UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-37513

GD CULTURE GROUP LIMITED

(Exact name of registrant as specified in its charter)

Nevada		47-3709051
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

22F - 810 Seventh Avenue,
New York, NY 10019		10019
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: +1-347- 2590292

Not applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001		GDC		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 14, 2024, there were 9,756,063 shares of the Company’s common stock issued and outstanding.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43

ITEM 4.	CONTROLS AND PROCEDURES	44

PART II.	OTHER INFORMATION	45

ITEM 1.	LEGAL PROCEEDINGS	45

ITEM 1A.	RISK FACTORS	45

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	45

ITEM 4.	MINE SAFETY DISCLOSURES	45

ITEM 5.	OTHER INFORMATION	45

ITEM 6.	EXHIBITS	45

CAUTIONARY NOTE REGARDING

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that may be deemed to be “forward-looking statements” within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations and or future financial performance. In some cases, you can identify forward-looking statements by their use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “ought to,” “plan,” “possible,” “potentially,” “predicts,” “project,” “should,” “will,” “would,” negatives of such terms or other similar terms. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements relating to:

●

our goals and strategies;

●

our future business development, results of operations and financial condition;

●

our estimates regarding expenses, future revenues, capital requirements and our need for additional financing;

●

our estimates regarding the market opportunity for our services;

●

the impact of government laws and regulations;

●

our ability to recruit and retain qualified personnel;

●

our failure to comply with regulatory guidelines;

●

uncertainty in industry demand;

●

general economic conditions and market conditions in the financial services industry;

●

future sales of large blocks or our securities, which may adversely impact our share price; and

●

depth of the trading market in our securities.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and elsewhere in this Quarterly Report on Form 10-Q.

You should not unduly rely on any forward-looking statements. Although we believe that the expectations reflected in the forward- looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q, to conform these statements to actual results or to changes in our expectations.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

UNAUDITED INTERIM consolidated financial statements AND SUPPLEMENTARY DATA

Index to unaudited interim consolidated financial statements

	Page
Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	2
Unaudited Interim Consolidated Statements of Operations and Comprehensive Loss For the Three and Six Months ended June 30, 2024 and 2023	3
Unaudited Interim Consolidated Statements of Changes in Shareholders’ Equity For the Three and Six Months ended June 30, 2024 and 2023	4
Unaudited Interim Consolidated Statements of Cash Flows For the Six Months ended June 30, 2024 and 2023	6
Notes to Unaudited Interim Consolidated Financial Statements	7

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2024			2023
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	301,837		$	5,175,518
Loan receivable		650,000			-
Other receivables, net		39,854			9,459
Convertible notes receivable		1,062,964			2,602,027
Prepaid and other current assets		520,364			1,290,890
Total current assets		2,575,019			9,077,894

EQUIPMENT, NET		10,146			12,511

RIGHT-OF-USE ASSETS, NET		1,456,687			1,561,058

OTHER ASSETS
Intangible assets, net		4,161,950			3,307,949
Other assets		250,740			250,740
Total other assets		4,412,690			3,558,689
Total assets	$	8,454,542		$	14,210,152

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Other payables and accrued liabilities	$	114,219		$	23,338
Other payables - related parties		60,833			20,833
Lease liabilities - current		288,205			358,998
Total current liabilities		463,257			403,169

OTHER LIABILITIES
Lease liabilities – non-current		1,254,790			1,317,678
Deferred tax liabilities		305,904			327,822
Total other liabilities		1,560,694			1,645,500
Total liabilities		2,023,951			2,048,669

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized, 9,501,261 and 5,453,416 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		950			545
Additional paid-in capital		82,759,142			77,530,221
Accumulated deficit		(76,922,034	)		(69,358,225	)
Accumulated other comprehensive income		211,613			175,306
Total GD Culture Group Limited shareholders’ equity		6,049,671			8,347,847
Noncontrolling interest		380,920			3,813,636
Total shareholders’ equity		6,430,591			12,161,483
Total liabilities and shareholders’ equity	$	8,454,542		$	14,210,152

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	For the Three Months ended June 30,						For the Six Months ended June 30,
	2024			2023			2024			2023
REVENUES
Software copyright	$	-		$	150,000		$	-		$	150,000
TOTAL REVENUES		-			150,000			-			150,000

COST OF REVENUES
Software copyright		-			-			-			-
TOTAL COST OF REVENUES		-			-			-			-

GROSS PROFIT		-			150,000			-			150,000

OPERATING EXPENSES
Selling expenses		208,333			-			2,400,000			-
General and administrative expenses		1,703,091			271,237			3,472,371			275,854
Research and development expenses		217,500			-			435,000			-
TOTAL OPERATING EXPENSES		2,128,924			271,237			6,307,371			275,854

LOSS FROM OPERATIONS		(2,128,924	)		(121,237	)		(6,307,371	)		(125,854	)

OTHER INCOME (EXPENSE)
Interest income		13,056			179			35,002			179
Other-than-temporary impairment losses		(1,500,000	)		-			(1,500,000	)		-
TOTAL OTHER INCOME (EXPENSE)		(1,486,944	)		179			(1,464,998	)		179

LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS		(3,615,868	)		(121,058	)		(7,772,369	)		(125,675	)

PROVISION FOR INCOME TAXES		(22,956	)		-			(21,918	)		-

LOSS FROM CONTINUING OPERATIONS		(3,592,912	)		(121,058	)		(7,750,451	)		(125,675	)
Net loss from continuing operations attributable to noncontrolling interest		(7,731	)		-			(186,642	)		-
Net loss from continuing operations attributable to shareholders of common stock		(3,585,181	)		(121,058	)		(7,563,809	)		(125,675	)

Discontinued operations:
Loss from discontinued operations, net of taxes		-			(34,440	)		-			(51,132	)

NET LOSS	$	(3,592,912	)	$	(155,498	)	$	(7,750,451	)	$	(176,807	)
Net loss attributable to noncontrolling interest		(7,731	)		-			(186,642	)		-
Net loss attributable to shareholders of common stock		(3,585,181	)		(155,498	)		(7,563,809	)		(176,807	)

OTHER COMPREHENSIVE INCOME (LOSS)
- Foreign currency translation adjustment		(4,802	)		(122,471	)		(19,911	)		(112,283	)
- Fair value changes of convertible note receivables		(93,912	)		-			(39,063	)		-
COMPREHENSIVE LOSS, net of tax	$	(3,691,626	)	$	(277,969	)	$	(7,809,425	)	$	(289,090	)
Comprehensive loss attributable to noncontrolling interest		(9,012	)		-			(281,923	)		-
Comprehensive loss attributable to shareholders of common stock		(3,682,614	)		(277,969	)		(7,527,502	)		(289,090	)

WEIGHTED AVERAGE NUMBER OF COMMON STOCKS
Basic and diluted		9,291,904			2,457,693			8,363,487			2,136,035

Loss per share from continuing operations
Basic and diluted	$	(0.39	)	$	(0.05	)	$	(0.93	)	$	(0.06	)
Loss per share from discontinued operations
Basic and diluted	$	-		$	(0.01	)	$	-		$	(0.02	)
Loss per share available to common shareholders
Basic and diluted	$	(0.39	)	$	(0.06	)	$	(0.93	)	$	(0.08	)

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three and six months ended June 30, 2024

									Additional						Accumulated Other			Total GD Culture Group Limited			Non			Total
	Preferred Stock				Common Stock				Paid-in			Accumulated			Comprehensive			Shareholders’			controlling			Shareholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Income			Equity			Interest			Equity
Balance, January 1, 2024		-	$	-		5,453,416	$	545	$	77,530,221		$	(69,358,225	)	$	175,306		$	8,347,847		$	3,813,636		$	12,161,483
Net loss		-		-		-		-		-			(3,978,628	)		-			(3,978,628	)		(178,911	)		(4,157,539	)
Issuance of common stock for Cash		-		-		810,277		81		829,798			-			-			829,879			-			829,879
Issuance of common stock for acquisition of 13.33% noncontrolling interest of Shanghai Xianzhui		-		-		400,000		40		3,150,753			-			-			3,150,793			(3,150,793	)		-
Exercise of pre-funded warrants		-		-		567,691		57		597			-			-			654			-			654
Exercise of November 2023 Registered Warrants		-		-		709,877		71		(71	)		-			-			-			-			-
Foreign currency translation		-		-		-		-		-			-			78,891			78,891			(94,000	)		(15,109	)
Fair value changes of convertible notes receivable		-		-		-		-		-			-			54,849			54,849			-			54,849
Balance, March 31, 2024 (unaudited)		-	$	-		7,941,261	$	794	$	81,511,298		$	(73,336,853	)	$	309,046		$	8,484,285		$	389,932		$	8,874,217
Net loss		-		-		-		-		-			(3,585,181	)		-			(3,585,181	)		(7,731	)		(3,592,912	)
Issuance of common stock for acquisition of copyright		-		-		1,560,000		156		1,247,844			-			-			1,248,000			-			1,248,000
Foreign currency translation		-		-		-		-		-			-			(3,521	)		(3,521	)		(1,281	)		(4,802	)
Fair value changes of convertible notes receivable		-		-		-		-		-			-			(93,912	)		(93,912	)		-			(93,912	)
Balance, June 30, 2024 (unaudited)		-	$	-		9,501,261	$	950	$	82,759,142		$	(76,922,034	)	$	211,613		$	6,049,671		$	380,920		$	6,430,591

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three and six months ended June 30, 2023

											Additional			Accumulated Deficit					Accumulated Other			Total
	Preferred Stock				Common Stock						Paid-in			Statutory					Comprehensive			Shareholders’
	Shares		Amount		Shares			Amount			Capital			Reserves		Unrestricted			Income			Equity
Balance, January 1, 2023		-	$	-		1,844,877		$	184		$	60,124,087		$	4,467	$	(56,841,074	)	$	179,460		$	3,467,124
Net loss		-		-		-			-			-			-		(21,309	)		-			(21,309	)
The cancellation of the common stock		-		-		(133,333	)		(13	)		(947,987	)		-		-			-			(948,000	)
Foreign currency translation		-		-		-			-			-			-		-			10,188			10,188
Balance, March 31, 2023 (unaudited)		-	$	-		1,711,544		$	171		$	59,176,100		$	4,467	$	(56,862,383	)	$	189,648		$	2,508,003
Net loss		-		-		-			-			-			-		(155,498	)		-			(155,498	)
Issuance of common stock for Cash		-		-		1,154,519			115			8,718,125			-		-			-			8,718,240
Issuance of common stock for acquisition right, title, and interest in and to the certain software		-		-		187,500			19			749,981			-		-			-			750,000
Foreign currency translation		-		-		-			-			-			-		-			(122,471	)		(122,471	)
Balance, June 30, 2023 (unaudited)		-	$	-		3,053,563		$	305		$	68,644,206		$	4,467	$	(57,017,881	)	$	67,177		$	11,698,274

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the six months ended June 30,
	2024			2023

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(7,750,451	)	$	(176,807	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of equipment		2,365			88
Amortization of intangible assets		385,468			-
Lease expenses of right-of-use assets		204,373			-
Other-than-temporary impairment losses		1,500,000			-

Changes in operating assets and liabilities
Accounts receivable		-			(27,604	)
Other receivables		(30,395	)		(1,104,411	)
Prepaid and other current assets		762,650			(173,349	)
Accounts payable		-			(115,396	)
Other payables and accrued liabilities		90,972			(164,607	)
Customer deposits		-			72,168
Lease liabilities		(233,683	)		-
Taxes payable		-			(8,158	)
Other payables - related party		40,000			-
Deferred tax liability		(21,918	)		-

Net cash used in operating activities		(5,050,619	)		(1,698,076	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		-			(4,642	)
Loan to a third party		(1,900,000	)		-
Repayment of loan to a third party		1,250,000			-

Net cash used in investing activities		(650,000	)		(4,642	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		829,879			8,718,238
Proceeds from exercise of pre-funded warrants		654			-

Net cash provided by financing activities		830,533			8,718,238

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		(3,595	)		(3,889	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(4,873,681	)		7,011,631

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		5,175,518			389,108

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	301,837		$	7,400,739

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	-		$	-
Cash paid for interest	$	-		$	82

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for Cash	$	-		$	8,718,240
Issuance of common stock for acquisition right, title, and interest in and to the certain software	$	1,248,000		$	750,000
The cancellation of the common stock	$	-		$	948,000
Initial recognition of right-of-use assets and lease liability	$	100,002		$	-
Issuance of common stock for 13.3333% interest in SH Xianzhui	$	3,150,793		$	-
Exercise of November 2023 Registered Warrants	$	71		$	-

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

GD CULTURE GROUP LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of business and organization

GD Culture Group Limited (“GDC” or the “Company”), formerly known as Code Chain New Continent Limited, TMSR Holding Company Limited and JM Global Holding Company, is a Nevada corporation and a holding company. The Company currently conducts its operations on virtual content production (the “Virtual Content Production”) through the Company and two subsidiaries, AI Catalysis corp. (“AI Catalysis”) and Shanghai Xianzhui Technology Co., Ltd. (“SH Xianzhui”). The Company focuses its business mainly on: 1) AI-driven digital human creation and customization; 2) Live streaming and e-commerce, and, 3) Live Streaming Interactive Game. The Company has relentlessly been focusing on serving its customers and creating value for them through the continual innovation and optimization of its products and services. Currently, the Company’s subsidiaries, Citi Profit Investment Holding Limited (“Citi Profit BVI”), Highlights Culture Holding Co., Limited (“Highlight HK”), Shanghai Highlight Entertainment Co., Ltd. (“Highlight WFOE”) are holding companies with no material operations.

SH Xianzhui was incorporated by Highlight WFOE and other two shareholders on August 10, 2023. SH Xianzhui is principally engaged in the provision of social media marketing agency service. Highlight WFOE initially owns 60% of the total equity interest of SH Xianzhui. On October 27, 2023, the Company entered into an equity purchase agreement with Highlight WFOE and Beijing Hehe Property Management Co., Ltd. (“Beijing Hehe”), which was amended on November 10, 2023 (such equity purchase agreement, as amended, the “Agreement” for purpose of this section “Investment in JV”), pursuant to which the Highlight WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and the Company agreed to issue 400,000 shares of common stock of the Company, valued at $2.7820 per share, the average closing bid price of the common stock of GDC as of the five trading days immediately preceding the date of the Agreement, to Beijing Hehe or its assigns. On January 11, 2024, the Company issued the 400,000 shares of its common stock, at the price of $2.5 per share, to Beijing Hehe and the transaction was completed. Up to the date of this unaudited interim consolidated financial statements were issued, the Company owns 73.3333% of the total equity interest of SH Xianzhui.

AI Catalysis is a Nevada corporation, incorporated on May 18, 2023. AI Catalysis is expected to bridge the realms of the internet, media, and artificial intelligence (“AI”) technologies. Positioned at the crossroads of traditional and streaming media, AI Catalysis plans to elevate the experience of media with AI-based interactive and smart content, aiming to transform the whole media landscape. At present, AI Catalysis primarily focused on the application of AI digital human technology with the sectors of e-commerce and entertainment to improve the interaction experiences online. AI Catalysis strives to deliver stable interactive livestreaming products to AI Catalysis’ users. AI Catalysis foresees future expansion to a variety of business sectors with AI applications in different scenarios. AI Catalysis plans to enter into the livestreaming market with a focus on e-commerce and livestreaming interactive game.

Prior to June 26, 2023, the Company had a subsidiary TMSR Holdings Limited (“TMSR HK”), which owns 100% equity interest in Makesi IoT Technology (Shanghai) Co., Ltd. (“Makesi WFOE”). Makesi WFOE had a series of contractual arrangement with Shanghai Yuanma Food and Beverage Management Co., Ltd. (“Yuanma”) that established a variable interest entity (the “VIE”) structure. For accounting purposes, Makesi WFOE was the primary beneficiary of Yuanma. Accordingly, under U.S. GAAP, GDC treated Yuanma as the consolidated affiliated entity and has consolidated Yuanma’s financial results in GDC’s financial statements prior to June 26, 2023. On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell, and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The sale of TMSR HK did not have any material impact on the Company’s unaudited interim consolidated financial statements.

Prior to September 26, 2023, the Company also conducted business through Shanghai Highlight Media Co., Ltd. (“Highlight Media”). Highlight WFOE had a series of contractual arrangement with Highlight Media. For accounting purposes, Highlight WFOE was the primary beneficiary of Highlight Media. Accordingly, under U.S. GAAP, GDC treated Highlight Media as the consolidated affiliated entity and has consolidated Highlight Media’s financial results in GDC’s financial statements prior to September 26, 2023. Highlight Media was an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. On September 26, 2023, Highlight WFOE entered into a termination agreement with Highlight Media and the shareholders of Highlight Media to terminate the VIE Agreements and sold the interest in the VIE Agreements. As a result of such termination, the Company no longer treats Highlight Media as a consolidated affiliated entity or consolidates the financial results and balance sheet of Highlight Media in the Company’s unaudited interim consolidated financial statements.

The accompanying unaudited interim consolidated financial statements reflect the activities of GDC and each of the following entities:

Name		Background	Ownership
Citi Profit BVI	●	A British Virgin Island company Incorporated in April 2019	100% owned by the Company
TMSR HK	●	A Hong Kong company	100% owned by Citi Profit BVI
	●	Incorporated in April 2019
	●	Disposed on June 26, 2023
Highlight HK	●	A Hong Kong company	100% owned by Citi Profit BVI
	●	Incorporated in November 2022
Makesi WFOE	●	A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)	100% owned by TMSR HK
	●	Incorporated in December 2020
	●	Disposed on June 26, 2023
Highlight WFOE	●	A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)	100% owned by Highlight HK
	●	Incorporated in January 2023
Yuanma	●	A PRC limited liability company	VIE of Makesi WFOE
	●	Acquired on June 21, 2022
	●	Disposed on June 26, 2023
Highlight Media	●	A PRC limited liability company	VIE of Highlight WFOE
	●	Acquired on September 16, 2022
	●	Disposed on September 26, 2023
AI Catalysis	●	A Nevada company	100% owned by the Company
	●	Incorporated in May 2023
SH Xianzhui	●	A PRC limited liability company	73.3333% owned by Highlight WFOE
	●	Incorporated in August 2023

Contractual Arrangements

Yuanma and Highlight Media were controlled through contractual agreements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements consist of a series of five agreements, consulting services agreement, equity pledge agreement, call option agreement, voting rights proxy agreement, and operating agreement (collectively the “Contractual Arrangements”).

Material terms of each of the VIE agreements with Yuanma are described below. The Company disposed TMSR HK, Makesi WFOE and Yuanma on June 26, 2023.

Technical Consultation and Services Agreement.

Pursuant to the technical consultation and services agreement between Makesi WFOE and Yuanma dated June 21, 2022, Makesi WFOE has the exclusive right to provide consultation services to Yuanma relating to Yuanma’s business, including but not limited to business consultation services, human resources development, and business development. Makesi WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Makesi WFOE has the right to determine the service fees based on Yuanma’s actual operation on a quarterly basis. This agreement will be effective for 20 years and can be extended by Makesi WFOE unilaterally by prior written notice to the other parties. Makesi WFOE may terminate this agreement at any time by giving a 30 days’ prior written notice to Yuanma. If any party breaches the agreement and fails to cure within 30 days from the written notice from the non-breach party, the non-breach party may (i) terminate the agreement and request the breaching party to compensate the non-breaching party’s loss or (ii) request special performance by the breaching party and the breaching party to compensate the non-breaching party’s loss.

Equity Pledge Agreement.

Under the equity pledge agreement among Makesi WFOE, Yuanma and Yuanma Shareholders dated June 21, 2022, Yuanma Shareholders pledged all of their equity interests in Yuanma to Makesi WFOE to guarantee Yuanma’s performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, Yuanma Shareholders will complete the registration of the equity pledge under the agreement with the competent local authority. If Yuanma breaches its obligation under the technical consultation and services agreement, Makesi WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed or the Yuanma Shareholders cease to be shareholders of Yuanma.

Equity Option Agreement.

Under the equity option agreement among Makesi WFOE, Yuanma and Yuanma Shareholders dated June 21, 2022, each of Yuanma Shareholders irrevocably granted to Makesi WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Yuanma. Also, Makesi WFOE or its designee has the right to acquire any and all of its assets of Yuanma. Without Makesi WFOE’s prior written consent, Yuanma’s shareholders cannot transfer their equity interests in Yuanma and Yuanma cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option. This pledge will remain effective until all options have been exercised.

Voting Rights Proxy and Financial Support Agreement.

Under the voting rights proxy and financial support agreement among Makesi WFOE, Yuanma and Yuanma Shareholders dated June 21, 2022, each Yuanma Shareholder irrevocably appointed Makesi WFOE as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of his equity interests in Yuanma, including but not limited to the power to vote on its behalf on all matters of Yuanma requiring shareholder approval in accordance with the articles of association of Yuanma. The proxy agreement is for a term of 20 years and can be extended by Makesi WFOE unilaterally by prior written notice to the other parties.

On June 26, 2023, the Company sold all the issued and outstanding equity interest in TMSR HK.

Material terms of each of the VIE agreements with Highlight Media are described below. The VIE agreements with Highlight Media were terminated and the Company disposed Highlight Media as of September 26, 2023.

Technical Consultation and Services Agreement.

Pursuant to the technical consultation and services agreement between Highlight Media and Makesi WFOE dated September 16, 2022, Makesi WFOE has the exclusive right to provide consultation services to Highlight Media relating to Highlight Media’s business, including but not limited to business consultation services, human resources development, and business development. Makesi WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Makesi WFOE has the right to determine the service fees based on Highlight Media’s actual operation on a quarterly basis. This agreement will be effective as long as Highlight Media exists. Makesi WFOE may terminate this agreement at any time by giving a 30 days’ prior written notice to Highlight Media.

Equity Pledge Agreement.

Under the equity pledge agreement among Makesi WFOE, Highlight Media and the shareholders of Highlight Media dated September 16, 2022, the shareholders of Highlight Media pledged all of their equity interests in Highlight Media to Makesi WFOE to guarantee Highlight Media’s performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, the shareholders of Highlight Media will complete the registration of the equity pledge under the agreement with the competent local authority. If Highlight Media breaches its obligation under the technical consultation and services agreement, Makesi WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed or the shareholders of Highlight Media cease to be shareholders of Highlight Media.

Equity Option Agreement.

Under the equity option agreement among Makesi WFOE, Highlight Media and the shareholders of Highlight Media dated September 16, 2022, each of the shareholders of Highlight Media irrevocably granted to Makesi WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Highlight Media. Also, Makesi WFOE or its designee has the right to acquire any and all of its assets of Highlight Media. Without Makesi WFOE’s prior written consent, Highlight Media’s shareholders cannot transfer their equity interests in Highlight Media and Highlight Media cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option. This pledge will remain effective until all options have been exercised.

Voting Rights Proxy and Financial Support Agreement.

Under the voting rights proxy and financial support agreement among Makesi WFOE, Highlight Media and the shareholders of Highlight Media dated September 16, 2022, each Highlight Media Shareholder irrevocably appointed Makesi WFOE as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of his equity interests in Highlight Media, including but not limited to the power to vote on its behalf on all matters of Highlight Media requiring shareholder approval in accordance with the articles of association of Highlight Media. The proxy agreement is for a term of 20 years and can be extended by Makesi WFOE unilaterally by prior written notice to the other parties.

On February 27, 2023, Highlight WFOE entered into a series of assignment agreements with Makesi WFOE, Highlight Media and Highlight Shareholders, pursuant to which Makesi WFOE assign all its rights and obligations under the VIE agreements to Highlight WFOE. The VIE agreements and the assignment agreements grant Highlight WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Highlight Media, including absolute rights to control the management, operations, assets, property and revenue of Highlight Media. The assignment does not have any impact on Company’s unaudited interim consolidated financial statements.

On September 26, 2023, Highlight WFOE terminated the VIE agreements with Highlight Media and the shareholders of Highlight Media.

As of the date of this report, the Company primary operations are focused on the live streaming market with focus on e-commerce and live streaming interactive game in the United States through its subsidiaries AI Catalysis and SH Xianzhui. All Highlight Media enterprise brand management service have been disposed.

Liquidity and Capital Resources

As of June 30, 2024, the Company had $301,837 in its operating bank accounts and working capital of approximately $2.1 million. In August 2024, Mr. Xiaojian Wang, the Chief Executive Officer of the Company, executed a Letter of Support in which he agreed to provide continuing financial support to the Company for a period of at least 12 months from the issuance date of the Company’s unaudited consolidated financial statements for the period ended June 30, 2024.

The Company also intends to raise additional debt or equity capital to fund future operations. There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, the Company has planned and implemented cost-cutting measures to reduce operating expenditures and loss. Management believes that the Company can adjust the pace of its business development and control operating expenses when necessary. Therefore, the Company assesses that current working capital, together with the letter of financial support from Mr. Xiaojian Wang, will be sufficient to meet its obligations for the next 12 months from the issuance date of this report. These unaudited consolidated financial statements are prepared on going concern basis.

Note 2 – Summary of significant accounting policies

Basis of Presentation

The accompanying unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are of a normal recurring nature and are necessary to fairly present the financial statements for the interim periods. The unaudited interim consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been prepared in accordance with the regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Results for the interim periods are not necessarily indicative of results to be expected for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on April 2, 2024, as amended on July 8, 2024 and July 22, 2024.

Principles of Consolidation

The unaudited interim consolidated financial statements of the Company include the accounts of GDC and its wholly owned subsidiaries and VIEs. All intercompany transactions and balances are eliminated upon consolidation.

Use of Estimates and Assumptions

The preparation of unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited interim consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited interim consolidated financial statements include the useful lives of intangible assets and equipment, impairment of long-lived assets, collectability of receivables, fair value of convertible notes, discount rate used to measure present value of lease liabilities and valuation allowance for deferred tax assets. Actual results could differ from these estimates.

Foreign Currency Translation and Transactions

The reporting currency of the Company is the U.S. dollar. The PRC subsidiaries of the Company conduct their businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted set forth in the H.10 statistical release of the Federal Reserve Board at the end of the period. The statements of operations accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income amounted to $208,204 and $73,279 as of June 30, 2024 and December 31, 2023, respectively. The unaudited interim consolidated balance sheets amounts, with the exception of shareholders’ equity at June 30, 2024 and December 31, 2023 were translated at 7.27 RMB and 7.10 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to unaudited interim consolidated statements of operations accounts for the six months ended June 30, 2024 and 2023 were 7.22 RMB and 6.93 RMB to $1.00, respectively. Unaudited interim consolidated statements of cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the unaudited interim consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the unaudited interim consolidated balance sheets.

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and demand deposits placed with commercial banks or other financial institutions and highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase of three months or less. All cash and cash equivalents are unrestricted as to withdrawal and use.

Loan Receivable

Loan receivable is the amounts lent to a third party with the interest rate of 5% per annual. Since the loan will be due within one year, the Company classified the loan as current assets under the loan receivable account on the unaudited interim consolidated balance sheet. The interest accrued during the reporting period was recorded as interest income on the unaudited interim consolidated statements of operations.

Prepaid and Other Current Assets

Prepaid and other current assets are advances paid to outside vendors for services purchases. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

Convertible Notes Receivable

The Company evaluated the terms of the DigiTrax Convertible Notes and the Liquid Convertible Notes (as defined in Note 12) according to ASC 320 “Investments — Debt Securities” and concluded that the convertible notes should be classified as an available-for-sale (“AFS”) security and measured at fair value. To evaluate the fair value of the available-for-sale security, the Company used the discounted cash flow method. The fair value changes of the convertible notes receivable were recorded as other comprehensive income.

The Company evaluates quarterly whether AFS securities are other-than-temporarily impaired (OTTI) based on criteria that include the extent to which cost exceeds market value, the duration of the market decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments, and the financial health and prospects of the issuer or security.

Declines in the value of AFS securities determined to be OTTI are recognized in earnings and included in other-than-temporary impairment losses. Debt securities with unrealized losses are considered OTTI if the Company intends to sell the security or if the Company will be required to sell the security prior to any anticipated recovery. If the Company determines that a security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the amortized cost and the current fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the amortized cost of the security. However, in this circumstance, if the Company does not intend to sell the security and will not be required to sell the security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the amortized cost of the security. Expected cash flows are discounted using the security’s effective interest rate. An equity security is determined to be OTTI if the Company does not expect to recover the cost of the security. Declines in the value of AFS securities determined to be temporary are reported, net of tax, as other comprehensive earnings (losses) and included as a separate component of stockholders’ equity.

Equipment

Equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method after consideration of the estimated useful lives of the assets and estimated residual value. The estimated useful lives and residual value are as follows:

		Useful Life		Estimated Residual Value
Office equipment and furnishing		5 years			5	%

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 loss. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Intangible Assets

Intangible assets represent software that are stated at cost, less accumulated amortization. Research and development costs associated with internally developed patents are expensed when incurred. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. The software has finite useful lives and is amortized using a straight-line method that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The Company amortizes the cost of software, over their useful life using the straight-line method. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances revised estimates of useful lives. The estimated useful life is as follows:

		Useful Life
Software		5 years

Lease

The Company determines if an arrangement is a lease at inception. Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases. The Company has no significant finance leases.

The Company recognizes lease liabilities and corresponding right-of-use assets on the balance sheet for leases. Operating lease right- of-use assets (the “ROU”) are disclosed as non-current assets in the Company’s consolidated balance sheets. Current maturities of operating lease liabilities are classified as operating lease liabilities - current, and operating lease liabilities that will be due in more than one year are disclosed as non-current liabilities on the consolidated balance sheets. Operating lease right-of-use assets and operating lease liabilities are initially recognized based on the present value of future lease payments at lease commencement. The operating lease right-of-use asset also includes any lease payments made prior to lease commencement and the initial direct costs incurred by the lessee and is recorded net of any lease incentives received. As the interest rates implicit in most of the leases are not readily determinable, the Company uses the incremental borrowing rates based on the information available at lease commencement to determine the present value of the future lease payments. Operating lease expenses are recognized on a straight-line basis over the term of the lease.

Most leases have initial terms ranging from 1.1 to 5.4 years. The Company’s lease agreements did not include non-lease components. Lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any significant residual value guarantees or restricted covenants.

The Company evaluates the carrying value of ROU assets if there are indicators of impairment and reviews the recoverability of the related asset group.

The Company reassesses of a contract is or contains a leasing arrangement and re-measures ROU assets and liabilities upon modification of the contract. The Company will derecognize ROU assets and liabilities, with difference recognized in the income statement on the contract termination.

Impairment for Long-lived Assets

Long-lived assets, including equipment, intangible assets and ROU assets 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 individually or as a group at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other assets and liabilities. The Company assesses the recoverability of the assets (or group of assets) based on the undiscounted future cash flows the assets (or group of assets) are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset (or group of assets) plus net proceeds expected from disposition of the asset (or group of assets), if any, are less than the carrying value of the asset (or group of assets). If an impairment is identified, the Company would reduce the carrying amount of the asset (or group of assets) to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. The carrying amount of the asset (or the long-lived assets in the asset group on a pro rata basis using the relative carrying amounts) is reduced to the extent not lower than the fair value of the asset. The adjusted carrying amounts after an impairment charge represent the new cost basis and is depreciated over their remaining useful lives.

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 Company considers the carrying amount of cash, accounts receivable, loan receivable, other receivables, accounts payable, other payables and accrued liabilities to approximate their fair values because of their short-term nature.

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.

As of June 30, 2024 and December 31, 2023, the carrying values of cash, other receivables, loan receivable, other payables and accrued liabilities approximate their fair values due to the short-term nature of the instruments. Fair value of convertible notes receivable have been discussed in Note 20.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method for contracts that were not completed as of January 1, 2018. This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue, other than retainage revenues, was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations. However, the impact of the Company’s retainage revenue was not material as of the date of adoption, and as a result, did not result in an adjustment.

The core principle underlying the revenue recognition ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.

The Company’s revenue streams are primarily recognized at a point in time.

The ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract 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) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASC 606 under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its retainage revenues.

An entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the entity controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the entity simply arranges but does not control the goods or services being transferred to the customer, will result in the recognition of the net amount the entity is entitled to retain in the exchange.

The Company, as a principal, provides services to clients under separate contracts, generating revenue. The pricing terms specified in the contracts are fixed. An obligation to perform is identified in contracts with clients. Revenue is recognized over the period in which the services are earned.

Payments received prior to the relevant criteria for revenue recognition are met, are recorded as customer deposits.

The Company have $nil and $150,000 revenue streams from continuing operations for the six months ended June 30, 2024 and 2023, respectively.

Income Taxes

The Company accounts for income taxes in accordance with U.S. GAAP. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited interim consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company incurred no such penalties and interest for the six months ended June 30, 2024 and 2023.

Interest

Interest income is mainly generated from bank deposits and other interest earning financial assets and is recognized on an accrual basis using the effective interest method.

Net Loss per Common Stock

Basic loss per share is computed by dividing loss available to common shareholders of the Company by the weighted average common stocks outstanding during the period. Diluted loss per share takes into account the potential dilution that could occur if securities or other contracts to issue common stocks were exercised and converted into common stocks.

In May 2023 and November 2023 in connection with the placement agency agreements (see Note 16), the Company issued and sold pre-funded warrants exercisable for an aggregate of 844,351 and 1,876,103 shares of common stock, at the exercise price of $8.35 and $3.019 per share, of which $8.349 and $3.018 was pre-funded and paid to the Company upon issuance of the pre-funded warrants, respectively. The remaining exercise price of the pre-funded warrants is $0.001 per share. The pre-funded warrants are exercisable by the holders at any time and do not expire. On November 1, 2023, in connection with the Warrant Exchange Agreements (see Note 16), the holders of May 2023 Unregistered Warrants (as defined in Note 16) surrendered the May 2023 Unregistered Warrants, and the Company cancelled the May 2023 Unregistered Warrants and issued to these holders pre-funded warrants to purchase up to 577,260 shares of the Company’s common stock with no consideration.

For the six months ended June 30, 2024, 567,691 pre-funded warrants representing 567,691 shares of the Company’s common stock were exercised for $654. The remaining pre-funded warrants are immediately exercisable after issuance and do not expire. As the remaining shares underlying the pre-funded warrants are issuable for nominal consideration of $0.001 per share, 922,072 in common stocks underlying the unexercised pre-funded warrants were considered outstanding for purposes of the calculation of loss per share as of June 30, 2024.

For the six months ended June 30, 2024 and 2023, 7,309,181 and 5,644,970 of outstanding warrants (excluding the Pre-funded Warrants and Exchange Warrants) which are equivalent to convertible of 3,080,017 and 1,415,806 common stocks were excluded from the diluted loss per share calculation due to their antidilutive effect.

Comprehensive Loss

Comprehensive loss is defined as the changes in equity of the Company during a year from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Accumulated other comprehensive income of the Company includes the foreign currency translation adjustments and unrealized gains or loss on available-for-sale investments.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net loss or and financial position.

Recently Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. The new amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments, with early adoption permitted. The Company has evaluated and concluded that there’s no impact of the new guidance on the unaudited interim consolidated financial statements. The Company adopted ASU 2021-08 since January 1, 2024.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company has evaluated and concluded that there’s no impact of the new guidance on the unaudited interim consolidated financial statements. The Company adopted ASU 2022-03 since January 1, 2024.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendment is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. The Company will begin providing the enhanced reportable segment financial disclosures effective with its Annual Report on Form 10-K for the year ending December 31, 2024.

In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which establishes accounting guidance for crypto assets meeting certain criteria. Bitcoin meets this criteria. The amendments require crypto assets meeting the criteria to be recognized at fair value with changes recognized in net income each reporting period. Upon adoption, a cumulative-effect adjustment is made to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. The Company has evaluated and concluded that there’s no impact of the new guidance on the unaudited interim consolidated financial statements. The Company adopted ASU 2022-08 since January 1, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.

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 unaudited interim consolidated balance sheets, unaudited interim consolidated statements of operations and comprehensive loss and unaudited interim consolidated statements of cash flows.

Note 3 – Variable Interest Entity

Yuanma

On June 21, 2022, Makesi WFOE entered into a series of contractual arrangements with Yuanma and its shareholders. The significant terms of these contractual arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classified Yuanma as VIE.

On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK, which hold 100% of the equity interests in Makesi WFOE. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of TMSR HK included the sale of Makesi WFOE and Yuanma, which has any material impact on the Company’s unaudited interim consolidated financial statements.

Highlight Media

On September 16, 2022, Makesi WFOE entered into contractual arrangements with Highlight Media and its shareholders. The significant terms of these contractual arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classifies Highlight Media as VIE.

On February 27, 2023, Highlight WFOE entered into a series of assignment agreements with Makesi WFOE, Highlight Media and Highlight Shareholders, pursuant to which Makesi WFOE assign all its rights and obligations under the VIE agreements to Highlight WFOE. The VIE agreements and the assignment agreements granted Highlight WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Highlight Media, including absolute rights to control the management, operations, assets, property and revenue of Highlight Media. The assignment did not have any impact on Company’s unaudited interim consolidated financial statements.

On September 26, 2023, Highlight WFOE entered into a termination agreement with Highlight Media and the shareholders of Highlight Media to terminate the VIE Agreements and sell the interest in the VIE Agreements for a purchase price of $100,000. As a result of such termination, the Company no longer treats Highlight Media as a consolidated affiliated entity or consolidates the financial results and balance sheet of Highlight Media in the Company’s unaudited interim consolidated financial statements.

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Highlight WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Highlight Media and Makesi WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Yuanma because Highlight WFOE and Makesi WFOE have both of the following characteristics:

(1)

The power to direct activities at Highlight Media and Yuanma that most significantly impact such entity’s economic performance, and

(2)

The obligation to absorb losses of, and the right to receive benefits from Highlight Media and Yuanma that could potentially be significant to such entity.

Accordingly, the accounts of Highlight Media and Yuanma are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, Yuanma’s financial positions and results of operations were included in the Company’s unaudited interim consolidated financial statements prior to June 26, 2023 and Highlight Media’s financial positions and results of operations were included in the Company’s unaudited interim consolidated financial statements prior to September 26, 2023.

As of June 30, 2024, the Company did not have any VIE operations. The operations results from VIE operations for the six months ended June 30, 2024 and 2023 have been reflected in discontinued operations as disclosed in Note 19.

Note 4 – Cash and Cash Equivalents

Cash at banks represents cash balances maintained at commercial banks. As of June 30, 2024 and December 31, 2023, the Company did not have any cash equivalents. The Company maintains bank accounts in the United States and institutions in PRC.

	June 30,		December 31,
	2024		2023
		(unaudited)
Cash at Banks	$	301,837	$	5,175,518

Note 5 – Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following as of June 30, 2024 and December 31, 2023:

	June 30,		December 31,
	2024		2023
	(unaudited)
Prepayments of digital human services	$	362,500	$	797,500
Prepayments of live streaming services		-		487,587
Consulting service		133,114		-
Other prepayments		24,750		5,803
Total prepaid and other current assets	$	520,364	$	1,290,890

Note 6 – Loan Receivable

On January 13, 2024, the Company entered into a loan agreement with Lotus City Limited (“Lotus”), pursuant to which, the Company agreed to lend $1,900,000 to Lotus, with the interest rate of 5% per annum accrued daily. The Loan together with accrued and unpaid interest and all other charges, costs and expenses, is due and payable on or before January 16, 2025. On January 16, 2024, the Company transferred $1,900,000 to Lotus. Since the loan will be due within one year, the Company classified the loan as current assets under the loan receivable account on the unaudited interim consolidated balance sheet.

On April 3, 2024 and June 4, 2024, Lotus repaid $1,000,000 and $250,000, respectively to the Company, leaving $650,000 in principal outstanding.

For the three and six months ended June 30, 2024, the Company accrued $19,781 and $30,659, respectively, of interest and recorded as interest income on the unaudited interim consolidated statements of operations. As of June 30, 2024, the outstanding balance of loan receivable was $650,000.

Note 7 – Other Receivables

As of June 30, 2024 and December 31, 2023, other receivables consisted of the following:

	June 30,		December 31,
	2024		2023
Interest receivable	$	30,659	$	-
Lease deposit		9,195		9,459
Total other receivables, net	$	39,854	$	9,459

Note 8 – Equipment, net

Equipment, net consisted of the following as of June 30, 2024 and December 31, 2023:

	June 30, 2024			December 31, 2023
	(unaudited)
Office equipment and furniture	$	14,190		$	14,190
Less: accumulated depreciation		(4,044	)		(1,679	)
Total	$	10,146		$	12,511

Depreciation expense for the three months ended June 30, 2024 and 2023 amounted to $1,182 and $88, respectively. Depreciation expense for the six months ended June 30, 2024 and 2023 amounted to $2,365 and $88, respectively.

Note 9 – Intangible Assets, net

Intangible assets consisted of the following as of June 30, 2024 and December 31, 2023:

	June 30, 2024			December 31, 2023
	(unaudited)
Software	$	4,891,824		$	3,653,104
Subtotal		4,891,824			3,653,104
Less: accumulated amortization		(729,874	)		(345,155	)
Total	$	4,161,950		$	3,307,949

The Company’s intangible assets include a software of $750,000 purchased from a third party by issuance of 180,000 of the Company’s common stock (as disclosed in Note 16), software of $2,903,104 purchased by the Company in cash and a software of $1,248,000 purchased from a third party by issuance of 1,560,000 of the Company’s common stock (as disclosed in Note 16). The Company amortizes its software over their estimated useful lives and reviews these assets for impairment.

Amortization expense for the three months ended June 30, 2024 and 2023 was $203,134 and nil, respectively. Amortization expense for the six months ended June 30, 2024 and 2023 was $385,468 and nil, respectively.

Note 10 – Other Payables and Accrued Liabilities

Other payables and accrued liabilities consisted of the following as of June 30, 2024 and December 31, 2023:

	June 30,		December 31,
	2024		2023
	(unaudited)
Professional service fee	$	90,931	$	-
Payroll		13,518		3,944
Rental		-		15,981
Travel and Entertainment expenses		9,770		3,413
Total	$	114,219	$	23,338

Note 11 – Related Party Transactions

Other payables – related parties:

Name of related party	Relationship	Nature	June 30, 2024		December 31, 2023
			(unaudited)
Xiaojian Wang	Chief Executive Officer	Accrued compensations	$	25,000	$	-
Zihao Zhao	Chief Finance Officer	Accrued compensations		35,833		20,833
Total			$	60,833	$	20,833

As of June 30, 2024 and December 31, 2023, the balance of other payables- related parties were $60,833 and $20,833, respectively, consisted of accrued compensations of the Company’s officers.

For the three and six months ended June 30, 2024, the Company recorded compensation expenses to its officers amounted to $20,000 and $40,000, respectively, for their services provided to the Company. For the three and six months ended June 30, 2023, the Company recorded compensation expenses to its officers amounted to $5,833 and $5,833, respectively, for their services provided to the Company.

Note 12 – Convertible Notes Receivable

The Company’s convertible notes receivable consisted of the following as of June 30, 2024 and December 31, 2023:

	Convertible Notes Receivable
Beginning	$	-
Convertible note receivable		2,500,000
Fair value changes of convertible notes		102,027
Ending, as of December 31, 2023		2,602,027
Fair value changes of convertible notes		54,849
Ending, as of March 31, 2024 (unaudited)		2,656,876
Fair value changes of convertible notes		(93,912	)
Other-than-temporary impairment losses on convertible note receivable		(1,500,000	)
Ending, as of June 30, 2024 (unaudited)	$	1,062,964

On June 1, 2023 and August 17, 2023, the Company purchased two convertible notes issued by DigiTrax Entertainment Inc. (the “DigiTrax”) for an aggregated of $1,000,000 (the “DigiTrax Convertible Notes”). Each DigiTrax Convertible Note will be due on one year after the original issuance (the “DigiTrax Convertible Note Maturity Date”). The Company has the right to receive interest on the aggregate unconverted and then outstanding principal amount of these notes at the rate of 10% per annum. Accrued and unpaid interest will be due and payable on conversion, repayment, redemption, maturity or default. At any time (after six months) after the issuance until the notes are no longer outstanding, the notes shall be convertible, in whole or part, into shares of common stock of DigiTrax at a price of $1.4 per share. In the event DigiTrax consummates a public offering of any capital stock and is able to receive gross proceeds of at least $10,000,000 (“Qualified Offering”) prior to the DigiTrax Convertible Note Maturity Date and there’s no event of default, all then outstanding principal and accrued but unpaid interest under the DigiTrax Convertible Notes should convert into the number of fully paid and nonassessable shares of DigiTrax common stock based on the lesser of (i) $1.4 per share, or (ii) seventy percent (70%) of the price per share of DigiTrax common stock that is subject to the Qualified Offering.

On June 2, 2023 and August 17, 2023, the Company purchased two convertible notes issued by Liquid Marketplace Corp. (the “Liquid”) for an aggregated of $1,500,000 (the “Liquid Convertible Notes”). Each Liquid Convertible Note will be due on one year after the original issuance (the “Liquid Convertible Note Maturity Date”). The Company has the right to receive interest on the aggregate unconverted and then outstanding principal amount of these notes at the rate of 8% per annum. Accrued and unpaid interest will be due and payable on conversion, repayment, redemption, maturity or default. At any time after the issuance until the notes are no longer outstanding, the notes shall be convertible, in whole or part, into shares of common stock of Liquid at a price of $0.25 per share. In the event Liquid consummates a public offering of any capital stock and is able to receive gross proceeds of at least $10,000,000 (“Qualified Offering”) prior to the Liquid Convertible Note Maturity Date and there’s no event of default, all then outstanding principal and accrued but unpaid interest under the Liquid Convertible Notes should convert into the number of fully paid and nonassessable shares of Liquid common stock based on the lesser of (i) $0.25 per share, or (ii) seventy percent (70%) of the price per share of Liquid common stock that is subject to the Qualified Offering.

The Company evaluated the terms of the DigiTrax Convertible Notes and the Liquid Convertible Notes according to ASC 320 and concluded that these notes should be classified as an available-for-sale security and measured at fair value.

As of June 30, 2024, $500,000 of the DigiTrax Convertible Notes was due and extended to May 31, 2025 as agreed by the Company and DigiTrax.

As of June 30, 2024, $500,000 of the Liquid Convertible Notes was due, but the Company failed to collect repayments from Liquid. The Company evaluated the recoverability of the aggregated $1,500,000 Liquid Convertible Notes according to ASC 326 and concluded that, the decline in value of Liquid Convertible Notes is other-than-temporary-impairment. The Company recorded $1,500,000 impairment loss on the Liquid Convertible Notes in the accompanying unaudited statement of operations, for the three months ended June 30, 2024. The unrealized gains on the fair value changes of the Liquid Convertible Notes amounted to $83,726, which was recognized in prior periods, were reversed from other comprehensive income. Up to the date of the unaudited interim consolidated financial statements were issued, there’s no evidence indicating that the fair value of Liquid Convertible Notes increased.

For the six months ended June 30, 2024 and 2023, the Company recorded unrealized loss on the fair value changes of these notes amounted to $39,063 (consisting of $53,808 unrealized loss on the fair value changes of Liquid Convertible Notes, partially offset by$14,745 unrealized gain on the fair value changes of DigiTrax Convertible Notes) and $

SEC Form 10-Q filed by GD Culture Group Limited