Rubber Leaf Inc. Annual Report - A Comprehensive Review for Investors

Dive into Rubber Leaf Inc.'s fiscal year 2025 performance and strategic shifts. This report offers a clear, insightful analysis of the company's latest SEC 10-K filing, helping you understand its current position and future prospects.

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1. Business Overview

Rubber Leaf Inc., incorporated in Nevada in 2021, designs, manufactures, and sells automotive rubber and plastic sealing strips. These essential components provide sealing, noise reduction, and weather protection for vehicle windows, doors, and other areas. As a "first-tier supplier," Rubber Leaf Inc. directly supplies major automotive manufacturers like eGT and Volkswagen.

Fiscal year 2025 marked a significant transformation for Rubber Leaf Inc., driven by a major strategic restructuring. On November 20, 2025, the company completed the sale of its former primary operating subsidiary, Rubber Leaf Sealing Products (Zhejiang) Co., Ltd. (RLSP), for $3,000,000 in cash. This divestiture streamlined operations and enhanced capital efficiency. Before the sale, in September 2025, Rubber Leaf Inc. established a new, wholly-owned subsidiary, Rubber Leaf Limited (RLHK), in Hong Kong. The company successfully transferred all core business operations—including customer contracts, supply agreements, and ongoing orders for sealing strips—to RLHK, ensuring uninterrupted business continuity. This strategic pivot allows Rubber Leaf Inc. to operate with a more agile structure while maintaining its established market presence and customer relationships.

2. Financial Performance

For the fiscal year ended December 31, 2025, Rubber Leaf Inc. reported the following key financial highlights:

• Revenue: Total revenue for 2025 reached $28.5 million, a slight decrease from $31.2 million in 2024. This dip primarily resulted from the Q4 2025 divestiture of RLSP, which contributed revenue for only part of the year.
• Gross Profit: Gross profit stood at $7.1 million (24.9% gross margin) in 2025, compared to $8.4 million (26.9% gross margin) in 2024. Increased raw material costs and competitive pricing pressures compressed margins.
• Net Income: The company reported a net income of $1.8 million for 2025, which included a one-time gain from the RLSP sale. This compares to a net income of $2.5 million in 2024. Excluding the one-time gain, operational net income was $1.2 million.
• Earnings Per Share (EPS): Basic EPS for 2025 was $0.09, down from $0.13 in 2024.

These figures reflect a year of strategic transition, where the financial impact of the RLSP sale partially offset operational performance.

3. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

This section outlines Rubber Leaf Inc.'s financial condition and operating results for fiscal year 2025, offering management's insights into past performance and future expectations.

Results of Operations: Our financial performance for fiscal year 2025 (as detailed in Section 2) reflects a period of significant strategic transition. The slight decrease in total revenue was primarily due to the divestiture of our former primary operating subsidiary, RLSP, in Q4 2025. While this divestiture impacted reported full-year revenue, it was a strategic move to streamline operations and enhance capital efficiency. Increased raw material costs and competitive pricing pressures within the automotive supply chain compressed gross profit margins. Despite these operational headwinds, the company reported a net income that included a one-time gain from the RLSP sale, demonstrating the underlying profitability of the continuing business, which successfully transitioned to Rubber Leaf Limited (RLHK).

Key operational achievements included securing a significant order with Hozon New Energy Auto for whole car rubber window sealing, marking a strong entry into the rapidly expanding electric vehicle (EV) market. We expect this new business to ramp up significantly in the coming periods. Furthermore, joint research and development agreements with FAW-Volkswagen underscore our continued technological leadership and strong OEM partnerships, critical for long-term growth and innovation in specialized rubber production. The company maintains its "domestic leading level" technology in specialized rubber production, particularly in high-hardness rubber and low-density sponge formulations.

Liquidity and Capital Resources: As of December 31, 2025, our liquidity position significantly strengthened due to the $3.0 million cash proceeds from the sale of RLSP, contributing to a robust cash balance of $5.5 million. This, combined with minimal long-term debt and a current ratio of 2.1x, indicates a strong capacity to meet short-term obligations and provides financial flexibility. Management intends to utilize this strong cash position to support ongoing operations, invest in strategic growth initiatives—particularly in the NEV sector—and potentially explore further market expansion opportunities. We believe our current cash reserves and anticipated cash flows from operations will sufficiently meet our working capital and capital expenditure requirements for the foreseeable future.

Critical Accounting Policies and Estimates: Preparing our financial statements under U.S. GAAP requires management to make estimates and assumptions. These estimates affect the reported amounts of assets and liabilities, revenues, expenses, and related disclosures. Critical accounting policies include revenue recognition, inventory valuation, and impairment of long-lived assets. We base these estimates on historical experience and various other assumptions we believe are reasonable under the circumstances. Actual results could differ from these estimates.

Off-Balance Sheet Arrangements: As of December 31, 2025, we had no off-balance sheet arrangements that are reasonably likely to materially affect our financial condition, revenues, expenses, results of operations, liquidity, or capital resources.

Contractual Obligations: Our primary contractual obligations consist of purchase commitments for raw materials and operating lease obligations for facilities. These obligations align with the normal course of business, and we expect to fund them through operating cash flows.

Outlook and Trends: Management remains optimistic about the future, particularly given our strategic pivot towards the New Energy Vehicle (NEV) sector and the successful operational restructuring. The automotive industry's shift towards electrification, lightweighting, and advanced sealing solutions directly aligns with our technological strengths and strategic initiatives. We anticipate continued growth driven by new contracts like Hozon and ongoing R&D with major OEMs. We remain vigilant regarding potential challenges such as raw material price volatility, intense competition, and geopolitical risks. Our focus remains on maintaining operational efficiency and strengthening customer and supplier relationships within the new RLHK structure. The company's operations in China are subject to local regulatory frameworks, including those governing foreign investment, environmental protection, and labor laws. The successful registration of the RLSP sale with Chinese authorities indicates compliance with relevant regulatory requirements for the divestiture.

4. Financial Health

As of December 31, 2025, Rubber Leaf Inc. reported a strong cash position of $5.5 million. The $3.0 million cash proceeds from the RLSP sale significantly bolstered this. The company maintains a healthy balance sheet with minimal long-term debt, primarily consisting of short-term operational liabilities. Its current ratio stands at 2.1x, indicating robust short-term liquidity and the ability to meet immediate financial obligations. This strong financial health provides flexibility for future investments and operational stability.

5. Risk Factors

Investors should be aware of the following principal risks:

• Related Party Transaction Scrutiny: The sale of RLSP to an entity partially owned by the CEO could raise concerns regarding potential conflicts of interest or the fairness of the transaction terms.
• Customer and Supplier Dependence: High reliance on a limited number of key customers and a single major supplier creates vulnerability. The loss of a major customer or disruption from a key supplier could materially impact revenue and operational continuity.
• Automotive Industry Volatility: The automotive sector is cyclical and sensitive to economic conditions, consumer spending, and regulatory changes. A downturn in vehicle production or shifts in consumer preferences could adversely affect demand for Rubber Leaf Inc.'s products.
• Raw Material Price Volatility: Fluctuations in the prices of rubber, plastics, and other raw materials, often commodity-driven, can impact production costs and gross margins.
• Intense Competition: The automotive sealing market is competitive, with both domestic and international players. Pressure on pricing, product innovation, and quality could affect market share and profitability.
• Geopolitical and Trade Risks: As a company with significant operations and a customer base in China, Rubber Leaf Inc. is exposed to geopolitical tensions, trade policy changes, and regulatory shifts in the region.

6. Competitive Position

Rubber Leaf Inc. holds a strong competitive position within the automotive sealing strip market. Its status as a "first-tier supplier" to global OEMs like eGT and Volkswagen attests to its product quality, reliability, and established relationships. The company's specialized expertise in high-hardness rubber and low-density sponge formulations provides a technological edge, enabling it to meet stringent automotive performance requirements. Its long-standing relationships with car manufacturers, built on trust and consistent delivery, represent a significant barrier to entry for competitors. The company's focus on innovation, evidenced by joint R&D with FAW-Volkswagen, further solidifies its position as a preferred partner for advanced automotive solutions.

7. Future Outlook

Rubber Leaf Inc. is well-positioned for growth, especially as it expands its presence in the New Energy Vehicle (NEV) sector. Substantial orders from Hozon New Energy Auto, with production ramping up through 2024, point to significant opportunities for increased revenue and market penetration in this high-growth segment. We expect the company's commitment to innovation, including ongoing joint R&D initiatives, to yield new product developments that cater to evolving automotive industry demands, such as lightweighting and enhanced sealing for electric vehicles. Management emphasizes a focus on operational efficiency within the new RLHK structure and exploring opportunities for market expansion, both domestically and potentially internationally, leveraging its established reputation and technological capabilities. This strategic direction, combined with a strong financial position, aims to drive sustainable long-term value for investors.