DH Enchantment, Inc., a Nevada-based holding company operating primarily through subsidiaries in Hong Kong and Taiwan, reported significant financial challenges in its latest 10-Q filing for the period ending September 30, 2024. The company experienced a notable decline in revenue, with total revenues netting $361.4 million for the three months ended September 30, 2024, down 18.4% from $442.9 million in the same period of 2023. Revenue from third parties also decreased to $237.5 million from $343.3 million year-over-year. However, for the six-month period, total revenues increased to $952.2 million, up 19.8% from $795.0 million in 2023, primarily driven by higher outbound retail sales.
Despite the increase in six-month revenue, the company reported a net loss of $(407.6 million) for the three months ended September 30, 2024, contrasting sharply with a net income of $4.5 million in the same period of the previous year. The six-month net loss also widened to $(400.2 million) from $(26.9 million) in 2023. The gross profit for the three months fell to $108.5 million, down from $162.9 million, reflecting a gross profit margin decline from 36.8% to 30.0%.
The company’s financial position deteriorated, with total assets decreasing to $1.3 billion from $1.7 billion since March 31, 2024. Total liabilities surged to $2.9 billion, resulting in a shareholders’ deficit that widened to $(1.6 billion). The working capital deficit also increased significantly to $796.1 million.
Strategically, DH Enchantment has shifted its focus to eCommerce and logistics following the discontinuation of its COVID-19 antigen testing business. The company completed a share exchange agreement to acquire OLS APAC Corporation, which operates the eCommerce platform "buyippee," issuing 3 billion shares in the process. The company plans to increase its authorized shares to facilitate the issuance of the remaining shares related to this acquisition.
Operationally, the company faces legal and regulatory risks, particularly concerning potential changes in Chinese regulations that could impact its ability to operate and list on U.S. exchanges. The recent passage of the Accelerating Holding Foreign Companies Accountable Act poses additional risks, as the company’s auditor may not be subject to PCAOB inspections, potentially leading to delisting.
Overall, DH Enchantment, Inc. continues to navigate a challenging financial landscape, with significant losses and operational shifts as it seeks to stabilize and grow its business in the eCommerce sector.