What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-19 · 546 added, 335 removed, 74 unchanged (92% of the section changed)

2 unchanged sentences

The following

discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited

financial statements and the notes related thereto.

Certain information contained in the discussion and analysis set forth below includes

forward-looking statements.

Our actual results may differ materially from those anticipated in these forward-looking statements as a

result of many factors.

discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited

condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

The discussion

below contains forward-looking statements that involve risks and uncertainties.

Actual results may differ materially from those anticipated

in these forward-looking statements due to various factors, including those discussed under “Risk Factors” in our Annual

Report on Form 10-K and other filings with the Securities and Exchange Commission.

Company and our Business Overview

Robotics Corporation became publicly listed through its business combination with AlphaVest Acquisition Corp.

in December 2025.

The transaction

was accounted for as a reverse recapitalization, with AMC Corporation deemed the accounting acquirer.

Accordingly, the historical financial

statements of AMC Corporation form the basis of the Company’s consolidated financial statements.

Company distributes security camera products through e-commerce platforms across the United States, Canada, and Europe.

Its product offerings

are primarily focused on residential and small business applications, including indoor and outdoor smart cameras.

to December 2025, certain e-commerce platform accounts were operated through arrangements with third-party entities, including Ants,

Xiaoyun, and Yishijue, pursuant to authorization agreements.

As of December 1, 2025, the Company terminated the contractual arrangements

with Xiaoyun and Yishijue, resulting in the deconsolidation of these variable interest entities.

Following such termination, the Company

operates its business without reliance on VIE structures.

Robotics Corporation became a publicly traded company upon the completion of its business combination with AlphaVest Acquisition Corp.

on December 9, 2025.

The transaction was accounted for as a reverse recapitalization, with AMC Corporation deemed the accounting acquirer.

Accordingly, the historical financial statements of AMC Corporation became those of the combined company.

Company primarily distributes intelligent security camera products through e-commerce platforms serving customers in the United States,

Canada, and Europe.

In addition to product sales, the Company generates recurring revenue through cloud-based intelligent information

services, artificial intelligence service-sharing arrangements, intelligent information services, and revenue-sharing arrangements with

strategic business partners.

During 2026, the Company continued to expand its emphasis on higher-margin service-based revenue while maintaining

a more disciplined approach to inventory management and operating expenses.

to December 2025, certain e-commerce platform accounts were operated through contractual arrangements with third-party entities, including

Ants, Xiaoyun, and Yishijue.

Effective December 1, 2025, the Company terminated the contractual arrangements with Xiaoyun and Yishijue

and deconsolidated those variable interest entities (“VIEs”).

Since that time, the Company has conducted its operations without

reliance on VIE structures.

Limited transitional transactions associated with certain former VIE marketplace accounts continued during

2026 and were accounted for as related-party transactions.

Development and Future Objectives

December 2025, the Company completed its business combination with AlphaVest Acquisition Corp., as a result of which AMC Corporation

became a wholly owned subsidiary of AMC Robotics Corporation.

The transaction was accounted for as a reverse recapitalization, with AMC

Corporation deemed the accounting acquirer for financial reporting purposes.

Investment in Public Equity (“PIPE”) Financing

connection with the Business Combination, the Company completed a PIPE financing that generated gross proceeds of $8.0 million.

financing closed concurrently with the Business Combination, and the Company issued warrants to investors as part of the transaction.

2025, the Company’s revenue mix shifted, with a decline in product sales and the introduction of a revenue-sharing arrangement

with its related party, Kami Vision Inc..

Under this arrangement, the Company is entitled to a percentage of revenue generated from intelligent

information services.

This revenue stream continued during the three months ended March 31, 2026.

Company intends to continue generating revenue from its existing product lines while advancing its strategy to develop and deploy autonomous

robotic systems and intelligent security solutions.

Management expects that continued execution of this strategy may improve margins

and support long-term growth, although the timing and extent of such improvements remain subject to market conditions and execution risks.

December 2025, the Company completed its business combination with AlphaVest Acquisition Corp., pursuant to which AMC Corporation became

a wholly owned subsidiary of AMC Robotics Corporation.

The transaction significantly strengthened the Company’s capital structure

and provided access to the public capital markets.

Investment in Public Equity Financing

with the Business Combination, the Company completed a private investment in public equity (“PIPE”) financing that generated

gross proceeds of approximately $8.0 million.

The financing enhanced the Company’s liquidity and financial flexibility to support

working capital requirements, strategic initiatives, and future growth opportunities.

the second quarter of 2026, the Company invested an aggregate of $1.0 million in Etronium AI Inc .

through two Simple Agreements

for Future Equity (“SAFEs”).

The investment reflects management’s strategy of pursuing opportunities in artificial

intelligence technologies that may complement the Company’s long-term robotics and intelligent security solutions.

The investment

is accounted for as a long-term investment under the applicable provisions of U.S.

Company’s revenue mix has continued to evolve from traditional product sales toward higher-margin recurring revenue generated through

cloud-based intelligent information services, artificial intelligence service offerings, and revenue-sharing arrangements with strategic

partners, including Kami Vision Inc.

Management believes this transition reduces working capital requirements associated with inventory-intensive

product sales while supporting improved gross margins and more predictable recurring revenue.

the six months ended June 30, 2026, the Company continued to generate a significant portion of its revenue from cloud-service revenue

sharing, AI service sharing, and intelligent information service arrangements with Kami.

The Company also continued to generate product

revenue through sales to related and unrelated customers.

remains focused on expanding the Company’s intelligent security and robotics business while continuing to improve operating efficiency

and profitability.

Key strategic priorities include:

recurring service-based revenue and artificial intelligence solutions;

● strengthening

strategic relationships with technology partners;

● maintaining

disciplined inventory and working capital management;

selective investments that complement the Company’s long-term growth strategy;

additional financing and strategic opportunities that enhance shareholder value.

The Company may evaluate financing alternatives from time to time to support its working capital requirements, strategic

investments, and long-term growth objectives.

There can be no assurance that additional financing will be available on acceptable terms

management believes the Company is well positioned to execute its long-term strategy, future operating results will continue to depend

on customer demand, technological innovation, competitive market conditions, the successful execution of strategic initiatives, and general

economic conditions.

Summary of Financial Performance

Three months ended March 31,

Three months ended June 30,

Total Revenue

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Net Income (Loss)

Company’s financial performance for the three months ended March 31, 2026 reflects a shift in operating focus toward profitability,

cost efficiency, and higher-margin revenue streams.

revenue decreased by $607,909, or 34%, to $1,184,616 for the three months ended March 31, 2026, compared to $1,792,525 for the same period

The decline was primarily attributable to a reduction in lower-margin product sales and decreased e-commerce volume.

Correspondingly,

cost of revenue decreased by $1,140,235, or 87%, to $163,960, reflecting improved cost discipline, reduced inventory-related inefficiencies,

and a shift in revenue mix.

a result, gross profit increased by $532,326, or 109%, to $1,020,656, compared to $488,330 in the prior-year period.

Gross margin expanded

significantly from approximately 27% for the three months ended March 31, 2025 to approximately 86% for the three months ended March

This improvement was primarily driven by reduced inventory impairment, improved procurement and cost controls, and a higher

contribution from revenue-sharing and service-based revenue streams.

results improved from a loss of $747,753 for the three months ended March 31, 2025 to operating loss of $128,539 for the three months

ended March 31, 2026, representing an improvement of approximately $876,292.

This improvement was primarily attributable to higher gross

profitability and significantly reduced discretionary spending, particularly in sales and marketing expenses, while general and administrative

expenses remained relatively consistent between periods.

For the three months ended March 31, 2026, the Company reported net income

of $145,601, compared to a net loss of $77,177 for the three months ended March 31, 2025, representing an improvement of approximately

The improvement in net results reflects enhanced cost efficiency and improved gross margins, partially offset by changes in

other income and expense items.

remained strong, with cash and cash equivalents of $6,632,619 as of March 31, 2026, compared to $7,004,601 as of December 31, 2025, a

decrease of $371,982.

The decrease was primarily attributable to operating cash outflows during the period, partially offset by proceeds

from warrant exercises.

to March 31, 2025, cash and cash equivalents increased $6.4 million, reflecting proceeds received in connection with the Business Combination

and related financing activities completed in December 2025.

The Company’s strengthened liquidity position has enhanced its ability

to support working capital needs and execute its operational strategy.

the three months ended March 31, 2026, the Company continued to focus on improving profitability, enhancing cost efficiency, and maintaining

a disciplined approach to managing its balance sheet.

Revision of Previously Issued Financial Statements

During the preparation of the Company’s unaudited

condensed consolidated financial statements for the quarter ended March 31, 2026, management identified certain immaterial prior period

errors primarily related to omitted accruals for professional service fees in the Company’s previously issued consolidated financial

statements for the year ended December 31, 2025.

Management concluded that the errors were not material to the previously issued annual

financial statements for the year ended December 31, 2025 and, therefore, restatement of the previously issued financial statements was

not required.

However, management further concluded that recording the correction entirely within the quarter ended March 31, 2026 would

materially misstate the Company’s results for the interim period.

Accordingly, the Company revised the comparative balance sheet

as of December 31, 2025 included in the unaudited condensed financial statements to correct such immaterial prior period errors.

Six months ended June 30,

Total Revenue

$ (1,068,007 )

Cost of Revenue

Operating loss

Company’s financial performance during the three and six months ended June 30, 2026 reflected a continued shift toward higher-margin

revenue streams and improved operating efficiency.

Although total revenues declined compared with the corresponding periods in 2025,

gross profit increased significantly as a result of a more favorable revenue mix and substantially lower product-related costs.

the three months ended June 30, 2026, total revenues decreased by $460,098, or 33%, to $937,177, compared with $1,397,275 for the corresponding

period in 2025.

The decrease was primarily attributable to lower product revenue, partially offset by an increase in revenue share and

other service-based revenue included within revenue share.

of revenues decreased by $944,124, or 83%, to $186,570, compared with $1,130,694 for the corresponding period in 2025.

The decrease primarily

reflected lower product costs, e-commerce platform expenses, delivery and freight costs, and inventory impairment losses associated with

the reduction in product sales.

a result, gross profit increased by $484,026, or 182%, to $750,607, compared with $266,581 for the prior-year period.

Gross margin increased

to approximately 80% for the three months ended June 30, 2026, from approximately 19% for the corresponding period in 2025.

The improvement

was primarily attributable to a greater contribution from higher-margin revenue-sharing and service-based activities and lower product-related

Company reported a loss from operations of $156,500 for the three months ended June 30, 2026, compared with a loss from operations of

$735,036 for the corresponding period in 2025, representing an improvement of $578,536.

The improvement was primarily attributable to

increased gross profit and lower sales and marketing expenses, partially offset by higher general and administrative expenses.

Company reported a net loss of $175,730 for the three months ended June 30, 2026, compared with a net loss of $228,913 for the corresponding

period in 2025, representing an improvement of $53,183.

The current-year period included an income tax benefit of approximately $1,655,

compared with income tax expense of approximately $1,751 in the prior-year period.

The improvement in operating results was partially

offset by total other expense, net, of $20,885 during the current-year quarter, compared with total other income, net, of $507,874 during

the prior-year quarter.

The prior-year quarter included $533,688 of other income from a related party.

the six months ended June 30, 2026, total revenues decreased by $1,068,007, or 33%, to $2,121,793, compared with $3,189,800 for the corresponding

period in 2025.

The decrease was primarily attributable to lower product revenue, partially offset by increased revenue share and service-based

of revenues decreased by $2,084,358, or 86%, to $350,530, compared with $2,434,888 for the corresponding period in 2025.

Consequently,

gross profit increased by $1,016,351, or 135%, to $1,771,263, compared with $754,912 in the prior-year period.

Gross margin increased

to approximately 83% for the six months ended June 30, 2026, from approximately 24% for the corresponding period in 2025.

Company reported a loss from operations of $27,961 for the six months ended June 30, 2026, compared with a loss from operations of $1,482,788

for the corresponding period in 2025, representing an improvement of $1,454,827.

The improvement primarily reflected increased gross

profit and significantly lower sales and marketing expenses, partially offset by higher general and administrative and research and development

Company reported a net loss of $30,129 for the six months ended June 30, 2026, compared with a net loss of $306,090 for the corresponding

period in 2025, representing an improvement of $275,961.

Total other expense, net, was $1,724 for the first six months of 2026, compared

with total other income, net, of $1,182,772 for the corresponding period in 2025.

The prior-year period included $1,217,586 of other

income from a related party.

The Company recorded income tax expense of approximately $444 and $6,074 for the six months ended June 30,

2026 and 2025, respectively.

the second quarter of 2026, the Company invested an aggregate of $1.0 million in Etronium AI Inc.

through two Simple Agreements for Future

The investment supports the Company’s long-term strategy of pursuing artificial intelligence technologies that may complement

its robotics and intelligent security solutions.

the results for the first six months of 2026 reflected significantly improved gross margins, reduced sales and marketing expenditures,

and a substantial reduction in operating loss, despite lower total revenues.

of Previously Issued Financial Statements

the preparation of the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2026,

management identified certain immaterial errors in the Company’s previously issued consolidated financial statements as of and

for the year ended December 31, 2025.

The errors primarily related to the omission of accrued professional service fees.

evaluated the errors in accordance with applicable accounting guidance and concluded that they were not material, individually or in

the aggregate, to the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2025.

Accordingly, an amendment or restatement of those financial statements was not required.

also concluded that correcting the errors entirely in the three months ended March 31, 2026 would have materially misstated the Company’s

results of operations for that interim period.

Therefore, the Company revised the December 31, 2025 comparative balance sheet included

in the unaudited condensed consolidated financial statements to reflect the correction of the immaterial prior-period errors.

revisions increased accrued expenses and other current liabilities and accumulated deficit by approximately $109,000 as of December 31,

The revisions had no effect on the Company’s cash flows for the year ended December 31, 2025.

of Operations

Company’s results of operations for the three months ended March 31, 2026 were characterized by declining revenue but significantly

improved profitability, driven by changes in revenue composition, cost structure, and operational discipline.

Company’s results of operations for the three and six months ended June 30, 2026 reflected continued progress in its transition

toward a higher-margin, more capital-efficient business model.

Although total revenues declined compared with the corresponding periods

in 2025, the Company achieved significant improvements in gross profit and operating results through changes in revenue composition,

disciplined cost management, and reduced product-related expenses.

most significant drivers of the year-over-year changes include:

shift away from inventory-intensive product sales toward higher-margin revenue-sharing arrangements

substantial reduction in inventory impairment and excess stock

cost alignment with revenue levels, particularly in logistics and marketing

reliance on related-party transactions as a key component of both revenue and profitability

changes reflect a broader strategic repositioning of the Company toward a more sustainable and capital-efficient operating model.

Three months ended March 31,

continued shift away from traditional inventory-intensive product sales toward higher-margin revenue-sharing arrangements;

growth in recurring revenue generated through revenue-sharing and related-party service arrangements;

substantial reduction in product costs, e-commerce platform expenses, freight costs, and inventory impairment losses resulting from

lower inventory-related activities;

Significantly

lower sales and marketing expenditures while maintaining disciplined operating cost management;

strategic collaboration with related parties, which remained an important source of revenue during the periods presented.

believes these changes reflect its long-term strategy of improving profitability, reducing working capital requirements, and expanding

recurring revenue streams.

Three months ended June 30,

Revenue Component

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Total Revenue

revenue for the three months ended March 31, 2026 was $1,184,616, a decrease of $607,909, or 34%, compared to $1,792,525 for the same

period in 2025.

The decline was primarily attributable to a significant reduction in third-party product revenue, partially offset by

increases in revenue derived from related party arrangements.

revenue decreased by $1,119,785, or 92%, to $102,018 for the three months ended March 31, 2026, compared to $1,221,803 in the prior-year

The decrease reflects reduced sales volume and a strategic shift away from lower-margin product lines, resulting in a contraction

of traditional inventory-based sales activities.

revenue from related parties increased by $136,414 to $136,548 for the three months ended March 31, 2026, compared to $134 in the prior-year

While the increase is significant on a percentage basis, related party product revenue remains a relatively small portion of

Six months ended June 30,

Revenue Component

Product revenue

Product revenue – related party

Revenue share – related party

Total Revenue

The increase reflects expanded transactions with affiliated entities as part of the Company’s evolving commercial

relationships.

share from related parties increased by $375,462, or 66%, to $946,050 for the three months ended March 31, 2026, compared to $570,588

in the prior-year period.

This category represents the Company’s participation in revenue-sharing arrangements, including cloud-based

services and intelligent information services introduced in 2025.

Revenue share has become the largest contributor to total revenue in

the current period, reflecting continued growth in these collaborative arrangements.

overall change in revenue composition reflects a shift from traditional product sales toward revenue-sharing and service-based models.

These arrangements generally involve lower direct costs and reduced working capital requirements compared to inventory-based sales.

believes this transition supports a more scalable and potentially higher-margin revenue structure over time, although total revenue declined

in the current period due to the reduction in product sales.

revenues for the three months ended June 30, 2026 were $937,177, a decrease of $460,098, or 33%, compared with $1,397,275 for the same

period in 2025.

Total revenues for the six months ended June 30, 2026 were $2,121,793, a decrease of $1,068,007, or 33%, compared with

$3,189,800 for the corresponding period in 2025.

decrease in revenues during both periods was primarily attributable to lower third-party product sales as the Company continued to reduce

its emphasis on inventory-intensive product distribution.

This decline was partially offset by continued growth in revenue generated

through revenue-sharing arrangements with related parties.

revenue decreased by $591,366, or 79%, during the second quarter and by $1,711,151, or 87%, during the first six months of 2026 compared

with the corresponding periods in 2025.

The decrease primarily reflected lower sales volumes as management continued to shift its business

strategy away from lower-margin product sales toward higher-margin service-based activities.

revenue from related parties totaled $5,143 for the three months ended June 30, 2026, compared with $146,655 for the corresponding period

For the six months ended June 30, 2026, product revenue from related parties totaled $141,691, compared with $ 146,789

for the corresponding period in 2025.

share from related parties increased by $272,780, or 54%, during the second quarter and by $648,242, or 60%, during the first six months

Revenue-sharing arrangements represented approximately 83% and 81% of total revenues during the three- and six-month periods

ended June 30, 2026, respectively, compared with approximately 36% and 34%, respectively, during the corresponding periods in 2025.

Company’s revenue mix continued to evolve during 2026, with revenue-sharing arrangements becoming the primary source of revenues.

Management believes these arrangements generally require substantially less working capital, involve lower direct costs than traditional

product sales, and support higher gross margins.

The Company expects to continue pursuing opportunities that expand recurring and service-based

revenue while maintaining a disciplined approach to inventory investment.

of Revenue and Gross Profit

Three months ended March 31,

Three months ended June 30,

Cost of Revenue

of revenue for the three months ended March 31, 2026 was $163,960, compared to $1,304,195 in the prior-year period, a decrease of $1,140,235.

Gross profit increased to $1,020,656 from $488,330, resulting in gross margin improving to 86% from 27%.

decrease in cost of revenue was primarily driven by significantly lower product-related costs, including reduced inventory-related charges

and lower sales volume.

In addition, logistics, fulfillment, and platform costs declined in line with reduced inventory-based sales activity.

improvement in gross margin also reflects a shift in revenue mix toward revenue-sharing and service-based arrangements, which generally

carry lower direct costs compared to product sales.

Overall, the results indicate a more favorable cost structure in the current period.

Three months ended March 31,

$ (1,130,694 )

Six months ended June 30,

Cost of Revenue

$ (2,434,888 )

of revenues for the three months ended June 30, 2026 was $186,570, compared with $1,130,694 for the corresponding period in 2025, representing

a decrease of $944,124, or 83%.

Cost of revenues for the six months ended June 30, 2026 was $350,530, compared with $2,434,888 for the

corresponding period in 2025, representing a decrease of $2,084,358, or 86%.

decrease in cost of revenues during both periods was primarily attributable to lower product-related costs resulting from reduced product

sales volumes, together with significant reductions in e-commerce platform expenses, product procurement costs, delivery and freight

costs, and inventory impairment losses.

These reductions reflect management’s continued efforts to reduce inventory-intensive operations

and improve operating efficiency.

profit increased to $750,607 for the three months ended June 30, 2026 from $266,581 for the corresponding period in 2025, representing

an increase of $484,026, or 182%.

For the six months ended June 30, 2026, gross profit increased to $1,771,263 from $754,912 for the

corresponding period in 2025, representing an increase of $1,016,351, or 135%.

margin improved to approximately 80% and 83% for the three- and six-month periods ended June 30, 2026, respectively, compared with approximately

19% and 24%, respectively, for the corresponding periods in 2025.

The increase primarily reflected a significant change in revenue mix.

Revenue-sharing and service-based arrangements, which generally have limited direct costs and are recognized on a net basis, represented

approximately 83% and 81% of total revenue for the three and six months ended June 30, 2026, respectively.

By comparison, product revenue

declined substantially and represented a smaller portion of total revenue.

Accordingly, the improvement in consolidated gross margin

was primarily attributable to the increased proportion of revenue generated from higher-margin revenue-sharing and service-based activities,

together with lower product-related costs and inventory impairment charges.

believes the continued shift toward service-based and recurring revenue, together with disciplined inventory and cost management, has

strengthened the Company’s gross profitability and positioned the business for more capital-efficient growth.

Three months ended June 30,

Expense Category

3 unchanged sentences

Total Operating Expenses

operating expenses for the period were $892,117, compared to $1,236,083 in the prior-year period, representing a decrease of $343,966,

The overall reduction was primarily driven by a significant decrease in sales and marketing expenses.

and administrative expenses were $854,786, compared to $817,412 in the prior-year period, an increase of $37,374, or 5%.

was primarily attributable to higher professional fees and other administrative costs associated with operating as a public company following

the Business Combination.

and marketing expenses decreased to $14,332 from $404,112, a decline of $389,780, or 96%, primarily due to reduced promotional activities.

and development expenses increased to $22,999 from $14,559, an increase of $8,400, or 58%, reflecting continued investment in product

and technology development.

the decrease in total operating expenses was mainly attributable to lower sales and marketing spending, partially offset by increased

general and administrative expenses and continued investment in research and development.

Six months ended June 30,

Expense Category

General & Administrative

Sales & Marketing

Research & Development

Total Operating Expenses

operating expenses for the three months ended June 30, 2026 were $907,107, compared with $1,001,617 for the corresponding period in 2025,

representing a decrease of $94,510 or 9%.

For the six months ended June 30, 2026, total operating expenses were $1,799,224, compared

with $2,237,700 for the corresponding period in 2025, representing a decrease of $438,476, or 20%.

The overall decrease during both periods

was primarily attributable to significantly lower sales and marketing expenditures, partially offset by higher general and administrative

and Administrative Expenses

and administrative expenses were $884,349 for the three months ended June 30, 2026, compared with $784,236 for the corresponding period

in 2025, representing an increase of $100,113, or 13%.

For the six months ended June 30, 2026, general and administrative expenses were

$1,739,135, compared with $1,601,648 for the corresponding period in 2025, representing an increase of $137,487, or 9%.

The increases

primarily reflected higher professional fees, public company compliance costs, legal and accounting fees, and other administrative expenses

incurred following the Company’s Business Combination and continued operation as a publicly traded company.

and Marketing Expenses

and marketing expenses decreased to $19,758 for the three months ended June 30, 2026 from $208,107 for the corresponding period in 2025,

representing a decrease of $188,349, or 91%.

For the six months ended June 30, 2026, sales and marketing expenses decreased to $34,090

from $612,219, representing a decrease of $578,129, or 94%.

The decreases primarily reflected substantially reduced advertising, promotional,

and customer acquisition activities as the Company continued to emphasize higher-margin revenue-sharing arrangements rather than expanding

traditional product sales.

and Development Expenses

and development expenses were $3,000 for the three months ended June 30, 2026, compared with $9,274 for the corresponding period in 2025,

representing a decrease of $6,274, or 68%.

For the six months ended June 30, 2026, research and development expenses were $25,999, compared

with $23,833 for the corresponding period in 2025, representing an increase of $2,166, or 9%.

The year-to-date increase primarily reflected

continued investment in product development and technology initiatives, while quarterly expenditures may fluctuate depending on the timing

of development activities.

the Company’s operating expense profile reflects management’s continued emphasis on cost discipline.

The substantial reduction

in sales and marketing expenditures, together with disciplined management of operating costs, partially offset the increase in public

company compliance and administrative expenses and contributed to the Company’s improved operating results during the three- and

six-month periods ended June 30, 2026.

Income (Expense)

Three months ended March 31,

Three months ended June 30,

Other income – related party

1 unchanged sentence

Interest income

Interest expense – related party

Interest expense

Total Other Income (loss), Net

other income, net was $19,161 for the three months ended March 31, 2026, compared to $674,899 in the prior-year period, a decrease of

The decrease was primarily due to the absence of other income from related parties in the current period, compared to $683,898

recognized in the prior-year period.

income increased to $28,651 from $318, reflecting higher cash balances during the period.

Other income (expense), net decreased by $16,675,

and no related party interest expense was recognized in the current period compared to $16,502 in the prior-year period.

Six months ended June 30,

Other income – related party

$ (1,217,586 )

Other income (expense), net

Interest income

Interest expense

Total Other Income (loss), Net

$ (1,184,496 )

other loss, net was $20,885 for the three months ended June 30, 2026, compared with total other income, net of $507,874 for the corresponding

period in 2025.

For the six months ended June 30, 2026, total other loss, net was $1,724, compared with total other income, net of $1,182,772

for the corresponding period in 2025.

most significant factor affecting the year-over-year comparison was the absence of other income from related parties during the 2026

During the three and six months ended June 30, 2025, the Company recognized $533,688 and $1,217,586, respectively, of other

income from related parties, while no comparable income was recognized during the corresponding periods in 2026.

As a result, total other

income declined significantly despite improvements in other components.

income (expense), net decreased by $36,064 during the three months ended June 30, 2026 and by $52,739 during the six months ended June

30, 2026, compared with the corresponding periods in 2025, primarily reflecting higher non-operating expenses.

income increased to $33,042 for the three months ended June 30, 2026 from $131 for the corresponding period in 2025, and increased to

$61,693 for the six months ended June 30, 2026 from $448 for the corresponding period in 2025.

The increases primarily reflected higher

average cash balances following the Company’s Business Combination and PIPE financing completed in December 2025.

interest expense was recognized during the three or six months ended June 30, 2026, compared with $8,082 and $24,584, respectively, during

the corresponding periods in 2025, reflecting the repayment or settlement of interest-bearing obligations.

and Capital Resources

of March 31, 2026, the Company had cash and cash equivalents of approximately $6.6 million, compared to approximately $7.0 million as

of December 31, 2025, representing a decrease of approximately $0.4 million.

The decrease was primarily attributable to operating cash

outflows during the period, partially offset by proceeds from warrant exercises.

to March 31, 2025, cash and cash equivalents increased significantly, primarily reflecting proceeds received in connection with the Business

Combination and related financing activities completed in December 2025.

Company’s liquidity position continues to be influenced by several key factors:

Operating performance, including gross margin and expense management

● Working capital dynamics, particularly receivables and payables, including those with related parties

● Access to external financing, including equity financing and capital markets transactions

● Inventory management, which affects cash utilized in operations

believes that the Company’s current cash position, together with expected operating cash flows, will be sufficient to meet its

working capital requirements and capital expenditure needs for at least the next twelve months from the issuance date of these financial

However, the Company’s future liquidity will depend on its ability to sustain profitability, manage working capital

efficiently, and maintain access to capital markets if needed.

of June 30, 2026, the Company had cash and cash equivalents of approximately $4.5 million, compared with approximately $7.0 million as

of December 31, 2025, representing a decrease of approximately $2.5 million during the first six months of 2026.

The decrease primarily

reflected approximately $1.5 million of net cash used in operating activities and the Company’s $1.0 million investment in Etronium

AI Inc., partially offset by approximately $20,000 of proceeds from the exercise of warrants.

to June 30, 2025, the Company’s cash and cash equivalents increased significantly, primarily reflecting the proceeds received from

the Business Combination and the related PIPE financing completed in December 2025, which substantially strengthened the Company’s

liquidity position.

Company’s liquidity continues to be influenced by several key factors, including:

performance, particularly revenue growth, gross margins, and expense management;

capital management, including the collection of trade receivables and the timing of payments

to vendors and related parties;

management and the Company’s continued transition toward a less inventory-intensive

business model;

investments that support the Company’s long-term growth objectives;

to external financing through equity or debt capital markets, if additional capital is required.

the second quarter of 2026, the Company invested an aggregate of $1.0 million in Etronium AI Inc.

through two SAFEs.

Management believes

this strategic investment complements the Company’s long-term strategy of expanding its artificial intelligence and robotics capabilities

while maintaining sufficient liquidity to support its ongoing operations.

believes that the Company’s existing cash and cash equivalents, together with anticipated cash flows from operations, will be sufficient

to meet its expected working capital requirements, planned operating activities, and capital expenditure needs for at least the next

twelve months from the date these unaudited condensed consolidated financial statements are issued.

However, the Company’s future

liquidity will continue to depend on its ability to generate positive operating cash flows, effectively manage working capital, successfully

execute its strategic initiatives, and, if necessary, obtain additional financing on acceptable terms.

There can be no assurance that

any financing will be completed on acceptable terms or at all.

Flow Analysis

Three months ended March 31,

Six months ended June 30,

Net cash (used in)/provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

cash used in operating activities was $391,580 for the three months ended March 31, 2026, compared to net cash provided by operating

activities of $203,985 in the prior-year period, representing a decrease of $595,565.

The use of cash in the current period was primarily

driven by changes in working capital, including the timing of collections and payments.

cash provided by investing activities was nil for the three months ended March 31, 2026, compared to net cash used of $305,624 in the

prior-year period.

The prior-year activity primarily related to transactions involving financial assets, while there were no significant

investing activities in the current period.

cash provided by financing activities was $20,085 for the three months ended March 31, 2026, compared to no financing activity in the

prior-year period.

The current period activity primarily reflects proceeds from financing-related transactions.

Company’s capital resources consist primarily of cash on hand and, to a lesser extent, cash generated from operations.

the Business Combination completed in December 2025, the Company significantly improved its liquidity and capital structure through the

receipt of trust proceeds and PIPE financing.

The Company may continue to rely on related-party transactions and financing arrangements,

as well as external financing sources, to support its working capital needs and growth initiatives as necessary.

Company’s capital requirements are driven primarily by working capital needs, operating expenses (including public company costs),

and potential investments in product development and service offerings.

The Company currently does not maintain a revolving credit facility

or other committed borrowing arrangements.

expects that the Company’s current cash position and anticipated operating cash flows will be sufficient to meet its short-term

liquidity needs.

However, the Company may seek additional financing to support future growth initiatives or respond to changing market

cash used in operating activities was $1.5 million for the six months ended June 30, 2026, compared to net cash provided by operating

activities of $675,160 for the corresponding period in 2025, representing a decrease of approximately $2.2 million.

use of cash during the 2026 period was primarily attributable to changes in working capital.

Accounts receivable—related party

increased by approximately $1.2 million, primarily reflecting amounts due under the Company’s revenue-sharing arrangements and

product sales to related parties.

Advances to suppliers—related party increased by approximately $1.1 million, primarily reflecting

advance payments for inventory and other anticipated operating requirements.

These uses of cash were partially offset by an approximately

$259,000 decrease in other receivables—related party, an approximately $248,000 decrease in inventories, and an approximately $116,000

decrease in prepaid expenses.

cash used in investing activities was $1.0 million for the six months ended June 30, 2026, compared to $529,432 during the corresponding

period in 2025.

cash used in investing activities during 2026 consisted primarily of the Company’s $1.0 million strategic investment in Etronium

through two SAFEs.

During the corresponding period in 2025, investing activities primarily consisted of the issuance of a promissory

note, partially offset by collections on a note receivable from a stockholder.

cash provided by financing activities was $20,085 for the six months ended June 30, 2026, compared to net cash used in financing activities

of $321,982 during the corresponding period in 2025.

activities during 2026 primarily reflected proceeds received from the exercise of warrants.

Financing activities during the corresponding

period in 2025 primarily reflected a $500,000 capital contribution from a shareholder, partially offset by the repayment of a short-term

loan of $821,982.

a result of the foregoing activities, cash and cash equivalents decreased by $2.5 million during the first six months of 2026, from $7.0

million at December 31, 2025 to $4.5 million at June 30, 2026.

The decrease primarily reflected cash used in operating activities and

the $1.0 million strategic investment, partially offset by warrant exercise proceeds.

Company’s principal sources of capital are its cash and cash equivalents, cash generated from operations, and, when appropriate,

access to equity and other financing sources.

Following the Business Combination completed in December 2025, the Company significantly

strengthened its capital structure through the receipt of trust proceeds and PIPE financing.

During the six months ended June 30, 2026,

the Company also received proceeds of approximately $20 thousand from the exercise of warrants.

Company’s capital requirements are primarily driven by working capital needs, operating expenses associated with its business and

public company reporting obligations, strategic investments, and the continued development of its products and technology offerings.

During the second quarter of 2026, the Company invested $1.0 million in Etronium AI Inc.

through two SAFEs, which management believes

support the Company’s long-term artificial intelligence and robotics strategy.

Company does not maintain a revolving credit facility or other committed borrowing arrangements.

Although the Company may continue to

evaluate additional financing opportunities to support future growth initiatives, management believes that its existing cash resources

and anticipated operating cash flows will be sufficient to fund its operating requirements, capital expenditures, and other contractual

obligations for at least the next twelve months from the date these unaudited condensed consolidated financial statements are issued.

However, the Company’s future capital requirements will depend on its operating performance, working capital needs, strategic initiatives,

and ability to obtain additional financing on acceptable terms.

There can be no assurance that any financing will be completed on acceptable

terms or at all.

Obligations and Commitments

Company’s contractual obligations consist primarily of lease obligations, and other operating liabilities, as disclosed in Note

9 - Lease and Note 14 – Commitments and Contingencies.

Company’s contractual obligations consist primarily of operating lease obligations and other operating liabilities, as disclosed

in Note 9 – Leases and Note 15 – Commitments and Contingencies to the unaudited condensed consolidated financial statements.

Obligations (ASC 842)

Company has operating lease arrangements for office space and facilities.

As of March 31, 2026, lease liabilities totaled $96,051, representing

the present value of future lease payments.

The Company’s undiscounted future minimum lease payments total approximately $100,060.

These obligations are not considered a significant liquidity burden.

Company enters into purchase commitments with suppliers in the normal course of business.

of June 30, 2026, the Company had operating lease liabilities of approximately $81,800, consisting of $58,900 classified as current and

$22,900 classified as non-current.

The Company had approximately $84,700 of undiscounted future minimum lease payments remaining under

its operating lease agreements.

Management believes these obligations do not represent a significant liquidity burden.

Company enters into purchase commitments with suppliers in the ordinary course of business.

These commitments are generally short-term

in nature and aligned with expected sales demand.

The Company continues to manage inventory levels conservatively, limiting exposure

to long-term procurement commitments.

in nature and are intended to support anticipated customer demand.

Management continues to monitor inventory levels and procurement activities

to efficiently manage working capital and minimize exposure to long-term purchase commitments.

Party Obligations

Historically,

the Company had obligations to related parties, which were reduced during 2025 through settlement using proceeds from financing activities

(see Note 6).

As of March 31, 2026, the Company continues to have transactions and balances with related parties in the ordinary course

however, outstanding related-party obligations are not material to the Company’s consolidated financial statements.

Company continues to conduct transactions with related parties in the ordinary course of business.

As of June 30, 2026, accounts receivable—related

party were approximately $3.3 million, compared with approximately $2.1 million as of December 31, 2025.

Advances to suppliers—related

party were approximately $1.1 million as of June 30, 2026, compared with approximately $21,000 as of December 31, 2025.

Other receivables—related

party decreased to approximately $217,000 from approximately $476,000 during the same period.

These balances affected the Company’s

operating cash flows during the first six months of 2026.

Management continues to monitor the collection, settlement and realization

of these balances.

Additional information regarding related-party balances and transactions is included in Note 6 - Related Party Balances

and Transactions.

Commitments and Contingencies

Company may be subject to contingencies, including legal or contractual matters, in the ordinary course of business.

Management does

not believe that any such matters will have a material adverse effect on the Company’s financial position as of March 31, 2026.

Company may be involved in legal proceedings, claims, and other contingencies arising in the ordinary course of business.

does not believe that any currently pending matters, individually or in the aggregate, will have a material adverse effect on the Company’s

financial position, results of operations, or cash flows.

Liquidity Assessment

of March 31, 2026, the Company’s liquidity position remains strong following the financing activities completed in December 2025.

While operating cash flows for the three months ended March 31, 2026 were negative, such usage was primarily driven by working capital

timing and does not necessarily reflect a deterioration in underlying operating performance.

Company’s current liquidity, combined with improved operating performance and reduced reliance on related-party financing, provides

a solid financial foundation.

However, future liquidity will depend on the Company’s ability to sustain operating performance,

effectively manage working capital, and access external financing if needed.

believes the Company is well-positioned to meet its near-term obligations and support its ongoing operations and strategic initiatives.

of June 30, 2026, the Company had $4.5 million of cash and cash equivalents and believes its liquidity position remains sufficient to

support its ongoing operations.

During the first six months of 2026, cash decreased primarily as a result of the Company’s $1.0

million strategic investment in Etronium AI Inc.

and changes in working capital, partially offset by proceeds received from the exercise

believes that the Company’s current cash resources, together with anticipated cash flows from operations, provide a solid financial

foundation to meet its near-term operating requirements and execute its strategic initiatives.

Nevertheless, the Company will continue

to monitor its liquidity and capital requirements and may pursue additional financing opportunities as market conditions and business

needs warrant.

Accounting Policies and Estimates

preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires management

to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as related

These estimates are based on historical experience, current conditions, and various other assumptions that management believes

are reasonable under the circumstances.

of the inherent uncertainty involved in making these estimates, actual results could differ materially from those estimates.

The Company’s

most critical accounting policies are those that involve significant judgment and have a material impact on the financial statements.

There have been no material changes to the Company’s critical accounting policies and estimates from those disclosed in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2025.

generally accepted accounting

principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses,

and related disclosures.

These estimates are based on historical experience, current conditions, and various other assumptions that management

believes are reasonable under the circumstances.

of the inherent uncertainty involved in making estimates, actual results could differ materially from those estimates.

Management continually

evaluates its accounting estimates and assumptions as facts and circumstances change.

have been no material changes to the Company’s critical accounting policies or significant estimates during the six months ended

June 30, 2026 from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Recognition (ASC 606)

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers , when control of goods or services

is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled.

significant area of judgment involves determining whether the Company acts as a principal or an agent in its revenue arrangements, particularly

in transactions involving:

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers when control of promised goods or

services is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those

goods or services.

Company generates revenue primarily from product sales, revenue-sharing arrangements, and related services.

A significant area of judgment

involves determining whether the Company acts as a principal or an agent in certain revenue arrangements, particularly those involving:

platform sales

Related-party

revenue-sharing arrangements (see Note 6 – Related Party Transactions)

assessment requires evaluation of factors such as control over goods or services, inventory risk, pricing discretion, and responsibility

for fulfillment.

the Company is determined to be the principal, revenue is recognized on a gross basis;

if the Company is an agent, revenue is recognized

on a net basis.

Changes in this assessment could materially affect reported revenue and cost of revenue.

addition, revenue-sharing arrangements require judgment in identifying performance obligations and determining the appropriate allocation

of transaction price.

Variability in contract terms or interpretation could impact the timing and amount of revenue recognized.

Revenue-sharing

arrangements;

with related parties (see Note 6 – Related Party Balances and Transactions).

assessment requires management to evaluate a number of factors, including control over the specified goods or services before transfer

to the customer, inventory risk, discretion in establishing pricing, and primary responsibility for fulfilling contractual obligations.

the Company concludes that it is the principal in an arrangement, revenue is recognized on a gross basis.

When the Company concludes

that it acts as an agent, revenue is recognized on a net basis.

Changes in these judgments could materially affect the amount of revenue

and cost of revenue reported in the Company’s condensed consolidated financial statements.

Revenue-sharing

arrangements also require significant judgment in identifying performance obligations, determining the transaction price, and assessing

the timing of revenue recognition.

Differences in contractual terms or changes in the underlying facts and circumstances could affect

the timing and amount of revenue recognized.

Valuation (ASC 330)

is stated at the lower of cost or net realizable value.

Cost is determined using standard costing methods, which approximate actual costs.

Company evaluates inventory for excess quantities, obsolescence, and slow-moving items.

This evaluation requires significant judgment

regarding forecasted demand, product lifecycle and technological obsolescence, and pricing trends and competitive conditions.

2025, the Company improved its inventory management practices, resulting in reduced inventory levels and lower impairment charges compared

to prior periods.

These practices continued during the three months ended March 31, 2026.

However, inventory valuation remains sensitive

to changes in demand patterns, product innovation cycles, and market conditions, which could result in additional write-downs in future

Cost is determined using the moving-average cost method, which approximates actual

evaluates inventory for excess quantities, obsolescence, slow-moving items, and expected future demand.

These assessments require significant

judgment regarding forecasted customer demand, product life cycles, technological developments, pricing trends, and competitive market

the six months ended June 30, 2026, the Company recorded inventory impairment charges of $49,929.

Nevertheless, inventory valuation continues

to be sensitive to changes in customer demand, product innovation cycles, and market conditions, which could result in additional write-downs

in future periods.

for Expected Credit Losses (ASC 326)

Company accounts for expected credit losses under ASC 326 using a loss-rate methodology based on historical credit loss experience, current

economic conditions, and forward-looking information.

significant portion of the Company’s accounts receivable is due from related parties (see Note 8), which introduces concentration

Management evaluates collectability on an ongoing basis, considering factors such as the financial condition of counterparties,

payment history, and contractual terms.

historical credit losses have been limited, changes in the financial condition of related parties or business relationships could result

in increased credit loss provisions in future periods.

Company provides warranties on certain products and recognizes a liability for estimated warranty costs at the time of sale.

liabilities are estimated based on historical claim rates, product failure trends, and estimated repair or replacement costs.

These estimates

require judgment and may be affected by changes in product design, manufacturing quality, or customer usage patterns.

Actual warranty

costs may differ from estimates, resulting in adjustments in future periods.

Company measures expected credit losses in accordance with ASC 326, Financial Instruments—Credit Losses , using a methodology

that considers historical loss experience, current economic conditions, and reasonable and supportable forecasts.

significant portion of the Company’s accounts receivable and other receivables relates to transactions with related parties (see

Note 6 – Related Party Balances and Transactions), resulting in concentrations of credit risk.

Management evaluates the collectability

of these balances on an ongoing basis by considering the financial condition of counterparties, historical payment experience, contractual

terms, and other relevant information.

the Company has experienced limited historical credit losses, deterioration in the financial condition of customers or related parties,

changes in business relationships, or adverse economic conditions could require the Company to record additional allowances for expected

credit losses in future periods.

Company provides limited warranties on certain products and records an estimated warranty liability at the time the related revenue is

liabilities are estimated based on historical claims experience, product failure trends, expected repair or replacement costs, and other

relevant factors.

These estimates require significant judgment and are subject to change as additional information becomes available.

Actual warranty costs may differ from management’s estimates due to changes in product design, manufacturing quality, customer

usage patterns, or other factors, and such differences are recognized in the period in which they become known.

the six months ended June 30, 2026, the Company continued to experience relatively low warranty claims, and management believes that

the recorded warranty liability appropriately reflects its estimated future warranty obligations.

However, actual warranty experience

could differ from current estimates, which may require adjustments to warranty expense and the related liability in future periods.

Interest Entity (VIE) Consolidation (ASC 810)

Company evaluates its involvement with variable interest entities in accordance with ASC 810.

A VIE is consolidated if the Company is

determined to be the primary beneficiary.

Company evaluates its involvement with VIEs in accordance with ASC 810, Consolidation.

A VIE is consolidated when the Company determines

that it is the primary beneficiary because it has both (i) the power to direct the activities that most significantly affect the VIE’s

economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant

Historically,

the Company consolidated certain VIEs that held e-commerce platform accounts.

In December 2025, the Company terminated the underlying

contractual arrangements and deconsolidated these entities (see Note 1).

As of March 31, 2026, the Company does not consolidate these

evaluation of VIE relationships requires judgment, particularly in assessing contractual arrangements and decision-making authority.

Changes in such arrangements or in the Company’s level of involvement could result in future consolidation or deconsolidation.

the Company consolidated certain VIEs that operated e-commerce platform accounts.

In December 2025, the Company terminated the contractual

arrangements that established its controlling financial interest in those entities and deconsolidated the VIEs.

As of June 30, 2026,

the Company no longer consolidates those entities, and management has concluded that no additional entities require consolidation under

evaluation of VIE relationships requires significant judgment, particularly in assessing contractual arrangements, decision-making authority,

and the Company’s economic interests in an entity.

Changes in contractual arrangements, ownership interests, or the Company’s

level of involvement could require a reassessment of consolidation conclusions in future reporting periods.

Party Transactions (ASC 850)

Company engages in transactions with related parties, including revenue-sharing arrangements and product sourcing (see Note 6).

for related-party transactions requires judgment in determining the appropriate revenue recognition treatment, classification, and presentation.

Because these transactions may not be conducted on an arm’s-length basis, there is an increased risk of misstatement if terms are

not properly evaluated.

Company monitors related-party balances and transactions on an ongoing basis to ensure appropriate recognition and disclosure.

Company engages in transactions with related parties in the ordinary course of business, including product sales, procurement activities,

revenue-sharing arrangements, and other operating transactions (see Note 6 – Related Party Balances and Transactions).

for related-party transactions requires management to exercise judgment in determining the appropriate recognition, measurement, classification,

and disclosure of such transactions.

Because these arrangements are not necessarily negotiated on terms equivalent to those that prevail

in arm’s-length transactions, management evaluates the underlying contractual terms and economic substance of each arrangement

to ensure appropriate accounting treatment under U.S.

Company monitors related-party transactions and outstanding balances on an ongoing basis and believes that all material related-party

transactions have been appropriately recognized and disclosed in the accompanying unaudited condensed consolidated financial statements.

Purchase Agreement

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of shares of its common stock.

2025, the Company funded prepayments under the arrangement and received partial settlements.

As of December 31, 2025 and March 31, 2026,

an FPA subscription receivable of $1,678,678 remained outstanding.

Company evaluated the FPA and determined that it is appropriately accounted for as an equity transaction.

Accordingly, the outstanding

balance is presented as a reduction to additional paid-in capital within stockholders’ equity.

were no material changes to the terms of the FPA during the three months ended March 31, 2026.

Refer to the Company’s Annual Report

on Form 10-K for the year ended December 31, 2025 for additional details regarding the FPA.

of June 30, 2026, the FPA subscription receivable remained $1,678,678, unchanged from December 31, 2025.

The Company continues to account

for the FPA as an equity transaction.

Accordingly, the outstanding subscription receivable is presented as a reduction of additional

paid-in capital within stockholders’ equity.

were no material changes to the terms or accounting treatment of the FPA during the six months ended June 30, 2026.

Taxes (ASC 740)

Company accounts for income taxes under ASC 740, Income Taxes , which requires recognition of deferred tax assets and liabilities

for temporary differences between financial reporting and tax bases.

evaluates the realizability of deferred tax assets, including net operating loss carryforwards, and establishes a valuation allowance

when it is more likely than not that such assets will not be realized.

assessment requires judgment regarding:

Company accounts for income taxes in accordance with ASC 740, Income Taxes , which requires the recognition of deferred tax assets

and liabilities for temporary differences between the financial reporting and tax bases of assets and liabilities.

evaluates the realizability of deferred tax assets, including net operating loss carryforwards, and records a valuation allowance when

it is more likely than not that some or all of the deferred tax assets will not be realized.

evaluation requires significant judgment regarding:

taxable income

1 unchanged sentence

planning strategies

in these assumptions could result in adjustments to valuation allowances and income tax expense.

in these assumptions could result in adjustments to deferred tax assets, valuation allowances, and income tax expense in future reporting

of Estimates and Judgments

Company’s financial results are particularly sensitive to changes in estimates related to:

recognition (principal vs.

recognition, including principal-versus-agent assessments;

valuation and impairment;

Collectability

of related-party receivables

of accounts receivable and related-party receivables;

consolidation conclusions;

change in any of these assumptions could materially affect reported revenue, gross profit, net income, and financial position.

change in principal vs.

agent conclusion could significantly alter reported revenue and cost of revenue

modest increase in inventory obsolescence assumptions could materially reduce gross margin

in collection of related-party receivables could increase credit loss provisions

continuously reviews these estimates and assumptions and adjusts them as necessary based on evolving business conditions.

recoverability of deferred tax assets.

in these assumptions could materially affect the Company’s reported revenue, gross profit, operating results, net income, financial

position, and cash flows.

For example, changes in principal-versus-agent conclusions could significantly affect reported revenue and

cost of revenue, while changes in assumptions regarding inventory obsolescence or the collectability of related-party receivables could

materially affect operating results.

continually evaluates these estimates and assumptions and updates them as facts and circumstances change.

Issued Accounting Pronouncements

a discussion of our new or recently adopted accounting pronouncements, see Note 2, Recent issued accounting pronouncements, to our consolidated

financial statements included elsewhere in this annual report.

does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect

on the consolidated financial statements and notes thereto included elsewhere in this annual report.

a discussion of recently adopted accounting standards and accounting standards issued but not yet adopted, see Note 2 – Recent

Accounting Pronouncements to the accompanying unaudited condensed consolidated financial statements.

does not expect that any accounting standards issued but not yet effective will have a material impact on the Company’s condensed

consolidated financial statements upon adoption.

Sheet Arrangements

of March 31, 2026, the Company does not have any material off-balance sheet arrangements as defined under Item 303 of Regulation S-K.

of June 30, 2026, the Company did not have any material off-balance sheet arrangements, as defined in Item 303(b)(1) of Regulation S-K.

Historically,

the Company utilized variable interest entities (“VIEs”) to conduct certain e-commerce operations.

These VIEs were consolidated

in prior periods;

however, following the termination of the underlying contractual arrangements in December 2025, the Company deconsolidated

these entities.

As a result, the Company does not have exposure to the assets, liabilities, or operations of these entities, other than

any residual contractual relationships, which are not material.

Company does not have any material guarantees, retained interests in transferred assets, special purpose entities, or other undisclosed

commitments that would be considered off-balance sheet arrangements.

believes that the absence of material off-balance sheet arrangements reduces the Company’s exposure to contingent liabilities and

supports transparency in its financial reporting.

the Company consolidated certain VIEs used in connection with its e-commerce operations.

Following the termination of the underlying

contractual arrangements in December 2025, the Company deconsolidated those entities.

As of June 30, 2026, the Company has no material

exposure to the assets, liabilities, or operations of those former VIEs other than ordinary-course contractual relationships, which management

does not consider material.

Company has no material guarantees, retained interests in transferred assets, unconsolidated special-purpose entities, or other off-balance

sheet arrangements that are reasonably likely to have a material effect on its financial condition, results of operations, or liquidity.

and Qualitative Disclosures About Market Risk

Company is exposed to certain market risks in the normal course of business, including foreign currency risk, interest rate risk, and

general economic risk.

Company is exposed to certain market risks in the ordinary course of business, including foreign currency risk, interest rate risk, concentration

risk, and general economic conditions.

Currency Risk

portion of the Company’s transactions are denominated in currencies other than the U.S.

dollar, particularly Renminbi (RMB).

a result, fluctuations in exchange rates may affect revenue, cost of revenue, and operating expenses when translated into U.S.

strengthening of the U.S.

dollar relative to foreign currencies may reduce reported revenue and margins, while a weakening of the U.S.

dollar may have the opposite effect.

The Company does not currently use derivative instruments to hedge foreign currency risk.

Company’s exposure to interest rate risk is limited due to the absence of significant interest-bearing debt.

Interest income is

earned on cash balances, and changes in interest rates may affect the amount of interest income recognized.

However, this exposure is

not considered material.

portion of the Company’s operations is conducted in currencies other than the U.S.

dollar, primarily the VND.

The Company may also

have limited exposure to other currencies through ordinary-course transactions with international counterparties.

Accordingly, fluctuations

in foreign currency exchange rates may affect the translation of revenues, costs of revenues, operating expenses, assets, and liabilities

Company does not currently use derivative financial instruments to hedge its foreign currency exposure.

Company’s exposure to interest rate risk is limited because it has no significant interest-bearing debt outstanding.

Interest income

is earned on cash and cash equivalents balances, and changes in market interest rates may affect future interest income.

Management does

not believe that interest rate risk is material to the Company’s financial position or results of operations.

Concentration

Company is exposed to concentration risk due to its reliance on related-party transactions for both revenue and procurement.

in the financial condition or operating performance of these related parties could materially affect the Company’s results.

hypothetical 10% change in foreign exchange rates would not have a material impact on the Company’s financial position based on

current exposure levels;

however, this may change as the Company expands its international operations.

Company has concentrations of credit and business risk arising from its relationships with certain customers, suppliers, and related

During the six months ended June 30, 2026, a substantial portion of the Company’s revenue continued to be generated through

revenue-sharing arrangements and transactions involving related parties.

As a result, changes in the financial condition or operating

performance of these counterparties could materially affect the Company’s operating results and cash flows.

believes that a hypothetical 10% change in foreign currency exchange rates would not have a material impact on the Company’s financial

position, results of operations, or cash flows based on its current level of foreign currency exposure.

and Economic Conditions

Company’s operations are subject to the impact of inflation and broader economic conditions, which may affect both costs and demand.

may increase the cost of components, manufacturing, logistics, and labor.

These cost increases may not be fully recoverable through price

adjustments, particularly in a competitive market environment where pricing pressure is significant.

Company’s products are generally considered discretionary consumer purchases.

As a result, economic downturns, reduced consumer

confidence, or higher interest rates may negatively impact demand for the Company’s products.

Chain Considerations

supply chain conditions, including component availability and shipping costs, may also affect the Company’s ability to procure

inventory and maintain margins.

Company actively monitors these factors and seeks to mitigate their impact through pricing strategies, cost management initiatives, and

supply chain optimization.

Company’s business is subject to the effects of inflation and broader macroeconomic conditions, which may affect both operating

costs and customer demand.

pressures may increase the costs of components, manufacturing, logistics, labor, and other operating expenses.

Although the Company continually

evaluates pricing strategies and cost-control initiatives, it may not be able to fully offset increases in operating costs through price

uncertainty, inflation, higher interest rates, or reduced consumer spending could adversely affect demand for the Company’s products

and services.

In addition, global supply chain disruptions, changes in component availability, and fluctuations in freight costs could

adversely affect the Company’s ability to procure inventory and maintain operating margins.

continues to monitor these risks and seeks to mitigate their impact through disciplined cost management, strategic sourcing, pricing

initiatives, and ongoing supply chain optimization.

3 – Quantitative and Qualitative Disclosures About Market Risk

2 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis