Annual Report for Fiscal Year Ending October 31, 2025 (Form 20-F)

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 related notes that appear in this annual 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. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report, particularly in "Risk Factors." All amounts included herein with respect to the fiscal years ended October 31, 2025, 2024 and 2023 are derived from our audited consolidated financial statements included elsewhere in this annual report. Our financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP.

A. Operating Results

Key Factors Affecting Our Results of Operations

Our Operating Subsidiaries currently derive a majority of their revenues from the sale of products and receipt of franchise fees. Park Ha intends to continually enhance its services and cross-sell new services to existing customers and acquire new customers by increasing market penetration with a deeper market coverage and broader geographical reach. Maintaining and enhancing the recognition, image and acceptance of our brand are important to Park Ha's ability to differentiate our products from and to compete effectively with our peers. Our brand image, however, could be jeopardized if we fail to maintain high product quality, pioneer and keep pace with evolving technology trends, or timely fulfill the orders for our products. If we fail to promote our brand or to maintain or enhance our brand recognition and awareness among our customers, or if we are subject to events or negative allegations affecting our brand image or the publicly perceived position of our brand, our business, results of operations and financial condition could be adversely affected.

Our business is in the beauty industry, which is now experiencing rapid technological and model changes. Failure to anticipate technology innovations or adapt to such innovations in a timely manner, or at all, may result in our products and services becoming obsolete or suffering unpredictable intervals.

We monitor a number of financial and non-financial key business metrics to evaluate on a regular basis business, growth trends and company budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. We believe that some of the most important measures include gross profit margin, operating margin, net income (loss) as well as the non-financial key metrics discussed below which may differ from other similarly titled metrics used by other companies, securities analysts or investors.

Number of contracts for our franchisees

We monitor the number of contracts with customers for our franchisees. The number of contracts will directly impact our results of operations, including revenues and gross profit margins for the foreseeable future. As of October 31, 2025, 2024 and 2023, we had 22, 45 and 38 franchisees in China, of which 22, 43 and 36 franchisees operate under the store name "Park Ha". As of October 31, 2025, 2024 and 2023, we had 0, 2 and 2 franchisees operate under a different brand name. The business relationships between us and our independent franchisees are built on our standards and policies that is of fundamental importance to the overall performance and protection of the "Park Ha" brand.

Expansion of our geographic coverage

We believe there is a substantial opportunity to further grow our customer base by continuing to make significant investments in sales, marketing and brand building. Our ability to attract new customers will depend on a number of factors, including competitive dynamics in our targeted new geographical markets in China. We intend to expand our marketing and sales team with a focus on increasing sales in targeted geographies and customer segments. This will play a pivotal role in driving the company's growth in terms of sales revenue and franchise fee revenue.

RESULTS OF OPERATIONS

For the years ended October 31, 2025, 2024 and 2023

The following table presents a summary of the Company's comprehensive operating performance for the fiscal years ended October 31, 2025, 2024 and 2023. The historical performance listed below does not necessarily indicate expected performance for any future period.

Revenue

The sales revenue consists of the following:

Direct costs consist of the following:

The gross profit consists of the following:

The gross profit margin consists of the following:

For the fiscal year ended October 31, 2025, our total revenue was $2,524,843, while for the fiscal year ended October 31, 2024, our total revenue was $2,381,851, representing a increase of $142,992, or 6%, which was primarily attributable to the growth in sales revenue.

Our products sales revenue increased by $306,803, or 43%, from $707,231 for the year ended October 31, 2024 to $1,014,034 for the year ended October 31, 2025, which is mainly because with the improvement of the company's brand awareness, the sales business is in the trend of increasing year by year.

Our Franchise fees revenue decreased by $163,811, or 10%, from $1,674,620 for the year ended October 31, 2024 to $1,510,809 for the year ended October 31, 2025, which is mainly because the decrease of franchisees.

For the fiscal year ended October 31, 2024, our total revenue was $2,381,851, while for the fiscal year ended October 31, 2023, our total revenue was $2,459,102, representing a decrease of $77,251, or 3%, which was primarily attributable to the decrease in franchise fees.

Our products sales revenue increased by $58,486, or 9%, from $648,745 for the year ended October 31, 2023 to $707,231 for the year ended October 31, 2024, which is mainly because with the improvement of the company's brand awareness, the sales business is in the trend of increasing year by year.

Our Franchise fees revenue decreased by $135,737, or 7%, from $1,810,357 for the year ended October 31, 2023 to $1,674,620 for the year ended October 31, 2024.The primary reason is that two Class A franchisees changed to Class C franchisees on May 2, 2023, and June 10, 2023, respectively, resulting in a decrease in revenue of $226,749 in fiscal year 2024 compared to fiscal year 2023. In fiscal year 2023, three Class A franchisees changed to Class C franchisees on April 29, 2023, May 21, 2023 and May 23, 2023, respectively, resulting in a decrease in revenue of $85,607 in fiscal year 2024 compared to the same period. Revenue recognized by terminated franchisees in FY2023 was $160,660; Revenue from newly signed franchisees increased by $403,200 in FY2024.

Products sales - Non-franchisees

Product sales revenue from non-franchisees increased by $179,928, or 51%, from $355,832 for the fiscal year ended October 31, 2024 to $535,760 for the fiscal year ended October 31, 2025. Sales revenue from non-franchisees accounted for 21% and 15% of the total revenue, respectively for the fiscal years ended October 31, 2025 and 2024. The above increase of revenue was mainly due to the increase of two new directly-operated stores.

Product sales revenue from non-franchisees increased by $53,327, or 18%, from $302,505 for the fiscal year ended October 31, 2023 to $355,832 for the fiscal year ended October 31, 2024. Sales revenue from non-franchisees accounted for 15% and 12% of the total revenue, respectively, for the fiscal years ended October 31, 2024 and 2023. Product sales revenue from non-franchisees for the fiscal years ended October 31, 2024 and 2023 remained a relatively stable growth trend.

The cost of products sales to non-franchise for the fiscal year ended October 31, 2025 was $21,982, which represents a increased of $592 or 3% compared to $21,390 for the fiscal year ended October 31, 2024. For the fiscal years ended October 31, 2025 and 2024, cost of products sales to non-franchisees accounted for 15% and 11% of the total cost of revenue, respectively. The cost of products sales to non-franchise for the fiscal year ended October 31, 2025 and 2024 remained relatively stable.

The cost of products sales to non-franchise for the fiscal year ended October 31, 2024 was $21,390, which represents a decreased of $24,380 or 53% compared to $45,770 for the fiscal year ended October 31, 2023. For the fiscal years ended October 31, 2024 and 2023, cost of products sales to non-franchisees accounted for 11% and 15% of the total cost of revenue, respectively. The above decrease in cost of revenue was mainly due to: (i) the sales of some old products have decreased; (ii) some old products have been optimized in the company's product composition structure, removing unnecessary packaging. These factors resulted in a decrease in cost of revenue compared to the previous period.

For the fiscal years ended October 31, 2025 and 2024, gross profit of products sales to non-franchisees accounted for 22% and 15% of the total gross profit, respectively. The gross profit and gross profit margin for the fiscal year ended October 31, 2025 were $513,778 and 96%, respectively. The gross profit and gross profit margin for the fiscal year ended October 31, 2024 were $334,422 and 94%, respectively. The gross profit margin of products sales to non-franchisees for the fiscal years ended October 31, 2025 and 2024 remained relatively stable.

For the fiscal years ended October 31, 2024 and 2023, gross profit of products sales to non-franchisees accounted for 15% and 12% of the total gross profit, respectively. The gross profit and gross profit margin for the fiscal year ended October 31, 2024 were $334,442 and 94%, respectively. The gross profit and gross profit margin for the fiscal year ended October 31, 2023 were $256,735 and 85%, respectively. The increase of gross profit margin of products sales to non-franchisees for the fiscal years ended October 31, 2024 is the result of the decrease of cost of products sales to non-franchise as the company optimized the composition of the products and saved related costs.

Product sales - Franchisees

Product sales revenue from franchisees increased by $126,875, or 36%, from $351,399 for the fiscal year ended October 31, 2024 to $478,274 for the fiscal year ended October 31, 2025. Sales revenue from franchisees accounted for 19% and 15% of the total revenue, respectively, for the fiscal years ended October 31, 2025 and 2024. The above increase revenue was mainly due to the company's effective maintenance of customer relationships with franchisees, as well as regular supervision of their inventory replenishment and implementation of marketing activities.

Product sales revenue from franchisees increased by $5,159, or 1%, from $346,240 for the fiscal year ended October 31, 2023 to $351,399 for the fiscal year ended October 31, 2024. Sales revenue from franchisees accounted for 15% and 14% of the total revenue, respectively, for the fiscal years ended October 31, 2024 and 2023. Product sales revenue from franchisees for the fiscal years ended October 31, 2024 and 2023 remained relatively stable.

The cost of products sales to franchisees for the fiscal year ended October 31, 2025 was $107,344, representing an increase of $39,751, or 59%, compared to $67,593 for the fiscal year ended October 31, 2024. For the fiscal years ended October 31, 2025 and 2024, the cost of products sales to franchisees accounted for 77% and 35% of the total cost of revenue, respectively. The above increase is the result of an increase in product sales revenue from franchisees.

The cost of products sales to franchisees for the fiscal year ended October 31, 2024 was $67,593, representing a decrease of $28,422, or 30%, compared to $96,015 for the fiscal year ended October 31, 2023. For the fiscal years ended October 31, 2024 and 2023, the cost of products sales to franchisees accounted for 35% and 31% of the total cost of revenue, respectively. The above decrease in cost of revenue was mainly due to: (i) the sales of some old products have decreased; (ii) some old products have been optimized in the company's product composition structure, removing unnecessary packaging. These factors resulted in a decrease in cost of revenue compared to the previous period.

For the fiscal years ended October 31, 2025 and 2024, gross profit of products sales to franchisees accounted for 16% and 13% of the total gross profit, respectively. For the fiscal year ended October 31, 2025, gross profit and gross profit margin were $370,930 and 78%, respectively, while for the fiscal year ended October 31, 2024, gross profit and gross profit margin were $283,806 and 81%, respectively. The gross profit margin of products sales to franchisees decreased by 3% in FY2025 compared to FY2024, the main reason is that the increase of procurement cost.

For the fiscal years ended October 31, 2024 and 2023, gross profit of products sales to franchisees accounted for 13% and 12% of the total gross profit, respectively. For the fiscal year ended October 31, 2024, gross profit and gross profit margin were $283,806 and 81%, respectively, while for the fiscal year ended October 31, 2023, gross profit and gross profit margin were $250,225 and 72%, respectively. The gross profit margin of products sales to franchisees increased by 9% in FY2024 compared to FY2023, the main reason is that the company optimized the composition of the products and saved related costs, which increased the gross profit margin of the new products by 84% compared with the gross profit margin of the old products by 72% in the previous period, thus improving the overall gross profit margin.

Franchise fees

For the fiscal year ended October 31, 2025, the total revenue from franchise fees was $1,510,809, with a cost of franchise fees of $13,200, compared to $1,674,620 and $106,353 for the fiscal year ended October 31, 2024. Gross profit of franchise fees decreased by $70,658 for the same years. For the fiscal years ended October 31, 2025 and 2024, the total revenue from franchise fees accounted for 60% and 70% of the total revenue, respectively. For the fiscal year ended October 31, 2025 and 2024, the cost of franchise fees accounted for 10% and 54% of the total cost of revenue, respectively. For the fiscal years ended October 31, 2025 and 2024, the gross profit of franchise fees accounted for 62% and 72% of the total gross profit. The main reason is that:

Roll-forward of franchisees

The following table provides a roll-forward of our franchise contracts during the years ended October 31, 2025 , 2024 and 2023:

As of October 31, 2025, we had 22 franchisees ("2025 Franchisees"). As of October 31, 2025, we had 22 franchisees as a result of (i) 17 franchisees renewed their contracts and 28 expired ("Renewed Franchisees"); (ii) 5 newly contracted franchisees.

The revenue for the fiscal year ended October 31, 2025 comprised the revenue from (i) Renewed Franchisees of US$601,012, Terminated franchisees of 736,734 (ii) newly contracted franchisees of US$173,063.

As of October 31, 2024, we had 45 franchisees ("2024 Franchisees"). As of October 31, 2024, we had 45 franchisees as a result of (i) 37 franchisees renewed their contracts and 1 expired. ("Renewed Franchisees"); (ii) 8 newly contracted franchisees.

The revenue for the fiscal year ended October 31, 2024 comprised the revenue from (i) Renewed Franchisees of US$1,271,420, and (ii) newly contracted franchisees of US$403,200.

As of October 31, 2023, we had 38 franchisees as a result of (i) renewal of the contracts with 32 franchisees ("Renewed Franchisees") upon their expiry; (ii) termination of the contracts with 17 franchisees upon their expiry; and (iv) 6 newly contracted franchisees.

The revenue for the fiscal year ended October 31, 2023 comprised the revenue from (i) 2022 Franchisees of US$1,200,789.82, (ii) Renewed Franchisees of US$419,134.72, and (iii) newly contracted franchisees of US$190,296.

Our franchise fees are recognized over the franchise term as the performance obligation is satisfied, typically spanning one year. For details, see "Note 2 - Summary of Significant Accounting Policies - Revenue Recognition." The revenue for the fiscal year ended October 31, 2025 decreased by appropriately 10% as compared to the fiscal year ended October 31, 2024.The primary reason is that the decline in the number of franchisees has led to a decrease in franchise fee revenue.

Cost of franchise fees mainly includes the training service cost provided for franchisees. Due to the need for the Company to have a comprehensive understanding of the franchisees and relevant course planning in the early stages of training, investing more resources, leading to the cost of franchising is relatively high. The investment for the future years will be smaller, so the training costs related to franchise fees for this period will be reduced. This leads to a reduction in franchise costs. The gross profit was mainly due to the combined effect of the above-mentioned changes in revenue and cost of franchise fees.

Selling and marketing expenses

For the fiscal year ended October 31, 2025, our selling and marketing expenses were $625,289, while for the fiscal year ended October 31, 2024, our selling and marketing expenses were $361,327, representing an increase of $263,962, or 73%. The main reason for the increase is (i)the increase of $100,120 in payroll and welfare expenses based on the increased directly-operated store and increased sales staff and increased annual bonuses; (ii)the increase in Store Rental expenses and Renovation costs of $127,781 from $31,192 in FY2024 to $158,973in FY2025 because the increased directly-operated store ; and (iii) the increase in promotion expenses of $27,662 from $10,829 for FY2024 to $38,491 for FY2025 as a result of continuously optimization of marketing approaches.

For the fiscal year ended October 31, 2024, our selling and marketing expenses were $361,327, while for the fiscal year ended October 31, 2023, our selling and marketing expenses were $299,615, representing a increase of $61,712, or 21%. The main reason for the increase is (i)the increase of $73,886 in payroll and welfare expenses based on the increased directly-operated store and increased sales staff and increased annual bonuses; (ii)the decrease in store rental expenses and renovation costs of $18,240 from $49,432in FY2023 to $ 31,192 in FY2024 because lower lease fees due to lower rents for re-contracted contracts; and (iii) the increase in promotion expenses of $6,269 from $4,560 for FY2023 to $10,829 for FY2024 as a result of continuously optimization of marketing approaches.

General and administrative expenses

For the fiscal year ended October 31, 2025, our general and administrative expenses were $25,483,541, while for the fiscal year ended October 31, 2024, our general and administrative expenses were $814,857, representing a increase of $24,668,684 or 3,027%. The increase was primarily attributable to the following reasons: (i) the increase in Share-based Payment Expense of $24,070,200 from $nil for FY2024 to $24,070,200 for FY2025 as the payment of the Share-based payment expenses; (ii) the increase in professional expenses of $424,404 from $411,750 for FY2024 to $ 836,154 for FY2025 as the payment for Investor Relations Website Press Release, financial services of ONE SUPREME HOLDINGS LIMITED and NASDAQ; and (iii)the increase in Payroll and welfare expenses of $ 136,758 as the distribution of listing bonuses.

For the fiscal year ended October 31, 2024, our general and administrative expenses were $814,857, while for the fiscal year ended October 31, 2023, our general and administrative expenses were $484,955, representing a increase of $329,902 or 68%. The increase was primarily attributable to the following reasons: (i) the increase in professional expenses of $278,698 from $133,052 for FY2023 to $411,750 for FY2024 as the Payment of the completed audit service and miscellaneous IPO services in 2024; and (ii) the increase in annual meeting training expenses of $ 48,709 from nil for FY2023 to $ 48,709 for FY2024.

Research and development expenses

For the fiscal year ended October 31, 2025, our R&D expenses were $238,184, while for the fiscal year ended October 31, 2024, our R&D expenses were $36,714, representing an increase of $201,470 or 549%. The increase was primarily attributable to the following reasons: (i) the increase in research and development expenses of Cell Therapies of $194,032 from $nil for FY2024 to $194,032 for FY2025; (ii) the increase in raw materials of $ 4,851 from $nil for FY2024 to $ 4,851 for FY2025.; and (iii) the increase in patent expenses of $ 3,929 from 395 for FY2024 to $4,324 for FY2025.

For the fiscal year ended October 31, 2024, our R&D expenses were $36,714, while for the fiscal year ended October 31, 2023, our R&D expenses were $30,881, representing an increase of $5,833 or 19%. R&D expenses for the fiscal years ended October 31, 2024 and 2023 remained relatively stable.

Allowance for expected credit losses

Allowance for expected credit losses derives from allowances on accounts receivable and loan receivable from franchisees, based on past collection experience, current economic conditions, future economic conditions and changes in the Company's customer collection trends. Allowance for expected credit losses of accounts receivables and franchisee loan and other receivables were $184,204 for the fiscal year ended October 31, 2025 representing an increase of $4,301 or 2% from $179,903 for the fiscal year ended October 31, 2024.

Allowance for accounts receivables decreased by $86,992 from $231,851 as of October 31, 2024 to $144,859 as of October 31, 2025, primarily due to the decreased balance of accounts receivables from $562,743 as of October 31, 2024 to $400,703 as of October 31, 2025.

Allowance for franchisee loan increased by $177,356 from $55,520 as of October 31, 2024 to $232,876 as of October 31, 2025, primarily due to the increase of past-due loans.

Allowance for other receivables decreased by $40,011 from $51,013 as of October 31, 2024 to $11,002 as of October 31, 2025, primarily due to the deregistration of a franchisee, a provision of USD 38,613 for bad debts was written off.

Allowance for expected credit losses derives from allowances on accounts receivable and loan receivable from franchisees, based on past collection experience, current economic conditions, future economic conditions and changes in the Company's customer collection trends. Allowance for expected credit losses of accounts receivables and franchisee loan and other receivables were $179,903 for the fiscal year ended October 31, 2024, representing an increase of $27,795 or 18% from $152,108 for the fiscal year ended October 31, 2023.

Allowance for accounts receivables increased by $ 141,347 from $90,504 as of October 31, 2023 to $231,851as of October 31, 2024, primarily due to (i) the increased balance of accounts receivables from $452,239 as of October 31, 2023 to $562,743 as of October 31, 2024 in connection with our business expansion; and (ii) the change in the aging structure of accounts receivables, specifically, the accounts receivables that are aging over one year of $68,778 as of October 31, 2023, as compared to the accounts receivables that are aging over one year of $185,942 as of October 31, 2024.

Allowance for franchisee loan decreased by $ 7,082 from $62,602 as of October 31, 2023 to $55,520 as of October 31, 2024, primarily due to the proportion of bad debt losses measured by the migration rate fell from a year earlier.

Allowance for other receivables increased by $51,013 from $nil as of October 31, 2023 to $51,013 as of October 31, 2024, primarily due to the delayed payment of $49,331 due from two franchisees due to their financial difficulties, of which are not collected as of the date of this annual report. No allowance for loan receivable from franchisees was made as of October 31, 2023 since the management considered that the aging of loans receivables from franchisees were within three months, which was relatively short and there were no default indicators.

Interest income (expense)

Interest income and bank income mainly come from the bank transfer fees and deposit interest. Net of Interest income for the fiscal years ended October 31, 2025 and 2024 was approximately $6,056 and $783, respectively.

Interest income and bank income mainly come from the bank transfer fees and deposit interest. Net of Interest income for the fiscal years ended October 31, 2024 and 2023 was approximately $783 and $1,590, respectively.

Income tax expense (benefit)

The Company in general is subject to profits tax rate at 25% for income generated for its operation in China and net operating losses can be carried forward for no longer than five years starting from the year subsequent to the year in which the loss was incurred.

In accordance with the implementation rules of EIT Laws, a qualified "High and New Technology Enterprise" ("HNTE") is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate expires. "Park Ha Jiangsu" obtained its HNTE certificate on November 6, 2024. Therefore, "Park Ha Jiangsu" is eligible to enjoy a preferential tax rate of 15% from 2024 to 2026 to the extent it has taxable income under the EIT Law.

Announcement No. 12 [2023] of the Ministry of Finance and the State Taxation Administration stipulates that the preferential corporate income tax (CIT) policy for small and low-profit enterprises (SLPEs) - reducing taxable income by 25% and applying a 20% tax rate - shall be extended until December 31, 2027.Wuxi Muchen and Wuxi Mufeng and ParkHa Investment, with annual taxable income not exceeding RMB 1 million for the year ended October 31, 2025, qualify as SLPEs. As such, 25% of their taxable income is subject to CIT at the reduced rate of 20%.

Ai Meihui obtained the "Review Approval Notification for Application and Adjustment of Fixed Amount for Periodic Fixed-Amount Taxpayers" issued by the State Taxation Administration, Jiangsu Wuxi Economic Development Zone Tax Bureau on August 30, 2025, indicating that the application for "Periodic Fixed-Amount Taxpayer Application and Adjustment of Fixed Amount" submitted by Ai Meihui on August 22, 2025, has been approved. Upon review, Ai Meihui's account shall implement a monthly taxable amount of 0 yuan from August 1, 2025, to December 31, 2025.

Xinyuexuan obtained the "Review Approval Notification for Application and Adjustment of Fixed Amount for Periodic Fixed-Amount Taxpayers" issued by the State Taxation Administration, Jiangsu Wuxi Economic Development Zone Tax Bureau on August 19, 2025, indicating that the application for "Periodic Fixed-Amount Taxpayer Application and Adjustment of Fixed Amount" submitted by Xinyuexuan on August 11, 2025, has been approved. Upon review, Xinyuexuan's account shall implement a monthly taxable amount of 0 yuan from July 1, 2025, to December 31, 2025.

The income tax expense for the fiscal years ended October 31, 2025 and 2024 were approximately $280,646and $314,860, respectively.

The income tax expense for the fiscal year ended October 31, 2025 was adjusted by (i)the increase in the income tax expense by $6,209,492, of which $34,827 because Park Ha Jiangsu enjoyed a preferential rate of 15%, of which $6,202,101 because Park Ha Cayman is not subject to tax, of which $(4,404) because Wuxi Muchen,Wuxi Mufeng and ParkHa Investment enjoyed a preferential rate of 5% for small and Low-Profit Enterprises, of which $(23,032)because Aimei Hui and Xinyuexuan enjoyed Deemed Provision Tax Assessment; (ii)the decrease in the income tax expense of $45,429 due to the effect of super deduction of R&D expenses of $199,378; and (iii)the increase in the income tax expense by 134,531 because Park Ha Jiangsu and Park Ha Shanghai recorded net loss for the fiscal year ended October 31, 2025;and (iv)the increase in the income tax expense of $3,078 due to the effect of entertainment expenses of $19,956.

The income tax expense for the fiscal year ended October 31, 2024 was adjusted by (i)the increase in the income tax expense by $112,241, of which $14,259 because Park Ha Jiangsu enjoyed a preferential rate of 15%, of which $93,472 because Park Ha Cayman is not subject to tax, of which $4,510 because Park Ha Jiangsu enjoyed a preferential rate of 15% in 2024 and 20% in 2023; (ii)the decrease in the income tax expense of $5,507due to the effect of super deduction of R&D expenses of $36,714; and (iii)the increase in the income tax expense by 7,260, of which $(3,827) as a result of offsetting previous years' tax losses of $25,512 of Park Ha Jiangsu, of which $11,087 because Park Ha Shanghai recorded net loss for the fiscal year ended October 31, 2024;and (iv) the increase in the income tax expense of $2,510 due to the effect of non-deductible expenses of $15,962

The income tax expense for the fiscal year ended October 31, 2023 was adjusted by (i) the decrease in the income tax expense of $13,767 as a result of offsetting previous years' tax losses of $50,630; (ii) the decrease in the income tax expense of $4,632 due to the effect of super deduction of R&D expenses of $23,160; (iii) the increase in the income tax expense of $48,158 due to the effect of non-deductible expenses of $193,168; and (iv) the increase in the income tax expense of $4,375 because Park Ha Jiangsu enjoyed a preferential rate of 20% and Park Ha Shanghai recorded net loss for the fiscal year ended October 31, 2023.

Net Loss/income

As a result of the foregoing, for the fiscal year ended October 31, 2025, our loss was $24,364,753, compared to net income $478,561 for the fiscal year ended October 31, 2024, representing an decrease of $24,843,314 or 5,191%.

As a result of the foregoing, for the fiscal year ended October 31, 2024, our net income was $478,561, compared to $852,042 for the fiscal year ended October 31, 2023, representing a decrease of $373,481 or 44%.

Working capital and capital resources

As of October 31, 2025, we had $3,787,678 in cash as compared to $547,498 as of October 31, 2024. The Company's working capital and other capital needs mainly come from shareholders' equity contributions and operating cash flows. Cash is needed to pay for inventory, wages, sales expenses, rent, income tax, and other operating expenses.

Although the Company's management believes that the cash generated from operations will be sufficient to meet the Company's normal working capital needs, its ability to service its current debts will depend on its future realization of its current assets for at least the next 12 months. The management has considered historical experience, economic conditions, trends in the beauty industry, the collectability of accounts receivable as of October 31, 2025, and the realization of inventory. Based on these considerations, the management believes that the Company has sufficient funds to meet its working capital needs and debt obligations, as they will be due at least 12 months from the date of financial reporting. However, there is no guarantee that the management's plan will be succeed. There are many factors that may occur and cause the Company's plan to fall short, such as economic conditions, competitive pricing in the industry and the continuous support of our suppliers. If future operating cash flows and other capital resources are insufficient to meet its liquidity needs, the Company may be forced to reduce or postpone its anticipated expansion plans, sell assets, acquire additional debt or equity capital, or refinance all or part of its debt.

The following table summarizes the Company's cash flow data for the fiscal years ended October 31, 2025, 2024 and 2023:

Net cash provided by operating activities

For the fiscal year ended October 31, 2025, the net cash provided by operating activities was $85,852, as compared to the net cash provided by operating activities of $960,470 for the fiscal year ended October 31, 2024. The decrease in net cash provided by operating activities was mainly due to the(i) decrease in fluctuations of contractual liabilities of $198,149, (ii) decrease in fluctuations of other receivables and other current assets of $287,456, (iii) increase in fluctuations of accounts receivable of $170,718, and(iv) increase in fluctuations of accounts payable of $164,236 for the year ended October 31, 2025.

For the fiscal year ended October 31, 2024, the net cash provided by operating activities was $960,470, as compared to the net cash provided by operating activities of $126,537 for the fiscal year ended October 31, 2023. The increase in net cash provided by operating activities was mainly due to the (i) increase in fluctuations of contractual liabilities of $1,057,807, (ii) decrease in fluctuations of accounts payable of $245,557, (iii) increase in fluctuations of accounts receivable of $239,005, (iv) increase in fluctuations of other receivables and other current assets of $228,893, and (v)decrease in fluctuations of other non-current assets of $168,396 for the year ended October 31, 2024.

Net cash (used in)provided by investing activities

For the fiscal year ended October 31, 2025, the net cash used in investment activities was $572,927, as compared to the net cash used in investment activities of $508,143 for the fiscal year ended October 31, 2024. The increase in net cash used in investment activities is mainly due to the decrease of loans repayment from franchisees.

For the fiscal year ended October 31, 2024, the net cash used in investment activities was $508,143, as compared to the net cash provided by investment activities of $1,023,419 for the fiscal year ended October 31, 2023. The decrease in net cash provided by investment activities is mainly due to the payment of franchisee loans granted to franchisees.

Net cash provided by(used in) financing activities

For the fiscal year ended October 31, 2025, the net cash provided by financing activities was $3,735,677, as compared to the net cash used in financing activities of $957,389 for the fiscal year ended October 31, 2024. The net cash provided by financing activities for the fiscal year ended October 31, 2025 was mainly due to the proceeds from issuance of shares

For the fiscal year ended October 31, 2024, the net cash used in financing activities was $957,389, as compared to the net cash provided by financing activities of $676,925 for the fiscal year ended October 31, 2023. The net cash used in financing activities for the fiscal year ended October 31, 2024 was mainly due to the payments to deferred IPO Cost.

Non-cash lease expenses

For the fiscal year ended October 31, 2025, our Company has operating leases for nine operating leases for its five self-operated stores, two employee dormitories, one warehouse and one office.

The right to use assets and liabilities of operating leases are recognized on the lease commencement date based on the present value of lease payments during the lease term. The discount rate used to calculate present value is the incremental borrowing rate, or (if any) the interest rate implied in the lease. The company mainly determines the incremental loan interest rate for each lease based on its lease term in China, with approximately 3.25%, 3.75% and 3.73% for the fiscal years ended October 31, 2025, 2024 and 2023, respectively.

For the fiscal years ended October 31, 2025, 2024 and 2023, the operating lease charges were $37,386, $30,425 and $45,869, respectively.

The components of the lease fee and the supplementary cash flow related to the lease are as follows:

As of October 31, 2025, 2024 and 2023, the weighted average lease term and discount rate are as follows:

The supplementary balance sheet information related to leasing is as follows:

The undiscounted minimum future lease payment schedule is as follows:

Concentration of credit risk

Cash deposits with banks are held in financial institutions in China, which deposits are not federally insured. Accordingly, the Company has a concentration of credit risk related to the uninsured part of bank deposits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.

Concentration of customers and suppliers

The Company has a concentration risk related to suppliers and customers. Failure to maintain existing relationships with the suppliers or customers to establish new relationships in the future could negatively affect the Company's ability to obtain goods sold to customers in a price advantage and timely manner. If the Company is unable to obtain ample supply of goods from existing suppliers or alternative sources of supply, the Company may be unable to satisfy the orders from its customers, which could materially and adversely affect revenues.

The customers accounting for 10% or more of the Company's revenue include the following:

The customers that accounted for 10% or more of the Company's accounts receivable comprised of the following:

The suppliers that accounted for 10% or more of the Company's purchases comprised of the following:

The suppliers that accounted for 10% or more of the Company's accounts payable comprised of the following:

Contract liability

The contract liabilities consist of advances from customers, which relate to unsatisfied performance obligations at the end of each reporting period and consists of cash payments received in advance from customers in sales of beauty products and devices and unearned franchise fee. As of October 31, 2025 and October 31, 2024, the Company's advances from customer deposit and unearned franchise fee amounted to $194,753 and $325,924 respectively.

Trend Information

Except as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that may reasonably be likely to have a significant impact on our net income, income from continuing operations, profitability, working capital or capital resources, or that would cause reported may not necessarily to be indicative of future operating results or financial condition.

Off-Balance Sheet Arrangements

Except as disclosed elsewhere in this annual report, we have not entered into any financial guarantees or other commitments to ensure the payment obligations of any third party. We have not entered into any derivative contracts that are indexed to its shares and classified as shareholders' equity or that are not reflected in its consolidated financial statements. In addition, we do not have any retained or contingent interests in the assets transferred to unconsolidated entities that services as credit, liquidity, or market risk support to such entities. We do not have any variable interests in any unconsolidated entity that provides us with financing, liquidity, market risk or credit support, or that engages in leasing, hedging or research and development services.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period. The most significant estimates and assumptions include the assessment of the expected credit losses for receivables. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this annual report reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.

The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:

Credit Losses

On January 1, 2023, we adopted Accounting Standards Update ("ASU") 2016-13 "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," by using a modified retrospective transition method, which replaces the incurred loss impairment methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. The expected credit loss impairment model requires the entity to recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of ASU 2016-13 did not have a material impact on our financial statements.

Our account receivables, loans receivable from franchisees, due from related parties and other receivables which is included in other receivables and other current assets line item in the balance sheet are within the scope of ASC Topic 326. We use the roll-rate method to measure expected credit losses of loans receivable from franchisees, on a collective basis when similar risk characteristics exist. The roll-rate method stratifies the receivables balance by delinquency stages and projected forward in one-year increments using historical roll rate. In each year of the simulation, losses on the receivables are captured, and the ending delinquency stratification serves as the beginning point of the next iteration. This process is repeated on a yearly rolling basis. The loss rate calculated for each delinquency stage is then applied to respective receivables balance. The management adjusts the allowance that is determined by the roll-rate method for both current conditions and forecasts of economic conditions. For account receivables, due from related parties and other receivables, we use the loss-rate method to evaluate the expected credit losses on an individual basis. When establishing the loss rate, we make the assessment on various factors, including historical experience, credit-worthiness of debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the debtors. We also provide specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.

Expected credit losses are included in the consolidated statements of operations and comprehensive income. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Account receivables, loans receivable from franchisees, due from related parties and other receivables are recognized and carried at original amount less an allowance for credit losses, as necessary. As of October 31, 2025 and 2024, allowance for credit losses for accounts receivable amounted to $144,859 and $231,851, respectively, allowance for credit losses for loan to franchisees amounted to $232,876, and $55,520, respectively, and allowance for credit losses for other receivables amounted to $11,002 and $51,013, respectively.

Quantitative and qualitative disclosure of market risk

The deterioration of the overall economic conditions in the United States and globally, including the impact of long-term deflation on our customers and suppliers, may harm our business and operational results.

Our business and operating results may be adversely affected by changes in national or global economic conditions. These situations include but are not limited to inflation and/or deflation, changes in interest rates, availability of capital markets, availability and cost of energy (including fuel surcharges), negative impacts caused by military conflicts between Russia and Ukraine, and the impact of government measures to manage economic conditions. The impact of such situations may be transmitted to our business in the form of a decrease in customer base and/or our customer expenses, as industry wide expenses may decrease and/or our suppliers may face economic pressure to shift costs.

Risks related to conducting business in China

The recent intervention of the state government in the commercial activities of Chinese companies listed in the United States may have a negative impact on our operations.

Recently, the Chinese government announced that it will strengthen regulation of Chinese companies listed overseas. According to the new measures, China will strengthen the supervision of cross-border data flow and security, crack down on illegal activities in the securities market, punish fraudulent securities issuance, market manipulation, and insider trading. China will also inspect the sources of funds for securities investment and control leverage. The Cyberspace Administration also conducted cybersecurity investigations on several technology giants listed in the United States, with a focus on antitrust, fintech regulation, and recently, with the passage of the Data Security Law, how companies collect, store, process, and transfer data. Our operations and commercial interests are in Chinese Mainland. If the intervention of the Chinese government is expanded and through agency, our commercial interests will be affected, and our operations may be negatively affected, although there is currently no obvious direct impact.