DirectBooking Technology : Annual Report for Fiscal Year Ending March 31, 2026 (Form 20-F)

About this update from Directbooking Technology Co., Ltd.

Operating and Financial Review and Prospects 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 annual report. This report contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information-D. Risk Factors" and elsewhere in this annual report. See "Cautionary Statement Regarding Forward-Looking Information". A. Operating Results Overview We are a provider of transportation services that employs environmentally friendly practices with the aim of facilitating reuse of C&D materials and reduction of construction waste. Through our operating subsidiary in Hong Kong, we operate in the construction industry, mainly handling transportation of materials excavated from construction sites. Our services principally comprise of soil and rock transportation services and construction works, which mainly include ELS works and bored piling. We used to engage in diesel oil trading, which we ceased in the year ended March 31, 2024. We generally provide our services as a subcontractor to other construction contractors in Hong Kong. How We Assess Performance of Our Business Revenues Our revenues are principally generated from handling transportation of materials excavated from construction sites, and construction services. Revenues from handling transportation of materials excavated from construction sites is recognized on completion of the related services. While revenues from provision of construction services are recognized based on the progress of completion of the contracts. Our revenues are affected by the development of the construction industry which includes development of residential, commercial, industrial and infrastructure projects. The timing, size and nature of these projects will, on the other hand, be determined by a number of factors such as the Hong Kong government's spending budget on construction projects, the investment of property developers and the general conditions and prospects of the local economy. Gross profit Gross profit represents revenues less costs for providing transportation services or costs of provision of construction services. Our cost of sales mainly comprised subcontracting charges, fuel costs, depreciation of machinery and direct labor costs. Although we determine our project prices based on a cost-plus method with reference to the time, costs and potential income estimated to be involved in a project, the actual time and costs involved in completing our construction related projects or transportation services may be adversely escalated in materials and labor, adverse weather conditions, the length of time we store or handle the excavated materials, and changes in rules, regulations, and policies in Hong Kong. Therefore, any failure to control and manage the cost and time involved in a project may give rise to delays in completion of work and/or cost overruns, which in turn may materially and adversely affect our financial condition, profitability, and liquidity. Depreciation and Amortization We carry plant and equipment on our balance sheet at cost, net of accumulated depreciation and amortization. Depreciation on plant and equipment are computed on a straight-line basis over the estimated useful life of the asset. General and Administrative Expenses Our general and administrative expenses consisted mainly of staff costs, transportation costs, amortization of right-of-use assets for operating lease, and amortization of right-of-use assets for finance lease on motor vehicles for administrative purpose, depreciation expense for idle machinery, which was recognized under general and administrative expenses due to a decrease in active projects, provision of credit loss, legal and professional fees, insurance expenses, office and rental expenses and other miscellaneous expenses. Interest Expense Our interest expense is mainly related to our interest expenses incurred by finance leases of motor vehicles and machinery and bank borrowings. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. As a result, management is required to routinely make judgments and estimates about the effects of matters that are inherently uncertain. Actual results may differ from these estimates under different conditions or assumptions. 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. Due to the level of activity and lack of complex transactions, we believe there are currently no critical accounting policies and estimates that affect the preparation of our financial statements. Exchange Rate The exchange rates used for translation from Hong Kong dollar to USD was 7.8000, a pegged rate determined by the linked exchange rate system in Hong Kong. This pegged rate was used to translate Company's balance sheets, income statement items and cash flow items throughout fiscal years 2025 to 202 6. For translation of Chinese Renminbi ("RMB") into USD, the exchange rate used as of March 31, 2026, was 6.8980RMB per USD, was applied to translate the balance sheet of Beijing Direct Booking Technology Co., Ltd. ("Beijing Direct Booking") as of that date. The exchange rate of 7.0713RMB per USD, representing the average rate for the period, was applied to translate the income statement and cash flow items of Beijing Direct Booking throughout fiscal year 2026. Fiscal year 2025 is not applicable as Beijing Direct Booking was incorporated on May 28, 2025. Results of Operations Year ended March 31, 2025, compared to year ended March 31, 2026 The following table sets forth a summary of the consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our total revenues. For the year ended March 31, 2025 2026 % of change USD USD Revenues Revenue generated from third parties 18,631,925 8,491,707 (54.4 )% Revenues generated from related parties 643,748 443,314 (31.1 )% 19,275,673 8,935,021 (53.6 )% Cost of sales Cost of sales charged by third parties (16,708,063 ) (9,574,016 ) (42.7 )% Cost of sales charged by related parties (887,945 ) (1,282,408 ) 44.4 % Cost of sales (17,596,008 ) (10,856,424 ) (38.3 )% Gross profit (loss) 1,679,665 (1,921,403 ) (214.4 )% Operating expenses: General and administrative expenses (8,845,949 ) (11,808,274 ) 33.5 % Loss from operations (7,166,284 ) (13,729,677 ) 91.6 % Other income, net 290,337 354,097 22.0 % Interest expense (224,412 ) (183,361 ) -18.3 % Loss before tax expense (7,100,359 ) (13,558,941 ) 91.0 % Income tax recovery 119,291 267,774 124.5 % Net loss (6,981,068 ) (13,291,167 ) 90.4 % Revenues Our revenues decreased by 54.4% to USD 8,935,021 (of which USD 443,314 was generated from related parties) for the year ended March 31, 2026, from USD19,275,673 (of which USD643,748 was generated from related parties) for the year ended March 31, 2025. The revenues decrease was principally a result of the significant decrease in our undertaking of both solid and rock transportation services and construction works. The following table sets out revenues generated from different services during the two years ended March 31, 2026 and 2025, respectively: For the year ended March 31, 2025 2026 USD % USD % Revenues Soil and rock transportation 10,668,170 55.3 % 7,075,782 79.2 % Miscellaneous construction works 8,607,503 44.7 % 1,859,239 20.8 % Total 19,275,673 100.0 % 8,935,021 100.0 % For the year ended March 31, 2026, as compared to 2025, revenues from soil and rock transportation services decreased. This decline was principally attributable to a decrease in transaction volume resulting from fewer business engagements during fiscal 2026. The substantial decrease in construction work segment was mainly due to the completion of three construction projects during fiscal 2025, with no comparable new projects secured or commenced during fiscal 2026 to replace the revenue generated from those completed projects. Cost of sales Our total cost of sales decreased by 38.3% to USD10,856,424 for the year ended March 31, 2026, from USD17,596,008 for the year ended March 31, 2025. The decrease was mainly attributable to the decrease in subcontracting charges for new and existing projects during fiscal 2026 and in line with the decrease in revenue. Cost of sales charged by third parties decreased by 42.7% to USD9,574,016 for the year ended March 31, 2026, from USD16,708,063 for fiscal 2025. Cost of sales charged by related parties increased by 44.42% to USD1,282,408 for the year ended March 31, 2026, from USD887,945 for fiscal 2025, which was mainly due to subcontracting services provided by the related party for a relatively large-scale project undertaken during fiscal 2026. Our cost of sales mainly comprised subcontracting charges, cost of construction materials, fuel costs, depreciation of machinery and direct labor costs. Although total revenue decreased by 54.0%, total cost of sales only decreased by 38.3% due to certain fixed costs included in cost of sales, such as direct labor costs, depreciation of machinery, and repairs and maintenance, which did not decrease proportionally with the decrease in revenue, as well as an increase in fuel costs driven by a rise in fuel oil unit prices during fiscal 2026. Gross profit and gross profit margin For the year ended March 31, 2025, the Company recorded gross profit of $1,679,665. For the year ended March 31, 2026, the Company recorded a gross loss of $1,921,403. Our gross margin shifted from a gross profit margin of 8.7% for the year ended March 31, 2025 to a gross loss margin 21.5% for the year ended March 31, 2026. The shift to a gross loss margin was primarily due to the substantial decrease in revenue from both revenue streams while direct costs could not be reduced proportionally. The gross profit margin for the construction works segment decreased from a gross profit margin of 10.6% in fiscal 2025 to a gross loss margin of 34.7% in fiscal 2026, largely attributable to the completion of three major construction projects during fiscal 2025 without comparable new projects secured or commenced during fiscal 2026, resulting in revenue dropping faster than project fixed overhead costs. Additionally, the soil and rock transportation segment experienced a significant drop in gross profit margin, from a gross profit of 7.2% in fiscal 2025 to a gross loss margin of 18.0% in fiscal 2026. This decline was mainly caused by fewer business engagements and lower transaction volume, resulting the fixed direct labor costs, fixed asset depreciation, and subcontracting costs that could not be fully passed on to customer or reduced in line with the top-line decline. The following table summarizes the gross profit and gross profit margin of different segments for the periods indicated: For the year ended March 31, 2025 2026 Gross profit Gross margin Gross profit Gross margin USD % USD % Soil and rock transportation 771,060 7.2 % (1,275,620 ) (18.0 )% Miscellaneous construction works 908,605 10.6 % (645,783 ) (34.7 )% Overall 1,679,665 8.7 % (1,921,403 ) (21.5 )% General and administrative expenses For the years ended March 31, 2025 and 2026, our general and administrative expenses consisted mainly of staff costs, transportation costs, amortization of right-of-use assets for operating lease, and amortization of right-of-use assets for finance lease on motor vehicles for administrative purpose, depreciation expense for idle machinery, which was recognized under general and administrative expenses due to a decrease in active projects, provision of credit loss, legal and professional fees, insurance expenses, office and rental expenses and other miscellaneous expenses. The following table sets forth a breakdown of our general and administrative expenses for the years ended March 31, 2025 and 2026: For the year ended March 31, 2025 2026 % of change USD USD Depreciation 115,744 239,261 106.7 % Insurance 75,471 51,552 (31.7 )% Legal and professional fees 6,778,458 7,936,318 17.1 % Office expenses 35,928 84,082 134.0 % Others 106,878 121,338 13.5 % Provision of credit loss 696,639 2,315,017 232.3 % Staff cost 692,455 611,790 (11.6 )% Transportation 344,376 448,916 30.4 % Total 8,845,949 11,808,274 33.5 % Our general and administrative expenses increased by 33.5% to USD 11,808,274 for the year ended March 31, 2026, from USD 8,845,949 for the year ended March 31, 2025. This increase was principally attributable to increases in provision for credit loss, legal and professional fees, and depreciation. The increase in legal and professional fees for fiscal 2026 was primarily due to additional legal and advisory services undertaken in connection with the Stock incentive plans and Private Placement equity financing transactions conducted during fiscal 2026. In fiscal 2026, certain depreciation costs were reclassified from cost of sales to general and administrative expenses, as the Company could not fully utilize the fixed assets due to fewer business engagements and lower transaction volume. Interest expense Our interest expense is mainly related to our interest expenses incurred by finance leases of motor vehicles and machinery, and bank borrowings. Our interest expense decreased by 18.3% to USD183,361 for the year ended March 31, 2026, from USD224,412 for the year ended March 31, 2025. The decrease was primarily due to the termination of certain fixed assets held under right-of-use finance leases, which reduced the corresponding finance lease obligations and related interest expense. Other income Other income comprised mainly income from machinery / motor vehicle rental, site management income, sale of scrap materials and mud, miscellaneous income, gains or losses on termination of machinery and motor vehicles under finance lease arrangements, and parking fines. The following table sets for the breakdown of our other income for the years ended March 31, 2025 and 2026: For the year ended March 31, 2025 2026 % of change USD USD Site management income 33,030 - (100.0 )% Machinery/ Motor vehicle rental 225,031 129,678 (42.4 )% Sale of scrap material/ Mud 119,410 - (100.0 )% Parking fines (80,028 ) (79,069 ) (1.2 )% (Loss) gain on termination of motor vehicle/ machinery under finance lease arrangements (11,026 ) 327,403 3069.4 % Other income (expense) 3,920 (23,915 ) (710.1 )% Total other income, net 290,337 354,097 22.0 % Income tax recovery We are not subject to any income tax in the Cayman Islands and the BVI pursuant to the rules and regulations in those jurisdictions, but our subsidiary, Primega Construction, is subject to Hong Kong profits tax. Due to the operating loss of Primega Construction for the year ended March 31, 2026, the allowable tax loss can be carried forward indefinitely to offset future taxable profit, against which a full valuation allowance was provided as it is not probable that future taxable profits will be available against which the unused tax losses can be utilized. We recognized income tax recovery of USD267,774 for the year ended March 31, 2026, compared to an income tax recovery of USD119,291 for the year ended March 31, 2025. The income tax recovery in fiscal 2026 was primarily due to deferred tax movements resulting from the reversal of deferred tax liabilities brought forward from fiscal 2025 related to property, plant and equipment and right-of-use assets under finance leases . The Company's subsidiary incorporated in the PRC is governed by the income tax laws of the PRC, and the income tax provisions in respect to operations in the PRC are 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 "FIE") are usually subject to a unified 25% enterprise income tax rate, while preferential tax rates, tax holidays and even tax exemptions may be granted on a case-by-case basis. EIT grants preferential tax treatment on certain Small and Micro Enterprises ("SMEs"). Under this preferential tax treatment, SMEs are entitled to a range from 12.5% to 20% of regular income tax. The Company's PRC subsidiary is a SME. Net loss For the year ended March 31, 2026, we recorded a net loss of USD 13,291,167, as compared to a net loss of USD 6,981,068 for the year ended March 31, 2025. This expansion in net loss was primarily driven by our shift from a gross profit position to a gross loss of USD 1,921,403 due to reduced revenue generation, coupled with a 33.5% increase in general and administrative expenses-principally resulting from depreciation expense for idle machinery, which was recognized under general and administrative expenses due to a decrease in active projects , recognition of higher provisions for credit losses and elevated legal and professional fees associated with our equity financing and stock incentive activities . Year ended March 31, 2024, compared to year ended March 31, 2025 The following table sets forth a summary of the consolidated results of operations for the periods indicated, both in absolute amount and as a percentage of our total revenues. For the year ended March 31, 2024 2025 % of change USD USD Revenues Revenue generated from third parties 13,464,430 18,631,925 38.4 % Revenues generated from related parties - 643,748 N/A 13,464,430 19,275,673 43.2 % Cost of sales Cost of sales charged by third parties (9,672,689 ) (16,708,063 ) 72.7 % Cost of sales charged by related parties (1,023,137 ) (887,945 ) (13.2 )% Cost of sales (10,695,826 ) (17,596,008 ) 64.5 % Gross profit 2,768,604 1,679,665 (39.3 )% Operating expenses: General and administrative expenses (1,336,394 ) (8,845,949 ) 561.9 % Income (loss) from operations 1,432,210 (7,166,284 ) (600.4 )% Other income, net 116,397 290,337 149.4 % Interest expense (210,713 ) (224,412 ) 6.5 % Income (loss) before tax expense 1,337,894 (7,100,359 ) (630.7 )% Income tax (expense) recovery (246,609 ) 119,291 (148.4 )% Net income (loss) 1,091,285 (6,981,068 ) (739.7 )% Revenues Our revenues increased by 43.2% to USD19,275,673 (of which USD643,748 was generated from related parties) for the year ended March 31, 2025, from USD13,464,430 for the year ended March 31, 2024. The revenues increase was principally a result of the significant increase in our undertaking of both solid and rock transportation services and construction works. The following table sets out revenues generated from different services during the two years ended March 31, 2025: For the year ended March 31, 2024 2025 USD % USD % Revenues Soil and rock transportation 8,436,223 62.7 % 10,668,170 55.3 % Miscellaneous construction works 5,028,207 37.3 % 8,607,503 44.7 % Total 13,464,430 100.0 % 19,275,673 100.0 % For the year ended March 31, 2025, as compared to 2024, revenues from soil and rock transportation services increased because demand for our transportation services increased as we undertook 3 new large-scale transportation projects. We continued to focus on expanding construction works to fully utilize our capacity. We were engaged in more construction projects during fiscal 2025. As such, revenues from miscellaneous construction works grew by 71.2% in 2025 year-on-year. Cost of sales Our total cost of sales increased by 64.5% to USD17,596,008 for the year ended March 31, 2025, from USD10,695,826 for the year ended March 31, 2024. The increase was due to the increase in our revenues in both solid and rock transportation and miscellaneous construction works. Cost of sales charged by third parties increased by 72.7% to USD16,708,063 for the year ended March 31, 2025, from USD9,672,689 for fiscal 2024. Cost of sales charged by related parties decreased by 13.2% to USD887,945 for the year ended March 31, 2025, from USD1,023,137 for fiscal 2024. Our cost of sales mainly comprised subcontracting charges, cost of construction materials, fuel costs, depreciation of machinery and direct labor costs. Gross profit and gross profit margin Our gross profit decreased by 39.3% to USD1,679,665 for the year ended March 31, 2025, from USD2,768,604 for the year ended March 31, 2024. Our gross profit margin decreased to 8.7% for the year ended March 31, 2025, from 20.6% for the year ended March 31, 2024. The decline in gross profit margin was primarily due to cost overruns in construction projects initiated in prior years, where the gross profit margin for this sector decreased from 24.3% in fiscal year 2024 to 10.6% in fiscal year 2025. Additionally, the soil and rock transportation sector experienced a significant drop in gross profit margin, from 18.4% in fiscal year 2024 to 7.2% in fiscal year 2025, largely attributable to increasing operational challenges, including skilled labor shortage and surging transportation costs, in Hong Kong's weak economic climate, where we had to incur larger proportion of labor costs and subcontracting costs which we could not pass on to customers. The following table summarizes the gross profit and gross profit margin of different segments for the periods indicated: For the year ended March 31, 2024 2025 Gross profit Gross margin Gross profit Gross margin USD % USD % Soil and rock transportation 1,548,076 18.4 % 771,060 7.2 % Miscellaneous construction works 1,220,528 24.3 % 908,605 10.6 % Overall 2,768,604 20.6 % 1,679,665 8.7 % General and administrative expenses For the years ended March 31, 2024 and 2025, our general and administrative expenses consisted mainly of staff costs, transportation costs, amortization of right-of-use assets for operating lease, and amortization of right-of-use assets for finance lease on motor vehicles for administrative purpose, provision of credit loss, legal and professional fees, insurance expenses, office and rental expenses and other miscellaneous expenses. The following table sets forth a breakdown of our general and administrative expenses for the years ended March 31, 2024 and 2025: For the year ended March 31, 2024 2025 % of change USD USD Legal and professional fees 313,190 6,778,458 2,064.3 % Depreciation 151,059 115,744 (23.4 )% Provision for (Reversal of) credit loss (22,522 ) 696,639 (3,193.1 )% Office expenses 23,836 35,928 50.7 % Others 80,689 106,878 32.5 % Staff cost 504,763 692,455 37.2 % Insurance 47,557 75,471 58.7 % Transportation 237,822 344,376 44.8 % Total 1,336,394 8,845,949 561.9 % Our general and administrative expenses increased by 561.9% to USD8,845,949 for the year ended March 31, 2025, from USD1,336,394 for the year ended March 31, 2024, principally due to the increase of legal and professional fees and provision for credit loss. A significant portion of the legal and professional fees were related to the consultancy fees paid for the Company's business review and development following the successful IPO. The consultancy fees were fully settled by issue of new ordinary shares of the Company. The management of the Company does not expect these consultancy services will recur in the future. Interest expense Our interest expense is mainly related to our interest expenses incurred by finance leases of motor vehicles and machinery, and bank borrowings. Our interest expense increased mildly by 6.5% to USD224,412 for the year ended March 31, 2025, from USD210,713 for the year ended March 31, 2024. Other income Other income comprised mainly income from machinery rental, site management income, sale of scrap materials and mud, and miscellaneous income, gains or losses from termination of machinery under finance lease arrangements, less parking fines. The following table sets for the breakdown of our other income for the years ended March 31, 2024 and 2025: For the year ended March 31, 2024 2025 % of change USD USD Sale of scrap materials/mud 182,397 119,410 (34.5 )% Rental of machinery - 225,031 N/A Site management income - 33,030 N/A Parking fines (69,051 ) (80,028 ) 15.9 % Other income/(expenses), net 3,051 (7,106 ) (332.9 )% Total, net 116,397 290,337 149.4 % Income tax expense We are not subject to any income tax in the Cayman Islands and the BVI pursuant to the rules and regulations in those jurisdictions, but our subsidiary, Primega Construction, is subject to Hong Kong profits tax. Due to the operating loss of Primega Construction for the year ended March 31, 2025, the allowable tax loss can be carried forward to offset future taxable profit. We recognized income tax recovery of USD119,291 for the year ended March 31, 2025, as compared to income tax expense was USD246,609 for the year ended March 31, 2024. Effective tax rate for the year ended March 31, 2024 was 18.4%. Net income/loss For the year ended March 31, 2025, we recorded a net loss of USD6,981,068. This loss primarily stemmed from increased general and administrative expenses, including significant legal and professional fees and provisions for credit losses, alongside a decline in gross profit. Net income for the year ended March 31, 2024 was USD1,091,285. B. Liquidity and Capital Resources Years ended March 31, 2026 and 2025 Our use of cash was primarily related to operating activities and purchase of property, plant and equipment and entering into finance leases. We have historically financed our operations primarily through our cash flow generated from our business operations in previous years, bank borrowings and capital raised through equity financing activities. We incurred a net loss of $13,291,167 and $6,981,068 for the years ended March 31, 2026 and 2025, respectively, and our accumulated deficits were $15,984,846 and $2,693,679 as of March 31, 2026 and 2025, respectively. In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," management has determined that these conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that this report is issued. In order to strengthen our liquidity in the foreseeable future, we have taken the following measures： ● Actively expanding our business to secure more projects and generate increased revenue and profit. ● Financial support from our shareholders; and ● Other equity financing activities to fund our operations. We can make no assurances that required financing will be available for the amounts needed, or on terms commercially acceptable to us, if at all. If one or all of these events do not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfalls, there would likely be a material adverse effect on us and would materially adversely affect our ability to continue as a going concern. The following table sets forth a summary of our cash flows information for the years indicated: For the year ended March 31, 2025 2026 USD USD Cash and cash equivalents at the beginning of the year 489,435 455,953 Net cash used in operating activities (2,819,237 ) (1,292,762 ) Net cash provided by (used in) investing activities 747 (12,235,420 ) Net cash provided by financing activities 2,785,008 13,216,423 Effect of exchange rate changes on cash and cash equivalents - (14,010 ) Cash and cash equivalents at the end of the year 455,953 130,184 Operating activities Our cash inflow from operating activities was principally receipt of payments from customers. Our cash outflows from operating activities were principally due to payments for purchase of diesel oils, subcontracting fees, staff costs, and administrative and other operating expenses. Net cash provided by operating activities reflects our net income adjusted for non-cash items, including non-cash operating lease expense, depreciation, deferred tax expenses, fees for consulting services, loss on termination of right-of-use assets - finance lease, allowance for credit loss, and changes in working capital items including accounts receivable, prepaid expense, deposits and other receivable, due to related parties, accounts payable, retention receivable, accruals and other current liabilities, contract liabilities, income taxes payable and lease liabilities - operating leases. Net cash used in operating activities for the year ended March 31, 2026 was USD1,292,762, as compared to net cash used in operating activities of USD2,819,237 during the fiscal year 2025. The decrease in net cash outflows used in operating activities due to the decrease in total accounts receivable - third parties by USD1,957,281 and the decrease in accounts payable, accruals and other current liabilities by USD253,968. During the year ended March 31, 2026, we had non-cash adjustments: net loss of USD13,291,167, non-cash operating lease expense of USD30,099, depreciation of right-of-use assets - finance lease of USD1,531,337, depreciation of property, plant and equipment of USD130,485, consulting services settled by issuance of ordinary shares of USD6,953,860, deferred tax recovery of USD267,774, allowance for credit loss of USD2,315,017. During the year ended March 31, 2026, we also had the following changes of working capital items: (i) decrease in accounts receivable - third parties of USD1,957,281; (ii) increase in accounts receivable - related parties of USD50,070; (iii) decrease in retention receivable of USD108,500; (iv) decrease in prepayment, deposits and other receivable of USD572,102; (v) decrease in accounts payable, accruals and other current liabilities of USD253,968; (vi) decrease in income taxes payable of USD216,939; (vii) decrease in lease liabilities - operating lease of USD26,266, and (viii) increase in due to related parties of USD 686,348. Investing activities For the year ended March 31, 2026, cash used in investing activities was USD 12,235,420 and for the year ended March 31, 2025, cash provided by investing activities was USD 747. During the year ended March 31, 2026, the proceeds from termination of ROU - finance lease were USD522,169, compared to USD747 for the year ended March 31, 2025. The net increase in cash used in investing activities was mainly due to the prepayments of potential investment in Wangmao. The Company paid the total purchase price of approximately US$12.7 million in or about December 2025 in accordance with the terms of the SPA. However, due to commercial considerations and unforeseen events, the Company has not received any shares of China Wangmao over six months after paying the investment cost. Subsequent to the financial year ended, the Company and China Wangmao mutually agreed to terminate the SPA effective on August 11, 2026 and China Wangmao agreed to refund the full principal amount of US$12.7 million and pay compensatory interest at an annual rate of 5.25% for the period during which it held the purchase price. On August 13, 2026, the Company fully recovered the principal amount of USD12.7 million together with all accrued interest in cash. Financing activities For the year ended March 31, 2026, net cash provided by financing activities was USD13,216,423. We obtained cash from financing from net proceeds from a related party of USD491,593 and repayment of bank loans of USD98,610, principal payment of finance lease liabilities of USD951,909 and principal payment of finance lease liabilities - related parties of USD315,533, net proceeds from issuance of ordinary shares to 16 investors related to PIPE transaction in 2025-11 of USD13,950,000 and p roceeds from issuance of shares to 4 individuals related to SPA in 2026-02 of USD140,882. For the year ended March 31, 2025, net cash provided by financing activities was USD2,785,008. We obtained cash from financing from proceeds from issuance of common stocks, net of issuance costs of USD5,277,100, proceeds from a related party of USD333,172. Net cash used in financing activities included payment of offering costs of USD1,438,964, repayment of bank loans of USD93,505, principal payment of finance lease liabilities of USD990,816 and principal payment of finance lease liabilities - related parties of USD301,979. Years ended March 31, 2025 and 2024 Our use of cash was primarily related to operating activities and purchase of property, plant and equipment and entering into finance leases. We have historically financed our operations primarily through our cash flow generated from our operations and bank borrowings. Following the completion of the IPO, all net proceeds of approximately USD5.3 million-including the exercise of over-allotment options-were transferred from the parent company to Primega Construction. We believe we have sufficient cash generated from operations to meet our regular working capital requirements based on the contracts on hand and cashflow projection for the next 12 months from the end of fiscal year 2025, which is also based on our management's experience and the financial data available. The following table sets forth a summary of our cash flows information for the years indicated: For the year ended March 31, 2024 2025 USD USD Cash and cash equivalents at the beginning of the year 240,219 489,435 Net cash provided by (used in) operating activities 2,394,212 (2,819,237 ) Net cash provided by investing activities 21,276 747 Net cash (used in) provided by financing activities (2,166,272 ) 2,785,008 Cash and cash equivalents at the end of the year 489,435 455,953 Operating activities Our cash inflow from operating activities was principally receipt of payments from customers. Our cash outflows from operating activities were principally due to payments for purchase of diesel oils, subcontracting fees, staff costs, and administrative and other operating expenses. Net cash provided by operating activities reflects our net income adjusted for non-cash items, including non-cash operating lease expense, depreciation, deferred tax expenses, fees for consulting services, loss on termination of right-of-use assets - finance lease, allowance for credit loss, and changes in working capital items including accounts receivable, prepaid expense, deposits and other receivable, accounts payable, retention receivable, accruals and other current liabilities, contract liabilities, income taxes payable and lease liabilities - operating leases. Net cash used in operating activities for the year ended March 31, 2025 was USD2,819,237, as compared to net cash provided by operating activities of USD2,394,212 fiscal year 2024. The turnaround was mainly attributable to the net loss of USD6,981,068 recorded in fiscal year 2025, the increase in total accounts receivable by USD2,616,415 and the decrease in accounts payable, accruals and other current liabilities by USD1,209,269. During the year ended March 31, 2025, we had net loss of USD6,981,068, non-cash operating lease expense of USD76,955, depreciation of right-of-use assets - finance lease of USD1,546,442, depreciation of property, plant and equipment of USD149,291, consulting services fees of USD6,144,000 related to the Company's business review and development which were fully settled by the issuance of the Company's ordinary shares, deferred tax recovery of USD143,400, allowance for credit loss of USD696,639. During the year ended March 31, 2025, we also had the following non-cash adjustments and changes of working capital items: (i) increase in accounts receivable of USD2,587,091; (ii) increase in accounts receivable - related parties of USD29,324; (iii) increase in retention receivable of USD46,496; (iv) decrease in prepayment, deposits and other receivable of USD763,634; (v) decrease in accounts payable, accruals and other current liabilities of USD1,209,269; (vi) decrease in accounts payable - related parties of USD279,498; (vii) decrease in contract liabilities of USD836,911; (viii) increase in income taxes payable of USD8,772; and (ix) decrease in lease liabilities - operating lease of USD102,940. Investing activities For the years ended March 31, 2025 and 2024, cash provided by investing activities was 747 and 21,276. Both of them are the proceeds from termination of ROU - finance lease, respectively, both of which represented proceeds from the termination of ROU - finance lease. Financing activities For the year ended March 31, 2025, net cash provided by financing activities was USD2,785,008. We obtained cash from financing from proceeds from issuance of common stocks, net of issuance costs of USD5,277,100, net proceeds from a related party of USD333,172. Net cash used in financing activities included payment of offering costs of USD1,438,964, repayment of bank loans of USD93,505, principal payment of finance lease liabilities of USD990,816 and principal payment of finance lease liabilities - related parties of USD301,979. For the year ended March 31, 2024, net cash used in financing activities was USD2,166,272. The cash used in financing activities was the repayment to a related party of USD623,776, proceeds from a related company of USD431,867, repayment of bank loans of USD34,822, principal payment of finance lease liabilities of USD1,074,899, and principal payment of finance lease liabilities - related parties of USD479,055 and payment of offering costs of USD385,587. C. Research and Development, Patents and Licences, etc. For the three years ended March 31, 2026, we did not incur material costs in research and development. We did not possess any patents. Our operating subsidiary had one diesel tank wagon duly licensed by the Hong Kong Fire Services Department to convey category 5 dangerous goods. Also, Primega Construction has established a quality management system that is certified to be in compliance with the requirements of ISO 9001:2015. D. Trend Information Other than as disclosed elsewhere in this document, we are not aware of any trends, uncertainties, demands, commitments or events since March 31, 2026 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. E. Off-balance Sheet Arrangements We do not have any outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. We do not engage in trading activities involving non-exchange traded contracts. In our ongoing business, we do not enter into transactions involving, or otherwise form relationships with, unconsolidated entities or financial partnerships that are established for the purpose of facilitating off-balance sheet arrangements for other contractually narrow or limited purposes. F. Tabular Disclosure of Contractual Obligations Our contractual obligations primarily consist of operating and finance lease obligations. The following table sets forth a breakdown of our contractual obligations as of March 31, 2026, and their maturity profile: Payment due by period Less than 1 year 1 to 3 years More than 3 years Total USD USD USD USD Contractual Obligations: Operating leases 10,578 - - 10,578 Financial leases 1,090,971 792,539 - 1,883,510 Bank borrowings 102,011 212,616 537,377 852,004 Total contractual obligations 1,203,560 1,005,155 537,377 2,746,092

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