# EDGAR Filing Document

**Accession Number:** 0001791725
**File Stem:** 0001213900-26-010177
**Filing Date:** 2026-1
**Character Count:** 624585
**Document Hash:** 55d9c74e42b6c8a6cb39c5f11123f03d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-26-010177.hdr.sgml**: 20260130

**ACCESSION NUMBER**: 0001213900-26-010177

**CONFORMED SUBMISSION TYPE**: 20-F

**PUBLIC DOCUMENT COUNT**: 131

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20260130

**DATE AS OF CHANGE**: 20260130

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Huadi International Group Co., Ltd.
- **CENTRAL INDEX KEY:** 0001791725
- **STANDARD INDUSTRIAL CLASSIFICATION:** STEEL PIPE & TUBES [3317]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 000000000
- **STATE OF INCORPORATION:** E9
- **FISCAL YEAR END:** 0930

**FILING VALUES:**
- **FORM TYPE:** 20-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39904
- **FILM NUMBER:** 26583382

**BUSINESS ADDRESS:**
- **STREET 1:** NO. 68, YAQIAN VILLAGE, YONGZHONG STREET
- **CITY:** WENZHOU
- **STATE:** F4
- **ZIP:** 325025
- **BUSINESS PHONE:** 86057786598888

**MAIL ADDRESS:**
- **STREET 1:** NO. 68, YAQIAN VILLAGE, YONGZHONG STREET
- **CITY:** WENZHOU
- **STATE:** F4
- **ZIP:** 325025

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 20-F**

**(Mark One)**

☐ **REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934**

**OR**

**☒** **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended September 30, 2025**

**OR**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

**OR**

☐ **SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**

**Commission file number 001-39904**

**Huadi International Group Co., Ltd.**

(Exact name of Registrant as specified in its charter)

**Cayman Islands**

(Jurisdiction of incorporation or organization)

**No. 1688 Tianzhong Street, Longwan District, Wenzhou, Zhejiang Province**

**People's Republic of China 325025**

**+86-057786598888**

(Address of principal executive offices)

**Huisen Wang, CEO**

**+86-057786598888**

**Huadi@huadigroup.com**

**No. 1688 Tianzhong Street, Longwan District, Wenzhou, Zhejiang Province**

**People's Republic of China 325025**

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Ordinary shares, par value 0.0002 per share | HUDI | Nasdaq Capital Market |

---

Securities registered or to be registered pursuant to Section 12(g) of the Act: **None**

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: **None**

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 14,299,182 ordinary shares as of September 30, 2025.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes ☒ No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ <br> Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☒ International Financial Reporting Standards as issued Other ☐ <br> by the International Accounting Standards Board ☐

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

☐ Yes ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

☐ Yes ☐ No

**Table of Contents**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| [**PART I**](#a_001) |  |  |
| &nbsp;&nbsp;&nbsp;Item 1. | [Identity of Directors, Senior Management and Advisers](#a_002) | 1 |
| &nbsp;&nbsp;&nbsp;Item 2. | [Offer Statistics and Expected Timetable](#a_003) | 1 |
| &nbsp;&nbsp;&nbsp;Item 3. | [Key Information](#a_004) | 1 |
| &nbsp;&nbsp;&nbsp;Item 4. | [Information on the Company](#a_005) | 40 |
| &nbsp;&nbsp;&nbsp;Item 4A. | [Unresolved Staff Comments](#a_006) | 62 |
| &nbsp;&nbsp;&nbsp;Item 5. | [Operating and Financial Review and Prospects](#a_007) | 63 |
| &nbsp;&nbsp;&nbsp;Item 6. | [Directors, Senior Management and Employees](#a_008) | 73 |
| &nbsp;&nbsp;&nbsp;Item 7. | [Major Shareholders and Related Party Transactions](#a_009) | 82 |
| &nbsp;&nbsp;&nbsp;Item 8. | [Financial Information](#a_010) | 84 |
| &nbsp;&nbsp;&nbsp;Item 9. | [The Offer and Listing](#a_011) | 85 |
| &nbsp;&nbsp;&nbsp;Item 10. | [Additional Information](#a_012) | 85 |
| &nbsp;&nbsp;&nbsp;Item 11. | [Quantitative and Qualitative Disclosures About Market Risk](#a_013) | 101 |
| &nbsp;&nbsp;&nbsp;Item 12. | [Description of Securities Other than Equity Securities](#a_014) | 102 |
| [**PART II**](#a_015) |  |  |
| &nbsp;&nbsp;&nbsp;Item 13. | [Defaults, Dividend Arrearages and Delinquencies](#a_016) | 103 |
| &nbsp;&nbsp;&nbsp;Item 14. | [Material Modifications to the Rights of Security Holders and Use of Proceeds](#a_017) | 103 |
| &nbsp;&nbsp;&nbsp;Item 15. | [Controls and Procedures](#a_018) | 103 |
| &nbsp;&nbsp;&nbsp;Item 16. | [\[Reserved\]](#a_019) | 104 |
| &nbsp;&nbsp;&nbsp;Item 16A. | [Audit Committee Financial Expert](#a_020) | 104 |
| &nbsp;&nbsp;&nbsp;Item 16B. | [Code of Ethics](#a_021) | 104 |
| &nbsp;&nbsp;&nbsp;Item 16C. | [Principal Accountant Fees and Services](#a_022) | 104 |
| &nbsp;&nbsp;&nbsp;Item 16D. | [Exemptions from the Listing Standards for Audit Committees](#a_023) | 105 |
| &nbsp;&nbsp;&nbsp;Item 16E. | [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](#a_024) | 105 |
| &nbsp;&nbsp;&nbsp;Item 16F. | [Change in Registrant's Certifying Accountant](#a_025) | 105 |
| &nbsp;&nbsp;&nbsp;Item 16G. | [Corporate Governance](#a_026) | 105 |
| &nbsp;&nbsp;&nbsp;Item 16H. | [Mine Safety Disclosure](#a_027) | 106 |
| &nbsp;&nbsp;&nbsp;Item 16I. | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#a_028) | 106 |
| &nbsp;&nbsp;&nbsp;Item 16J. | [Insider trading policies](#a_029) | 106 |
| &nbsp;&nbsp;&nbsp;Item 16K. | [Cyber Security](#a_030) | 106 |
| [**PART III**](#a_031) |  |  |
| &nbsp;&nbsp;&nbsp;Item 17. | [Financial Statements](#a_032) | 107 |
| &nbsp;&nbsp;&nbsp;Item 18. | [Financial Statements](#a_033) | 107 |
| &nbsp;&nbsp;&nbsp;Item 19. | [Exhibits](#a_034) | 107 |

---

i

**Conventions Used in this Annual Report**

Except where the context otherwise requires and for purposes of this annual report on Form 20-F only:

● "China" or "PRC" refers to the People's Republic of China, and only in the context of describing PRC rules, laws, regulations, regulatory authority, and any PRC entities or citizens under such rules, laws and regulations, and other legal or tax matters in this report, excludes Hong Kong, Macau and Taiwan;

● "Huadi International" refers to Huadi International Group Co., Ltd. (also referred to as 华迪国际集团股份公司), a Cayman Islands exempted company;

● "HK Beach" refers to Hong Kong Beach Limited (also referred to as 香港海滨有限公司), a Hong Kong company and a wholly owned subsidiary of Yongqiang Tuoxing;

● "Huadi Steel" refers to Huadi Steel Group Limited (also referred to as 华迪钢业集团有限公司), a PRC company and a 99% owned subsidiary of Wenzhou Hongshun;

● "Huadi Songyang" refers to Huadi (Songyang) Co., Ltd. (also referred to as 华迪特材（松阳）有限公司), a PRC company and a wholly owned subsidiary of HK Beach;

● "PRC operating entities" refers to Huadi Steel and Huadi Songyang;

● "RMB" or "Renminbi" refers to the legal currency of China;

● "SEC" refers to the Securities and Exchange Commission of the United States;

● "Wenzhou Hongshun" refers to Hongshun Stainless Steel Limited (also referred to as 温州鸿顺不锈钢有限公司), a PRC company and a wholly owned subsidiary of HK Beach;

● "We," "us," "our company," "Company," and "our" refer to Huadi International Group Co., Ltd. and its subsidiaries; and

● "Yongqiang Tuoxing" refers to Yongqiang Tuoxing Limited (also referred to as 永强拓兴有限公司), a British Virgin Islands company and a wholly owned subsidiary of Huadi International.

This annual report contains translations of certain RMB amounts into U.S. dollar amounts at a specified rate solely for the convenience of the reader. All reference to "U.S. dollars," "USD," "US$" or "$" are to United States dollars. The exchange rates in effect as of September 30, 2025, 2024, and 2023 were US $1.00 for RMB 7.1190, RMB 7.0176, and RMB 7.2960, respectively. The average exchange rates for the years ended September 30, 2025, 2024 and 2023 were US $1.00 for RMB 7.2125, RMB 7.2043, and RMB 7.0533, respectively. We use period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

We obtained the industry and market data used in this annual report or any document incorporated by reference from industry publications, research, surveys and studies conducted by third parties and our own internal estimates based on our management's knowledge and experience in the markets in which we operate. We did not, directly or indirectly, sponsor or participate in the publication of such materials, and these materials are not incorporated in this annual report other than to the extent specifically cited in this annual report. We have sought to provide current information in this annual report and believe that the statistics provided in this annual report remain up-to-date and reliable, and these materials are not incorporated in this annual report other than to the extent specifically cited in this annual report.

ii

**SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS**

Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate," and similar expressions are intended to identify such forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under "*Item 3 - Key Information-Risk Factors,*" "*Item 4 - Information on the Company,*" "*Item 5 - Operating and Financial Review and Prospects*," and elsewhere in this report, as well as factors which may be identified from time to time in our other filings with the Securities and Exchange Commission (the "SEC") or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

iii

**PART I**

**Item 1. Identity of Directors, Senior Management and Advisers**

Not applicable for annual reports on Form 20-F.

**Item 2. Offer Statistics and Expected Timetable**

Not applicable for annual reports on Form 20-F.

**Item 3. Key Information**

**Overview**

**Our Corporate Structure and Operations in China**

Huadi International is not a Chinese operating company but a Cayman Islands incorporated holding company with no material operations of its own, conducting business through our subsidiaries' operation in China. Huadi International does not conduct our business through variable interest entity ("VIE") structure. For more details of risks related to our corporate structure, see "*Risk Factors- Risks Related to Our Corporate Structure and Ordinary Shares"* beginning on page 10.

Huadi Songyang, Wenzhou Hongshun, and Huadi Steel are subject to certain legal and operational risks associated with being based in China and having a majority of our operations in China. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in our operations, significant depreciation of the value of our ordinary shares, or a complete hindrance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless. The PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on the daily business operation of PRC subsidiaries and our ability to accept foreign investments and list on an U.S. or other foreign exchange. These risks may cause significant depreciation of the value of our ordinary shares, or a complete hinderance of our ability to offer or continue to offer our securities to investors. See "*Risk Factors - Risks Related to Doing Business in China*" beginning on page 9.

Below is a chart illustrating our current corporate structure as of the date of this annual report:

![](image_001.jpg)

**The Holding Foreign Companies Accountable Act ("HFCAA")**

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. An identified issuer will be required to comply with these rules if the SEC identifies it as having a "non-inspection" year under a process to be subsequently established by the SEC. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, amending the HFCAA and requiring the SEC to prohibit an issuer's securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years. If our auditor cannot be inspected by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the trading of our securities on any U.S. national securities exchanges, as well as any over-the-counter trading in the U.S., will be prohibited. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions.

On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the "SOP") with the China Securities Regulatory Commission and the Ministry of Finance of China. The SOP, together with two protocol agreements governing inspections and investigations (together, the "SOP Agreement"), establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. The SOP Agreement remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the SOP Agreement disclosed by the SEC, the PCAOB shall have sole discretion to select any audit firms for inspection or investigation and the PCAOB inspectors and investigators shall have a right to see all audit documentation without redaction. Under the PCAOB's rules, a reassessment of a determination under the HFCAA may result in the PCAOB reaffirming, modifying or vacating the determination.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong are subject to uncertainties and depends on a number of factors out of our and our auditor's control. The PCAOB continues to demand complete access in mainland China and Hong Kong and remains focused on conducting regular inspections and pursuing ongoing investigations, as well as initiating new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

Our auditor, HTL, is headquartered in Houston, Texas, and is subject to inspection by the PCAOB on a regular basis. Therefore, we believe our auditor is not subject to the determinations as to the inability to inspect or investigate registered firms completely announced by the PCAOB on December 16, 2021. However, we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. In the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company's auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the Company's securities to be prohibited under the HFCAA ultimately result in a determination by a securities exchange to delist the Company's securities. In addition, under the HFCAA, our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our ordinary shares being delisted by and exchange. See "*Risk Factors - Risks Related to Doing Business in China - The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering*" on page 33.

**Recent Regulatory Actions by the PRC Government**

Because the Company conducts substantially of its operations in China through its PRC subsidiaries, we are subject to certain legal and operational risks associated with the operations in China, including changes in the legal, political, and economic policies of the Chinese government, the relationship between China and United States, or Chinese or United States regulations may materially and adversely affect our business, financial condition and results of operations. The Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operating subsidiaries' operations and/or the value of our Ordinary Shares or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our Ordinary Shares to significantly decline or become worthless.

Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China, which may be changed from time to time, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretations and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice.

On December 28, 2021, the Cyberspace Administration of China, or the CAC, published the CAC Revised Measures, which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over one million users seeks a "foreign" listing, it must apply for the cybersecurity review. In addition, operators of critical information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CAC Revised Measures provides no further explanation on the extent of "network platform operator" and "foreign" listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying the our PRC operating entities as critical information infrastructure operators.

The CAC Revised Measures empowers the cybersecurity review office to initiate a cybersecurity review when they believe any particular data processing activities "affect or may affect national security." In addition, on November 14, 2021, the CAC promulgated the Regulations on the Administration of Cyber Data Security (Draft for Comments) (the "Draft CAC Regulations"), and according to the Draft CAC Regulations, any data processors shall, in accordance with relevant state provisions, apply for a cybersecurity review when carrying out, among other things, "other data processing activities that affect or may affect national security."

In the opinion of our PRC counsel, Zhejiang Dongou Law Firm, we are not subject to cybersecurity review with the CAC, after the Measures for Cybersecurity Review (2021 version) became effective on February 15, 2022, since (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying our PRC operating entities as critical information infrastructure operators or requiring our PRC operating entities to go through cybersecurity review or network data security review by the CAC.

On February 17, 2023, the CSRC promulgated the Trial Measures of, and the Overseas Listings Rules, which has become effective on March 31, 2023. On the same date of the issuance of the Overseas Listings Rules, the CSRC circulated the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises (the "Notice"). Pursuant to the Trial Measures and the Notice, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a PRC company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. The companies that have already been listed on overseas stock exchanges or have obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing before March 31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing yet need to make filings for subsequent offerings in accordance with the Overseas Listings Rules. In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As of the date of the annual report, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect to our listing on the Nasdaq Capital Market. However, there remains significant uncertainty as to the enactment, interpretation, and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.

On December 24, 2021, the CSRC, together with other relevant government authorities in China issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) ("Draft Overseas Listing Regulations"). The Draft Overseas Listing Regulations requires that a PRC domestic enterprise seeking to issue and list its shares overseas ("Overseas Issuance and Listing") shall complete the filing procedures of and submit the relevant information to CSRC. The Overseas Issuance and Listing includes direct and indirect issuance and listing. Where an enterprise whose principal business activities are conducted in PRC seeks to issue and list its shares in the name of an overseas enterprise ("Overseas Issuer") on the basis of the equity, assets, income or other similar rights and interests of the relevant PRC domestic enterprise, such activities shall be deemed an indirect overseas issuance and listing ("Indirect Overseas Issuance and Listing") under the Draft Overseas Listing Regulations. Therefore, the proposed listing would be deemed an Indirect Overseas Issuance and Listing under the Draft Overseas Listing Regulations. As such, the Company would be required to complete the filing procedures of and submit the relevant information to CSRC after the Draft Overseas Listing Regulations become effective.

In addition, on December 28, 2021, the CAC, the National Development and Reform Commission ("NDRC"), and several other administrations jointly issued the revised Measures for Cybersecurity Review, or the Revised Review Measures, which became effective and replace the existing Measures for Cybersecurity Review on February 15, 2022. According to the Revised Review Measures, if an "online platform operator" that is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review. Based on a set of Q&A published on the official website of the State Cipher Code Administration in connection with the issuance of the Revised Review Measures, an official of the said administration indicated that an online platform operator should apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators. Given the recency of the issuance of the Revised Review Measures and their pending effectiveness, there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and implementation. For example, it is unclear whether the requirement of cybersecurity review applies to follow-on offerings by an "online platform operator" that is in possession of personal data of more than one million users where the offshore holding company of such operator is already listed overseas. Furthermore, the CAC released the draft of the Regulations on Network Data Security Management in December 2021 for public consultation, which among other things, stipulates that a data processor listed overseas must conduct an annual data security review by itself or by engaging a data security service provider and submit the annual data security review report for a given year to the municipal cybersecurity department before January 31 of the following year. If the draft Regulations on Network Data Security Management are enacted in the current form, we, as an overseas listed company, will be required to carry out an annual data security review and comply with the relevant reporting obligations. For more information, see "*Risk Factors - Risks Related to Doing Business in China -The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. If the Chinese government intervenes or influences our operations in the future, it could result in a material change in our operations and/or the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors or cause such securities to significantly decline in value or become worthless*" on page 24.

**Transfers of Cash to and from Our Subsidiaries**

We are a holding company with no material operations of our own and do not generate any revenue. We currently conduct substantially all the operations through our PRC subsidiaries. We are permitted under PRC laws and regulations to provide funding to PRC subsidiaries only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. See "*Risk Factors - Risks Related to Doing Business in China - PRC regulations on loans to and direct investment in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business*" on page 27.

Under our current corporate structure, we rely on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have, including the funds necessary to pay dividends and other cash distributions to our shareholders or to service any debt we may incur. Our subsidiaries in the PRC generate and retain cash generated from operating activities and re-invest it in our business. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends to us.

The transfer of funds among companies are subject to the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Revision, the "Provisions on Private Lending Cases"), which was implemented on August 20, 2020 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal or criminal purposes; (v) the lending is violations of public orders or good morals; or (vi) the lending is in violations of mandatory provisions of laws or administrative regulations. As advised by our PRC counsel, Zhejiang Dongou Law Firm, the Provisions on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary's operations. We have not been notified of any other restriction which could limit our PRC subsidiaries' ability to transfer cash between subsidiaries. See *"Regulation - Regulations on Private Lending."*

 

We currently do not maintain any cash management policies that dictate the purposes, amounts and procedures form cash transfers among the Company, our subsidiaries, or investors. Rather, as of the date of this annual report, funds can be transferred in accordance with the applicable PRC laws and regulations.

The following table summarizes our cash transfers within our organization for the year ended September 30, 2025:

---

| | | | |
|:---|:---|:---|:---|
| **Nature** | **Cash outflow** | **Cash inflow** | **Amount** |
| Capital contribution | Huadi International | HK Beach | $20000 |
| Capital contribution | HK Beach | Huadi Songyang | 470000 |
| Repayment on internal loan | Huadi Steel | HK Beach | 450000 |

---

The following table summarizes our cash transfers within our organization for the year ended September 30, 2024:

---

| | | | |
|:---|:---|:---|:---|
| **Nature** | **Cash outflow** | **Cash inflow** | **Amount** |
| Capital contribution | Huadi International | HK Beach | $2200000 |
| Capital contribution | HK Beach | Wenzhou Hongshun | 60000 |
| Capital contribution | HK Beach | Huadi Songyang | 10980300 |
| Capital contribution | Wenzhou Hongshun | Huadi Steel | 60000 |
| Internal loan | HK Beach | Huadi Steel | 2950000 |
| Repayment on internal loan | Huadi Songyang | Huadi Steel | 13881 |

---

The following table summarizes our cash transfers within our organization for the year ended September 30, 2023:

---

| | | | |
|:---|:---|:---|:---|
| **Nature** | **Cash outflow** | **Cash inflow** | **Amount** |
| Capital contribution | Huadi International | HK Beach | $12800000 |
| Capital contribution | HK Beach | Huadi Songyang | 3549700 |
| Internal loan | Huadi International | Huadi Steel | 6858500 |
| Internal loan | HK Beach | Huadi Steel | 8500000 |
| Internal loan | Huadi Steel | Huadi Songyang | 14178 |

---

Our PRC subsidiaries are permitted to pay dividends only out of their retained earnings. However, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, after making up for previous year's accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such funds reaches 50% of its registered capital. This portion of our PRC subsidiaries' respective net assets are prohibited from being distributed to their shareholders as dividends. See "*Regulation - Regulations on Dividend Distributions*." However, none of our subsidiaries has made any dividends or other distributions to our holding company or any U.S. investors as of the date of this annual report. See also "*Risk Factors - Risks Related to Doing Business in China - Huadi International relies on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business"* on page 28.

As of the date of this annual report, none of our subsidiaries have ever issued any dividends or made other distributions to us or their respective holding companies nor have we or any of our subsidiaries ever paid dividends or made other distributions to U.S. investors. We intend to retain all of our available funds and any future earnings and cash proceeds from overseas financing activities to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future.

In addition, the PRC government regulates and imposes certain restrictions on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of mainland China. If the foreign exchange management system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to transfer cash out of China, and pay dividends in foreign currencies to our shareholders. There can be no assurance that the PRC government will not impose restrictions on our ability to transfer or distribute cash within our organization or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations. See "*Risk Factors - Risks Related to Doing Business in China - Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment"* on page 30.

A 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises. Any gain realized on the transfer of Ordinary Shares by such investors is also subject to PRC tax at a current rate of 10% which in the case of dividends will be withheld at source if such gain is regarded as income derived from sources within the PRC. See also *"Risk Factors - Risks Related to Doing Business in China - If our entities outside of China are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders"* on page 32.

**Enforceability of Civil Liabilities**

We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability. We are incorporated in the Cayman Islands because of certain benefits associated with being a Cayman Islands corporation, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of exchange control or currency restrictions and the availability of professional and support services. However, the Cayman Islands has a less developed body of securities laws as compared to the United States and provides less protections to investors. In addition, Cayman Islands companies may not have standing to sue before the federal courts of the United States.

Substantially all of our assets are located outside the United States. In addition, a majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or such persons or to enforce against them or against us, judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

There is uncertainty as to whether the courts of China would (1) recognize or enforce judgments of United States courts obtained against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or (2) be competent to hear original actions brought in each respective jurisdiction, against us or such persons predicated upon the securities laws of the United States or any state thereof.

The recognition and enforcement of foreign judgments are provided for under the Chinese Civil Procedure Law. Chinese courts may recognize and enforce foreign judgments in accordance with the requirements of the Chinese Civil Procedure Law based either on treaties between China and the country where the judgment is made or in reciprocity between jurisdictions. China does not have any treaties or other agreements with the Cayman Islands or the United States that provide for the reciprocal recognition and enforcement of foreign judgments. As a result, it is uncertain whether a Chinese court would enforce a judgment rendered by a court in either of these two jurisdictions.

We have been advised by Ogier, our counsel as to Cayman Islands law, that it is uncertain whether the courts of the Cayman Islands will allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. We have been further advised that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any re- examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) is given by a foreign court
of competent jurisdiction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) imposes on the judgment debtor
a liability to pay a liquidated sum for which the judgment has been given;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) is final;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) is not in respect of taxes,
a fine or a penalty; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) is not obtained by fraud; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) is not of a kind the enforcement
of which is contrary to natural justice or the public policy of the Cayman Islands.

Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions.

A Cayman Islands court may impose civil liability on us or our directors or officers in a suit brought in the Grand Court of the Cayman Islands against us or these persons with respect to a violation of U.S. federal securities laws, provided that the facts surrounding any violation constitute or give rise to a cause of action under Cayman Islands law.

**Summary of Risk Factors**

 ****

***Risks Related to Our Business and Industry***

● Tariffs could materially have a negative impact on the demand for our products. See "*Risk Factors- Risks Related to Our Business and Industry- Tariffs could materially have a negative impact on the demand for our products.*" on page 12.

● The trade policy initiatives announced by the United States administration against China may adversely affect our business. See "*Risk Factors- Risks Related to Our Business and Industry- The trade policy initiatives announced by the United States administration against China may adversely affect our business*" on page 12.

● Our business is affected by global economic and political conditions. See "*Risk Factors- Risks Related to Our Business and Industry- Our business is affected by global economic and political conditions*" on page 13.

● Any decline in the availability or increase in the cost of raw materials and energy resources could materially affect our earnings. See "*Risk Factors- Risks Related to Our Business and Industry- Any decline in the availability or increase in the cost of raw materials and energy resources could materially affect our earnings*" on page 14.

● The loss of any of our key customers could reduce our revenues and our profitability. See "*Risk Factors- Risks Related to Our Business and Industry- The loss of any of our key customers could reduce our revenues and our profitability*" on page 14.

***Risks Related to Doing Business in China***

 

● The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. If the Chinese government intervenes or influences our operations in the future, it could result in a material change in our operations and/or the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors or cause such securities to significantly decline in value or become worthless *.* See "*Risk Factors* - *Risks Related to Doing Business in China* - *The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. If the Chinese government intervenes or influences our operations in the future, it could result in a material change in our operations and/or the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors or cause such securities to significantly decline in value or become worthless*" on page 24.

● Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations"* on page 26.

● Substantial uncertainties exist with respect to China Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Substantial uncertainties exist with respect to China Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations*" on page 28.

● Huadi International relies on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Huadi International relies on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.*" on page 28.

● Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ordinary shares. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ordinary shares*" on page 29.

● The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment*" page 30.

● Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment*" on page 30.

● Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject our PRC operating entities to penalties. See "*Risk Factors* - *Risks Related to Doing Business in China* - *Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject our PRC operating entities to penalties*" on page 30.

● The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. See "*Risk Factors* - *Risks Related to Doing Business in China* - *The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China*" on page 31.

● PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries' ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law. See "*Risk Factors* - *Risks Related to Doing Business in China* - *PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries' ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law*" on page 31.

***Risks Related to Our Corporate Structure and Ordinary Shares***

● Huadi International is an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Ordinary Shares less attractive to investors. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Shares* - *Huadi International is an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Ordinary Shares less attractive to investors*" on page 37.

● Huadi International is a "foreign private issuer," and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Shares* - *Huadi International is a "foreign private issuer," and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects*" on page 37.

● As a foreign private issuer, we are permitted to, and did follow certain home country corporate governance practices instead of otherwise applicable Nasdaq Capital Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Shares- As a foreign private issuer, we are permitted to, and did follow certain home country corporate governance practices instead of otherwise applicable Nasdaq Capital Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers*" on page 37.

● You may have difficulty enforcing judgments obtained against us. See "*Risk Factors-Risks Related to Corporate Structure and Our Ordinary Shares* - *You may have difficulty enforcing judgments obtained against us*" on page 37.

● You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because Huadi is incorporated under Cayman Islands law. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Shares* - *You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because Huadi is incorporated under Cayman Islands law*" on page 38.

● Nasdaq may apply additional and more stringent criteria for Huadi International's continued listing. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Share- Nasdaq may apply additional and more stringent criteria for Huadi International's continued listing*" on page 38.

● If Huadi International cannot satisfy, or continue to satisfy, the listing requirements and other rules of Nasdaq Capital Market, although we exempt from certain corporate governance standards applicable to US issuers as a foreign private issuer, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Share- If Huadi International cannot satisfy, or continue to satisfy, the listing requirements and other rules of Nasdaq Capital Market, although we exempt from certain corporate governance standards applicable to US issuers as a foreign private issuer, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them*" page 38.

● The market price of Huadi International's ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price. See "*Risk Factors-Risks Related to Our Corporate Structure and Ordinary Share- The market price of Huadi International's ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price*" on page 39.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A. [RESERVED]**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. CAPITALIZATION AND INDEBTEDNESS**

Not applicable for annual reports on Form 20-F.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. REASONS FOR THE OFFER AND USE OF PROCEEDS**

Not applicable for annual reports on Form 20-F.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. RISK FACTORS**

***An investment in our ordinary shares involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information contained in this annual report, before making an investment in our ordinary shares. Any of the risk factors described below could significantly and negatively affect our financial position, results of operations or cash flows. In addition, these risks represent important factors that can cause our actual results to differ materially from those anticipated in our forward-looking statements.***

**Risks Related to Our Business and Industry**

***Tariffs could materially have a negative impact on the demand for our products.***

Import tariffs, other trade barriers, and protectionist policies could negatively affect steel prices and our exports to international markets, particularly the United States. Such import barriers adversely affect our PRC operating entities' business by limiting our access to or competitiveness in foreign steel markets. For example, our PRC operating entities might anticipate a significant increase in the cost of goods to be sold to the United States as a result of tariffs on steel and steel products imports imposed by the US government. The US government imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports in March 2018 under "Section 232" from nearly all foreign countries. In February 2025, the US government increased tariffs on aluminum imports to 25% effective from March 12, 2025. In June 2025, the US government further increased the tariff rate for both steel and aluminum imports to 50% effective from June 4, 2025. In addition to the Section 232 tariff, the US government has imposed hefty anti-dumping and subsidy countervailing duties on a wide range of steel imports from China. With regard to our company in particular, the Section 232 tariff had a limited effect on our U.S. sales, because the tariffs on our exports to the United States had already reached 25% before 2018 and 70 % before June 2025. There was no additional tariff on our US exports in respect of the Section 232 tariff or the US-China trade war. However, you should not expect that our sales of products would continue to offset the potential increase in the pricing of steel products due to any increased tariffs. As a result of increasing costs, our potentially increased pricing could have an adverse effect on our operations and financial conditions.

***The trade policy initiatives announced by the United States administration against China may adversely affect our business.***

On August 14, 2017, the President of the United States issued a memorandum instructing the United States Trade Representative ("USTR") to determine whether to investigate under section 301 of the United States Trade Act of 1974 (Trade Act), laws, policies, practices, or actions of the Chinese government that may be unreasonable or discriminatory and that may be harming United States intellectual property rights, innovation, or technology development. Based on information gathered in that investigation, the USTR published a report on March 22, 2018, on the acts, policies, and practices of the Chinese government, supporting findings that such are unreasonable or discriminatory and burden or restrict United States commerce. On March 8, 2018, the President exercised his authority to issue the imposition of significant tariffs on imports of steel and aluminum from a number of countries, including China. Subsequently, the USTR announced an initial proposed list of 1,300 goods imported from China that could be subject to additional tariffs and initiated a dispute with the World Trade Organization against China for alleged unfair trade practices. The President has indicated that his two primary concerns to be addressed by China are (i) a mandatory $100 billion reduction in the China/United States trade deficit and (ii) limiting the planned $300 billion Chinese government support for advanced technology industries including artificial intelligence, semiconductors, electric cars, and commercial aircraft. On July 6, 2018, the United States initially imposed 25% tariffs on $34 billion worth of Chinese goods, including agriculture and industrial machinery, which prompted the Chinese government to initially impose tariffs on $34 billion worth of goods from the United States, including beef, poultry, tobacco and cars. Since July 2018, the United States imposed tariffs on $250 billion worth of Chinese products and has threatened tariffs on $325 billion more. In response, China imposed tariffs on $110 billion worth of U.S. goods, and threatened qualitative measures that would affect U.S. businesses operating in China. In May 2019, the United States raised the tariffs on $100 billion of Chinese products to 25% from 10%, and were expected to increase further to 30% on October 15, 2019, however such increase was suspended pending negotiation of a "phase one" trade agreement with China. On August 1, 2019, President Trump announced a new 10% ad valorem duty on additional categories of goods imported from China, which amount was then increased to 15% on August 23, 2019. The new tariff at the rate of 15% became effective September 1, 2019 with respect to certain categories of goods and was expected to become effective for additional categories of goods on December 15, 2019. On December 13, 2019, the U.S. and China signed a "phase one" trade agreement, which avoided the imposition of additional tariffs. On February 1, 2025, President Trump declared a national emergency regarding the influx of synthetic opioids from China into the United States and imposed a 10% tariff on all Chinese imports. In February 2025, China responded with a 15% additional duty on imports of U.S. coal and liquified natural gas and a 10% additional duty on imports of U.S. crude oil, agricultural machinery and large-displacement vehicles, among others. In March 2025, the President raised tariffs on Chinese goods to 20%, and China responded with a 15% tariff on chicken, wheat, corn and cotton, and a 10% tariff on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products. On April 2, 2025, the President issued an executive order declaring a national emergency arising from conditions reflected in U.S. goods trade deficits, raising tariff rate on Chinese imports by 34% to 54%. This led to China imposing matching tariffs on all U.S. goods, followed by further tariff increases by the United States. After discussions, both countries agreed to de-escalate from the latest rounds of tariff increases. On May 12, 2025, the United States and China reached an agreement to temporarily reduce reciprocal tariffs by 115%. On October 30, 2025, the United States and China further agreed that the United States will reduce tariffs on Chinese imports by 10% and China will suspend all retaliatory tariffs that it has announced since March 4, 2025. However, there can be no assurances that the U.S. or China will not increase tariffs or impose additional tariffs in the future.

In addition to the tariffs on Chinese imports, the President has also directed the U.S. Secretary of the Treasury to develop new restrictions on Chinese investments in the U.S. aimed at preventing Chinese-controlled companies and funds from acquiring U.S. firms with sensitive technologies. A Foreign Investment Risk Review Modernization Act was introduced to Congress for review to modernize the restrictive powers imposed by the Committee on Foreign Investment in the United States.

This evolving policy dispute between China and the United States is likely to have significant impact on the Chinese economy as well as consumer discretional spending, directly and indirectly, and no assurance can be given that we will not be adversely affected by any governmental actions taken by either China or the United States, perhaps materially. In view of the positions of the respective trade representatives, it is not possible to predict with any certainty the outcome of this dispute or whether it will involve other agencies or entities brought in to resolve the policy differences between the two countries. Furthermore, any political or trade controversies, political events, or crises between the United States and China or proxies thereof, whether or not directly related to our business, could reduce the price of our ordinary shares since we are a U.S. listed company operating in China.

***Our business is affected by global economic and political conditions.***

As our PRC operating entities offer a broad range of products exported to more than twenty (20) countries and regions, including the United States, Mexico, Thailand, Australia, Argentina, Taiwan, India, the Philippines, UAE Canada and Germany, our PRC operating entities' products depend upon factors relating to global economic conditions such as consumers, employment rates, the amounts of consumers' disposable income, business conditions, interest rates, consumer debt, availability of credit, and applicable taxation in regional and local markets where our PRC operating entities sell our products. The oil and gas industry is one of the largest consumers of stainless steel seamless pipes. Oil prices experience a protracted slowdown and may therefore affect demand for steel pipes. Therefore, changes in global economic conditions and other factors beyond our control could adversely affect our operations and financial conditions.

Furthermore, the ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities have adversely affected and could continue to adversely affect global financial markets and thus could affect our client's business and our business, even though we do not have any direct exposure to Russia, Israel, or the adjoining geographic regions. However, we cannot predict the progress or outcome of the situation in Ukraine, or Israel, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities, or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn, have a material adverse effect on the operations, results of operations, financial condition, liquidity and business outlook of our business.

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***Our revenue will decrease if the industries in which our customers operate experience a protracted slowdown.***

The products our PRC operating entities offer mainly serve as key components in projects and machines operated by our customers which are in a broad range of industries. Therefore, our PRC operating entities' businesses are subject to the general changes in economic conditions affecting those industry segments of the economy. If the industry segments in which our customers operate do not grow or if there is a contraction in those industries, demand for our PRC operating entities' products will decrease. Demand for our products is typically affected by a number of overarching economic factors, including, but not limited to, interest rates, the availability and magnitude of private and governmental investment in infrastructure projects, and the health of the overall global economy. If there is a decline in economic activity in China and the other markets in which we operate or a protracted slowdown in industries on which we rely for our sales, demand for our products and our revenue will likewise decrease.

***We operate in a competitive industry. If we are unable to compete successfully, we may lose market share to our competitors.***

The market for stainless steel seamless pipes and related products is highly competitive. Our PRC operating entities' current or potential competitors include major steel pipe manufacturers in China and overseas. Some of the competitors may have greater brand recognition, a larger group of customers or vendors, longer operating histories as well as marketing resources than we do. Customers may weight their experience and resources over us in various ways, therefore increasing the competitor's respective market shares.

You should not expect that we will be able to compete successfully against current or potential competitors, and such competitive pressures may have a material and adverse effect on our business, financial condition, and results of operations. Failure to compete successfully against existing or new competitors may cause us to lose market share, customers, and other business partners.

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***Competition within the steel industry may adversely affect our ability to sell our products, and excess production capacity in the industry could put downward pressure on steel prices.***

Our PRC operating entities compete with numerous other steel producers in various regions of the PRC and to a lesser extent, steel producers from other countries. This competition affects the prices we are able to sell our products, and our ability to retain or attract customers. In addition, if the currencies of our foreign competitors decline against the RMB, those competitors may be able to offer lower prices to our customers than we can.

In the past, high demand for steel and attractive pricing brought new investors to the steel industry, leading to added production capacity. Subsequent overcapacity in the industry has contributed and may continue to contribute, to lower steel prices. In addition, lower steel prices set by our competitors may also put downward pressure on steel prices.

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***Any decline in the availability or increase in the cost of raw materials and energy resources could materially affect our earnings.***

The principal raw materials used to manufacture our products are various grades and forms of steel, from rolled steel bars, plates, and sheets. Our PRC operating entities' pipe and fitting manufacturing operations depend heavily on the availability of various raw materials and energy resources. The availability of raw materials and energy resources may decline, and their prices may fluctuate greatly. During fiscal years ended September 30, 2025 and 2024, we purchased a total of $2,456,896 and $1,832 raw materials from Taizhou Huadi Industrial Ltd., a related party, respectively; and we purchased a total of $nil and $666,114 raw materials from Taizhou Huadi Material Technology Co., another related party, respectively. If our suppliers are unable or unwilling to provide us with raw materials on terms favorable to us, our PRC operating entities may be unable to produce certain products. This could result in a decrease in profit and damage to our reputation in the steel industry. In the event our raw material and energy costs increase; we may not be able to pass these higher costs on to our customers in full or at all. Any increase in the prices for raw materials or energy resources could materially increase our costs and, therefore, lower our earnings.

***The loss of any of our key customers could reduce our revenues and our profitability.***

We consider our major customers in each period to be those customers that accounted for more than 10% of our revenue in such period. We had nil and two major customers for the fiscal years ended September 30, 2025 and 2024, while no such major customers for the fiscal year ended September 30, 2023. As the majority of our revenues are driven by customers' orders for stainless steel seamless pipes products, there can be no assurance that we will maintain or improve the relationships with customers who do not have long-term contracts with us. Our major customers often change each period based on when a given order is placed. If we cannot maintain long-term relationships with major customers or replace major customers from period to period with equivalent customers, the loss of such sales could have an adverse effect on our business, financial condition, and results of operations.

***We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.***

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Our PRC operating entities have entered into a number of transactions with related parties, including entities in which our shareholders and their immediate family members hold interests. For example, during the fiscal years ended September 30, 2025 and 2024, we purchased a total of $2,456,896 and $1,832 of raw materials from Taizhou Huadi Industrial Ltd., respectively; and we purchased a total of $nil and $666,114 of raw materials from Taizhou Huadi Material Technology Co., respectively. Additionally, during the fiscal years ended September 30, 2025 and 2024, we sold a total of $nil and $7,343 of piping products to Taizhou Huadi Material Technology Co., respectively; and a total of $nil and $1,661 of piping products to Shanghai Huadi Industrial Ltd., respectively. Our PRC operating entities may, in the future, enter into additional transactions with entities in which shareholders, members of our board of directors, and other related parties hold ownership interests.

Transactions with the entities in which related parties hold ownership interests present the potential for conflicts of interest, as the interests of these entities and their shareholders may not align with the interests of the Company and its subsidiaries and our unaffiliated shareholders with respect to the negotiation of, and certain other matters related to, our purchases from and other transactions with such entities. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as the treatment of events of default.

Currently, our board of directors has authorized the Audit Committee upon its formation to review and approve all material related party transactions. We rely on the laws of the Cayman Islands, which provide that directors owe a duty of care and a duty of loyalty to our company. Under Cayman Islands law, our directors have a duty to act honestly, in good faith, and with a view to our best interests. Huadi international's directors also have a duty to exercise the care, diligence and skills that a reasonable prudent person would exercise in comparable circumstances. See "*Description of Ordinary Shares - Differences in Corporate Law*" for additional information on our directors' fiduciary duties under Cayman Islands law. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties and these transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.

***Any disruption in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products.***

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As to the products we manufacture, we must manage our supply chain for raw materials and delivery of our products. Supply chain fragmentation and local protectionism within China further complicate supply chain disruption risks. Local administrative bodies and physical infrastructure built to protect local interests pose transportation challenges for raw material transportation as well as product delivery. In addition, profitability and volume could be negatively impacted by limitations inherent within the supply chain, including competitive, governmental, legal, natural disasters, and other events that could impact both supply and price. Any of these occurrences could cause significant disruptions to our supply chain, manufacturing capability, and distribution system that could adversely impact our ability to produce and deliver products.

***Our inability to raise capital could have a material adverse effect on our financial condition and the results of operations.***

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Our PRC operating entities' production can be improved with additional production facilities and better equipment within the plant. We plan to raise additional capital through future offerings for us to grow our business by investing in research and development and building new facilities or acquiring existing facilities. If we cannot raise capital and is unable to execute our business plan successfully, our customers may experience substantial delays in receiving our products, which could have a material adverse effect on our business relationship with them and our financial conditions.

***We will require substantial additional funding in the future. There is no assurance that additional financing will be available to us.***

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We are dependent upon bank loans and proceeds received from shareholders' equity contributions to meet our capital requirements in the past. We cannot assure you that we will be able to obtain capital in the future to meet our capital requirements for our standard stainless steel seamless pipes products and high-ends products development and to maintain operations and improve financial performance. If we are unable to meet our future funding requirements for working capital and for general business purposes, we could experience operating losses and limit our marketing efforts as well as decrease or eliminate capital expenditures. If so, our operating results, our business results and our financial position would be adversely affected. If adequate additional financing is not available on reasonable terms, we may not be able to undertake our expansion plan or purchase additional equipment for our operations, and we would have to modify our business plans accordingly.

***The rapid expansion could significantly strain our resources, management, and operational infrastructure, which could impair our ability to meet increased demand for our PRC operating entities' products and hurt our business results.***

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To accommodate our anticipated growth, we will need to expend capital resources and dedicate personnel to implement and upgrade our accounting, operational, and internal management systems and enhance our record-keeping and contract tracking system. Such measures will require us to dedicate additional financial resources and personnel to optimize our operational infrastructure and to recruit more personnel to train and manage our growing employee base. If we cannot successfully implement these measures efficiently and cost-effectively, we will be unable to satisfy the demand for our products, which will impair our revenue growth and hurt our overall financial performance.

***During any growth, our products may necessitate hiring additional employees. If our operating entities fail to address associated challenges in recruiting, maintaining, integrating, and motivating new employees, it could adversely impact our business growth.***

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Any significant growth in the market for our PRC operating entities' products or our entry into new markets may require additional employees for managerial, operational, financial, and other purposes. As of September 30, 2025, we have 362 employees. Our PRC operating entities would also need to continue to expand, train, and manage our employees. Continued future growth will impose significant added responsibilities upon our management to identify, recruit, maintain, integrate, and motivate new employees. If our operating entities fail to address these challenges, our business growth may be adversely affected.

***We may encounter working capital shortages, as we may need additional funds to finance the purchase of materials and supplies, development of new products, and hiring of additional employees.***

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For effective growth management, we will be required to continue improving our operations, management, and financial systems and controls. We cannot assure investors that we will be able to timely and effectively meet increased demand and maintain the quality standards required by our existing and potential customers. Our failure to manage growth effectively may lead to operational and financial inefficiencies, that will have a negative effect on our profitability.

***We cannot assure you that our internal growth strategy will be successful, which may result in a negative impact on our growth, financial condition, results of operations, and cash flow.***

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One of our strategies is to grow internally through increasing the development of new products and improving the quality of existing products. However, many obstacles to this expansion exist, including, but not limited to, increased competition from similar businesses, our ability to improve our products and product mix to realize the benefits of our research and development efforts, international trade and tariff barriers, unexpected costs, costs associated with marketing efforts abroad and maintaining attractive foreign exchange rates. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to implement this internal growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations, and cash flows.

***Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.***

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Our business operations depend on the continued services of our senior management, particularly the executive officers named in this annual report. While the Company has provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses to enforce such agreements in China or we may be unable to enforce them at all.

***Our business substantially dependent upon our key research and development personnel who possess skills that are valuable in our industry, and we may have to actively compete for their services.***

Our PRC operating entities compete for qualified personnel with other steel pipes products manufacturing companies. Intense competition for these personnel could cause our compensation costs to increase, which could have a material adverse effect on our results of operations and financial performance. Our future success and ability to grow our business will depend in part on the continued service of these individuals and our ability to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified employees, we may not be able to meet our business and financial goals.

***If we fail to protect our intellectual property rights, it could harm our business and competitive position.***

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We rely on a combination of patent, trademark and domain name laws and non-disclosure agreements and other methods to protect our intellectual property rights. As of the date of this annual report, our PRC subsidiaries own 55 patents and 10 trademarks. All 55 patents and 10 of the trademarks have been properly registered with regulatory agencies such as the State Intellectual Property Office and Trademark Office of China's State Administration for Industry and Commerce ("SAIC"). One trademark has been properly registered with the United States Patent and Trademark Office ("USPTO"). One trademark has been properly registered with Office of the Controller General of Patents, Designs and Trademarks of India ("CGPDTM"). These intellectual properties have allowed our products to earn market share in the stainless steel industry.

The process of seeking patent protection can be lengthy and expensive, and our existing and future patents may be insufficient to provide us with meaningful protection or commercial advantage. Our patents and patent applications may also be challenged, invalidated or circumvented.

In accordance with Chinese intellectual property laws and regulations, we will have to renew our trademarks once the terms expire. However, patents are not renewable. Our 39 utility patents issued to us have only 10 years of protection. Once these patents expire, our products may lose some market share if they are copied by our competitors. Then, our business revenue might suffer some loss as well.

Implementation of PRC intellectual property related laws and regulations has historically been lacking, primarily because of ambiguities in the PRC laws and enforcement difficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other western countries. Furthermore, policing the unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.

***Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes.***

Our business could be materially and adversely affected by the outbreak of epidemics including but not limited to the 2019 novel coronavirus (COVID-19), swine influenza, avian influenza, Middle East respiratory syndrome (MERS-CoV), and severe acute respiratory syndrome (SARS-CoV). Our financial and operating performance may be adversely affected by epidemics, natural disasters, and other catastrophes. Epidemics, natural disasters, wars (including the potential of war), terrorist activity (including threats of terrorist activity), social unrest and heightened travel security measures instituted in response, and travel-related accidents, as well as geopolitical uncertainty and international conflict, will affect travel volume and may, in turn, have a material adverse effect on our business and results of operations. In addition, we may not be adequately prepared in contingency planning or recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely and materially affected, which in turn may harm our reputation.

***If our PRC operating entities are not able to continue to innovate or if they fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.***

The steel pipes products industry has trends of developing high-end and high-tech products to fulfill the changing customers' demands. Furthermore, our competitors are constantly developing innovations in different types of steel pipe products to enhance customers' experience. We continue to invest significant resources in our infrastructure, research and development and other areas to enhance our existing products as well as to introduce new stainless steel seamless pipe products that will attract more participants to our marketplaces. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan. Our failure to innovate and adapt to these changes would have a material adverse effect on our business, financial condition and results of operations.

***If our PRC operating entities fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.***

We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing clients. Successful promotion of our brand and our ability to attract clients depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our products. Currently, we promote our brand through print media advertising, video advertising, billboard advertising and internet promotions. It is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.

***New lines of business or new products may subject us to additional risks.***

From time to time, we may implement new lines of business or offer new products within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product. Furthermore, any new line of business and/or new products could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products could have a material adverse effect on our business, results of operations and financial condition.

***Huadi International is a "controlled company" within the meaning of the Nasdaq stock Market Rules and Nasdaq Capital Market rules.***

Huadi International is a controlled company pursuant to "controlled company" defined under the Nasdaq Stock Market Rules. Under Nasdaq listing Rule 5605(a)(2), "family member" means a person's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person's home. Our Chairman, Di Wang, and our Director, Jueqin Wang, are father and son. As of the date of this annual report, Di Wang is deemed to beneficially own 8,336,000 of our ordinary shares through Yongqiang Donghai Limited, a British Virgin Islands company holding 8,336,000 ordinary shares of Huadi International. Di Wang has the sole voting and dispositive power of all the shares held by Yongqiang Donghai Limited through certain entrustment agreement with the shareholders of Yongqiang Donghai Limited. Jueqin Wang is deemed to beneficially own 1,664,000 of our ordinary shares through Yongqiang Maituo Limited, a British Virgin Islands company holding 1,664,000 ordinary shares of Huadi International. Jueqin Wang has the sole voting and dispositive power of all the shares held by Yongqiang Maituo Limited. Collectively, Di Wang and Jueqin Wang have voting and dispositive power over 50% of the issued and outstanding shares of Huadi International. Accordingly, Huadi International is a controlled company under applicable Nasdaq listing standards. For so long as Huadi International remains a controlled company under that definition, Huadi International is permitted to elect to rely, and will rely, on certain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors. Although we currently do not intend to rely on the "controlled company" exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If we elected to rely on the "controlled company" exemption, a majority of the members of our board of directors might not be independent directors and our nomination and compensation committees might not consist entirely of independent directors. Our status as a controlled company could cause our ordinary shares to look less attractive to certain investors or otherwise harm our trading price. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

***From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.***

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We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our products and better serve our clients. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.

Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:

● difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business;

● inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;

● difficulties in retaining, training, motivating and integrating key personnel;

● diversion of management's time and resources from our normal daily operations;

● difficulties in successfully incorporating licensed or acquired technology and rights into our products;

● difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;

● difficulties in retaining relationships with clients, employees and suppliers of the acquired business;

● risks of entering markets in which we have limited or no prior experience;

● regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre- closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;

● assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability;

● failure to successfully further develop the acquired technology;

● liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and

● potential disruptions to our ongoing businesses.

We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced products or that any new or enhanced products, if developed, will achieve market acceptance or prove to be profitable.

***A lack of insurance coverage could expose us to significant costs and business disruption.***

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The Company maintains majority of its bank accounts in the PRC as of September 30, 2025. Cash balances in bank accounts in PRC are protected under Deposit Insurance Regulation, pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not provide complete protection for the Company's accounts, as its aggregate deposits are higher than the compensation limit, which is RMB500,000 for one bank ($70,000).

Save for the Deposit Insurance Regulation mentioned above, neither Huadi International nor its subsidiaries maintain any insurance to cover other assets, property and potential liability of our business. The lack of insurance could leave our business inadequately protected from loss. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected.

***We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the foreign corrupt practices act could have a material adverse effect on our business.***

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We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations, agreements with third parties and make sales in Asia, North America, Africa, Europe and Oceania, which may experience corruption. Our existing business in Asia, North America, Africa, Europe and Oceania creates the risk of unauthorized payments or offers of payments by one of the employees, consultants, or sales agents of our Company, because these parties are not always subject to our control. It will be our policy to implement safeguards to discourage these practices by our employees. Also, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, or sales agents of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

***If we fail to implement and maintain effective internal control over financial reporting, our ability to accurately report our financial results may be impaired, which could adversely impact investor confidence and the market price of Huadi International's ordinary shares.***

We will implement measures to strengthen our internal control. For example, we have established clear roles and responsibilities for accounting and financial reporting staff to address complex accounting and financial reporting issues. We intend to conduct regular and continuous U.S. GAAP accounting and financial reporting programs and send our financial staff to attend external U.S. GAAP training courses. However, the implementation of these measures may not fully address any deficiencies we may have in our internal control over financial reporting. We are not able to estimate with reasonable certainty the costs that we will need to incur to implement these and other measures designed to improve our internal control over financial reporting. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. However, we cannot assure you that we will be able to continue implementing these measures in the future, or that we will not identify additional material weaknesses or significant deficiencies in the future.

Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such firm might have identified additional material weaknesses and deficiencies. Upon the completion of the initial public offering, we have become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, will require that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ended September 30, 2020. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm may be required to report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ordinary shares.

Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

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***Failure to appropriately evaluate the credit profile of our customers and/or delay in settlement of accounts receivable from our customers could materially and adversely impact our operating cash flow and may result in significant provisions and impairments on our accounts receivable which in turn would have a material adverse impact on our business operations, results of operation, financial condition and our business pursuits and prospects.***

As of September 30, 2025 and 2024, we had accounts receivable net of allowance of $24,773,841 and $18,713,342, respectively. Our customers include various levels of government and state-owned entities. Due to the nature of the customers and the practice of the industry, the Company generally allows credit period of 6 months to its customers. However, our customers sometimes still require additional time for payment, depending on their internal cash flow budget or various levels of approvals.

The Company considered various factors, including nature, historical collection experience, the age of the above-mentioned assets' balance, credit quality and specific risk characteristics of its customers, current economic conditions, forecasts of future economic conditions, reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. The Company has adopted loss rate method which is a combination of historical rate method and adjustment rate method, to estimate the credit loss. The measurement of the allowance for credit losses is recognized through current expected credit loss expense. Current expected credit loss expense is included as a component of general and administrative expenses in the consolidated statements of operations and comprehensive income. Write-offs are recorded in the period in which the asset is deemed to be uncollectible. No write-off was recorded during the years ended September 30, 2025 and 2024, respectively.

While we have implemented policies and measures with the aim of improving our management of credit risk and have expanded our efforts in the collection of overdue or long outstanding accounts receivable, and while we accelerated collection from both international and domestic projects, there is no assurance that our substantial accounts receivable position with respect to our reported revenue (on a net basis) will not persist in the future given the nature of our business. Any deterioration of credit profile of our customers or any failure or delay in their settlement of our accounts receivable could put tremendous pressure on our operating cash flow, and may result in material and adverse impact on our business operations, results of operations and financial condition.

***Environmental regulations impose substantial costs and limitations on our operations.***

We used a variety of chemicals and produce significant emissions in our manufacturing operations. As such, we are subject to various national and local environmental laws and regulations in China concerning issues such as air emissions, wastewater discharges, and solid waste management and disposal. These laws and regulations can restrict or limit our operations and expose us to liability and penalties for non-compliance. While we believe that our facilities are in material compliance with all applicable environmental laws and regulations, the risks of substantial unanticipated costs and liabilities related to compliance with these laws and regulations are an inherent part of our business. It is possible that future conditions may develop, arise or be discovered that create new environmental compliance or remediation liabilities and costs. While we believe that we can comply with existing environmental legislation and regulatory requirements and that the costs of compliance have been included within budgeted cost estimates, compliance may prove to be more limiting and costly than anticipated.

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***Non-compliance with present or future construction and environmental regulations may result in potentially significant monetary damages and fines.***

As the operations of our business impact the environment, we must comply with all applicable national and local environmental laws and regulations in China. We are required to undertake environmental impact assessment procedures and pass certain inspection and approval procedures before commencing our operations. We are also required to register with, or obtain approvals from, relevant environmental protection authorities for various environmental matters such as discharging waste generated by our operations.

We intend to increase our capacity in the future by establishing new facilities. We will be required to obtain certain environmental, construction and safety approvals and completed certain examination and acceptance procedures for these facilities. We may not be able to obtain such approvals or complete such procedures in a timely manner or at all. If for any reason the relevant government authorities in China determine that we are not in compliance with environmental and construction laws and regulations, we may be required to pay fines, suspend or cease our operations in the relevant premises. In addition, because the requirements imposed by environmental, health and safety laws and regulations may change and more stringent regulations may be adopted, we may be unable to accurately predict the cost of complying with these laws and regulations, which could be substantial.

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***If we fail to maintain appropriate inventory levels in line with the approximate level of demand for our products, we could lose sales or face excessive inventory risks and holding costs.***

To operate our business successfully and meet our customers' demands and expectations, we must maintain a certain level of finished goods inventory to ensure immediate delivery when required. We are also required to maintain an appropriate level of raw materials for our production. However, forecasts are inherently uncertain. If our forecasted demand is lower than what eventually transpires, we may not be able to maintain an adequate inventory level of our finished goods or produce our products in a timely manner, and we may lose sales and market share to our competitors. On the other hand, we may also be exposed to increased inventory risks due to accumulated excess inventory of our products or raw materials, parts and components for our products. Excess inventory levels may lead to increases in inventory holding costs, risks of inventory obsolescence and provisions for write-downs, which will materially and adversely affect our business, financial condition and results of operations.

To maintain an appropriate inventory level of finished goods and raw materials to meet market demand, we adjust our procurement amount and production schedule from time to time based on customers' orders and anticipated demand. We also carry out an inventory review and an aging analysis on a regular basis. We make provision for obsolete and slow-moving inventory of raw materials and finished goods that are no longer suitable for use in production or sale. However, we cannot guarantee that these measures will always be effective and that we will be able to maintain an appropriate inventory level. We may also be exposed to the risk of holding excessive inventory, which may increase our inventory holding costs and subject us to the risk of inventory obsolescence or write-offs, which could have a material adverse effect on our business, results of operations and financial condition. If we cannot maintain an appropriate inventory level, we may lose sales and market share to our competitors.

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***Potential disruptions in the capital and credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements, which could adversely affect our results of operations, cash flows and financial condition.***

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Potential changes in the global economy may affect the availability of business and customer credit. We may need to rely on the credit markets, particularly for short-term borrowings from banks in China, as well as the capital markets, to meet our financial commitments and short-term liquidity needs if internal funds from our operations are not available to be allocated to such purposes. Disruptions in the credit and capital markets could adversely affect our ability to draw on such short-term bank facilities. Our access to funds under such credit facilities is dependent on the ability of the banks that are parties to those facilities to meet their funding commitments, which may be dependent on governmental economic policies in China. Those banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from us and other borrowers within a short period of time.

Long-term disruptions in the credit and capital markets could result from uncertainty, changing or increased regulations, reduced alternatives or failures of financial institutions could adversely affect our access to the liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Such measures may include deferring capital expenditures, and reducing or eliminating discretionary uses of cash. These events would adversely impact our results of operations, cash flows and financial position.

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***We rely on short-term borrowings for our liquidity and we may not be able to continue to obtain financing on favorable terms, if at all.***

Our liquidity relies significantly on short-term borrowings. As of September 30, 2025, we had $4,122,341 undue factored notes receivable with recourse, which were classified as short-term borrowings. Financing may not be available to us on favorable terms, if at all. If we are unable to obtain short-term financing in an amount sufficient to support our operations, it may be necessary, to suspend or curtail our operations, which would have a material adverse effect on our business and financial condition. In that event, current stockholders would likely experience a loss of most of or all of their investment.

**Risks Related to Doing Business in China**

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***Chinese government's monitoring and macro-control of the market could hurt demand of our products.***

Our PRC operating entities could be impacted by China's macro-control policy on control of China's steel and steel products industry. Sales of standard steel products might be cut to complete the annual task of overcapacity cut in steel industry. Stricter inspections against steel products might be conducted in key provinces. These macroeconomic and steel products industry trends have affected and will continue to have impact on customers' demand of our products and therefore, might have an adverse influence on our operations and financial conditions.

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***The considerable uncertainty in Chinese economic growth could hurt the demand for our products.***

While China has grown significantly over the past two decades, the growth rate has decreased and may continue to decrease due to uncertainties with respect to national structural control along with other factors. If China's economy continues to slow, or even materially decline, demand for our products might also decrease accordingly. Therefore, our PRC operating entities' business might be adversely affected by the prolonged slowdown in the economic condition, which would negatively affect sales of our products, operations of our company and our financial conditions.

***The Chinese government exerts substantial influence over the manner in which we must conduct our business activities*. *If the Chinese government intervenes or influences our operations in the future, it could result in a material change in our operations and/or the value of our ordinary shares, significantly limit or completely hinder our ability to offer or continue to offer securities to investors or cause such securities to significantly decline in value or become worthless.***

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulations and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, insurance commissions, property, and other matters. The central or local governments of these jurisdictions may impose new and restrictive regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China, and result in a material change in our operations and/or the value of our ordinary shares.

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On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretations and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice.

On December 28, 2021, the Cyberspace Administration of China, or the CAC, published the CAC Revised Measures, which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over one million users seeks a "foreign" listing, it must apply for the cybersecurity review. In addition, operators of critical information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CAC Revised Measures provides no further explanation on the extent of "network platform operator" and "foreign" listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying the our PRC operating entities as critical information infrastructure operators.

The CAC Revised Measures empowers the cybersecurity review office to initiate a cybersecurity review when they believe any particular data processing activities "affect or may affect national security." In addition, on November 14, 2021, the CAC promulgated the Regulations on the Administration of Cyber Data Security (Draft for Comments) (the "Draft CAC Regulations"), and according to the Draft CAC Regulations, any data processors shall, in accordance with relevant state provisions, apply for a cybersecurity review when carrying out, among other things, "other data processing activities that affect or may affect national security." As confirmed by our PRC counsel, Zhejiang Dongou Law Firm, we are not subject to cybersecurity review with the CAC in accordance with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying our PRC operating entities as critical information infrastructure operators or requiring our PRC operating entities to go through cybersecurity review or network data security review by the CAC.

On February 17, 2023, the CSRC promulgated the Trial Measures of, and the Overseas Listings Rules, which has become effective on March 31, 2023. On the same date of the issuance of the Overseas Listings Rules, the CSRC circulated the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises (the "Notice"). Pursuant to the Trial Measures and the Notice, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a PRC company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. The companies that have already been listed on overseas stock exchanges or have obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing before March 31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing yet need to make filings for subsequent offerings in accordance with the Overseas Listings Rules. In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions are issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As of the date of the annual report, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect to our listing on the Nasdaq Capital Market. However, there remains significant uncertainty as to the enactment, interpretation, and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.

As confirmed by our PRC counsel, Zhejiang Dongou Law Firm, our PRC operating entities currently have obtained all material permissions and approvals required for our operations in compliance with the relevant PRC laws and regulations in the PRC, including the business license, and we are not required to obtain permission or approval from the PRC authorities, including CSRC or CAC, for their operations, nor have we or our PRC operating entities received any denial. We are subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals discussed here are not required, that applicable laws, regulations, or interpretations change such that we or any of our PRC operating entities is required to obtain approvals in the future, or that the PRC government could disallow our holding company structure, which would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and continue to offer securities to our investors. These adverse actions could cause the value of our ordinary shares to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC if we fail to comply with such rules and regulations, which would likely adversely affect the ability of our securities to be listed on the U.S. exchange, which would likely cause the value of our securities to significantly decline or become worthless.

***Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations.***

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All of our operations are located in China. Accordingly, our business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China's economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, China's economic growth has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.

Huadi International may also decide to finance our PRC subsidiaries by means of capital contributions. These capital contributions must be approved by the Ministry of Commerce ("MOC") or its local counterpart. On March 30, 2015, the State Administration of Foreign Exchange ("SAFE") promulgated Circular of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide. Circular 19 came into force and replaced both previous Circular 142 and Circular 36 on June 1, 2015. On June 9, 2016, SAFE promulgated Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, to further expand and strengthen such reform. Under Circular 19 and Circular 16, foreign-invested enterprises in the PRC are allowed to use their foreign exchange funds under capital accounts and RMB funds from exchange settlement for expenditure under current accounts within its business scope or expenditure under capital accounts permitted by laws and regulations, except that such funds shall not be used for (i) expenditure beyond the enterprise's business scope or expenditure prohibited by laws and regulations; (ii) investments in securities or other investments than principal-secured products issued by banks; (iii) granting loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) construction or purchase of real estate for purposes other than self-use (except for real estate enterprises). In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not be altered without SAFE's approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations of these circulars could result in severe monetary or other penalties. These circulars may significantly limit our ability to use RMB converted from the cash provided by our offshore financing activities to fund the establishment of new entities in China by our PRC subsidiaries, to invest in or acquire any other PRC companies through our PRC subsidiaries, or to establish new variable interest entities in the PRC.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

***PRC regulations on loans to and direct investment in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.***

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As an offshore holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries or may make additional capital contributions to our PRC subsidiaries, subject to satisfaction of applicable governmental registration and approval requirements.

Any loans we extend to our PRC subsidiaries cannot exceed the statutory limit and must be registered with the local counterpart of the SAFE.

We may also decide to finance our PRC subsidiaries by means of capital contributions. According to the relevant PRC regulations on foreign-invested enterprises in China, these capital contributions are subject to registration with or approval by the MOFCOM or its local counterparts. In addition, the PRC government also restricts the convertibility of foreign currencies into Renminbi and the use of the proceeds. On March 30, 2015, SAFE promulgated the Notice on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19, which took effect and replaced certain previous SAFE regulations from June 1, 2015. SAFE further promulgated the Circular on Reforming and Regulating Policies on the Management of the Settlement of Foreign Exchange of Capital Accounts, or SAFE Circular 16, effective on June 9, 2016, which, among other things, amend certain provisions of SAFE Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the RMB capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to use Renminbi converted from the net proceeds of this offering to fund our PRC operating subsidiaries, to invest in or acquire any other PRC companies through our PRC Subsidiaries, which may adversely affect our business, financial condition and results of operations.

***Substantial uncertainties exist with respect to China Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.***

On March 15, 2019, the National People's Congress approved the Foreign Investment Law, which came into effect on January 1, 2020. The Foreign Investment Law embodies a Chinese regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.

Among other things, the Foreign Investment Law stipulates that entities established in China but wholly or partly invested by a foreign investor will be treated as FIEs. Once an entity is determined to be a FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a negative list to be proposed by the competent investment department of the State Council in conjunction with the competent commerce department of the State Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the competent investment department or competent commerce department of the State Council after being reported to the State Council for approval. Foreign investment beyond the negative list will be granted national treatment and will not require prior approval from PRC government authorities.

On September 6, 2024, the National Development and Reform Commission ("NDRC") of China and MOFCOM, jointly issued the Special Administrative Measures for Entry of Foreign Investment (Negative List) (2024 Version), or the Negative List, which became effective and replaced the previous version on November 1, 2024. Pursuant to the Negative List, if a PRC company, which engages in any business where foreign investment is prohibited under the Negative List, or prohibited businesses, seeks an overseas offering or listing, it must obtain the approval from competent governmental authorities. Based on a set of Q&A published on the NDRC's official website, a NDRC official indicated that after a PRC company submits its application for overseas listing to the CSRC and where matters relating to prohibited businesses under the Negative List are implicated, the CSRC will consult the regulatory authorities having jurisdiction over the relevant industries and fields.

The development, manufacture and sales of construction materials products and manufacturing equipment are not currently subject to foreign investment restrictions set forth in the Negative List. Currently, the Foreign Investment Law does not materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects. However, should the development, manufacture and sales of construction materials products and manufacturing equipment become subject to foreign investment restrictions set forth in the Negative List, then the viability of our current corporate structure, corporate governance and business operations may be materially impacted in many aspects.

***Huadi International relies on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.***

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Huadi International is a holding company, and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require our PRC subsidiaries to adjust its taxable income, in a manner that would materially and adversely affect their ability to pay dividends and other distributions to us.

Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.

In response to the persistent capital outflow and the Renminbi's depreciation against the U.S. dollar in the fourth quarter of 2016, the People's Bank of China and the SAFE, have implemented a series of capital control measures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries' dividends and other distributions may be subjected to tighter scrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit Huadi International's ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

***Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ordinary shares.***

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All of our revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the proceeds from our initial public offering. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries is RMB. Gains and losses from the re-measurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations. The re-measurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to- period comparisons of our reported results of operations.

The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions and China's foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. However, the PBOC regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within a narrow range. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. Since October 1, 2016, Renminbi has joined the International Monetary Fund (IMF)'s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from our initial public offering into RMB to pay our operating expenses, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ordinary shares.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on the price of our ordinary shares.

***Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.***

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The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive all of our net revenues in RMB. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.

In light of the flood of capital outflows of China in 2016 due to the weakening RMB, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

***Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject our PRC operating entities to penalties.***

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Our PRC operating entities are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. If the local governments deem our contribution to be not sufficient, we may be subject to late contribution fees or fines in relation to any underpaid employee benefits, our financial condition and results of operations may be adversely affected.

Currently, we are making contributions to the plans based on the minimum standards although the PRC laws required such contributions to be based on the actual employee salaries up to a maximum amount specified by the local government. Therefore, in our consolidated financial statements, we have made an estimate and accrued a provision in relation to the potential make-up of our contributions for these plans as well as to pay late contribution fees and fines. If we are subject to late contribution fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.

***The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.***

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The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOC be notified in advance of any change-of- control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise "national defense and security" concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise "national security" concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

***PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries' ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.***

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SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

If our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

All of our shareholders who directly or indirectly hold shares in Huadi International and who are known to us as being PRC residents have completed the foreign exchange registrations required in connection with our recent corporate restructuring.

However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries' ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.

***If our entities outside of China are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.***

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Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a "de facto management body" within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term "de facto management body" as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation's general position on how the "de facto management body" test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its "de facto management body" in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See "*Item 10.E - Taxation - PRC Taxation.*" However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body." As substantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that Huadi International or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then Huadi International or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on the investment in our ordinary shares.

***We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiary.***

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Huadi International is an exempted company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions on equity from our PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC "resident enterprise" to a foreign enterprise investor, unless any such foreign investor's jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, such withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC enterprise. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, which became effective in August 2015, require non-resident enterprises to determine whether they are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See "*Item 10.E - Taxation - PRC Taxation.*" As of September 30, 2025 and 2024, we did not record any withholding tax on the retained earnings of our subsidiaries in the PRC as we intended to re-invest all earnings generated from our PRC subsidiaries for the operation and expansion of our business in China, and we intend to continue this practice in the foreseeable future. Should our tax policy change to allow for offshore distribution of our earnings, we would be subject to a significant withholding tax. We cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant tax authority or we will be able to complete the necessary filings with the relevant tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiaries to HK Beach, our Hong Kong subsidiary.

***The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the HFCAA all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to Huadi International's offering, business operations, share price and reputation. Furthermore, trading in our securities may be prohibited under the HFCAA, as Amended, if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely for two consecutive years, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities.***

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with the lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in "Restrictive Market," (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company's auditors.

On May 20, 2020, the U.S. Senate passed the HFCAA requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company's auditors for three consecutive years, the issuer's securities are prohibited to trade on a U.S. stock exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCAA. On December 18, 2020, the HFCAA was signed into law.

On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. 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. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant's annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, amending the HFCAA and requiring the SEC to prohibit an issuer's securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

On December 16, 2021, the SEC announced that the PCAOB designated China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated under the HFCAA. The Company's auditor, HTL International, LLC ("HTL"), is based in Houston, Texas, and therefore is not affected by this mandate by the PCAOB.

On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the "SOP") with the China Securities Regulatory Commission and the Ministry of Finance of China. The SOP, together with two protocol agreements governing inspections and investigations (together, the "SOP Agreement"), establishes a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. The SOP Agreement remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the SOP Agreement disclosed by the SEC, the PCAOB shall have sole discretion to select any audit firms for inspection or investigation, and the PCAOB inspectors and investigators shall have a right to see all audit documentation without redaction. Under the PCAOB's rules, a reassessment of a determination under the HFCAA may result in the PCAOB reaffirming, modifying, or vacating the determination.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor's control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

Our auditor, HTL, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, is an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor's compliance with the applicable professional standards. HTL is headquartered in Houston, Texas, and is subject to inspection by the PCAOB on a regular basis.

However, it remains unclear what the SEC's implementation process related to the above rules and amendments will entail or what further actions the SEC, the PCAOB, or Nasdaq will take to address these issues and what impact those actions will have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange. In addition, the above rules and amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our ordinary shares could be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required to engage a new audit firm, which would require significant expense and management time.

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***Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.***

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The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing Notice of the Ministry of Finance and the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax Treatment on Enterprise Reorganization (Circular 59) and Announcement No. 7 [2015] of the State Administration of Taxation-Announcement on Several Issues concerning the Enterprise Income Tax on Income from the Indirect Transfer of Assets by Non-Resident Enterprises (Circular 7) which became effective in February 2015. Under Circular 7, where a non-resident enterprise conducts an "indirect transfer" by transferring the equity interests of a PRC "resident enterprise" indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. Circular 7 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

Circular 7 extends its tax jurisdiction to not only indirect transfers but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, Circular 7 provides clear criteria on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an "indirect transfer" by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax.

According to the "Enterprise Income Tax Law of the People's Republic of China" (adopted on March 16, 2007, first amended on February 24, 2017, and further amended on December 29, 2018), if the business dealings between an enterprise and its affiliated parties do not conform to the principle of independent transactions and thus reduce the taxable income or income of the enterprise or its affiliated parties, the tax authorities have the right to adjust in accordance with reasonable methods. The cost incurred by an enterprise and its related parties in developing and accepting intangible assets or providing and receiving labor services together shall be apportioned according to the principle of independent transaction when calculating taxable income.

If a resident enterprise, or an enterprise controlled by a resident enterprise and a Chinese resident and established in a country (region) whose actual tax burden is significantly lower than the tax rate level of China's enterprise income tax, does not allocate or reduce its profits due to reasonable business needs, the portion of the above profits that should belong to the resident enterprise shall be included in the current income of the resident enterprise.

Interest expenses incurred when the ratio of creditor's rights investment to equity investment accepted by an enterprise from its affiliated parties exceeds the prescribed standard shall not be deducted in the calculation of taxable income.

If an enterprise reduces its taxable income or income by implementing other arrangements without reasonable commercial purposes, tax authorities have the right to adjust them in accordance with reasonable methods.

Huadi International faces uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59 and Circular 7, and may be required to expend valuable resources to comply with Circular 59 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

The PRC tax authorities have the discretion under SAT Circular 59 and Circular 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59 and Circular 7, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.

***If Huadi International becomes directly subject to the scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm Huadi International's business operations, share price and reputation.***

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U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets generally. As a result of these scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our business and our share price. If Huadi International becomes the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our share.

**Risks Related to Our Corporate Structure and Ordinary Shares**

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***Huadi International is an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Ordinary Shares less attractive to investors.***

Huadi International is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years since January 26, 2021, when we completed our initial public offering, although we could lose that status sooner if our revenues exceed $1.235 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if we become a "large accelerated filer," as defined in Exchange Act Rule 12b-2, in which case we would no longer be an emerging growth company as of the following September 30. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail our company of this exemption from new or revised accounting standards and, therefore, will be subject to accounting standards that are available to emerging growth companies.

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***Huadi International is a "foreign private issuer," and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.***

Huadi International is a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

***As a foreign private issuer, we are permitted to, and did follow certain home country corporate governance practices instead of otherwise applicable Nasdaq Capital Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.***

As a foreign private issuer, we are permitted to and did follow certain home country corporate governance practices instead of those otherwise required under the applicable rules of the Nasdaq Capital Market for domestic U.S. issuers, provided that we disclose the requirements we are not following and describe the home country practices we are following. We have elected to follow home country practice in Cayman Islands in lieu of Nasdaq Capital Market Listing Rule 5600 with the exception of those rules which are required to be followed pursuant to the provisions of Listing Rule 5615(a)(3). See "*Item 16G. Corporate Governance.*" Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq Capital Market may provide less protection to you than what is accorded to investors under the applicable rules of the Nasdaq Capital Market applicable to domestic U.S. issuers.

***You may have difficulty enforcing judgments obtained against us.***

Huadi International is an exempted company incorporated under the laws of the Cayman Islands and substantially all of our assets are located outside of the United States. Virtually all of our assets and a substantial portion of our current business operations are conducted in the PRC. In addition, almost all of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to bring an action against these individuals within the United States. It may also be difficult for you to enforce the U.S. courts judgments obtained in U.S. courts including judgments based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, many of whom are not residents in the United States, and whose significant part of assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC, respectively, would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, it is uncertain whether such Cayman Islands or PRC courts would entertain original actions brought in the courts of the Cayman Islands or the PRC, against us or such persons predicated upon the securities laws of the United States or any state. See *"Enforceability of Civil Liabilities"* on page 7.

***You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because Huadi is incorporated under Cayman Islands law.***

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Huadi International is an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law may not be as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

***Nasdaq may apply additional and more stringent criteria for Huadi International's continued listing.***

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Nasdaq Listing Rule 5101 provides Nasdaq with broad discretionary authority over the continued listing of securities in Nasdaq and Nasdaq may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on Nasdaq inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq. In addition, Nasdaq has used its discretion to deny initial or continued listing or to apply additional and more stringent criteria in the instances, including but not limited to: (i) where the company engaged an auditor that has not been subject to an inspection by the PCAOB, an auditor that PCAOB cannot inspect, or an auditor that has not demonstrated sufficient resources, geographic reach, or experience to adequately perform the company's audit; (ii) where the company planned a small public offering, which would result in insiders holding a large portion of the company's listed securities. Nasdaq was concerned that the offering size was insufficient to establish the company's initial valuation, and there would not be sufficient liquidity to support a public market for the company; and (iii) where the company did not demonstrate sufficient nexus to the U.S. capital market, including having no U.S. shareholders, operations, or members of the board of directors or management.

***If Huadi International cannot satisfy, or continue to satisfy, the listing requirements and other rules of Nasdaq Capital Market, although we exempt from certain corporate governance standards applicable to US issuers as a foreign private issuer, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.***

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To maintain our listing on the Nasdaq Capital Market, we will be required to comply with certain rules of Nasdaq Capital Market, including those regarding minimum stockholders' equity, minimum share price and certain corporate governance requirements. Even if we initially meet the listing requirements and other applicable rules of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.

If the Nasdaq Capital Market subsequently delists our securities from trading, we could face significant consequences, including:

● a limited availability for market quotations for our securities;

● reduced liquidity with respect to our securities;

● a determination that our ordinary share is a "penny stock," which will require brokers trading in our ordinary share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares;

● limited amount of news and analyst coverage; and

● a decreased ability to issue additional securities or obtain additional financing in the future.

***The market price of Huadi International's ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the public offering price.***

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The price of any future offerings for our ordinary shares will be determined through negotiations between the investors and us and may vary from the market price of our ordinary shares following our public offering. If you purchase our ordinary shares in our offerings, you may not be able to resell those shares at or above the offering price. We cannot assure you that the future offering price of our ordinary shares, or the market price following our offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our offering. The market price of our ordinary shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

● actual or anticipated fluctuations in our revenue and other operating results;

● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

● announcements by us or our competitors of significant services or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

● lawsuits threatened or filed against us; and

● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

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***Huadi International does not intend to pay dividends for the foreseeable future.***

Huadi International currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our ordinary shares if the market price of our ordinary shares increases.

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***Shares eligible for future sale may adversely affect the market price of Huadi International's ordinary shares, as the future sale of a substantial amount of outstanding ordinary shares in the public marketplace could reduce the price of our ordinary shares.***

The market price of our shares could decline as a result of sales of substantial amounts of Huadi International's shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our ordinary shares. All of the shares sold in the past offering will be freely transferable without restriction or further registration under the Securities Act. The remaining shares will be "restricted securities" as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act.

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***Huadi International will incur additional costs as a result of becoming a public company, which could negatively impact our net income and liquidity.***

As a public company, Huadi International will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, Sarbanes-Oxley Act and rules and regulations implemented by the SEC and the Nasdaq Capital Market require significantly heightened corporate governance practices for public companies. We expect that these rules and regulations will increase our legal, accounting and financial compliance costs and will make many corporate activities more time-consuming and costly. If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action, investors may lose confidence in us and the market price of our ordinary shares could decline.

***The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.***

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As a publicly listed company, we are required to file annual reports with the SEC. In some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we are a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company. Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations.

**Item 4. Information on the Company**

**A.** **History and Development of the Company** 

 

Huadi International was incorporated in the Cayman Islands with limited liability on September 27, 2018. Huadi International does not have any operations, and it conducts business through its subsidiaries in China. Our PRC operating entities, Huadi Steel and Huadi Songyang, were established in 1998 and 2023, respectively, in China. Our main business operation focuses on new product development, manufacturing, marketing, and sales of stainless steel seamless pipes, tubes, and stainless steel bars. We also supply products for use in the thermal and nuclear power plants, automotive, oil and gas, agricultural and industrial equipment, chemical engineering, and electricity markets. We manufacture many of our products to operate under specialized conditions, including in load-bearing, high-pressure, corrosive and high-temperature environments.

Our principal executive office is located at No. 1688 Tianzhong Street, Longwan District, Wenzhou, Zhejiang Province, People's Republic of China 325025. The telephone number of our principal executive office is +86 057786598888. Our registered agent in Cayman Islands is Harneys Fiduciary (Cayman) Limited. Our registered office and our registered agent's office in Cayman Islands are both at 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman, KY1-1002, Cayman Islands. Our registered agent in the United States is Cogency Global Inc.

Since 2018, we have undergone a series of reorganizations. In particular:

● Incorporation of the listing entity. Huadi International was incorporated on September 27, 2018 under the laws of Cayman Islands. On the date of its incorporation, one (1) ordinary share was issued to Mapcal Limited. On the same day, Mapcal Limited transferred one (1) ordinary share to Mr. Shek Kin Pong for a consideration of $1.00.

● Incorporations of the intermediate holding entities. Yongqiang Tuoxing was incorporated on October 2, 2018 under the laws of British Virgin Islands, and is a wholly owned subsidiary of Huadi International; HK Beach was incorporated on November 7, 2018 under the laws of Hong Kong SAR, and is a wholly owned subsidiary of Yongqiang Tuoxing. Wenzhou Hongshun was incorporated on June 3, 2019 under the laws of PRC, and is a wholly owned subsidiary of HK Beach; The intermediate holding entities are not actively engaging in any business as of the date of this annual report.

● Acquisition of the PRC operating entity. Prior to the reorganizations as described above, we historically conducted our business through Huadi Steel, a company incorporated on November 12, 1998 under the laws of PRC. In August 2019, Wenzhou Hongshun acquired 99% shares of Huadi Steel from the PRC Shareholders (as defined below), and Huadi Steel became 99% owned by Wenzhou Hongshun. As of the date of this annual report, Huadi Steel engages in the manufacturing and distribution of industrial steel pipe and tube products.

Huadi International listed its ordinary shares on the Nasdaq Capital Market under the symbol "HUDI" on January 22, 2021 and completed an initial public offering of 3,125,000 ordinary shares on January 26, 2021, raising approximately $22 million in net proceeds after deducting underwriting commissions and the offering expenses payable by us. On November 7, 2022, Huadi International entered into a securities purchase agreement with two institutional investors, pursuant to which Huadi International agreed to sell up to 3,500,000 ordinary shares, par value US$0.0002 per share, in a registered direct offering (the "Offering"). On November 9, 2022, Huadi International closed the Offering for the sale of 1,000,000 ordinary shares and received gross proceeds of approximately $25,000,000 before deducting placement agent fees and other offering expenses. For information regarding our share issuances, see "*NOTE 14 - SHAREHOLDERS' EQUITY - Ordinary Shares - Shares Issuances*" to our consolidated financial statements pursuant to Item 17 of Part III of this annual report.

***Recent Development***

Huadi Songyang was incorporated on June 15, 2023 under the laws of the PRC. Huadi Songyang is a wholly owned subsidiary of Hong Kong Beach Limited. Huadi Songyang was established to expand the product line of industrial steel pipe and tube products manufacture and distribution. Factory in Huadi Songyang is still in construction and expected to completed and in use in the year ended September 30, 2026.

For information regarding our principal capital expenditures, see "*Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Capital Expenditures.*"

**B.** **Business Overview** 

We are a provider of industrial stainless steel piping products and production services with extensive distribution facilities and networks in over twenty (20) provinces in China. We have also offered a broad range of products exported to twenty (20) countries and regions such as the United States, Singapore, Mexico, Thailand, Australia, Argentina, Taiwan, India, the Philippines, UAE, Canada and Germany . Our main business operation focuses on new product development, manufacturing, marketing, and sales of stainless steel seamless pipes, tubes, and stainless steel bars. We also supply products for use in the thermal and nuclear power plants, automotive, oil and gas, agricultural and industrial equipment, chemical engineering, and electricity markets. We manufacture many of our products to operate under specialized conditions, including in load-bearing, high-pressure, corrosive, and high-temperature environments.

The principal markets we operate in are China, the United States, India, Mexico, and Australia. The following tables present revenues by category of activity and geographic areas for the years ended September 30, 2025, 2024, and 2023.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Ended September 30,** | **Year Ended September 30,** | **Year Ended September 30,** | **Year Ended September 30,** | **Year Ended September 30,** | **Year Ended September 30,** |
|  | **2025** | **2025** | **2024** | **2024** | **2023** | **2023** |
|  | **US$** | **%** | **US$** | **%** | **US$** | **%** |
| Steel piping products | 62487643 | 99.4% | 73635012 | 99.1% | 83113259 | 98.6% |
| Production services to third entities | 407968 | 0.6% | 635417 | 0.9% | 1219041 | 1.4% |
| **Total** | **62895611** | **100%** | **74270429** | **100%** | **84332300** | **100%** |

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| | | |
|:---|:---|:---|
|  | **September 30, <br> 2025** | **September 30, <br> 2025** |
|  | **Sales Amount<br> (In USD)** | **As % of<br> Sales** |
| **Top 5 Geographic Areas:** | | |
| China | $53572505 | 85.18% |
| USA | 6267793 | 9.97% |
| India | 1407889 | 2.24% |
| Singapore | 400632 | 0.64% |
| Australia | 370226 | 0.59% |
| Other foreign countries | 876566 | 1.38% |

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| | | |
|:---|:---|:---|
|  | **September 30, <br> 2024** | **September 30, <br> 2024** |
|  | **Sales Amount<br> (In USD)** | **As % of<br> Sales** |
| **Top 5 Geographic Areas:** | | |
| China | $60079920 | 80.89% |
| USA | 7814677 | 10.52% |
| Singapore | 3767180 | 5.07% |
| The United Arab Emirates | 776416 | 1.05% |
| India | 748168 | 1.01% |
| Other foreign countries | 1084068 | 1.46% |

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| | | |
|:---|:---|:---|
|  | **September 30, <br> 2023** | **September 30, <br> 2023** |
|  | **Sales Amount<br> (In USD)** | **As % of<br> Sales** |
| **Top 5 Geographic Areas:** | | |
| China | $73744662 | 87.45% |
| USA | 7146478 | 8.47% |
| India | 1596243 | 1.89% |
| Mexico | 577416 | 0.68% |
| Australia | 385111 | 0.46% |
| Other foreign countries | 882390 | 1.05% |

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***Our Products and Services***

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We offer a comprehensive range of products to provide the benefits of a "design-build shop" to approximately 400 steel pipe and tube customers with numerous customer relationships of over 17 years. We produce over 3,000 distinct pipe and tube products in various materials, sizes, and shapes. We believe we are one of the leading manufacturers in China of certain steel products, such as automotive 304L and 347H stainless steel pipes, which are widely used in hydraulic mechanisms, automotive applications such as brake systems, steering columns and axles, and various other industrial applications. Consequently, we are able to customize our product offerings based on customers' project demand; whether it's a highly corrosive environment such as a chemical waste transmission line pipe, an extremely pressured thermal power generator pipe, or a mix of both, we can make it and deliver on time.

We employ a broad array of finishing techniques, most importantly Cold Drawn Seamless ("CDS"), which is the technique used for manufacturing all our products, and this differentiates us from other steel pipe manufacturers that employ alternative finishing techniques such as Electric Resistance Weld ("ERW"). CDS pipe/tubing is widely used for applications where precise dimensional and mechanical tolerances are required. The product is manufactured by drawing a steel billet over a mandrel through a precision ground die, creating a tube with uniform grain structure, hardness, and a high degree of dimensional accuracy.

Unlike welded pipe, CDS pipe creates a seamless connection and is ideal for more stressful applications requiring higher quality, increased mechanical properties, uniformity, strength, and soundness. This feature, together with some of specialty alloy materials, expand our product applications to almost all industries that require high reliability under extreme environment, such as corrosive, high temperature, or highly pressured.

Depending on each client's specific needs, we also order suitable alloy from our long-term partnered suppliers, and our staff will then process raw materials through the production line. As raw material and direct labor costs combined account for more than 80% of the total product cost, yield rate, or the percentage of non-defective items of all produced items, is critical to profitability.

***Industrial Applications***

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<u>Oil and Gas</u>

We manufacture and supply energy tubular products, including Oil Country Tubular Goods ("OCTG") and line pipe. OCTG is used in the oil and gas industry as key components of the drilling, exploration and production processes of oil and natural gas. Line pipe is used for the transportation of these resources over long and short distances. We manufacture a diversified line of OCTG and line pipe products in a variety of grades for use in oil and gas fields across China.

<u>Electric Energy</u>

We manufacture and supply pipes and tubes for both thermal power and nuclear power plants. Our products are widely applied in power generating systems which require high quality and resistance against corrosion and pressure as the consequence for any leakage could be severe. China has been our largest market over the past several years for the electric energy pipe section.

<u>Automotive</u>

We manufacture and supply pipes for hydraulic mechanism components in automotives such as brake systems, steering columns and axles. We believe we are the leading company in this niche market as we have the lower defective rate compared with our competitors attributable to our specialized manufacturing technique for 321 and 347H pipe which are the most widely used alloy for this application. CRRC, one of the world's largest suppliers of rail transit equipment, is our biggest customer for the market section of piping components used in fluid conveyance and hydraulic mechanical systems.

<u>Other Industrial Applications</u>

Our other industrial applications primarily consist of product applications in pharmaceutical, medical, chemical and food industries. Stainless steel has more than 150 grades with varying chromium and molybdenum contents to suit the environment the alloy must endure, and this diversity offers extensive applications in various industries. Our specialized manufacturing technique enables us to make products suitable to customer's designed purposes.

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***Seasonality***

We have in the past experienced, and expect in the future to continue to experience, limited seasonal fluctuations in our revenues and sales as a result of the holiday season, weather and customers' buying patterns. We recorded relatively lower revenue during Lunar New Year (normally in January or February) owing to fewer business activities in Mainland China. Besides, revenue in the summer months is relatively lower than in other periods throughout the year, as purchase orders and production level fell due to high temperature.

***Our Suppliers and Raw Material Input***

Our primary raw material input is stainless steel billet. There are over 150 grades of stainless steel, of which 15 are most commonly used. Depending on each client's specific needs, we purchase specific type of stainless steel billet and different manufacturing techniques are used for processing raw materials into finished goods to make sure the products meet customer's quality standard.

We purchase our raw materials from a variety of sources and consolidate purchases among our top suppliers to improve cost and delivery terms. We maintain flexibility to purchase raw materials from a variety of sources based on price, availability and end-user specifications. For example, we maintain active relationships with other suppliers to ensure alternative sources of supply. We have also developed supply programs with certain of our key suppliers that we believe provide us with reduced lead times for steel purchases relative to our competitors. We believe our scale is a key competitive advantage, as we are able to leverage our purchasing volume and market insights to obtain more favorable terms from our suppliers and drive procurement savings. We purchase from a variety of suppliers and believe these raw materials are widely available. If we were unable to purchase from our primary suppliers, we do not expect we would face difficulties in locating another supplier at substantially the same price. We have secure and efficient access to all the raw materials necessary for the production of our products. We believe our relationships with the suppliers of these raw materials are strong. While the prices of such raw materials may vary greatly from time to time, we believe we could hedge such risk by adjusting our price or absorb the higher cost at times if necessary.

For the year ended September 30, 2025, one supplier accounted for 20.85% of the Company's total purchase. There were three suppliers that have significant concentration of total accounts payable for the year ended September 30, 2025, which accounted for 26.32%, 18.48% and 14.02% of the Company's total accounts payable.

For the year ended September 30, 2024, three suppliers accounted for 31.45%, 13.77% and 10.39% of the Company's total raw material purchase. There were three suppliers that have significant concentration of total accounts payable for the year ended September 30, 2024, which accounted for 31.96%, 31.40% and 13.32% of the Company's total accounts payable.

For the year ended September 30, 2023, two suppliers accounted for 25.98% and 12.39% of the Company's total purchase. There was four suppliers that have significant concentration (over 10%) of total accounts payable for the year ended September 30, 2023, which accounted for 24.45%, 23.32%, 17.17% and 14.62% of the Company's total accounts payable.

***Sales and Marketing***

We have sold our products to over 20 countries and regions over the world as shown below.

![](image_002.jpg)

We generated 85.18% of our sales revenue from China market where our manufacturing facility locates in during the fiscal year 2025. For the same period, US and India account for 9.97% and 2.24% of our total revenues respectively.

Our strategic focus in the steel industry has long been centered on establishing strong connections with major customers, particularly those in oil and gas industry and electric energy industry. We engaged in proactive marketing initiatives, including distributing detailed product brochures and participating in open bidding. As we have gradually forged a reputation for quality education through a proven track record of success over the years, we have attracted customers outside China.

We adopted a multifaceted marketing approach to elevate the visibility of our brand:

● Promotional events. From time to time, we organize promotional and recruiting events to provide real-time, on-site opportunities for our customers. For example, we actively participate in various exhibitions and expand our influence correspondingly.

● Referrals. Word-of-mouth referrals by former and current customers. We actively work with our customers to encourage them to recommend our products and services to other potential customers in the oil and gas industry and electric energy industry.

● Media advertising. From time to time, we may publish articles in our websites and popular local newspapers to promote our brand awareness. We have also placed advertisements on search engines and internet portals in China.

***Our Steel Pipe and Tube Customers***

*China*

 

For the Chinese market, we supplied a significant portion of our products to the oil and gas, electrical energy, pharmaceutical, and automotive market sectors, which are generally publicly owned entities. We also supply to other industries, including agriculture, chemistry, and construction, which are generally privately-owned entities. Our major customers consist of the China National Petroleum Corporation and Sinopec, one of the world's largest oil and gas companies and CRRC, one of the world's largest suppliers of rail transit equipment.

 

*United States*

 

We primarily sell our engineering and pharmaceutical equipment piping products to the United States through our network of dealers. We also sell a significant portion to automotive manufacturers for oil and hydraulic piping products used in engine and braking systems.

 

*India*

 

Our major customer in India is a leading power company with whom we have partnered with for over 10 years. We primarily supply CDS pipe made of various stainless steel materials for applications in thermal power generating systems.

*Singapore*

Our major customers in Singapore is a leading master distributor of stainless steel and high nickel alloys seamless tubes and fittings. We primarily supply seamless pipe made of various stainless steel materials.

*The United Arab Emirates*

Our two major customers in the United Arab Emirates are leading master distributor of seamless stainless steel and high nickel alloys tubes and fittings. We primarily supply seamless pipe made of various stainless steel materials.

The Company had no significant customers during the year ended September 30, 2025. There was one customer accounted for a significant portion of total accounts receivable for the year ended September 30, 2025, which accounted for 11.30% of the Company's total accounts receivable.

During the year ended September 30, 2024, two customers accounted for 10.23% and 10.15% of total revenue. As of September 30, 2024, amount due from these two customers included in accounts receivable was $788,305 and $512,547, respectively, representing 4.00% and 2.60% of total accounts receivable, respectively. There was one customer accounted for a significant portion of total accounts receivable for the year ended September 30, 2024, which combined accounted for 16.82% of the Company's total accounts receivable.

The Company had no significant customer during the year ended September 30, 2023. The Company had no significant customer during the year ended September 30, 2023. There was one customer accounted for a significant portion of total accounts receivable for the year ended September 30, 2023, which combined accounted for 22.00% of the Company's total accounts receivable.

***Our Competitive Strengths***

*Solutions Provider to Our Customers, With Commitment to Differentiated Service*

We are committed to offering our customers superior product diversity, quality and reliability. As a result, we are able to serve as a "design-build shop" for many of our customers with numerous customer relationships of over 15 years in length. Our extensive and diversified manufacturing technique and equipment enable us to manufacture products customized for customer's project demand, so our customers don't need to go through numerous different suppliers and frustrating with different standards employed by each supplier. Moreover, our product mix, sophisticated logistics, information technology systems, and specialized manufacturing capabilities allow us to effectively bundle shipments, thereby reducing transportation costs. We produce over 3,000 distinct pipe and tube products in a broad range of sizes and shapes and we believe we are the only manufacturer of certain products in China such as automotive 304L and 347H stainless steel pipes which are widely used in hydraulic mechanisms, automotive applications such as brake systems, steering columns and axles, and various other industrial applications.

*Efficient Operations with Significant Scale and Purchasing Power*

We believe we are able to leverage our scale to drive procurement savings. Our manufacturing scale and raw material consumption also allow us to aggregate purchasing and obtain more favorable terms from our suppliers. Over the past several years, management has implemented cost and production efficiency initiatives, while managing capital expenditures to optimize physical assets. These improvements have allowed us to maintain lean manufacturing processes, which result in lower inventory levels, efficient change-overs and reduced customer lead times, enabling us to more successfully and profitably satisfy growing demand in the end markets related to products we sell.

*Diversified Market and Territory Outreach*

We believe we have diversified customer portfolio and territory outreach to mitigate impact by economic and industry cycle. Our customers spread over more than 10 industries in more than 20 countries, and we are still expanding to new areas, and this gives us protection against recession of one industry or one country.

*Rigorous Quality Control*

We established a comprehensive quality management system, implemented by a quality management system (QMS) in compliance with ISO 9001:2015 quality management systems. We use three-tier of product quality testing system to ensure that the products manufactured has a pass rate of 99.85% to provide our clients with high-quality, highly reliable products.

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***Experienced and Proven Management Team***

Our senior management team has decades of leadership experience in the industrial steel pipe and tube industry, transportation and logistics and other relevant industrial sectors. Our management team and senior management intend to remain with us in the capacity of officers and/or directors, which will provide helpful continuity in advancing our strategic and growth goals.

***Award-Winning Products and Operation***

We have received numerous nationally recognized industry awards as well and province recognized awards. Notable awards and activities are detailed in chronological order as following:

● In December 2007, Zhejiang Provincial Bureau of Quality and Technical Supervision awarded Huagang brand stainless steel seamless steel pipe of Huadi Steel "Zhejiang famous brand product."

● The Stainless Steel Branch of China Metal Material Circulation Association awarded Huadi Steel the "Top Ten Seamless Pipe Production in China's Stainless Steel Industry in 2013" certificate.

● In June 2009, Wenzhou Enterprises Association, Wenzhou Entrepreneurs Association and Wenzhou Industrial and Economic Association awarded Huadi Steel the certificate of 2009 Wenzhou Top 100 Enterprises.

● In March 2010, the All-China Federation of Industry and Commerce issued the certificate "Huadi Steel won the 328th place in the 2008 Top 500 National Private Enterprises."

● In August 2010, the All-China Federation of Industry and Commerce issued the certificate of "Huadi Steel No.370 among the 500 Top Chinese Enterprises in 2010."

● In August 2011, the All-China Federation of Industry and Commerce issued the certificate of "Huadi Steel No.329 of 2011 Top 500 Manufacturing Enterprises in China."

● In August 2011, the All-China Federation of Industry and Commerce issued the certificate of "Huadi Steel No.499 of 2011 Top 500 Chinese Private Enterprises."

● In August 2012, the All-China Federation of Industry and Commerce issued the certificate of "Huadi Steel No.361 of 2012 China Top 500 Private Manufacturing Enterprises."

● In August 2013, the All-China Federation of Industry and Commerce issued the certificate "Huadi Steel No.345 of 2013 China Top 500 Private Manufacturing Enterprises."

● In December 2015, Wenzhou Enterprises Association, Wenzhou Entrepreneurs Association and Wenzhou Industrial and Economic Association awarded Huadi Steel "the certificate of Wenzhou top 100 enterprises in 2015."

● The Company holds the "National High and New Technology Enterprise" certificate jointly issued by Zhejiang Provincial Department of Science and Technology, Zhejiang Provincial Department of Finance and Zhejiang Provincial Taxation Bureau of the State Administration of Taxation. The certificate was issued on December 24, 2022 and valid for 3 years. The certificate was renewed on December 29, 2025 and valid for another 3 years.

● In January 2019, Zhejiang Provincial Department of Commerce awarded Huadi Steel Zhejiang export brand, valid from 2019 to 2021.

● On June 26, 2020, the China Association of Manufacturing Enterprises and the China Industrials Information Statistics Association issued the "200 Best Benefits for Chinese Manufacturing Enterprises" Certificate, proving that Huadi Steel was rated as "200 Best Benefits for Chinese Manufacturing Enterprises in 2020" by the China Association of Manufacturing Enterprises, the China Industrials Information Statistics Association and Focus China.com, ranking 200th. This certificate is valid until June 25, 2021.

● On January 30, 2015, Zhejiang Provincial Bureau of Administration for Industry and Commerce issued a certificate of "Zhejiang Famous Traders" to Huadi Steel and recognized the "Huadi (Steel)" as a famous trade name in Zhejiang Province. Valid for 6 years.

● On December 12, 2019, Wenzhou Municipal Bureau of Administration for Market Regulation and Wenzhou Municipal Bureau of Intellectual Property granted Huadi Steel a list of key Trademarks protection in Wenzhou (well-known Trademarks enterprises).

● In January 2020, Zhejiang Provincial Bureau of Administration for Market Regulation awarded Huadi Steel "Zhejiang Trademarks Brand Demonstration Enterprise."

● In July 2022, Economy and Information Technology Department of Zhejiang issued a certificate of "Zhejiang Specialized, Refined, Unique and New Small and Medium sized Enterprise" to Huadi Steel. This certificate is valid until July 2025.

● In January 2023, Zhejiang Provincial Department of Commerce awarded Huadi Steel Zhejiang export brand, valid from 2023 to 2025.

● In February 2023, Longwan District Committee of the Communist Party of China in Wenzhou, Longwan District People's Government of Wenzhou, High-tech District Working Committee of the Communist Party of China in Wenzhou, Management Committee of High-tech District in Wenzhou awarded Huadi Steel "Top 100 enterprises of Longwan District and High-tech District in 2022".

● In September 2023, Zhejiang Provincial Bureau of Administration for Market Regulation awarded Huadi Steel "Zhejiang AAA Level Enterprise with excellent credit standing", valid for 3 years.

● In November 2023, Department of Science and Technology of Zhejiang Provincial issued a certificate of "Zhejiang High-tech Enterprise Research and Development Center" to Huadi Steel.

We believe our national and province-level awards, reflect widespread recognition of our innovative products, national- recognized reputation as well as success in our industry.

***Our Business Strategies***

Our primary objective is to create value by sustaining growth in earnings and cash flows from operating activities over various economic cycles. To achieve this objective, we strive to improve our cost structure, provide high quality service and products, expand our product offerings and increase our market share.

*Expand Leading Market Positions*

We believe that our leading market position and scale are our most compelling competitive strengths. Our management team is focused on expanding market share, which we believe will generate operating leverage and improved financial performance. We believe this can be accomplished through acquisitions and organic initiatives, including offering new products, serving additional end markets, actively participating in domestic bidding projects, and increasing customer penetration and geographic coverage. As part of our business strategy, we evaluate acquisition opportunities from time to time.

*Optimize Our Portfolio and Product Mix to be Responsive to Market Conditions*

We seek to maintain flexibility to adjust our product mix and rapidly respond to changing market conditions. While prioritizing our highest margin products, we regularly evaluate our portfolio of assets to ensure that our offerings are responsive to prevailing market conditions. We will assess and pursue opportunities to utilize, optimize and grow production capacity to capitalize on market opportunities.

*Provide Superior Quality Products and Customer Service*

Our products play a critical role in a variety of construction, infrastructure, equipment and safety applications. Our emphasis on manufacturing processes, quality control testing and product development helps us deliver a high-quality product to our customers. We focus on providing superior customer service through our geographic manufacturing footprint and continued development of our proprietary, vendor managed AIM system, as well as our experienced sales forces. We also seek to provide high-quality customer service through continued warehouse optimization, including increased digitization and automation of certain systems to debottleneck loading and dispatch logistics and improve truck availability. We believe that warehouse, transportation and shipping logistics and speed of delivery represents a key area of commercial differentiation relative to our competitors.

*Focus on Efficient Manufacturing and Cost Management*

We strive for continued operational excellence with the goal of providing high-quality products at competitive prices. Our operating personnel continually examine costs and profitability by product, plant and region. Our goal is to maximize operational benchmarks by leveraging skilled manufacturing and supply chain management processes.

*Focus on Key Supplier Relationships*

We believe that our relationships with our key suppliers provide a competitive advantage in serving our customers. Our ability to provide our suppliers with accurate information regarding our future demands is critical to this relationship. In doing so, we are focused on accurate demand planning and have invested in systems to enhance this function.

*Execute Pricing Strategy to Pass Through Underlying Costs*

We believe we have a track record of managing underlying commodity price exposure through our price negotiation, raw material procurement and inventory management program. In addition to managing underlying commodity prices, more recently we have had success in sharing transportation costs with our customers through our product pricing strategies, particularly for our electrical conduit products. We believe there is opportunity to implement this pricing strategy for our other products as well.

***Properties and Facilities*** 

*<u>Real Property</u>*

 ****

There is no private land ownership in China. Individuals and entities are permitted to acquire land use rights for specific purposes. As of the date of this annual report, our granted land use rights for our properties as follows:

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| | | | |
|:---|:---|:---|:---|
| **Location** | **Type of Right** | **Usage** | **Period of Usage** |
| Room 602, Building 2, Longlian Building, No.167 Luodong North Street, Yongzhong Street, Longwan District | land use right/property (structure)ownership Land use right area<br> 46.9 m<sup>2</sup>/property area <br> 599.34 m<sup>2</sup> | Commercial and financial land/office space | The right to use land ends on November 22, 2051 |
| Room 702, Building 2, Longlian Building, No.167 Luodong North Street, Yongzhong Street, Longwan District | land use right/property (structure)ownership Land use right area <br> 46.9 m<sup>2</sup>/property area <br> 599.34 m<sup>2</sup> | Commercial and financial land/office space | The right to use land ends on November 22, 2051 |
| Room 701, Building 2, Longlian Building, No.167 Luodong North Street, Yongzhong Street, Longwan District | land use right/property (structure)ownership Land use right area <br> 46.9 m<sup>2</sup>/property area <br> 599.34 m<sup>2</sup> | Commercial and financial land/office space | The right to use land ends on November 22, 2051 |
| Room 601, Building 2, Longlian Building, No.167 Luodong North Street, Yongzhong Street, Longwan District | land use right/property (structure)ownership Land use right area <br> 46.95 m<sup>2</sup>/property area 5<br> 99.97 m<sup>2</sup> | Commercial and financial land/office space | The right to use land ends on November 22, 2051 |

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| | | |
|:---|:---|:---|
| **Location** | **Type (Usage)** | **Termination date** |
| No.1688 Tianzhong Road, Yongzhong Street, Longwan District | Industrial land 24,433.83m<sup>2</sup> | September 29, 2055 |
| Yongqiang High-tech Industrial Park | Industrial land 28,536.23m<sup>2</sup> | December 13, 2051 |
| No. 213 Haibin Street, Sanan Village, Haibin Street, Longwan District | Industrial land 5,350.66m<sup>2</sup> | April 6, 2047 |

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*<u>Intellectual Property</u>*

*Trademark*

As of the date of this annual report, we have the right to use the following trademarks:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **No.** | **Registrant** | **Trademark** | **Registration Number** | **Valid Through** | **Application Area** | **Jurisdiction of<br> Registration** |
| 1 | Huadi Steel | ![](image_003.jpg) | 1091403 | August 27, 2027 | Metal Sheet and Plate, Metal Door Panel, Metal Binding Strap, Metal Flange, Metal Signboard, Metal Electrode | PRC |
| 2 | Huadi Steel | ![](image_004.jpg) | 853741 | December 17, 2034 | Steel tubes, steel plates, metal valves (non-machine parts), crash barriers of metal for roads, steel wire, ferrules of metal, small items of metal hardware, flanges of metal, junctions of metal for pipes, buckles of common metal | United States |
| 3 | Huadi Steel | ![](image_005.jpg) | 4138907 | January 27, 2029 | Steel tubes, steel plates, metal valves (non-machine parts), crash barriers of metal for roads, steel wire, ferrules of metal, small items of metal hardware, flanges of metal, junctions of metal for pipes, buckles of common metal | PRC |
| 4 | Huadi Steel | ![](image_006.jpg) | 1495281 | December 20, 2030 | Adjustment and safety accessories for tap equipment, bathroom hand dryer, automatic watering device, water tank level control valve, Drainage pipe equipment, floor drain, bath fixtures steel pipes; Metal pipe joints; | PRC |
| 5 | Huadi Steel | ![](image_007.jpg) | 4966620 | February 13, 2029 | Metal water pipes; Metal drain pipe; Metal pipe; Metal pipe clamp; Metal pipes; Metal pipe fittings. | PRC |
| 6 | Huadi Steel | ![](image_008.jpg) | 5690716 | December 27, 2029 | Polishing; Welding; Dyeing; Paper handling; Ceramic firing; Leather processing; Waste and garbage recovery; Energy production; Chemical processing and treatment. | PRC |
| 7 | Huadi Steel | ![](image_009.jpg) | 3371731 | March 13, 2034 | Steel pipe; steel plate; metal valve (non-machine parts); highway anti-collision metal fence; steel wire; metal ring; hardware; metal flange; metal pipe joint; ordinary metal buckle | PRC |
| 8 | Huadi Steel | ![](image_010.jpg) | 6110349 | December 13, 2029 | Keywords steel template; wire metal pole; steel wire; gasket (filler); metal head; metal wire; metal mooring buoy; metal ore; metal tablet; metal coin box; | PRC |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **No.** | **Registrant** | **Trademark** | **Registration Number** | **Valid Through** | **Application Area** | **Jurisdiction of<br> Registration** |
| 9 | Huadi Steel | ![](image_011.jpg) | 33766210 | December 27, 2029 | Steel plate; steel pipe; movable metal ladder for passenger boarding; metal track; steel wire; metal joint for non electrical cable; metal gasket; metal hinge; hardware; metal lock (non electric); electronic safe; metal flange; metal packaging container; metal signboard; metal cage; metal welding wire; metal mooring buoy; metal identification bracelet; metal wind vane; Keywords metal buttress of tree or plant; animal trap; common metal art; chrome ore; metal monument; | PRC |
| 10 | Huadi Steel | ![](image_012.jpg) | 76959663 | October 27, 2034 | Faucets, pipes (sanitary equipment components), hand dryers for bathrooms, automatic watering devices, water pipe faucets, water pipe equipment, floor drains, bathroom fixtures, pipe fittings for plumbing fixtures | PRC |
| 11 | Huadi Steel | ![](image_013.jpg) | 1328323 | December 27, 2034 | STAINLESS STEEL TUBE, STEEL TUBE, STEEL PLATE, METAL VALVE, (NON-MACHINERY PARTS) HIGHWAY CRASHWORTHY METAL RAILING, STEEL WIRE, FERRULE, HARDWARE, TOOL METAL FLANGES, METAL PIPING JOINT, COMMON METAL BUTTON, ALL IN INTERNATIONAL CLASS 6. | Inida |

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*<u>Patent</u>*

 

We rely on our technology patents to protect our domestic business interests and ensure our competitive position in our industry. As of the date of this annual report, the issued patents we hold are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **No.** | **Patent Name** | **Owner** | **Category** | **Patent Code.** | **Authorization Date** |
| **1.** | Stainless Steel Pipe | Huadi Steel | Utility Patent | 201821427886.8 | 4/16/2019 |
| **2.** | Double Stainless Steel Tube | Huadi Steel | Utility Patent | 201821429676.2 | 4/16/2019 |
| **3.** | Stainless Steel Plastic Composite Pipe | Huadi Steel | Utility Patent | 201821432001.3 | 4/16/2019 |
| **4.** | Stainless steel composite steel pipe | Huadi Steel | Utility Patent | 201821431399.9 | 4/16/2019 |
| **5.** | Steel pipe grinding machine | Huadi Steel | Utility Patent | 201821429953.X | 4/16/2019 |
| **6.** | Steel pipe grinding equipment | Huadi Steel | Utility Patent | 201821429597.1 | 4/16/2019 |
| **7.** | Traction device for steel pipe grinding equipment | Huadi Steel | Utility Patent | 201821431400.8 | 4/16/2019 |
| **8.** | Steel pipe outer round polishing machine | Huadi Steel | Utility Patent | 201821429490.7 | 4/16/2019 |
| **9.** | Steel pipe pickling tank | Huadi Steel | Utility Patent | 201821431397.X | 4/16/2019 |
| **10.** | Steel pipe discharging device | Huadi Steel | Utility Patent | 201821430722.0 | 4/16/2019 |
| **11.** | Cap of stainless steel tube | Huadi Steel | Utility Patent | 201821430724.X | 4/16/2019 |
| **12.** | Stainless steel sleeve | Huadi Steel | Utility Patent | 201821430309.4 | 4/16/2019 |
| **13.** | Dust removal in circulating workshop Device | Huadi Steel | Utility Patent | 201821431295.8 | 4/16/2019 |
| **14.** | Dedusting for workshop Device | Huadi Steel | Utility Patent | 201821429952.5 | 4/16/2019 |
| **15.** | Workshop dust removal device | Huadi Steel | Utility Patent | 201821430336.1 | 7/2/2019 |
| **16.** | Stainless steel U-shaped body for expansion joint and use method thereof | Huadi Steel | Invention | 201811017559.X | 1/24/2020 |
| **17.** | High-cleanliness stainless steel cable and its processing technique | Huadi Steel | Invention | 201811017618.3 | 10/2/2020 |
| **18.** | Anti-corrosion post-treatment process of stainless steel pipe | Huadi Steel | Invention | 201811016027.4 | 9/4/2020 |
| **19.** | Steel Pipe | Huadi Steel | Utility Patent | 201922057582.8 | 7/17/2020 |
| **20.** | Steel pipe with fasteners | Huadi Steel | Utility Patent | 201922057948.1 | 7/17/2020 |
| **21.** | Seamless steel pipe | Huadi Steel | Utility Patent | 201922059650.4 | 7/17/2020 |
| **22.** | Steel pipe | Huadi Steel | Utility Patent | 201922059702.8 | 7/17/2020 |
| **23.** | Seamless steel pipe | Huadi Steel | Utility Patent | 201922057670.8 | 9/15/2020 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **No.** | **Patent Name** | **Owner** | **Category** | **Patent Code.** | **Authorization Date** |
| **24.** | Single side hollow stainless steel filter plate | Huadi Steel | Invention | 201811017643.1 | 11/6/2020 |
| **25.** | Enhanced seamless steel pipe | Huadi Steel | Utility Patent | 202023103573.7 | 11/23/2021 |
| **26.** | Seamless steel pipe | Huadi Steel | Utility Patent | 202023143733.0 | 11/23/2021 |
| **27.** | Seamless stainless steel pipe | Huadi Steel | Utility Patent | 202023106260.7 | 11/23/2021 |
| **28.** | Seamless stainless steel pipe | Huadi Steel | Utility Patent | 202023106540.8 | 11/23/2021 |
| **29.** | Easily-connected stainless steel pipe | Huadi Steel | Utility Patent | 202023103018.4 | 11/19/2021 |
| **30.** | Seamless stainless steel pipe process | Huadi Steel | Invention | 201911223120.7 | 12/10/2021 |
| **31.** | Easily-connected seamless stainless steel pipe | Huadi Steel | Utility Patent | 202122123520.X | 2/18/2022 |
| **32.** | Anti-corrosion U-shaped Stainless steel pipe | Huadi Steel | Utility Patent | 202122131985.X | 2/18/2022 |
| **33.** | Stainless steel fuel pipe | Huadi Steel | Utility Patent | 202122123523.3 | 2/18/2022 |
| **34.** | Insulated seamless steel pipe | Huadi Steel | Utility Patent | 202122121603.5 | 2/18/2022 |
| **35.** | Flex-resistant stainless steel pipe | Huadi Steel | Utility Patent | 202122121602.0 | 2/18/2022 |
| **36.** | Seamless stainless steel pipe and its processing technique | Huadi Steel | Invention | 202110032380.7 | 7/29/2022 |
| **37.** | Anti-compression insulated stainless steel pipe | Huadi Steel | Utility Patent | 202221920113.X | 1/10/2023 |
| **38.** | High-strength seamless stainless steel pipe | Huadi Steel | Utility Patent | 202221920094.0 | 1/10/2023 |
| **39.** | Seamless stainless steel pipe with an internal connection structure | Huadi Steel | Utility Patent | 202221937622.3 | 1/10/2023 |
| **40.** | Seamless stainless steel pipe with noise reduction capability | Huadi Steel | Utility Patent | 202222029425.8 | 1/10/2023 |
| **41.** | Composite anti-corrosion seamless stainless steel pipe | Huadi Steel | Utility Patent | 202222029426.2 | 1/10/2023 |
| **42.** | Acid pickling and passivation treatment process for seamless stainless steel pipes | Huadi Steel | Invention | 202210876101.X | 7/21/2023 |
| **43.** | Polishing process for stainless steel pipes | Huadi Steel | Invention | 202210942157.0 | 8/22/2023 |
| **44.** | A seamless stainless steel pipe with tensile and wear-resistant properties | Huadi Steel | Utility Patent | 202322575197.9 | 5/28/2024 |
| **45.** | An antifreeze seamless stainless steel pipe | Huadi Steel | Utility Patent | 202322747767.8 | 6/7/2024 |
| **46.** | A high-pressure resistant stainless steel pipe | Huadi Steel | Utility Patent | 202322747763.X | 6/7/2024 |
| **47.** | A type of anti bending and compression resistant stainless steel pipe | Huadi Steel | Utility Patent | 202322747766.3 | 5/14/2024 |
| **48.** | A pressure resistant seamless stainless steel pipe | Huadi Steel | Utility Patent | 202421620487.9 | 3/28/2025 |
| **49.** | A reinforced seamless stainless steel pipe | Huadi Steel | Utility Patent | 202421611817.8 | 4/11/2025 |
| **50.** | Cold rolled stainless steel pipe post-treatment equipment and processing technology | Huadi Steel | Utility Patent | 202410914363.X | 5/13/2025 |
| **51.** | A low-temperature resistant composite stainless steel pipe | Huadi Steel | Utility Patent | 202421616608.2 | 4/1/2025 |
| **52.** | A double-layer stainless steel pipe | Huadi Steel | Utility Patent | 202322575199.80 | 6/28/2025 |
| **53.** | High strength small-diameter stainless steel pipe | Huadi Steel | Utility Patent | 202422641101.9 | 8/1/2025 |
| **54.** | A seamless stainless steel pipe that can be fitted and fixed | Huadi Steel | Utility Patent | 202422627362.50 | 8/5/2025 |
| **55.** | A heat-resistant stainless steel tube and its processing technology | Huadi Steel | Utility Patent | 202311324345.8 | 1/2/2026 |

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As of the date of this annual report, we have 8 invention patents and 47 utility patents, which were granted for new technical solutions or improvement with a lower degree of 'inventiveness' than invention patents, i.e., products with a new shape or structural physical features. Utility Models are also sometimes called "Utility Patents" or "Petty Patents" in other countries. Utility patents are protected under PRC laws for a term of 10 years.

*<u>Domain</u>*

 

As of the date of this annual report, we have the following domain registrations issued in the PRC.

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| | | |
|:---|:---|:---|
| **No.** | **Domain Name** | **Owner** |
| 1 | huadigroup.com | Huadi Steel |

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***Research and Development***

In addition to our existing innovative products, we continue to develop new products and technologies to fulfill the evolving needs of domestic and international customers. Our research and development efforts are an essential part of our operations and the core strength in competing with other steel pipe manufactures in different industries.

We have a research and development team of 75 employees, consisted of people from the technical and production departments. All of our patents are researched in house by our research and development team.

For the years ended September 30, 2025 and 2024, we invested $2,166,881 and $2,239,220, respectively, in new products development and improvements in existing processes.

***Legal Proceedings***

We had been subject to legal proceedings in the past, but have since resolved these. From time to time, we may become involved in various legal or administrate proceedings that may arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise. Except for those set below, currently there is no legal proceeding pending or threatened against to which we are a party of.

On April 6, 2023, Huadi Steel filed a complaint with the Tuoketuo District People's Court in Hohhot, Ineer Mongolia Province, demanding that Inner Mongolia Jiutai New Material Co., Ltd ("Jiutai") pay for purchases of goods from Huadi Steel in the amount of RMB 980,543 and bear the litigation costs of the case. On April 26, 2023, Jiutai agreed to pay Huadi Steel for settle the case for a total of RMB 980,543 payable in installment payments. On the same day, Tuoketuo District People's Court issued the Civil Mediation Statement. On August 7, 2023, as Jiutai failed to pay the first installment, Huadi Steel filed an application for enforcement with the Tuoketuo District People's Court. To the date the Annual Report was available to issue, the enforcement was still in implementation stage.

On May 12, 2023, Huadi Steel filed a complaint with the Tuoketuo District People's Court in Hohhot, Ineer Mongolia Province, demanding that Inner Mongolia Jiutai New Material Co., Ltd ("Jiutai") pay for purchases of goods from Huadi Steel of RMB 832,249 and bear the litigation costs of the case. On April 26, 2023, Jiutai agreed to pay Huadi Steel to settle the case for a total of RMB 832,249 payable in multiple installments. On the same day, Tuoketuo District People's Court issued the Civil Mediation Statement. Huadi Steel received the first installment of RMB 200,000 on January, 24, 2023. To the date the Annual Report was available to issue, the enforcement was still in implementation stage.

On July 17, 2025, Huadi Steel engaged Zhejiang Jiaruicheng Law Firm to provide legal services for the case of a sales contract dispute between Huadi Steel and Xinjiang Hesheng Silicon Industry New Materials Co., Ltd. ("Hesheng"), demanding that Hesheng pay for purchases of goods from Huadi Steel of RMB 670,676 and bear the litigation costs of the case. To the date the Annual Report was available to issue, the case has been officially filed by the Intermediate People's Court of Urumqi and has not yet been heard in court.

On November 20, 2025, Wang chaosong, an employee of Huadi Steel, filed a complaint with the Longwan District People's Court in Wenzhou, Zhejiang Province, demanding that Huadi Steel discharge the labor contract and pay for employment injury insurance of his level-7 disability of RMB 397,600. To the date the Annual Report was available to issue, no judgment has been made. As advised by our PRC counsel, Zhejiang Dongou Law Firm, the risk of Huadi Steel Industry Group Co., Ltd. losing this case is relatively small.

***Chinese Laws and Regulations***

*Recent Regulatory Actions by the PRC Government*

We are aware that, recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretations and enforcement of the rules and regulations in the PRC adverse to us, which may take place quickly with little advance notice.

On December 28, 2021, the Cyberspace Administration of China, or the CAC, published the CAC Revised Measures, which further restates and expands the applicable scope of the cybersecurity review. The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC Revised Measures, if a network platform operator holding personal information of over one million users seeks a "foreign" listing, it must apply for the cybersecurity review. In addition, operators of critical information infrastructure purchasing network products and services are also obligated to apply for the cybersecurity review for such purchasing activities. Although the CAC Revised Measures provides no further explanation on the extent of "network platform operator" and "foreign" listing, we do not believe we are obligated to apply for a cybersecurity review pursuant to the CAC Revised Measures, considering that (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that we will reach such threshold in the near future; (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying the our PRC operating entities as critical information infrastructure operators.

The CAC Revised Measures empowers the cybersecurity review office to initiate a cybersecurity review when they believe any particular data processing activities "affect or may affect national security." In addition, on November 14, 2021, the CAC promulgated the Regulations on the Administration of Cyber Data Security (Draft for Comments) (the "Draft CAC Regulations"), and according to the Draft CAC Regulations, any data processors shall, in accordance with relevant state provisions, apply for a cybersecurity review when carrying out, among other things, "other data processing activities that affect or may affect national security." As confirmed by our PRC counsel, Zhejiang Dongou Law Firm, we are not subject to cybersecurity review with the CAC in accordance with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying our PRC operating entities as critical information infrastructure operators or requiring our PRC operating entities to go through cybersecurity review or network data security review by the CAC.

On February 17, 2023, the CSRC promulgated the Trial Measures of, and the Overseas Listings Rules, which has become effective on March 31, 2023. On the same date of the issuance of the Overseas Listings Rules, the CSRC circulated the Notice on Administration Arrangements for the Filing of Overseas Listings by Domestic Enterprises (the "Notice"). Pursuant to the Trial Measures and the Notice, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings or listing application. If a PRC company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. The companies that have already been listed on overseas stock exchanges or have obtained the approval from overseas supervision administrations or stock exchanges for its offering and listing before March 31, 2023 and will complete their overseas offering and listing prior to September 30, 2023 are not required to make immediate filings for its listing yet need to make filings for subsequent offerings in accordance with the Overseas Listings Rules. In addition, on February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As of the date of the annual report, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect to our listing on the Nasdaq Capital Market. However, there remains significant uncertainty as to the enactment, interpretation, and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.

As confirmed by our PRC counsel, Zhejiang Dongou Law Firm, our PRC operating entities currently have obtained all material permissions and approvals required for our operations in compliance with the relevant PRC laws and regulations in the PRC, including the business license, and we are not required to obtain permission or approval from the PRC authorities, including CSRC or CAC, for their operations, nor have we or our PRC operating entities received any denial. We are subject to the risks of uncertainty of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals discussed here are not required, that applicable laws, regulations, or interpretations change such that we or any of our PRC operating entities is required to obtain approvals in the future, or that the PRC government could disallow our holding company structure, which would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and continue to offer securities to our investors. These adverse actions could cause the value of our ordinary shares to significantly decline or become worthless. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC if we fail to comply with such rules and regulations, which would likely adversely affect the ability of our securities to be listed on the U.S. exchange, which would likely cause the value of our securities to significantly decline or become worthless.

 

*Regulation on Product Liability*

The principal legal provisions on product liability are set out under the Product Quality Law of the PRC issued by the Standing Committee of the National People's Congress, or SCNPC, on February 22, 1993 and was recently amended on December 29, 2018. The Product Quality Law requests that the producers shall have their own proper regulations for the management of product quality, rigorously implementing quality regulations, quality liabilities and relevant measures for their assessment. As prescribed in this law, producers shall be responsible for the quality of products they produce and they shall be liable for failing to meet the prescribed quality standards. Violation of the Product Quality Law may result in fines and the violator will be ordered to suspend its operations, or its business license will be revoked and criminal liability may be incurred if the case is serious enough to constitute a crime.

*Regulation on Foreign Exchange Control and Registration of Offshore Investment by PRC Residents*

See "*Item 10. Additional Information - D. Exchange Controls*."

*Regulation on Dividend Distributions*

The principal laws, rule and regulations governing dividends distribution by companies in the PRC are the PRC Company Law, which applies to both PRC domestic companies and FIEs, and the Foreign Investment Law and its Implementing Rules, which apply to FIEs.

Under these laws, regulations and rules, wholly foreign-owned enterprises ("WFOEs") in China may pay dividends only out of their accumulated profits, if any, determined in accordance with the PRC accounting standards and regulations. In addition, FIEs in the PRC are required to set aside as general reserves at least 10% of their accumulated profits each year, if any, to fund certain reserve funds, until the cumulative amount of their reserves reaches 50% of their registered capital. These reserves are not distributable as cash dividends. PRC companies are not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

*Regulations Related to Foreign Investment*

The establishment, operation, and management of companies in China are mainly governed by the PRC Company Law, as most recently amended in 2018, which applies to both PRC domestic companies and foreign-invested companies. On March 15, 2019, the National People's Congress approved the Foreign Investment Law, and on December 26, 2019, the State Council promulgated the Implementing Rules of the PRC Foreign Investment Law, or the Implementing Rules, to further clarify and elaborate the relevant provisions of the Foreign Investment Law. The Foreign Investment Law and the Implementing Rules both took effect on January 1, 2020. They replaced three previous major laws on foreign investments in China, namely, the Sino-foreign Equity Joint Venture Law, the Sino-foreign Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their respective implementing rules. Pursuant to the Foreign Investment Law, "foreign investments" refer to investment activities conducted by foreign investors (including foreign natural persons, foreign enterprises or other foreign organizations) directly or indirectly in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment in other methods as specified in laws, administrative regulations, or as stipulated by the State Council. The Implementing Rules introduce a see-through principle and further provide that foreign-invested enterprises that invest in the PRC shall also be governed by the Foreign Investment Law and the Implementing Rules.

The Foreign Investment Law and the Implementing Rules provide that a system of pre-entry national treatment and negative list shall be applied for the administration of foreign investment. "Pre-entry national treatment" means that the treatment given to foreign investors and their investments at market access stage is no less favorable than that given to domestic investors and their investments. "Negative list" means the special administrative measures for foreign investment's access to specific fields or industries, which will be proposed by the competent investment department of the State Council in conjunction with the competent commerce department of the State Council and other relevant departments, and be reported to the State Council for promulgation, or be promulgated by the competent investment department or competent commerce department of the State Council after being reported to the State Council for approval. Foreign investment beyond the negative list will be granted national treatment. Foreign investors shall not invest in the prohibited fields as specified in the negative list, and foreign investors who invest in the restricted fields shall comply with the special requirements on the shareholding, senior management personnel, etc. In the meantime, relevant competent government departments will formulate a catalog of industries for which foreign investments are encouraged according to the needs for national economic and social development, to list the specific industries, fields, and regions in which foreign investors are encouraged and guided to invest.

Investment activities in the PRC by foreign investors were principally governed by the Catalogue for the Guidance of Foreign Investment Industries, or the Catalogue, which was promulgated and is amended from time to time by the MOFCOM and the NDRC. Industries listed in the Catalogue were divided into three categories: encouraged, restricted and prohibited. Industries not listed in the Catalogue were generally deemed as constituting a fourth "permitted" category. The Catalog was replaced by the Special Administrative Measures for Access of Foreign Investment (Negative List) and the Catalogue of Industries for Encouraging Foreign Investment in 2018 and 2019, respectively. On December 27, 2021, the NDRC and MOFCOM issued the latest Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Edition) (the "Negative List 2021"), which came into effect on January 1, 2022. The Negative List 2021 sets out the areas where foreign investment is prohibited and the areas where foreign investment is allowed only on certain conditions. Foreign investment in areas not listed in the Negative List 2021 is treated equally with domestic investment and the relevant provisions of the Negative List for Market Access shall apply to domestic and foreign investors on a unified basis. Moreover, according to Negative List 2021, PRC entities which engage in any field forbidden by the Negative List 2021 for access of foreign investment shall be approved by competent PRC authorities when they seek listing offshore, and foreign investors shall not participate in operation and management and their shareholding ration shall be in compliance with PRC laws.

According to the Implementing Rules, the registration of foreign-invested enterprises shall be handled by the State Administration for Market Regulation ("SAMR") or its authorized local counterparts. Where a foreign investor invests in an industry or field subject to licensing in accordance with laws, the relevant competent government department responsible for granting such license shall review the license application of the foreign investor in accordance with the same conditions and procedures applicable to PRC domestic investors unless it is stipulated otherwise by the laws and administrative regulations, and the competent government department shall not impose discriminatory requirements on the foreign investor in terms of licensing conditions, application materials, reviewing steps and deadlines, etc. However, the relevant competent government departments shall not grant the license or permit enterprise registration if the foreign investor intends to invest in the industries or fields as specified in the negative list without satisfying the relevant requirements. In the event that a foreign investor invests in a prohibited field or industry as specified in the negative list, the relevant competent government department shall order the foreign investor to stop the investment activities, dispose of the shares or assets or take other necessary measures within a specified time limit, and restore to the status before the occurrence of the investment described above. The illegal gains, if any, shall be confiscated. In the event that the investment activities of a foreign investor violate the special administration measures for access restrictions on foreign investments as stipulated in the negative list, the relevant competent government department shall order the investor to make corrections within the specified time limit and take necessary measures to meet the relevant requirements. In the event that the foreign investor fails to make corrections within the specified time limit, the provisions above regarding the circumstance that a foreign investor invests in the prohibited field or industry shall apply.

Pursuant to the Foreign Investment Law and the Implementing Rules, and the Information Reporting Measures for Foreign Investment jointly promulgated by the MOFCOM and the SAMR, which took effect on January 1, 2020, a foreign investment information reporting system shall be established and foreign investors or foreign-invested enterprises shall report investment information to competent commerce departments of the government through the enterprise registration system and the enterprise credit information publicity system, and the administration for market regulation shall forward the above investment information to the competent commerce departments in a timely manner. In addition, the MOFCOM shall set up a foreign investment information reporting system to receive and handle the investment information and inter-departmentally shared information forwarded by the administration for market regulation in a timely manner. The foreign investors or foreign-invested enterprises shall report the investment information by submitting reports including initial reports, change reports, deregistration reports and annual reports.

Furthermore, the Foreign Investment Law provides that foreign-invested enterprises established according to the previous laws regulating foreign investment prior to the implementation of the Foreign Investment Law may maintain their structure and corporate governance within five years after the implementation of the Foreign Investment Law. The Implementing Rules further clarify that such foreign-invested enterprises established prior to the implementation of the Foreign Investment Law may either adjust their organizational forms or organizational structures pursuant to the Company Law or the Partnership Law or maintain their current structure and corporate governance within five years upon the implementation of the Foreign Investment Law. Since January 1, 2025, if a foreign-invested enterprise fails to adjust its organizational form or structure according to applicable laws and go through the applicable registrations, the relevant administration for market regulation shall not handle other registrations for changes and shall publicize the relevant circumstances. However, after the organizational forms or structures have been adjusted, the original parties to the Sino-foreign equity or cooperative joint ventures may continue to process matters such as equity interest transfer, income distribution, or surplus assets as agreed in the relevant contracts.

In addition, the Foreign Investment Law and the Implementing Rules also specify other protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited, etc.

*Regulations on Offshore Parent Holding Companies' Direct Investment in and Loans to Their PRC Subsidiaries*

Loans made by foreign investors as shareholders in foreign invested enterprises established in China are considered to be foreign debts and are mainly regulated by the Regulation of the People's Republic of China on Foreign Exchange Administration, the Interim Provisions on the Management of Foreign Debts, the Statistical Monitoring of Foreign Debts Tentative Provisions, the Detailed Rules for the Implementation of Provisional Regulations on Statistics and Supervision of External Debt, and the Administrative Measures for Registration of Foreign Debts. Pursuant to these regulations and rules, a shareholder loan in the form of foreign debt made to a PRC entity does not require the prior approval of SAFE, but such foreign debt must be registered with and recorded by SAFE or its local branches within 15 business days after entering into the foreign debt contract. Under these regulations and rules, the balance of the foreign debts of a foreign invested enterprise shall not exceed the difference between the total investment and the registered capital of the foreign invested enterprise, or Total Investment and Registered Capital Balance.

The principal regulations governing foreign currency exchange in China are the *Foreign Exchange Administration Regulations*, as amended in August 2008. Under this regulation, the Renminbi is freely convertible for current account items, including the trade and service-related foreign exchange transactions and other current exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made.

Pursuant to the *Administration Rules of the Settlement, Sale and Payment of Foreign Exchange* promulgated on June 20, 1996 by the People's Bank of China, foreign-invested enterprises in China may purchase or remit foreign currency for settlement of current account transactions without the approval of the SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other relevant PRC governmental authorities.

In addition, the *Notice of the General Affairs Department of SAFE on The Relevant Operation Issues Concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-invested Enterprises*, or Circular 142, which was promulgated on August 29, 2008 by SAFE, regulates the conversion by foreign-invested enterprises of foreign currency into Renminbi by restricting how the converted Renminbi may be used. Circular 142 requires that Renminbi converted from the foreign currency-denominated capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the relevant government authority and may not be used to make equity investments in PRC, unless specifically provided otherwise. The SAFE further strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-denominated capital of a foreign-invested enterprise. The use of such Renminbi may not be changed without approval from the SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Any violation of Circular 142 may result in severe penalties, including substantial fines.

In November 2012, SAFE promulgated the *Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment*, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the *Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents* in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

In July 2014, SAFE decided to further reform the foreign exchange administration system in order to satisfy and facilitate the business and capital operations of foreign invested enterprises, and issued the *Circular on the Relevant Issues Concerning the Launch of Reforming Trial of the Administration Model of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises in Certain Areas*, or Circular 36, on August 4, 2014. This circular suspends the application of Circular 142 in certain areas and allows a foreign-invested enterprise registered in such areas to use the Renminbi capital converted from foreign currency registered capital for equity investments within the PRC.

On March 30, 2015, SAFE released the *Notice on the Reform of the Management Method for the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises*, or Circular 19, which has made certain adjustments to some regulatory requirements on the settlement of foreign exchange capital of foreign-invested enterprises, lifted some foreign exchange restrictions under Circular 142, and annulled Circular 142 and Circular 36. However, Circular 19 continues to, prohibit foreign-invested enterprises from, among other things, using Renminbi fund converted from its foreign exchange capitals for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial enterprises.

On June 19, 2016, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, which took effect on the same day. Compared to Circular 19, Circular 16 not only provides that, in addition to foreign exchange capital, foreign debt funds and proceeds remitted from foreign listings should also be subject to the discretional foreign exchange settlement, but also lifted the restriction, that foreign exchange capital under the capital accounts and the corresponding Renminbi capital obtained from foreign exchange settlement should not be used for repaying the inter-enterprise borrowings (including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party.

The Notice of the People's Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or PBOC Notice No. 9, issued by the PBOC on January 12, 2017, provides that within a transition period of one year from January 12, 2017, the foreign invested enterprises may adopt the currently valid foreign debt management mechanism, or Current Foreign Debt Mechanism, or the mechanism as provided in PBOC Notice No. 9, or Notice No. 9 Foreign Debt Mechanism, at their own discretion. PBOC Notice No. 9 provides that enterprises may conduct independent cross-border financing in RMB or foreign currencies as required. According to the PBOC Notice No.9, the outstanding cross-border financing of an enterprise (the outstanding balance drawn, here and below) shall be calculated using a risk-weighted approach, or Risk-Weighted Approach, and shall not exceed the specified upper limit, namely: risk-weighted outstanding cross-border financing ☐ the upper limit of risk-weighted outstanding cross-border financing. Risk-weighted outstanding cross-border financing = ☐ outstanding amount of RMB and foreign currency denominated cross-border financing × maturity risk conversion factor × type risk conversion factor + ☐ outstanding foreign currency denominated cross-border financing × exchange rate risk conversion factor. Maturity risk conversion factor shall be 1 for medium- and long-term cross-border financing with a term of more than one year and 1.5 for short-term cross-border financing with a term of less than one year. Type risk conversion factor shall be 1 for on-balance-sheet financing and 1 for off-balance-sheet financing (contingent liabilities) for the time being. Exchange rate risk conversion factor shall be 0.5. The PBOC Notice No. 9 further provides that the upper limit of risk-weighted outstanding cross-border financing for enterprises shall be 200% of its net assets, or Net Asset Limits. Enterprises shall file with SAFE in its capital item information system after entering into a cross-border financing agreement, but no later than three business days before making a withdrawal.

Based on the foregoing, if we provide funding to our wholly foreign owned subsidiaries through shareholder loans, the balance of such loans shall not exceed the Total Investment and Registered Capital Balance and we will need to register such loans with SAFE or its local branches in the event that the Current Foreign Debt Mechanism applies, or the balance of such loans shall be subject to the Risk-Weighted Approach and the Net Asset Limits and we will need to file the loans with SAFE in its information system in the event that the Notice No. 9 Mechanism applies. Under the PBOC Notice No. 9, after a transition period of one year from January 11, 2017, the PBOC and SAFE will determine the cross-border financing administration mechanism for the foreign-invested enterprises after evaluating the overall implementation of PBOC Notice No. 9. As of the date hereof, neither the PBOC nor SAFE has promulgated and made public any further rules, regulations, notices or circulars in this regard. It is uncertain which mechanism will be adopted by the PBOC and SAFE in the future and what statutory limits will be imposed on us when providing loans to our PRC subsidiaries.

*Regulations on Trademarks*

According to the Trademark Law of the People's Republic of China, promulgated by the SCNPC in August 1982 and amended in 1993, 2001, 2013 and 2019 respectively, the Trademark Office of China National Intellectual Property Administration is responsible for the registration and administration of trademarks and is also responsible for resolving trademark disputes in China. Registered trademarks are valid for ten years from the date the registration is approved. A registrant may apply to renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed registrations are valid for ten years. In April 2014, the State Council issued the revised Implementation Regulation of the Trademark Law, which specified the requirements of applying for trademark registration and review. Meanwhile, we have successfully applied on our own name 10 trademarks.

*Regulations on Patents*

According to the Patent Law of the People's Republic of China promulgated by the SCNPC in 1984 and amended in 1992, 2000, 2008 and 2020 respectively, a patentable invention or a utility model must meet three criteria: novelty, inventiveness and practicability. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application date. We have obtained 47 patents, all of which we have ownership of, including a number of those that were originally under the ownership of certain individuals affiliated with our Company through ownership transfer.

*Regulations on Private Lending*

 

The transfer of funds among companies are subject to the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases, or the Provisions on Private Lending Cases, which was issued by the Supreme People's Court of the People's Republic of China on August 25, 2015 and amended on August 19, 2020 and December 29, 2020, respectively, to regulate the private lending activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases do not apply to the disputes arising from relevant financial services such as loan disbursement by financial institutions and their branches established upon approval by the financial regulatory authorities to engage in lending business.

The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal or criminal purposes; (v) the lending is violations of public orders or good morals; or (vi) the lending is in violations of mandatory provisions of laws or administrative regulations.

In addition, the Provisions on Private Lending Cases set forth that the People's Court shall support the interest rates not exceeding four times of the market interest rate quoted for one-year loan at the time the private lending contracts were entered into.

*Regulations on Taxation*

See "*Item 10. Additional Information - E. Taxation - PRC Taxation.*"

*Regulations on Employment*

Pursuant to the Labor Contract Law of the PRC, which was issued on June 29, 2007, amended on December 28, 2012 and became effective on July 1, 2013, labor contracts shall be concluded in writing if employment relationships are to be or have been established between enterprises or institutions and the employees. Enterprises and institutions are forbidden to force employees to work beyond the time limit and employers shall pay employees for overtime work in accordance with national regulations. In addition, employee wages shall not be lower than local standards on minimum wages and shall be paid to employees in a timely manner.

According to the Labor Law of the PRC which was promulgated on July 5, 1994 and last amended and came into effect on December 29, 2018, enterprises and institutions shall establish and improve their system of workplace safety and sanitation, strictly abide by state rules and standards on workplace safety, educate employees in occupational safety and sanitation in the PRC. Occupational safety and sanitation facilities shall comply with state-fixed standards. Enterprises and institutions shall provide employees with a safe workplace and sanitation conditions which are in compliance with state stipulations and the relevant articles of occupational protection.

*Regulations Related to Labor and Social Welfare*

Pursuant to the Interim Regulations on Levying Social Insurance Premiums promulgated on January 22, 1999 and revised on March 24, 2019, Decisions of the State Council on Modifying the Basic Endowment Insurance System for Enterprise Employees promulgated on December 3, 2005, Decision on Establishment of Basic Medical System for Urban Employee issued by State Council with effect from December 14, 1998, the Regulations on Unemployment Insurance effective from January 22, 1999, Regulations on Work-Related Injury Insurance promulgated on April 27, 2003, amended on December 20, 2010, and became effective on January 1, 2011, and the Interim Measures concerning the Maternity Insurance for Enterprise Employees promulgated on December 14, 1994 with effect from January 1, 1995, employers are required to register with the competent social insurance authorities and provide their employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance and medical insurance.

Pursuant to Opinions of the General Office of the State Council on Comprehensively Advancing Combined Implementation of Maternity Insurance and Basic Medical Insurance for Employees, promulgated by the General Office of State Council on March 6, 2019, maternity insurance fund shall merge into the basic medical care insurance fund for employees so as to unify payment and harmonize consolidation level. The new ratio of employers' contribution to basic medical care insurance for employees is determined based on the aggregate of the ratios of employers' contribution to maternity insurance and basic medical care insurance for employees, and an individual is not required to pay for maternity insurance. Therefore, after March 6, 2019, our Company has no record of maternity insurance fund in the payment details of social security, since it has been merged into the basic medical care insurance fund.

Pursuant to the Social Insurance Law of the PRC, which became effective on July 1, 2011 with last amendment on December 29, 2018, all employees are required to participate in basic pension insurance, basic medical insurance schemes and unemployment insurance, which must be contributed by both the employers and the employees. All employees are required to participate in work-related injury insurance and maternity insurance schemes, which must be contributed by the employers. Employers are required to complete registrations with local social insurance authorities. Moreover, employers must timely make all social insurance contributions. Except for mandatory exceptions such as force majeure, social insurance premiums may not be paid late, reduced or be exempted. Where an employer fails to make social insurance contributions in full and on time, the social insurance contribution collection agencies shall order it to make all or outstanding contributions within a specified period and impose a late payment fee at the rate of 0.05% per day from the date on which the contribution becomes due. If such employer fails to make the overdue contributions within such time limit, the relevant administrative department may impose a fine equivalent to one to three times the overdue amount.

Pursuant to the Emergency Notice on Practicing Principles of the State Council Executive Meeting and Stabilizing Work on Collecting Social Insurance Premiums, promulgated by the Ministry of Human Resources and Social Security on September 21, 2018, local authorities are prohibited from organizing the centralized settlement of historical unpaid social insurance premiums of enterprises.

Pursuant to the Administrative Regulations on the Housing Provident Fund effective from April 3, 1999, amended on March 24, 2002 and March 24, 2019, enterprises are required to register with the competent administrative centers of housing provident fund and open bank accounts for housing provident funds for their employees. Employers are also required to timely pay all housing fund contributions for their employees. Where an employer fails to submit and deposit registration of housing provident fund or fails to go through the formalities of opening housing provident fund accounts for its employees, the housing provident fund management center shall order it to go through the formalities within a prescribed time limit. Failing to do so at the expiration of the time limit will subject the employer to a fine of not less than RMB10,000 and up to RMB50,000. When an employer fails to pay housing provident fund due in full and in time, housing provident fund center is entitled to order it to rectify, failing to do so would result in enforcement exerted by the court.

We have not made adequate contributions to employee benefit plans, as required by applicable PRC laws and regulations. See *"Risk Factors-Risks Related to Our Business and Industry - Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject our PRC operating entities to penalties."*

**C.** **Corporate Structure** 

Below is a chart illustrating our current corporate structure as of the date of this annual report:

![](image_014.jpg)

**D.** **Property, plants and equipment** 

 ****

See "*- B. Business Overview - Properties and Facilities.*"

**Item 4A. Unresolved Staff Comments**

None.

**Item 5. Operating and Financial Review and Prospects**

 

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear 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. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report, particularly in "Risk Factors."*

**<u>Overview</u>**

Huadi International was incorporated in the Cayman Islands, with limited liabilities on September 27, 2018. Huadi International does not have operations, and it conducts business through its subsidiaries in China. Our operating companies, Huadi Steel and Huadi Songyang, were established in 1998 and 2023, respectively, in China. Our main business operation focuses on new product development, manufacturing, marketing, and sales of stainless steel seamless pipes, tubes, and stainless steel bars. Our products are used in infrastructure and non-residential construction applications. We also supply products for use in the thermal and nuclear power plants, automotive, oil and gas, agricultural and industrial equipment, chemical engineering, and electricity markets. We manufacture many of our products to operate under specialized conditions, including in load-bearing, high-pressure, corrosive, and high-temperature environments.

We provide our products with extensive distribution facilities and networks for over twenty (20) provinces in China. We have also offered a broad range of products exported to over twenty (20) countries and regions such as the United States, Singapore, Mexico, Thailand, Australia, Argentina, Taiwan, India, the Philippines, UAE, Canada and Germany.

**<u>Key Factors Affecting Our Results</u>**

Our results are primarily derived from the sale of steel pipe and tube products to various infrastructure and non-residential end markets in China and some other foreign countries. Our business is therefore dependent upon construction activity in these sectors of the economy. The historical performance and outlook for our business is influenced by numerous factors, including the following:

● Fluctuations in Prices of Steel and Other Costs - Fluctuations in steel prices can lead to volatility in the pricing of our products, which influences the buying patterns of our customers. Because the cost of steel coil represents over half of our total cost of sales, higher or lower cost steel affects our gross margins. Increases in the market price of steel typically enable us to raise our selling prices. To a lesser extent, our gross margins and selling prices can also be impacted by the prices of other raw materials, transportation and labor.

● Economic Cycles - In addition to fluctuations in steel prices, demand for the products we manufacture is dependent on general economic cycles and infrastructure and non-residential construction end markets.

● Inventory Levels - Customer and other manufacturer inventory levels of steel pipe and tube products can change significantly from period to period. During periods of rising steel prices, our customer base has demonstrated the desire to build inventory levels. During periods of decreasing steel prices, our customer base typically reduces inventory levels. We use a number of supply chain and inventory management techniques to help us mitigate the effect of these fluctuations.

● General Competition - Several of our products have historically faced significant competition both in China and some foreign markets, and we have successfully competed against our competitors with excellent customer service, high quality products and rapid fulfillment of customer orders. However, our business could be adversely affected by competitors who reduce prices, improve on-time delivery and take other competitive actions, which may reduce our customers' purchases of products from us.

● Fluctuations in Foreign Currency Exchange - We sell a significant portion of our products in countries outside of China (approximately 14.82% and 19.11% based on 2025 and 2024 revenues respectively). Historically, we have relied on lower wages and favorable exchange rates in China to make our products sold abroad competitive in price. If in any circumstances, China's currency appreciates against the U.S. dollar, our advantage in price competitiveness might be impacted. To the extent the Chinese RMB start to appreciate, our products could become more expensive and, as a result, less attractive to potential customers in other countries.

**A.** **Operating Results** 

***For the years ended September 30, 2025, 2024 and 2023***

The following table presents an overview of our results of operations for the years ended September 30, 2025, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Sales | $62487643 | $73635012 | $83113259 |
| Production service revenue | 407968 | 635417 | 1219041 |
| Cost of sales | (56102806) | (66954594) | (71976696) |
| **Gross profit** | **6792805** | **7315835** | **12355604** |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative | 7775890 | 6783449 | 7338320 |
| &nbsp;&nbsp;&nbsp;Research and development | 2166881 | 2239220 | 2550777 |
| &nbsp;&nbsp;&nbsp;Foreign currency transaction gains | (265960) | (98353) | (644118) |
| **Total operating expenses** | **9676811** | **8924316** | **9244979** |
| **Operating (loss) income** | **(2884006)** | **(1608481)** | **3110625** |
| Other income (expenses): |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest income (expenses), net | 220621 | 206340 | (296265) |
| &nbsp;&nbsp;&nbsp;Other income (expenses), net | 767777 | 1245926 | 701751 |
| **Total other income (expenses), net** | **988398** | **1452266** | **405486** |
| **(Loss) Income before income taxes** | **(1895608)** | **(156215)** | **3516111** |
| Income tax benefits (expenses) | 494807 | 298610 | (220854) |
| **Net (loss) income** | **(1400801)** | **142395** | **3295257** |
| Net (loss) income attributable to non-controlling interests | (4874) | 4973 | 37535 |
| Net (loss) income attributable to Huadi International Group Co., Ltd. | $(1395927) | $137422 | $3257722 |
| Net (loss) income | $**(1400801)** | $**142395** | $**3295257** |
| Other comprehensive (loss) income: |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | (1133731) | 2500007 | (1314988) |
| **Total comprehensive (loss) income** | **(2534532)** | **2642402** | **1980269** |

---

***Revenues***

For the year ended September 30, 2025, revenues decreased by approximately $11.37 million or 15.32%, to approximately $62.90 million from approximately $74.27 million for the year ended September 30, 2024. The decrease in revenues was primarily driven by the following factors:

1) Due to the overall economic downturn in China, demand of construction materials decreased correspondingly.

2) The decrease was partially offset by the increase of weighted average selling price ("ASP") during the fiscal year 2025 due to the rising price of raw materials.

The following table presents revenues by geographic areas for the years ended September 30, 2025.

---

| | | |
|:---|:---|:---|
|  | **September 30, 2025** | **September 30, 2025** |
|  | **Sales Amount**<br> **(In USD)** | **As % of**<br> **Sales** |
| **Top 5 Geographic Areas:** | | |
| China | $53572505 | 85.18% |
| USA | 6267793 | 9.97% |
| India | 1407889 | 2.24% |
| Singapore | 400632 | 0.64% |
| Australia | 370226 | 0.59% |
| Other foreign countries | 876566 | 1.38% |

---

For the year ended September 30, 2024, revenues decreased by approximately $10.06 million or 11.93%, to approximately $74.27 million from approximately $84.33 million for the year ended September 30, 2023. The decrease in revenues was primarily driven by the following factors:

1) Due to the overall economic downturn in China, demand of construction materials decreased correspondingly.

2) As a result of decreased market demand, we reduced the weighted average selling price ("ASP") during the fiscal year 2024 to remain competitive.

The following table presents revenues by geographic areas for the years ended September 30, 2024.

---

| | | |
|:---|:---|:---|
|  | **September 30, 2024** | **September 30, 2024** |
|  | **Sales Amount**<br> **(In USD)** | **As % of**<br> **Sales** |
| **Top 5 Geographic Areas:** | | |
| China | $60079920 | 80.89% |
| USA | 7814677 | 10.52% |
| Singapore | 3767180 | 5.07% |
| The United Arab Emirates | 776416 | 1.05% |
| India | 748168 | 1.01% |
| Other foreign countries | 1084068 | 1.46% |

---

For the year ended September 30, 2023, revenues increased by approximately $7.96 million or 10.43%, to approximately $84.33 million from approximately $76.37 million for the year ended September 30, 2022. The increase in revenues was primarily driven by the following factors:

1) Due to the end of control measures on COVID-19 since 2022 December, construction market recovered and we delivered several orders delayed by mentioned control measures.

2) We were extending business in domestic market in China. Our domestic sales increased over 13.83% compared to the last fiscal year. Our international sales revenue during fiscal year 2023 amounted to approximately $10.59 million, a decrease of 9.62% compared to last fiscal year.

The following table presents revenues by geographic areas for the years ended September 30, 2023.

---

| | | |
|:---|:---|:---|
|  | **September 30, 2023** | **September 30, 2023** |
|  | **Sales Amount**<br> **(In USD)** | **As % of**<br> **Sales** |
| **Top 5 Geographic Areas:** | | |
| China | $73744662 | 87.45% |
| USA | 7146478 | 8.47% |
| India | 1596243 | 1.89% |
| United Mexican States | 577416 | 0.68% |
| Australia | 385111 | 0.46% |
| Other foreign countries | 882390 | 1.05% |

---

***Gross profit***

Our gross profit decreased by approximately $0.53 million, or 7.15%, to approximately $6.79 million for the year ended September 30, 2025 from approximately $7.32 million for the year ended September 30, 2024. Gross profit margin was 10.80% for the year ended September 30, 2025, as compared to 9.85% for the year ended September 30, 2024. The slight increase of gross profit margin was mainly due to increased weighted average selling price ("ASP") during the fiscal year 2025 which was driven by rising price of raw materials.

Our gross profit decreased by approximately $5.04 million, or 40.79%, to approximately $7.32 million for the year ended September 30, 2024 from approximately $12.36 million for the year ended September 30, 2023. Gross profit margin was 9.85% for the year ended September 30, 2024, as compared to 14.65% for the year ended September 30, 2023. The increase of gross profit was consistent with the decrease of revenues for fiscal 2024 as compared to fiscal 2023. The decrease of gross profit margin was mainly due to the decreased weighted ASP as discussed above.

Our gross profit increased by approximately $1.22 million, or 10.96%, to approximately $12.36 million for the year ended September 30, 2023 from approximately $11.14 million for the year ended September 30, 2022. Gross profit margin was 14.65% for the year ended September 30, 2023, as compared to 14.91% for the year ended September 30, 2022. The slight decrease of gross profit margin was mainly due to increased raw material prices which drove up the cost of sales, while weighted ASP remained stable as we were extending domestic markets.

***Selling, general and administrative ("SGA") expenses***

Selling, general and administrative expenses increased by approximately $1.00 million, or 14.63% to approximately $7.78 million for the year ended September 30, 2025 as compared to approximately $6.78 million for the year ended September 30, 2024. The decrease of SGA expenses was mainly due to impairment loss on long-term investment in Wenzhou Longlian Development Co., Ltd. The increase was partially offset by decreased freight expenses for our international and domestic sales and decreased business entertainment expenses which were in consistent with the decrease of revenue.

Selling, general and administrative expenses decreased by approximately $0.56 million, or 7.56% to approximately $6.78 million for the year ended September 30, 2024 as compared to approximately $7.34 million for the year ended September 30, 2023. The decrease of SGA expenses was mainly due to the i) reversal of expected credit losses amounted to approximately $42,000, as compared to $0.43 million bad expenses provided during the year ended September 30, 2023; ii) decreased freight and agency expenses due to the decline of sales.

Selling, general and administrative expenses increased by approximately $0.89 million, or 13.73% to approximately $7.34 million for the year ended September 30, 2023 as compared to approximately $6.45 million for the year ended September 30, 2022. The increase of SGA expenses was mainly due to the following: i) $0.43 million bad debt expense provided during the year ended September 30, 2023, while $0.56 million bad debt recovery during the year ended September 30, 2022; and ii) increased freight and agency expenses related to the domestic market development.

***Research and development ("R&D") expenses***

Research and development expenses decreased by approximately $72,000, or 3.23% to approximately $2.17 million for the year ended September 30, 2025 as compared to approximately $2.24 million for the year ended September 30, 2024. R&D expenses as a percentage of revenue stayed relatively stable at approximately 3.45% in the year ended September 30, 2025 as compared to the year ended September 30, 2024. Management is committed to expanding our research and development activities continually for more orders.

Research and development expenses decreased by approximately $0.31 million, or 12.21% to approximately $2.24 million for the year ended September 30, 2024 as compared to approximately $2.55 million for the year ended September 30, 2023. R&D expenses as a percentage of revenue stayed consistent at approximately 3.02% in the year ended September 30, 2024 as compared to the year ended September 30, 2023. Management is committed to expanding our research and development activities continually for more orders.

Research and development expenses increased by approximately $0.22 million, or 9.43% to approximately $2.55 million for the year ended September 30, 2023 as compared to approximately $2.33 million for the year ended September 30, 2022. Management is committed to expanding our research and development activities continually for more orders.

***Interest income (expense), net***

Our interest income, net increased by approximately $14,000, or 6.92% to approximately an interest net income of $0.22 million for the year ended September 30, 2025, from approximately an interest net income of $0.20 million for the year ended September 30, 2024. The increase of interest net income was mainly due to the rise of interest expense as increased loans the Company borrowed from the banks.

Our interest income, net increased by approximately $0.50 million, or 169.65% to approximately an interest net income of $0.20 million for the year ended September 30, 2024, from approximately an interest net expense of $0.30 million for the year ended September 30, 2023. The increase of interest net income was mainly due to the decline of interest expense as decreased bank loan the Company borrowed from the banks.

Our interest expense, net decreased by approximately $1.33 million, or 81.82% to approximately $0.30 million for the year ended September 30, 2023, from approximately $1.63 million for the year ended September 30, 2022. The decrease of interest expense was mainly due to decreased bank loan the Company borrowed from the banks.

***Other income (expenses), net***

We had net other income of approximately $0.77 million, which mainly attributable to i) dividend income received from invested company of approximately $0.33 million; ii) government grants of approximately $0.35 million; and iii) rental income of approximately $0.11 million.

We had net other income of approximately $1.25 million, which mainly attributable to i) dividend income received from invested company of approximately $0.28 million; ii) government grants of approximately $0.90 million; and iii) rental income of approximately $0.13 million.

 ****

We had net other income of approximately $0.70 million, which mainly attributable to dividend income received from invested company, government grant received and rental income during fiscal year 2023.

***Net (loss) income***

As a result of the factors described above, our net loss for the fiscal year ended September 30, 2025 was approximately $1.40 million compared to net income of $0.14 million for the fiscal year ended September 30, 2024, a decrease in profit of approximately $1.54 million, or approximately 1083.74%.

As a result of the factors described above, our net income for the fiscal year ended September 30, 2024 was approximately $0.14 million compared to net profit of $3.30 million for the fiscal year ended September 30, 2023, a decrease in profit of approximately $3.16 million, or approximately 95.68%.

 ****

As a result of the factors described above, our net income for the fiscal year ended September 30, 2023 was approximately $3.30 million compared to net profit of $1.95 million for the fiscal year ended September 30, 2022, a increase in profit of approximately $1.35 million, or approximately 69.16%.

**B.** **Liquidity and Capital Resources** 

 ****

As of September 30, 2025, 2024 and 2023, we had cash and cash equivalents of $6,483,489, $18,118,456 and $20,192,460, respectively. We believe that our current cash, cash to be generated from our operations and access to capital market will be sufficient to meet our working capital needs for at least the next twelve months. However, we plan to expand our business to implement our growth strategies in the water supply market and strengthen our position in the marketplace. To do so, we may need more capital through equity financing and bank borrowing to increase our production and meet market demands.

Substantially all of our operations are conducted in China and all of our revenues, expense, cash and cash equivalents are denominated in Renminbi (RMB). RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into U.S. Dollars.

With respect to retained earnings accrued after such date, our board of directors may declare dividends after taking into account our operations, earnings, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration and payment, as well as the amount, of dividends will be subject to our By-Laws, charter and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.

We have limited financial obligations dominated in US dollars, thus the foreign currency restrictions and regulations in the PRC on the dividends distribution will not have a material impact on the liquidity, financial condition and results of operations of the Company.

 **

***Material cash requirements***

 **

Our material cash requirements as of September 30, 2025 and any subsequent period primarily include our capital expenditures and contractual obligations.

***<u>Capital expenditures</u>***

We incurred capital expenditures of RMB 106,213,954 (US$14,726,371), RMB 22,102,018 (US$3,067,893), and RMB 25,378,199 (US$3,598,060) in the 2025, 2024 and 2023 fiscal years, respectively, primarily in connection with the purchase of machinery and equipment and CIP. We intend to fund our future capital expenditures with our existing cash balance, proceeds from our offering, and other financing alternatives. We will continue to incur capital expenditures to support the growth of our business.

From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of components and raw materials to be used in the manufacture of our products. However, due to contractual terms and opportunities to renegotiate pricing, we generally do not have binding and enforceable purchase orders under such contracts beyond the short-term.

***<u>Contractual obligations</u>***

As of September 30, 2025, we had outstanding borrowings of an aggregate principal of $12,190,890, of which $4,165,886 is scheduled to become due in the succeeding 12 months. As of September 30, 2024, we had outstanding borrowings of an aggregate principal of $1,249,765, all of them is scheduled to become due in the succeeding 12 months.

The following table sets forth our contractual obligations as of September 30, 2025:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payment Due by Period** | **Payment Due by Period** | **Payment Due by Period** | **Payment Due by Period** | **Payment Due by Period** |
|  | **Total** | **Less than**<br> **1 year** | **1 - 3 years** | **3 - 5 years** | **More than**<br> **5 years** |
| Undue factored notes receivable with recourse | $4122341 | $4122341 | $- | $- | $- |
| Long-term borrowings - Banks | 8068549 | 43545 | 4417756 | 1724961 | 1882287 |
| **Total** | $12190890 | $4165886 | $4417756 | $1724961 | $1882287 |

---

The following table sets forth our contractual obligations as of September 30, 2024:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Payment Due by Period** | **Payment Due by Period** | **Payment Due by Period** | **Payment Due by Period** | **Payment Due by Period** |
|  | **Total** | **Less than**<br> **1 year** | **1 - 3 years** | **3 - 5 years** | **More than**<br> **5 years** |
| Undue factored notes receivable with recourse | $1249765 | $1249765 | $- | $- | $- |
| **Total** | $1249765 | $1249765 | $- | $- | $- |

---

***Sources and Conditions of Liquidity***

Our sources to fund our material cash requirements are predominantly from sales of steel piping products and production revenue, proceeds from bank and proceeds from equity financing, when applicable.

***<u>Cash Flow Summary</u>***

---

| | | | |
|:---|:---|:---|:---|
|  | **Years ended September 30,** | **Years ended September 30,** | **Years ended September 30,** |
|  | **2025** | **2024** | **2023** |
| Net cash (used in) provided by operating activities | $(8480674) | $12993841 | $(2447726) |
| Net cash used in investing activities | (14972639) | (3067893) | (3594045) |
| Net cash provided by (used in) financing activities | 10768333 | (8814852) | 11582041 |
| Effect of exchange rate changes on cash | (218720) | 456156 | 878178 |
| Net (decrease) increase in cash | $(12903700) | $1567252 | $6418448 |
| Cash and cash equivalents and restricted cash at the beginning of year | 22528945 | 20961693 | 14543245 |
| Cash and cash equivalents and restricted cash at the end of year | $9625245 | $22528945 | $20961693 |

---

*<u>Operating Activities:</u>*

Net cash used in operating activities for the year ended September 30, 2025 was approximately $8.48 million, which was primarily attributable to a net loss approximately $1.40 million, adjusted for non-cash items for approximately $1.44 million and adjustments for changes in operating assets and liabilities approximately $8.52 million. The adjustments for changes in operating assets and liabilities mainly included:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) increase in accounts receivable
 of approximately $6.44 million, which was in consistent with the increase in revenue during the second half year of 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) increase in inventories
 of approximately $1.09 million, as more finished goods were prepared for subsequent sales order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) decrease in advance to
 suppliers of approximately $2.04 million and decrease in notes payable of approximately $2.96 million, which were mainly due to the
 payment to suppliers.

Net cash provided by operating activities for the year ended September 30, 2024 was approximately $12.99 million, which was primarily attributable to a net profit approximately $0.14 million, adjusted for non-cash items for approximately $0.45 million and adjustments for changes in working capital approximately $12.40 million. The adjustments for changes in working capital mainly included:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) decrease in accounts receivable
 of approximately $6.13 million, which was in consistent with the decrease in revenue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) decrease in inventories
 of approximately $4.34 million, as less raw materials were purchased due to the decreased market demand;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) increase in notes payable
 of approximately $11.34 million, as two major suppliers granted a credit term ranging from 3 to 6 months to the Company and permitted
 notes payment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) increase in deferred government
 grants of approximately $1.11 million, which was mainly to support the factory construction in Songyang;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) decrease in accounts payable
 of approximately $5.38 million and increase in advance to suppliers of approximately $1.49 million, which were mainly due to the
 payment to suppliers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) decrease in advance from
 customers of approximately $1.94 million.

Net cash used in operating activities for the year ended September 30, 2023 was approximately $2.45 million, which was primarily attributable to a net profit approximately $3.30 million, adjusted for non-cash items for approximately $0.49 million and adjustments for changes in working capital approximately $6.24 million. The adjustments for changes in working capital mainly included:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) increase in accounts receivable
 of approximately $3.84 million - our accounts receivable increased significantly due to increased credit sales which was subsequently
 collected. For the year ended September 30, 2023, we had an overall sales outstanding of 105 days compared with 108 days for the
 fiscal year 2022;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) increase in notes receivable
 of approximately $6.50 million and increase in notes payable of approximately $1.14 million – notes receivable consists of
 bank acceptance notes and commercial acceptance notes we received from our customers while notes payable consists of bank acceptance
 note we issue to our supplier for procurement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) decrease in advances to
 suppliers of approximately $1.10 million – our advances to suppliers decreased significantly mainly attributable to the delivery
 of orders from our suppliers. The supply shortage leads to long lead time of raw material procurement. To reduce the lead time, we
 were required to make advance payment for order we placed from time to time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) increase in inventory of
 approximately $2.55 million – our inventory increased due to increased inventory stock level which aims to reduce customer
 lead time;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Increase in accounts payable
 of approximately $3.98 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Increase in tax payable
 of approximately $1.00 million – tax payable increased due to increased net income;

*<u>Investing Activities:</u>*

Net cash used in investing activities was approximately $14.97 million for the year ended September 30, 2025. It was primarily attributable to i) purchase of machinery of approximately $1.46 million; ii) payments and prepayments for acquisition of CIP of approximately $13.27 million, the CIP mainly represented a new factory in Songyang; and iii) placement of short-term and long-term time deposits of approximately $0.26 million.

Net cash used in investing activities was approximately $3.07 million for the year ended September 30, 2024. It was primarily attributable to i) purchase of machinery of approximately $0.31 million; and ii) acquisition of CIP of approximately $2.76 million, the CIP mainly represented a new factory in Songyang.

Net cash used in investing activities was approximately $3.59 million for the year ended September 30, 2023. It was primarily attributable to the addition of land use right for subsequent operation needs.

*<u>Financing Activities:</u>*

Net cash provided by financing activities was approximately $10.77 million for the year ended September 30, 2025. It was primarily attributable to i) proceeds from short-term borrowings of approximately $4.07 million; and ii) proceeds from long-term borrowings of approximately $10.19 million. The net cash used in financing activities was partially offset by i) repayment on short-term borrowings of approximately $1.22 million; and ii) repayment on long-term borrowings of approximately $2.22 million.

Net cash used in financing activities was approximately $8.81 million for the year ended September 30, 2024. It was primarily attributable to i) proceeds from short-term borrowings of approximately $1.22 million; and ii) proceeds from long-term borrowings of approximately $2.76 million. The net cash used in financing activities was partially offset by i) repayment on short-term borrowings of approximately $4.50 million; and ii) repayment on long-term borrowings of approximately $8.27 million.

Net cash provided by financing activities was approximately $11.58 million for the year ended September 30, 2023. It was primarily attributable to the following: i) $23.01 million net proceeds from its stock offering ("the Offering"). On November 9, 2022, the Company closed the Offering for the sale of 1,000,000 ordinary shares at price of $25.00 per share. The Company received gross proceeds from the sale of the Shares of approximately $25 million before deducting placement agent fees and other offering expenses. ii) the net repayment of bank loans with the approximate amount of $11.14 million.

***Commitments and Contingencies***

***<u>Commitments</u>***

*<u>Capital commitments</u>*

The Company's capital commitments primarily relate to capital expenditures contracted for construction of new factories. Total capital commitments contracted but not provided for amounted to $9,422,194 and $6,238,097 as of September 30, 2025 and 2024, respectively.

***<u>Contingencies</u>***

From time to time, the Company is involved in various legal proceedings, claims and other disputes arising from commercial operations, employees, and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity. As of September 30, 2025 and 2024, the Company had no material pending legal proceedings outstanding.

***Off-Balance Sheet Arrangements***

We have restricted cash held in designated bank accounts as secured deposits for issuance of letter of credit and bank guarantee to assure product quality and/or contract performance as requested by some of our customers. As of September 30, 2025 and 2024, restricted cash was $3,141,756 and $4,410,489, respectively.

Save as the restricted cash, we have no other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

**C.** **Trend Information** 

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition or results of operations.

**D.** **Critical Accounting Estimates** 

Our significant accounting policies and their effect on our financial condition and results of operations are fully disclosed in our consolidated financial statements included elsewhere in this From 20-F. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information. The estimates include, but are not limited to: allowances for expected credit losses, inventory valuation, useful lives of property, plant and equipment, and land use rights, impairment in equity investment, and income taxes related to realization of deferred tax assets and uncertain tax position.

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that i) involve a significant level of estimation uncertainty and ii) have had or are reasonably likely to have a material impact on the financial condition or results of operations. Despite the fact that the management determines there are no critical accounting estimates, the most significant estimates relate to allowance for doubtful accounts, for which we are required to estimate the collectability of accounts receivable. The estimates were based on a number of factors including the customer's historical payment history, its current creditworthiness, and other factors that may affect our ability to collect from customers.

***Allowance for credit losses***

In 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASC 326"), which replaced the "incurred loss" impairment methodology with an approach based on "expected losses" to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this guidance on October 1, 2023 using a modified retrospective approach with a cumulative effect recorded as increase of retained earnings and non-controlling interests with amount of $942,227, net of tax.

ASC 326 requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. Under this guidance, the Company has exposure to credit losses for financial assets including accounts receivable, notes receivable, other receivable and other noncurrent assets. The Company considered various factors, including nature, historical collection experience, the age of the above-mentioned assets' balance, credit quality and specific risk characteristics of its customers, current economic conditions, forecasts of future economic conditions, reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. The Company has adopted loss rate method which is a combination of historical rate method and adjustment rate method, to estimate the credit loss.

Financial assets are presented net of the allowance for credit losses in the consolidated balance sheets. The measurement of the allowance for credit losses is recognized through current expected credit loss expense. Current expected credit loss expense is included as a component of general and administrative expenses in the consolidated statements of operations and comprehensive income. Write-offs are recorded in the period in which the asset is deemed to be uncollectible.

The Company believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates. To the extent that there are material differences between these estimates and the actual results, future financial statements will be affected.

**E.** **Safe Harbor** 

See "*SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS*."

**Item 6. Directors, Senior Management and Employees**

**A.** **Directors and Senior Management** 

The following table provides information regarding our executive officers and directors as of the date of this annual report:

---

| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position(s)** |
| Di Wang | 78 | Chairman of the Board and Director |
| Huisen Wang | 66 | Chief Executive Officer |
| Jianping Xiang | 47 | Chief Financial Officer |
| Jueqin Wang | 52 | Director |
| Songlin Li<sup>(1)(2)(3)</sup> | 55 | Independent Director, Chair of the Compensation Committee |
| Jiancong Huang<sup>(1)(2)(3)</sup> | 60 | Independent Director, Chair of the Nomination Committee |
| He "Henry" Huang<sup>(1)(2)(3)</sup> | 52 | Independent Director, Chair of the Audit Committee |

---

(1) Member of the Audit Committee

(2) Member of the Compensation
 Committee

(3) Member of the Nomination
 Committee

The business address of each of the officers and directors is No. 1688 Tianzhong Street, Longwan District, Wenzhou, Zhejiang Province. People's Republic of China.

***Di Wang*, *Chairman of the Board and Director***

Mr. Wang has been serving as the Chairman of the Board of Huadi International since inception. Mr. Wang is also the founder and Chairman of the Board of Huadi Steel. Mr. Wang has extensive experience in manufacturing and managing manufacturing plants. He was the senior management of three manufacturing plants before founding Huadi Steel in 1998. He is the leader and member of many industry associations, including the vice president of the Stainless Steel Branch of China Special Steel Association, the president of Wenzhou Stainless Steel Industry Association, the chair of the Steel Pipe Committee of Zhejiang Metallurgical Industry Association, the representative of the tenth Party Congress of Wenzhou City, member of the second and third Chinese People's Political Consultative Conference Standing Committee of Longwan District, Zhejiang Province.

***Huisen Wang, Chief Executive Officer***

Mr. Wang has been a Director and the Chief Executive Officer of Huadi International since inception. He is also a director and the General Manager of Huadi Steel since 1998. Prior to that, Mr. Wang was a senior management member at an electric machinery factory. Mr. Wang is a licensed engineer and certified senior manager in China.

***Jianping Xiang, Chief Financial Officer***

Mr. Jianping Xiang has about two decades of experience serving as the Chief Financial Officer of Huadi Steel Group Limited, a People's Republic of China's (the "PRC") subsidiary wholly owned by the Company since January 1, 2003. He is responsible for supervising and managing the accounting department of Huadi Steel Group Limited. He worked as the Chief Executive Officer of Wenzhou Jianeng Printing Equipment Co., Ltd. from January 2014 to December 2016, during which he was responsible for market expansion, decision making and audit reports review. He was a Managing Accountant of Huadi Steel Group Limited from January 2002 to December 2002, during which the was responsible for budget controlling and contract management. He was an Assisting Accountant of Huadi Steel Group Limited from September 1999 to December 2001, during which he was responsible for the preparation of audit reports and compliance with auditing rules according to PRC laws. Mr. Xiang holds a certificate for Intermediate Accountant in PRC since 1999. Mr. Xiang graduated with a master's degree in Business Administration in Finance from Universidad Catolica San Antonio in 2022 and a bachelor's degree in Accounting from Jiangxi University of Finance and Economics in 1998.

***Jueqin Wang, Director***

Mr. Wang has been a Director of Huadi International since inception. He is also the President of Huadi Steel, where he started as a sales manager in 1998. He has extensive experience in the steel manufacturing industry. Mr. Wang has also been the Chairman of a leather company in Wenzhou, PRC since 1999. Mr. Wang is a licensed engineer in China.

***He "Henry" Huang, Independent Director***

Professor Huang is an Associate Professor of Accounting at Yeshiva University's Sy Syms School of Business. Professor Huang's current teaching interests are managerial accounting and contemporary topics in accounting, such as International Financial Reporting Standards (IFRS) and accounting research based on FASB codification and eIFRS. Professor Huang's research focuses on the impact of external monitoring mechanisms (e.g., securities litigation, shareholder rights, regulations, and hedge fund activism) on firms' accounting practice, valuation, and internal governance. Professor Huang's practical expertise covers international investment and trade, accounting information system, accounting-related securities litigation, and entrepreneurial planning. His research has been frequently cited by both the academic and professional communities and has won research grants from the Research Grants Council of Hong Kong. Before joining Yeshiva University, Professor Huang taught accounting courses at University of Houston, Butler University in Indianapolis, and Prairie View A&M University (a Member of the Texas A&M University System) in Houston. Professor Huang received a Ph.D. in accounting from Bauer College of Business, University of Houston. He received a master's degree in science from Bauer College of Business, University of Houston. Professor Huang has also earned law degrees from both U.S. and China. We believe Professor He's expertise in accounting can help us improve our accounting reporting. In addition, the Board believes that Mr. Huang qualifies as a "financial expert" as defined by the SEC rules and therefore appointed him as the chairman of the Audit Committee.

***Jiancong Huang, Independent Director***

Mr. Huang is the Chief Executive Officer and Chairman of the Board of ZK International Group Co., Ltd. (Nasdaq: ZKIN). Mr. Huang has extensive experience in the manufacturing industry and held a President position in two companies before ZK International Group Co., Ltd. was founded. He earned his EMBA from Renmin University of China and Engineering Professional Title, and was awarded as Top10 Wenzhou Entrepreneurship and appointed to be the Vice Director of China Construction and Building Standard and Safety Committee. He is also a member of National Pipe Standard Committee and National Building Water Supply and Waste Standard Committee. Mr. Huang is an experienced corporate strategist and visionary with decades of experience in corporate management and innovation. He has a systematic ideology on the future of stainless steel pipe in the water and gas supply area. We believe his expertise in the industry and public company experience can help us enhance our corporate governance standard.

***Songlin Li*, *Independent Director***

Mr. Li is the Chairman of Wenzhou Stainless Steel Industry Association and he has been working as the Chairman of Zhejiang Fengye Group Co., Ltd. since 2002. He is a Stainless Steel Engineer with over twenty years of working experience in the Stainless Steel Industry. We believe his industry expertise can help contribute to the growth of our company.

**Family Relationship**

Our Chairman Di Wang and our Director Jueqin Wang are father and son. There is no other family relationship among our directors or executive officers.

**B.** **Compensation** 

The following table presents summary information regarding the total compensation awarded to, earned by, or paid to each of the named executive officers and directors for services rendered to us for the fiscal year ended September 30, 2025.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Salary**<br> **($)** | **Bonus**<br> **($)** | **Stock**<br> **Awards**<br> **($)** | **All Other** <br> **Compensation**<br> **($)** | **Total**<br> **($)** |
| Jianping Xiang, Chief Financial Officer | 12902 | 16638 | 29400 | – | 58940 |
| Huisen Wang, Chief Executive Officer | 12783 | 11092 |  | – | 23875 |
| Di Wang, Chairman of the Board | 12783 | 11092 |  | – | 23875 |
| Jueqin Wang, Director | 12783 |  |  | – | 12783 |
| He "Henry" Huang, Independent Director | 20000 |  |  | – | 20000 |
| Jiancong Huang, Independent Director |  |  |  | – |  |
| Songlin Li, Independent Director |  |  |  | – |  |

---

**Clawback Policy**

On December 1, 2023, the Board adopted an Executive Compensation Recovery Policy (the "Clawback Policy") providing for the recovery of certain incentive-based compensation from current and former executive officers of the Company in the event the Company is required to restate any of its financial statements filed with the SEC under the Exchange Act in order to correct an error that is material to the previously-issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Adoption of the Clawback Policy was mandated by new Nasdaq listing standards introduced pursuant to Exchange Act Rule 10D-1. The Clawback Policy is in addition to Section 304 of the Sarbanes-Oxley Act of 2002 which permits the SEC to order the disgorgement of bonuses and incentive-based compensation earned by a registrant issuer's chief executive officer and chief financial officer in the year following the filing of any financial statement that the issuer is required to restate because of misconduct, and the reimbursement of those funds to the issuer. A copy of the Clawback Policy has been filed herewith as Exhibit 97.1.

**C.** **Board Practices** 

**Employment Agreements**

Our employment agreements with our officers generally provide for employment for a specific term (typically approximately three years at a time) and pay annual salary, health insurance, pension insurance, and paid vacation and family leave time. The agreement may be terminated by either party as permitted by law. In the event of any termination of the agreement by our company that results in violation of applicable labor laws, we shall pay the employee all damages incurred from such termination. In the event of a breach or termination causing loss to our company by the employee, the employee shall pay all economic loss we had incurred as a result.

**Election of Officers**

Our executive officers are appointed by, and serve at the discretion of, our board of directors, including our Chief Executive Officer Huisen Wang and Chief Financial Officer Jianping Xiang. There is no family relationship among any of our directors or executive officers.

**Board of Directors**

Our board of directors currently consists of five (5) directors, a majority of whom are independent as such term is defined by the Nasdaq Capital Market.

A director may vote in respect of any contract or transaction in which he is interested, provided, however that the nature of the interest of any director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee thereof of the nature of a director's interest shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any particular transaction. A director may be counted for a quorum upon a motion in respect of any contract or arrangement which he shall make with our company, or in which he is so interested and may vote on such motion.

**Corporate Governance**

The business and affairs of the company are managed under the direction of our board. We have conducted board meetings regularly since inception. Each of our directors has attended all meetings either in person, via telephone conference, or through written consent for special meetings. In addition to the contact information in this annual report, the board has adopted procedures for communication with the officers and directors on December 8, 2022. Shareholders will be given specific information on how he/she can direct communications to the officers and directors of the Company at our annual shareholders' meetings. All communications from stockholders are relayed to the members of the board.

**Board Committees**

Our board of directors has established an audit committee, a compensation committee and a nomination committee and adopted a charter for each of the three committees. Each committee's members and functions are described below.

● **Audit Committee:** He "Henry" Huang (Chair), Songlin Li, Jiancong Huang

● **Compensation Committee:** Songlin Li (Chair), Jiancong Huang, He "Henry" Huang

● **Nomination Committee:** Jiancong Huang (Chair), Songlin Li, He "Henry" Huang

The Board has adopted an executive compensation recovery policy that recovers erroneously awarded incentive-based compensation if a company needs to prepare an accounting restatement due to the company's noncompliance with any financial reporting requirement.

The Board has adopted an insider trading policy to promote compliance with applicable securities laws and regulations, including those that prohibit insider trading.

The Board has adopted a written disclosure policy, which applies to all directors, officers and employees of the Company and its wholly owned subsidiaries, to ensure that communications to the investing public about the Company are timely, factual and accurate and are broadly disseminated in accordance with all applicable legal and regulatory requirements.

In addition, the Board adopted a whistleblower procedure that provides the Audit Committee the responsibility to ensure proper procedure of the receipt, retention, and treatment of complaints about the Company's accounting, internal accounting controls, or auditing matters. The Audit Committee must also provide for confidential, anonymous submission by the Company's employees of concerns about questionable accounting or auditing matters.

The Board also adopted a corporate governance policy for its website content, as well as procedures for shareholder's communication with Directors. With all of the above referenced charters and procedures in place, the Company is committed to corporate governance practices that are compliance with applicable laws, regulations and exchange requirements.

The functions of each committee the Company formed and adopted charters for as of the date of this annual report are described below:

**<u>Audit Committee</u>**

The Audit Committee shall make such examinations as are necessary to monitor the corporate financial reporting and external audits of the Company and its subsidiaries; to provide to the Board the results of its examinations and recommendations derived therefrom; to outline to the Board improvements made, or to be made, in internal accounting controls; to nominate an independent auditor; and to provide to the Board such additional information and materials as it may deem necessary to make the Board aware of significant financial matters requiring Board attention.

**<u>Compensation Committee</u>**

The purpose of the Compensation Committee is to review and make recommendations to the Board regarding all forms of compensation to be provided to the executive officers and directors of the Company, including stock compensation and loans, and all bonus and stock compensation to all employees.

**<u>Nomination Committee</u>**

The purpose of the Nomination Committee shall be to review and make recommendations to the Board regarding matters concerning corporate governance; review the composition of and evaluate the performance of the Board; recommend persons for election to the Board and evaluate director compensation; review the composition of committees of the Board and recommend persons to be members of such committees; review and maintain compliance of committee membership with applicable regulatory requirements; and review conflicts of interest of members of the Board and corporate officers.

**Duties of Directors**

Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. We have the right to seek damages if a duty owed by our directors is breached.

The functions and powers of our board of directors include, among others:

● appointing officers and determining the term of office of the officers;

● authorizing the payment of donations to religious, charitable, public or other bodies, clubs, funds or associations as deemed advisable;

● exercising the borrowing powers of the company and mortgaging the property of the company;

● executing checks, promissory notes and other negotiable instruments on behalf of the company; and

● maintaining or registering a register of mortgages, charges or other encumbrances of the company.

**Interested Transactions**

A director may vote, attend a board meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is interested. A director must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction we have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction.

**Remuneration and Borrowing**

The directors may receive such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or prepaid all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our board of directors or committees of our board of directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.

**Qualification**

There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

**Terms of Directors and Officers**

All directors hold office until the next annual meeting of shareholders at which they would be recommended for re-election by the shareholders and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the board of directors. Our directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Each of our directors will hold office until the expiration of his or her term as provided in the written agreement with our company, if any, and until his or her successor has been elected or appointed. A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his office by notice in writing to the company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors resolve that his office be vacated. Our officers are elected by and serve at the discretion of the board of directors.

**Limitation of Director and Officer Liability**

Under Cayman Islands law, each of our directors and officers, in performing his or her functions, is required to act honestly and in good faith with a view to our best interests and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Cayman Islands law does not limit the extent to which a company's memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any indemnification provision may be held by the Cayman Islands courts to be contrary to public policy (for example, a provision for indemnification against civil fraud or the consequences of committing a crime).

Under our memorandum and articles of association, we may indemnify our directors against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with civil, criminal, administrative or investigative proceedings to which they are party or are threatened to be made a party by reason of their acting as our directors. To be entitled to indemnification, these persons must have acted honestly and in good faith with a view to the best interests of the company and, in the case of criminal proceedings, they must have had no reasonable cause to believe their conduct was unlawful. The decision of our board of directors as to whether such a person acted honestly and in good faith with a view to the best interests of the company and as to whether the person had no reasonable to cause to believe that his or her conduct was unlawful is, in the absence of fraud, sufficient for the purposes of the indemnification, unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entry of no plea does not, by itself, create a presumption that a director did not act honestly and in good faith and with a view to our best interests or that the director had reasonable cause to believe that his or her conduct was unlawful. Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission. These provisions will not limit the liability of directors under United States federal securities laws.

We may indemnify anyone serving at our request as a director of another entity against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings. To be entitled to indemnification, such a person must have acted honestly and in good faith with the view to our best interests and, in the case of criminal proceedings, must have had no reasonable cause to believe that his or her conduct was unlawful. The decision of our board of directors as to whether the person acted honestly and in good faith with a view to our best interests and as to whether the person had no reasonable cause to believe that his or her conduct was unlawful, is in the absence of fraud sufficient for the purposes of indemnification, unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entry of no plea does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to our best interests or that the person had reasonable cause to believe that his or her conduct was unlawful.

We may purchase and maintain insurance in relation to any of our directors or officers against any liability asserted against the directors or officers and incurred by the directors or officers in that capacity, whether or not we have or would have had the power to indemnify the directors or officers against the liability as provided in our memorandum and articles of association.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers or persons controlling our company under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

**Involvement in Certain Legal Proceedings**

To the best of our knowledge, as of the date of this annual report, none of our directors or officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has any been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in "*Related Party Transactions*," our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

**D.** **Employees** 

We had 362, 355 and 362 employees for our continuing operations in 2025, 2024, and 2023 fiscal years, respectively. The majority of our employees are full-time and have signed employment agreements for one year, renewable with substantially the same terms on mutual agreements. Our employees are not represented by a labor organization or covered by a collective bargaining agreement. We have not experienced any work stoppages. The following table sets forth the average numbers of our employees, categorized by function for the period indicated.

---

| | | | |
|:---|:---|:---|:---|
| <br>**Department** | **2025 fiscal**<br>**year** | **2024 fiscal**<br>**year** | **2023 fiscal**<br>**year** |
| Production | 160 | 164 | 158 |
| Technical | 75 | 75 | 75 |
| Sales | 15 | 34 | 50 |
| Quality Control | 37 | 33 | 23 |
| Administration | 45 | 23 | 26 |
| Accounting | 9 | 12 | 12 |
| Trade | 3 | 3 | 4 |
| Procurement | 5 | 5 | 8 |
| Security | 13 | 6 | 6 |
| **Total** | 362 | **355** | **362** |

---

As required by PRC laws and regulations, we participate in various employee social security plans for our employees that are administered by local PRC governments, including housing, pension, medical insurance and unemployment insurance. We compensate our employees with basic salaries and performance-based bonuses. None of our employees is represented by any collective bargaining arrangements. We believe we have maintained good relationship with our employees.

**E.** **Share Ownership** 

The following table sets forth information with respect to beneficial ownership of our ordinary shares as of the date of this annual report:

● Each person who is known by us to beneficially own more than 5% of our outstanding ordinary shares;

● Each of our director, director nominees and named executive officers; and

● All directors and named executive officers as a group.

The number and percentage of ordinary shares beneficially owned are based on 14,299,182 ordinary shares issued and outstanding as of January 13, 2026. Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our ordinary shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of ordinary shares beneficially owned by a person listed below and the percentage ownership of such person, ordinary shares underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of January 13, 2026 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all ordinary shares shown as beneficially owned by them. Unless otherwise indicated in the footnotes, the address for each principal shareholder is in the care of our Company at No. 1688 Tianzhong Street, Longwan District, Wenzhou, Zhejiang Province, China.

---

| | | |
|:---|:---|:---|
| **Named Executive Officers and Directors** | **Amount of**<br> **Beneficial**<br> **Ownership<sup>(1)</sup>**  | **Percentage**<br> **Ownership<sup>(2)</sup>** |
| **Directors and Named Executive Officers:** | | |
| Di Wang<sup>(3)</sup> | 8336000 | 58.30% |
| Jueqin Wang<sup>(4)</sup> | 1664000 | 11.64% |
| Huisen Wang | 0 | 0% |
| Jianping Xiang | 60000 | 0.42% |
| He "Henry" Huang | 2000 | 0.01% |
| Songlin Li | 0 | 0% |
| Jiancong Huang | 0 | 0% |
| **All directors and executive officers as a group (5 persons)** | 10062000 | 70.37% |
| **5% Beneficial Owners:** |  |  |
| Yongqiang Donghai Limited<sup>(3)</sup> | 8336000 | 58.30% |
| Yongqiang Maituo Limited<sup>(4)</sup> | 1664000 | 11.64% |

---

\* Less than 1% of our total outstanding shares.

(1) Beneficial ownership is
 determined in accordance with the rules of the SEC and includes voting or investment power with respect to the ordinary shares. All
 shares represent only ordinary shares held by shareholders as no options are issued or outstanding.

(2) Calculation based on 14,299,182
 ordinary shares issued and outstanding as of January 13, 2026.

(3) Di Wang is deemed to beneficially
 own 8,336,000 of our ordinary shares through Yongqiang Donghai Limited, a British Virgin Islands company holding 8,336,000 of our
 ordinary shares. Di Wang has the sole voting and dispositive power of all the shares held by Yongqiang Donghai Limited through certain
 entrustment agreement with the shareholders of Yongqiang Donghai Limited.

(4) Jueqin Wang is deemed to
 beneficially own 1,664,000 of our ordinary shares through Yongqiang Maituo Limited, a British Virgin Islands company holding 1,664,000
 of our ordinary shares. Jueqin Wang has the sole voting and dispositive power of all the shares held by Yongqiang Maituo Limited.

**Item 7. Major Shareholders and Related Party Transactions**

**A.** **Major Shareholders** 

See "*Item 6. Directors, Senior Management and Employees - E. Share Ownership.*"

**B.** **Related Party Transactions** 

**Related Parties**

---

| | |
|:---|:---|
| **Name** | **Relationship with the Company** |
| Taizhou Huadi Industrial Ltd. ("Taizhou Huadi") | An entity 30% owned by Jueqin Wang |
| Shanghai Huadi Industrial Ltd. ("Shanghai Huadi") | An entity 51% owned by Jueqin Wang |
| Huashang Micro Finance Co. ("Huashang") | An entity 19% owned by the Company |
| Taizhou Huadi Material Technology Co. ("Huadi Material") | An entity 100% owned by Yiyu Wang |
| Wenzhou Maituo International Trade Ltd. ("Wenzhou Maituo") | An entity controlled by Meiling Wang |
| Jueqin Wang | Chairman of the Board and Director |
| Di Wang | Principal shareholder of the Company |
| Yiyu Wang | Immediate family member of majority shareholder of the Company |
| Meiling Wang | Immediate family member of majority shareholder of the Company |

---

**Related Party Transactions**

 ****

***2025 Fiscal year***

During the year ended September 30, 2025, the Company purchased a total of $2,456,896 raw materials from Taizhou Huadi and fully paid. These raw materials primarily consisted of stainless steel bars and stainless steel strips. As of September 30, 2025, the Company had no account payable balance due to this entity.

During the year ended September 30, 2025, the Company received a refund of $674,228 from Huadi Material due to changes in production plan. As of September 30, 2025, the Company had outstanding accounts payable of $462 to this entity.

During the year ended September 30, 2025, the Company leased an office to Huashang with annual rent amounted $27,407, and the Company recorded $25,865 rental income. As of September 30, 2025, the Company had advance balance of $7,131 from this entity.

During the year ended September 30, 2025, the Company repaid RMB 350,000 ($48,527 in USD) to Jueqin Wang. The borrowing was made in previous years to support the Company's operations, which was unsecured, due on demand, and interest free. As of September 30, 2025, the company had outstanding balance of $255,344 to Jueqin Wang.

 ****

 **

***2024 Fiscal year***

 **

During the year ended September 30, 2024, the Company purchased a total of $1,832 raw materials from Taizhou Huadi. These raw materials primarily consisted of stainless steel bars and stainless steel strips. The Company paid a total of $3,741,463 to Taizhou Huadi for raw materials purchased in recent years. As of September 30, 2024, the Company had no account payable balance due to this entity.

During the year ended September 30, 2024, the Company purchased $666,114 raw materials from Huadi Material and paid a total of $1,427,247. As of September 30, 2024, the Company had advance balance of $692,485 to this entity. Also, the Company sold a total of $7,343 steel materials and refunded $390,513 to Huadi Material which was paid in advance by Huadi Material in the year ended September 30, 2023. As of September 30, 2024, the Company had no advance balance from this entity.

During the year ended September 30, 2024, the Company sold a total of $1,661 steel materials to Shanghai Huadi. As of September 30, 2024, these amounts were fully collected.

During the year ended September 30, 2024, the Company refunded $631,567 to Wenzhou Maituo, which was paid in advance by Wenzhou Maituo in the year ended September 30, 2023. As of September 30, 2024, the Company had no advance balance from this entity.

During the year ended September 30, 2024, the Company leased an office to Huashang with annual rent amounted $29,192, and the Company recorded $30,232 rental income. As of September 30, 2024, the Company had advance balance of $5,650 from this entity.

During the year ended September 30, 2024, the Company repaid RMB 150,000 ($20,821 in USD) to Jueqin Wang. The borrowing was made in previous years to support the Company's operations, which was unsecured, due on demand, and interest free. As of September 30, 2024, the company had outstanding balance of $308,908 to Jueqin Wang.

 ****

***2023 Fiscal year***

During the year ended September 30, 2023, the Company purchased a total of $679,210 raw materials from Taizhou Huadi, and sold a total of $239,640 piping products to Taizhou Huadi. These raw materials primarily consisted of stainless steel bars and stainless steel strips. As of September 30, 2023, the Company had outstanding accounts payable of $3,692,394 to this entity.

During the year ended September 30, 2023, the Company sold a total of $520 steel materials to Huadi Material. As of September 30, 2023, the Company had advance balance of $385,605 from this entity.

During the year ended September 30, 2023, the Company received $623,629 in advance from Wenzhou Maituo for piping products.

During the year ended September 30, 2023, the Company leased an office to Huashang with annual rent amounted $26,235, and the Company recorded $19,550 rental income. As of September 30, 2023, the Company had advance balance of $6,462 from this entity.

During the year ended September 30, 2023, the Company repayment RMB 2,000,000 ($274,123 in USD) to Di Wang. The borrowing was made in previous years to support the Company's operations, which was unsecured, due on demand, and interest free.

**Related Party Balances**

Net outstanding balances with related parties consisted of the following as of this annual report and September 30, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
| **Accounts** | **Name of related parties** | **2025** | **2024** |
| Advance to suppliers, net | Taizhou Huadi Material Technology Co. | $- | $692485 |
| Accounts payable | Taizhou Huadi Material Technology Co. <sup>(1)</sup> | (462) |  |
| Advance from customer | Huashang Micro Finance Co. <sup>(2)</sup> | (7131) | (5650) |
| Due to related parties - noncurrent portion | Jueqin Wang <sup>(3)</sup> | (255344) | (308908) |

---

(1) The balances with the related
 part are payables to Huadi Material for raw materials. The amount is trade nature. As of the date of this annual report, the amount
 payable to Huadi Material has been $462.

(2) The balances with the related
 part are rental fees advance from Huashang. The amount is non-trade nature. As of the date of this annual report, the amount due
 to Huashang has been $nil.

(3) The balances with the related
 part are unsecured, interest free with no specific repayment terms. The amount is non-trade nature. As of the date of this annual
 report, the amount due to Jueqin Wang has been $255,344.

**Employment Agreements**

See "*Item 6. Directors, Senior Management and Employees - C. Board Practices - Employment Agreements.*"

**C.** **Interests of experts and counsel** 

Not applicable for annual reports on Form 20-F.

**ITEM 8.** **Financial Information**

**A.** **Consolidated Statements and Other Financial Information** 

We have appended consolidated financial statements filed as part of this annual report.

**Legal and Administrative Proceedings**

See "*Item 4. Information on the Company - B. Business Overview - Legal Proceedings.*"

**Dividend Policy**

We intend to keep any future earnings to finance the expansion of our business. We do not anticipate that any cash dividends will be paid in the foreseeable future.

Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business immediately following the date on which the distribution or dividend is paid.

If we determine to pay dividends on any of our ordinary share in the future, as a holding company, we will depend on receipt of funds from our Hong Kong subsidiary, HK Beach.

Current PRC regulations permit our indirect PRC subsidiaries to pay dividends to HK Beach only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries and affiliates in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.

Cash dividends, if any, on our ordinary share will be paid in U.S. dollars. HK Beach may be considered a non-resident enterprise for tax purposes. Any dividends Hongshun pays to HK Beach may be regarded as China-sourced income and may be subject to PRC withholding tax at a rate of up to 10%.

For us to pay dividends to our shareholders, we will rely on payments made from Huadi Steel to Wenzhou Hongshun, and the distribution of such payments to HK Beach as dividends from Wenzhou Hongshun. Certain payments from Huadi Steel to Wenzhou Hongshun are subject to PRC taxes, including VAT, urban maintenance and construction tax, educational surcharges. In addition, if Huadi Steel or its subsidiaries or branches incur debt on their own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months preceding its receipt of the dividends.

**B.** **Significant Changes** 

We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

**Item 9. The Offer and Listing**

**A.** **Offer and listing details** 

Not applicable for annual reports on Form 20-F.

**B.** **Plan of distribution** 

Not applicable for annual reports on Form 20-F.

**C.** **Markets** 

Our ordinary shares are listed on the Nasdaq Capital Market under the symbol "HUDI" since January 22, 2021.

**D.** **Selling shareholders** 

Not applicable for annual reports on Form 20-F.

**E.** **Dilution** 

Not applicable for annual reports on Form 20-F.

**F.** **Expenses of the issue** 

Not applicable for annual reports on Form 20-F.

**Item 10. Additional Information**

**A.** **Share capital** 

Not applicable for annual reports on Form 20-F.

**B.** **Memorandum and articles of association** 

Huadi International was incorporated on September 27, 2018 under the Companies Act (as amended) of the Cayman Islands, or the "Cayman Islands Companies Act". As of September 30, 2025, there were 14,299,182 ordinary shares issued and outstanding.

Our memorandum and articles of association do not permit a director to decide what compensation he or she will receive. All decisions about the compensation of directors will be recommended by the compensation committee, upon its formation, and approved by the board of directors as a whole, both acting only when a quorum of members is present.

The following are summaries of the material provisions of our memorandum and articles of association and the Cayman Islands Companies Act, insofar as they relate to the material terms of our ordinary shares.

**Description of Ordinary Shares**

Huadi International was incorporated on September 27, 2018 under the Cayman Islands Companies Act and our affairs are governed by our amended and restated memorandum and articles of association and the Cayman Islands Companies Act, and the common law of the Cayman Islands. Pursuant to our amended and restated memorandum and articles of association, our company's authorized share capital consists of 250,000,000 ordinary shares with a par value of US$0.0002 per share. As of January 13, 2026, there were 14,299,182 ordinary shares issued and outstanding.

**Our Memorandum and Articles**

Copies of our amended and restated memorandum and articles of association are filed as exhibits.

**Objects of Our Company**

Under our amended and restated memorandum and articles of association, the objects of our company are unrestricted and we have the full power and authority to carry out any object not prohibited by the law of the Cayman Islands.

**Ordinary Shares**

Each ordinary share in the Company confers upon the shareholder:

● the right to one vote at a meeting of the shareholders of the Company or on any resolution of shareholders;

● the right to an equal share in any dividend paid by the Company; and

● the right to an equal share in the distribution of the surplus assets of the Company on its liquidation.

All of our issued ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders may freely hold and vote their ordinary shares.

**Listing**

Our ordinary shares are listed on the Nasdaq Capital Market under the symbol "HUDI."

**Transfer Agent and Registrar**

The transfer agent and registrar for the ordinary shares is VStock Transfer LLC.

**Dividends**

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Cayman Islands Companies Act, as amended. Our amended and restated articles of association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our board of directors determine is no longer needed. Dividends may also be declared or paid out of share premium account or otherwise permitted by the Cayman Islands Companies Act, provided that in no circumstances may we pay a dividend if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.

**Voting rights**

Any action required or permitted to be taken by the shareholders must be taken at a duly called and quorate annual or special meeting of the shareholders entitled to vote on such action and may be effected by a resolution in writing. At each general meeting, each shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) will have one vote for each ordinary share which such shareholder holds. At any shareholders' meeting the chairman is responsible for deciding in such manner as he considers appropriate whether any resolution proposed has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes of the meeting. A poll may be demanded by the chairman of such meeting or one or more shareholders present in person or by proxy entitled to vote.

**Election of directors**

Directors may be appointed by an ordinary resolution of our shareholder or by a resolution of the directors of the Company.

**Meetings of shareholders**

Any of our directors may convene meetings of shareholders at such times and in such manner and places within or outside the Cayman Islands as the director considers necessary or desirable. The director convening a meeting shall give at least seven days' notice of a meeting of shareholders to those shareholders whose names on the date the notice is given appear as members in the register of members of the Company and are entitled to vote at the meeting, and each of the Company's directors. Our board of directors must convene a general meeting upon the written request of one or more shareholders holding no less than 10% of our voting share capital.

No business may be transacted at any general meeting unless a quorum is present at the time the meeting proceeds to business. Two or more members present in person or by proxy and entitled to vote shall be a quorum. If, within two hours from the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of shareholders, shall be dissolved. In any other case, it shall stand adjourned to the next business day in the jurisdiction in which the meeting was to have been held at the same time and place or to such other time and place as the board of directors may determine, and if, at the adjourned meeting, a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may transact the business for which the meeting was called. If present, the chair of our board of directors shall be the chair presiding at any meeting of the shareholders.

**Meetings of directors**

The management of our company is entrusted to our board of directors, who will make decisions by voting on resolutions of directors. At any meeting of directors, a quorum will be present if two directors are present, unless otherwise fixed by the directors. If there is a sole director, that director shall be a quorum. A person who holds office as an alternate director shall be counted in the quorum. A director who also acts as an alternate director shall count twice towards the quorum. An action that may be taken by the directors at a meeting may also be taken by a resolution of directors consented to in writing by all of the directors.

**Pre-emptive rights**

There are no pre-emptive rights applicable to the issue by us of new shares under either Cayman Islands law or our amended and restated memorandum and articles of association.

**Transfer of Ordinary Shares**

Subject to the restrictions in our amended and restated memorandum and articles of association and applicable securities laws, any of our shareholders may transfer all or any of his or her ordinary shares by written instrument of transfer signed by the transferor and containing the name of the transferee. Our board of directors may resolve by resolution to refuse or delay the registration of the transfer of any ordinary share without giving any reason. If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged with the Company, notify the transferee of such refusal.

**Winding Up**

On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of our shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

**Calls on Ordinary Shares and forfeiture of Ordinary Shares**

Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

**Repurchase of Shares**

The Cayman Islands Companies Act and our amended and restated memorandum and articles of association permits us to purchase our own shares, subject to certain restrictions and requirements. Our directors may only exercise this power on our behalf, subject to the Cayman Islands Companies Act, our amended and restated memorandum and articles of association and to any applicable requirements imposed from time to time by the Nasdaq, the Securities and Exchange Commission, or by any other recognized stock exchange on which our securities are listed.

Provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner, provided the requirements under the Cayman Islands Companies Act have been satisfied, including out of capital, as may be determined by our board of directors. Under the Cayman Islands Companies Act, the repurchase of any share may be paid out of our company's profits or out of the proceeds of a fresh issue of shares made for the purpose of such repurchase, or out of capital (including share premium account and capital redemption reserve). If the repurchase proceeds are paid out of our Company's capital, our Company must, immediately following such payment, be able to pay its debts as they fall due in the ordinary course of business. In addition, under the Cayman Islands Companies Act, no such share may be repurchased (1) unless it is fully paid up, (2) if such repurchase would result in there being no shares outstanding, and (3) unless the manner of purchase (if not so authorized under the amended and restated memorandum and articles of association) has first been authorized by a resolution of our shareholders. In addition, under the Cayman Islands Companies Act, our Company may accept the surrender of any fully paid share for no consideration unless, as a result of the surrender, the surrender would result in there being no shares outstanding (other than shares held as treasury shares).

**Variation of Rights of Shares**

The rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that class or series), whether or not our company is being wound-up, may be varied with the consent in writing of the holders of two-thirds of the issued shares of that class or series or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class or series. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

**Modifications of rights**

All or any of the rights attached to any class of our shares may (unless otherwise provided by the terms of issue of the shares of that class) be varied with the consent in writing of the holders of two-thirds of the issued shares of that class or with the sanction of a special resolution passed by not less than two-thirds of such shareholders of that class as may be present in person or by proxy at a separate general meeting of the holders of shares of that class.

**Changes in the number of shares we are authorized to issue and those in issue**

We may from time to time by resolution of shareholders in the requisite majorities:

● amend our amended and restated memorandum of association to increase or decrease the authorized share capital of our Company;

● divide our authorized and issued shares into a larger number of shares; and

● combine our authorized and issued shares into a smaller number of shares.

**Inspection of books and records**

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.

**Rights of non-resident or foreign shareholders**

There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non- resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

**Issuance of additional Ordinary Shares**

Our amended and restated memorandum and articles of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent available authorized but unissued shares.

**Exempted Company**

We are an exempted company with limited liability under the Cayman Islands Companies Law. The Cayman Islands Companies Law distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company that does not hold a license to carry on business in the Cayman Islands:

● does not have to file an annual return of its shareholders with the Registrar of Companies;

● is not required to open its register of members for inspection;

● does not have to hold an annual general meeting;

● is prohibited from making any invitation to the public in the Cayman Islands to subscribe for any of its securities;

● may issue negotiable or bearer shares or shares with no par value;

● may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

● may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

● may register as an exempted limited duration company; and

● may register as a segregated portfolio company.

"Limited liability" means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.

**Differences in Corporate Law**

The Cayman Islands Companies Law is modeled after that of English law but does not follow recent English statutory enactments. In addition, the Cayman Islands Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Cayman Islands Companies Law applicable to us and the laws applicable to companies incorporated in the State of Delaware.

**Mergers and Similar Arrangements**.

The Cayman Islands Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, a "merger" means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and a "consolidation" means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.

In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of the shareholders of each constituent company, and such other authorization, if any, as may be specified in such constituent company's articles of association.

The plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures, under the Cayman Islands Companies Law subject to certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands.

While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

● the statutory provisions as to the required majority vote have been met;

● the shareholders have been fairly represented at the meeting in question;

● the arrangement is such that an intelligent and honest man of that class acting in respect of his interest would reasonably approve.; and

● the arrangement is not one that would more properly be sanctioned under some other provision of the Cayman Islands Company Law.

The Cayman Islands Companies Law also contains a statutory power of compulsory acquisition which may facilitate the "squeeze out" of dissentient minority shareholders upon a tender offer. When a tender offer is made and accepted by holders of not less than 90% of the shares which are subject to the offer within four months, the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

**Shareholders' Suits and Protection of Minority Shareholders**.

In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Grand Court can be expected to apply and follow the common law principles (namely the rule derived from the seminal English case of *Foss v. Harbottle*, and the exceptions thereto, which limits the circumstances in which a shareholder may bring a derivative action on behalf of the company or a personal action to claim loss which is reflective of loss suffered by the company) which permit a minority shareholder to commence a class action against, or derivative actions in the name of, a company to challenge the following acts in the following circumstances:

● a company acts or proposes to act illegally or ultra vires and is therefore incapable of ratification by the shareholders;

● an irregularity in the passing of a resolution which requires a qualified majority;

● an act purporting to abridge or abolish the individual rights of a member; and

● an act which constitutes a fraud on the minority where the wrongdoers are themselves in control of the company.

In the case of a company (not being a bank) having its share capital divided into shares, the Grand Court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and to report thereon in such manner as the Grand Court shall direct.

**Indemnification of Directors and Executive Officers and Limitation of Liability**.

The Cayman Islands Companies Law does not limit the extent to which a company's memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such indemnification may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty, willful default or fraud of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

**Directors' Fiduciary Duties**.

Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he or she owes the following duties to the company - a duty to act in good faith in the best interests of the company, a duty not to make a personal profit based on his or her position as director (unless the company permits him or her to do so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that English and Commonwealth courts are moving towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

**Shareholder Action by Written Consent**

Under the Delaware corporate law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.

**Shareholder Proposals**

Under the Delaware corporate law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. The Cayman Islands Companies Law provides shareholders with only limited rights to requisition a general meeting and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in articles of association. Our articles of association allow our shareholders holding 10% or more of the voting rights to requisition a shareholder's meeting. Other than this right to requisition a shareholders' meeting, our articles of association do not provide our shareholders other right to put proposal before a meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders' annual general meetings unless expressly provided under the articles of association.

**Cumulative Voting**

Under the Delaware corporate law, cumulative voting for elections of directors is not permitted unless the corporation's certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder's voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the Cayman Islands Companies Law but our articles of association do not provide for cumulative voting.

**Removal of Directors**

Under the Delaware corporate law, a director of a corporation may be removed with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.

**Transactions with Interested Shareholders**

The Delaware corporate law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target's outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target's board of directors. The Cayman Islands Companies Law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into *bona fide* in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.

**Dissolution; Winding up**

Under the Delaware corporate law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the Cayman Islands Companies Law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its shareholders. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Cayman Islands Companies Law and our articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.

**Variation of Rights of Shares**

Under the Delaware corporate law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under the Cayman Islands Companies Law and our articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the holders of two-thirds of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.

**Amendment of Governing Documents**

Under the Delaware corporate law, a corporation's governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by the Cayman Islands Companies Law, our memorandum and articles of association may only be amended with a special resolution of our shareholders.

**C.** **Material contracts** 

We have not entered into any material contracts other than in the ordinary course of business and otherwise described elsewhere in this annual report .

**D.** **Exchange controls** 

**PRC Laws and Regulations relating to Foreign Exchange**

***General administration of foreign exchange***

According to the Regulations on the Control of Foreign Exchange (《中华人民共和国外汇管理条例》), which were promulgated by the State Council on January 29, 1996, came into effect on April 1, 1996, and were amended on January 14, 1997, and August 5, 2008, payments for transactions that take place within the PRC must be made in RMB. Unless otherwise approved, PRC companies may not repatriate foreign currency payments received from abroad or retain the same abroad. RMB is convertible into other currencies for current account items, such as trade-related receipts and payments and payment of interest and dividends. The conversion of RMB into other currencies and remittance of the converted foreign currency outside the PRC for of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from the SAFE or its local office. According to regulations on foreign exchange settlement of FIEs, they may retain foreign exchange in accounts with designated foreign exchange banks under the current account items subject to a cap set by the SAFE or its local office. Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution engaged in settlement and sale of foreign exchange pursuant to relevant SAFE rules and regulations. For foreign exchange proceeds under the capital accounts, approval from the SAFE is generally required for the retention or sale of such proceeds to a financial institution engaged in settlement and sale of foreign exchange.

***SAFE Circular No. 21***

On May 10, 2013, the SAFE promulgated the Circular of the SAFE on Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents (《外国投资者境内直接投资外汇管理规定》) ("SAFE Circular No. 21"), which was amended on December 30, 2019. It provided for and simplified the operational steps and regulations on foreign exchange matters related to direct investment by foreign investors, including foreign exchange registration, account opening and use, receipt and payment of funds, and settlement and sales of foreign exchange.

 ****

***SAFE Circular No. 59***

Pursuant to the Circular of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment (《国家外汇管理局关于进一步改进和调整直接投资外汇管理政策的通知》), promulgated by SAFE on November 19, 2012, which became effective on December 17, 2012, and was further amended on May 4, 2015, October 10, 2018, and December 30, 2019, respectively, approval is not required for opening a foreign exchange account and depositing foreign exchange into the accounts relating to the direct investments. SAFE Circular No. 59 also simplified foreign exchange-related registration required for the foreign investors to acquire the equity interests of Chinese companies and further improve the administration on foreign exchange settlement for FIEs.

***SAFE Circular No. 13***

Pursuant to the Circular on Further Simplifying and Improving the Foreign Currency Management Policy on Direct Investment (《国家外汇管理局关于进一步简化和改进直接投资外汇管理政策的通知》), effective from June 1, 2015, and amended on December 30, 2019, which cancels the administrative approvals of foreign exchange registration of direct domestic investment and direct overseas investment and simplifies the procedure of foreign exchange-related registration, the investors shall register with banks for direct domestic investment and direct overseas investment.

***SAFE Circular No. 19***

The Notice of the State Administration of Foreign Exchange on Reforming the Mode of Management of Settlement of Foreign Exchange Capital of Foreign-Funded Enterprises(《国家外汇管理局关于改革外商投资企业外汇资本金结汇管理方式的通知》), or the SAFE Circular No.19, which was promulgated by the SAFE on March 30, 2015, and became effective on June 1, 2015 and was amended on December 30, 2019 and March 23, 2023, provides that a foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights and interests (or for which the bank has registered the injection of the monetary capital contribution into the account). Pursuant to the SAFE Circular No.19, for the time being, FIEs are allowed to settle 100% of their foreign exchange capitals on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise shall first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment with the foreign exchange administration or the bank at the place where it is registered.

Based on the foregoing, when setting up a new foreign-invested enterprise, the foreign invested enterprise shall register with the bank located at its registered place after obtaining the business license, and if there is any change in capital or other changes relating to the basic information of the foreign-invested enterprise, including without limitation any increase in its registered capital or total investment, the foreign invested enterprise shall register such changes with the bank located at its registered place after obtaining the approval from or completing the filing with competent authorities. Pursuant to the relevant foreign exchange laws and regulations, the above-mentioned foreign exchange registration with the banks will typically take less than four weeks upon the acceptance of the registration application. If we intend to provide funding to our WFOE through capital injection at or after their establishment, we shall register the establishment of and any follow-on capital increase in our wholly foreign owned subsidiaries with the State Administration for Industry and Commerce or its local counterparts, file such via the FICMIS and register such with the local banks for the foreign exchange related matters.

***Offshore Investment***

 ****

***Circular 37***

Under the *Circular of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles* (《关于境内居民通过特殊目的公司境外投融资及返程投资外汇管理有关问题的通知》), or the SAFE Circular 37, issued by the SAFE and effective on July 4, 2014, PRC residents are required to register with the local SAFE branch prior to the establishment or control of an offshore special purpose vehicle, or SPV, which is defined as offshore enterprises directly established or indirectly controlled by PRC residents for offshore equity financing of the enterprise assets or interests they hold in China. An amendment to registration or subsequent filing with the local SAFE branch by such PRC resident is also required if there is any change in basic information of the offshore company or any material change with respect to the capital of the offshore company. At the same time, the SAFE has issued the *Operation Guidance for the Issues Concerning Foreign Exchange Administration over Round-trip Investment* regarding the procedures for SAFE registration under the SAFE Circular 37, which became effective on July 4, 2014, as an attachment of Circular 37.

Under the relevant rules, any failure by any of our shareholders who is a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these regulations could subject our SPV to restrictions imposed on foreign exchange activities, including restrictions on its ability to receive registered capital as well as additional capital from PRC resident shareholders, and contribute registered capital as well as additional capital to WFOE. If WFOE fails to obtain necessary registered capital within the approved business time limit, the industries and commercial administrative authorities might revoke its business license. Due to the failure by shareholders to complete the registration, WFOE's ability to pay dividends or make distributions to our SPV is also restricted, and repatriation of profits and dividends derived from SPV by PRC residents to China are illegal. The offshore financing funds are also not allowed to be used in China. In addition, the failure of the PRC resident shareholders to complete the registration may subject the shareholders to fines less than RMB50,000, and the enterprises to fines less than RMB300,000.

As of the date of the annual report, our beneficial owners have all completed the initial foreign exchange registrations as required by SAFE Circular 37 and Circular 13.

**E.** **Taxation** 

**PRC Taxation**

***Enterprise Income Tax***

On March 16, 2007, the Standing Committee of the National People's Congress promulgated the Enterprise Income Tax Law of the PRC which was amended on February 24, 2017 and December 29, 2018. On December 6, 2007, the State Council enacted the Regulations for the Implementation of the Enterprise Income Tax Law, which became effective on January 1, 2008 and was amended on April 23, 2019. Under the PRC EIT Law, both resident enterprises and non-resident enterprises are subject to tax in the PRC. Resident enterprises are defined as enterprises that are established in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but are actually or in effect controlled from within the PRC. Non-resident enterprises are defined as enterprises that are organized under the laws of foreign countries and whose actual management is conducted outside the PRC, but have established institutions or premises in the PRC, or have no such established institutions or premises but have income generated from inside the PRC. Under the PRC EIT Law and relevant implementing regulations, a uniform enterprise income tax rate of 25% is applied. However, if non-resident enterprises have not formed permanent establishments or premises in the PRC, or if they have formed permanent establishment or premises in the PRC but there is no actual relationship between the relevant income derived in the PRC and the established institutions or premises set up by them, enterprise income tax is set at the rate of 10% with respect to their income sourced from inside the PRC.

Pursuant to the PRC EIT Law, the EIT tax rate of a high and new technology enterprise or HNTE, is 15%. According to the Administrative Measures for the Recognition of HNTEs, effective on January 1, 2008 and amended on January 29, 2016, for each entity accredited as HNTE, its HNTE status is valid for three years if it meets the qualifications for HNTE on a continuing basis during such period.

***Value-added Tax***

The Provisional Regulations of on Value-added Tax of the PRC were promulgated by the State Council on December 13, 1993 and came into effect on January 1, 1994 which were subsequently amended on November 10, 2008 and came into effect on January 1, 2009, and were further amended on February 6, 2016 and November 19, 2017. The Detailed Rules for the Implementation of Provisional Regulations of on Value-added Tax of the PRC were promulgated by the Ministry of Finance on December 25, 1993 and subsequently amended on December 15, 2008 and October 28, 2011, or collectively, VAT Law. On November 19, 2017, the State Council promulgated The Order on Abolishing the Provisional Regulations of the PRC on Business Tax and Amending the Provisional Regulations of on Value-added Tax of the PRC, or Order 691. According to the VAT Law and Order 691, all enterprises and individuals engaged in the sale of goods, the provision of processing, repair and replacement services, sales of services, intangible assets, real property and the importation of goods within the territory of the PRC are the taxpayers of VAT. The VAT rates generally applicable are simplified as 17%, 11%, 6% and 0%, and the VAT rate applicable to the small-scale taxpayers is 3%.

The Company is subject to a VAT rate of 17% before May 1, 2018, a VAT rate of 16% effective on May 1, 2018, and the most current VAT rate of 13% effective on April 1, 2019. The VAT payable may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products.

***Dividend Withholding Tax***

The PRC EIT Law provides that since January 1, 2008, an enterprise income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident investors which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC.

Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance Arrangement and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, issued on February 20, 2009 by the State Administration of Taxation, or the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment. According to the Circular on Several Issues regarding the "Beneficial Owner" in Tax Treaties, which was issued on February 3, 2018 by the SAT, effective as of April 1, 2018, when determining the applicant's status of the "beneficial owner" regarding tax treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more than 50% of its income in twelve months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further provides that applicants who intend to prove his or her status of the "beneficial owner" shall submit the relevant documents to the relevant tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers' Enjoyment of the Treatment under Tax Agreements.

***Tax on Indirect Transfer***

On February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or SAT Circular 7. Pursuant to SAT Circular 7, an "indirect transfer" of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises, may be recharacterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a "reasonable commercial purpose" of the transaction arrangement, features to be taken into consideration include, inter alia, whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consist of direct or indirect investment in China or if its income is mainly derived from China; and whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure. According to SAT Circular 7, where the payor fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. SAT Circular 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017, the SAT issued the Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or SAT Circular 37, which was amended by the Announcement of the SAT on Revising Certain Taxation Normative Documents issued on June 15, 2018 by SAT. SAT Circular 3 further elaborates the relevant implemental rules regarding the calculation, reporting and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to the interpretation and application of SAT Circular 7. SAT Circular 7 may be determined by the tax authorities to be applicable to our offshore transactions or sale of our shares or those of our offshore subsidiaries where non-resident enterprises, being the transferors, were involved.

**Cayman Islands Taxation**

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. Ogier, our legal counsel as to Cayman Islands law, has advised us that there are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of the shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the Shares, nor will gains derived from the disposal of the shares be subject to Cayman Islands income or corporation tax.

**United States Federal Income Taxation**

The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:

● banks;

● financial institutions;

● insurance companies;

● regulated investment companies;

● real estate investment trusts;

● broker-dealers;

● traders that elect to mark-to-market;

● U.S. expatriates;

● tax-exempt entities;

● persons liable for alternative minimum tax;

● persons holding our ordinary shares as part of a straddle, hedging, conversion or integrated transaction;

● persons that actually or constructively own 10% or more of our voting shares;

● persons who acquired our ordinary shares pursuant to the exercise of any employee share option or otherwise as consideration; or

● persons holding our ordinary shares through partnerships or other pass-through entities.

Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. Federal tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our ordinary shares.

**Tax Treaties**

As above mentioned, according to the Sino-U.S. Tax Treaty which was effective on January 1st, 1987 and aimed to avoid double taxation disadvantage, income that is incurred in one nation should be taxed by that nation and exempted from the other nation, but for the dividend that is generated in China and distributed to foreigners in other nations, a rate 10% tax will be charged.

**Taxation of Dividends and Other Distributions on our Ordinary Shares**

Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the ordinary shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the ordinary shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, ordinary shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on The Nasdaq Capital Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our ordinary shares, including the effects of any change in law after January 31, 2019.

Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our ordinary shares will constitute "passive category income" but could, in the case of certain U.S. Holders, constitute "general category income."

To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

**Taxation of Dispositions of Ordinary Shares**

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the ordinary shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ordinary shares for more than one year, you will be eligible for reduced tax rates of 0% (for individuals in the 10% or 15% tax brackets), 20% (for individuals in the 39.6% tax brackets) or 15% for all other individuals. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes.

**Passive Foreign Investment Company**

Based on our current and anticipated operations and the composition of our assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current taxable year. Our actual PFIC status for the current taxable year will not be determinable until the close of such taxable year and, accordingly, there is no guarantee that we will not be a PFIC for the current taxable year. Because PFIC status is a factual determination for each taxable year which cannot be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:

● at least 75% of its gross income is passive income, defined as income from interest, dividends, rents, royalties, gains on property producing foreign personal holding company income and certain other income that does not involve the active conduct of a trade or business; or

● at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the "asset test").

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.

We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the value of our assets for purposes of the asset test will generally be determined based on the market price of our ordinary shares, our PFIC status will depend in large part on the market price of our ordinary shares. Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raised in from our initial public offering. If we are a PFIC for any year during which you hold ordinary shares, we will continue to be treated as a PFIC for all succeeding years during which you hold ordinary shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a "deemed sale" election with respect to the ordinary shares.

If we are a PFIC for any taxable year during which you hold ordinary shares, you will be subject to special tax rules with respect to any "excess distribution" that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ordinary shares, unless you make a "mark-to-market" election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ordinary shares will be treated as an excess distribution. Under these special tax rules:

● the excess distribution or gain will be allocated ratably over your holding period for the ordinary shares;

● the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

● the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or "excess distribution" cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as capital, even if you hold the ordinary shares as capital assets.

A U.S. Holder of "marketable stock" (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for the ordinary shares, you will include in income each year an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of your taxable year over your adjusted basis in such ordinary shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ordinary shares. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under "Taxation of Dividends and Other Distributions on our Ordinary Shares" generally would not apply.

The mark-to-market election is available only for "marketable stock," which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter ("regularly traded") on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including The Nasdaq Capital Market. If the ordinary shares are regularly traded on The Nasdaq Capital Market and if you are a holder of ordinary shares, the mark-to-market election would be available to you were we to be or become a PFIC.

Alternatively, a U.S. Holder of stock in a PFIC may make a "qualified electing fund" election with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder's pro rata share of the corporation's earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold ordinary shares in any year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 regarding distributions received on the ordinary shares and any gain realized on the disposition of the ordinary shares.

You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our ordinary shares and the elections discussed above.

**Information Reporting and Backup Withholding**

Dividend payments with respect to our ordinary shares and proceeds from the sale, exchange or redemption of our ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information.

Under the Hiring Incentives to Restore Employment Act of 2010, certain United States Holders are required to report information relating to ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold ordinary shares. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

**F.** **Dividends and paying agents** 

Not applicable for annual reports on Form 20-F.

**G.** **Statement by experts** 

Not applicable for annual reports on Form 20-F.

**H.** **Documents on display** 

We are subject to the information requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information with the SEC. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The SEC maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC.

**I.** **Subsidiary Information** 

Not applicable.

**J.** **Annual Report to Security Holders** 

We are not required to provide an annual report to security holders in response to the requirements of Form 6-K.

**Item 11. Quantitative and Qualitative Disclosures About Market Risk**

We are exposed to a variety of financial risks, including market risk (including currency risk, price risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. Our overall risk management program focuses on preservation of capital and the unpredictability of financial markets and has sought to minimize potential adverse effects on our financial performance and position.

***Foreign Exchange Risk***

 ****

All of our revenues and substantially all of our expenses are denominated in RMB. In our consolidated financial statements, our financial information that uses RMB as the functional currency has been translated into U.S. dollars. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.

The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions. The PRC government allowed the RMB to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within a narrow band. Since June 2010, the PRC government has allowed the RMB to appreciate slowly against the U.S. dollar, though there have been periods when the RMB has depreciated against the U.S. dollar. In particular, on August 11, 2015, the PBOC allowed the RMB to depreciate by approximately 2% against the U.S. dollar. It is difficult to predict how long the current situation may last and when and how the relationship between the RMB and the U.S. dollar may change again.

To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amounts available to us.

***Market Risk***

 ****

Market risk is the risk of loss arising from adverse changes in market rates and prices. Our market risk exposure is generally limited to those risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we utilize financial instruments or derivative instruments for trading purposes.

***Commodity Price Risk***

 ****

Our revenue is exposed to the market risk of price fluctuations related to the sale of our steel pipe. Prices for the steel pipe that we sell are generally determined by market forces. These prices may be influenced by factors such as supply and demand, production costs (including the costs of our raw materials) and global and domestic economic growth. Adverse changes in any of these factors may reduce the revenue that we receive from the sale of our steel pipe. Our costs are also exposed to fluctuations in prices for the purchase, processing and production of metal scrap, steel billets and other raw material inputs. Historically, we have generally been able to pass along price increases to our customers; however, we may be unable to do so in the future. We do not engage in commodity price hedging activities.

**Item 12. Description of Securities Other than Equity Securities**

**A.** **Debt Securities** 

Not applicable.

**B.** **Warrants and Rights** 

Not applicable.

**C.** **Other Securities** 

Not applicable.

**D.** **American Depositary Shares** 

Not applicable.

**PART II**

**Item 13. Defaults, Dividend Arrearages and Delinquencies**

We do not have any material defaults in the payment of principal, interest, or any installments under a sinking or purchase fund.

**Item 14. Material Modifications to the Rights of Securities Holders and Use of Proceeds**

**Material Modifications to the Rights of Security Holders**

See "*Item 10. Additional Information-B. Memorandum and Articles of Association - Description of Ordinary Shares*" for a description of the rights of securities holders.

**Use of Proceeds**

Not applicable for annual reports on Form 20-F.

**Item 15. Controls and Procedures**

Evaluation of Disclosure Controls and Procedures.

&nbsp;&nbsp;&nbsp;&nbsp;(a) As of September 30, 2025, the
end of the fiscal year covered by this report, our management, under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on
the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2025, our disclosure controls
and procedures were ineffective. Such conclusion is due to the presence of material weakness in internal control over financial reporting
as described below.

&nbsp;&nbsp;&nbsp;&nbsp;(b) Management's annual report
on internal control over financial reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. We assessed the effectiveness of the Company's internal control over financial reporting as of September 30, 2025. In making its assessment, management used the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "2013 COSO Framework"). The 2013 COSO Framework outlines the 17 underlying principles and the following fundamental components of a company's internal control: (i) control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Our management has implemented and tested our internal control over financial reporting based on these criteria and identified certain material weaknesses set forth below. Based on the assessment, management determined that, as of September 30, 2025, we did not maintain effective internal control over financial reporting due to the existence of the following material weaknesses:

● The Company does not have sufficient accounting and finance personnel with U.S.-GAAP experience

As a result, the Company plans to develop remedial actions to strengthen its accounting and financial reporting functions. To strengthen the Company's internal control over financial reporting, the Company plans to put design, implement, and test internal control over financial reporting. In addition to the foregoing efforts, the Company expects to implement the following remedial actions:

● Hire addition personnel with experience in US GAAP financial reporting and control procedures; an

Despite the material weaknesses and deficiencies reported above, our management believes that our consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

&nbsp;&nbsp;&nbsp;&nbsp;(c) Attestation report of the registered
public accounting firm.

Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;(d) Changes in internal control
over financial reporting.

There have been no changes in our internal controls over financial reporting occurred during the twelve months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**Item 16. [Reserved]**

**Item 16A. Audit Committee Financial Expert**

The Company's board of directors has determined that He "Henry" Huang qualifies as an "audit committee financial expert" in accordance with applicable Nasdaq Capital Market standards. The Company's board of directors has also determined that members of the Audit Committee are all "independent" in accordance with the applicable Nasdaq Capital Market standards.

**Item 16B. Code of Ethics**

The Company has adopted a Code of Business Conduct and Ethics that applies to the Company's directors, officers, employees and advisors. The Code of Ethics is attached as an exhibit to this annual report. We have also posted a copy of our code of business conduct and ethics on our website at http://ir.huadi.cc/.

**Item 16C. Principal Accountant Fees and Services**

HTL was appointed by the Company to serve as its independent registered public accounting firm for the fiscal years ended September 30, 2025, 2024 and 2023.

**Fees Paid to Independent Registered Public Accounting Firm**

***Audit Fees***

HTL's fees for the for the annual audit of our financial statements for the fiscal year ended September 30, 2025 was $180,000. HTL's fees for the for the annual audit of our financial statements for the fiscal year ended September 30, 2024 was $180,000. HTL's fees for the annual audit of our financial statements for the fiscal year ended September 30, 2023 was $180,000.

***Audit-Related Fees***

HTL did not provide audit related service during the fiscal years ended September 30, 2025, 2024 and 2023.

***Tax Fees***

HTL did not provide tax services for the fiscal years ended September 30, 2025, 2024 and 2023.

***All Other Fees***

The Company has not paid HTL for any other services in fiscal years ended September 30, 2025, 2024 and 2023.

***Audit Committee Pre-Approval Policies***

Before HTL wes engaged by the Company to render audit services, the engagement was approved by the Company's audit committee. All services rendered by HTL have been so approved.

**Item 16D. Exemptions from the Listing Standards for Audit Committees**

Not applicable.

**Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers**

Neither the Company nor any affiliated purchaser has purchased any shares or other units of any class of the Company's equity securities registered by the Company pursuant to Section 12 of the Securities Exchange Act during the fiscal year ended September 30, 2025.

**Item 16F. Change in Registrant's Certifying Accountant**

Not applicable.

**Item 16G. Corporate Governance**

As a Cayman Islands company listed on the Nasdaq Capital Market, we are subject to Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from Nasdaq corporate governance listing standards. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

On August 8, 2024, we obtained an exemption letter from our Cayman counsel, Ogier, relying on Nasdaq Marketplace Rule 5615(a)(3), which allows foreign private issuers to follow home country practice with respect to certain corporate governance requirements. In January 2026, we obtained an updated home country practice letter from Ogier reaffirming and supplementing the foregoing position. As permitted under Cayman Islands law and our amended and restated memorandum and articles of association, we did not hold an annual general meeting of shareholders in 2025.

Despite relying on these exemptions, we continue to adhere to certain Nasdaq corporate governance requirements, such as maintaining a majority of independent directors on our board, conducting regular executive sessions attended solely by independent directors, and ensuring that our audit committee is comprised entirely of independent directors who meet the qualifications set forth in Rule 10A-3 under the Exchange Act. We may, in the future, rely on other exemptions under Nasdaq rules to follow home country practices for additional corporate governance requirements. See "*Risk Factors - Risks Related to Our Corporate Structure and Ordinary Shares - Huadi International is a "controlled company" within the meaning of the Nasdaq stock Market Rules and Nasdaq Capital Market rules*" and "*- As a foreign private issuer, we are permitted to, and did follow certain home country corporate governance practices instead of otherwise applicable Nasdaq Capital Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.*"

**Item 16H. Mine Safety Disclosure**

Not applicable.

**Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections** 

Not applicable.

**Item 16J. Insider Trading Policies**

We have adopted insider trading policies governing the purchase, sale, and other dispositions of our securities by directors, senior management, and employees. A copy of the insider trading policies is attached as an exhibit to this annual report.

 ****

**Item 16K. Cyber Security**

*Risk Management and Strategy*

As a provider of industrial stainless steel piping products and production services with extensive distribution facilities and networks across over twenty (20) provinces in China, as well as exports to twenty (20) countries and regions globally, we recognize the importance of developing, implementing, and maintaining appropriate and adequate administrative and technical measures to safeguard our information management security systems and protect the confidentiality, integrity, and availability of data. Given the critical industries we serve, including automotive, oil and gas, and electric energy, our cybersecurity measures are designed to ensure the uninterrupted operation of our systems and the security of sensitive data critical to these industries. Therefore, we have developed and maintain a comprehensive cybersecurity risk management program that focuses on monitoring, risk mitigation, and risk response, in order to ensure the security and safety of our computer systems, networks, cloud services, software, and all data stored therein:

● We established the Cyber Security and Confidentiality Committee and the Network Information Center (the "NIC"), and implemented a work responsibility system and accountability system;

● As the weak current rooms of the NIC and various networking departments are key departments of the computer information network, they must be managed by dedicated personnel;

● The NIC is responsible for i) technical parameters of various equipment; and ii) the planning, construction, application development, operation and maintenance, and user management of the Company's LAN.

**PART III**

**Item 17. Financial Statements**

See Item 18.

**Item 18. Financial Statements**

Our consolidated financial statements are included at the end of this annual report, beginning with page F-1.

**Item 19. Exhibits**

---

| | |
|:---|:---|
| **Exhibit No.** | **Description of Exhibit** |
| 1.1 | [Memorandum and Articles of Association (Exhibit 3.1 to the Form F-1 filed on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex3-1_huadiinter.htm) |
| 1.2 | [Amended and Restated Memorandum and Articles of Association (Exhibit 3.2 to the Form F-1/A submitted on November 25, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020039259/ea129937ex3-2_huadiinter.htm) |
| 2.1\* | [Description of Securities](ea027424801ex2-1_huadi.htm) |
| 4.1 | [Summary Translation of Employment Agreement by and between the Registrant and Di Wang (Exhibit 10.1 to the Form F-1 submitted on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex10-1_huadiinter.htm) |
| 4.2 | [Summary Translation of Employment Agreement by and between the Registrant and Jueqin Wang (Exhibit 10.2 to the Form F-1 filed on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex10-2_huadiinter.htm) |
| 4.3 | [Summary Translation of Employment Agreement by and between the Registrant and Huisen Wang (Exhibit 10.3 to the Form F-1 filed on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex10-3_huadiinter.htm) |
| 4.4 | [Employment Agreement with Jianping Xiang (Exhibit 10.1 to the Form 6-K filed on December 09, 2022 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390022078777/ea169929ex10-1_huadiinter.htm) |
| 4.5 | [Director Offer Letter with Songlin Li (Exhibit 10.5 to the Form F-1 filed on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex10-5_huadiinter.htm) |
| 4.6 | [Director Offer Letter with Jiancong Huang (Exhibit 10.6 to the Form F-1 filed on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex10-6_huadiinter.htm) |
| 4.7 | [Director Offer Letter with He "Henry" Huang (Exhibit 10.7 to the Form F-1 filed on September 18, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020027397/ea123536ex10-7_huadiinter.htm) |
| 4.8 | [Entrustment Agreement among shareholders of Yongqiang Donghai Limited (Exhibit 10.8 to the Form F-1/A filed on November 25, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020039259/ea129937ex10-8_huadiinter.htm) |
| 8.1 | [List of Subsidiaries (Exhibit 8.1 to our annual report on Form 20-F, filed with the SEC on February 5, 2024 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390024009988/f20f2023ex8-1_huadiinter.htm) |
| 11.1 | [Code of Business Conduct and Ethics (Exhibit 14.1 to the Form F-1/A filed on November 25, 2020 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390020039259/ea129937ex14-1_huadiinter.htm) |
| 11.2 | [Insider Trading Policies (Exhibit 11.2 to our annual report on Form 20-F, filed with the SEC on February 5, 2024 and is incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/1791725/000121390024009988/f20f2023ex11-2_huadiinter.htm) |
| 12.1\* | [Certification of Chief Executive Officer Required by Rule 13a-14(a)](ea027424801ex12-1_huadi.htm) |
| 12.2\* | [Certification of Chief Financial Officer Required by Rule 13a-14(a)](ea027424801ex12-2_huadi.htm) |
| 13.1\*\* | [Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code](ea027424801ex13-1_huadi.htm) |
| 13.2\*\* | [Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code](ea027424801ex13-2_huadi.htm) |
| 97.1 | [Executive Compensation Recovery Policy (incorporate by reference to Exhibit 97.1 to our annual report on Form 20-F, filed with the SEC on February 5, 2024)](http://www.sec.gov/Archives/edgar/data/1791725/000121390024009988/f20f2023ex97-1_huadiinter.htm) |
| 101.INS\* | Inline XBRL Instance Document. |
| 101.SCH\* | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL\* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF\* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB\* | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE\* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104\* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

---

\* Filed herewith. <br> \*\* Furnished herewith.

**SIGNATURES**

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

---

| | | |
|:---|:---|:---|
| **HUADI INTERNATIONAL GROUP CO., LTD.** | **HUADI INTERNATIONAL GROUP CO., LTD.** | **HUADI INTERNATIONAL GROUP CO., LTD.** |
| By: | */s/ Huisen Wang* | */s/ Huisen Wang* |
|  | Name: | Huisen Wang |
|  | Title: | Chief Executive Officer |

---

Date: January 30, 2026

**HUADI INTERNATIONAL GROUP CO., LTD.**

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| **Consolidated Financial Statements** |  |
| [Reports of Independent Registered Public Accounting Firm <u>(PCAOB ID 7000)</u>](#f_001) | F-2 |
| [Consolidated Balance Sheets as of September 30, 2025 and 2024](#f_002) | F-3 |
| [Consolidated Statements of Income and Comprehensive Income (Loss) for the years ended September 30, 2025, 2024 and 2023](#f_003) | F-4 |
| [Consolidated Statements of Changes in Shareholders' Equity for the years ended September 30, 2025, 2024 and 2023](#f_004) | F-5 |
| [Consolidated Statements of Cash Flows for the years ended September 30, 2025, 2024, and 2023](#f_005) | F-6 |
| [Notes to Consolidated Financial Statements](#f_006) | F-7 - F-36 |

---

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the Board of Directors and Stockholders of

Huadi International Group Co., Ltd.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Huadi International Group Co., Ltd. and its subsidiaries (the "Company") as of September 30, 2025 and 2024, and the related consolidated statements of income and comprehensive income (loss), changes in shareholders' equity, and cash flows for each of the years in the three-year period ended September 30, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

---

| |
|:---|
| /s/ HTL International, LLC<br>HTL International, LLC |
| We have served as the Company's auditor since 2023. |
| Houston, Texas |
| January 30, 2026 |

---

**HUADI INTERNATIONAL GROUP CO., LTD.**

**CONSOLIDATED BALANCE SHEETS**

**AS OF SEPTEMBER 30, 2025 AND 2024**

(**IN U.S. DOLLARS, EXCEPT SHARE DATA)**

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $6483489 | $18118456 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 3141756 | 4410489 |
| &nbsp;&nbsp;&nbsp;Time deposits | 100164 | - |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance for credit losses of $1,183,298 and $1,003,514, respectively | 24773841 | 18713342 |
| &nbsp;&nbsp;&nbsp;Notes receivable, net | 8358797 | 7901784 |
| &nbsp;&nbsp;&nbsp;Inventories | 24084711 | 23312978 |
| &nbsp;&nbsp;&nbsp;Advances to suppliers, net | 2252953 | 3622162 |
| &nbsp;&nbsp;&nbsp;Advances to suppliers, net – related parties | - | 692485 |
| &nbsp;&nbsp;&nbsp;Other receivables, net | 1091526 | 700513 |
| Total current assets | 70287237 | 77472209 |
| &nbsp;&nbsp;&nbsp;Property, plant and equipment, net | 15318750 | 8047615 |
| &nbsp;&nbsp;&nbsp;Land use rights, net | 4213536 | 4373158 |
| &nbsp;&nbsp;&nbsp;Long-term time deposits | 165996 | - |
| &nbsp;&nbsp;&nbsp;Long-term investments | 11656412 | 13012340 |
| &nbsp;&nbsp;&nbsp;Long-term prepayments | 6615984 | - |
| &nbsp;&nbsp;&nbsp;Deferred tax assets | 1044334 | 550874 |
| &nbsp;&nbsp;&nbsp;Other noncurrent assets | 221288 | 138335 |
| **TOTAL ASSETS** | $**109523537** | $**103594531** |
| LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $2709191 | $1889342 |
| &nbsp;&nbsp;&nbsp;Accounts payable - related parties | 462 | - |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 3003704 | 2153227 |
| &nbsp;&nbsp;&nbsp;Notes payable | 10148897 | 13337893 |
| &nbsp;&nbsp;&nbsp;Advance from customers | 1310685 | 1548151 |
| &nbsp;&nbsp;&nbsp;Advance from customers - related parties | 7131 | 5650 |
| &nbsp;&nbsp;&nbsp;Short-term borrowings | 4122341 | 1249765 |
| &nbsp;&nbsp;&nbsp;Long-term borrowings - current portion | 43545 | - |
| &nbsp;&nbsp;&nbsp;Tax payable | 2961173 | 3644165 |
| Total current liabilities | 24307129 | 23828193 |
| &nbsp;&nbsp;&nbsp;Long-term borrowings | 8025004 | - |
| &nbsp;&nbsp;&nbsp;Due to related parties - noncurrent portion | 255344 | 308908 |
| &nbsp;&nbsp;&nbsp;Deferred government grants - noncurrent portion | 1123753 | 1139991 |
| **TOTAL LIABILITIES** | **33711230** | **25277092** |
| **COMMITMENTS AND CONTINGENCIES** |  |  |
| Shareholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.0002 par value, 250,000,000 shares authorized, 14,299,182 and 14,279,182 shares issued and outstanding, respectively | 2860 | 2856 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 67359101 | 67329705 |
| &nbsp;&nbsp;&nbsp;Statutory surplus reserves | 919978 | 919978 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 6308532 | 7704459 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | 923834 | 2046228 |
| Total equity attributable to Huadi International Group Co., Ltd. | 75514305 | 78003226 |
| Equity attributable to non-controlling interests | 298002 | 314213 |
| Total shareholders' equity | 75812307 | 78317439 |
| **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | $**109523537** | $**103594531** |

---

The accompanying notes are an integral part of these consolidated financial statements.

**HUADI INTERNATIONAL GROUP CO., LTD.**

**CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)**

**FOR THE YEARS ENDED SEPTEMBER 30, 2025, 2024 AND 2023 (IN U.S. DOLLARS, EXCEPT SHARE DATA)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Sales | $62487643 | $73635012 | $83113259 |
| Production service revenue | 407968 | 635417 | 1219041 |
| Cost of sales | (56102806) | (66954594) | (71976696) |
| **Gross profit** | **6792805** | **7315835** | **12355604** |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative | 7775890 | 6783449 | 7338320 |
| &nbsp;&nbsp;&nbsp;Research and development | 2166881 | 2239220 | 2550777 |
| &nbsp;&nbsp;&nbsp;Foreign currency transaction gains | (265960) | (98353) | (644118) |
| **Total operating expenses** | **9676811** | **8924316** | **9244979** |
| **Operating (loss) income** | **(2884006)** | **(1608481)** | **3110625** |
| Other income (expenses): |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest income (expenses), net | 220621 | 206340 | (296265) |
| &nbsp;&nbsp;&nbsp;Other income (expenses), net | 767777 | 1245926 | 701751 |
| **Total other income (expenses), net** | **988398** | **1452266** | **405486** |
| **(Loss) Income before income taxes** | **(1895608)** | **(156215)** | **3516111** |
| Income tax benefits (expenses) | 494807 | 298610 | (220854) |
| **Net (loss) income** | **(1400801)** | **142395** | **3295257** |
| Net (loss) income attributable to non-controlling interests | (4874) | 4973 | 37535 |
| Net (loss) income attributable to Huadi International Group Co., Ltd. | $(1395927) | $137422 | $3257722 |
| Net (loss) income | $**(1400801)** | $**142395** | $**3295257** |
| Other comprehensive (loss) income: |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | (1133731) | 2500007 | (1314988) |
| **Total comprehensive (loss) income** | **(2534532)** | **2642402** | **1980269** |
| Comprehensive (loss) income attributable to non-controlling interests | (16211) | 29973 | 24385 |
| Comprehensive (loss) income attributable to Huadi International Group Co., Ltd. | $**(2518321)** | $**2612429** | $**1955884** |
| Basic and diluted earnings per share |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $(0.10) | $0.01 | $0.23 |
| &nbsp;&nbsp;&nbsp;Diluted | $(0.10) | $0.01 | $0.23 |
| Weighted average numbers of common shares outstanding |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | 14277484 | 14268333 | 14138525 |
| &nbsp;&nbsp;&nbsp;Diluted | 14277484 | 14268333 | 14138525 |

---

The accompanying notes are an integral part of these consolidated financial statements.

**HUADI INTERNATIONAL GROUP CO., LTD.**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 2025, 2024 AND 2023**

**(IN U.S. DOLLARS, EXCEPT SHARE DATA)**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Shares** | **Amount** | **Additional<br> paid-in<br> capital** | **Accumulated<br> deficit** | **Accumulated<br> other<br> comprehensive<br> income** | **Statutory Surplus Reserve** | **Shareholders'<br> equity to<br> Huadi<br> International <br> Group Co., Ltd.** | **Non-<br> controlling<br> interests** | **Total shareholders'<br> equity** |
| Balance at September 30, 2022 | 13239182 | 2648 | 44211313 | 3802265 | 873059 | 494223 | 49383508 | 250433 | 49633941 |
| Share issuance | 1000000 | 200 | 23009800 | - | - | - | 23010000 | - | 23010000 |
| Statutory reserves |  | - |  | (380295) |  | 380295 | - | - |  |
| Stock-based compensation | 20000 | 4 | 59596 | - | - | - | 59600 | - | 59600 |
| Foreign currency translation gain |  | - | - | - | (1301838) | - | (1301838) | (13150) | (1314988) |
| Net income | - | - | - | 3257722 | - | - | 3257722 | 37535 | 3295257 |
| Balance at September 30, 2023 | 14259182 | 2852 | 67280709 | 6679692 | (428779) | 874518 | 74408992 | 274818 | 74683810 |
| Cumulative effect of adoption of CECL |  | - | - | 932805 | - | - | 932805 | 9422 | 942227 |
| Statutory reserves |  | - | - | (45460) | - | 45460 | - | - | - |
| Stock-based compensation | 20000 | 4 | 48996 | - | - | - | 49000 | - | 49000 |
| Foreign currency translation gain |  | - | - | - | 2475007 | - | 2475007 | 25000 | 2500007 |
| Net income | - | - | - | 137422 | - | - | 137422 | 4973 | 142395 |
| Balance at September 30, 2024 | 14279182 | $2856 | $67329705 | $7704459 | $2046228 | $919978 | $78003226 | $314213 | $78317439 |
| Share-based compensation | 20000 | 4 | 29396 | - | - | - | 29400 | - | 29400 |
| Foreign currency translation gain |  |  | - | - | (1122394) | - | (1122394) | (11337) | (1133731) |
| Net (loss) income |  | - | - | (1395927) | - | - | (1395927) | (4874) | (1400801) |
| **Balance at September 30, 2025** | **14299182** | **2860** | **67359101** | **6308532** | **923834** | **919978** | **75514305** | **298002** | **75812307** |

---

The accompanying notes are an integral part of these consolidated financial statements.

**HUADI INTERNATIONAL GROUP CO., LTD.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED SEPTEMBER 30, 2025, 2024 AND 2023**

**(IN U.S. DOLLARS)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Cash Flows from Operating Activities:** |  |  |  |
| Net (loss) income | $(1400801) | $142395 | $3295257 |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation | 614558 | 685674 | 657107 |
| &nbsp;&nbsp;&nbsp;Amortization | 28780 | 73726 | 58778 |
| &nbsp;&nbsp;&nbsp;Stock-based compensation | 29400 | 49000 | 59600 |
| &nbsp;&nbsp;&nbsp;Credit loss expense (reversal) | 101257 | (41720) | - |
| &nbsp;&nbsp;&nbsp;Bad debt expenses | 276217 | 89425 | 430708 |
| &nbsp;&nbsp;&nbsp;Impairment loss on long-term investment | 1155411 | - | - |
| &nbsp;&nbsp;&nbsp;Deferred tax expenses | (494807) | (307278) | (64606) |
| &nbsp;&nbsp;&nbsp;Gains on disposal of fixed assets | (1264) | - | (2557) |
| &nbsp;&nbsp;&nbsp;Foreign currency transaction gains | (265960) | (98353) | (644118) |
| Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable | (6436584) | 6134515 | (3840784) |
| &nbsp;&nbsp;&nbsp;Notes receivable | (484090) | (153248) | (6501994) |
| &nbsp;&nbsp;&nbsp;Inventories | (1089484) | 4337744 | (2545634) |
| &nbsp;&nbsp;&nbsp;Advances to suppliers, net | 1368014 | (1485013) | 1103735 |
| &nbsp;&nbsp;&nbsp;Advances to suppliers, net – related party | 673772 | (674539) | - |
| &nbsp;&nbsp;&nbsp;Other receivables | (386710) | (523082) | 380277 |
| &nbsp;&nbsp;&nbsp;Other noncurrent assets | (80688) | 14596 | (261810) |
| &nbsp;&nbsp;&nbsp;Accounts payable | 836240 | (5376754) | 3984378 |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 870189 | 126976 | 226934 |
| &nbsp;&nbsp;&nbsp;Notes payable | (2960139) | 11339061 | 1135639 |
| &nbsp;&nbsp;&nbsp;Advances from customers | (211080) | (1938570) | (912997) |
| &nbsp;&nbsp;&nbsp;Tax payable | (622905) | (511162) | 994361 |
| &nbsp;&nbsp;&nbsp;Deferred government grants | - | 1110448 | - |
| &nbsp;&nbsp;&nbsp;**Net cash (used in) provided by operating activities** | **(8480674)** | **12993841** | **(2447726)** |
| **Cash Flows from Investing Activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Placement of time deposits | (262709) | - | - |
| &nbsp;&nbsp;&nbsp;Purchases of property, plant and equipment | (1457008) | (308631) | (157571) |
| &nbsp;&nbsp;&nbsp;Purchases of land-use-right | - | - | (3440489) |
| &nbsp;&nbsp;&nbsp;Acquisition of CIP | (6395450) | (2759262) | - |
| &nbsp;&nbsp;&nbsp;Prepayments for acquisition of CIP | (6873913) | - | - |
| &nbsp;&nbsp;&nbsp;Proceeds from disposition of property, plant and equipment | 16441 | - | 4015 |
| **Net cash used in investing activities** | **(14972639)** | **(3067893)** | **(3594045)** |
| **Cash Flows from Financing Activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from short-term borrowings | 4068901 | 1217377 | 5588190 |
| &nbsp;&nbsp;&nbsp;Repayments on short-term borrowings | (1215993) | (4499422) | (12982576) |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term borrowings | 10186482 | 2762239 | 5639913 |
| &nbsp;&nbsp;&nbsp;Repayments on long-term borrowings | (2222530) | (8274225) | (9389931) |
| &nbsp;&nbsp;&nbsp;Proceeds from stock offering, net of offering costs | - | - | 23010000 |
| &nbsp;&nbsp;&nbsp;Proceeds from related parties | - | - | 6858500 |
| &nbsp;&nbsp;&nbsp;Repayments to related parties | (48527) | (20821) | (7142055) |
| **Net cash provided by(used in) financing activities** | **10768333** | **(8814852)** | **11582041** |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (218720) | 456156 | 878178 |
| **Net (decrease) increase in cash and cash equivalents and restricted cash** | **(12903700)** | **1567252** | 6418448 |
| Cash and cash equivalents and restricted cash at the beginning of year | 22528945 | 20961693 | 14543245 |
| **Cash and cash equivalents and restricted cash at the end of year** | $**9625245** | $**22528945** | $**20961693** |
| **Supplemental disclosures of cash flows information:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for income taxes | $3228966 | $328428 | $25773 |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $195369 | $176023 | 442748 |
| The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows: |  |  |  |
| Cash and cash equivalents | $6483489 | $18118456 | $20192460 |
| Restricted cash | 3141756 | 4410489 | 769233 |
| Total cash and cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows | $9625245 | $22528945 | $20961693 |

---

The accompanying notes are an integral part of these consolidated financial statements.

**HUADI INTERNATIONAL GROUP CO., LTD.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS**

---

| | | | |
|:---|:---|:---|:---|
| **Entity Name** | **Registered<br> Location** | **Date of Incorporation** | **Ownership as of the<br> issuance date of the report** |
| &nbsp;&nbsp;Huadi International Group Co., Ltd. ("Huadi International") | Cayman Island | &nbsp;&nbsp;September 27, 2018 | &nbsp;&nbsp;&nbsp;Parent |
| &nbsp;&nbsp;Yongqiang Tuoxing Limited. <br> ("Yongqiang Tuoxing") | &nbsp;&nbsp;British Virgin Island | &nbsp;&nbsp;October 2, 2018 | &nbsp;&nbsp;&nbsp;100% by the Parent |
| &nbsp;&nbsp;Hong Kong Beach Limited. ("HK Beach") | &nbsp;&nbsp;Hong Kong | &nbsp;&nbsp;November 7, 2018 | &nbsp;&nbsp;&nbsp;100% by Yongqiang Tuoxing |
| &nbsp;&nbsp;Wenzhou Hongshun Stainless Steel Limited. ("Hongshun") | &nbsp;&nbsp;Wenzhou,<br> China | &nbsp;&nbsp;June 3, 2019 | &nbsp;&nbsp;&nbsp;100% by HK Beach |
| &nbsp;&nbsp;Huadi Steel Group Limited. <br> ("Huadi Steel") | &nbsp;&nbsp;Wenzhou, <br> China | &nbsp;&nbsp;November 12, 1998 | &nbsp;&nbsp;&nbsp;99% by Hongshun |
| &nbsp;&nbsp;Huadi (Songyang) Co., Ltd. ("Huadi Songyang") | &nbsp;&nbsp; Songyang,<br> China | &nbsp;&nbsp;June 15, 2023 | &nbsp;&nbsp;&nbsp;100% by HK Beach |

---

**Huadi International Group Co., Ltd. ("Huadi International")**

Huadi International was incorporated on September 27, 2018 under the laws of Cayman Islands. Under its memorandum of association, Huadi International is authorized to issue 250,000,000 ordinary shares of a single class, par value $0.0002 per ordinary share. There are currently 14,299,182 issued and outstanding ordinary shares. Huadi International is a holding company and is currently not actively engaged in any business. Huadi International's registered agent is Harneys Fiduciary (Cayman) Limited and its registered office is at 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman, KY1-1002, Cayman Islands.

**Yongqiang Tuoxing Limited ("Yongqiang Tuoxing")**

Yongqiang Tuoxing was incorporated on October 2, 2018 under the laws of British Virgin Islands. Under its memorandum of association, Yongqiang Tuoxing is authorized to issue 50,000 ordinary shares of a single class, par value $1.00 per ordinary share. Yongqiang Tuoxing is a wholly owned subsidiary of Huadi International and is currently not actively engaged in any business. Yongqiang Tuoxing's registered agent is Harneys Corporate Services Limited and its registered office is at Craigmuir Chambers, Road Town, Tortola, VG1110, British Virgin Islands.

**Hong Kong Beach Limited ("HK Beach")**

HK Beach was incorporated on November 7, 2018 under the laws of Hong Kong and is a wholly owned subsidiary of Yongqiang Tuoxing. HK Beach did not have any operations as of September 30, 2025.

**Wenzhou Hongshun Stainless Steel Ltd. ("Wenzhou Hongshun")**

Wenzhou Hongshun was incorporated on June 3, 2019 in China and is a wholly owned subsidiary of HK Beach. Wenzhou Hongshun is a wholly-foreign owned enterprise organized under the laws of the People's Republic of China. The registered principal activities of Wenzhou Hongshun are sales of stainless steel pipes, stainless steel bars, stainless steel elbows, stainless steel products, auto parts and components; import and export of goods, technology import and export. Wenzhou Hongshun did not have any operations as of September 30, 2025.

**Huadi Steel Group Limited. ("Huadi Steel")**

Huadi Steel was incorporated on November 12, 1998 under the laws of the People's Republic of China. Since August 18, 2015, Huadi Steel was owned by nine shareholders in People's Republic of China ("PRC Shareholders"). Huadi Steel focuses on manufacturing of industrial stainless steel seamless pipes and tubes products with extensive distribution facilities and network in China.

**Huadi (Songyang) Co., Ltd. ("Huadi Songyang")**

Huadi Songyang was incorporated on June 15, 2023 in China and is a wholly owned subsidiary of HK Beach. Huadi Songyang is a wholly-foreign owned enterprise organized under the laws of the People's Republic of China. Huadi Songyang is established for the purpose of expanding product line of industrial steel pipe and tube products manufacture and distribution.

Except where the context otherwise requires and for purposes of this financial statement only, "the Company", "we", "us", "our company", "our" and "Huadi" refer to the above-mentioned entities.

**Reorganization**

In or about August 2019, the Company completed a corporate reorganization to roll several controlled entities (now referred to as the subsidiaries) into one legal corporation (the Company). Di Wang, one of the PRC Shareholders transferred 5% equity of Huadi Steel to a Hong Kong entity which was subsequently transferred to Wenzhou Hongshun on August 28, 2019. On August 22, 2019, Wenzhou Hongshun acquired 94% equity of Huadi Steel from the PRC Shareholders. As a result, Huadi Steel's equity interest is 99% held by Wenzhou Hongshun and 1% held by Di Wang as of September 30, 2025.

During the years presented in these consolidated financial statements, the control of the entities has never changed (always under the control of the PRC Shareholders). Accordingly, the combination has been treated as a corporate restructuring (reorganization) of entities under common control and thus the current capital structure has been retroactively presented in prior periods as if such structure existed at that time and in accordance with ASC 805-50-45-5, the entities under common control are presented on a combined basis for all periods to which such entities were under common control. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.

**NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES**

***a.***  ***Basis of Presentation*** 

The accompanying consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United Stated of America ("US GAAP") and have been consistently applied. Significant accounting policies followed by the Company in the preparation of the accompanying consolidated financial statements are summarized below.

***b.***  ***Principles of Consolidation*** 

The accompanying consolidated financial statements include the financial statements of the Company and its majority-owned and controlled subsidiaries. Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.

All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

***c.***  ***Non-controlling interests*** 

For the Company's subsidiaries, non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. Non-controlling interests are classified as a separate line item in the equity section of the Company's consolidated balance sheets and have been separately disclosed in the Company's consolidated statements of operations and comprehensive income to distinguish the interests from that of the Company.

***d.***  ***Use of Estimates*** 

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. GAAP. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent liabilities at the balance sheet date, and the reported revenues and expenses during the reported period in the consolidated financial statements and accompanying notes. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows may be affected.

Significant accounting estimates are used for, but not limited to, allowances for expected credit losses, inventory valuation, useful lives of property, plant and equipment, and land use rights, impairment in long-term investment, and income taxes related to realization of deferred tax assets and uncertain tax position. We have assessed the impact and are not aware of any specific events or circumstances that required an update to our estimates and assumptions or materially affected the carrying value of our assets or liabilities as of the date of issuance of this prospectus. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

***e.***  ***Foreign Currency Translation*** 

The reporting currency of the Company is U.S. dollars ("US$"). The functional currency of the Company's entities incorporated in Cayman Islands, BVI and Hong Kong generally is US$. The Company's PRC subsidiaries generally determined their functional currency to be RMB. The determination of the respective functional currency is based on the criteria of ASC Topic 830, Foreign Currency Matters.

Transactions denominated in currencies other than functional currency are translated into functional currency at the exchange rates quoted by authoritative banks prevailing at the dates of the transactions. Exchange gains and losses resulting from those foreign currency transactions denominated in a currency other than the functional currency are recorded as a component of operating expenses in the consolidated statements of income and comprehensive income (loss).

The consolidated financial statements of the Company are translated from the functional currency into US$. Assets and liabilities denominated in foreign currencies are translated into US$ using the applicable exchange rates at the balance sheet date. Equity accounts other than earnings generated in current year are translated into US$ at the appropriate historical rates. Revenues, expenses, gains and losses are translated into US$ using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded in accumulated other comprehensive income as a component of shareholders' equity. Cash flows are also translated at average translation rates for the periods; therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

The relevant exchange rates are listed below:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Fiscal Years Ended<br> September 30** | **For the Fiscal Years Ended<br> September 30** | **For the Fiscal Years Ended<br> September 30** |
|  | **2025** | **2024** | **2023** |
| **Period Ended RMB: USD exchange rate** | 7.1190 | 7.0176 | 7.2960 |
| **Period Average RMB: USD exchange rate** | 7.2125 | 7.2043 | 7.0533 |

---

***f.***  ***Cash and Cash Equivalents*** 

Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased. The Company maintains majority of its bank accounts in the PRC as of September 30, 2025. Cash balances in bank accounts in PRC are protected under Deposit Protection Scheme in accordance with the Deposit Protection Scheme Ordinance. The maximum protection is up to RMB500,000 per depositor per Scheme member, including both principal and interest.

***g.***  ***Restricted Cash*** 

Restricted cash mainly represents deposits held in designated bank accounts for issuance of bank acceptance notes and letter of guarantee. Those notes are generally short term in nature due to their short maturity period of three to six months, while letter of guarantee is generally due within one year; thus, restricted cash is classified as a current asset. Restricted cash is included in the beginning or ending balance of cash and cash equivalents and restricted cash in the consolidated statements of cash flows.

As of September 30, 2025 and 2024, restricted cash was $3,141,756 and $4,410,489, respectively. No cash is restricted to assure future credit availability.

***h.***  ***Time deposits*** 

Time deposits are those balances placed with the banks. These deposits that have original maturities longer than three months but less than one year are classified as short-term time deposits which are reflected in the consolidated balance sheets as "Time deposits", while the balances with original maturities longer than one year are reflected in the consolidated balance sheets as "Long-term time deposits". The time deposits have a fixed interest rate return and the Company has the intent and ability to hold the deposits to maturity. Time deposits are recorded at amortized cost which approximates fair value.

As of September 30, 2025 and 2024, time deposits were $100,164 and $nil, respectively. These deposits have been pledged for issuance of note payable

***i.***  ***Accounts Receivable, net*** 

Accounts receivable, net includes receivables mainly from customers that represent revenues earned but not yet collected. Accounts receivable, net are initially measured at fair value and subsequently measured at their amortized cost less allowance for credit losses. Please refer to Note 2 (k) - Allowance for credit losses for adoption of expected credit losses model.

***j.***  ***Notes receivable, net*** 

Notes receivable, net represent bank acceptance notes and commercial acceptance notes the Company receives from its customers in exchange for goods or services that it has transferred to customers. The notes generally range from three to six months from the date of issuance. The carrying value of notes receivable is reduced by an allowance of credit losses. Please refer to Note 2 (k) - Allowance for credit losses for adoption of expected credit losses model.

As part of the regular business and in case of immediate cash needs, the Company sells its notes receivable at a discount with or without recourse. Notes receivables are considered sold and derecognized from balance sheet when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the note receivables, and the Company has surrendered control over the transferred note receivables. If the Company does not surrender control, typically for those arrangements with recourse, the cash received from the purchaser is accounted for as a secured borrowing. In the case of arrangements with recourse, notes receivables are not derecognized.

***k.***  ***Allowance for credit losses*** 

In 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASC 326"), which replaced the "incurred loss" impairment methodology with an approach based on "expected losses" to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this guidance on October 1, 2023 using a modified retrospective approach.

ASC 326 requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. Under this guidance, the Company has exposure to credit losses for financial assets including accounts receivable, notes receivable, other receivable and other noncurrent assets. The Company considered various factors, including nature, historical collection experience, the age of the above-mentioned assets' balance, credit quality and specific risk characteristics of its customers, current economic conditions, forecasts of future economic conditions, reversion period, and qualitative and quantitative adjustments to develop an estimate of credit losses. The Company has adopted loss rate method which is a combination of historical rate method and adjustment rate method, to estimate the credit loss.

Financial assets are presented net of the allowance for credit losses in the consolidated balance sheets. The measurement of the allowance for credit losses is recognized through current expected credit loss expense. Current expected credit loss expense is included as a component of general and administrative expenses in the consolidated statements of operations and comprehensive income. Write-offs are recorded in the period in which the asset is deemed to be uncollectible. For the year ended September 30, 2025, the Company recorded $101,257 expected credit loss expense in selling, general and administrative expenses. As of September 30, 2025, the allowance for credit losses of accounts receivable, notes receivable, other receivable and other noncurrent assets was $1,183,298, $138,247, $5,052 and $105,083, respectively.

***l.***  ***Inventories*** 

Inventories, net primarily consist of i) raw materials mainly including steel strips; and ii) finished goods including steel piping products, are stated at the lower of cost or net realizable value. Cost is principally determined using the weighted-average cost method. The Company records write-downs to inventory for excess quantities, obsolescence or impairment when appropriate to reflect inventory at net realizable value. These write-downs are based upon a combination of factors including current sales volume, market conditions, lower of cost or market analysis and expected realizable value of the inventory. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

There were no write-downs recognized of inventories for the years ended September 30, 2025, 2024 and 2023.

***m.***  ***Advances to Suppliers, net*** 

Advances to suppliers refer to advances for purchase of materials or other service agreements.

The Company reviews a supplier's credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would write off such amount in the period when it is considered as impaired.

The allowance for advance to suppliers recognized as of September 30, 2025 and 2024 was $197,935 and $270,148, respectively.

***n.***  ***Property and Equipment, net*** 

Property, plant, and equipment are recorded at cost less accumulated depreciation and impairment. Depreciation commences upon placing the asset in usage and is recognized on a straight-line basis over the estimated useful lives of the assets with 5% of residual value, as follows:

---

| | |
|:---|:---|
|  | **Useful lives** |
| Buildings | 10-32 years |
| Machinery and equipment | 5-20 years |
| Transportation vehicles | 3-10 years |
| Office equipment | 3-10 years |

---

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in other income or expenses in the consolidated statements of income and other comprehensive income.

***o.***  ***Land Use Rights, net*** 

Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company. The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights are sometimes referred to informally as "ownership." Land use rights are stated at cost less accumulated amortization. Land use rights are amortized using the straight-line method with the following estimated useful lives:

---

| | |
|:---|:---|
|  | **Useful lives** |
| Land use rights | 50 years |

---

***p.***  ***Long-term Investments*** 

Effective October 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-01 and related ASU 2018-03 concerning recognition and measurement of financial assets and financial liabilities. In adopting this guidance, the Company has made an accounting policy election to adopt an adjusted cost method measurement alternative for investments in equity securities without readily determinable fair values.

For equity investments that are accounted for using the measurement alternative, the Company initially records equity investments at cost but is required to adjust the carrying value of such equity investments through earnings when there is an observable transaction involving the same or a similar investment with the same issuer or upon an impairment.

***q.***  ***Impairment of Long-lived Assets*** 

Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset or an asset group may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment for the long-lived assets by comparing the carrying value of the asset or the asset group to an estimate of future undiscounted cash flows expected to be generated from the use of the asset or the asset group and its eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the asset or the asset group, the Company recognizes an impairment loss based on the excess of the carrying value of the asset or the asset group over its fair value.

There was no impairment charge recognized for long-lived assets for the years ended September 30, 2025, 2024 and 2023.

***r.***  ***Fair Value*** 

Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value.

Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

For the Company's financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, other receivable, other current liabilities, notes receivable, notes payable, short-term and long-term borrowings, the carrying amounts approximate their fair values due to their short maturities as of September 30, 2025 and 2024.

The Company noted no transfers between levels during any of the periods presented.

 

The Company did not have any instruments that were measured at fair value on a recurring or non-recurring basis as of September 30, 2025 and 2024.

***s.***  ***Revenue Recognition*** **  

The Company adopted ASC Topic 606 Revenue from Contracts with Customers ("ASC 606") on October 1, 2018 using the modified retrospective approach. There is no adjustment to the opening balance of retained earnings at October 1, 2018, since there was no change to the timing and pattern of revenue recognition upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company's customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services and is recorded net of value-added tax ("VAT"). To achieve that core principle, the Company applies the following steps:

Step 1: Identify the contract (s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The Company derives its revenues from two sources: (1) revenue from sales of steel piping products, (2) revenue from production service.

&nbsp;&nbsp;&nbsp;&nbsp;(1) Revenue from sales of steel piping products

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer's ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In the principal versus agent consideration, since no another party is involved in transactions, the Company is the principal.

In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. As the Company's standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on their relative standalone selling price.

The Company does not routinely permit customers to return products, while in certain conditions product changes are allowed. The customer does not have the option to purchase the warranty separately. Also, the warranty does not provide a service to the customer beyond fixing defects that existed at the time of sale. Thus, the warranty is assurance-type, and historically customer returns have been immaterial.

Sales revenue is recognized when control of the product is transferred to the customer (i.e., when the Company's performance obligation is satisfied at a point in time). The Company sells its products either under free onboard ("FOB") shipping point term or under FOB destination term. For sales under FOB shipping point term, the Company recognize revenues when products are loaded on the ships. Product delivery is evidenced by warehouse shipping logs as well as assigned shipping bills from the shipping companies. For sales under FOB destination term, the Company recognize revenues when the products are delivered and accepted by customers. Product delivery is evidenced by signed receipt documents and title transfers upon delivery. Prices are determined based on negotiations with the Company's customers and are not subject to adjustment. As a result, the Company expects returns to be minimal.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Revenue from production service

The Company identifies the product processing agreement as contract. For each contract, the Company considers the promise to provide production service, each of which are distinct, to be the identified performance obligations. In the principal versus agent consideration, since no another party is involved in transactions, the Company is a principal. The transaction price is clearly stated on the contract and not subject to adjustment. The Company allocates the transaction price to each distinct service based on their relative standalone selling price. Production service revenue is recognized when production order is completed and transferred to customer.

*<u>Contract costs</u>*

Contract costs include contract acquisition costs and contract fulfillment costs which are all recorded within prepayments, deposits, and other assets in the consolidated balance sheets.

Contract acquisition costs consist of incremental costs incurred by the Company to originate contracts with customers. Contract acquisition costs generally include costs that are only incurred as a result of obtaining a contract and are expected to be recovered over the contract period. As the Company's contract periods are less than one year, the Company has elected the practical expedient under ASC 340-40-25-4 to expense the costs as incurred. All other costs incurred regardless of obtaining a contract are expensed as incurred. For the years ended September 30, 2025 and 2024, $423,680 and $317,944 contract acquisition costs were expensed as incurred, respectively.

Contract fulfillments costs consist of costs incurred by the Company to fulfill a contract with a customer and are capitalized when the costs generate or enhance resources that will be used in satisfying future performance obligations of the contract and the costs are expected to be recovered. Capitalized contract fulfillment costs generally include contracted services, direct labor, materials, and allocable overhead directly related to resources required to fulfill the contract. Contract fulfillment costs are recognized in cost of revenue during the period that the related costs are expected to contribute directly or indirectly to future cash flows, which is generally over the contract term, on a basis consistent with the transfer of goods or services to the customer to which the costs are related. There were no contract fulfillment cost as of September 30, 2025 and 2024.

*<u>Contract balance</u>*

The Company does not have amounts of contract assets since revenue is recognized at a point in time. Contract liabilities are presented as advance from customers on the consolidated balance sheet. Contract liabilities are recognized when the Company receives prepayment from customers resulting from purchase order or product processing agreement. Contract liabilities will be recognized as revenue when the products are delivered. As of September 30, 2025 and 2024, the balance of advance from customers amounted to $1,317,816 and $1,553,801, respectively. For the years ended September 30, 2025 and 2024, the beginning balance of advance from customers of $1,152,863 and $2,393,995 were recognized as revenue when the products are delivered.

***t.***  ***Value-added Tax ("VAT")*** 

The Company is subject to VAT and related surcharges on revenue generated from products and services. The VAT is based on gross sales price and VAT rates range from 6% to 13% between October 1, 2021 and September 30, 2025 depending on the type of products sold or services provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in accrued expenses and other current liabilities. All of the VAT returns filed by the Company's subsidiaries in China, have been and remain subject to examination by the tax authorities for five years from the date of filing.

***u.***  ***Cost of sales*** 

Cost of sales consists primarily of direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of machinery and equipment and allocations of electricity and infrastructure costs.

***v.***  ***Selling Expenses*** 

Selling expenses consist primarily of shipping and handling costs, travel expenses, advertising costs, and payroll and related expenses for employees involved in marketing and business development activities.

Shipping and handling costs are expensed as incurred. Shipping and handling costs were $1,196,286, $1,547,311 and $1,749,338 for the years ended September 30, 2025, 2024 and 2023, respectively.

Advertising costs are expensed as incurred. Advertising costs were $97,343, $216,728 and $157,293 for the years ended September 30, 2025, 2024 and 2023, respectively.

***w.***  ***General and Administrative Expenses*** 

General and administrative expenses consist primarily of employee related expenses for general corporate functions, including accounting, finance, tax, legal and human relations; costs associated with these functions including facilities and equipment depreciation expenses, repair and maintenance expenses and other general corporate related expenses.

***x.***  ***Research and Development Costs*** 

Research and development activities are directed toward the development of new products as well as improvements in existing processes. These costs, which primarily include salaries, contract services and supplies, are expensed as incurred.

***y.***  ***Government Grants*** 

Government grants consist of specific subsidies and other subsidies. Specific subsidies are subsidies that the local government has provided for a specific purpose, such as research and development purpose, construction of production plants and facilities related to manufacturing base. Other subsidies are the subsidies that the local government has not specified its purpose for and are not tied to future trends or performance of the Company, receipt of such subsidy income is not contingent upon any further actions or performance of the Company and the amounts do not have to be refunded under any circumstances.

The government grants are recorded when received with no further conditions to be met or certain operating conditions are met for which the grants are intended to compensate. Government grants compensate for assets are recognized as a deduction of the carrying amount of the asset when conditions are met.

As of September 30, 2025 and 2024, liabilities included $1,123,753 and $1,139,991, respectively, in deferred government grants. For the years ended September 30, 2025, 2024 and 2023, the Company recognized government grants of $346,597, $904,313 and $373,032, respectively, in other income (expense), net in the consolidated statements of income and other comprehensive income.

***z.***  ***Income Taxes*** 

The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

To the extent applicable, the Company records interest and penalties as other expense. All of the tax returns of the Company's PRC subsidiaries remain subject to examination by PRC tax authorities for five years from the date of filing. The fiscal year for tax purpose in PRC is December 31.

The Company and its subsidiaries are not subject to U.S. tax laws and local state tax laws. The Company's income and that of its related entities must be computed in accordance with Chinese and foreign tax laws, as applicable, and all of which may be changed in a manner that could adversely affect the amount of distributions to shareholders. There can be no assurance that Income Tax Laws of PRC will not be changed in a manner that adversely affects shareholders. In particular, any such change could increase the amount of tax payable by the Company, reducing the amount available to pay dividends to the holders of the Company's ordinary shares.

---

| | |
|:---|:---|
| ***aa.*** | ***Comprehensive Income/(Loss)*** |

---

Comprehensive income/(loss) is defined as the changes in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments from shareholders and distributions to shareholders. Comprehensive income/(loss) for the periods presented primarily includes net income/(loss) and foreign currency translation adjustments.

---

| | |
|:---|:---|
| ***bb.*** | ***Earnings Per Share*** |

---

Earnings (loss) per share is calculated in accordance with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed in accordance with the treasury stock method and based on the weighted average number of ordinary shares and dilutive common share equivalents. Dilutive common share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive. There were no dilutive common share equivalents outstanding during the years ended September 30, 2025, 2024 and 2023.

***cc.***  ***Employee benefit*** 

The full-time employees of the Company are entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees' respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans were $1,081,240, $856,887 and $707,355 for the years ended September 30, 2025, 2024 and 2023, respectively.

***dd.***  ***Statutory reserves*** 

Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable "statutory surplus reserve fund". Subject to certain cumulative limits, the "statutory surplus reserve fund" requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC ("PRC GAAP") at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the "reserve fund". For foreign invested enterprises, the annual appropriation for the "reserve fund" cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulated loss.

---

| | |
|:---|:---|
| ***ee.*** | ***Contingencies*** |

---

From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable, and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company's management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

---

| | |
|:---|:---|
| ***ff.*** | ***Related Party Transactions*** |

---

A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the Company's securities (ii) the Company's management and or their immediate family, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities. Transactions involving related parties cannot be presumed to be carried out on an arm's length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

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| | |
|:---|:---|
| ***gg.*** | ***Certain Risks and Concentration*** |

---

*Exchange Rate Risks*

 

The Company operates in PRC, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB.

*Currency Convertibility Risks*

Substantially all of the Company's operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People's Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the People's Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers' invoices, shipping documents and signed contracts.

*Concentration of Credit Risks*

 

Assets that potentially subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable and contract assets. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates.

As of September 30, 2025 and 2024, all of the Company's cash and cash equivalents, restricted cash and notes receivable were held at major financial institutions located in the PRC which the management believes are of high credit quality. On May 1, 2015, China's new Deposit Insurance Regulation came into effect, pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not provide complete protection for the Company's accounts, as its aggregate deposits are higher than the compensation limit, which is RMB500,000 for one bank ($70,000). However, the Company believes the risk of failure of any of these Chinese banks is remote. Bank failure is uncommon in PRC and the Company believes that those Chinese banks that hold the Company's cash and cash equivalents, restricted cash and notes receivable are financially sound based on publicly available information.

Accounts receivable and contract assets are typically unsecured and are mainly derived from revenues earned from customers in the PRC. The risk with respect to accounts receivable and contract assets is mitigated by credit evaluations the Company performs on its customers and its ongoing monitoring processes of outstanding balances.

*Interest Rate Risks*

The Company is subject to interest rate risk. Although bank interest bearing loans are charged at fixed interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged by the banks when these loans are refinanced.

*Risks and Uncertainties*

 

The operations of the Company are located in the PRC. Accordingly, the Company's business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company's results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in **Note 1**, this may not be indicative of future results.

*Liquidity Risks*

 

Our primary sources of liquidity consist of existing cash balances, cash flows from our operating activities and availability under our revolving credit facility. Our ability to generate sufficient cash flows from our operating activities is primarily dependent on our sales of steel pipe, tube and ancillary products to our customers at margins sufficient to cover fixed and variable expenses.

As of September 30, 2025 and 2024, we had cash and cash equivalents of $6,483,489 and $18,118,456, respectively. We believe that our current cash, cash to be generated from our operations and access to loans from our related parties will be sufficient to meet our working capital needs for at least the next twelve months. However, we do not have any amounts committed to be provided by our related party. We are also not dependent upon this offering to meet our liquidity needs for the next twelve months. However, we plan to expand our business to implement our growth strategies in our existing market and strengthen our position in the marketplace. To do so, we will need more capital through equity financing to increase our production and meet market demands.

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| | |
|:---|:---|
| ***hh.*** | ***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. Under the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of accounting standards until they would apply to private companies. Therefore, the Company's financial statements may not be comparable to financial statements of companies that comply with public company effective dates.

*<u>New Accounting Pronouncements Recently Adopted</u>*

In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU No. 2023-07 is effective for public companies for annual reporting periods beginning after December 15, 2023, on a retrospective basis. The Company adopted ASU No. 2023-07 on October 1, 2024.

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker ("CODM") in deciding how to allocate resources to an individual segment and in assessing performance. The Company's CODM identified as the Company's Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates as one operating segment.

 

*<u>New Accounting Pronouncements Not Yet Adopted</u>*

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company does not expect to early adopt this guidance and is in the process of evaluating the impact of adoption of this guidance on the Company's consolidated financial statements.

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company's consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

**NOTE 3 – ACCOUNTS RECEIVABLE, NET**

Accounts receivable, net as of September 30, 2025 and 2024 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Accounts receivable | $25957139 | $19716856 |
| Less: allowance for expected credit losses | (1183298) | (1003514) |
| Accounts receivable, net | $24773841 | $18713342 |

---

The Company's customers are for the most part, various levels of government, state-owned entities and construction companies. Due to the nature of the customers and the practice of the industry, the Company generally allows credit period of 180 days to its customers. The average accounts receivable turnover period was approximately 131 days, 110 days and 106 days for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.

Changes of allowance for expected credit losses for the years ended September 30, 2025 and 2024 are as follow:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Beginning balance | $1003514 | $2391641 |
| &nbsp;&nbsp;&nbsp;Cumulative-effect adjustment of adoption of CECL | - | (1271219) |
| &nbsp;&nbsp;&nbsp;Addition/(Reversal) | 191562 | (157175) |
| &nbsp;&nbsp;&nbsp;Exchange difference | (11778) | 40267 |
| Ending balance | $1183298 | $1003514 |

---

**NOTE 4 – NOTES RECEIVABLE, NET**

Notes receivable, net as of September 30, 2025 and 2024 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Notes receivable | $8497044 | $8122287 |
| Less: allowance for expected credit losses | (138247) | (220503) |
| Notes receivable, net | $8358797 | $7901784 |

---

Movement of allowance for expected credit losses are as follow:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Beginning balance | $220503 | $- |
| &nbsp;&nbsp;&nbsp;Cumulative-effect adjustment of adoption of CECL | - | 116097 |
| &nbsp;&nbsp;&nbsp;(Reversal)/Addition | (78089) | 97214 |
| &nbsp;&nbsp;&nbsp;Exchange difference | (4167) | 7192 |
| Ending balance | $138247 | $220503 |

---

Notes receivable consisted of bank acceptance notes and commercial acceptance notes. These notes with 3-6 months maturity dates were issued by customers to pay their payable balances to the Company. Factored notes receivables with recourse amounted $4,122,341 and $1,249,765 were recorded as short-term borrowings as of September 30, 2025 and 2024, respectively.

**NOTE 5 – INVENTORIES**

Inventories as of September 30, 2025 and 2024 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Raw materials | $14023679 | $13985558 |
| Work in process | 267465 | 264814 |
| Finished goods | 9793567 | 9062606 |
| Total | $24084711 | $23312978 |

---

There was no inventory write-downs recognized for the years ended September 30, 2025, 2024 and 2023.

**NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET**

Property, plant and equipment, net as of September 30, 2025 and 2024 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Buildings | $4702714 | $4770665 |
| Machinery and equipment | 9439854 | 8398347 |
| Transportation vehicles | 1100660 | 1116564 |
| Office equipment | 636766 | 636193 |
| Construction in progress ("CIP") | 9096839 | 2917883 |
| Total property plant and equipment, at cost | 24976833 | 17839652 |
| Less: accumulated depreciation | (9658083) | (9792037) |
| Property, plant and equipment, net | $15318750 | $8047615 |

---

*Reclassification*

As of September 30, 2024, the Company reclassified $1,741,612 from machinery and equipment to buildings. The reclassification has no effect on the reported total assets, total liabilities, revenues, net income or total cash flows.

*Depreciation expense*

Depreciation expense was $614,558, $685,674 and $657,107 for the years ended September 30, 2025, 2024 and 2023, respectively.

*Disposal*

During fiscal year ended September 30, 2025, the Company sold fixed assets with a net carrying value of $15,177, and recorded gain on sale of fixed assets of $1,264. During fiscal year ended September 30, 2024, no fixed asset was sold.

*Pledge*

As of September 30, 2025 and 2024, the Company pledged buildings to secure banking facilities granted to the Company. The carrying values of the pledged buildings to secure bank borrowings by the Company are shown in *Note 12*.

**NOTE 7 – LAND USE RIGHTS**

Land use rights as of September 30, 2025 and 2024 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Land use rights, cost | $4944307 | $5015749 |
| Less: accumulated amortization | (730771) | (642591) |
| Land use rights, net | $4213536 | $4373158 |

---

Amortization expense was $28,780, $73,726 and $58,778 for the years ended September 30, 2025, 2024 and 2023, respectively.

As of September 30, 2025 and 2024, the Company pledged land use rights to secure banking facilities granted to the Company. The carrying values of the pledged land use rights to secure bank borrowings by the Company are shown in *Note 12*.

**NOTE 8 – LONG-TERM INVESTMENTS**

Long-term investments consisted of the following as of September 30, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Huashang Micro Finance Co. | $5337828 | $5414957 |
| Longwan Rural Commercial Bank | 6318584 | 6409884 |
| Wenzhou Longlian Development Co., Ltd | 1170586 | 1187500 |
| Long-term investment Cost | $12826998 | $13012340 |
| Less: provision for impairment | (1170586) | - |
| Long-term investment | $11656412 | $13012340 |

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Changes of provision for impairment for the year ended September 30, 2025 are as follow:

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| | |
|:---|:---|
|  | **2025** |
| Beginning balance | $- |
| &nbsp;&nbsp;&nbsp;Addition | 1155411 |
| &nbsp;&nbsp;&nbsp;Exchange difference | 15175 |
| Ending balance | $1170586 |

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***Huashang Micro Finance Co.***

In 2009, the Company made an investment of RMB 90,000,000 ($13,203,257 in USD) to acquire 22.5% in Huashang Micro Finance Co. ("Huashang"), a finance company offers micro loans to its customers. In 2015, as the result of a capital reduction, the Company's ownership was reduced by 3.5% to 19% for a cash consideration of RMB 52,000,000 ($8,535,827 in USD). The Company carries this investment at the cost on its consolidated balance sheets. The Company did not receive any dividend income from Huashang during the years ended September 30, 2025, 2024 and 2023.

The ownership percentage of the above long-term investments in Huashang has not changed during the fiscal year ended September 30, 2025. During the year ended September 30, 2025 and 2024, no impairment of long-term investment was recognized.

***Wenzhou Longlian Development Co., Ltd***

In 2011, the Company made an investment of RMB 8,333,400 ($1,307,982 in USD) to acquire 8.3334% in Wenzhou Longlian Development Co., Ltd. ("Longlian"), a property and infrastructure development company. The Company carries this investment at the cost on its consolidated balance sheets. The Company did not receive any dividend income from Longlian and no impairment loss was recorded during the years ended September 30, 2024 and 2023.

In January 2025, Longlian determined to terminate operations and entered into liquidation procedure. The Company provided fully impairment on this investment and recognized an impairment loss of $1,155,411 during the year ended September 30, 2025.

***Longwan Rural Commercial Bank***

In 2012, the Company made an investment of RMB 44,982,000 ($7,172,207 in USD) to acquire 2.1% in Longwan Rural Commercial Bank. ("LRCB"), a private bank accepting deposits and providing short-term or long-term lending to its customers. The Company carries this investment at the cost on its consolidated balance sheets. During the year ended September 30, 2025, the Company received dividend income of RMB 2,381,400 ($330,177 in USD) from LRCB. During the year ended September 30, 2024, the Company received dividend income of RMB 1,984,500 ($275,460 in USD) from LRCB. During the year ended September 30, 2023, the Company received dividend income of RMB 1,764,000 ($250,096 in USD) from LRCB.

The ownership percentage of the above long-term investments in LRCB has not changed during the fiscal year ended September 30, 2025. During the year ended September 30, 2025 and 2024, no impairment of long-term investment was recognized.

**NOTE 9 – LONG-TERM PREPAYMENTS**

Long-term prepayments consisted of prepayments for machinery and equipment, materials, and construction costs for new factory in Songyang of $6,615,984 and $nil as of September 30, 2025 and 2024, respectively. Once the installation of machinery and equipment or phased construction of factory is completed, the associated cost is reclassified into Property, Plant and Equipment.

**NOTE 10 – NOTES PAYABLE**

Notes payable consisted of bank notes payable of $10,148,897 and $13,337,893 provided by the Company to its suppliers as of September 30, 2025 and 2024, respectively. These short-term bank notes can be endorsed and assigned to suppliers as payments for purchases. The bank notes payables are generally payable within six months. These short-term notes payable are guaranteed by the bank for their full face value. In addition, the banks usually require the Company to deposit a certain amount of fund at the bank as a guarantee deposit, which is classified on the consolidated balance sheets as restricted cash.

**NOTE 11 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**

Accrued expenses and other current liabilities consisted of the following as of September 30, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Accrued payroll and other welfare | $2149582 | $1898958 |
| Other accrued expenses | 854122 | 254269 |
| Total | $3003704 | $2153227 |

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**NOTE 12 – SHORT-TERM AND LONG-TERM BORROWINGS**

Short-term and long-term borrowings consisted of the following as of September 30, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| **Short-term borrowings** | $4122341 | $1249765 |
| **Long-term borrowings** |  |  |
| Current portion | $43545 | $- |
| Non-current portion | 8025004 | - |
| **Total long-term borrowings** | $8068549 | $- |

---

**Short-term borrowings**

Short-term borrowings outstanding on September 30, 2025 and 2024 were undue factored notes receivable with recourse as shown in **Note 4**. These notes receivable will be expired in no more than six months from September 30, 2025 and 2024, respectively.

**Long-term borrowings**

Long-term borrowings consisted of the following on September 30, 2025:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Bank Name** | **Amount -<br> RMB** | **Amount -<br> RMB** | **Amount - USD** | **Issuance Date** | **Expiration Date** | **Interest** |
| Agricultural Bank of China |  | 9990000 | $1403287 | 3/20/2025 | 3/19/2028 | 2.40% |
| Agricultural Bank of China |  | 3990000 | 560472 | 3/28/2025 | 3/27/2028 | 2.45% |
| Agricultural Bank of China |  | 4990000 | 700941 | 8/18/2025 | 8/14/2028 | 2.40% |
| Agricultural Bank of China |  | 5000000 | 702346 | 9/16/2025 | 10/16/2026 | 2.35% |
| China Zheshang Bank Co., ltd |  | 6720000 | 943953 | 7/18/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 2640000 | 370839 | 7/30/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 3540000 | 497261 | 8/11/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 4240000 | 595589 | 8/26/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 4000000 | 561877 | 9/1/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 2080000 | 292176 | 9/8/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 6950000 | 976260 | 9/12/2025 | 7/17/2032 | 3.00% |
| China Zheshang Bank Co., ltd |  | 3300000 | 463548 | 9/24/2025 | 7/17/2032 | 3.00% |
| **Total** | **RMB** | **57440000** | $**8068549** |  |  |  |

---

No long-term borrowings were outstanding on September 30, 2024.

The following is a maturity analysis of long-term borrowings as of September 30, 2025:

---

| | | |
|:---|:---|:---|
|  | **RMB** | **USD** |
| **Years ending September 30,** |  |  |
| 2026 | 310000 | $43545 |
| 2027 | 7020000 | 986094 |
| 2028 | 24430000 | 3431662 |
| 2029 | 5580000 | 783818 |
| 2030 | 6700000 | 941143 |
| 2031 and thereafter | 13400000 | 1882287 |
| **Total long-term borrowings** | 57440000 | $8068549 |

---

**Pledges and Guarantees**

The Company's bank borrowings are pledged by its assets as listed below, and guaranteed by the Company's major shareholders: Di Wang, Jueqin Wang, their immediate family members, third-party individuals, and third-party companies:

---

| | | |
|:---|:---|:---|
|  | **As of September 30,** | **As of September 30,** |
|  | **2025** | **2024** |
| Buildings, net | $24453 | $24806 |
| Construction in progress ("CIP") | 9096839 | - |
| Land use rights, net | 3653199 | 417411 |
| Total | $12774491 | $442217 |

---

**Interest expenses**

For the years ended September 30, 2025, 2024 and 2023, total interest expense on all short-term borrowings, long-term borrowings and notes receivable factoring amounted to $195,369, $176,023 and $442,748, respectively.

**NOTE 13 – CUSTOMER AND SUPPLIER CONCENTRATIONS**

Significant customers and suppliers are those that account for greater than 10% of the Company's revenues and purchases.

*Customer concentration*

The Company had no significant customers during the year ended September 30, 2025. There was one customer accounted for a significant portion of total accounts receivable for the year ended September 30, 2025, which accounted for 11.30% of the Company's total accounts receivable.

During the year ended September 30, 2024, two customers accounted for 10.23% and 10.15% of total revenue. As of September 30, 2024, amount due from these two customers included in accounts receivable was $788,305 and $512,547, respectively, representing 4.00% and 2.60% of total accounts receivable, respectively. There was one customer accounted for a significant portion of total accounts receivable for the year ended September 30, 2024, which combined accounted for 16.82% of the Company's total accounts receivable.

The Company had no significant customer during the year ended September 30, 2023. There was one customer accounted for a significant portion of total accounts receivable for the year ended September 30, 2023, which combined accounted for 22.00% of the Company's total accounts receivable.

The loss of our significant customer or the failure to attract new customers could have a material adverse effect on our business, consolidated results of operations and financial condition.

*Purchase concentration*

For the year ended September 30, 2025, one supplier accounted for 20.85% of the Company's total purchase. There were three suppliers that have significant concentration of total accounts payable for the year ended September 30, 2025, which accounted for 26.32%, 18.48% and 14.02% of the Company's total accounts payable.

For the year ended September 30, 2024, three suppliers accounted for 31.45%, 13.77% and 10.39% of the Company's total raw material purchase. There were three suppliers that have significant concentration of total accounts payable for the year ended September 30, 2024, which accounted for 31.96%, 31.40% and 13.32% of the Company's total accounts payable.

For the year ended September 30, 2023, two suppliers accounted for 25.98% and 12.39% of the Company's total purchase. There were four suppliers that have significant concentration (over 10%) of total accounts payable for the year ended September 30, 2023, which accounted for 24.45%, 23.32%, 17.17% and 14.62% of the Company's total accounts payable.

The Company believes there are numerous other suppliers that could be substituted should the supplier become unavailable or non-competitive.

**NOTE 14 – RELATED PARTY TRANSACTIONS**

*1) Nature of relationships with related parties:*

---

| | |
|:---|:---|
| **Name** | **Relationship with the Company** |
| Taizhou Huadi Industrial Ltd. ("Taizhou Huadi") | An entity 30% owned by Jueqin Wang |
| Huashang Micro Finance Co. ("Huashang") | An entity 19% owned by the Company |
| Taizhou Huadi Material Technology Co. (Huadi Material) | An entity 100% owned by Yiyu Wang |
| Wenzhou Maituo International Trade Ltd. ("Wenzhou Maituo") | An entity controlled by Meiling Wang |
| Jueqin Wang | Principal shareholder of the Company |
| Di Wang | Chairman of the Board and Director |
| Yiyu Wang | Immediate family member of majority shareholder of the Company |
| Meiling Wang | Immediate family member of majority shareholder of the Company |

---

*2) Related party transactions*

**2025 Fiscal year**

During the year ended September 30, 2025, the Company purchased a total of $2,456,896 raw materials from Taizhou Huadi and fully paid. These raw materials primarily consisted of stainless steel bars and stainless steel strips. As of September 30, 2025, the Company had no account payable balance due to this entity.

During the year ended September 30, 2025, the Company received a refund of $674,228 from Huadi Material due to changes in production plan. As of September 30, 2025, the Company had outstanding accounts payable of $462 to this entity.

During the year ended September 30, 2025, the Company leased an office to Huashang with annual rent amounted $27,407, and the Company recorded $25,865 rental income. As of September 30, 2025, the Company had advance balance of $7,131 from this entity.

During the year ended September 30, 2025, the Company repaid RMB 350,000 ($48,527 in USD) to Jueqin Wang. The borrowing was made in previous years to support the Company's operations, which was unsecured, due on demand, and interest free. As of September 30, 2025, the company had outstanding balance of $255,344 to Jueqin Wang.

**2024 Fiscal year**

During the year ended September 30, 2024, the Company purchased a total of $1,832 raw materials from Taizhou Huadi. These raw materials primarily consisted of stainless steel bars and stainless steel strips. The Company paid a total of $3,741,463 to Taizhou Huadi for raw materials purchased in recent years. As of September 30, 2024, the Company had no account payable balance due to this entity.

During the year ended September 30, 2024, the Company purchased $666,114 raw materials from Huadi Material and paid a total of $1,427,247. As of September 30, 2024, the Company had advance balance of $692,485 to this entity. Also, the Company sold a total of $7,343 steel materials and refunded $390,513 to Huadi Material which was paid in advance by Huadi Material in the year ended September 30, 2023. As of September 30, 2024, the Company had no advance balance from this entity.

During the year ended September 30, 2024, the Company sold a total of $1,661 steel materials to Shanghai Huadi. As of September 30, 2024, these amounts were fully collected.

During the year ended September 30, 2024, the Company refunded $631,567 to Wenzhou Maituo, which was paid in advance by Wenzhou Maituo in the year ended September 30, 2023. As of September 30, 2024, the Company had no advance balance from this entity.

During the year ended September 30, 2024, the Company leased an office to Huashang with annual rent amounted $29,192, and the Company recorded $30,232 rental income. As of September 30, 2024, the Company had advance balance of $5,650 from this entity.

During the year ended September 30, 2024, the Company repaid RMB 150,000 ($20,821 in USD) to Jueqin Wang. The borrowing was made in previous years to support the Company's operations, which was unsecured, due on demand, and interest free. As of September 30, 2024, the company had outstanding balance of $308,908 to Jueqin Wang.

**2023 Fiscal year**

During the year ended September 30, 2023, the Company purchased a total of $679,210 raw materials from Taizhou Huadi, and sold a total of $239,640 piping products to Taizhou Huadi. These raw materials primarily consisted of stainless steel bars and stainless steel strips. As of September 30, 2023, the Company had outstanding accounts payable of $3,692,394 to this entity.

During the year ended September 30, 2023, the Company sold a total of $520 steel materials to Huadi Material. As of September 30, 2023, the Company had advance balance of $385,605 from this entity.

During the year ended September 30, 2023, the Company received $623,629 in advance from Wenzhou Maituo for piping products.

During the year ended September 30, 2023, the Company leased an office to Huashang with annual rent amounted $26,235, and the Company recorded $19,550 rental income. As of September 30, 2023, the Company had advance balance of $6,462 from this entity.

During the year ended September 30, 2023, the Company repayment RMB 2,000,000 ($274,123 in USD) to Di Wang. The borrowing was made in previous years to support the Company's operations, which was unsecured, due on demand, and interest free.

*3) Related party balances*

Net outstanding balances with related parties consisted of the following as of September 30, 2025 and 2024:

---

| | | | |
|:---|:---|:---|:---|
| **Accounts** | **Name of related parties** | **2025** | **2024** |
| Advance to suppliers, net | Taizhou Huadi Material Technology Co. | $- | $692485 |
| Accounts payable | Taizhou Huadi Material Technology Co. | (462) | - |
| Advance from customer | Huashang Micro Finance Co. | (7131) | (5650) |
| Due to related parties – noncurrent portion | Jueqin Wang | (255344) | (308908) |

---

**NOTE 15 – SHAREHOLDERS' EQUITY**

**Ordinary shares**

*Reverse Stock Split*

On October 9, 2020, the Board of the Directors of Huadi International approved a 2 for 1 reverse stock split whereby every two authorized, issued and outstanding ordinary share was exchanged for one new ordinary shares (the "Reverse Stock Split") and as a result of the Reverse Stock Split, the authorized ordinary shares decreased from 500,000,000 shares to 250,000,000 shares, par value of each ordinary share increased from $0.0001 to $0.0002, and the number of issued and outstanding ordinary shares decreased from 20,000,000 shares to 10,000,000 shares. All share information included in the consolidated financial statements and notes thereto have been retroactively adjusted as if such Reverse Stock Split occurred on the first day of the first period presented.

*Shares Issuances*

 

On January 26, 2021, the Company completed its initial public offering ("IPO") of 3,125,000 shares of its common stock at a public offering price of $8.00 per share. The gross proceeds from the offering were approximately $25 million before deducting placement agents' commissions and other offering expenses. The offering was conducted on a firm commitment basis. The Company issued warrants to the Underwriters equal to six percent (6%) of the shares issued in the IPO (the "Representative Warrants"). The Representative Warrants will be exercisable at any time, and from time to time, in whole or in part, during the period commencing 180 days from the effective date of the offering, which period shall not extend further than four and one-half year years from the effective date of the registration statement in compliance with FINRA Rule 5110(f)(2)(G)(i). The Representative Warrants are exercisable at a per share price of $10.00, which is 125% of the Public Offering Price. The Representative Warrants are also exercisable on a cashless basis. As of September 30, 2022, no warrant was exercised.

On January 22, 2021, the Company issued 2,000 shares to Henry He Huang, the Company's Director, pursuant to the Director Offer Letter between the Company and Henry He Huang. The Company received no proceed from this issuance as it is a stock-based compensation, and the Company valued the shares based on the fair value at the date of issuance. The shares had fair value of $16,000.

On February 19, 2021, the board of Wenzhou Hongshun approved the resolution to increase investment into Huadi Steel by RMB 99 million, of which RMB 32 million has been paid by Wenzhou Hongshun as of March 30, 2021, with Di Wang invested additional RMB 1 million. As a result, the shareholder structure remains the same with Wenzhou Huadi Steel's equity interest 99% held by Wenzhou Hongshun and 1% held by Di Wang.

On November 7, 2022, the Company entered into a securities purchase agreement with two institutional investors pursuant to which the Company agreed to sell up to 3,500,000 ordinary shares, par value $0.0002 per share, in a registered direct offering. On November 9, 2022, the Company closed the Offering for the sale of 1,000,000 ordinary shares. The Company received gross proceeds from the sale of the Shares of approximately $25,000,000, before deducting placement agent fees and other offering expenses. The Company has agreed to grant each purchaser, for a period of one ninety (90) days after the closing date, or for an additional thirty (30) days thereafter at the election of the Company, the right to purchase additional ordinary shares in an aggregate amount equal to up to 250% of the Shares issued or issuable to each purchaser pursuant to the Purchase Agreement, on the same terms, conditions and price at the purchase of the ordinary shares. Management determined that these warrants are equity instruments because the warrants are both a) indexed to its own stock; and b) classified in stockholders' equity. The warrants were recorded at their fair value on the date of grant as a component of stockholders' equity. As of September 30, 2023, all warrants have expired.

Stock-based compensation

On April 20, 2023, the Company granted an aggregate of 20,000 annual bonus share (the "Bonus Shares") to its Chief Financial Officer Mr. Jianping Xiang. The stock-based compensation expense in relation to the Bonus Shares have been recognized based on the fair value on the share price of $2.98 on the grant date. As of September 30, 2023, the 20,000 shares have been issued to Mr. Jianping Xiang. For the year ended September 30, 2023, the Company recognized $59,600 for the compensation cost.

On April 16, 2024, the Company granted an aggregate of 20,000 annual bonus share (the "Bonus Shares") to its Chief Financial Officer Mr. Jianping Xiang. The stock-based compensation expense in relation to the Bonus Shares have been recognized based on the fair value on the share price of $2.45 on the grant date. As of September 30, 2024, the 20,000 shares have been issued to Mr. Jianping Xiang. For the year ended September 30, 2024, the Company recognized $49,000 for the compensation cost.

On April 16, 2025, the Company granted an aggregate of 20,000 annual bonus share (the "Bonus Shares") to its Chief Financial Officer Mr. Jianping Xiang. The stock-based compensation expense in relation to the Bonus Shares have been recognized based on the fair value on the share price of $1.47 on the grant date. As of September 30, 2025, the 20,000 shares have been issued to Mr. Jianping Xiang. For the year ended September 30, 2025, the Company recognized $29,400 for the compensation cost.

**Non-controlling interests**

Non-controlling interests represent the interest of non-controlling shareholder in Huadi Steel based on his proportionate interests in the equity of that company adjusted for its proportionate share of income or losses from operations. In August 2019, Wenzhou Hongshun acquired 99% equity percentage of Huadi Steel from the PRC Shareholders. As the result, Huadi Steel's equity interest is 99% held by Wenzhou Hongshun and 1% held by Di Wang. The non-controlling interest in Huadi Steel was 1% as of September 30, 2025 and 2024.

**Restricted net assets**

The Company's ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws and regulations permit payments of dividends by WFOEs and Huadi Steel (collectively, the "Huadi PRC Subsidiaries") only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Huadi PRC Subsidiaries.

Huadi PRC Subsidiaries are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their respective registered capital. In addition, Huadi PRC Subsidiaries may allocate a portion of their after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at their discretion. Huadi PRC Subsidiaries may allocate a portion of their respective after-tax profits based on PRC accounting standards to a discretionary surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.

As a result of the foregoing restrictions, Huadi PRC Subsidiaries are restricted in their ability to transfer their assets to the Company. Foreign exchange and other regulations in the PRC may further restrict Huadi PRC Subsidiaries from transferring funds to the Company in the form of dividends, loans and advances. As of September 30, 2025 and 2024, amounts restricted are the paid-in-capital and statutory reserve of Huadi PRC Subsidiaries as follows:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Statutory reserves | $919978 | $919978 |
| Paid-in-capital | 25285336 | 24815336 |
| Total | $26205314 | $25735314 |

---

**NOTE 16 – INCOME TAXES**

**Enterprise Income Taxes ("EIT")**

 

*Cayman Islands*

Huadi International is incorporated in Cayman Island as an offshore holding company. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.

*British Virgin Islands*

Tuoxing is incorporated in British Virgin Islands as an offshore holding company. Under the current laws of the British Virgin Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed.

*Hong Kong*

HK Beach is established in Hong Kong. Under the current Hong Kong Inland Revenue Ordinance, companies are subject to 16.5% income tax or on its taxable income generated from operations in Hong Kong. On December 29, 2017, Hong Kong government announced a two-tiered profit tax rate regime. Under the two-tiered tax rate regime, the Company's Hong Kong subsidiary, HK Beach, the first HK$2.0 million assessable profits will be subject to an 8.25% lower tax rate and the remaining taxable income will continue to be taxed at the existing 16.5% tax rate. The two-tiered tax regime becomes effective from the assessment year of 2018 and 2019, which is on or after April 1, 2018. The application of the two-tiered rates is restricted to only one nominated enterprise among connected entities. HK Beach is nominated by the Company as the entity to apply the two-tiered rates among the group for the assessment years of 2025, 2024 and 2023.

*PRC*

Hongshun is established in PRC and is subject to statutory income tax rate at 25%.

Huadi Steel, the Company's main operating subsidiary in PRC, was entitled High and New Technology Enterprise ("HNTE") and enjoyed preferential tax rate of 15% for a three-year validity period from fiscal year 2022, and the HNTE certificate was renewed on December 29, 2025. Thus, Huadi Steel is eligible for a 15% preferential tax rate from fiscal year 2022 to fiscal year 2028. As of September 30, 2024, the tax years ended December 31, 2018 through December 31, 2023 for the Company's PRC entities remain open for statutory examination by PRC tax authorities.

Huadi Songyang is established in PRC and is subject to statutory income tax rate at 25%.

Income taxes for the years ended September 30, 2025, 2024 and 2023 are attributed to the Company's continuing operations in China and consisted of:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Current income tax | $- | $8668 | $285460 |
| Deferred income tax | (494807) | (307278) | (64606) |
| Total income tax (benefits) expense | $(494807) | $(298610) | $220854 |

---

Income tax expense reconciliations using the effective income tax rate for Huadi steel, the Company's main operating subsidiary, are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| (Loss) Income before taxes | $(1895608) | $(156215) | $3516111 |
| PRC EIT tax rates | 25% | 25% | 15% |
| Tax at the PRC EIT tax rates | $(473902) | (39054) | 527417 |
| Difference due to preferential tax | 98221 | (19006) | - |
| Rate differences in various jurisdictions | 118435 | 78051 | 82748 |
| Tax effect of R&D expenses deduction | (325032) | (335883) | (382617) |
| Tax effect of non-taxable investment income and government grant | (49527) | (41319) | (37514) |
| Tax effect of non-deductible expenses | 27083 | 41415 | 30820 |
| Changes in valuation allowance | 109915 | 17186 | - |
| Income tax (benefits) expenses | $(494807) | $(298610) | $220854 |

---

**Deferred tax assets**

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets as of September 30, 2025 and 2024 are presented below:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Deferred tax assets: |  |  |
| &nbsp;&nbsp;&nbsp;Allowance for expected credit losses | $214752 | $202245 |
| &nbsp;&nbsp;&nbsp;Allowance for bad debt | 116747 | 47416 |
| &nbsp;&nbsp;&nbsp;Impairment on long-term investment | 175588 | - |
| &nbsp;&nbsp;&nbsp;Loss carryforward | 665998 | 318856 |
| &nbsp;&nbsp;&nbsp;DTA allowance | (128751) | (17643) |
| Total | $1044334 | $550874 |

---

**Tax payables**

Tax payables consisted of the following as of September 30, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Income tax payable | $2918611 | $3318644 |
| VAT and tax payable | 42562 | 325521 |
| Total | $2961173 | $3644165 |

---

**Uncertain tax positions**

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. An uncertain tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of September 30, 2025 and 2024 the Company did not have any significant unrecognized uncertain tax positions.

**NOTE 17 – COMMITMENT AND CONTINGENCIES**

**Commitments**

*Capital commitments*

 

The Company's capital commitments primarily relate to capital expenditures contracted for construction of new factories. Total capital commitments contracted but not provided for amounted to $9,422,194 and $6,238,097 as of September 30, 2025 and 2024, respectively. All commitments as of September 30, 2025 were within 1 year.

**Contingencies**

From time to time, the Company is involved in various legal proceedings, claims and other disputes arising from commercial operations, employees, and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity. As of September 30, 2025 and 2024, the Company had no material pending legal proceedings outstanding.

**NOTE 18 – SEGMENT REPORTING**

The Company follows FASB ASC Topic 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and evaluating their performance. Reportable operating segments include components of an entity about which separate financial information is available and which operating results are regularly reviewed by the chief operating decision maker ("CODM"), our CEO Mr. Di Wang, to make decisions about resources to be allocated to the segment and assess each operating segment's performance.

The Company derives its revenues from two sources: (1) revenue from sales of steel piping products, (2) revenue from production service.

As the CODM assesses performance for the Company and determines how to allocate resources based on consolidated net income (loss) as reported in the consolidated statements of income and comprehensive (loss) income, the Company considers itself to have a single operating segment and, therefore, only one reportable segment.

The CODM's resource allocation decisions typically affect the overall business rather than any individual product/service line. As a result, the Company does not allocate shared operating expenses to specific service lines for management reporting, and decisions are made based on consolidated financial results. This is supported by the fact that the Company's financial systems are not designed to budget, track transactions, or allocate shared costs for reporting operating margins at the product/service line level or any other detailed level. The Company believes that presenting financial information as a single operating segment aligns with how management organizes and makes decisions about the business.

The following table includes the significant expense categories and amounts that are regularly provided to the CODM:

 ****

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Revenues | $62895611 | $74270429 | $84332300 |
| Cost of sales | (56102806) | (66954594) | (71976696) |
| Gross profit | 6792805 | 7315835 | 12355604 |
| Selling expense | (2428570) | (2661411) | (2829580) |
| General and administrative expense | (5347320) | (4122038) | (4508740) |
| Research and development expense | (2166881) | (2239220) | (2550777) |
| Foreign currency transaction gains | 265960 | 98353 | 644118 |
| (Loss)/Income from operations | (2884006) | (1608481) | 3110625 |
| Other income (expenses), net | 988398 | 1452266 | 405486 |
| (Loss)/Income before income taxes | (1895608) | (156215) | 3516111 |
| Income tax benefit/(provision) | 494807 | 298610 | (220854) |
| Net (loss) income | $(1400801) | $142395 | $3295257 |

---

The following table disaggregates the revenue for the years ended September 30, 2025, 2024 and 2023 are as follows:

*Revenue by product/service line*

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Sales of steel piping products | $62487643 | $73635012 | $83113259 |
| Production service revenue | 407968 | 635417 | 1219041 |
| Total revenue | $62895611 | $74270429 | $84332300 |

---

*Revenue by geographical areas*

The following table presents revenues by geographic areas for the year ended September 30, 2025:

---

| | | |
|:---|:---|:---|
|  | **Sales Amount<br> (In USD)** | **As %<br> of Sales** |
| **Top 5 Geographic Areas:** |  |  |
| China | $53572505 | 85.18% |
| USA | 6267793 | 9.97% |
| India | 1407889 | 2.24% |
| Singapore | 400632 | 0.64% |
| Australia | 370226 | 0.59% |
| Other foreign countries | 876566 | 1.38% |

---

The following table presents revenues by geographic areas for the year ended September 30, 2024.

---

| | | |
|:---|:---|:---|
|  | **Sales Amount<br> (In USD)** | **As %<br> of Sales** |
| **Top 5 Geographic Areas:** |  |  |
| China | $60079920 | 80.89% |
| USA | 7814677 | 10.52% |
| Singapore | 3767180 | 5.07% |
| The United Arab Emirates | 776416 | 1.05% |
| India | 748168 | 1.01% |
| Other foreign countries | 1084068 | 1.46% |

---

The following table presents revenues by geographic areas for the year ended September 30, 2023.

---

| | | |
|:---|:---|:---|
|  | **Sales Amount<br> (In USD)** | **As %<br> of Sales** |
| **Top 5 Geographic Areas:** |  |  |
| China | $73744662 | 87.45% |
| USA | 7146478 | 8.47% |
| India | 1596243 | 1.89% |
| United Mexican States | 577416 | 0.68% |
| Australia | 385111 | 0.46% |
| Other foreign countries | 882390 | 1.05% |

---

**NOTE 19 – OTHER INCOME (EXPENSE), NET**

Other income (expense), net for the years ended September 30, 2025, 2024 and 2023 consisted of the following:

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| Government grants | $346597 | $904313 | $373032 |
| Dividend income | 330177 | 275460 | 250096 |
| Rental income | 106616 | 127996 | 85437 |
| Other net miscellaneous income (expenses) | (15613) | (61843) | (6814) |
| Total revenue | $767777 | $1245926 | $701751 |

---

**NOTE 20 – SUBSEQUENT EVENTS**

In accordance with ASC Topic 855, "Subsequent Events", which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. The Company has evaluated all events or transactions that occurred after September 30, 2025, up through January 30, 2026 the date the Company issued the consolidated financial statements and concluded that no other subsequent material events except for the disclosed below:

**Bank borrowings**

 

*Borrowings repayment and renewal*

 

From September 30, 2025 to the date the audited consolidated financial statements were available to be issued, the Company partially repaid its long-term borrowings of $563,281 (RMB 4,010,000).

*New borrowings*

As the date the audited consolidated financial statements were available to be issued, the Company has new bank borrowings in the amount of $4,259,727 (RMB 30,325,000) as following:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Bank Name** | **Amount<br> - RMB** | **Amount<br> - RMB** | **Amount - USD** | **Issuance Date** | **Expiration Date** | **Interest** |
| China Zheshang Bank Co., ltd |  | 2000000 | $280938 | 10/17/2025 | 10/16/2026 | 1.55% |
| China Zheshang Bank Co., ltd |  | 3000000 | 421408 | 12/19/2025 | 12/18/2026 | 1.55% |
| Zhejiang Commercial Bank Co.,Ltd. |  | 4595000 | 645456 | 10/22/2025 | 07/17/2032 | 3.00% |
| Zhejiang Commercial Bank Co.,Ltd. |  | 8270000 | 1161680 | 11/18/2025 | 07/17/2032 | 3.00% |
| Zhejiang Commercial Bank Co.,Ltd. |  | 2160000 | 303413 | 11/28/2025 | 07/17/2032 | 3.00% |
| Zhejiang Commercial Bank Co.,Ltd. |  | 10300000 | 1446832 | 12/05/2025 | 07/17/2032 | 3.00% |
| **Total** | **RMB** | **30325000** | $**4259727** |  |  |  |

---

**NOTE 21 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY**

The Company performed a test on the restricted net assets of the consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), "General Notes to Financial Statements" and concluded that it was applicable for the Company to disclose the financial statements for the parent company.

The subsidiary did not pay any dividend to the Company for the periods presented herein. For the purpose of presenting parent-only financial information, the Company records its investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as "Investment in subsidiaries" and the income of the subsidiary is presented as "share of income of subsidiaries". Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.

The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of September 30, 2025 and 2024, respectively.

**PARENT COMPANY BALANCE SHEETS**

**AS OF SEPTEMBER 30, 2025 AND 2024**

(**IN U.S. DOLLARS, EXCEPT SHARE DATA)**

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $108312 | $511454 |
| &nbsp;&nbsp;&nbsp;Other receivables | 6858500 | 6858500 |
| Total current assets | 6966812 | 7369954 |
| &nbsp;&nbsp;&nbsp;Investment in subsidiaries | 68701993 | 70724772 |
| **TOTAL ASSETS** | $**75668805** | $**78094726** |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | $154500 | $91500 |
| Total current liabilities | 154500 | 91500 |
| **TOTAL LIABILITIES** | **154500** | **91500** |
| **COMMITMENTS AND CONTIGENCIES** |  |  |
| Shareholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.0002 par value, 250,000,000 shares authorized, 14,299,182 and 14,279,182 shares issued and outstanding, respectively | 2860 | 2856 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 67359101 | 67329705 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 7228510 | 8624437 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | 923834 | 2046228 |
| Total equity | **75514305** | **78003226** |
| **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | $**75668805** | $**78094726** |

---

**PARENT COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)**

**FOR THE YEARS ENDED SEPTEMBER 30, 2025, 2024 AND 2023**

**(IN U.S. DOLLARS, EXCEPT SHARE DATA)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Operating expenses:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative | $491781 | $474715 | $605480 |
| **Total operating expenses** | **491781** | **474715** | **605480** |
| **Operating income** | **(491781)** | **(474715)** | **(605480)** |
| Other income (expenses): |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest income (expenses), net | 16239 | 120137 | 106363 |
| &nbsp;&nbsp;&nbsp;Share of (loss) income of subsidiaries | (920385) | 492000 | 3756839 |
| **Total other income (expenses), net** | **(904146)** | **612137** | **3863202** |
| **Income before income taxes** | **(1395927)** | **137422** | **3257722** |
| Income tax expenses | - | - | - |
| **Net income** | **(1395927)** | **137422** | **3257722** |
| Other comprehensive income (loss): |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | (1122394) | 2475007 | (1301838) |
| **Total comprehensive income (loss)** | $**(2518321)** | $**2612429** | $**1955884** |

---

**PARENT COMPANY STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED SEPTEMBER 30, 2025, 2024 AND 2023 (IN U.S. DOLLARS, EXCEPT SHARE DATA)**

---

| | | | |
|:---|:---|:---|:---|
|  | **2025** | **2024** | **2023** |
| **Cash Flows from Operating Activities:** |  |  |  |
| Net income | $(1395927) | $137422 | $3257722 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Stock-based compensation | 29400 | 49000 | 59600 |
| &nbsp;&nbsp;&nbsp;Share of loss (income) of subsidiaries | 920385 | (492000) | (3756839) |
| Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other current liabilities | 63000 | 25000 | - |
| &nbsp;&nbsp;&nbsp;**Net cash provided by (used in) operating activities** | **(383142)** | **(280578)** | **(439517)** |
| **Cash Flows from Investing Activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Investment in subsidiary | (20000) | (2200000) | - |
| **Net cash used in investing activities** | **(20000)** | **(2200000)** | **-** |
| **Cash Flows from Financing Activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from stock offering, net of offering costs |  |  | 23010000 |
| &nbsp;&nbsp;&nbsp;Repayments to related parties |  |  | (6858500) |
| &nbsp;&nbsp;&nbsp;Repayments to subsidiaries | - | - | (12733500) |
| **Net cash (used in) provided by financing activities** | **-** | **-** | **3418000** |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | - | - | - |
| **Net (decrease) increase in cash and cash equivalents and restricted cash** | **(403142)** | **(2480578)** | **2978483** |
| Cash and cash equivalents and restricted cash at the beginning of year | 511454 | 2992032 | 13549 |
| **Cash and cash equivalents and restricted cash at the end of year** | $**108312** | $**511454** | $**2992032** |

---

## Exhibit 2.1

**Exhibit 2.1**

**DESCRIPTION OF SECURITES REGISTERED UNDER SECTION 12 OF THE SECURITIES**

**EXCHANGE ACT OF 1934, AS AMENDED (the "Exchange Act")**

The following is a summary of material provisions of our currently effective amended and restated memorandum and articles of association (our "Memorandum and Articles of Association"), as well as the Companies Act (as amended) of the Cayman Islands, or the "Cayman Islands Companies Act" insofar as they relate to the material terms of our Ordinary Shares. Notwithstanding this, because it is a summary, it may not contain all the information that you may otherwise deem important. It is subject to and qualified in its entirety by reference to our amended and restated Memorandum and Articles, which are incorporated by reference as an exhibit to the Annual Report on Form 20-F of which this Exhibit 2.1 is a part.

**Description of Ordinary Shares**

***Type and Class of Securities (Item 9.A.5 of Form 20-F)***

As of the date of the Annual Report on Form 20-F (the "Form 20-F") of which this Exhibit 2.1 is a part, Huadi International Group Co., Ltd. (the "Company", "we", "us" or "our") has only one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: the Company's ordinary shares (the "Ordinary Shares").

Pursuant to our amended and restated memorandum and articles of association, our company's authorized share capital consists of 250,000,000 Ordinary Shares with a par value of US$0.0002 per share. As of January 13, 2026, there are 14,299,182 Ordinary Shares issued and outstanding.

***Preemptive Rights (Item 9.A.3 of Form 20-F)***

Our shareholders do not have preemptive rights.

***Limitations or Qualifications (Item 9.A.6 of Form 20-F)***

Not applicable.

***Rights of Other Types of Securities (Item 9.A.7 of Form 20-F)***

Not applicable.

***Rights of Ordinary Shares (Item 10.B.3 of Form 20-F)***

*Class of Ordinary Shares*

The Company has only one class of Ordinary Shares. Pursuant to our amended and restated memorandum and articles of association, our company's authorized share capital consists of 250,000,000 ordinary shares with a par value of US$0.0002 per share. All of our shares to be issued in the offering will be issued as fully paid. As of the date of this report, the Company has no outstanding options, warrants and other convertible securities.

*Dividends*

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Cayman Islands Companies Act, as amended. Our amended and restated articles of association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our board of directors determine is no longer needed. Dividends may also be declared or paid out of share premium account or otherwise permitted by the Cayman Islands Companies Act, provided that in no circumstances may we pay a dividend if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.

*Voting Rights*

Any action required or permitted to be taken by the shareholders must be taken at a duly called and quorate annual or special meeting of the shareholders entitled to vote on such action and may be effected by a resolution in writing. At each general meeting, each shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) will have one vote for each ordinary share which such shareholder holds. At any shareholders' meeting the chairman is responsible for deciding in such manner as he considers appropriate whether any resolution proposed has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes of the meeting. A poll may be demanded by the chairman of such meeting or one or more shareholders present in person or by proxy entitled to vote.

*Cumulative Voting*

Delaware law permits cumulative voting for the election of directors only if expressly authorized in the certificate of incorporation. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our amended and restated memorandum and articles of association do not provide for cumulative voting.

*Pre-emptive Rights*

There are no pre-emptive rights applicable to the issue by us of new shares under either Cayman Islands law or our amended and restated memorandum and articles of association.

*Meetings of Shareholders*

Any of our directors may convene meetings of shareholders at such times and in such manner and places within or outside the Cayman Islands as the director considers necessary or desirable. The director convening a meeting shall give at least seven days' notice of a meeting of shareholders to those shareholders whose names on the date the notice is given appear as members in the register of members of the Company and are entitled to vote at the meeting, and each of the Company's directors. Our board of directors must convene a general meeting upon the written request of one or more shareholders holding no less than 10% of our voting share capital.

No business may be transacted at any general meeting unless a quorum is present at the time the meeting proceeds to business. Two or more members present in person or by proxy and entitled to vote shall be a quorum. If, within two hours from the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of shareholders, shall be dissolved. In any other case, it shall stand adjourned to the next business day in the jurisdiction in which the meeting was to have been held at the same time and place or to such other time and place as the board of directors may determine, and if, at the adjourned meeting, a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may transact the business for which the meeting was called. If present, the chair of our board of directors shall be the chair presiding at any meeting of the shareholders.

*Meetings of Directors*

The management of our company is entrusted to our board of directors, who will make decisions by voting on resolutions of directors. At any meeting of directors, a quorum will be present if two directors are present, unless otherwise fixed by the directors. If there is a sole director, that director shall be a quorum. A person who holds office as an alternate director shall be counted in the quorum. A director who also acts as an alternate director shall count twice towards the quorum. An action that may be taken by the directors at a meeting may also be taken by a resolution of directors consented to in writing by all of the directors.

*Winding Up*

On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of our shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

*Calls on Ordinary Shares and forfeiture of Ordinary Shares*

Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

*Repurchase of Ordinary Shares*

The Cayman Islands Companies Act and our amended and restated memorandum and articles of association permits us to purchase our own shares, subject to certain restrictions and requirements. Our directors may only exercise this power on our behalf, subject to the Cayman Islands Companies Act, our amended and restated memorandum and articles of association and to any applicable requirements imposed from time to time by the Nasdaq, the Securities and Exchange Commission, or by any other recognized stock exchange on which our securities are listed.

Provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner, provided the requirements under the Cayman Islands Companies Act have been satisfied, including out of capital, as may be determined by our board of directors. Under the Cayman Islands Companies Act, the repurchase of any share may be paid out of our company's profits or out of the proceeds of a fresh issue of shares made for the purpose of such repurchase, or out of capital (including share premium account and capital redemption reserve). If the repurchase proceeds are paid out of our Company's capital, our Company must, immediately following such payment, be able to pay its debts as they fall due in the ordinary course of business. In addition, under the Cayman Islands Companies Act, no such share may be repurchased (1) unless it is fully paid up, (2) if such repurchase would result in there being no shares outstanding, and (3) unless the manner of purchase (if not so authorized under the amended and restated memorandum and articles of association) has first been authorized by a resolution of our shareholders. In addition, under the Cayman Islands Companies Act, our Company may accept the surrender of any fully paid share for no consideration unless, as a result of the surrender, the surrender would result in there being no shares outstanding (other than shares held as treasury shares).

*Inspection of Books and Records*

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.

*Issuance of additional Ordinary Shares*

Our amended and restated memorandum and articles of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent available authorized but unissued shares.

 ****

***Requirements to Change the Rights of Holders of Ordinary Shares (Item 10.B.4 of Form 20-F)***

*Variations of Rights of Shares*

The rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that class or series), whether or not our company is being wound-up, may be varied with the consent in writing of the holders of two-thirds of the issued shares of that class or series or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class or series. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

***Limitations on the Rights to Own Ordinary Shares (Item 10.B.6 of Form 20-F)***

*Rights of Non-Resident or Foreign Shareholders*

There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

***Ownership Threshold (Item 10.B.8 of Form 20-F)***

There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non- resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

***Differences Between the Law of Different Jurisdictions (Item 10.B.9 of Form 20-F)***

The Cayman Islands Companies Act is modeled after that of English law but does not follow recent English statutory enactments. In addition, the Cayman Islands Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Cayman Islands Companies Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.

*Mergers and Similar Arrangements*

The Cayman Islands Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, a "merger" means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and a "consolidation" means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company.

In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by a special resolution of the shareholders of each constituent company, and such other authorization, if any, as may be specified in such constituent company's articles of association.

The plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares if they follow the required procedures, under the Cayman Islands Companies Act subject to certain exceptions. The fair value of the shares will be determined by the Cayman Islands court if it cannot be agreed among the parties. Court approval is not required for a merger or consolidation effected in compliance with these statutory procedures.

In addition, there are statutory provisions that facilitate the reconstruction of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands.

While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

● the statutory provisions as to the required majority vote have been met;

● the shareholders have been fairly represented at the meeting in question;

● the arrangement is such that an intelligent and honest man of that class acting in respect of his interest would reasonably approve.; and

● the arrangement is not one that would more properly be sanctioned under some other provision of the Cayman Islands Companies Act.

The Cayman Islands Companies Act also contains a statutory power of compulsory acquisition which may facilitate the "squeeze out" of dissentient minority shareholders upon a tender offer. When a tender offer is made and accepted by holders of not less than 90% of the shares which are subject to the offer within four months, the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

 

*Shareholders' Suits and Protection of Minority Shareholders*

 

In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Grand Court can be expected to apply and follow the common law principles (namely the rule derived from the seminal English case of *Foss v. Harbottle*, and the exceptions thereto, which limits the circumstances in which a shareholder may bring a derivative action on behalf of the company or a personal action to claim loss which is reflective of loss suffered by the company) which permit a minority shareholder to commence a class action against, or derivative actions in the name of, a company to challenge the following acts in the following circumstances:

● a company acts or proposes to act illegally or ultra vires and is therefore incapable of ratification by the shareholders;

● an irregularity in the passing of a resolution which requires a qualified majority;

● an act purporting to abridge or abolish the individual rights of a member; and

● an act which constitutes a fraud on the minority where the wrongdoers are themselves in control of the company.

In the case of a company (not being a bank) having its share capital divided into shares, the Grand Court may, on the application of members holding not less than one fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and to report thereon in such manner as the Grand Court shall direct.

*Indemnification of Directors and Executive Officers and Limitation of Liability*

The Cayman Islands Companies Act does not limit the extent to which a company's memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such indemnification may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty, willful default or fraud of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

*Directors' Fiduciary Duties.*

 

Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he or she owes the following duties to the company — a duty to act in good faith in the best interests of the company, a duty not to make a personal profit based on his or her position as director (unless the company permits him or her to do so), a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, there are indications that English and Commonwealth courts are moving towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

*Shareholder Action by Written Consent*

Under the Delaware corporate law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our articles of association provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.

*Shareholder Proposals*

 

Under the Delaware corporate law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. The Cayman Islands Companies Act provides shareholders with only limited rights to requisition a general meeting and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in articles of association. Our articles of association allow our shareholders holding 10% or more of the voting rights to requisition a shareholder's meeting. Other than this right to requisition a shareholders' meeting, our articles of association do not provide our shareholders other right to put proposal before a meeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders' annual general meetings unless expressly provided under the articles of association.

*Cumulative Voting*

 

Under the Delaware corporate law, cumulative voting for elections of directors is not permitted unless the corporation's certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder's voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the Cayman Islands Companies Act but our articles of association do not provide for cumulative voting.

*Removal of Directors*

 

Under the Delaware corporate law, a director of a corporation may be removed with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.

*Transactions with Interested Shareholders*

 

The Delaware corporate law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target's outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target's board of directors. The Cayman Islands Companies Act has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into *bona fide* in the best interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.

*Dissolution; Winding up*

 

Under the Delaware corporate law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the Cayman Islands Companies Act, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its shareholders. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Cayman Islands Companies Act and our articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.

*Variation of Rights of Shares*

 

Under the Delaware corporate law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under the Cayman Islands Companies Act and our articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the holders of two-thirds of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.

*Amendment of Governing Documents*

 

Under the Delaware corporate law, a corporation's governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by the Cayman Islands Companies Act, our memorandum and articles of association may only be amended with a special resolution of our shareholders.

***Changes in Capital (Item 10.B.10 of Form 20-F)***

We may from time to time by resolution of shareholders in the requisite majorities:

● amend our amended and restated memorandum of association to increase or decrease the authorized share capital of our Company;

● divide our authorized and issued shares into a larger number of shares; and

● combine our authorized and issued shares into a smaller number of shares.

**Debt Securities (Item 12.A of Form 20-F)**

Not applicable.

**Warrants and Rights (Item 12.B of Form 20-F)**

Not applicable.

**Other Securities (Item 12.C of Form 20-F)**

Not applicable.

**Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)**

Not applicable.

## Exhibit 12.1

**Exhibit 12.1**

**Certification by the Principal Executive Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Huisen Wang, Chief Executive Officer of Huadi International Group Co., Ltd. (the "Company"), certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual report on Form 20-F of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The Company's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Company and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. disclosed in this report any change in the Company's
internal control over financial reporting that occurred during the period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The Company's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee
of the Company's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: January 30, 2026 | Date: January 30, 2026 | Date: January 30, 2026 |
| By: | */s/ Huisen Wang* | */s/ Huisen Wang* |
|  | Name: | Huisen Wang |
|  | Title: | Chief Executive Officer |

---

## Exhibit 12.2

**Exhibit 12.2**

**Certification by the Principal Financial Officer**

**Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Jianping Xiang, Chief Financial Officer of Huadi International Group Co., Ltd. (the "Company"), certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1. I have reviewed this annual report on Form 20-F of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4. The Company's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Company and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. disclosed in this report any change in the Company's
internal control over financial reporting that occurred during the period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5. The Company's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee
of the Company's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: January 30, 2026 | Date: January 30, 2026 | Date: January 30, 2026 |
| By: | */s/ Jianping Xiang* | */s/ Jianping Xiang* |
|  | Name: | Jianping Xiang |
|  | Title: | Chief Financial Officer |

---

## Exhibit 13.1

**Exhibit 13.1**

**Certification by the Principal Executive Officer**

**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

I, Huisen Wang, Chief Executive Officer of Huadi International Group Co., Ltd. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;a. the Company's annual report on Form 20-F for the fiscal
year ended September 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;b. the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

---

| | | |
|:---|:---|:---|
| Date: January 30, 2026 | Date: January 30, 2026 | Date: January 30, 2026 |
| By: | */s/ Huisen Wang* | */s/ Huisen Wang* |
|  | Name: | Huisen Wang |
|  | Title: | Chief Executive Officer |

---

## Exhibit 13.2

**Exhibit 13.2**

**Certification by the Principal Financial Officer**

**Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

I, Jianping Xiang, Chief Financial Officer of Huadi International Group Co., Ltd. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;a. the Company's annual report on Form 20-F for the fiscal
year ended September 30, 2025 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;b. the information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

---

| | | |
|:---|:---|:---|
| January 30, 2026 | January 30, 2026 | January 30, 2026 |
| By: | /s/ Jianping Xiang | /s/ Jianping Xiang |
|  | Name: | Jianping Xiang |
|  | Title: | Chief Financial Officer |

---