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 September 30, 2025

☐ 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 November 3, 2025, there were 55,984,777 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	2

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9

ITEM 4.	CONTROLS AND PROCEDURES	10

PART II.	OTHER INFORMATION	11

ITEM 1.	LEGAL PROCEEDINGS	11

ITEM 1A.	RISK FACTORS	11

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	11

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	12

ITEM 4.	MINE SAFETY DISCLOSURES	12

ITEM 5.	OTHER INFORMATION	12

ITEM 6.	EXHIBITS	12

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, 2024 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to unaudited interim condensed consolidated financial statements

		Page
Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024		F-1
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2025 and 2024		F-2
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024		F-3 – F-4
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024		F-5
Notes to Unaudited Interim Condensed Consolidated Financial Statements		F-6

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2025			2024
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	225,072		$	22,538
Other receivables, net		9,195			9,195
Prepaid and other current assets		412,162			-
Total current assets		646,429			31,733

EQUIPMENT, NET		4,553			7,781

RIGHT-OF-USE ASSETS, NET		1,057,858			1,342,333

OTHER ASSETS
Intangible assets, net		6,304,868			1,102,400
Other assets		250,740			250,740
Digital assets		857,735,191			-
Total other assets		864,290,799			1,353,140
Total assets	$	865,999,639		$	2,734,987

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Other payables and accrued liabilities	$	508,990		$	401,821
Other payables - related parties		191,965			502,266
Lease liabilities - current		315,579			427,984
Income tax payable		1,960,625			141,810
Total current liabilities		2,977,159			1,473,881

OTHER LIABILITIES
Lease liabilities – non-current		865,729			1,104,552
Deferred tax liabilities		-			153,911
Total other liabilities		865,729			1,258,463
Total liabilities		3,842,888			2,732,344

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized, 55,984,777 and 11,167,294 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively		5,599			1,117
Additional paid-in capital		935,314,053			82,758,975
Subscription receivable		(17,390	)		-
Accumulated deficit		(73,582,481	)		(83,194,386	)
Accumulated other comprehensive income		152,611			152,585
Total GD Culture Group Limited shareholders’ equity (deficits)		861,872,392			(281,709	)
Noncontrolling interest		284,359			284,352
Total shareholders’ equity		862,156,751			2,643
Total liabilities and shareholders’ equity	$	865,999,639		$	2,734,987

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

F-1

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	For the three months ended						For the nine months ended
	September 30,						September 30,
	2025			2024			2025			2024

OPERATING EXPENSES
Selling and marketing expenses	$	-		$	(2,909	)	$	(300,000	)	$	(2,402,909	)
General and administrative expenses		(1,229,826	)		(873,067	)		(3,190,433	)		(4,345,438	)
Research and development expenses		(1,236,333	)		(217,500	)		(1,469,666	)		(652,500	)
Other-than-temporary impairment losses		-			(2,756,986	)		-			(4,256,986	)
TOTAL OPERATING EXPENSES		(2,466,159	)		(3,850,462	)		(4,960,099	)		(11,657,833	)

LOSS FROM OPERATIONS		(2,466,159	)		(3,850,462	)		(4,960,099	)		(11,657,833	)

OTHER INCOME
Interest income		2,179			10,381			6,476			45,383
Unrealized gain on fair value changes of digital assets		16,230,431			-			16,230,431			-
TOTAL OTHER INCOME		16,232,610			10,381			16,236,907			45,383

INCOME (LOSS) BEFORE INCOME TAX (EXPENSES) BENEFITS		13,766,451			(3,840,081	)		11,276,808			(11,612,450	)

INCOME TAX (EXPENSES) BENEFITS		(1,677,982	)		748			(1,664,903	)		22,666

NET INCOME (LOSS)	$	12,088,469		$	(3,839,333	)	$	9,611,905		$	(11,589,784	)
Net loss attributable to noncontrolling interest		-			(98,134	)		-			(284,776	)
Net income (loss) attributable to shareholders of common stock		12,088,469			(3,741,199	)		9,611,905			(11,305,008	)

OTHER COMPREHENSIVE INCOME (LOSS)
- Foreign currency translation adjustment		9			9,961			33			(9,950	)
- Fair value changes of convertible note receivables		-			(106	)		-			(39,169	)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax		9			9,855			33			(49,119	)
COMPREHENSIVE INCOME (LOSS), net of tax	$	12,088,478		$	(3,829,478	)	$	9,611,938		$	(11,638,903	)
Comprehensive income (loss) attributable to noncontrolling interest		-			(95,478	)		7			(377,401	)
Comprehensive income (loss) attributable to shareholders of common stock		12,088,478			(3,734,000	)		9,611,931			(11,261,502	)

BASIC WEIGHTED AVERAGE NUMBER OF COMMON STOCKS		25,115,911			10,453,319			18,849,721			9,065,183

Basic earnings (loss) per share available to common shareholders	$	0.48		$	(0.36	)	$	0.51		$	(1.25	)

DILUTED WEIGHTED AVERAGE NUMBER OF COMMON STOCKS		25,177,616			10,453,319			18,911,426			9,065,183

Diluted earnings (loss) per share available to common shareholders	$	0.48		$	(0.36	)	$	0.51		$	(1.25	)

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

F-2

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended September 30, 2025

	Attributable to GD Culture Group Limited Shareholders
																				Total
																		Accumulated		GD Culture Group					Total
	Preferred Stock				Common Stock				Additional Paid-in			Subscription			Accumulated			Other Comprehensive		Limited Shareholders’			Non controlling		Shareholders’ Equity
	Shares		Amount		Shares		Amount		Capital			Receivable			Deficit			Income		Deficits			Interest		(Deficit)

Balance, January 1, 2025		-	$	-		11,167,294	$	1,117	$	82,758,975		$	-		$	(83,194,386	)	$	152,585	$	(281,709	)	$	284,352	$	2,643
Net loss		-		-		-		-		-			-			(977,510	)		-		(977,510	)		-		(977,510	)
Issuance of common stock for cash		-		-		1,115,600		111		909,889			-			-			-		910,000			-		910,000
Foreign currency translation		-		-		-		-		-			-			-			4		4			2		6
Balance, March 31, 2025 (unaudited)		-	$	-		12,282,894	$	1,228	$	83,668,864		$	-		$	(84,171,896	)	$	152,589	$	(349,215	)	$	284,354	$	(64,861	)
Net loss		-		-		-		-		-			-			(1,499,054	)		-		(1,499,054	)		-		(1,499,054	)
Issuance of common stock for cash		-		-		1,115,600		112		540,938			-			-			-		541,050			-		541,050
Issuance of prefunded warrants for cash		-		-		-		-		3,615,226			(17,390	)		-			-		3,597,836			-		3,597,836
Exercise of November 2023 Registered Warrants		-		-		952,644		95		(95	)		-			-			-		-			-		-
Issuance of common stock for acquisition of certain software		-		-		2,444,295		245		5,988,278			-			-			-		5,988,523			-		5,988,523
Foreign currency translation		-		-		-		-		-			-			-			13		13			5		18
Balance, June 30, 2025 (unaudited)		-	$	-		16,795,433	$	1,680	$	93,813,211		$	(17,390	)	$	(85,670,950	)	$	152,602	$	8,279,153		$	284,359	$	8,563,512
Net income		-		-		-		-		-			-			12,088,469			-		12,088,469			-		12,088,469
Issuance of common stock for acquisition of Pallas		-		-		39,189,344		3,919		225,726,702			-			-			-		225,730,621			-		225,730,621
Capital contribution from related party		-		-		-		-		615,774,140			-			-			-		615,774,140			-		615,774,140
Foreign currency translation		-		-		-		-		-			-			-			9		9			-		9
Balance, September 30, 2025 (unaudited)		-	$	-		55,984,777	$	5,599	$	935,314,053		$	(17,390	)	$	(73,582,481	)	$	152,611	$	861,872,392		$	284,359	$	862,156,751

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

F-3

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Three and Nine Months Ended September 30, 2024

	Attributable to GD Culture Group Limited Shareholders
																		Total GD Culture
	Preferred Stock				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Group Limited Shareholders’			Non controlling			Total 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		-	$	-		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		-	$	-		9,501,261	$	950	$	82,759,142		$	(76,922,034	)	$	211,613		$	6,049,671		$	380,920		$	6,430,591
Net loss		-		-		-		-		-			(3,741,199	)		-			(3,741,199	)		(98,134	)		(3,839,333	)
Exercise of pre-funded warrants		-		-		577,007		58		(58	)		-			-			-			-			-
Exercise of February 2021 Registered Warrants		-		-		92,756		9		(9	)		-			-			-			-			-
Foreign currency translation		-		-		-		-		-			-			7,305			7,305			2,656			9,961
Fair value changes of convertible notes receivable		-		-		-		-		-			-			(106	)		(106	)		-			(106	)
Balance, September 30, 2024		-	$	-		10,171,024	$	1,017	$	82,759,075		$	(80,663,233	)	$	218,812		$	2,315,671		$	285,442		$	2,601,113

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

F-4

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Nine Months ended September 30,
	2025			2024

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	9,611,905		$	(11,589,784	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of equipment		3,228			3,548
Amortization of intangible assets		786,055			628,834
Amortization of right-of-use assets		284,475			313,472
Unrealized gain from fair value changes of digital assets		(16,230,431	)		-
Deferred income tax		(153,911	)		(22,666	)
Other-than-temporary impairment losses from convertible note receivables		-			1,500,000
Other-than-temporary impairment losses from intangible assets		-			2,756,986
Changes in operating assets and liabilities
Other receivables		-			(38,587	)
Prepaid and other current assets		(412,162	)		1,128,935
Other payables and accrued liabilities		2,399			138,130
Lease liabilities		(351,228	)		(294,492	)
Taxes payable		1,818,815			-
Other payables - related party		39,184			151,528

Net cash used in operating activities		(4,601,671	)		(5,324,096	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to a third party		-			(1,900,000	)
Collection from loan to a third party		-			1,250,000

Net cash used in investing activities		-			(650,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		1,451,050			829,879
Proceeds from issuance of prefunded warrants		3,602,607			-
Proceeds from exercise of prefunded warrants		-			654
Proceeds from related party loan		50,000			-
Proceeds from shareholder loan		100,000			-
Repayments to a related party		(399,485	)		-

Net cash provided by financing activities		4,804,172			830,533

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		33			14

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		202,534			(5,143,549	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		22,538			5,175,518

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	225,072		$	31,969

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	6,000		$	-
Cash paid for interest	$	-		$	-

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for acquisition right, title, and interest in and to the certain software	$	5,988,523		$	1,248,000
Initial recognition of right-of-use assets and lease liability	$	-		$	205,539
Issuance of common stock for 13.3333% interest in SH Xianzhui	$	-		$	3,150,793
Exercise of November 2023 Registered Warrants	$	95		$	71
Exercise of pre-funded warrants pursuant to the Warrant Exchange Agreements	$	-		$	58
Exercise of February 2021 Registered Warrants	$	-		$	9
Issuance of common stock for acquisition of Pallas	$	225,730,621		$	-
Capital contribution from a related party	$	615,774,140		$	-

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

F-5

GD CULTURE GROUP LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED 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, 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, and 2) Live streaming and e-commerce. 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 two other shareholders on August 10, 2023. SH Xianzhui is principally engaged in the provision of social media marketing agency service. Highlight WFOE initially owned 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% of the 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 these unaudited interim condensed 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.

Acquisition of Pallas

On September 8, 2025, the Company (the “Acquirer”), Pallas Capital Holding Ltd, a British Virgin Islands company incorporated on June 30, 2025 (“Pallas” or the “Target”), and the shareholders of the Target (each a “Seller” and collectively, the “Sellers”) executed an agreement and plan of securities exchange (the “Share Exchange Agreement”, and the transactions contemplated thereby, collectively, the “Pallas Transaction”), pursuant to which, the Sellers wish to sell to the Acquirer, and the Acquirer wishes to purchase from the Sellers, 100% interest in and to the ordinary shares of the Target (the “Target Shares”). In exchange for the Target Shares, the Acquirer shall issue an aggregate of 39,189,344 shares of the Company’s common stock (the “GDC Shares”) to such Sellers. On September 29, 2025, the Sellers transferred to Acquirer 10,000 shares of Target Shares, being all of the issued and outstanding ordinary shares of the Target, and received in exchange certificates representing the 39,189,344 GDC Shares. Thereafter, Pallas became a wholly-owned subsidiary of the Company.

Pallas was established for the primary purpose of holding digital assets as a long-term reserve, with the objective of achieving potential appreciation in value. As of September 30, 2025, Pallas held 7,500 units of Bitcoin.

Two shareholders of the Company, who beneficially own 11.4%, in the aggregate, of the outstanding shares of common stock of the Company, immediately before the execution of the Pallas Transaction, also serve as the directors and share voting and dispositive power over the shares issued by the Target. Accordingly, the Transaction constitutes a related party transaction for the Company pursuant to Item 404 of Regulation S-K.

Referring to FASB ASC Topic 805-10-55-5, the Company applied two steps (including step 1, screen test and step 2, evaluation of process and input) in evaluating whether the acquisition was an asset acquisition or a business combination. Pallas had no operations except for holding Bitcoin as a reserve, and substantially all of the fair value of the gross assets acquired is concentrated in its Bitcoin. Therefore, the Company decided that Pallas cannot constitute a business and such Pallas Transaction should be accounted for as an asset acquisition. The purchase consideration is measured based on the fair value of the Company’s common stock issued and the consideration is further allocated to the value of the asset acquired in the transaction. Given the related party nature of the Pallas Transaction and the fact that the acquired digital assets are highly liquid and have observable market prices, which indicated that the fair value of the assets acquired is far higher than the fair value of the common stock issued, management concluded that the such Pallas transaction indicated a capital contribution from the shareholders. Accordingly, the excess of the fair value of the digital assets acquired over the fair value of the common stock issued should be recorded as an increase in additional paid-in capital and the value of the assets acquired, which was concurrently with the determination of the value of the assets acquired under asset acquisition.

F-6

Subsidiaries of the Company

The accompanying unaudited interim condensed 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
Highlight HK	●	A Hong Kong company	100% owned by Citi Profit BVI
	●	Incorporated in November 2022
Highlight WFOE	●	A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)	100% owned by Highlight HK
Highlight WFOE	●	Incorporated in January 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
Pallas	●	A British Virgin Islands company	100% owned by the Company
	●	Incorporated in June 2025, acquired on September 29, 2025

As of the date of this report, the Company’s primary operations are focused on the live streaming market with focus on e-commerce in the United States. The Company is also working on the development of a mobile and web platform for interactive fiction—story experiences where readers make choices that branch the plot and lead to multiple endings.

Liquidity and Capital Resources

As of September 30, 2025, the Company had $225,072 in its operating bank accounts and working capital deficit of approximately $2.3 million. From September 2024 to January 2025, Mr. Xiaojian Wang, the Chief Executive Officer of the Company (“CEO”), lent $399,485 to the Company through six loan agreements, for working capital purposes. Pursuant to the loan agreements, these loans are non-interest bearing and will be due from September 2025 to January 2026, respectively. From March 2025 to May 2025, the Company repaid $399,485 in full to the CEO. Up to the date of the unaudited interim condensed consolidated financial statements were issued, there was no outstanding loan from the CEO.

On January 23, 2025, Green Oasis Limited, a shareholder holding less than 5% ownership shares in the Company, provided a $100,000 loan to the Company, for working capital purposes, with maturity as of April 23, 2025. On April 25, 2025, Green Oasis Limited and the Company extended the maturity date to July 23, 2025, which was further extended to July 23, 2026 through an amendment agreement signed on July 30, 2025.

On March 4, 2025, the Company sold 1,115,600 shares of common stock at $0.896379 per share, generating gross proceeds of $1,000,000. The Company received net proceeds of $910,000 after deducting underwriter’s fees of $70,000 and a $20,000 reimbursement for the underwriter’s legal counsel and due diligence analysis expenses. The Company used the proceeds from the offering for working capital purposes.

On May 2, 2025, the Company completed a securities offering in which it agreed to sell (i) 1,115,600 shares of its common stock at a purchase price of approximately $0.524 per share and (ii) 9,380,582 pre-funded warrants at a purchase price of approximately $0.523 per warrant. As of September 30, 2025, the Company received gross proceeds of $4,478,000 from the subscription of 1,115,600 shares of its common stock and 7,468,536 pre-funded warrants, with $17,390 still outstanding and receivable from the investor. The offering remains ongoing and has not yet been fully completed. Transaction costs incurred through September 30, 2025 included underwriter’s fees of $314,343 and a $20,000 reimbursement for the underwriter’s legal counsel and due diligence expenses. After deducting these expenses, net proceeds from the offering (excluding the receivable of $17,390 from the investor) amounted to $4,143,657. As of September 30, 2025, The Company used the proceeds from the offering for working capital purposes.

On October 24, 2025, the Company sold 1,333,334 shares of common stock at $2.1 per share, generating gross proceeds of $2.8 million. The Company received net proceeds of approximately $2.5 million after deducting underwriter’s fees of $196,000 and other offering costs of $60,000. The Company plans to use the proceeds from the offering for working capital purposes.

F-7

The Company expects to continue incurring significant operating cash outflows to support its operations. Additional financing may be required to sustain the business. Management will make its best efforts to secure the necessary funding to support the Company’s operations.

The Company evaluated its ability to continue as a going concern in accordance with ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess whether there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The management assessed its liquidity position and concluded that the Company will have sufficient liquidity to meet its obligations as they become due for at least the next twelve months from the date the unaudited interim condensed consolidated financial statements are issued.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed 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 condensed 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 condensed 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, 2024, which was filed with the SEC on March 18, 2025.

Principles of Consolidation

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

Use of Estimates and Assumptions

The preparation of unaudited interim condensed 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 condensed 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 condensed consolidated financial statements include the useful lives of intangible assets and equipment, impairment of long-lived assets, collectability of receivables, 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.

F-8

Translation adjustments included in accumulated other comprehensive income amounted to $213,604 and $213,571 as of September 30, 2025 and December 31, 2024, respectively. The consolidated balance sheets amount, with the exception of shareholders’ equity at September 30, 2025 and December 31, 2024 were translated at 7.1190 RMB and 7.2993 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to unaudited interim condensed consolidated statements of operations accounts for the nine months ended September 30, 2025 and 2024 were 7.2199 RMB and 7.1665 RMB to $1.00, respectively. The unaudited interim condensed consolidated statements of cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the unaudited interim condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the 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

As of September 30, 2025 and December 31, 2024, the Company did not have any cash equivalents. All cash were unrestricted as to withdrawal and use and were demand deposits placed with commercial banks.

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.

Equipment

Equipment was 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 unaudited interim condensed consolidated statements of operations. Expenditure 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 copyright 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 copyrights have finite useful lives and are 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 copyrights, 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 copyrights		5 years

F-9

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 lease liabilities upon modification of the contract. The Company will derecognize ROU assets and lease liabilities, with differences recognized in the income statement on the contract termination.

Impairment for Long-lived Assets

The Company’s determination of whether or not an indication of impairment exists at the cash generating unit level requires significant management judgment pertaining to intangible assets, including a software copyright of AI Box, which is used for online living-stream and a software copyright of Chat Box, which is used for online interactive entertainment scenarios, as well as the operating Right-of-use (“ROU”) assets, including the offices of the Company. Management considers both external and internal sources of information in assessing whether there are any indications that the Company’s intangible assets and ROU assets are impaired. Based on the evaluation, the Company recognized impairment losses in long-lived assets of nil and $2,756,986, respectively, for the nine months ended September 30, 2025 and 2024.

Digital Assets

The Company holds digital assets primarily for investment and treasury purposes rather than for use in the ordinary course of business. In accordance with ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets, digital assets are accounted for as intangible assets measured at fair value, with changes in fair value recognized immediately in earnings. Digital assets are initially recorded at cost, including acquisition-related fees. Subsequent to initial recognition, digital assets are measured at fair value at each reporting date, and unrealized gains and losses are included in the statement of operations. Upon disposal, the difference between proceeds and carrying amount is recognized as a gain or loss in earnings. The Company discloses the number of units held, cost basis, fair value, and any significant restrictions on the ability to sell or transfer digital assets in the Note 3 to the consolidated financial statements.

Assets Acquisition

The Company evaluates each transaction to determine whether it should be accounted for as a business combination or an asset acquisition in accordance with ASC 805, Business Combinations. A transaction is accounted for as an asset acquisition when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, and the acquired set does not include a substantive process capable of producing outputs.

In assessing whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset, the Company considers the nature of the assets, their risks and characteristics, and whether they represent a group of similar assets as defined under ASC 805-10-55-5A through 55-5C.

For transactions accounted for as asset acquisitions, the purchase consideration is measured based on the fair value of the consideration transferred, which generally consists of the fair value of equity securities or other assets issued. The acquired assets and assumed liabilities are recognized based on their relative fair values, and no goodwill is recognized.

F-10

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, other receivables, 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 September 30, 2025 and December 31, 2024, the carrying values of cash, other receivables and other payables approximate their fair values due to the short-term nature of the instruments.

Selling and Marketing Expenses

Selling and marketing expenses mainly consist of marketing related expenses.

General and Administrative Expenses

General and administrative expenses mainly consist of (i) staff cost, rental and depreciation related to general and administrative personnel, (ii) professional expenses.

Research and Development Expenses

Research and development expenses mainly consist of outsourced research and development expenses. Research and development expenses are expensed as incurred.

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 are 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 condensed 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. For the three months ended September 30, 2025, the Company reversed $39,429 of previously overstated penalty and interest recognized in prior quarter, consisting of $17,411 of interest and $22,018 of penalty. For the nine months ended September 30, 2025, the Company recorded $5,301 of penalty and interest related to the late filing of tax returns, consisting of $1,912 of interest and $3,389 of penalty. For the three and nine months ended September 30, 2024, the Company did not record any penalty and interest for failed filing the tax return timely.

F-11

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 Income (Loss) per Common Stock

Basic income (loss) per share is computed by dividing income (loss) available to common shareholders of the Company by the weighted average common stocks outstanding during the period. Diluted income (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, November 2023 and May 2025, the Company issued and sold pre-funded warrants that are exercisable for shares of common stock at a nominal exercise price. In accordance with ASC 260, these prefunded warrants are considered to be common stock equivalents and are included in the calculation of basic and diluted earnings per share when the inclusion is dilutive. As the exercise price of the prefunded warrants is nominal and substantially all conditions necessary to exercise the warrants have been met, the prefunded warrants are included in the weighted average shares outstanding for both basic and diluted income (loss) per share. As of September 30, 2025, 7,468,536 pre-funded warrants as described were outstanding.

For the nine months ended September 30, 2025 and 2024, 1,220,151 and 3,142,515 of outstanding warrants (excluding the Pre-funded Warrants and Exchange Warrants) which are equivalent to convertible of 1,018,763 and 2,941,127 common stocks, respectively, were excluded from the diluted income (loss) per share calculation due to their antidilutive effect.

Comprehensive Income (Loss)

Comprehensive income (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 losses on available-for-sale investments.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation.

Recently Accounting Pronouncements

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 adopted ASU 2023-07 for the year ended December 31, 2024. The adoption has no significant impact on the Company’s financial statements and disclosure.

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.

F-12

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. This new guidance is designed to improve the disclosures about the types of expenses, including employee compensation, depreciation, and amortization, and costs incurred related to inventory and manufacturing activities. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027 on a prospective basis with optional retrospective application. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

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 condensed consolidated balance sheets, unaudited interim condensed consolidated statements of operations and comprehensive income (loss) and unaudited interim condensed consolidated statements of cash flows.

Note 3 – Fair Value of Financial Instruments

ASC 820, Fair Value Measurements states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. The Company’s assets and liabilities that were measured at fair value on a recurring basis were as follows (in millions):

	September 30, 2025 (Unaudited)								December 31, 204
	Fair Value		Level I		Level II		Level III		Fair Value		Level I		Level II		Level III
Digital assets ⁽¹⁾	$	858	$	858	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	858	$	858	$	—	$	—	$	—	$	—	$	—	$	—

As of September 30, 2025, the Company’s digital assets were comprised of 7,500 units of Bitcoin, at cost of $842 million. These Bitcoins were originally held by Pallas and continued to be held following the Company’s acquisition of Pallas. In accordance with ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets, the Company accounts for its crypto assets as indefinite-lived intangible assets measured at fair value, with changes in fair value recognized in net income each reporting period.

The fair value of Bitcoin is determined based on quoted prices in active markets. The Company does not apply amortization to digital assets. Gains and losses resulting from changes in fair value are presented within “Other income” in the consolidated statements of operations.

As of September 30, 2025, the fair value of the Company’s Bitcoin holdings was $857,735,191. For the three and nine months ended September 30, 2025, the Company recognized a net income of $16,230,431 in the consolidated statements of operations related to changes in the fair value of its Bitcoin holdings. There was no disposal of digital assets during the nine months ended September 30, 2025.

F-13

Note 4 – Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following as of September 30, 2025 and December 31, 2024:

	September 30, 2025		December 31, 2024
	(unaudited)
Prepayments of operating lease	$	79,094	$	-
Prepaid offering costs		70,000		-
Prepaid research and development fee*		233,333		-
Other prepayments		29,735		-
Total prepaid and other current assets	$	412,162	$	-

On May 28, 2025, the Company made an advance payment to a contractor for service activities related to the Chat Box platform. The contracted work primarily involves system configuration, integration, testing support, and other operational assistance to facilitate the Company’s ongoing research and development process, rather than the creation of new technology or software functionality. The services are expected to be completed by November 30, 2025.

Note 5 – Equipment, net

Equipment, net consisted of the following as of September 30, 2025 and December 31, 2024:

	September 30, 2025			December 31, 2024
	(unaudited)
Office equipment and furniture	$	14,190		$	14,190
Subtotal		14,190			14,190
Less: accumulated depreciation		(9,637	)		(6,409	)
Total	$	4,553		$	7,781

Depreciation expense for the three months ended September 30, 2025 and 2024 amounted to $1,076 and $1,183, respectively. Depreciation expense for the nine months ended September 30, 2025 and 2024 amounted to $3,228 and $3,548, respectively.

Note 6 – Intangible Assets, net

Intangible assets consisted of the following as of September 30, 2025 and December 31, 2024:

	September 30, 2025			December 31, 2024
	(unaudited)
Software	$	4,890,092		$	4,890,092
Add: purchase of software*		5,988,523			-
Subtotal		10,878,615			4,890,092
Less: accumulated amortization		(1,822,573	)		(1,036,518	)
Accumulated impairment		(2,751,174	)		(2,751,174	)
Total	$	6,304,868		$	1,102,400

On April 28, 2025, the Company purchased one software- Chat Box, by issuance of 2,444,295 shares of the Company’s common stock. Chat Box is an immersive chatbot platform centered on Al technology, specifically designed for otaku enthusiasts and interactive entertainment scenarios. Building on the Chat Box platform, the Company is undertaking secondary development to create a product that will serve as both mobile and web platform for interactive fiction experiences, where readers can make choices that branch the storyline and lead to multiple endings.

F-14

Amortization expenses for the three months ended September 30, 2025 and 2024 were $361,828 and $245,136, respectively. Amortization expenses for the nine months ended September 30, 2025 and 2024 were $786,055 and $628,834, respectively.

As of September 30, 2025, the net book value of software copyrights was $ 6,304,868, after deducting accumulated amortization of $1,822,573. No impairment losses were recorded for the three and nine months ended September 30, 2025. Due to limited potential economic benefits for varying reasons for the nine months ended September 30, 2024, the Company recognized impairment losses of $2,756,986 for the three and nine months ended September 30, 2024, to the software copyrights.

Future amortization of intangible assets are as follows:

	Amortization
Remaining of FY2025		361,826
FY2026		1,447,308
FY2027		1,447,308
FY2028		1,447,308
FY2029		1,301,708
FY2030		299,410
Total future amortization of intangible assets	$	6,304,868

Note 7 – Other Payables and Accrued Liabilities

Other payables and accrued liabilities consisted of the following as of September 30, 2025 and December 31, 2024:

	September 30,		December 31,
	2025		2024
	(unaudited)
Professional service fee	$	340,973	$	375,085
Payroll		63,068		26,558
Advance from an investor ⁽¹⁾		4,771		-
Amounts due to shareholder ⁽²⁾		100,000		-
Others		178		178
Total	$	508,990	$	401,821

(1)	Includes advance from one of the warrant shareholders for the exercise of prefunded warrants.

(2)

Note 8 – Related Party Balances and Transactions

Other payables – related parties:

Name of related party	Relationship	Nature	September 30, 2025		December 31, 2024
			(unaudited)
Xiaojian Wang	Chief Executive Officer	Accrued compensations	$	87,500	$	50,000
Xiaojian Wang	Chief Executive Officer	Interest-free loans to the Company*		-		349,485
Xiaojian Wang	Chief Executive Officer	Operating related fees paid on behalf of the Company		41,635		50,000
Zihao Zhao	Chief Finance Officer	Accrued compensations		60,833		50,833
Zihao Zhao	Chief Finance Officer	Reimbursement		1,997		1,948
Total			$	191,965	$	502,266

*	The terms of these loans are disclosed in Note 1- Liquidity and Capital Resources.

Related Party Transaction

As disclosed in Note 1, the Company purchased 100% equity interest of Pallas from the Sellers, on September 29, 2025. Two shareholders of the Company, who beneficially own 11.4%, in the aggregate, of the outstanding shares of common stock of the Company, immediately before the execution of the Transaction, also serve as the directors and share voting and dispositive power over the shares issued by the Target. Accordingly, the Pallas Transaction constitutes a related party transaction for the Company pursuant to Item 404 of Regulation S-K.

F-15

As of September 30, 2025 and December 31, 2024, the balance of other payables - related parties were $191,965 and $502,266, respectively, mainly consisted of accrued compensation of the Company’s officers, interest - free loans received from the Company’s officers and operating related fees paid by the Company’s officer on behalf of the Company. As of September 30, 2025, the interest-free loans received from the Company’s officers were fully repaid.

For the three months ended September 30, 2025 and 2024, the Company recorded compensation expenses to its officers amounted to $37,500 and $20,000, respectively, for their services provided to the Company.

For the nine months ended September 30, 2025 and 2024, the Company recorded compensation expenses to its officers amounted to $89,536 and $60,000, respectively, for their services provided to the Company.

Note 9 – Leases

Leases are classified as operating leases or finance leases in accordance with ASC 842 Leases. The Company’s operating leases mainly related to the rights to use building and office facilities. For leases with terms greater than 12 months, the Company records the related asset and liability at the present value of lease payments over the term. Certain leases include rental escalation clauses, renewal options and/or termination options, which are factored into the Company’s determination of lease payments when appropriate.

	September 30, 2025			December 31, 2024
	(unaudited)
Weighted average remaining lease term:
Operating lease		3.33 years			3.63 years

Weighted average discount rate:
Operating lease		7.54	%		7.53	%

The balances for the operating leases where the Company is the lessee are presented as follows within the consolidated balance sheets:

	September 30, 2025		December 31, 2024
	(unaudited)
Operating lease right-of-use assets, net
Operating lease	$	1,057,858	$	1,342,333

Lease liabilities
Current portion of operating lease liabilities		315,579		427,984
Non-current portion of operating lease liabilities		865,729		1,104,552
	$	1,181,308	$	1,532,536

F-16

Future lease payments under operating leases as of September 30, 2025 were as follows:

	Operating Leases
Remaining of FY2025		97,826
FY2026		393,261
FY2027		401,127
FY2028		409,149
FY2029		34,605
Total lease payments	$	1,335,968
Less: imputed interest		154,660
Present value of lease liabilities ⁽¹⁾	$	1,181,308

(1)

As of September 30, 2025, present value of future operating lease payments consisted of current portion of operating lease liabilities and non-current portion of operating lease liabilities, amounting to $315,579 and $865,729, respectively.

Lease expense for all the Company’s operating leases for the three months ended September 30, 2025 and 2024 were $100,134 and $133,586, respectively. Lease payments for all the Company’s operating leases for the three months ended September 30, 2025 and 2024 were $105,102 and $81,075, respectively.

Lease expense for all the Company’s operating leases for the nine months ended September 30, 2025 and 2024 were $342,150 and $381,791, respectively. Lease payments for all the Company’s operating leases for the nine months ended September 30, 2025 and 2024 were $425,219 and $314,170, respectively.

For the three and nine months ended September 30, 2025, the Company incurred $227,761 and $395,383, respectively, short-term lease expenses. For the three and nine months ended September 30, 2025, the short-term lease payments were $154,000 and $490,056, respectively. The Company did not incur any short-term lease expenses for the three and nine months ended September 30, 2024.

Note 10 – Taxes

Income Tax

United States

GDC and AIC are corporations organized in the state of Nevada and operate primarily in the state of New York. As a result, they are subject to U.S. federal corporate income tax as well as state and local income taxes in New York.

For the nine months ended September 30, 2025 and 2024, the applicable statutory tax rates were as follows:

●

Federal corporate income tax rate: 21%;

●

New York State corporate income tax rate: 6.5%;

●

New York City business corporation tax rate: 8.85%;

●

Metropolitan Transportation Business Tax Surcharge (MTA Tax): 30% of the New York State corporate franchise tax liability;

The Company’s effective tax rate may differ from the statutory rates due to various factors, including non-deductible expenses, tax credits, valuation allowances, and the impact of state and local taxes. Additionally, the Company evaluates uncertain tax positions in accordance with ASC 740, recognizing tax benefits only if it is more likely than not that the position will be sustained upon examination.

F-17

British Virgin Islands

Citi Profit BVI and Pallas are incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.

Hong Kong

Highlight HK is incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. Highlight HK is subject to Hong Kong profit tax at a rate of 8.25% for assessable profits on the first HK$2 million and 16.5% for any assessable profits in excess of HK$2 million for the three and nine months ended September 30, 2025 and 2024. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception.

PRC

Highlight WFOE and SH Xianzhui are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), qualified small and micro enterprises with annual taxable income not exceeding RMB 3 million are eligible for a preferential corporate income tax rate of 5% until December 31, 2027. This preferential rate is applied in accordance with relevant Chinese tax laws and regulations, and may be adjusted by the authorities from time to time.

The current and deferred components of income tax expenses from continuing operations appearing in the unaudited interim condensed consolidated statements of operations are as follows:

	For the nine months ended September 30,
	2025			2024
Current tax expenses	(unaudited)			(unaudited)
Federal	$	(90,000	)	$	-
State		(1,728,814	)		-
Total current tax expenses	$	(1,818,814	)	$	-
Deferred tax benefits
Federal	$	153,911		$	22,666
State		-			-
Total deferred tax benefits	$	153,911		$	22,666
Total (expenses) benefits for income taxes	$	(1,664,903	)		22,666

F-18

The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2022 to 2024 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates:

	For the nine months ended September 30, 2025			For the nine months ended September 30, 2024
(unaudited)	(unaudited)
Statutory tax rate
Federal		21.00	%		21.00	%
State (net of federal benefit)		(5.94	)%		-
Foreign tax		(30.13	)%		(1.53	)%
Amortization of intangible assets		2.91	%		-
Change in valuation allowance		12.37	%		(19.47	)%
State capital base tax		(15.33	)%		-	%
Others		0.36	%		(0.60	)%
Effective tax rate		(14.76	)%		(0.60	)%

As of September 30, 2025 and December 31, 2024, income tax payable to US tax authorities was $1,960,625 and $141,810, respectively. As of September 30, 2025 and December 31, 2024, no income tax was payable to Chinese tax authorities.

The principal components of the Company’s deferred income tax assets and liabilities as of September 30, 2025 and December 31, 2024 were as follows:

	September 30,			December 31,
	2025			2024
	(unaudited)
Deferred tax assets
Net operating losses carried forward	$	6,627,320		$	6,105,138
Provision of credit loss on note receivable and loan receivable		1,092,011			1,092,011
Impairment loss of intangible assets		845,008			845,008
Amortization of intangible assets		327,985			-
Lease liability		483,357			605,169
Total deferred tax assets	$	9,375,681		$	8,647,326
Less: Valuation allowance		(9,008,993	)		(8,020,571	)
Deferred tax assets, net of valuation allowance	$	366,688		$	626,755
Deferred tax liabilities
Right - Of - Use assets	$	(366,688	)	$	(465,347	)
Amortization of intangible assets		-			(315,319	)
Total deferred tax liabilities	$	(366,688	)	$	(780,666	)
Total deferred tax liabilities, net	$	-		$	(153,911	)

As of September 30, 2025, the Group had tax losses carry forwards of approximately $5.3 million from the entity in the PRC. The tax loss in the PRC can be carried forward for five years to offset future taxable profit and which will expire between 2028 and 2029 if not utilized. As of September 30, 2025, the Group had tax losses carry forwards of approximately $20.0 million from the entities in the U.S. The tax loss in the U.S. can be carried forward indefinitely.

Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s operating history and continued losses in the United States. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management reviews this valuation allowance periodically and makes changes accordingly.

F-19

Note 11 – Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits.

Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2025 and December 31, 2024, the Company did not have any cash excess of the FDIC insured limit. As of September 30, 2025 and December 31, 2024, $3,288 and $3,267 were deposited with a financial institution located in the PRC, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

Note 12 – Equity

Statutory Reserves and Restricted Net Assets

In accordance with the PRC Regulations on Enterprises with Foreign Investment, an enterprise established in the PRC with foreign investment is required to make appropriations to certain statutory reserves, namely a general reserve fund, an enterprise expansion fund, a staff welfare fund and a bonus fund, all of which are appropriated from net profit as reported in its PRC statutory accounts. A foreign invested enterprise is required to allocate at least 10% of its annual after-tax profits to a general reserve fund until such fund has reached 50% of its respective registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus funds are at the discretion of the board of directors for the foreign invested enterprises. For other subsidiaries incorporated in the PRC, the general reserve fund was appropriated based on 10% of net profits as reported in each subsidiary’s PRC statutory accounts. General reserve and statutory surplus funds are restricted to set-off against losses, expansion of production and operation and increasing registered capital of the respective company. Staff welfare and bonus fund and statutory public welfare funds are restricted to capital expenditures for the collective welfare of employees. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor are they allowed for distribution except under liquidation. As of September 30, 2025 and December 31, 2024, there was no balance of the PRC statutory reserve funds.

In addition, under PRC laws and regulations, the Company’s PRC subsidiaries are restricted in their ability to transfer their net assets to the Company in the form of dividend payments, loans or advances. Amounts of restricted net assets include paid up capital and statutory reserve funds of the Company’s PRC subsidiaries. As of September 30, 2025 and December 31, 2024, the Company did not have any restricted net assets.

Furthermore, cash transfers from the Company’s PRC subsidiaries to the Company’s subsidiaries outside of the PRC are subject to the PRC government control of currency conversion. Shortages in the availability of foreign currency may restrict the ability of the Company’s PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their foreign currency denominated obligations.

Common Stock

On January 11, 2024, the Company issued the 400,000 shares of its common stock to Beijing Hehe for exchange of 13.3333% of the total equity interest of SH Xianzhui (as described in Note 1).

In March 2024, the Company entered into a placement agency agreement (the “March 2024 Placement Agency Agreement”), with Univest Securities, LLC (“Univest”), pursuant to which, Univest agrees to use its reasonable best efforts to sell the Company’s common stock in a registered direct offering and a concurrent private placement (the “March 2024 Offering”). Univest has no obligation to buy any of the securities from the Company or to arrange for the purchase or sale of any specific number or dollar amount of securities.

Pursuant to the March 2024 Offering, an aggregate of 810,277 shares of common stock of the Company, par value $0.0001 per share, were sold to certain purchasers (the “March 2024 Offering Purchasers”), pursuant to a securities purchase agreement, dated March 22, 2024 (the “March 2024 Securities Purchase Agreement”) at a price of $1.144 per common stock, for aggregated proceeds of approximately $0.9 million. The Company paid Univest a cash fee equal to 4.0% of the aggregate gross proceeds raised in the March 2024 Offering. The Company also issued warrants to Univest to purchase up to 40,514 shares of common stock of the Company at an exercise price of $1.373 per share, (the “March 2024 Placement Agent Warrants”). The March 2024 Placement Agent Warrants and the common stock underlying the March 2024 Placement Agent Warrants were not registered under the Securities Act, pursuant to the registration statement of March 2024 Offering. The March 2024 Placement Agent Warrants were issued pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

F-20

On May 31, 2024, the Company entered into a software purchase agreement with Shanxi Gangdong Cultural Media Co., Ltd., a seller unaffiliated with the Company (the “SGCM”). Pursuant to the agreement, the Company agreed to purchase and SGCM agreed to sell all of SGCM’s right, title, and interest in and to the certain software. The purchase price of the software shall be $1,248,000, payable in the form of issuance of 1,560,000 shares of common stock of the Company, valued at $0.80 per share. The Company plans to use the software to develop its AI business. On June 4, 2024, the Company issued 1,560,000 shares of common stock of the Company to the SGCM’s designees and the transaction was completed.

From February 2024 to October 2024, 1,489,385 shares of the Company’s common stock were issued due to the exercise of pre-funded warrants, that were sold in the fiscal year 2023.

From March 2024 to October 2024, 1,361,460 shares of the Company’s common stock were issued due to the exercise of 1,695,885 registered warrants issued in November 2023 (the “November 2023 Registered Warrants”).

In August 2024, 92,756 shares of the Company’s common stock were issued due to the exercise of 54,646 registered warrants and 84,244 unregistered warrants that were issued in the fiscal year 2021.

On February 10, 2025, the Company entered into an At-The-Market Issuance Sales Agreement (the “ATM Agreement”) with Univest as the sales agent (the “February 2025 Offering”). Pursuant to the ATM Agreement, the Company may issue and sell from time to time, shares of its common stock having an aggregate offering price of not more than $10,000,000 through the sales agent or any of its sub-agent(s) or other designees, acting as sales agent. Up to the date the unaudited interim condensed consolidated financial statements were issued, the Company has not issued or sold any shares under the ATM Agreement.

On March 4, 2025, the Company entered into a securities purchase agreement (the “March 2025 Securities Purchase Agreement”) with certain investors for the sale of 1,115,600 shares of common stock at $0.896379 per share (the “March 2025 Offering”), generating net proceeds in the amount of $910,000, after deducting underwriter’s fees of $70,000, equal to seven percent (7%) of the aggregate gross proceeds raised in this Offering and reimbursement of $20,000 for the underwriter’s legal counsel and due diligence analysis expense. The Company used the proceeds from the offering for working capital purposes.

On May 2, 2025, the Company entered into a securities purchase agreement (the “May 2025 Securities Purchase Agreement”) with certain investors for the sale of 1,115,600 shares of common stock at approximately $0.524 per share and 9,380,582 pre-funded warrants (the “May 2025 Pre-Funded Warrants”) at approximately $0.523 per warrant (the “May 2025 Offering”). As of September 30, 2025, the Company received gross proceeds of $4,478,000 for subscription of 1,115,600 shares of its common stock and 7,468,536 pre-funded warrants, with $17,390 still outstanding and receivable from the investor. The offering remains ongoing and has not yet been fully completed. Transaction costs incurred through September 30, 2025 included underwriter’s fees of $314,343 and a $20,000 reimbursement for the underwriter’s legal counsel and due diligence expenses. After deducting these expenses, net proceeds from the offering (excluding the receivable of $17,390 from the investor) amounted to $4,143,657. As of September 30, 2025, the Company used the proceeds from the offering for working capital purposes.

On April 28, 2025, the Company entered into a software purchase agreement (the “Agreement”) with Gongzheng Xu and Qing Wang, who are unaffiliated with the Company at the time (collectively, the “GXQW”). Pursuant to the Agreement, the Company agreed to purchase and the GXQW agreed to sell all of GXQW’s right, title, and interest in and to the certain software (the “Chat Box”). The purchase price of the software shall be payable in the form of issuance of 2,444,295 shares of the Company’s common stock. On April 28, 2025, the Company issued 2,444,295 shares of its common stock to GXQW and the transaction was completed. The Company used the software to develop its AI business.

F-21

On September 8 2025, the Company, Pallas and the Sellers executed the Share Exchange Agreement, pursuant to which, the Sellers wish to sell to the Acquirer, and the Acquirer wishes to purchase from the Sellers, 100% interest in and to the Target Shares. On September 29, 2025, in exchange for the Target Shares, the Company issued an aggregate of 39,189,344 shares of the Company’s common stock to such Sellers.

As of September 30, 2025 and December 31, 2024, the total outstanding shares of the Company’s common stock were 55,984,777 and 11,167,294, respectively.

Warrants

Placement Agent Warrants

In March 2024, the Company entered into a placement agency agreement (the “March 2024 Placement Agency Agreement”), with Univest, pursuant to which, Univest agrees to use its reasonable best efforts to sell the Company’s common stock in a registered direct offering and a concurrent private placement (the “March 2024 Offering”). Univest has no obligation to buy any of the securities from the Company or to arrange for the purchase or sale of any specific number or dollar amount of securities.

In connection with the March 2024 Offering, the Company issued 40,514 shares of unregistered warrants (the “March 2024 Placement Agent Warrants”) to Univest, at an exercise price of $1.373 per share. The March 2024 Placement Agent Warrants and the common stock underlying the March 2024 Placement Agent Warrants were not registered under the Securities Act, pursuant to the registration statement of March 2024 Offering. The March 2024 Placement Agent Warrants were issued pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

As of September 30, 2025 and December 31, 2024,

SEC Form 10-Q filed by GD Culture Group Limited