What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-17 compared with 2025-11-13 · 262 added, 203 removed, 133 unchanged (78% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion and analysis should

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This Quarterly Report on Form 10-Q contains “forward-looking

statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes

of federal and state securities laws, including, but not limited to:

statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of

federal and state securities laws, including, but not limited to:

any projections of earnings, revenue, or other financial items;

any statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives

of management for future operations;

statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives of management

for future operations;

any statements concerning proposed new products, services, or developments;

any statements regarding

future economic conditions or performance;

any statements regarding future economic

conditions or performance;

any statements of belief;

and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,”

“continue,” “believe,” “expect,” “plan,” “project,” or “anticipate,”

and other similar words.

In addition to any assumptions and other factors and matters referred to specifically in connection with such

forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking

statements include those factors set forth under “Item 1A.

Risk Factors” included in our annual report on Form 10-K (File

001-42099) for the fiscal year ended June 30, 2025, filed with the U.S.

Securities and Exchange Commission (the “SEC”)

on September 25, 2025 (the “Annual Report”).

Forward-looking

statements may include the words “may,” “will,” “estimate,” “intend,” “continue,”

“believe,” “expect,” “plan,” “project,” or “anticipate,” and other similar

In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements,

factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking statements include

those factors set forth under “Item 1A.

Risk Factors” included in our annual report on Form 10-K (File No.

001-42099) for

the fiscal year ended June 30, 2025, filed with the U.S.

Securities and Exchange Commission (the “SEC”) on September 25, 2025

(the “Annual Report”).

Although we believe that the expectations reflected

in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed.

financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks

and uncertainties, such as those disclosed in this Quarterly Report.

We do not intend, and undertake no obligation, to update any forward-looking

statement, except as required by law.

Our future financial

condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties,

such as those disclosed in this Quarterly Report.

We do not intend, and undertake no obligation, to update any forward-looking statement,

except as required by law.

The information included in this Management’s

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Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report.

We are a fast-growing U.S.-based warehousing

and logistics service provider that offers a comprehensive package of supply-chain solutions relating to warehouse management and order

We are a fast-growing U.S.-based warehousing and

logistics service provider that offers a comprehensive package of supply-chain solutions relating to warehouse management and order fulfillment.

With the boom of e-commerce and Internet technology,

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complexities involved in shipping goods across borders.

Specifically, when a foreign consumer places an order online, it

can take a long time for the goods to be delivered from one country to another (especially for bulky items), while facing high damage

rates and congestion during peak seasons.

One of the solutions to such problems is to set up overseas warehouses, which are local storage

facilities established in a foreign country where the cross-border merchants intend to sell their goods.

Cross-border e-commerce merchants

can export goods in batches in advance to overseas warehouses, which can then be delivered to overseas consumers once orders are placed

via e-commerce platforms.

As a result, the delivery time and the rate of damaged and lost packages may be reduced significantly, therefore

enhancing the shopping experience of consumers.

Specifically, when a foreign consumer places an order online, it can

take a long time for the goods to be delivered from one country to another (especially for bulky items), while facing high damage rates

and congestion during peak seasons.

One of the solutions to such problems is to set up overseas warehouses, which are local storage facilities

established in a foreign country where the cross-border merchants intend to sell their goods.

Cross-border e-commerce merchants can export

goods in batches in advance to overseas warehouses, which can then be delivered to overseas consumers once orders are placed via e-commerce

As a result, the delivery time and the rate of damaged and lost packages may be reduced significantly, therefore enhancing

the shopping experience of consumers.

We provide one-stop warehousing and logistics

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are similar to those we provide to our overseas customers.

This allows us to provide integrated solutions for our customers, whether

they need domestic or international warehousing and logistics support.

As of September 30, 2025 and June 30, 2025, we had an active customer

This allows us to provide integrated solutions for our customers, whether they

need domestic or international warehousing and logistics support.

As of December 31, 2025 and June 30, 2025, we had an active customer

base of 588, and 505, respectively, for our warehousing and logistics services.

For the three months ended September 30, 2025

and 2024, we had total revenue of $49.5 million and $42.5 million, and net loss of $6.5 million and $4.6 million, respectively.

we do not have any subsidiaries, assets, or employees in the PRC, we generate a significant portion of our revenue from customers based

During the three months ended September 30, 2025 and 2024, we generated approximately 83% and 85% of our revenue from PRC-based

customers, respectively.

For the six months ended December 31, 2025 and

2024, we had total revenue of $101.0 million and $93.6 million, and net loss of $10.4 million and $6.3 million, respectively.

do not have any subsidiaries, assets, or employees in the PRC, we generate a significant portion of our revenue from customers based in

During the six months ended December 31, 2025 and 2024, we generated approximately 83% and 86% of our revenue from PRC-based customers,

respectively.

Results of Operations

The following table outlines our consolidated

statements of operations for the three months ended September 30, 2025 and 2024:

September 30,

statements of operations for the three and six months ended December 31, 2025 and 2024:

For Three Months

For Six Months

Costs of services

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Loss from operations

(10,800,205 )

Other (income) expenses:

Other income, net

Loss on disposal of assets

Finance costs

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Loss before provision for income taxes

Current income tax recovery

Deferred income tax recovery

Total income tax recovery

(10,351,799 )

Current income tax expense

Deferred income tax expense (recovery)

Total income tax expenses (recovery)

(10,368,235 )

Total comprehensive loss

Basic & diluted net loss per share

(10,368,235 )

Basic & diluted net earnings per share

Weighted average number of shares of common stock-basic and diluted

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The following table sets forth our revenue for

the three months ended September 30, 2025 and 2024:

September 30,

the three and six months ended December 31, 2025 and 2024:

Costs of services

Gross loss margin %

Gross profit (loss)

Gross profit (loss) margin %

The following table outlines the compositions

of our revenue streams:

September 30,

Transportation services

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Other services

Our revenue increased by $7.0 million, or

16.5%, to $49.5 million during the three months ended September 30, 2025, compared to $42.5 million for the same

period in 2024.

Three Months Ended December 31, 2025

Our revenue slightly increased by $0.4 million,

or 0.8%, to $51.5 million during the three months ended December 31, 2025, compared to $51.1 million for the same period

The increase was due to the following factors:

Revenue from our transportation services increased by $3.6 million,

or 12.6%, for the three months ended September 30, 2025, compared with the same period in 2024, due to the addition of new warehouse

locations, which resulted in an increase in shipment volume for the three months ended September 30, 2025.

Revenue from our warehousing services increased by $3.4 million, or

24.4%, for the three months ended September 30, 2025, compared with the same period in 2024.

1) Revenue from our transportation services decreased by $4.1

million, or 11.5%, for the three months ended December 31, 2025, compared with the same period in 2024, due to a decreased proportion

of traditional customer order volume and an increased proportion of Temu and TikTok order volume for the three months ended December

Aggressive market pushes by e-commerce platforms have incentivized sellers to ship orders through the platforms rather than

directly to consumers.

For example, more of our traditional customers are transferring orders in bulk to Amazon warehouses to sell through

their Fullfillment by Amazon program instead of shipping individual items to buyers.

Additionally, because Temu and TikTok orders typically

only generate warehouse service revenue due to transportation services already being provided by the e-commerce platforms, the decrease

in the volume of traditional orders and subsequent decrease in transportation services revenue is not offset by the general increase

in order volume.

While overall order volume has increased, the number of orders using our transportation services has decreased, resulting

in a decrease in transportation service volume and revenue.

2) Revenue from our warehousing services increased by $4.5 million,

or 30.2%, for the three months ended December 31, 2025, compared with the same period in 2024.

As an integrated part of our one-stop

warehousing and logistics services, revenue increase from our warehousing services was driven by the growth in our transportation

services and the addition of new warehouses acquired in 2025.

The following table sets forth a breakdown of our costs of services

for the three months ended September 30, 2025 and 2024:

September 30,

warehousing and logistics services, revenue increase from our warehousing services was driven by the optimizations of warehouse space

usage and streamlining of workflow, and the Temu and TikTok customer bases have increased and contribute to a more significant portion

of warehouse service volume.

Six Months Ended December 31, 2025 and

Our revenue increased by $7.4 million, or 7.9%, to $101.0 million

during the six months ended December 31, 2025, compared to $93.6 million for the same period in 2024.

The increase was due to

the following factors:

Revenue from our transportation services slightly decreased by $0.6 million, or 0.9%, for the six months ended December 31, 2025, compared with the same period in 2024, due to a decreased proportion of traditional customer order volume and an increased proportion of Temu and TikTok order volume for the six months ended December 31, 2025.

Aggressive market pushes by e-commerce platforms have incentivized sellers to ship orders through the platforms rather than directly to consumers.

For example, more of our traditional customers are transferring orders in bulk to Amazon warehouses to sell through their Fullfillment by Amazon program instead of shipping individual items to buyers.

Additionally, because Temu and TikTok orders typically only generate warehouse service revenue due to transportation services already being provided by the e-commerce platforms, the decrease in the volume of traditional orders and subsequent decrease in transportation services revenue is not offset by the general increase in order volume.

While overall order volume has increased, the number of orders using our transportation services has decreased, resulting in a decrease in transportation service volume and revenue..

from our warehousing services increased by $8.0 million, or 27.4%, for the six months ended December 31, 2025, compared with the same

period in 2024.

As an integrated part of our one-stop warehousing and logistics services, revenue increase from our warehousing services

was driven by optimizations of warehouse space usage and streamlining of workflow.

The following table sets forth a breakdown of

our costs of services for the three and six months ended December 31, 2025 and 2024:

Lease expenses

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Other expenses

Our costs of services mainly represented the costs incurred for the

use of third-party direct freight service carriers, such as FedEx and UPS, warehouse rental expenses, costs of labor, and trucking expenses.

Costs of services increased by $5.9 million, or 12.7%, during the three months ended September 30, 2025, compared with

the same period in 2024.

Three Months Ended December 31,

2025 and 2024

Our costs of services mainly represented the costs

incurred for the use of third-party direct freight service carriers, such as FedEx and UPS, warehouse rental expenses, costs of labor,

and trucking expenses.

Costs of services increased by $1.7 million, or 3.3%, during the three months ended December 31, 2025,

compared with the same period in 2024.

The increase was primarily driven by the following two factors:

Between September 30, 2024 and September 30, 2025, the Company expanded its operations through opening two new warehouses,

including a new warehouse in the State of Illinois.

These new facilities focused less on the traditional drop-shipping model, instead

operating as hubs for lower profit margin services such as transfers or returns.

These dynamics resulted in a notable increase in warehouse

labor, rental, and other related operating expenses.

Freight costs increased in line with the increase in revenue from transportation

In addition, the Company’s gross profit margin on FedEx shipments increased to 6% during the three months ended September

30, 2025, compared to 2% during the same period in 2024.

This increase is largely driven by the transition of part of the freight volume

to third-party vendors shipping through FedEx that provided more competitive pricing for different shipment size and weight brackets,

lowering costs, increasing shipping options, and stabilizing the cost structure.

Our overall gross loss margin improved from (8.5%) for the three months

ended September 30, 2024 to (5.0%) for the same period in 2025, primarily due to expanded shipping options and lowered shipping costs.

Working with several different third-party FedEx vendors has allowed us to provide competitive shipping prices across a wider range of

shipment sizes and weights compared to working only with FedEx directly.

Although revenue increased by $7.0 million during this period,

the Company was unable to generate profit from warehouse-related expenditures.

Between December 31, 2024 and December 31, 2025, the Company expanded its operations through opening three new warehouses, including a new warehouse in the State of Illinois.

These new facilities focused less on the traditional drop-shipping model, instead operating as hubs for lower profit margin services such as transfers or returns.

These dynamics resulted in a notable increase in temporary labor expenses by $1.5 million, rental expenses by $2.0 million, and other related operating expenses.

Freight costs decreased by $1.0 million due to a decreased proportion of traditional customer order volume and an increased proportion of Temu and TikTok order volume.

Aggressive market pushes by e-commerce platforms incentivizing sellers to ship orders through the platforms instead of directly to customers.

While overall order volume has increased, freight costs have decreased due to fewer orders utilize our transportation and freight services.

Traditional customers are much more likely to rely on our services for deliveries and transfers.

Our overall gross profit/(loss) margin decreased

from 0.9% for the three months ended December 31, 2024 to -1.5% for the same period in 2025, primarily due to a decrease in the proportion

of shipments using our shipping services, which typically has higher profit margins.

Many of the new customers have come through the Temu

and TikTok e-commerce platforms, which provide their own shipping labels.

This has muted the holiday season increase in revenue from transportation

services we typically see and we have had to cut profit margins of the shipping services to keep competitive prices.

Additionally, the

new warehouses added between December 31, 2024 and December 31, 2025 have been used for lower profit margin services, such as handling

returned orders.

Although revenue increased by $0.4 million during this period, the Company was unable to generate profit from warehouse-related

expenditures.

Six Months Ended December 31, 2025 and

Costs of services increased by $7.5 million,

or 7.8%, during the six months ended December 31, 2025, compared with the same period in 2024.

The increase was primarily driven

by the following two factors:

Between December 31, 2024 and December 31, 2025, the Company expanded its operations through opening three new warehouses, including a new warehouse in the State of Illinois.

These new facilities focused less on the traditional drop-shipping model, instead operating as hubs for lower profit margin services such as transfers or returns.

These dynamics resulted in a notable increase in temporary labor expenses by $2.9 million, rental expenses by $3.5 million, and other related operating expenses.

Freight costs increased by $1.0 million due to additional order volume from the three new warehouses added between December 31, 2024 and December 31, 2025.

While the new Illinois and California warehouses did not focus mainly on drop-shipped orders, they still handled a significant amount.

The volume of orders at these two warehouses further increased during the three months ended June 30, 2025 and the three months ended December 31, 2025, respectively, when several larger customers started utilizing the new warehouses for drop-shipped orders.

Our overall gross loss margin slightly improved

from 3.3% for the six months ended December 31, 2024 to 3.2% for the same period in 2025, primarily due to the Company’s increased

focus on overall warehouse efficiency.

We have been expanding our selection of temporary labor service providers with the goal of decreasing

costs without sacrificing warehouse output.

Operating expenses

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and administrative expenses.

The following table sets forth a breakdown of our general and administrative expenses for the three months

ended September 30, 2025 and 2024:

September 30,

The following table sets forth a breakdown of our general and administrative expenses for the three and six months

ended December 31, 2025 and 2024:

Office expenses

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Other expenses

Credit loss expenses

Credit loss expenses (recovery)

Three Months Ended December 31,

2025 and 2024

Our general and administrative expenses increased

by $0.5 million, from $3.7 million for the three months ended September 30, 2024 to $4.2 million for the same

period in 2025, representing an increase of 14.9%.

by $0.7 million, from $2.7 million for the three months ended December 31, 2024 to $3.3 million for the same period

in 2025, representing an increase of 25.2%.

The increase was due to the following factors:

Office expenses increased by $0.3 million, or 92.5% as a result of

the growth in our dispatching services team.

The increase in personnel necessitated an increased expenditure in office supplies and necessities.

Rental expenses increased by $0.2 million, or 145.3%.

The increase is mainly due to the reclassification

of abnormal capacity portion of new warehouses (EWS1 and ONT1) from cost to general and administrative expenses.

Repairs and maintenance expenses increased by $0.4 million, or 107.9%,

as a result of the growth in our transportation services.

Salary and benefits decreased by $0.3 million, or 28.9%, mainly due to the Company being overcharged

for workers’ comp insurance in the three months ended September 30, 2024, which was refunded in December 2024.

The increase is mainly due to new warehouse locations added between December 2024 and December 2025.

Repairs and maintenance expenses increased by $0.5 million, or 604.2%, mainly due to additional warehouse locations and growth in our truck fleet.

Salary and benefits increased by $0.4 million, or 50.8%, due to personnel increases from the additional warehouse locations and transportation service growth.

Professional fees decreased by $0.6 million, or 66.1%.

The decrease is mainly due to fewer external consultants used in the three months ended December 31, 2025.

Six Months Ended December 31, 2025 and 2024

Our general and administrative expenses increased

by $1.2 million, from $6.3 million for the six months ended December 31, 2024 to $7.5 million for the same period

in 2025, representing an increase of 19.2%.

The increase was due to the following factors:

Rental expenses increased by $0.7 million, or 311.4%.

The increase is mainly due to new warehouse locations added between December 2024 and December 2025.

Repairs and maintenance expenses increased by $0.9 million, or 210.9%, mainly due to additional warehouse locations and growth in our truck fleet.

Professional fees decreased by $0.5 million, or 43.7%.

The decrease is mainly due to fewer external consultants used in the six months ended December 31, 2025.

Our income tax recovery decreased by $0.1 million

for the three months ended September 30, 2025 compared to the same period in 2024, mainly due to the non-recurring reversal

of previously recognized deferred tax liabilities during the three months ended September 30, 2024.

for the three months ended December 31, 2025 compared to the same period in 2024, mainly due to the non-recurring reversal of recognized

deferred tax liabilities during the three months ended December 31, 2024.

Our income tax recovery decreased by $1.5 million

for the six months ended December 31, 2025 compared to the same period in 2024, mainly due to the non-recurring reversal of previously

recognized deferred tax liabilities during the six months ended December 31, 2024.

As a result of the foregoing, our net loss for

the three months ended September 30, 2025 was $6.5 million, compared with $4.6 million for the same period in 2024,

representing an increase in net loss by $1.9 million.

the three months ended December 31, 2025 was $3.9 million, compared with $1.7 million for the same period in 2024, representing

a decrease by $2.2 million.

Our net loss for the six months ended December 31,

2025 was $10.4 million, compared with $6.3 million for the same period in 2024, representing a decrease by $4.1 million.

Liquidity and Capital Resources

Going Concern

These financial statements 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 $6.5 million during the three months ended September 30, 2025

and as of that date, had a net current liability of $11.1 million.

Without additional financing, the Company may not be able to fund

its ongoing operations.

The Company is expanding its service offerings to new customers, optimizing warehouse utilization, and

developing higher-margin logistics solutions to improve profitability and cash generation.

Management is executing a cost

optimization plan, including delaying certain non-essential capital expenditures, reducing third-party service costs, and improving

operational efficiency across warehouse operations to preserve cash flow.

In addition, the Company is in discussions with several

financial institutions and investors to secure additional credit facilities and other forms of financing to strengthen working

There is no assurance that the Company will be able to obtain financings or obtain them on favorable terms.

uncertainties may cast significant doubt on the Company’s ability to continue as a going concern.

The Company will need to

raise sufficient working capital to maintain operations.

These financial statements do not include any adjustments related to the

recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a

going concern.

These financial statements 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 $10.4 million during the six months ended December 31, 2025 and as of that date,

had a net current liability of $15.8 million.

Without additional financing, the Company may not be able to fund its ongoing operations.

The Company is expanding its service offerings to new customers, optimizing warehouse utilization, and developing higher-margin logistics

solutions to improve profitability and cash generation.

Management is executing a cost optimization plan, including delaying certain non-essential

capital expenditures, reducing third-party service costs, and improving operational efficiency across warehouse operations to preserve

In addition, the Company is in discussions with several financial institutions and investors to secure additional credit facilities

and other forms of financing to strengthen working capital.

There is no assurance that the Company will be able to obtain financings or

obtain them on favorable terms.

These uncertainties may cast significant doubt on the Company’s ability to continue as a going concern.

The Company will need to raise sufficient working capital to maintain operations.

These financial statements do not include any adjustments

related to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue

as a going concern.

Such adjustments could be material.

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and capital contributions from stockholders.

As of September 30, 2025 and June 30, 2025, we had cash and cash equivalents and restricted

As of December 31, 2025 and June 30, 2025, we had cash and cash equivalents and restricted

cash of $9.4 million and $13.6 million, respectively, which primarily consisted of cash deposited in banks.

Our working capital requirements mainly consist of costs of services

and general and administrative expenses.

We expect that our capital requirements will be met by cash generated from our operating activities

and financing activities.

We believe that our current cash and cash generated from our operating activities will be sufficient to meet

our current and anticipated working capital requirements and capital expenditures for at least the next 12 months.

We may, however,

need additional cash resources in the future if we experience changes in our business conditions or other developments.

Cash Flows for the three months Ended

September 30, 2025 and 2024

September 30,

Our working capital requirements mainly consist

of costs of services and general and administrative expenses.

We expect that our capital requirements will be met by cash generated from

our operating activities and financing activities.

We believe that our current cash and cash generated from our operating activities will

be sufficient to meet our current and anticipated working capital requirements and capital expenditures for at least the next 12 months.

We may, however, need additional cash resources in the future if we experience changes in our business conditions or other developments.

Cash Flows for the six months Ended

December 31, 2025 and 2024

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of

Cash and cash equivalents and restricted cash at end of the

Cash and cash equivalents and restricted cash at beginning of six months period

Cash and cash equivalents and restricted cash at end of six months period

We had a balance of cash and cash equivalents

and restricted cash of $10.8 million as of September 30, 2025, compared with a balance of $13.6 million as of June 30, 2025.

During the three months ended September 30, 2025, changes in our cashflow were mainly due to the following activities:

and restricted cash of $9.4 million as of December 31, 2025, compared with a balance of $13.6 million as of June 30, 2025.

the six months ended December 31, 2025, changes in our cashflow were mainly due to the following activities:

Operating Activities

Net cash used in operating activities was $3.4

$1.9 million for the three months ended September 30, 2025, compared to net cash used in operating activities of $3.6 million

million for the six months ended December 31, 2025, compared to net cash used in operating activities of $9.2 million

for the same period in 2024, representing a $5.8 million increase in the net cash inflow from operating activities.

The increase was

primarily due to the following:

We had net loss of $6.5 million for the three months ended

September 30, 2025.

For the three months ended September 30, 2024, we had net loss of $4.6 million, which led to a $1.9 million

decrease in net cash inflow from operating activities.

Changes in accounts receivable and other receivables were $3.8 million

cash inflow for the three months ended September 30, 2025.

For the three months ended September 30, 2024, changes in accounts

receivable and other receivables were $0.2 million cash inflow, which led to a $3.6 million increase in net cash inflow

from operating activities.

Changes in accounts payable and accrued liabilities used $1.6 million

net cash outflow for the three months ended September 30, 2025.

For the three months ended September 30, 2024, changes

in accounts payable and accrued liabilities provided net cash outflow of $1.9 million, which led to a $0.4 million increase

was primarily due to the following:

had net loss of $10.4 million for the six months ended December 31, 2025.

For the six months ended December 31, 2024,

we had net loss of $6.3 million, which led to a $4.1 million decrease in net cash inflow from operating activities.

in accounts receivable and other receivables were $2.7 million cash inflow for the six months ended December 31, 2025.

the six months ended December 31, 2024, changes in accounts receivable and other receivables were $6.0 million cash outflow,

which led to an $8.7 million increase in net cash inflow from operating activities.

(iii) Changes

in accounts payable and accrued liabilities used $0.3 million net cash outflow for the six months ended December 31, 2025.

months ended December 31, 2024, changes in accounts payable and accrued liabilities provided net cash outflow of $2.0 million, which

led to a $1.7 million increase in net cash inflow from operating activities.

in non-cash items provided $5.3 million net cash inflow for the six months ended December 31, 2025.

For the six months

ended December 31, 2024, changes in non-cash items provided net cash inflow of $4.4 million, which led to a $0.9 million increase

in net cash inflow from operating activities.

Changes in non-cash items provided $2.5 million net cash inflow

for the three months ended September 30, 2025.

For the three months ended September 30, 2024, changes in non-cash items

provided net cash inflow of $2.0 million, which led to a $0.5 million increase in net cash inflow from operating activities.

Investing Activities

Net cash provided by investing activities was

$1.3 million for the three months ended September 30, 2025, primarily attributable to $0.06 million cash used for the purchase

of property and equipment, $2.4 million cash used for loans extended to others, and $3.7 million proceeds received from loan repayments.

For the three months ended September 30,

2024, net cash used in investing activities was $1.3 million, primarily attributable to $1.4 million cash used for the purchase

$1.6 million for the six months ended December 31, 2025, primarily attributable to $0.6 million cash used for the purchase

of property and equipment, $2.4 million cash used for loans extended to others, and $4.6 million proceeds received from loan repayments.

For the six months ended December 31, 2024,

net cash used in investing activities was $1.0 million, primarily attributable to $2.1 million cash used for the purchase of

property and equipment, $1.0 million cash used for loans extended to others, and $2.0 million proceeds received from loan repayments.

Financing Activities

For the three months ended September 30,

2025, we had net cash used in financing activities of $2.1 million, which was primarily attributable to the $0.1 million used to

repay finance lease liabilities and $2.02 million used to repay convertible notes.

For the three months ended September 30,

2024, we had net cash used in financing activities of $0.04 million, which was primarily attributable to the net effects of $0.04 million

used to repay finance lease liabilities.

For the six months ended December 31, 2025,

we had net cash used in financing activities of $2.3 million, which was primarily attributable to the $0.3 million used to repay

finance lease liabilities and $2.0 million used to repay convertible notes.

For the six months ended December 31, 2024,

we had net cash inflow from financing activities of $7.7 million, which was primarily attributable to the net effects of:

(i) $0.4 million

repayment to related parties;

(ii) $8.1 million of net proceeds from the Pre-Paid Advance under the SEPA.

Commitments and Contractual Obligations

As of September 30, 2025, we had operating and

As of December 31, 2025, we had operating and

finance leases for office space, warehouse space, and forklifts.

Lease terms expire at various dates through October 2025 to November

Lease terms expire at various dates through June 2026 to November 2034

with options to renew for varying terms at our sole discretion.

We have not included these options to extend or terminate in the

calculation of ROU assets or lease liabilities, as there is no reasonable certainty, as of the date of this Quarterly Report, that these

options will be exercised.

As of September 30, 2025, maturities of lease

liabilities for each of the following fiscal years ending June 30 and thereafter were as follows:

We have not included these options to extend or terminate in the calculation

of ROU assets or lease liabilities, as there is no reasonable certainty, as of the date of this Quarterly Report, that these options will

be exercised.

As of December 31, 2025, maturities of lease liabilities

for each of the following fiscal years ending June 30 and thereafter were as follows:

2030 and beyond

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Non-current portion

Other than the above leases, we did not have

significant commitments, long-term obligations, or guarantees as of September 30, 2025.

Other than the above leases, we did not have significant

commitments, long-term obligations, or guarantees as of December 31, 2025.

Off-balance Sheet Commitments and Arrangements

Other than two standby letters of credit with Eastwest Bank in the

aggregate amount of $4,391,165, we did not have during the period presented, and we do not currently have, any off-balance sheet financing

arrangements as defined under the rules and regulations of the SEC, or any relationships with unconsolidated entities or financial partnerships,

including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating

off-balance sheet arrangements or other contractually narrow or limited purposes.

As of September 30, 2025, we still have an unused line

of credit of $4,391,165 with Eastwest Bank.

Other than six standby letters of credit with

Eastwest Bank in the aggregate amount of $4,394,812, we did not have during the period presented, and we do not currently have, any off-balance

sheet financing arrangements as defined under the rules and regulations of the SEC, or any relationships with unconsolidated entities

or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established

for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of December 31, 2025,

we still have an unused line of credit of $4,394,812 with Eastwest Bank.

Critical Accounting Policies and Estimates

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judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual outcomes could

differ materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

Despite that management determines that there

are no critical accounting estimates, the one that requires relatively significant estimates relates to useful lives of property and

equipment, allowance for credit losses for accounts receivable and other receivables, and loan receivables.

Our significant accounting policies are more

fully described in Note 2 — Summary of Significant Accounting Policies” in the notes to our unaudited consolidated

financial statements.

Actual outcomes could differ

materially from those estimates in a manner that could have a material effect on our consolidated financial statements.

We consider an accounting estimate to be critical

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate

was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that

we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

We consider accounting for the credit losses for accounts receivable and other receivables, and loan receivables to be critical accounting

There are other items within our financial statements that require estimation but are not deemed critical, as defined above.

Our significant accounting policies are more fully

described in Note 2 — Summary of Significant Accounting Policies” in the notes to our unaudited consolidated financial

We believe that there were no critical accounting policies that affected the preparation of such financial statements.

Quantitative and

Qualitative Disclosures About Market Risk .

Quantitative and Qualitative Disclosures

About Market Risk .

As a smaller reporting company, we are not required

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis