{"url_path":"/sec/bgm/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 ** **OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-07-21","source_url":"https://www.sec.gov/Archives/edgar/data/1779578/0001104659-26-085247-index.html","accession_number":"0001104659-26-085247","cik":"0001779578","ticker":"BGM","issuer_name":"BGM Group Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1779578/0001104659-26-085247-index.html","primary_entity_key":"0001779578","primary_entity_name":"BGM Group Ltd."},"word_count":8757,"has_tables":true,"body_markdown":"**ITEM 5.** **OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n​\n\n*The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included elsewhere in this annual report. This annual report contains forward-looking statements. See “Forward-Looking Information” in this annual report. In evaluating our and the VIE and its subsidiaries’ business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution you that our and the VIE and its subsidiaries’ business and financial performance are subject to substantial risks and uncertainties.*\n\nA.  Operating Results\n\nOverview\n\nWe are engaged in the research, development, and production of licorice products, oxytetracycline products, TCMD product, heparin product, sausage casings, and fertilizers.\n\nWe also have a strategic focus on the technology fields of AI application, intelligent robots, algorithmic computing power, cloud computing, and biopharmaceuticals. In terms of AI application implementation, we rely on big data mining and AI Agent technology, and utilize the two platforms of Du Xiao Bao and Bao Wang to provide comprehensive and professional AI solutions and intelligent robot services for insurance companies, insurance brokers, and consumers. Its services cover multiple key scenarios such as sales and marketing, underwriting assessment, claims processing, and customer service. We are capable of analyzing consumer data, building consumer profiles, accurately predicting insurance needs, and providing highly customized services for consumers. In the field of biopharmaceuticals, we deeply integrate AI-assisted decision-making into every link of production and manufacturing, achieving supply chain optimization, process efficiency improvement, and market trend prediction. This provides scientific decision-making basis for our management and offers high-quality products and precise services for consumers.\n\nWe were originally incorporated in the Cayman Islands on February 7, 2019. Our business is mainly conducted by Gansu QLS, the VIE in the PRC, and its subsidiaries, using RMB, the currency of China.\n\n110\n\n[Table of Contents](#TOC)\n\nOn May 20, 2019 and November 20, 2020, we, through our wholly foreign-owned entity Chengdu Trade, entered into a series of contractual arrangements with Gansu QLS, which include an Exclusive Service Agreement, an Equity Pledge Agreement, a Call Option Agreement, a Shareholders’ Voting Rights Proxy Agreement and Powers of Attorney. Pursuant to the VIE Agreements, WFOE provides Gansu QLS with technical support, consulting services and other management services and is entitled to receive 99.214% of Gansu QLS’ net profits, this percentage being the number of shares of Gansu QLS held by shareholders having signed the VIE Agreements over the total issued and outstanding shares of Gansu QLS. In addition, Gansu QLS’s shareholders have pledged 99.214% of their equity interests in Gansu QLS to WFOE, irrevocably granted WFOE an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Gansu QLS, and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by WFOE.\n\nTo optimize its corporate structure, Chengdu Trade and Gansu QLS executed certain exclusive service termination agreement (the “Service Termination Agreement”) to terminate certain contractual service arrangements between Chengdu Trade and Gansu QLS. As a result of the aforementioned termination, Chengdu Trade will no longer have contractual control over, nor receive the economic benefits of Gansu QLS. In connection with such termination, Qilian Shan International Trade (Hainan) Co., Ltd (“Hainan Trade”), a wholly-owned subsidiary of Qilian International (Hong Kong) Holdings Limited, entered into a series of VIE Agreements with Gansu QLS. The Service Termination Agreement and the new service agreement with Hainan Trade became effective on December 1, 2022.\n\nThrough the VIE Agreements, WFOE is deemed as the primary beneficiary of Gansu QLS for accounting purpose and is able to consolidate the VIE’s financial statements under the U.S. GAAP.\n\nBased on the VIE Agreements, Gansu QLS is considered a VIE of Qilian Chengdu/Hainan Trade under U.S. GAAP. As the above entities were under common control before and after the execution of the VIE Agreements, the restructuring was accounted for as a reorganization of entities under common control and consolidated financial statements were prepared as if the reorganization occurred at the beginning of the first period presented. Thus, the financial results presented here include those of the VIE and the VIE’s subsidiaries from the first period presented. Refer to our Risk Factors under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”\n\nAs of the date of this annual report, there is an aggregate of 200,623,358 ordinary shares, consisting of 180,623,358 Class A ordinary shares, par value of US$0.00833335 each, and 20,000,000 Class B ordinary shares, par value of US$0.00833335 each.\n\nOutlook\n\nWe and the VIE and its subsidiaries plan to continue developing their business by expanding their marketing network and investing in pharmaceutical and chemical facilities, which depend heavily on sufficient capital. If we are not able to obtain equity or debt financing, we and our affiliates may not be able to execute the development and expansion plans, which could have material adverse effect on our, the VIE and its subsidiaries’ future business performance and operating results.\n\nOur net revenue for the year ended September 30, 2025 was $37.92 million, representing an increase of $12.82 million, or 34%, from $25.10 million for the year ended September 30, 2024. Net loss attributable to our shareholders for the year ended September 30, 2025 was $19.94 million, representing an increase of $18.50 million, or 128.2%, from $1.4 million net loss attributable to our shareholders for the year ended September 30, 2024. Non-GAAP EBITDA (as defined below) for the year ended September 30, 2025 was $18.56 million, representing an increase of $(18.30) million, or (7027%), from $(0.3) million for the year ended September 30, 2024. For additional information on EBITDA, please see the subsection “EBITDA” below.\n\n**Key Indicators of the Company’s Performance**\n\nIn assessing performance, we consider a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, general and administrative expenses, net income from operations, and EBITDA (Non-GAAP) (as defined below). The key measures that we use to evaluate the performance of our subsidiaries and VIE and its subsidiaries’ business are set forth below:\n\nNet Revenue\n\nNet revenue is equal to gross sales minus sales returns and sales incentives that the Company offers to our customers, such as discounts that are offset to gross sales. Our net sales are driven by changes in the number of customers, product varieties, selling price, and mix of products sold.\n\n111\n\n[Table of Contents](#TOC)\n\nGross Profit\n\nGross profit is equal to net sales minus cost of goods sold. Cost of goods sold primarily includes inventory costs (net of supplier consideration), inbound freight, custom clearance fees, and other miscellaneous expenses. Cost of goods sold generally changes as the Company incurs higher or lower costs from suppliers and as the customer and product mix changes.\n\nSelling, General and Administrative, Research and Development Expenses\n\nSelling, general and administrative, research and development expenses primarily consist of salaries and benefits for employees, shipping expense, utilities, maintenance and repairs expenses, insurance expense, depreciation and amortization expenses, research and development expense, selling and marketing expenses, professional fees, and other operating expenses.\n\nNon-GAAP Financial Measures-EBITDA\n\nManagement uses certain financial measures to evaluate our operating performance which is calculated and presented on the basis of methodologies other than in accordance with GAAP (“Non-GAAP”). These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. We believe that EBITDA is a useful performance measure and can be used to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our subsidiaries and the VIE and its subsidiaries’ business than GAAP measures alone can provide. Our management believes that EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect its operating performance. Our management believes that the use of these Non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with the companies in the same industry, many of which present similar Non-GAAP financial measures to investors. We present EBITDA in order to provide supplemental information that our management considers relevant for the readers of our consolidated financial statements included elsewhere in this annual report, and such information is not meant to replace or supersede U.S. GAAP measures.\n\nOur management defines EBITDA as net income (loss) before interest expense, income taxes, and depreciation and amortization. EBITDA is not defined under U.S. GAAP and is subject to important limitations as analytical tools and, as such, you should not consider them in isolation or as substitutes for analysis of our Company’s financial results as reported under U.S. GAAP. For example, EBITDA:\n\n●excludes certain tax payments that may represent a reduction in cash available to the Company;\n\n●does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;\n\n●does not reflect changes in, or cash requirements for, the Company’ working capital needs; and\n\n●does not reflect the significant interest expense, or the cash requirements, necessary to service the Company’s debt.\n\n112\n\n[Table of Contents](#TOC)\n\n**Results of Operations for the years ended September 30, 2025 and 2024**\n\nThe following table sets forth a summary of our consolidated results of operations for the years ended September 30, 2025 and 2024. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the years ended**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n​\n\n​\n\n**September 30, **\n\n​\n\n**Changes**\n\n \n\n​\n\n  ​ ​ ​\n\n**2025**\n\n  ​ ​ ​\n\n**2024**\n\n  ​ ​ ​\n\n**Amount**\n\n  ​ ​ ​\n\n**%**\n\n \n\nNet revenue\n\n​\n\n$\n\n37,919,425\n\n​\n\n$\n\n25,097,951\n\n​\n\n$\n\n12,821,474\n\n \n\n51\n\n%\n\nCost of revenue\n\n​\n\n \n\n31,607,966\n\n​\n\n \n\n20,983,196\n\n​\n\n \n\n10,624,770\n\n \n\n51\n\n%\n\n**Gross profit**\n\n​\n\n** **\n\n**6,311,459**\n\n​\n\n** **\n\n**4,114,755**\n\n​\n\n \n\n2,196,704\n\n \n\n53\n\n%\n\nSelling, general and administrative, research and development expenses\n\n​\n\n \n\n18,893,123\n\n​\n\n \n\n4,678,526\n\n​\n\n \n\n14,214,597\n\n \n\n304\n\n%\n\n**Loss from operations**\n\n​\n\n** **\n\n**(12,581,664)**\n\n​\n\n** **\n\n**(563,771)**\n\n​\n\n \n\n(12,017,893)\n\n \n\n2,132\n\n%\n\nInterest income (expense)\n\n​\n\n \n\n83,127\n\n​\n\n \n\n(639,511)\n\n​\n\n \n\n722,598\n\n \n\n(113)\n\n%\n\nOther expense\n\n​\n\n \n\n(7,439,687)\n\n​\n\n \n\n(933,860)\n\n​\n\n \n\n(6,505,787)\n\n \n\n697\n\n%\n\n**Loss before income tax provision**\n\n​\n\n** **\n\n**(19,938,224)**\n\n​\n\n** **\n\n**(2,137,142)**\n\n​\n\n \n\n(17,801,082)\n\n \n\n833\n\n%\n\nIncome tax expense/(benefit)\n\n​\n\n \n\n277,790\n\n​\n\n \n\n(619,981)\n\n​\n\n \n\n897,771\n\n \n\n(145)\n\n%\n\n**Net loss**\n\n​\n\n** **\n\n**(20,216,014)**\n\n​\n\n** **\n\n**(1,517,161)**\n\n​\n\n \n\n(18,698,853)\n\n \n\n1,232\n\n%\n\nLess: net loss attributable to non-controlling interest\n\n​\n\n \n\n(274,772)\n\n​\n\n \n\n(74,331)\n\n​\n\n \n\n(200,441)\n\n \n\n270\n\n%\n\n**Net loss attributable to BGM Group Ltd**\n\n​\n\n**$**\n\n**(19,941,242)**\n\n​\n\n**$**\n\n**(1,442,830)**\n\n​\n\n**$**\n\n(18,498,412)\n\n \n\n1,282\n\n%\n\n​\n\n**Net Revenue**\n\nThe following table sets forth the breakdown of our net revenue:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the years ended**\n\n​\n\n**  ​ ​ ​**\n\n​\n\n​\n\n**  ​ ​ ​**\n\n​\n\n​\n\n​\n\n**September 30, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2025**\n\n​\n\n**2024**\n\n​\n\n**Changes**\n\n** **\n\n​\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%  **\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%  **\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n​\n\n**Net revenue**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nDiversified Pharmaceutical and Allied Products\n\n​\n\n$\n\n23,591,893\n\n​\n\n62\n\n%\n\n$\n\n25,097,951\n\n​\n\n100\n\n%\n\n$\n\n(1,506,058)\n\n​\n\n(6)\n\n%\n\nAI Solutions\n\n​\n\n$\n\n3,362,732\n\n​\n\n9\n\n%\n\n$\n\n—\n\n​\n\n—\n\n%\n\n$\n\n3,362,732\n\n​\n\n—\n\n%\n\nInsurance Business\n\n​\n\n$\n\n10,964,800\n\n​\n\n29\n\n%\n\n$\n\n—\n\n​\n\n—\n\n%\n\n$\n\n10,964,800\n\n​\n\n—\n\n%\n\nTotal\n\n​\n\n$\n\n37,919,425\n\n \n\n100\n\n%  \n\n$\n\n25,097,951\n\n \n\n100\n\n%  \n\n$\n\n12,821,474\n\n \n\n51\n\n%\n\n​\n\nCompared with net revenue for the year ended September 30, 2024, our net revenue increased by $12.82 million, or 51%, for the year ended September 30, 2025, which was primarily attributable to a $3.36 million increase in sales from ai solutions, a $10.96 million increase in sales from insurance business, and $1.51 million decreased sales from diversified pharmaceutical and allied products.\n\nDiversified Pharmaceutical and Allied Products\n\nThe sales of diversified pharmaceutical and allied products, AI Solutions and Insurance Business accounted for 62%, 9% and 29%, respectively, of this segment’s total sales for the year ended September 30, 2025, and 100%, 0% and 0%, respectively, of such segment’s total sales for the year ended September 30, 2024. For the year ended September 30, 2025, the WFOE and the VIE and its subsidiaries’ sales translated into USD for diversified pharmaceutical and allied products decreased by approximately $1.51 million, or 6%, from approximately $25.10 million for the year ended September 30, 2024 to approximately $23.59 million for the year ended September 30, 2025.\n\nAI Solutions\n\nSales from AI Solutions increased by $3.36 million, from $0 million for the year ended September 30, 2024, to $3.36 million for the year ended September 30, 2025. The increase in sales of AI Solutions was mainly due to the acquisition of the AI solution company in 2025. Accordingly, the revenue generated by this business segment was nil in 2024.\n\n113\n\n[Table of Contents](#TOC)\n\nInsurance Business\n\nSales from insurance business increased by $10.96 million, from $0 million for the year ended September 30, 2024 to $10.96 million for the year ended September 30, 2025. The increase in income is due to the acquisition of an insurance business in 2025. Accordingly, the revenue generated by this business segment was nil in 2024.\n\n**Cost of Revenue and Gross Profit**\n\nThe following tables set forth the calculation of gross profit and gross margin for the each of our segments:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**For the years ended**\n\n**  ​ ​ ​**\n\n**  ​ ​ ​**\n\n​\n\n**  ​ ​ ​**\n\n**  ​ ​ ​**\n\n** **\n\n​\n\n​\n\n**September 30, **\n\n​\n\n**Changes**\n\n** **\n\n​\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n** **\n\nDiversified Pharmaceutical and Allied Products\n\n \n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\n \n\n​\n\n  ​\n\n \n\n  ​\n\n​\n\nNet revenue\n\n​\n\n$\n\n23,591,893\n\n​\n\n$\n\n25,097,951\n\n​\n\n$\n\n(1,506,058)\n\n \n\n(6)\n\n%\n\nCost of revenue\n\n​\n\n \n\n20,896,423\n\n​\n\n \n\n20,983,196\n\n​\n\n \n\n(86,773)\n\n \n\n—\n\n%\n\nGross profit\n\n​\n\n$\n\n2,695,470\n\n​\n\n$\n\n4,114,755\n\n​\n\n$\n\n(1,419,285)\n\n \n\n(34)\n\n%\n\nGross Margin\n\n​\n\n \n\n11\n\n%  \n\n \n\n16\n\n%  \n\n \n\n(5)\n\n%  \n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nAI Solution\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\n \n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n3,362,732\n\n​\n\n$\n\n—\n\n​\n\n$\n\n3,362,732\n\n \n\nNA\n\n%\n\nCost of revenue\n\n​\n\n \n\n1,868,683\n\n​\n\n \n\n—\n\n​\n\n \n\n1,868,683\n\n \n\nNA\n\n%\n\nGross profit\n\n​\n\n$\n\n1,494,049\n\n​\n\n$\n\n—\n\n​\n\n$\n\n1,494,049\n\n \n\nNA\n\n%\n\nGross Margin\n\n​\n\n \n\n44\n\n%  \n\n \n\n​\n\n%  \n\n \n\n44\n\n%  \n\nNA\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nInsurance business\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\n \n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n10,964,800\n\n​\n\n$\n\n—\n\n​\n\n$\n\n10,964,800\n\n \n\nNA\n\n%\n\nCost of revenue\n\n​\n\n \n\n8,842,860\n\n​\n\n \n\n—\n\n​\n\n \n\n8,842,860\n\n \n\nNA\n\n%\n\nGross profit\n\n​\n\n$\n\n2,121,940\n\n​\n\n$\n\n—\n\n​\n\n$\n\n2,121,940\n\n \n\nNA\n\n%\n\nGross Margin\n\n​\n\n \n\n19\n\n%  \n\n \n\n​\n\n%  \n\n \n\n19\n\n%  \n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nTotal\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\n​\n\n \n\n​\n\n \n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n37,919,425\n\n​\n\n$\n\n25,097,951\n\n​\n\n$\n\n12,821,474\n\n \n\n51\n\n%\n\nCost of revenue\n\n​\n\n \n\n31,607,966\n\n​\n\n \n\n20,983,196\n\n​\n\n \n\n10,624,770\n\n \n\n51\n\n%\n\nGross profit\n\n​\n\n$\n\n6,311,459\n\n​\n\n$\n\n4,114,755\n\n​\n\n$\n\n2,196,704\n\n \n\n53\n\n%\n\nGross Margin\n\n​\n\n \n\n17\n\n%  \n\n \n\n16\n\n%  \n\n \n\n—\n\n%  \n\n​\n\n​\n\n​\n\n**Diversified Pharmaceutical and Allied Products**\n\nCost of revenue for our diversified pharmaceutical and allied products was $20.90 million for the year ended September 30, 2025, a decrease of $0.087 million, from $20.98 million for the year ended September 30, 2024, which was primarily attributable to the decreased sales of the product as described above. Gross margin of our diversified pharmaceutical and allied products decreased from 16% to 11% primarily due to a shift in sales mix toward lower-margin products, coupled with increased unit costs resulting from lower production volumes and rising raw material prices.\n\n114\n\n[Table of Contents](#TOC)\n\n**AI Solution**\n\nCost of revenue for AI Solution increased by $1.87 million, from nil million for the year ended September 30, 2024, to $1.87million for the year ended September 30, 2025. The increase in the cost of revenue for sales of AI Solutions was mainly due to the acquisition of an AI solution company in 2025. Accordingly, the cost of revenue generated by this business segment was nil in 2024.\n\nInsurance business\n\nCost of revenue for our insurance business was approximately $8.84 million for the year ended September 30, 2025, an increase of approximately $8.84 million, from approximately nil for the year ended September 30, 2024. The increase in income is due to the acquisition of an insurance business in 2025. Accordingly, the cost of revenues generated by this business segment was nil in 2024.\n\nSelling, General and Administrative, Research and Development Expenses\n\nSelling, general and administrative expenses were $18.89 million for the year ended September 30, 2025, representing an increase of approximately $14.21 million, or 304%, from $4.68 million for the year ended September 30, 2024. The increase was mainly attributable to the selling, general and administrative, research and development expenses of acquired company of about $4 million and the Company granted approximately 10 million stock option in 2025.\n\nInterest Income, net\n\nInterest income, net for the year ended September 30, 2025, increased by approximately $0.723 million. The increase of the balance is due to interest expense of Gansu QLS of prior years were adjusted in 2024.\n\nOther Expense\n\nOther expense was $7.44 million for the year ended September 30, 2025, as compared to $0.93 million for the year ended September 30, 2024, which primarily consisted of government grants and investment loss. The increase is mainly from the $5.65 million increased loss recognized from the fair value change in the investment in trading securities for the year ended September 30, 2025\n\nIncome Tax Expense/(Benefit)\n\nIncome tax expense increased by $0.90 million, or (145)%, from $(619,981) for the year ended September 30, 2024 to $277,790 for the year ended September 30, 2025. The increased tax expense for 2025 with a loss before income tax provision is due to the decrease for deferred tax asset.\n\nNet Loss Attributable to Non-controlling interest\n\nNet loss attributable to non-controlling interest was approximately $274,772 for the fiscal year ended September 30, 2025, an increase of $200,441, or 270%, from approximately $74,331 of net loss attributable to non-controlling interest for the year ended September 30, 2024. The decrease was a result of the increase of net loss of Chengdu QLS, which is partially owned by non-controlling interest holders. Chengdu QLS and its subsidiaries experienced a net loss of approximately $12.52 million for the year ended September 30, 2025 and it experienced a net loss of approximately $0.3 million for the year ended September 30, 2024. Chengdu QLS and its subsidiaries manufacture our heparin products and sausage casings. See “—Net Revenue—Heparin Products and Sausage Casings” and “—Cost of Revenue and Gross Profit—Heparin Products and Sausage Casings.”\n\nNet Loss Attributable to Our Shareholders\n\nAs a result of the above, our net loss attributable to our shareholders increase by $18.50 million, or 1,282%, from net loss attributable to our shareholders of $1.4 million for the year ended September 30, 2024 to net loss attributable to our shareholders of $19.94 million for the year ended September 30, 2025.\n\n115\n\n[Table of Contents](#TOC)\n\nEBITDA\n\nThe following table sets forth of the calculation of our EBITDA:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the years ended**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n** **\n\n​\n\n​\n\n**September 30, **\n\n​\n\n**Changes**\n\n** **\n\n​\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n** **\n\nNet income\n\n \n\n$\n\n(20,216,014)\n\n​\n\n$\n\n(1,517,161)\n\n​\n\n$\n\n(18,698,853)\n\n \n\n1232\n\n%\n\nInterest income (expense)\n\n​\n\n \n\n(83,127)\n\n​\n\n \n\n639,511\n\n​\n\n \n\n(722,638)\n\n \n\n(113)\n\n%\n\nIncome tax provision\n\n​\n\n \n\n277,790\n\n​\n\n \n\n(619,981)\n\n​\n\n \n\n897,771\n\n \n\n(145)\n\n%\n\nDepreciation & Amortization\n\n​\n\n \n\n1,463,190\n\n​\n\n \n\n1,237,229\n\n​\n\n \n\n225,961\n\n \n\n18\n\n%\n\n**EBITDA**\n\n​\n\n$\n\n(18,558,161)\n\n​\n\n$\n\n(260,402)\n\n​\n\n$\n\n(18,297,759)\n\n \n\n7,027\n\n%\n\nPercentage of EBITDA to revenue\n\n​\n\n \n\n(48.94)\n\n%  \n\n \n\n(1.0)\n\n%  \n\n \n\n(47.9)\n\n%  \n\n​\n\n​\n\n​\n\nOur EBITDA was $18.56 million for the year ended September 30, 2025, an increase of $18.30 million, or 7027%, compared to $(0.3) million for the year ended September 30, 2024. This was mainly due to the increase in net income resulting from increased the loss from investment due to the fair value change discussed above for the years ended September 30, 2025. The percentage of EBITDA to revenue was (47.9%) and (1.0%) for the years ended September 30, 2025 and 2024, respectively.\n\nResults of Operations for the years ended September 30, 2024 and 2023\n\nThe following table sets forth a summary of our consolidated results of operations for the years ended September 30, 2024 and 2023. The historical results presented below are not necessarily indicative of the results that may be expected for any future period.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the years ended**\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n** **\n\n​\n\n​\n\n**September 30, **\n\n​\n\n**Changes**\n\n** **\n\n​\n\n**  ​ ​ ​**\n\n**2024**\n\n**  ​ ​ ​**\n\n**2023**\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n​\n\nNet revenue\n\n​\n\n$\n\n25,097,951\n\n​\n\n$\n\n46,471,478\n\n​\n\n$\n\n(21,373,527)\n\n \n\n(46)\n\n%\n\nCost of revenue\n\n​\n\n \n\n20,983,196\n\n​\n\n \n\n44,719,984\n\n​\n\n \n\n(23,736,788)\n\n \n\n(53)\n\n%\n\n**Gross profit**\n\n​\n\n** **\n\n**4,114,755**\n\n​\n\n** **\n\n**1,751,494**\n\n​\n\n \n\n**2,363,261**\n\n \n\n**135**\n\n%\n\nSelling, general and administrative, research and development expenses\n\n​\n\n \n\n4,678,526\n\n​\n\n \n\n4,361,593\n\n​\n\n \n\n316,933\n\n \n\n7\n\n%\n\n**Loss from operations**\n\n​\n\n** **\n\n**(563,771)**\n\n​\n\n** **\n\n**(2,610,099)**\n\n​\n\n \n\n**2,046,328**\n\n \n\n**(78)**\n\n%\n\nInterest income\n\n​\n\n \n\n(639,511)\n\n​\n\n \n\n99,190\n\n​\n\n \n\n(738,701)\n\n \n\n(745)\n\n%\n\nOther expense\n\n​\n\n \n\n(933,860)\n\n​\n\n \n\n(5,391,995)\n\n​\n\n \n\n4,458,135\n\n \n\n(83)\n\n%\n\n**Loss before income tax provision**\n\n​\n\n** **\n\n**(2,137,142)**\n\n​\n\n** **\n\n**(7,902,904)**\n\n​\n\n \n\n**5,765,762**\n\n \n\n**(73)**\n\n%\n\nIncome tax expense/ (benefit)\n\n​\n\n \n\n(619,981)\n\n​\n\n \n\n219,166\n\n​\n\n \n\n(839,147)\n\n \n\n(383)\n\n%\n\n**Net loss**\n\n​\n\n** **\n\n**(1,517,161)**\n\n​\n\n** **\n\n**(8,122,070)**\n\n​\n\n \n\n**6,604,909**\n\n \n\n**(81)**\n\n%\n\nLess: net loss attributable to non-controlling interest\n\n​\n\n \n\n(74,331)\n\n​\n\n \n\n(341,450)\n\n​\n\n \n\n267,119\n\n \n\n(78)\n\n%\n\n**Net loss attributable to BGM Group Ltd**\n\n​\n\n**$**\n\n**(1,442,830)**\n\n​\n\n**$**\n\n**(7,780,620)**\n\n​\n\n**$**\n\n**6,337,790**\n\n \n\n**(81)**\n\n%\n\n​\n\n**Net Revenue**\n\nThe following table sets forth the breakdown of our net revenue:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**For the years ended**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**September 30, **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**2024**\n\n​\n\n**2023**\n\n​\n\n**Changes**\n\n \n\n​\n\n​\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%  **\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%  **\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n​\n\n**Net revenue**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nOxytetracycline & licorice products and TCMD\n\n​\n\n$\n\n21,961,282\n\n \n\n87\n\n%  \n\n$\n\n29,152,228\n\n \n\n63\n\n%  \n\n$\n\n(7,190,946)\n\n \n\n(24)\n\n%\n\nHeparin products and sausage casing\n\n​\n\n$\n\n2,230,759\n\n \n\n9\n\n%  \n\n$\n\n15,318,798\n\n \n\n33\n\n%  \n\n$\n\n(13,088,039)\n\n \n\n(85)\n\n%\n\nFertilizer\n\n​\n\n$\n\n905,910\n\n \n\n4\n\n%  \n\n$\n\n2,000,452\n\n \n\n4\n\n%  \n\n$\n\n(1,094,542)\n\n \n\n(55)\n\n%\n\nTotal\n\n​\n\n$\n\n25,097,951\n\n \n\n100\n\n%  \n\n$\n\n46,471,478\n\n \n\n100\n\n%  \n\n$\n\n(21,373,527)\n\n \n\n(46)\n\n%\n\n​\n\n116\n\n[Table of Contents](#TOC)\n\nCompared with net revenue for the year ended September 30, 2023, our net revenue decreased by $21.4 million, or 46%, for the year ended September 30, 2024, which was primarily attributable to a $7.2 million decrease in sales from Oxytetracycline & licorice products and TCMD, a $13.1 million decrease in sales from heparin products and sausage casing, and $1.1 million decreased sales from Fertilizer product.\n\nOxytetracycline & Licorice Products and TCMD\n\nThe sales of oxytetracycline products, licorice products and TCMD accounted for 76%, 21% and 3%, respectively, of this segment’s total sales for the year ended September 30, 2024, and 95%, 5% and 0%, respectively, of such segment’s total sales for the year ended September 30, 2023. For the year ended September 30, 2024, the WFOE and the VIE and its subsidiaries’ sales translated into USD for oxytetracycline products, licorice products and TCMD decreased by approximately $7.2 million, or 24%, from approximately $29.2 million for the year ended September 30, 2023 to approximately $22.0 million for the year ended September 30, 2024. The decrease in sales in this segment is due to a decrease of oxytetracycline product for $10.9 million, offset by 3.3 million of increase from sales of licorice product. The reasons for the decrease in sales of oxytetracycline products are due to that :1) oxytetracycline products has halved, resulting in a decrease in sales from November 2023; 2) the price of the company’s oxytetracycline products is relatively high compared to other companies in the market. The increase in sales of licorice products is due to that: 1) the sales price of licorice products has increased. Because of one or two raw materials of licorice products being monopolized by the market, the price of this material has risen, resulting in an increase in the market sales price of licorice products; 2) the favorable market environment has led to an increase in the sales volume of licorice products; 3) the company signed a general agency agreement for licorice products in May 2024 and implemented an exclusive sales policy; 4) the company developed new products, licorice liquid extract and licorice extract powder in November 2023, which sold well and accounted for 72.8% of licorice revenue.\n\nHeparin Products and Sausage Casings\n\nSales from heparin products and sausage casing decreased by $13.1 million, or 85%, from $15.3 million for the year ended September 30, 2023, to $2.2 million for the year ended September 30, 2024. The decrease of $10 million in sales of heparin products is mainly due to four reasons: 1) Our country issued a centralized procurement policy for heparin products in hospitals, and the procurement price decreased by 50-70% compared to before. This news has reduced the purchasing volume of heparin products for customers in February 2023. 2) At the same time, the price of heparin products has also entered a downward trend, with the sales unit price dropping from 48,000 yuan in April 2023 to 12,000 yuan in December 2023, and now reaching 15,800 yuan. 3) The customer had a relatively large inventory of heparin products purchased in the early stage, and in order to reduce losses, the customer had to digest the inventory. Therefore, the decrease in customer procurement was the main reason for the company’s sales decline. 4) The company went from a profitable state to a loss state, with more production resulting in greater losses. Therefore, the company made the decision to shut down a production factory of Chengdu Qilianshan Biotechnology Co., Ltd. which occupied 78% of the Company’s total Heparin products to reduce losses. The company has been shut down since September 2023, only entrusted for processing. The sales of sausage casing decreased by $2 million mainly due to the impact of the national centralized procurement policy, resulting in a decrease in the company’s production.\n\nFertilizer\n\nSales from fertilizer decreased by $1.1 million, or 55%, from $2.0 million for the year ended September 30, 2023 to $0.9 million for the year ended September 30, 2024. The decrease in income is due to that: 1) the sales of organic fertilizers in 2024 are mostly government bidding projects, with very little retail sales; 2) The 2023 bidding projects include organic fertilizers, soil conditioners, and microbial agents, which are no longer included in the 2024 bidding projects.\n\n​\n\n117\n\n[Table of Contents](#TOC)\n\n**Cost of Revenue and Gross Profit**\n\nThe following tables set forth the calculation of gross profit and gross margin for the each of our segments:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**For the years ended**\n\n  ​ ​ ​\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n​\n\n \n\n​\n\n​\n\n**September 30, **\n\n​\n\n**Changes**\n\n \n\n​\n\n​\n\n​\n\n**2024**\n\n**  ​ ​ ​**\n\n​\n\n**2023**\n\n**  ​ ​ ​**\n\n​\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n​\n\nOxytetracycline & licorice products and TCMD\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n21,961,282\n\n​\n\n$\n\n29,152,228\n\n​\n\n$\n\n(7,190,946)\n\n \n\n(25)\n\n%\n\nCost of revenue\n\n​\n\n \n\n18,324,619\n\n​\n\n \n\n27,392,225\n\n​\n\n \n\n(9,067,606)\n\n \n\n(33)\n\n%\n\nGross profit\n\n​\n\n$\n\n3,636,663\n\n​\n\n$\n\n1,760,003\n\n​\n\n$\n\n1,876,660\n\n \n\n107\n\n%\n\nGross Margin\n\n​\n\n \n\n16.6\n\n%  \n\n \n\n6.0\n\n%  \n\n \n\n10.6\n\n%  \n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nHeparin products and sausage casing\n\n​\n\n \n\n​\n\n​\n\n \n\n  ​\n\n​\n\n \n\n​\n\n \n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n2,230,759\n\n​\n\n$\n\n15,318,798\n\n​\n\n$\n\n(13,088,039)\n\n \n\n(85)\n\n%\n\nCost of revenue\n\n​\n\n \n\n2,105,248\n\n​\n\n \n\n16,267,458\n\n​\n\n \n\n(14,162,210)\n\n \n\n(87)\n\n%\n\nGross profit\n\n​\n\n$\n\n125,511\n\n​\n\n$\n\n(948,660)\n\n​\n\n$\n\n1,074,171\n\n \n\n(113)\n\n%\n\nGross Margin\n\n​\n\n \n\n5.6\n\n%  \n\n \n\n(6.2)\n\n%  \n\n \n\n11.8\n\n%  \n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nFertilizer\n\n​\n\n \n\n​\n\n​\n\n \n\n  ​\n\n​\n\n \n\n​\n\n \n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n905,910\n\n​\n\n$\n\n2,000,453\n\n​\n\n$\n\n(1,094,543)\n\n \n\n(55)\n\n%\n\nCost of revenue\n\n​\n\n \n\n553,329\n\n​\n\n \n\n1,060,302\n\n​\n\n \n\n(506,973)\n\n \n\n(48)\n\n%\n\nGross profit\n\n​\n\n$\n\n352,581\n\n​\n\n$\n\n940,151\n\n​\n\n$\n\n(587,570)\n\n \n\n(62)\n\n%\n\nGross Margin\n\n​\n\n \n\n38.9\n\n%  \n\n \n\n47.0\n\n%  \n\n \n\n(8.1)\n\n%  \n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nTotal\n\n​\n\n \n\n​\n\n​\n\n \n\n  ​\n\n​\n\n \n\n​\n\n \n\n​\n\n​\n\nNet revenue\n\n​\n\n$\n\n25,097,951\n\n​\n\n$\n\n46,471,478\n\n​\n\n$\n\n(21,373,527)\n\n \n\n(46)\n\n%\n\nCost of revenue\n\n​\n\n \n\n20,983,196\n\n​\n\n \n\n44,719,984\n\n​\n\n \n\n(23,736,788)\n\n \n\n(53)\n\n%\n\nGross profit\n\n​\n\n$\n\n4,114,755\n\n​\n\n$\n\n1,751,494\n\n​\n\n$\n\n2,363,261\n\n \n\n135\n\n%\n\nGross Margin\n\n​\n\n \n\n16.4\n\n%  \n\n \n\n3.8\n\n%  \n\n \n\n12.6\n\n%  \n\n  ​\n\n​\n\n​\n\nOxytetracycline & Licorice Products and TCMD\n\nCost of revenue for our oxytetracycline and licorice products and TCMD was $18.3 million for the year ended September 30, 2024, a decrease of $9.1 million, or 33%, from $27.4 million for the year ended September 30, 2023, which was primarily attributable to the decreased sales of the product as described above. Gross margin of our oxytetracycline and licorice products increased from 6.0% to 16.6% primarily due to 1) the newly developed licorice extract products have low costs, and the ratio of dry and wet licorice is constantly adjusted to reduce costs and increase gross margin; 2) as described before, the price of licorice products has increased, resulting in an increase in gross profit\n\nHeparin Products and Sausage Casings\n\nCost of revenue for our heparin products and sausage casings was $2.1 million for the year ended September 30, 2024, a decrease of $14.2 million, or 87%, from $16.3 million for the year ended September 30, 2023. This was primarily attributable to the decreased sales of $13.1 million, or 85%, for the year ended September 30, 2024 compared to the fiscal year ended September 30, 2023. From the negative gross margin of 6.2% in this segment for the fiscal year 2023 to gross margin of 5.6% for the fiscal year 2024, was due to the sales of heparin products and sausage casings in 2024, which is the remaining inventory in 2023. In 2023, the company increased its procurement of fresh sausages, resulting in a 5% increase in yield. Additionally, the average processing fee decreased from 4.51 yuan to 4.09 yuan or 9%.\n\n118\n\n[Table of Contents](#TOC)\n\nFertilizer\n\nCost of revenue for our fertilizer products was approximately $0.6 million for the year ended September 30, 2024, a decrease of approximately $0.5 million, or 48%, from approximately $1.1 million for the year ended September 30, 2023. This was primarily attributable to the decreased sales of $1.1 million, or 55%, for the year ended September 30, 2024 compared to the fiscal year ended September 30, 2023.\n\nSelling, General and Administrative, Research and Development Expenses\n\nSelling, general and administrative expenses were $4.7 million for the year ended September 30, 2024, representing an increase of approximately $0.3 million, or 7%, from $4.4 million for the year ended September 30, 2023. The increase was mainly attributable to an increase of legal fees of $0.2 million in the parent company.\n\nInterest Income, net\n\nInterest expense, net for the year ended September 30, 2024, increased by approximately $0.7 million. The increase of the balance is due to interest expense of Gansu QLS of prior years were adjusted in 2024.\n\nOther Expense\n\nOther expense was $0.9 million for the year ended September 30, 2024, as compared to $5.4million for the year ended September 30, 2023, which primarily consisted of government grants and investment loss. The decrease is mainly from the $4.7 million increased loss recognized from the fair value change in the investment in trading securities for the year ended September 30, 2023.\n\nIncome Tax Expense/(Benefit)\n\nIncome tax expense decreased by $0.8million, or 383%, from $219,166 for the year ended September 30, 2023 to $(619,981) for the year ended September 30, 2024. The decreased tax expense for 2024 with a loss before income tax provision is due to the increased for deferred tax asset.\n\nNet Loss Attributable to Non-controlling interest\n\nNet loss attributable to non-controlling interest was approximately $74,331 for the fiscal year ended September 30, 2024, a decrease of $0.3 million, or 78%, from approximately $0.3 million of net loss attributable to non-controlling interest for the year ended September 30, 2023. The decrease was a result of the decrease of net loss of Chengdu QLS, which is partially owned by non-controlling interest holders. Chengdu QLS and its subsidiaries experienced a net loss of approximately $0.3 million for the year ended September 30, 2024 and it experienced a net loss of approximately $1.6 million for the year ended September 30, 2023. Chengdu QLS and its subsidiaries manufacture our heparin products and sausage casings. See “—Net Revenue—Heparin Products and Sausage Casings” and “—Cost of Revenue and Gross Profit—Heparin Products and Sausage Casings.”\n\nNet Loss Attributable to Our Shareholders\n\nAs a result of the above, our net loss attributable to our shareholders decreased by $6.3 million, or 81%, from net loss attributable to our shareholders of $7.8 million for the year ended September 30, 2023 to net loss attributable to our shareholders of $1.4 million for the year ended September 30, 2024.\n\n119\n\n[Table of Contents](#TOC)\n\nEBITDA\n\nThe following table sets forth of the calculation of our EBITDA:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**  ​ ​ ​**\n\n**For the years ended**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n \n\n​\n\n​\n\n**September 30, **\n\n​\n\n**Changes**\n\n \n\n​\n\n​\n\n**2024**\n\n**  ​ ​ ​**\n\n**2023**\n\n**  ​ ​ ​**\n\n**Amount**\n\n**  ​ ​ ​**\n\n**%**\n\n​\n\nNet income\n\n​\n\n$\n\n(1,517,161)\n\n​\n\n$\n\n(8,122,070)\n\n​\n\n$\n\n6,604,909\n\n \n\n(81)\n\n%\n\nInterest income (expense)\n\n​\n\n \n\n639,511\n\n​\n\n \n\n(99,190)\n\n​\n\n \n\n738,701\n\n \n\n(745)\n\n%\n\nIncome tax provision\n\n​\n\n \n\n(619,981)\n\n​\n\n \n\n219,166\n\n​\n\n \n\n(839,147)\n\n \n\n(383)\n\n%\n\nDepreciation & Amortization\n\n​\n\n \n\n1,237,229\n\n​\n\n \n\n1,143,064\n\n​\n\n \n\n94,165\n\n \n\n8\n\n%\n\n**EBITDA**\n\n​\n\n$\n\n(260,402)\n\n​\n\n$\n\n(6,859,030)\n\n​\n\n$\n\n6,598,628\n\n \n\n(96)\n\n%\n\nPercentage of EBITDA to revenue\n\n​\n\n \n\n(1.0)\n\n%  \n\n \n\n(14.8)\n\n%  \n\n \n\n13.7\n\n%  \n\n  ​\n\n​\n\n​\n\nOur EBITDA was $(0.3) million for the year ended September 30, 2024, an increase of $6.6 million, or (96)%, compared to $(6.9) million for the year ended September 30, 2023. This was mainly due to the increase in net income resulting from increased the loss from investment due to the fair value change discussed above for the years ended September 30, 2023. The percentage of EBITDA to revenue was (1.0) % and (14.8)% for the years ended September 30, 2024 and 2023, respectively.\n\n**B.****Liquidity and Capital Resources**\n\n**Liquidity and Capital Resources**\n\nAs of September 30, 2025, we had cash of approximately $9.82 million. We have funded our working capital and other capital requirements primarily by cash flow from operations, and bank loans.\n\nAlthough our management believes that the cash generated from operations will be sufficient to meet our normal working capital needs for at least the next twelve months, our ability to repay our current obligations will depend on the future realization of our current assets. Our management has considered the historical experience, the economy, trends in the pharmaceutical industry, the expected collectability of accounts receivable and the realization of the inventories as of September 30, 2025. Based on these considerations, our management believes that we have sufficient funds to meet our working capital requirements and debt obligations as they become due for at least the next twelve months from the date of this annual report. However, there is no assurance that management will be successful in their plan. There are a number of factors that could potentially arise and result in shortfalls to our plan, such as the demand for the WFOE and the VIE and its subsidiaries’ products, economic conditions, the competitive pricing in the industry and our banks and suppliers being able to provide continued supports. If the future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to reduce or delay our expected acquisition plan, sell assets, obtain additional debt or equity capital or refinance all or a portion of our and our affiliates’ debt.\n\nThe following table summarizes our cash flow data for the years ended September 30, 2025, 2024 and 2023:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Years ended**\n\n​\n\n​\n\n**September 30, **\n\n​\n\n  ​ ​ ​\n\n**2025**\n\n  ​ ​ ​\n\n**2024**\n\n  ​ ​ ​\n\n**2023**\n\nNet cash (used in)/provided by operating activities\n\n​\n\n$\n\n(2,372,437)\n\n​\n\n$\n\n544,238\n\n​\n\n312,209\n\nNet cash provided by (used) in investing activities\n\n​\n\n​\n\n(162,908)\n\n​\n\n​\n\n983,418\n\n​\n\n(4,742,445)\n\nNet cash provided by used in financing activities\n\n​\n\n​\n\n2,618,921\n\n​\n\n​\n\n(491,728)\n\n​\n\n(2,921,084)\n\nEffect of exchange rate on cash\n\n​\n\n​\n\n(80,390)\n\n​\n\n​\n\n1,305,079\n\n​\n\n(151,446)\n\nNet (decrease) increase in cash, cash equivalents and restricted cash\n\n​\n\n$\n\n3,186\n\n​\n\n$\n\n2,341,007\n\n​\n\n(7,502,766)\n\n​\n\nOperating Activities\n\nNet cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, accounts receivable and inventory reserve, deferred tax, unrealized gain(loss) from trading securities and adjusted for the effect of working capital changes.\n\n120\n\n[Table of Contents](#TOC)\n\nNet cash used in operating activities was approximately $2.37 million for the year ended September 30, 2025, an increase of $2.92 million in cash used in operating activities, or 536%, compared to net cash provided by operating activities of $0.5 million for the year ended September 30, 2024. The increase of net cash outflow was a result of the following:\n\n1.\n\nIncrease in net loss of $20.22 million, from net loss of $1.52 million to net loss of $18.70 million.\n\n2.\n\nChange in account receivable was $3.35 million net cash inflow for the year ended September 30, 2025. For the year ended September 30, 2024, the change in account receivable was $0.38 million net cash outflow, which led to a $3.72 million increase in net cash outflow from operating activities.\n\n3.\n\nChange in inventory was $1.85 million net cash outflow for the year ended September 30, 2025. For the year ended September 30, 2024, the change in inventory was $0.96 million net cash inflow, which led to a $2.80 million increase in net cash outflow from operating activities.\n\n4.\n\nChange in other current assets was $12.57 million net cash inflow for the year ended September 30, 2025. For the year ended September 30, 2024, the change in other current assets was $1.51 million net cash outflow, which led to a $14.08 million increase in net cash inflow from operating activities. This is mainly because the input tax was reclassified to other current assets in 2024.\n\n5.\n\nChange in accrued expenses and other payables was $11.03 million net cash outflow for the year ended September 30, 2025. For the year ended September 30, 2024, the change in accrued expenses and other payables was $0.35 million net cash inflow, which led to a $11.39 million increase in net cash outflow from operating activities.\n\n6.\n\nChange in account payable was $1.83 million net cash outflow for the year ended September 30, 2025. For the year ended September 30, 2024, the change in account payable was $0.38 million net cash inflow, which led to a $2.21 million increase in net cash outflow from operating activities.\n\n7.\n\nChange in contract liabilities was $2.67 million net cash inflow for the year ended September 30, 2025. For the year ended September 30, 2024, the change in contract liabilities was $0.57 million net cash outflow, which led to a $3.24 million increase in net cash inflow from operating activities.\n\n8.\n\nChange in unrealized gain from marketable securities was $7.33 million for the year ended September 30, 2025. For the year ended September 30, 2024, the change in unrealized gain from marketable securities was $0.82 million net cash inflow, which led to a $6.51 million increase in net cash inflow from operating activities. This is due to the company’s redemption of part of the funds and the conversion of the remaining funds into stocks.\n\n9.\n\nStock based compensation was $10.23 million for the year ended September 30, 2025. For the year ended September 30, 2024, Stock based compensation was nil.\n\nNet cash provided by operating activities was approximately $0.5 million for the year ended September 30, 2024, an increase of $0.2million in cash provided by operating activities, or 74%, compared to net cash provided by operating activities of $0.3 million for the year ended September 30, 2023. The increase of net cash inflow was a result of the following:\n\n1.Decrease in net loss of $6.6 million, from net loss of $8.1 million to net loss of $1.5 million.\n\n2.Change in inventory reserve was $0.8 million net cash outflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in inventory reserve was $0.4 million net cash inflow, which led to a $1.2 million decrease in net cash outflow from operating activities. It’s because the inventory reserve was provisioned in previous years was sold in 2024, so the inventory reserve made in previous years was written off in 2024.\n\n3.Change in account receivable was $0.4 million net cash inflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in account receivable was $1.2 million net cash outflow, which led to a $1.6 million increase in net cash inflow from operating activities.\n\n121\n\n[Table of Contents](#TOC)\n\n4.Change in bank acceptance note receivable was $0.9 million net cash inflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in bank acceptance note receivable was $1.7 million net cash outflow, which led to a $2.6 million increase in net cash inflow from operating activities. The main reason is that since November 2023, the production volume of oxytetracycline has been halved. As a result, the sales volume has decreased, leading to a corresponding reduction in cash collection. Moreover, 90% of the payments received for oxytetracycline are mainly in the form of six - month bank acceptance drafts. With the decrease in sales volume, the corresponding notes receivable have also declined.\n\n5.Change in inventory was $1.0 million net cash inflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in inventory was $3.4 million net cash inflow, which led to a $2.4 million decrease in net cash outflow from operating activities. This is mainly because the market price of heparin sodium has been continuously dropping since March 2023 under the influence of the national centralized drug procurement policy. The company decided to shut down all heparin sodium production lines to reduce business risks. The production suspension is the main reason.\n\n6.Change in other current assets was $1.5 million net cash outflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in other current assets was $1.4 million net cash inflow, which led to a $2.9 million decrease in net cash outflow from operating activities. This is mainly because the input tax was reclassified to other current assets in 2024.\n\n7.Change in account payable was $0.4 million net cash inflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in account payable was $1.6 million net cash outflow, which led to a $2.0 million increase in net cash inflow from operating activities.\n\n8.Change in contract liabilities was $0.6 million net cash outflow for the year ended September 30, 2024. For the year ended September 30, 2023, the change in contract liabilities was $0.5 million net cash inflow, which led to a $1.1 million decrease in net cash outflow from operating activities.\n\n9.Change in unrealized gain from marketable securities was $0.8 million for the year ended September 30, 2024. For the year ended September 30, 2023, the change in unrealized gain from marketable securities was $5.5 million net cash inflow, which led to a $4.7 million decrease in net cash outflow from operating activities. This is due to the company’s redemption of part of the funds and the conversion of the remaining funds into stocks.\n\nInvesting Activities\n\nNet cash used in investing activities was approximately $0.16 million for the year ended September 30, 2025, an decrease of $1.16 million, or 117%, compared to $1.00 million net cash provided by investing activities for the year ended September 30, 2024. The decrease was mainly due to the decreased short term investment of for $1 million and the decrease of redemption from market securities of $4.8 million, cash received from acquisition of $2.39 million.\n\nNet cash provided by investing activities was approximately $1.0 million for the year ended September 30, 2024, an increase of $5.7million, or (121%), compared to $4.7 million net cash used in investing activities for the year ended September 30, 2023. The increase was mainly due to the decreased short term investment of for $1.0 million and, the purchase of intangible assets of $0.8 million,  the increase of investment in payments on long term investment of $1.4 million, cash received from disposal of long term investment of $0.5million, the increase of payment made for construction of $0.9 million, and redemption from marketable securities $4.8million.\n\nFinancing Activities\n\nNet cash provided by financing activities was approximately $2.62 million for the year ended September 30, 2025, an increase of $3.11 million, or 633%, compared to $(0.50) million for the year ended September 30, 2024. The increase was mainly a result of $1.61 million increase from proceeds from bank loan and and proceeds from bank notes payable of $1.01 million.\n\nNet cash used in financing activities was approximately $0.5 million for the year ended September 30, 2024, a decrease of $2.4 million, or 83%, compared to $2.9 million for the year ended September 30, 2023. The decrease was mainly a result of $0.7 million decrease from net cash repaid for bank loan and bank notes payable, and a $1.8 million decrease in dividend paid.\n\n122\n\n[Table of Contents](#TOC)\n\n**Capital Expenditures**\n\nOur capital expenditures were $2.2 million, $3.9 million and $3.7 million in fiscal years ended September 30, 2025, 2024 and 2023, respectively. We intend to fund our future capital expenditures with our existing cash balance and cash flow from operating activities. We will continue to make capital expenditures to meet the expected growth of the WFOE and the VIE and its subsidiaries’ business. The capital expenditure for the year ended September 30, 2025 is estimated to be $50 million for the acquired entity.\n\n**Holding Company Structure**\n\nBGM Group Ltd (“BGM”) is a holding company with no material operations of its own. BGM conducts its operations primarily through its subsidiaries, the VIE and the VIE’s subsidiaries in China. As a result, BGM’s ability to pay dividends depends upon dividends paid by our PRC Subsidiary. In addition, our PRC Subsidiary is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise as promulgated by the Ministry of Finance of the PRC, or PRC GAAP. Pursuant to the law applicable to China’s foreign investment enterprise, foreign investment enterprise in the PRC have to make appropriation from their after-tax profit, as determined under PRC GAAP, to reserve funds including (i) general reserve fund, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered capital of our PRC subsidiary. Appropriation to the other two reserve funds is at our PRC subsidiary’s discretion.\n\nAs an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund raising activities to our PRC Subsidiary only through loans or capital contributions, subject to the satisfaction of the applicable government registration and approval requirements. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China— PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from using proceeds from future financing activities to make loans or additional capital contributions to our PRC Subsidiary.” As a result, there is uncertainty with respect to BGM’s ability to provide prompt financial support to the PRC Subsidiary when needed.\n\n**C. Research and Development, Patents and Licenses, etc.**\n\nSee “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”\n\n**D. Trend Information**\n\nOther than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the fiscal year ended September 30, 2025 that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.\n\nE. Critical Accounting Estimates\n\nOur significant accounting policies and their effect on our financial condition and results of operations are fully disclosed in our consolidated financial statements included elsewhere in this annual report. We have prepared our consolidated financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These estimates are prepared using our best judgment, after considering past and current events and economic conditions. While management believes the factors evaluated provide a meaningful basis for establishing and applying sound accounting policies, management cannot guarantee that the estimates will always be consistent with actual results. In addition, certain information relied upon by us in preparing such estimates includes internally generated financial and operating information and external market information. Actual results may differ from these estimates.\n\n123\n\n[Table of Contents](#TOC)\n\nWe consider an accounting estimate to be critical if: (1) it requires us to make assumptions because the information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate and (2) changes in the estimate could have a material impact on our financial condition or results of operations. We consider the following accounting policies to be both those most important to our financial condition and those that require the most subjective judgment:\n\nValuation of investment in trading securities: Management relies on estimates of projected cashflows as support for the amounts disclosed in the Company’s financial statements as investments and valuation allowances taken against respective investments. The projections are based on the best estimates available. However, these estimates are subject to potential changes in market conditions, interest rates and market liquidity considerations. Certain inputs involve unobservable inputs and are classified as level 3 of the fair value hierarchy (see Note 2, Summary of significant account policies-Fair Value of Financial Instruments to our consolidated financial statements included elsewhere in this Annual Report). The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions.\n\n​\n\n​"}