MAJESTIC IDEAL HOLDINGS LTD INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS For the Six Months Ended

MAJESTIC IDEAL HOLDINGS LTD

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

MAJESTIC IDEAL HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

MAJESTIC IDEAL HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

MAJESTIC IDEAL HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES OF SHAREHOLDERS'

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

MAJESTIC IDEAL HOLDINGS LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

MAJESTIC IDEAL HOLDINGS LIMITED AND ITS SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. organization and principal activities

Majestic Ideal Holdings Limited ("We", "us", the "Company", "MIHL", or "Majestic") was incorporated in Cayman Islands on November 3, 2021. Shortly after its incorporation, MIHL incorporated Nifty Holdings Limited ("Nifty"), a British Virgin Islands company, as its wholly-owned subsidiary. MIHL acquired, through Nifty, all the shares in Multi Ridge; in consideration thereof, issued 10,351,125 Shares to Action Holdings Limited, a British Virgin Islands company whose ultimate beneficial owners were our Controlling Shareholders, Mr. Sek Yan Ko and Ms. Yuk Yin Judy Li, as part of the reorganization in contemplation of the proposed listing of MIHL. On the same day, the Company issued 561,375 Shares to Ms. Lok Yi Lui Jeanne and 337,500 Shares to Mr. Kim Sun Chan, respectively, individuals with no affiliation with the Company. On November 10, 2023, Action Holdings Limited transferred 650,000 shares and 600,000 shares to Sonic Motion Limited, a British Virgin Islands Company, and Sonic Flash Limited, a British Virgin Islands Company, respectively, following. Our Controlling Shareholders held their beneficial interest in the Company through Keystone Holdings Limited, a British Virgin Islands company and other intermediate holding companies.

Nifty Holdings Limited ("Nifty Holdings") was incorporated in the BVI on November 23, 2021. It is a wholly owned subsidiary company of Majestic Ideal and is engaged in investment holding.

Multi Ridge (Asia) Limited ("Multi Ridge") was incorporated in Hong Kong on October 11, 2013. It was also a wholly-owned subsidiary company of the Action Holding before a group reorganization as detailed below.

(New Brand Cashmere Products Co., Ltd) ("New Brand") was established as a wholly foreign owned entity ("WFOE") on February 14, 2014 in the People's Republic of China (the "PRC"). New Brand in principally engaged in trading of yarns and finished garments in the PRC and is a wholly-owned subsidiary company of Multi Ridge.

Pursuant to a group reorganization (the "Group Reorganization") to rationalize the structure of MIHL and MIHL's subsidiary companies (herein collectively referred to as the "Group") in preparation for the listing of our shares, we become the holding company of the Group on November 26, 2021, which involves the interspersion of the Majestic and Nifty Holdings between Action Holdings, the immediate holding company, and Multi Ridge. Upon the Group Reorganization and as at the date of this report, details of the subsidiary companies are as follows:

MAJESTIC IDEAL HOLDINGS LIMITED AND ITS SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies and Practices

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for information pursuant to the rules and regulations of the Securities and Exchange Commission.

Going concern and management's plan

Our working capital deficit was RMB14,017,887 (US$1,931,715) as of March 31, 2025. Subsequent to March 31, 2025, the Company successfully completed its Initial Public Offering, raising gross proceeds of approximately US$15.0 million. This significant infusion of capital has strengthened the Company's financial position and liquidity. The net proceeds from the IPO, together with ongoing cash flows from operations and the continued financial support from Mr. Ko and Ms. Li (the Company's Controlling Shareholders), are expected to be adequate to meet the Company's working capital and operational funding requirements for at least the next 12 months from the issuance date of this report.

The Company remains focused on its strategy of improving operational efficiency and reducing costs. Accordingly, the consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and the settlement of liabilities in the normal course of business.

Principles of consolidation

The consolidated financial statements include the financial statements of us and its subsidiaries. All transactions and balances among us and its subsidiaries have been eliminated upon consolidation.

Use of estimates and assumptions

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management's estimates and assumptions. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Company's consolidated financial statements include but not limited to the useful lives of property and equipment, impairment of long-lived assets, valuation of accounts receivables, prepayments, other receivable, inventory and deferred tax assets. Actual results could differ from these estimates.

Functional currency and foreign currency translation

New Brand uses Renminbi ("RMB") as its functional and reporting currency. Multi Ridge uses Hong Kong Dollar ("HKD") as its functional and reporting currency. The functional and reporting currency of MIHL and its subsidiaries incorporated in the BVI is United States dollars ("US$"). The determination of the respective functional currency is based on the criteria of Accounting Standards Codification ("ASC") 830, Foreign Currency Matters.

Transactions denominated in currencies other than functional currency are translated into functional currency at the exchange rates quoted by authoritative banks prevailing at the dates of the transactions. Exchange gains and losses resulting from those foreign currency transactions denominated in a currency other than the functional currency are recorded as other income (loss), net in the consolidated statements of comprehensive loss.

The financial statements of us are translated from the functional currency into RMB. Assets and liabilities are translated at the exchange rates at the balance sheet date. Equity accounts other than earnings generated in the current period are translated into RMB using the appropriate historical rates. Revenues and expenses, gains and losses are translated into RMB using the periodic average exchange rate for the year. Translation adjustments are reported as foreign currency translation adjustments and are shown as a component of other comprehensive income (loss) in the consolidated statements of comprehensive loss.

MAJESTIC IDEAL HOLDINGS LIMITED AND ITS SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies and Practices (cont.)

Convenience translation

Translations of amounts in the consolidated balance sheet, consolidated statements of income and consolidated statements of cash flows from RMB into US$ as of and for the period ended March 31, 2025, are solely for the convenience of the reader and were calculated at the noon buying rate of US$1 = RMB7.2567, as published in H.10 statistical release of the United States Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized, or settled into US$ at such rate or at any other rate.

We adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Accounts receivable, net, and allowance for credit losses

Accounts receivable is recorded at the net valueless estimates for allowance for credit losses. Management regularly reviews outstanding accounts and provides an allowance for credit losses. Many factors are considered in estimating the general allowance, including reviewing delinquent accounts receivable, performing an aging analysis and a customer credit analysis, and analyzing historical bad debt records and current economic trends.

On October 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC 326"). The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost including accounts receivable and other receivable. Results for reporting periods beginning after October 1, 2023 are presented under ASC Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. No cumulative-effect adjustment to the Company's equity was required upon adoption. The adoption of ASU 2016-13 did not have a material impact on our financial statements. Upon adoption, the Company recorded a credit loss of RMB125,888 (US$17,348) for the period ended March 31, 2025.

Prepayments are cash deposited or advanced to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any advances to suppliers determined by management that such advances will not be in receipts of inventories or refundable, we will recognize an allowance account to reserve such balances. Management reviews its advances to suppliers on a regular basis to determine if the allowance is adequate, and adjusts the allowance when necessary.

Deposits and other receivables, net

Deposits and other receivables, net primarily include deposits, VAT input, IPO deferred costs and others. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made.

Inventories, which are primarily comprised of merchandizes for sale, are stated at the lower of cost or net realizable value, using the weighted average method. We evaluate the need for reserves associated with obsolete, slow-moving and non-saleable inventory by reviewing net realizable values on a periodic basis. Only defects products can be return to our suppliers.

MAJESTIC IDEAL HOLDINGS LIMITED AND ITS SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies and Practices (cont.)

Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. We also re-evaluate the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Impairment for long-lived assets

Long-lived assets, representing property and equipment with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, we would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. For the six months ended March 31, 2024 and 2025, no impairment of long-lived assets was recognized.

Fair value measurement

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by us.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

The Company's financial instruments primarily consist of cash and bank balances, accounts receivable, accounts payable, other payables and accrued liabilities, short-term bank loans.

The carrying value of cash and bank balances, accounts receivable, accounts payable, short-term borrowings and other current assets and liabilities approximate fair value because of the short-term nature of these items. The estimated fair values of short-term bank loans were not materially different from their carrying value as presented due to the short maturities and that the interest rates on the borrowing approximate those that would have been available for loans of similar remaining maturity and risk profile. As the carrying amounts are reasonable estimates of the fair value, these financial instruments are classified within Level 1 of the fair value hierarchy.

MAJESTIC IDEAL HOLDINGS LIMITED AND ITS SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies and Practices (cont.)

Before October 1, 2019, we applied ASC Topic 840 ("ASC 840"), Leases, and each lease is classified at the inception date as either a capital lease or an operating lease.

We adopted ASC 842, "Leases" ("ASC 842") on October 1, 2019, using the modified retrospective transition method through a cumulative-effect adjustment in the period of adoption rather than retrospectively adjusting prior periods and the package of practical expedient. We categorized leases with contractual terms longer than twelve months as either operating or finance lease.

Operating Right-of-use ("ROU") assets represent our rights to use underlying assets for the lease terms and lease liabilities represent our obligation to make lease payments arising from the leases. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term, reduced by lease incentives received, plus any initial direct costs, using the discount rate for the lease at the commencement date. If the implicit rate in lease is not readily determinable for our operating leases, we generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We elected not to separate non-lease components from lease components; therefore, it will account for lease component and the non-lease components as a single lease component when there is only one vendor in the lease contract for the office leases. Lease payments are fixed.

For operating leases, lease expense is recognized on a straight-line basis in operations over the lease term. For finance leases, lease expense is recognized as depreciation and interest; depreciation on a straight-line basis over the lease term and interest using the effective interest method.

Any lease with a term of 12 months or less is considered short-term. As permitted by ASC 842, short-term leases are excluded from the ROU asset and lease liabilities on the consolidated balance sheets. Consistent with all other operating leases, short-term lease expense is recorded on a straight-line basis over the lease term.

In accordance with the relevant regulations and their articles of association, MIHL's subsidiaries incorporated in the PRC are required to allocate at least10% of their after-tax profit determined based on the PRC accounting standards and regulations to the general reserve until the reserve has reached 50% of the relevant subsidiary's registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the respective company. These reserves can only be used for specific purposes and are not transferable to Multi Ridge in the form of loans, advances or cash dividends. For the six months ended March 31, 2024 and 2025, appropriations to the general reserve amounted to nil and nil, respectively. No appropriations to the enterprise expansion fund and staff welfare and bonus fund have been made by New Brand.

We adopted Accounting Standards Update ("ASU") 2014-09 Revenue from Contracts with Customers (ASC 606). The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that we (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation.

Our revenues consist of sales of yarns and finished garments to third party customers.

MAJESTIC IDEAL HOLDINGS LIMITED AND ITS SUBSIDIARIES

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies and Practices (cont.)

We recognize sales of yarns and finished garments at the point in time when we have transferred physical possession of the goods to the customer and the customer has accepted the goods. Meanwhile, customer's acknowledgement of the receipt of goods indicates that control of the goods has been transferred to the customer. Goods are accepted by the customers if we have delivered the correct quantity and the delivered goods are in good quality. Generally, if the customer does not claim and return the goods within 15 days from acknowledgement of receipt, the goods are considered accepted Customer usually pays within 40 days to 90 days. The transaction price is determined and allocated to the product prior to the transfer of the goods to the customer.

We estimate potential returns and records such estimates against its gross revenue to arrive at its reported net sales revenue. We have not experienced any sales returns.

Cost of revenues, which are directly related to revenue generating transactions, primarily consists of purchase costs for yarns and finished garments.

Operations and support

Operations and support expenses consist primarily of personnel-related compensation expenses, including salaries and related social insurance costs for our operations and support personnel, office rental and property management fees, professional services fees, depreciation, travelling expenses, office supplies, utilities, communication and expenses related to general operations.

Sales and marketing expenses

Sales and marketing expenses consist primarily of personnel-related compensation expenses, including salaries and related social insurance costs, promotion expenses, and testing fees.

Government grants are recognized as income in other income, net or as a reduction of specific costs and expenses for which the grants are intended to compensate. Such amounts are recognized in the consolidated statements of comprehensive income upon receipt and when all conditions attached to the grants are fulfilled. We can get financial support from the Local Government if our tax contributions reach RMB300,000 in a calendar year.

Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the years of deferred tax assets and liabilities.

We are incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. The Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.