Erayak Power Solution Group Inc 6-K, filed Oct 14, 2026
Erayak Power Solution Group Inc. (RAYA)
About this 6-K
Erayak Power Solution Group Inc filed this 6-K on October 14, 2026.
Erayak Power Solution Group Inc. reported sales of $12,170,000 for the six months ended June 30, 2026, up 39.17%, but a net loss of $761,221 and gross margin of 15.63%. Cash, cash equivalents and restricted cash totaled $2,830,218. AI summary
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October
Commission File Number:
No. 528, 4th Avenue
Binhai Industrial Park
Wenzhou, Zhejiang Province
People’s Republic of China 325025
+86-577-86829999
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Erayak Power Solution Group Inc | ||
| Date: October 14, 2026 | By: | /s/ Lingyi Kong |
| Name: | Lingyi Kong | |
| Title: | Chief Executive Officer | |
1
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2026 and 2025 | |
| 99.2 | Unaudited Interim Condensed Consolidated Financial Statements for the Six Months Ended June 30, June 30, 2026 and 2025 | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
2
Exhibit 99.1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this report on Form 6-K and with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 20-F for the fiscal year ended December 31, 2025. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
Results of Operations
For the Six Months Ended June 30, 2026 and 2025
The following table summarizes the results of our operations for the six months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
(All amounts, other than percentages, are in U.S. dollars)
| For the Six Months Ended June 30, | Variance | |||||||||||||||
| 2026 | 2025 | Amount | Percentage | |||||||||||||
| Sales | $ | 12,170,000 | $ | 8,744,869 | $ | 3,425,131 | 39.17 | % | ||||||||
| Cost of sales | (10,267,645 | ) | (7,007,751 | ) | (3,259,894 | ) | 46.52 | % | ||||||||
| Gross profit | 1,902,355 | 1,737,118 | 165,237 | 9.51 | % | |||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (1,564,543 | ) | (1,262,833 | ) | (301,710 | ) | 23.89 | % | ||||||||
| Selling and marketing expenses | (445,872 | ) | (329,644 | ) | (116,228 | ) | 35.26 | % | ||||||||
| Research and development costs | (869,957 | ) | (781,775 | ) | (88,182 | ) | 11.28 | % | ||||||||
| Total operating expenses | (2,880,372 | ) | (2,374,252 | ) | (506,120 | ) | 21.32 | % | ||||||||
| Operating loss | $ | (978,017 | ) | $ | (637,134 | ) | $ | (340,883 | ) | 53.50 | % | |||||
| Other income (expenses): | ||||||||||||||||
| Rental income, net | 86,898 | 77,775 | 9,123 | 11.73 | % | |||||||||||
| Interest income (expenses), net | 45,318 | (136,575 | ) | 181,892 | - | % | ||||||||||
| Other income, net | 52,653 | 173,072 | (120,419 | ) | -69.58 | % | ||||||||||
| Total other income, net | 184,869 | 114,272 | 70,597 | 61.78 | % | |||||||||||
| Loss before income taxes | $ | (793,148 | ) | $ | (522,862 | ) | $ | (270,286 | ) | 51.69 | % | |||||
| Income tax refund | 31,927 | 6,207 | 25,720 | 414.37 | % | |||||||||||
| Net loss | $ | (761,221 | ) | $ | (516,655 | ) | $ | (244,566 | ) | 47.34 | % | |||||
Revenues
Revenues increased by $3,425,131, or 39.17%, from $8,744,869 for the six months ended June 30, 2025, to $12,170,000 for the six months ended June 30, 2026. The revenue growth was primarily driven by an increase of $1,909,601 (or 63.80%) in sales of gasoline generators and an increase of $1,759,222 (or 35.43%) in sales of inverters. These increases were primarily attributable to higher sales volume supported by improving market conditions, rising downstream demand, and an expanded customer base.
Cost of sales
Our cost of sales increased by $3,259,894, or 46.52%, from $7,007,751 for the six months ended June 30, 2025, to $10,267,645 for the six months ended June 30, 2026. The increase in cost of sales was generally in line with our revenue growth. In addition, the revenue increase during the period was predominantly concentrated in our generator product lines. Generator products inherently carry a higher proportion of direct raw material and component costs, which resulted in a higher relative cost of sales structure.
Gross profit and gross margin
Our gross profit increased by $165,237, or 9.51%, from $1,737,118 for the six months ended June 30, 2025, to $1,902,355 for the six months ended June 30, 2026. However, our gross profit margin decreased by 4.23 percentage points, from 19.86% for the six months ended June 30, 2025, to 15.63% for the six months ended June 30, 2026.
The compression in gross margin was primarily attributable to a shift in product sales mix and our commercial pricing strategy. To drive top-line expansion and capture market share in an improving market environment, the Company implemented a volume-driven pricing strategy (“high-volume, low-margin”). Coupled with an increased proportion of gasoline generator sales – which rose from 34.23% to 40.29% of total revenue and carry lower intrinsic gross margins due to higher material costs – cost of sales grew at a faster pace (46.52%) than sales revenue (39.17%), thereby moderating overall gross margin.
General and Administrative Expenses
General and administrative expenses increased by $301,710, or 23.89%, from $1,262,833 for the six months ended June 30, 2025, to $1,564,543 for the six months ended June 30, 2026. The increase was primarily driven by a $103,468 rise in sales tax related to operational and compliance adjustments, a $96,961 increase in employee compensation and benefits resulting from statutory base adjustments for salaries, social security, and housing provident funds, as well as higher office and miscellaneous expenses ($55,698) and consulting fees ($48,007) to support business growth. These increases were partially offset by a $74,470 reduction in rent and utilities.
Selling expenses
Selling and marketing expenses increased by $116,228, or 35.26%, from $329,644 for the six months ended June 30, 2025, to $445,872 for the six months ended June 30, 2026. The increase was primarily attributable to a $90,585 surge in travel and promotional spending dedicated to advertising campaigns and website development for business expansion, a $52,507 increase in shipping and handling costs driven by higher product shipment volumes, and a $42,386 increase in inspection and certification fees for new client acquisition, partially offset by a $65,343 decrease in sales personnel compensation and benefits.
Interest income (expenses), net
Net interest income (expenses) improved by $181,892, shifting from net interest expense of $136,575 for the six months ended June 30, 2025, to net interest income of $45,318 for the six months ended June 30, 2026. The favorable variance was primarily attributable to higher interest earned as the Company utilized idle cash balances in its Hong Kong subsidiary to invest in short-term investments generating higher yields.
Other income, net
Total other income (expenses), net decreased by $120,419, or 69.58%, from $173,072 for the six months ended June 30, 2025, to $52,653 for the six months ended June 30, 2026. The decrease was primarily driven by a $76,755 unfavorable swing in foreign exchange, shifting from exchange gains of $30,641 to exchange losses of $46,114 due to foreign currency fluctuations, a $46,834 decrease in miscellaneous income, and a $38,355 decrease in government subsidies received. These reductions were partially offset by $44,609 recognized in sample reimbursement during the six months ended June 30, 2026.
Liquidity and Capital Resources
As of June 30, 2026 and December 31, 2025, we had cash, cash equivalents and restricted cash of $2,830,218 (including restricted cash of $337,426) and $436,788 (including restricted cash of $251,932), respectively. In addition, we had positive working capital of $23.93 million as of June 30, 2026. While our working capital primarily consists of trade receivables, inventories, and prepayments, we actively manage our cash flow through disciplined collections and inventory realization. Taking into account our cash flow projections, scheduled debt maturities, and anticipated capital expenditures, we believe that our current cash position, along with operating cash flows and existing banking facilities will be sufficient to meet our working capital needs and financial obligations for at least the next twelve months. We are not dependent on related party advances or additional equity offerings to meet our short-term liquidity needs.
Substantially all our operations are conducted in China and a majority portion of our revenues, expense, cash and cash equivalents are denominated in Renminbi (RMB). RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into U.S. Dollars.
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Under PRC law, RMB is currently convertible into U.S. Dollars under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the State Administration of Foreign Exchange (SAFE), but is not from a company’s “capital account,” which includes foreign direct investments and loans, without the prior approval of the SAFE.
With respect to retained earnings, our board of directors may declare dividends after taking into account our operations, earnings, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration and payment, as well as the amount, of dividends will be subject to our Sixth Amended and Restated Memorandum and Articles of Association and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.
We have limited financial obligations denominated in US dollars, thus the foreign currency restrictions and regulations in the PRC on the dividends distribution will not have a material impact on the liquidity, financial condition and results of operations of the Company.
2
Cash Flow Summary
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (3,738,472 | ) | $ | (782,378 | ) | ||
| Net cash used in investing activities | (7,324,950 | ) | (4,489,976 | ) | ||||
| Net cash provided by financing activities | 13,150,087 | 4,361,752 | ||||||
| Effect of exchange rate changes on cash | 306,765 | 8,168 | ||||||
| Net increase (decrease) in cash | $ | 2,393,430 | $ | (902,434 | ) | |||
Operating Activities:
Net cash used in operating activities for the six months ended June 30, 2026 was approximately $3.74 million, which was primarily attributable to a net loss of approximately $0.76 million, adjusted for non-cash items of approximately $0.65 million and adjustments for changes in working capital of approximately $(3.62) million. The adjustments for changes in working capital mainly included an increase in related party accounts receivable of approximately $4.00 million and an increase in accounts receivable of approximately $0.98 million to support market expansion, an increase in inventories of approximately $1.08 million, and a decrease in advances from customers of approximately $0.45 million, partially offset by a decrease in advance to suppliers of approximately $0.73 million, a decrease in advance to related party suppliers of approximately $1.31 million, an increase in accounts payable of approximately $0.37 million, and an increase in related party accounts payable of approximately $0.51 million.
Net cash used in operating activities for the six months ended June 30, 2025 was approximately $0.78 million, which was primarily attributable to a net loss approximately $0.52 million, adjusted for non-cash items for approximately $0.61 million and adjustments for changes in working capital approximately $0.88 million. The adjustments for changes in working capital mainly included increase of accounts receivable of approximately $1.15 million, decrease in related party accounts receivable of approximately $1.32 million, decrease of advance to suppliers of approximately $0.48 million, decrease of accounts payable of approximately $2.86 million, and increase of advance from customers of approximately $0.65 million.
Investing Activities:
Net cash used in investing activities for the six months ended June 30, 2026 was approximately $7.32 million, which was primarily attributable to cash paid for the acquisition of property, plant, and equipment of approximately $9.99 million and short-term investments of approximately $1.36 million, partially offset by proceeds from the maturity of fixed deposits of approximately $4.04 million.
Net cash used in investing activities was approximately $4.49 million for the six months ended June 30, 2025. It was primarily attributable to the addition of fixed assets for production needs and acquisition of intangible assets during the period.
Financing Activities:
Net cash provided by financing activities for the six months ended June 30, 2026 was approximately $13.15 million, which mainly consisted of proceeds from share issuance of approximately $7.48 million, net proceeds from long-term bank loans of approximately $2.92 million, proceeds from notes payable of approximately $1.46 million, net proceeds from related party borrowings of approximately $0.86 million, and net proceeds from short-term borrowings of approximately $0.43 million.
Net cash provided by financing activities was approximately $4.36 million for the six months ended June 30, 2025. It was primarily attributable to net proceeds from short-term bank loans of approximately $3.38 million, net proceeds from long-term bank loans of approximately $2.48 million, offset by the repayment of related party loans of approximately $1.51 million.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company’s year-end financial statements, which could result in significant differences from this unaudited financial information.
3
Exhibit 99.2
ERAYAK POWER SOLUTION GROUP INC.
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2026 AND DECEMBER 31, 2025
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| June 30, 2026 (Unaudited) | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, related parties | ||||||||
| Inventories | ||||||||
| Advances to suppliers | ||||||||
| Advances to suppliers, related parties | ||||||||
| Other receivables | ||||||||
| Other receivables, related parties | ||||||||
| Short-term investment | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets | ||||||||
| Deferred tax assets | ||||||||
| Deferred expenses | ||||||||
| Long-term investment | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | $ | ||||||
| Notes payable | ||||||||
| Accounts payable | ||||||||
| Accounts payable, related parties | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Advances from customers | ||||||||
| Due to related parties | ||||||||
| Long-term loans – current portion | ||||||||
| Tax payable | ||||||||
| Total current liabilities: | ||||||||
| Non-current liabilities: | ||||||||
| Long-term loans | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Shareholders’ Equity: | ||||||||
| Class A shares, | ||||||||
| Class B shares, | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Total Shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these interim consolidated financial statements.
ERAYAK POWER SOLUTION GROUP INC.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| Six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ( | ) | ( | ) | ||||
| Selling and marketing | ( | ) | ( | ) | ||||
| Research and development | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Operating (loss) income | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Interest income (expenses), net | ( | ) | ||||||
| Rental income, net | ||||||||
| Other income, net | ||||||||
| Total other income, net | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax refund (provision) | ||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustment | ||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Earnings per share attributable to common shareholders: | ||||||||
| Shares* | ||||||||
| (Loss) earnings per share* | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding | ||||||||
| Basic and Diluted* | ||||||||
| * |
The accompanying notes are an integral part of these interim consolidated financial statements.
2
ERAYAK POWER SOLUTION GROUP INC.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
For the six months ended June 30, 2026:
| Class A shares* | Ordinary shares, $0.00001 par Amount* | Class B shares* | Amount* | Additional Paid-in Capital | Statutory Reserve | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Total shareholders’ equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2025 | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||||||||||||||
| Share issuance | ||||||||||||||||||||||||||||||||||||
| Share issuance | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | ||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2025:
| Class A shares* | Ordinary shares, $0.00001 par Amount* | Class B shares* | Amount* | Additional Paid-in Capital | Statutory Reserve | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Total shareholders’ equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | ( | ) | ||||||||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these interim consolidated financial statements.
3
ERAYAK POWER SOLUTION GROUP INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(UNAUDITED, IN U.S. DOLLARS)
| 2026 | 2025 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Right of use lease asset | ||||||||
| Deferred expenses | ( | ) | ||||||
| Loss on asset disposal | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Accounts receivable, related parties | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Advances to suppliers | ||||||||
| Advances to suppliers, related parties | ||||||||
| Other receivables | ( | ) | ||||||
| Other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable, related parties | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Advances from customers | ( | ) | ||||||
| Notes payable | ||||||||
| Tax payable | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Acquisition of property, plant, and equipment | ( | ) | ( | ) | ||||
| Acquisition of intangible assets | ( | ) | ( | ) | ||||
| Fixed deposit | ||||||||
| Short-term investment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from short-term borrowings | ||||||||
| Repayments on short-term borrowings | ( | ) | ( | ) | ||||
| Proceeds from related parties | ||||||||
| Payments to related parties | ( | ) | ( | ) | ||||
| Proceeds from share issuance | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from long-term bank loans | ||||||||
| Repayments on long-term bank loans | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ||||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of period | ||||||||
| Cash and cash equivalents at the end of period | ||||||||
| Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheet | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | |||||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
4
ERAYAK POWER SOLUTION GROUP INC.
SELECTED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Erayak Power Solution Group Inc. (“Erayak Group”)
Erayak Group was incorporated on
Erayak Group is a holding company and is currently not actively engaging in any business. Erayak Group’s registered agent is Harneys Fiduciary (Cayman) Limited, and its registered office is on the 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman, KY1-1002, Cayman Islands.
| Entity Name | Registered Location | Date of Incorporation | Ownership as of the issuance date of the report | |||
| Erayak Power Solution Group Inc. (“Erayak Group”) | ||||||
| Erayak Power Solution Limited (“Erayak BVI’) | ||||||
| Erayak Power Solution Hong Kong Limited (“Erayak HK”) | ||||||
| Ruike Electronics (Wenzhou) Co., Ltd. (“Ruike”) | ||||||
| Wenzhou Wenjie Technology Limited (“Wenjie”) | ||||||
| Zhejiang Leiya Electronics Limited (“Leiya”) | ||||||
| Wenzhou New Focus Limited (“New Focus”) |
Erayak Power Solution Limited (“Erayak BVI”)
Erayak BVI was incorporated on June 17, 2019
under the laws of British Virgin Islands. Under its memorandum of association, Erayak BVI is authorized to issue
Erayak Power Solution Hong Kong Limited (“Erayak HK”)
Erayak HK was incorporated on June 26, 2019 under
the laws of Hong Kong and is a wholly owned subsidiary of Erayak Power Solution Limited. The paid in capital was $
Ruike Electronics (Wenzhou) Co., Ltd. (“Ruike”)
Ruike was incorporated on December 5, 2023 in
People’s Republic of China (“China” or “PRC”), and is a wholly owned subsidiary of Erayak Power Solution
Hong Kong Limited. Ruike is a wholly foreign owned enterprise organized under the laws of the PRC. The paid in capital was RMB
Wenzhou Wenjie Technology Limited (“Wenjie”)
Wenjie was incorporated on December 11, 2019
in People’s Republic of China (“China” or “PRC”), and is a wholly owned subsidiary of Erayak Power Solution
Hong Kong Limited. Wenjie is a wholly foreign owned enterprise organized under the laws of the PRC. The paid in capital was RMB
Zhejiang Leiya Electronics Limited (“Leiya”)
Leiya was incorporated on March 5, 2009 under
the laws of the People’s Republic of China. The paid in capital was RMB
The registered principal activities of Leiya are mainly development, production and sales of inverters, chargers and gasoline generators.
5
Wenzhou New Focus Limited (“New Focus”)
New Focus was incorporated on November 21, 2012
in China, and is a wholly owned subsidiary of Leiya. The paid in capital was RMB
The principal activity of New Focus is mainly the sale of Leiya’s products, which involves exports to multiple countries.
Reorganization
In or about April and August 2020, the Company
completed corporate reorganization to roll several controlled entities (now referred to as the subsidiaries) into one legal corporation
(the Company). Shengling Xiang transferred
During the years presented in these consolidated financial statements, the control of the entities has never changed (always under the ultimate control of Lingyi Kong). Accordingly, the combination has been treated as a corporate restructuring (reorganization) of entities under common control and thus the current capital structure has been retroactively presented in prior periods as if such structure existed at that time and in accordance with ASC 805-50-45-5, the entities under common control are presented on a combined basis for all periods to which such entities were under common control. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
Reclassification
Certain prior-period amounts have been reclassified
to conform to the current-period presentation. Specifically, for the period ended June 30, 2025, operating expenses were adjusted by
$
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and have been consistently applied. The accompanying consolidated financial statements include the financial statements of the Company and its majority-owned and controlled subsidiaries. All significant inter-company transactions and balances have been eliminated upon consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Such estimates include, but are not limited to, allowances for doubtful accounts, inventory valuation, useful lives of property, plant and equipment, intangible assets, and income taxes related to realization of deferred tax assets and uncertain tax position. Actual results could differ from those estimates.
Foreign Currency Translation
The financial records of the Company’s subsidiaries in People’s Republic of China (“PRC”) are maintained in their local currencies which are Chinese Yuan (“CNY” or “RMB”). Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the consolidated balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income/(expense), net in the consolidated statements of income and comprehensive income.
The Company maintained its financial record using the United States dollar (“US dollar”) as the functional currency, while the subsidiaries of the Company in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The reporting currency of the Company is US dollar. When translating local financial reports of the Company’s subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the consolidated balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the consolidated statements of income and comprehensive income.
The relevant exchange rates are listed below:
| June 30, | June 30, | December 31, | ||||||||||
| 2026 | 2025 | 2025 | ||||||||||
| Period Ended RMB: USD exchange rate | ||||||||||||
| Period Average RMB: USD exchange rate | ||||||||||||
6
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.
Restricted Cash
The Company had bank acceptance notes outstanding with the bank and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. Those notes are generally short term in nature due to their short maturity period of six to nine months; thus, restricted cash is classified as a current asset.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts presented in the statement of cash flows. The Company adopted the new standard effective January 1, 2018, using the retrospective transition method.
As of June 30, 2026, and December 31, 2025, restricted
cash was $
Accounts Receivable, net
Accounts receivables are recognized and carried at the original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments to inventory for excess quantities, obsolescence or impairment when appropriate to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower cost or market analysis and the expected realizable value of the inventory.
Advances to Suppliers
Advances to suppliers refer to advances for purchase of materials or services, which are applied against accounts payable when the materials or services are received.
The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would write off such an amount in the period when it is considered impaired. As of June 30, 2026 and December 31, 2025, the Company had no write-offs for advances to suppliers.
Advances from Customers
Advances from customers refer to advances received from customers, which are applied against accounts receivable when products are sold.
Property, Plant and Equipment, net
Property, plant, and equipment are recorded at
cost less accumulated depreciation.
| Useful lives | ||
| Buildings | ||
| Machinery and equipment | ||
| Transportation vehicles | ||
| Office furniture and equipment | ||
| Electronic equipment |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses.
7
Intangible Assets
Intangible assets consist of patents and a trademark. Intangible assets are amortized using the straight-line method with the following estimated useful lives:
| Useful lives | ||
| Patents | ||
| Trademark | ||
| Software | ||
| Land use rights |
Leases/Right of use assets
Effective January 1, 2018, the Company adopted the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed in financial statements. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
Impairment of Long-lived Assets
The Company’s management reviews the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
There was no impairment charge recognized for long-lived assets for the periods ended June 30, 2026 and December 31, 2025.
Fair Value Measurement
Fair Value Measurements and Disclosures requires disclosure of the fair value of financial instruments held by the Company. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
ASC 820-10 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations for those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
For the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, other receivables, accounts payable, other current liabilities, and bank loans, the carrying amounts approximate their fair values due to their short maturities as of June 30, 2026 and December 31, 2025.
Value-added Tax (“VAT”)
Sales revenue represents the invoiced value of
goods, net of VAT. All of the Company’s products that are sold in the PRC are subject to a VAT on the gross sales price.
8
Revenue Recognition
The Company generates its revenues mainly from sales of electrical products, such as electrical converters and inverters, to third-party customers, who are mainly distributors and retailers. The Company follows Financial Accounting Standards Board (FASB) ASC 606 and accounting standards updates (“ASU”) 2014-09 for revenue recognition. On January 1, 2018, the Company has early adopted ASU 2014-09, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In the principal versus agent consideration, since no another party is involved in transactions, the Company is a principal.
In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company analyzed historical refund claims for defective products, and since no warranty, discount or return policy are documented in the sales agreements, the Company concluded that they have been immaterial.
Revenues are reported net of all value added taxes. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on their relative standalone selling price.
Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied at a point in time), which typically occurs at delivery. For international sales, the Company sells its products primarily under the free onboard (“FOB”) shipping point term. For sales under the FOB shipping point term, the Company recognizes revenues when products are delivered from Company to the designated shipping point. Prices are determined based on negotiations with the Company’s customers and are not subject to adjustment.
Rental income
Rental income is from subleasing part of the leased assets under operating leases, and it is recognized in the statements of comprehensive income on a straight-line basis over the term of the lease.
Government Grant
Government grants are compensation for expenses already incurred or for the purpose of giving immediate financial support to the Company. The government evaluates the Company’s eligibility for the grants on a consistent basis, and then makes the payment. Therefore, there are no restrictions on the grants.
Government grants are recognized when received
and all the conditions for their receipt have been met. The grants received were $
Research and Development Costs
Research and development activities are directed toward the development of new products as well as improvements in existing processes. These costs, which primarily include salaries, contract services and supplies, are expensed as incurred.
Shipping and Handling Costs
Shipping and handling costs are expensed when
incurred and are included in selling and marketing expenses. Shipping and handling costs were $
Advertising Costs
Advertising costs are expensed as incurred in
accordance with ASC 720-35, “Selling and Marketing Expenses-Advertising Costs”. Advertising costs were $
9
Income Taxes
The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts.
The Company records uncertain tax positions in
accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that
the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the
more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than
To the extent applicable, the Company records
interest and penalties as other expense. All the tax returns of the Company’s PRC subsidiaries remain subject to examination by
PRC tax authorities for
The Company and its subsidiaries are not subject to U.S. tax laws and local state tax laws. The Company’s income and that of its related entities must be computed in accordance with Chinese and foreign tax laws, as applicable, and all of which may be changed in a manner that could adversely affect the amount of distributions to shareholders. There can be no assurance that the Income Tax Laws of PRC will not be changed in a manner that adversely affects shareholders. Any such change could increase the amount of tax payable by the Company, reducing the amount available to pay dividends to the holders of the Company’s ordinary shares.
Earnings Per Share
Earnings (loss) per share is calculated in accordance with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are computed in accordance with the treasury stock method and based on the weighted average number of ordinary shares and dilutive ordinary share equivalents. Dilutive ordinary share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive. There were no dilutive ordinary share equivalents outstanding during the six months ended June 30, 2026 and 2025.
The Company did not use the two-class method to compute net income per ordinary share, because it did not have other issued securities other than ordinary shares. Class A and Class B shares are both ordinary shares, and per Article 6 in Memorandum and Articles of Association (amended and restated), they have the same rights, preferences, privileges, and restrictions, except for voting and conversion rights.
Comprehensive income/(loss)
Comprehensive income/(loss) is defined as the changes in shareholders’ equity during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive income or loss is reported in the consolidated statements of comprehensive income/(loss). Accumulated other comprehensive income/(loss), as presented on the accompanying consolidated balance sheets, consists of accumulated foreign currency translation adjustments.
Certain Risks and Concentration
Exchange Rate Risks
The Company operates in PRC, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB.
Currency Convertibility Risks
Substantially all the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts.
10
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents, restricted cash, notes receivable. The Company places its cash and cash equivalents, restricted cash, and note receivable in good credit quality financial institutions in Hong Kong and PRC. Concentration of credit risks with respect to accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers’ financial condition.
Interest Rate Risks
The Company is subject to interest rate risk. The Company has bank interest bearing loans charged at variable interest rates. And although some bank interest bearing loans are charged at fixed interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged by the banks when these loans are refinanced.
Risks and Uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is following existing laws and regulations including its organization and structure disclosed in Note1, this may not be indicative of future results.
Liquidity Risks
Our primary sources of liquidity consist of existing cash balances, cash flows from our operating activities and availability under our revolving credit facility. Our ability to generate sufficient cash flows from our operating activities is primarily dependent on our sales of converters and power generating products to our customers at margins sufficient to cover fixed and variable expenses.
As of June 30, 2026, and December 31, 2025, we
had cash and cash equivalents of $
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable as of June 30, 2026 and December 31, 2025 consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The average accounts receivable turnover period
was approximately
Changes of allowance for doubtful accounts for the fiscal periods ended June 30, 2026 and December 31, 2025 were as follow:
| June 30, 2026 | December 31, 2025 | |||||||
| Beginning balance | $ | ( | ) | $ | ( | ) | ||
| Provision adjustment for accounts receivable | ( | ) | ||||||
| Exchange difference | ( | ) | ( | ) | ||||
| Ending balance | $ | ( | ) | $ | ( | ) | ||
11
NOTE 4 – INVENTORIES
Inventories as of June 30, 2026 and December 31, 2025 consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Inventory valuation allowance | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
There were inventory valuation allowance or write-offs recognized for the fiscal periods ended June 30, 2026 and December 31, 2025.
NOTE 5 – ADVANCES TO SUPPLIERS AND OTHER
Advances to suppliers and other as of June 30, 2026 and December 31, 2025 consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Advance to suppliers | $ | $ | ||||||
| Advance payment for SaaS system | ||||||||
| Advance payment for potential factory lease and land purchase | ||||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Total | ||||||||
As of June 30, 2026 and December 31, 2025, there
was an advance payment in the amount of $
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of June 30, 2026 and December 31, 2025 consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Transportation vehicles | ||||||||
| Electronic devices | ||||||||
| Office furniture and equipment | ||||||||
| Construction in progress | ||||||||
| Building | ||||||||
| Total property plant and equipment, at cost | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Additions to property and equipment for the fiscal
periods ended June 30, 2026 and December 31, 2025 were $
Depreciation expenses were $
The depreciation expenses included in cost of
sales during the periods ended June 30, 2026 and 2025 were $
12
NOTE 7 – INTANGIBLE ASSETS
Intangible assets as of June 30, 2026 and December 31, 2025 consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Intangible assets | ||||||||
| Cost, beginning | $ | $ | ||||||
| Accumulated amortization, beginning | ( | ) | ( | ) | ||||
| Additions, at cost | ||||||||
| Amortization current period | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
The intangible assets include land use rights that the Company acquired
during the period. The useful life of the land use rights is
The rest intangible assets represent the ERAYAK trademark, the Company’s purchase of patents related to new technologies to produce inverters, and software purchased for internal use.
There were no disposals for the fiscal periods ended June 30, 2026 and December 31, 2025.
During the periods of June 30, 2026 and December 31, 2025, the Company had no impaired intangibles.
Five succeeding years of amortization are as follows:
| Year | Amortization | Net carrying value | ||||||
| 2027 | $ | $ | ||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
NOTE 8 – LEASE
The Company has two related party leases for the land and building where it operates:
Related party lease #1: A 20-year lease with no option to renew, and the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. After paid part of the 20-year lease payment, the Company secured the right to use of property, and the lessor, Wenzhou Ailefu Technology Co., Ltd (“Ailefu”), provided the leased assets as guarantee for the Company to apply bank loans, and the lease payment for the future 20 years have been prepaid. The Company sub-leases part of the property and uses rental income to cover part or all the interest expense on the bank loans. The related bank loans are disclosed in Note 12 – Short-term Borrowings. Rental income from the sublease is disclosed in Note 19 – Rental Income, Net.
Related party lease #2: A two-year lease with option to renew. The Company paid the full rent at the beginning of the lease.
The ending balances of right of use assets were $
NOTE 9 – SHORT-TERM INVESTMENT
The Company’s short-term investments primarily consist of structured products and money market funds. These investments are recorded at fair value, with changes in fair value recognized in earnings (or other comprehensive income, as applicable).
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of June 30, 2026.
| Balance at June 30, 2026 | Quoted Prices in Active Market for
Identical Assets (Level l) | Significant Other Observable (Level 2) | Significant unobservable Inputs (Level 3) | |||||||||||||
| Short-term investments: | ||||||||||||||||
| Structured Products | ||||||||||||||||
The structured products held by the Company do not have quoted prices for identical assets in active markets and therefore are generally not classified within Level 1 of the fair value hierarchy. The fair values of these wealth management products are primarily determined based on quotes or net asset values provided by the issuing banks, with reference to observable yields, market interest rates, and market inputs for similar products. These inputs are directly or indirectly observable in the marketplace, and the Company does not rely on significant unobservable inputs to estimate their fair values. Accordingly, the Company believes that the fair value measurements of these wealth management products are consistent with the characteristics of Level 2 inputs under the fair value hierarchy and classifies them within Level 2. If, in the future, certain wealth management products lack bank quotes, published net asset values, or other observable market inputs, and their valuations rely primarily on significant unobservable assumptions, the Company will reassess their classification within the fair value hierarchy.
13
NOTE 10 – LONG-TERM INVESTMENT
In July 2024, the Company acquired a
During the fiscal year ended December 31, 2025, the Company determined that it gained the ability to exercise significant influence over the operating and financial policies of the Investee due to representation on the board of directors and participation in policy-making processes. Accordingly, the Company transitioned the accounting for this investment to the equity method in accordance with ASC 323, Investments – Equity Method and Joint Ventures. Under the equity method, the investment is initially measured at the carrying value of the previous investment plus the cost of any additional interest acquired. The Company subsequently adjusts the carrying amount of the investment to recognize its share of the investee's earnings or losses in the Consolidated Statements of Comprehensive Loss.
For the year ended December 31, 2025,
the Company recorded an investment loss of RMB
NOTE 11 – OTHER CURRENT ASSETS
As of December 31, 2025, other current assets
included a three-year fixed deposit in the amount of RMB
On June 9, 2026, the fixed deposit matured and
was fully settled along with the accrued interest. Concurrently with the repayment and settlement of the underlying bank loan, the pledge
on the fixed deposit and related interest was fully released. As of June 30, 2026, the balance of this fixed deposit was $
NOTE 12 – SHORT-TERM BORROWINGS
Short-term borrowings from financial institutions consisted of the following on June 30, 2026:
| Bank Name | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Longwan Rural Commercial Bank | $ | % | ||||||||||||||
| Bank of Wenzhou | % | |||||||||||||||
| Bank of China | % | |||||||||||||||
| Industrial and Commercial Bank of China | % | |||||||||||||||
| Huaxia Bank | % | |||||||||||||||
| Huaxia Bank | % | |||||||||||||||
| Total | RMB | $ | ||||||||||||||
Short-term borrowings from financial institutions consisted of the following on December 31, 2025:
| Bank Name | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Bank of Wenzhou | % | |||||||||||||||
| Bank of China | % | |||||||||||||||
| Huaxia Bank | % | |||||||||||||||
| Huaxia Bank | % | |||||||||||||||
| Industrial and Commercial Bank of China | % | |||||||||||||||
| Total | RMB | $ | ||||||||||||||
The Company’s short-term bank borrowings
are guaranteed by the
14
NOTE 13 – LONG-TERM LOANS
As of June 30, 2026, the long-term loan consisted of the following:
| Description | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Minsheng Bank | $ | % | ||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Total | RMB | $ | ||||||||||||||
As of December 31, 2025, the long-term loans consisted of the following:
| Description | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| WeBank Shenzhen | $ | % | ||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| Longwan Rural Commercial Bank | % | |||||||||||||||
| Longwan Rural Commercial Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Subtotal | ||||||||||||||||
| Current portion of long-term loans | ( | ) | ( | ) | ||||||||||||
| Total | RMB | $ | ||||||||||||||
The long-term bank loans from Minsheng Bank are
collateralized by certain assets of the Company. As of June 30, 2026 and December 31, 2025, the collateral consisted of land use rights
held by Ruike with a carrying amount of $
NOTE 14 – SALES
Disaggregated sales by types for the six months ended June 30, 2026 and 2025 consisted of the following:
| 2026 | 2025 | |||||||
| Inverters | $ | $ | ||||||
| Chargers | ||||||||
| Gasoline generators | ||||||||
| Power bank | ||||||||
| Other products | ||||||||
| Total | $ | $ | ||||||
There is no warranty, discount or return policy documented in the sales agreements.
15
NOTE 15 – GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the six months ended June 30, 2026 and 2025 consisted of following:
| 2026 | 2025 | |||||||
| Employee compensation and benefits | $ | $ | ||||||
| Travel and communication expenses | ||||||||
| Rent and utilities | ||||||||
| Consulting fees | ||||||||
| Insurance | ||||||||
| Depreciation and amortization expenses | ||||||||
| Bank charges | ||||||||
| Sales tax | ||||||||
| Entertainment | ||||||||
| Office and miscellaneous | ||||||||
| Total | $ | $ | ||||||
NOTE 16 – SELLING AND MARKETING EXPENSES
Selling and marketing expenses for the six months ended June 30, 2026 and 2025 consisted of the following:
| 2026 | 2025 | |||||||
| Employee compensation and benefits | $ | $ | ||||||
| Travel and promotion | ||||||||
| Shipping and handling | ||||||||
| Insurance | ||||||||
| Consulting fee | ||||||||
| Inspection and certification fees | ||||||||
| Entertainment | ||||||||
| Office and miscellaneous | ||||||||
| Total | $ | $ | ||||||
NOTE 17 – RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the six months ended June 30, 2026 and 2025 consisted of the following:
| 2026 | 2025 | |||||||
| Salaries | $ | $ | ||||||
| Direct input | ||||||||
| Utility | ||||||||
| Depreciation | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
NOTE 18 – INTEREST INCOME (EXPENSES), NET
Interest income (expenses) for the six months ended June 30, 2026 and 2025 consisted of the following:
| 2026 | 2025 | |||||||
| Interest expense | $ | ( | ) | $ | ( | ) | ||
| Interest income | ||||||||
| Total interest income (expense), net | $ | $ | ( | ) | ||||
NOTE 19 – RENTAL INCOME, NET
The Company subleases part of the leased assets
on a straight-line basis to other third parties. The lease terms with lessees vary and usually start from two years.
| 2026 | 2025 | |||||||
| Rental income | $ | $ | ||||||
| Rental expense | ( | ) | ( | ) | ||||
| Total rental income, net | $ | $ | ||||||
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NOTE 20 – OTHER INCOME, NET
The following table shows the details of net other income (expenses) for the six-month periods ended June 30, 2026 and 2025:
| 2026 | 2025 | |||||||
| Government grant | $ | $ | ||||||
| Exchange (losses) gains | ( | ) | ||||||
| Sample reimbursement | ||||||||
| Miscellaneous income | ||||||||
| Miscellaneous expenses | ( | ) | ( | ) | ||||
| Total other income (expenses), net | $ | $ | ||||||
NOTE 21 – RELATED PARTY TRANSACTIONS
1)
| Name | Relationship with the Company | |
| Wenzhou Ailefu Technology Co. Ltd. (“Ailefu”) | ||
| Hangzhou Xiangze Trading Co. Ltd. (“Xiangze”) | ||
| Wenzhou Leiling Technology Development Co. Ltd. (“Leiling”) | ||
| Shanghai Fushishenye Mechanical and Electrical Equipment Co. Ltd. (“Fushishenye”) | ||
| Zhejiang Rayak Technology Co. Ltd. (“Rayak Tech”) | ||
| Chuanlong Lin | ||
| Erayak International Limited (“Erayak International”) | ||
| Shengling Xiang | ||
| Lingyi Kong | ||
| Chunhua Xiang |
2) Related party balances
Net outstanding balances with related parties consisted of the following as of June 30, 2026 and December 31, 2025:
| Accounts | Name of related parties | June 30, 2026 | December 31, 2025 | |||||||
| Due to related party | Lingyi Kong | |||||||||
| Zhejiang Rayak Technology Co. Ltd. | ||||||||||
| TOTAL | $ | $ | ||||||||
| Accounts payables, related parties | Wenzhou Ailefu Technology Co. Ltd. | |||||||||
| TOTAL | $ | $ | ||||||||
| Accounts receivables, related parties | Zhejiang Rayak Technology Co., Ltd. | |||||||||
| TOTAL | $ | $ | ||||||||
| Advance to suppliers, related parties | Shanghai Fushishenye Mechanical and Electrical Equipment Co. Ltd. | |||||||||
| Wenzhou Ailefu Technology Co. Ltd. | ||||||||||
| TOTAL | $ | $ | ||||||||
| Other receivables, related parties | Wenzhou Ailefu Technology Co. Ltd. | |||||||||
| TOTAL | $ | |||||||||
NOTE 22 – SHAREHOLDERS’ EQUITY
Ordinary shares
The Company is authorized to issue
Holders of Class A Ordinary Shares and Class
B Ordinary Shares shall always vote together as one class on all resolutions submitted to a vote by the Members.
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Initial Public Offering
On December 14, 2022, the Company consummated
its initial public offering (“IPO”) of
Private Placement
On May 20, 2024, the Company entered into securities
purchase agreements (the “Securities Purchase Agreements”) with certain purchasers (“Purchasers”) in connection
with the issuance and sale (the “Private Placement”) of (i) an aggregate of
Registered Direct Offering
On July 25, 2025, ERAYAK Power Solution Group
Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors
named thereto (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering
(the “Registered Direct Offering”): (i)
Registered Direct Offering
On July 31, 2025, ERAYAK Power Solution Group
Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors
named thereto (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering
(the “Registered Direct Offering”): (i)
Share Subscription
On August 19, 2025, Erayak Power Solution Group
Inc (the “Company”) consummated a share subscription (the “Share Subscription”) with Erayak International Limited.
Under the terms of the Share Subscription, the Erayak International Limited purchased
Reverse Stock Split
On September 8, 2025, the shareholders and Board
of Directors of the Company approved the 220-for-1 reverse stock split of its ordinary shares in accordance with Cayman law and the corresponding
filing of the ratio change, which was duly filed with the Cayman Registrar. As a result of the reverse stock split, the number of ordinary
shares outstanding were reduced from
Increase in Authorized Share Capital
On November 19, 2025, the shareholders and the
board of directors of the Company approved an increase in the Company’s authorized share capital from US$
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Reverse Stock Split
On March 25, 2026, the board of directors of ERAYAK Power Solution Group Inc., a Cayman Islands exempted company, approved a 1-for-10 reverse stock split of the Company’s Class A ordinary shares and Class B ordinary shares. The reverse stock split became effective on April 20, 2026, and the Company’s Class A ordinary shares began trading on a post-split basis on the Nasdaq Stock Market LLC on the same date under the current trading symbol “RAYA.”
At-the-Market (ATM) Equity Offerings
September 2025 Sales Agreement
On September 29, 2025, the Company entered into an At-the-Market Sales Agreement with Craft Capital Management LLC (“Craft”) to sell Class A ordinary shares. During the first quarter of 2026, the Company completed the following sales under this facility prior to its termination:
| ● | January 30, 2026: The Company completed a closing for the sale of |
| ● | February 13, 2026: The Company completed a closing for the sale of |
| ● | February 26, 2026: The Company completed a closing for the sale of |
In aggregate, under the September 2025 Sales
Agreement, the Company issued
March 2026 Sales Agreement
On March 16, 2026, the Company entered into a new At-the-Market Sales Agreement with Craft. During the six months ended June 30, 2026, the Company completed the following sales under this facility:
| ● | March 31, 2026 Closing (Funded April 10, 2026): The Company closed the sale of |
| ● | June 2026 ATM Sales: Between June 8, 2026, and June 25, 2026, the Company sold an aggregate of |
In aggregate, under the March 2026 Sales Agreement,
the Company issued
Private Placement of Class A Ordinary Shares
On April 9, 2026, the Company completed a private
placement pursuant to which it issued
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Subscription of Class B Ordinary Shares
On May 28, 2026, ERAYAK International Limited,
an entity wholly owned by Lingyi Kong, executed a subscription letter to subscribe for
During the six months ended June 30, 2026, the
Company incurred total offering-related costs of $
Share Capital Reduction and Increase in Authorized Share Capital
Pursuant to shareholder resolutions approved
on July 9, 2026, the Company executed a share capital reduction whereby the par value of each issued and outstanding Class A and Class
B ordinary share was reduced from US$
Immediately following the Share Capital Reduction
and Reorganization, the Company’s authorized share capital was increased from US$
All share and per-share amounts presented in these consolidated financial statements and the accompanying notes have been retroactively adjusted to reflect the reverse stock split for all periods presented, unless otherwise indicated.
Statutory Reserve
The Company’s PRC subsidiaries are required
to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based
on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations
to the statutory surplus reserve are required to be at least
Under PRC laws and regulations, paid in capital, additional paid in capital, and statutory surplus reserves are restricted to set-off against losses, expansion of production and operation and increasing registered capital of the respective company and are not distributable other than upon liquidation. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor allowed for distribution except under liquidation.
NOTE 23 – COMMITMENTS AND CONTINGENCIES
As of June 30, 2026 and December 31, 2025, the
Company had
From time to time, the Company is involved in various legal proceedings, claims and other disputes arising from commercial operations, employees, and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity.
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NOTE 24 – SUBSEQUENT EVENTS
Pursuant to shareholder resolutions approved
on July 9, 2026, the Company executed a share capital reduction whereby the par value of each issued and outstanding Class A and Class
B ordinary share was reduced from US$
Immediately following the Share Capital Reduction
and Reorganization, the Company’s authorized share capital was increased from US$
As for the date of the issuance of these financial statements, the new borrowings are presented below:
| Bank Name | Amount – RMB | Issuance Date | Expiration Date | Annual interest rate | ||||||||
| Minsheng Bank | % | |||||||||||
| Minsheng Bank | % | |||||||||||
| Minsheng Bank | % | |||||||||||
| Minsheng Bank | % | |||||||||||
| Minsheng Bank | % | |||||||||||
| Huaxia Bank | % | |||||||||||
| Huaxia Bank | % | |||||||||||
| Industrial and Commercial Bank of China | % | |||||||||||
| Industrial and Commercial Bank of China | % | |||||||||||
| Bank of Communications | % | |||||||||||
| Bank of Communications | % | |||||||||||
| Total | RMB | |||||||||||
The Company has evaluated subsequent events through October 14, 2026. No other matters were identified affecting the accompanying financial statements or related disclosures.
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