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

About this update from Tjgc Group Limited

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 discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See "Disclosure Regarding Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under "Item 3. KEY INFORMATION - D. Risk Factors" and elsewhere in this Annual Report. A. Operating Results Overview TJGC Group Limited ("TJGC Group") is a limited liability company established under the laws of the British Virgin Islands on May 13, 2022. We are an integrated marketing and advertising services provider in Hong Kong specializing in mobile games promotion for the local market. We provide services to mobile game developers, principally developers of mobile gaming applications or "apps" that gamers download from the developers' websites and applicable mobile operating systems, such as Apple Store or Android Google Play Store. The market for specialized mobile game advertising in Hong Kong is occupied by a few market players who compete with one another. Based on our knowledge and understanding of our market position, we consider ourselves a major player in the industry with a significant market share. Our prominent market share and proven track record are indicative of our audience reach and engagement, as well as our relevance to advertisers in our local markets. Recent Developments April 2026 Registered Direct Offering On April 15, 2026, the Company entered into securities purchase agreements with certain investors to issue and sell 15,000,000 no-par value ordinary shares in a best-efforts offering at a price of US$0.40 per share, generating aggregate gross proceeds of US$6,000,000. The offering was conducted under the Form F-1 registration statement (File No. 333-294243), which was declared effective by the SEC on the same date. The Nasdaq closing price of our ordinary shares on April 14, 2026 was US$0.9399. This offering has no minimum share volume or gross proceeds requirement for closing. Eddid Securities USA Inc. served as the exclusive placement agent. Neither party established an escrow or trust account for investor funds, as the placement agent did not take possession of investor proceeds. The placement agent had no obligation to purchase the offered shares or secure a fixed transaction size. As consideration for its services, the Company paid the placement agent a cash fee equal to 4% of the gross proceeds, or US$240,000, together with other customary compensation. The offering closed on April 16, 2026. Our ordinary shares are listed on the Nasdaq Capital Market under the ticker symbol "TJGC". Share Consolidation in May 2026 On May 6, 2026, the Board of Directors adopted a written resolution to approve a share consolidation. Pursuant to the resolution, every three (3) issued no-par ordinary shares of the Company will be combined into one (1) no-par Ordinary Share (the "Share Consolidation"). No fractional shares will be issued; any fractional entitlement resulting from the consolidation will be rounded up to the nearest whole share. As a result, the Company's issued Ordinary Shares will be reduced from 30,300,000 shares to 10,100,000 shares. After rounding up, the final number of issued Ordinary Shares became 10,100,023 shares, each carrying the rights and restrictions set forth in the memorandum and articles of association filed on November 11, 2025. The Share Consolidation was effective on May 26, 2026. The Share Consolidation was reflected with the Nasdaq Capital Market and in the marketplace at the opening of business on May 26, 2026. Key factors that affect operating results Our results of operations have been and will continue to be affected by a number of factors, including those set out below: Growth and infrastructure development of the mobile gaming ecosystem Our business and results of operations will be impacted by industry factors that drive the overall performance of the mobile gaming ecosystem. The mobile gaming ecosystem has grown rapidly in recent years with technological advancement alongside an increase in the number and variety of mobile apps befitting for gaming application. We expect that the acceleration, or, conversely, decline of this remarkable growth would continue to affect our business and the results of operations. In addition, even if the mobile app ecosystem continues to grow at its current rate, our ability to position ourselves within the market will impact our business and results of operations. Large third-party internet platforms such as YouTube, Apple App Store and Google Play Store, among others, predominate the distribution of online mobile games. Likewise, advertising agents target users of mobile games by launching advertising campaigns in third-party media platforms, such as social media websites. We expect this trend to continue for the foreseeable future. Some of these third-party platforms have significant market power and discretion to set platform fees and constraints over the dissemination of permissible content over their domains. All of these platform fees and constraints affect mobile game developers' operations and profitability, and in turn, could have repercussions on their advertising spendings with us. In addition, the imposition by these third-party platforms of constraints over permissible content could affect our ability to target users with personalized advertising materials and allocate marketing campaigns in an efficient and cost-effective manner. Significant changes to the policies of these third-party platforms could drive rapid change across the mobile gaming ecosystem. Further, new tools for gaming developers, industry standards, and platforms may also emerge in the future. We have made, and expect to continue to make, considerable investments of management resources in responding to emerging technologies, especially those pertaining to advancement in internet digital technologies and mobile app utilization, in order to respond to rapid technological changes with the mobile gaming ecosystem. These include the deployment of our internal and financial resources, including our management's time and effort, to explore the technological infrastructure and evaluate its suitability for application in our business models. We may also need to partner with new media platforms and incur further expense outlays such as the hiring of additional staff workforce or consultants of technical expertise to harness the application of new technologies. While our investments in innovations may not result in revenue in the near term, we believe these investments have allowed us to adapt our business model to emerging trends and enable us to maintain competitiveness in the changing marketplace. New developments in PRC laws and regulations regarding the public use of mobile games in the country We have benefited in the past from the tightening of the rules and regulations in the PRC concerning the public's use of mobile games in the country. As the mobile gaming developers and operators in the PRC sought after alternative revenue channels through the new launching of mobile games in our local market in Hong Kong, they require corresponding advertising services for their marketing campaigns and, we believe, afforded us promising opportunities to grow our client portfolio. There are significant uncertainties regarding the future direction that new developments in PRC legislation regarding the use of mobile games may assume. These legislative developments, if materialized, are beyond our control and could turn out to be either advantageous or detrimental to our future business prospects. Some of the mobile gaming developers responding to these changes may decide to seek alternative revenue channels by opening up overseas markets outside of our local market and allocate their advertising budget to these regions, thus reducing their spending with us. Our ability to navigate these changes and grow our business over time depends on our being able to capture new opportunities and respond to challenges arising from these new developments in a timely and adequate manner. Our local market in Hong Kong will continue to have overriding significance for our business. At the same time, we serve to reduce our heavy reliance on our local market by diversifying our business to specific East Asian countries. Manage our pricing for advertising services and profit margin The margin of our advertising services is derived from the service fees we charged our clients less the cost of services incurred, which included, importantly, the fees we paid to media publishers for accessing advertising traffic over their platforms and procurement of advertising inventories. Each of these factors varies according to the market conditions. We formulate the pricing for our advertising services based on an equitable mark-up on our estimated cost to execute the advertising campaign, having regard to the results of price negotiation with our clients, prevailing market trends and industry information available to us. We determine our service fee on a case-by-case basis, taking into account many factors including: the nature of advertising services required; the scale and complexity of the advertising campaign and the timeframe involved; the specific media channels for deploying the advertisement placement and the associated advertising traffic costs. While we have begun to establish our market niche with mobile gaming advertising in our local market, the competition within the advertising industry is intense. We not only face direct competition from other advertising agencies, but also competition from other conventional marketing channels in the marketplace that could potentially replace us. Intensified competition from existing and new entrants into the market aspiring to capture market share could result in price cutting, which could erode our profit margin and profitability. We strive to maintain our competitiveness and market position by providing a comprehensive range of advertising solutions, outstanding quality of customer services, and complementary value-added solution packages. To maintain our profit margin, we must continue to deploy management and financial resources to maintain our competitive advantage and consolidate our market position. Solicit and retain clients from new business ventures We also see business opportunities outside of our traditional business in advertising and we intend to expand our business downstream by entering into the acquisition of operation rights with upcoming mobile games in the local Hong Kong market. To successfully harness these new business ventures, we must navigate the competitive and fast-moving mobile gaming market environment in a proactive manner to adequately assess their profiles and stay competitive. On March 7, 2025, we entered into a Game Development Agreement with a game development company to develop a mobile games platform, which amounted to US$2.1 million. Subsequently, on January 30, 2026, the parties entered into a supplemental agreement, pursuant to which they mutually agreed to reduce the total contract consideration under the Game Development Agreement to approximately US$1.9 million. In addition, on June 13, 2025, CTRL Games entered into an agreement with QMO Digital Co., Ltd, another vendor, for the development of a game membership platform webpage and a software development kit (SDK) with one-year technical maintenance and support. The aggregate contract value under the agreement is approximately US$500,000. The Game Development Agreement is attached as an exhibit to this Annual Report. We hope to become a mobile game operator after the game is successfully developed. However, there is no guarantee that the company will develop a game which works and/or is successful. During the year ended March 31, 2026, the Company recognized an impairment loss of HK$4,312,000 (US$550,000) on games development costs. As of March 31, 2026, the development of the mobile games platform remains in progress, and we anticipate officially launching the platform and related games to the public during the year ending March 31, 2027. Our founders, some of whom are also our executive directors, have prior work experience in the mobile gaming industry, and have accumulated extensive industry knowledge and in-depth understanding of the mobile gaming market, we believe we are well-positioned to harness these new business ventures. As we seek further scale by downstream expansion, the necessary investments in management and financial resources could impact our profitability in the near term. We believe this additional business ventures nevertheless will open broader revenue channels by enabling us to become the direct market player in the mobile gaming industry. However, we cannot ensure you that we will be successful in developing these new business opportunities. See "Risks Related to Our Business and Industry" on page 5 for more information. We hope to continue obtaining favorable commercial terms of service from our media publishers Our business viability and future growth will depend on our ability to maintain long-term cooperative relationships with media publishers to procure suitable advertisement inventories at competitive pricing terms for placing advertisements on behalf of our clients. Our relationships with the media publishers are mainly governed by contractual agency agreements which provide for, among other things, the pricing for advertisement inventories and credit periods offered to us. These agency agreements typically have a term of one year and are subject to renewal upon expiry. The commercial terms under the agency agreements are subject to renegotiation when they are renewed. Our contracts with media publishers usually provide that they retain the right to terminate our authorized agency relationship at their discretion. If a media publisher terminates its cooperative relationship with us or we fail to negotiate service terms that are favorable to us, we may lose access to the relevant advertising channels and sustain advertisers' deflection, as a result, our revenue, results of operations and financial condition may be adversely affected. In addition, the pricing discounts we obtain from media publishers depend in part on the bulk volume of transactions we laid down for them. If our business declines and we are not able to obtain the current level of pricing discounts, we may need to pass on the price escalation to our clients as less competitive advertising packages or our profitability will be affected. We believe we have established business relationships with a wide network of local media publishers covering various media channels, which mitigate our exposure to the termination of business relationships with one or more media publishers. We also intend to enter into strategic acquisitions of media publishers in the local market for upstream integration, which will provide us further control over the media publishing operation at our disposal. However, we do not have definitive agreements or commitments for any material acquisitions at this time. We believe the investment and operation of these new acquisitions will add operating overheads for ourselves, which may impact our profitability. Enter into exhibition business with exhibition partner We have identified an opportunity to leverage its core competencies and utilize currently idle resources to enter the lucrative live events market. The primary benefits include establishing a new revenue stream, enhancing brand visibility, cross-promoting our core mobile game and anime products, and capturing a new market segment by utilizing existing expertise. After careful evaluation, management concludes that the potential benefits substantially outweigh the associated costs and risks and enter into the new business ventures. On February 14, 2025, our wholly-owned subsidiary, CTRL Solutions, entered into four (4) cooperative agreements with the same exhibition service provider and one Exhibition Events Joint Investment Agreement with respect to holding the event (collectively, the "Cooperative Agreements"). The total value of the four (4) Cooperative Agreements is approximately HK$ 15.3 million (US$2.7 million), and the value of the event is approximately HK$6.3 million (US$0.8 million). The exhibition partner is scheduled to coordinate and organize five exhibitions in the year ending March 31, 2026. All five exhibitions were completed during the year ended March 31, 2026 and the Company currently has no plans to hold further exhibitions. Collaborating with the exhibition partner offers several key advantages. First, the partner has extensive expertise and experience, ensuring optimal planning and execution of the event. They also have a vast network of suppliers and partners, allowing for the efficient integration of necessary resources such as venues, equipment, and design services. Additionally, professional firms bring creative design solutions that capture audience attention and enhance brand image. Their project management skills help streamline the entire process, from scheduling to budget control, reducing the stress on organizers. Furthermore, we believe this exhibition partners often have marketing capabilities that can attract more visitors and media coverage, ultimately maximizing the impact of the exhibition. This opportunity also involves risks that we may not be successful in holding these exhibitions and that such exhibitions will not be profitable. See " Risks Related to Our Business and Industry - We may not be successful in holding exhibition or event " for more information. Exploration of emerging technologies We have begun to explore the use of AI technologies in internal workflows. These exploratory initiatives are intended to enhance operational efficiency over time. As of the date of this Annual Report, such efforts remain at an early stage and are not expected to have a material impact on our results of operations in the near term. Comparison of Fiscal Years Ended March 31, 2026 and 2025 The following table sets forth key components of our results of operations for the fiscal years ended March 31, 2026 and 2025: For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Revenue 30,472,131 28,717,563 3,662,954 (1,754,568 ) (5.8 )% Cost of services (23,885,710 ) (22,532,501 ) (2,874,043 ) 1,353,209 (5.7 )% Gross Profit 6,586,421 6,185,062 788,911 (401,359 ) (6.1 )% Operating Expenses General and Administrative expense (22,351,548 ) (27,377,958 ) (3,492,086 ) (5,026,410 ) 22.5 % Impairment loss on games development costs - (4,312,000 ) (550,000 ) (4,312,000 ) 100.0 % Impairment loss of prepayment (10,593,902 ) - - 10,593,902 (100.0 )% Reversal of impairment loss on prepayment - 3,083,924 393,358 3,083,924 100.0 % Loss from operation (26,359,029 ) (22,420,972 ) (2,859,817 ) 3,938,057 (14.9 )% Other income (expenses) Other income, net 17,779 414,229 52,835 396,450 2229.9 % Other gain (loss) 53,200 (566,243 ) (72,225 ) (619,443 ) (1164.4 )% Interest expense (294,642 ) (675,671 ) (86,183 ) (381,029 ) 129.3 % Total other income (expenses), net (223,663 ) (827,685 ) (105,573 ) (604,022 ) 270.1 % Loss before tax (26,582,692 ) (23,248,657 ) (2,965,390 ) 3,334,035 (12.5 )% Income tax (253,734 ) (255,420 ) (32,579 ) (1,686 ) 0.7 % Net loss (26,836,426 ) (23,504,077 ) (2,997,969 ) 3,332,349 (12.4 )% Other comprehensive (loss) income (16,276 ) 10,108 1,289 26,384 (162.1 )% Total comprehensive loss (26,852,702 ) (23,493,969 ) (2,996,680 ) 3,358,733 (12.5 )% Revenue The following table sets forth the breakdown of our revenue by major revenue type for the years ended March 31, 2026 and 2025, respectively: For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Online advertising 10,728,665 10,862,227 1,385,488 133,562 1.2 % Offline advertising and web banner marketing 17,966,617 14,289,326 1,822,618 (3,677,291 ) (20.5 )% Provisioning of strategic planning services 369,124 418,331 53,359 49,207 13.3 % Other services 1,407,725 3,147,679 401,489 1,739,954 123.6 % Total revenue 30,472,131 28,717,563 3,662,954 (1,754,568 ) (5.8 )% Our revenue decreased by approximately HK$1.8 million, or approximately 5.8%, to approximately HK$28.7 million for the year ended March 31, 2026, compared to the year ended March 31, 2025, mainly due to the decrease in revenue from offline and web banner marketing which outweighed the increase in revenue from the provision of strategic planning services. Of these, revenue from online advertising slightly increased by approximately HK$0.1 million, while offline advertising delivered by approximately HK$3.7 million for the year ended March 31, 2026, mainly due to the economy downturns. Our clients decreased their marketing budget on large-scale advertising and generally shifted their budget to one-off offline events. As a result, the offline advertising revenue decreased by approximately 20.5%. The provision of strategic planning services recorded an increase in revenue of approximately 13.3% during the year ended March 31, 2026, primarily because of the increase in one-off localization projects. Our other services increased by approximately HK$1.7 million or approximately 123.6% to approximately HK$1.7 million, mainly due to the increase in the revenue of a profit sharing on the crossover collaboration products. Cost of services The following table sets forth the breakdown of cost of services for the years ended March 31, 2026 and 2025, respectively: For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Online advertising fee 6,398,096 6,930,926 884,047 532,830 8.3 % Offline advertising fee 12,846,555 9,236,788 1,178,162 (3,609,767 ) (28.1 )% Staff cost 3,509,297 3,774,592 481,453 265,295 7.6 % Others 1,131,762 2,590,195 330,381 1,458,433 128.9 % Total Cost of services 23,885,710 22,532,501 2,874,043 (1,353,209 ) (5.7 )% Cost of services decreased by approximately HK$1.4 million or approximately 5.7% to approximately HK$22.5 million for the year ended March 31, 2026, compared to the year ended March 31, 2025. The decrease in the cost of services was generally in line with our reduced total revenue derived during the year. Online advertising fee Online advertising fee includes payments to media publishers and operators of websites, social media platforms and search engines for the procurement of advertising inventories, as well as the media promotion fees and patronage paid to YouTubers, KOL, hard-core gamers and local celebrities to film introductory gaming videos for broadcast in their personal blogs and social media platforms. Online advertising fees increased by approximately HK$0.5 million or approximately 8.3% to approximately HK$6.9 million for the year ended March 31, 2026, compared to the year ended March 31, 2025. This increase corresponded with the growth in online advertising revenue. Offline advertising fee Offline advertising fees principally includes payments to the owners or operators of the physical medium for the leased use of premises to broadcast advertising content. As discussed, with a generally reduced demand for the large scale of the large-scale advertising, our offline advertising fee was decreased by approximately HK$3.6 million or 28.1% compared to the year ended March 31, 2025. The Company's offline advertising services primarily comprises outdoor channels, such as large-format LED billboards on buildings and advertisements on subway platforms. As these forms of advertising involve relatively high costs, the decrease in offline advertising fee has outpaced the decline in revenue. Others Others mainly represent miscellaneous expenses related to the production of advertisements or videos, media boosting costs and other expenses incurred from the Company's other services. Other costs increased by approximately HK$1.5 million, or 128.9% to approximately HK$2.6 million, for the year ended March 31, 2026, compared to the year ended March 31, 2025. This increase was primarily due to the costs associated with crossover collaboration products. Gross profit For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Gross profit 6,586,421 6,185,062 788,911 (401,359 ) (6.1 )% Gross profit margin 21.6 % 21.5 % 21.5 % Gross profit margin decreased slightly from 21.6% for the year ended March 31, 2025, to 21.5% for the year ended March 31, 2026. The decrease in gross profit margin was primarily attributable to the reduction in gross profit margin from online advertising, which was partially offset by an improvement in gross profit margin from offline advertising segment. Operating Expenses General and administrative expense Our general and administrative expenses mainly represented the staff costs, depreciation expenses of property and equipment, legal and professional fees and impairment loss. Our operation expenses increased by HK$5.0 million, or 22.5%, from HK$22.4 million for the year ended March 31, 2025 to HK$27.4 million for the year ended March 31, 2026, due to increase in total staff cost and professional fee of HK$5.9 million for the year ended March 31, 2026. Such increase mainly due to hiring additional staff and adviser for our compliance as public company and expansion. Impairment loss of prepayment and reversal of impairment loss on prepayment Our impairment loss and subsequent reversals on prepayment related to advance payments made for exhibition services. During the year ended March 31, 2025, our subsidiary, CTRL Solutions, entered into four cooperative investment agreements with an exhibition service provider. The total value of these agreements amounts to approximately HK$15,3 million for exhibitions scheduled to be held during the year ended March 31, 2026. Based on a review of previously held exhibitions, management anticipated that the four exhibitions would result in a net loss. Consequently, we recorded an impairment loss on the related prepayments of approximately HK$10.6 million for the year ended March 31, 2025. Upon completion of all four exhibitions during the year ended March 31, 2026, and based on their actual financial results, we recorded a reversal of the previously recognized impairment loss in the amount of approximately HK$3.1 million. Impairment loss on games development costs During the year ended March 31, 2026, our subsidiary, CTRL Games, entered into agreements with third-party developers for an aggregate consideration of US$2.1 million to develop a mobile games platform and related game software, which are anticipated to launch during the fiscal year ending March 31, 2027. As of March 31, 2026, we performed a recoverability assessment of the associated prepaid development costs. Following an analysis of the projected future cash flows for the platform and related game software, we determined that the carrying amount of these prepayments exceeded their estimated fair value. Consequently, we recognized an impairment loss of approximately HK$4.3 million for the year ended March 31, 2026. Other income, net For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Other income, net 17,779 414,229 52,835 396,450 2229.9 % Other income, net, increased to approximately HK$0.4 million for the year ended March 31, 2026, compared to approximately HK$18,000 for the year ended March 31, 2025. The increase was primarily attributable to a reversal of accounts receivable allowance of approximately HK$0.26 million and a reversal of accrued expenses of approximately HK$0.13 million recognized during the current year, neither of which occurred in the prior year. The remainder of the balance primarily consisted of a slight year-over-year increase in net bank interest income. Other gain (loss) For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Other gain (loss) 53,200 (566,243 ) (72,225 ) (619,443 ) (1164.4 )% We recorded an other loss of HK566,243 for the year ended March 31, 2026, compared to a net foreign exchange gain of HK$53,200 for the year ended March 31, 2025. This fluctuation was primarily driven by the recognition of a loss on exhibitions held of HK$496,075 and a net foreign exchange loss of HK$102,664 in the current year, arising from the translation of United States Dollar-denominated balances into Hong Kong Dollars, which is our reporting currency. These losses were partially offset by a gain of HK$32,496 recognized on the disposal of property and equipment. Income tax For the years ended March 31, % of 2025 2026 2026 Variance variance HK$ HK$ US$ HK$ Current income tax 262,812 264,564 33,745 1,752 0.7 % Deferred income tax (9,078 ) (9,144 ) (1,166 ) (66 ) 0.7 % Total income tax 253,734 255,420 32,579 1,686 0.7 % Our company, TJGC Group, was incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, TJGC Group is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no British Virgin Islands withholding tax will be imposed. In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. Our income tax for the year ended March 31, 2026 has remained consistent with the year ended March 31, 2025. B. Liquidity and Capital Resources As of the date of this Annual Report, we have financed our operations primarily through cash flows from operations, the proceeds of the IPO and loans from bank and other borrowings. We plan to support our future operations primarily from cash generated from our operations and the net proceeds raised from our IPO and our recent follow-on offering. On January 23, 2025, the Company closed its IPO of 2,000,000 ordinary shares, no par value per share (the "Ordinary Shares"). The Ordinary Shares were priced at $4.00 per share, and the offering was conducted on a firm commitment basis. On January 25, 2025, R.F. Lafferty & Co., Inc., as the representative of the underwriters for the IPO, exercised its over-allotment option to purchase an additional 300,000 ordinary shares of the Company at the public offering price of $4.00 per share. The closing for the sale of the over-allotment shares took place on January 27, 2025. The IPO and the exercise of the over-allotment option with net proceeds totaling HK$64,093,706 (US$8,238,371) from the offering after deducting underwriting discounts and offering expenses of $7,369,135 (US$947,202) from the gross proceeds totaling HK$71,462,841 (US$9,200,000). Subsequent to the fiscal year ended March 31, 2026, the Company entered into securities purchase agreements with certain investors to issue and sell 15,000,000 ordinary shares in a best-efforts offering at a price of US$0.40 per share, generating aggregate gross proceeds of US$6,000,000. This offering closed on April 16, 2026, and the Company received net proceeds of approximately US$5,435,772 after deducting placement agent fees and other estimated offering expenses. As of March 31, 2026, we had an outstanding bank and other borrowings balance of approximately HK$15.6 million (US$2.0 million), of which the bank and other borrowings of approximately HK$9.3 million (US$1.2 million) will be payable within one year and approximately HK$6.3 million (US$0.8 million) will be payable after one year. The weighted average annual interest rate of the bank and other borrowings for the year ended March 31, 2026 was approximately 2.9%. As reflected in our audited consolidated financial statements, we had a net loss of approximately HK$23.5 million for the year ended March 31, 2026, as compared to net loss of approximately HK$26.8 million for the year ended March 31, 2025. As of March 31, 2026 we had cash of approximately HK$2.6 million (US$0.3 million), compared to approximately HK$23.9 million as of March 31, 2025. We also had an accumulated deficit of approximately HK$47.7 million and positive working capital that amounted to HK$1.8 million as of March 31, 2026, compared to HK$28.4 million as of March 31, 2025. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our working capital requirements are influenced by the size of our operations, the volume and dollar value of our sales contracts, the progress of execution on our customer contracts, and the timing for collecting accounts receivable, and repayment of accounts payable. We believe that our current cash and cash flows provided by operating activities, loans from banks and other borrowings, and the net proceeds from our IPO, and our April 2026 follow-on offering will be sufficient to meet our working capital needs in the next 12 months from the date the audited consolidated financial statements are issued. Notwithstanding this belief, there can be no assurance that our operational initiatives to increase revenue and reduce costs will be successful, or that we will be able to raise additional funds on reasonable terms if needed. If we experience an adverse operating environment or incur unanticipated capital expenditure requirements, or if we determine to accelerate our growth, then additional financing may be required. Such financing may include the use of additional debt or the sale of additional equity securities. Any financing which involves the sale of equity securities or instruments that are convertible into equity securities could result in immediate and possibly significant dilution to our existing shareholders. As of March 31, 2026 and 2025, there are no outstanding dividends payable. Comparison of Years Ended March 31, 2026 and 2025 We do not plan to pay any further dividends out of our retained earnings, as of the date of this annual report. For the years ended March 31, 2025 2026 2026 HK$ HK$ US$ Net cash used in operating activities (26,637,785 ) (29,079,572 ) (3,709,129 ) Net cash used in investing activities (8,190,000 (1,640,454 ) (209,241 ) Net cash provided by financing activities 54,354,045 9,425,636 1,202,249 Translation difference (16,276 ) 10,108 1,289 Net increase (decrease) in cash 19,526,260 (21,294,390 ) (2,716,121 ) Cash and restricted cash at the beginning of fiscal year 4,368,915 23,878,899 3,045,778 Cash and restricted cash at the end of fiscal year 23,878,899 2,594,617 330,946 Operating activities Net cash used in operating activities amounted to approximately HK$29.1 million for the year ended March 31, 2026. This was primarily driven by (i) net loss of approximately HK$23.5 million for the year ended March 31, 2026; (ii) an increase in deposit and prepayments of approximately HK$7.2 million, (iii) an increase in accounts receivable of approximately HK$1.5 million; and (iv) the impact of non-cash adjustments, including an impairment loss on games development costs of HK$4.3 million, partially offset by a reversal of impairment loss on prepayment of approximately HK$3.1 million. These outflows were partially offset by (v) an increase in amounts due to shareholders of approximately HK$1.7 million. Net cash used in operating activities amounted to approximately HK$26.6 million for the year ended March 31, 2025, mainly derived from (i) net loss of approximately HK$26.8 million for the year ended March 31, 2025; and (ii) increase in deposits and prepayments of approximately HK$11.7 million which was driven by payment in advance to our services provider for offline event of approximately HK$15.3 million and decrease of deferred IPO cost of HK$4.5 million and offset by increase in impairment loss on prepayment of approximately HK$10.6 million. Investing activities Net cash used in investing activities amounted to approximately HK$1.6 million for the year ended March 31, 2026, mainly derived from (i) payments for capitalized games development costs of approximately HK$1.6 million; and (ii) the acquisition of motor vehicle for HK$0.6 million, which was subsequently disposed for proceeds of HK$0.5 million Net cash used in investing activities amounted to approximately HK$8.2 million for the year ended March 31, 2025, mainly derived from payments for capitalized games development costs of approximately HK$8.2 million. Financing activities Net cash provided by financing activities amounted to approximately of HK$9.4million for the year ended March 31, 2026, mainly derived from (i) proceeds from new and other borrowings of approximately of HK$8.4 million; (ii) advances from a shareholder of Company of approximately of HK$2.0 million, partially offset by the repayment of bank borrowings of approximately HK$0.9 million. Net cash provided by financing activities was approximately of HK$54.4million for the year ended March 31, 2025, which was driven by proceeds from the IPO of approximately of HK$71.5million, offset by (i) payments for deferred IPO costs of approximately HK$17.7 million; and advance from a shareholder of the Company of approximately HK$1.4 million and repayment of bank borrowings of approximately HK$0.9 million. Off-balance sheet arrangements We did not have during the years presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes Inflation Inflation does not materially affect the business or the results of operations of our Operating Subsidiaries. Seasonality The nature of our business does not appear to be affected by seasonal variations. C. Research and Development, Patent and Licenses, etc. Please refer to "Item 4. Information on the Company - B. Business Overview". D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. E. Significant Accounting Policies The consolidated financial statements of us have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and on a going-concern basis. The following descriptions of significant accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this Annual Report. The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. Revenue Recognition The Company applied ASC Topic 606 "Revenue from Contracts with Customers" ("ASC 606") for all years presented. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle: Step 1: Identify the contract with the customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when the company satisfies a performance obligation. The Company has elected to apply the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The Company enters into contracts with customers that include promises to transfer various services, which are generally capable of being distinct and accounted for as separate performance obligations. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. Revenue is recognized when the promised services are transferred to customers, in an amount that reflects the consideration allocated to the respective performance obligation. The Company is engaging in the one-stop advertising services to customers in Hong Kong. The Company's principal revenue stream includes: (a) Online advertising For revenue generated through the online placement of advertisements, the Company's performance obligation is fulfilled at the point in time when the advertisement content is broadcasted in the digital media and the marketing publication is publicly released, or the transfer of the broadcasting right to the customer is made. In the event the contract with the customer further entitles the Company to a one-off licensing fee for granting the customer the intellectual property right attached to the advertising contents and materials, the Company concluded that such licensing fee is integral to but not distinct or separated from the overall advertising solution package. The entire transaction price of the advertising contract, inclusive of the online advertising fee and the licensing fee, is attributed as a single performance obligation and revenue is recognized at the point in time when the Company's contractual obligation is completed that is the broadcast of the advertisement content and transfer of the intellectual property right are simultaneously fulfilled. (b) Offline advertising and web banner marketing For revenue generated through the offline and web banner placement, the Company performed its services over a specific tenure set out in the advertising contract. The performance obligation is fulfilled over this pre-determined period when the agreed-upon action is completed or when the advertisement is displayed in the relevant medium to the public or target audience. The Company recognizes the revenue over the pre-determined contract period, generally the advertising period, during which its services are rendered to the advertiser and satisfied the relevant performance obligation. The Company enters a distinct contract with its customers. The Company concluded that each of the respective services (1) is distinct and (2) meets the criteria for recognizing revenue over time. In addition, the nature of services provided for each successive period are substantially similar and result in the transfer of substantially the same benefit to the customers. Therefore, we concluded that the periodic services fee satisfies the requirements of ASC 606-10-25-14(b) to be accounted for as a single performance obligation. (c) Provisioning of strategic planning services Revenue generated from providing strategic planning services is recognized over time as the Company successively fulfils its performance obligation over the contractual service period and the advertiser simultaneously receives and consumes the benefits provided by the Company's service performance. The Company concluded that each of the respective services (1) is distinct and (2) meets the criteria for recognizing revenue over contractual service period. In addition, the nature of services provided for each successive period are substantially similar and result in the transfer of substantially the same benefit to the customers. That is, the benefit consumed by the clients is substantially similar for each month, even though the exact volume of services may vary. Therefore, we concluded that the periodic services fee satisfies the requirements of ASC 606-10-25-14(b) to be accounted for as a single performance obligation. (d) Other services Other services rendered by the Company to its clients include provision of (i) administrative services; and (ii) strategic planning on a profit-sharing fee basis. Share-based Compensation We apply ASC 718 ("ASC 718"), Compensation - Stock Compensation, to account for our employee share-based payments. In accordance with ASC 718, we determine whether an award should be classified and accounted for as a liability award or an equity award. All of our share-based awards to employees were classified as equity awards. We measure the employee share-based compensation based on the fair value of the award at the grant date. Expense is recognized using accelerated method over the requisite service period. Use of Estimates and Assumptions The preparation of consolidated financial statements in conformity with U.S. GAAP requires the 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 revenues and expenses during the reporting period. These estimates and judgments are based on historical information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable, the allowance for credit losses, useful lives of property and equipment, deferred income taxes, the realization of deferred tax assets, revenue recognition and other provisions and contingencies. Actual results could differ from those estimates. G. Safe Harbor See "Introductory Notes-Forward-Looking Information."

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