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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October
Commission File Number:
Level 21, 88 Market Street
CapitaSpring
Singapore 048948
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Explanatory Note
Mega Matrix Inc. (the “Company”) is furnishing this Form 6-K to provide its interim consolidated financial statements and to incorporate such financial statements into the Company’s registration statements referenced below.
Incorporation by Reference
This report and exhibits to this Form 6-K shall be deemed to be incorporated by reference in the registration statements on Form S-8 (File No. 333-277227), Form F-3 (File No. 333-283739), Form S-8 (File No. 333-289715), Form F-3 (File No. 333-290026) and Form S-8 (File No. 333-295194), each as filed with the Securities and Exchange Commission, to the extent not superseded by documents or reports subsequently filed.
| 1 |
Exhibit Index
| Exhibit No. | Exhibit Description | |
| 99.1 | Unaudited Interim Consolidated Financial Statements for the Three and Six Months Ended June 30, 2026 and 2025. | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations in connection with the Unaudited Interim Consolidated Financial Statements for the Three and Six Months Ended June 30, 2026 and 2025. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| 2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Mega Matrix Inc. | ||
| By: | /s/ Yucheng Hu | |
| Yucheng Hu | ||
| Chief Executive Officer | ||
| Dated: October 1, 2026 | ||
| 3 |
Exhibit 99.1
MEGA MATRIX INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Rounded to the Nearest Hundred US Dollars, except for share and per share data, unless otherwise stated)
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trading securities | ||||||||
| Stable coins | ||||||||
| Digital assets | ||||||||
| Loans receivable - a related party | ||||||||
| Due from a related party | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other assets | ||||||||
| Current content assets, net | ||||||||
| Total current assets | ||||||||
| Non-current Assets: | ||||||||
| Long-term investments | ||||||||
| Goodwill | ||||||||
| Content assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Contract liabilities | ||||||||
| Income taxes payable | ||||||||
| Other current liabilities and accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| Shareholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Class A Ordinary Shares, $ | ||||||||
| Class B Ordinary Shares, $ | ||||||||
| Class C Ordinary Shares, $ | ||||||||
| Paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-1
MEGA MATRIX INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Rounded to the Nearest Hundred US Dollars, except for share and per share data, unless otherwise stated)
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling expenses | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Changes in fair value of digital assets | ( | ) | ||||||
| Share of equity loss | ( | ) | ( | ) | ||||
| Changes in fair value of trading securities | ( | ) | ( | ) | ||||
| Interest income, net | ||||||||
| Other income, net | ||||||||
| Total other (expenses) income, net | ( | ) | ||||||
| Loss before income tax | ( | ) | ( | ) | ||||
| Income tax expenses | ( | ) | ( | ) | ||||
| Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share: | ||||||||
| Basic and Diluted* | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares used in loss per share computations: | ||||||||
| Basic and Diluted* | ||||||||
| * | The share information is presented on a retroactive basis to reflect the share consolidation effected on September 15, 2026 (Note 1). |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
MEGA MATRIX INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
| Class A Ordinary Shares |
Class B Ordinary Shares |
Class C Ordinary Shares |
||||||||||||||||||||||||||||||||||
| Number of Shares* |
Amount | Number of Shares * |
Amount | Number of Shares* |
Amount | Paid-in Capital |
Accumulated Deficit |
Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Share-based compensation to employees | - | - | ||||||||||||||||||||||||||||||||||
| Share-based compensation to non-employees | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Share-based compensation to employees | - | - | ||||||||||||||||||||||||||||||||||
| Share-based compensation to non-employees | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares under the ATM program (Note 9) | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
MEGA MATRIX INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Rounded to the Nearest Hundred US Dollars, unless otherwise stated)
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| Investing activities: | ||||||||
| Purchases of digital assets | ( | ) | ( | ) | ||||
| Investment in an equity investee | ( | ) | ||||||
| Investment in trading securities | ( | ) | ||||||
| Redemption of trading securities | ||||||||
| Repayment of loans from a related party | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Subscription fees from investors | ||||||||
| Net cash provided by financing activities | ||||||||
| Net changes in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash, cash equivalents, beginning of period | ||||||||
| Cash, cash equivalents, end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Payment of interest expenses | $ | $ | ||||||
| Payment of income tax expenses | $ | $ | ||||||
| Non-cash Investing and Financing activities | ||||||||
| Purchase of digital assets in the form of USDT | $ | $ | ||||||
| Investment in an equity investee in the form of USDT | $ | $ | ||||||
| Payable for investment in an equity investee | $ | $ | ||||||
| Settlement of loans receivable due from an equity investee through increase in investment in the equity investee | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Reorganization and reclassification of Class A, Class B and Class C ordinary shares
On October 8, 2024, Mega Matrix Inc. (“MPU Cayman” or the “Company”), Mega Matrix Corp. (“MPU DE”, formerly “AeroCentury Corp.” and “ACY”), a Delaware corporation, and MPU Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of MPU Cayman (“MPU Merger Sub”) effected a redomicile merger (the “Redomicile Merger”). As a result, MPU Merger Sub merged with and into MPU DE, with MPU DE surviving as a wholly-owned subsidiary of MPU Cayman, pursuant to the Third Amended and Restated Agreement and Plan of Merger, dated May 31, 2024 (the “Merger Agreement”), which Merger Agreement was approved by MPU DE stockholders on September 25, 2024. Pursuant to the Redomicile Merger and as approved by the NYSE American, MPU Cayman’s Class A Shares are now listed on the NYSE American under the symbol “MPU.” At the time of the Redomicile Merger, the CUSIP/ISIN number relating to the Class A Shares of MPU Cayman was G6005C 108/ KYG6005C1087. Prior to the Redomicile Merger, shares of MPU DE’s common stock were registered pursuant to Section 12(b) of the Exchange Act, and listed on the NYSE American under the symbol “MPU.” As a result of the Redomicile Merger, each issued and outstanding share of MPU DE’s common stock acquired prior to October 8, 2024 has been exchanged for one MPU Cayman Class A Share. The Redomicile Merger does not have accounting impact on the consolidated financial statements. Following the 2026 Share Consolidation (defined below), the CUSIP number for the Class A Shares is G6005C116.
On December 10, 2024, the Company entered into a share repurchase agreement (“Repurchase Agreement”) and a share subscription agreement (“Subscription Agreement”) with Mr. Yucheng Hu, the Company’s Chairman and Chief Executive Officer, pursuant to which the Company effected a reclassification (“Reclassification”) through an issuance of
At the time of the Redomicile Merger, MPU Cayman was authorized to issue shares totaling US$
Upon the completion of the Redomicile Merger, MPU Cayman issued approximately
On August 15, 2025, the Company’s shareholders approved an increase of the share capital to US$
F-5
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
On September 2, 2025, Mr. Yucheng Hu, Chairman of the Board of Directors and a shareholder of the Company, submitted a notice of conversion pursuant to the Company’s Third Amended and Restated Memorandum and Articles of Association (“MAA”), requesting to convert
On September 1, 2026, the Company’s shareholders approved a proposal, as an ordinary resolution, that (a) all the Company’s class A ordinary shares, class B ordinary shares and class C ordinary shares of par value USD
On September 15, 2026, the Company, at the authorization of the Board of Directors, effected a share consolidation at a ratio of 1 post-split ordinary share for every 20 pre-split ordinary shares (the “2026 Share Consolidation”). At the effective time of the Share Consolidation, the authorized share capital of the Company was amended from USD
F-6
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
The major subsidiaries of the Company as of June 30, 2026 are summarized as below:
| Later of date of | |||||||||
| incorporation or | Place of | % of | Principal | ||||||
| Name of Subsidiaries | Acquisition | Incorporation | Ownership | Activities | |||||
| Major subsidiaries: | |||||||||
| FunVerse Holding Limited |
| ||||||||
| Yuder Pte. Ltd. |
| ||||||||
| Bona Box FZ LLC |
| ||||||||
| Saving Digital Pte. Ltd. |
| ||||||||
| Marsprotocol Technologies Pte. Ltd. |
| ||||||||
| Pure Holding Limited (formerly known as “FunVerse Holding Inc”) |
| ||||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The interim condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
The condensed consolidated financial information as of June 30, 2026 and for the six months ended June 30, 2026 and 2025 has been prepared pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The interim financial information should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal years ended December 31, 2025 and 2024, included in the Company’s Annual Report on Form 20-F filed on April 16, 2026.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the years ended December 31, 2025 and 2024.
Basis of consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.
F-7
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value Measurement
The Company applies ASC Topic 820, Fair Value Measurements and Disclosures for fair value measurements. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.
ASC Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Fair value of digital assets is based on Level 1 inputs as these were based on observable quoted prices in the Company’s principal market for identical assets. Management of the Company considers the carrying amount of cash and cash equivalents, accounts receivable, loans receivable due from a related party, other receivables, accounts payable, due from a related party, other payables and income taxes payable based on the short-term maturity of these instruments to approximate their fair values because of their short-term nature.
Accounts receivable
Accounts receivable are recorded at the gross billing amount less an allowance for expected credit losses. Accounts receivable do not bear interest.
The Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to accounts receivable and the estimated credit losses charged to the allowance is classified as “General and administrative expenses” in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company assesses collectability by reviewing accounts receivable on aging schedules because the accounts receivable were primarily consisted of online advertising service fees from certain customers. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Delinquent account balances are written-off against the allowance for expected credit loss after management has determined that the likelihood of collection is not probable.
As of June 30, 2026 and December 31, 2025, the Company did not provide expected credit losses against accounts receivable.
F-8
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Digital assets
The Company holds its digital assets in accounts with third-party custodians and exchanges. The Company assesses the custodial arrangements and related risks, including cybersecurity and counterparty risks.
The Company’s digital assets are within the scope of ASU 2023-08. The Company measures certain cryptocurrencies at fair value, with changes in fair value recorded in net income in each reporting period.
ASC 820 defines “principal market” as the market with the greatest volume and level of activity for the asset or liability. The determination of the principal market (and, as a result, the market participants in the principal market) is made from the perspective of the reporting entity. The digital assets held by the Company are traded on a number of active markets globally. The Company executes its actual digital asset transactions and trades across its principal operating exchanges and trading venues, which provide the necessary liquidity and access for these assets. The Company uses pricing data from CoinMarketCap as a reference source to evaluate market activity and fair value for digital assets, including bitcoin, AA, ENA, ETH and USDT, which the Company can access.
Purchases of digital assets by the Company are included within investing activities on the accompanying unaudited condensed consolidated statements of cash flows. The changes in digital assets are included within operating activities in the accompanying unaudited condensed consolidated statements of cash flows. Changes in fair value are reported as “changes in fair value of digital assets” and realized gains or losses are reported as “realized gains (loss) on digital assets”, if any, in the unaudited condensed consolidated statements of operations. The Company accounts for its gains or losses in accordance with the first-in first-out method of accounting.
Revenue Recognition
Membership and top-up streaming services (“IAP”)
Membership and top-up streaming services are referred to as In-App Purchases (“IAP”). The Company offers membership streaming services to subscribing members from various countries and the features of the plan, which primarily include access to exclusive and ad-free streaming of short dramas, and accelerated downloads and others. It’s optional for users to subscribe for weekly, monthly or annual membership on the short drama streaming platform. Users can also top up their accounts to acquire in-app coins on our platform, which are then used to continue viewing the short dramas. Users can also earn in-app coins to watch short dramas by completing daily and new user tasks.
Full membership and top-up charges are prepaid before provision of membership and top-up streaming services. The collection of membership and top-up charges are initially recorded as “contract liabilities” on the unaudited condensed consolidated balance sheets and membership revenue is recognized ratably over the membership period, and top-up revenue is recognized as in-app coins are consumed and services are rendered.
Online advertising services (“IAA”)
Online advertising services are referred to as In-App Advertising (“IAA”). The Company sells advertising services by delivering brand advertising primarily to third-party advertising agencies. The Company provides advertisement placements on its short drama streaming platform in different formats, including but not limited to video, banners, links, logos, brand placement and buttons. The transaction prices are varied according to the scale of impressions and types of the advertisements in the contracts with customers. The contracts have one performance obligation. Revenues are recognized over time. The Company has a right to consideration from the customers in an amount that corresponds directly with the value the Company’s performance obligations completed to date. The Company adopted practical expedient under ASC 606-10-55-18, and recognizes revenues from provision of online advertising services based on amounts invoiced to the customers.
F-9
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (cont.)
Content licensing business
The Company entered into license agreements with third party platform customers, pursuant to which the Company grants license of its self-produced short-dramas to the platforms and allows them to distribute the short dramas for an agreed period of time. The transaction price is comprised of a fixed price and variable price which is calculated at a percentage of the revenues generated by the customers. The Company evaluates whether the license provides a right-to-use or right-to-access intellectual property. Revenue from fixed consideration is recognized at a point in time when control of the license is transferred for right-to-use licenses, or over time for right-to-access licenses. Variable consideration is recognized when it is probable that a significant reversal will not occur.
Contract balances
Contract liabilities are recognized if the Company receives consideration prior to satisfying the performance obligations, which include customer advances and deferred revenue under service arrangements.
As of December 31, 2025, the Company had contract liabilities of $
Disaggregation of revenue
For the six months ended June 30, 2026 and 2025, the Company disaggregates revenue into three revenue streams, consisting of In-App Purchases services, In-App Advertising services and content licensing business, as follows:
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| In-App Purchase services | $ | $ | ||||||
| In-App Advertising services | ||||||||
| Content licensing business | ||||||||
| $ | $ | |||||||
Segment reporting
The Company uses the management approach to determine operating segment. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocation of resource and assessing performance.
The Company operates and manages its business as a operating and reportable segment.
F-10
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Segment reporting (cont’d)
The following table disaggregates the Company’s revenues by primary geographical markets based on the location of customers for the six months ended June 30, 2026 and 2025:
| For the six months ended June 30, 2026 | ||||||||||||||||||||
| United States and | Asia- | Europe, Middle East | Latin | |||||||||||||||||
| Canada | Pacific | and Africa | America | Total | ||||||||||||||||
| In-App Purchase services | $ | $ | $ | $ | $ | |||||||||||||||
| In-App Advertising services | ||||||||||||||||||||
| Content licensing | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| For the six months ended June 30, 2025 | ||||||||||||||||||||
| United States and | Asia- | Europe, Middle East | Latin | |||||||||||||||||
| Canada | Pacific | and Africa | America | Total | ||||||||||||||||
| In-App Purchase services | $ | $ | $ | $ | $ | |||||||||||||||
| In-App Advertising services | ||||||||||||||||||||
| Content licensing | ||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
Going concern
For the six months ended June 30, 2026 and 2025, the Company reported net losses of $
The Company’s liquidity is based on its ability to generate cash from operating activities and obtain financing from investors to fund its general operations and capital expansion needs. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources.
Given the financial condition of the Company and its operating performance, the Company assesses current working capital is sufficient to meet its obligations for the next 12 months from the issuance date of this report. Accordingly, management continues to prepare the Company’s unaudited condensed consolidated financial statements on going concern basis.
F-11
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration and credit risks
1) Credit risk
Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2026, $
The risk with respect to accounts receivable and amounts due from related parties is mitigated by credit evaluations the Company performs on its customers and its ongoing monitoring processes of outstanding balances.
The Company’s operations are carried out in Singapore. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in Singapore as well as by the general state of the Singapore’s economy. In addition, the Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, interest rates and methods of taxation among other factors.
2) Foreign currency risk
The Company incurred certain operating expenses in the subsidiaries in Singapore which are denominated in SGD. Foreign exchange transactions are conducted freely through commercial banks in accordance with market rates. The value of the SGD is determined by market forces and is subject to fluctuations driven by international economic and political developments, as well as monetary policies managed by the Monetary Authority of Singapore (MAS).
3) Concentration risks
Accounts receivable are typically unsecured and derived from goods sold and services rendered to customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of customers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company has a concentration of its receivables and revenues with specific customers. For the six months ended June 30, 2026 and 2025, the Company had no customers which accounted for more than 10% of revenues.
As of June 30, 2026, one customer accounted for
F-12
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent accounting pronouncements
In December 2025, the FASB issued ASU 2025-12, which is to correct, clarify, and otherwise improve U.S. GAAP. ASU 2025-12 includes 33 improvements that span a wide range of topics, including Clarifying diluted earnings per share (EPS) calculation when a loss from continuing operations exists, Clarifying disclosure requirements for lease receivables from sales-type or direct financing leases, Revising the calculation of the reference amount for beneficial interests to prevent double counting credit losses, Clarifying the permissible methods to account for treasury stock retirements, and Clarifying the guidance for transfers of receivables from contracts with customers. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in this Update in an interim period, it must adopt them as of the beginning of the annual reporting period that includes that interim reporting period. An entity may elect to early adopt the amendments on an issue-by-issue basis. For example, an entity may decide to early adopt certain amendments and adopt the remaining amendments at the effective date. An entity should apply the amendments in this Update (except for the amendments to Topic 260, Earnings Per Share, related to Issue 4) using one of the following transition methods: (i) Prospectively to all transactions recognized on or after the date that the entity first applies the amendments, or (ii) Retrospectively to the beginning of the earliest comparative period presented. An entity should adjust the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the earliest comparative period presented. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In December 2025, the FASB issued ASU 2025-11, which is intended to improve the navigability of the guidance in ASC 270 and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with U.S. GAAP. The ASU also addresses the form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other Codification topics, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. As the Board stated in the proposed guidance and reiterates in the ASU, the amendments are not intended to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements. For public business entities, the amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. For entities other than public business entities, for interim reporting periods within annual reporting periods beginning after December 15, 2028. Early adoption is permitted for all entities. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In July 2025, the FASB issued ASU 2025-05, which amends ASC 326-20 to provide a practical expedient for all entities which elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset in developing reasonable and supportable forecasts as part of estimating expected credit losses, and an accounting policy election for all entities, other than a public business entity, that elect the practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient and, if so, whether it has also applied the accounting policy election. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collections are evaluated. ASU 2025-05 became effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. Entities should apply the new guidance prospectively. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
F-13
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In January 2025, the FASB issued ASU 2025-01, “Income Statement – Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Clarifying the Effective Date.” This pronouncement revises the effective date of ASU 2024-03 and clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Entities within the ASU’s scope are permitted to early adopt the accounting standard update. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — codification amendments in response to SEC’s disclosure Update and Simplification initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows — Overall, 250-10 Accounting Changes and Error Corrections — Overall, 260-10 Earnings Per Share — Overall, 270-10 Interim Reporting — Overall, 440-10 Commitments — Overall, 470-10 Debt — Overall, 505-10 Equity — Overall, 815-10 Derivatives and Hedging — Overall, 860-30 Transfers and Servicing — Secured Borrowing and Collateral, 932-235 Extractive Activities — Oil and Gas — Notes to Financial Statements, 946-20 Financial Services — Investment Companies — Investment Company Activities, and 974-10 Real Estate — Real Estate Investment Trusts — Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal.
Recently issued ASUs by the FASB, except for the ones mentioned above, have no material impact on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss or consolidated balance sheets.
F-14
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
3. DIGITAL ASSETS
Digital asset holdings were comprised of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| BTC | $ | $ | ||||||
| AA | ||||||||
| USDT | ||||||||
| ENA | ||||||||
| ETH | ||||||||
| $ | $ | |||||||
BTC
For the six months ended June 30, 2026, the Company did not enter into any transactions relating to BTC and did not realize gains or losses from trading BTC. For the six months ended June 30, 2026, the Company recognized a decrease in fair value of BTC of $
For the six months ended June 30, 2025, the Company purchased
The Company held
AA
For the six months ended June 30, 2026, the Company exchanged
For the six months ended June 30, 2025, the Company did not enter into any transactions relating to AA.
As of June 30, 2026 and December 31, 2025, the Company held
ENA
For the six months ended June 30, 2026, the Company did not enter into any transactions relating to ENA and did not realize gains or losses from trading ENA. For the six months ended June 30, 2026, the Company recognized a decrease in fair value of ENA of $
For the six months ended June 30, 2025, the Company did not enter into any transactions relating to ENA.
As of June 30, 2026 and December 31, 2025, the Company held
F-15
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
3. DIGITAL ASSETS (CONTINUED)
USDT
As of June 30, 2026 and December 31, 2025, the Company held
ETH
For the six months ended June 30, 2026, the Company exchanged
For the six months ended June 30, 2025, the Company did not enter into any transactions relating to ETH.
As of June 30, 2026 and December 31, 2025, the Company held one and nil token of ETH, respectively.
Additional information about digital assets
The following table presents additional information about BTC for the six months ended June 30, 2026 and 2025:
| For the six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Opening balance | $ | $ | ||||||
| Purchases of BTC | ||||||||
| Purchases of BTC from exchange of USDT | ||||||||
| Changes in fair value of BTC | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
The following table presents additional information about AA for the six months ended June 30, 2026 and 2025:
| For the six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Opening balance | $ | $ | ||||||
| Purchases of AA from exchange of USDT | ||||||||
| Changes in fair value of AA | ||||||||
| Ending balance | $ | $ | ||||||
F-16
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
3. DIGITAL ASSETS (CONTINUED)
The following table presents additional information about USDT for the six months ended June 30, 2026 and 2025:
| For the six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Opening balance | $ | $ | ||||||
| Purchases of USDT | ||||||||
| Investment in Armonia (Note 5) | ( | ) | ||||||
| Exchange of USDT into USDC | ( | ) | ||||||
| Exchange of USDT into AA | ( | ) | ||||||
| Exchange of USDT into ETH | ( | ) | ||||||
| Exchange of USDT into BTC | ( | ) | ||||||
| Payment of operating expenses | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
The following table presents additional information about ENA for the six months ended June 30, 2026 and 2025:
| For the six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Opening balance | $ | $ | ||||||
| Changes in fair value of ENA | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
The following table presents additional information about ETH for the six months ended June 30, 2026 and 2025:
| For the six months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Opening balance | $ | $ | ||||||
| Purchases of ETH from exchange of USDT | ||||||||
| Changes in fair value of ETH | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
F-17
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
4. PREPAID EXPENSES AND OTHER ASSETS
As of June 30, 2026 and December 31, 2025, prepaid expenses and other assets were comprised of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Due from online payment platforms (a) | $ | $ | ||||||
| Prepayment to suppliers | ||||||||
| Others | ||||||||
| Less: allowance for credit loss against other receivable | ( | ) | ||||||
| $ | $ | |||||||
For the six months ended June 30, 2026, the Company filed a lawsuit case against one customer for collection of the outstanding receivable. However management assessed the collection was remote. For the six months ended June 30, 2026, the Company provided full allowance of $
| (a) |
5. LONG-TERM INVESTMENTS
As of June 30, 2026 and December 31, 2025, long-term investments were comprised of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Investment in Quleduo | $ | $ | ||||||
| Investment in AIFLIX LLC (“AIFlix”) | ||||||||
| Investment in Armonia Technology Limited (“Armonia”) | ||||||||
| Less: share of equity loss in Quleduo | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Quleduo is a privately held company which is engaged in software design and development. As of December 31, 2025, the Company owned
During the six months ended June 30, 2026, the Company entered into a debt settlement agreement with Quleduo, pursuant to which the Company agreed to settle the outstanding balance of loans receivable due from Quleduo by increase in equity interest ownership in Quleduo. The Company waived loans receivable of $
The Company used equity method to measure the investment in Quleduo. For the six months ended June 30, 2026 and 2025, Quleduo reported net loss of approximately $
On March 17, 2025, the Company set up AIFlix with Wardour Studios Inc. (“Wardour Studios”), a leading Hollywood production and digital-effects studio specializing in next-generation content creation, for AI-generated short drama production. The Company and Wardour Studios owned equity interest of
On May 26, 2026, the Company entered into a share purchase agreement to acquire
F-18
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
6. CONTENT ASSETS, NET
Content assets were comprised of current content assets and non-current content assets. The useful lives of current content assets were below
Current content assets were comprised of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Produced contents | ||||||||
| - in development and production | $ | $ | ||||||
| - released | ||||||||
| Copyrights | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Less: accumulated impairment | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Non-current content assets were comprised of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Produced contents | $ | $ | ||||||
| Copyrights | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The following is a schedule, by fiscal years, of amortization amount of content assets as of June 30, 2026:
| For the six months ending December 31, 2026 | $ | |||
| For the year ending December 31, 2027 | ||||
| For the year ending December 31, 2028 | ||||
| Total | $ |
For the six months ended June 30, 2026 and 2025, the Company recorded amortization expenses of $
F-19
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
7. OPERATING LEASES
As of June 30, 2026 and December 31, 2025, the Company leases office spaces in the United States and Singapore under non-cancelable operating leases, with terms ranging within
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. The Company records the straight-line lease expense and any contingent rent, if applicable, in the account of “general and administrative expenses” on the consolidated statements of operations and comprehensive loss.
For the six months ended June 30, 2026 and 2025, the Company recorded rent expenses of $
8. OTHER CURRENT LIABILITIES AND ACCRUED EXPENSES
As of June 30, 2026 and December 31, 2025, other current liabilities and accrued expenses were comprised of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Advertising fees payable | $ | $ | ||||||
| Amount due to Armonia (Note 5) | ||||||||
| Accrued payroll | ||||||||
| Other tax payable | ||||||||
| Others | ||||||||
| $ | $ | |||||||
9. EQUITY
Ordinary Shares
On August 15, 2025, the Company’s shareholders approved an increase of the share capital to US$
On September 2, 2025, Mr. Yucheng Hu, Chairman of the Board of Directors and a shareholder of the Company, submitted a notice of conversion pursuant to the Company’s Third Amended and Restated Memorandum and Articles of Association (“MAA”), requesting to convert
F-20
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
9. EQUITY (CONTINUED)
Ordinary Shares (cont.)
On September 1, 2026, the Company’s shareholders approved a proposal, as an ordinary resolution, that (a) all the Company’s class A ordinary shares, class B ordinary shares and class C ordinary shares of par value USD
On September 15, 2026, the Company, at the authorization of the Board of Directors, effected a share consolidation at a ratio of 1 post-split ordinary share for every 20 pre-split ordinary shares (the “2026 Share Consolidation”). At the effective time of the Share Consolidation, the authorized share capital of the Company was amended from USD
Share and per-share data for all periods presented in the financial statements have been retroactively adjusted for the 2026 Share Consolidation.
On February 18, 2025, the Company entered into an At The Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co., LLC (the “Manager”) pursuant to which the Company may offer and sell, from time to time, through the Manager, Class A Ordinary Shares, par value $
F-21
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
9. EQUITY (CONTINUED)
Ordinary Shares (continued)
On July 24, 2025, the Company signed a Securities Purchase Agreement (the “Agreement”) with certain accredited investors (collectively, the “Investors”), pursuant to which the Investors, severally and not jointly, agreed, subject to certain terms and conditions of the Agreement, to purchase an aggregate of
In addition, pursuant to a prior engagement letter with H.C. Wainwright & Co. (“Wainwright”), the Company agreed to pay Wainwright a cash fee equal to
For the six months ended June 30, 2026, the Company issued
For the six months ended June 30, 2026, the Company also issued
For the six months ended June 30, 2025, the Company also issued
As of June 30, 2026, the Company issued
As of December 31, 2025, the Company had
F-22
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
9. EQUITY (CONTINUED)
Warrants
In connection with the private placement closed on January 17, 2024, the Company issued
| As of January 17, 2024 | ||||
| Risk-free rate of return | % | |||
| Estimated volatility rate | % | |||
| Dividend yield | % | |||
| Spot price of underlying ordinary share | $ | |||
| Exercise price | $ | |||
| Relative fair value of warrant | $ | |||
In connection with the private placement closed on August 5, 2024, the Company issued (i) Series A common stock warrants to purchase an aggregate of
| August 5, 2024 | ||||||||
| Series A Warrants | Series B Warrants | |||||||
| Risk-free rate of return | % | % | ||||||
| Estimated volatility rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Spot price of underlying ordinary share | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
As of June 30, 2026 and December 31, 2025, the Company had outstanding warrants to purchase up to
F-23
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
10. INCOME TAXES
The Company recorded income tax expenses of $
For the six months ended June 30, 2026 and 2025, the difference between the U.S. statutory rate and our effective tax rate was primarily due to foreign rate difference, state income tax and the valuation allowance on the Company’s deferred tax assets.
We evaluate tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We believe that we have no material uncertain tax positions required to be disclosed.
In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carryback the losses to taxable income during periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance including the Company’s current three-year cumulative loss through June 30, 2026, the current year operation forecast, future reversals of existing taxable temporary differences, taxable income in prior carryback years, historical operating losses etc. Based on this analysis, the Company has concluded that a valuation allowance is necessary for its U.S. and foreign deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences and has recorded a full valuation allowance on its deferred tax assets.
11. RELATED PARTIES
1) Nature of relationships with related parties
| Name | Relationship with the Company | |
| Yucheng Hu |
| |
| Quleduo |
2) Transactions with related parties
As of December 31, 2025, the Company had loans receivable of $
For the six months ended June 30, 2025, the Company collected repayment of $
F-24
MEGA MATRIX INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Rounded to the Nearest Hundred US Dollars, except for share data, unless otherwise stated)
11. RELATED PARTIES (CONTINUED)
3) Balances with related parties
As of June 30, 2026 and December 31, 2025, the Company had balances due from below related parties:
| June 30, 2026 | December 31, 2025 | |||||||
| Loans receivable - a related party | ||||||||
| Quleduo (a) | $ | $ | ||||||
| Due from a related party | ||||||||
| Yucheng Hu (b) | $ | $ | ||||||
| a. |
| b. |
12. COMMITMENTS AND CONTINGENCIES
As noted in Note 8, the Company had an outstanding payable of investment of $
In the ordinary course of the Company’s business, the Company may be subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company’s business, financial condition, liquidity or results of operations.
13. SUBSEQUENT EVENTS
On September 1, 2026, the Company’s shareholders approved a proposal, as an ordinary resolution, that (a) all the Company’s class A ordinary shares, class B ordinary shares and class C ordinary shares of par value USD
On September 15, 2026, the Company, at the authorization of the Board of Directors, effected a share consolidation at a ratio of 1 post-split ordinary share for every 20 pre-split ordinary shares (the “2026 Share Consolidation”). At the effective time of the Share Consolidation, the authorized share capital of the Company was amended from USD
These unaudited condensed consolidated financial statements were approved by management and available for issuance on October 1, 2026. The Company has evaluated subsequent events through this date and concluded that there are no additional reportable subsequent events other than those disclosed above.
F-25
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We are a holding company incorporated in the Cayman Islands and headquartered in Singapore. We wholly own MPU DE, which in turn wholly owns FunVerse Holding Limited, a British Virgin Islands company (“FunVerse”). FunVerse directly owns Yuder Pte. Ltd., a Singapore corporation (“Yuder”), which operates FlexTV, our short drama streaming platform. FlexTV offers English, Japanese and Thai short dramas translated into multiple languages for users across Europe, the Americas, Southeast Asia and other global regions. In addition to original content production, Yuder also acquires third-party content licenses for translation and distribution on the FlexTV platform. To provide diverse international content, our production team has filmed in multiple locations worldwide, including the United States, Mexico, Australia, Japan, Thailand and the Philippines.
We witnessed intensified competition in the global short drama industry, characterized by elevated user acquisition costs, aggressive marketing spending and widespread operating losses across peers. Against this challenging environment, the Company implemented a tightened and prudent operating strategy focused on operational efficiency, margin stability and long-term sustainable growth. We proactively shifted from self-developed short drama production to an asset-light model through strategic content procurement, optimized marketing expenditure to improve delivery efficiency, and expanded organic user acquisition via social media engagement. As a result, advertising expenses as a percentage of total revenue improved significantly from 53% in the six months ended June 30, 2025 to 43% in the six months ended June 30, 2026, while average revenue per user (“ARPU”) increased from $3.05 in the six months ended June 30, 2025 to $3.62 in the six months ended June 30, 2026, reflecting enhanced user monetization efficiency.
Recent Corporate Developments
On September 1, 2026, the Company’s shareholders approved a proposal, as an ordinary resolution, that (a) all the Company’s class A ordinary shares, class B ordinary shares and class C ordinary shares of par value USD0.001 each, whether issued or unissued (collectively, the “Shares”), be consolidated at a ratio of twenty (20) Shares into one (1) Share of par value USD0.02, with the consolidated Shares having the same rights and being subject to the same restrictions (other than the change in par value) as the existing Shares of the relevant class under the Company’s then-existing memorandum and articles of association (the “Share Consolidation”); (b) the Company's authorized share capital be altered from USD1,110,000 divided into 1,000,000,000 class A ordinary shares of par value USD0.001 each, 50,000,000 class B ordinary shares of par value USD0.001 each, 50,000,000 class C ordinary shares of par value USD0.001 each, and 10,000,000 preferred shares of par value USD0.001 each to USD1,110,000 divided into 50,000,000 class A ordinary shares of par value USD0.02 each, 2,500,000 class B ordinary shares of par value USD0.02 each, 2,500,000 class C ordinary shares of par value USD0.02 each, and 10,000,000 preferred shares of par value USD0.001 each as a result of the Share Consolidation; (c) no fractional Shares be issued in connection with the Share Consolidation and, in the event that a shareholder would otherwise be entitled to receive a fractional Share upon the Share Consolidation, the total number of Shares to be received by such shareholder be rounded up to the next whole Share; (d) the Share Consolidation shall take effect from September 15, 2026; and (e) any one director or officer of the Company be and is hereby authorized, for and on behalf of the Company, to do all such other acts or things necessary or desirable to implement, carry out and give effect to the Share Consolidation, if and when deemed advisable by the Board in its sole discretion.
On September 15, 2026, the Company, at the authorization of the Board of Directors, effected a share consolidation at a ratio of 1 post-split ordinary share for every 20 pre-split ordinary shares (the “2026 Share Consolidation”). At the effective time of the Share Consolidation, the authorized share capital of the Company was amended from USD1,110,000 divided into 1,000,000,000 class A ordinary shares of par value USD0.001 each, 50,000,000 class B ordinary shares of par value USD0.001 each, 50,000,000 class C ordinary shares of par value USD0.001 each, and 10,000,000 preferred shares of par value USD0.001 each to USD1,110,000 divided into 50,000,000 class A ordinary shares of par value USD0.02 each, 2,500,000 class B ordinary shares of par value USD0.02 each, 2,500,000 class C ordinary shares of par value USD0.02 each, and 10,000,000 preferred shares of par value USD0.001.
On May 26, 2026, the Company entered into a share purchase agreement to acquire 30% equity interest in Armonia Technology Limited (“Armonia”), at consideration of $1,500,000. For the six months ended June 30, 2026, the Company made investment of $1,200,000 in the form of USDT with remaining investment of $300,000 outstanding. Though the Company owned 30% equity interest in Armonia, the Company had no voting rights and could not exercise significant influence over Armonia. Accordingly, the Company elected the measurement alternative for the investment in Armonia, which is recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Key Components of Results of Operations
Revenues
We generated revenue primarily from (i) membership and top-up streaming services, also known as in-App purchase services (“IAP”), (ii) online advertising services, also known as in-App advertising services (“IAA”), and (iii) content licensing business of our short dramas. For the six months ended June 30, 2026 and 2025, our revenues were comprised of the following:
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| In-App Purchase services | $ | 8,467,700 | $ | 12,455,500 | ||||
| In-App Advertising services | 1,468,800 | 1,150,300 | ||||||
| Content licensing business | 535,000 | 1,191,000 | ||||||
| $ | 10,471,500 | $ | 14,796,800 | |||||
Membership and top-up streaming services (“IAP”)
Membership and top-up streaming services are referred to as In-App Purchases (“IAP”). We offer membership services to subscribers in various countries and provide the plans that primarily include access to exclusive and ad-free streaming of short dramas, accelerated downloads and more. Users can choose to become weekly, monthly or annual members on our short drama streaming platform. Users can also top up their accounts to acquire in-app coins on our platform, which are then used to continue viewing the short dramas. Users can also earn in-app coins by completing daily and new user tasks.
For the six months ended June 30, 2026 and 2025, we collected recharge amount of approximately $8.5 million and $12.7 million from In-App Purchases services, respectively. We recognize membership revenue ratably over the membership period and top-up revenue as in-app coins are consumed and services are rendered.
| For the six months ended June 30, 2026 | ||||||||||||||||||||
| United States and |
Asia- | Europe, Middle East |
Latin | |||||||||||||||||
| Canada | Pacific | and Africa | America | Total | ||||||||||||||||
| Revenues from In-App Purchases services | $ | 1,060,600 | $ | 5,127,800 | $ | 1,865,900 | $ | 413,400 | $ | 8,467,700 | ||||||||||
| Period Active Users (“PAU”)(1) | 132,578 | 1,237,024 | 718,513 | 253,893 | 2,342,008 | |||||||||||||||
| Average membership and top-up streaming services revenue per active user (“ARPU”)(2) | $ | 8.00 | $ | 4.15 | $ | 2.60 | $ | 1.63 | $ | 3.62 | ||||||||||
| Period Paying Users (“PPU”) (3) | 20,796 | 193,771 | 62,859 | 32,547 | 309,973 | |||||||||||||||
| Average membership and top-up streaming services revenue per paying user (“ARPPU”)(4) | 51.00 | 26.46 | 29.68 | 12.70 | 27.32 | |||||||||||||||
2
| For the six months ended June 30, 2025 | ||||||||||||||||||||
| United States and |
Asia- | Europe, Middle East |
Latin | |||||||||||||||||
| Canada | Pacific | and Africa | America | Total | ||||||||||||||||
| Revenues from In-App Purchases services | $ | 4,666,800 | $ | 4,516,800 | $ | 2,536,000 | $ | 735,900 | $ | 12,455,500 | ||||||||||
| Period Active Users (“PAU”)(1) | 606,944 | 1,747,828 | 1,192,264 | 538,246 | 4,085,282 | |||||||||||||||
| Average membership and top-up streaming services revenue per active user (“ARPU”)(2) | $ | 7.69 | $ | 2.58 | $ | 2.13 | $ | 1.37 | $ | 3.05 | ||||||||||
| Period Paying Users (“PPU”) (3) | 104,596 | 141,774 | 85,644 | 32,586 | 364,600 | |||||||||||||||
| Average membership and top-up streaming services revenue per paying user (“ARPPU”)(4) | 44.62 | $ | 31.86 | $ | 29.61 | $ | 22.58 | $ | 34.16 | |||||||||||
| (1) | A PAU is defined as a user who has downloaded and opened FlexTV app at least once. For the six months ended June 30, 2026 and 2025, the PAU is calculated at the total of six months PAU. |
| (2) | ARPU is defined as average membership and top-up streaming services revenue generated by each active user in one period. |
| (3) | A PPU is defined as a user who has registered for a membership or topping up, provided a method of payment, and is entitled to access FlexTV services. This membership or topping up does not include participation in free trials or other promotional offers extended by the company to new users. For the six months ended June 30, 2026 and 2025, the PPU is calculated at the total of six monthly PPU. |
| (4) | ARPPU is defined as average membership and top-up streaming services revenue generated by each paying user in one period. |
Online advertising services (“IAA”)
Online advertising services are referred to as In-App Advertising (“IAA”). We sell advertising services by delivering brand advertising primarily to third-party advertising agencies. We provide advertisement placements on our short drama streaming platform in different formats, including but not limited to video, banners, links, logos, brand placement and buttons. We identify one performance obligation in the contracts with customers. Revenues are recognized over time based on amounts invoiced to the customers.
Content licensing business
The Company entered into license agreements with third party platform customers, pursuant to which the Company grants licenses of its self-produced short-dramas to the platforms and allows them to distribute the short dramas for an agreed period of time. The transaction price is comprised of a fixed price and variable price which is calculated at a percentage of the revenues generated by the customers. The Company evaluates whether the license provides a right-to-use or right-to-access intellectual property. Revenue from fixed consideration is recognized at a point in time when control of the license is transferred for right-to-use licenses, or over time for right-to-access licenses. Variable consideration is recognized when it is probable that a significant reversal will not occur. For the six months ended June 30, 2026 and 2025, the Company generated revenues of approximately $0.5 million and $1.2 million, respectively, from its content licensing business.
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Cost of revenues
For the six months ended June 30, 2026 and 2025, the cost of revenues was primarily comprised of platform service fees charged by third party payment processors, amortization of produced contents and software and copyrights which were applied to produce short dramas and other expenses which were directly attributable to producing short dramas.
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Platform service fees charged by third party payment processors | $ | 2,288,800 | $ | 3,300,400 | ||||
| Amortization of content assets | 1,087,900 | 2,655,400 | ||||||
| Others | 336,600 | 394,200 | ||||||
| $ | 3,713,300 | $ | 6,350,000 | |||||
Selling expenses
Selling and marketing expenses primarily consist of advertising expenses, primarily composed of traffic expenses, and other miscellaneous expenses.
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Advertising expenses | $ | 4,536,900 | $ | 7,779,400 | ||||
| Others | - | 53,700 | ||||||
| $ | 4,536,900 | $ | 7,833,100 | |||||
General and administrative expenses
General and administrative expenses primarily consist of (i) IT expenses, (ii) payroll and welfare expenses; (iii) professional and consulting expenses including legal expenses, audit expenses and other consultants, and (iv) other miscellaneous expenses.
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| IT expenses | $ | 2,377,100 | $ | 2,029,500 | ||||
| Payroll and welfare expenses | 3,074,800 | 945,500 | ||||||
| Consulting expenses | 1,289,700 | 1,361,200 | ||||||
| Credit loss against other receivable | 80,500 | - | ||||||
| Others | 584,600 | 341,200 | ||||||
| $ | 7,406,700 | $ | 4,677,400 | |||||
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Income taxes
We account for income taxes in accordance with the authoritative guidance, which requires income tax effects for changes in tax laws to be recognized in the period in which the law is enacted.
Cayman Islands
Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains. Additionally, upon payments of dividends by us to our shareholders, no withholding tax will be imposed.
United States
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states. Currently we are not under any audit examination from federal or state tax authorities in the United States.
The tax expenses primarily come from the state minimum taxes and franchise taxes.
Singapore
We are subject to corporate income tax for our business operations in Singapore. Tax on corporate income is imposed at a flat rate of 17% based on the adjusted taxable income.
Deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. The ASC 740 – Accounting for Income Tax guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized.
We have determined that a valuation allowance is necessary against the full population of the deferred tax assets as based on all available evidence, we do not anticipate that our future taxable income will be sufficient to recover our deferred tax assets. However, should there be a change in our ability to recover our deferred tax assets, we will re-evaluate our position and release a portion or all of the valuation allowance if required.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, we recognize liabilities for uncertain tax positions based on the two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. As of June 30, 2026, we do not have any uncertain tax positions based on our analysis.
We reevaluate these uncertain tax positions on a quarterly basis and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activities. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.
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Results of Operations
The following table represents our consolidated statement of operations for the six months ended June 30, 2026 and 2025.
| For the Six Months Ended June 30 |
Changes | |||||||||||||||
| 2026 | 2025 | in Amount | in % | |||||||||||||
| Revenues | $ | 10,471,500 | $ | 14,796,800 | $ | (4,325,300 | ) | (29 | )% | |||||||
| Cost of revenues | (3,713,300 | ) | (6,350,000 | ) | 2,636,700 | (42 | )% | |||||||||
| Gross profit | 6,758,200 | 8,446,800 | (1,688,600 | ) | (20 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | (4,536,900 | ) | (7,833,100 | ) | 3,296,200 | (42 | )% | |||||||||
| General and administrative expenses | (7,406,700 | ) | (4,677,400 | ) | (2,729,300 | ) | 58 | % | ||||||||
| Total operating expenses | (11,943,600 | ) | (12,510,500 | ) | 566,900 | (5 | )% | |||||||||
| Loss from operations | (5,185,400 | ) | (4,063,700 | ) | (1,121,700 | ) | 28 | % | ||||||||
| Other income (expenses): | ||||||||||||||||
| Changes in fair value of digital assets | (1,191,100 | ) | 19,000 | (1,210,100 | ) | (6,369 | )% | |||||||||
| Share of equity loss | (600 | ) | (2,400 | ) | 1,800 | (75 | )% | |||||||||
| Changes in fair value of trading securities | (1,400 | ) | (1,200 | ) | (200 | ) | 17 | % | ||||||||
| Interest income, net | 3,000 | 94,400 | (91,400 | ) | (97 | )% | ||||||||||
| Other income, net | 73,800 | 12,400 | 61,400 | 495 | % | |||||||||||
| Total other (expenses) income, net | (1,116,300 | ) | 122,200 | (1,238,500 | ) | (1,014 | )% | |||||||||
| Loss before income tax | (6,301,700 | ) | (3,941,500 | ) | (2,360,200 | ) | 60 | % | ||||||||
| Income tax expenses | (800 | ) | (600 | ) | (200 | ) | 33 | % | ||||||||
| Net loss | (6,302,500 | ) | (3,942,100 | ) | $ | (2,360,400 | ) | 60 | % | |||||||
Revenues
Compared with revenues for the six months ended June 30, 2025, our revenues for the six months ended June 30, 2026 decreased by approximately $4.3 million, or 29%. The decrease was primarily due to a decrease of approximately $4.0 million in revenues from membership and top-up streaming services and a decrease of revenues from content licensing business of approximately $0.7 million, partially offset by an increase of approximately $0.3 million in revenues from online advertising services.
Revenues from membership and top-up streaming services. Revenues from membership and top-up streaming services for the six months ended June 30, 2026 decreased by approximately $4.0 million, or 32%. The decline was driven by two key factors. First, commencing in May 2025, the Company strategically scaled back self-developed short dramas and shifted to a model centered on acquiring copyrighted content, which resulted in fewer new titles being released on the platform. Second, against a backdrop of intensifying industry competition characterized by aggressive marketing spend and widespread losses among peers, the Company adopted a disciplined operational strategy, optimizing its promotional policies to safeguard profit margins and preserve cash flow.
During the six months ended June 30, 2026, average revenue per user (“ARPU”) for the short drama business increased to $3.62 from $3.05 in the same period of 2025, primarily supported by improved user subscription conversion. However we witnessed a decrease in active users from 4,085,282 to 2,342,008, and a decrease in paying users from 364,600 to 309,973, leading to a decrease of ARPPU from $34.16 to $27.32. The decreases were affected by decrease new titles released on the platform.
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Looking ahead, the Company intends to integrate AI-generated short dramas into its content portfolio, attracting a broader user base through a balanced approach of in-house development and strategic content procurement. This model is expected to drive meaningful production cost efficiencies while sustaining healthy ARPU performance. With sustained investment in AI-powered short drama content, the Company anticipates a return to growth in membership and top-up streaming services revenue in the coming periods.
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Membership and top-up streaming services | $ | 8,467,700 | $ | 12,455,500 | ||||
| ARPU | $ | 3.62 | $ | 3.05 | ||||
Revenues from online advertising services. Our revenues from online advertising services increased by approximately $0.3 million, or 28%. The increase was due to an increase in advertisers who placed ads on our platform.
Revenues from content licensing business. Our revenues from content licensing business were approximately $0.5 million and $1.2 million for the six months ended June 30, 2026 and 2025, respectively. The decrease was primarily because of a decrease of new content provided during the six months ended June 30, 2026.
Cost of revenues
For the six months ended June 30, 2026, the cost of revenues decreased by approximately $2.6 million, or 42% from approximately $6.4 million for the six months ended June 30, 2025. The change in cost of revenues was primarily derived from a decrease of approximately $1.0 million in platform service fees charged by third party payment processors which was in line with a decrease in revenues from membership and top-up streaming services, and a decrease of approximately $1.6 million in amortization of content assets with a decrease in new content assets on our platform.
We expect our cost of revenues will increase in the next year with net effects of increase in purchase of AI-based short dramas to attract more customers, partially offset by a decrease of amortization of content assets as we plan to reduce self-developed short-dramas.
Gross profit
Gross profit for the six months ended June 30, 2026 and 2025 was approximately $6.8 million and $8.4 million, respectively.
Selling expenses
As compared with the six months ended June 30, 2025, selling expenses for the six months ended June 30, 2026 decreased by approximately $3.3 million. The decrease was primarily driven by a reduction of approximately $3.2 million in advertising expenses, consistent with the decline in our revenues from membership and top-up streaming services.
7
Notably, advertising expenses as a percentage of total revenue improved significantly from 53% for the six months ended June 30, 2025 to 43% for the six months ended June 30, 2026. This improvement was mainly attributable to our successful acquisition of organic traffic through social media engagement and content initiatives, which enhanced overall marketing efficiency.
| For the Six Months Ended June 30, 2026 |
% of revenue |
For the Six Months Ended June 30, 2025 |
% of revenue |
|||||||||||||
| Advertising expenses | $ | 4,536,900 | 43 | % | $ | 7,779,400 | 53 | % | ||||||||
General and administrative expenses
For the six months ended June 30, 2026, we incurred general and administrative expenses of approximately $7.4 million, representing an increase of approximately $2.7 million, or 58% from approximately $4.7 million for the six months ended June 30, 2025. The increase was primarily attributable to an increase of approximately $0.3 million in IT expenses because we incurred more IT support expenses for our short drama streaming platform, an increase of approximately $2.1 million, or 225%, in payroll and welfare expenses, which was because of optimization of compensation system, an increase of approximately $0.2 million in other expenses, which was because we incurred more travel and entertainment expenses in the six months ended June 30, 2026, and an increase of approximately $0.1 million in provision of credit losses against other receivable because the collection from one customer was expected to be remote.
Changes in fair value of digital assets
For the six months ended June 30, 2026, we recorded a decrease in fair value of approximately $1.2 million in digital assets as compared with an increase of approximately $19,000 for the same period of 2025. The change in fair value of digital assets was primarily because of fluctuations in market price of digital assets.
Net Loss
As a result of the foregoing, net loss for the six months ended June 30, 2026 was approximately $6.3 million, increasing by approximately $2.4 million, or 60%, from approximately $3.9 million for the six months ended June 30, 2025.
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Liquidity and Capital Resources
To date, we have financed our operating and investing activities primarily through equity financing through private placements. As of June 30, 2026, the Company held cash of approximately $3.2 million.
For the six months ended June 30, 2026 and 2025, the Company reported net losses of approximately $6.3 million and $3.9 million, respectively. In addition, the Company had accumulated deficits of approximately $66.9 million and $60.6 million as of June 30, 2026 and December 31, 2025, respectively, but the Company had working capital of approximately $5.0 million, including cash of approximately $3.2 million as of June 30, 2026, which is expected to support our operating and investing activities for the next 12 months.
The Company’s liquidity is based on its ability to generate cash from operating activities and obtain financing from investors to fund its general operations and capital expansion needs. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources.
Given the financial condition of the Company and its operating performance, the Company assesses that current working capital is sufficient to meet its obligations for the next 12 months from the issuance date of this half year report. Accordingly, management continues to prepare the Company’s unaudited condensed consolidated financial statements on going concern basis.
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the disclosure of contingent assets and liabilities, and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. Estimates and judgments are used when accounting for the amount and timing of future cash flows associated with each asset that are used to evaluate whether assets are impaired, accounting for income taxes, and the amounts recorded as allowances for credit losses.
Cash Flow
The following table sets forth a summary of our cash flows for the six months ended June 30, 2026 and 2025:
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (3,042,400 | ) | $ | (3,985,800 | ) | ||
| Net cash used in investing activities | (1,047,000 | ) | (1,239,400 | ) | ||||
| Net cash provided by financing activities | - | 360,400 | ||||||
| Net changes in cash and cash equivalents | (4,089,400 | ) | (4,864,800 | ) | ||||
| Cash, cash equivalents, beginning of period | 7,297,400 | 8,870,800 | ||||||
| Cash, cash equivalents, end of period | $ | 3,208,000 | $ | 4,006,000 | ||||
Operating activities
Net cash used in operating activities for the six months ended June 30, 2026 was $3.0 million, primarily attributable to net loss of approximately $6.3 million, adjusted for (a) non-cash items including a decrease in fair value of approximately $1.2 million in digital assets, amortization of content assets of approximately $1.1 million, share-based compensation expenses of approximately $0.4 million, and (b) changes in operating assets and liabilities primarily in an increase of content assets of approximately $0.9 million as we continuously invested in content assets for short drama and an increase of other current liabilities and accrued expenses of approximately $1.3 million.
Net cash used in operating activities for the six months ended June 30, 2025 was approximately $4.0 million, primarily attributable to net loss of approximately $3.9 million, adjusted for (a) non-cash items including amortization of content assets of approximately $2.7 million and share-based compensation expenses to certain management and non-employees of approximately $0.4 million, and (b) changes in operating assets and liabilities including (i) an increase of content assets of approximately $3.3 million as we invested in content assets since we acquired FunVerse in January 2024, and (ii) an increase of approximately $0.2 million in contract liabilities as a result of decrease in subscription for short-dramas by our paying users for short-dramas because of decrease in release of new short-dramas on our platform.
9
Investing activities
For the six months ended June 30, 2026, the cash flow used in investing activities was approximately $1.0 million, which was primarily attributable to purchase of digital assets of approximately $1.0 million.
For the six months ended June 30, 2025, the cash flow used in investing activities was approximately $1.2 million, which was primarily attributable to purchase of digital assets of approximately $1.3 million, partially offset by collection of loans of approximately $0.1 million from a related party.
Financing activities
For the six months ended June 30, 2026, we did not report cash provided by or used in financing activities.
For the six months ended June 30, 2025, we raised cash of approximately $0.4 million from the issuance of ordinary shares under the ATM program.
Critical Accounting Estimates
We prepare our unaudited condensed consolidated financial statements in accordance with U.S. GAAP, which requires our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
Our expectations regarding the future are based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. When reading our unaudited condensed consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Out of our significant accounting policies, which are described in Note 2—Summary of Significant Accounting Policies of our unaudited condensed consolidated financial statements included elsewhere in this report, certain accounting policies are deemed “critical”, as they require management’s highest degree of judgment, estimates and assumptions, including (i) revenue recognition, and (ii) income tax.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.
Valuation allowance for deferred tax assets
We account for income taxes using the liability method in accordance with ASC 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in earnings. Deferred tax assets are reduced by a valuation allowance through a charge to income tax expense when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized.
The valuation allowance is considered on an individual entity basis. As of June 30, 2026 and December 31, 2025, valuation allowances on deferred tax assets are provided because we believe that it is more-likely-than-not that certain of the subsidiaries will not be able to generate sufficient taxable income in the near future, to realize the deferred tax assets carried-forward.
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Non-GAAP Financial Measures
In addition to consolidated U.S. GAAP financial measures, we consistently evaluate our use of and calculation of the non-GAAP financial measures, “Adjusted EBITDA”.
Adjusted EBITDA is a financial measure defined as our EBITDA of FunVerse and its subsidiary, adjusted to eliminate the effects of certain non-cash and/or non-recurring items, that do not reflect our ongoing strategic business operations. EBITDA is computed as net loss of FunVerse and its subsidiary before interest, taxes, depreciation, and amortization. Adjusted EBITDA is EBITDA of FunVerse and its subsidiary further adjusted for certain income and expenses, which management believes results in a performance measurement that represents a key indicator of the Company’s core business operations of membership and top-up streaming services and online advertising business. The adjustments currently include impairment of content assets.
We believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and our board of directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments.
Adjusted EBITDA is provided in addition to and should not be considered to be a substitute for, or superior to net loss, the comparable measure under U.S. GAAP. Further, Adjusted EBITDA should not be considered as an alternative to revenue growth, net loss, diluted loss per share or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. Adjusted EBITDA has limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under U.S. GAAP.
Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP financial metric for historical periods are presented in the table below:
| For the Six Months Ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| Reconciliation of Adjusted EBITDA of FunVerse and its subsidiary: | ||||||||
| Consolidated net loss | $ | (6,302,500 | ) | $ | (3,942,100 | ) | ||
| Difference between consolidated net loss and net loss of FunVerse and its subsidiary | 5,956,400 | 2,458,300 | ||||||
| Net loss of FunVerse and its subsidiary | (346,100 | ) | (1,483,800 | ) | ||||
| Depreciation and amortization expenses | 1,087,900 | 2,655,400 | ||||||
| EBITDA | 741,800 | 1,171,600 | ||||||
| Adjustments: | ||||||||
| Impairment of content assets | 14,300 | - | ||||||
| Adjusted EBITDA | 756,100 | 1,171,600 | ||||||
For the six months ended June 30, 2026, Adjusted EBITDA of FunVerse and its subsidiary was approximately $0.8 million, compared with approximately $1.2 million in the same period of 2025.
The decrease in adjusted EBITDA was mainly caused by decreased revenues generated from membership and top-up streaming services during the six months ended June 30, 2026, because the Company strategically scaled back self-developed short dramas and shifted to a model centered on acquiring copyrighted content, which resulted in fewer new titles being released on the platform. The Company successfully transitioned from self-developed content production to a more asset-light model focused on acquiring copyrighted short dramas, while optimizing its go-to-market strategy to drive organic user acquisition through social media engagement. This shift enhanced operational efficiency and stabilized margin profiles despite a challenging industry environment.
Looking ahead, the Company plans to integrate AI-generated short dramas into its content pipeline. This strategic initiative is expected to reduce content costs, improve user engagement, and strengthen profitability over time. With a clearer path to sustainable growth and operational efficiency, management remains confident in the Company’s long-term value creation potential.
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