage.

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Defects in our products could result in
loss of customers, reputational damage, and decreased revenue, facing warranty claims that may arise from defective products.

Our products may contain undetected defects, especially
when first introduced or when newer products are released. Errors, defects, or poor quality can arise due to design flaws, defects in
raw materials or components or manufacturing difficulties, which can affect the quality of our products. Any actual or perceived errors,
defects, or poor quality in our products could result in the replacement or recall of our products, shipment delays, rejection of our
products, damage to our reputation, lost revenue, and increases in customer service and support costs, all of which could have a material
adverse effect on our business, financial condition, and results of operations.

We may not be able to adequately protect
our material intellectual property and other proprietary rights, or to defend successfully against intellectual property infringement
claims by third parties.

Our ability to compete effectively depends in
part upon our intellectual property rights.