{"url_path":"/sec/rajaf/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 Operating and Financial Review and Prospects**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1885680/0001213900-26-057774-index.html","accession_number":"0001213900-26-057774","cik":"0001885680","ticker":"RAJAF","issuer_name":"Cordyceps Sunshine Biotech Holdings Co., Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1885680/0001213900-26-057774-index.html","primary_entity_key":"0001885680","primary_entity_name":"Cordyceps Sunshine Biotech Holdings Co., Ltd."},"word_count":2246,"has_tables":true,"body_markdown":"**Item\n5. Operating and Financial Review and Prospects**\n\n* *\n\n*You should read the following discussion and\nanalysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the\nrelated notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties.\nOur actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements\nas a result of various factors, including those set forth under “Item 3. Key Information - 3.D. Risk Factors” and elsewhere\nin this annual report.*\n\n \n\n**5.A. Operating Results.**\n\n \n\nWe focus on the cultivating and sales\nof Cattle camphor mushroom products. The results of operations are shown as follows.\n\n \n\n  \nFor the years ended\nDecember 31,  \n2025 VS 2024  \n2024 VS 2023 \n\n  \n2025  \n2024  \n2023  \nAmount  \n%  \nAmount  \n% \n\n  \n$  \n$  \n$  \n$  \n   \n$  \n  \n\nRevenue - third parties \n 1,069,943  \n 1,200,541  \n 755,677  \n (130,598) \n -10.88% \n 444,864  \n 58.87%\n\nRevenue - related parties \n 175,405  \n 52,943  \n 126,856  \n 122,462  \n 231.31% \n (73,913) \n -58.27%\n\nTotal revenue \n 1,245,348  \n 1,253,484  \n 882,533  \n (8,136) \n -0.65% \n 370,951  \n 42.03%\n\nOperating costs - third parties \n 484,607  \n 347,004  \n 116,146  \n 137,603  \n 39.65% \n 230,858  \n 198.77%\n\nTotal operating costs \n 484,607  \n 347,004  \n 116,146  \n 137,603  \n 39.65% \n 230,858  \n 198.77%\n\nGross profit \n 760,741  \n 906,480  \n 766,387  \n (145,739) \n -16.08% \n (140,093) \n -18.28%\n\nOperating expenses \n 　  \n 　  \n 　  \n 　  \n 　  \n 　  \n 　 \n\nGeneral and administrative \n 901,869  \n 1,090,393  \n 538,554  \n (188,524) \n -17.29% \n 551,839  \n 102.47%\n\n(Loss) income from operations \n (141,128) \n (183,913) \n 227,833  \n 42,785  \n -23.26% \n (411,746) \n -180.72%\n\nNon-operating income (expense) \n 　  \n 　  \n 　  \n 　  \n 　  \n 　  \n 　 \n\nInterest income (expenses), net \n (19,179) \n (17,055) \n (39,770) \n (2,124) \n 12.45% \n 22,715  \n -57.12%\n\nGain on disposal of assets \n -  \n 4,328  \n -  \n (4,328) \n -100.00% \n 4,328  \n N/A \n\nOther income \n 5,485  \n 5,339  \n 2,752  \n 146  \n 2.73% \n 2,587  \n 94.00%\n\nTotal non-operating income, net \n (13,694) \n (7,388) \n (37,018) \n (6,306) \n 85.35% \n 29,630  \n -80.04%\n\n(Loss) income before income taxes \n (154,822) \n (191,301) \n 190,815  \n 36,479  \n -19.07% \n (382,116) \n -200.25%\n\nIncome tax expense \n -  \n 34,957  \n 21,530  \n (34,957) \n -100.00% \n 13,427  \n 62.36%\n\nNet (loss) income from continuing operations \n (154,822) \n (226,258) \n 169,285  \n 71,436  \n -31.57% \n (395,543) \n -233.66%\n\nDiscontinued Operation \n    \n    \n    \n 　  \n 　  \n 　  \n 　 \n\nLoss from discontinued operation, net of income tax \n -  \n -  \n (282,761) \n -  \n N/A  \n 282,761  \n -100.00%\n\nGain from sale of discontinued operation, net of income tax \n -  \n -  \n 865,085  \n -  \n -100.00% \n (865,085) \n -100.00%\n\nGain from discontinued operation, net of income tax \n -  \n -  \n 582,324  \n -  \n -100.00% \n (582,324) \n -100.00%\n\nNet (Loss) Income \n (154,822) \n (226,258) \n 751,609  \n 71,436  \n -31.57% \n (977,867) \n -130.10%\n\n \n\n24\n\n \n\n \n\nThird-party revenue amounted to $1,069,943 and $1,200,541 for 2025\nand 2024, all related to sales of Cattle camphor mushroom products.\n\n \n\nThe Company sold Cattle camphor mushroom products to Gasar Biotechnology\nCo., Ltd, a related party of the Company, in the amounts of $175,405 and $52,943 for the years ended December 31, 2025 and 2024, respectively,\nresulting in an increase of $122,462 or 231.31%.  The Company sold Cattle camphor mushroom products to Gasar Biotechnology Co., Ltd,\na related party of the Company, in the amounts of $126,856 for the year ended December 31, 2023; related party sales decreased by $73,913\nor 58.27% for the year ended December 31, 2024.\n\n \n\nThe Company expanded and developed many third-party companies or individual\ncustomers, as third party sales accounted for 85.92%, 95.78%, and 85.63% of the total sales for the years ended December 31, 2025, 2024,\nand 2023, respectively.\n\n \n\n**Operating costs**\n\n \n\nTotal operating costs of $484,607, $347,004, and $116,146 for\nthe years of 2025, 2024, and 2023, respectively. Cost of revenue represents the goods purchasing cost. The cost of revenue increased\nby $137,603 or 39.65% and $230,858 or 198.77% for the years ended December 31, 2025 and 2024, respectively. In 2025, the Company\nlowered selling prices to promote Cattle camphor mushroom products, and the resulting increase in sales volume led to a corresponding\nrise in related costs. In contrast, the increase in 2024 was primarily due to a significant rise in third-party sales revenue.\n\n \n\n**Gross profit**\n\n \n\nOur gross profit was $760,741 or 61.09%, $906,480 or 72.32%, and\n$766,387 or 86.84% for the years ended December 31, 2025, 2024, and 2023, respectively.\n\n \n\n**Operating expenses**\n\n \n\nGeneral and administrative expenses\ndecreased from $1,090,393 for the year of 2024 to $901,869 for the year of 2025, representing a decrease of $188,524 or 17.29%. Due\nto business promotion in 2025, there was an increase in exhibition activities, booth setup, and staff hours. However, operating expenses\ndecreased as a result of a reduction in professional service fees compared to 2024 and the reclassification of fixed asset depreciation\nto inventory upon product harvest.\n\n \n\nGeneral and administrative expenses increased from $538,554 for\nthe year of 2023 to $1,090,393 for the year of 2024, representing an increase of an increase of $551,839 or 102.47%. The increase was\ndue to the addition of retail store sales and an increase in fixed asset depreciation in 2024, which led to higher personnel\ncosts and related operating expenses. In addition, professional service fees also increased as a result of the expanded scale of operations.\n\n \n\n**Net income (loss)**\n\n \n\nFor the year ended December 31, 2025, the Company’s continuing\noperations shifted from a net loss of $226,258 in 2024 to a net loss of $154,822, representing a decrease in loss of $71,436 or 31.57%.\nAlthough operating costs and operating expenses increased due to business promotion, overall operating expenses decreased as a result\nof the reclassification of fixed asset depreciation to inventory upon product harvest.\n\n \n\n25\n\n \n\n \n\nFor the year ended\nDecember 31, 2024, the Company’s continuing operations shifted from a net profit of $169,285 in 2023 to a net loss of $226,258,\nrepresenting a decrease of $395,543 or 233.66%. Although revenue began to increase in 2023, the return to a net loss in 2024 was primarily\ndue to higher depreciation expenses resulting from the purchase of cultivation facilities and increased operating expenses incurred during\nthe early stage of business expansion.\n\n \n\n**Factors Affecting Our Results of\nOperations**\n\n* *\n\n*Loss of key\npersonnel.*Our revenue was derived from our competitive advantages in our products. We rely heavily on the expertise and leadership\nof our senior management to maintain our core competence. The loss of the service of any of our key personnel could adversely affect our\nbusiness.\n\n* *\n\n*Macro-economic\nconditions.* Our business, financial condition and results of operations may be materially adversely affected by a challenging economic\nclimate, including adverse changes in interest rates, volatile commodity markets and inflation, contraction in the availability of credit\nin the market and reductions in consumer spending. A macroeconomic downturn, which decreases the disposal personal income and reduces\nthe need for luxury goods, may contribute to decreased sales of our Cordyceps products. Conversely, the economic growth may result in\nmore sales of our Cordyceps products.\n\n* *\n\n*Depreciation*.\nOur depreciation expenses are mainly driven by the net value of cultivation facilities and other equipment. Depreciation of property,\nplant and equipment is calculated based on cost, less their estimated residual value, if any, using the straight-line method over estimated\nuseful life from 3 years to 10 years. Any change of the depreciation accounting policy or impairment of our property may affect our operating\nresults.\n\n* *\n\n*Prevailing\nsalary levels*. Our cost of revenues is impacted by prevailing salary levels. Although we have not been subject to significant wage\ninflation in Taiwan, a significant increase in the market rate for wages could harm our operating results and our operating margin. Our\nability to attract, retain, and expand our senior management and our professional and technical staff is an important factor in determining\nour future success. The market for qualified scientists and researchers is competitive. From time to time, it may be difficult to attract\nand retain qualified individuals with the required expertise at a fair wage. An increase in compensation of our scientists and researchers\nmay increase our operating cost.\n\n \n\n**5.B. Liquidity and Capital Resources.**\n\n \n\nOther than our\ngrowing experience and skills in Cattle camphor mushroom products and the growing demand for our products and services for the domestic\nand oversea markets, both of which we believe may increase our liquidity if they continue, we are not aware of any trends or any demands,\ncommitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing\nin any material way.\n\n \n\nFor 2026, we expect\nour main growth will be from our products sales in Taiwan. The demand for our products and services appears to be strengthening, from\nwhich we expect to generate more positive cash flow.\n\n \n\nOur long-term\nfuture capital requirements will depend on many factors, including our level of revenue, the timing and extent of our spending to support\nthe maintenance and growth of our operations, the expansion of our sales and the continued market acceptance of our products and services.\n\n \n\n26\n\n \n\n \n\nWorking Capital Summary\n\n \n\n  \nDecember 31,\n2025  \nDecember 31,\n2024 \n\nCurrent assets \n$997,742  \n$601,602 \n\nCurrent liabilities \n 5,192,062  \n 4,986,645 \n\nWorking capital \n$(4,194,320) \n$(4,385,043)\n\nTotal deficit \n$(534,551) \n$(375,543)\n\n \n\nAs of December\n31, 2025, we had $997,742 in current assets, $5,192,062 in current liabilities, and a working capital deficit of $4,194,320.\nIn addition, we had total shareholders’ deficit of $534,551 as of December 31, 2025.\n\n \n\nAs of December 31, 2024, we had $601,602 in current assets, $4,986,645\nin current liabilities, and a working capital deficit of $4,385,043. In addition, we had total shareholders’ deficit of $375,543\nas of December 31, 2024.\n\n \n\nBoth 2025 and\n2024 had negative working capital, mainly because of a cultivation facilities purchase agreement signed in 2023. The agreement required\nbatch deliveries in 2023 and 2024, which led to a substantial rise in payables. Since these payables were not fully paid off by 2025,\nworking capital stayed negative.\n\n \n\nCash flows\n\n \n\n  \nFor the years ended December 31, \n\n  \n2025  \n2024  \n2023 \n\nNet cash provided by (used in) operating activities from continuing operations \n$(35,845) \n$312,006  \n$321,833 \n\nNet cash provided by operating activities from discontinued operations \n -  \n -  \n 37,891 \n\nNet cash used in investing activities from continuing operations \n -  \n (305,637) \n (319,487)\n\nNet cash used in investing activities from discontinued operations \n -  \n -  \n (333)\n\nNet cash provided by financing activities from continuing operations \n -  \n -  \n 14,643 \n\nNet cash used in financing activities from discontinued operations \n -  \n -  \n (46,851)\n\nEffect of exchange rate changes on cash and cash equivalents \n 1,760 \n 7,811  \n (692)\n\nNet increase (decrease) in cash and cash equivalents \n$(34,085) \n$14,180  \n$7,004 \n\n \n\n*Operating activities:*\n\n \n\nFor the year ended December 31, 2025, we had net cash used in\noperating activities of $35,845. This resulted primarily from $135,243 in depreciation, $74,017 in amortization, $91,310 in operating\nlease expense, a $320,821 decrease in consumptive biological assets, a $77,007 increase in accounts payable, and a $51,526 increase in\naccrued expenses, partially offset by a $358,549 increase in inventories, a $134,541 increase in other assets, a $59,962 increase in other\npayable, and $91,539 in operating lease liabilities.\n\n \n\nAlthough we incurred a net loss for the year ended December 31, 2024, we had net cash flow of $312,006 provided by operating activities\nfor the year ended December 31, 2024, which mainly resulted from our property depreciation of $407,265, operating lease expense in the\namount of $90,609, an increase of $104,608 in accounts payable, an increase of $193,434 in due to related parties, and an increase of\n$89,329 in other payable, offset by an increase in consumptive biological assets $124,572 and an increase in prepaid taxes of $103,847.\n\n \n\n27\n\n \n\n \n\nWe had net cash flow of $359,724 provided by operating activities for\nthe year ended December 31, 2023. which mainly resulted from our net income of $169,285, property depreciation of $56,757, operating lease\nexpense in the amount of $81,203, an increase of $182,849 in accounts payable, and the cash flow provided by discontinued operation\nof $37,891, offset by an increase in consumptive biological assets of $192,634 due to the increase in sales and payment for operating\nlease liability of $80,540.\n\n \n\n*Investing activities:*\n\n \n\nFor the year ended\nDecember 31, 2025, there were no cash flows arising from investing activities.\n\n \n\nWe had net cash\nflow of $305,637 used in investing activities for the year ended December 31, 2024, primarily attributable to the cash outflow of $349,237\nfor purchasing property and equipment and proceeds from disposal of fixed asset of $43,600.\n\n \n\nWe had net cash flow of $319,820 used in investment\nactivities for the year ended December 31, 2023, primarily due to the cash outflow of $319,487 for purchasing property and equipment and\nthe cash used in discontinued operation of $333.\n\n \n\n*Financing activities:*\n\n \n\nFor the years\nended December 31, 2025 and 2024, there were no cash flows arising from financing activities.\n\n \n\nWe had a negative\ncash flow from financing activity of $32,208 during the year ended December 31, 2023. Which proceeds from related party of $14,643, offset\nby cash used in discontinued operations of $46,851.\n\n \n\nThe Company currently\nplans to satisfy its cash requirements for the next 12 months through earning and borrowings from its related parties or companies affiliated\nwith its related parties and believes it can satisfy its cash requirements so long as it is able to obtain financing from these affiliated\nparties. The Company expects that money earned and borrowed will be used during the next 12 months to satisfy the Company’s operating\ncosts, professional fees and for general corporate purposes. There is no written funding agreement between the Company and its related\nparties.\n\n \n\n**Off-Balance Sheet Commitments and\nArrangements**\n\n \n\nAs of December 31, 2025,\n2024, and 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under\nthe Securities Act of 1934.\n\n** **\n\n**Contractual Obligations and Commitments**\n\n \n\nAs of December 31, 2025, 2024, and\n2023, we did not have any contractual obligations.\n\n** **\n\n**5.E. Critical Accounting Policies.**\n\n \n\nOur significant\naccounting policies are described in the notes to our financial statements for the years ended December 31, 2025, 2024, and 2023, and\nare included elsewhere in this annual statement.\n\n \n\n28"}