AGM : Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)

About this update from Agm Group Holdings Inc.

Operating and Financial Review and Prospects You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this annual report. Overview We aim to become an integrated technology company with blockchain oriented ASIC chip design, advanced encryption mining machine production, and financial technology software services. In 2025, we developed the latest generation of our proprietary ASIC cryptocurrency mining machines, the KOI MINER C21 SERIES ("C21"), with a hash rate of up to 285 TH/s and energy efficiency as low as 13.2 J/TH. We primarily derive revenue from the sales of cryptocurrency mining machines and standardized computing equipment. Revenue is recognized upon the satisfaction of our performance obligation (upon transfer of control of promised goods to customers or services to customers) in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services, excluding amounts collected on behalf of third parties (for example, value added taxes). We act as a principal in the revenue generating process and recognize revenue on a gross basis. Costs and Expenses We primarily incur the following costs and expenses: Costs of revenues Cost of revenues primarily consists of cost of product revenue, which includes direct costs of cryptocurrency mining machines and standardized computing equipment. Selling, general and administrative expenses Selling, general and administrative expenses consist primarily of bad debt expense, compensation expense for our corporate staff and personnel supporting our corporate staff, marketing costs, office supplies, professional fees (including consulting, audit and legal fees), travel and business hospitality expenses. 5.A. Operating Results. For The Year Ended December 31, 2025 2024 2023 Revenues $ 30,561,201 $ 32,044,575 $ 68,758,258 Cost of Revenues (27,405,410 ) (25,188,174 ) (65,605,382 ) Gross profit 3,155,791 6,856,401 3,152,876 Operating expenses Selling, general & administrative expenses (7,836,997 ) (909,042 ) 12,667,684 Total operating expenses (7,836,997 ) (909,042 ) 12,667,684 (Loss)/income from operations (4,681,206 ) 5,947,359 15,820,560 Other income/(expenses) Other income 41,236 50,438 37,071 Other expenses (374,814 ) (259,269 ) (348,569 ) Gain on disposal of subsidiaries 8,489,563 - - Total other income/(expenses) 8,155,985 (208,831 ) (311,498 ) Income before provision of income taxes 3,474,779 5,738,528 15,509,062 Provision for income taxes expenses (2,896,953 ) (2,330,891 ) (4,093,157 ) Net income from continuing operation 577,826 3,407,637 11,415,905 Loss from discontinued operation, net of income tax (16,196 ) (288,542 ) (18,855,185 ) Net income/(loss) $ 561,630 $ 3,119,095 $ (7,439,280 ) Revenues Our total revenue decreased by $1.5 million or 4.6% from $ 32.0 million for the year ended December 31, 2024 to $30.6 million for the year ended December 31, 2025. The decrease of revenue was mainly attributable to market share competitions. In order to retain the current market share, the Company has made strategical decision to reduce unit price and strive for order volume. Our total revenue decreased by $36.8 million or 53.4% from $ 68.8 million for the year ended December 31, 2023 to $32.0 million for the year ended December 31, 2024. All of our total revenues for the years ended December 31, 2024 and 2023 were generated from third parties and no revenues incurred from related party. The decrease of revenue was mainly contributed by a decrease in sales contracts, did not sell two of our main products and postponing the date of delivery resulting in revenues not being recognized. Cost of Revenues Cost of revenue increased by $2.2 million or 8.8% from $25.2 million for the year ended December 31, 2024 to $27.4 million for the year ended December 31, 2025. The increase in cost of revenues was caused by an 8% increase in sale volume compared to the prior year while, the cost of goods sold remains stable. Cost of revenue decreased by $40.4 million or 61.6% from $65.6 million for the year ended December 31, 2023 to $25.2 million for the year ended December 31, 2024. The decrease in cost of revenues was in line with the decrease in revenue. It was mainly contributed by not selling two of our main products. Gross profit Gross margin for the year ended December 31, 2025 was 10.3% compared to 21.4% for the year ended December 31, 2024. The decrease in gross margin was in line with the decrease in revenue and increase in cost of revenue. As the market competition keeps intensifying, the reduction of unit price was achieved, however, the cost of revenue remains stable. Gross margin for the year ended December 31, 2024 was 21.4% compared to 4.6% for the year ended December 31, 2023. The significant increase in gross margin was primarily attributable to the increase in the price of Bitcoin, which resulted in higher selling prices for cryptocurrency mining machines, while the procurement costs of such machines remained relatively stable across two years. Selling, general and administrative expenses Selling, general and administrative expenses mainly included allowance for credit losses reversal, sales and administrative employee-related expenses, professional fees and office supplies. Selling, general and administrative expenses were $7.8 million for the year ended December 31, 2025. It increased by $6.9 million compared to the year ended December 31, 2024. The significant increase was primarily contributed by increased financing activities of the Company during the year ended December 31, 2025, which led to a $1.2 million increase in its professional service fees compared to the year ended December 31, 2024. In addition, it was also attributable to the recognition of a $5.0 million impairment loss in 2025. Selling, general and administrative expenses were $0.9 million for the year ended December 31, 2024. It increased by $13.6 million compared to the year ended December 31, 2023. The significant increase was primarily due to a reversal of allowance for credit losses of $15.5 million recorded in the year ended December 31, 2023. (Loss)/income from operations As a result of the factors described above, operating net loss was $4.7 million for the year ended December 31, 2025 compared to net income of $5.9 million for the year ended December 31, 2024. It decreased by $10.6 million or 178.7%. Our operating income was $5.9 million for the year ended December 31, 2024 compared to $15.8 million for the year ended December 31, 2023. It decreased by $9.9 million or 62.4%. Other income/ (expenses), net For the year ended December 31, 2025, net other income was $8.2 million compared to net other expenses of $0.2 million for the year ended December 31, 2024. This increase in net income was primarily due to an increase in net other income, which was mainly contributed by gains on the disposal of subsidiaries during the year ended December 31, 2025. For the year ended December 31, 2024, net other expenses were $0.2 million compared to $0.3 million for the year ended December 31, 2023. The decrease was mainly due to the reduction in exchange losses. Income from continuing operation before provision of income taxes As a result of the foregoing, our income from continuing operation before provision of income taxes was $3.5 million, or $1.98 per basic and diluted share, for the year ended December 31, 2025, compared with $5.7 million, or $11.83 per basic and diluted share, for the year ended December 31, 2024. Our income from continuing operation before provision of income taxes of $15.5 million, or $31.97 per basic and diluted share, for the year ended December 31, 2023. Income tax For the year ended December 31, 2025, we had provision for income tax of $2.9 million, representing an increase of $0.6 million, or 24.3%, compared to provision for income tax of $2.3 million for the year ended December 31, 2024. The increase in provision for income tax was mainly due to the impairment of deferred tax assets recognized in connection with the sale of subsidiaries. For the year ended December 31, 2024, we had provision for income tax of $2.3 million, a decrease of $1.8 million, or 43.1%, as compared to expense for income tax benefit of $4.1 million for the year ended December 31, 2023. The decrease in provision for income tax was mainly due to the increase in gross profit without a significant reversal of bad debt provision. Gain loss from discontinued operation, net of income taxes Our loss from discontinued operations was $0.02 million, or -$0.01 per basic and diluted share, for the year ended December 31, 2025, compared with a loss from discontinued operations of $0.28 million, or -$0.59 per basic and diluted share, for the year ended December 31, 2024. Our loss from discontinued operations of $18.9 million, or -$38.87 per basic and diluted share for the year ended December 31, 2023. On May 6, 2025, the Company entered into an Equity Transfer Agreement with Hong Kong Giant Electronics Co., Limited, pursuant to which the Company sold 100% of its shares to the buyer for a total purchase price of US$57.45 million. Nanjing Lucun was a wholly-owned subsidiary of AGM HK incorporated in the PRC and principally producing high-performance hardware and computing equipment. The disposition was completed on May 7, 2025. The discontinued operations represent a strategic shift that has a major effect on the Company's operations and financial results, which triggers discontinued operations accounting in accordance with ASC 205-20-45. The results of operations related to the discontinued operations for the years ended December 31, 2025, 2024, and 2023 were reported at loss. The results of discontinued operations of Nanjing Lucun for the years ended December 31, 2025, 2024 and 2023 are as follows: For The Years Ended December 31, 2025 2024 2023 Revenues $ - $ 23,871,417 $ 24,148,914 Cost of Revenues (21,465 ) (23,443,331 ) (22,672,758 ) Gross profit (21,465 ) 428,086 1,476,156 Operating expense (20,875 ) (882,885 ) (26,538,318 ) Other income/(loss), net 23,055 71,756 (70,220 ) Loss before income tax (19,285 ) (383,043 ) (25,132,382 ) Income tax benefit 3,089 94,501 6,277,197 Loss from discontinued operations $ (16,196 ) $ (288,542 ) $ (18,855,185 ) Net income/(loss) As a result of the factor described above, our net income was $0.6 million, or $0.32 per basic and diluted share, for the year ended December 31, 2025, as compared with net income was $3.1 million, or $6.44 per basic and diluted share, for the year ended December 31, 2024. Our net loss of $7.4 million, or -$15.33 per basic and diluted share, for the year ended December 31, 2023. Foreign currency translation The accompanying consolidated financial statements are presented in United States dollar ("$"), which is the reporting currency of us. The functional currency of AGM Group Holdings, Inc., AGM Technology Limited, AGM Defi Tech Limited, our then subsidiaries established pursuant to the laws of Hong Kong, AGM Defi Lab Pte Limited, our then subsidiary established pursuant to the laws of Singapore, and KOI Global Ltd, our subsidiary established pursuant to the laws of the British Virgin Islands are United States dollar. The functional currency of AGM Tianjin Construction Development Co, Ltd., Beijing AnGaoMeng Technology Service Co., Ltd., Nanjing Lucun Semiconductor Co. Ltd., Beijing Keen Sense Technology Service Co., Ltd, and Beijing Bixin Electronic Technology Co., Ltd, our indirect subsidiaries established pursuant to the laws of China, are Renminbi ("RMB"). For the subsidiaries whose functional currencies are RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the exchange rate at the end of the period, and equity is translated at historical exchange rates. The Consolidated Balance Sheets balances, with the exception of equity at December 31, 2025 and 2024, were translated at RMB7.0288 and RMB7.1884 to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rates applied to the Consolidated Statements of Operations and Comprehensive Loss/Income and the Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 were RMB7.1429, RMB7.1217 and RMB7.0467 to $1.00, respectively. Net gains and losses resulting from foreign exchange translations are included in the comprehensive income/loss on the consolidated statements of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $4,551, $686,179 and $3,571,930 for the years ended December 31, 2025, 2024 and 2023, respectively. This non-cash loss had the effect on our reported comprehensive loss or income. 5.B. Liquidity and Capital Resources. Liquidity For the years ended December 31, 2025 and 2024 Liquidity is the ability of a company to generate funds to support our current and future operations, satisfy our obligations and otherwise operate on an ongoing basis. As of December 31, 2025 we had approximately $0.3 million in cash and cash equivalents and $25.1 million in accounts receivable for continuing operations, compared to $1.2 million in cash and $13.4 million in accounts receivable as of December 31, 2024. We believe that our current cash and cash to be generated from our operations will be sufficient to meet our working capital needs for at least the next twelve months. We are not dependent upon external borrowings. We plan to expand our business to implement our growth strategies to broaden our service and strengthen our position in the marketplace. The following table sets forth a summary of changes in our working capital from December 31, 2024 to December 31, 2025 for continuing operations: December 31, December 31, Percentage 2025 2024 Change Change Working capital: Total current assets $ 42,332,089 $ 46,002,900 (3,670,811 ) (8.0 )% Total current liabilities 3,190,107 33,013,668 (29,823,561 ) (90.3 )% Working capital $ 39,141,982 12,989,232 26,152,750 201.3 % Because the exchange rate conversion is different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities reflected on the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the consolidated balance sheets. Current assets for continuing operations Current assets decrease by $3.7 million from $46.0 million as of December 31, 2024 to $42.3 million as of December 31, 2025. The decrease was primarily contributed by a decrease in inventories of $21.4 million and offset by an increase in accounts receivable of $11.8 million and an increase in prepayment and other current assets of $5.6 million . Current liabilities for continuing operations Current liabilities saw a decrease of $29.8 million from $33.0 million as of December 31, 2024 to $3.2 million as of December 31, 2025. The decrease mainly consisted of a decrease in income tax payable of $14.6 million, a decrease in accounts payable of $12.8 million and a decrease in due to related parties of $1.6 million. Cash Flow Summary The following table sets forth certain items in our consolidated statements of cash flows for 2025, 2024 and 2023. For The Years Ended December 31, 2025 2024 2023 Net cash (used in) / provided by operating activities $ (4,077,322 ) $ 7,111,426 $ (1,691,718 ) Net cash provided by / (used in) investing activities 5,000 115,848 (10,708 ) Net cash provided by / (used in) financing activities 3,180,676 (7,242,251 ) 1,322,819 Effect of exchange rate changes on cash and cash equivalents 38,014 (407,532 ) (2,092,354 ) Net change in cash and cash equivalents and restricted cash (853,632 ) (422,509 ) (2,471,961 ) Cash and cash equivalents, beginning of the year 1,178,970 1,601,479 4,073,440 Cash and cash equivalents and restricted cash, end of the year 325,338 1,178,970 1,601,479 We have cash and cash equivalents held in financial institutions in the following countries (regions): December 31, December 31, Country (Region) 2025 2024 China (Mainland) $ 787 $ 5,752 Hong Kong 96,178 936,264 Singapore 228,373 228,448 Total cash and cash equivalents $ 325,338 $ 1,170,464 Operating Activities: Net cash used in operating activities from continuing operations for the year ended December 31, 2025 was $3.4 million (total of $4.1 million used in operating activities including net cash used in operating activities from discontinued operations of $0.6 million), mainly comprising a net income from continuing operations of $0.6 million, an allowance for doubtful accounts of $5.0 million, a decrease in accrued expenses and other payables of $5.0 million and a decrease in inventories of $21.4 million, offset by a gain on disposal of subsidiaries of $8.5 million and an increase in accounts receivable of $26.9 million. Net cash used in operating activities from continuing operations for the year ended December 31, 2024 was $40.4 million (total of $7.1 million provided by operating activities including net cash provided by operating activities from discontinued operations of $47.5 million), mainly comprising a net income from continuing operations of $3.4 million, offset by an increase in accounts receivable of $9.3 million, an increase in inventories of $27.2 million and a decrease in accounts payable of $7.0 million. Net cash provided by operating activities from continuing operations for the year ended December 31, 2023 was $33.4 million (total of $1.7 million used in operating activities including net cash used in operating activities from discontinued operations of $35.1 million), mainly comprising a net income from continuing operations of $11.4 million, a decrease in accounts receivable of $72.6 million, a decrease in advances to suppliers of $4.4 million, an increase in advances from customers of $3.7 million, offset by a decrease in accounts payable of $44.4 million and an adjustment to allowance for doubtful accounts of $15.4 million. Investing Activities: Net cash provided from investing activities was $5,000 for the year ended December 31, 2025. It comprised of $5,000 from continuing operations for disposal of subsidiaries. Net cash provided from investing activities was $115,848 for the year ended December 31, 2024. It comprised of $2,433 from continuing operations for disposal of property and equipment and $113,415 from discontinued operations. Net cash used in investing activities for the year ended December 31, 2023 was $10,708 consisting of $1,050 from continuing operations for purchase of property and equipment and $9,658 from discontinued operations. Financing Activities: Net cash provided by financing activities was $3.2 million for the year ended December 31, 2025. Net cash provided by financing activities from continuing operations was attributed to proceeds from issuance of ordinary shares for cash of $4.8 million, proceeds from related parties of $0.6 million, offset by repayments to related parties of $2.2 million. Net cash used in financing activities was $7.2 million for the year ended December 31, 2024 consisting of net cash used in financing activities from continuing operations of $7.1million net of net cash used in financing activities from discontinued operations of $0.1 million. Net cash used in financing activities from continuing operations was attributed to repayments to related parties of $8.0 million and offset by proceeds from related parties of $1.0 million. Net cash provided by financing activities for the year ended December 31, 2023 was $1.3 million comprising $1.2 million from continuing operations and $0.1 million from discontinued operations. Net cash provided by financing activities for continuing operations included proceeds from related parties of $4.4 million and repayments to related parties of $3.2 million. We expect to incur additional costs associated with becoming a public company in the United States, primarily due to increased expenses related to accounting and tax services, legal expenses and investor and stockholder-related expenses. These additional long-term expenses may require us to seek other sources of financing, such as additional borrowings or public or private equity or debt capital. The availability of these other sources of financing will depend upon our financial condition and results of operations as well as prevailing market conditions and may not be available on terms reasonably acceptable to us or at all. Credit facility We mainly finance our operations through proceeds borrowed from related parties. As of December 31, 2025, due to related parties was $0.6 million compared to $2.2 million as of December 31, 2024, representing a decrease of $1.6 million. Due to related parties as of December 31, 2025 and 2024 include: December 31, December 31, 2025 2024 Yufeng Mi - 4,503 HongKong Kisen 592,131 2,195,948 Total due to related parties $ 592,131 $ 2,200,451 The balance of due to related parties represents expenses incurred by related parties in the ordinary course of business and expenses related parties paid on behalf of us. These loans are bear interest at an annual rate of 0.1%, unsecured and repayable on demand. From time to time, we borrowed $0.6 million from and repaid $2.2 million to related parties in the year ended December 31, 2025. We borrowed $1.0 million from and repaid $8.0 million to related parties in the year ended December 31, 2024. 5.C. Research and Development, Patent and Licenses, etc. Please refer to "Item 4. Information on the Company - D. Property, Plant and Equipment - Intellectual Property." 5.D. Trend Information. Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition or results of operations. 5.E. Critical Accounting Estimates. Critical accounting policies The discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these audited consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our estimates on an ongoing basis. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making the judgments we make about the carrying values of our assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from the estimates. The critical accounting policies summarized in this section are discussed in further detail in the notes to the audited consolidated financial statements appearing elsewhere in this annual report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. We consider our critical accounting estimates include (i) revenue recognition; (ii) allowance for credit losses; (iii) provision of advances to suppliers; (iv) valuation allowances of deferred tax assets; and (v) uncertainty of tax position. Discontinued operation The Company reports a disposal of its component or a group of its components as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on the Company's operations and financial results. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. In the period that a discontinued operation is classified as held for sale, the assets and liabilities of the discontinued operation are presents separately in asset and liability sections, respectively, of the consolidated balance sheets and prior periods are presented on a comparative basis. In the consolidated statements of operations and comprehensive (loss)/income, the results from discontinued operations are reported separately from the income and expenses from continuing operations and prior periods are presented on a comparative basis. Cash flows for discontinued operations are presented separately in the consolidated statements of cash flows. Unless otherwise noted, discussion in the Notes to consolidated financial statements refers to the Company's continuing operations. Reclassification Certain prior period amounts have been reclassified to conform to current period presentation in order to reflect the discontinued operations of Nanjing Lucun. None of these reclassifications had an impact on reported financial position or cash flows for any of the period presented. Revenue recognition We adopted Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606") for all years presented. The core principle of this new revenue standard is that a company should recognize revenue when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration to which We expect to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle by us in determination of revenue recognition: ● Step 1: Identify the contract(s) with the customer; ● Step 2: Identify the performance obligations in the contract; ● Step 3: Determine the transaction price; ● Step 4: Allocate the transaction price to the performance obligations in the contract; and ● Step 5: Recognize revenue when or as we satisfy a performance obligation. We derive revenue from the sale of cryptocurrency mining machines and standardized computing equipment for the years ended December 31, 2025, 2024 and 2023. Revenue is recognized upon the satisfaction of its performance obligation (upon transfer of control of promised goods to customers) in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods, excluding amounts collected on behalf of third parties (for example, value added taxes). We act as a principal in revenue generating process and should recognize revenue on a gross basis. Revenues are measured as the amount of consideration we expect to receive in exchange for transferring products to customers. The transaction price is fixed as specified in the contracts. Our contracts do not include explicit right of return, and variation consideration is not significant. All transactions are settled in cash within normal credit period, and there is no financing component. Allowance for credit losses Accounts receivable consists principally of amounts due from trade customers. Credit is extended based on an evaluation of the customer's financial condition and collateral is not generally required. Accounts receivable are recognized and carried at net realizable value. We evaluate the accounts receivable for expected credit losses on a regular basis. We maintain an estimated allowance for credit losses to reduce its accounts receivable to the amount that it believes will be collected. We use the length of time a balance has been outstanding, the payment history, creditworthiness and financial conditions of the customers and industry trend as credit quality indicators to monitor our receivables within the scope of expected credit losses model, along with reasonable and supportable forecasts as a basis to develop our expected loss estimates. We adjust the allowance percentage periodically when there are significant differences between estimated credit losses and actual bad debts. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, the Company also makes specific allowance in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted. We reversed our credit loss allowance by $10.9 million, consisting of write-offs of $7.5 million and a $3.5 million derecognition resulting from the sale of subsidiaries, and recorded credit losses of $5.0 million for the year ended December 31, 2025. We reversed credit losses of nil and recorded credit losses of $0.7 million for the year ended December 31, 2024. We reversed credit losses of $21.9 million and recorded credit losses of $1.9 million for the year ended December 31, 2023. Inventory write-down Inventories, primarily consisting of standardized computing equipment, are finished goods from manufacturers. Cost of inventory is determined using the first-in, first-out cost method. Where there is evidence that the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, the inventories are written down to net realizable value. There were no write-downs recognized for the inventories for the years ended December 31, 2025, 2024 and 2023. Provision of advance to suppliers (1) Advance to suppliers are settled when the products are provided and accepted by us. We review our advance to suppliers on a periodic basis and determine the adequacy of provision when amounts outstanding are not likely to be collected in cash or utilized against receipt of products. For the years ended December 31, 2025, 2024 and 2023, we recorded provision of advances to suppliers of nil, nil and $3.5 million, respectively. During the same periods, we reduced such provisions by $1.5 million, $2.0 million and nil, respectively, with the reduction in 2025 resulting from the sale of subsidiaries and the reduction in 2024 was attributable to the reversal of previously recognized provisions. (2) Other current assets, which primarily consisted of loans receivable and other rent receivable. For the years ended December 31, 2025, 2024 and 2023, we recorded provision of other current assets of nil, nil and $1.2 million and reduced provision by $1.2m, nil and nil, respectively. Leases We account for our lease under ASC 842 Leases, and identify lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. For all operating leases except for short-term leases, we recognize operating right-of-use assets and operating lease liabilities. Leases with an initial term of 12 months or less are short-term leases. We do not recognize right-of-use assets or lease liabilities on the consolidated balance sheet for short-term leases but rather recognizes lease expense on a straight-line basis over the lease term. The operating lease liabilities are recognized based on the present value of the lease payments not yet paid, discounted using our incremental borrowing rate over a similar term of the lease payments at least commencement. The right-of-use assets consist of the amount of the measurement of the lease liabilities and any prepaid lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Valuation allowance of deferred tax assets We account for income taxes using the asset/liability method prescribed by ASC 740, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. We record a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date. For the years ended December 31, 2025, 2024 and 2023, we recorded $3.3 million, $0.6 million and nil valuation allowance of deferred tax assets. For the years ended December 31, 2025, 2024 and 2023, we reduced valuation allowance of deferred tax assets by $3.4 due to sales of subsidiaries, nil and nil, respectively. Uncertainty of tax position The China EIT Law provides that an enterprise established under the laws of foreign countries or regions but whose "de facto management body" is located in China be treated as a resident enterprise for PRC tax purpose and consequently be subject to China income tax at the rate of 25% for its worldwide income. The Implementing Rules of the China EIT Law merely defines the location of the "de facto management body" as "the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located." On April 22, 2009, China State Administration of Taxation further issued a notice entitled "Notice regarding Recognizing Offshore-Established Enterprises Controlled by PRC Shareholders as Resident Enterprises Based on Their place of Effective Management." Under this notice, a foreign company controlled by a PRC company or a group of PRC companies shall be deemed as a PRC resident enterprise, if (i) the senior management and the core management departments in charge of its daily operations mainly function in China; (ii) its financial decisions and human resource decisions are subject to decisions or approvals of persons or institutions in China; (iii) its major assets, accounting books, company sales, minutes and files of board meetings and shareholders' meetings are located or kept in China; and (iv) more than half of the directors or senior management personnel with voting rights reside in China. Based on a review of surrounding facts and circumstances, we believe that there is an uncertain tax position as to whether its operations outside of China will be considered a resident enterprise for PRC tax purposes due to limited guidance and implementation history of the China EIT Law. Should our subsidiaries be treated as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on worldwide income at a uniform tax rate of 25%. For the years ended December 31, 2025, and 2024, we have evaluated this uncertain tax position and recorded a tax liability on the Consolidated Balance Sheet. As of December 31, 2025 and 2024, income tax payable related to the uncertain tax position were $0.8 million and $15.4 million, respectively. Recently adopted accounting pronouncements In December 2023, the FASB issued ASU 2023-09, Improvement to Income Tax Disclosure. This standard requires more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This standard also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for public business entities, for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. The Company adopted ASU 2023-09 for the year beginning on January 1, 2025, prospectively. The Company expects the impact of adoption of this ASU to be immaterial to its financial statements. Recently issued accounting pronouncements not yet adopted In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. This new guidance is designed to improve the disclosures about the types of expenses, including employee compensation, depreciation, and amortization, and costs incurred related to inventory and manufacturing activities. In January 2025, the FASB issued ASU No. 2025-01 to clarify certain provisions of ASU 2024-03, including its effective date and transition guidance. As clarified, the amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. The guidance should be applied prospectively, with an option for retrospective application. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-04, Debt-Debt with Conversion and Other Options (Subtopic 470-20). The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is in the process of assessing the impact of the amendments on the Company's consolidated financial statements. In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU addresses challenges encountered when applying the guidance in Topic 326, Financial Instruments-Credit Losses, to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is in the process of assessing the impact of the amendments on the Company's consolidated financial statements. In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832) . ASU No. 2025-10 establishes guidance on the recognition, measurement, and presentation of government grants received by business entities. The guidance is effective for annual reporting periods beginning after December 15, 2029, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is in the process of assessing the impact of the amendments on the Company's consolidated financial statements. Recently issued ASUs by the FASB, except for the ones mentioned above, are not expected to have a significant impact on our consolidated results of operations or financial position. Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. We do not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to our consolidated financial condition, results of operations, cash flows, or disclosures.

View stock analysis, news, and events for Agm Group Holdings Inc.