Youxin Technology : Annual Report for Fiscal Year Ending September 30, 2025 (Form 20-F)

About this update from Youxin Technology Ltd

OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this annual report. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in "Cautionary Note Regarding Forward-Looking Statements" and under "Risk Factors" elsewhere in the annual report. Overview We are a SaaS and PaaS provider committed to helping retail enterprises digitally transform their businesses using our cloud-based SaaS product and PaaS platform to develop, use, and control business applications without the need to purchase complex IT infrastructure. Our PaaS platform and SaaS product enhance transaction-related activities in the retail sector, such as recording distributions, tracking store-related transactions, and e-commerce clouds and giving our retail clients a comprehensive view of their business operations in real-time on multiple interfaces, allowing them to make critical business decisions anytime and anywhere. We believe our Company is uniquely positioned to meet the need of mid-tier brands in Mainland China. In particular, we specialize in supporting mid-tier brands that heavily rely on offline direct distribution with high volume IT update requirements. We provide a customized, comprehensive, fast-deployment omnichannel digital solutions that unify all aspects of commerce with store innovations, distributed inventory management, cross-channel data integration, and a rich set of ecommerce capabilities that encompass mobile applications, social media, and web-based applications. Since our inception in 2018, we have achieved significant product and customer milestones. Within two years, we launched the interface engine, settlement engine, integration engine, and our own PaaS platform, Youxin Cloud, and started collaborating with large brands. We continued to develop Youxin Cloud. All of our professional service customers have also been payment channel customers. Typically, our customers first execute our one-year contracts for professional services. Under the professional services contract, we would develop the customized CRM system for the customer's use. Our revenue increased by 3%, from $521,241 for the year ended September 30, 2024, to $539,474 for the year ended September 30, 2025. With our ongoing efforts on the initial implementation of the new third-generation PaaS platform and our ongoing efforts to increase distributors and new customers to use our third-generation PaaS platform, we continue to anticipate revenue growth as new distributors and customers purchase licenses and professional services for the third-generation PaaS platform. However, as of September 30, 2024, the company focused on implementing the third-generation PaaS platform into trial for potential customers and distributors. Through the trials, company can collect feedback and continue to optimize the platform. After the IPO, the company's R&D team integrated AI models, successfully enabling the generation of complex customized code on the PaaS platform via natural language, which has significantly enhanced product delivery capabilities. Based on this, the company have attracted clients from various industries, including cosmetics and cruise lines, assisting them in rapidly building customized CRM systems. Because of our company's shift to developing and marketing its third-generation PaaS platform during the lockdown period beginning November 2022, fewer personnel were required to implement its third-generation PaaS platform because PaaS products generally have embedded more functionalities compared to the more hands-on personnel efforts for customized CRM development services. Accordingly, the number of employees decreased over a one-year period from 32 for the fiscal year ended September 30, 2024 to 22 for fiscal year ended September 30, 2025. In addition, for the third-generation PaaS platform, the company has sought to increase partnerships with distributors. Under the distribution agreements, the company grants a license for its third-generation PaaS platform to the distributors who then handle customer acquisition, sales, implementation, and delivery. Thus, the company anticipates gradual growth without substantially increasing costs or employee headcount. Because of the business model for PaaS systems with less personnel requirement for the third-generation PaaS platform, the company does not intend to increase the employee headcount to meet increasing customer demand and the company believes its current headcount is sufficient to meet such demand for the near term. PaaS Platform Our PaaS cloud platform is architected specifically to enable mid-tier brands to operate their businesses in a flexible and distributed manner. Compared to traditional software enterprise service providers, our underlying software infrastructure is relatively distinct, and we maximize the total code efficiency for our clients by conducting private deployments on multiple clouds. We believe that Youxin Cloud is one of the few domestic cloud services in Mainland China that can build millions of complex external digital applications, especially transaction-related distribution, store, and e-commerce clouds. With our simple and lightweight build applications, retail chain participants, such as distributors, stores, resellers can view data in real time on one screen. The general customized applications developed by our PaaS platform can be delivered to the clients in approximately two months based on the client's operation and specific needs. We generate revenue from development and service fees. Services revenue is dependent upon the customer's continued usage of the PaaS platform. The PaaS services include process design, project management, system deployment and implementation, and launch to trial operation and acceptance. We charge an annual service fee as long as the customer continues using the system and is based on the number of user accounts over the subscription period. SaaS Product On February 2023, we launched Yunzhuidan SaaS product for our mid-tier brands in the Chinese retail industry to provide a more standardized SaaS product compared to our customized PaaS services. Our SaaS product is delivered ready-to-use, allowing clients to concentrate on building applications without having to worry about other components like operation systems, storage, and infrastructure. Yunzhuidan allows brands to interact with its stores across multiple digital channels, bouncing between mobile, web and social interfaces before completing a purchase. By the end of the fiscal year ended September 30, 2024, we have largely pulled back from offering trials or investing capital for large-scale sales of Yunzhuidan. We currently sell our SaaS product at a fixed retail price. We also derive ongoing revenue from our SaaS product, including providing database maintenance, system accessing, function updates, and other subsequent support to SaaS product users. Revenue from subscription services slightly decreased by $40,868 or 18% from $232,556 for the year ended September 30, 2024, to $191,688 for the year ended September 30, 2025. For fiscal year 2024, we continued to optimize the functionality of our PaaS platform, achieving significant improvements in functionality and user experience. We added a "filter" feature to our Object Engine, which greatly enhanced its flexibility and data processing capabilities, while also optimizing the underlying SQL logic. On the other hand, we continuously refined the platform's business processes and various practical functions, such as optimizing the user interface, adding print and recycle bin features. In 2025, our R&D department introduced AI models to generate complex customized code through natural language. We have implemented conversational interaction in user scenarios, which allows our customers directly interface with the software in plain language (typed or spoken), and receive immediate and relevant responses or actions. On the business side, the marketing team and partners continued to promote in various retail sectors and attempt to introduce the PaaS platform into the international market to meet the needs of overseas-bound company in 2026. For more information, see "Business-Our Products and Services." Factors Affecting Our Performance Market Adoption of PaaS Platform The market acceptance and adoption of PaaS technology is a critical factor that can significantly impact our company's performance. We are closely monitoring market trends and adjusting our strategy to respond to changing customer needs. We regularly conduct market research and solicit feedback from existing customers to ensure that our platform remains relevant and competitive in the market. As PaaS technology becomes more widely adopted within our target market, it becomes easier for us to establish ourselves as a leading provider in the space. This can lead to increased brand recognition, stronger customer relationships, and better pricing power over time. Between November 13, 2022 and November 30, 2022, Guangzhou city, where the company is headquartered, was locked down due to a COVID-19 outbreak in another part of China. During this period, the company shifted its operations to remote work. During the lockdown period, the company implemented its third-generation PaaS platform. For the third-generation PaaS platform, the company has sought to increase partnerships with distributors. Under the distribution agreements, the company grants a license for its third-generation PaaS platform to the distributors who then handle customer acquisition, sales, implementation, and delivery. Thus, the company anticipates gradual growth without substantially increasing costs or employee headcount. Because of the business model for PaaS systems with less personnel requirement for the third-generation PaaS platform, the company does not intend to increase the employee headcount to meet increasing customer demand and the company believes its current headcount is sufficient to meet such demand for the near term. New Customer Acquisition Our operating results and growth prospects will depend in part on our ability to attract new customers. We are intensely focused on growing our customer base. We continue to invest in our sales and marketing efforts and developer community outreach, actively participate in industry summits to gain more partnership opportunities which are critical to driving customer acquisition. We have built a retail partner network through our effective marketing efforts and continue to launch new functions and products to satisfy our customers' needs, which continuously raises awareness of our PaaS and SaaS offerings, and generating word-of-mouth referrals that not only attract more brands, developers and partners, but also lead to growing end user demand, better user insights and a more vibrant service ecosystem. We use the following measures to quantify new customer acquisitions: (1) leveraging our cloud-tracking solutions to guide customers to explore our other products; (2) providing stable, high performance and highly personalized customization development with our PaaS platform; and (3) collecting sales lead and channel sales leads and referring them to our pre-sales solutions department. Such leads may come from referrals from existing and prior customers or from engagement with industry summits. Investment for Growth We are committed to delivering industry-leading products to maintain and build credibility in the global PaaS and SaaS communities. We believe that the comprehensiveness of our product offerings and our continued efforts to introduce new features and capabilities on our platform provides us with a significant competitive advantage. We plan to improve our platform by expanding the functionality of current products, developing new products, and exploring different verticals and use cases to support the growth of our business. Additionally, we will invest heavily in our engineering capabilities and marketing capabilities to maintain our strong position in the developer community. Effect of Currency Translation The majority of our revenues are currently derived from our SaaS product, which comes primarily from our contracts with the retail sector located in the PRC. These revenues are predominantly denominated in RMB. Our reporting and functional currency is the U.S. dollar. The financial statements of our subsidiaries and consolidated affiliated entities using functional currencies other than the U.S. dollar, such as RMB, are translated to the U.S. dollar. As a result, as RMB depreciates or appreciates against the U.S. dollar, our revenue presented in U.S. dollars will be negatively or positively affected. See "Quantitative and Qualitative Disclosure about Market Risk-Foreign exchange risk." Taxation Cayman Islands We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to income, corporation, or capital gains tax in the Cayman Islands. In addition, our payment of dividends, if any, is not subject to withholding tax in the Cayman Islands. British Virgin Islands Youxin BVI is incorporated in the British Virgin Islands and is not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed. Hong Kong Our subsidiaries in Hong Kong, including Youxin Cloud (HK) Limited, our wholly owned subsidiary, are subject to Hong Kong profits tax on their activities conducted in Hong Kong at a uniform tax rate of 16.5%. Under Hong Kong tax law, our subsidiaries in Hong Kong are exempted from income tax on their qualified foreign-derived income and there is no withholding tax in Hong Kong on remittance of dividends. No provision for Hong Kong profits tax was made as we had no estimated taxable income that was subject to Hong Kong profits tax since inception. PRC Our subsidiaries in China are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the PRC Enterprise Income Tax Law, or PRC EIT Law, which became effective on January 1, 2008, and was last amended on December 29, 2018, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. We are subject to VAT on the products sold and services provided. We are also subject to surcharges on VAT payments in accordance with PRC law. As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries through Youxin Cloud (HK) Limited. The PRC EIT Law and its implementing rules provide that dividends paid by a PRC entity to a nonresident enterprise for income tax purposes are subject to PRC withholding tax at a rate of 10%, and may be subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect of the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise (i) directly holds at least 25% of the PRC enterprise, (ii) is a tax resident in Hong Kong and (iii) could be recognized as a Beneficial Owner of the dividend from PRC tax perspective. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements issued on February 20, 2009 by the SAT, or Guoshuihan [2009] 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. Based on the Announcement of the State Administration of Taxation on Issues Concerning "Beneficial Owners" in Tax Treaties, which was promulgated on February 3, 2018 and came into effect on April 1, 2018, if the business activities conducted by the nonresident enterprise do not constitute substantive business activities, the nonresident enterprise may not be considered as a "beneficiary owner", and thus may not enjoy the reduced tax rate under applicable tax treaties. In October 2019, the State Administration of Taxation issued Announcement of the State Taxation Administration on Issuing the Measures for Non-resident Taxpayers' Enjoyment of Treaty Benefits, or SAT Circular 35, which became effective on January 1, 2020. SAT Circular 35 provides that nonresident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, nonresident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Youxin Cloud (HK) Limited may be able to benefit from the 5% withholding tax rate for the dividends it receives from its PRC subsidiaries, if it satisfies the conditions prescribed under Guoshuihan [2009] 81 and other relevant tax rules and regulations. However, according to Guoshuihan [2009] 81 and SAT Circular 35, if the relevant tax authorities consider the primary purpose of our transactions or arrangements to be achieving favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a "resident enterprise" under the PRC EIT Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See "Risk Factors-Risks Related to Doing Business in China-If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders." A. Operating Results The following table summarizes the results of our operations for the years ended September 30, 2025, 2024 and 2023, respectively, and provides information regarding the dollar and percentage of the revenue during such periods. For the years ended September 30, 2025 2024 2023 Amount % of Revenues Amount % of Revenues Amount % of Revenues REVENUES $ 5 39,474 100 % $ 521,241 100 % $ 895,978 100 % COST OF REVENUES (3 59,509 ) (67 )% (179,648 ) (34 )% (352,676 ) (39 )% GROSS PROFIT 179,965 33 % 341,593 66 % 543,302 61 % OPERATING EXPENSES Selling expenses (130,792 ) (24 )% (94,481 ) (18 )% (225,926 ) (25 )% General and administrative expenses (2,746,298 ) (509 )% (496,006 ) (95 )% (589,372 ) (66 )% Research and development expenses (158,190 ) (29 )% (1,139,922 ) (219 )% (2,152,602 ) (240 )% Total operating expenses (3,035,280 ) (563 )% (1,730,409 ) (332 )% (2,967,900 ) (331 )% NET LOSS FROM OPERATIONS (2,855,315 ) (529 )% (1,388,816 ) (266 )% (2,424,598 ) (270 )% OTHER (EXPENSE) INCOME, NET Other income 539 - 134,802 26 % 99,053 11 % Other expense (24,271 ) (4 )% (21,435 ) (4 )% (17,693 ) (2 )% Loss from investments (2,736,514 ) (507 )% - - - - Issuance costs allocated to warrant liabilities (876,282 ) (162 )% - - - - Loss on issuance of warrant liabilities (5,802,241 ) (1,076 )% - - - - Change in fair value of warrant liabilities 2,647,942 491 % - - - - Total other (expense) income, net (6,790,827 ) (1,259 )% 113,367 22 % 81,360 9 % NET LOSS BEFORE TAXES ( 9,646,142 ) (1,788 )% (1,275,449 ) (244 )% (2,343,238 ) (261 )% Income tax expense - - (5,212 ) (1 )% - - NET LOSS $ ( 9,646,142 ) (1,788 )% $ (1,280,661 ) (245 )% $ (2,343,238 ) (261 )% Comparison of Results of Operations for the Years Ended September 30, 2025 and 2024 Revenues The following table presents revenues by service categories for the years ended September 30, 2025 and 2024, respectively: For the years ended September 30, 2025 2024 Variance Service Category Amount % of revenues Amount % of revenues Amount % Professional services $ 515,684 96 % $ 275,314 53 % $ 240,370 87 % Customized CRM system development service 285,188 53 % - - 285,188 100 % Additional function development service 38,808 7 % 42,758 8 % (3,950 ) (9 )% Subscription service 191,688 36 % 232,556 45 % (40,868 ) (18 )% Payment channel services 21,590 4 % 206,526 40 % (1 84,936 ) (90 )% Others 2, 200 - % 39,401 7 % ( 37,201 ) (94 )% Total revenues $ 5 39,474 100 % $ 521,241 100 % $ 18 ,233 3 % Our total revenues increased by $ 18,233 or 3% , from $521,241 for the year ended September 30, 2024, to $5 39,474 for the year ended September 30, 2025, mainly because the Company restarted the customized CRM system development services. Revenue from professional services accounted for $515,684 or 96% of total revenues for the year ended September 30, 2025, as compared to $275,314 or 53% for year ended September 30, 2024. The professional services include customized CRM system development services, additional function development services and subscription services. Revenue from customized CRM system development services increased by $285,188 or 100% from nil for the year ended September 30, 2024, to $285,188 for the year ended September 30, 2025. The increase was mainly due to the Company restarting the Customized CRM system development service. Revenue from the additional function development services decreased by $3,950 or 9% from $42,758 for the year ended September 30, 2024, to $38,808 for the year ended September 30, 2025. The decrease was mainly due to the less new needs of the function development from the existing clients for the year ended September 30, 2025. Revenue from subscription services decreased by $40,868 or 18% from $232,556 for the year ended September 30, 2024, to $191,688 for the year ended September 30, 2025. The decrease was mainly due to the decreasing customized CRM system development services from 2023 to 2024, which led to the Company to provide less subscription service in the following periods. Cost of revenues The following table presents cost of revenue by service categories for the years ended September 30, 2025 and 2024, respectively: For the years ended September 30, 2025 2024 Variance Service Category Amount % of cost Amount % of cost Amount % Professional fee $ 356,807 99 % $ 158,880 88 % $ 197,927 125 % Customized CRM system development service 185,635 52 % - - 185,635 100 % Additional function development service 27,242 7 % 22,259 12 % 4,983 22 % Subscription service 143,930 40 % 136,621 76 % 7,309 5 % Others 2,702 1 % 20,768 12 % ( 18,066 ) (87 )% Total cost $ 3 59,509 100 % $ 179,648 100 % $ 1 79,861 100 % Our service costs primarily include (1) labor costs (including salaries, social insurance and benefits) for employees involved with our operations and product support, (2) third-party service fees including cloud computing and data usage, (3) lease expense and (4) related costs of outsourcing contractor conducting system implementation and support services to customers. Cost of revenues for the year ended September 30, 2025, was $359,509, a decrease of $179,861, or 100%, from $179,648 for the year ended September 30, 2024. The following table shows information by different categories of services we provided for the year ended September 30, 2025 in USD: Service category Professional fee Payment channel fee Others Total Revenue 515,684 21 ,590 2, 200 5 39,474 Cost of revenue 356,807 - 2 ,702 3 59,509 Gross profit 158,877 21 ,590 (50 2 ) 179,965 Gross margin 31 % 100 % (23 )% 33 % The following table shows information by different categories of services we provided for the year ended September 30, 2024 in USD: Service category Professional fee Payment channel fee Others Total Revenue 275,314 206,526 39,401 521,241 Cost of revenue 158,880 - 20,768 179,648 Gross profit 116,434 206,526 18,633 341,593 Gross margin 42 % 100 % 47 % 66 % As a result of the foregoing, we had gross profits of $179,965 and $341,693 with gross margins of 33% and 66% for the years ended September 30, 2025 and 2024, respectively. The overall gross profit as margin decreased by 33%. The gross margin has been and will continue to be affected by a number of factors, including the timing and extent of our investments in our operation, our ability to manage server costs, the ability to manage the usage of third-party software and the extent to which we periodically choose to pass on the cost savings from lower pricing and higher utilization to our customers in the form or lower prices as well as our efforts to drive greater usage of our products through attractive pricing and improve the serviceability of our PaaS platform by developing more customers. Selling expenses Our selling expenses increased by $36,311 or 38% from $94,481 for the year ended September 30, 2024 to $130,792 for the year ended September 30, 2025. The increase was mainly due to the increase in advertising and promotion expenses. The increase of advertising and promotion expenses by $25,661 or 3,270% was primarily due to an increase in putting effort to the business promotion to expand customer base for the year ended September 30, 2025, compared to the year ended September 30, 2024. General and administrative expenses Our general and administrative expenses increased by $2,250,292 or 454%, from $496,006 for the year ended September 30, 2024 to $2,746,298 for the year ended September 30, 2025. The increase for the year ended September 30, 2025 was primarily due to the professional fees incurred during the IPO and the follow-up offering that were not directly attributable of the offerings were expensed as incurred. Research and development expenses Research and development costs for the year ended September 30, 2025 of $158,190 decreased by $981,732 or 86% compared to $1,139,922 for the year ended September 30, 2024. The decrease was primarily attributed to the decrease in labor related costs including salary and welfare by $ 903,189 or 94 % for the year ended September 30, 2025 compared to the year ended September 30, 2024. Other income Other income primarily arises from the interest income of bank deposits and government grants. Other income decreased by $134,263, or 100%, to $539 for the year ended September 30, 2025, from $134,802 for the year ended September 30, 2024. Other expense Other expense primarily arises from the interest expense of bank loans. Other expense decreased by $2,836, or 13%, to $24,271 for the year ended September 30, 2025, from $21,435 for the year ended September 30, 2024. Loss from Investments Loss from investment primarily arises from the loss from short-term investments in wealth management product with underlying in equity stocks listed in global capital markets and other equity and monetary market products. For the years ended September 30, 2025 and 2024, the loss from investment was $2,736,514 and nil, respectively. Issuance costs allocated to warrant liabilities The increase in issuance costs allocated to warrant liabilities was due to the Company's related financing transactions during the current fiscal year. For the years ended September 30, 2025 and 2024, the issuance costs allocated to warrant liabilities was $ 876,282 and nil, respectively. Loss on issuance of warrant liabilities The loss on issuance of warrant liabilities was due to the Company issued shares with warrants in the current fiscal year, and the fair value of the warrant liabilities is higher than the investment amount received. For the years ended September 30, 2025 and 2024, the loss on issuance of warrant liabilities were $5,802,241 and nil, respectively. Change in fair value of warrant liabilities The change in fair value of warrant liabilities was due to fluctuations in the fair value of warrants issued by the Company. For the years ended September 30, 2025 and 2024, the fair value changes of these warrants were a gain of $2,647,942 and nil, respectively. Net loss As a result of the foregoing, we reported a net loss of $9,646,142 for the year ended September 30, 2025, compared to a net loss of $1,280,661 for the year ended September 30, 2024. Comparison of Results of Operations for the Years Ended September 30, 2024 and 2023 Revenues The following table presents revenues by service categories for the years ended September 30, 2024 and 2023, respectively: For the years ended September 30, 2024 2023 Variance Service Category Amount % of revenues Amount % of revenues Amount % Professional services $ 275,314 53 % $ 548,822 61 % $ (273,508 ) (50 )% Customized CRM system development service - - 134,768 15 % (134,768 ) (100 )% Additional function development service 42,758 8 % 155,904 17 % (113,146 ) (73 )% Subscription service 232,556 45 % 258,150 29 % (25,594 ) (10 )% Payment channel services 206,526 40 % 291,643 33 % (85,117 ) (29 )% Others 39,401 7 % 55,513 6 % (16,112 ) (29 )% Total revenues $ 521,241 100 % $ 895,978 100 % $ (374,737 ) (42 )% Our total revenues decreased by $374,737 or 42%, from $895,978 for the year ended September 30, 2023, to $521,241 for the year ended September 30, 2024, mainly because the Company gradually reduced operating the customized CRM system development services. Revenue from professional services accounted for $275,314 or 53% of total revenues for the year ended September 30, 2024, as compared to $548,822 or 61% for year ended September 30, 2023. The professional services include customized CRM system development services, additional function development services and subscription services. Revenue from customized CRM system development services decreased by $134,768 or 100% from $134,768 for the year ended September 30, 2023, to nil for the year ended September 30, 2024. The decrease was mainly due to the Company gradually reducing operating Customized CRM system development service. Revenue from the additional function development services decreased by $113,146 or 73% from $155,904 for the year ended September 30, 2023, to $42,758 for the year ended September 30, 2024. The decrease was mainly due to the less new needs of the function development from the existing clients for the year ended September 30, 2024. Revenue from subscription services decreased by $25,594 or 10% from $258,150 for the year ended September 30, 2023, to $232,556 for the year ended September 30, 2024. The decrease was mainly due to the decreasing customized CRM system development services from 2023, which led to the Company to provide less subscription service in the following periods. Cost of revenues The following table presents cost of revenue by service categories for the years ended September 30, 2024 and 2023, respectively: For the years ended September 30, 2024 2023 Variance Service Category Amount % of cost Amount % of cost Amount % Professional fee $ 158,880 88 % $ 318,439 90 % $ (159,559 ) (50 )% Customized CRM system development service - - 103,850 29 % (103,850 ) (100 )% Additional function development service 22,259 12 % 77,559 22 % (55,300 ) (71 )% Subscription service 136,621 76 % 137,030 39 % (409 ) - Payment channel fee - - - - - - Others 20,768 12 % 34,237 10 % (13,469 ) (39 )% Total cost $ 179,648 100 % $ 352,676 100 % $ (173,028 ) (49 )% Our service costs primarily include (1) labor costs (including salaries, social insurance and benefits) for employees involved with our operations and product support, (2) third-party service fees including cloud computing and data usage, (3) lease expense and (4) related costs of outsourcing contractor conducting system implementation and support services to customers. Cost of revenues for the year ended September 30, 2024, was $179,648, a decrease of $173,028, or 49%, from $352,676 for the year ended September 30, 2023. The following table shows information by different categories of services we provided for the year ended September 30, 2024 in USD: Service category Professional fee Payment channel fee Others Total Revenue 275,314 206,526 39,401 521,241 Cost of revenue 158,880 - 20,768 179,648 Gross profit 116,434 206,526 18,633 341,593 Gross margin 42 % 100 % 47 % 66 % The following table shows information by different categories of services we provided for the year ended September 30, 2023 in USD: Service category Professional fee Payment channel fee Others Total Revenue 548,822 291,643 55,513 895,978 Cost of revenue 318,439 - 34,237 352,676 Gross profit 230,383 291,643 21,276 543,302 Gross margin 42 % 100 % 38 % 61 % As a result of the foregoing, we had gross profits of $341,693 and $543,302 with gross margins of 66% and 61% for the years ended September 30, 2024 and 2023, respectively. The overall gross profit as margin increased by 5%. The gross margin has been and will continue to be affected by a number of factors, including the timing and extent of our investments in our operation, our ability to manage server costs, the ability to manage the usage of third-party software and the extent to which we periodically choose to pass on the cost savings from lower pricing and higher utilization to our customers in the form or lower prices as well as our efforts to drive greater usage of our products through attractive pricing and improve the serviceability of our PaaS platform by developing more customers. Selling expenses Our selling expenses decreased by $131,445 or 58% from $225,926 for the year ended September 30, 2023 to $94,481 for the year ended September 30, 2024. The decrease was mainly due to the decrease in headcount and salaries and welfare. The decrease of salaries and welfare by $121,669 or 59% was primarily due to a decrease in headcount and pay cuts for the year ended September 30, 2024, compared to the year ended September 30, 2023. General and administrative expenses Our general and administrative expenses decreased by $93,366 or 16%, from $589,372 for the year ended September 30, 2023 to $496,006 for the year ended September 30, 2024. The decrease for the year ended September 30, 2024 was primarily due to a decrease in salaries and welfare of $106,754 or 46% compared to the year ended September 30, 2024 as decrease in headcount and pay cuts. Research and development expenses Research and development costs for the year ended September 30, 2024 of $1,139,922 decreased by $1,012,680 or 47% compared to $2,152,602 for the year ended September 30, 2023. The decrease was primarily attributed to the decrease in labor related costs including salary and welfare by $839,219 or 47% for the year ended September 30, 2024 compared to the year ended September 30, 2023. Payment made to Cloud Service and other related research and development costs decreased by $82,227 or 43% for the year ended September 30, 2024, which was in line with the operating of business of reducing of CRM development services. Other income, net. Total net other income was $113,367 for the year ended September 30, 2024, compared to $81,360 for the year ended September 30, 2023. Net loss As a result of the foregoing, we reported a net loss of $1,280,661 for the year ended September 30, 2024, compared to a net loss of $2,343,238 for the year ended September 30, 2023. B. Liquidity and Capital Resources Cash Flows and Working Capital The Company has incurred recurring net cash outflows in operating activities since inception and has funded its operations primarily from public offerings. The Company had an accumulated deficit of approximately $25.1 million and $15.4 million as of September 30, 2025 and 2024, respectively. The Company had net losses of approximately $9.6 million, $1.3 million and $2.3 million for the years ended September 30, 2025, 2024 and 2023, respectively. For the year ended September 30, 2025, Net proceeds from the IPO, September 2025 Public Offering and the exercise of total Series A Warrants and Series B Warrants were $9.1 million, $5.3 million and $4.5 million, respectively As of September 30, 2025, the Company has approximately $9.9 million of unrestricted cash. In addition, the Company will need to maintain its operating costs at a level through strict cost control and budget, such as staff reductions, to ensure operating costs are minimized and will not exceed such aforementioned sources of funds to continue as a going concern for a period within 12 months after the issuance of its consolidated financial statements. The Company believes that available cash, together with the efforts from aforementioned management plan and actions will be sufficient to support its continuous operations and to meet its payment obligations when liabilities fall due within the next twelve months from the date of issuance of these consolidated financial statements. As a result, no substantial doubt about the Company's ability to continue as a going concern existed as of September 30, 2025. Cash Flows for the year ended September 30, 2025, compared to the year ended September 30, 2024 The following table summarizes our cash flows for the years ended September 30, 2025 and 2024: For the years ended September 30, 2025 2024 Net cash used in operating activities $ (3,913,752 ) $ (728,066 ) Net cash (used in) provided by investing activities (3,028,941 ) 360 Net cash provided by financing activities 16,7 90,704 431,390 Effect of foreign exchange rate on cash 45,593 (59,713 ) Net increase (decrease) in cash and restricted cash $ 9,893,604 $ (356,029 ) Operating Activities Net cash used in operating activities was $3,913,752 for the year ended September 30, 2025, as compared to $728,066 net cash used in operating activities for the year ended September 30, 2024. The net cash used in operating activities for the year ended September 30, 2025, reflects our net loss of $9,646,142, adjusted primarily for non-cash items, including a loss on issuance of warrant liabilities of $5,802,241, issuance costs allocated to warrant liabilities of $876,282, a loss from investments of $2,736,514, and changes in the fair value of warrant liabilities of $2,647,942, partially offset by a decrease in payroll payables of $734,904, a decrease in contract liabilities of $185,744, and an increase in prepaid expenses and other current assets of $172,366. The net cash used in operating activities for the year ended September 30, 2024, reflects our net loss of $1,280,661, partially offset by a decrease in accounts receivable of $52,210 and an increase in payroll payable of $ 404,216. Investing Activities Net cash used in investing activities was $3,028,941 for the year ended September 30, 2025, as compared to $360 net cash provided by investing activities for the year ended September 30, 2024. The net cash used in investing activities for the year ended September 30, 2025, was primarily attributable to the purchase of short-term investment of $3,800,000 and payment of acquisition of $207,972, partially offset by proceeds from the redemption of short-term investment of $979,031. The net cash provided by investing activities for the year ended September 30, 2024, was primarily attributable to the disposal of property and equipment. Financing Activities Net cash provided by financing was $16,790,704 for the year ended September 30, 2025, as compared to $431,390 net cash provided by financing activities for the year ended September 30, 2024. The increase in net cash provided by financing activities for the year ended September 30, 2025 was primarily attributable to proceeds from the issuance of ordinary shares upon the initial public offering, net of offering costs, of $9,097,000, proceeds from the follow-on offering of $5,270,064, proceeds from the exercise of Series A Warrants of $4,486,999, partially offset by repayments to related parties of $1,038,283 and payment of deferred offering costs of $1,028,932. For the year ended September 30, 2024, we obtained funds from related parties of $792,283 and partially offset by the payment of deferred offering costs of $360,893. Cash Flows for the year ended September 30, 2024, compared to the year ended September 30, 2023 The following table summarizes our cash flows for the years ended September 30, 2024, and 2023: For the years ended September 30, 2024 2023 Net cash used in operating activities $ (728,066 ) $ (2,310,183 ) Net cash provided by investing activities 360 815 Net cash provided by financing activities 431,390 484,878 Effect of foreign exchange rate on cash (59,713 ) 5,194 Net decrease in cash and restricted cash $ (356,029 ) $ (1,819,296 ) Operating Activities Net cash used in operating activities was $728,066 for the year ended September 30, 2024, as compared to $2,310,183 net cash used in operating activities for the year ended September 30, 2023. The net cash used in operating activities for the year ended September 30, 2024, reflects our net loss of $1,280,661, partially offset by a decrease in accounts receivable of $52,210 and an increase in payroll payable of $ 404,216. The net cash used in operating activities for the year ended September 30, 2023, reflects our net loss of $2,343,238, a decrease in contract liabilities of $268,907, partially offset by an increase in payroll payable of $102,096 and a decrease in accounts receivable of $94,595. Investing Activities Net cash provided by investing activities was $360 for the year ended September 30, 2024, as compared to $815 net cash provided by investing activities for the year ended September 30, 2023. The net cash provided by investing activities for the year ended September 30, 2024 and 2023, was mainly attributable to the disposal of property and equipment. Financing Activities Net cash provided by financing for the year ended September 30, 2024, was $431,390, as compared to $484,878 net cash provided by financing activities for the year ended September 30, 2023. For the year ended September 30, 2024, we obtained funds from related parties of $792,283 and partially offset by the payment of deferred offering costs of $360,893. For the year ended September 30, 2023, we obtained funds from related parties of $284,292 and from the Industrial & Commercial Bank of China of $321,834 partially offset by a cash outflow of payment of deferred offering costs of $121,248. Contractual Obligations The following table sets forth our contractual obligations as of September 30, 2025: Payment due in Total USD Less than 1 year 1 - 2 years Thereafter Short-term bank loan 318,865 318,865 - - Operating lease 87,471 51,065 36,406 - Off-Balance Sheet Arrangements We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's deficit (equity) or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. Concentrations (a) Customer The following table sets forth information as to each customer that accounted for 10% or more of net revenue for the years ended September 30, 2025, 2024 and 2023. Years Ended September 30, 2025 2024 2023 Amount % Amount % Amount % Customer Customer B $ 208,531 39 % $ 134,551 26 % $ 147,268 16 % Customer E 112,528 21 % - - - - Customer F 89,172 16 % - - - - Customer A 19,464 4 % 194,598 37 % 264,686 30 % Customer C 28,031 5 % - - 142,807 16 % Customer D - - 75,562 14 % 121,509 14 % Total $ 457,726 85 % $ 404,711 77 % $ 676,270 76 % The following table sets forth information as to each customer that accounted for 10% or more of total gross accounts receivable as of September 30, 2025 and 2024. September 30, 2025 September 30, 2024 Amount % of Total Amount % of Total Customer Customer B $ 176,534 83 % $ 121,524 73 % Customer A 24,344 11 % - - Customer E 1,397 1 % 29,412 17 % Total $ 202,275 95 % $ 150,936 90 % (b) Suppliers The following table sets forth information as to each supplier that accounted for 10% or more of purchase for the years ended September 30, 2025, 2024 and 2023. Years Ended September 30, 2025 2024 2023 Amount % Amount % Amount % Supplier Supplier A $ 87,270 37 % $ 112,285 37 % $ 205,573 46 % Supplier B 27,872 12 % 36,047 12 % 59,604 13 % Supplier C 33,585 14 % - - - - Supplier F 26,448 11 % - - - - Total $ 175,175 74 % $ 148,332 49 % $ 265,177 59 % The following table sets forth information as to each supplier that accounted for 10% or more of total accounts payable as of September 30, 2025 and 2024. September 30, 2025 September 30, 2024 Amount % of Total Amount % of Total Supplier Supplier D $ 17,559 51 % $ 17,812 57 % Supplier E 13,345 39 % 13,537 43 % Supplier G 3,286 10 % - - % Total $ 34,190 100 % $ 31,349 100 % Contingencies During the ordinary course of business, the Company may encounter legal proceedings, claims, and litigation. These matters are fraught with uncertainties, and their outcomes cannot be accurately predicted. In accordance with accounting principles, if the Company determines that it is probable a loss has occurred and the amount can be reasonably estimated, a liability will be recorded. As of September 30, 2025, the Company is involved in three separate legal cases with one former employee. Labor Arbitration Claim (Case 1) In July 2024, the Company became subject to a labor arbitration claim. In connection with this matter, certain funds totaling $24,298 (RMB 172,980) were restricted by the court. As of September 30, 2025, the arbitration remains pending. Resolved Labor Dispute (Case 2) In September 2025, a labor-related legal matter was resolved following a first-instance court judgment. Pursuant to the judgment, the Company was required to pay wage differentials for a specified period, together with an immaterial case filing fee. The Company settled the related amounts of approximately $7,703 (RMB 54,837) in October 2025. Appealed Labor Dispute (Case 3) In December 2025, a first-instance judgment was issued in connection with another labor dispute, requiring the Company to make a payment to the plaintiff. The Company has appealed the judgment and is in the process of completing the appeal procedures. As of the reporting date, the appeal is pending As of September 30, 2025 and 2024, the Company's accrued provision for its ongoing litigation matters was $24,459 and nil respectively, which was recorded in accrued expenses and other current liabilities in its consolidated financial statements. There was no further update as the date that the consolidated financial statements are available to be issued. Inflation Inflation does not materially affect our business or the results of our operations. Seasonality The nature of our business does not appear to be affected by seasonal variations. C. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. We evaluate these estimates on an ongoing basis. An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such an estimate is made and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. Out of our significant accounting policies, which are described in "Note 3-Summary of Significant Accounting Policies" of our consolidated financial statements included elsewhere in this Form 20-F, accounting policies for revenue recognition, allowance for credit loss, impairment of long-lived assets and valuation allowance for deferred tax asset are deemed "critical", as they require management's highest degree of judgment, estimates and assumptions. The descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. We believe that the following critical accounting estimates involve the most significant judgments used in the preparation of our financial statements. Revenue recognition for Customized CRM system development and cloud-based connectivity services We provide customized CRM system development services and cloud-based connectivity to our customers with tailored functionalities and interfacing capabilities suitable to meet the operation needs of our customers and provides continuous access to the customized CRM through our platform which represent a single promise. The provision of customized CRM platform accessing, and function updates is considered as one performance obligation as the services provided are not distinct within the context of the contract whereas the customer can only obtain benefit when the services are provided together. We have a continuous obligation to ensure the performance of the customized CRM system through our platform over the contract service period. As we provide the customers with the right to use customized CRM system, we have the right to recognize revenue over the contractual service period by using input method. Allowance for credit loss Accounts receivable include trade accounts due from clients. The credit terms given to customers are generally 90 days. We review our receivables on a regular basis to determine if the provision for credit loss is adequate and makes provision when necessary. Accounts receivable is considered past due based on its contractual terms. In establishing the allowance, we use an aging schedule method to estimate the amount of the allowance for credit losses. We also consider historical losses, the financial condition, the payment patterns and the forecasted information in pooling basis upon the use of the Current Expected Credit Loss Model ("CECL Model") in accordance with ASC topic 326, Financial Instruments - Credit Losses. As of September 30, 2025, 2024, and 2023, the allowances for expected credit loss were nil, $4,664 and nil, respectively. As of September 30, 2025, 2024, and 2023, the write-off of allowances for expected credit loss were nil, $4,664 and nil, respectively. Valuation allowance for deferred tax asset We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. Significant judgment is required in determining the valuation allowance. In assessing the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable temporary differences and ongoing tax planning strategies. If it is determined that we are able to realize deferred tax assets over the net carrying value or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance in the period in which such a determination is made, with a corresponding increase or decrease to earnings. As of September 30, 2025, 2024 and 2023, we have made full valuation allowance to deferred tax assets with amount of $1.23 million, $1.17 million and $3.00 million, respectively.

View stock analysis, news, and events for Youxin Technology Ltd