Armlogi Holding Corp.

1. Organization and principal activities

Armlogi Holding Corp. and its consolidated subsidiaries (the “Company”) operate as a third-party logistics company, providing multi-model transportation and logistics services primarily in the United States.

The Company’s primary transportation services involve arranging shipments, on behalf of its customers, of materials that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, Trucking, and UPS, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. The Company also provides other value-added logistics services, including warehousing services, materials management and distribution services, and customs house brokerage services, to complement its core transportation service offering.

2. Summary of significant accounting policies

Principal of consolidation

The audited consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

Use of estimates

The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. There were no significant accounting estimates affecting the audited consolidated financial statements for the years ended June 30, 2025 and 2024.

Cash and cash equivalents

Cash and cash equivalents consists of petty cash on hand and cash held in banks and other financial institutions, which is highly liquid and has original maturities of three months or less and is unrestricted as to withdrawal or use.

Restricted cash

Restricted cash represents the cash restricted for six standby letters of credit with Eastwest Bank as collateral for certain of the Company’s lease agreements. The terms of the letters of credit start from April 26, 2023, August 1, 2023, November 7, 2023, December 27, 2024, January 14, 2025, and March 20, 2025, respectively. The letters of credit are renewable on an annual basis until the termination thereof.

Certain risks and concentration

The Company’s financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and restricted cash, receivables, loan receivables, other current assets, and other non-current assets. As of June 30, 2025 and 2024, substantially all of the Company’s cash and restricted cash were held in major financial institutions located in the U.S., which management considers to be of high credit quality.

During the years ended June 30, 2025 and 2024, the Company’s five largest customers collectively accounted for approximately 55.1% and 53.0% of its total revenue, respectively. During the year ended June 30, 2025, the Company’s top five suppliers collectively accounted for 51.8% (2024:60%) of its total purchases. Two suppliers collectively accounted for approximately 45.5% and one supplier accounted for approximately 50% of the total purchases during the years ended June 30, 2025 and 2024, and no other suppliers individually accounted for more than 10% of the total purchases over the same period.

As of June 30, 2025 and 2024, the largest three accounts receivable balances from customers accounted for 66% and 58% of the total balance of accounts receivable, respectively.

Accounts receivable and other receivables

The Company’s receivables are recorded when billed and represent amounts owed by third-party customers. The carrying value of the Company’s receivables, net of the expected credit loss, represents their estimated net realizable value. The Company evaluates the expected credit loss of accounts receivable and other receivables on a loss rate method based on historical information adjusted for current conditions and future estimated economic performance. The Company’s credit term generally ranged to 3-30 days. If there is an approval from the board of the Company, the credit term can extend to 180 days.

Loan receivables

Loan receivables are carried at amortized cost, net of an allowance for credit losses, in accordance with ASC 326,Financial Instruments – Credit Losses (CECL).

Management estimates expected credit losses over the contractual term of the loans, adjusted for expected prepayments, using relevant available information. This includes:

The estimate of expected credit losses is measured on a collective (pool) basis when loans share similar risk characteristics (e.g., credit rating, or collateral). Loans that do not share risk characteristics with others are evaluated individually.

Property and equipment

Property and equipment are recorded at cost, less accumulated depreciation and impairment. Depreciation of property and equipment is calculated on a straight-line basis, after consideration of expected useful lives and estimated residual values. The estimated annual deprecation rates of these assets are generally as follows:

Expenditures for maintenance and repairs are expensed as incurred. Gains and losses on disposals are the differences between net sales proceeds and carrying amounts of the relevant assets and are recognized in the consolidated statements of operations and comprehensive income.

Long-Lived Assets

Long-lived assets, such as property and equipment, and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company compares the undiscounted expected future cash flows to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent the carrying amount of the asset or asset group exceeds the fair value. Fair values of long-lived assets are determined through various techniques, such as applying probability weighted, expected present value calculations to the estimated future cash flows using assumptions a market participant would utilize or through the use of a third-party independent appraiser or valuation specialist. No impairment losses of long-lived assets were recorded during the years ended June 30, 2025 and 2024.

Intangible assets consist of software and security systems, which are amortized using the straight-line method over five toseven years.

Revenue recognition

The Company provides one-stop logistic services. The Company’s revenue is primarily from transportation services, which include the arrangement of freight services. The Company generates its transportation services revenue by purchasing transportation from direct carriers and reselling those services to its customers.

In general, each shipment transaction or service order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed-upon transaction price exists. The transaction price is typically fixed and not contingent upon the occurrence or non-occurrence of any other event. The Company’s transportation transactions provide for the arrangement of the movement of freight to a customer’s destination. The transportation services that are provided to the customer, including certain ancillary services, such as loading/unloading, freight insurance, and customs clearance, represent a single performance obligation, as these promises are not distinct in the context of the contract. This performance obligation is satisfied over time and recognized in revenue upon the transfer of control of the services over the requisite transit period as the customer’s goods move from origin to destination. The Company determines the period to recognize revenue in transit based on the departure date and the delivery date. Determination of the transit period and the percentage of completion of the shipment as of the reporting date will affect the timing of revenue recognition. The Company has determined that revenue recognition over the transit period provides a reasonable estimate of the transfer of services to its customers as it depicts the pattern of the Company’s performance under the contracts with its customers. The change in contract liabilities is due to the timing of customer deposits for orders, offset by customer deposits recognized as revenue during the period. The Company expects to recognize revenue for any performance obligations within a twelve-month period and have elected not to provide disclosures regarding remaining performance obligations for contracts with a term ofone year or less.

The Company also provides warehousing services for its customers. These warehousing service contracts include two performance obligations: i) inventory management and order fulfilment and ii) storage services. The Company’s performance obligation for inventory management and order fulfilment is satisfied at a point in time as services are generally priced based on the number of items processed and handled. The benefits are consumed by the customers at the point in time when such specific services are performed by the Company. Performance of such services generally takes less than one day to process. The performance obligation for storage services is satisfied over time as the storage service is based on a term period and the customers simultaneously receive and consume the services provided by the Company as they are performed. The transaction price for the warehousing services is based on the consideration specified in the contract with the customer and contains fixed and variable consideration. In general, the fixed consideration component of a contract represents reimbursement for facility and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration component is comprised of cost reimbursement per unit pricing for time and pricing for materials used and is determined based on cost plus a mark-up for hours of services provided and materials used and is recognized based on the level of activity volume.

Other services include primarily customs house brokerage services sold on a stand-alone basis as a single performance obligation. The Company recognizes revenue from this performance obligation at a point in time, which is the completion of the services. Duties and taxes collected from the customer and paid to the customs agent on behalf of the customers are excluded from revenue.

ASC 606,Revenue from Contracts with Customers, provides for a five-step model for recognizing revenue from contracts with customers. These five steps include:

Under ASC 606, revenue is recognized when the customer obtains control of a good or service. The Company uses independent contractors and third-party carriers in the performance of its transportation services. The Company evaluates who controls the transportation services to determine whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party. The Company determined it acts as the principal for its transportation services performance obligation since it is in control of establishing the prices for the specified services, managing all aspects of the shipment process, and assuming the risk of loss for delivery and collection. Such transportation services revenue is presented on a gross basis in the consolidated statements of operations and comprehensive income.

A summary of the Company’s revenue disaggregated by major service lines is as follows:

Contract liabilities

Contract liabilities represent payments received from customers in excess of the revenue recognized. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting year. The Company classifies these customer deposits as short-term contract liabilities, as the Company expects to satisfy these obligations within its normal operating cycle, which is generally one year. For the years ended June 30, 2025 and 2024, the amounts transferred from contract liabilities at the beginning of the fiscal year to revenue were $247,824 and $424,182, respectively.

Practical Expedients

The Company has elected to not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of the end of the period, as the Company’s contracts with its transportation customers have an expected duration of one year or less.

For the performance obligation to transfer warehousing services in contracts with customers, revenue is recognized in the amount for which the Company has the right to invoice the customer, as this amount corresponds directly with the value provided to the customer for the Company’s performance completed to date.

The Company also applies the practical expedient that permits the recognition of employee sales commissions related to transportation services as an expense when incurred, since the amortization period of such costs is less than one year. These costs are included in the consolidated statements of operations and comprehensive income.

Leases

The Company determines if an arrangement is a lease at inception. Leases are classified as either operating leases or finance leases pursuant to ASC 842.

Operating leases are recognized as right-of-use (“ROU”) assets in non-current assets and lease liabilities in current and non-current liabilities in the consolidated balance sheets if the initial lease term is greater than 12 months. For leases with an initial term of 12 months or less, the Company recognizes those lease payments on a straight-line basis over the lease term.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. Lease expenses for lease payments are recognized on a straight-line basis over the lease term and are included in general and administrative expenses, cost of service and other expenses.

Finance lease ROU assets are included in ROU and current lease liabilities, and other non-current lease liabilities in the consolidated balance sheets.

Finance lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Management uses the implicit rate when readily determinable. Finance lease ROU assets are generally amortized over the lease term and are included in depreciation expenses. The interest on the finance lease liabilities is included in interest expense.

Annually, the Company performs an impairment analysis on ROU assets, and as of June 30, 2025, there was no material impairment to ROU assets.

The Company has elected the accounting policy to account for leases with both lease and non-lease components as a single lease component. For leases with an initial term of 12 months or less, the Company elected the exemption from recording ROU assets and lease liabilities for all leases that qualify, and records rent expenses on a straight-line basis over the lease term.

Taxation

Current income taxes are provided on the basis of net profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period of the enactment of the change.

The Company considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Company has considered possible sources of taxable income, including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected within the industry.

The Company recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. The Company did not have any unrecognized tax benefits as of June 30, 2025 and 2024.

Earnings per share

Basic earnings per share of common stock are computed by dividing net income allocable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income allocable to common stockholders by the weighted average number of shares outstanding, plus the number of additional shares that would have been outstanding if the potential shares, such as restricted stock awards and stock options, had been issued and were considered dilutive.

Segment Reporting

FASB ASC 280, Segment Reporting (“ASC 280”), establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, the CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes functional expenses (cost of services and general and administrative) at the consolidated level to manage the Company’s operations. Other segment items included in consolidated net income are other income, finance costs, income taxes, and infrequent items such as loss on debt extinguishment and loss on disposal of assets, which are reflected in the consolidated statements of operations.

All the Company’s business activities for the years ended June 30, 2025 and 2024 were conducted in the U.S. Therefore, revenue for the years ended June 30, 2025 and 2024 were all from the U.S.

The Company’s long-lived assets consist primarily of property and equipment, right-of-use assets and restricted cash. As of June 30, 2025 and 2024, all of the Company’s long-lived assets were in the U.S.

Fair value measurement

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value are as follows:

The Company’s financial instruments include cash and cash equivalents and restricted cash, accounts receivable and other receivables, loan receivables, long-term loan receivables, other current assets, other non-current assets, accounts payable and accrued liabilities, income tax payable, due to related parties, convertible notes, and lease liabilities. The carrying amounts of cash and cash equivalents and restricted cash, accounts receivable and other receivables, loan receivables, long-term loan receivables, other current assets, other non-current assets, accounts payable and accrued liabilities and income tax payable, due to related parties, convertible notes, and short-term lease liabilities approximate their fair values due to the short-term nature of these instruments. The carrying value of the Company’s long-term lease liabilities would not differ significantly from fair value (based on Level 2 inputs) if recalculated based on current interest rates.

The Company noted no transfers between levels during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring or non-recurring basis as of June 30, 2025 and 2024.

Costs of service

Cost of service primarily consist of amortization and depreciation, equipment lease and warehouse lease expenses, freight expenses, port handling and customs fees, salary and benefits, temporary labor expenses, warehouse expenses, utilities and other expenses.

General and administrative expenses

General and administrative expenses primarily consist of office equipment and furniture depreciation expenses, office expenses, professional fees, office space rental expenses, repairs and maintenance, salary and benefits, sundry costs, vehicle expenses, tax and licenses, credit loss expenses, and other expenses.

Recently issued accounting standards

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 is designed to improve the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the Company’s chief operating decision–making group (the “CODM”). The new standard is effective for the Company for its annual periods beginning January 1, 2024 and for interim periods beginning January 1, 2025, with early adoption permitted. The Company adopted ASU 2023-07 on January 1, 2024, which did not have a material impact on the Consolidated Financial Statements

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.

3. Accounts Receivable and Other Receivables, Net

Accounts receivable and other receivables, net consisted of the following:

The movement of allowance for credit loss for the years ended June 30, 2025 and 2024:

4. Property and Equipment, Net

Property and equipment, net consisted of the following:

Depreciation expenses are recorded in cost of service and general and administrative expenses. The Company recorded depreciation expenses of US$2,555,625 and US$1,827,231 during the years ended June 30, 2025 and 2024, respectively. Specifically, US$2,349,234 and US$1,513,947 of the depreciation expenses were recorded in cost of service for the years ended June 30, 2025 and 2024, respectively. US$206,391 and US$313,284 of the depreciation expenses was recorded in general and administrative expenses for the years ended June 30, 2025 and 2024, respectively.

5. Intangible Assets, Net

Intangible assets, net consisted of the following:

The Company recorded amortization of US$38,081 and US$35,319, which were included in cost of service, for the years ended June 30, 2025 and 2024, respectively.

6. Loan Receivables

During the years ended June 30, 2025 and 2024, the Company’s loan receivables consisted of the following:

As of June 30, 2025, the Company recorded a loan receivable balance of US$3,893,563 and long-term loan receivable of US$Nil, including accrued interest income of US$143,563.

As of June 30, 2024, the Company recorded a loan receivable balance of US$1,877,131 and long-term loan receivable of US$2,908,636, including accrued interest income of US$35,767.

7. Leases

As of June 30, 2025, the Company had operating and finance leases for office space, warehouse space, and forklifts. Lease terms expire at various dates through July 2025 to November 2034 with options to renew for varying terms at the Company’s sole discretion. The Company has 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 report, that these options will be exercised. The Company had certain sublease contracts and recognized US$1,253,104 and US$2,850,368 lease income during the years ended June 30, 2025 and 2024, respectively.

During the year ended June 30, 2025, the Company recognized additional operating lease liabilities of US$27,857,474, as the result of entering into three new operating lease agreements. The ROU assets were recognized at the discount rate of 10.25%, resulting in US$27,857,474 on the commencement dates. For the year ended June 30, 2025 and 2024, the Company terminated certain operating lease agreements prior to the original expiration dates. As a result, the ROU assets were derecognized of US$1,861,834 and US$2,619,484, respectively.

7. Leases (cont.)

The components of lease expenses were as follows:

The Company recorded operating lease expenses of US$34,402,300 and US$27,056,232 during the years ended June 30, 2025 and 2024, respectively. Specifically, US$31,677,864 and US$24,710,718 of the operating lease expenses were recorded in cost of service for the years ended June 30, 2025 and 2024, respectively. US$2,327,782 and US$351,201 of the operating lease expenses were recorded in general and administrative expenses for the years ended June 30, 2025 and 2024, respectively. US$396,654 and US$1,994,313 of the operating lease expenses were recorded in other expenses for the years ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, aggregate annual lease obligations for each of the following fiscal years ending June 30 and thereafter were as follows:

Weighted average remaining lease term:

Weighted average discount rate:

During the year ended June 30, 2025, US$60,000 (2024: US$1,377,312) lease expense was recognized in cost of service under short-term leases.

8. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:

Other liabilities as of June 30, 2025 mainly consisted of tenant deposits.

9. Convertible notes

On November 25, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (the “Investor”), pursuant to which the Company has the right to sell to the Investor up to $50.0 million (the “Commitment Amount”) of shares of the Company’s common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. In connection with the SEPA, and subject to the conditions set forth therein, the Investor agreed to advance to the Company pursuant to certain convertible promissory notes (the “Convertible Notes”) an aggregate principal amount of up to $21.0 million (the “Pre-Paid Advance”), subject to a 10% original issue discount, to be disbursed to the Company in three tranches:

According to the SEPA, the Company, at its sole discretion, has the right, but not the obligation, to issue and sell to the Investor, and the Investor will subscribe for and purchase the Company’s common stock by the delivery to the Investor of Advance Notices (as defined in the SEPA). In addition, the Investor, at its sole discretion, has the right, but not the obligation, by the delivery to the Company of Investor Notices, to cause an Advance Notice to be deemed delivered to the Investor and the issuance and sale of shares of the Company’s common stock to the Investor as long as there is a balance outstanding under a Convertible Note.

The Company agreed to pay a commitment fee of $500,000, representing 1% of the Commitment Amount (the “Commitment Fee”). The Commitment Fee was to be satisfied as follows: (a) Initial Payment: One-half of the Commitment Fee, amounting to $250,000, was paid on December 13, 2024, through the issuance of 43,147 shares of common stock to the Investor. The number of shares of common stock was determined by dividing one-half of the Commitment Fee by the average of the daily volume-weighted average price (“VWAP”) of the Company’s common shares during the three trading days immediately preceding November 25, 2024. The remaining one-half of the Commitment Fee, amounting to $250,000 (the “Deferred Fee”) was initially expected to be paid on the three-month anniversary of the date of the SEPA, either in cash or, at the Company’s election, by way of a Pre-paid Advance. Pursuant to a modification agreement (the “Modification Agreement”) entered into by and between the Company and the Investor, the Company agreed to pay to the Investor a reduced amount of $150,000 in cash on March 24, 2025, and the Investor agreed to accept such reduced amount in full satisfaction of the Deferred Fee.

Unless earlier terminated as provided thereunder, the SEPA shall terminate automatically on the earliest of (i) November 25, 2026, provided that if any Convertible Notes are then outstanding, such termination shall be delayed until such date that all Convertible Notes that were outstanding have been repaid, or (ii) the date on which the Investor has made payment of Pre-paid Advances pursuant to SEPA for shares of common stock equal to $50,000,000.

Advance Notice

If the Company requests a purchase of shares of common stock from the Investor by the delivery of an Advance Notice to the Investor, the purchase price therefor shall be the price per share of common stock obtained by multiplying the market price by (i)95% in respect of an Advance Notice within an Option 1 Pricing Period (as defined below) or (ii)97% in respect of an Advance Notice with an Option 2 Pricing Period (as defined below).

9. Convertible Notes (cont.)

The “Option 1 Pricing Period” means the period on the applicable advance notice date with respect to an Advance Notice selecting an Option 1 Pricing Period commencing (i) if submitted to Investor prior to 9:00 a.m. Eastern Time on a trading day, the open of trading on such day or (ii) if submitted to Investor after 9:00 a.m. Eastern Time on a trading day, upon receipt by the Company of written confirmation (which may be by e-mail) of acceptance of such Advance Notice by the Investor (or the open of regular trading hours, if later), and which confirmation shall specify such commencement time, and, in either case, ending on 4:00 p.m. New York City time on the applicable Advance Notice date, or such other time as maybe agreed by the parties. The “Option 1 market price” means the VWAP of the common stock during the Option 1 Pricing Period.

The “Option 2 Pricing Period” means the three consecutive trading days commencing on the Advance Notice Date. The Option 2 market price shall mean the VWAP of the common stock during the Option 1 Pricing Period.

Investor Notice

If the Investor requests a sale from the Company by the delivery of an Investor Notice to the Company, the purchase price, as of any conversion date or other date of determination, will be the lower of (i) $7.5937 per share of common stock, or (ii)94% of the lowest daily VWAP during the 5 consecutive trading days immediately preceding the conversion date or other date of determination (the “Variable Price”), which Variable Price shall not be lower than the floor price ($1.1880) (the “Floor Price”) then in effect.

In March 2025, the Company issued 434,879 shares of common stock, par value of US$0.00001 per share, at a price of US$1.72 per share, for an aggregate amount of US$750,000, representing the conversion of the SEPA loan for Investor Notices pursuant to the SEPA.

In May 2025, the Company issued 138,908 shares of common stock, par value of US$0.00001 per share, at a price of US$1.4398 per share, for an aggregate amount of US$200,000, representing the conversion of the SEPA loan for Investor Notices pursuant to the SEPA.

Repayments of Convertible Notes

Interest accrues on the outstanding principal balance of the Convertible Notes at an annual rate equal to 0% (“Interest Rate”), which Interest Rate shall increase to an annual rate of 18% upon the occurrence of an event of default (for so long as such event remains uncured).

If, any time after the issuance date of a Convertible Note, and from time to time thereafter, an Amortization Event (as defined below) has occurred, then the Company shall make monthly payments beginning on the 7th trading day after the Amortization Event Date and continuing on the same day of each successive calendar month until the entire outstanding principal amount shall have been repaid. Each monthly payment shall be in an amount equal to the sum of (i) $5,000,000 of the principal in the aggregate (or the outstanding principal if less than such amount) (the “Amortization Principal Amount”), plus (ii)10% of the Amortization Principal Amount, and (iii) the accrued and unpaid interest under the Convertible Note as of each payment date.

An “Amortization Event” means (i) the daily VWAP is less than the floor price then in effect for five trading days during a period of seven consecutive trading days, (ii) the Company has issued to the Investor, pursuant to the transactions contemplated in a Convertible Note, the other notes and the SEPA, in excess of 99% of the common stock available under the exchange cap of 8,322,636 shares of common stock, which represent 19.99% of the aggregate number of shares common stock issued and outstanding as of the effective date of the SEPA, or (iii) any time after the effectiveness deadline of February 8, 2025, the Investor is unable to utilize a registration statement to resell underlying common stock for a period of ten (10) consecutive trading days (the last day of each such occurrence, an “Amortization Event Date”).

The Convertible Notes are accounted for as a single liability measured at amortized costs. The original issue discount and all the transaction costs related to issuance of the Convertible Notes are capitalized to the carrying amount of the Convertible Notes and presented as a direct deduction from the debt liability. The discount and transaction costs are amortized into expenses based on the effective interest rate method. The effective interest rate related to the Convertible Notes is 13.99%.

First Modification

Pursuant to the Modification Agreement signed with the Investor on March 21, 2025 (the “First Modification”), the Company confirms, acknowledges, and agrees that an event described in Section 1(c) of the Promissory Notes has occurred (the “Floor Price Event”) and is continuing, because the VWAP was less than the Floor Price for five consecutive Trading Days. The Company acknowledges that the occurrence of the Floor Price Event constitutes an Amortization Event under the Promissory Notes, requiring the Company to make monthly cash payments in accordance with Section 1(c) of the Promissory Notes. In connection with this obligation, the Company agreed to make cash payments on specified dates and in minimum amounts.

9. Convertible notes (cont.)

The payment schedule began with an initial payment of $850,000 due on March 24, 2025, followed by eight weekly minimum payments of $200,000 each, commencing the week of March 31, 2025, and continuing through the week of May 19, 2025. In total, the Company was obligated to make minimum payments of $2,450,000 under this schedule.

The Company has fully settled these minimum payments in accordance with the payment schedule. The Company also retains the option to make payments in excess of the stated minimums, and any such additional amounts are applied first to reduce the original principal balance of the Convertible Promissory Note dated November 25, 2025.

In consideration of the covenants and agreements set forth in the Modification Agreement dated March 21, 2025, the Investor agreed, from the date thereof until May 20, 2025, to: (A) defer the Company’s obligation to make monthly payments as a result of the Floor Price Event or otherwise pursuant to Section 1(c) of the Promissory Notes, (B) shall not submit any Conversion Notices or Investor Notices unless the stock is trading at a price per share that is greater than $1.80 at the time any such notice is delivered, and (C) waive the application of the Payment Premium in respect of Company payments made in accordance with Section 2 above; in each case provided that (i) the Company strictly complies with the terms of this Agreement and (ii) there is no occurrence or existence of any Event of Default or any breach of any term of any of the Financing Documents.

Since the change of the modified debt instrument is not substantially different from those of the old debt, the First Modification is accounted for as a modification.

Second Modification

Pursuant to the Modification Agreement signed with the Investor on June 6, 2025 (the “Second Modification”), the Company also agreed to make, cash payments on the dates and in the minimum amounts under the promissory notes in the aggregate, as set forth below. The Company may, at its option, make cash payments in excess of the minimum amounts set forth below. Payment made pursuant to this Agreement shall be applied first to Promissory Note 2, then to Promissory Note 1, unless otherwise agreed by the parties.

As of June 30, 2025, the Company had paid the minimum payment of $1,010,000.

The present value of the cash flows under the new debt instrument, when discounted at the effective interest rate of the original instrument, exceeds 10% of the present value of the remaining cash flows under the original instrument. As the terms of the modified debt instrument are substantially different from those of the original debt, the Second Modification is accounted for as an extinguishment.

As a result, the Company recognized a loss on debt extinguishment of $1,192,431. The effective interest rate applicable to the new debt is 10.25%.

10. Other Income (Expenses)

Other income and expenses consisted of the following:

11. Income Taxes

Under the current California state and U.S. federal income tax, the Company’s California subsidiaries are subject to the California state corporate income tax at a rate of 8.84% and federal income tax at a flat rate of 21%.

The Company’s provision for income taxes/(recovery) consisted of the following:

The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense:

Significant components of deferred income tax assets and liabilities were as follows:

As at June 30, 2025, the Company had federal and state net operating loss carryforwards of US$16.82 million and US$17.05 million, respectively, which may be carried forward indefinitely.

12. Stockholders’ Equity

The Company is authorized to issue 100,000,000 shares of common stock, par value US$0.00001 per share, with 42,250,934 and 41,634,000 shares were issued and outstanding as of June 30, 2025 and 2024, respectively.

On May 15, 2024, the Company issued to EF Hutton LLC (now known as D. Boral Capital LLC; hereinafter, the “Representative”), as representative of the several underwriters with respect to the Company’s initial public offering (the “IPO”), and its affiliates, certain warrants, exercisable during the five-year period from the commencement of sales of the shares of common stock offered in the IPO, entitling the Representative to purchase an aggregate of up to 81,700 shares of common stock at a per share price equal to 125.0% of the public offering price per share in the IPO, or US$6.25 (the “Representative’s Warrants”). The fair value of US$268,430 of the Representative’s Warrants, using the Black Scholes Model with the following weighted-average assumptions: market value of underlying share of US$4.62, risk free rate of 4.46%, expected term offive years; exercise price of the warrants of US$6.25, volatility of 100%; and expected future dividends ofnil, was recorded in the Additional Paid-in Capital.

On December 13, 2024, the Company issued 43,147 shares of common stock, par value of US$0.00001 per share, for a price of US$5.79 per share, for an aggregate amount of US$250,000 as 50% of the commitment fee to an investor.

In March 2025, the Company issued 434,879 shares of common stock, par value of US$0.00001 per share, at a price of US$1.72 per share, for an aggregate amount of US$750,000, for Investor Notices pursuant to the SEPA.

In May 2025, the Company issued 138,908 shares of common stock, par value of US$0.00001 per share, at a price of US$1.44 per share, for an aggregate amount of US$200,000, for Investor Notices pursuant to the SEPA.

13. Earnings per Share

Basic and diluted net earnings per share for the year ended June 30, 2025 and 2024 were as follows:

Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares and dilutive share equivalents outstanding during the period. For the year ended June 30, 2025, the computation of diluted loss per share does not assume the impacts from the exercise of the Company’s outstanding unexercised warrants and the convertible debt, due to its loss position for the year ended June 30, 2025.

14. Commitments and Contingencies

Other commitments

Other than the standby letters of credit with Eastwest Bank in the aggregate amount of US$4,387,550 (see Note 2) and the operating and finance leases (see Note 7), the Company did not have other significant commitments, long-term obligations, or guarantees as of June 30, 2025 and 2024.

Contingencies

The Company is subject to legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome arising out of any such matter will have a material adverse effect on the Company’s consolidated financial position, cash flows or results of operations taken as a whole. As of June 30, 2025 and 2024, the Company was not a party to any material legal or administrative proceedings.

15. Related Party Transactions and Balances

Related Parties

Related Party transactions

The Company had the following related party transactions:

15. Related Party Transactions and Balances (cont.)

Due to related party balance

The Company’s balances due to related parties as of June 30, 2025 and 2024 were as follows:

The due to related party balances as of June 30, 2024 were unsecured, interest-free, and are due on demand.

16. Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to June 30, 2025, through the date the consolidated financial statements were available to issue, and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements other than the one below: