Note 2 – Summary of Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies from those described in the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, other than the addition of the policy on default interest accrual on notes payable described below. Significant accounting policies of importance to the reader are summarized below; refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 for the full discussion of significant accounting policies.

Going Concern

In accordance with ASC 205-40, Presentation of Financial Statements — Going Concern, management evaluates at each reporting period whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

The Company is in default of its payment obligations under the September 2025 Note Payable, the Assumed Note Payable and the Sponsor Note Payable, with an aggregate of approximately $3.8 million of principal and accrued interest in default (see Note 6 and Note 7), and the Company’s common stock and warrants are subject to a trading halt pending the Company’s appeal of Nasdaq’s delisting determination. These conditions, considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern. Management evaluated these conditions together with its plans: (i) the Company held cash and cash equivalents of $23.3 million at June 30, 2026 and generated net income of $2.75 million for the six months then ended, with sequential quarter-over-quarter growth in both revenue and net income; (ii) management is actively engaged in negotiations with the noteholders to extend maturities and, where applicable, reduce default interest rates; and (iii) the Company is pursuing an intra-group financing arrangement under which CN Healthy Food Tech Group Corp. would obtain funding from its PRC subsidiary, Harbin Kangliang Kechuang Co., Ltd., the Group’s primary profit-generating entity. Such cross-border lending is permissible under the Administrative Measures for Overseas Loans by Domestic Enterprises (Yinfa [2026] No. 63); the proposed loan will not exceed the applicable outbound-loan ceiling (the lender’s most recent audited equity multiplied by the macro-prudential adjustment factor of 0.6), and the Company will complete the required foreign exchange registration prior to disbursement. The projected proceeds fully cover the defaulted principal and accrued interest. After considering these plans, management concluded that the substantial doubt has been alleviated, and that the Company will be able to meet its obligations as they become due for at least twelve months from the date these condensed consolidated financial statements are issued.

Emerging Growth Company

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). The Company has elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Actual results could differ from those estimates. The Company’s most significant assumptions and estimates relate to the carrying value of accounts receivable, the net realizable value of inventories, the valuation of nonmonetary transactions, the useful life and recoverability of long-lived assets, the determination of reserves for customer refunds, classification of warrants, accrual of default interest on notes payable, income tax provision, determination of uncertain tax positions, and determination of deferred tax valuation allowances.

Segment Information

The Company determined there are two operating and reportable segments: wholesale distribution and live-stream sales. The wholesale distribution segment focuses on product sales made through the Company’s extensive distributor network. The live-stream sales segment focuses on digital coupon sales for healthcare products and services on behalf of third-party merchants made through online platforms, primarily live-streaming platforms such as Douyin, Meituan and Kuaishou.

Cash and Cash Equivalents

The Company maintains cash and cash equivalents at financial institutions in the People’s Republic of China (“PRC”), where deposits are insured up to RMB 500,000 (approximately $73,595 at June 30, 2026) per institution, and at financial institutions in the United States, where deposits are insured up to $250,000 per institution. Substantially all of the Company’s cash and cash equivalents balance of $23,317,217 at June 30, 2026 was held at PRC financial institutions ($23,302,901) with the remainder ($14,316) held at U.S. financial institutions, and the substantial majority of these balances exceeded the applicable insurance limits. The Company has not experienced any losses on its cash deposits and believes the risk of loss is mitigated by the financial standing of the institutions in which the funds are held.

Customer and Supplier Concentration

The Company controls credit risk through credit approvals, requirement for customer advances, credit limits, and monitoring procedures. The Company maintains a low concentration risk, with no single customer contributing more than 10% of total revenue for the three and six months ended June 30, 2026 or 10% of accounts receivable as of June 30, 2026.

The Company currently obtains inventory from approximately twenty suppliers. The Company sources each of its products from two to three different suppliers to minimize disruption to its supply chain if one supplier were to encounter production issues. Three suppliers have each contributed over 10% of the Company’s total procurement, with individual contributions of 50.5%, 17.7% and 17.7% for the three months ended June 30, 2026 and three suppliers have each contributed over 10% of the Company’s total procurement, with individual contributions of 42.7% , 19.3% and 19.3% for the six months ended June 30, 2026.Two suppliers have each contributed over 10% of the Company’s total procurement, with individual contributions of 63.1% and 19.6% for the three months ended June 30, 2025.Two suppliers have each contributed over 10% of the Company’s total procurement, with individual contributions of 36.5% and 24.2% for the six months ended June 30, 2025.

Inventories

Inventories, consisting of finished goods, are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. As of June 30, 2026 and December 31, 2025, an allowance for obsolete or slow-moving inventory was not required, and there was no provision for inventory shrinkage for the six months ended June 30, 2026 and 2025.

Investment in Equity Securities

Investments in equity securities without readily determinable fair values are accounted for under either the measurement alternative method or the equity method, in accordance with ASC 321, Investments — Equity Securities. During April 2025, the Company acquired a 5.0% equity interest in a privately held household appliance enterprise in exchange for RMB 1,000,000 ($145,588 at the date of acquisition and $147,190 at June 30, 2026) and recorded it within other assets on the accompanying condensed consolidated balance sheets at cost under the measurement alternative method, as the investment does not provide the Company with control or significant influence and does not have risk and reward characteristics substantially similar to an investment in the investee’s common stock.

Advertising Costs

The Company expenses the costs of advertising as incurred. Advertising expenses, included within selling expenses on the accompanying condensed consolidated statements of operations and comprehensive income (loss), were $108 and $198 for the three months ended June 30, 2026 and 2025, $20,269 and $240 for the six months ended June 30, 2026 and 2025,respectively.

Notes Payable — Default Interest

Beginning in the first quarter of 2026, the Company commenced accruing default interest on its three defaulted promissory notes at the contractual default rate of 15.0% per annum. As of December 31, 2025, the expected default interest on the three defaulted promissory notes totaled approximately $77,560, which was determined to be de minimis and was not accrued as of that date. Such amount, together with additional default interest accrued during the six months ended June 30, 2026, has been recorded as interest expense during the current quarter. The Company evaluated the embedded conversion features of its outstanding promissory notes under ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity, and concluded that no bifurcation from the host debt instrument was required. The Company accounts for any subsequent amendments, settlements or restructurings of these instruments under ASC 470-50, Debt — Modifications and Extinguishments. See Notes 6 and 7.

Earnings per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similarly except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive securities had been issued and the inclusion was not anti-dilutive. The number of shares outstanding and the number of warrants remain unchanged as of June 30,2026. Potentially dilutive shares issuable upon conversion of the September 2025 Note Payable and the Sponsor Note Payable are excluded from the table below because the conversion formulas are not defined in the respective agreements and the number of shares issuable is indeterminable.

All potentially dilutive securities listed below were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive or, in the case of the shares issuable under the Assumed Note Payable, because the effect would have been immaterial.

The following potentially dilutive securities were outstanding as of the dates indicated:

All warrants are equity-classified at June 30, 2026 (see Note 8). The 650,000 shares represent the fixed conversion right embedded in the Assumed Note Payable (see Note 6).

Foreign Currency and Foreign Currency Translation

Translation of amounts from RMB into USD has been made at the following exchange rates for the respective periods:

Recent Accounting Pronouncements, adopted during the six months ended June 30, 2026

In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient for public business entities when estimating expected credit losses on current accounts receivable and current contract assets arising from transactions within the scope of Topic 606. Under the practical expedient, an entity may assume that current economic conditions as of the balance sheet date will persist through the remaining life of such receivables. The Company adopted ASU 2025-05 effective January 1, 2026. The adoption did not have a material effect on the Company’s condensed consolidated financial statements, as the Company’s current trade receivables are not material and historically have not experienced credit losses.

In November 2024, the FASB issued ASU 2024-04, Debt — Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion under ASC 470-20. The Company adopted ASU 2024-04 effective January 1, 2026 on a prospective basis. The adoption did not have a material effect on the Company’s condensed consolidated financial statements. The Company will apply the guidance in ASU 2024-04 in the event any amendment, settlement or conversion of its outstanding convertible promissory notes (see Notes 6 and 7) is determined to be an induced conversion.

Recent Accounting Pronouncements, previously adopted

As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, the Company adopted the following pronouncements during the year ended December 31, 2025, none of which had a material effect on its consolidated financial statements: ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures; ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures; and ASU 2024-02, Codification Improvements — Amendments to Remove References to the Concepts Statements.

Recent Accounting Pronouncements, not yet adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, as subsequently clarified by ASU 2025-01. ASU 2024-03 requires public business entities to disclose, in tabular format within the notes to the financial statements, disaggregated information about specific categories of expenses (including purchases of inventory, employee compensation, depreciation, and intangible asset amortization) included in each relevant expense caption presented on the face of the income statement. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that adoption will have on its condensed consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies certain form-and-content requirements for condensed interim financial statements and the applicability of specified interim disclosure requirements. The Company is currently evaluating the impact that adoption of ASU 2025-11 will have on its condensed consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which includes 33 narrow-scope clarifications and corrections to various Topics in the Accounting Standards Codification. The Company is currently evaluating the impact, if any, that adoption of ASU 2025-12 will have on its condensed consolidated financial statements and related disclosures.

The Company has evaluated other recently issued but not yet effective accounting standards and does not expect the adoption of any such standards to have a material effect on its condensed consolidated financial statements.