Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. All amounts included herein with respect to the three and six months ended December 31, 2025 and 2024 are derived from our audited consolidated financial statements included elsewhere in this Report. Our financial statements have been prepared in accordance with the U.S. GAAP.

Overview

We are a U.S.-based integrated cross-border supply chain solution provider with a strategic focus on the Asian market including China. We primarily provide customized cross-border ocean freight solutions and airfreight solutions in the U.S. that specifically cater to our customers' requirements and needs in transporting goods into the U.S. We offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.

Founded in Chicago, Illinois in 2018, we are an Asian American-owned business rooted in the U.S. with in-depth understanding of both the U.S. and Asian international trading and logistics service markets. Our customers are typically Asia- and U.S.-based logistics service companies serving large e-commerce platforms, social commerce platforms and manufacturers to sell and transport consumer and industrial goods made in Asia into the U.S.

We have established an extensive collaboration network of service providers, including global freight carriers for our cross-border freight consolidation and forwarding services as well as domestic ground transportation carriers for our U.S. domestic transportation services.

We operate three massive and hyper-busy regional warehousing and distribution centers in the U.S., in Illinois and Texas. In addition to our self-operated regional centers, we maintain close contact with warehouses and distribution terminals in almost all transportation hubs in the U.S. which we have cooperated in the past to support the warehousing and distributing services of our cross-border freight in case such freight requires storage, fulfilment, transloading, palletizing, packaging or distribution in states other than Illinois and Texas.

Leveraging our strong cross-border supply chain service capabilities, extensive service provider network of cross-border freight carriers and U.S. domestic ground transportation carriers, massive and hyper-busy regional warehousing and distribution centers as well as deep understanding of the Asian market, we have been able to build up our brand and reputation and have achieved fast growth since our inception.

For the three months ended December 31, 2025 and 2024, our revenues amounted to approximately $7.0 million and approximately $3.6 million, respectively, and our gross profit (loss) amounted to approximately $1.9 million and approximately $(0.1) million during the same periods, respectively.

For the six months ended December 31, 2025 and 2024, our revenues amounted to approximately $13.1 million and approximately $7.7 million, respectively, and our gross profit amounted to approximately $3.0 million and approximately $0.5 million during the same periods, respectively.

Key Factors Affecting Our Results of Operations

We believe the most significant factors that affect our business and results of operations include the following:

Our Ability to Expand Our Customer Base

Our results of operations are dependent upon our ability to expand and maintain our customer base. We will continue to expand our customer base to achieve a sustainable business growth. We aim to attract new customers and maintain our existing customers. We plan to improve the quality and expand the variety of our services to obtain more customers.

During fiscal year 2025, we introduced a new revenue stream through the distribution of pharmaceutical and medical products. Under this model, we purchase products directly from manufacturers, store them in designated warehouses, and deliver them to customers' warehouses or other specified locations. While this business expansion creates opportunities to reach new customers in the healthcare sector. It also exposes us to additional risks compared with our traditional cross-border logistics services. These risks include heightened regulatory and compliance requirements for the handling and distribution of medical products, increased working capital exposure from holding inventory, and greater operational complexity in maintaining product quality and safety. Successfully expanding our customer base in this new segment will depend on our ability to manage these risks effectively while maintaining high service standards and compliance with applicable regulations.

Our Ability to Control Costs

Our results of operations are affected by our ability to control costs including transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation, which may be subject to factors, including, among other things, fluctuations in wage rates, fuel prices, toll fees, and leasing costs. Effective cost-control measures have a direct impact on our financial condition and results of operations. For example, our cross-border freight carrier and U.S. domestic ground transportation carrier services providers use large quantities of fuel to operate vehicles, and therefore, hence the higher fuel cost incurred by them may causes our higher fee rates cost charged on us by such the service providers. The availability and price of fuel and third-party transportation capacity are subject to political, economic, and market factors that are beyond our control. We also incur a significant amount of costs in relation to transportation and labor. Any unexpected increase in these costs, which is subject to factors beyond our control, could adversely impact our profitability. We have adopted, and expect to adopt, additional cost control measures. However, the measures we have adopted or will adopt in the future may not be as effective as expected. If we are not able to effectively control our costs and adjust the level of fee rates based on operating costs and market conditions, our profitability and cash flow may be adversely affected.

With the introduction of our new pharmaceutical and medical product distribution business in fiscal year 2025, our cost structure has become more complex. Unlike our traditional cross-border logistics services, which are largely variable in nature, the new business requires us to hold inventory, maintain specialized warehouse conditions, and comply with more stringent product handling standards. These factors may increase fixed operating costs, including storage, insurance, and quality control expenses. Consequently, our ability to control costs in this new business segment will depend not only on fuel and labor trends but also on our efficiency in managing inventory turnover and compliance-related expenses.

We have implemented, and expect to continue adopting, additional cost-control measures to mitigate these risks. However, such measures may not always be as effective as anticipated. If we are unable to effectively control our operating costs or adjust our pricing in response to changing market conditions, our profitability and cash flows may be adversely affected.

Our Ability to Provide High-quality Services

Our results of operations depend on our ability to maintain and further enhance our service quality. Together with our network of service providers, we provide integrated cross-border ocean and air freight supply chain solutions and services to our customers. If we or our service providers are unable to provide express delivery services in a timely, reliable, safe and secure manner, our reputation and customer loyalty could be negatively affected. In additional, if our customer service personnel fail to satisfy customer needs or respond effectively to customer complaints, we may lose potential or existing customers and experience a decrease in customer orders, which could have a material adverse effect on our business, financial condition and results of operations.

As we expand into pharmaceutical and medical product distribution, maintaining high-quality service standards becomes even more critical. This new business line involves additional operational requirements, such as temperature-controlled storage, specialized handling, and compliance with healthcare product regulations. Any lapse in these areas could result in regulatory penalties, product spoilage, or loss of customer trust. Compared to our existing logistics operations, the consequences of service failures in this segment could be more severe, given the sensitive nature of medical products and the higher expectations of healthcare customers. Ensuring consistent service quality will therefore require enhanced employee training, strengthened supplier oversight, and continuous monitoring of compliance procedures.

Strategic Acquisitions and Investments

Our results of operations also depend on our ability to pursue strategic acquisitions and investments in expanding our global footprints, diversifying our service offerings, and advancing our technologies. We may selectively pursue mergers, acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. However, we cannot assure you that we will make prudent decisions at all times. Our ability to successfully execute or effectively operate, integrate, leverage and grow these investments or strategic partnerships could impact our results of operations and financial conditions.

In response to governmental directives and recommended safety measures, we have implemented personal safety measures at all of our facilities. However, these measures may not be sufficient to mitigate the risk of infection by COVID-19. If a significant number of our employees, or third parties performing key functions, including our chief executive officer and members of our board of directors, become ill, our business may be further adversely impacted.

The impact of COVID-19 pandemic on us in the future will depend on future developments which are highly unpredictable and beyond our control, such as the frequency, duration and severity of the resurgence of COVID-19 and the emergence of new variants, as well as the measures that may be taken by governments around the world in response to these developments, the impact of the pandemic on the global economy and the measures taken by governments to stimulate the general economy. Therefore, we cannot guarantee that the pandemic will not continue to have an adverse effect on our business and results of operations in the future, which may be material.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, service providers and stockholders.

Uncertainty and Impacts on the Recent U.S. Tarriff Policies and Regulations

Our results of operations also depend on our ability to respond with the recent tariff and other restrictions placed on imports. Since February 2025, trade between the U.S. and China has remained under tight restrictions and elevated trade barriers. While some temporary relief measures and exemptions were granted, most U.S. tariffs on Chinese goods remain in place, particularly affecting key sectors such as agriculture, automobiles, industrial materials, and consumer goods. These trade measures have significantly disrupted U.S.-China commerce, reducing exports in certain categories and forcing companies on both sides to adjust supply chains, pricing, and sourcing strategies. Despite some ongoing negotiations, the overall trade environment remains challenging and uncertain, with cross-border business continuing to face heightened costs and operational complexities.

In May 2025, the US and China agreed to a truce to lower import taxes on goods being traded between the two countries for 90 days. Under the terms of the agreement, both countries committed to pausing the imposition of new tariffs and partially rolling back existing duties on select goods, primarily in the technology, agricultural, and consumer product sectors. Although the agreement marks a major de-escalation of the trade war between the two countries, there is still a high degree of uncertainty surrounding U.S. tariff policy, how it will be implemented, and how other countries will react to it. It also remains uncertain whether increased tariffs and trade tensions will create further disruptions and uncertainties to the international trade and lead to a downturn in the global economy.

As of August 29, 2025, the United States has permanently eliminated the $800 de minimis threshold that previously allowed low-value shipments to enter the country duty-free. This change applies to all international shipments, regardless of value, origin, or shipping method. The decision was made to strengthen trade enforcement and address concerns over illicit trade practices. All imports, including those valued under $800, are now subject to applicable duties and taxes. These changes increase the complexity of customs processing, slow clearance times, and reduce the volume of low-value parcels traditionally handled by freight forwarders.

Moreover, increasing trade protectionism may cause an increase in (i) the cost of goods exported from regions globally, particularly from the Asia-Pacific region, (ii) the length of time required to transport goods and (iii) the risks associated with exporting goods. Such increases may further reduce the quantity of goods to be shipped, extend shipping schedules, increase voyage costs, and other associated costs, which could have an adverse impact on our customers' business, operating results and financial condition and could thereby affect their ability to make timely payments to us and their order quantities. This could have a material adverse effect on our business, operating results, cash flows and financial condition.

We will continue to actively monitor the situation and consider strategic adaptation to maintain service levels and profitability.

Key Components of Results of Operations

Revenues. We generate revenues primarily by providing customized cross-border ocean freight solutions and airfreight solutions to customers that specifically cater to their requirements and needs in transporting goods into the U.S. Under the service agreements with our customers, we offer a wide variety of integrated services under our cross-border ocean freight solutions and cross-border airfreight solutions, including (i) cross-border freight consolidation and forwarding services, (ii) customs clearance services, (iii) warehousing and distribution services and (iv) U.S. domestic ground transportation services.

From December 2024, we started to generate revenues from the distribution of pharmaceutical and medical products. We order from the manufacturer, receive and carry the products at a designated warehouse, and deliver the products to the customers' warehouses or designated locations.

Cost of Revenues. Our cost of revenues from customized cross-border ocean and air freight solutions mainly comprises transportation and delivery costs, warehouse service charges, custom declaration and terminal charges, freight arrangement charges and other overhead cost allocation which includes operating and financing lease-related costs, depreciation expenses of property and equipment and other miscellaneous expenses.

Our cost of revenues from the distribution of pharmaceutical and medical products comprises cost of pharmaceutical products from manufacturers.

Selling Expenses. Our selling expenses primarily include salaries expense, advertising expenses, marketing expense of a system, and traveling expense of sales team engaged in developing potential customers and maintaining customer relationships and transportation cost for selling pharmaceutical products.

General and Administrative Expenses. Our general and administrative expenses primarily include salaries and staff benefits, repair and maintenance expenses, depreciation on property and equipment, amortization on intangible assets, lease expenses warehouses used for administrative purpose and office premises, travelling and entertainment expenses, bank charges, legal and professional fees, insurance expenses and other office expenses.

Other Income. Our other income primarily consists of rental income and interest income in connection with a third-party loan.

Interest Expenses. Our interest expenses primarily consist of the interest expenses incurred for finance leases, convertible debts, equipment loans, vehicle loans and other loans and interest for late credit card payment.

Income Tax Expenses. Our income tax expenses consist primarily of U.S. federal, state income taxes, replacement tax in the state of Illinois and PRC enterprise income tax.

Results of Operations

The following table summarizes the results of consolidated statements of operations and comprehensive income (loss) for the three months and six months ended December 31, 2025 and 2024 in U.S. dollars.

		For the Six Months Ended December 31,								For the Three Months Ended December 31,
		2025				2024				2025				2024
Revenue from cross-border freight solutions - third party		$	8,110,140			$	6,702,063			$	3,928,426			$	3,102,276
Revenue from cross-border freight solutions - related parties			1,221,728				756,994				641,568				275,227
Revenue from distribution of pharmaceutical products - third parties			3,780,654				218,086				2,442,639				218,086
Total revenue			13,112,522				7,677,143				7,012,633				3,595,589
Cost of revenue from cross-border freight solutions - third party			7,286,059				6,153,994				3,552,213				3,159,709
Cost of revenue from cross-border freight solutions - related party			822,137				921,050				355,631				356,320
Cost of revenue from pharmaceutical products - third parties			1,985,266				121,791				1,194,496				121,791
Total cost of revenue			10,093,462				7,196,835				5,102,340				3,637,820
Gross profit (loss)			3,019,060				480,308				1,910,293				(42,231	)
Operating expenses:
Selling expenses			1,093,244				54,488				903,833				54,488
General and administrative expenses			4,318,013				3,749,059				2,210,358				1,911,853
Provision (reversal) of allowance for expected credit loss for account receivable			82,151				1,956				(1,174	)			(10,881	)
Provision of allowance for expected credit loss on loan receivable from a third party			288,000				-				288,000				-
Total operating expenses			5,781,408				3,805,503				3,401,017				1,955,460
Loss from operations			(2,762,348	)			(3,325,195	)			(1,490,724	)			(1,997,691	)
Other income (expense)
Other income, net			282,380				201,541				135,541				91,753
Interest expense			(379,890	)			(68,992	)			(183,449	)			(40,882	)
Total other income (expense)			(97,510	)			132,549				(47,908	)			50,871
Loss before income taxes			(2,859,858	)			(3,192,646	)			(1,538,632	)			(1,946,820	)
Income tax expense			81,039				89,581				45,049				-
Net loss attributable to the Company			(2,940,897	)			(3,282,227	)			(1,583,681	)			(1,946,820	)
Other comprehensive (loss) income:
Foreign currency translation income			204,978				(12,186	)			168,050				(25,179	)
Comprehensive (loss) income attributable to the Company		$	(2,735,919	)		$	(3,294,413	)		$	(1,415,631	)		$	(1,971,999	)

For the Three Months Ended December 31, 2025 Compared to the Three Months Ended December 31, 2024

The following table summarizes our consolidated results of operations and percentages of certain items in relation to total revenues for the three months ended December 31, 2025 and 2024, and provides information regarding the dollar and percentage increase or (decrease) during such periods. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.

		For the three months ended December 31,
		2025								2024
Revenues		Amount				% of total Revenues				Amount				% of total Revenues				Amount Increase (Decrease)				Percentage Increase (Decrease)
Revenue from cross-border freight solutions
Cross-border ocean freight solutions		$	945,533				13.5	%		$	1,374,805				38.2	%		$	(429,272	)			(31.2	)%
Cross-border airfreight solutions			3,624,461				51.7	%			2,002,698				55.7	%			1,621,763				81.0	%
Subtotal			4,569,994				65.2	%			3,377,503				93.9	%			1,192,491				35.3	%
Revenue from distribution of pharmaceutical products			2,442,639				34.8	%			218,086				6.1	%			2,224,553				1,020.0	%
Total revenues			7,012,633				100.0	%			3,595,589				100.0	%			3,417,044				95.0	%
Cost of revenues - cross-border freight solution			3,907,844				55.8	%			3,516,029				97.8	%			391,815				11.1	%
Cost of revenues - pharmaceutical products			1,194,496				17.0	%			121,791				3.4	%			1,072,705				880.8	%
Total cost of revenues			5,102,340				72.8	%			3,637,820				101.2	%			1,464,520				40.3	%
Gross profit - cross-border freight solution			662,150				14.5	%			(138,526	)			(4.1	)%			800,676				(578.0	)%
Gross profit - pharmaceutical products			1,248,143				51.1	%			96,295				44.2	%			1,151,848				1,196.2	%
Total gross profit (loss)		$	1,910,293				27.2	%		$	(42,231	)			(1.2	)%		$	1,952,524				(4,623.4	)%

Revenues

Our total revenues from cross-border freight solutions increased by approximately $1.2 million, or 35.3%, from approximately $3.4 million for the three months ended December 31, 2024, to approximately $4.6 million for the three months ended December 31, 2025. The increase was mainly due to increase in revenue from cross-border airfreight solutions.

Revenues from our cross-border ocean freight solutions decreased by approximately $0.4 million, or 31.2%, from approximately $1.4 million for the three months ended December 31, 2024, to approximately $0.9 for the three months ended December 31, 2025. This reduction was primarily due to a decrease in the volume of cross-border ocean freight processed and forwarded, dropping from 1,046 TEU in the three months ended December 31, 2024, to 1,025 TEU for the three months ended December 31, 2025.

Revenues from our cross-border airfreight solutions increased by approximately $1.6 million or 81.0%, from approximately $2.0 million for the three months ended December 31, 2024, to approximately $3.6 million for the three months ended December 31, 2025. The increase was primarily due to (i) increase in our volume of cross-border air freight processed from approximately 4,459 tons for the three months ended December 31, 2024, to approximately 5,365 tons for the three months ended December 31, 2025, and (ii) stronger demand of value-added services, such as warehouse repackaging and related handling services.

Starting from December 2024, we established a new revenue stream through the distribution of pharmaceutical products. We procured pharmaceuticals-primarily pharmaceutical solutions-directly from manufacturers and supplied them to distributors, hospitals, and clinics. Revenues from distribution of pharmaceutical products increased by approximately $2.2 million or 1,020.0%, from approximately $0.2 million for the three months ended December 31, 2024, to approximately $2.4 million for the three months ended December 31, 2025.

Revenues by Customer Geographic

		For the three months ended December 31,
		2025								2024
Revenues		Amount				% of total Revenues				Amount				% of total Revenues				Amount Increase (Decrease)				Percentage Increase (Decrease)
Revenue from cross-border freight solutions
Asia-based customers		$	4,091,677				58.4	%		$	2,750,202				76.5	%		$	1,341,475				48.8	%
U.S.-based customers			478,317				6.8	%			627,301				17.4	%			(148,984	)			(23.8	)%
			4,569,994				65.2	%			3,377,503				93.9	%			1,192,491				35.3	%
Revenue from distribution of pharmaceuticals
Asia-based customers			2,442,639				34.8	%			218,086				6.1	%			2,224,553				1,020.0	%
Total revenues		$	7,012,633				100.0	%		$	3,595,589				100.0	%		$	3,417,044				95.0	%

Revenues from cross-border freight solutions for the Asia-based customers increased by approximately $1.3 million, or 48.8%, from approximately $2.8 million for the three months ended December 31, 2024, to approximately $4.1 million for the three months ended December 31, 2025. Revenues from cross-border freight solutions for the U.S.-based customers decreased by approximately $0.1 million, or 23.8%, from approximately $0.6 million for the three months ended December 31, 2024 to approximately $0.5 million for the same period in 2025.

The increase in revenues from Asia-based customers for the three months ended December 31, 2025 was primarily driven by strengthened relationships with key clients. During the three months ended December 31, 2024, the Company experienced reduced volumes from Asia-based customers due to delays and temporary suspensions of certain cross-border logistics projects amid heightened U.S.-China trade tensions, particularly affecting e-commerce customers. During the three months ended December 31, 2025, project activity gradually resumed as trade conditions improved, resulting in higher revenue from Asia-based customers.

We also assigned dedicated teams to manage high-value accounts, which led to an increase in their shipment volumes. In addition, revenue growth was supported by an expansion of value-added logistics services, reflecting higher demand for services such as repackaging, handling, and customized solutions.

The decrease in revenue from the U.S.-based customers for the three months ended December 31, 2025, compared to the same period in 2024, was primarily driven by a decrease in shipment volumes serving e-commerce platforms and concerns over a potential economic downturn and reduced consumer spending power in the U.S., which led to lower shipment volumes.

Our customers for the distribution of pharmaceutical products are located in China, as we specifically target the Chinese market.For the three months ended December 31, 2025, our total revenue from pharmaceutical product distribution amounted to approximately $2.4 million. For the three months ended December 31, 2024, our total revenue from pharmaceutical product distribution amounted to approximately $0.2 million.

Cost of Revenues

A breakdown of our cost of revenues for the three months ended December 31, 2025 and 2024 is as follows:

		For the three months ended December 31,								Amount Increase				Percentage Increase
		2025				2024				(Decrease)				(Decrease)
Cost of revenue from cross-border freight solutions
Transportation and delivery costs		$	1,698,675			$	1,401,927			$	296,748				21.2	%
Warehouse service charges			702,377				867,098				(164,721	)			(19.0	)%
Custom declaration and terminal charges			863,749				583,471				280,278				48.0	%
Freight arrangement charges			65,966				128,205				(62,239	)			(48.5	)%
Overhead cost			577,077				535,328				41,749				7.8	%
Subtotal			3,907,844				3,516,029				391,815				11.1	%
Cost of revenue from distribution of pharmaceuticals
Cost of goods sold			1,194,496				121,791				1,072,705				880.8	%
Total cost of revenue		$	5,102,340			$	3,637,820			$	1,464,520				40.3	%

Our cost of revenues from cross-border freight solutions increased by approximately $0.4 million, or 11.1%, from approximately $3.5 million for the three months ended December 31, 2024, to approximately $3.9 million for the three months ended December 31, 2025. The increase in cost of revenues was mainly due to the combined effects of:

(i)

an increase in transportation and delivery costs, including trucking, drayage, chassis rental, freight, and delivery costs during the three months ended December 31, 2025, which was primarily due to an increase in delivery services provided to customers. Both revenue from transportation services and the associated delivery costs increased in line with the change in service;

(ii)

an increase in customs declaration and terminal charges, consisting of customs fees, handling charges, and entry service fees charged by ports and terminals during the three months ended December 31, 2025, resulting from an increase in the volume of cross-border freight we handled, particularly airfreight, during the same period;

(iii)

an increase in overhead costs, mainly comprising warehouse and equipment lease expenses, utilities, depreciation of property and equipment, and other direct costs during the three months ended December 31, 2025. The increase in balance was mainly attributable to the annual rent adjustment; which was partly offset by

(iv)

a decrease in warehouse service charges, primarily representing labor costs at our regional warehousing and distribution centers during the three months ended December 31, 2025, was mainly driven by reduced contractor labor cost due to a strategic shift in our staffing model. We transitioned away from high-volume, general temporary staffing in favor of retaining a core group of highly skilled and experienced contract personnel. By prioritizing the retention of contractors with deep institutional knowledge of our workflows, we achieved a higher units-per-labor-hour (UPH) ratio and significantly reduced the overhead associated with onboarding and training. This stabilization of the workforce allowed us to absorb increased throughput demand with a lower total headcount, effectively reducing our variable cost per shipment while maintaining high accuracy and safety standard; and

(v)

a decrease in freight arrangement charges, mainly representing scheduling and booking fees for cross-border ocean freight and airfreights from the U.S. to China, during the three months ended December 31, 2025, primarily due to a decrease in the volume of cross-border ocean arrangements, from the U.S. to China.

Our cost of revenues from the distribution of pharmaceuticals increased by approximately $1.1 million, or 880.8%, from approximately $0.1 million for the three months ended December 31, 2024, to approximately $1.2 million for the three months ended December 31, 2025.

Gross Profit

Our overall gross profit was approximately $1.9 million for the three months ended December 31, 2025, compared to gross loss of approximately $0.04 million in the same period of the prior year.

Our gross margin for cross-border freight solutions was 14.5% for the three months ended December 31, 2025, compared to (4.1)% for three months ended December 31, 2024. The increase in gross margin was primarily attributable to combined effect of (i) the easing of trade tensions and the stabilization of cross-border trade policies resulted in an increase in shipment volumes. This volume growth allowed for better absorption of fixed costs and improved pricing power across our primary freight lane, and (ii) decreased warehouse labor costs, as discussed above.

Our gross margin for distribution of pharmaceutical was 51.1% for the three months ended December 31, 2025, compared to 44.2% for three months ended December 31, 2024. Increase in gross margin was mainly due to new products with higher profit margin.

Selling Expenses

Our selling expenses amounted to approximately $0.9 million for the three months ended December 31, 2025, compared to approximately $0.05 million for the same period in 2024. The increase was primarily driven by the salaries for our sales team, marketing expense of a system and the advertising expense amounted to approximately $0.7 million, both of which were incurred in connection with the launch of our new pharmaceutical distribution service during the year.

General and Administrative Expenses

Our general and administrative expenses increased by approximately $0.3 million, or 15.6%, from approximately $1.9 million for the three months ended December 31, 2024, to approximately $2.2 million for the three months ended December 31, 2025. These expenses represented 31.5% and 53.2% of our total revenues for the three months ended December 31, 2025 and 2024, respectively. The increase was mainly due to increase in our consultancy service fee and our new pharmaceutical distribution segment in the second quarter of the fiscal year ended June 30, 2025 contributed to the rise in operating costs.

Our professional fees increased by approximately $0.5 million, or 254.2%, from approximately $0.2 million for the three months ended December 31, 2024, to approximately $0.8 million for the three months ended December 31, 2025. Our professional fee represented 34.6% and 11.3% of our total general and administrative expenses for the three months ended December 31, 2025 and 2024, respectively. The increase was primarily due to advisory and consulting expenses strategic planning initiatives. These costs included external support for market assessments, financial and operational due diligence, and the development of long-term strategic plans to guide future growth.

Other Income, net

Our other income, net increased by $43,788, or 47.7%, from $91,753 for the three months ended December 31, 2024, to $135,541 for the three months ended December 31, 2025. The increase was primarily due to increase in interest income of $39,491 in connection with a third-party loan.

Interest Expenses

Our interest expenses increased by $142,567, or 348.7%, from $40,882 for the three months ended December 31, 2024, to $183,449 for the three months ended December 31, 2025. The increase in interest expense was mainly due to higher outstanding interest-bearing loans and interest expense in connection with the convertible note.

Loss Before Income Taxes

We had a net loss before income taxes of approximately $1.5 million and approximately $1.9 million for the three months ended December 31, 2025 and 2024, respectively. We were in a loss position before income taxes for the three months ended December 31, 2025, primarily attributable to the net effects of: (i) the rise in operating expenses, which was partly offset by an increase in gross profit due to the new business segment for the three months ended December 31, 2025 as mentioned above.

Income Tax Expense

We had income tax expenses of $45,049 and $nil for the three months ended December 31, 2025 and 2024, respectively. A current income tax provision of $46,554 was recognized for a subsidiary with net assessable income while no current income tax provision was recognized for subsidiaries in net operating loss for the three months ended December 31, 2025.

Based on management's assessment of future taxable income, the Company determined that it was no longer more likely than not that sufficient future taxable income would be available to utilize the deferred tax benefits. As a result, the Company recorded a full valuation allowance against its DTAs and did not recognize any deferred tax assets. We recognized a deferred income tax credit of $1,505 due to amortization of intangible assets, resulting in a net income tax expense of $45,049 for the three months ended December 31, 2025.

We did not have current income tax provision in the three months ended December 31, 2024, due to net operating loss, and we recognized a net deferred income tax asset of $585,198 due to temporary differences recognized and net operating loss carried forward. We also recognized a valuation allowance of $585,198 to write off our deferred tax asset since we are uncertain that we will be able to utilize the deferred tax asset to offset future taxable income, resulting in a net income tax expense of $nil in the three months ended December 31, 2024.

Net loss

As a result of the foregoing, we had a net loss of $1.6 million and of $1.9 million for the three months ended December 31, 2025 and 2024, respectively.

For the Six Months Ended December 31, 2025 Compared to the Six Months Ended December 31, 2024

The following table summarizes our consolidated results of operations and percentages of certain items in relation to total revenues for the six months ended December 31, 2025 and 2024, and provides information regarding the dollar and percentage increase or (decrease) during such periods. The operating results in any historical period are not necessarily indicative of the results that may be expected for any future period.

		For the Six Months Ended December 31,
		2025								2024
Revenues		Amount				% of total Revenues				Amount				% of total Revenues				Amount Increase (Decrease)				Percentage Increase (Decrease)
Revenue from cross-border freight solutions
Cross-border ocean freight solutions		$	2,380,397				18.2	%		$	3,211,396				41.8	%		$	(830,999	)			(25.9	)%
Cross-border airfreight solutions			6,951,471				53.0	%			4,247,661				55.4	%			2,703,810				63.7	%
Subtotal			9,331,868				71.2	%			7,459,057				97.2	%			1,872,811				25.1	%
Revenue from distribution of pharmaceutical products			3,780,654				28.8	%			218,086				2.8	%			3,562,568				1,633.6	%
Total revenues			13,112,522				100.0	%			7,677,143				100.0	%			5,435,379				70.8	%
Cost of revenues - cross-border freight solution			8,108,196				61.8	%			7,075,044				92.2	%			1,033,152				14.6	%
Cost of revenues - pharmaceutical products			1,985,266				15.2	%			121,791				1.5	%			1,863,475				1,530.1	%
Total cost of revenues			10,093,462				77.0	%			7,196,835				93.7	%			2,896,627				40.2	%
Gross profit - cross-border freight solution			1,223,672				13.1	%			384,013				5.1	%			839,659				218.7	%
Gross profit - pharmaceutical products			1,795,388				47.5	%			96,295				44.2	%			1,699,093				1,764.5	%
Total gross profit		$	3,019,060				23.0	%		$	480,308				6.3	%		$	2,538,752				528.6	%

Revenues

Our total revenues from cross-border freight solutions increased by approximately $1.9 million, or 25.1%, from approximately $7.5 million for the six months ended December 31, 2024, to approximately $9.3 million for the six months ended December 31, 2025. The increase was mainly due to increase in revenue from cross-border airfreight solutions.

Revenues from our cross-border airfreight solutions increased by approximately $2.7 million or 63.7%, from approximately $4.2 million for the six months ended December 31, 2024, to approximately $7.0 million for the six months ended December 31, 2025. Despite our volume of cross-border air freight processed decreased, from approximately 11,732 tons for the six months ended December 31, 2024, to approximately 11,141 tons for the six months ended December 31, 2025, our revenue increased primarily due to we experienced stronger demand of value-added services, such as warehouse repackaging and related handling services, which generates higher revenue per shipment and more than offset the impact of lower freight volumes.

Revenues from our cross-border ocean freight solutions decreased by approximately $0.8 million, or 25.9%, from approximately $3.2 million for the six months ended December 31, 2024, to approximately $2.4 million for the six months ended December 31, 2025. This reduction was primarily due to a decrease in the volume of cross-border ocean freight processed and forwarded, dropping from 2,476 TEU in the six months ended December 31, 2024, to 2,356 TEU for the six months ended December 31, 2025.

Starting from December 2024, we established a new revenue stream through the distribution of pharmaceutical products. We procured pharmaceuticals-primarily pharmaceutical solutions-directly from manufacturers and supplied them to distributors, hospitals, and clinics. For the six months ended December 31, 2025, our total revenue from pharmaceutical product distribution amounted to approximately $3.8 million. For the six months ended December 31, 2024, our total revenue from pharmaceutical product distribution amounted to approximately $0.2 million.

Revenues by Customer Geographic

		For the Six Months Ended December 31,
		2025								2024
Revenues		Amount				% of total Revenues				Amount				% of total Revenues				Amount Increase (Decrease)				Percentage Increase (Decrease)
Revenue from cross-border freight solutions
Asia-based customers		$	8,108,536				61.8	%		$	5,559,837				72.5	%		$	2,548,699				45.8	%
U.S.-based customers			1,223,332				9.4	%			1,899,220				24.7	%			(675,888	)			(35.6	)%
			9,331,868				71.2	%			7,459,057				97.2	%			1,872,811				25.1	%
Revenue from distribution of pharmaceuticals
Asia-based customers			3,780,654				28.8	%			218,086				2.8	%			3,562,568				1,633.6	%
Total revenues		$	13,112,522				100.0	%		$	7,677,143				100.0	%		$	5,435,379				70.8	%

Revenues from cross-border freight solutions for the Asia-based customers increased by approximately $2.5 million, or 45.8%, from approximately $5.6 million for the six months ended December 31, 2024, to approximately $8.1 million for the six months ended December 31, 2025. Revenues from cross-border freight solutions for the U.S.-based customers decreased by approximately $0.7 million, or 35.6%, from approximately $1.9 million for the six months ended December 31, 2024 to approximately $1.2 million for the same period in 2025.

The increase in revenues from Asia-based customers for the six months ended December 31, 2025 was primarily driven by strengthened relationships with key clients. The company assigned dedicated teams to manage high-value accounts, which led to an increase in their shipment volumes. In addition, revenue growth was supported by an expansion of value-added logistics services, reflecting higher demand for services such as repackaging, handling, and customized solutions.

The decrease in revenue from the U.S.-based customers for the six months ended December 31, 2025, compared to the same period in 2024, was primarily driven by a decrease in shipment volumes serving e-commerce platforms and concerns over a potential economic downturn and reduced consumer spending power in the U.S., which led to lower shipment volumes.

Our customers for the distribution of pharmaceutical products are located in China, as we specifically target the Chinese market.For the six months ended December 31, 2025, our total revenue from pharmaceutical product distribution amounted to approximately $3.8 million. For the six months ended December 31, 2024, our total revenue from pharmaceutical product distribution amounted to approximately $0.2 million.

Cost of Revenues

A breakdown of our cost of revenues for the six months ended December 31, 2025 and 2024 is as follows:

		For the Six Months Ended December 31,								Amount Increase				Percentage Increase
		2025				2024				(Decrease)				(Decrease)
Cost of revenue from cross-border freight solutions
Transportation and delivery costs		$	3,175,664			$	3,035,817			$	139,847				4.6	%
Warehouse service charges			1,600,639				1,637,200				(36,561	)			(2.2	)%
Custom declaration and terminal charges			1,991,737				1,025,095				966,642				94.3	%
Freight arrangement charges			187,653				292,545				(104,892	)			(35.9	)%
Overhead cost			1,152,503				1,084,387				68,116				6.3	%
Subtotal			8,108,196				7,075,044				1,033,152				14.6	%
Cost of revenue from distribution of pharmaceuticals
Cost of goods sold			1,985,266				121,791				1,863,475				1,530.1	%
Total cost of revenue		$	10,093,462			$	7,196,835			$	2,896,627				40.2	%

Our cost of revenues from cross-border freight solutions increased by approximately $1.0 million, or 14.6%, from approximately $7.1 million for the six months ended December 31, 2024, to approximately $8.1 million for the six months ended December 31, 2025. The increase in cost of revenues was mainly due to the combined effects of:

(i)

an increase in customs declaration and terminal charges, consisting of customs fees, handling charges, and entry service fees charged by ports and terminals during the six months ended December 31, 2025. Compared to six months ended December 31, 2024, we experienced a higher frequency of ocean-based vessel discharges and thus incurred more terminal charges during the six months ended December 31, 2025, despite of the decrease in the volume of cross-border freight we handled, particularly airfreight;

(ii)

an increase in transportation and delivery costs, including trucking, drayage, chassis rental, freight, and delivery costs during the six months ended December 31, 2025, which was significantly lower than the corresponding increase in revenue. This improved margin profile was primarily driven by two strategic factors: (i) We achieved greater density in our logistics network by prioritizing Full Truckload ("FTL") shipments. By maximizing the capacity of each vehicle and reducing empty-mile or partial-load transit, we were able to scale our total shipment volume without a linear increase in trucking and fuel expenses, and (ii) shifted its service mix from standard shipping to value-added offerings, such as customized warehouse repackaging and specialized handling. These services generate higher revenue per unit compared to commoditized freight transport but incur lower incremental delivery and drayage costs; which was partly offset by

(iii)

an increase in overhead costs, mainly comprising warehouse and equipment lease expenses, utilities, depreciation of property and equipment, and other direct costs during the six months ended December 31, 2025. The increase in balance was mainly attributable to the annual rent adjustment; which was partly offset by

(iv)

a decrease in freight arrangement charges, mainly representing scheduling and booking fees for cross-border ocean freight and airfreights from the U.S. to China, during the six months ended December 31, 2025, primarily due to a decrease in the volume of cross-border ocean arrangements, from the U.S. to China; and

Our cost of revenues from the distribution of pharmaceuticals was approximately $2.0 million and approximately $0.1 million for the six months ended December 31, 2025 and 2024, respectively. Increase was consistent with increase in revenue from distribution of pharmaceuticals.

Gross Profit

Our overall gross profit was approximately $3.0 million and approximately $0.5 million for the six months ended December 31, 2025 and 2024, respectively.

Our gross margin for cross-border freight solutions was 13.1% and 5.1% for the six months ended December 31, 2025 and 2024, respectively. The increase in gross margin was primarily attributable to strategically increase our proportion of high-margin value-added services. These services command higher pricing compared to traditional freight, shifting our revenue mix toward more profitable activities.

Our gross margin for the distribution of pharmaceutical was 47.5% for six months ended December 31, 2025. compared to 44.2% for six months ended December 31, 2024. Slightly increase in gross margin was mainly due to we offer new products with higher profit margin.

Selling Expenses

Our selling expenses amounted to approximately $1.1 million for the six months ended December 31, 2025, compared to approximately $0.05 million for the same period in 2024. The increase was primarily driven by the salaries for our sales team, marketing expenses of a system and the advertising expense amounted to approximately $0.9 million, both of which were incurred in connection with the launch of our new pharmaceutical distribution service in December 2024.

General and Administrative Expenses

Our general and administrative expenses increased by approximately $0.6 million, or 15.2%, from approximately $3.7 million for the six months ended December 31, 2024, to approximately $4.3 million for the six months ended December 31, 2025. These expenses represented 32.9% and 48.8% of our total revenues for the six months ended December 31, 2025 and 2024, respectively. The increase was mainly due to increase in our professional expense and our new pharmaceutical distribution segment in the second quarter of the fiscal year ended June 30, 2025 contributed to the rise in operating costs.

Our professional fees increased by approximately $0.8 million, or 140.2 %, from approximately $0.6 million for the six months ended December 31, 2024, to approximately $1.3 million for the six months ended December 31, 2025. Our professional fee represented 30.9% and 14.8% of our total general and administrative expenses for the six months ended December 31, 2025 and 2024, respectively. The increase was primarily due to advisory and consulting expenses strategic planning initiatives. These costs included external support for market assessments, financial and operational due diligence, and the development of long-term strategic plans to guide future growth.

Other Income, net

Our other income, net, increased by $80,839, or 40.1%, from $201,541 for the six months ended December 31, 2024, to $282,380 for the six months ended December 31, 2025. The increase was primarily due to increase in interest income in connection with a third-party loan.

Interest Expenses

Our interest expenses increased by $310,898, or 450.6%, from $68,992 for the six months ended December 31, 2024, to $379,890 for the six months ended December 31, 2025. The increase in interest expense was mainly due to higher outstanding interest-bearing loans and interest expense in connection with the convertible note.

Loss Before Income Taxes

We had a net loss before income taxes of approximately $2.9 million and approximately $3.2 million for the six months ended December 31, 2025 and 2024, respectively. We were in a loss position before income taxes for the six months ended December 31, 2025, primarily attributable to the net effects of: (i) the rise in operating expenses, which was partly offset by an increase in gross profit due to the new business segment for the six months ended December 31, 2025 as mentioned above.

Income Tax Expense

We had income tax expenses of $81,039 and $89,581 for the six months ended December 31, 2025 and 2024, respectively. A current income tax provision of $104,533 was recognized for a subsidiary with net assessable income while no current income tax provision was recognized for subsidiaries in net operating loss for the six months ended December 31, 2025.

Based on management's assessment of future taxable income, the Company determined that it was no longer more likely than not that sufficient future taxable income would be available to utilize the deferred tax benefits. As a result, the Company recorded a full valuation allowance against its DTAs and did not recognize any deferred tax assets. We recognized a deferred income tax credit of $23,494 due to amortization of intangible assets, resulting in a net income tax expense of $81,039 for the six months ended December 31, 2025.

We did not have current income tax provision in the six months ended December 31, 2024, due to net operating loss, and we recognized a deferred income tax asset of $959,095 due to temporary differences recognized and net operating loss carried forward. We also recognized a valuation allowance of $1,048,676 to write off our deferred tax asset since we are uncertain that we will be able to utilize the deferred tax asset to offset future taxable income, resulting in a net income tax expense of $89,581 in the six months ended December 31, 2024.

Net loss

As a result of the foregoing, we had a net loss of approximately $2.9 million and of approximately $3.3 million for the six months ended December 31, 2025 and 2024, respectively.

Liquidity and Capital Resources

As of December 31, 2025, we had a cash balance of approximately $1.6 million. Our current assets were approximately $21.2 million, and our current liabilities were approximately $10.4 million, resulting in a current ratio of 2.03 and positive working capital of approximately $10.8 million. Total stockholders' equity as of December 31, 2025 was approximately $12.2 million.

As of December 31, 2025 and June 30, 2025, we had accounts receivable net of allowance of approximately $4.2 million and approximately $3.3 million, respectively. We periodically review our accounts receivable and allowance level to ensure our methodology for determining allowances is reasonable and to accrue additional allowances if necessary. For accounts receivable as of December 31, 2025 and June 30, 2025, we provided a credit loss allowance of $171,609 and $87,728, respectively.

As of December 31, 2025, our liquidity position is significantly influenced by a material loan receivable from an unaffiliated third party. The gross principal balance is governed by a loan agreement dated July 3, 2025, bearing interest at 4.35% per annum with a maturity date of July 3, 2026.

At December 31, 2025, the carrying value of this receivable was approximately $6.6 million, net of an allowance for credit losses of $288,000. This net balance represents 32.3% of our total current assets, constituting a significant concentration of credit risk.

Our ability to fund future operating activities and working capital requirements is partially dependent on the timely collection of this principal and interest. While we continue to monitor the counterparty's creditworthiness and currently believe they maintain the financial capacity to meet their obligations, the recorded allowance reflects our estimate of expected credit losses under the CECL (Current Expected Credit Loss) model. Any material default or significant delay in payment by this third party could adversely impact our short-term liquidity and necessitate alternative financing. There can be no assurance that the balance will be collected in full in accordance with its contractual terms.

In assessing our liquidity, we monitor and analyze our cash on hand, our ability to generate sufficient revenues sources in the future, and our operating and capital expenditure commitments. Historically, we have funded our working capital needs primarily through operations, issuances of convertible debts, private placements, loans, initial public offerings and working capital loans from stockholders. Our working capital requirements are influenced by the efficiency of our operations, the volume and dollar value of our revenue contracts, the progress in the execution of customer contracts, and the timing of accounts receivable collections.

Cash Flows

The following table sets forth summary of our cash flows for the periods indicated:

		For the Six Months Ended December 31,
		2025				2024
Net cash used in operating activities		$	(4,469,978	)		$	(1,933,000	)
Net cash used in investing activities			(7,145,990	)			(1,350,498	)
Net cash provided by financing activities			8,095,889				4,295,361
Effect of exchange rate changes on cash			205,457				(11,999	)
Net increase in cash and cash equivalent			(3,314,622	)			999,864
Cash, beginning of the period			4,956,060				123,550
Cash, end of the period		$	1,641,438				1,123,414

Operating Activities

Net cash used in operating activities was $4,469,978 in the six months ended December 31, 2025, which included a net loss of $2,940,897, adjusted for non-cash items of $2,504,011 and changes in working capital deficits of $4,033,092. The non-cash items primarily included $1,054,794 straight-line lease expense of operating leases, $940,860 stock-based compensation for consulting expenses, $102,975 depreciation included in G&A and cost of revenue, $17,200 depreciation of right-of-use finance assets, $98,835 amortization of discount and bond issuance cost, $42,742 amortization of intangible assets, $100,052 interest income from a third party loan, $288,000 from provision of allowance for expected credit loss on loan receivable, $82,151 from provision of allowance for expected credit loss and a decrease of $23,494 from deferred tax liabilities. The adjustments for changes in working capital mainly included an increase of $932,852 in accounts receivable from third parties due to an increase of revenues near period end, an increase of $47,610 in accounts receivable - related parties, an increase in inventory of $27,802, an increase of $3,000,087 in prepayment, deposit and other receivable and a payment of $1,341,522 for operating lease liabilities, partially offset by a decrease of $50,142 in contract assets, an increase of $71,761 in refund liabilities, an increase of $135,197 in accounts payable to related parties, an increase of $404,825 in accounts payable to third parties, a decrease of $65,152 in note receivable, a decrease of $70,169 in right of return assets, an increase of $35,428 in contract liabilities, an increase of $94,806 in tax payable, and an increase of $389,301 in accrued liabilities and other payables.

Net cash used in operating activities was $1,933,000 in the six months ended December 31, 2024, including net loss of $3,282,227, adjusted for non-cash items for $1,183,152 and changes in working capital of positive $166,075. The non-cash items primarily included $989,003 amortization and interest expense of operating lease assets, $87,132 depreciation included in G&A and cost of revenue, $15,480 depreciation of right-of-use finance assets and $1,956 from provision of allowance for expected credit loss and a decrease of $89,581 from deferred tax asset due to recognition of valuation allowance. The adjustments for changes in working capital mainly included a decrease of $424,648 and $565,766 in accounts receivable - third parties and related parties, respectively, due to a decrease of revenues near period end and an increase of $312,722 in accrued expense and other payable, partially offset by an increase in prepayment, deposit and other receivable of $112,620, a decrease of $742,649 in operating lease liabilities and a decrease of $156,165 in accounts payable - related parties.

The $2,536,978 increase in cash used in operating activities for the six months ended December 31, 2025, compared to the prior year, was primarily due to an increase in advance deposits of $2,873,260 to supplier and an increase of $1,357,500 in accounts receivable - third parties, partly offset by a decrease of $341,330 in net loss and an increase of $667,902 in accounts payable - third parties and related parties due to the timing of vendor, client, and related parties payment.

Investing Activities

Net cash used in investing activities was $7,145,990 and $1,350,498 for the six months ended December 31, 2025 and 2024, respectively. Net cash used in investing activities for the six months ended December 31, 2025, was primarily attributable loans of $7,037,190 to a third party. The cash used in same period of last year was primarily attributable to loans to a third party of $686,697 and net cash payment for asset acquisition of $552,721.

Financing Activities

Net cash provided by financing activities was $8,095,889 and $4,295,361 for the six months ended December 31, 2025 and 2024. The increase was primarily due to proceeds from private placement of financing activities compared with the prior period. During the six months ended December 31, 2025, we generated cash inflows from loan borrowings of $1,644,523, private placements of $7,133,492, advances from related parties of $260,144 and advance from shareholders of $174,626, which were partially offset by $399,615 in principal repayments of convertible debt, loan repayments of $597,546 and advance to related parties of $62,779. During the six months ended December 31, 2024, we had due to the net proceeds of $5,351,281 from the offering and proceeds from loan borrowing of $195,000 and a loan from a third party of $276,365, partly offset by repayment of $805,345 to shareholders and loans repayment of $339,914 during the six months ended December 31, 2024.

Capital Expenditure

Our capital expenditures are incurred primarily in connection with the purchase of fixed assets, including machinery and equipment, furniture and fixtures, leasehold improvement and vehicles. Our capital expenditures amounted to nil and $111,080 for the six months ended December 31, 2025 and 2024, respectively.

We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We intend to fund our future capital expenditures with our existing cash balance, proceeds of loans and issuance of convertible debts and private placement offering.

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reported amounts of assets, liabilities, revenue, costs and expenses, and any related disclosures. Actual results could materially differ from those estimates. Critical accounting policy is both material to the presentation of financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on financial condition or results of operations. Accounting estimates and assumptions may become critical when they are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.

Critical accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting estimate were made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. The management of the Company believes the following critical accounting estimate is the most significantly affected by judgments and assumptions used in the preparation of our consolidated financial statements:

Common Stock Warrants Instruments

The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments' specific terms and applicable authoritative guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company's own ordinary shares and whether the instrument holders could potentially require "net cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company determined, upon further review of the warrant agreement and the convertible debt agreement, that the common stock warrants are qualified for equity accounting treatment. The fair value of equity-classified warrants is estimated as of the date of issuance using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model includes various assumptions, including the fair market value of our common stock, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control.

Allowance of expected credit losses on loan receivable from a third party

The Company accounts for its allowance for credit losses on loan receivables in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 326, Financial Instruments-Credit Losses ("ASC 326"). The Company assesses the credit risk of its third-party loan receivables at each reporting date to ensure that the allowance reflects management's current estimate of expected credit losses over the contractual life of the instrument.

The measurement of the allowance for expected credit losses is primarily determined using a Probability of Default ("PD") and Loss Given Default ("LGD") methodology. This assessment considers whether the borrower meets its contractual obligations and involves an evaluation of the borrower's historical performance, current financial condition, and the value of any underlying collateral.

The PD × LGD model includes various assumptions, including the selection of forward-looking macroeconomic forecasts (such as interest rate environments), the borrower's credit rating, and estimated recovery rates. This assessment, which requires the use of significant professional judgment, is conducted at the time of loan inception and as of each subsequent quarterly period end date while the loan is outstanding. These assumptions reflect management's best estimates based on current and supportable information, but they involve inherent uncertainties based on economic and market conditions generally outside of the Company's control. Changes in these estimates are recognized in the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) in the period in which they occur.

Refer to Notes 2 to the condensed consolidated financial statements included in this report for further discussion of our significant accounting policies and the effect on our condensed consolidated financial statements.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards updates ("ASUs"). Management periodically reviews new accounting standards that are issued, see Note 2 - Summary Of Significant Accounting Policies in the note of financial statement