CN Healthy Food Tech Group Corp.

Previous wording

Unless otherwise indicated, references to “we”, “us”, “our”, “CN Healthy” or the “Company” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are to CN Healthy Food Tech Group Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto included in Part I. Item 1. of this Quarterly Report, the risk factors included in Part II. Item 1A. of this Quarterly Report, and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 31, 2026.

Current wording

Unless otherwise indicated, references to “we”, “us”, “our”, “CN Healthy” or the “Company” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are to CN Healthy Food Tech Group Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto included in Part I. Item 1. of this Quarterly Report, the risk factors included in Part II. Item 1A. of this Quarterly Report, and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 31, 2026, as amended on June 12, 2026.

Previous wording

We operate within the health and wellness food industry, focusing on the research and development, production, and sale of natural, grain-based health foods that support preventative health and wellness. We manage our business in two operating segments: wholesale distribution and live-stream sales.

Current wording

We operate within the high-end health food industry, driven by artificial intelligence technology and biotechnology innovation. We are committed to researching, developing, producing, and selling natural, grain-based health foods, and integrating modern biotechnology with traditional Chinese medicine theory to support preventative health and wellness. We manage our business in two operating segments: wholesale distribution and live-stream sales.

Previous wording

The Nasdaq trading halt imposed on October 1, 2025 in connection with the CSRC’s review of our U.S. listing remained in effect as of the filing date of this Quarterly Report. As disclosed in our current report on Form 8-K filed with the SEC on April 29, 2026, on April 24, 2026, Heilongjiang Zhongneng Liangke Agricultural Technology Co., Ltd. (“Zhongneng Liangke”), a wholly-owned PRC operating subsidiary of the Company, received an Advance Notice of Administrative Penalty (the “Notice”) from the Heilongjiang Regulatory Bureau of the China Securities Regulatory Commission (the “CSRC”) in connection with the Company’s overseas listing filing process. The Notice proposes administrative fines of RMB 3,000,000 on Zhongneng Liangke and RMB 1,500,000 on Mr. Zhenjun Jiang, the Company’s Chairman and Chief Executive Officer, in his capacity as the directly responsible executive. On May 7, 2026, Zhongneng Liangke received the final Administrative Penalty Decision (the “Decision”) from the CSRC whereby the CSRC affirmed and formally imposed the fines proposed in the Notice. As of the date of this Quarterly Report, neither the Company nor Mr. Jiang has paid any fines. See Note 11 to the condensed consolidated financial statements.

Current wording

The Nasdaq trading halt imposed on October 1, 2025 in connection with the CSRC’s review of our U.S. listing remained in effect as of the filing date of this Quarterly Report. On April 24, 2026, our PRC operating subsidiary Heilongjiang Zhongneng Liangke Agricultural Technology Co., Ltd. received an Advance Notice of Administrative Penalty from the Heilongjiang Regulatory Bureau of the CSRC, proposing administrative fines of RMB 3,000,000 on Zhongneng Liangke and RMB 1,500,000 on Mr. Zhenjun Jiang, our Chairman and Chief Executive Officer, as the directly responsible executive,these penalties have already been paid on May 24, 2026; see Note 11 to the condensed consolidated financial statements.

Previous wording

Our historical results of operations for the three months ended March 31, 2025 reflect the operations of Legacy CFI, the accounting acquirer in the Business Combination, prior to the consummation of the Business Combination on September 30, 2025, and accordingly do not include the costs of operating as a U.S. public company or the effects of the Business Combination, including the amortization of shares issued for management advisory services described in Note 8 to the condensed consolidated financial statements. Our results of operations for periods following the Business Combination may not be directly comparable to our historical results of operations for periods preceding the Business Combination.

Current wording

Our historical results of operations for the three and six months ended June 30, 2025 reflect the operations of Legacy CFI, the accounting acquirer in the Business Combination, prior to the consummation of the Business Combination on September 30, 2025, and accordingly do not include the costs of operating as a U.S. public company or the effects of the Business Combination, including the amortization of shares issued for management advisory services described in Note 8 to the condensed consolidated financial statements. Our results of operations for periods following the Business Combination may not be directly comparable to our historical results of operations for periods preceding the Business Combination.

Previous wording

Results of Operations — Three Months Ended March 31, 2026 compared to Three Months Ended March 31, 2025

Current wording

Results of Operations — Three and Six Months Ended June 30, 2026 compared to Three and Six Months Ended June 30, 2025

Previous wording

Revenue, net for the three months ended March 31, 2026 was $5,828,544, an increase of $1,005,096, or 20.8%, compared to $4,823,448 for the three months ended March 31, 2025. The increase was driven by continued expansion of our wholesale distribution network and growing contribution from our live-stream sales segment. As described in Note 1 to the condensed consolidated financial statements, the comparative period reflects the historical operating results of Legacy CFI as the accounting acquirer in the September 30, 2025 reverse recapitalization.

Current wording

Revenue, net increased during the second quarter and first six month of 2026 compare to the same period of 2025. The increase was driven by continued expansion of our wholesale distribution network and launch of new salable products. As described in Note 1 to the condensed consolidated financial statements, the comparative period reflects the historical operating results of Legacy CFI as the accounting acquirer in the September 30, 2025 reverse recapitalization.

Previous wording

Cost of revenue for the three months ended March 31, 2026 was $1,463,696, a decrease of $1,002,406, or 40.6%, compared to $2,466,102 for the three months ended March 31, 2025. Gross profit accordingly increased $2,007,502, or 85.2%, to $4,364,848 from $2,357,346 in the prior period, and gross profit margin expanded to 74.9% from 48.9%. The improvement in gross profit margin reflects a combination of factors, the principal drivers of which include: (i) the commencement of operations of our own production base in Taikang Industrial Park, Heilongjiang Province in October 2025, with the three months ended March 31, 2026 being the first full quarter during which the Company’s core products were predominantly self-produced rather than sourced from third-party OEM partners, materially lowering per-unit production cost; (ii) a shift in revenue mix toward higher-margin live-stream platform sales of digital coupons (which carry materially lower cost of revenue than physical product sales through the wholesale distribution network); and (iii) operating leverage on relatively fixed production-related costs as the wholesale distribution network expanded.

Current wording

Cost of revenue decreased during the second quarter and first six month of 2026 compare to the same periods of 2025. The improvement in gross profit margin reflects a combination of factors, the principal drivers of which include: (i) the commencement of operations of our own production base in Beikang Industrial Park, Heilongjiang Province in October 2025, with the six months ended June 30, 2026 being the period during which the Company’s core products were predominantly self-produced rather than sourced from third-party OEM partners, materially lowering per-unit production cost; and (ii) operating leverage on relatively fixed production-related costs as the wholesale distribution network expanded.

Previous wording

Total operating expenses for the three months ended March 31, 2026 were $3,634,232, an increase of $2,082,084, or 134.1%, compared to $1,552,148 for the three months ended March 31, 2025. The increase was primarily attributable to $2,071,857 of amortization expense associated with 1,000,000 restricted common shares issued to officers of Iron Horse in September 2025 for management advisory services to be rendered over a six-month period ending March 30, 2026 (see Note 8 to the condensed consolidated financial statements). This amortization is recorded within general and administrative expenses and was not present in the comparative period. The six-month service period concluded on March 30, 2026 and no further amortization of these shares-issued-for-services will be recorded in subsequent periods. Excluding this non-recurring item, total operating expenses for the three months ended March 31, 2026 would have been $1,562,375, broadly consistent with the comparative period. Selling expenses decreased $579,691, or 52.3%, primarily reflecting a shift in the mix of selling and distribution activity, while research and development expenses remained relatively stable at $38,370 (March 31, 2025: $27,483).

Current wording

Total operating expenses increased during the second quarter and first six months of 2026 compared to the same periods of 2025. Total operating expenses were $1,126,289 for the three months ended June 30, 2026, a slight increase compared to the same period of 2025, primarily due to higher consulting and audit expenses (see Note 13 - Segment Information). The significant increase in operating expenses for the first six months of 2026 was primarily attributable to $2,045,000 of amortization expense associated with 1,000,000 restricted common shares issued to officers of Iron Horse in September 2025 for management advisory services rendered over a six-month period ended March 30, 2026 (see Note 8 to the condensed consolidated financial statements). This amortization is recorded within general and administrative expenses and was not present in the comparative period. The six-month service period concluded on March 30, 2026, and no further amortization of these shares issued for services will be recorded in subsequent periods. Selling expenses decreased $108,466, or 24.9%, and $383,749, or 30.9%, for the three and six months ended June 30, 2026, respectively, compared with the same periods of 2025, primarily reflecting a shift in the mix of selling and distribution activity. Research and development expenses remained relatively stable in the second quarter of 2026 and increased $15,576, or 26.7%, for the six months ended June 30, 2026 compared to the same period of 2025, due to higher labor costs in the R&D department.

Previous wording

Total other income (expense), net for the three months ended March 31, 2026 was an expense of $189,076, compared to income of $93,597 for the three months ended March 31, 2025, a decrease of $282,673. The principal driver of this swing was the recognition of $206,021 of default interest expense on three promissory notes that have been in default since the fourth quarter of 2025 (see Note 6 and Note 7 to the condensed consolidated financial statements). The default interest accrues at the contractual rate of 15.0% per annum, and no portion was paid in cash during the three months ended March 31, 2026. Interest income for the three months ended March 31, 2026 was $16,564, compared to $38,777 for the comparative period, reflecting the prevailing interest rate environment on cash holdings, the substantial majority of which are held in PRC bank accounts.

Current wording

Total other income (expense), net changed from net other income of $154,248 and $247,845 for the three and six months ended June 30, 2025, respectively, to net other expense of $549,040 and $738,116 for the three and six months ended June 30, 2026. The change was mainly attributable to: (i) the recognition in the second quarter of 2026 of the CSRC administrative penalty of RMB 3,000,000, equivalent to $436,961; and (ii) the recognition of $335,908 of default interest expense during the six months ended June 30, 2026 on three promissory notes that have been in default since the fourth quarter of 2025 (see Note 6 and Note 7 to the condensed consolidated financial statements). The default interest accrues at the contractual rate of 15.0% per annum, and no portion was paid in cash during the six months ended June 30, 2026. Interest income decreased $135,265, or 84.6%, and $157,478, or 79.3%, for the three and six months ended June 30, 2026, respectively, compared to the same periods of 2025, primarily due to lower bank deposit interest rates.

Previous wording

Provision for income tax for the three months ended March 31, 2026 was $850,537, compared to $125,112 for the three months ended March 31, 2025. The Company’s effective tax rate was 157.1% for the three months ended March 31, 2026, compared to 13.9% for the three months ended March 31, 2025. The effective tax rate for the current quarter differs significantly from both the comparative period and the PRC statutory rate of 25.0% principally because (i) the $2,071,857 of amortization of shares-issued-for-services described above is a non-deductible permanent difference recorded at the U.S. parent level, (ii) default interest of $206,021 on the three U.S.-side promissory notes is also recorded at the U.S. parent level and is non-deductible, and (iii) the Company maintains a full valuation allowance against its U.S. deferred tax assets, with the result that the loss-making U.S. parent generates no offsetting tax benefit. Together, these items compressed consolidated pre-tax income to $541,540 while the underlying PRC operating entities continued to generate taxable income subject to PRC income tax. The Company expects its effective tax rate to normalize toward the PRC statutory rate in subsequent periods following the conclusion of the shares-issued-for-services amortization on March 30, 2026.

Current wording

The Company's effective tax rate was 33.0% for the second quarter of 2026, compared to 27.5% for the same period of 2025 and 46.1% for the six months ended June 30, 2026,compared to 25.0% for the same period of 2025. The effective tax rate for the second quarter and first six month of 2026 differs significantly from both the comparative period of 2025 and the PRC statutory rate of 25.0% principally because (i) the $2,045,000 of amortization of shares-issued-for-services described above is a non-deductible permanent difference recorded at the U.S. parent level, (ii) default interest of $335,908 on the three U.S.-side promissory notes is also recorded at the U.S. parent level and is non-deductible, and (iii) the Company maintains a full valuation allowance against its U.S. deferred tax assets, with the result that the loss-making U.S. parent generates no offsetting tax benefit. Together, these items compressed consolidated pre-tax income to $4,565,986 while the underlying PRC operating entities continued to generate taxable income subject to PRC income tax.(iv)Loss on some subsidiaries diluted the companies total income before tax.

Previous wording

As of March 31, 2026, our cash and cash equivalents totaled $29,690,865 and a net working capital surplus of $11,045,507. As of March 31, 2026, approximately $29,690,682 and $183 of our cash and cash equivalents were held in the PRC and United States, respectively.

Current wording

As of June 30, 2026, our cash and cash equivalents totaled $23,317,217 and a net working capital surplus of $15,785,144. As of June 30, 2026, approximately $23,302,900 and $14,317 of our cash and cash equivalents were held in the PRC and United States, respectively.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026 was $3,599,863, compared to net cash used of $165,415 for the three months ended March 31, 2025. The increase in operating cash outflow was driven principally by a $6,369,184 decrease in advances from customers during the current quarter, which represents the fulfillment and recognition as revenue of customer prepayments received in prior periods, partially offset by non-cash add-backs of $2,071,857 for amortization of shares-issued-for-services and $206,021 for accrued default interest. Net cash used in investing activities for the three months ended March 31, 2026 was $1,638, reflecting minimal capital expenditure during the quarter, compared to net cash used of $75,258 in the comparative period. Net cash provided by financing activities for the three months ended March 31, 2026 was $116,000, reflecting Business Combination-related financing receipts (March 31, 2025: $nil). The effect of foreign currency exchange rate changes on cash and cash equivalents was a positive $162,617 for the current quarter (March 31, 2025: $197,515). After consideration of all activities, cash and cash equivalents decreased by $3,322,884 during the three months ended March 31, 2026, ending at $29,690,865.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026 was $10,630,971, compared to net cash used of $1,472,289 for the six months ended June 30, 2025. The increase in operating cash outflow was driven principally by a $15,462,898 decrease in advances from customers during the period, which represents the fulfillment and recognition as revenue of customer prepayments received in prior periods,and $1,040,401 increase in procurement of inventories, partially offset by a $1,769,444 increase in accounts payable, with a further $1,047,762 increase in prepayments to suppliers adding to the outflow. Net cash used in investing activities for the six months ended June 30, 2026 was $6,657, reflecting minimal capital expenditure during the period, compared to net cash used of $447,768 in the comparative period. Net cash provided by financing activities for the six months ended June 30, 2026 was $116,000, reflecting Business Combination-related financing receipts (June 30, 2025: $nil). The effect of foreign currency exchange rate changes on cash and cash equivalents was a positive $825,097 for the current period (June 30, 2025: $708,526). After consideration of all activities, cash and cash equivalents decreased by $9,696,532 during the six months ended June 30, 2026, ending at $23,317,217.