| Summary of significant accounting policies | 2. Summary of significant accounting policies Basis of presentation The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included
in our annual Report on Form 10-K for the year ended June 30, 2024. In the opinion of the Company’s management,
the unaudited interim condensed consolidated financial statements include all adjustments, which are only of a normal and recurring nature,
necessary for a fair statement of the financial position of the Company as of December 31, 2024, and its results of operations and cash
flows for the six-month period then ended. Operating results for the three and six months ended December 31, 2024 are not necessarily
indicative of the results that may be expected for the fiscal year ended June 30, 2025. Principal of consolidation The unaudited interim condensed consolidated financial
statements include the financial statements of the Company and its subsidiaries. All transactions and balances among the Company
and its subsidiaries have been eliminated upon consolidation. Principal activities Percentage of Date of Place of Armlogi Holding Corp. Holding company — September 27, 2022 Nevada, U.S. Armstrong Logistic Inc. Logistic services 100 % April 16, 2020 California, U.S. Armlogi Truck Dispatching LLC Truck dispatching services 100 % February 26, 2021 California, U.S. Andtech Trucking LLC Trucking services 100 % May 7, 2021 California, U.S. Armlogi Trucking LLC Trucking services 100 % March 25, 2021 California, U.S. Andtech Customs Broker LLC Customs house brokerage services 100 % June 8, 2021 California, U.S. Armlogi Group LLC Leasing services 100 % October 19, 2021 California, U.S. Use of Estimates The preparation of financial statements and related
disclosures in accordance with accounting principles generally accepted in the United States (‘U.S. GAAP”) requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. There were no critical
accounting estimates affecting the unaudited condensed consolidated financial statements for the three and six months ended December
31, 2024 and 2023. Cash Cash consists of petty cash on hand and cash held
in banks, which is highly liquid and has original maturities of three months or less and is unrestricted as to withdrawal or use. Restricted Cash Restricted cash represents the cash restricted
for three standby letters of credit with Eastwest Bank as collateral for certain of the Company’s lease agreements. The terms of
the letters of credit start from August 1, 2023, November 7, 2023 and December 27, 2024, respectively. The letters of credit are renewable
on an annual basis until the termination thereof. Certain risks and concentration The Company’s financial instruments that
potentially subject the Company to significant concentrations of credit risk consist primarily of cash and restricted cash, receivables,
loan receivables and other current assets. As of December 31, 2024 and June 30, 2024, substantially all of the Company’s cash and
restricted cash were held in EastWest Bank located in the U.S., which management considers to be of high credit quality. Accounts receivable and other receivables The Company’s receivables are recorded when
billed and represent amounts owed by third-party customers. The carrying value of the Company’s receivables, net of the expected
credit loss, represents their estimated net realizable value. The Company evaluates the expected credit loss of accounts receivable and
other receivables on a loss rate method based on historical information adjusted for current conditions and future estimated economic
performance. Property and equipment Property and equipment are recorded at cost, less
accumulated depreciation and impairment. Depreciation of property and equipment is calculated on a straight-line basis, after consideration
of expected useful lives and estimated residual values. The estimated annual deprecation rates of these assets are generally as follows:
Category Depreciation method Depreciation rate
Furniture and fixtures Straight-line 7 years
Auto & trucks Straight-line 5 – 8 years
Trailers & truck chassis Straight-line 15 – 17 years
Machinery & equipment Straight-line 2 – 7 years
Leasehold improvements Straight-line Shorter of lease term or 15 years Expenditures for maintenance and repairs are expensed
as incurred. Gains and losses on disposals are the differences between net sales proceeds and carrying amounts of the relevant assets
and are recognized in the unaudited condensed consolidated statements of operations and comprehensive income (loss). Long-Lived Assets Long-lived assets, such as property and equipment,
and definite-lived intangible assets, right-of-use assets (operating lease and finance lease) are reviewed for impairment whenever events
or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset
or asset group to be tested for possible impairment, the Company compares the undiscounted expected future cash flows to be generated
by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable
on an undiscounted cash flow basis, an impairment charge is recognized to the extent the carrying amount of the asset or asset group exceeds
the fair value. Fair values of long-lived assets are determined through various techniques, such as applying probability weighted, expected
present value calculations to the estimated future cash flows using assumptions a market participant would utilize or through the use
of a third-party independent appraiser or valuation specialist. No impairment losses of long-lived assets were recorded during the three
and six months ended December 31, 2024 and 2023. Intangible assets consist of software and security
systems, which are amortized using the straight-line method over five seven Revenue recognition The Company provides one-stop logistic services.
The Company’s revenue is primarily from transportation services, which include the arrangement of freight services. The Company
generates its transportation services revenue by purchasing transportation from direct carriers and reselling those services to its customers. In general, each shipment transaction or service
order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed-upon
transaction price exists. The transaction price is typically fixed and not contingent upon the occurrence or non-occurrence of any other
event. The Company’s transportation transactions provide for the arrangement of the movement of freight to a customer’s destination.
The transportation services that are provided to the customer, including certain ancillary services, such as loading/unloading, freight
insurance, and customs clearance, represent a single performance obligation, as these promises are not distinct in the context of the
contract. This performance obligation is satisfied over time and recognized in revenue upon the transfer of control of the services over
the requisite transit period as the customer’s goods move from origin to destination. The Company determines the period to recognize
revenue in transit based on the departure date and the delivery date. Determination of the transit period and the percentage of completion
of the shipment as of the reporting date will affect the timing of revenue recognition. The Company has determined that revenue recognition
over the transit period provides a reasonable estimate of the transfer of services to its customers as it depicts the pattern of the Company’s
performance under the contracts with its customers. The change in contract liabilities is due to the timing of customer deposits for orders,
offset by customer deposits recognized as revenue during the period. We expect to recognize revenue for any performance obligations within
a twelve-month period and have elected not to provide disclosures regarding remaining performance obligations for contracts with a term
of one year or less. The Company also provides warehousing services
for its customers. These warehousing service contracts include two performance obligations: i) inventory management and order fulfilment
and ii) storage services. The Company’s performance obligation for inventory management and order fulfilment is satisfied at a point
in time as services are generally priced based on the number of items processed and handled. The benefits are consumed by the customers
at the point in time when such specific services are performed by the Company. Performance of such services generally takes less than
one day to process. The performance obligation for storage services is satisfied over time as the storage service is based on a term
period and the customers simultaneously receive and consume the services provided by the Company as they are performed. The transaction
price for the warehousing services is based on the consideration specified in the contract with the customer and contains fixed and variable
consideration. In general, the fixed consideration component of a contract represents reimbursement for facility and equipment costs incurred
to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration
component is comprised of cost reimbursement per unit pricing for time and pricing for materials used and is determined based on cost
plus a mark-up for hours of services provided and materials used and is recognized based on the level of activity volume. Other services include primarily customs house
brokerage services sold on a stand-alone basis as a single performance obligation. The Company recognizes revenue from this performance
obligation at a point in time, which is the completion of the services. Duties and taxes collected from the customer and paid to the customs
agent on behalf of the customers are excluded from revenue. The Company uses independent contractors and third-party
carriers in the performance of its transportation services. The Company evaluates who controls the transportation services to determine
whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party.
The Company determined it acts as the principal for its transportation services performance obligation, since it is in control of establishing
the prices for the specified services, managing all aspects of the shipment process, and assuming the risk of loss for delivery and collection.
Such transportation services revenue is presented on a gross basis in the unaudited condensed consolidated statements of operations and
comprehensive income (loss). A summary of the Company’s revenue disaggregated
by major service lines is as follows:
December 31, December 31,
US$ US$
Transportation services 64,617,825 59,639,714
Warehousing services 28,984,064 23,234,845
Other services 23,689 375,369
Total 93,625,578 83,249,928 Contract liabilities Contract liabilities represent payments received
from customers in excess of revenue recognized. The contract liabilities are reported in a net position on a customer-by-customer basis
at the end of each reporting year. We classify these customer deposits as short-term contract liabilities, as we expect to satisfy these
obligations within our normal operating cycle, which is generally one year. For the six months ended December 31, 2024 and 2023, the amounts
transferred from contract liabilities at the beginning of the fiscal year to revenue were US$245,716 and US$423,932, respectively. Practical Expedients The Company has elected to not disclose the aggregate
amount of the transaction price allocated to performance obligations that are unsatisfied as of the end of the period, as the Company’s
contracts with its transportation customers have an expected duration of one year or less. For the performance obligation to transfer warehousing
services in contracts with customers, revenue is recognized in the amount for which the Company has the right to invoice the customer,
as this amount corresponds directly with the value provided to the customer for the Company’s performance completed to date. The Company also applies the practical expedient
that permits the recognition of employee sales commissions related to transportation services as an expense when incurred, since the amortization
period of such costs is less than one year. These costs are included in the unaudited condensed consolidated statements of operations
and comprehensive income (loss). Leases The Company determines if an arrangement is a
lease at inception. Leases are classified as either operating leases or finance leases pursuant to ASC 842. i) Operating leases Operating leases are recognized as right-of-use
(“ROU”) assets in non-current assets and lease liabilities in current and non-current liabilities in the consolidated balance
sheets if the initial lease term is greater than 12 months. For leases with an initial term of 12 months or less, the Company
recognizes those lease payments on a straight-line basis over the lease term. ROU assets represent the right to use an underlying
asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As
most of the Company’s leases do not provide an implicit rate, management uses the incremental borrowing rate based on the information
available at the commencement date in determining the present value of lease payments. Management uses the implicit rate when readily
determinable. Lease expenses for lease payments are recognized on a straight-line basis over the lease term and are included in general
and administrative expenses, costs of sales and other expenses. ii) Finance leases Finance lease ROU assets are included in ROU and
current lease liabilities, and other non-current lease liabilities in the unaudited condensed consolidated balance sheets. Finance lease ROU assets and liabilities are recognized
at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not
provide an implicit rate, management uses the incremental borrowing rate based on the information available at the commencement date in
determining the present value of lease payments. Management uses the implicit rate when readily determinable. Finance lease ROU assets
are generally amortized over the lease term and are included in depreciation expenses. The interest on the finance lease liabilities is
included in interest expense. The Company has elected the accounting policy
to account for leases with both lease and non-lease components as a single lease component. For leases with an initial term of 12 months
or less, the Company elected the exemption from recording ROU assets and lease liabilities for all leases that qualify, and records rent
expenses on a straight-line basis over the lease term. Taxation Current income taxes are provided on the basis
of net profit or loss for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for
income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are recognized for temporary
differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements, net operating
loss carry forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance
with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply
to taxable income in which temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities
of changes in tax rates is recognized in the statement of operations in the period of the enactment of the change. The Company considers positive and negative evidence
when determining whether a portion or all of its deferred tax assets will more likely than not be realized. This assessment considers,
among other matters, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the duration
of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate
realization of deferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward
periods provided for in the tax law and during the periods in which the temporary differences become deductible. When assessing the realization
of deferred tax assets, the Company has considered possible sources of taxable income, including (i) future reversals of existing
taxable temporary differences, (ii) future taxable income exclusive of reversing temporary differences and carry-forwards, (iii) future
taxable income arising from implementing tax planning strategies, and (iv) specific known trend of profits expected to be reflected
within the industry. The Company recognizes a tax benefit associated
with an uncertain tax position when, in its judgment, it is more likely than not that the position will be sustained upon examination
by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently
measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate
settlement with a taxing authority. The Company’s liability associated with unrecognized tax benefits is adjusted periodically due
to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments
are recognized entirely in the period in which they are identified. The Company’s effective tax rate includes the net impact of
changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management. The Company
classifies interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. The Company did not
have any unrecognized tax benefits as of December 31, 2024 and June 30, 2024. Earnings per share Basic earnings per share of common stock are computed
by dividing net income allocable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted
earnings per share is computed by dividing net income allocable to common stockholders by the weighted average number of shares outstanding,
plus the number of additional shares that would have been outstanding if the potential shares, such as restricted stock awards and stock
options, had been issued and were considered dilutive. Segment Reporting The Company follows FASB ASC Topic 280, Segment
Reporting, which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments
and evaluating their performance. Reportable operating segments include components of an entity about which separate financial information
is available and which operating results are regularly reviewed by the chief operating decision maker to make decisions about resources
to be allocated to the segment and assess each operating segment’s performance. Based on the guidance provided by ASC Topic 280,
management has determined that the Company operates in one segment and consists of one reporting unit, given the similarities in economic
characteristics between its operations and the common nature of its services and customers. All the Company’s business activities
for the three and six months ended December 31, 2024 and 2023 were conducted in the U.S. Fair value measurement Fair value is the price that would be received
from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When
determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers
the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when
pricing the asset or liability. The established fair value hierarchy requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial
instrument’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair
value measurement. The three levels of inputs that may be used to measure fair value are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The Company’s financial instruments include
cash and restricted cash, accounts receivable and other receivables, loan receivables, long-term loan receivable, other current assets,
accounts payable and accrued liabilities, income tax payable, due to related parties, accrued payroll liabilities, commitment fee payable,
convertible notes and lease liabilities. The carrying amounts of cash and restricted cash, accounts receivable and other receivables,
loan receivables, other current assets, accounts payable and accrued liabilities, due to related parties, accrued
payroll liabilities, commitment fee payable, convertible notes, and short-term lease liabilities approximate their fair values due to
the short-term nature of these instruments. The carrying value of the Company’s long-term loan receivables and long-term lease liabilities
would not differ significantly from fair value (based on Level 2 inputs) if recalculated based on current interest rates. The Company noted no transfers between levels
during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring or non-recurring
basis as of December 31, 2024 and June 30, 2024. Costs of sales Costs of sales primarily consist of amortization
and depreciation, equipment lease and warehouse lease expenses, freight expenses, port handling and customs fees, salary and benefits,
temporary labor expenses, warehouse expenses, utilities and other expenses. General and administrative expenses General and administrative expenses primarily
consist of office equipment and furniture depreciation expenses, office expenses, professional fees, office space rental expenses, repairs
and maintenance, salary and benefits, sundry costs, vehicle expenses, tax and licenses, credit loss expenses, and other expenses. Recently issued accounting standards Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited
condensed consolidated financial statements. |
