DarkIris Inc 6-K, filed Aug 13, 2026
DarkIris Inc. (DKI)
About this 6-K
DarkIris Inc filed this 6-K on August 13, 2026.
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 August 2026
Commission
File Number:
(Registrant’s Name)
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K
DarkIris Inc. (the “Company”) is furnishing this Form 6-K to provide six-month interim financial statements.
EXHIBIT INDEX
The following exhibits are being filed herewith:
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.
| DarkIris Inc. | ||
| By: | /s/ Hong Zhifang | |
| Name: | Hong Zhifang | |
| Title: | Chief Executive Officer | |
Date: August 13, 2026
Exhibit 99.1
DarkIris Inc. Reports 13.9% Revenue Growth for the First Half of Fiscal Year 2026
Hong Kong, August 13, 2026 (GLOBE NEWSWIRE) — DarkIris Inc. (Nasdaq: DKI) (the “Company” or “DarkIris”), an innovative technology provider in the digital media and entertainment sector, today announced its unaudited financial results for the six months ended March 31, 2026.
Mr. Zhifang Hong, Chief Executive Officer and Chairman of DarkIris, commented, “We are encouraged by the continued momentum across our business in the first half of fiscal year 2026. Revenue increased by 13.9% year over year, while gross profit grew at an even faster rate of 20.9%, with gross margin expanding to 29.6%. These results demonstrate the underlying strength of our core business and our continued progress in enhancing monetization efficiency.
“This performance was supported by contributions from newly launched titles, sustained engagement across our existing game portfolio, and year-over-year growth in both our paying user base and average revenue per paying gamer. Importantly, despite the removal of one of our legacy titles, our newer games continued to attract and monetize users, reinforcing our confidence in the resilience and scalability of our product portfolio.
“During the period, we also made strategic expenditures to strengthen our products and support the Company’s next stage of development. These included approximately $2.13 million of game enhancement costs for two games and approximately $0.29 million of professional service fees associated with our Nasdaq listing, which were significant contributors to the increase in operating expenses and the reported loss for the period. We view these expenditures as part of our broader effort to enhance product quality, strengthen our technology capabilities and build the infrastructure necessary to support long-term growth.
“Building on this foundation, we are increasingly pursuing a dual-engine growth strategy across gaming and AI-driven digital media. We expanded our AI and content capabilities through the commercial launch of our AIGC video platform and the acquisition of a portfolio of film and television intellectual property titles. We believe these initiatives broaden our opportunities across AI-assisted content creation, digital entertainment and IP-driven commercialization while complementing our established gaming business.
“Looking ahead, we remain focused on scaling our game portfolio, advancing our AI-driven content capabilities and pursuing new monetization opportunities across both gaming and digital media. We believe the investments we are making today will position DarkIris to build a more diversified, technology-driven and sustainable growth platform for our shareholders.”
First Half of Fiscal Year 2026 Financial Highlights
| ● | Revenue was $5.93 million for the first half of fiscal year 2026, an increase of 13.9% from $5.20 million for the same period of last fiscal year. | |
| ● | Gross profit was $1.76 million for the first half of fiscal year 2026, an increase of 20.9% from $1.45 million for the same period of last fiscal year. | |
| ● | Gross margin was 29.6% for the first half of fiscal year 2026, an increase of 1.7 percentage points from 27.9% for the same period of last fiscal year. | |
| ● | Net loss was $1.90 million for the first half of fiscal year 2026, compared to net income of $0.91 million for the same period of last fiscal year. | |
| ● | Basic and diluted loss per share was $1.51 for the first half of fiscal year 2026, compared to basic and diluted earnings per share of $0.91 for the same period of last fiscal year. |
First Half of Fiscal Year 2026 Financial Results
Revenue
Revenue was $5.93 million for the first half of fiscal year 2026, an increase of 13.9% from $5.20 million for the same period of last fiscal year. The increase was primarily driven by the continued contribution of games launched in fiscal year 2025 and the successful release of new titles in fiscal year 2026. The increase was mainly attributable to the increase of monthly paying gamers from 70,866 gamers for the first half of fiscal year 2025 to 79,608 gamers for the first half of fiscal year 2026. Additionally, the average revenue per paying gamer increased from $20.50 for the first half of fiscal year 2025 to $22.38 for the first half of fiscal year 2026, which further contributed to the increase in revenue.
Cost of Revenue
Cost of revenue was $4.17 million for the first half of fiscal year 2026, an increase of 11.2% from $3.75 million for the same period of last fiscal year.
The following table sets forth the breakdown of cost of revenue for the first half of fiscal year 2026 and 2025, respectively:
For the Six Months Ended March 31, | Variance | |||||||||||||||
| 2026 | 2025 | Amount | % | |||||||||||||
| Platform handling fees | $ | 3,328,844 | $ | 3,032,345 | $ | 296,499 | 9.8 | % | ||||||||
| Revenue sharing with game developers | 834,137 | 679,034 | 155,103 | 22.8 | % | |||||||||||
| Cloud server costs | 10,149 | 41,076 | (30,927 | ) | (75.3 | )% | ||||||||||
| Stamp duty and value-added tax surcharge | 34 | 72 | (38 | ) | (52.8 | )% | ||||||||||
| Total cost of revenues | $ | 4,173,164 | $ | 3,752,527 | $ | 420,637 | 11.2 | % | ||||||||
Platform Handling Fees
Platform handling fees were $3.33 million for the first half of fiscal year 2026, an increase of 9.8% from $3.03 million for the same period of last fiscal year. Revenue generated from game players are shared between the platform and the Company, typically ranging from 15% to 60%. These third party digital platforms have been successful in promoting the games, attracting gamer to make in-game purchases and game revenues increased from approximately $5.2 million for the first half of fiscal year 2025 to approximately $5.9 million for the first half of fiscal year 2026, resulting in a synchronous increase in revenue sharing with these platforms.
Revenue Sharing with Game Developers
Revenue sharing with game developers was $0.83 million for the first half of fiscal year 2026, an increase of 22.8% from $0.68 million for the same period of last fiscal year. Revenue sharing with game developers is typically ranging from 10% to 20%. The increase was mainly attributed to the increased gamers spending which resulted in increase in game revenue, revenue sharing with game developers was correspondingly increased.
Cloud Server Costs
Cloud server costs were $10,149 for the first half of fiscal year 2026, a decrease of 75.3% from $41,076 for the same period of last fiscal year. Game revenue generated from Google and Apple digital platforms reduced which, in turn, reduced data requirements from cloud servers and the corresponding cloud server costs. Also, the decrease in cloud server costs was attributable to the provision of cloud servers by certain third party digital platforms and, as a result, the Company did not need to incur cloud server costs for certain games.
Gross Profit and Gross Profit Margin
Gross profit was $1.76 million for the first half of fiscal year 2026, an increase of 20.9% from $1.45 million for the same period of last fiscal year.
Gross profit margin was 29.6% for the first half of fiscal year 2026, an increase of 1.7 percentage points from 27.9% for the same period of last fiscal year. The increase was mainly attributable to the growth in game revenue outpacing the increase in cost of revenue.
Operating Expenses
Total operating expenses were $3.67 million for the first half of fiscal year 2026, an increase of 718.3% from $0.45 million for the same period of last fiscal year.
| ● | Selling expenses were $0.80 million for the first half of fiscal year 2026, compared to nil for the same period of last fiscal year. The increase was mainly attributable to incurrence of advertising and promotional expenses for launching of new games. | |
| ● | General and administrative expenses were $2.87 million for the first half of fiscal year 2026, an increase of 539.1% from $0.45 million for the same period of last fiscal year. The increase was mainly attributable to game enhancement costs of $2.13 million for two games, which were expensed as incurred. |
Net (loss) Income
Net loss was $1.90 million for the first half of fiscal year 2026, compared to net income of $0.91 million for the same period of last fiscal year.
Basic and Diluted Loss per Share
Basic and diluted loss per share were $1.51 for the first half of fiscal year 2026, compared to basic and diluted earnings per share of $0.91 for the same period of last fiscal year.
Financial Condition
As of March 31, 2026, the Company had cash of $0.47 million, compared to $1.80 million as of September 30, 2025. The Company also had accounts receivable of approximately $1.59 million, prepaid expenses and other current assets of approximately $0.67 million and working capital of approximately $0.4 million.
Net cash used in operating activities was $0.49 million for the first half of fiscal year 2026, compared to net cash provided by operating activities of $0.73 million for the same period of last fiscal year. The decrease in cash in operating activities was partially offset by a decrease in accounts receivable of approximately $1.0 million due to collections and an increase of $0.3 million in amortization of intangible assets as a result of increase in capitalization of intangible assets after new games were launched.
Net cash used in investing activities was $1.31 million for the first half of fiscal year 2026, compared to $0.79 million for the same period of last fiscal year. The increase was mainly attributable to intangible assets under construction as the Company continued to invest in game development for maintaining the growth momentum.
Net cash provided by financing activities was $0.47 million for the first half of fiscal year 2026, compared to net cash used in financing activities of $0.19 million for the same period of last fiscal year. The increase mainly consisted of proceeds of $472,424 capital contribution from shareholders. In April 2026, the Company completed a $3.8 million private investment in public equity (“PIPE”) financing, by issuing 9,400,000 Class A ordinary shares, par value $0.0001 per share, of the Company (“Class A Ordinary Shares”) at a price of $0.35 per Class A Ordinary Share; and 1,428,571 Class B ordinary shares, par value $0.0001 per share, of the Company (“Class B Ordinary Shares”) at a price of $0.35 per Class B Ordinary Share (the “Private Placement”). In relation to this PIPE financing, a sum of $472,424 capital contribution was received in March 2026, while the remaining capital contribution was fully received in April 2026.
About DarkIris Inc.
DarkIris Inc. (Nasdaq: DKI) is an innovative, growth-oriented public company focused on AI-driven digital media and content production technologies. Through advanced production capabilities, including its artificial intelligence platform, aideptus.com, the Company aims to provide creators, studios, and developers with generative AI solutions designed to streamline creative workflows and enhance digital content production experiences. For more information, please visit the Company’s website at www.darkiris.com.
Forward-Looking Statements
Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can find many (but not all) of these statements by the use of words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” or other similar expressions in this press release. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the U.S. Securities and Exchange Commission (“SEC”).
For investor and media inquiries, please contact:
DarkIris Inc.
Investor Relations Department
Email: dki@darkiris.com
Ascent Investor Relations LLC
Tina Xiao
Phone: +1 646-932-7242
Email: investors@ascent-ir.com
DarkIris Inc.
Condensed Consolidated Balance Sheets
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 472,948 | $ | 1,800,202 | ||||
| Accounts receivable | 1,594,366 | 2,617,164 | ||||||
| Prepaid expenses and other current assets | 673,353 | 341,105 | ||||||
| Total current assets | 2,740,667 | 4,758,471 | ||||||
| Non-current assets: | ||||||||
| Intangible assets under construction | 2,200,000 | 2,700,000 | ||||||
| Intangible assets, net | 2,228,733 | 679,133 | ||||||
| Security deposits | - | 300,000 | ||||||
| Property and equipment, net | 13,731 | 9,294 | ||||||
| Total non-current assets | 4,442,464 | 3,688,427 | ||||||
| Total assets | $ | 7,183,131 | $ | 8,446,898 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 172,313 | 44,863 | ||||||
| Contract liabilities | 1,333,787 | 1,401,978 | ||||||
| Share capital subscription | 472,424 | - | ||||||
| Taxes payable | 155,911 | 174,329 | ||||||
| Accrued expenses | 167,131 | 42,929 | ||||||
| Total current liabilities and total liabilities | 2,301,566 | 1,664,099 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Class A ordinary shares ($0.0016 par value, 28,125,000 shares authorized, 917,213 shares issued and outstanding as of March 31, 2026 and September 30, 2025, respectively) * | 1,468 | 1,468 | ||||||
| Class B ordinary shares ($0.0016 par value, 3,125,000 shares authorized, 340,600 shares issued and outstanding as of March 31, 2026 and September 30, 2025, respectively) * | 545 | 545 | ||||||
| Additional paid-in capital | 19,129,328 | 19,129,328 | ||||||
| Accumulated deficits | (14,248,033 | ) | (12,348,542 | ) | ||||
| Accumulated other comprehensive loss | (1,743 | ) | - | |||||
| Total shareholders’ equity | 4,881,565 | 6,782,799 | ||||||
| Total liabilities and shareholders’ equity | $ | 7,183,131 | $ | 8,446,898 | ||||
* Retrospectively restated for the effect of a 1-for-16 reverse share split on May 11, 2026.
DarkIris Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | 5,928,589 | $ | 5,204,659 | ||||
| Cost of revenues | (4,173,164 | ) | (3,752,527 | ) | ||||
| Gross profit | 1,755,425 | 1,452,132 | ||||||
| Operating expenses: | ||||||||
| Selling expenses | (804,466 | ) | - | |||||
| General and administrative expenses | (2,868,124 | ) | (448,805 | ) | ||||
| Total operating expenses | (3,672,590 | ) | (448,805 | ) | ||||
| (Loss) income from operations | (1,917,165 | ) | 1,003,327 | |||||
| Other income: | ||||||||
| Government subsidy income | - | 839 | ||||||
| Interest income | 2,188 | 465 | ||||||
| Other income | 15,548 | 18,014 | ||||||
| Total other income, net | 17,736 | 19,318 | ||||||
| (Loss) income before income taxes | (1,899,429 | ) | 1,022,645 | |||||
| Income tax expenses | (62 | ) | (115,253 | ) | ||||
| Net (loss) income | (1,899,491 | ) | 907,392 | |||||
| Other comprehensive (loss) income: | ||||||||
| Foreign currency translation loss | (1,743 | ) | 15,252 | |||||
| Comprehensive (loss) income | $ | (1,901,234 | ) | $ | 922,644 | |||
| (Loss) earnings per share | ||||||||
| Basic and diluted | $ | (1.51 | ) | $ | 0.91 | |||
| Weighted average shares outstanding | ||||||||
| Basic and diluted * | 1,257,813 | 1,000,000 | ||||||
* Retrospectively restated for the effect of a 1-for-16 reverse share split on May 11, 2026.
DarkIris Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | (1,899,491 | ) | $ | 907,392 | |||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation expense | 2,463 | 4,985 | ||||||
| Loss on disposal of property and equipment | - | 502 | ||||||
| Amortization of intangible assets | 250,400 | 1,467 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 1,022,798 | (628,001 | ) | |||||
| Prepaid expenses and other current assets | (180,627 | ) | 327,759 | |||||
| Security deposit | 150,000 | - | ||||||
| Accounts payable | 127,324 | (147,653 | ) | |||||
| Contract liabilities | (68,913 | ) | 125,259 | |||||
| Taxes payable | (18,425 | ) | 116,406 | |||||
| Accrued expenses | 122,222 | 22,722 | ||||||
| Net cash (used in) provided by operating activities | (492,249 | ) | 730,838 | |||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (6,794 | ) | (5,113 | ) | ||||
| Proceeds from disposal of property and equipment | - | 874 | ||||||
| Intangible assets under construction | (1,300,000 | ) | (790,000 | ) | ||||
| Net cash used in investing activities | (1,306,794 | ) | (794,239 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from capital contribution | 472,424 | 570,000 | ||||||
| Advances from shareholders | - | 967,649 | ||||||
| Repayments to shareholders | - | (1,191,185 | ) | |||||
| Deferred initial public offering costs | - | (537,948 | ) | |||||
| Net cash provided by (used in) financing activities | 472,424 | (191,484 | ) | |||||
| Effect of exchange rate changes on cash | (635 | ) | (360 | ) | ||||
| Net decrease in cash | (1,327,254 | ) | (255,245 | ) | ||||
| Cash, beginning of period | 1,800,202 | 313,735 | ||||||
| Cash, end of period | $ | 472,948 | $ | 58,490 | ||||
| Supplemental disclosure information: | ||||||||
| Cash paid for income tax | 18,816 | - | ||||||
| Cash paid for interest | - | - | ||||||
Exhibit 99.2
DARKIRIS INC.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2026 AND SEPTEMBER 30, 2025 AND
FOR THE SIX MONTHS ENDED MARCH 31, 2026 AND 2025
| F-1 |
DARKIRIS INC.
TABLE OF CONTENTS
| F-2 |
DarkIris Inc.
Condensed Consolidated Balance Sheets
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Intangible assets under construction | ||||||||
| Intangible assets, net | ||||||||
| Security deposits | ||||||||
| Property and equipment, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Contract liabilities | ||||||||
| Share capital subscription | ||||||||
| Taxes payable | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities and total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Class A ordinary shares ($ par value, shares authorized, shares issued and outstanding as of March 31, 2026 and September 30, 2025, respectively) * | ||||||||
| Class B ordinary shares ($ par value, shares authorized, shares issued and outstanding as of March 31, 2026 and September 30, 2025, respectively) * | ||||||||
| Ordinary shares value | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficits | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-3 |
DarkIris Inc.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
| - | 2026 | 2025 | ||||||
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling expenses | ( | ) | ||||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| (Loss) income from operations | ( | ) | ||||||
| Other income: | ||||||||
| Government subsidy income | ||||||||
| Interest income | ||||||||
| Other income | ||||||||
| Total other income, net | ||||||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax expenses | ( | ) | ( | ) | ||||
| Net (loss) income | ( | ) | ||||||
| Other comprehensive (loss) income: | ||||||||
| Foreign currency translation loss | ( | ) | ||||||
| Comprehensive (loss) income | $ | ( | ) | $ | ||||
| (Loss) earnings per share | ||||||||
| Basic and diluted | $ | ) | $ | |||||
| Weighted average shares outstanding | ||||||||
| Basic and diluted * | ||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-4 |
DarkIris Inc.
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity
For the Six Months Ended March 31, 2026 and 2025
| Accumulated | ||||||||||||||||||||||||||||||||
| Class A | Class B | Additional | other | Total | ||||||||||||||||||||||||||||
| ordinary shares* | ordinary shares* | paid-in | (Accumulated | comprehensive | shareholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | deficits) | loss | equity | |||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Capital contribution | - | - | ||||||||||||||||||||||||||||||
| Net income for the period | - | - | ||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | ||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Income (loss) for the period | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-5 |
DarkIris Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
| 2026 | 2025 | |||||||
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation expense | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Amortization of intangible assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Security deposit | ||||||||
| Accounts payable | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Taxes payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Intangible assets under construction | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from capital contribution | ||||||||
| Advances from shareholders | ||||||||
| Repayments to shareholders | ( | ) | ||||||
| Deferred initial public offering costs | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure information: | ||||||||
| Cash paid for income tax | ||||||||
| Cash paid for interest | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-6 |
DARKIRIS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars, except for the number of shares)
Note 1 – Organization and principal activities
DarkIris Inc. (“DarkIris”) is a holding company incorporated under the laws of the Cayman Islands on May 31, 2024. The principal activities of DarkIris and its subsidiaries (collectively the “Company”) are software development, internet sales, wholesale and retail of cultural products.
Reorganization
In
connection with its initial public offering, the Company undertook a reorganization of its legal structure (the “Reorganization”).
The Reorganization involved: (1) the incorporation of DarkIris, a Cayman Islands holding company; (2) reorganized Quantum Arts Co., Limited
(“Quantum”), incorporated in Hong Kong China on
Prior to the reorganization, equity interest in Quantum and Turing were owned by Xiamen Xiqi Network Co., Ltd (“Xiqi”) and Xiqi was collectively owned by 11 shareholders. On January 16, 2025, Quantum was reorganized as a wholly owned subsidiary of DarkIris. On February 24, 2025, Turin was reorganized as a wholly owned subsidiary of Quantum.
On
November 4, 2024, DarkIris acquired
On
May 14, 2025, Quantum entered into a share transfer agreement with Xiamen Yusanjia Culture Communication Co., Ltd (“Xiamen Yusanjia”),
an unaffiliated third party, to transfer all outstanding shares of Turing, at the price approximately at RMB
On
October 11, 2025, DarkIris Digital Technology (Xiamen) Co., Ltd (“DarkIris Digital”) was incorporated under the laws of PRC
and Quantum owns
On
February 26, 2026, Aether Intelligence Pte. Ltd. (“Aether”) was incorporated under the laws of Singapore and DarkIris owns
Details of the Company and its subsidiaries are set out below:
Schedule of subsidiaries company
| Date of | Place of | % of | ||||||
| Name of Entity | Incorporation | Incorporation | Ownership | Principal Activities | ||||
| DarkIris | Parent | |||||||
| Quantum | ||||||||
| Stellar | ||||||||
| DarkIris Digital | ||||||||
| Aether |
| F-7 |
Liquidity
In assessing the Company’s liquidity and substantial doubt about its ability to continue as a going concern, the Company monitors and analyzes cash on-hand and operating expenditure commitments. The Company’s liquidity needs are to meet working capital requirements and operating expense obligations. To date, the Company financed its operations primarily through a combination of existing cash resource, cash generated by operating activities, and periodic issuance of common shares.
The
accompanying unaudited condensed consolidated financial statements do not include any adjustments or classifications that may result
from the possible inability of the Company to continue as a going concern. The accompanying unaudited condensed financial statements
have been prepared on a basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company recorded net losses of approximately $
In evaluating if there is substantial doubt about the ability to continue as a going concern, the Company is trying to alleviate the going concern risk through (1) equity or debt financing, and (2) reducing cash used in operating activities, to meet the anticipated working capital requirements for at least the next 12 months. The Company may, however, need additional capital in the future to fund its further expansion. If the Company determines that its cash requirements exceed the amount of cash it has on hand at the time, the Company may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to shareholders of the Company.
As a result, the Company prepared the unaudited condensed consolidated financial statements assuming the Company will continue as a going concern. However, there is no assurance that the measures above can be achieved as planned. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Summary of significant accounting policies
Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal years ended September 30, 2025 and 2024. Operating results for the six months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending September 30, 2026.
The unaudited condensed consolidated financial statements of the Company reflect the principal activities of the Company’s main operation subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
Use of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the unaudited condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include allowance for credit losses, the useful lives of intangible assets, and property and equipment, and the valuation of deferred tax assets. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. A change in accounting estimates shall be accounted for in the period of change if the change affects that period only or in the period of change and future periods if the change affects both. A change in accounting estimates shall not be accounted for by restating or retrospectively adjusting amounts reported in financial statements of prior periods or by reporting pro forma amounts for prior periods.
| F-8 |
Foreign currency translation and transaction
The functional and reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiary operating in China uses Renminbi (“RMB”) as the functional currency.
The financial statements of the Company and its subsidiaries, other than subsidiaries with functional currency of US$, are translated into US$ using the exchange rate as of the balance sheet date for assets and liabilities and average exchange rate for the year for income and expense items. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in consolidated statements of changes in shareholders’ equity (deficit). Translation gains and losses are recognized in the consolidated statements of operations and comprehensive income (loss) as other comprehensive income or loss.
For
the Company, except for the shareholders’ equity, the balance sheet accounts as of March 31, 2026 and September 30, 2025 were translated
at RMB
Cash
The
Company maintains cash with various financial institutions primarily in China. Cash maintained in banks within the PRC of less than RMB
Accounts receivable
Accounts receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the historical carrying amount net of allowance for credit losses.
The Company maintains an allowance for credit losses which reflects its best estimate of amounts that potentially will not be collected. The Company determines the allowance for credit losses taking into consideration various factors including but not limited to historical collection experience and credit-worthiness of the debtors as well as the age of the individual receivables balance. The Company establishes an allowance for credit losses when there is objective evidence that the Company may not be able to collect amounts due. The allowance is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive income (loss). As of March 31, 2026 and September 30, 2025, allowance for credit losses was and , respectively.
| F-9 |
Intangible assets under construction
The intangible assets under construction resulting from payment to game development to game developers (or of a development phase of an internal project) are recognized if, and only if, all of the following conditions are met: (i) technical feasibility to complete the intangible asset so it will be available for use or sale; (ii) the intention to complete the intangible asset and use it or sell it; (iii) ability to use or sell the intangible asset, (iv) how the intangible asset will generate probable future economic benefits; (v) the availability of proper technical, financial, and other resources to complete the development of the intangible asset and to use it or sell it, and (vi) the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for intangible assets corresponds to the sum of expenses incurred since the intangible asset started to meet the recognition criteria mentioned above until the moment it is considered finished and begins its value generation. After the closure of each game development, the initially recognized amount of intangible assets corresponds to the sum of the expenses incurred since the intangible asset started meeting the aforementioned recognition criteria, and the initial recognized amount of intangible assets are amortized over their estimated useful lives. After the initial recognition, the carrying amount of the intangible assets are recorded at cost less amortization expenses, and the carrying amount of the intangible assets are reviewed for impairment if indicators of impairment arise.
The Company evaluates the recoverability of intangible assets whenever events or circumstances indicate that the carrying amount of the intangible assets may not be recoverable. The estimation of recoverable amounts is sensitive to key assumptions including the discount rate used in determining present values, expected future cash-inflows and the long-term growth rate used for estimating cash flows in perpetuity. Recoverability of intangible assets are measured by comparison of the carrying amount of the intangible asset to the future discounted cash flows the intangible asset is expected to generate. If the intangible asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. For the six months ended March 31, 2026 and 2025, there were no impairment expenses of intangible assets.
When the criteria for capitalization are not met, the Company recognizes game development expenses in income (loss) for the period, when incurred. Expenses for game modification are recognized in the period in which they are incurred.
Intangible asset, net
The
Company’s intangible assets with definite useful lives primarily are purchased games. The Company typically amortizes intangible
assets with definite useful lives on a straight-line basis over estimated useful lives of
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and impairment, if any. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
Schedule of useful lives of property, plant and equipment
| Category | Estimated useful lives | |
| Office equipment |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations and comprehensive income (loss). Expenditures on maintenance and repairs are charged to expenses as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized.
| F-10 |
Impairment for long-lived assets
Long-lived assets, including intangible assets under construction, intangible assets, and property and equipment with finite lives, are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the discounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated discounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of March 31, 2026 and September 30, 2025, impairment of long-lived assets was .
Operating leases
The Company accounts for operating leases following ASC 842, Leases (“Topic 842”). The Company, through its subsidiary, leases its offices, which are classified as operating leases in accordance with Topic 842. Operating leases are required to record in the balance sheet as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, and (3) initial direct costs for any expired or existing leases as of the adoption date. The Company elected the short-term lease exemption for the lease terms that are 12 months or less.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset and whether it has the right to control the use of the asset. The right-of-use assets and related lease liabilities are recognized at the lease commencement date. The Company recognizes operating lease expenses on a straight-line basis over the lease term and had no finance leases for any of the periods stated herein.
The
right-of-use of asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and less any lease incentive received. All right-of-use
assets are reviewed for impairment annually. There was
Fair value measurement
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | 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 reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
| F-11 |
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
The carrying amounts reported in the balance sheets of cash, accounts receivable, prepaid expenses and other current assets, security deposits, accounts payable, contract liabilities, taxes payable, accrued expenses, approximate their fair market value based on the short-term nature of these instruments. The Company did not have any non-financial assets or liabilities that are measured at fair value on a recurring basis as of March 31, 2026 and September 30, 2025.
Accounts payable
Accounts payable represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are settled on normal commercial terms.
Related party transactions
A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the Company’s securities (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.
Revenue recognition
The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) on April 1, 2019. Accordingly, the consolidated financial statements for the six months ended March 31, 2025, and 2024 are presented under ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. To determine revenue recognition for contracts with customers, the Company performs the following five steps : (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligation. VAT that the Company collects concurrent with revenue-producing activities is excluded from revenue.
The Company follows the requirements of Topic 606-10-55-36 through -40, Revenue from Contracts with Customers, Principal Agent Considerations, in determining the gross versus net revenue recognition for performance obligation(s) in the contract with a customer. Revenue recorded with the Company acting in the capacity of a principal is reported on a gross basis equal to the full amount of consideration to which the Company expects in exchange for the good or service transferred. Revenue recorded with the Company acting in the capacity of an agent is reported on a net basis, exclusive of any consideration provided to the principal party in the transaction.
The Company principal business is the development, publishing and operating mobile digital games via various third-party digital storefronts. Revenue is primarily derived from sales of mobile in-app purchases, virtual goods and downloadable content that can be purchased by the end users, as desired. When control of the promised products and services is transferred to the customers, the Company recognizes revenue in the amount that reflects the consideration it expects to receive in exchange for these products and services. Revenue from delivery of products is recognized at a point in time when the end consumers download the virtual goods and content.
| F-12 |
Principal vs Agent Consideration
The Company offers certain software products via third-party digital storefronts, such as the Apple App Store and the Google Play Store. For sales of software products via third-party digital storefronts and retail distributor, the Company determines whether or not the Company is acting as the principal in the sale to the end user, which the Company considers in determining if revenue should be reported based on the gross transaction price to the end user or based on the transaction price net of fees retained by the third-party digital storefront. An entity is the principal if it controls a good or service before it is transferred to the customer. Key indicators that the Company uses in evaluating these sales transactions include, but are not limited to, the following:
| ● | The underlying contract terms and conditions between the various parties to the transaction; | |
| ● | Which party is primarily responsible for fulfilling the promise to provide the specified good or service; and | |
| ● | Which party has discretion in establishing the price for the specified good or service. |
Based on evaluation of the above indicators, for sales arrangements via the Apple App Store, the Google Play Store, and other third party digital platforms, the Company has discretion in establishing the price for the specified good or service and the Company determined that the Company is the principal to the end user and thus report revenue on a gross basis and mobile platform fees charged by these digital storefronts are expensed as incurred and reported within cost of revenues.
For the six months ended March 31, 2026 and 2025, there was no revenue recognized on a net basis where the Company is acting as an agent.
Contract balances and remaining performance obligations
Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs.
The
Company’s contract liabilities include unused in-game credit of $
Segment reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company’s chief operating decision maker in order to allocate resources and assess performance of the segment.
In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making Company, in deciding how to allocate resources and in assessing performance. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM has been identified as the chief executive officer (the “CEO”), who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The Company has determined that there is only one reportable operating segment.
Cost of revenue
Cost of revenue consists primarily of platform handling fees, revenue sharing with game developers, and cloud server costs.
| F-13 |
Selling expenses
Selling expenses mainly include advertising expenses for promoting mobile digital games.
Government grants
Government
subsidy income represent cash subsidies received from PRC government. Cash subsidies which have no defined rules and regulations to govern
the criteria necessary for companies to enjoy the benefits are recognized when received. Such subsidies are generally provided as incentives
from the local government to encourage the expansion of local business. There is no guarantee that the Company will continue to receive
such government subsidy income in the future. For the six months ended March 31, 2026, and 2025, the Company had the following government
subsidy income: personal income tax subsidy of and $
Value-added taxes
Revenue represents the invoiced value of goods and services, net of VAT. The VAT is based on gross sales price and VAT rates range up to 13%, depending on the type of products sold or service provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. All of the VAT returns filed by the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of filing.
Income taxes
The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company believes there were no uncertain tax positions on March 31, 2026 and September 31, 2025, respectively.
The Company’s affiliated entities in the PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances. As of March 31, 2026, the tax years for the Company’s affiliated entities in the PRC remain open for statutory examination by PRC tax authorities. There were no ongoing examinations by tax authorities as of March 31, 2026 and September 30, 2025.
Comprehensive income (loss)
Comprehensive income (loss)is defined as the increase in equity of the Company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Amongst other disclosures, ASC 220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Company’s comprehensive income (loss) included net income and foreign currency translation adjustments that are presented in the unaudited condensed consolidated statements of comprehensive income (loss).
| F-14 |
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing income available to ordinary shareholders of the Company by the weighted average ordinary shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. As of March 31, 2026 and September 30, 2025, there was no dilution impact.
Diluted earnings per share is calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of March 31, 2026 and September 30, 2025, there were dilutive shares.
On
May 11, 2026, the Company effected a one-for-sixteen (
Risks and uncertainties
The Company does not carry any business interruption insurance, product liability insurance, or any other insurance policy. As a result, the Company may incur uninsured losses, increasing the possibility that investors would lose their entire investment in the Company.
Recent accounting pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
In November 2024, the FASB issued ASU 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. This ASU may be applied either on a prospective or retrospective basis. We are currently evaluating the impact of this standard on our disclosures.
In January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40),which 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. Early adoption of Update 2024-03 is permitted.
In May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), Clarifications to Share-Based Consideration Payable to a Customer, which revised the Master Glossary definition of the term performance condition for share-based consideration payable to a customer. The revised definition incorporates conditions (such as vesting conditions) that are based on the volume or monetary amount of a customer’s purchases (or potential purchases) of goods or services from the grantor (including over a specified period of time). The revised definition also incorporates performance targets based on purchases made by other parties that purchase the grantor’s goods or services from the grantor’s customers. The revised definition of the term performance condition cannot be applied by analogy to awards granted to employees and nonemployees in exchange for goods or services to be used or consumed in the grantor’s own operations. Although it is expected that entities will conclude that fewer awards contain service conditions, for those that are determined to have service conditions, the amendments in this Update eliminate the policy election permitting a grantor to account for forfeitures as they occur. Therefore, when measuring share-based consideration payable to a customer that has a service condition, the grantor is required to estimate the number of forfeitures expected to occur. Separate policy elections for forfeitures remain available for share-based payment awards with service conditions granted to employees and nonemployees in exchange for goods or services to be used or consumed in the grantor’s own operations. The amendments in this Update clarify that share-based consideration encompasses the same instruments as share-based payment arrangements, but the grantee does not need to be a supplier of goods or services to the grantor. Finally, the amendments in this Update clarify that a grantor should not apply the guidance in Topic 606 on constraining estimates of variable consideration to share-based consideration payable to a customer. Therefore, a grantor is required to assess the probability that an award will vest using only the guidance in Topic 718. Collectively, these changes improve the decision usefulness of a grantor’s financial statements, improve the operability of the guidance, and reduce diversity in practice for accounting for share-based consideration payable to a customer. Under the amendments in this Update, revenue recognition will no longer be delayed when an entity grants awards that are not expected to vest. This is expected to result in estimates of the transaction price that better reflect the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer and, therefore, more decision-useful financial reporting.
| F-15 |
The amendments in this Update are effective for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) beginning after December 15, 2026. Early adoption is permitted for all entities. The amendments in this Update permit a grantor to apply the new guidance on either a modified retrospective or a retrospective basis. When applying the amendments in this Update on a modified retrospective basis, a grantor should recognize a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of 4 equity or net assets in the statement of financial position) as of the beginning of the period of adoption and should not recast any financial statement information before the period of adoption. A grantor should apply the amendments as of the date of initial application to all share-based consideration payable to a customer. When applying the amendments in this Update on a retrospective basis, a grantor should recast comparative periods and recognize a cumulative-effect adjustment to 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 period presented. Additionally, an entity that elects to apply the guidance retrospectively should use the actual outcome, if known, of a performance condition or service condition as of the beginning of the annual reporting period of adoption for all prior-period estimates. If actual outcomes are unknown as of the beginning of the annual reporting period of adoption, an entity should use its estimate of the probability of achieving a service condition or performance condition as of the beginning of the annual reporting period of adoption for all prior-period estimates.
In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) - Targeted Improvements to the Accounting for Internal-Use Software”, the amendments in this Update remove all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40. Therefore, an entity is required to start capitalizing software costs when both of the following occur: 1. Management has authorized and committed to funding the software project. 2. It is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”). In evaluating the probable-to-complete recognition threshold, an entity is required to consider whether there is significant uncertainty associated with the development activities of the software (referred to as “significant development uncertainty”). The two factors to consider in determining whether there is significant development uncertainty are whether: 1. The software being developed has technological innovations or novel, unique, or unproven functions or features, and the uncertainty related to those technological innovations, functions, or features, if identified, has not been resolved through coding and testing. 2. The entity has determined what it needs the software to do (for example, functions or features), including whether the entity has identified or continues to substantially revise the software’s significant performance requirements. The amendments in this Update specify that the disclosures in Subtopic 360- 10, Property, Plant, and Equipment—Overall, are required for all capitalized internal-use software costs, regardless of how those costs are presented in the financial statements. Additionally, the amendments clarify that the intangibles disclosures in paragraphs 350-30-50-1 through 50-3 are not required for capitalized internal-use software costs. Furthermore, the amendments in this Update supersede the website development costs guidance and incorporate the recognition requirements for website-specific development costs from Subtopic 350-50 into Subtopic 350-40. 4 within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments in this Update permit an entity to apply the new guidance using any of the following transition approaches: 1. A prospective transition approach 2. A modified transition approach that is based on the status of the project and whether software costs were capitalized before the date of adoption 3. A retrospective transition approach. Under a prospective transition approach, an entity should apply the amendments in this Update to new software costs incurred as of the beginning of the period of adoption for all projects, including in-process projects. Under a modified transition approach, an entity should apply the amendments in this Update on a prospective basis to new software costs incurred (for all projects, including costs incurred for in-process projects), except for in-process projects that, as of the date of adoption, the entity determines do not meet the capitalization requirements under the amendments but meet the capitalization requirements under current guidance. For those in-process projects, an entity should derecognize any capitalized costs through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the date of adoption. Under a retrospective transition approach, an entity should recast comparative periods and recognize a cumulative-effect adjustment to 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 first period presented.
| F-16 |
In September 2025, the FASB issued ASU 2025-07, “Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) - Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract”, the amendments in this Update exclude from derivative accounting nonexchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract. However, this scope exception does not apply to (1) variables based on a market rate, market price, or market index, (2) variables based on the price or performance of a financial asset or financial liability of one of the parties to the contract, (3) contracts (or features) involving the issuer’s own equity that are evaluated under the guidance in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and (4) call options and put options on debt instruments. 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. An entity is permitted to apply the amendments in this Update either (1) prospectively to new contracts entered into on or after the date of adoption or (2) on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption for contracts existing as of the beginning of the annual reporting period of adoption. If an entity applies the modified retrospective transition method described in the preceding paragraph, upon adoption the entity may elect on an instrument-by-instrument basis to (1) measure contracts previously accounted for as derivatives that are no longer accounted for as derivatives in their entirety under the amendments in this Update at fair value with changes in fair value recognized in earnings and (2) stop applying the fair value option for contracts that contained embedded features that otherwise would have been bifurcated but are no longer accounted for as derivatives under the amendments in this Update.
The amendments in this Update clarify that an entity should apply the guidance in Topic 606, including the guidance on noncash consideration in paragraphs 606-10-32-21 through 32-24, to a contract with share-based noncash consideration (for example, shares, share options, or other equity instruments) from a customer for the transfer of goods or services. The guidance in other Topics (including Topic 815 on derivatives and hedging and Topic 321 on equity securities) does not apply to share-based noncash consideration from a customer for the transfer of goods or services unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under Topic 606. 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. An entity is permitted to apply the amendments in this Update either (1) prospectively to new contracts entered into on or after the date of adoption, including modified contracts accounted for as separate contracts in accordance with paragraph 606-10-25-12, or (2) on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption for contracts existing as of the beginning of the annual reporting period of adoption.
In November 2025, the FASB issued ASU 2025-08, “Financial Instruments—Credit Losses (Topic 326) Purchased Loans”, the amendments in this update expand the population of acquired financial assets subject to the gross-up approach in Topic 326. In accordance with the amendments in this Update, loans (excluding credit cards) acquired without credit deterioration and deemed “seasoned” (defined below) are purchased seasoned loans and accounted for using the gross-up approach at acquisition. Specifically, after an entity determines that a loan is a non-PCD asset based on its assessment of credit deterioration experienced since origination, the entity should apply the guidance described in the amendments to determine whether the loan is seasoned and, therefore, should be accounted for using the gross-up approach. All non-PCD loans (excluding credit cards) that are acquired in a business combination are deemed seasoned. Other non-PCD loans (excluding credit cards) are seasoned if they were purchased at least 90 days after origination and the acquirer was not involved in the origination of the loans. 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. The amendments in this Update should be applied prospectively to loans that are acquired on or after the initial application date. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim reporting period, it should apply the amendments as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period.
| F-17 |
In November 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 815) Hedge Accounting Improvements”, Issue 1: Similar Risk Assessment for Cash Flow Hedges - the amendments in this Update expand the hedged risks permitted to be aggregated in a group of individual forecasted transactions in a cash flow hedge by changing the requirement to designate a group of individual forecasted transactions from having a shared risk exposure to having a similar risk exposure. Entities are required to assess risk similarity both at hedge inception and on an ongoing basis. The amendments also clarify that a group of individual forecasted transactions can be considered to have a similar risk exposure if the derivative used as the hedging instrument is highly effective against each hedged risk in the group. In addition, in some cases, entities are permitted to perform an ongoing qualitative assessment of whether a group of individual forecasted transactions has a similar risk exposure. The amendments in this Update improve GAAP by expanding the hedged risks permitted to be aggregated in a group of individual forecasted transactions, thereby enabling entities to apply hedge accounting to potentially broader portfolios of forecasted transactions. Entities that aggregate larger groups of individual forecasted transactions in accordance with the amendments can achieve hedge accounting in a more efficient, cost-effective manner while reducing the risk of missed forecasts for highly effective economic hedges. Furthermore, the amendments improve operability and foster consistent application of the similar risk assessment. Therefore, an entity’s financial statements can provide more relevant information to investors about the entity’s risk management activities related to cash flow hedges of groups of forecasted transactions. 4 The amendments in this Update improve GAAP because the application of hedge accounting will not be limited by whether the execution of the nonfinancial purchase or sale transaction is in the spot or forward market. Relative to current GAAP, which limits designation of nonfinancial components to those that are contractually specified, a model based on the clearly-and-closely-related criteria permits hedge accounting for eligible components of forecasted spot-market transactions, forward-market transactions, and subcomponents of explicitly referenced components in an agreement’s pricing formula. Furthermore, the amendments also may enable entities to reduce missed forecasts for highly effective economic hedges, more closely aligning hedge accounting with the economics of entities’ risk management activities. The amendments in this Update also clarify that entities may designate a variable price component in a contract that is accounted for as a derivative as the hedged risk if all other hedge criteria are satisfied. That clarification improves GAAP because it resolves diversity in practice about whether hedge accounting may be applied in those situations and allows hedge accounting to be applied to highly effective economic hedges. Issue 4: Net Written Options as Hedging Instruments The amendments in this Update on the use of net written options as hedging instruments improve GAAP by updating the hedge accounting guidance to accommodate differences in the loan and swap markets that developed after the cessation of the London Interbank Offered Rate. Specifically, the amendments in this Update eliminate the requirement to apply the net written option test to a compound derivative comprising a swap and a written option designated as the hedging instrument in a cash flow hedge or a fair value hedge of interest rate risk. Issue 5: Foreign-Currency-Denominated Debt Instrument as Hedging Instrument and Hedged Item (Dual Hedge) The amendments in this Update eliminate the recognition and presentation mismatch related to a dual hedge strategy (that is, a hedge for which a foreign currency-denominated debt instrument is both designated as the hedging instrument in a net investment hedge and designated as the hedged item in a fair value hedge of interest rate risk). The amendments require that an entity exclude the debt instrument’s fair value hedge basis adjustment from the net 5 investment hedge effectiveness assessment. As a result, an entity immediately recognizes in earnings the gains and losses from the remeasurement of the debt instrument’s fair value hedge basis adjustment at the spot exchange rate. Entities are prohibited from applying this guidance by analogy to other circumstances. The amendments in this Update improve GAAP by enabling entities that utilize dual hedging strategies to reflect the economic offset of changes attributable to both interest rate risk and foreign exchange risk. For public business entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. For entities other than public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted on any date on or after the issuance of this Update. Entities should apply the amendments in this Update on a prospective basis for all hedging relationships. An entity may elect to adopt the amendments in this Update for hedging relationships that exist as of the date of adoption. Upon adoption of the amendments in this Update, entities are permitted to modify certain critical terms of certain existing hedging relationships without dedesignating the hedge.
| F-18 |
In December 2025, the FASB issued ASU 2025-10, “Government Grants (Topic 832) Accounting for Government Grants Received by Business Entities”, The amendments in this Update establish the accounting for a government grant received by a business entity, including guidance for (1) a grant related to an asset and (2) a grant related to income. A grant related to an asset is a government grant, or part of a government grant, that is conditioned on the purchase, construction, or acquisition of an asset (for example, a long-lived asset or inventory). A grant related to income is a government grant, or part of a government grant, other than a grant related to an asset (for example, a grant that reimburses a business entity for operating expenses). The amendments in this Update require that a government grant received by a business entity should not be recognized until: 1. It is probable that (a) a business entity will comply with the conditions attached to the grant and (b) the grant will be received. 2. A business entity meets the recognition guidance for a grant related to an asset or a grant related to income. 3 The amendments in this Update require that a grant related to an asset be recognized on the balance sheet as a business entity incurs the related costs for which the grant is intended to compensate, either as: 1. Deferred income (the deferred income approach) 2. An adjustment to the cost basis in determining the carrying amount of the asset (the cost accumulation approach). A grant related to income and a grant related to an asset for which the deferred income approach is elected should be recognized in earnings on a systematic and rational basis over the periods in which a business entity recognizes as expenses the costs for which the grant is intended to compensate. When a business entity elects the cost accumulation approach for a grant related to an asset, there is no separate subsequent recognition of the government grant proceeds in earnings. The carrying amount of the asset that reflects the government grant proceeds would be used to determine depreciation or other subsequent accounting for that asset. The amendments in this Update require that a business entity present a grant related to income and a grant related to an asset for which the deferred income approach is elected as part of earnings either (1) separately under a general heading such as other income or (2) deducted from the related expense. In addition, the amendments in this Update require, consistent with current disclosure requirements, that a business entity provide disclosures, including the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant. 5 Under a modified prospective approach, prior-period results should not be restated and there is no cumulative-effect adjustment. 2. A modified retrospective approach to both: a. Government grants that are entered into on or after the beginning of the earliest period presented b. Government grants that are not complete as of the beginning of the earliest period presented. A government grant is complete when substantially all of the government grant proceeds have been recognized before the beginning of the earliest period presented. Under a modified retrospective approach, all prior period results should be restated for government grants that are not complete as of the beginning of the earliest period presented through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented. 3. A retrospective approach to all government grants through a cumulative effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented.
In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270) Narrow-Scope Improvements”, the amendments in this Update clarify interim disclosure requirements and the applicability of Topic 270. The amendments in this Update result in a comprehensive list of interim disclosures that are required by GAAP. In developing the list of disclosures required by other Topics, the Board focused on identifying the interim disclosures that are currently required under GAAP. The objective of the amendments is to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in this Update also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The intent of the disclosure principle, which is modeled after a previous SEC disclosure requirement, is to help entities determine whether disclosures not specified in Topic 270 should be provided in interim reporting periods. The amendments in this Update also clarify the applicability of Topic 270, the types of interim reporting, and the form and content of interim financial statements in accordance with GAAP. The Board expects that these clarifications will enhance consistency in interim reporting for all entities. The Board considers the amendments in this Update to be necessary to reflect the development of interim reporting over time. The amendments in this Update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, for public business entities and for interim reporting periods within annual reporting 3 periods beginning after December 15, 2028, for entities other than public business entities. Early adoption is permitted for all entities. The amendments in this Update can be applied either (1) prospectively or (2) retrospectively to any or all prior periods presented in the financial statements.
| F-19 |
In December 2025, the FASB issued ASU 2025-12, “Codification Improvements”, thirty-three issues are addressed in this Update. Generally, the amendments in this Update are not intended to result in significant changes for most entities. However, the Board recognizes that changes to guidance may result in accounting changes for some entities. Therefore, the Board is providing transition guidance for the amendments. 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. 12 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: 1. Prospectively to all transactions recognized on or after the date that the entity first applies the amendments 2. 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. An entity may elect the transition method on an issue-by-issue basis. For example, it may apply certain amendments prospectively while applying others retrospectively. For the amendments in this Update to Topic 260 (that is, Issue 4), an entity should apply the amendments retrospectively to each prior reporting period presented in the period of adoption.
In April, the FASB issued ASU 2026-01, Equity (Topic 505) Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The amendments in this Update require that PIK dividends on equity-classified preferred stock be initially measured on the basis of the PIK dividend rate stated in the preferred stock agreement. For example, if the preferred stock agreement specifies that PIK dividends are calculated by multiplying the PIK dividend rate by the liquidation value of the preferred stock outstanding, an entity should initially measure the PIK dividend at that amount. The liquidation value (or liquidation preference) of the preferred stock is typically defined by the preferred stock agreement and specifies the value of the preferred stock upon the occurrence of a liquidation event (such as the entity becoming insolvent). When preferred stock is not issued at a discount or premium, the liquidation value upon initial issuance is typically the same as the original issuance price of the preferred stock. The amendments in this Update improve GAAP by providing authoritative guidance for the initial measurement of PIK dividends on equity-classified preferred stock. Specifically, the amendments improve the decision usefulness of the financial reporting information provided to investors by (1) enhancing the comparability of financial information reported among entities that issue PIK dividends on equity-classified preferred stock and (2) providing additional information about the liquidation value of the preferred stock, which helps investors to understand the amount and preference of relative claims on an entity. The amendments also provide clear, cost-effective guidance that will reduce complexity. 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 an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. An entity adopting the amendments in an interim reporting period should apply them as of the beginning of the annual reporting period that includes that interim reporting period. An entity is permitted to apply the amendments in this Update either (1) on a prospective basis or (2) on a modified retrospective basis for equity-classified preferred stock instruments that are outstanding as of the initial application date. Under the prospective transition approach, an issuer should apply the amendments in this Update to PIK dividends recognized on equity-classified preferred stock instruments on or after the initial application date. Under the modified retrospective transition approach, an issuer should recast prior reporting periods presented and recognize a cumulative-effect adjustment to equity as of the beginning of the earliest period presented related to previously issued PIK dividends recognized on equity-classified preferred stock that is outstanding as of the initial application date.
| F-20 |
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). The amendments in this Update apply to all entities and affect entities that: 1. Buy or receive transferable environmental credits and use those credits: a. To settle environmental credit obligations arising from regulatory compliance programs b. To transfer in an exchange transaction c. In a nonreciprocal transfer (for example, to distribute to an investor) d. To meet voluntary environmental initiatives, such as carbon neutral or net zero initiatives. 2. Generate environmental credits. 3. Have enforceable obligations resulting from regulatory compliance programs represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. The amendments in this Update improve GAAP by providing specific authoritative guidance for environmental credits and environmental credit obligations. Environmental Credits Broadly, environmental credits as defined by the amendments in this Update are enforceable rights represented to prevent, control, reduce, or remove emissions or other pollution that are separately transferable in an exchange transaction. Entities can acquire environmental credits in an exchange transaction, receive environmental credits through a grant from a regulator or its designee(s) as part of a regulatory compliance program, internally generate environmental credits, or receive environmental credits in a nonreciprocal transfer that is not a grant from a regulator or its designee(s). Recognition and Measurement An entity is required to recognize an environmental credit as an asset when it is probable that the environmental credit will be (1) used to settle an environmental credit obligation, (2) transferred in an exchange transaction, or (3) used in a nonreciprocal transfer. An entity is required to recognize costs to obtain all other environmental credits as an expense when incurred (for example, environmental credits acquired to satisfy a voluntary net zero emission initiative). Environmental credits received through a grant from a regulator or internally generated by an entity initially should be measured at the amount of transaction costs incurred to obtain those environmental credits, if any. Environmental credits that are obtained in a transaction initially measured in accordance with a Topic other than Topic 818 should follow the requirements of that Topic. All other environmental credits should be initially measured at cost in accordance with the guidance on asset acquisitions in Subtopic 805-50, Business Combinations—Related Issues. At each reporting date, an entity is required to subsequently measure its environmental credits recognized as assets considering its intended use of those environmental credits. Specifically: 1. Compliance environmental credits. Environmental credits that an entity is probable of using to settle an environmental credit obligation should be subsequently measured at cost and not tested for impairment at each reporting date. 2. Noncompliance environmental credits. All other environmental credits owned by an entity should be subsequently measured at cost, less impairment losses, if any. Noncompliance environmental credits should be tested for impairment at each reporting date. Impairment expense should be recognized when the carrying value of a noncompliance environmental credit exceeds its fair value, measured as the excess of the carrying value over fair value. Subsequent reversal of a previously recognized impairment loss is prohibited. Additionally, an entity is permitted to elect an accounting policy to measure eligible classes of noncompliance environmental credits at fair value, with subsequent changes recognized in earnings. Presentation An entity is required to present its compliance environmental credit assets separately from its environmental credit obligation liabilities on the balance sheet. Disclosure An entity is required to disclose in annual reporting periods qualitative information about how it obtained and intends to use its environmental credits, the accounting policies used to account for environmental credits, and significant estimates and judgments used in applying the guidance. An entity also is required to disclose in annual reporting periods the current and noncurrent amounts of compliance environmental credits and noncompliance environmental credits (if not separately presented on a classified balance sheet), the total expense for voluntary environmental credits, and the total impairment expense.
| F-21 |
If an entity changes its use, or intended use, of its environmental credits, it is required for annual reporting periods to disclose the nature of that change as of the date that it occurs and the related effect on earnings on that date, if any. Environmental Credit Obligations Environmental credit obligations as defined by the amendments in this Update are enforceable obligations resulting from regulatory compliance programs represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. As a result, voluntary initiatives and similar statements of intent do not constitute an environmental credit obligation. Recognition and Measurement An entity is required to recognize an environmental credit obligation liability when events (for example, emissions) occurring on or before the reporting date result in an environmental credit obligation. In determining whether a liability should be recognized, the amendments in this Update require that an entity assume that the reporting date is the end of the compliance period regardless of whether the compliance period ends on that date. An entity is required to initially and subsequently measure an environmental credit obligation liability at each reporting date using the carrying amount of the compliance environmental credits that the entity holds and expects to use to settle that obligation at the reporting date (referred to as the funded portion of the liability). If an entity has insufficient compliance environmental credits at the reporting date to satisfy the liability, that unfunded portion should be initially and subsequently measured at the fair value of the environmental credits necessary to settle the unfunded portion at the reporting date, with certain exceptions. An environmental credit obligation liability should be derecognized when an entity remits the necessary environmental credits to a regulator. Disclosure An entity is required to disclose in annual reporting periods all of the following about regulatory compliance programs that result in the entity’s environmental credit obligation liabilities: 1. The activities or events that result in environmental credit obligation liabilities under those programs, including the nature and timing of settlement provisions 2. The accounting policies used to account for the environmental credit obligations 3. How the unfunded portion of an environmental credit obligation liability is measured 4. Significant estimates and judgments used in applying the guidance. An entity also is required to disclose in annual reporting periods: 1. The current and noncurrent amounts of the funded and unfunded portions of environmental credit obligation liabilities (if not separately presented on a classified balance sheet) 2. Total expense related to environmental credit obligation liabilities 3. Total costs associated with environmental credit obligation liabilities that are capitalized in the carrying amount of another asset during the reporting period in accordance with another Topic. For public business entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. For entities other than public business entities, the amendments are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. An entity should apply the amendments in this Update on a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets on the balance sheet) as of the beginning of the annual reporting period of adoption. An entity should not recast any financial statement information before the period of adoption. At the date of initial application, the entity should: 1. Recognize an environmental credit asset if it is probable that the entity will use the environmental credit to settle an environmental credit obligation, transfer the credit in an exchange transaction, or use the credit in a nonreciprocal transfer. For all other environmental credits (voluntary environmental credits), the entity should derecognize the carrying amount of those environmental credits unless that amount was capitalized as part of another asset (for example, inventory) before the date of initial application. An entity also should derecognize the carrying amount of an asset recognized for a nonrefundable deposit made to obtain voluntary environmental credits. 2. Measure environmental credits recognized as assets as follows: a. Compliance environmental credits. Using the entity’s carrying amount existing at the date of initial application. b. Noncompliance environmental credits. At the lower of the entity’s carrying amount of the environmental credits existing at the date of initial application and the fair value of the environmental credits at the date of initial application. c. Notwithstanding (a) and (b) above, an entity may elect to measure all of its environmental credits that were internally generated or received through a grant from a regulator or its designee(s) at their transaction costs, if any. d. Any class of eligible noncompliance environmental credits that an entity elects to measure at fair value. Using the fair value of those environmental credits at the date of initial application. 3. Continue to include the cost of environmental credits capitalized as part of another asset (for example, manufactured inventory) before the date of initial application as part of the carrying amount of that other asset. 4. Recognize and measure environmental credit obligation liabilities by applying the amendments at the date of initial application. 5. Apply the amendments to Topic 805, Business Combinations, prospectively to transactions occurring after the date of initial application.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of operations, cash flows, and disclosures.
| F-22 |
Note 3. Accounts receivable, net
Accounts receivable consisted of the following:
Schedule of accounts receivable, net
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ||||||||
| Accounts receivable, net | $ | $ | ||||||
Note 4. Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following:
Schedule of prepaid expenses and other current assets
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| Prepaid expenses | $ | $ | ||||||
| Security deposits | ||||||||
| Prepaid income sharing | ||||||||
| VAT receivables | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
Note 5. Intangible assets under construction
Intangible assets under construction relate to payment for game developments, the expected time for completion ranging from April 2026 to July 2026.
Note 6. Intangible assets, net
Intangible assets, net, consisted of the following:
Schedule of intangible assets
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| Purchased games | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization
expense for the six months ended March 31, 2026 and 2025 amounted to $
Estimated future amortization expense is as follows:
Schedule of amortization expenses
| Amortization | ||||
| Twelve months ending September 30, | expense | |||
| For the remaining of Fiscal 2026 | $ | |||
| Fiscal 2027 | ||||
| Fiscal 2028 | ||||
| Fiscal 2029 | ||||
| Fiscal 2030 | ||||
| Total | $ | |||
| F-23 |
Note 7. Property and equipment, net
Property and equipment, net, consisted of the following:
Schedule of property and equipment
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| Office equipment | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Depreciation
expense for the six months ended March 31, 2026 and 2025 amounted to $
Note 8. Accrued expenses
Accrued expenses consisted of the following:
Schedule of accrued expenses
| As of | As of | |||||||
| March 31, | September 30, | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | (audited) | |||||||
| Salaries payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total | $ | $ | ||||||
Note 9. Income taxes
The Company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled.
Cayman Islands
DarkIris is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, DarkIris is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands.
Hong Kong
In
accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within
Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2018/2019 onwards, Hong Kong profit tax rates are
PRC
Generally,
entities that are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable
income as determined under PRC tax laws and accounting standards at a rate of
| F-24 |
The income tax expenses consisted of the following components:
Schedule of income tax expense
| 2026 | 2025 | |||||||
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Current income tax expenses | $ | $ | ||||||
| Deferred income tax expenses | ||||||||
| Total income tax expenses | $ | $ | ||||||
A reconciliation of the Company’s Hong Kong (“HK”) statutory tax rate to the effective income tax rate during the periods is as follows:
Schedule of effective income tax rate reconciliation
| 2026 | 2025 | |||||||
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Income tax expense with HK statutory tax rate | % | % | ||||||
| Tax effect of preferential tax treatments | ( | )% | ||||||
| Change of valuation allowance | ( | )% | ( | )% | ||||
| Statutory income tax rate differential | ( | )% | ||||||
| Effective income tax rate | % | % | ||||||
In September 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosure which effective for annual periods beginning after December 15, 2025 which did not have a material effect on the Company’s financial position, result of operations, cash flows or disclosure.
Note 10. Equity
Ordinary Shares
On
May 31, 2024, the authorized share capital of the Company is $
On May 31, 2024, the Company issued ordinary shares to shareholders at par value of $ each.
On
February 27, 2025, the Company re-designated and re-classified its authorized share capital from $
In
May 2026, the Company consolidated its authorized, issued, and outstanding Class A ordinary shares and Class B ordinary shares of the
Company at a ratio of 16:1. After the share consolidation, the authorized share capital of the Company is $
As of March 31, 2025, after the share consolidation, the issuance of Class A ordinary shares and Class B ordinary shares was retrospectively adjusted to Class A ordinary shares, and to ordinary shares, respectively.
As of March 31, 2026, after the share consolidation, the issuance of Class A ordinary shares and Class B ordinary shares was retrospectively adjusted to Class A ordinary shares, and to ordinary shares, respectively.
| F-25 |
Capital contribution
In
February 2025, an investor subscribed ordinary shares of the Company at $ per share for
In
April 2026, the Company completed a $
Note 11. Concentration of major customers and suppliers
No single customer represented 10% or more of revenue for the six months ended March 31, 2026 and 2025.
As
of March 31, 2026, one receivable accounted for
For
the six months ended March 31, 2026, three major suppliers accounted for approximately
As
of March 31, 2026, three suppliers accounted for
Note 12. Related party transactions
The relationship and the nature of related party transactions are summarized as follow:
Schedule of relationship and the nature of related party transactions
| Name | Relationship with the Company | Nature of transactions | ||
| Xiamen Xiqi Network Technology Co., Ltd (“Xiqi”) | |
As of March 31, 2026 and September 30, 2025, the Company does not have any related party balance.
For the six months ended March 31, 2026, the Company did not have any related party transaction. For the six months ended March 31, 2025, the Company’s related parties provided working capital to support the Company’s operations when needed. The borrowings were unsecured, due on demand, and interest free. The following table summarizes borrowing transactions with the Company’s related parties:
Schedule of borrowing transactions related party
| Repayment | Borrowing | |||||||
| Name of related parties | Amount | Amount | ||||||
| Xiqi | $ | $ | ||||||
| F-26 |
Note 13. Commitments and Contingencies
Lease commitment
The
Company has three short-term office leases for operation with expiry dates of August 2026, October 2026, and February 2027, and the total
future minimum lease payment was $
Capital commitment
As
of March 31, 2026, the Company has $
Contingencies
To the best of the Company’s knowledge, there are no claims, lawsuits, investigations and proceedings, including unasserted claims against the Company that reasonably could have a material effect on the Company’s financial position, results, or cash flow.
Note 14. Subsequent events
| 1. | In April 2026, the Company
entered into a short video drama purchase agreement with a company incorporated in Hong Kong to purchase certain short video dramas
content (the “Short Video Drama Purchase Agreement”). The transaction contemplated by the Short Video Drama Purchase Agreement
was closed on April 24, 2026, under which the Company acquired a portfolio of 10 film and television intellectual property titles,
and the content acquisition of premium film and television IPs with a price of $ |
| 2. | In April 2026, the Company
completed a $ |
| 3. | In May 2026, the Company
consolidated its authorized, issued, and outstanding Class A ordinary shares and Class B ordinary shares of the Company at a ratio
of 16:1. After the share consolidation, the authorized share capital of the Company is $ |
| F-27 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our company’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
We manage our business by tracking certain performance metrics, including the number of active and paying gameplayers of our games using a combination of internal and third-party analytics tools, including such tools provided by Apple and Google. These key metrics are influenced by a variety of factors that may cause fluctuations on a quarterly basis, such as policies and restrictions imposed by platform providers, seasonality, user connectivity, conversion of users into paying users, and the addition of new content or storylines to certain games. In some cases, our operating metrics may not directly correlate with our revenue trends. Future growth in our player base will depend on our ability to retain existing players, attract new players, acquire or launch new games and features, and expand into new markets and distribution platforms.
The following operating metrics are the key performance indicators we use to evaluate our business. The primary drivers of changes in these metrics are listed below in order of importance:
Daily Active Users
We define Daily Active Users (DAU) as the number of individuals who played one of our games on a given calendar day. Under this metric, a player who plays two different games on the same day is counted as two DAUs. The Average DAU for a particular period is calculated by averaging the number of DAUs for each day within that period. We believe DAU is a useful metric to measure the scale and usage of our games on a specific day, and it more accurately reflects player engagement with our games.
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Quarterly Average DAU(1) | ||||||||
| Q1 (October 1 – December 31) | 6,767 | 4,164 | ||||||
| Q2 (January 1 – March 31) | 6,068 | 4,471 | ||||||
(1) Quarterly Average DAU refers to the Average DAU calculated on a quarterly basis, facilitating year-over year comparisons.
In the first quarter of 2026, the average DAU was 6,767, showing steady growth both quarter-on-quarter and year-on-year. The growth was primarily driven by the new game launched on September 16, 2025, as a key strategic product, which demonstrated exceptional user acquisition capabilities in its first full quarter of operation, contributing a significant number of new active users. Meanwhile, the flagship game *Floating Myth* continued to support long-tail engagement before its discontinuation on December 31, 2025, effectively forming the core source of user growth alongside year-end holiday campaigns.
In the second quarter of 2026, the average DAU dropped to 6,068, marking a sequential decline. This decrease was primarily driven by the official removal of “Floating Myth,” which resulted in the platform losing the existing active contributions from this product. Additionally, some legacy games entered a relatively mature phase, leading to natural fluctuations in user engagement as products progressed through their lifecycle. Despite the periodic pressure on active scale, it still showed a significant year-on-year growth of 35.7% compared to the same period in 2025, demonstrating that users accumulated through new games effectively supported the overall scale.
Monthly Paying Users
We define Monthly Paying Users (MPU) as the number of individuals who have made at least one purchase of virtual goods on a specific platform within the 30-day period leading up to the measurement date. According to this metric, an individual who purchases virtual goods in two different games within the same 30-day period is counted as two MPUs. Similarly, an individual who makes purchases on two different platforms, such as Apple iOS or Google Play, for any of our games is counted as two MPUs. The Average MPU for a specific period is calculated by averaging the MPU for each month within that period. We believe that MPU is a useful metric to measure the monetization of our games.
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Quarterly Average MPU(1) | ||||||||
| Q1 (October 1 – December 31) | 40,493 | 36,349 | ||||||
| Q2 (January 1 – March 31) | 39,115 | 34,517 | ||||||
(1) Quarterly Average MPU refers to the Average MPU calculated on a quarterly basis, facilitating year-over year comparisons.
In the first quarter of 2026, the average MPU increased to 40,493, showing a significant rise compared to the previous quarter. This growth was primarily driven by the new game launched in September 2025 entering a phase of intense development, where well-designed and reasonable pay scenarios effectively boosted new user monetization. Additionally, the Company allocated more promotional resources to high-potential end-of-year nodes, supported by stable retention from older products like the *Great Tales of Wei, Shu, and Wu* series, significantly enhancing the quarterly MPU performance.
In the second quarter of 2026, the average MPU was 39,115, showing a slight decline compared to the first quarter, primarily reflecting seasonal fluctuations in user spending behavior and the adjustment in paying user structure following the exit of *Floating Myth*. Despite this, the MPU achieved a steady year-on-year growth of 13.3% compared to the same period in 2025, demonstrating that the Company’s product matrix has established a more stable base of paying users after the accumulation of new products.
| 2 |
Average Revenue per Paying User (ARPPU)
We define Average Revenue per Paying User (ARPPU) as the total revenue attributed to in-game purchases during a given time period, divided by the number of months in that period, and then divided by the Average MPU for that period. We believe that ARPPU is a useful metric to describe monetization.
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Quarterly ARPPU | ||||||||
| Q1 (October 1 – December 31) | 22.57 | 21.99 | ||||||
| Q2 (January 1 – March 31) | 22.18 | 19.01 | ||||||
In the first quarter of 2026, our average revenue per paying user reached $22.57, steadily increasing compared to the previous quarter. The main driving factors include: the operation team has improved user conversion efficiency through diversified revenue models such as cross year limited time promotions and version content updates; At the same time, the high-value user group of the new strategy game continues to consume, effectively taking over and filling the income gap before the delisting of “Floating Myth”, continuously optimizing the overall income structure.
In the second quarter of 2026, ARPPU remained at a high level of $22.18, basically unchanged from the first quarter, but achieved a significant growth of 16.7% compared to the same period in 2025. The strong performance this quarter is mainly due to the Company’s continued efforts to maintain user payment capabilities through content updates and refined operations; In the process of stabilizing the payment structure of new games, the Company has effectively stabilized the payment depth of core users and improved overall monetization efficiency by optimizing theme props and daily consumption design.
Monthly Download Users (MDU)
We define Monthly Download Users (MDU) as the number of users who completed the download and installation of a game within a given calendar month. It is important to note that we track each user based on the unique identification associated with each download device, and multiple downloads by the same user are typically counted once. The Average MDU for a specific period is calculated by averaging the MDU for each month within that period. MDU is a key metric for assessing the reach and market appeal of a game. It is particularly indicative during the initial launch phase or during periods of major promotional campaigns, offering a clear reflection of user acquisition effectiveness and the potential market scale.
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Quarterly Average MDU | ||||||||
| Q1 (October 1 – December 31) | 147,511 | 118,187 | ||||||
| Q2 (January 1 – March 31) | 116,406 | 105,791 | ||||||
In the first quarter of 2026, the MDU reached 147,511, a significant increase compared to the 129,601 in the fourth quarter of 2025, and set a new historical high. The main driving force for the strong growth of MDU in this quarter comes from the following aspects: the strong absorption effect of key strategic new products: the new game launched on September 16, 2025, after entering the full operation period of the first quarter, has successfully driven a large amount of natural traffic and new users to enter through high-intensity market promotion and excellent dissemination scope, becoming the core incremental source of user downloads in this quarter. The final pull before the main product was taken down: Although the main game “Floating Myth” was taken down on December 31, 2025, the related farewell activities and operational actions still attracted some users’ download attention in the early and middle stages before its official exit from the market, forming an effective brand matrix siphon effect with the new product.
The MDU for the second quarter of 2026 was 116,406, a decrease from the 147,511 in the first quarter. The decline in MDU in this quarter was mainly due to the official removal of the main product “Floating Myth” from the product matrix at the end of last quarter, causing the platform to lose its stock download contribution. In addition, after the explosive promotion of the new game in the early stages of its launch, the user acquisition rhythm entered the normal operation stage along with the product lifecycle, putting temporary pressure on the overall new momentum. Despite this, the MDU remained at a scale of 110,000 in this quarter, and achieved steady year-on-year growth compared to the 105,791 person times in the same period of 2025, reflecting that the Company’s overall user acquisition ability remains high and resilient after adjusting its promotion strategy.
| 3 |
Results of Operations for the Six Months Ended March 31, 2026 and 2025
The following table summarizes our results of operations for the six months ended March 31, 2026 and 2025:
For the Six Months Ended March 31, | Variance | |||||||||||||||
| 2026 | 2025 | Amount | % | |||||||||||||
| Revenues | $ | 5,928,589 | $ | 5,204,659 | $ | 723,930 | 13.9 | % | ||||||||
| Cost of revenues | (4,173,164 | ) | (3,752,527 | ) | 420,637 | 11.2 | % | |||||||||
| Gross profit | 1,755,425 | 1,452,132 | 303,293 | 20.9 | % | |||||||||||
| Selling expenses | (804,466 | ) | - | 804,466 | 100.0 | % | ||||||||||
| General and administrative expenses | (2,868,124 | ) | (448,805 | ) | 2,419,319 | 539.1 | % | |||||||||
| (Loss) income from operations | (1,917,165 | ) | 1,003,327 | (2,920,492 | ) | (291.1 | )% | |||||||||
| Government subsidy income | - | 839 | (839 | ) | (100.0 | )% | ||||||||||
| Interest income | 2,188 | 465 | 1,723 | 370.5 | % | |||||||||||
| Other income | 15,548 | 18,014 | (2,466 | ) | (13.7 | )% | ||||||||||
| (Loss) income before income taxes | (1,899,429 | ) | 1,022,645 | (2,922,074 | ) | (285.7 | )% | |||||||||
| Income tax expenses | (62 | ) | (115,253 | ) | (115,191 | ) | (99.9 | )% | ||||||||
| Net (loss) income | ($ | 1,899,491 | ) | $ | 907,392 | ($ | 2,806,883 | ) | (309.3 | )% | ||||||
Revenue
Revenue increased by approximately $0.72 million, or 13.9%, to approximately $5.93 million for the six months ended March 31, 2026 from approximately $5.20 million for the six months ended March 31, 2025. This growth was primarily driven by the continued contribution of games launched in fiscal 2025 and the successful release of new titles in fiscal year 2026.
The increase was mainly attributable to the increase of monthly paying gamers from 70,866 gamers for the six months ended March 31, 2025 to 79,608 gamers for the six months ended March 31, 2026. Additionally, the average revenue per paying gamer increased from $20.50 for the six months ended March 31, 2025 to $22.38 for the six months ended March 31, 2026, which further contributed to the increase in revenue.
Cost of revenue
Cost of revenue increased by approximately $0.42 million, or 11.2%, to approximately $4.17 million for the six months ended March 31, 2026 from approximately $3.75 million for the same period of last year.
The following table sets forth the breakdown of cost of revenues for the six months ended March 31, 2026 and 2025, respectively:
For the Six Months Ended March 31, | Variance | |||||||||||||||
| 2026 | 2025 | Amount | % | |||||||||||||
| Platform handling fees | $ | 3,328,844 | $ | 3,032,345 | $ | 296,499 | 9.8 | % | ||||||||
| Revenue sharing with game developers | 834,137 | 679,034 | 155,103 | 22.8 | % | |||||||||||
| Cloud server costs | 10,149 | 41,076 | (30,927 | ) | (75.3 | )% | ||||||||||
| Stamp duty and value-added tax surcharge | 34 | 72 | (38 | ) | (52.8 | )% | ||||||||||
| Total cost of revenues | $ | 4,173,164 | $ | 3,752,527 | $ | 420,637 | 11.2 | % | ||||||||
| 4 |
Platform handling fees
Platform handling fees increased by approximately $0.3 million, or 9.8%, to approximately $3.3 million for the six months ended March 31, 2026 from $3.0 million for the same period of last year. Revenue generated from game players are shared between the platform and the Company, typically ranging from 15% to 60%. These third party digital platforms have been successful in promoting the games, attracting gamer to make in-game purchase and game revenues increased from approximately $5.2 million for the six months ended March 31, 2025 to approximately $5.9 million for the six months ended March 31, 2026, resulting in a synchronous increase in revenue sharing with these platforms.
Revenue sharing with game developers
Revenue sharing with game developers is typically ranging from 10% to 20%. Revenue sharing with game developers increased by approximately $0.2 million, or 22.8%, to approximately $0.8 million for the six months ended March 31, 2026 from approximately $0.7 million for the same period of last year. The increase was mainly attributed to the increased gamers spending which resulted in increase in game revenue, revenue sharing with game developers were correspondingly increased.
Cloud server costs
Cloud server costs decreased by $30,927, or 75.3%, to approximately $10,149 for the six months ended March 31, 2026 from approximately $41,076 for the same period of last year. Game revenue generated from Google and Apple digital platforms reduced which, in turn, reduced data requirements from cloud servers and the corresponding cloud server costs. Also, the decrease in cloud server costs was attributable to the provision of cloud servers by certain third party digital platforms and, as a result, the Company did not need to incur cloud server costs for certain games.
Gross profit
Gross profit increased by approximately $0.3 million, or 20.9%, to approximately $1.76 million for the six months ended March 31, 2026 from approximately $1.45 million for the same period of last year, while gross profit margin increased by 1.7%, from 27.9% for the six months ended March 31, 2025 to 29.6% for the six months ended March 31, 2026. The increase in gross profit margin was mainly attributable to the growth in game revenue outpaced the increase in costs of revenue.
Selling expenses
Selling expenses primarily relate to advertising and promotional expenses. Selling expenses increased by approximately $0.8 million, or 100%, to $0.8 million for the six months ended March 31, 2026 from approximately nil for the same period of last year. The increase was mainly attributable to incurrence of advertising and promotional expenses for launching of new games.
General and administrative expenses
General and administrative expenses increased by approximately $2.42 million, or 539.1%, to approximately $2.87 million for the six months ended March 31, 2026 from approximately $0.45 million for the same period of last year. The increase was mainly attributable to game enhancement costs of $2.13 million for two games were expensed as incurred and approximately $0.29 million professional service fees incurred for various parties after being successful listed in NASDAQ.
Other income
Other income mainly related to bank charges, foreign exchange losses and other miscellaneous income. Other income decreased by $2,466, or 13.7%, to other income of $15,548 for the six months ended March 31, 2026 from other expenses of $18,014 for the same period of last year. The decrease was mainly attributable to foreign exchange losses as the United States dollar has been depreciating against other currencies.
| 5 |
Income tax expenses
For the six months ended March 31, 2026 and 2025, our income tax expense was $62 and approximately $0.1 million, respectively. The income tax expenses were as a result of taxable income from operations.
Net (loss) income
As a result of the foregoing, net loss was approximately $1.9 million for the six months ended March 31, 2026, a decrease of approximately $2.8 million from net income of approximately $0.9 million for the six months ended March 31, 2025.
Liquidity and Capital Resources
As of March 31, 2026, the Company had cash of approximately $0.47 million.
In assessing liquidity, management monitors and analyzes our cash on-hand, ability to generate sufficient revenue sources in the future, and operating and capital expenditure commitments.
As of March 31, 2026, the Company had working capital of approximately $0.4 million. The Company’s working capital requirements are influenced by the level of operations, revenue generated from mobile digital games, costs and expenses controlled, encashment of accounts receivable.
The Company intends to finance future working capital requirements and capital expenditures from cash generated from operating activities and funds raised from financing activities. The Company may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions that the Company may decide to pursue. With the financial support from shareholders, the Company believes that the current cash together with cash generated from operating activities and financing activities will be sufficient to meet the present anticipated working capital requirements and capital expenditures. If existing cash is insufficient to meet requirements, the Company may seek to issue debt or equity securities or obtain additional credit facilities. Financing may be unavailable in the amounts the Company’s need or on terms acceptable to the Company, if at all. Issuance of additional equity securities, including convertible debt securities, would dilute earnings per share. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict operations and ability to pay dividends to shareholders. If the Company is unable to obtain additional equity or debt financing as required, the Company’s business and prospects may suffer.
Indebtedness. As of March 31, 2026, the Company did not have any debts, finance leases, purchase commitments, guarantees, or other material contingent liabilities.
Off-Balance Sheet Arrangements. The Company has not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, the Company has not entered into any derivative contracts that are indexed to shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, the Company does not have any variable interest in any unconsolidated entity that provide financing, liquidity, market risk or credit support to or engages in hedging services with the Company.
Capital Resources. The primary drivers and material factors impacting liquidity and capital resources include ability to generate sufficient cash flows from operations and financial support from shareholders, as well as proceeds from equity and debt financing, to ensure future growth and expansion plans.
Working Capital. Total working capital as of March 31, 2026 amounted to approximately $0.4 million, compared to approximately $3.1 million as of September 30, 2025. The decrease in working capital was mainly caused by an increase in intangible assets under construction as the Company continued to invest in game development for maintaining the growth momentum.
| 6 |
Capital Needs. The Company’s capital needs include daily working capital needs and capital needs to finance the development of business. Management believes that income generated from current operations can satisfy daily working capital needs over the next 12 months. The Company may also raise additional capital through public offerings or private placements to finance business development and to consummate any merger or acquisition, if necessary.
Cash flows
For the six months ended March 31, 2026 and 2025
The following table sets forth a summary of our cash flows for the six months ended March 31, 2026 and 2025, respectively.
| For the Six Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) provided by operating activities | $ | (492,249 | ) | $ | 730,838 | |||
| Net cash used in investing activities | (1,306,794 | ) | (794,239 | ) | ||||
| Net cash provided by (used in) financing activities | 472,424 | (191,484 | ) | |||||
| Effect of exchange rate changes on cash | (635 | ) | (360 | ) | ||||
| Net decrease in cash | (1,327,254 | ) | (255,245 | ) | ||||
| Cash, beginning of year | 1,800,202 | 313,735 | ||||||
| Cash, end of year | $ | 472,948 | $ | 58,490 | ||||
Operating activities
Net cash used in operating activities was approximately $0.5 million for the six months ended March 31, 2026, which was mainly due to net loss of approximately $1.9 million. The decrease in cash in operating activities was partially offset by a decrease in accounts receivable of approximately $1.0 million due to collections and an increase of $0.3 million in amortization of intangible assets as a result of increase in capitalization of intangible assets after new games were launched.
Net cash provided by operating activities was approximately $0.7 million for the six months ended March 31, 2025, which mainly consisted of (i) net income of approximately $0.9 million; (ii) a decrease of prepaid expenses and other current assets of $0.3 million arising from the refund of the security deposit from the game developer, and (iii) an increase of taxes payable of approximately $0.1 million arising from provision of corporate income tax. The increase in cash in operating activities was partially offset by an increase in accounts receivable of approximately $0.6 million due to revenue generated from game players.
Investing activity
Net cash used in investing activity was $1.3 million for the six months ended March 31, 2026, which mainly attributable to intangible assets under construction as the Company continued to invest in game development for maintaining the growth momentum.
Net cash used in investing activity was approximately $0.8 million for the six months ended March 31, 2025, which mainly consisted of intangible assets under construction as the Company continued to invest in game development for maintaining the growth momentum.
Financing activities
Net cash provided by financing activities was approximately $0.5 million for the six months ended March 31, 2026, which mainly consisted of proceeds of $472,424 capital contribution from shareholders. In April 2026, the Company completed a $3.8 million private investment in public equity (“PIPE”) financing, by issuing 9,400,000 Class A ordinary shares, par value $0.0001per share, of the Company (“Class A Ordinary Shares”) at a price of $0.35 per Class A Ordinary Share; and 1,428,571 Class B ordinary shares, par value $0.0001 per share, of the Company (“Class B Ordinary Shares”) at a price of $0.35 per Class B Ordinary Share (the “Private Placement”). In relation to this PIPE financing, a sum of $472,424 capital contribution was received in March 2026, while the remaining capital contribution was fully received in April 2026.
Net cash used in financing activities was approximately $0.2 million for the six months ended March 31, 2025, which mainly consisted of (i) proceeds of approximately $0.6 million capital contribution from shareholders; and (ii) advances of approximately $1.0 million from shareholders. The cash provided by financing was partially offset by repayments of approximately $1.2 million to shareholders and deferred initial public offering costs of $0.5 million.
| 7 |