NOTE 14 – COMMITMENTS AND CONTINGENCIES

Current vulnerability due to certain concentrations

For the six months ended June 30, 2026, two customers accounted for 15.5% and 11.4% of sales, respectively, and three customers accounted for 32.9%, 19.4% and 15.9% of accounts receivable, respectively. During the same period, three suppliers accounted for 20.9%, 20.0% and 18.3% of raw material purchases, and four different products accounted for 25.9%, 18.6%, 18.6% and 18.6% of revenue.

For the six months ended June 30, 2025, one customer accounted for 11.5% of sales and two customers accounted for 63.5% and 13.7% of accounts receivable. During the same period, three suppliers accounted for 24.9%, 19.4% and 16.4% of raw material purchases, and three different products accounted for 32.8%, 22.8% and 13.5% of revenue.

Nature of Operations

Economic environment - Substantially all of the Company’s operations are conducted in the PRC, and therefore the Company is subject to special considerations and significant risks not typically associated with companies operating in the United States of America. These risks include, among others, the political, economic and legal environments and fluctuations in the foreign currency exchange rate. The Company’s results from operations may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. The unfavorable changes in global macroeconomic factors may also adversely affect the Company’s operations.

In addition, all of the Company’s revenue is denominated in the PRC’s currency of Renminbi (RMB), which must be converted into other currencies before remittance out of the PRC. Both the conversion of RMB into foreign currencies and the remittance of foreign currencies abroad require approval of the PRC government.