13. LONG-TERM LOANS

Long-term loans represent the amounts due to various banks and financial lease companies lasting over one year. As of December 31, 2023, the Group had no loans. During 2024, the Group entered into long-term loans contracts with two creditors. The outstanding balances on long-term loans as of June 30, 2025 and March 31, 2025 consisted of the following: 

On October 23, 2024, Hongchang Food entered into a sales and leaseback contract with Chailease. Pursuant to the contract, the Company sold its machines for approximately US$561,698 and immediately leased it back from Chailease for a three-year period from October 25, 2024 to October 25, 2027. The cost of the relevant equipment was approximately US$218,505, which has been accounted in the other non-current assets. The Company had not transferred the control of the underlying assets to Chailease and the Company evaluated that the sales transaction did not qualify as a sale in accordance with ASC 606. Therefore, the sales and leaseback contract was in essence a debt financing arrangement and did not apply sales and leaseback accounting in ASC 842. The proceeds, net of the financing costs, were financial liability with a yearly implied interest rate of 15.16%. This long-term loan was guaranteed by WFOE, Mr. Zengqiang Lin, and Mr. Huaqiang Lin. The Company was required to make monthly interest and principal payment.

During the three months ended March 31, 2025, the Company repaid approximately US$58,585. As of March 31, 2025, the Company had an outstanding balance of US$529,769, of which US$123,996 and US$405,773 were classified to current portion and non-current portion, respectively. 

During the three months ended June 30, 2025, the Company repaid approximately US$58,908. As of June 30, 2025, the Company had an outstanding balance of US$496,190, of which US$177,334 and US$318,856 were classified to current portion and non-current portion, respectively. 

The future maturities of long-term loans from Fujian Fuqing Huitong Rural Commercial Bank Co., Ltd. are as follows:

The purposes of these long-term loans are for the construction of Hongchang Food Industrial Park, and the interest of these loans was capitalized in construction-in-progress. Interest capitalized in construction-in-progress was US$102,448 and US$78,166 for the three months ended June 30, 2025 and 2024, respectively.

The loan from Pucheng Rural Credit Union will mature on August 30, 2025. As of June 30, 2025, the Company had an outstanding balance of US$136,742 were classified to current portion.