Armlogi Holding Corp

Previous wording

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our registration statement on Form S-1 (File No. 333-274667).

Current wording

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our annual report on Form 10-K (File No. 001-42099), filed with the SEC on September 26, 2024.

Previous wording

The following table outlines our unaudited condensed consolidated statements of income for the three and nine months ended March 31, 2024 and 2023:

Current wording

The following table outlines our consolidated statements of operations for the three months ended September 30, 2024 and 2023:

Previous wording

The following table sets forth our revenue for the three and nine months ended March 31, 2024 and 2023:

Current wording

The following table sets forth our revenue for the three months ended September 30, 2024 and 2023:

Previous wording

Our revenue increased by $34.7 million, or 39.9%, to $121.7 million during the nine months ended March 31, 2024, compared to $87.0 million for the same period in 2023. The increase was due to the following factors:

Current wording

Our revenue increased by $1.2 million, or 3.0%, to $42.5 million during the three months ended September 30, 2024, compared to $41.2 million for the same period in 2023. The increase was due to the following factors:

Previous wording

Our costs of sales mainly represented the costs incurred for the use of third-party direct freight service carriers, such as FedEx and UPS, warehouse rental expenses, costs of labor, and trucking expenses. Costs of sales increased by $11.3 million, or 47.2%, during the three months ended March 31, 2024, compared with the same period in 2023. The increase was in line with the increase of our revenue.

Current wording

Our costs of sales mainly represented the costs incurred for the use of third-party direct freight service carriers, such as FedEx and UPS, warehouse rental expenses, costs of labor, and trucking expenses. Costs of sales increased by $10.1 million, or 28.0%, during the three months ended September 30, 2024, compared with the same period in 2023. The increase was driven by two main factors.First, there was a rise in freight expenses due to higher UPS shipping charges.Second, lease expenses, employee salary and benefits, and temporary labor costs increased as we expanded our warehouse and operations team to support growth.

Previous wording

The following table sets forth a breakdown of our costs of sales for the three and nine months ended March 31, 2024 and 2023:

Current wording

The following table sets forth a breakdown of our costs of salesfor the three months ended September 30, 2024 and 2023:

Previous wording

Our freight expenses, rental expenses (primarily warehouse operating lease expenses), temporary labor expenses, and salary and benefits increased significantly by $3.0 million, $3.8 million, $1.5 million, and $1.3 million, respectively, during the three months ended March 31, 2024, compared to the same period in 2023. The increases in these expenses were all due to the growth of our revenue in transportation services and warehouse services.

Current wording

Our lease expenses (primarily warehouse operating lease expenses), freight expenses, temporary labor expenses, and salary and benefits increased significantly by $2.3 million, $3.2 million, $2.8 million, and $1.0 million, respectively, during the three months ended September 30, 2024 compared to the same period in 2023. The increases in lease expenses are due to the additional operating leases acquired in the last fiscal quarter. The increases in freight expenses are due to the increase of the surcharge by FedEx. The increase in temporary labor expenses and salary and benefits is due to the expansion of the warehouse operations.

Previous wording

Our operating expenses consist primarily of general and administrative expenses. The following table sets forth a breakdown of our general and administrative expenses for the three and nine months ended March 31, 2024 and 2023:

Current wording

Our operating expenses consist primarily of general and administrative expenses. The following table sets forth a breakdown of our general and administrative expenses for the three months ended September 30, 2024 and 2023:

Previous wording

Our general and administrative expenses increased by $0.2 million, from $3.1 million for the three months ended March 31, 2023, to $3.3 million for the same period in 2024, representing an increase of 7%. The increase was due to increased administrative activities primarily related to office supplies, and repairs and maintenance, to accommodate our business expansion.

Current wording

Our general and administrative expenses increased by $1.8 million, from $1.9 million for the three months ended September 30, 2023 to $3.7 million for the same period in 2024, representing an increase of 92%. The increase was due to the following factors:

Previous wording

Our income tax expense decreased by $1.0 million for the three months ended March 31, 2024 compared to the same period in 2023, mainly due to the decrease in profit before tax by $2.5 million during the three months ended March 31, 2024.

Current wording

Our income tax expense decreased by $2.5 million for the three months ended September 30, 2024 compared to the same period in 2023, mainly due to the decrease in profit before tax by $10 million during the three months ended September 30, 2024.

Previous wording

As a result of the foregoing, our net income for the three months ended March 31, 2024 was $0.7 million, compared with the net income of $2.2 million for the same period in 2023, representing a decrease by $1.5 million.

Current wording

As a result of the foregoing, our net income (loss) for the three months ended September 30, 2024 was $(4.6) million, compared with the net income of $2.8 million for the same period in 2023, representing a decrease by $7.4 million.

Previous wording

In assessing our liquidity, management monitors and analyzes our cash on-hand, our ability to generate sufficient revenue sources in the future, and our operating and capital expenditure commitments. As of the date of this Quarterly Report, we have financed our operations primarily through cash generated by operating activities and capital contributions from stockholders. As of March 31, 2024 and June 30, 2023, we had cash (including restricted cash) of $6.0 million and $6.6 million, respectively, which primarily consisted of cash deposited in banks.

Current wording

In assessing our liquidity, management monitors and analyzes our cash on-hand, our ability to generate sufficient revenue sources in the future, and our operating and capital expenditure commitments. As of the date of this Quarterly Report, we have financed our operations primarily through cash generated by operating activities and capital contributions from stockholders. As of September 30, 2024 and June 30, 2024, we had cash and restricted cash of $5.0 million and $10.0 million, respectively, which primarily consisted of cash deposited in banks.

Previous wording

Our working capital requirements mainly consist of costs of sales and general and administrative expenses. We expect that our capital requirements will be met by cash generated from our operating activities and financing activities from our principal stockholders. We believe that our current cash and cash generated from our operating activities will be sufficient to meet our current and anticipated working capital requirements and capital expenditures for at least the next 12 months. We may, however, need additional cash resources in the future if we experience changes in our business conditions or other developments.

Current wording

Our working capital requirements mainly consist of costs of sales and general and administrative expenses. We expect that our capital requirements will be met by cash generated from our operating activities and financing activities. We believe that our current cash and cash generated from our operating activities will be sufficient to meet our current and anticipated working capital requirements and capital expenditures for at least the next 12 months. We may, however, need additional cash resources in the future if we experience changes in our business conditions or other developments.

Previous wording

Cash Flows for the Nine Months Ended March 31, 2024 and 2023

Current wording

Cash Flows for the three months Ended September 30, 2024 and 2023

Previous wording

We had a balance of cash and restricted cash of $6.0 million as of March 31, 2024, compared with a balance of $6.6 million as of June 30, 2023. During the nine months ended March 31, 2024, we mainly derived our cash inflow from operating activities.

Current wording

We had a balance of cash and restricted cash of $5.0 million as of September 30, 2024, compared with a balance of $10.0 million as of June 30, 2024. During the three months ended September 30, 2024, changes in our cashflow were mainly due to the following activities:

Previous wording

Net cash provided by operating activities was $4.0 million for the nine months ended March 31, 2024, compared to net cash provided in operating activities of $10.5 million for the same period in 2023, representing a $6.5 million decrease in the net cash inflow provided by operating activities. The decrease was primarily due to the following:

Current wording

Net cash used in operating activities was $3.6 million for the three months ended September 30, 2024, compared to net cash provided by operating activities of $3.1 million for the same period in 2023, representing a $6.7 million decrease in the net cash inflow provided by operating activities. The decrease was primarily due to the following:

Previous wording

Net cash used in investing activities was $4.7 million for the nine months ended March 31, 2024, primarily attributable to $3.1 million cash used for the purchase of property and equipment and $1.6 million used for loans extended to a customer for the nine months ended March 31, 2024.

Current wording

Net cash used in investing activities was $1.3 million for the three months ended September 30, 2024, primarily attributable to $1.4 million cash used for the purchase of property and equipment, $1.0 million cash used for loans extended to others, and $1.0 million proceeds received from loan repayments.

Previous wording

For the same period in 2023, net cash used in investing activities was $4.3 million, primarily attributable to $1.8 million cash used for the purchase of property and equipment and $2.4 million used for loans extended to a customer.

Current wording

For the three months ended September 30, 2023, net cash used in investing activities was $2.2 million, primarily attributable to $1.1 million cash used for the purchase of property and equipment and $1.0 million used for loans extended to others.

Previous wording

For the nine months ended March 31, 2023, we had net cash used in financing activities of $3.0 million, which was primarily attributable to the net effects of: (i) $2.5 million used to repay related parties; (ii) $0.5 million advanced to related parties; iii) $0.2 million used for expenses relating to the initial public offering; (iv) $0.2 million used to repay finance lease liabilities; and (v) $0.4 million in capital contributions from stockholders.

Current wording

For the three months ended September 30, 2024, we had net cash used in financing activities of $0.05 million, which was primarily attributable to the net effects of $0.05 million used to repay finance lease liabilities.

Previous wording

For the nine months ended March 31, 2024, we had net cash provided by financing activities of $0.2 million, which was primarily attributable to the net effects of: (i) $0.5 million collected from related parties for the repayment of loans we previously advanced to them; (ii) $0.6 million used for expenses relating to the initial public offering; (iii) $0.2 million used to repay finance lease liabilities; and (iv) $0.5 million in capital contributions from stockholders.

Current wording

For the three months ended September 30, 2023, we had net cash provided from financing activities of $1.0 million, which was primarily attributable to the net effects of: (i) $0.5 million collected from related parties for the repayments of loans the Company previously advanced to them; (ii) $0.5 million lent from related parties; (iii) $0.1 million used for expenses relating to the initial public offering; (iv) $0.05 million used to repay finance lease liabilities; and (v) $0.1 million in capital contributions from stockholders.

Previous wording

As of March 31, 2024, we had operating and finance leases for office space, warehouse space, and forklifts. Lease terms expire at various dates through April 2026 to November 2034 with options to renew for varying terms at our sole discretion. We have not included these options to extend or terminate in the calculation of right-of-use assets or lease liabilities, as there is no reasonable certainty, as of the date of this Quarterly Report, that these options will be exercised.

Current wording

As of September 30, 2024, we had operating and finance leases for office space, warehouse space, and forklifts. Lease terms expire at various dates through February 2025 to July 2034 with options to renew for varying terms at our sole discretion. We have not included these options to extend or terminate in the calculation of ROU assets or lease liabilities, as there is no reasonable certainty, as of the date of this Quarterly Report, that these options will be exercised.

Previous wording

Other than two one-year term standby letters of credit with Eastwest Bank in the aggregate amount of $2,061,673, we did not have during the period presented, and we do not currently have, any off-balance sheet financing arrangements as defined under the rules and regulations of the SEC, or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2024, we still have unused credit of $2,061,673 with Eastwest Bank.

Current wording

Other than two standby letters of credit with Eastwest Bank in the aggregate amount of $2,061,673, we did not have during the period presented, and we do not currently have, any off-balance sheet financing arrangements as defined under the rules and regulations of the SEC, or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of September 30, 2024, we still have unused credit of $2,061,673 with Eastwest Bank.

Previous wording

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of this Quarterly Report, and revenue and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases their estimates on historical experience and on various other factors that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

Current wording

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, each as of the date of this Quarterly Report, and revenue and expenses during the periods presented. On an ongoing basis, management evaluates their estimates and assumptions, and the effects of any such revisions are reflected in the financial statements in the period in which they are determined to be necessary. Management bases their estimates on historical experience and on various other factors that they believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual outcomes could differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

Previous wording

As of March 31, 2024 and June 30, 2023, the historical cost of property and equipment was $13,503,962 and $9,566,675, respectively.

Current wording

As of September 30, 2024 and June 30, 2024, the historical cost of property and equipment was $16,127,139 and $14,773,842, respectively.

Previous wording

We recorded depreciation expenses of $1,313,684 and $788,699 during the nine months ended March 31, 2024 and 2023, respectively. For the nine months ended March 31, 2024 and 2023, we recorded depreciation expenses of $1,091,795 and $641,222 in costs of sales, respectively, and $221,889 and $147,477 in general and administrative expenses, respectively.

Current wording

We recorded depreciation expenses of $578,432 and $388,929 during the three months ended September 30, 2024 and 2023, respectively. Specifically, $436,368 and $324,849 of the depreciation expenses were recorded in costs of sales for the three months ended September 30, 2024 and 2023, respectively. $142,064 and $64,080 of the depreciation expenses were recorded in general and administrative expenses for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

While our significant accounting policies are more fully described in “Note 2 — Summary of Significant Accounting Policies” in the notes to ourunaudited financial statements, we believe that there were no critical accounting policies that affect the preparation of financial statements.

Current wording

Our significant accounting policies are more fully described in Note 2 — Summary of Significant Accounting Policies” in the notes to our unaudited consolidated financial statements. We believe that there were no critical accounting policies that affected the preparation of such financial statements.