OFA Group 10-K

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) covers information pertaining to the Company for the years ended March 31, 2026 and 2025 and should be read in conjunction with the audited consolidated financial statements and related notes of the Company as of and for the years ended March 31, 2026 and 2025 and related notes thereto. Except as otherwise noted, the financial information contained in this MD&A and in the financial statements has been prepared in accordance with accounting principles generally accepted in the United States of America. All amounts are expressed in U.S. dollars unless otherwise noted. This discussion contains forward-looking statements that involve risks and uncertainties including those discussed below and elsewhere in this annual report, particularly those under “Risk Factors.” Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. 72 Critical Accounting Policies and Critical Accounting Judgments and Estimates The Company prepared the consolidated financial statements in accordance with U.S. GAAP. These accounting principles require the Company to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each period, and the reported amounts of revenues and expenses during each period. The Company continually evaluates these judgments and estimates based on its own historical experience, knowledge and assessment of current business and other conditions, its expectations regarding the future based on available information, which together form its basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of the accounting policies require a higher degree of judgment than others in their application. Critical accounting policies When reading our consolidated financial statements, you should consider our selection of critical accounting policies, including revenue recognition, contract assets, contract liabilities, mezzanine equity and income taxes, of which the details are set out in our consolidated financial statements. Recently Accounting Pronouncements See the discussion of the recent accounting pronouncements contained in Note 3 for the years ended March 31, 2026 and 2025 to the consolidated financial statements, “Summary of Significant Accounting Policies”. Critical accounting estimates You should also consider the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. The Company believes the following accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition The Company adopted the revenue standard Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. As a professional interior design and fit-out service provider, the Company recognizes revenue based on the effort or inputs to the satisfaction of a performance obligation over time as work progresses because of the continuous transfer of control to the customer and the right to bill the customer as costs are incurred. The Company uses the ratio of actual costs incurred to total estimated costs since costs incurred (an input method) represent a reasonable measure of progress towards the satisfaction of a performance in order to estimate the portion of revenue earned. This method faithfully depicts the transfer of value to the customer when the Company is satisfying a performance obligation that entails a number of interrelated tasks or activities for a combined output that requires the Company to coordinate the work of employees and subcontractors. Contract costs typically include direct labor, subcontract and consultant costs, materials and indirect costs related to contract performance. Changes in estimated costs to complete these obligations result in adjustments to revenue on a cumulative catch-up basis, which causes the effect of revised estimates to be recognized in the current period. Changes in estimates can routinely occur over the contract term for a variety of reasons including, changes in scope, unanticipated costs, delays or favorable or unfavorable progress than original expectations. When the outcome of the contract cannot be reasonably measured, revenue is recognized only to the extent of contract costs incurred that are expected to be recovered. In situations where the estimated costs to perform exceeds the consideration to be received, the Company accrues the entire estimated loss during the period the loss becomes known. Our operating subsidiary’s contracts may contain variable consideration in the form of unpriced or pending change orders or claims that either increase or decrease the contract price. Variable consideration is generally estimated using the expected value method but may from time to time be estimated using the most likely amount method depending on the circumstance. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are based upon historical experience and known trends. 73 Service Arrangement Settled in Digital Assets During the year ended March 31, 2026, the Company, acting through its Hearth RWA tokenization platform, entered into the Tokenization Agreement, dated March 31, 2026, with the Real Word Asset to provide blockchain-based tokenization infrastructure and related technology services in connection with the Client’s mixed-use real estate development project located in Long Island City, New York. Under the Tokenization Agreement, the Company is entitled to a non-refundable Platform Technology Fee of $15,000,000, payable in two equal installments and settleable in U.S. dollars or in cryptocurrency. The consideration received constitutes noncash consideration under ASC 606. Noncash consideration is measured at the fair value of the consideration received at contract inception. The Client elected to settle the first installment of the Platform Technology Fee through the transfer of 12,500,000 PPDF on March 31, 2026. The PPDF received was issued by the customer and was established on March 25, 2026, shortly before the transfer to the Company. As of the date of receipt, the PPDF had not enough established trading history, was not traded in an active market, and was subject to significant liquidity restrictions. Based on these factors, the Company determined that the fair value of the noncash consideration received was not reliably measurable as of March 31, 2026. Because the services had not been performed as of March 31, 2026 and the fair value of the noncash consideration was not reliably measurable, the Company has not recognized any revenue with respect to the Service Arrangement for the period. Consistent with its policy for consideration received in advance of performance, the Company recorded the arrangement as a contract liability; however, because the fair value of the consideration received could not be reliably measured, the contract liability and the related digital assets received were recorded at zero value as of March 31, 2026. Accordingly, the PPDF received is reflected in the consolidated balance sheet at zero carrying amount, and no contract liability was recognized at the $15,000,000 million stated contract value. The Company will reassess the arrangement in subsequent periods. Revenue, and any associated remeasurement of the consideration received, will be recognized when (i) the related performance obligation is satisfied and (ii) the fair value of the consideration received becomes reliably measurable, such as upon the development of an active trading market for the PPDF or upon disposition. Any subsequent recognition could differ materially from the stated contract value, and the ultimate amount realized, if any, is subject to significant uncertainty. 74 Results of Operations Comparison of Fiscal Years Ended March 31, 2026 and 2025 The following table sets forth key components of the results of operations for the years ended March 31, 2026 and 2025: For the years ended March 31, % of 2026 2025 Variance variance Revenue $ 716,885 $ 202,007 $ 514,878 254.88 % Cost of revenue 553,040 113,376 439,664 387.79 % Gross profit 163,845 88,631 75,214 84.86 % Operating expenses Depreciation and amortization 1,606,981 - 1,606,981 100.00 % Selling, general and administrative 1,445,961 369,991 1,075,970 290.81 % Professional services 2,665,876 113,729 2,552,147 2,244.06 % Advertising and marketing 530,467 20,558 509,909 2,480.34 % Salaries and wages 1,933,078 271,568 1,661,510 611.82 % Total operating expenses 8,182,363 775,846 7,406,517 954.64 % Loss from operations (8,018,518 ) (687,215 ) (7,331,303 ) 1,066.81 % Other income (expense) Government subsidies 9,029 20,018 (10,989 ) (54.90 )% Interest expense (13,725 ) (48,451 ) 34,726 (71.67 )% Interest income 464 968 (504 ) (52.07 )% Total other income (expense), net (4,232 ) (27,465 ) 23,233 (84.59 )% Loss before income tax expense (8,022,750 ) (714,680 ) (7,308,070 ) 1,022.57 % Income tax expense (66 ) - 66 100.00 % Net loss $ (8,022,816 ) $ (714,680 ) $ (7,308,136 ) 1,022.57 % Revenue The following table sets forth the breakdown of the revenue by major revenue type for the years ended March 31, 2026 and 2025, respectively: For the years ended March 31, 2026 2025 Variance (US$) % of revenue (US$) % of revenue Amount % Revenue Design, Design and fit-out 609,486 85.02 % 97,440 48.24 % 512,046 525.50 % Others 107,399 14.98 % 104,567 51.76 % 2,832 2.71 % Total revenue 716,885 100.00 % 202,007 100.00 % 514,878 254.88 % The Company’s revenue increased by $514,878, or 254.88%, from $202,007 for the year ended March 31, 2025 to $716,885 for the year ended March 31, 2026, primarily due to a growth in customer demand for services during the year ended March 31, 2026. The primary reason for the increase in revenue was the fulfillment of new design, design and fit-out contracts earned in the year ended March 31, 2026. The Company expects revenue will continue to improve in the coming years along with the business environment stabilization, construction activities resume, and investment sentiment recovery. The Company’s backlog of ongoing projects provides a certain degree of revenue stability going forward. As of March 31, 2026, the Company had 7 projects in progress with a total contract amount of $584,110 and recognized the related revenue of $35,418 up to the year ended March 31, 2026. The Company expects that such projects in progress as of March 31, 2026 will be completed and the remaining related revenue of $548,692 will be recognized during the year ending March 31, 2027. While overall market conditions remain uncertain, Due to the recovery in client activities, new projects are secured, which may support revenue growth in the coming periods. In addition, preliminary discussions are underway regarding potential new projects and strategic collaborations, which would support revenue growth in the coming periods. The Company is expanding its footprint beyond Hong Kong into the Greater Bay Area and international markets to improve the market diversification. Efforts are also made for vertical integration across the whole project lifecycle. The Company is also focused on innovation, efficiency, and scalability, transitioning from a traditional project-based model to a subscription-based model for AI tools, real estate development and senior care infrastructure. The Company has started to implement AI-driven digital transformation to optimize design workflows and cost structures. OFA QikBIM is an AI-powered Building Information Modeling (“BIM”) platform designed to automate portions of the architectural and engineering design process, including the generation of coordinated architectural drawings, structural plans, BIM models, and related project documentation. The Company, through its Hearth RWA tokenization platform, will provide certain blockchain-based tokenization infrastructure and related technology services in connection with certain projects. 75 Revenue from the design, design and fit-out services increased by $512,046, or 525.50%, from $97,440 for the year ended March 31, 2025 to $609,486 for the year ended March 31, 2026. The increase was mainly due to a growth in customer demand for design and fit-out services during the year ended March 31, 2026. This exceptional growth was primarily driven by the successful execution of a major project secured in June 2025, which was substantially completed by the end of March 2026. Our revenue is subject to significant fluctuations based on the timing and completion of major projects within a given period. For example, our exceptional revenue growth for the year ended March 31, 2026 was primarily driven by the successful execution of a major commercial project secured in June 2025 and completed in March 2026, and such project-based revenue may not be indicative of future quarterly trends. Others represent revenue from the application and project management services and increased by $2,832, or 2.71%, from $104,567 for the year ended March 31, 2025 to $107,399 for the year ended March 31, 2026. The revenue from application and project management remained relatively stable in this period. The following table presents revenue by property type for the years ended March 31, 2026 and 2025, respectively: For the years ended March 31, 2026 2025 Variance (US$) % of revenue (US$) % of revenue Amount % Revenue Commercial $ 698,738 97.47 % $ 80,569 39.88 % $ 618,169 767.25 % Industrial 9,415 1.25 % 37,853 18.74 % (28,438 ) (75.13 )% Institutional 1,210 0.16 % - - % 1,210 100.00 % Residential 7,522 1.00 % 74,563 36.91 % (67,041 ) (89.91 )% Lands - - % 9,022 4.47 % (9,022 ) (100.00 )% Total revenue $ 716,885 100.00 % $ 202,007 100.00 % $ 514,878 254.88 % Revenue from commercial project increased by $618,169 or 767.25%, from $80,569 for the year ended March 31, 2025 to $698,738 for the year ended March 31, 2026. The increase was primarily due to the launch of new design and fit-out projects, which resulted in an uptick in business during the year ended March 31, 2026. Revenue from industrial projects decreased by $28,438, or 75.13%, from $37,853 for the year ended March 31, 2025 to $9,415 for the year ended March 31, 2026. This revenue decline is directly attributable to a lack of active, revenue-generating industrial projects during the year ended March 31, 2026. The completion of prior projects in the year ended March 31, 2025, coupled with a subdued pipeline for new industrial contracts in the year ended March 31, 2026, resulted in this temporary absence of activity within the industrial segment. Revenue from institutional projects increased by $1,210, from none for the year ended March 31, 2025 to $1,210 for the year ended March 31, 2026. No institutional projects were earned in the year ended March 31, 2025. Revenue from residential projects decreased by $67,041, or 89.91%, from $74,563 for the year ended March 31, 2025 to $7,522 for the year ended March 31, 2026. The decline was mainly due to the fewer residential projects recognized during the year ended March 31, 2026. However, the Company expects that revenue from the on-going residential segment will increase in the following year ended March 31, 2027 as work progresses and these projects reach revenue recognition milestones. Revenue from lands projects decreased by $9,022, or 100.00%, from $9,022 for the year ended March 31, 2025 to none for the year ended March 31, 2026. There is no land project this year. Cost of revenue The following table sets forth the breakdown of the cost of revenue for the financial years ended March 31, 2026 and 2025: For the years ended March 31, 2026 2025 Variance (US$) % of cost of revenue (US$) % of cost of revenue Amount % Cost of revenue Subcontracting and material costs $ 526,333 95.17 % $ 79,251 69.90 % $ 447,082 564.13 % Project staff costs 26,707 4.83 % 34,125 30.10 % (7,418 ) (21.74 )% Total cost of revenue $ 553,040 100.00 % $ 113,376 100.00 % $ 439,664 387.79 % 76 The cost of revenue increased by $439,664, or 387.79%, from $113,376 for the year ended March 31, 2025 to $553,040 for the year ended March 31, 2026, which was mainly due to the increase in subcontracting and material costs and in line with the increase in our revenue. The Company generally outsources its fit-out work to internally approved subcontractors. The subcontracting costs mainly represented the charges and fees paid to the subcontractors who provided labor and services to carry out the fit-out works, and the material costs paid to fit-out material suppliers who provided fit-out materials for completing the fit-out works. The subcontracting and material costs increased by $447,082, or 564.13%, from $79,251 for the year ended March 31, 2025 to $526,333 for the year ended March 31, 2026, which was mainly due to the increase in revenue, as stated above, during the year ended March 31, 2026. Project staff costs represented salaries and mandatory provident funds provided to the staff in project management and design teams who were directly involved in provision of services in the projects. Project staff costs decreased by $7,418, or 21.74%, from $34,125 for the year ended March 31, 2025 to $26,707 for the year ended March 31, 2026. The decrease was mainly due to lower staff costs for project management and application projects, reflecting cost control for these two projects for the year ended March 31, 2026. Gross profit Gross profit from major revenue type is summarized as follows: For the Years Ended March 31, % of 2026 2025 Variance Variance Design, Design and fit-out Gross profit $ 70,781 $ 13,070 $ 57,711 441.55 % Gross profit margin 11.61 % 13.41 % (1.80 )% Others Gross profit $ 93,064 $ 75,561 $ 17,503 23.16 % Gross profit margin 86.65 % 72.26 % 14.39 % Total Gross profit $ 163,845 $ 88,631 $ 75,214 84.86 % Gross profit margin 22.86 % 43.88 % (21.02 )% Total gross profit increased by $75,214 or 84.86%, from $88,631 for the year ended March 31, 2025 to $163,845 for the year ended March 31, 2026. The increase in total gross profit was primarily driven by a significant uplift in revenue from higher-value service offerings, reflecting a shift in the business portfolio. Total gross profit margin decreased by 21.02% from 43.88% for the year ended March 31, 2025 to 22.86% for the year ended March 31, 2026. This change was strategically driven by a shift in the project mix. A substantially greater proportion of revenue was generated from the rapidly scaling “Design, Design and Fit-out Services,” which increased its gross profit by 441.55% while achieving a gross profit margin of 11.61%, down from 13.41%. Conversely, the “Others” project type, while maintaining a very high gross profit margin of 86.65% (up from 72.26%), contributed a smaller relative proportion to the total revenue mix. The overall result shows the Company’s effort to actively increase its portfolio toward scalable, higher-value core service offerings, which has successfully driven a large expansion in absolute profit. The decrease in the blended gross margin demonstrates the transition phase of this strategy, as higher-margin but niche services make up a smaller share of a much larger and growing total revenue base. In addition to the mix shift, the margin improvement also reflected better project execution—through tighter cost control, more accurate quoting, and leaner staffing aligned with project timelines. These efforts indicate that the Company is not merely scaling up in size, but actively enhancing operational efficiency and sharpening its project delivery capabilities. 77 Gross profit from major project type is summarized as follows: For the years ended March 31, % of 2026 2025 Variance variance Commercial Gross profit $ 152,766 $ 48,662 $ 104,104 213.93 % Gross profit margin 21.86 % 60.40 % (38.53 )% Industrial Gross profit $ 3,621 $ 4,835 $ (1,214 ) (25.11 )% Gross profit margin 38.46 % 12.77 % 25.69 % Institutional Gross profit $ 1,210 $ - $ 1,210 100.00 % Gross profit margin 100.00 % - % 100.00 % Residential Gross profit $ 6,248 $ 26,112 $ (19,864 ) (76.07 )% Gross profit margin 83.06 % 35.02 % 48.04 % Land Gross profit $ - $ 9,022 $ (9,022 ) (100.00 )% Gross profit margin - % 100.00 % (100.00 )% Total Gross profit $ 163,845 $ 88,631 $ 75,214 84.86 % Gross profit margin 22.86 % 43.88 % (21.02 )% The gross profit from commercial project increased by $104,104, or 213.93%, from $48,662 for the year ended March 31, 2025 to $152,766 for the year ended March 31, 2026. The increase was primarily due to execution of high-value contract on commercial projects during the year and launch of other new assignments. Meanwhile, the gross profit margin from commercial projects decreased from 60.40% for the year ended March 31, 2025 to 21.86% for the year ended March 31, 2026. The gross profit from industrial projects decreased by $1,214, or 25.11%, from $4,835 for the year ended March 31, 2025 to $3,621 for the year ended March 31, 2026. The gross profit margin from industrial projects increased from 12.77% for the year ended March 31, 2025 to 38.46% for the year ended March 31, 2026. The substantial improvement in gross profit margin indicates enhanced cost management and a focus on higher-margin contracts. Management will continue to prioritize profitability and operational efficiency within the industrial project portfolio. The gross profit from institutional projects increased by $1,210, or 100.00%, from none for the year ended March 31, 2025 to $1,210 for the year ended March 31, 2026. There is no institutional project for the year ended March 31, 2025. The gross profit from residential projects decreased by $19,864, or 76.07%, from $26,112 for the year ended March 31, 2025 to $6,248 for the year ended March 31, 2026. The gross profit margin from residential projects increased from 35.02% for the year ended March 31, 2025 to 83.06% for the year ended March 31, 2026, mainly due to improved cost control and a higher proportion of early-stage design work. Two on-going major residential contracts with contract value of $518,341 are expected to drive revenue growth in the next fiscal year. The gross profit from lands projects decreased by $9,022, or 100%, from $9,022 for the year ended March 31, 2025 to none for the year ended March 31, 2026. No lands projects are executed in the year ended March 31, 2026. 78 Operating expenses Operating expenses consist of the following: For year ended For the year ended % of March 31, 2026 March 31, 2025 Variance variance Depreciation and amortization $ 1,606,981 $ - $ 1,606,981 100.00 % Selling, general and administrative 1,445,961 369,991 1,075,970 290.81 % Professional services 2,665,876 113,729 2,552,147 2,244.06 % Advertising and marketing 530,467 20,558 509,909 2,480.34 % Salaries and wages 1,933,078 271,568 1,661,510 611.82 % Total operating expenses $ 8,182,363 $ 775,846 $ 7,406,517 954.64 % Depreciation and amortization increased by $1,606,981, or 100.00%, from none for the year ended March 31, 2025 to $1,606,981 for the year ended March 31, 2026. The increase is mainly due to depreciation expenses recorded in this year for the hardware and intangible assets, which no such expenses for the year ended March 31, 2025. The selling, general and administrative increased by $1,075,970, or 290.81%, from $369,991 for the year ended March 31, 2025 to $1,445,961 for the year ended March 31, 2026. The increase was largely attributable to the establishment of our U.S. headquarters in Rolling Hills, California, alongside the scaling of IT infrastructure, salary and wages and travel activities. Professional services increased by $2,552,147, or 2,244.06%, from $113,729 for the year ended March 31, 2025 to $2,665,876 for the year ended March 31, 2026. This substantial rise was primarily due to engaging specialized legal, accounting, and consulting services essential for ensuring the Company’s full compliance with U.S. GAAP and SEC rules. This expenditure reflects our commitment to robust financial reporting and regulatory adherence. We anticipate this expenditure will decline in future periods as the enhanced policy and internal control framework becomes fully effective. The advertising and marketing increased by $509,909, or 2,480.34%, from $20,558 for the year ended March 31, 2025 to $530,467 for the year ended March 31, 2026. This substantial increase was a strategic and deliberate investment to support the Company’s significant expansion initiatives following its successful initial public offering (the “IPO”). The capital raised provided the necessary resources to build market presence and brand awareness. The salaries and wages expenses increased by $1,661,510, or 611.82%, from $271,568 for the year ended March 31, 2025 to $1,933,078 for the year ended March 31, 2026, which was mainly due to the addition of new staff in the U.S. operations. The U.S. team is based in Rolling Hills, California, and includes senior leadership such as the Chief Executive Officer and Chief Operations Officer. The office functions as the Company’s North American headquarters and serves as a strategic center for business development, partnership outreach, and regional market research. The team is currently focused on establishing the Company’s presence in the U.S. through relationship-building with local firms, early-stage engagement with clients, and preparation for launching AI-driven architectural services and tokenization services of certain projects. While still in the investment phase, these initiatives are expected to support the Company’s long-term positioning in high-growth markets and demonstrate early operational traction. Other income (expenses) Other income (expenses) mainly includes interest (expenses) income, net and other income. Interest income. The Company recorded interest income of $464 and $968 for the years ended March 31, 2026 and 2025, respectively. Interest expense on bank borrowings. The interest expenses on bank borrowings were $13,725 and $48,451 for the years ended March 31, 2026 and 2025, respectively. Other income mainly represents the government subsidies. 79 Government subsidies. Government subsidies relate to the SME Export Marketing Fund. The SME Export Marketing Fund (EMF) is a funding scheme administered by the Trade and Industry Department (TID) of the Hong Kong Special Administrative Region (HKSAR) Government. Its primary objective is to help small and medium-sized enterprises (SMEs) in Hong Kong expand their businesses through participation in export promotion activities. It provides financial assistance to reduce the cost of marketing and entering new markets outside of Hong Kong. The Company recognizes government subsidies as other income when they are received, as the subsidies are not subject to any past or future performance conditions. Government subsidies received and recognized as other income totaled $9,029 and $20,018 for the years ended March 31, 2026 and 2025, respectively. Income tax expense. Our Company is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, our Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed. Our operating subsidiary, Office for Fine Architecture Limited, is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. Hong Kong profit tax rates are 8.25% on assessable profits up to $255,102 (HK$2,000,000), and 16.5% on any part of assessable profits over $255,102 (HK$2,000,000). The Company believes there were no uncertain tax positions as of March 31, 2026 and 2025, respectively. The Company’s subsidiary OFA Financial was incorporated in Delaware and is treated as United States corporations for US federal income tax purposes per the Internal Revenue Code (US) and are thereby subject to federal income tax on its worldwide income. The applicable U.S. federal corporate income tax rate is 21%. The Company is exempt from Delaware state corporate income tax as it does not conduct business within the state of Delaware, though it remains subject to the annual Delaware franchise tax. The Company’s subsidiary Office for Fine Architecture, Inc. was incorporated in California and is treated as a United States corporation for US federal income tax purposes per the Internal Revenue Code (US) and are thereby subject to federal income tax on its worldwide income at a statutory rate of 21%. In addition, Office for Fine Architecture, Inc. is subject to California state corporate tax laws and, if it conducts business or has income sourced to California, is generally subject to California corporation tax and applicable California franchise tax obligations. Guangzhou Zhiyi Consulting Services Co., Ltd. is governed by the income tax laws of the PRC and the income tax provisions in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), domestic enterprises and Foreign Investment Enterprises (the “FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis. The Company believes there were no uncertain tax positions as of March 31, 2026 and 2025, respectively. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months. The Company is not currently under examination by an income tax authority, nor has been notified that an examination is contemplated. Net loss. As a result of the foregoing, the Company reported a net loss of $8,022,816 for the year ended March 31, 2026, as compared to a net loss of $714,680 for the year ended March 31, 2025. Other comprehensive income . Foreign currency translation adjustment amounted to $126,915 and $18,435 for the year ended March 31, 2026 and 2025, respectively. The balance sheet amounts, with the exception of equity, on March 31, 2026 were translated at $1.00 to HK$7.84, as compared to $1.00 to HK$7.78 on March 31, 2025. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the year ended March 31, 2026 and 2025 were $1.00 to HK$7.80 and $1.00 to HK$7.79, respectively. The change in the value of the HK$ relative to the U.S. dollar may affect the financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operation. 80 Liquidity and Capital Resources To date, the Company has financed our operations primarily through cash flows from operations and loans from banks and related parties, if necessary. The Company plans to support its future operations primarily from cash generated from its operations and the IPO proceeds. In addition, the Company continues to maintain access to existing bank credit lines and may consider short-term bridge financing if required to support operational liquidity. As reflected in the audited consolidated financial statements, the Company had net loss of $8,022,816 for the year ended March 31, 2026, as compared to net loss of $714,680 for the year ended March 31, 2025. As of March 31, 2026, the Company had cash of $2,713,466 compared to $31,950 as of March 31, 2025. The Company had negative working capital that amounted to $4,111,677 as of March 31, 2026 and positive working capital of $93,229 as of March 31, 2025. The working capital requirements are influenced by the size of our operations, the volume and dollar value of our sales contracts, the progress of execution on our customer contracts, and the timing for collecting accounts receivable, and repayment of accounts payable. As of March 31, 2026, the Company had an outstanding bank borrowings balance of $470,249, of which the bank borrowings of $22,192 will be payable within one year and the bank borrowings of $448,057 will be payable after one year. The bank borrowings are at an annual effective interest rate of 3.000%. On December 11, 2025, the Company received a letter from the Staff notifying the Company that the closing bid price per share for its Class A O rdinary Shares was below $1.00 for a period of 30 consecutive business days and that the Company did not meet the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company had until the Compliance Period, to regain compliance with Nasdaq’s minimum bid price requirement. On June 9, 2026, the Company received the Letter from the Staff notifying the Company that the Company is eligible for the Second Compliance Period, or until the Compliance Date, to regain compliance, based on the Staff’s determination of the Company meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the minimum bid price requirement, and the Company’s written notice to Nasdaq of its intention to cure the deficiency during the Second Compliance Period, by effecting a reverse stock split, if necessary. The Letter has no immediate impact on the listing of the Company’s Ordinary Shares on Nasdaq. If at any time during the Second Compliance Period the closing bid price of the Company’s Ordinary Shares is at least $1.00 per share for a minimum of 10 consecutive business days (which may be extended to be a period of up to 20 consecutive business days in the discretion of the Staff), Nasdaq will provide the Company with written confirmation of compliance. The Letter does not result in the immediate delisting of the Company’s Class A O rdinary Shares , and the shares will continue to trade uninterrupted under the symbol “OFAL.” If the Company does not regain compliance by the Compliance Date, the Staff will provide written notification that the Company’s Ordinary Shares is subject to delisting. At that time, the Company may appeal the delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq listing rules. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by Nasdaq to the panel, such appeal would be successful. On May 21, 2026, at the Extraordinary General Meeting the shareholders approved and authorized the Board to effect a 1-for-10 share consolidation of the Company’s Class A Ordinary Shares at its discretion. The Company’s Ordinary Shares have been redesignated as Class A O rdinary Shares and have commenced trading on Nasdaq on December 17, 2025 as Class A O rdinary Shares under the same symbol “OFAL.” The Company believes that its current cash and cash flows provided by operating activities, loans from banks, and the net proceeds from its IPO will be sufficient to meet its working capital needs in the next 12 months from the balance sheet date. If additional funding is needed, the Company believes it would have access to supplemental bank facilities or bridge financing options, subject to prevailing market conditions. No assurance can be given, however, that additional financing, if required, would be available at all or on favorable terms. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to the existing shareholders. 81 Even though the management believes that it will be able to successfully execute its business plan, which includes increasing market acceptance of the Company’s services to boost its sales volume to achieve economies of scale while applying more effective marketing strategies and cost control measures to better manage operating cash flow position, third-party financing and capital issuance, and meet the Company’s future liquidity needs, there can be no assurances in that regard. In response to the net loss of $8,022,816 for the year ended March 31, 2026 and a working capital deficit of $4,111,677 as of March 31, 2026, the Company has implemented, and continues to pursue, a range of measures designed to strengthen its liquidity and capital position. First, in May 2025 the Company completed its IPO, generating net proceeds of approximately $15.3 million that materially strengthened its cash position and capital base. Second, the Company has secured access to committed equity financing: (i) on October 29, 2025, it entered into the PIPE Purchase Agreement with Greentree and TriCore, providing for the issuance and sale, in multiple closings, of up to $50,000,000 in stated value of Preferred Shares; and (ii) on July 14, 2025, it entered into a Atsion Purchase Agreement with Atsion, establishing the Equity Facility. The Equity Facility is entirely at the Company’s discretion and does not represent a committed obligation or guaranteed proceeds; amounts are drawn, if at all, solely at the Company’s election and subject to the terms of the Atsion Purchase Agreement. Third, through the arrangement with the Contractor, the Company intends to commercialize the platform and to transition a portion of its design operations from a traditional project-based model toward a scalable, subscription-based AI software offering, which management expects to broaden the Company’s revenue base and support its longer-term growth and liquidity objectives. Fourth, the Company continues to generate recurring revenue from its core design, fit-out, project-management and platform services, and is expanding beyond Hong Kong into the Greater Bay Area and international markets to diversify its revenue base. In addition to its U.S. operations, the Company maintains business activities and market presence in Hong Kong and Japan through its subsidiaries, strategic partnerships, and project development initiatives. Fifth, holders of the Company’s Preferred Shares have elected to convert a portion of their holdings into Class A O rdinary Shares , reducing the Company’s potential cash redemption obligations. Finally, the Company continues to actively manage operating expenditures and discretionary spending—including staffing, subcontractor and marketing costs—to preserve liquidity, and it retains access to existing bank credit facilities and may pursue short-term bridge financing if required. Based on these plans, which management believes are probable of being effectively implemented, management believes the Company will have sufficient liquidity to meet its obligations as they become due for at least twelve months from the date these consolidated financial statements are issued. The Company is well-positioned to support its operations and execute its growth strategies over at least the next twelve months. As a result, management has concluded that there is no substantial doubt about the Company’s ability to continue as a going concern, and accordingly the audited consolidated financial statements do not include any related adjustments. The following table sets forth a summary of the cash flows for the years ended March 31, 2026 and 2025: For the years ended March 31, 2026 2025 Net cash used in operating activities $ (4,171,385 ) $ (256,215 ) Net cash used in investing activities $ (12,708 ,670 ) $ - Net cash provided by (used in) financing activities $ 19,551,920 $ (1,497 ) Net increase (decrease) in cash and restricted cash $ 2,671,865 $ (257,712 ) Effect of currency translation on cash and cash equivalents $ 9 ,651 $ 21,502 Cash and restricted cash at the beginning of the year $ 31,950 $ 268,160 Cash and restricted cash at the end of the year $ 2,713,466 $ 31,950 As of March 31, 2026, the Company had total cash and restricted cash of $2,713,466, compared to $31,950 as of March 31, 2025. Of this amount, $1,033,466 represented unrestricted cash available for general corporate and working-capital purposes, and $1,680,000 represented restricted cash held in a non-interest-bearing escrow account maintained at East West Bank by Finuvia LLC. Finuvia LLC is an affiliate of Precursor Capital Limited, a shareholder of the Company . The restricted cash is not available for the Company’s general use and is subject to release only upon satisfaction of the conditions specified in the underlying agreements; because the Company retains control over the disbursement of these funds and the release conditions had not been met as of the balance sheet date, the amounts continue to be reported as the Company’s assets. The Company had a working-capital deficit of $4,111,677 as of March 31, 2026, compared to positive working capital of $93,229 as of March 31, 2025, and incurred a net loss of $8,022,816 for the year ended March 31, 2026. Accordingly, the Company’s liquidity available for general operations is more limited than the total cash and restricted cash balance. 82 Operating Activities Net cash used in operating activities amounted to $4,171,385 for the year ended March 31, 2026, mainly derived from the net loss of $8,022,816, mainly offset by increase in depreciation and amortization, and share-based compensation and shares issued for services. Net cash used in operating activities amounted to $256,215 for the year ended March 31, 2025, mainly derived from the net loss of $714,680, plus the decrease in amounts due to related parties, mainly offset by decrease in contract assets and increase in contract liabilities. Investing Activities Net cash used in investing activities amounted to $12,708,670 for the year ended March 31, 2026, primarily attributable to the Company’s investment in intellectual property of $12,117,479, together with purchases of property and equipment of $591,191. On March 31, 2026, the Company’s subsidiary, Office for Fine Architecture Limited, entered into the Assignment Agreement with the Contractor, under which the Company acquired a 50% undivided co-ownership interest in the QikBIM for an aggregate purchase price of $17,500,000, due to foreign currency translation at the applicable exchange rate on the reporting date, the recorded amount in the financial statements is $1 7,502,381 . $12,117,47 9 was paid as of March 31, 2026. The acquired intellectual property covers the United States and Hong Kong standards adaptation and commercialization versions of the system, including its source code, algorithms and modules for user-interface design, automated structural plan generation, and the generation of mechanical, electrical, plumbing and drainage plans compliant with U.S. codes. The Company retains sole governance and commercialization authority over the system. No cash used in investing activities for the year ended March 31, 2025. Financing Activities Net cash provided by financing activities amounted to $19,511,920 for the year ended March 31, 2026, primarily attributable to the proceeds from issuance of Class A O rdinary Shares upon IPO, issuance of Ordinary Shares after the IPO and proceeds from Series A Preferred Shares. Trend Information Except for the information disclosed, the Company is not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. However, the Company remains cautiously optimistic about the medium-term outlook, particularly in light of new residential contracts signed in February 2026 and a gradual pickup in client engagement activity in the following period. Historically focused on the Hong Kong market, we are actively pursuing geographic diversification to expand our operational footprint to oversea markets. We are also investing in digital transformation initiatives, specifically leveraging artificial intelligence (AI) to enhance design efficiency, optimize labor costs and create new revenue stream. Commitments and Contingencies Commitments As of March 31, 2026, the Company did not have any significant capital and other commitments. 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 matters will have a material adverse effect on its financial position, cash flows or results of operations on an individual basis or in the aggregate. As of March 31, 2026 and 2025, the Company is not a party to any material legal or administrative proceedings. 83 The following table summarizes the contractual obligations as of March 31, 2026: Payments due by period Less than 1 – 3 4 – 5 More than Contractual obligations Total 1 year years years 5 years Bank borrowings $ 470,249 $ 22,192 $ 145,286 $ 104,372 $ 198,399 Future lease payments 672,804 183,904 361,737 127,163 - $ 1,143,053 $ 206,096 $ 507,023 $ 231,535 $ 198,399 Inflation While global inflation has retreated from its peak levels, the economic landscape remains constrained by persistently elevated interest rates. The prolonged high-rate environment continues to dampen financing activity and discretionary spending in Hong Kong. Consequently, we face ongoing inflationary pressure on operating costs, particularly wages and materials, while simultaneously contending with softening client demand. This dual pressure creates a challenging margin environment, requiring stringent cost controls to preserve profitability. In order to adapt, we and our subsidiaries would endeavor to seek new business opportunities and would continue to take a conservative approach to cost budgeting, including, but not limited to, withholding distribution of staff bonuses, reconsidering staffing needs and applying greater pressure on the pricing negotiations with subcontractors and suppliers. Seasonality The nature of our business does not appear to be affected by seasonal variations. ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk As a “smaller reporting company” we are not required to provide information required by this Item. ITEM 8. Financial Statements and Supplementary Data Reference is made to pages F-1 through F-19 comprising a portion of this report, which are incorporated herein by reference. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 84