As filed with the Securities and Exchange Commission on November 22, 2024

Registration No. 333-[          ]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Papa Medical Inc.
(Exact name of Registrant as specified in its charter)

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202 North California Ave
City of Industry, CA 91744
(626) 855-0800
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

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Hua Yao, Chief Financial Officer
Papa Medical Inc.
202 North California Ave
City of Industry, CA 91744
(657) 221-8185
(Name, address, including zip code, and telephone number, including area code, of agent for service)

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copies to:

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Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

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 7(a)(2)(B) of the Securities Act. ☐

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†         The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy the securities in any jurisdiction where such offer or sale is not permitted.

Preliminary Prospectus (Subject to Completion)

Dated [    ], 20[    ]

[          ] Shares of Class A Common Stock

[Company’s Logo]

Papa Medical Inc.

This is the initial public offering of [          ] shares of Class A common stock on a firm commitment basis. The estimated initial public offering price is expected to be in the range of $[          ] to $[          ] per share. Currently, no public market exists for our Class A common stock. We intend to apply to have our Class A common stock listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “PAPA.” The offering is contingent upon final approval of our Nasdaq listing, and we will not complete the offering if our Class A common stock is not listed on Nasdaq.

We have granted the underwriters the option, exercisable for 45 days from the date of this prospectus, to purchase up to an additional [          ] shares of Class A common stock from us at the initial public offering price less the underwriting discount and commissions to cover over-allotments.

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

We are an “emerging growth company” as defined under the applicable U.S. federal securities laws and, as such, we are eligible for reduced public company reporting requirements. We will be deemed to be a “controlled company” under the Nasdaq listing rules because Dr. Jian Hua, our chief executive officer and director, holds 95.3% of our outstanding voting power, and is expected to hold more than 50% of our outstanding voting power upon completion of this offering. As a controlled company, we are not required to comply with certain of Nasdaq’s corporate governance requirements.

See “Risk Factors” beginning on page 7 for factors you should consider before investing in our Class A common stock.

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(1)    For a description of compensation payable to the underwriters, see “Underwriting.”

The underwriters have an option to purchase up to [          ] additional Class A common stock from us at the initial public offering price, less the underwriting discounts and commissions, within 45 days from the date of this prospectus, to cover any over-allotment. The underwriters expect to deliver the Class A common stock against payment in U.S. dollars in New York, NY to purchasers on or about [          ], 20[    ].

Prospectus dated [    ], 20[    ]

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TABLE OF CONTENTS

This prospectus contains certain estimates and information concerning our industry, including market position, market size, and growth rates of the markets in which we participate. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the “Risk Factors” section. These and other factors could cause results to differ materially from those expressed in these publications and reports.

You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free-writing prospectus. We are offering to sell, and seeking offers to buy, the Class A common stock offered hereby, but only under circumstances and in jurisdictions where offers and sales are permitted and lawful to do so. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Class A common stock.

Neither we nor the underwriters have taken any action that would permit a public offering of the Class A common stock outside the United States or permit the possession or distribution of this prospectus or any filed free-writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free-writing prospectus must inform themselves about and observe any restrictions relating to the offering of the Class A common stock and the distribution of this prospectus or any filed free-writing prospectus outside the United States.

Until [          ], 20[    ] (the 25th day after the date of this prospectus), all dealers that buy, sell or trade Class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Risk Factors

An investment in our Class A common stock involves significant risks. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our Class A common stock. Any of the following risks could have a material and adverse effect on the business, financial condition and results of operations of us and our Class A common stock. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

Existing laws, regulations and policies and the issuance of new or more stringent laws, regulations, policies and any other restrictions or limitations in relation to the E-vapors industry can materially and adversely affect our business operations.

As E-vapors have become more and more popular in recent years, government authorities worldwide have imposed laws, regulations and policies to regulate E-vapors and the vaping industry, and may impose more stringent controls either with changes in existing laws or regulations, with new laws or regulations, or with new interpretations of existing laws or regulations. Some governments have prohibited the use of E-vapors in certain areas, imposed specific taxes on E-vapors or imposed restrictions, in certain areas such as product advertising, flavorings or nicotine concentration. Some governments, primarily state and municipal, have imposed restrictions or prohibitions on smoking in public and on public transportation, such as on trains, airplanes and buses. Such prohibitions have been or may in the future be extended to E-vapors, and such restrictions may be imposed by local, regional or national governments.

We cannot assure you that government authorities will not impose further restrictions on E-vapors in the future, including but not limited to requirements to obtain and maintain licenses, approvals or permits for relevant business operation. Such restrictions, if any, may adversely affect supplies of raw materials, production and sales activities, taxation or other aspects of our business operation. We may not be able to comply with any or all changes in existing laws and regulations or any new laws and regulations and may incur significant compliance costs. All of the above may affect our production or market demand for E-vapors and thus adversely affect our business, financial condition and results of operations. To the extent that we grow in scale and significance, we expect to face increased scrutiny, which may result in increased investment in compliance and related capabilities.

The World Health Organization (“WHO”) and the United State Centers for Disease Control and Prevention (“CDC”) have been clear in their view of the harmful effects of nicotine. Although they recognize that e-cigarettes may expose users to fewer harmful chemicals than burned cigarettes, which are considered very dangerous, any tobacco product, including e-cigarettes, is unsafe particularly for young people and pregnant women.

Countries have taken different steps to address the dangers of nicotine and to consider the difference between e-cigarettes and burned cigarettes. However, instances of death or serious illness resulting or perceived to result from the use of e-cigarettes and E-vapors as well as significant reported use by certain populations, including adolescents as well as nicotine-naive individuals, may spur governments at all levels to increase restrictions on E-vapors. We cannot assure you that the actions taken by municipal, state or provincial and national governments will not materially and adversely affect the market for E-vapors generally and our business of in particular.

Cannabis E-vapors are subject to regulations and restrictions in the United States and are prohibited in many other countries.

We primarily generate revenues from sales of cannabis E-vapors in the United States. In the United States, cannabis E-vapors are subject to federal and state regulation. At the state level, although an increasing number of states in the United States permit adult use of recreational marijuana products (non-hemp cannabis products), states have restrictions as to where the products can be sold and many of the states that permit recreational use of marijuana products require that sales be made only at licensed stores. At the federal level, although “hemp” has been removed from the definition of marijuana under the Controlled Substances Act, the Controlled Substances Act still lists non-hemp cannabis as illegal substance and therefore, sale of non-hemp cannabis products is prohibited. Likewise, under certain circumstances, devices intended for use in consuming federally prohibited non-hemp cannabis may also technically qualify as prohibited drug paraphernalia under the Controlled Substances Act and the laws of certain states that continue to broadly restrict production and sale of non-hemp cannabis products (as further discussed below).

Most European countries have yet to legalized recreational cannabis. Clear generational and social gaps still exist that make legalization and development of the market a slow process, although the potential legalization of adult-use cannabis in Germany is likely to accelerate the cannabis debate within the EU and promote the development of the industry at a regional level. Our ability to expand our marketing of cannabis E-vapors in the European market is dependent upon whether recreational cannabis will become legal in major European countries, and we cannot guarantee that we will be able to sell our cannabis E-vapors in Europe in the future. These restrictions on the sale and use of cannabis could impair our ability to market and sell our products.

While we believe that our business and sales do not violate the Federal Paraphernalia Law, legal proceedings alleging violations of such law or changes in such law or interpretations thereof could adversely affect our business, financial condition or results of operations.

Under the Controlled Substances Act (see U.S. Code Title 21 Section 863, herein referred to as the “Federal Paraphernalia Law”), it is unlawful to sell, offer for sale, transport in interstate commerce, import, or export “drug paraphernalia.” The term “drug paraphernalia” means “any equipment, product or material of any kind which is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance.” However, that law exempts “(1) any person authorized by local, State, or Federal law to manufacture, possess, or distribute such items” and “(2) any item that, in the normal lawful course of business, is imported, exported, transported, or sold through the mail or by any other means, and traditionally intended for use with tobacco products, including any pipe, paper, or accessory.” Any non-exempt drug paraphernalia offered or sold by any person in violation of the Federal Paraphernalia Law can be subject to seizure and forfeiture upon the conviction of such person for such violation, and a convicted person can be subject to fines and even imprisonment under the Federal Paraphernalia Law.

Several states with legal cannabis programs, including California, have enacted legislation invoking this exemption to shield state-legal businesses from federal enforcement on paraphernalia grounds. In addition, a 2022 court decision from the U.S. Court of International Trade applied this exemption in prohibiting U.S. Customs and Border Protection from refusing import entry of cannabis paraphernalia components that the importer could legally possess in the state of importation.

While we believe that our business and sales are legally compliant with the Federal Paraphernalia Law in all material respects, any legal action commenced against us under such law could result in substantial costs and could have an adverse impact on our business, financial condition or results of operations. In addition, changes in cannabis laws or interpretations of such laws are difficult to predict, and could significantly affect our business.

Because Dr. Jian Hua, our chief executive officer and director holds 83.6% of our common stock and 70.0% of the equity of our related party, Dr. Hua has a conflict of interest.

Because our chief executive officer and director, Dr. Jian Hua, holds 83.6% of our common stock, consisting of 4,363,656 shares of Class A common stock and 12,365,440 shares of Class B common stock, he has the power to elect all of our directors and to approve any matter which is subject to stockholder approval. Dr. Hua also directly and indirectly owns 70.0% of the equity in and directly controls Shenzhen Feellife, from which we made purchase in the amount of approximately US$1.5 million, US$0.9 million, US$2.4 million and US$5.4 million for the nine months ended September 30, 2024 and 2023 and in 2023 and 2022, respectively. The price and other terms at which Shenzhen Feellife sells products and provides services to us have been largely determined by Dr. Hua. See “Certain Relationships and Related Party Transactions” for more information. In addition, as our chief executive officer, Dr. Hua has significant authority in the implementation of our business plan. Dr. Hua’s interests may be different from our interests. Because of Dr. Hua’s conflict of interest, there is a risk that any actions he may take may have an adverse effect upon the success and development of our business and the price of our Class A common stock.

In addition, pricing will be designed to enable us to sell the products at a price which enables us to generate a gross margin that we consider acceptable, and Dr. Hua will have significant input as to what an acceptable gross margin is. As our chief executive officer, Dr. Hua has the ability to determine whether to pursuant any legal action to enforce our agreements with Shenzhen Feellife. Thus, we will be relying on Dr. Hua taking actions that are in our best interests, and we run the risk that he may not do so.

As a result of the voting power of Dr. Hua, investors will have little, if any, power to influence our business or to approve any action submitted to stockholders for their approval. The fact that he has a controlling interest in us may, by itself, serve as a deterrent to any person seeking to obtain control of us or to enter into any business relationship which might be beneficial to the minority stockholders.

We are exposed to risks relating to our relationship with certain related parties.

We entered into a business process outsourcing service agreement with Shenzhen Feellife, our related party, pursuant to which Shenzhen Feellife shall provide us with services including technology R&D, marketing, financial expertise, production management, business process design and operation. We also entered into a lease agreement with Cpresso, LLC, our related party, pursuant to which we leased 18,000 square feet of a real estate property located in California for processing and distribution of E-liquid. Both entities are directly controlled by Dr. Hua, our principal shareholder. See “Certain Relationships and Related Party Transactions.” Due to the reliance on our business relationship with these related parties, any interruption of their operations, any failure of them to accommodate our growing business demands, any termination or suspension of our cooperation terms, or any deterioration of cooperative relationships with them may materially and adversely affect our operation. Failure by these related parties to provide us with satisfactory services in a timely manner is likely to have a material adverse effect on our business, financial condition and results of operations.

The prices paid to Shenzhen Feellife with respect to supply prices are in line with market rates of other non-related parties. The prices paid to Cpresso, LLC with respect to lease rates are currently more favorable than the market rates of other non-related parties, and we expect to adjust such prices to keep in line with market rates of other non-related parties from January 1, 2025. We have not considered other potential suppliers to provide similar services and leased properties, as there is a risk in relying on third-party suppliers who are not familiar with our products and/or services. Such risk is manageable when the suppliers are controlled by Dr. Hua, our chief executive officer and director. We do not presently have an plans to engage other suppliers to provide similar services.

Recently enacted legislation and regulations relating to delivery, sales and shipping restrictions of the tobacco products in the United States may make it more difficult to sell cannabis E-vapors and consuming E-vapors in the United States.

The Prevent All Cigarette Trafficking Act of 2009 (the “PACT Act”), as amended by the Preventing Online Sales of E-Cigarettes to Children Act (the “POSECC Act”) to extend the provisions of the PACT Act to cover e-cigarettes and other vaping devices (including, based on recent regulations, cannabis and hemp vaporization products that liquids,) as well as e-liquids product, imposes stringent rules on interstate shippers and, in particular, online sellers. Under the PACT Act, interstate shippers must register with the U.S. Attorney General and the tobacco tax administrator of each jurisdiction into which they ship products as well as submit monthly reports to such tobacco tax administrators. In addition, online retailers making delivery sales to consumers must also (i) verify the age of customers using a commercially available database, (ii) use private shipping services that collect an adult signature and verify the recipient’s age using government-issued identification at the point of delivery, (iii) if shipping to jurisdictions that tax vaping products, collect and remit all applicable local and state taxes and comply with all applicable licensing requirements of the recipient’s jurisdiction, (iv) comply with shipping-package quantity restrictions and labeling requirements, and (v) maintain records for five years of any delivery interrupted because the carrier or delivery service determines or has reason to believe that the person ordering the delivery is in violation of the PACT Act. Shippers and delivery sellers who do not comply with the PACT Act are subject to civil and criminal penalties. Accordingly, compliance with the requirements of the PACT Act may significantly increase the costs of our and our customers’ online businesses, increasing the prices of our products sold online and making them less attractive to consumers as compared to products sold at local retailers. In addition, failure to comply with the PACT Act could expose us to significant penalties that could materially adversely affect our business and our financial condition and results of operations.

Further, to implement the PACT Act as amended by the POSECC Act, the United States Postal Service (the “USPS”) issued a rule on October 21, 2021 prohibiting the mailing of e-cigarettes and other vaping devices as well as e-liquids products, subject to potential exceptions already applicable to combusted cigarettes and smokeless tobacco (e.g., for shipments between legally operating businesses). Soon after, major private carriers like Federal Express and United Parcel Service announced that they would cease all deliveries of vapor products. These restrictions on use of the USPS to ship our products and the decisions by major private carriers not to deliver vapor products in the United States could materially impair our ability to sell products in the United States which would adversely affect our business,

financial condition and results of operations. We use PACT Act compliant carriers to remain compliant with the tax and delivery restrictions of the PACT Act. To the extent that the carriers that we currently use change their policies and refuse to ship or are prohibited from shipping E-vapors and we are not able to find other carriers that are PACT Act compliant, our business and prospects will be materially impaired, and we may not be able to continue in the cannabis dosing business in the United States.

If it is determined or perceived that the use of cannabis E-vapors and consuming E-vapors poses long-term health risks, the use of E-vapors may decline significantly, which may materially and adversely affect our business, financial condition and results of operations.

Since E-vapors were only introduced to the market in the last two decades and are rapidly evolving, studies relating to the long-term health effects of CBD or tobacco vaping product use are still ongoing. Currently, there remain uncertainties regarding whether E-vapors are sufficiently safe for their intended use, and health risks associated with the usage of E-vapors have been under scrutiny. According to the WHO, there is no conclusive evidence that the use of consuming E-vapors which contain nicotine facilitates smoking cessation. The WHO recommended governments to strengthen relevant laws and regulations on the sale of E-vapors, including to, among others, prohibit marketing strategies targeting the underage and the non-smoking population.

Negative publicity on the health consequences of E-vapors or other similar devices may also adversely affect the use of E-vapors. For example, the FDA and the CDC issued a joint statement on August 30, 2019, linking a number of cases of respiratory illnesses to nicotine vaping product use. On November 8, 2019, the CDC announced that it had preliminarily linked cases of severe respiratory illness to the presence of Vitamin E acetate, which was found in certain cannabis-derived tetrahydrocannabinol-containing vaping cartridges of vaping devices not intended for use with nicotine-containing e-liquids that may have been obtained illegally. However, evidence is not sufficient to rule out the contribution of other chemicals of concern, including chemicals in either cannabis or non-cannabis products. In January 2020, after further research, the FDA and CDC recommended against the use of cannabis-containing E-vapors, especially those from unofficial sources, and that the underage, pregnant women and adults who do not currently use tobacco products should not start using E-vapors. On February 25, 2020, the CDC issued a final update, stating that the number of cases of severe respiratory illnesses had declined to single digits as of February 9, 2020. The CDC also reconfirmed that (i) Vitamin E acetate, which was found in some cannabis-derived vaping cartridges that were mostly obtained illegally, was strongly linked to and indicated to be the primary cause of the severe respiratory illnesses, and (ii) cannabis-derived E-vapors from illicit sources were linked to most cases of severe respiratory illnesses.

Research regarding the actual causes of these illnesses is still ongoing. If vaping product use is determined or perceived to pose long-term health risks or to be linked to illnesses, the use of E-vapors may significantly decline, which would have a material adverse effect on our business, financial condition and results of operations.

The E-vapors market may develop more slowly or differently than we expect.

The consuming E-vapors market worldwide has experienced rapid growth through recent years and the cannabis E-vapors market is developing, with the United States accounting for the overwhelming majority of sales. The growth of cannabis E-vapors is largely confined to those states in the United States where recreational cannabis is legal. The growth rate may decrease or decline due to uncertainties with respect to the acceptance of vaping technologies and products, health studies relating to E-vapors use, general economic conditions, disposable income growth, and pace of development of technologies and other factors. There can be no assurance that the penetration of E-vapors among adult smokers will further deepen, or that the consuming and cannabis E-vapors market will grow at a pace that we expect. Additionally, E-vapors market development is subject to the uncertainty of overall regulatory landscape for such products, which may have a material impact on the market development of E-vapors. There can be no assurance that the regulatory regime will be favorable to nicotine or cannabis E-vapors in general and us. It is also uncertain whether our products will achieve and sustain high levels of market acceptance and meet users’ expectation. Our ability to increase the sales of our E-vapors depends on several factors, some of which may be beyond our control, including users’ receptiveness towards and adoption of vaping technologies and products, market awareness of our brand, the market acceptance of our products, the “word-of-mouth” effects of our products, our ability to attract, retain and effectively train sales personnel, our ability to develop effective relationships with our customers and suppliers, performance and functionality of our products and our ability to meet consumer trends. If we are not successful in implementing our business strategies, developing our E-vapors, anticipating consumer trends or reaching adult smokers, or if these users do not accept our E-vapors, the market for our products may not develop or may develop more slowly than we expect, any of which could materially and adversely affect our profitability and growth prospects.

We face competition from companies in the E-vapors industry as well as other sources of nicotine and cannabis, and we may fail to compete effectively.

The E-vapors industry worldwide is intensely competitive. Our E-vapors compete with tobacco, marijuana cigarettes, and a wide range of other tobacco and legal and illegal cannabis products. Some of our current or future competitors may have longer operating history, greater brand recognition, or greater financial, technical or marketing resources than we do. Certain competitors may be able to secure raw materials and products from suppliers and manufacturers on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory policies, and devote substantially more resources to product development and technology. In addition, the cannabis E-vapors market is in the early stages and at present is mainly limited to the United States. Our ability to be successful in this market is dependent upon our ability to develop vaping systems that attracts and retains consumer interest and the regulatory environment in the United States. Accordingly, increased competition may adversely affect our results of operations, market share and brand recognition, or force us to incur losses. There can be no assurance that we will be able to successfully compete against current and future competitors, and competitive pressures may have a material adverse effect on our business, prospects, financial condition and results of operations of.

Our business, financial condition and results of operations of may be adversely impacted by product defects or other quality issues.

Our products may contain defects that are not detected until after they are shipped or inspected by our users. The failure of our supplier or us to maintain the consistency and quality throughout our production process could result in substandard quality or performance of our products, and product defects could cause significant damage to our market reputation and reduce our sales and market share. Defects in these products could result in personal injury, property damage, pollution, release of hazardous substances or damage to equipment and facilities. Actual or alleged defects in the products we distribute or sell may give rise to claims against us for losses and expose us to claims for damages. If we deliver any defective products, or if there is a perception that our products are of substandard quality, we may incur substantial costs associated with mass product recalls, product returns and replacements and significant warranty claims, our credibility and market reputation, results of operations and market share may be adversely affected.

Further, defective products may result in compliance issues that could subject us to administrative proceedings and unfavorable results such as product recall and other actions. Such proceedings and unfavorable results could have a material adverse effect on our brand, reputation and results of operations.

We are exposed to product liability and user complaints arising from the products we sell, which could expose us to significant insurance and loss expenses.

The sale of E-vapors involves a certain level of risk of product liability claims in the event that the use of our products results in any personal injury, property damage or health and safety issues. The customers or users of our E-vapors may bring suits against us alleging damages for the failure of our products to meet stated specifications or other requirements.

There is no assurance that we can succeed in defending ourselves, and we may be required to pay significant amounts of damages for product liability claims and, to the extent that we are able to obtain product liability coverage, product liability insurance may not provide sufficient coverage against claims of injury based on the fact that they are inhaling a nicotine product. Further, product liability claims against us, whether or not successful, are costly and time-consuming to defend. These claims, whether against us or another manufacturer, may result in negative publicity that could severely damage our reputation and affect the marketability of our products, and could result in substantial costs and diversion of our resources and management’s attention. Any of the above could in turn materially and adversely affect our business, financial condition and results of operations. Although we may seek indemnification or contribution from our suppliers in certain circumstances, we cannot assure you that we will be able to receive indemnification or contribution in full, or at all.

Since our products involve inhaling CBD or nicotine, we may be subject to claims based on the known effects of CBD or nicotine. We cannot assure you that manufacturers and customers of E-vapors may not face liability resulting from the nature of the product — a device for inhaling CBD or nicotine, which could materially impair our ability to operate profitably if at all.

Furthermore, negative publicity including but not limited to negative online reviews on social media and crowd-sourced review platforms, industry findings or media reports related to the quality, functionality and health concerns of E-vapors, whether or not accurate, and whether or not concerning our products, can adversely affect our business, results of operations and reputation. Such negative publicity may reduce users’ confidence in us, our products and our brand, which may adversely affect our business and results of operations.

We have limited insurance coverage, which could expose us to significant costs and business disruption.

We maintain comprehensive property insurance to cover risks arising from damages to our properties, and labor insurance for our employees. While we believe our insurance coverage addresses the material risks to which we are exposed and is adequate and customary in our current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which we are exposed. A successful liability claim against us due to injuries or damages suffered by users of our product could materially and adversely affect our reputation, results of operations and financial conditions. Even if unsuccessful, such a claim could cause us adverse publicity, require substantial costs to defend, and divert the time and attention of our management.

Our business and the industry in which we operate are subject to inherent risks and uncertainties, including, among others, developments in regulatory landscape, medical discovery and market acceptance of E-vapors.

Our business and the industry in which we operate are subject to inherent risks and uncertainties, including, among others, developments in regulatory landscape, medical discovery and market acceptance of E-vapors. Our business and the E-vapors industry are subject to inherent risks, challenges and uncertainties, including but not limited to the following:

•        the regulatory landscape, in the jurisdictions to which we market our products, are constantly evolving, and there may be further restrictions, bans or requirements with respect to E-vapors that may increase our cost of compliance or prevent us from marketing our products to certain jurisdictions;

•        we may face unforeseen capital requirements caused by the changing industry requirements or consumer tastes and demands; demands for our E-vapors may decline significantly due to the decrease in market acceptance for our E-vapors generally;

•        we may not be able to establish business relationships with customers or compete with other more established competitors as, for an evolving industry, customers generally prefer to choose more established suppliers;

•        we may not be able to adjust our procurement and/or production in time to meet the changes in market demands; and

•        future changes in our industry may not be consistent with our prediction. Therefore, our industrial prospects, research and development focus and business plans may not be effective in helping sustain our competitive position in the E-vapors industry.

If we fail to cope with the challenges and compete with other industry players in such uncertain and evolving E-vapors industry, our future prospects, business, financial conditions and results of operations may be materially and adversely affected.

We may not be able to develop and introduce new products or upgrade existing products in a timely and cost-effective manner, which may adversely affect our business, results of operations and prospects.

Our success depends on our ability to develop new products and upgrade existing products, with respect to the latest technological developments in current and new markets, while improving the quality of the products in a timely and cost-effective manner in order to optimize adult smokers’ experience. It is difficult to predict the preferences of users or a specific segment of users. Changes and upgrades to our existing products may not be well received by our users, and newly introduced products may not achieve expected results. Going forward, we may introduce new products with different features. Such efforts may require substantial investments of additional human capital and financial resources. However, if we are not able to develop or obtain rights to the latest technological developments, we may not be able to market a product that meets the adult consumer’s changing taste. If we fail to improve our existing products or introduce new products that meet consumer taste ones in a timely or cost-effective manner, our ability to attract and retain users may be impaired, and our results of operations and prospects may be adversely affected.

We cannot assure you that we can anticipate, identify, develop or market products that respond to changes in users’ preferences and expectations. For example, our surveys may not yield accurate or useful insights on user behaviors, and feedbacks on our products may be different after such products are commercially available to a wider public. There can be no assurance that any of our new products will achieve market acceptance or generate sufficient revenues to offset the costs and expenses incurred in relation to our development and promotion efforts. There can be no assurance that each of our new products will achieve market acceptance and be successful.

We are subject to concentration risks of suppliers and customers.

In 2023 and 2022, there were two and five customers from whom revenues individually represent greater than 10% of our total revenues, respectively. The total sales to these customers accounted for approximately 46.5% and 68.9% of our total revenues, respectively, for the same periods. There were the same two customers from whom revenues individually represent greater than 10% of our total revenues for the nine months ended September 30, 2024 and 2023, respectively. The total sales to these customers accounted for approximately 56.9% and 50.8% of our total revenues for the nine months ended September 30, 2024 and 2023, respectively.

In 2023 and 2022, there were four and two suppliers from whom purchases individually represent greater than 10% of our total purchases, respectively. The total purchase from these suppliers accounted for approximately 62.7% and 65.6% of our total purchase, respectively, for the same periods. There were both three suppliers from whom purchases individually represent greater than 10% of our total purchases for the nine months ended September 30, 2024 and 2023, respectively. The total purchase from these suppliers accounted for approximately 45.8% and 56.8% of our total purchase for the nine months ended September 30, 2024 and 2023, respectively.

Considering such concentration, the loss of these customers and suppliers could have a material adverse effect on our business.

Outbreaks of infectious diseases, epidemics, natural disasters or other events have materially and adversely affected, and in the future, may materially and adversely affect our business, results of operations and financial condition.

The occurrence of infectious diseases and epidemics, including the COVID-19 pandemic, and natural disasters, including hurricanes, floods, earthquakes, tornadoes, fires and other disasters disease may adversely affect the business, financial condition or results of operations of us. To combat the COVID-19 pandemic, a global health emergency that spread globally since early 2020, various governments have taken measures to contain the virus, which have affected economic activity in all countries where the consumers of our products live. We have taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for our personnel, social distancing, and securing the supply of materials that are essential to our production process. Although the measures have been lifted as the WHO declared the COVID-19 became an established and ongoing health issue in May 2023, we continue to monitor the macroeconomic risk (including labor shortage, inflation and supply change shortages) and carefully evaluate potential outcomes and work to mitigate risks. For example, to mitigate inflationary pressures, we carefully make annual budgets, manage cost levels, and have formulated cashflow policies. The extent of the impact of COVID-19 on our future financial results will be dependent on future developments such as the length and severity of the COVID-19, the potential resurgence of the COVID-19, future government actions in response to the pandemic and the overall impact of the COVID-19 on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable, and may have an adverse impact on our future operations, financial condition, liquidity and results of operations.

Natural disasters may give rise to server interruptions, breakdowns, system failures, technology platform failures, internet failures or other operation interruptions for us and our service providers or suppliers, which could cause the loss or corruption of data or malfunction of software or hardware as well as adversely affect our ability and the ability of our service providers, suppliers, or customers to conduct daily operations. The occurrence of any of the foregoing could have a material adverse effect on the business, results of operations and financial condition of us.

Misuse or abuse of our products may lead to potential adverse health effects, subjecting us to complaints, product liability claims and negative publicity.

We are unable to control how our users choose to use our products. For example, we cannot prevent the users from misusing or abusing our products or prevent minors from obtaining access to our products. Our users may also use our products to inhale chemicals obtained from informal sources and in other potentially hazardous applications that can result in personal injury, product liability and environmental claims.

Misuse or abuse of our products, including use of our products in combination with other products and components from third parties, may significantly and adversely affect the health of our users, subjecting us to user complaints and product liability litigation, even though such products were not used in the manner recommended by us. Applicable law may render us liable for damages without regard to negligence or fault. The FDA strongly advises against vaping during pregnancy on the ground that any products containing nicotine are not safe to use during pregnancy since nicotine is a health risk for pregnant women and developing babies and can damage a baby’s brain and lungs. We cannot assure you that we would not be subject to liability resulting from a birth defect in a baby born to a woman who used our E-vapors during pregnancy, notwithstanding our warnings not to use during pregnancy. Any such liability may not be covered by insurance and may materially impair our ability to operate profitably.

Regardless of whether these complaints or product liability litigation have merit, they may be costly and time-consuming to defend and resolve, and bring negative publicity that could damage our reputation and result in higher scrutiny by the government or stricter regulations, all of which could materially and adversely affect our business, financial condition and results of operations.

Our business may be impacted by supply chain issues, which are affecting businesses worldwide.

One of effects of the COVID-19 has been delays resulting from supply chain issues, which relate to the difficulty that companies have in having their products manufactured, shipped to the country of destination, and delivered from the port of entry to the customer’s location. During 2022, there were certain delays in the delivery of products to market. To the extent that products are shipped by sea, there are additional risks resulting from ports not being able to unload ships promptly, causing delays in getting into port, including potential damage from seawater and fire, product degradation and the possibility of containers being destroyed, damaged or falling off the ship into the water. We rely on Shenzhen Feellife to provide us with services including technology R&D, marketing, financial expertise, production management, business process design and operation. If Shenzhen Feellife cannot meet our requirements and result in a slowdown in the delivery of products to us, there may be a material adverse impact on our business operations as the inability to delivery products to the ultimate vendor could impair our ability to generate revenue from our E-vapors. After the COVID-19 restrictive measures were lifted in late 2022, the port delays have significantly decreased, and we do not believe that the supply chain issues that previously affected our operations are currently affecting us. However, we cannot assure you that such delays arising from a similar future event will not affect our business in the future, the occurrence of which could materially and adversely affect our business, financial condition and results of operations.

If we do not maintain sufficient inventory or if we do not adequately manage our inventory, we could lose sales or incur higher inventory-related expenses, which could negatively affect our operating results.

To ensure adequate inventory supply, we must forecast inventory needs and expenses, place orders sufficiently in advance with our suppliers and manufacturers and manufacture products based on our estimates of future demand for particular products. Our forecast for demand, however, may not accurately reflect the actual market demands, which depends on a number of factors including, without limitation, launches of new products, changes in product life cycles and pricing, product defects, changes in user spending patterns, supplier back orders and other supplier-related issues, customers’ procurement plans, as well as the volatile economic environment in the markets where we sell our products. In addition, when we launch a new product with new components or raw material, it may be difficult to establish relationships, determine appropriate raw material and product selection, and accurately forecast market demand for such product. We cannot assure you that we will be able to maintain proper inventory levels for our business at all times, and any such failure may have a material and adverse effect on our business, financial condition and results of operations.

Inventory levels in excess of customer demand with respect to E-vapors may result in inventory write-downs, expiration of products or an increase in inventory holding costs and a potential negative effect on our liquidity. If we fail to manage our inventory effectively, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs. In addition, we may be required to lower sale prices in order to reduce inventory level, which may lead to lower gross margins. High inventory levels may also require us to commit substantial capital resources, preventing us from using that capital for other important purposes. Any of the above may materially and adversely affect our results of operations and financial condition.

Conversely, if we underestimate customer demand, or if our supplier fails to provide products to us in a timely manner, we may experience inventory shortages, which may, in turn, require us to purchase our products at higher costs, result in unfulfilled user orders, leading to a negative impact on our financial condition and our relationships with customers. Additionally, our wholesalers largely determine the inventory levels of the retail stores they operate

or to whom they sell, based on their estimation, and such inventory levels might not correspond to actual market demands and could lead to under-stocking or over-stocking in the retail stores. We cannot assure you that there will not be under-stocking or over-stocking in these stores which would materially impact the results of our operations and our working capital. As a result, under-stocking can lead to missed sales opportunities, while over-stocking could result in inventory depreciation and decreased shelf space for stocks that are in higher demands. These could adversely affect our business, financial condition and results of operations.

Misconduct, including illegal, fraudulent or collusive activities, by our employees, customers, suppliers and manufacturers, may harm our brand and reputation and adversely affect our business and results of operations.

Misconduct, including illegal, fraudulent or collusive activities, unauthorized business conduct and behavior, or misuse of corporate authorization by our employees, customers, suppliers and manufacturers and other business partners could subject us to liability and negative publicity. Our employees, customers, suppliers and manufacturers may conduct fraudulent activities or violations of the U.S. Foreign Corrupt Practices Act, such as accepting payments from or making payments to other distribution channel participants or other third parties in order to bypass our internal system and to complete shadow transactions and/or transactions outside our official or authorized distribution channels, disclosing users’ information to competitors or other third parties for personal gains, or applying for fake reimbursement. They may conduct activities in violation of unfair competition law, which may expose us to unfair competition allegations and risks. We cannot assure you that such incidents will not occur in the future. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent these activities may not be effective. Such misconduct could damage our brand and reputation, which could adversely affect our business and results of operations.

Substantially all of our executive officers and directors are located in mainland China, and serve as key employees of Shenzhen Feellife, our related party.

Our executive officers and directors are located in mainland China, except that our Chief Financial Officer Ms. Hua Yao, and our Chief Operating Officer and Human Resource Manager Mr. Johnathan Lin, are located in the United States. As a result, it may be difficult for you to effect service of process upon any of them inside mainland China. It may also be difficult for you to enforce in U.S. courts’ judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against these executive officers and directors as they do not currently reside in the United States or have substantial assets located in the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against our directors and officers who are residents of China if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

In addition, our executive officers and directors are key employees of Shenzhen Feellife, our related party. As a result, they may need to split their time between Shenzhen Feellife and us, and thus may not have sufficient time and resource to serve as our executive officers and directors, which could adversely and materially affect our business and results of operations.

Uncertainties in the interpretation and enforcement of PRC laws and regulations may significantly limit or completely hinder our ability to offer or continue to offer shares of Class A common stock to investors and cause the value of our shares of Class A common stock to significantly decline or be worthless.

On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) issued the Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises and five supporting guidelines, which became effective on March 31, 2023 (the “Overseas Listing Regulations”). The Overseas Listing Regulations are applicable to overseas securities offerings and/or listings conducted by issuers who simultaneously meet the following conditions: (1) in the most recent accounting year, any one of the following indicators of the PRC domestic companies accounts for more than 50% of the relevant data in the issuer’s consolidated financial statements

audited during the same period: operating revenue, total profit, total assets, or net assets; (2) the main business activities are conducted within China or the main premises are located in China, or a majority of senior management personnel responsible for business operations and management are Chinese citizens or have their habitual residence in China. The Overseas Listing Regulations stipulate that such issuer shall fulfill the filing procedures within three working days after it makes an application for initial public offering and listing in an overseas stock market. Breaches may result in fines ranging from RMB1 million to RMB10 million, and severe violations could lead to the relevant responsible persons being barred from entering the securities market.

We do not conduct business and we do not have any substantial assets or funds in mainland China. Substantially all of our operations are in the US. Although most of our executive officers and directors are located in mainland China, substantially all of our employees are based in the US and where our research and development activities are conducted. We do not have any variable interest entities arrangements or any similar agreements. As of the date of this prospectus, we have been advised by our counsel as to PRC laws, that our registered public offering in the U.S. is not subject to the review or prior approval of the CSRC.

As of the date of this prospectus, we do not believe we are subject to any other PRC laws applicable to those Chinese companies established in mainland China, according to DeHeng Law Offices (Shenzhen), our adviser as to PRC laws. Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in China could change rapidly in the future. We cannot guarantee that the Chinese government will not introduce new regulations or modify existing ones that could impact our business or operations. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer its securities to investors, cause significant disruption to its business operations, and severely damage its reputation, which could materially and adversely affect our financial condition and results of operations and cause its securities, including the securities we have registered for sale in a prospectus, to significantly decline in value or become worthless.

We may become subject to governmental regulations, other legal obligations and liability related to privacy, information security, and data protection, and any security breaches.

To the extent that we market to the public and collect personal data, such as credit card information, we would face risks inherent in handling large volumes of data and in securing and protecting such data. In particular, we would face a number of data-related challenges related to our business operations, including: (i) protecting the data in and hosted on our system and cloud servers, including against attacks on our system and cloud servers by external parties or fraudulent behavior by our employees; (ii) addressing concerns related to privacy and sharing, safety, security and other factors; and (iii) complying with applicable laws, rules and regulations relating to the collection, use, disclosure or security of personal information, including any requests from regulatory and government authorities relating to such data.

Furthermore, we are or may become subject to a variety of laws and regulations in the United States and abroad regarding privacy, data security, cybersecurity and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In June 2018, California adopted the California Consumer Privacy Act, which became effective in 2020, as later amended by the California Privacy Rights Act of 2020 taking effective in 2023 (collectively, the “California Privacy Law”). Under the California Privacy Law, a California consumer has the rights to, among others, demand to see all the personal information a company has saved on the consumer, as well as a full list of all the third parties that data is shared with, and request that the company delete or correct the personal information it has on the consumer. The California Privacy Law broadly defines personal information. The California Privacy Law also has specific requirements for companies subject to the law. The California Privacy Law provides for a private right of action for unauthorized access, theft or disclosure of personal information in certain situations, with possible damage awards of $100 to $750 per consumer per incident, or actual damages, whichever is greater. The California Privacy Law also permits class action lawsuits. To the extent that we do business in California, through our website or otherwise through the Internet, provided certain conditions are met, we may become subject to the California Privacy Law and any other similar consumer protection laws.

The European Union Parliament approved a new data protection regulation, known as the General Data Protection Regulation (“GDPR”), which came into effect in May 2018. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR imposes significant penalties for non-compliance. In the event that residents of the European Economic Area access our website and input protected information, including information provided in ordering products through our website, we may become subject to provisions of the GDPR.

We are also subject to laws restricting disclosure of information relating to our employees. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, cybersecurity and data protection. However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us or our third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our business and operating results.

While we take measures to comply with all applicable data privacy and protection laws and regulations, we cannot guarantee the effectiveness of the measures undertaken by us and our business partners. However, compliance with any additional laws could be expensive, and may place restrictions on our business operations and the manner in which we interact with our users. In addition, any failure to comply with applicable cybersecurity, privacy, and data protection laws and regulations could result in proceedings against us by government authorities or others, including notification for rectification, confiscation of illegal earnings, fines, or other penalties and legal liabilities against us, which could materially and adversely affect the business, financial condition, results of operations of us and the value of our Class A common stock. In addition, any negative publicity on our website or platform’s safety or privacy protection mechanism and policy could harm our public image and reputation and materially and adversely affect the business, financial condition, and results of our operations.

Infringement of our intellectual property by any third party or loss of our intellectual property rights may materially and adversely affect our business, financial condition and results of operations.

We, through our operating subsidiaries, either own or will own or license as an exclusive licensee patent, trademark, copyright and trade secret and other intellectual property, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We also enter into confidentiality agreements with certain third parties who may access our proprietary information, and we control access to our proprietary technology and information. However, intellectual property protection may not be sufficient. Confidentiality agreements may be breached by counterparties, we may not be able to enforce these agreements and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights.

In addition, policing any unauthorized use of our intellectual property, whether owned or licensed, is difficult, time-consuming and costly, and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. Furthermore, we may be subject to the risks of losing our intellectual property rights or the intellectual property rights due to several reasons. Specifically, certain intellectual property rights, such as patents, are subject to a limited period of time. Upon the expiry of such period of time, others may freely use such intellectual properties without any license or charges, which may impose competitive harm to us and in turn adversely affect our business and prospects. The intellectual property rights that we currently have may also be revoked, invalidated or deprived by regulatory authorities as a result of intellectual property claims or challenges successfully raised by third parties. Moreover, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in maintaining, protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We may from time to time be subject to infringement claims relating to intellectual properties of third parties, which may be expensive to defend with no assurance of success and may disrupt our business and operations.

We cannot assure you that our operations or any aspects of our business do not or will not infringe upon or otherwise violate patents, copyrights or other intellectual property rights held by third parties. There could also be existing patents or other intellectual property of which we are not aware that we may infringe. While we do not know of any intellectual property rights on which our products or our business infringe, we cannot assure you that holders of patents or other intellectual property rights purportedly relating to some aspect of our technology or business, would not seek to enforce such patents against us or that they will not be successful in any such enforcement action. We may encounter disputes from time to time over rights and obligations concerning intellectual properties, and we may not prevail in those disputes.

We have more than ten patents and patent applications in China and the United States. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or damages or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these third-party infringement claims, regardless of their merits, which could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected.

To accommodate our growth, we anticipate that we will need to implement a variety of new and upgraded operational and financial systems, procedures and controls, including the improvement of our accounting and other internal management systems. We will also need to continue to expand, train, manage and motivate our workforce and manage our relationships with customers and suppliers. All of these endeavors involve risks and will require substantial management effort and significant additional expenditures. We may not be able to manage our growth or execute our strategies effectively, and any failure to do so may have a material adverse effect on our business and prospects.

Our success depends on our ability to retain our core management team and other key personnel.

We depend on the continued contributions of our senior management and other key employees as they are expected to play an important role in guiding the implementation of our business strategies and future plans. If any of our other members of senior management were to terminate his or her employment, there can be no assurance that we would be able to find suitable replacements in a timely manner, at acceptable cost or at all. The loss of services of key personnel or the inability to identify, hire, train and retain other qualified and managerial personnel in the future may materially and adversely affect our business, financial condition, results of operations and prospects. Additionally, we rely on our research and development personnel for product development and technology innovation. If any of our key research and development personnel were to leave us, we cannot assure you that we can secure equally competent research and development personnel in a timely manner, or at all, which could materially impair our business and the results of operations.

Competition for highly skilled employees is intense, and if we are unable to attract and retain the highly skilled employees, our efficiency and operations would be adversely affected.

As we continue to experience growth, we believe our success depends on the efforts and talents of our employees, including management team and financial personnel. Our future success depends on our continued ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for highly skilled personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our products and our ability to serve customers could diminish, resulting in a material adverse effect on our business.

Any global systemic economic and financial crisis could negatively affect our business, results of operations and financial condition.

Because our sales may depend on end customers’ levels of disposable income, perceived job prospects and willingness to spend, our business and prospects may be affected by global economic conditions. The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and is continuously facing new challenges, including the escalation of the European sovereign debt crisis since 2011, the slowdown of the Chinese economy in 2012, the effects the COVID-19 pandemic and steps taken by the governments to address the pandemic. The conflict in Ukraine and the imposition of broad economic sanctions on Russia could also raise energy prices and disrupt global markets. Economic conditions in the markets in which are products are sold are sensitive to both global economic conditions, and the particular changes in each country’s economic and political policies and its expected or perceived overall economic growth rate. A decline in the economic prospects could alter current or prospective customers’

spending priorities. Therefore, a slowdown in global economy or the economy of the regions in which are products are marketed may lead to a reduction in demand for our products, which could materially and adversely affect our financial condition and results of operations.

Our internal control over financial reporting may not be effective, and deficiencies in our internal controls could have a material adverse effect on our business and reputation.

As a privately-owned company, we are not subject to the reporting requirements of the Securities Act, the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. As such, we have not engaged an independent certified public accounting firm to conduct an audit on our internal controls. Upon the completion of this offering, we will become subject to these rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.

Upon the completion of this offering, we will 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. In addition, if we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting on an annual basis. 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 burden 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.

We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. However, our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in the implementation or improvement, could adversely affect our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipates that we will continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of our internal controls, or our consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially and adversely affect our ability to operate our business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the stock price of our Class A common stock could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to obtain or maintain listing on Nasdaq.

Risks Related to this Offering and Ownership of Our Common Stock

Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A common stocks may view as beneficial.

We have created a dual-class share structure such that our common stock will consist of Class B common stocks and Class A common stocks. In respect of matters requiring the votes of shareholders, holders of shares of Class A common stocks are entitled to one vote per share, while holders of shares of Class B common stock are entitled to five votes per share. We will sell shares of Class A common stock in this offering. Each share of Class B common stock is convertible into one share of Class A common stock at any time by the holder thereof, while shares of Class A common stock are not convertible into shares of Class B common stock under any circumstances.

Dr. Jian Hua, our chief executive officer and director, beneficially owns 4,363,656 issued shares of Class A common stock and 12,365,440 issued shares of Class B common stock and thus beneficially owns 95.3% of the aggregate voting power of our current total issued and outstanding share capital. Dr. Jian Hua will beneficially own (i) [          ]% of the aggregate voting power of our then total issued and outstanding share capital, assuming the underwriters do not exercise their over-allotment option, or (ii) [          ]% of the aggregate voting power of our then total issued and outstanding share capital, assuming the underwriters exercise their over-allotment option in full. See “Principal Stockholders.” As a result of the dual-class share structure and the concentration of ownership, Dr. Hua will have considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Dr. Hua may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our Company and may reduce the price of our Class A common stock. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A common stock may view as beneficial.

An active trading market for our Class A common stock may not develop and the trading price for our common stock may fluctuate significantly.

We plan to submit an application to list our Class A common stock on Nasdaq. Prior to the completion of this offering, there has been no public market for our Class A common stock, and we cannot assure you that a liquid public market for our Class A common stock will develop. If an active public market for our Class A common stock does not develop following the completion of this offering, the market price and liquidity of our Class A common stock may be materially and adversely affected. The initial public offering price for our Class A common stock is determined by negotiation between us and the underwriters based upon several factors, and the trading price of our Class A common stock after this offering could decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their shares.

The trading price of our Class A common stock may be volatile, which could result in substantial losses to investors.

The trading price of our Class A common stock is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors. The securities of some newly public companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial increase followed by a substantial decline in their trading prices. The trading performances of securities of other companies in our industry after their offerings may affect the attitudes of investors toward companies of our same industry listed in the United States, which consequently may impact the trading performance of our Class A common stock, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of other companies of our same industry may also negatively affect the attitudes of investors towards us. In addition to the above factors, the price and trading volume of our Class A common stock may be highly volatile due to multiple factors, including the following:

•        regulatory developments affecting us, our customers, or our industry;

•        announcements of studies and reports relating to our service offerings or those of our competitors;

•        actual or anticipated fluctuations in our results of operations and changes or revisions of our expected results;

•        changes in financial estimates by securities research analysts;

•        announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments;

•        additions to or departures of our senior management;

•        detrimental negative publicity about us, our management or our industry;

•        release or expiry of lock-up or other transfer restrictions on our outstanding common stock; and

•        sales or perceived potential sales of additional Class A common stock.

If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our Class A common stock may be more volatile than it otherwise would be.

As a company conducting a relatively modest public offering, we are subject to the risk that a small number of investors may hold a high percentage of Class A common stock sold in this offering, even if the initial sales by the Underwriters are designed to comply with the Nasdaq listing requirements. If this were to happen, investors could find our shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their stock price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their shares and we may cease to meet the Nasdaq public stockholder requirements.

Because our initial public offering price is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution.

If you purchase shares in this offering, you will pay more for your shares than the amount paid by our existing stockholders for their shares of Class A common stock. As a result, you will experience immediate and substantial dilution, representing the difference between the initial public offering price per share, and our net tangible book value per share, after giving effect to the net proceeds to us from this offering. See “Dilution” for a more complete description of how the value of your investment in our Class A common stock will be diluted upon completion of this offering.

Substantial future sales or perceived potential sales of our shares in the public market could cause the price of our shares to decline.

Sales of our shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our shares to decline. All shares sold in this offering will be freely transferable without restriction or additional registration under the Securities Act, except for the shares our officers may purchase in the offering. For additional information, see “Underwriting.” The remaining shares outstanding after this offering will be available for sale, upon the expiration of the [      -day] lock-up period beginning from the date of this prospectus, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. Any or all of these shares may be released prior to the expiration of the lock-up period at the discretion of the representatives of the underwriters of this offering. To the extent shares are released before the expiration of the lock-up period and sold into the market, the market price of our shares could decline.

Nasdaq may apply additional and more stringent criteria for our initial and continued listing because we plan to have a small public offering and our insiders will hold a large portion of our listed securities.

The Nasdaq Listing Rule provides Nasdaq with broad discretionary authority over the initial and 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 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. Our initial public offering will be relatively small and the insiders of our Company will hold a large portion of the company’s listed securities following the consummation of the offering. Therefore, we may be subject to the additional and more stringent criteria of Nasdaq for our initial and continued listing, which might cause delay or even denial of our listing application.

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies, and as a result of this election our financial statements may not be comparable to those of companies that comply with public company effective dates, including other emerging growth companies that have not made this election.

Because we are a “controlled company” as defined in the Nasdaq Stock Market Rules, you may not have protection of certain corporate governance requirements which are otherwise required by Nasdaq’s rules.

Under Nasdaq’s rules, a controlled company is a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company. We are a controlled company because Dr. Jian Hua, our chief executive officer, holds more than 50% of our voting power, and we expect we will continue to be a controlled company upon completion of this offering. For so long as we remain a controlled company, we are we are not required to comply with the following permitted to elect to rely, and may rely, on certain exemptions from the obligation to comply with certain corporate governance requirements, including:

•        an exemption from the rule that a majority of our Board must be independent directors;

•        an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and

•        an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.

We have not taken advantage of these exemptions except that a majority of our Board is not comprising of independent directors. As a result, to the extent that we take advantage of these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements. Although we do not currently intend to take advantage of the controlled company exemptions except as set forth above, we cannot assure you that, in the future, we will not seek to take advantage of these exemptions. If we cease to be a “controlled company” in the future, we will be required to comply with the Nasdaq listing standards, which may require replacing a number of our directors and will require development of certain other governance-related policies and practices. These and any other actions necessary to achieve compliance with such rules may increase our legal and administrative costs, will make some activities more difficult, time-consuming and costly and may also place additional strain on our personnel, systems and resources.

We have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.

We have not determined a specific use for a portion of the net proceeds of this offering, and our management will have considerable discretion in deciding how to apply these proceeds. You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you that the net proceeds will be used in a manner that would improve our results of operations or increase the share price, nor that these net proceeds will be placed only in investments that generate income or appreciate in value.

Special Note Regarding Forward-Looking Statements and Industry Data

This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements relating to:

•        our mission, goals and strategies;

•        our future business development, financial conditions and results of operations;

•        the expected growth of the E-vapors industry in the United States and other related countries and regions;

•        our expectations regarding demand for and market acceptance of our products and services;

•        our expectations regarding our relationships with suppliers, customers and other partners;

•        the effect of regulations relating to the marketing and sale of E-vapors in the United States and other countries and regions;

•        competition in our industry;

•        our proposed use of proceeds;

•        relevant government policies and regulations relating to our industry;

•        our ability to develop and maintain effective disclosure controls and internal controls over financial reporting;

•        our ability to comply with the continued listing standards on the exchange or trading market on which our shares of Class A common stock is listed for trading;

•        the volatility of our operating results and financial condition and the price of our Class A common stock;

•        general economic and business condition in the United States and elsewhere; and

•        assumptions underlying or related to any of the foregoing.

You should read this prospectus and the documents that we refer to in this prospectus thoroughly with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

This prospectus also contains statistical data and estimates that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. Although we have not independently verified the data, we believe that the publications and reports are reliable. However, the statistical data and estimates in these publications and reports are based on a number of assumptions and if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. In addition, due to the rapidly evolving nature of the industry in which we operate, projections or estimates about our business and financial prospects involve significant risks and uncertainties. You should not place undue reliance on these forward-looking statements.

Use of Proceeds

We will receive net proceeds from this offering of approximately US$[          ] million (or US$[          ] million if the underwriters exercise its over-allotment option in full) based on an initial offering price of US$[          ] per share, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders and obtain additional capital. We plan to use the net proceeds of this offering as follows:

•        US$[          ] million or approximately 30.0% for R&D of our products;

•        US$[          ] million or approximately 30.0% for upgrading our plant and facilities;

•        US$[          ] million or approximately 25.0% for sales and marketing of our products and promotion through marketing channels; and

•        the remainder 15.0% for working capital and other general corporate purposes.

The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations, the rate of growth, if any, of our business, and our present plans and business conditions. The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management will have significant flexibility and discretion in applying the net proceeds of the offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See “Risk Factors — Risks Related to this Offering and Ownership of Our Common Stock — We have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.”

Dividend Policy

We have not declared any cash dividends since inception and we do not anticipate paying any dividends in the foreseeable future. Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business. The payment of dividends is within the discretion of the Board and will depend on our earnings, capital requirements, financial condition, prospects, operating results, cash needs, growth plans, applicable Nevada law, which provides that dividends are only payable out of surplus or current net profits, and other factors our board might deem relevant. There are no restrictions that currently limit our ability to pay dividends on our Class A common stock other than those generally imposed by applicable state law.

Capitalization

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

•        on an actual basis; and

•        on a pro forma as adjusted basis to reflect the issuance and sale of [          ] shares at an initial public offering price of US$[          ] per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

____________

Note:

(1)      The number of issued and outstanding shares as of September 30, 2024 on a pro forma as adjusted basis reflects our receipt of the net proceeds of approximately US$[          ] resulting from our sale and issuance of [          ] shares of common stock in this offering at an initial public offering price of US$[          ] per share of common stock, after deducting US$[          ] of underwriting discounts and commissions and estimated offering expenses payable by us.

Selected Consolidated Financial Data

The following condensed consolidated statements of income and comprehensive income for the nine months ended September 30, 2024 and 2023, condensed consolidated balance sheets data as of September 30, 2024 and 2023, and condensed consolidated statements of cash flow data for the nine months ended September 30, 2024 and 2023, have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The following consolidated statements of income and comprehensive income for the years ended December 31, 2023 and 2022, consolidated balance sheets data as of December 31, 2023 and 2022, and consolidated statements of cash flow data for the years ended December 31, 2023 and 2022, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. You should read this Selected Consolidated Financial Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our historical results are not necessarily indicative of results expected for future periods.

Consolidated Statements of Operations

____________

*        The shares data is presented on a retroactive basis to reflect the reorganization.

Consolidated Balance Sheets

____________

*        The shares data is presented on a retroactive basis to reflect the reorganization.

Consolidated Statements of Cash Flows

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this prospectus. 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 prospectus, particularly in “Risk Factors.” All amounts included herein with respect to the fiscal years ended December 31, 2023 and 2022 are derived from our audited consolidated financial statements included elsewhere in this prospectus. All amounts included herein with respect to the nine months ended September 30, 2024 and 2023 are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Our financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP.

Overview

We are the first end-to-end innovative cannabis dosing solution provider in the US that possesses the medical atomization or nebulizing background and sells nebulizer, according to the Frost & Sullivan Report. We deeply engage in the key activities in the cannabis and consuming E-vapors industry, from the research and development, formulation design, e-liquid production, e-liquid filling to e-liquid co-packing services. We primarily generated revenues from sales of cannabis E-vapors and consuming E-vapors, which collectively accounted for 89.9% and 91.4% of the total revenues for the years ended December 31, 2023 and 2022, respectively. We generated revenues from sales of cannabis E-vapors and consuming E-vapors, which collectively accounted for 90.7% and 92.6% of the total revenues for the nine months ended September 30, 2024 and 2023, respectively.

Reorganization

For the purpose of this offering and listing on the Nasdaq, a reorganization (the “Reorganization”) of our legal structure was completed in January 2024. On April 15, 2024, we entered into a stock purchase agreement with Shenzhen LFS, which we have accounted for the Reorganization as transaction between entities with common ownership, which is akin to a reorganization of entities under common control. As all the entities involved in the process of the Reorganization are under common ownership of our shareholders before and after the Reorganization, the Reorganization is accounted for in a manner similar to a pooling of interests with the assets and liabilities of the parties to the Reorganization carried over at their historical amounts. Therefore, the accompanying consolidated financial statements were prepared as if the corporate structure of us had been in existence since the beginning of the periods presented.

Since our businesses are effectively controlled by the same group of the shareholders before and after the Reorganization, they are considered under common control. The above-mentioned transactions were accounted for as recapitalization. The consolidation of PAPA Medical Inc and our 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 consolidated financial statements.

Key Factors that Affect Results of Operations

Our results of operations have been, and are expected to continue to be, affected by various factors, which primarily include the following:

•        The effect of legislation and regulations affecting the cannabis and consuming E-vapors.

•        The development of an international market for E-vapors, which is presently primarily limited to certain states in the United States.

•        Our ability to obtain regulatory approval to market additional cannabis and consuming E-vapors in the United States, Europe and other target countries and regions.

•        Our ability to develop and market cannabis and consuming E-vapors to meet the changing tastes of users.

Impact of COVID-19 On Our Operations

To combat the COVID-19 pandemic, a global health emergency that spread globally since early 2020, various governments have taken measures to contain the virus, which have affected economic activity in all countries where the consumers of our products live. We have taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for our personnel, social distancing, and securing the supply of materials that are essential to our production process. Although the measures have been lifted as the WHO declared the COVID-19 became an established and ongoing health issue in May 2023, we continue to monitor the macroeconomic risk (including labor shortage, inflation and supply change shortages) and carefully evaluate potential outcomes and work to mitigate risks. We believe that we have not experienced a material adverse impact on our financial conditions. However, the extent of the impact of COVID-19 on our future financial results will be dependent on future developments such as the length and severity of the COVID-19, the potential resurgence of the COVID-19, future government actions in response to the pandemic and the overall impact of the COVID-19 on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable, and may have an adverse impact on our future operations, financial condition, liquidity and results of operations. See “Risk Factors — Risks Related to Our Business and Industry — Outbreaks of infectious diseases, epidemics, natural disasters or other events have materially and adversely affected, and in the future, may materially and adversely affect our business, results of operations and financial condition.”

Key Components of Results of Operations

Revenues

We primarily generate revenues from sales of cannabis and consuming E-vapors, which collectively accounted for 89.9% and 91.4% of the total revenues for the years ended December 31, 2023 and 2022, and for 90.7% and 92.6% of the total revenues for the nine months ended September 30, 2024 and 2023, respectively. The following table breaks down our revenues by amounts and as percentages of our total revenues for the periods presented:

Cost of Revenues

Our cost of revenues includes the manufacturing cost of cannabis and consuming E-vapors, which primarily consists of direct material costs, salaries and benefits for staff engaged in production activities and related expenses which are directly attributable to the production of products. The following table breaks down our cost of revenues by amounts and as percentages of our total revenues for the periods presented:

Gross Profit and Gross Profit Margin

Our gross profit increased by approximately 75.0% from US$15.6 million for the nine months ended September 30, 2023 to US$27.3 million for the nine months ended September 30, 2024, primarily attributable to an increase in sales volume and customers’ demands, which resulted from an increasing number of 29 new clients. Additionally, the sales of newly developed medical nebulizers and online candy sales for the nine months ended September 30, 2024 contributed significantly to the overall increase in gross profit with high gross profit margin with our improved brand recognition. Our gross profit margin increased from approximately 24.7% for the nine months ended September 30, 2023 to approximately 24.8% for the nine months ended September 30, 2024, primarily due to the increased sales volume and customers’ demands, as well as the increased medical nebulizers and online candy sales with high gross profit margin.

Our gross profit increased by approximately 140.7% from US$2.7 million for the year ended December 31, 2022 to US$6.5 million for the year ended December 31, 2023, primarily attributable to an increase in sales volume, which resulted from offering price discounts to both returning and new clients. Additionally, the sale of newly developed medical nebulizers in 2023 contributed significantly to the overall increase in gross profit with high gross profit margin. Our gross profit margin increased by approximately 29.0% from approximately 20.0% for the year ended December 31, 2022 to approximately 25.8% for the year ended December 31, 2023, primarily due to the increased sales volume and medical nebulizers sales operated since 2023 with high gross profit margin.

Operating Expenses

The following table sets forth our operating expenses and as percentages of our total revenues for the periods presented:

Sales and marketing expenses

Our sales and marketing expenses primarily consist of (i) compensation to selling personnel, including the salaries and other benefits; and (ii) commission paid to the third parties relevant to the sales and marketing function.

General and administrative expenses

Our general and administrative expenses primarily consist of salaries, bonuses and benefits for employees involved in general corporate functions, and those not specifically dedicated to sales activities, such as depreciation and amortization of fixed assets, legal and other professional services fees, rental and other general corporate related expenses.

Research and development expenses

Our research and development expenses consist primarily of materials cost for testing, payroll and related expenses for research and development professionals and the utilities expenses occurred in designing, developing and operating our technology innovations for launching new products and upgrading existing products.

Operating income

Our profit from operations decreased slightly by approximately 6.3% from US$1.6 million for the nine months ended September 30, 2023 to US$1.5 million for the nine months ended September 30, 2024, and our profit from operations increased by approximately 57.1% from US$1.4 million for the year ended December 31, 2022 to US$2.2 million for the year ended December 31, 2023.

Net income

Our net income decreased slightly by approximately 16.7% from US$1.2 million for the nine months ended September 30, 2023 to US$1.0 million for the nine months ended September 30, 2024, and our net income increased from US$0.7 million for the year ended December 31, 2022 to US$1.5 million for the year ended December 31, 2023.

Taxation

Income taxes

Current income taxes are provided on the basis of income/(loss) for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are provided using the assets and liabilities method. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect

on deferred taxes of a change in tax rates is recognized in the consolidated statement of income and comprehensive income in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more-likely-than-not that some portion of, or all of the deferred tax assets will not be realized.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of our management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, we consider possible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.

Uncertain tax positions

We evaluate 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. As of September 30, 2024, December 31, 2023 and 2022, we did not have any significant unrecognized uncertain tax positions.

We did not accrue any liability, interest or penalties related to uncertain tax positions in the provision for income taxes line of our consolidated statements of operations for the nine months ended September 30, 2024 and 2023, and for the fiscal years ended December 31, 2023 and 2022.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in Note 2 — “Summary of principal accounting policies” of our consolidated financial statements included elsewhere in this registration statement, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions.

Impairment of Right-of-use Assets and Other Long-lived Assets

We review our right-of-use assets, or ROU assets, and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. Factors we consider to be important which could trigger an impairment review primarily include:

•        significant underperformance relative to projected operating results;

•        significant changes in the overall business strategy;

•        significant adverse changes in legal or business environment; and

•        significant competition, unfavorable industry trends, or economic outlook.

When these events occur, we measure impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposal. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, we would recognize an impairment loss based on the excess of the carrying value over the fair value of the assets. Fair value is generally determined by discounting the cash flow expected to be generated by the assets, when the market prices are not readily available. As of September 30, 2024 and December 31, 2023, there was no impairment of long-lived assets.

Revenue recognition

We recognize our revenues under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle underlying the revenue recognition of this Accounting Standards Update (“ASU”) allows us to recognize revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which we expect to be entitled in such exchange. This will require us to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.

We apply five-step model to recognize revenue from customer contracts. The five-step model requires us to (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur; (iv) allocate the transaction price to the respective performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligation.

We recognize revenues at a point in time when control of the products is transferred to the customers, generally occurs upon delivery according to the terms of the underlying contracts. Our standalone selling prices are based on the prices charged to customers for the single performance obligation which is transfer of control of products upon delivery to the customers. Our general terms and conditions for its contracts do not contain a right of return that allows the customer to return products and receive credit, and therefore we do not estimate returns.

Contract Balances

When either party to a contract has been performed, we present the contract in the consolidated balance sheets as the contract assets or contract liabilities, depending on the relationship between the entity’s performance and the customer’s payment.

Contract assets represent our right to consideration in exchange for products that we have transferred to customers. We have no contract assets as of September 30, 2024, December 31, 2023 and 2022.

Generally, we collect the considerations in advance. The contract liabilities primarily are related to unsatisfied performance obligations when payment has been received from customers before satisfying the corresponding performance obligation. The contract liabilities are recorded as “advance from customers” on the consolidated balance sheets. As of September 30, 2024 and December 31, 2023, the balance of contract liabilities was US$3.4 million and US$1.8 million, respectively. Approximately 94.8% of the balance of 2023 has been recognized as revenue as of the date of this prospectus. We expect to recognize the balance as of September 30, 2024 as revenue within the next 12 months.

Recent accounting pronouncements

See the discussion of the recent accounting pronouncements in the section headed “Summary of Significant Accounting Policies” contained in Note 2 to the combined financial statements.

Results of Operations

The three months ended September 30, 2024 compared to the three months ended September 30, 2023

Revenues:    Our total revenues increased by approximately 49.3% from US$6.7 million for the three months ended September 30, 2023 to US$10.0 million for the three months ended September 30, 2024. The increase was primarily due to the expansion of our cannabis E-vapors customer base in the United States, which is mainly driven by the increased demand on cannabis E-vapors by the customers. Additionally, online candy sales for the three months ended September 30, 2024 contributed to the increase in revenue with our improved brand recognition.

Cost of Revenues:    Our total cost of sales increased by approximately 50.0% to US$ 7.5 million for the three months ended September 30, 2024 from US$5.0 million for the three months ended September 30, 2023, primarily due to our increased cost of raw materials and increased manufacturing cost in line with the increased sales for the three months ended September 30, 2024.

Gross profit and gross profit margin:    As a result of the factors set out above, our gross profit increased by approximately 41.2% from US$1.7 million for the three months ended September 30, 2023 to US$2.4 million for the three months ended September 30, 2024, primarily attributable to an increase in sales volume and customers’ demands with our improved brand recognition, which resulted from an increasing number of 21 new clients for the three months ended September 30, 2024. However, our gross profit margin decreased from approximately 25.3% for the three months ended September 30, 2023 to approximately 24.5% for the three months ended September 30, 2024, primarily due to the increased cost of our new products and the offering price discounts by the Company to new clients in order to stimulate sales and gain more market share.

Selling and marketing expenses:    Our sales and marketing expenses increased by 33.3% to US$1.2 million for the three months ended September 30, 2024 from US$0.9 million for the three months ended September 30, 2023, principally due to the increased cost of sales person and the additional amount of US$0.1 million related to Amazon platform fee in 2024.

General and administrative expenses:    Our general and administrative expenses increased by 500.0% to US$0.6 million for the three months ended September 30, 2024 from US$0.1 million for the three months ended September 30, 2023, primarily due to the increased labor cost and additional rental cost for another workshop operating lease.

Research and Development Expenses:    Our research and development expenses increased by approximately 100.0% from US$1.0 million for the three months ended September 30, 2023 to US$2.0 million for the three months ended September 30, 2024, primarily due to the increased R&D personnel and activities for our new series of E-vapors, iPrefer since the first quarter of 2024.

Interest (expense)/income, net:    We had a net of interest expense of US$14,036 and interest income of US$1,690 for the three months ended September 30, 2024 and 2023, respectively, The interest income recognized for the three months ended September 30, 2024 and 2023 was generated from the highly-liquid investments placed with banks which are unrestricted as to withdrawal and use, and have original maturities of three months or less.

Other loss, net:    We recorded a net of other loss of US$7,235 for the three months ended September 30, 2024, which was mainly due to the impairment loss of raw materials and finished goods of US$21,520. We recorded a net of other loss of US$17,390 for the three months ended September 30, 2023, which was mainly due to the impairment loss of raw materials and finished goods of US$58,172.

Income tax expenses:    Our income tax expense decreased by approximately 22.8% from US$150,142 for the three months ended September 30, 2023 to US$115,944 for the three months ended September 30, 2024, primarily due to the decrease of taxable income generated from operations.

Net income:    As a result of the above, our net income decreased from US$0.4 million for the three months ended September 30, 2023 to US$0.3 million for the three months ended September 30, 2024.