Armlogi Holding Corp. 10-K

Item 8. Financial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ARMLOGI HOLDING CORP. AND SUBSIDIRIES TABLE OF CONTENTS Page Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 6413 ) F-2 Consolidated Balance Sheets as of June 30, 2025 and 2024 F-3 Consolidated Statements of Operations and Comprehensive Income for the Years Ended June 30, 2025 and 2024 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended June 30, 2025 and 2024 F-5 Consolidated Statements of Cash Flows for the Years Ended June 30, 2025 and 2024 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Armlogi Holding Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Armlogi Holding Corp. and its subsidiaries (the “Company”) as of June 30, 2025 and 2024, and the related consolidated statement of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2025, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ ZH CPA, LLC We have served as the Company’s auditor since 2022. Denver, Colorado September 25, 2025 999 18 th Street, Suite 3000, Denver, CO, 80202 USA Phone: 1.303.386.7224 Fax: 1.303.386.7101 Email: admin@zhcpa.us F- 2 ARMLOGI HOLDING CORP. CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2025 AND 2024 (US$, except share data, or otherwise noted) June 30, 2025 June 30, 2024 US$ US$ Assets Current assets Cash and cash equivalents 9,190,277 7,888,711 Accounts receivable and other receivables, net of (amortized cost of $ 22,802,369 and $ 25,872,226 and allowance for credit losses of $ 594,869 and $ 407,182 at June 30, 2025 and 2024, respectively) 22,207,500 25,465,044 Other current assets 998,925 1,624,611 Prepaid expenses 1,375,646 1,129,435 Loan receivables 3,893,563 1,877,131 Total current assets 37,665,911 37,984,932 Non-current assets Restricted cash – non-current 4,387,550 2,061,673 Long-term loan receivables — 2,908,636 Property and equipment, net 11,259,820 11,010,407 Intangible assets, net 54,627 92,708 Right-of-use assets – operating leases 115,361,185 111,955,448 Right-of-use assets – finance leases 745,547 309,496 Other non-current assets 739,555 711,556 Total assets 170,214,195 167,034,856 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Current liabilities Accounts payable and accrued liabilities 9,604,783 7,502,339 Contract liabilities 939,097 276,463 Income taxes payable — 57,589 Due to related parties — 350,209 Accrued payroll liabilities 283,150 405,250 Convertible notes 5,292,749 — Operating lease liabilities – current 29,280,907 24,216,446 Finance lease liabilities – current 386,327 155,625 Total current liabilities 45,787,013 32,963,921 Non-current liabilities Operating lease liabilities – non-current 98,939,552 93,126,092 Finance lease liabilities – non-current 397,692 169,683 Deferred income tax liabilities — 1,536,455 Total liabilities 145,124,257 127,796,151 Commitments and contingencies Stockholders’ equity Common stock, US$ 0.00001 par value, 100,000,000 shares authorized, 42,250,934 and 41,634,000 issued and outstanding as of June 30, 2025 and June 30, 2024, respectively 422 416 Additional paid-in capital 16,668,858 15,468,864 Retained earnings 8,420,658 23,769,425 Total stockholders’ equity 25,089,938 39,238,705 Total liabilities and stockholders’ equity 170,214,195 167,034,856 The accompanying notes form an integral part of these audited consolidated financial statements. F- 3 ARMLOGI HOLDING CORP. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED JUNE 30, 2025 AND 2024 (US$, except share data, or otherwise noted) Year Ended June 30, 2025 Year Ended June 30, 2024 US$ US$ Revenue 190,408,258 166,977,034 Costs of service 193,408,827 148,894,227 Gross (loss) profit ( 3,000,569 ) 18,082,807 Operating costs and expenses: General and administrative 14,675,543 9,967,792 Total operating costs and expenses 14,675,543 9,967,792 (Loss) Income from operations ( 17,676,112 ) 8,115,015 Other (income) expenses: Other income, net ( 2,714,344 ) ( 2,320,257 ) Loss on debt extinguishment 1,192,431 — Loss on disposal of assets 43,625 — Finance costs 714,352 47,649 Total other (income) expenses ( 763,936 ) ( 2,272,608 ) (Loss) Income before provision for income taxes ( 16,912,176 ) 10,387,623 Current income tax (recovery) expense ( 26,954 ) 2,145,072 Deferred income tax (recovery) expense ( 1,536,455 ) 801,333 Total income tax (recovery) expense ( 1,563,409 ) 2,946,405 Net (loss) income ( 15,348,767 ) 7,441,218 Total comprehensive (loss) income ( 15,348,767 ) 7,441,218 Basic & diluted net (loss) earnings per share ( 0.37 ) 0.19 Weighted average number of shares of common stock-basic 41,808,909 40,205,836 Weighted average number of shares of common stock-diluted 41,808,909 40,216,109 The accompanying notes form an integral part of these audited consolidated financial statements. F- 4 ARMLOGI HOLDING CORP. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKOLDERS’ EQUITY FOR THE YEARS ENDED JUNE 30, 2025 AND 2024 (US$, except share data, or otherwise noted) Common Stock Amount Additional paid-in capital Retained earnings Total equity Balance as of June 30, 2023 40,000,000 400 8,985,007 16,328,207 25,313,614 Net income — — — 7,441,218 7,441,218 Contribution from stockholders — — 1,269,022 — 1,269,022 Issuance of common stock for cash, net of issuance costs 1,634,000 16 5,214,835 — 5,214,851 Balance as of June 30, 2024 41,634,000 416 15,468,864 23,769,425 39,238,705 Net loss — — — ( 15,348,767 ) ( 15,348,767 ) Shares issued for Investor Notices pursuant to Standby Equity Purchase Agreement (SEPA) 573,787 5 949,995 — 950,000 Issuance of common stock for commitment fee 43,147 1 249,999 — 250,000 Balance as of June 30, 2025 42,250,934 422 16,668,858 8,420,658 25,089,938 The accompanying notes form an integral part of these audited consolidated financial statements. F- 5 ARMLOGI HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2025 AND 2024 (US$, except share data, or otherwise noted) For The Year Ended June 30, 2025 For The Year Ended June 30, 2024 US$ US$ Cash Flows from Operating Activities: Net (loss) income ( 15,348,767 ) 7,441,218 Adjustments for items not affecting cash: Net loss from disposal of fixed assets 43,625 — Depreciation of property and equipment and right-of-use financial assets 2,931,993 1,996,720 Amortization 38,081 35,317 Non-cash operating leases expense 7,536,058 5,193,458 Current estimated credit loss 275,610 94,694 Loss on debt extinguishment 1,192,431 — Accretion of convertible note 617,845 — Deferred income taxes ( 1,536,455 ) 801,333 Interest income ( 144,501 ) ( 109,427 ) Changes in operating assets and liabilities Accounts receivable and other receivables 2,981,935 ( 8,157,462 ) Other current assets 625,686 11,881 Prepaid expenses ( 246,211 ) ( 332,531 ) Other non-current assets ( 28,000 ) ( 711,556 ) Accounts payable & accrued liabilities 2,102,444 ( 667,825 ) Income tax payable ( 57,589 ) ( 2,597,106 ) Contract liabilities 662,634 ( 147,719 ) Accrued payroll liabilities ( 122,100 ) 141,894 Net changes in derecognized ROU and operating lease liability ( 63,874 ) — Net cash provided from operating activities 1,460,845 2,992,889 Cash Flows from Investing Activities: Purchase of property and equipment ( 2,889,928 ) ( 5,208,522 ) Proceeds from sale of property and equipment 48,000 — Loan disbursement amounts ( 1,000,000 ) ( 4,750,000 ) Proceeds from loan repayments 2,036,705 2,520,917 Net cash used in investing activities ( 1,805,223 ) ( 7,437,605 ) Cash Flows from Financing Activities: Net proceeds received from related parties — 1,000 Proceeds (lend to) from related parties ( 350,209 ) 511,353 Repayments of finance lease liabilities ( 360,443 ) ( 163,936 ) Repayment of commitment payable ( 150,000 ) — Repayment of convertible notes ( 3,260,000 ) — Deferred issuance costs for initial public offering — ( 951,617 ) Proceeds from convertible notes 8,092,473 Proceeds from IPO and share issuance, net — 7,471,180 Capital contributions from stockholders — 969,021 Net cash provided by financing activities 3,971,821 7,837,001 Net increase in cash and cash equivalents and restricted cash 3,627,443 3,392,285 Cash and cash equivalents and restricted cash, beginning of year 9,950,384 6,558,099 Cash and cash equivalents and restricted cash, end of year 13,577,827 9,950,384 The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that total the same amounts shown in the Consolidated Statements of Cash Flows: Cash and cash equivalents 9,190,277 7,888,711 Restricted cash – non-current 4,387,550 2,061,673 Total cash and cash equivalents and restricted cash shown in the Consolidated Balance Sheet 13,577,827 9,950,384 Supplemental Disclosure of Cash Flows Information: Cash paid for income tax ( 122,248 ) ( 4,742,178 ) Cash paid for interest ( 96,507 ) ( 47,649 ) Non-Cash Transactions: Decrease in right-of-use assets due to remeasurement of lease terms 1,148,456 — Right-of-use assets acquired in exchange for operating lease liabilities 27,857,474 81,927,507 Right-of-use assets acquired in exchange for finance lease liabilities 819,155 — Shares issued to settle commitment fee 250,000 — Shares issued pursuant to SEPA 950,000 — IPO expenses paid by stockholders — 300,000 The accompanying notes form an integral part of these audited consolidated financial statements. F- 6 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Principal activities Percentage of ownership Date of incorporation Place of incorporation Armlogi Holding Corp. Holding company — September 27, 2022 Nevada, U.S. Armstrong Logistic Inc. Logistic services 100 % April 16, 2020 California, U.S. Armlogi Truck Dispatching LLC Truck dispatching services 100 % February 26, 2021 California, U.S. AndTech Trucking LLC Trucking services 100 % May 7, 2021 California, U.S. Armlogi Trucking LLC Trucking services 100 % March 25, 2021 California, U.S. AndTech Customs Broker LLC Customs house brokerage services 100 % June 8, 2021 California, U.S. Armlogi Group LLC Leasing services 100 % October 19, 2021 California, U.S. 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. F- 7 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (cont.) 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: ● Historical loss experience for similar loan portfolios; ● Current conditions, such as borrower financial performance and collateral values; and ● Reasonable and supportable forecasts about future economic conditions (e.g., industry trends, customer sector risks, interest rates, and market trends). 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: Category Depreciation method Depreciation rate Furniture and fixtures Straight-line 7 years Auto & trucks Straight-line 5 – 8 years Trailers & truck chassis Straight-line 5 – 17 years Machinery & equipment Straight-line 2 – 7 years Leasehold improvements Straight-line Shorter of lease term or 15 years 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 to seven years. F- 8 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (cont.) 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 of one 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: (i) Step 1: Identify the contract with the customer (ii) Step 2: Identify the performance obligations in the contract (iii) Step 3: Determine the transaction price (iv) Step 4: Allocate the transaction price to the performance obligations in the contract (v) Step 5: Recognize revenue when the Company satisfies a performance obligation 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. F- 9 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (cont.) A summary of the Company’s revenue disaggregated by major service lines is as follows: June 30, 2025 June 30, 2024 US$ US$ Transportation services 127,013,393 115,323,654 Warehousing services 63,285,107 51,502,358 Other services 109,758 151,022 Total 190,408,258 166,977,034 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. i) Operating leases 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. ii) Finance leases Finance lease ROU assets are included in ROU and current lease liabilities, and other non-current lease liabilities in the consolidated balance sheets. F- 10 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (cont.) 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. F- 11 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (cont.) 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: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities. Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. 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. F- 12 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Summary of significant accounting policies (cont.) 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: June 30, 2025 June 30, 2024 US$ US$ Accounts receivable – third parties 22,713,346 24,239,599 Accounts receivable – related parties 912 1,067,729 Other receivables – third parties* 88,111 65,835 Other receivables – related parties* - 499,063 Gross total 22,802,369 25,872,226 Less: allowance for credit loss ( 594,869 ) ( 407,182 ) Total 22,207,500 25,465,044 * The balance is comprised primarily of accounts receivable associated with service arrangements that are not within the scope of ASC 606. The movement of allowance for credit loss for the years ended June 30, 2025 and 2024: June 30, 2025 June 30, 2024 US$ US$ Balance as of beginning 407,182 666,531 Additional provision 275,610 94,694 Write-off ( 87,923 ) ( 354,043 ) Ending balance 594,869 407,182 F- 13 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Property and Equipment, Net Property and equipment, net consisted of the following: June 30, 2025 June 30, 2024 US$ US$ Furniture and fixtures 10,414,191 9,845,383 Auto & Truck 2,624,905 2,080,830 Trailers & track chassis 2,215,011 1,161,811 Machinery & equipment 2,139,119 1,611,720 Leasehold improvement 139,541 74,098 Total 17,532,767 14,773,842 Less: Accumulated depreciation ( 6,272,947 ) ( 3,763,435 ) Property and equipment, net 11,259,820 11,010,407 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: June 30, 2025 June 30, 2024 US$ US$ Security Systems 85,758 85,758 Software 100,021 100,021 Total 185,779 185,779 Less: Accumulated depreciation ( 131,152 ) ( 93,071 ) Intangible, net 54,627 92,708 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. F- 14 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Loan Receivables During the years ended June 30, 2025 and 2024, the Company’s loan receivables consisted of the following: i) On July 10, 2023, the Company entered into a loan agreement with Pundarika LLC for a principal of US$ 1,000,000 . The loan matured on August 31, 2024 and bore an interest rate of 3.2 % annually. The loan was fully paid on August 30, 2024. ii) On January 24, 2024, the Company entered into a loan agreement with Athena Home Inc. for a principal of US$ 600,000 . The loan originally matured on January 24, 2025 and bore an interest rate of 3.2 % annually. The maturity date of the loan was extended to July 24, 2025 on April 18, 2025, and was further extended to January 24, 2026 on July 18, 2025. The Company expects the loan to be repaid upon maturity. iii) On May 21, 2024, the Company entered into a loan agreement with MYJW LLC. for a principal of US$ 400,000 . The loan matures on December 31, 2025 and bears an interest rate of 3.2 % annually. The Company expects the loan to be repaid upon maturity. iv) On May 28, 2024, the Company entered into a loan agreement with Pundarika LLC. for a principal of US$ 1.5 million. As security for loan repayment, Pundarika LLC pledged its inventory currently held in the Company’s warehouse as collateral. The value of the collateralized inventory is equivalent to the outstanding loan amount, ensuring a 1:1 collateral coverage ratio. The loan matures on December 31, 2025 and bears interest at a rate of 3.2 % annually. The Company expects the loan to be repaid upon maturity. A partial payment of US$ 1 million was repaid by Pundarika LLC on November 14, 2024. v) On June 6, 2024, the Company entered into a loan agreement with Pundarika LLC. for a principal of US$ 1.0 million. As security for loan repayment, Pundarika LLC pledged its inventory currently held in the Company’s warehouse as collateral. The value of the collateralized inventory is equivalent to the outstanding loan amount, ensuring a 1:1 collateral coverage ratio. The loan matures on December 31, 2025 and bears interest at a rate of 3.2 % annually. The Company expects the loan to be repaid upon maturity. vi) On June 13, 2024, the Company entered into a loan agreement with Bacalar Enterprise Freight Inc. for a principal of US$ 250,000 . The loan originally matured on June 13, 2025 and bears interest at a rate of 3.2 % annually. The maturity date of the loan was extended to December 13, 2025 on June 10, 2025. The Company expects the loan to be repaid upon maturity. vii) On August 29, 2024, the Company entered into a loan agreement with Pundarika LLC. for a principal of US$ 1.0 million. As security for loan repayment, Pundarika LLC has pledged its inventory currently held in the Company’s warehouse as collateral. The value of the collateralized inventory is equivalent to the outstanding loan amount, ensuring a 1:1 collateral coverage ratio. The loan matures on December 31, 2025 and bears interest at a rate of 3.2 % annually. The Company expects the loan to be repaid upon maturity. 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. F- 15 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Leases (cont.) The components of lease expenses were as follows: June 30, 2025 June 30, 2024 US$ US$ Operating: Operating lease expenses 34,402,300 27,056,232 Financing: Accretion 96,507 47,649 Amortization – included in cost of service 376,368 169,488 Total 472,875 217,137 Cash paid for amounts included in the measurement of liabilities: Operating cash flows used in operating leases 26,866,242 21,813,313 Operating cash flows used in finance leases 96,507 47,649 Financing cash flows used in finance leases 360,443 163,936 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 27,857,474 81,927,507 Finance leases 819,155 - 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: Operating Finance US$ US$ 2026 31,110,870 432,301 2027 36,578,138 312,731 2028 37,872,441 77,669 2029 25,804,167 67,226 2030 and beyond 39,734,608 - Total minimum lease payment 171,100,224 889,927 Less: imputed interest ( 42,879,765 ) ( 105,908 ) Total lease liabilities 128,220,459 784,019 Less: current potion ( 29,280,907 ) ( 386,327 ) Non-current portion 98,939,552 397,692 Weighted average remaining lease term: Operating leases 5.17 years Finance leases 2.39 years Weighted average discount rate: Operating leases 10.32 % Finance leases 11.25 % 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. F- 16 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following: June 30, 2025 June 30, 2024 US$ US$ Accounts payable 9,005,727 6,003,542 Credit card Payable 485,909 1,446,549 Other liabilities 113,147 52,248 Total 9,604,783 7,502,339 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: ● The first Pre-Paid Advance was disbursed on November 25, 2024 (Promissory Note 1), in the amount of $ 5.0 million and the Company received $ 4.5 million in cash, net of the 10 % original issue discount. ● The second Pre-Paid Advance was disbursed on December 17, 2024 (Promissory Note 2), in the amount of $ 5.0 million and the Company received $ 4.5 million in cash, net of the 10 % original issue discount. ● The third Pre-Paid Advance, originally expected to be advanced in the principal amount of $ 11.0 million on the second trading day after the initial Registration Statement (as defined in the SEPA) first became effective, is no longer expected to be disbursed, since the initial Registration Statement did not become effective within 75 calendar days of the date of the registration rights agreement entered into between the Company and the Investor in connection with the SEPA, which was a condition precedent to such advance. 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). F- 17 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. F- 18 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Date Minimum Payment (Principal + Premium) June 6, 2025 $ 1,010,000 July 16, 2025 $ 1,010,000 August 15, 2025 $ 1,010,000 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 %. F- 19 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Other Income (Expenses) Other income and expenses consisted of the following: June 30, 2025 June 30, 2024 US$ US$ Rental income 1,253,104 2,850,368 Rental expense ( 408,098 ) ( 2,049,159 ) Interest income 381,033 164,817 Credit card rebate income 803,856 1,246,575 Other income 684,449 107,656 Total 2,714,344 2,320,257 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: June 30, 2025 June 30, 2024 US$ US$ Current ( 26,954 ) 2,145,072 Deferred ( 1,536,455 ) 801,333 Total income tax expenses (recovery) ( 1,563,409 ) 2,946,405 The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense: June 30, 2025 June 30, 2024 US$ US$ Statutory tax rate 29.84 % 29.84 % (Loss) Income for the year before income taxes ( 16,912,176 ) 10,387,623 Expected income tax expense ( 5,046,594 ) 3,099,667 Permanent differences – deductible state tax expense in computation of federal tax - ( 153,262 ) Change in valuation allowance 3,510,139 - Prior year true-up ( 26,954 ) - Total income taxes ( 1,563,409 ) 2,946,405 Significant components of deferred income tax assets and liabilities were as follows: June 30, 2025 June 30, 2024 US$ US$ Deferred income tax assets (liabilities) Net operating loss carrying forward 5,040,024 - Allowance for credit loss 177,509 121,503 Valuation allowance ( 3,510,139 ) - Property, plant and equipment ( 1,707,394 ) ( 1,657,958 ) Total deferred income tax assets (liabilities) - ( 1,536,455 ) 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. F- 20 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 of five years ; exercise price of the warrants of US$ 6.25 , volatility of 100 %; and expected future dividends of nil , 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: June 30, 2025 June 30, 2024 US$ US$ Numerator: Net (loss) income attributable to stockholders – basic and diluted ( 15,348,767 ) 7,441,218 Denominator: Weighted average number of shares of common stock outstanding – basic 41,808,909 40,205,836 (Loss) Earnings per share attributable to stockholders – basic ( 0.37 ) 0.19 Denominator: Weighted average number of shares of common stock outstanding – diluted 41,808,909 40,216,109 (Loss) Earnings per share attributable to stockholders – diluted ( 0.37 ) 0.19 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. F- 21 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Name of related parties Relationship with the Company Jacky Chen Former CEO of the Company’s significant operating subsidiary, Armstrong Logistic Inc. (from January 1, 2021 to December 31, 2021) Aidy Chou Founder, CEO, and substantial stockholder Tong Wu Founder, Secretary, Treasurer, director, and substantial stockholder DNA Motor Inc. A company wholly-owned by Jacky Chen Junchu Inc. A company wholly-owned by Tong Wu Related Party transactions The Company had the following related party transactions: (i) During the year ended June 30, 2025, the Company repaid an aggregate of US$ 350,209 to the Company’s related parties, Jacky Chen and Tong Wu. During the year ended June 30, 2024, the Company’s related party, Jacky Chen, advanced US$ 1,000 to support the Company’s working capital needs. (ii) DNA Motor Inc., the landlord of five of the Company’s operating leases, is owned by Jacky Chen. During the year ended June 30, 2025, for these operating leases, US$ 302,855 (2024: US$ 396,213 ) of lease expense was recorded in general and administrative expenses, US$ 8,995,340 (2024: US$ 11,576,570 ) was recorded in cost of service, and US$ 396,654 (2024: US$ 1,244,809 ) was recorded in other expenses. The aggregate lease liability associated with these operating leases as of June 30, 2025 was US$ 24,092,384 (2024: US$ 32,853,612 ). (iii) During the year ended June 30, 2025, the Company generated revenue of US$ 118,285 (2024: US$ 520,805 ) for providing logistic services to DNA Motor Inc. During the year ended June 30, 2025, the Company paid expenses in the total amount of US$ 680,961 (2024: US$ 2,549,849 ) on behalf of DNA Motor Inc. (iv) During the year ended June 30, 2025, the Company incurred operating expenses of US$ 3,541,534 for outside services, warehouse supplies, freight expenses and operating expenses provided by DNA Motor Inc. During the year ended June 30, 2024, the Company incurred operating expenses of US$ 840,135 and general and administrative expenses of US$ 613 for outside services, warehouse supplies, freight expenses and operating expenses provided by DNA Motor Inc. (v) During the year ended June 30, 2025, the Company generated revenue of US$ 893,148 (2024: US$ 2,251,040 ) for providing warehousing services to DNA Motor Inc. (vi) During the year ended June 30, 2025, the Company purchased plant and equipment from DNA Motor Inc. of US$ 8,000 (2024: US$ nil ). (vii) On January 22, 2024, the Company entered into a loan agreement with Tony Wu for a principal of US$ 700,000 . The loan matured on January 24, 2025 and bore interest at a rate of 3.2 % annually. On March 6, 2024, the loan was repaid with the principal and interest expense of US$ 2,700 . F- 22 ARMLOGI HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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: June 30, 2025 June 30, 2024 US$ US$ Tong Wu - 181,971 Jacky Chen - 168,238 Total - 350,209 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: ● On March 6, 2025, the Company entered into a non-binding Letter of Intent to acquire 100 % of the issued and outstanding capital stock of Leopard Transnational Inc., a California-based logistics provider with approximately 360,000 square feet of U.S. warehouse space. The proposed consideration includes common stock and potential earn-out payments. The transaction remains subject to due diligence, negotiation of a definitive agreement, and necessary approvals, and had not been completed as of the date the financial statements were available to be issued. F- 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.