Armlogi Holding Corp

Previous wording

We provide one-stop warehousing and logistics services to cross-border e-commerce merchants outside the U.S. who seek to sell in the U.S. market. We currently operate nine warehouses across the country, with an aggregate gross floor area of approximately 2,765,667 square feet. Aside from a nationwide footprint and large storage space, our warehouses are equipped with automated sorting systems, heavy-duty forklifts, and pallets and trays that are suitable for processing bulky items. As a one-stop warehousing and logistics service provider, we offer a full spectrum of services, including (i) customs brokerage services; (ii) transportation of merchandise to U.S. warehouses; and (iii) warehouse management and order fulfillment services, which further include (a) product storage and retrieval, (b) product packing and labeling, (c) kitting and repackaging, (d) order assembly and load consolidation, (e) inventory management and sales forecasting, (f) third-party distribution coordination, and (g) other value-added services. We also provide warehousing and logistics services to our U.S.-based commercial customers, who are typically domestic e-commerce merchants seeking efficient and reliable warehousing and logistics solutions to support their operations. In general, the warehousing and logistics services we provide to our domestic customers are similar to those we provide to our overseas customers. This allows us to provide integrated solutions for our customers, whether they need domestic or international warehousing and logistics support. As of September 30, 2024 and June 30, 2024 and 2023, we had an active customer base of 156, 105, and 83, respectively, for our warehousing and logistics services.

Current wording

We provide one-stop warehousing and logistics services to cross-border e-commerce merchants outside the U.S. who seek to sell in the U.S. market. We currently operate ten warehouses across the country, with an aggregate gross floor area of approximately 3,858,667 square feet. Aside from a nationwide footprint and large storage space, our warehouses are equipped with automated sorting systems, heavy-duty forklifts, and pallets and trays that are suitable for processing bulky items. As a one-stop warehousing and logistics service provider, we offer a full spectrum of services, including (i) customs brokerage services; (ii) transportation of merchandise to U.S. warehouses; and (iii) warehouse management and order fulfillment services, which further include (a) product storage and retrieval, (b) product packing and labeling, (c) kitting and repackaging, (d) order assembly and load consolidation, (e) inventory management and sales forecasting, (f) third-party distribution coordination, and (g) other value-added services. We also provide warehousing and logistics services to our U.S.-based commercial customers, who are typically domestic e-commerce merchants seeking efficient and reliable warehousing and logistics solutions to support their operations. In general, the warehousing and logistics services we provide to our domestic customers are similar to those we provide to our overseas customers. This allows us to provide integrated solutions for our customers, whether they need domestic or international warehousing and logistics support. As of December 31, 2024 and June 30, 2024 and 2023, we had an active customer base of 298, 105, and 83, respectively, for our warehousing and logistics services.

Previous wording

For the three months ended September 30, 2024 and 2023, we had total revenue of $42.5 million and $41.2 million, and net loss of $4.6 million and net income of $2.8 million, respectively. While we do not have any subsidiaries, assets, or employees in the PRC, we generate a significant portion of our revenue from customers based in China. During the three months ended September 30, 2024 and 2023, we generated approximately 85% and 95% of our revenue from PRC-based customers, respectively.

Current wording

For the six months ended December 31, 2024 and 2023, we had total revenue of $93.6 million and $83.2 million, and net loss of $6.3 million and net income of $6.5 million, respectively. While we do not have any subsidiaries, assets, or employees in the PRC, we generate a significant portion of our revenue from customers based in China. During the six months ended December 31, 2024 and 2023, we generated approximately 86% and 96% of our revenue from PRC-based customers, respectively.

Previous wording

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

Current wording

The following table outlines our consolidated statements of operations for the three and six months ended December 31, 2024 and 2023:

Previous wording

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

Current wording

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

Previous 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:

Current wording

Our revenue increased by $9.1 million, or 21.8%, to $51.1 million during the three months ended December 31, 2024, compared to $42.0 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 $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.

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 $16.3 million, or 47.6%, during the three months ended December 31, 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 salesfor the three months ended September 30, 2024 and 2023:

Current wording

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

Previous 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.

Current wording

Our freight expenses, lease expenses (primarily warehouse operating lease expenses), temporary labor expenses, warehouse expenses, and salary and benefits increased significantly by $8.3 million, $2.5 million, $2.9 million, $1.2 million and $0.7 million, respectively, during the three months ended December 31, 2024, compared to the same period in 2023. The increases in lease expenses were due to the additional operating leases acquired in the last and current fiscal quarter. The increases in freight expenses were due to the increase in UPS expenses. The increases in temporary labor expenses, warehouse expenses, and salary and benefits were due to the expansion of the warehouse operations.

Previous wording

Our overall gross profit (loss) margin decreased from 12.7% for the for the three months ended September 30, 2023 to (8.5%) for the same period in 2024, primarily due to the increase of the surcharge by UPS and the decreases in customer order volume, as well as some of the recently leased warehouses that are not fully utilized.

Current wording

Our overall gross profit (loss) margin decreased from 15.5% for the for the six months ended December 31, 2023 to (3.3%) for the same period in 2024, primarily due to the increase of the surcharge by UPS and the decreases in customer order volume, as well as some of the recently leased warehouses that are not fully utilized.

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 months ended September 30, 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 and six months ended December 31, 2024 and 2023:

Previous 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:

Current wording

Our general and administrative expenses increased by $1.5 million, or 31%, from $4.8 million for the three months ended December 31, 2023 to $6.3 million for the same period in 2024. The increase was due to the following factors:

Previous 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.

Current wording

Our income tax expense decreased by $1.5 million for the three months ended December 31, 2024, compared to the same period in 2023, mainly due to the decrease in profit before tax by $6.9 million during the three months ended December 31, 2024.

Previous 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.

Current wording

As a result of the foregoing, our net (loss) income for the three months ended December 31, 2024 was $(1.7) million, compared with the net income of $3.7 million for the same period in 2023, representing a decrease by $5.4 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 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.

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 proceeds from the Convertible Note. As of December 31, 2024 and June 30, 2024, we had cash and restricted cash of $7.4 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. 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 financing activities. On November 25, 2024, we entered into the SEPA with the Investor, pursuant to which we have the right to sell to the Investor up to $50.0 million of our common stock. We believe that our current cash and cash generated from our financing 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 three months Ended September 30, 2024 and 2023

Current wording

Cash Flows for the Six Months Ended December 31, 2024 and 2023

Previous 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:

Current wording

We had a balance of cash and restricted cash of $7.4 million as of December 31, 2024, compared with a balance of $10.0 million as of June 30, 2024. During the six months ended December 31, 2024, changes in our cashflow were mainly due to the following activities:

Previous 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:

Current wording

Net cash used in operating activities was $9.2 million for the six months ended December 31, 2024, compared to net cash provided by operating activities of $3.5 million for the same period in 2023, representing a $12.7 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 $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.

Current wording

Net cash used in investing activities was $1.0 million for the six months ended December 31, 2024, primarily attributable to $2.1 million cash used for the purchase of property and equipment, $1.0 million cash used for loans extended to others, and $2.0 million proceeds received from loan repayments.

Previous 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.

Current wording

For the six months ended December 31, 2023, net cash used in investing activities was $3.9 million, primarily attributable to $2.9 million cash used for the purchase of property and equipment and $1.0 million used for loans extended to others.

Previous 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.

Current wording

For the six months ended December 31, 2023, we had net cash provided by financing activities of $0.9 million, which was primarily attributable to the net effects of: (i) $1.0 million collected from related parties for the repayments of loans we previously advanced to them; (ii) $0.3 million used for expenses relating to the initial public offering; (iii) $0.1 million used to repay finance lease liabilities; and (iv) $0.3 million in capital contributions from stockholders.

Previous 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.

Current wording

Other than three standby letters of credit with Eastwest Bank in the aggregate amount of $2,259,932, 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 December 31, 2024, we still have unused credit of $2,259,932 with Eastwest Bank.

Previous 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.

Current wording

As of December 31, 2024 and June 30, 2024, the historical cost of property and equipment was $16,736,612 and $14,773,842, respectively.

Previous 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.

Current wording

We recorded depreciation expenses of $1,216,422 and $919,272 during the six months ended December 31, 2024 and 2023, respectively. Specifically, $1,108,175 and $786,466 of the depreciation expenses were recorded in costs of sales for the six months ended December 31, 2024 and 2023, respectively, $108,247 and $132,806 of the depreciation expenses were recorded in general and administrative expenses for the six months ended December 31, 2024 and 2023, respectively.