# Treasure Global Inc: Form 10-Q for the period ended Mar 31, 2025 - Company: [Treasure Global Inc](/companies/tgl.md) (CIK 1905956) - Form: 10-Q - Filed: 2025-05-15 - Accepted by EDGAR: May 15, 2025, 16:01 ET - Period: 2025-03-31 - Accession: 0001213900-25-044149 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1905956/000121390025044149/ea0241599-10q_treasure.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1905956/000121390025044149/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2025-03-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2025-01-01 to 2025-03-31 | $666.5k | us-gaap:Revenues | | Revenue | 9 months, 2024-07-01 to 2025-03-31 | $1.2m | us-gaap:Revenues | | Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $180.2k | us-gaap:CostOfRevenue | | Cost of revenue | 9 months, 2024-07-01 to 2025-03-31 | $293.4k | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $486.3k | us-gaap:GrossProfit | | Gross profit | 9 months, 2024-07-01 to 2025-03-31 | $882.4k | us-gaap:GrossProfit | | Research and development | 3 months, 2025-01-01 to 2025-03-31 | $5.3k | us-gaap:ResearchAndDevelopmentExpense | | Research and development | 9 months, 2024-07-01 to 2025-03-31 | $85.7k | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$43.4k | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2024-07-01 to 2025-03-31 | −$1.5m | us-gaap:OperatingIncomeLoss | | Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $615 | us-gaap:InterestExpense | | Interest expense | 9 months, 2024-07-01 to 2025-03-31 | $3.0k | us-gaap:InterestExpense | | Income tax | 9 months, 2024-07-01 to 2025-03-31 | $20.8k | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2025-01-01 to 2025-03-31 | $1.3m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2024-07-01 to 2025-03-31 | $76.9k | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.09 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 9 months, 2024-07-01 to 2025-03-31 | $0.14 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.09 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2024-07-01 to 2025-03-31 | $0.14 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 1,156,208 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 9 months, 2024-07-01 to 2025-03-31 | 542,963 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 9 months, 2024-07-01 to 2025-03-31 | −$5.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 9 months, 2024-07-01 to 2025-03-31 | $4.5k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Current assets | at 2025-03-31 | $10.7m | us-gaap:AssetsCurrent | | Total assets | at 2025-03-31 | $30.4m | us-gaap:Assets | | Current liabilities | at 2025-03-31 | $1.3m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2025-03-31 | $1.3m | us-gaap:Liabilities | | Shareholders' equity | at 2025-03-31 | $29.1m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 75,808 characters. *The following discussion and analysis of our results of operations and financial condition should be read together with our unaudited condensed consolidated financial statements and the notes thereto, which are included elsewhere in this Report and our Annual Report on Form 10-K for the year ended June 30, 2024 (the “Annual Report”) filed with the SEC. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).* ### Overview Treasure Global Inc is a holding company incorporated on March 20, 2020, under the laws of the State of Delaware. TGL has no substantive operations other than holding all of the outstanding shares of ZCity Sdn Bhd (“ZCITY”), (formerly known as Gem Reward Sdn. Bhd, underwent a name change on July 20, 2023). It was originally established under the laws of the Malaysia on June 6, 2017, through a reverse recapitalization. Prior to March 11, 2021, TGL and ZCITY were separate companies under the common control of Kok Pin “Darren,” Tan which resulted from Mr. Tan’s prior 100% ownership of TGL and his prior 100% voting and investment control over ZCITY pursuant to the Beneficial Shareholding Agreements. For a more detailed description of the Beneficial Shareholding Agreements and Mr. Tan’s common control over TGL and ZCITY see Part I, Item 1. “*Business – Corporate Structure.”* On March 11, 2021, TGL and ZCITY were reorganized into a parent subsidiary structure pursuant to the Share Swap Agreement in which TGL exchanged the swap shares for all of the issued and outstanding equity of ZCITY. Pursuant to the Share Swap Agreement, the purchase and sale of the swap shares was completed on March 11, 2021, but the issuance of the swap shares did not occur until October 27, 2021 when TGL amended its certificate of incorporation to increase the number of its authorized common stock to a number that was sufficient to issue the swap shares. As a result of the Share Swap Agreement, (i) ZCITY became the 100% subsidiary of TGL and Kok Pin “Darren” Tan no longer had any control over the ZCITY ordinary shares and (ii) Kok Pin “Darren” Tan the Initial ZCITY Stockholders and Chong Chan “Sam” Teo owned 100% of the shares of TGL common stock (Kok Pin “Darren” Tan owning approximately 97%). Subsequent to the date of the Share Swap Agreement, Kok Pin “Darren” Tan transferred 9,529,002 of his 10,000,000 shares of TGL common stock to 16 individuals and entities and currently owns less than 5% of our common stock. #### -ZCITY Operation We have created an innovative online-to-offline e-commerce platform business model offering consumers and merchants instant rebates and affiliate cashback programs, while providing a seamless e-payment solution with rebates in both e-commerce (i.e., online) and physical retailers/merchant (i.e., offline) settings. Our proprietary product is an application branded “ZCITY App,” which was developed through ZCITY. The ZCITY App was successfully launched in Malaysia on June 2020. ZCITY is equipped with the know-how and expertise to develop additional/add-on technology-based products and services to complement the ZCITY App, thereby growing its reach and user base. Through simplifying a user’s e-payment gateway experience, as well as by providing great deals, rewards and promotions with every use, we aim to make the ZCITY App Malaysia’s top reward and loyalty platform. Our longer-term goal is for the ZCITY App and its ever-developing technology to become one of the most well-known commercialized applications more broadly in Southeast Asia and Japan. As of February 10, 2025, we had 2,707,610 registered users and 2,027 registered merchants. Southeast Asia (“SEA”) consumers have access to a plethora of smart ordering, delivery and “loyalty” websites and apps, but in our experience, SEA consumers very rarely receive personalized deals based on their purchases and behavior. The ZCITY App targets consumer through the provision of personalized deals based on consumers’ purchase history, location and preferences. Our technology platform allows us to identify the spending trends of our customers (the when, where, why, and how much). We are able to offer these personalized deals through the application of our proprietary artificial intelligence (or “AI”) technology that scours the available database to identify and create opportunities to extrapolate the greatest value from the data, analyze consumer behavior and roll out attractive rewards-based campaigns for targeted audiences. We believe this AI technology is currently a unique market differentiator for the ZCITY App. We operate our ZCITY App on the hashtag: “#RewardsOnRewards.” We believe this branding demonstrates to users the ability to spend ZCITY App-based Reward Points (or “RP”) and “ZCITY Cash Vouchers” with discount benefits at checkout. Additionally, users can earn rewards from selected e-Wallet or other payment methods. ZCITY App users do not require any on-going credit top-up or need to provide bank card number with their binding obligations. We have partnered with Malaysia’s leading payment gateway, iPay88, for secure and convenient transactions. Users can use our secure platform and enjoy cashless shopping experiences with rebates when they shop with e-commerce and retail merchants through trusted and leading e-wallet providers such as Touch’n Go eWallet, Boost eWallet, GrabPay eWallet and credit card/online banking like the “FPX” (the Malaysian Financial Process Exchange) as well as more traditional providers such as Visa and Mastercard. #### -Food Distribution Operation On April 12, 2023, we have acquired 100% equity interest in Foodlink Global Sdn. Bhd. (“Foodlink”), along with its two wholly-owned subsidiaries, Morgan Global Sdn. Bhd (“Morgan”) and AY Food Ventures Sdn. Bhd. (“AY Food”), for a consideration of approximately $3,000 from DBH. Through Foodlink, Morgan, and AY Food, we have been engaged in the operation of sub-licensing restaurant branding and the selling and trading of food and beverage products. On May 24, 2024, we had disposed Foodlink and its subsidiaries along with the food distribution operation to a third party for a consideration of $148,500. The disposal of Foodlink and its subsidiaries did not have material impact to our operation. #### -Customized Software development service During the fiscal year, the Company initiated a new revenue stream in the ordinary course of business by offering customized software development services, primarily targeting enterprise clients. As of January 2025, we have entered into a new service partnership with Reveillon Group Limited to design, develop, and implement a comprehensive digital system. This initiative involves the creation of integrated modules focused on improving administrative processes, data analysis, and user engagement. The system is being built with scalability, customization, and long-term performance in mind, ensuring it meets evolving business needs. This collaboration underscores our ongoing commitment to delivering robust and adaptable digital solutions across various industries. The project is scheduled for completion within 12 months of the agreement’s start date. ### Recent Development #### \- Reverse Stock Splits On February 27, 2024, we effected a 1:70 reverse stock split of its shares of common stock. Upon execution of the 1-for-70 reverse stock split (“February 2024 split”). On April 7, 2025, the Company effected a 1:50 reverse stock split of its shares of common stock (“April 2025 split”). We believed it is appropriate to reflect the above transactions on a retroactive basis similar to those after a stock split or dividend pursuant to ASC 260. All shares and per share amounts used herein Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations have been retroactively stated to reflect the effect of the February 2024 Split and April 2025 Split. #### \- Financing Development On November 30, 2023, we closed our underwritten public offering (the “November 2023 Offering”) of (i) 7,433 shares of common stock, at a public offering price of $350 per share of Common Stock and (ii) 4000 pre-funded warrants (the “Pre-Funded Warrants”), each with the right to purchase one of Common Stock, at a public offering price of $350 per Pre-Funded Warrant. Upon closing of the November 2023 Offering, we received aggregate net proceed of approximately $3.5 million, after deducting underwriting discounts and commission, and non-accountable expense. On March 22, 2024, we entered into a marketing offering agreement (“Marketing Offering Agreement”) with H.C. Wainwright & Co., LLC, (the “Manager”). Pursuant to the Marketing Offering Agreement, the Company intends to issue and sell through or to the Manager, as sales agent and / or principal from time to time of the Company’s common stock at the Market Offering. As of March 31, 2025, we have received an aggregated net proceed of approximately $2.9 million, net of broker fee from issuance of 33,566 shares of common stock which sell through or to the Manager. On October 10, 2024, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP (“Alumni Capital”), a Delaware limited partnership which was subsequently amended by the Modification Agreement on January 21, 2025 . Pursuant to the Purchase Agreement, we have the right, but not the obligation to cause Alumni Capital to purchase up to $50,000,000 common stock, par value $0.00001 (the “Commitment Amount”), at certain purchase Price during the period beginning on the execution date of the Purchase Agreement and ending on the earlier of (i) the date on which Alumni Capital has purchased $50,000,000 of the Company’s common stock pursuant to the Purchase Agreement or (ii) December 31, 2025. As of March 31, 2025, Alumni Capital has purchased approximately $7.5 million worth of the Company’s common stock, totaling 864,180 shares. The Company has received approximately $6.7 million in net proceeds as of March 31, 2025, with the remaining balance received in April 2025 . On November 27, 2024, we entered into a subscription agreement (the “Subscription Agreement”) with certain investors (the “Investors”). Pursuant to the Subscription Agreement, the Investors agreed to invest an aggregate amount of $1,177,000 (the “Investment Amount”) into us for 71,333 shares of the Company’s common stock (the “Offered Shares”), par value $0.00001 at a negotiated purchase price of $16.5 (the “Offering”). As of March 31, 2025, the Company has issued 71,333 shares of Offered Shares to the Investors and received aggregate net proceed of $1,177,000. #### -Business Development Since December 2022, we have been developing the TAZTE Smart F&B system (“TAZTE”), a comprehensive solution designed to facilitate digital transformation for registered food and beverage (“F&B”) outlets across Malaysia. TAZTE was conceived as a merchant-centric program, intended to leverage user data to drive substantial business growth for our merchant clientele. We initially offered a complimentary trial period to merchants, which was scheduled to conclude on December 31, 2023. This trial period was later extended until June 2024. However, due to insufficient participation from merchant clients, management has decided to discontinue the program as of June 2024. Since July 2024, we formalized agreements to develop and implement a Smart Campus System at ELMU University in Nilai, Malaysia. Leveraging our expertise in infrastructure management, we are working with ELMU University to deploy an automated smart campus system that will enhance resource management across the campus, with a strong focus on optimizing electricity usage through integrated software and hardware solutions. This initiative aims to achieve an efficient energy saving consumptions and better environmental, social and governance. The project is expected to be fully deployed within 12 months from the contract’s commencement date. Since September 2024, we have been driving the development of credit services within the ZCity App through a strategic partnership with Credilab Sdn Bhd (“CLSB”). We are in the midst of facilitating the integration of CLSB’s credit services platform into the ZCity App and developing the customer base for these services. Through the partnership, we intend to collaborate on the creation of a digital wallet, AI-driven chatbot, and customer support systems. The collaboration is designed to drive user engagement and enhance the overall credit services offering within the ZCity App ecosystem. The partnership is scheduled to conclude on September 19, 2029, during which CLSB has also granted TGL a non-exclusive right to use its brand in marketing materials for five years. Since October 2024, we have been advancing our user engagement strategy by partnering with Octagram Investment Limited (“OCTA”) to develop and integrate mini-game modules into the ZCity App. We have worked closely with OCTA to design and customize these interactive modules, ensuring they align with our specifications for game mechanics, branding, and user experience. The integration is optimized for cross-platform compatibility and smooth performance across devices, as well as ensuring ongoing support and timely updates, maintaining the seamless functionality of the mini-games with future ZCity App updates. We believe that this initiative is key to enhancing the app’s interactive features and driving user engagement. In October 2024, we have also been developing a cutting-edge Live Streaming Platform enhanced by AI Digital Human Solutions by partnering with V Gallant Sdn Bhd. We will be overseeing the customization of the platform to meet specific requirements, ensuring seamless integration with third-party platforms and optimizing performance across devices. Ongoing support and updates will also be prioritized to maintain consistent functionality. This initiative is central to our efforts to expand our interactive streaming capabilities and elevate user experiences. The development is scheduled to be completed on December 31, 2025. ### Key Factors that Affect Operating Results We believe the key factors affecting our financial condition and results of operations include the following: ### Our Ability to Create Value for Our Users and Generate Revenue Our ability to create value for our users and generate our revenues from merchants is driven by the factors described below: *Number and volume of transactions completed by our consumers.* Consumers are attracted to ZCITY by the breadth of personalized deals/rewards and the interactive user experience our platform offers. The number and volume of transaction completed by our member consumers is affected by our ability to continue to enhance and expand our product and service offerings and improve the user experience. #### Empowering data and technology. Our ability to engage our member consumers and empower our merchants and their brands is affected by the breadth and depth of our data insights, such as the accuracy of our members’ shopping preferences, and our technology capabilities and infrastructure, and our continued ability to develop scalable services and upgrade our platform user experience to adapt to the quickly evolving industry trends and consumer preferences. ### Our Investment in User Base, Technology, People and Infrastructure We have made, and will continue to make, significant investments in our platform to attract consumers and merchants, enhance user experience and expand the capabilities and scope of our platform. We expect to continue to invest in our research and development team as well as in our technology capabilities and infrastructure, which will lower our margins but deliver overall long-term growth. ### Inflation Although Malaysia is experiencing a high inflation rate, we do not believe that inflation has had a material adverse effect on our business as March 31, 2025, but we will continue to monitor the effects of inflation on our business in future periods. ### Supply Chain Disruptions Although there have been Russia’s February 2022 invasion of Ukraine and the 2023 Middle East conflicts that may have affected the operations of some of our online and offline merchants, these disruptions have not had a material adverse effect on our business as of March 31, 2025, but we will continue to monitor the effects of above mentioned disruptions on our business in future periods. ### Key Operating Metrics Our management regularly reviews a number of metrics to evaluate our business, measures our performance, identifies trends, formulates financial projections and makes strategic decisions. The main metrics we consider, and our results for last five quarters, are set forth in the table below: | | For the Quarters Ended March 31, 2024 | June 30, 2024 | September 30, 2024 | December 31, 2024 | March 31, 2025 | | --- | ---: | ---: | ---: | ---: | ---: | | Number of new registered user (1) | 12,405 | 4,934 | 3,293 | 2,016 | 1,467 | | Number of active users (2) | 41,458 | 26,819 | 25,216 | 21,734 | 10,647 | | Number of new participating merchants | - | - | - | - | - | (1) Registered are persons who have registered on the ZCITY App. (2) Active users are users who have logged into the ZCITY App at least once. | | As of March 31, 2024 | As of June 30, 2024 | As of September 30, 2024 | As of December 31, 2024 | As of March 31, 2025 | | --- | ---: | ---: | ---: | ---: | ---: | | Accumulated registered users | 2,696,255 | 2,701,189 | 2,704,482 | 2,706,498 | 2,707,965 | | Accumulated Participating merchants | 2,027 | 2,027 | 2,027 | 2,027 | 2,027 | We have experienced a decrease in growth rate in registered users, and a decline of active users over our last five quarters as of March 31, 2025. As of March 31, 2025, we recorded 2,707,965 registered users and 10,647 active users on the ZCITY platform. On average, our registered user base has grown by approximately 0.2% over the past five quarters, while our active user numbers have experienced an average decrease of 35.9%. The decline in growth of registered users and active users over the past five quarters, as of March 31, 2025, is primarily attributed to reduced E-voucher purchases from our vendor, resulting in fewer E-vouchers available for sale. Additionally, we’ve implemented reductions in marketing spending and customer rewards to enhance cost-effectiveness and operational profitability. Consequently, this has led to a decrease in new user registrations and lower retention rates among active users on our ZCITY platform. We continuously monitor the development and participation of active users as a proportion of its total registered user base to ensure the effectiveness of our marketing and feature implantation strategies. Accordingly, the proportion of total registered users that we consider active users at the end last five quarters as of March 31, 2025 is as follows: | Starting | Ending | Total registered users | Total active users | Total active users to total registered users | | --- | --- | ---: | ---: | ---: | | January 1, 2024 | March 31, 2024 | 2,696,555 | 41,458 | 1.5% | | April 1, 2024 | June 30, 2024 | 2,701,189 | 26,819 | 1.0% | | July 1, 2024 | September 30, 2024 | 2,704,482 | 25,216 | 0.9% | | October 1, 2024 | December 31, 2024 | 2,706,498 | 21,734 | 0.1% | | January 1, 2025 | March 31, 2025 | 2,707,965 | 10,647 | 0.4% | We continuously monitor the development of the churn and retention rates of the active user base. Active users churn rate is the percentage of customers who had stop subscribing in our platform while retention rate is the percentage of customers who is retained in our platform. Accordingly, our churn and retention rates of the active user base at the end of last five quarters as of March 31, 2025 is as follows: | Starting | Ending | Total active users | New active users (registered within the quarter) | Existing active users | Active users churn rate | Active users retention rate | | --- | --- | ---: | ---: | ---: | ---: | ---: | | January 1, 2024 | March 31, 2024 | 41,458 | 12,705 | 28,753 | 81.7% | 18.3% | | April 1, 2024 | June 30, 2024 | 26,819 | 4,634 | 22,185 | 46.5% | 53.5% | | July 1, 2024 | September 30, 2024 | 25,216 | 3,293 | 21,923 | 18.3% | 81.7% | | October 1, 2024 | December 30,2024 | 21,734 | 2,016 | 19,718 | 21.8% | 78.2% | | January 1, 2024 | March 31, 2025 | 10,647 | 1,467 | 9,180 | 57.8% | 42.2% | The retention rate and churn rate for our active users are calculated as follows: | | | | | --- | --- | --- | | Retention rate of active users for any quarter | = | Existing active users | | Total active users in the past quarter | | | | | | | | --- | --- | --- | | Churn rate of active users for any quarter | = | Total active users from past quarter minus current quarter existing active users | | Total active users in the past quarter | | | We have used different strategies to build and maintain our users and increase their engagement. Initially, we focused on mass marketing strategies to attract registered users. Subsequently, we have shifted to a more targeted approach focused on increasing user engagement and user spending. ### Results of Operation ### For the three months ended March 31, 2025 and 2024 #### Revenue Our breakdown of revenues by categories for the three months ended March 31, 2025 and 2024, respectively, is summarized below: | | For the Three Months Ended March 31, | Change | | --- | ---: | ---: | | | **2025%** | **2024%%** | | | (Unaudited) | (Unaudited) | | Product and loyalty program revenue | $28,594 4.3% | $1,455,201 91.2% (98.0)% | | Transaction revenue | 35,321 5.3% | 13,666 0.8% 158.5% | | Member subscription revenue | - -% | 84,235 5.3% (100.0)% | | Sublicence revenue | - -% | 43,027 2.7% (100.0)% | | Customized software development service | 602,606 90.4% | - -% | | Total revenues | $666,521 100.0% | $1,596,129 100.0% (58.2)% | 47 Total revenues decreased by approximately $1.5 million or 58.2% to approximately $0.6 million for the three months ended March 31, 2025 from approximately $1.6 million for the three months ended March 31, 2024. The decrease was mainly attributable to the decrease in product and loyalty program revenue offset by increase in revenue from customized software development service . #### Product and loyalty program revenue Product revenue was generated through sales of our e-voucher, health care products and other products through our ZCITY platform while loyalty program revenue was recognized when our customers redeem their previously earned reward points from our loyalty program or upon expiration of the reward point. In addition, we also engage in sales of food and beverage products through our subsidiaries, Morgan and AY Food, despite they were disposed in May 2024. The product and loyalty program revenue decrease by approximately $1.4 million or 98.0% to approximately $29,000 for the three months ended March 31, 2025 from approximately $1.5 million for the same period in 2024. The decline in revenue was primarily driven by the company’s strategic decision to streamline its product line, with a particular focus on eliminating lower-margin products, mainly e-vouchers. In addition, the decrease was attributable our strategic decision to reduce spending on customer rewards and marketing campaigns in order to enhance cost-effectiveness and profitability in our operations. This reduction in customer incentives and marketing expenditures resulted in a decrease in the platform’s appeal to both existing and potential customers, ultimately leading to a decline in revenue for the current period. #### Transaction revenue Transaction revenue primarily consists of fees charged to merchants for participating in our ZCITY platform upon successful sales and service transactions, as well as for payment services facilitated between merchants and their customers online. Our transaction revenue increased by 158.5%, reaching approximately $35,000 for the three months ended March 31, 2025, compared to approximately $13,666 for the same period in 2024. This growth was driven by our recent partnership with Credilab Sdn. Bhd. (“CLSB”), a third-party credit services provider. Through this partnership, we introduced our portfolio clients from ZCITY to CLSB’s credit service platform. In return, CLSB agreed to pay us a transaction fee upon successful transactions and share 50% of the revenue derived from these Portfolio Clients. #### Member subscription revenue Member subscription revenue primarily consists of fees charged to customers who sign up for Zmember, our membership program that offers exclusive savings, bonuses, and referral rewards. For the three months ended March 31, 2025, member subscription revenue decreased by 100.0% to approximately $0, from approximately $0.1 million for the same period in 2024. The decrease was primarily due to we experienced slowdown in acquiring new customers to participate in our Zmember program . As of March 31, 2025 and 2024, we had 27,620 and 28,927 customers who subscribed to our Zmember program, respectively. #### Sublicense revenue As we acquired exclusive worldwide license for right of use in Morganfield’s Trademark, and Abe Yus’s Trademark on May 1, 2023, and June 6, 2023, respectively, for a period of five years, we have generated sublicense revenue consisting of fee charged to the customers who sublicensed the right of use of the Trademark from us. As we had disposed Foodlink and its subsidiaries along with the food distribution and sublicensing operation in May 2024, we would no longer generate revenue from sublicense going forward. #### Customized software development services During the fiscal year, the Company initiated a new revenue stream in the ordinary course of business by offering customized software development services, primarily targeting enterprise clients. As of January 2025, we have entered into a new service partnership with Reveillon Group Limited to design, develop, and implement a comprehensive digital system. This initiative involves the creation of integrated modules focused on improving administrative processes, data analysis, and user engagement. The system is being built with scalability, customization, and long-term performance in mind, ensuring it meets evolving business needs. This collaboration underscores our ongoing commitment to delivering robust and adaptable digital solutions across various industries. The project is scheduled for completion within 12 months of the agreement’s start date #### Cost of revenue Our breakdown of cost of revenue by categories for the three months ended March 31, 2025, and 2024, respectively, is summarized below: | | For the Three Months Ended March 31, | Change | | --- | ---: | ---: | | | **2025** | **2024%** | | | **(Unaudited)** | **(Unaudited)** | | Product and loyalty program revenue | $46,346 | $1,321,757 (96.5)% | | Sublicense revenue | - | 57,366 (100.0)% | | Customized software development service | 133,892 | - 100.0% | | Total cost of revenue | $180,238 | $1,379,123 (86.9)% | Cost of revenue primarily consists of purchases of gift cards or “E-voucher” PIN codes, healthcare products, and food and beverage products, which are directly attributable to our product revenue. It also includes monthly license payments made to our licensor to maintain our right to use the Trademark, which supports our sublicense revenue. In addition, cost of revenue includes both in-house labor and outsourced labor costs related to customized software development services. Total cost of revenue decreased by approximately $1.4 million, or 86.9%, for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was consistent with the decline in our revenue. #### Gross profit Our gross profit from our major revenue categories is summarized as follows: *(Unaudited)* *(Unaudited)* | Product and loyalty program revenue | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | Change | Percentage Change | | --- | ---: | ---: | ---: | ---: | | Gross profit (loss) | $(17,752) | $133,444 | $(151,196) | (113.3)% | | Gross margin | (62.1)% | 9.2% | (71.3)% | | | **Transaction revenue** | | | | | | Gross profit | $35,321 | $13,666 | $21,665 | 158.5% | | Gross margin | 100.0% | 100.0% | -% | | | **Member subscription revenue** | | | | | | Gross profit | $- | $84,235 | $(84,235) | (100.0)% | | Gross margin | -% | 100.0% | (100)% | | | **Sublicense revenue** | | | | | | Gross (loss) profit | $- | $(14,339) | $14,339 | (100.0)% | | Gross margin | -% | (33.3)% | 33.3% | | | **Customized software development service revenue** | | | | | | Gross (loss) profit | $468,714 | $- | $468,714 | 100.0% | | Gross margin | 77.8% | -% | 77.8% | | | **Total** | | | | | | Gross profit | $486,283 | $217,006 | $269,277 | 124.1% | | Gross margin | 73.0% | 13.6% | 59.4% | | 49 Our gross profit for the three months ended March 31, 2025, amounted to approximately $0.5 million as compared to approximately $0.2 million for the same period in 2024, reflecting an increase of approximately $0.3 million or 124.1%. Our gross margin improved from 13.6% for the three months ended March 31, 2024 to 73.0% for the same period in 2025, representing an enhancement of 59.4% in our gross margin percentage. The increase in gross profit and gross profit margin for the three months ended March 31, 2025, was primarily attributable to our engagement in a customized software development project during the period, which generated approximately $0.5 million in gross profit. This project carried a relatively high gross profit margin of approximately 77.8%, which boosted our overall gross profit margin for the three months ended March 31, 2025. #### Operating expenses Our operating expenses consist of selling expenses, general and administrative expenses, research and development expenses and stock-based compensation expenses. #### Selling expenses Selling expenses amounted to approximately $8,000 and $0.3 million for the three months ended March 31, 2025 and 2024, respectively, representing a decrease of approximately $0.3 million or 97.1%. The decrease was mainly attributable to a decrease in marketing and promotion expense of approximately $0.3 million related to promoting our ZCITY platform. Marketing and promotion expense consists of redemptions of reward points which is generated from non-spending related activities (registration as a new user, referral of a new user and Spin & Win eligibility to receive reward points) in exchange for discounted credit of purchasing our products upon conversion of using the reward points. For the three months ended March 31, 2025 and 2024, we incurred approximately $3,000 and approximately $49,000, respectively, in marketing and promotion expense, and recognized the same amount of product revenue at the time of redemption of the non-spending related activities reward points by our customers. The decrease in marketing and promotion expenses was primarily driven by our strategic goal to optimize the promotional activities, enhance our cost effectiveness, and increase profitability in our operations. #### General and administrative expenses General and administrative expenses amounted to approximately $0.4 and $1.1 million for the three months ended March 31, 2025 and 2024, respectively, representing a decrease of approximately $0.7 million or 59.9%. The decrease was primarily attributed to decrease salary expenses of approximately $0.3 million and decrease of professional fee of approximately $0.4 million to promote our operation effectiveness. #### Research and development expenses Research and development expense amounted to approximately $5,000 and $182,000 for the three months ended March 31, 2025 and 2024, representing 97.1% decrease as we incurred less spending in mobile application or website development. #### Stock-based compensation expenses Stock-based compensation expenses amounted to $70,000 and $0 for the three months ended March 31, 2025, and 2024, respectively. The stock-based compensation incurred for the three months ended March 31, 2025, was related to compensation paid to our executive officer as part of their compensation plan and third party for professional service. #### Other income (expense), net Other income, net, amounted to approximately $1.3 million for the three months ended March 31, 2025, while other expense, net amounted to approximately $0.3 million for the same period ended March 31, 2024, representing a change of approximately $1.4 million which was primarily attributable to increase in gain from change in fair value of derivative liabilities of approximately $1.7 million, offset by increase in unrealized loss of approximately $0.2 million from marketable securities we received as service consideration in exchange for development of an artificial intelligence powered travel platform. #### Provision for income taxes Provision for income taxes amounted to $0 for the three months ended March 31, 2025 and 2024. The amount was mainly attributable to tax imposed on us from the State of Delaware, as we are required to remit franchise tax to the State of Delaware on an annual basis. We also were subject to controlled foreign corporations Subpart F income (“Subpart F”) tax, which is a tax primarily on passive income from controlled foreign corporations with a tax rate of 35%. In addition, the Tax Cuts and Jobs Act imposed a global intangible low-taxed income (“GILTI”) tax, which is a tax on certain off-shore earnings at an effective rate of 10.5% for tax years (50% deduction of the current enacted tax rate of 21%) with a partial offset for 80% foreign tax credits. If the foreign tax rate is 13.125% or higher, there will be no U.S. corporate tax after the 80% foreign tax credits are applied. For the three months ended March 31, 2025 and 2024, our foreign subsidiaries did not generate any income that are subject to Subpart F tax and GILTI tax. #### Net income (loss) We generated net income of approximately $1.3 million for the three months ended March 31, 2025, compared to incurring a net loss of approximately $1.7 million for the three months ended March 31, 2024, representing a change of approximately $3.0 million. The change was primarily attributable to the factors discussed above. ### For the nine months ended March 31, 2025 and 2024 #### Revenue Our breakdown of revenues by categories for the nine months ended March 31, 2025 and 2024, respectively, is summarized below: | | For the Nine Months Ended March 31, | Change | | --- | ---: | ---: | | | **2025%** | **2024%%** | | | **(Unaudited)** | **(Unaudited)** | | Product and loyalty program revenue | $378,598 32.2% | $21,159,190 97.2% (98.2)% | | Transaction revenue | 106,879 9.1% | 49,741 0.2% 114.9% | | Member subscription revenue | 87,707 7.5% | 405,659 1.9% (78.4)% | | Sublicence revenue | - -% | 159,239 0.7% (100.0)% | | Customized software development service revenue | 602,605 51.3% | - -% 100.0% | | Total revenues | $1,175,790 100.0% | $21,773,829 100.0% 100.0% | Total revenues decreased by approximately $20.6 million or 94.6% to approximately $1.2 million for the nine months ended March 31, 2025 from approximately $21.8 million for the nine months ended March 31, 2024. The decrease was mainly attributable to the decrease in product and loyalty program revenue, offset by increase in customized software development service revenue. #### Product and loyalty program revenue Product revenue was generated through sales of our e-voucher, health care products and other products through our ZCITY platform while loyalty program revenue was recognized when our customers redeem their previously earned reward points from our loyalty program or upon expiration of the reward point. In addition, we also engage in sales of food and beverage products through our subsidiaries, Morgan and AY Food, despite they were disposed in May 2024. The product and loyalty program revenue decrease by approximately $20.8 million or 98.2% to approximately $0.4 million for the nine months ended March 31, 2025 from approximately $21.1 million for the same period in 2024. The decline in revenue was primarily driven by the company’s strategic decision to streamline its product line, with a particular focus on eliminating lower-margin products, mainly e-vouchers. In addition, the decrease was attributable our strategic decision to reduce spending on customer rewards and marketing campaigns in order to enhance cost-effectiveness and profitability in our operations. This reduction in customer incentives and marketing expenditures resulted in a decrease in the platform’s appeal to both existing and potential customers, ultimately leading to a decline in revenue for the current period. #### Transaction revenue Transaction revenue primarily consists of fees charged to merchants for participating in our ZCITY platform upon successful sales and service transactions, as well as for payment services facilitated between merchants and their customers online. Our transaction revenue increased by 114.9%, to approximately $107,000 for the nine months ended March 31, 2025, compared to approximately $50,000 for the same period in 2024. The increase was driven by our recent partnership with Credilab Sdn. Bhd. (“CLSB”), a third-party credit services provider. Through this partnership, we introduced our portfolio clients from ZCITY to CLSB’s credit service platform. In return, CLSB agreed to pay us a transaction fee upon successful transactions and share 50% of the revenue derived from these Portfolio Clients. #### Member subscription revenue Member subscription revenue primarily consists of fees charged to customers who sign up for Zmember, our membership program that offers exclusive savings, bonuses, and referral rewards. For the nine months ended March 31, 2025, member subscription revenue decreased by 78.4% to approximately $88,000, from approximately $0.4 million for the same period in 2024. The decrease was primarily due to we experienced slowdown in acquiring new customers to participate in our Zmember program. As of March 31, 2025 and 2024, we had 27,620 and 28,927 customers who subscribed to our Zmember program, respectively. #### Sublicense revenue As we acquired exclusive worldwide license for right of use in Morganfield’s Trademark, and Abe Yus’s Trademark on May 1, 2023, and June 6, 2023, respectively, for a period of five years, we have generated sublicense revenue consisting of fee charged to the customers who sublicensed the right of use of the Trademark from us. As we had disposed Foodlink and its subsidiaries along with the food distribution and sublicensing operation in May 2024, we would no longer generate revenue from sublicense going forward. #### Customized software development services During the fiscal year, the Company initiated a new revenue stream in the ordinary course of business by offering customized software development services, primarily targeting enterprise clients. As of January 2025, we have entered into a new service partnership with Reveillon Group Limited to design, develop, and implement a comprehensive digital system. This initiative involves the creation of integrated modules focused on improving administrative processes, data analysis, and user engagement. The system is being built with scalability, customization, and long-term performance in mind, ensuring it meets evolving business needs. This collaboration underscores our ongoing commitment to delivering robust and adaptable digital solutions across various industries. The project is scheduled for completion within 12 months of the agreement’s start date #### Cost of revenue Our breakdown of cost of revenue by categories for the nine months ended March 31, 2025 and 2024, respectively, is summarized below: | | For the Nine Months Ended March 31, | Change | | --- | ---: | ---: | | | **2025** | **2024%** | | | **(Unaudited)** | **(Unaudited)** | | Product and loyalty program revenue | $159,492 | $20,873,905 (99.2)% | | Sublicense revenue | - | 174,681 (100.0)% | | Customized software development service revenue | 133,892 | - 100.0% | | Total cost of revenue | $293,384 | $21,048,586 (94.6)% | Cost of revenue primarily consists of purchases of gift cards or “E-voucher” PIN codes, healthcare products, and food and beverage products, which are directly attributable to our product revenue. It also includes monthly license payments made to our licensor to maintain our right to use the Trademark, which supports our sublicense revenue. In addition, cost of revenue includes both in-house labor and outsourced labor costs related to customized software development services. Total cost of revenue decreased by approximately $20.9 million or 94.6% for the nine months ended March 31, 2025 compared with the same period in 2024. The decrease was in line with our decrease in revenue. #### Gross profit Our gross profit from our major revenue categories is summarized as follows: *(Unaudited)* *(Unaudited)* | Product and loyalty program revenue | For the Nine months Ended March 31, 2025 | For the Nine months Ended March 31, 2024 | Change | Percentage Change | | --- | ---: | ---: | ---: | ---: | | Gross profit | $219,106 | $285,285 | $(66,179) | (23.2)% | | Gross margin | 57.9% | 1.3% | 56.5% | | | **Transaction revenue** | | | | | | Gross profit | $106,879 | $49,741 | $57,138 | 114.9% | | Gross margin | 100.0% | 100.0% | -% | | | **Member subscription revenue** | | | | | | Gross profit | $87,707 | $405,659 | $(317,952) | (78.4)% | | Gross margin | 100.0% | 100.0% | -% | | | **Sublicense revenue** | | | | | | Gross loss | $- | $(15,442) | $15,442 | (100.0)% | | Gross loss margin | -% | (9.7)% | 9.7% | | | **Customized software development service revenue** | | | | | | Gross loss | $468,714 | $- | $468,714 | 100.0% | | Gross loss margin | 77.8% | -% | 77.8% | | | **Total** | | | | | | Gross profit | $882,406 | $725,243 | $157,163) | 21.7% | | Gross margin | 75.0% | 3.3% | 71.7% | | 53 Our gross profit for the nine months ended March 31, 2025, amounted to approximately $0.9 million as compared to approximately $0.7 million for the same period in 2024, reflecting an increase of approximately $0.2 million or 21.7%. Our gross margin improved from 3.3% for the nine months ended March 31, 2024 to 75.0% for the same period in 2025, representing an enhancement of 71.7 % in our gross margin percentage. The increase in gross profit and gross profit margin for the three months ended March 31, 2025, was primarily attributable to our engagement in a customized software development project during the period, which generated approximately $0.5 million in gross profit and carried a relatively high gross profit margin of approximately 77.8%, thereby boosting our overall gross profit margin. In addition, the increase was also driven by strategic measures implemented during the nine months ended March 31, 2025, including the streamlining of our product offerings by eliminating lower-margin products and reducing spending on customer rewards within our ZCITY platform. These actions resulted in a decrease in deferred revenue and contributed to higher gross margins from product and loyalty program revenue for the three months ended March 31, 2025. #### Operating expenses Our operating expenses consist of selling expenses, general and administrative expenses, research and development expenses and stock-based compensation expenses. #### Selling expenses Selling expenses amounted to approximately $0.1 million and $1.6 million for the nine months ended March 31, 2025 and 2024, respectively, representing a decrease of approximately $1.5 million or 92.0%. The decrease was mainly attributable to a decrease in marketing and promotion expense of approximately $1.4 million related to promoting our ZCITY platform. Marketing and promotion expense consists of redemptions of reward points which is generated from non-spending related activities (registration as a new user, referral of a new user and Spin & Win eligibility to receive reward points) in exchange for discounted credit of purchasing our products upon conversion of using the reward points. For the nine months ended March 31, 2025 and 2024, we incurred approximately $33,000 and $0.4 million, respectively, in marketing and promotion expense, and recognized the same amount of product revenue at the time of redemption of the non-spending related activities reward points by our customers. The decrease in marketing and promotion expenses was primarily driven by our strategic goal to optimize the promotional activities, enhance our cost effectiveness, and increase profitability in our operations. #### General and administrative expenses General and administrative expenses amounted to approximately $2.0 million and $3.1 million for the nine months ended March 31, 2025 and 2024, respectively, representing a decrease of approximately $1.2 million or 35.9%. The decrease was primarily attributed to decrease salary expenses of approximately $0.6 million and decrease of professional fee of approximately $0.6 million to promote our operation effectiveness. #### Research and development expenses Research and development expense amounted to approximately $86,000 and $0.4 million for the nine months ended March 31, 2025 and 2024, representing 78.7% decrease as we incurred less spending in mobile application or website development. #### Stock-based compensation expenses Stock-based compensation expenses amounted to $210,000 and $0 for the nine months ended March 31, 2025, and 2024, respectively. The stock-based compensation incurred for the nine months ended March 31, 2024, was related to compensation paid to our executive officer as part of their compensation plan and third party for professional service. #### Other income (expense), net Other income, net, amounted to approximately $1.6 million for the nine months ended March 31, 2025, while other expense, net amounted to approximately $0.6 million for the same period ended March 31, 2024, representing a change of approximately $2.0 million which was primarily attributable to increase in gain from change in fair value of derivative liabilities of approximately $1.7 million, and decrease in unrealized loss of approximately $0.5 from marketable securities we received as service consideration in exchange for development of an artificial intelligence powered travel platform, offset by decrease of other income from software developing service, net of cost of approximately $0.7 million as we did not recognized such income for the nine months ended March 31, 2025. #### Provision for income taxes Provision for income taxes amounted to approximately $21,000 for the nine months ended March 31, 2025 and 2024, respectively. The amount was mainly attributable to tax imposed on us from the State of Delaware, as we are required to remit franchise tax to the State of Delaware on an annual basis. We also were subject to controlled foreign corporations Subpart F income (“Subpart F”) tax, which is a tax primarily on passive income from controlled foreign corporations with a tax rate of 35%. In addition, the Tax Cuts and Jobs Act imposed a global intangible low-taxed income (“GILTI”) tax, which is a tax on certain off-shore earnings at an effective rate of 10.5% for tax years (50% deduction of the current enacted tax rate of 21%) with a partial offset for 80% foreign tax credits. If the foreign tax rate is 13.125% or higher, there will be no U.S. corporate tax after the 80% foreign tax credits are applied. For the nine months ended March 31, 2025 and 2024, our foreign subsidiaries did not generate any income that are subject to Subpart F tax and GILTI tax. #### Net loss Our net losses decreased by approximately $5.1 million predominately due to the reasons as discussed above. ### Liquidity and Capital Resources In assessing liquidity, we monitor and analyze cash on-hand and operating expenditure commitments. Our liquidity needs are to meet working capital requirements and operating expense obligations. To date, we financed our operations primarily through cash flows from contribution from stockholders, issuance of convertible notes, related party loans and our completion of initial underwritten public offering. As of March 31, 2025 and June 30, 2024, we had approximately $0.3 million and $0.2 million, respectively, in cash and cash equivalent which primarily consists of bank deposits, which are unrestricted as to withdrawal and use. On November 30, 2023, we closed our November 2023 Offering of (i) 7,433 shares of common stock, at a public offering price of $350 per share of Common Stock and (ii) 4000 pre-funded warrants (the “Pre-Funded Warrants”), each with the right to purchase one of Common Stock, at a public offering price of $350 per Pre-Funded Warrant. Upon closing of the November 2023 Offering, we received aggregate net proceed of approximately $3.5 million, after deducting underwriting discounts and commission, and non-accountable expense. On March 22, 2024, we entered into a marketing offering agreement (“Marketing Offering Agreement”) with H.C. Wainwright & Co., LLC, (the “Manager”). Pursuant to the Marketing Offering Agreement, the Company intends to issue and sell through or to the Manager, as sales agent and / or principal from time to time of the Company’s common stock at the Market Offering. As of March 31, 2025, we have received an aggregated net proceed of approximately $2.9 million, net of broker fee from issuance of 33,566 shares of common stock which sell through or to the Manager. On October 10, 2024, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP (“Alumni Capital”), a Delaware limited partnership which was subsequently amended by the Modification Agreement on January 21, 2025. Pursuant to the Purchase Agreement, we have the right, but not the obligation to cause Alumni Capital to purchase up to $50,000,000 common stock, par value $0.00001 (the “Commitment Amount”), at certain purchase Price during the period beginning on the execution date of the Purchase Agreement and ending on the earlier of (i) the date on which Alumni Capital has purchased $50,000,000 of the Company’s common stock pursuant to the Purchase Agreement or (ii) December 31, 2025. As of March 31, 2025, Alumni Capital has purchased approximately $7.5 million worth of the Company’s common stock, totaling 864,180 shares. The Company has received approximately $6.7 million in net proceeds as of March 31, 2025, with the remaining balance received in April 2025. On November 27, 2024, we entered into a subscription agreement (the “Subscription Agreement”) with certain investors (the “Investors”). Pursuant to the Subscription Agreement, the Investors agreed to invest an aggregate amount of $1,177,000 (the “Investment Amount”) into us for 71,333 shares of the Company’s common stock (the “Offered Shares”), par value $0.00001 at a negotiated purchase price of $16.5 (the “Offering”). As of March 31, 2025, the Company has issued 71,333 shares of Offered Shares to the Investors and received aggregate net proceed of $1,177,000. Despite receiving the proceeds from various offerings, management is of the opinion that we will not have sufficient funds to meet the working capital requirements and debt obligations as they become due starting from one year from the date of this report due to our recurring loss. Therefore, management has determined there is substantial doubt about our ability to continue as a going concern. If we are unable to generate significant revenue, we may be required to curtail or cease our operations. Management is trying to alleviate the going concern risk through the following sources: - Equity financing to support our working capital; - Financial support and credit guarantee commitments from our related parties. However, there is no guarantee that the substantial doubt about our ability to continue as a going concern will be alleviated. The following summarizes the key components of our cash flows for the nine months ended March 31, 2025 and 2024: | | For the Nine Months Ended March 31, 2025 | March 31, 2024 | | --- | ---: | ---: | | Net cash used in operating activities | $(5,817,360) | $(4,160,429) | | Net cash used in investing activities | (4,347,614) | (206,671) | | Net cash provided by (used in) financing activities | 10,357,274 | 1,219 | | Effect of exchange rate on cash and cash equivalents | (111,286) | 78,779 | | Net change in cash and cash equivalents | $81,014 | $(4,287,102) | ### Operating Activities Net cash used in operating activities for the nine months ended March 31, 2025 was approximately $5.8 million and was mainly comprised of (i) non-cash item of gain in change in fair value of derivative liabilities of approximately $1.7 million, (ii) increase in accounts receivable of approximately $0.3 million due to higher sales made on account but not yet collected, (iii) increase of other receivable and other assets of approximately $4.4 million which mainly includes prepayment to certain developers for the development of our internal AI software, (iv) decrease in customer deposits of approximately $75,000, as we recognized member service revenue in the current period from certain merchant prepayments made in the prior period, and (v) decrease of other payable and accrued liabilities of approximately $0.1 million as we pay off some of the accrued operating expenses, offset by (i) the net income of approximately $0.1 million, (ii) non-cash items of depreciation, amortization, allowance for credit losses, stock-based compensation and unrealized loss on marketable securities amounted to approximately $0.2 million, (ii) decrease of prepayment of approximately $76,000 due to the utilization of prior-period prepayments for inventory purchases, and (iii) increase of approximately $0.1 million in accounts payable as we made more purchases on account. Net cash used in operating activities for the nine months ended March 31, 2024 was approximately $4.1 million and was mainly comprised of the net loss of approximately $5.0 million, non-cash other income of $1.0 million from software developing service related to VCI Global Limited project as mentioned in other income, net above, increase of prepayment of approximately $0.2 million as our vendors required us to make deposit to secure the purchase, decrease of customer deposit of approximately $0.1 million as realized more membership subscription revenue from the customer deposit collected from prior period, and decrease of other payables and accrued liabilities of approximately $0.1 million as made timely payment to our service providers, offset by non-cash items of depreciation, amortization, allowance for credit losses and unrealized loss on marketable securities amounted to approximately $1.7 million, decrease of inventories of approximately $0.4 million as we reduced our purchase and intended to maintain a more effective inventory level, decrease of approximately $0.3 million in other receivables and other current assets is attributed to the utilization of prepaid information technology and insurance expenses from previous periods in the current period, and increase of approximately $0.1 million in accounts payable as we made more purchases on account. ### Investing Activities Net cash used in investing activities for the nine months ended March 31, 2025 was approximately $8.3 million which includes a remittance of approximately $4.3 million to CLSB as a collaboration deposit to support CLSB’s credit service activities for the Portfolio Clients. Net cash used in investing activities for the nine months ended March 31, 2024 was approximately $0.2 million, which was mainly due to purchase of equipment and intangible assets of approximately $15,000, and $0.2 million, respectively, for our operations used. ### Financing Activities Net cash provided financing activities the nine months ended March 31, 2025 was approximately $10.4 million, which mainly comprised of approximately $10.3 million net proceeds received from issuance of common stock through market offering, subscription agreement, and share purchase agreement, and loan proceed of approximately $51,000, offset by payments of insurance loan and related party loan of approximately $42,000. Net cash provided financing activities for the nine months ended March 31, 2024 was approximately $1,000, which mainly comprised of repayment to convertible notes, insurance loan and related party loan of approximately $3.5 million, offset by approximately $3.5 million net proceeds received from issuance of common stock and Pre-Funded Warrants related to the November 2023 Offering, and approximately $63,000 proceeds received from insurance loan. ### Off-Balance Sheet Arrangements We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits. ### Critical Accounting Estimate Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimates that are significant to the preparation of our financial statements. These estimates are important for an understanding of our financial condition and results of operation. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting estimates involve the most significant estimates and judgments used in the preparation of our financial statements. The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in our unaudited condensed consolidated financial statements include the estimated retail price per point and estimated breakage to calculate the revenue recognized in our loyalty program revenue, the useful lives of property and equipment, impairment of long-lived assets, provision for estimated credit losses, write-down for estimated obsolescence or unmarketable inventories, realization of deferred tax assets and uncertain tax position, fair value of our stock price to determine the beneficial conversion feature (“BCF”) within the convertible note, fair value of the stock-based compensation, fair value of the marketable securities and fair value of the warrants issued. Actual results could differ from these estimates. #### Accounts receivable, net Accounts receivable are recorded at the invoiced amount, net of an allowance for uncollectible accounts and do not accrue interest. We offer various payments terms to customers from cash due on delivery to 90 days based on their credit history. Accounts receivable encompass amounts due from sales of healthcare products on our ZCITY platform. Starting from July 1, 2023, we adopted ASU No.2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”). We used a modified retrospective approach, and the adoption does not have an impact on our unaudited condensed consolidated financial statements. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account balances are charged off against the allowance when all collection efforts have been exhausted, and recovery potential is deemed remote. Our management reviews historical accounts receivable collection rates across all aging brackets and has made 100% provision of credit loss for customer balances aged above 120 days for sales of healthcare products on our ZCITY platform. Our management continuously assesses the reasonableness of the credit loss allowance policy and updates it as needed. As of March 31, 2025 and June 30, 2024, we recorded $4,820 and $1,100 of provision for estimated credit losses, respectively. #### Inventories Our inventories are recorded at the lower of cost or net realizable value, with cost determined using the first-in-first-out (FIFO) method. These costs encompass gift cards or ‘E-voucher’ pin codes, which are acquired from our suppliers as merchandise goods or store credit, as well as healthcare products. Management conducts regular comparisons between the cost of inventories and their net realizable value. If the net realizable value is lower than the cost, an allowance is made for inventory write-down. Ongoing assessments of inventories are carried out to identify potential write-downs due to estimated obsolescence or unmarketability. This determination is based on the difference between the inventory costs and the estimated net realizable value, considering forecasts for future demand and market conditions. Once inventories are written down to the lower of cost or net realizable value, they are not subsequently marked up based on changes in underlying facts and circumstances. Our management has reviewed the aforementioned factors and has applied a 100% write-down for inventories aged above 180 days related to our E-voucher and health care products. For the three and nine months ended March 31, 2025, no write-downs for estimated obsolescence or unmarketable inventories were recorded. For the three and nine months ended March 31, 2024, we recorded $486 write-down for inventories. #### Other receivables and other current assets, net Other receivables and other current assets consist of prepayment to third parties for cyber security service, director & officer liability insurance (“D&O Insurance”), and other professional fee. Other receivables and other current assets also include refundable advance to third party service provider, and other deposits. Starting from July 1, 2023, we had adopted ASC Topic 326 on our other receivables using the modified retrospective approach. The new credit loss guidance replaces the old model for measuring the allowance for credit losses with a model that is based on the expected losses rather than incurred losses. Under the new accounting guidance, we measure credit losses on its other receivables using the current expected credit loss model under ASC 326. As of March 31, 2025 and June 30, 2024, we have provided allowance for credit loss of $317,416 and $212,758, respectively. #### Prepayments Prepayments and deposits are mainly cash deposited or advanced to suppliers for future inventory purchases. This amount is refundable and bears no interest. For any prepayments determined by management that such advances will not be in receipt of inventories, services or refundable, we will recognize an allowance account to reserve such balances. Management reviews our prepayments on a regular basis to determine if the allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. Our management continues to evaluate the reasonableness of the valuation allowance policy and updates it if necessary. No allowance of prepayments was recorded as of March 31, 2025 and June 30, 2024. #### Impairment for long-lived assets Long-lived assets, including 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 assessed 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. No impairment for long-lived assets were recorded as of March 31, 2025 and June 30, 2024. #### Investment in marketable securities Investments in marketable securities, net, consist of investments in listed shares, which are listed on Nasdaq. Marketable securities are accounted for under ASC 321 and reported at their readily determinable fair values as quoted by market exchanges with changes in fair value recorded in other (expense) income in the unaudited condensed consolidated statements of operations and comprehensive loss. All changes in a marketable security’s fair value are reported in earnings as they occur, as such, the sale of a marketable security does not necessarily give rise to a significant gain or loss. Unrealized gains/(losses) due to fluctuations in fair value are recorded in the consolidated statements of operations and comprehensive loss. Declines in fair value below cost deemed to be other-than-temporary are recognized as impairments in the unaudited condensed consolidated statements of comprehensive income. For the three and nine months ended March 31, 2025, we recorded an unrealized holding gain on marketable securities of approximately $0.5 million and $0.3 million, respectively. In comparison, for the same period in 2024, we recognized an unrealized holding loss of approximately $502,000 and $169,000, respectively. #### Revenue recognition Loyalty program - Performance obligations satisfied over time Our ZCITY reward loyalty program allows members to earn points on purchases that can be redeemed for rewards that include discounts on future purchases. When members purchase our product or make purchase with our participated vendor through ZCITY, we allocate the transaction price between the product or service, and the reward points earned based on the relative stand-alone selling prices and expected point redemption. The portion allocated to the reward points is initially recorded as contract liability and subsequently recognized as revenue upon redemption or expiration. The two primary estimates utilized to record the contract liability for reward points earned by members are the estimated retail price per point and estimated breakage. The estimated retail price per point is based on the actual historical retail prices of product purchased or service obtained through the redemption of reward points. We estimate breakage of reward points based on historical redemption rates. We continually evaluate our methodology and assumptions based on developments in retail price per point redeemed, redemption patterns and other factors. Changes in the retail price per point and redemption rates have the effect of either increasing or decreasing the contract liability through current period revenue by an amount estimated to represent the retail value of all points previously earned but not yet redeemed by loyalty program members as of the end of the reporting period. Customized Software development Service revenue - Performance obligations satisfied over time We recognize revenue from customized software development services over time using the cost-to-cost input method to measure progress toward satisfaction of our performance obligations. This approach requires us to make critical estimates and judgments, including determining total estimated costs to complete each contract and assessing progress toward completion. Changes in project scope, complexity, or estimated costs may significantly impact the timing and amount of revenue we recognize. We also evaluate whether we have an enforceable right to payment for performance completed to date and whether control is transferred continuously to the customer. Any revisions to total estimated contract costs or anticipated losses are recorded in the period in which the changes are identified. #### Income taxes Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited condensed consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely to be realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. #### Stock-based compensation We account for stock-based compensation awards to officers in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that stock-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period. In June 2024, we executed executive employment agreements (“Employment Agreements”) with three individuals, appointing them as the Company’s executive officers. Under the terms of the Employment Agreements, each executive officer is entitled to receive a predetermined monetary value of the Company’s common stock as annual compensation for the first year, with stock compensation for subsequent years contingent upon performance. The stock compensation is prorated on a monthly basis and is subject to the restrictions of Securities Act Rule 144. The fair value of the stock-based compensation which included common stock issued were equivalent to the predetermined monetary value. For the nine months ended March 31, 2025 and 2024, we have incurred stock-based compensation from our officer amounted to $210,000 and $0, respectively based on the vesting schedule from the Employment Agreement. #### Convertible notes We evaluate our convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the fair value of the embedded derivative is recorded at fair value each reporting period and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature. A BCF is recorded by us as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and we amortize the discount to interest expense, over the life of the debt. #### Warrants - *Fair value of Pre-Funded Warrants* For the year ended June 30, 2024, 14,000,000 Pre-Funded Warrants were issued in connection with the November 2023 Offering. The Pre-Funded Warrants are classified as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method. We valued the Pre-Funded Warrants at issuance concluding the purchase price approximated the fair value and allocated net proceeds from the purchase proportionately to the common stock and Pre-Funded Warrants, of which $1,398,600 was allocated to the Pre-Funded Warrants and recorded as a component of additional paid in capital. - *Fair value of Alumni Capital warrants* We account for the purchase warrants issued to Alumni Capital as liabilities, which are remeasured at fair value at each reporting period, with changes in fair value recognized in our consolidated statements of operations. The fair value of these warrants is estimated using the Black-Scholes option pricing model, which requires the use of significant judgment and assumptions, including expected stock price volatility, risk-free interest rate, expected life of the warrant, and the market price and exercise price of our common stock. These assumptions are highly subjective and inherently uncertain, and changes in any of these inputs can materially affect the estimated fair value of the warrant liability. As of March 31, 2025, we estimated the fair value of the purchase warrants issued to Alumni Capital to be $431,403, using the following assumptions: (1) expected volatility of 161.2%, (2) risk-free interest rate of 3.89%, (3) expected life of 2.53 years, (4) exercise price of $3, and (5) stock price of $4. ### Recent Accounting Pronouncements See Note 2 of the notes to the unaudited condensed consolidated financial statements included elsewhere in this report for a discussion of recently issued accounting standards ## Controls and procedures As filed, 3,592 characters. #### Evaluation of Disclosure Controls and Procedures Our disclosure controls and procedures are designed to ensure that the information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission (“SEC”) rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were not, in design and operation, effective as of March 31, 2025 at a reasonable assurance level due to the material weaknesses in internal control over financial reporting described below: - Inadequate U.S. GAAP expertise. The current accounting staff is inexperienced in applying U.S. GAAP standard as they are primarily engaged in ensuring compliance with International Financial Reporting Standards (“IFRS”) accounting and reporting requirement for our consolidated operating entities, and thus require substantial training. The current staff’s accounting skills and understanding as to how to fulfill the requirements of U.S. GAAP-based reporting, including subsidiary financial statements consolidation, are inadequate. - Inadequate internal audit function. We lack of a functional internal audit department or personnel that monitors the consistencies of the preventive internal control procedures and lack of adequate policies and procedures in internal audit function to ensure that our policies and procedures have been carried out as planned. A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Following the identification of the material weaknesses, we plan to take remedial measures including: - hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; - implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; - establishing internal audit function by engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley Act of 2002 compliance requirements and improvement of overall internal control; and - strengthening corporate governance. #### Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ## Risk factors As filed, 635 characters. As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item. In any event, there have been no material changes in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2024, filed with the SEC on September 30, 2024 and our applicable risk factors in our Registration Statement on Form S-1 (File No. 333-275411), initially filed with the SEC on November 8, 2023. Filed May 15, 2025. Source: SEC EDGAR, the filing index for accession 0001213900-25-044149. Last ingested by Listed: Oct 26, 2026, 17:10 ET. No prices; not investment advice.