Chanson International Holding

Chanson International Holding operates in the bakery and beverage product manufacturing and retail industry, primarily through 63 stores in Xinjiang, PRC, and three stores in New York City, U.S. ⁶⁴. The company's business model involves directly operating stores rather than franchising, which allows for greater control over product quality, brand presentation, and customer experience ⁶⁵. Revenue generation is a mix of bakery product sales, seasonal product sales, beverage product sales, and eat-in services ⁶⁶. The company's primary customer segments include both individual and corporate customers ⁶⁷. A significant portion of the company's business in the PRC is conducted through Variable Interest Entities (VIEs), which are individually-owned businesses controlled by Xinjiang United Family through contractual agreements, enabling consolidation of their financial results under U.S. GAAP ⁶⁸.

The PRC Stores offer over 1,246 types of bakery products, seasonal products, and beverage products, with 153 new products introduced since January 1, 2025 ⁶⁹. Bakery products include packaged items, birthday cakes, and made-in-store pastries, while seasonal products feature mooncakes and zongzi, and beverage products comprise store-made beverages and juices ⁷⁰. The U.S. Stores provide 53 types of eat-in menu items and bakery products, along with numerous beverage products, including 23 new products since January 1, 2025 ⁷¹. Their eat-in menu includes sandwiches, éclairs, tarts, cakes, cookies, croissants, and pastries, with beverage offerings like coffee, tea, juice, soda, and cocktails ⁷². The PRC Stores manufacture most bakery products at a central factory in Urumqi, Xinjiang, and contract third-party producers for seasonal items, while the U.S. Stores prepare products in-store ⁷³.

For the fiscal year ended December 31, 2025, Chanson International reported total revenue of $18,268,894 ⁷⁴, with a cost of revenue of $10,050,891 ⁷⁵, resulting in a gross profit of $8,218,003 ⁷⁶ and a gross margin of 45.0% ⁷⁷. Operating expenses totaled $10,105,128 ⁷⁸, leading to a loss from operations of $1,887,125 ⁷⁹. Net income for the period was $187,540 ⁸⁰. As of December 31, 2025, the company had cash and cash equivalents of $8,644,357 ⁸¹. Total liabilities were $25,774,859 ⁸², and total shareholders' equity was $56,210,932 ⁸³. The company had short-term bank loans of $432,263 ⁸⁴ and long-term bank loans of $5,343,905 ⁸⁵. Net cash provided by operating activities was $2,864,867 ⁸⁶.

Year-over-year, total revenue increased by $41,357, or 0.2%, from $18,227,537 in 2024 to $18,268,894 in 2025 ⁸⁷. Revenue from China increased by 1.3% to $16,358,524 ⁸⁸, while revenue from the U.S. decreased by 8.4% to $1,910,370 ⁸⁹. The PRC Stores accounted for 89.5% of total revenue in 2025, up from 88.5% in 2024 ⁹⁰. Gross profit increased by $1,023,685, or 14.2%, from $7,194,318 in 2024 to $8,218,003 in 2025 ⁹¹, with gross margin expanding by 5.5 percentage points to 45.0% ⁹². Selling expenses increased by $1,504,301, or 31.6%, to $6,261,580 ⁹³, and general and administrative expenses increased by $876,889, or 29.6%, to $3,843,548 ⁹⁴.

During the fiscal year 2025, nine bakery stores were opened in the PRC ⁹⁵. Chanson 23rd Street suspended its bakery product operations in April 2025 due to increased competition ⁹⁶. Chanson 3rd Ave suspended all business operations in January 2025 due to building renovation and increased competition ⁹⁷. The company launched several new cocktail products with new flavors and styles in the U.S. Stores, leading to increased private event bookings ⁹⁸. The U.S. Stores also transitioned from complex to streamlined eat-in menu items, reducing labor costs and enhancing inventory management ⁹⁹. The company entered into a loan agreement with Liberty Asset Management Capital Limited for $2.0 million, of which $0.5 million was charged off as bad debt ¹⁰⁰. Additionally, the company made long-term debt investments of approximately $16.5 million in Shenzhen Yongdahui Trading Co., Ltd. and $30.0 million in Beijing Zhixuan Tiangong Technology Development Co., Ltd. ¹⁰¹.

The company plans to expand its business by opening new stores, with a current plan to open an additional ten stores in fiscal year 2026 with a total budget of approximately RMB5.0 million (approximately $0.7 million) ¹⁰². This expansion will focus on exploring new markets while strengthening the existing presence in Xinjiang and New York City, driven by sales data analysis, customer trend features, and continuous improvement of in-store customer experience ¹⁰³. The U.S. Stores are actively negotiating with potential business partners for new store openings ¹⁰⁴.

A key growth vector involves enhancing in-store customer experience and customer services through store renovations to create a clean, modern interior design with open kitchens, relaxing music, and soft lighting ¹⁰⁵. Store managers will have flexibility in decorating and product display to cater to local customer needs. Standardized training for store employees will be continuously provided to ensure high-quality services and uphold brand image ¹⁰⁶.

Another strategic growth area is the continued implementation of healthy and nutritious diet principles in product development ¹⁰⁷. The company aims to integrate healthy elements such as zero or low fat, low calorie, zero or low sugar, high fiber, vitamins, and minerals into existing and future products, including new categories like multi-grain products ¹⁰⁸. The R&D team will continue to participate in industry conferences and engage with experts to develop product formulas reflecting market trends ¹⁰⁹.

Operationally, the company expects to implement initiatives to control costs and improve operating efficiency in fiscal year 2026, which is projected to lead to an increase in revenue and net income compared to fiscal year 2025 ¹¹⁰. The company will continue to invest in product innovation and promote sales growth, which is expected to result in increased SG&A expenses in absolute dollars due to business growth and operations ¹¹¹. Headcount, particularly in sales and marketing, is also expected to increase to support growth ¹¹².

Planned capital allocation includes funding new stores with cash on hand, operating cash flows, and equity financing from outside investors ¹¹³. The investment budget for the bakery production line of the central factory in Urumqi is approximately RMB16.1 million (approximately $2.2 million) after VAT deduction, with approximately RMB15.9 million (approximately $2.18 million) already spent as of December 31, 2025, and an estimated future minimum expenditure of RMB200,000 (approximately $29,320) ¹¹⁴. The company plans to use cash flow from the operations of the PRC Stores to fund this future construction ¹¹⁵.

Management has explicitly flagged several structural headwinds and execution risks. The post-COVID-19 economy in China has recovered slower than expected, impacting consumer spending due to economic pressure and weak consumer confidence ¹¹⁶. The growing prevalence of online consumption has intensified market competition in China, affecting in-store sales ¹¹⁷. In the U.S., increased competition from other bakery brands and restaurants in New York City has adversely affected revenue and gross margins ¹¹⁸. The company also faces risks from fluctuations in exchange rates, which could negatively affect business and financial results, especially given that most business is conducted in RMB and financial statements are presented in U.S. dollars ¹¹⁹.

The company faces material risks including the potential ineffectiveness of its VIE Agreements in providing operational control over the UFG Entities, which contribute a substantial part of its revenue and net income, and the risk that these agreements may not be enforceable under PRC laws, potentially leading to a significant loss in investment value. The PRC government's significant oversight and discretion over the operations of its PRC subsidiary and VIEs could lead to interventions or policy changes that materially alter operations or diminish the value of Class A Ordinary Shares. Uncertainties in the interpretation and enforcement of PRC laws, including the amended PRC Company Law and data security regulations like the Cybersecurity Review Measures and Measures for the Security Assessment of Cross-border Data Transfer, could limit legal protection and subject the company to additional compliance requirements or penalties. The geographic concentration of the PRC Stores in Xinjiang and the U.S. Stores in New York City makes the company vulnerable to adverse economic, political, and social conditions in these specific regions, including geopolitical instability from conflicts such as those in Russia-Ukraine and Israel-Hamas, which have already caused volatility in commodity prices and supply chain disruptions, indirectly affecting the U.S. Stores' business. The company also faces risks related to changing consumer preferences, intense competition in the bakery market, the inability to source raw materials of acceptable quality or pass on price increases, and potential disruptions at its central factory or from third-party suppliers. Furthermore, the company has identified a material weakness in its internal control over financial reporting due to insufficient in-house personnel with U.S. GAAP and SEC reporting knowledge, which could adversely affect financial reporting accuracy and investor confidence. The dual-class share structure concentrates voting control with Mr. Gang Li, potentially leading to decisions not aligned with other shareholders' interests. The company's Class A Ordinary Shares may also be subject to delisting if it fails to meet Nasdaq's continued listing requirements, as evidenced by a prior notice regarding minimum bid price ¹²⁰.

Management's message to shareholders emphasizes a commitment to growth and brand strengthening through strategic initiatives. They intend to expand into new markets by opening additional stores, with a budget of approximately RMB5.0 million (approximately $0.7 million) ¹²¹ for ten new stores in fiscal year 2026, and are actively negotiating with potential business partners for new U.S. store openings. A key strategic priority is to enhance in-store customer experience and services through store renovations and continuous employee training, aiming to create a distinctive and relaxing environment. Furthermore, management is focused on integrating healthy and nutritious diet principles into product development, exploring new product categories, and refining product formulas with the help of their R&D team and industry experts. They also plan to increase brand awareness through marketing efforts, social media presence, and growing e-commerce sales, particularly in the New York City market. Management expects revenue and net income to increase in fiscal year 2026 compared to fiscal year 2025, driven by cost control measures and improved operating efficiency. The controlling shareholder, Mr. Gang Li, has pledged continuous financial support for at least 12 months from the issuance of the consolidated financial statements as of and for the year ended December 31, 2025, and the company may seek additional equity financing if needed.