Treasure (US:TGL)2025-05-15 20:01PART I. FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements The company's financial position shows significant asset growth and a swing to net income, despite revenue decline and substantial going concern doubts Unaudited Condensed Consolidated Balance Sheets Total assets surged to $30.4 million from $4.3 million, driven by intangible assets and receivables, significantly increasing stockholders' equity Condensed Consolidated Balance Sheet Highlights (USD) | Balance Sheet Item | March 31, 2025 (Unaudited) | June 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $10,671,192 | $956,714 | | Total Assets | $30,417,481 | $4,278,585 | | Intangible assets, net | $15,153,640 | $3,130,936 | | Total Current Liabilities | $1,304,367 | $895,109 | | Total Liabilities | $1,304,367 | $897,852 | | Total Stockholders' Equity | $29,113,114 | $3,380,733 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Revenue declined significantly, yet the company achieved net income due to a substantial gain from derivative liabilities, despite ongoing operational losses Statement of Operations Highlights (USD) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $666,521 | $1,596,129 | $1,175,790 | $21,773,829 | | Gross Profit | $486,283 | $217,006 | $882,406 | $725,243 | | Loss from Operations | ($43,409) | ($1,370,554) | ($1,548,092) | ($4,378,577) | | Change in fair value of derivative liabilities | $1,781,758 | - | $1,781,758 | - | | Net Income (Loss) | $1,259,965 | ($1,713,315) | $76,926 | ($5,044,541) | | Basic and Diluted EPS | $1.09 | ($116.03) | $0.14 | ($732.60) | Unaudited Condensed Consolidated Statements of Change in Stockholders' Equity (Deficiency) Stockholders' equity significantly increased to $29.1 million due to substantial common stock issuances from various financing activities - Total stockholders' equity grew from $3,380,733 at the beginning of the period to $29,113,114 at March 31, 20252021 - Key activities increasing equity include the issuance of common stock for a market offering (net $2.46M), a share purchase agreement (net $6.2M), a subscription agreement ($1.18M), and for software development services ($17.4M)2021 Unaudited Condensed Consolidated Statements of Cash Flows Operating cash outflow increased to $5.8 million, offset by $10.4 million from financing activities, resulting in a modest cash increase Cash Flow Summary (USD) | Cash Flow Activity | Nine Months Ended March 31, 2025 | Nine Months Ended 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 financing activities | $10,357,274 | $1,219 | | Net increase (decrease) in cash | $81,014 | ($4,287,102) | - Financing activities were primarily driven by proceeds from the issuance of common stock through market offerings ($2.46M), a share purchase agreement ($6.71M), and a subscription agreement ($1.18M)24 Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's strategic shift to software, going concern doubts, significant equity transactions, and customer concentration risks - The company operates the ZCITY O2O e-commerce platform and launched a new revenue stream from customized software development services during the three months ended March 31, 20252932 - Management has substantial doubt about the company's ability to continue as a going concern due to recurring losses ($1.5M for nine months ended Mar 31, 2025), an accumulated deficit ($38.0M), and net operating cash outflow ($5.8M)3541 - The company now operates two reportable segments: (i) payment processing and e-commerce operation (ZCITY platform), and (ii) customized software development48223 - The company executed a 1-for-70 reverse stock split on February 27, 2024, and a 1-for-50 reverse stock split on April 7, 2025168171241 - For Q3 2025, one customer accounted for 90.4% of total revenues. For the nine months ended March 31, 2025, two customers accounted for 51.3% and 25.2% of total revenues215216 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strategic shift to high-margin software, offsetting declining legacy revenue, while addressing liquidity and going concern doubts Overview and Recent Developments The company launched customized software development, executed reverse stock splits, secured financing, and entered strategic partnerships - The company launched a new revenue stream offering customized software development services, targeting enterprise clients257 - Executed a 1-for-70 reverse stock split on Feb 27, 2024, and a 1-for-50 reverse stock split on April 7, 2025258 - Secured significant financing through a $50M share purchase agreement with Alumni Capital, a market offering, and a subscription agreement261262263 - Entered into strategic partnerships to develop a Smart Campus System, integrate credit services with CLSB, develop mini-games with OCTA, and build a Live Streaming Platform with V Gallant265266267 Key Operating Metrics Active users on the ZCITY platform significantly declined due to strategic reductions in marketing and E-voucher offerings Active Users Trend | Quarter Ended | Active Users | | :--- | :--- | | March 31, 2024 | 41,458 | | June 30, 2024 | 26,819 | | September 30, 2024 | 25,216 | | December 31, 2024 | 21,734 | | March 31, 2025 | 10,647 | - The decline in user growth and activity is attributed to a strategic reduction in E-voucher availability and cuts in marketing and customer rewards to enhance operational profitability277 Results of Operation Total revenues declined, but gross profit and net income improved significantly due to high-margin software services and derivative liability gains Revenue Breakdown - Three Months Ended March 31 (USD) | Revenue Category | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Product and loyalty program | $28,594 | $1,455,201 | (98.0)% | | Customized software development | $602,606 | $0 | N/A | | Total Revenues | $666,521 | $1,596,129 | (58.2)% | - Gross margin for Q3 2025 improved to 73.0% from 13.6% in Q3 2024, primarily due to the new high-margin (77.8%) customized software development business290291292 - Operating expenses for Q3 2025 decreased significantly to $0.53 million from $1.59 million in Q3 2024, due to reductions in selling, G&A, and R&D expenses294295296 - Net income for Q3 2025 was $1.3 million, compared to a net loss of $1.7 million in Q3 2024, mainly due to a $1.7 million gain from the change in fair value of derivative liabilities299301 Liquidity and Capital Resources Despite recent financing, the company faces substantial doubt about its going concern ability due to significant cash used in operations and investing - As of March 31, 2025, the company had cash and cash equivalents of approximately $0.3 million321 Cash Flow Summary - Nine Months Ended March 31 (USD) | Category | 2025 | 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 financing activities | $10,357,274 | $1,219 | - Management has determined there is substantial doubt about the company's ability to continue as a going concern and is trying to alleviate the risk through equity financing and financial support from related parties326329 Critical Accounting Estimate Management identifies critical accounting estimates for revenue recognition, asset impairment, and fair value of financial instruments like warrants - Key estimates include loyalty program revenue (breakage and retail price per point), customized software development revenue (cost-to-cost method), impairment of long-lived assets, and allowance for credit losses337345347 - The fair value of warrants issued to Alumni Capital is a critical estimate, classified as a liability and remeasured at each reporting period using a Black-Scholes model with significant assumptions (e.g., volatility of 161.2%)355 - Stock-based compensation for executive officers is based on a predetermined monetary value of common stock, recognized monthly350 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide the information for this item356 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to inadequate U.S. GAAP expertise and lack of an internal audit function - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025357 - Material weaknesses identified include: (1) Inadequate U.S. GAAP expertise and (2) Lack of an internal audit function360 - Remediation plans include hiring qualified accounting personnel, implementing U.S. GAAP training, establishing an internal audit function, and strengthening corporate governance359 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect - The company is not a party to any pending legal proceedings expected to have a material adverse effect362 Item 1A. Risk Factors As a smaller reporting company, this section is not required, and no material changes to previously disclosed risk factors have occurred - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended June 30, 2024363 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - The company reports no unregistered sales of equity securities for the period364 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None365 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable366 Item 5. Other Information The company reported no other information for this item - None367 Item 6. Exhibits This section lists the exhibits filed with the report, including agreements, certifications, and XBRL data files