Big Tree Cloud Holdings Ltd

Big Tree Cloud Holdings Limited operates at the intersection of two distinct industries in the People's Republic of China: the personal care products industry, where it develops, produces and markets feminine care products, principally feminine pads, and the artificial intelligence sector, which it entered in January 2026 ¹. The personal care industry in China is highly competitive, with competition based on the ability to launch new products, pricing of products, quality of products and packaging, brand awareness, perceived value and quality, innovation, offline sales capabilities, customers' functional and emotional satisfaction, promotional activities, advertising, editorials, e-commerce and mobile-commerce initiatives and other activities ². The market for personal care products in China is continuously evolving and its growth and development is impacted by numerous factors subject to uncertainties beyond the company's control, such as the macroeconomic environment, per capita spending, consumers' purchasing frequency, demand for personal care products from consumers in lower tier cities, regulatory changes, technological innovations, cultural influences and changes in tastes and preferences ³. The AI industry is highly competitive and characterized by rapid technological change, and many of the company's competitors have significantly greater technical, financial and human resources than the company does ⁴. The company's current sales are primarily focused on lower-tier cities in the PRC, and most of its customers are located in these areas ⁵.

The company faces vigorous competition from both domestic and international players in China, and its competitors for these markets include global, regional and local manufacturers, including private label manufacturers ⁶. Some of these competitors may have better access to financial resources and greater market penetration, longer operating histories, greater brand recognition or larger customer bases than the company does and may be able to respond more effectively to changing business and economic conditions ⁷. Alternatively, despite the company's differentiated business model, some competitors may have significantly lower product development and manufacturing costs, particularly with respect to private label products, allowing them to offer products at a lower price, and e-commerce potentially intensifies competition by simplifying distribution and lowering barriers to entry ⁸. The company believes that maintaining and enhancing the reputation of its brands is of significant importance to the success of its business and that its financial success is directly dependent on consumer perception of its brands, although as a young company its brand awareness among consumers may not be as strong as the more established personal care brands ⁹. The company successfully adopted new sterilization technology and equipment and deployed a compounded absorbent core structure, which improved the health sanitation, comfort level and breathability of its feminine pads, but as new companies and larger, existing personal care product manufacturers enter the personal care market, the company may lose any technological advantage it may have had in the marketplace and suffer a decline in its position in the market ¹⁰.

The company generates revenue through the sale of personal care products, principally feminine pads, and, beginning in fiscal year 2026, through AI technology services. The company's primary business operations and financial results are focused on the development and production of feminine pads, and as of June 30, 2026, it had nine series of feminine pad products to serve consumers of different age groups and with different preferences for personal care products ¹¹. The company's product portfolio also includes body and oral care products, sanitary pads and accessories ¹². The company's AI business is conducted through Shenzhen Nafutong New Technology Co., Ltd., its operating entity, and it provides technology development and related services for AI-centric platforms, including front-end and back-end development, architecture setup, system delivery, system integration, maintenance and other customized services ¹³. Certain platforms under development are also intended to serve individual end-users; for example, the company is developing an AI learning and application platform intended to provide AI training to university students, young professionals and other individual users and to cultivate talent with practical AI application skills, and it is also developing an AI training business directed at individual end-users ¹⁴. The company has not acquired any AI-related entity, and its expansion into the AI sector has been developed organically to date ¹⁵. The company's customer base is limited compared with those of certain established participants in the personal care products and AI technology services industries, and it derives a substantial portion of its revenue from a limited number of customers ¹⁶.

The company's personal care product line is centered on feminine pads, with nine series of feminine pad products serving consumers of different age groups and with different preferences as of June 30, 2026 . The company continues to develop other personal care products to expand its product portfolio, and as part of its ongoing business strategy it expects to continue to introduce new feminine care products while expanding its product launches into adjacent categories in which it may have little to no prior operating experience, such as facial and body care products ¹⁷. The company's product categories include sanitary pads, body and oral care products, and accessories . The company's principal intellectual property assets include the registered trademarks for its brands, the design and invention patents and copyrights for its products and logos ¹⁸. Historically, some of the company's trademark applications on certain key categories were rejected or revoked, which resulted in difficulties in its ability to protect its use of brand name or logo on products of such categories, and may subject it to possible intellectual property disputes with third parties over such uses ¹⁹.

The company's AI technology services line, launched through its strategic expansion into the artificial intelligence sector in January 2026, provides technology development and related services for AI-centric platforms, including front-end and back-end development, architecture setup, system delivery, system integration, maintenance and other customized services . The company is developing an AI learning and application platform intended to provide AI training to university students, young professionals and other individual users and to cultivate talent with practical AI application skills, and it is also developing an AI training business directed at individual end-users . The AI business is at an early stage and generated only approximately US$0.1 million of revenue during the fiscal year ended June 30, 2026 ²⁰. The company has limited experience in the AI industry, and its ability to develop its AI business depends on, among other things, its ability to attract and retain qualified AI personnel, to deliver the platforms it has agreed to develop on time and to the satisfaction of its clients, to secure additional client contracts, and to comply with the evolving laws and regulations applicable to AI technology and services in China ²¹. The company's AI business may also divert management attention and financial resources from its personal care business ²².

During the period, the company completed a share consolidation of every twenty (20) issued and unissued ordinary shares of a par value of US$0.0001 each into one (1) ordinary share of a par value of US$0.002 each, which was approved by shareholders at the extraordinary general meeting held on January 30, 2026 and became effective in the market at the open of business on February 23, 2026 ²³. As of June 30, 2026, there were 1,251,873 Class A ordinary shares, par value US$0.002 per share, and 3,500,000 Class B ordinary shares, par value US$0.002 per share, issued and outstanding ²⁴. The company entered into a used vehicle purchase agreement with Mr. Wenquan Zhu on October 10, 2025 for a vehicle at a consideration of RMB2,800,000 (approximately $400,343) ²⁵. The company also engaged in related-party borrowings, including short-term loans from June 2024 to December 2024 of an aggregate principal amount of approximately $1,108,807 (HKD 8,695,264) to DSY HK with a 12% annual interest rate, of which principal of $630,000 was repaid for the year ended June 30, 2026 ²⁶. On October 19, 2026, the company renewed a bank loan, and the renewed loan has a principal amount of RMB8.5 million (approximately US$1.3 million) and matures on September 17, 2029 ²⁷.

The company's revenue from continuing operations decreased substantially from approximately US$7.3 million for the fiscal year ended June 30, 2024 to approximately US$1.3 million for the fiscal year ended June 30, 2025 and approximately US$0.6 million for the fiscal year ended June 30, 2026 ²⁸. The company recorded net income of approximately US$0.6 million for the fiscal year ended June 30, 2024 and incurred net losses of approximately US$32.5 million and US$3.7 million for the fiscal years ended June 30, 2025 and 2026, respectively ²⁹. The company had negative net cash flows from operating activities of approximately US$1.5 million, US$6.5 million and US$3.4 million for the fiscal years ended June 30, 2024, 2025 and 2026, respectively ³⁰. Gross margin decreased from approximately 66.9% for fiscal year 2024 and 53.8% for fiscal year 2025 to approximately 7.0% for fiscal year 2026 ³¹. As of June 30, 2026, the company had an accumulated deficit of approximately US$41.0 million and a working-capital deficit of approximately US$0.2 million ³². As of June 30, 2026, the company had approximately US$3.1 million in cash and cash equivalents attributable to continuing operations, and it subsequently funded an additional US$0.9 million under a third-party loan agreement ³³. The company also had approximately US$1.5 million of short-term bank borrowings as of June 30, 2026, which were scheduled to mature on October 30, 2026 ³⁴.

The company's growth strategy centers on the expansion of its AI technology services business, which it entered in January 2026 to capture growing market demand for AI skills and AI-enabled solutions . The company provides technology development and related services for AI-centric platforms, including front-end and back-end development, architecture setup, system delivery, system integration, maintenance and other customized services, and certain platforms under development are also intended to serve individual end-users . The company is developing an AI learning and application platform intended to provide AI training to university students, young professionals and other individual users and to cultivate talent with practical AI application skills, and it is also developing an AI training business directed at individual end-users . The AI business is at an early stage and generated only approximately US$0.1 million of revenue during the fiscal year ended June 30, 2026 . The company expects to incur costs as it develops its AI technology services, recruits and retains technical personnel, acquires customers and continues to operate its consumer-products business, and these expenditures may not result in increased revenue, improved margins or positive operating cash flow on a timely basis or at all .

The company's personal care products business growth strategy includes continuing to introduce new feminine care products while expanding product launches into adjacent categories in which it may have little to no prior operating experience, such as facial and body care products . The company expects to expand its operations and sales channels to cover other regions in China beyond the lower-tier cities where its current sales are primarily focused . Such expansion could experience delays or other difficulties and will require significant capital, and under PRC laws construction projects and production are subject to broad and strict government supervision and approval procedures, including project approvals and filings, construction land and project planning approvals, occupational disease control approvals, construction project environment protection filings and approvals, the pollution discharge permits, drainage license, work safety approvals, fire protection approvals, and the completion of inspection and acceptance by relevant authorities . The company also plans to construct and equip a manufacturing plant to produce its personal health products .

The company's capital requirements are expected to remain significant as it funds operations, continues research and development, implements marketing strategies, expands its product portfolio and improves services, and the development, commercialization and expansion of its AI technology services also require capital investment . The company expects to require capital to develop and improve its AI platforms and customized solutions, recruit and retain technical and sales personnel, acquire computing capacity, software, data and other technology resources, conduct research and development, obtain and serve enterprise customers, expand its AI service offerings, market its products and services, support working-capital needs and satisfy its existing obligations . The company's liquidity has depended substantially on equity financing, shareholder contributions, related-party and bank borrowings, and proceeds from investments and subsidiary disposals . As of June 30, 2026, the company had approximately US$3.1 million in cash and cash equivalents attributable to continuing operations, but it subsequently funded an additional US$0.9 million under a third-party loan agreement . The company also had approximately US$1.5 million of short-term bank borrowings as of June 30, 2026, which were scheduled to mature on October 30, 2026, and on October 19, 2026, it renewed this bank loan, with the renewed loan having a principal amount of RMB8.5 million (approximately US$1.3 million) and maturing on September 17, 2029 . There can be no assurance that additional financing will be available when needed, in sufficient amounts or on commercially acceptable terms .

The company's ability to achieve and maintain profitability and positive operating cash flow depends on numerous factors, including its ability to expand and diversify its customer base, retain major customers, obtain and successfully complete AI technology projects, obtain customer acceptance of project deliverables, manage project and product costs, improve gross margins, control operating expenses, respond to competition and adapt to macroeconomic, regulatory and market conditions . The company may also incur unexpected expenses or encounter difficulties, delays or disputes in completing projects, collecting receivables or implementing its business strategy . If the company is unable to obtain sufficient additional financing when required, it may need to delay, reduce or discontinue the development or commercialization of its AI technology services, reduce research and development, marketing, hiring or other expenditures, scale back its personal care products business, dispose of assets, seek financing on unfavorable terms or otherwise curtail its operations .

The company's operational outlook includes the construction and equipping of a manufacturing plant to produce its personal health products . The company's products and services require a substantial amount of third-party and in-house software and complex hardware to operate, and the development of such advanced technologies is inherently complex and costly, requiring coordination with vendors and suppliers in order to produce and manufacture its personal care products . The company's ability to launch new products may be limited by delays or difficulties affecting the ability of its suppliers or manufacturers to timely manufacture new products . The company relies on a limited number of suppliers for a significant portion of its purchases, and for the fiscal year ended June 30, 2026, its four largest suppliers accounted for approximately 29%, 17%, 15% and 11% of its total purchases, respectively, or approximately 72% in the aggregate . The company continually seeks to diversify its supplier base, although there can be no assurance that it will be successful in doing so, or that alternative sources will be available on commercially reasonable terms .

The company's capital allocation priorities include funding the development and commercialization of its AI technology services and supporting its personal care products business. The company's business plan to design, manufacture, market and sell personal care products and to provide better care for families in China is expected to require continued capital investment to fund operations, continue research and development, implement marketing strategies, expand product portfolio and improve services . The company's AI technology services business is at an early stage and generated only approximately US$0.1 million in revenue during the fiscal year ended June 30, 2026, and there can be no assurance that its investment in this business will result in increased revenue, improved margins or positive cash flows on a timely basis or at all . The company's liquidity has depended substantially on equity financing, shareholder contributions, related-party and bank borrowings, and proceeds from investments and subsidiary disposals . Equity financing could dilute existing shareholders, and debt financing could impose repayment obligations, increase interest expense, require collateral and restrict the company's operations .

The company faces structural headwinds including a substantial decline in revenue from continuing operations from approximately US$7.3 million for the fiscal year ended June 30, 2024 to approximately US$1.3 million for the fiscal year ended June 30, 2025 and approximately US$0.6 million for the fiscal year ended June 30, 2026 . The company's gross margin also decreased from approximately 66.9% for fiscal year 2024 and 53.8% for fiscal year 2025 to approximately 7.0% for fiscal year 2026 . The company's independent registered public accounting firm, Audit Alliance LLP, included an explanatory paragraph in its report on the consolidated financial statements as of and for the year ended June 30, 2025 stating that the company's net loss, net cash outflow from operating activities and accumulated deficit raise substantial doubt about its ability to continue as a going concern . The company's ability to continue as a going concern depends on its ability to generate sufficient cash flows from operations and to obtain additional equity or debt financing, including loans from Mr. Wenquan Zhu, its chairman and chief executive officer, and there can be no assurance that such financing will be available on acceptable terms or at all .

The company's customer concentration presents a significant constraint, as for the fiscal year ended June 30, 2026, its two largest customers accounted for approximately 76% and 13% of its total revenue, respectively, or approximately 89% in the aggregate, and for the fiscal year ended June 30, 2025, its two largest customers accounted for approximately 71% and 23% of its total revenue, respectively, or approximately 94% in the aggregate . For the fiscal year ended June 30, 2024, no individual customer accounted for 10% or more of the company's total revenue . The amount of revenue the company derives from a particular customer may vary from period to period depending on, among other things, the customer's demand for its products or services, the timing and scope of customer orders or projects, customer acceptance of project deliverables, changes in the customer's business strategy or financial condition, market conditions, competitive developments and other factors that may be outside the company's control . The company's customers generally are not obligated to purchase any minimum quantity of products or services from it, except as may be provided in specific purchase orders or service agreements, and they may reduce, delay or discontinue their purchases .

The company's most material risks center on its severe revenue decline, customer concentration, going-concern uncertainty and liquidity constraints. Revenue from continuing operations fell from approximately US$7.3 million for the fiscal year ended June 30, 2024 to approximately US$1.3 million for the fiscal year ended June 30, 2025 and approximately US$0.6 million for the fiscal year ended June 30, 2026, while gross margin collapsed from approximately 66.9% for fiscal year 2024 and 53.8% for fiscal year 2025 to approximately 7.0% for fiscal year 2026 . The company incurred net losses of approximately US$32.5 million and US$3.7 million for the fiscal years ended June 30, 2025 and 2026, respectively, and had negative net cash flows from operating activities of approximately US$1.5 million, US$6.5 million and US$3.4 million for the fiscal years ended June 30, 2024, 2025 and 2026, respectively . As of June 30, 2026, the company had an accumulated deficit of approximately US$41.0 million and a working-capital deficit of approximately US$0.2 million . The company's former independent registered public accounting firm, Audit Alliance LLP, included an explanatory paragraph in its report on the consolidated financial statements as of and for the year ended June 30, 2025 stating that the company's net loss, net cash outflow from operating activities and accumulated deficit raise substantial doubt about its ability to continue as a going concern . Customer concentration is acute: for the fiscal year ended June 30, 2026, the company's two largest customers accounted for approximately 76% and 13% of total revenue, respectively, or approximately 89% in the aggregate, and for the fiscal year ended June 30, 2025, its two largest customers accounted for approximately 71% and 23% of total revenue, respectively, or approximately 94% in the aggregate . Supplier concentration also increased, with the four largest suppliers accounting for approximately 29%, 17%, 15% and 11% of total purchases for the fiscal year ended June 30, 2026, respectively, or approximately 72% in the aggregate, compared to approximately 51% in the aggregate for the fiscal year ended June 30, 2025 . The company's AI business, entered in January 2026, is at an early stage and generated only approximately US$0.1 million of revenue during the fiscal year ended June 30, 2026, and the AI industry is highly competitive and characterized by rapid technological change, with many competitors having significantly greater technical, financial and human resources . The company had approximately US$1.5 million of short-term bank borrowings as of June 30, 2026, which were scheduled to mature on October 30, 2026, and it renewed this bank loan on October 19, 2026 with a principal amount of RMB8.5 million (approximately US$1.3 million) maturing on September 17, 2029 .

Management's message to shareholders emphasizes a strategic pivot toward artificial intelligence while continuing to operate the legacy personal care products business, with the company acknowledging significant challenges including substantial revenue decline, widening losses and going-concern uncertainty. The company commenced its business in 2020 and has since experienced rapid growth, but its revenue from continuing operations decreased substantially from approximately US$7.3 million for the fiscal year ended June 30, 2024 to approximately US$1.3 million for the fiscal year ended June 30, 2025 and approximately US$0.6 million for the fiscal year ended June 30, 2026 . The company recorded net income of approximately US$0.6 million for the fiscal year ended June 30, 2024 and incurred net losses of approximately US$32.5 million and US$3.7 million for the fiscal years ended June 30, 2025 and 2026, respectively . Gross margin decreased from approximately 66.9% for fiscal year 2024 and 53.8% for fiscal year 2025 to approximately 7.0% for fiscal year 2026 . The company's independent registered public accounting firm, Audit Alliance LLP, included an explanatory paragraph in its report on the consolidated financial statements as of and for the year ended June 30, 2025 stating that the company's net loss, net cash outflow from operating activities and accumulated deficit raise substantial doubt about its ability to continue as a going concern . Management's strategic priorities for the period ahead center on three themes: first, the development and commercialization of AI technology services, which the company entered in January 2026 to capture growing market demand for AI skills and AI-enabled solutions, and which generated only approximately US$0.1 million of revenue during the fiscal year ended June 30, 2026 ; second, the continued operation and expansion of the personal care products business, including the introduction of new feminine care products and expansion into adjacent categories such as facial and body care products ; and third, the management of liquidity and capital resources, with the company's liquidity having depended substantially on equity financing, shareholder contributions, related-party and bank borrowings, and proceeds from investments and subsidiary disposals . The company had approximately US$3.1 million in cash and cash equivalents attributable to continuing operations as of June 30, 2026, and it subsequently funded an additional US$0.9 million under a third-party loan agreement . The company also had approximately US$1.5 million of short-term bank borrowings as of June 30, 2026, which were scheduled to mature on October 30, 2026, and on October 19, 2026, it renewed this bank loan, with the renewed loan having a principal amount of RMB8.5 million (approximately US$1.3 million) and maturing on September 17, 2029 . Management has stated that its ability to continue as a going concern depends on its ability to generate sufficient cash flows from operations and to obtain additional equity or debt financing, including loans from Mr. Wenquan Zhu, its chairman and chief executive officer, and there can be no assurance that such financing will be available on acceptable terms or at all .