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 Armlogi Holding Corp. and its subsidiaries (collectively, the “Company”). All transactions and balances among Armlogi Holding Corp. 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. The most significant estimates relate to allowance for credit losses associated with the accounts receivables, other receivables and loan receivables, impairment of right-of-use assets – operating lease, impairment of property, plant and equipment and valuation allowance against net deferred tax assets. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.

Going concern Assessment

These consolidated financial statements for fiscal years ended June 30, 2026 and 2025 have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

The Company incurred a net loss of $20.9 million and utilized $5.1 million of net cash in operating activities during the fiscal year ended June 30, 2026 and, as of June 30, 2026, had a negative working capital of $25.6 million and accumulated deficits of $12.5 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is actively expanding its service offerings to new customers, optimizing warehouse utilization, and developing higher-margin logistics solutions to improve profitability and cash generation, and is concurrently seeking to raise working capital through discussions with financial institutions and investors to secure additional credit facilities and other forms of financing to fund its operations.

However, there can be no assurance that these plans and arrangements will be sufficient to meet the Company’s ongoing capital expenditure, working capital, and other requirements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of assets, or the amounts or classification of liabilities, that may result from the outcome of this uncertainty.

Measurement of credit loss on financial instruments

The Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments,” for financial assets at amortized cost including accounts receivable and other receivables, refundable deposits, and loan receivable. This guidance replaced the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. The Company used loss-rate method and individual evaluation method to estimate allowance for credit loss. For those past due balances over 1 year and other higher risk receivables identified by management are reviewed individually for collectability. In establishing an allowance for credit losses, the Company uses reasonable and supportable information, which is based on historical collection experience, the financial condition of its customers and assumptions for the future movement of different economic drivers and how these drivers will affect each other. Loss-rate approach is based on the historical loss rates and expectations of future conditions. The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected or if a settlement with respect to a disputed receivable is reached for an amount that is less than the carrying value.

Cash and cash equivalents

Cash and cash equivalents consist 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 amounts held as collateral for six standby letters of credit issued by Eastwest Bank in connection with certain of the Company’s lease agreements. The terms of the letters of credit commence on August 4, 2023, May 4, 2023, November 15, 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 it to significant concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash, accounts receivable and other receivables, loan receivables, other current assets, and other non-current assets. As of June 30, 2026 and 2025, substantially all of the Company’s cash and cash equivalents 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, 2026 and 2025, the Company’s five largest customers collectively accounted for approximately 55.9% and 55.1% of its total revenue, respectively. During the years ended June 30, 2026 and 2025, the Company’s top five suppliers collectively accounted for approximately 37.2% and 51.8% of its total purchases, respectively. Two suppliers collectively accounted for approximately 26.0% and 45.5% of the total purchases during the years ended June 30, 2026 and 2025, respectively, and no other supplier accounted for more than 10% of the total purchases over the same period.

As of June 30, 2026 and 2025, the largest three accounts receivable balances from customers accounted for approximately 36.6% and 66.0% 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 using a loss rate method based on historical information adjusted for current conditions and future estimated economic performance. The Company’s credit terms generally range from 3 to 30 days. Upon approval by the Board of Directors of the Company, the credit term may be extended to 180 days.

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 depreciation rates of these assets are generally as follows:

Expenditures for maintenance and repairs are expensed as incurred. Gains or 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 loss.

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 that the carrying amount of such 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 its 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 that a market participant would utilize, or through the engagement of a third-party independent appraiser or valuation specialist. No impairment losses on long-lived assets were recorded during the years ended June 30, 2026 and 2025.

The Company’s intangible assets consist of software and security systems, which are amortized on a straight-line basis over five toseven years.

Revenue recognition

The Company provides one-stop logistics services. The Company’s revenue is primarily derived 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 is 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 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 over which to recognize revenue based on the departure date and the delivery date, and the measurement of revenue progress as of the reporting date affects 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 its contracts with customers. Contract liabilities represent payments received from customers in excess of the revenue recognized. The contract liabilities are reported on a net position on a customer-by-customer basis at the end of each reporting period. 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. 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 remaining performance obligations within a twelve-month period and has 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 fulfillment and (ii) storage services. The Company’s performance obligation for inventory management and order fulfillment 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, and performance of such services generally takes less than one day to complete. 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 warehousing services is based on the consideration specified in the contract with the customer and comprises 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 comprises cost reimbursement per unit pricing for time and materials used, 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 consist primarily of customs house brokerage services sold on a standalone basis as a single performance obligation. The Company recognizes revenue from this performance obligation at a point in time upon the completion of the services. Duties and taxes collected from the customer and remitted 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 which party 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 has determined that it acts as the principal with respect to its transportation services performance obligation, as it controls the establishment of prices for the specified services, manages all aspects of the shipment process, and assumes 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 loss.

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 on a net position on a customer-by-customer basis at the end of each reporting period. 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, 2026 and 2025, the amounts transferred from contract liabilities at the beginning of the fiscal year to revenue were $939,097 and $247,824, respectively.

Practical Expedients

The Company has elected not to 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 loss.

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 expense is recognized on a straight-line basis over the lease term and is included in general and administrative expenses, costs of sales 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.

The Company performs an annual impairment analysis on ROU assets; as of June 30, 2026, no material impairment of ROU assets was identified.

The Company has elected 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 has elected the exemption from recording ROU assets and lease liabilities for all leases that qualify, and records rent expense on a straight-line basis over the lease term.

Taxation

Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items that 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 carryforwards, 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 tax rates expected to apply to taxable income in the years in which those 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 consolidated statements of operations in the period of 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 carryforward periods, the Company’s experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income within the carryforward 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 carryforwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trends 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 in their entirety 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 didnot have any unrecognized tax benefits as of June 30, 2026 and 2025.

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 are 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 of the Company’s business activities for the years ended June 30, 2026 and 2025 were conducted in the United States. Accordingly, all revenue for the years ended June 30, 2026 and 2025 was derived from the United States.

The Company’s long-lived assets consist primarily of property and equipment, right-of-use assets and restricted cash. As of June 30, 2026 and 2025, 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 the 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, accounts receivable and other receivables, loan receivables, other current assets, accounts payable and accrued liabilities, and lease liabilities. The carrying amounts of cash and cash equivalents, accounts receivable and other receivables, loan receivables, other current assets, accounts payable and accrued liabilities, and 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 using current interest rates.

The Company identified no transfers between levels during any of the periods presented. The Company did not hold any financial instruments measured at fair value on a recurring or non-recurring basis as of June 30, 2026 or 2025.

Cost of Services

Cost of services primarily consists 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, warehouse lease expenses, repairs and maintenance, salary and benefits, sundry costs, vehicle expenses, taxes and licenses, credit loss expenses, and other expenses.

Commitments and Contingencies

In the normal course of business, the Company is subject to commitments and contingencies, including operating lease and finance lease commitments, legal proceedings and claims arising out of its business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss will occur and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments on liability for contingencies, including the historical and specific facts and circumstances of each matter.

Recently issued accounting standards

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income (Topic 220-40): Expense Disaggregation Disclosures (“ASU 2024-03”). This update requires, among other things, more detailed disclosure about types of expenses in commonly presented expense captions such as cost of sales and selling, general, and administrative expenses, and is intended to improve the disclosures about an entity’s expenses including purchases of inventory, employee compensation, depreciation and amortization. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company has not yet adopted this new guidance and is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

In January 2025, the FASB issued ASU 2025-01, which clarifies the effective date of ASU 2024-03 for non-calendar year-end entities. ASU 2024-03 and ASU 2025-01 are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company has not yet adopted this new guidance and is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, which simplifies credit loss measurement for current accounts receivable and contract assets under Topic 326. This standard is effective for all entities for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company has not yet adopted this new guidance and is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, which enhances interim reporting requirements under Topic 270. For public business entities, ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. For all other entities, it is effective for interim reporting periods within annual reporting periods beginning after December 15, 2028. Early adoption is permitted for all entities. The Company has not yet adopted this new guidance and is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements and related disclosures. Management does not believe that any 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, 2026 and 2025:

4. Property and Equipment, Net

Property and equipment, net consisted of the following:

Depreciation expenses are recorded in costs of sales and general and administrative expenses. During the years ended June 30, 2026 and 2025, the Company recorded total depreciation expenses of US$2,899,311 and US$2,555,625, respectively, of which US$2,704,417 and US$2,349,234 were recorded in costs of sales, and US$194,894 and US$206,391 were recorded in general and administrative expenses, respectively.

5. Intangible Assets, Net

Intangible assets, net consisted of the following:

The Company recorded amortization expenses of US$41,479 and US$38,081, which were included in costs of sales, for the years ended June 30, 2026 and 2025, respectively.

6. Loan Receivables

During the years ended June 30, 2026 and 2025, the Company’s loan receivables consisted of the following:

As of June 30, 2026, the Company recorded a loan receivable balance of US$1,059,612, including accrued interest income of US$99,612. During the year ended June 30, 2026, the Company recognized a credit loss allowance of US$453,449.

The movement of allowance for credit loss for the years ended June 30, 2026 and 2025:

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

7. Leases

As of June 30, 2026, the Company had operating and finance leases for office space, warehouse space, and forklifts. Lease terms expire at various dates from September 2026 through 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 right-of-use (“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 arrangements and recognized US$286,000 and US$1,253,104 of sublease income during the years ended June 30, 2026 and 2025, respectively.

During the year ended June 30, 2026, the Company recognized additional operating lease liabilities of US$4,605,476 arising from one new operating lease agreement and one renewed lease agreement, compared to the June 30, 2025 operating lease liability balance of US$128,220,460. The corresponding ROU assets were recognized at a discount rate of 10.25%, resulting in ROU assets of US$4,605,476 recognized on the respective commencement dates. For the year ended June 30, 2026, the Company terminated certain operating lease agreements prior to their original expiration dates. As a result, ROU assets and lease liabilities of US$2,151,439 and US$2,172,285, respectively, were derecognized.

The components of lease expenses were as follows:

Cash paid for amounts included in the measurement of liabilities:

Of the total operating lease expenses of US$36,790,295 and US$34,402,300 recognized during the years ended June 30, 2026 and 2025, respectively, US$29,636,118 and US$31,677,864 were recorded in cost of sales, US$7,154,177 and US$2,327,782 were recorded in general and administrative expenses, and US$Nil and US$396,654 were recorded in other expenses, for the years ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, the maturities of lease liabilities for each of the following fiscal years ending June 30 and thereafter were as follows:

7. Leases (cont.)

Weighted average remaining lease term:

Weighted average discount rate:

During the year ended June 30, 2026, US$151,537 (2025: US$60,000) lease expense was recognized in costs of sales 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, 2026 consist primarily of customs duty advance payments received from customers.

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 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:

Pursuant to the SEPA, the Company, at its sole discretion, has the right, but not the obligation, to issue and sell to the Investor shares of 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 to require the issuance and sale of the Company’s common stock to the Investor, for so 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: (i) 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 which 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; and (ii) 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 was automatically terminable on the earliest of (i) November 25, 2026; provided that if any Convertible Notes were then outstanding, such termination would be delayed until the date on which all such outstanding Convertible Notes had been repaid in full; or (ii) the date on which the Investor had made payment of Pre-paid Advances pursuant to the SEPA for shares of common stock equal to $50,000,000.

Advance Notice

If the Company requested a purchase of shares of common stock from the Investor by the delivery of an Advance Notice to the Investor, the purchase price therefor was 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 within an Option 2 Pricing Period (as defined below).

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 the 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 the Investor after 9:00 a.m. Eastern Time on a trading day, upon receipt by the Company of written confirmation of acceptance of such Advance Notice by the Investor (or the open of regular trading hours, if later), such confirmation having specified 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 agreed to 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” means the VWAP of the common stock during the Option 2 Pricing Period.

Investor Notice

If the Investor requested 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, was 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 was no 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 Convertible Notes pursuant to Investor Notices under 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 Convertible Notes pursuant to Investor Notices under the SEPA.

In September 2025, the Company issued 77,669 and 3,114,476 shares of common stock, par value of US$0.00001 per share, at a price of US$1.29 and US$1.19 per share, respectively, for an aggregate amount of US$3,800,000, representing the conversion of Convertible Notes pursuant to Investor Notices under the SEPA.

Repayments of Convertible Notes

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

If, at any time after the issuance date of a Convertible Note, and from time to time thereafter, an Amortization Event (as defined below) shall have occurred, then the Company shall make monthly payments beginning on the seventh (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”), (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 of common stock issued and outstanding as of the effective date of the SEPA, or (iii) at 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 cost. The original issue discount and all the transaction costs related to the 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 confirmed, acknowledged, and agreed that an event described in Section 1(c) of the Convertible Notes had occurred (the “Floor Price Event”) and was continuing, because the VWAP was less than the Floor Price for five consecutive Trading Days. The Company acknowledged that the occurrence of the Floor Price Event constituted an Amortization Event under the Convertible Notes, requiring the Company to make monthly cash payments in accordance with Section 1(c) of the Convertible Notes. In connection with this obligation, the Company agreed to make cash payments on specified dates and in minimum amounts.

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

The Company fully settled these minimum payments in accordance with the payment schedule. The Company also retained the option to make payments in excess of the stated minimums, and any such additional amounts were applied first to reduce the outstanding principal balance of the Convertible Note dated November 25, 2024.

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 Convertible Notes, (B) not submit any Conversion Notices or Investor Notices unless the common stock traded at a price per share greater than $1.80 at the time any such notice was delivered, and (C) waive the application of the Payment Premium in respect of Company payments made in accordance with Section 2 of the Modification Agreement; in each case, provided that (i) the Company strictly complied with the terms of the Modification Agreement and (ii) no Event of Default had occurred or existed, and no breach of any term of any of the Financing Documents had occurred.

As the terms of the modified debt instrument were not substantially different from those of the original debt instrument, 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 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. Payments made pursuant to the Modification Agreement were applied first to Promissory Note 2, then to Promissory Note 1, unless otherwise agreed by the parties.

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 instrument, the Second Modification is accounted for as an extinguishment.

For the year ended June 30, 2025, the Company had paid the minimum payment of $3,260,000 pursuant to the First Modification and Second Modification. For the year ended June 30, 2026, the Company had paid the minimum payment of $2,020,000 pursuant to the Second Modification.

The Company fully satisfied all payment obligations pursuant to the First Modification and the Second Modification, and, upon the conversion of the Convertible Notes into 3,192,145 shares of common stock in September 2025, all outstanding Convertible Notes were fully settled.

10. Other Income (Expenses)

Other income, net consisted of the following:

11. Income Taxes

Under current California state and U.S. federal income tax laws, 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%.

During the year ended June 30, 2026, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures on a prospective basis for the first annual period beginning after December 15, 2024. The adoption did not affect the recognized amounts of income tax expense or related tax balances; it expanded the income tax disclosures presented below. Prior comparative periods have not been restated, consistent with the prospective method of adoption.

Components of loss before income taxes

The following table presents the components of loss before income taxes by geographic region for the year ended June 30, 2026, in accordance with the updated requirements of ASU 2023-09:

The following tables present the provision for, or benefit from, income taxes for the year ended June 30, 2026, in accordance with the updated requirements of ASU 2023-09:

11. Income Taxes (cont.)

The Company’s income tax recovery for the fiscal year ended June 30, 2025 consisted of the following:

During the fiscal year ended June 30, 2026, the Company adopted ASU 2023-09. As a result of the adoption, the effective income tax rates for the year ended June 30, 2026 are as follows:

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

Income Taxes Paid

The amount of cash paid for income taxes (net of refunds) for the year ended June 30, 2026 is as follows:

11. Income Taxes (cont.)

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

As of June 30, 2026, the Company had federal and state net operating loss carryforwards of US$18.0 million and US$19.3 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, of which 45,443,079 and 42,250,934 shares were issued and outstanding as of June 30, 2026 and 2025, respectively.

As of June 30, 2026 and 2025, the Company had 81,700 warrants outstanding and exercisable to purchase an aggregate of 81,700 shares of common stock.

On December 13, 2024, the Company issued 43,147 shares of common stock, par value of US$0.00001 per share, at a price of US$5.79 per share, for an aggregate amount of US$250,000, representing 50% of the commitment fee payable 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$1.73 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.

In September 2025, the Company issued 77,669 shares of common stock at a price of US$1.29 per share and 3,114,476 shares of common stock at a price of US$1.19 per share, each with a par value of US$0.00001 per share, for an aggregate amount of US$3,800,000, for Investor Notices pursuant to the SEPA to settle the remaining balance on the convertible notes.

13. Segment Information

The Company follows FASB ASC Topic 280, Segment Reporting, which requires companies to disclose segment data based on how management makes decisions about allocating resources to segments and evaluating their performance. Reportable operating segments include components of an entity about which separate financial information is available and whose operating results are regularly reviewed by the chief operating decision maker (the “CODM”) to make decisions about resource allocation and to assess each operating segment’s performance.

The Company’s CODM is Mr. Aidy Chou, Chief Executive Officer of the Company. The CODM regularly reviews financial information, including segment revenue, gross loss, general and administrative expenses, segment net loss, segment assets, and long-lived assets, to evaluate segment performance and allocate resources accordingly.

Based on its internal management reporting and assessment, the Company has determined that it operates inone reportable segment, with over 90% of its revenues and assets generated within the United States.

As the Company operates in only one reportable segment, all financial information required by ASC 280 is presented in the accompanying consolidated financial statements. Substantially all of the Company’s revenues are derived from operations conducted in the United States, and substantially all of its long-lived assets are located in the United States.

The Company operates as asingle operating and reportable segment. Accordingly, the significant expenses regularly provided to the CODM are those presented in the consolidated statements of operations, which include general and administrative expenses.

14. Earnings per Share

Basic and diluted net loss per share for the year ended June 30, 2026 and 2025 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 years ended June 30, 2026 and 2025, the computation of diluted loss per share excludes the dilutive effect of the Company’s outstanding unexercised warrants and convertible debt, as the Company was in a net loss position for each such period.

15. Commitments and Contingencies

Other commitments

Other than the standby letters of credit with Eastwest Bank in the aggregate amount of US$4,325,148 (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, 2026 and 2025.

Contingencies

The Company is subject to legal proceedings and regulatory actions in the ordinary course of business. As of June 30, 2026, except the transfer of listing of the Company’s common stock described below, the Company was not a party to any material legal or administrative proceedings. As of June 30, 2025, the Company was not a party to any material legal or administrative proceedings.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

As previously disclosed on a Current Report on Form 8-K filed by the Company, on November 7, 2025, the Company received a written notice from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the 30 consecutive business days preceding the receipt of the notice, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market (the “Minimum Bid Price Requirement”). The Company was granted an initial period of 180 calendar days, or until May 6, 2026, to regain compliance with the Minimum Bid Price Requirement.

On March 26, 2026, the Company submitted an application to Nasdaq to transfer the listing of its common stock from The Nasdaq Global Market to The Nasdaq Capital Market, along with a written notification of its intent to regain compliance with the Minimum Bid Price Requirement, including by effecting a reverse stock split if necessary. The Staff notified the Company in a letter dated May 7, 2026 (the “Second Nasdaq Notice”) that Nasdaq had approved the Company’s application to list its common stock on The Nasdaq Capital Market. Nasdaq’s approval was based in part upon the Company meeting the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing on The Nasdaq Capital Market (except for the bid price requirement), the Company’s written notice of its intention to cure the deficiency by effecting a reverse stock split, if necessary, its agreement to the conditions outlined in the Nasdaq Listing Agreement, and additional supporting information provided in its application.

The Company’s common stock has been transferred to The Nasdaq Capital Market at the opening of business on May 8, 2026, and the Staff has determined that the Company were eligible for an additional 180 calendar day period, or until November 2, 2026, to regain compliance (the “Second Compliance Period”). If at any time during this period the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of ten, and generally not more than 20, consecutive business days, the Staff will provide the Company with written confirmation of compliance and the matter will be closed.

In addition, as previously disclosed on a Current Report on Form 8-K filed by the Company, on April 17, 2026, the Company received a notice from Nasdaq that the listing of its common stock was not in compliance with Nasdaq Listing Rule 5450(b)(1)(C) for continued listing on The Nasdaq Global Market, as the Company’s Market Value of Publicly Held Shares (“MVPHS”) was below $5,000,000 for the previous 30 consecutive business days (the “MVPHS Deficiency”). Upon transfer to The Nasdaq Capital Market, the Company automatically regained compliance with the MVPHS requirement.

The Company intends to continue actively monitoring the bid price for its shares of common stock through the expiration of the Second Compliance Period and will consider all available options to resolve the deficiency, including the reverse stock split, as approved by the Board on September 21, 2026. However, there can be no assurance that the Company will be able to regain or maintain compliance with the Nasdaq listing criteria or continue to meet the continued listing requirements of The Nasdaq Capital Market.

16. Related Party Transactions and Balances

Related Parties

Related Party transactions

The Company hadno related party transactions.

17. Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to June 30, 2026, 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 audited consolidated financial statements.