MPU

Business Context and Reporting Period

Mega Matrix Inc. (NYSE American: MPU) is a Cayman Islands exempted company and foreign private issuer. The filing covers the fiscal year ended December 31, 2024. In October 2024, the company completed a redomicile merger, moving its listing from a Delaware corporation to the Cayman Islands entity while maintaining operations through its Singapore-based subsidiary, Yuder Pte. Ltd. The company has pivoted from its former aircraft leasing and staking businesses to focus exclusively on FlexTV, a short drama streaming platform. FlexTV produces and licenses short-form vertical dramas globally, with content available in over 15 languages.

Key Financial Metrics (Year Ended Dec 31, 2024)

Revenue Breakdown:

• Membership and top-up streaming services: $31,586,800 (87.3%)
• Online advertising services: $3,698,500 (10.2%)
• Content licensing business: $898,700 (2.5%)

User Metrics (2024):

• Period Active Users (PAU): 10,026,118
• Period Paying Users (PPU): 1,011,762
• Average Revenue Per Paying User (ARPPU): $31.22

Material Changes vs. Prior Period

The company experienced a fundamental business transformation in 2024 compared to 2023:

• Revenue Generation: Revenue increased from $0 in 2023 (due to reclassification of ceased staking business) to $36.2 million in 2024, driven entirely by the launch of the FlexTV platform in January 2024.
• Net Loss: Net loss increased to $10.5 million in 2024 from $4.7 million in 2023. This increase is attributed to significant operating expenses required to launch and scale the new streaming business, including $22.6 million in selling expenses (primarily advertising) and $10.1 million in general and administrative expenses.
• Asset Composition: The company sold all digital assets (ETH/USDT) held in 2023, resulting in a $0 balance for digital assets in 2024. Conversely, the company acquired significant content assets (copyrights and software) valued at approximately $5.5 million through the acquisition of FunVerse.
• Capital Structure: In December 2024, the company reclassified 5,933,700 Class A shares held by the CEO into Class B shares (50 votes per share), consolidating voting control.

Guidance, Outlook, Risks, and Unusual Items

Outlook and Guidance: The company does not provide specific numerical financial guidance. Management expects to continue investing in content production and user acquisition to drive growth. The company has initiated an "At-The-Market" (ATM) offering program to raise up to $20 million to fund growth plans and working capital.

Material Risks:

• Internal Controls: The company disclosed a material weakness in internal control over financial reporting as of December 31, 2024, citing a lack of sufficient personnel with U.S. GAAP expertise. Consequently, disclosure controls and procedures were deemed ineffective.
• Liquidity: While the company holds $8.9 million in cash, it has a history of net losses and relies on future financing (equity or debt) to sustain operations. Management believes current working capital is sufficient for the next 12 months.
• Regulatory: Operations are subject to complex regulations in Singapore and globally regarding content, data privacy, and digital assets. The company faces risks of license revocation or content bans.
• Concentration: Two customers accounted for 54% of accounts receivable as of year-end. The CEO holds 89.52% of the total voting power.

Unusual Items:

• Reclassification: Historical financial data for 2022 and 2023 was revised to reclassify revenues and costs from the ceased solo-staking business to "Other income" and "General and administrative expenses," respectively.
• Acquisition: The company acquired 100% of FunVerse (operator of FlexTV) in two tranches during 2024, recognizing $2.9 million in goodwill.

Investor Verification Checklist

• Internal Control Remediation: Verify the specific steps taken to address the material weakness in financial reporting and the timeline for achieving effective controls.
• User Retention and Churn: Assess the sustainability of the 10 million active user base and the conversion rate to paying users, given the high customer acquisition costs ($22.6M in selling expenses).
• Content Library Viability: Review the amortization schedule of the $5.5M content asset library to understand the duration of revenue generation from current investments.
• Capital Needs: Monitor the utilization of the $20M ATM facility and the company's ability to raise further capital given the current net loss trajectory.
• Regulatory Compliance: Confirm the status of necessary licenses in key markets (Singapore, US, Asia-Pacific) and any pending regulatory actions.