CHSN — H1 2026 Financial Report Analysis

Overview

Chanson International Holding runs the "George Chanson" bakery chain in Xinjiang, China (53 stores) and three cafés in New York City. For the six months to June 30, 2026, it reported a net profit of $0.85 million, compared with a $1.05 million loss a year earlier. The bakeries did not produce that profit. They still lost money: the company had an operating loss of $0.78 million. The swing to profit came from $1.80 million of interest on loans the company has made to three outside parties, which now total $54.9 million. That is more than half of everything Chanson owns. Revenue slipped 4.5% to $8.30 million. China sales were flat, and US sales nearly halved after one New York café was handed to a third party to run.

At a glance

• $8.30M revenue, down 4.5%. China stores were flat at $7.81M (+0.4%), and the US cafés fell 46.7% to about $0.5M. The core bakery business is not growing.
• -$0.78M operating loss. Operating income is what the stores earn before interest and investment income. This line is still negative, so the bakeries cost more to run than they bring in.
• $54.9M lent to outside parties vs. $20.0M cash. Interest on these loans ($1.80M) turned the loss into a profit, but only $0.50M of it arrived as cash in the half.

The numbers

Chanson is a foreign private issuer. It files a half-yearly report on Form 6-K rather than quarterly 10-Qs, so the comparison here is the first half of 2026 against the first half of 2025.

Gross margin is the share of revenue left after the direct cost of the baked goods and drinks sold. It rose to 47.7%. Gross profit grew 2.4% to $3.96M even as revenue fell.

The bakery business: flat in China, shrinking in New York

China (94% of revenue). Bakery products rose 2.5% to $7.3M. "Other products" fell 23.9% to $0.48M. Within that, seasonal products such as festival gift items dropped 24.7% to $0.38M, and beverages dropped 20.5% to $0.10M. Management gives three reasons: China's economic recovery "has progressed at a slower pace than expected," customers are "more sensitive to the selling price," and shoppers are moving to online bakery brands. It also says several well-known coffee chains opened low-priced stores in Xinjiang, which took drink sales. The store base is being reshuffled rather than grown. Of the 45 franchise-style stores (run through contracts with their individual owners), 3 opened and 9 closed so far in 2026.

United States. Revenue fell to about $0.5M, down 46.7%. Bakery sales there dropped 82.7% to $0.04M and beverages 35.8% to $0.41M. Two changes explain it. The 23rd Street café stopped selling bakery products in April 2025 because of local competition. In February 2026, the Broadway location was handed to a third party under a management and profit-sharing agreement that runs to January 2032. Chanson now collects a revenue-based fee from that store instead of booking its full sales.

Costs. Selling expenses rose 15.6% to $3.26M, which is 39.2% of revenue. Two items drove most of the increase. Staff costs rose $0.30M because the company added salespeople for China stores opened in late 2025. Fees paid to online delivery and shopping platforms rose $0.22M as more sales went through them. General and administrative (G&A) costs fell 33.7% to $1.48M. Most of that drop came because last year included a one-off $0.5M write-off of an earlier loan (explained below).

The real business now: lending

Chanson's balance sheet shows three "long-term debt investments." These are loans or loan-like placements of cash with outside companies:

Together these make up 56% of total assets of $97.6M. For comparison, the whole bakery chain brought in $8.30M of revenue in the half. The filing says the company "significantly increased its long-term debt investments as part of its strategy to enhance returns on excess cash and expand financing-related activities." The money came from selling shares. The $30.0M placed with Zhixuan Tiangong on November 6, 2025 matches the $30.0M private placement the company signed on November 5, 2025. The filing also flags that these investments are "concentrated with a limited number of counterparties." It records no allowance for possible losses on them.

There is a precedent here. Last year's results included a $0.5M write-off of a $2.0M loan made in 2023 to Liberty Asset Management Capital, after that borrower ran into "financial distress" and repaid only $1.5M at maturity.

Takeaway: Chanson's first profitable half in this comparison came from interest on $54.9M it has lent out, not from selling bread. The bakeries still lost $0.78M before that income. Of the $1.80M of interest booked, only $0.50M was actually received in cash. The rest was added to the amounts owed to Chanson. The profit is only as good as those three borrowers' ability to pay.

What the headline numbers hide

• Cash conversion is poor. Net income was +$0.85M, but operating cash flow was -$3.19M. Two items explain most of the gap. First, $1.80M of investment income was booked but mostly not collected. Interest earned but not yet paid rose from $0.62M at year-end to $1.92M. Second, the company prepaid $3.1M to two software developers. That covers $2.0M of a $3.0M contract with ELEFUN Group for an "AI-enabled smart store system" and $1.1M of a $1.5M contract with Snow Leopard HK for a livestream-commerce system. In one half, these prepayments came to more than a third of the chain's revenue.
• Strip out the one-offs and the operations did not improve. Without investment income, pre-tax results were a loss of about $0.93M, versus $1.35M a year ago. But last year's loss included the $0.5M bad-debt write-off. Without that, the comparable 2025 loss was about $0.85M. On a like-for-like basis, the bakery business lost slightly more this year.
• The higher gross margin was partly absorbed by selling costs. Gross margin rose 3.2 points, but selling expenses rose from 32.4% to 39.2% of revenue. Much of that rise came from platform fees and extra staff, which suggests the move to online sales costs as much as it adds.
• EPS is not comparable year over year. The shares were reverse-split 1-for-80 in August 2025 and 1-for-100 in May 2026, so every 8,000 old shares became one. The prior-year loss of $286.93 per share reflects only 3,655 weighted shares after restatement. Meanwhile the share count has grown fast. Shares outstanding went from 389,789 at year-end to 2,322,391 at June 30, after 3.25M shares were sold through an at-the-market program (shares sold gradually into the market) for about $13.0M net. After the half ended, another 93,720 shares were sold in July and 5,000,000 more in an August private placement, bringing the count to roughly 7.4M. The same profit would therefore be spread over about three times as many shares.
• Dilution at falling prices. The August placement sold shares at $0.80 each. The November 2025 placement was priced at $80 per share after adjusting for the May 2026 reverse split. That is a 99% drop in the price new investors paid in nine months.
• Large flows with the controlling shareholder. At June 30, Chanson was owed about $15.1M by CEO and controlling shareholder Gang Li and owed him about $16.3M. These amounts are netted and shown as a single $1.2M liability. The filing describes "interest-free advances and repayments [and] funding transfers" with him and entities linked to his family during the half. He also guarantees the $16.5M Yongdahui loan and several of the company's bank loans.
• Debt coming due. Bank loans due within 12 months rose to $3.40M (from $0.80M), as long-term loans moved into the current portion. That amount is easily covered by $20.0M of cash.

No adjusted (non-GAAP) earnings figures were reported. All numbers above are as reported under US accounting rules (GAAP).

What to watch

Management gave no revenue or profit guidance. It said only that it will prioritise "operational efficiency, prudent cost and capital management" and pursue "growth opportunities in our markets." This is the first report we have published for Chanson, so there is no earlier outlook to check against.

What the filing does set out are dates:

• October 26, 2026: shareholder vote. The proxy filed September 28 proposes a third reverse split (another 1-for-100). It also proposes raising the number of shares the company is allowed to issue to 411 billion Class A shares after that consolidation. An August 24 vote had already raised the voting power of the founder-held Class B shares from 50 to 80 votes each. Combined with the ongoing at-the-market program, which allows up to $219.4M of share sales, these changes give management room for much more share issuance.
• November 30, 2026: software milestones. Both prepaid software projects reach acceptance tests on this date. The $2.0M ELEFUN prepayment is partly refundable if the stage acceptance fails. The $1.1M Snow Leopard prepayment is refundable on vendor default.
• Loan maturities in mid-2027 and late 2027. The Yongdahui loan (about $16.5M) falls due around June 30, 2027, and the Zhixuan Tiangong loan ($30.0M) around November 6, 2027. Whether these are repaid in cash, with the interest that has built up, will show whether the profit in this report was real.

Our view: On its own, the bakery chain is a roughly $16–17M-a-year business, with China sales flat, a shrinking New York presence and losses at the operating level. The company's earnings now depend on lending activity that is several times the size of its operations, funded by repeated share sales at sharply lower prices. Until the loan interest arrives in cash and the stores turn an operating profit, we would treat the reported net income as unproven. The next full-year figures should come in the FY2026 annual report on Form 20-F, expected around late April 2027.