UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549










FORM 20-F










(Mark One)

| ̈  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934                            
|-- | ----------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                             
|OR
|   |                                                                                                                             
|x  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2019
|   |                                                                                                                             
|OR
|   |                                                                                                                             
| ̈  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                    
|   |                                                                                                                             
|OR
|   |                                                                                                                             
| ̈  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                 



Date of event requiring this shell company report



For the transition period from ____________
to ______________.



Commission file number: 333-229116










|Leaping Group Co., Ltd.                                                                                                                                                
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Exact name of Registrant as specified in its charter)                                                                                                                 
|                                                                                                                                                                       
|Cayman Islands                                                                                                                                                         
|(Jurisdiction of incorporation or organization)                                                                                                                        
|                                                                                                                                                                       
|2010 Huaruntiexi Center
        Tiexi District, Shenyang, Liaoning Province
        People’s Republic of China
        +86-02422598763                                 
|(Address of principal executive offices)                                                                                                                               
|                                                                                                                                                                       
|Tao Jiang, Chief Executive Officer
        Telephone: +86-02422598763
        Email: jiangtao@mediayz.com
        At the address of the Company set forth
        above
|(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)                                                                                










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



|Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
|------------------- |  | ----------------- |  | -----------------------------------------
|Ordinary Shares     |  | YZCM              |  | The Nasdaq Capital Market                



Securities registered or to be registered pursuant to Section
12(g)

|None            
|----------------
|(Title of Class)



Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:

|None            
|----------------
|(Title of Class)



Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report. 16,021,126.7606 ordinary shares
were outstanding as of June 30, 2019.



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.



 ̈ 
Yes  x  No



If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.



 ̈ 
Yes  x  No



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.



x 
Yes   ̈  No



Indicate by check mark whether the registrant has submitted
electronically every Interactive Data 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).



x 
Yes   ̈ No



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



|Large accelerated filero |  | Accelerated filero |  | Non-accelerated filerx |  | Emerging growth companyx
|------------------------ |  | ------------------ |  | ---------------------- |  | ------------------------



If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 which basis of accounting the registration
has used to prepare the financial statements included in this filing:



|U.S.
    GAAPx |  | International
    Financial Reporting Standards as
 issued by the International Accounting Standards Boardo |  | Other ̈
|-------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ------



If “Other” has been checked
in response to the previous question, indicate by check mark which consolidated financial statement item the registrant has elected
to follow.



 ̈ Item
17  ̈ Item 18



If this is an annual report, indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).



 ̈ 
Yes  x  No
















TABLE OF CONTENTS



|INTRODUCTION  | 2                                                                               
|------------- | --------------------------------------------------------------------------------
|              |                                                                                 
|PART
    I    | 3                                                                               
|              |                                                                                 
|ITEM
    1.   | IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                       
|              |                                                                                 
|ITEM
    2.   | OFFER
    STATISTICS AND EXPECTED TIMETABLE                                     
|              |                                                                                 
|ITEM
    3.   | KEY
    INFORMATION                                                             
|              |                                                                                 
|ITEM
    4.   | INFORMATION
    ON THE COMPANY                                                  
|              |                                                                                 
|ITEM
    4A.  | UNRESOLVED
    STAFF COMMENTS                                                   
|              |                                                                                 
|ITEM
    5.   | OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS                                
|              |                                                                                 
|ITEM
    6.   | DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES                                  
|              |                                                                                 
|ITEM
    7.   | MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                           
|              |                                                                                 
|ITEM
    8.   | FINANCIAL
    INFORMATION                                                       
|              |                                                                                 
|ITEM
    9.   | THE
    OFFER AND LISTING                                                       
|              |                                                                                 
|ITEM
    10.  | ADDITIONAL
    INFORMATION                                                      
|              |                                                                                 
|ITEM
    11.  | QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  
|              |                                                                                 
|ITEM
    12.  | DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES                      
|              |                                                                                 
|PART
    II   | 71                                                                              
|              |                                                                                 
|ITEM
    13.  | DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES                             
|              |                                                                                 
|ITEM
    14.  | MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|              |                                                                                 
|ITEM
    15.  | CONTROLS
    AND PROCEDURES                                                     
|              |                                                                                 
|ITEM
    16A. | AUDIT
    COMMITTEE FINANCIAL EXPERT                                            
|              |                                                                                 
|ITEM
    16B. | CODE
    OF ETHICS                                                              
|              |                                                                                 
|ITEM
    16C. | PRINCIPAL
    ACCOUNTANT FEES AND SERVICES                                      
|              |                                                                                 
|ITEM
    16D. | EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  
|              |                                                                                 
|ITEM
    16E. | PURCHASES
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      
|              |                                                                                 
|ITEM
    16F. | CHANGE
    IN REGISTRANT’S CERTIFYING ACCOUNTANT                                
|              |                                                                                 
|ITEM
    16G. | CORPORATE
    GOVERNANCE                                                        
|              |                                                                                 
|ITEM
    16H. | MINE
    SAFETY DISCLOSURE                                                      
|              |                                                                                 
|PART
    III  | 73                                                                              
|              |                                                                                 
|ITEM
    17.  | FINANCIAL
    STATEMENTS                                                        
|              |                                                                                 
|ITEM
    18.  | FINANCIAL
    STATEMENTS                                                        
|              |                                                                                 
|ITEM
    19.  | EXHIBITS                                                                        













INTRODUCTION



Unless otherwise indicated or the context
requires otherwise, references in this annual report to:



| | · | “Affiliated Entities” are to our subsidiaries and LMG (defined below) and its subsidiaries;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “China” or the “PRC” are to the People’s Republic of China, excluding Taiwan and the special administrative regions of Hong Kong and Macau for the purposes of this annual report only;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “Event Planning and Execution Business” are to one of our four major businesses, event planning and execution;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “Film Production Business” are to one of our four major businesses, film and TV program production;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “Leaping Group” are to Leaping Group Co., Ltd., a limited liability company organized under the laws of Cayman Islands;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “LMG” are to Leaping Media Group Co., Ltd., a limited liability company organized under the laws of the PRC, which we control via a serious of contractual arrangements between WFOE (defined below) and LMG;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “Movie Theater Operating Business” are to one of our four major businesses, movie theater operation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “Multi-Channel Advertising Business” are to one of our four major businesses, multi-channel advertising;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “pre-movie advertising” or “pre-movie advertisement” are to the advertising or advertisement for advertising clients conducted or distributed before a movie; “pre-movie local advertising” or “pre-movie local advertisement” are to the pre-movie advertising or advertisement for advertising clients based in the city or province in which the movie theater is located, with the restriction that the same advertising/advertisement is not conducted or distributed outside the city or province in which the movie theater is located; “pre-movie national advertising” or “pre-movie national advertisement” are to the pre-movie advertising or advertisement conducted or distributed across at least two different cities or provinces; “pre-roll advertisement” are to the advertisement immediately before a movie and after the pre-movie advertisement;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “shares,” “Shares” or “Ordinary Shares” are to the Ordinary Shares of the Company, par value US$0.00284 per share;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “VIE” are to variable interest entity;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “we,” “us,” or the “Company” are to one or more of Leaping Group, and its Affiliated Entities, as the case may be;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “WFOE” or “Yuezhong Shenyang” are to Yuezhong (Shenyang) Technology Co., Ltd., a limited liability company organized under the laws of the PRC, which is wholly-owned by Yuezhong Media HK;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | · | “Yuezhong International” are
        to the Company’s wholly owned subsidiary, Yuezhong International Co., Ltd., a British Virgin Islands company; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | · | “Yuezhong Media HK” are to Yuezhong International’s wholly owned subsidiary, Yuezhong Media Co., Limited, a Hong Kong corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



Discrepancies in any table between the amounts identified as
total amounts and the sum of the amounts listed therein are due to rounding.



This annual report on Form 20-F includes
our audited consolidated financial statements for the fiscal years ended June 30, 2019, 2018, and 2017.



This annual report contains translations
of certain Renminbi amounts into U.S. dollars at specified rates. Unless otherwise stated, the translation of Renminbi into U.S.
dollars has been made at RMB6.87 to US$1.00, the noon buying rate in effect on June 30, 2019, as set forth in the H.10 Statistical
Release of the Federal Reserve Board. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could
be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The
PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi
into foreign exchange and through restrictions on foreign trade. The noon buying rate was RMB7.06 to US$1.00 on October 25,
2019.



2







Part I



Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not Applicable.



Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE



Not Applicable.



Item 3. KEY INFORMATION



A. Selected Financial Data



The following table sets forth selected
historical statements of operations for the fiscal years ended June 30, 2019, 2018, and 2017, and balance sheet data as of June
30, 2019 and 2018, which have been derived from our audited consolidated financial statements included elsewhere in this annual
report. The consolidated financial statements are prepared and presented in accordance with GAAP. Historical results are not necessarily
indicative of the results for any future periods.



Selected Statements of Operations Information:





|                                              |  | For the Years Ended June 30, |                
|--------------------------------------------- |  | ---------------------------- | ---------------
|                                              |  | 2019                         |                
|REVENUE                                       |  | $                            | 11,679,690     
|Cost of revenue                               |  |                              | 3,297,582      
|Business taxes and surcharges                 |  |                              | 90,011         
|Total cost of revenue                         |  |                              | 3,387,593      
|GROSS PROFIT                                  |  |                              | 8,292,097      
|Selling expenses                              |  |                              | 62,811         
|General and administrative expenses           |  |                              | 1,342,480      
|Total operating expenses                      |  |                              | 1,405,291      
|INCOME FROM OPERATIONS                        |  |                              | 6,886,806      
|                                              |  |                              |                
|OTHER INCOME (EXPENSES)                       |  |                              |                
|Interest income                               |  |                              | 158            
|Other income (expenses)                       |  |                              | 1,645          
|Total other income (expenses), net            |  |                              | 1,803          
|INCOME BEFORE INCOME TAX PROVISION            |  |                              | 6,888,609      
|PROVISION FOR INCOME TAXES                    |  |                              | 1,699,690      
|NET INCOME                                    |  |                              | 5,188,919      
|Other comprehensive income (loss)             |  |                              | (64,021        
|COMPREHENSIVE INCOME                          |  | $                            | 5,124,898      
|Earnings per common share — basic and diluted |  | $                            | 0.310          
|Weighted average shares — basic and diluted*  |  |                              | 16,728,728.5356










*       Retrospectively
restated for effect of reverse split.





3







Selected Balance Sheets Information:



|                                                                                                                                                                                          |  | As of June 30, 2019 |            |   | As of June 30,  2018 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ---------- | - | -------------------- | -
|ASSETS                                                                                                                                                                                    |  |                     |            |   |                      |  
|CURRENT ASSETS:                                                                                                                                                                           |  |                     |            |   |                      |  
|Cash                                                                                                                                                                                      |  | $                   | 194,488    |   |                      | $
|Accounts receivable, net                                                                                                                                                                  |  |                     | 7,384,640  |   |                      |  
|Deposits                                                                                                                                                                                  |  |                     | 570,204    |   |                      |  
|Deferred offering costs                                                                                                                                                                   |  |                     | 1,403,604  |   |                      |  
|Advances to suppliers                                                                                                                                                                     |  |                     | 22,862     |   |                      |  
|Prepaid expenses and other receivables                                                                                                                                                    |  |                     | 96,499     |   |                      |  
|TOTAL CURRENT ASSETS                                                                                                                                                                      |  |                     | 9,672,297  |   |                      |  
|Inventories, net                                                                                                                                                                          |  |                     | 332,542    |   |                      |  
|Property and equipment, net                                                                                                                                                               |  |                     | 1,015,959  |   |                      |  
|Deferred tax assets                                                                                                                                                                       |  |                     | 78,222     |   |                      |  
|TOTAL ASSETS                                                                                                                                                                              |  | $                   | 11,099,020 |   |                      | $
|                                                                                                                                                                                          |  |                     |            |   |                      |  
|LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                      |  |                     |            |   |                      |  
|CURRENT LIABILITIES:                                                                                                                                                                      |  |                     |            |   |                      |  
|Accounts payable                                                                                                                                                                          |  | $                   | 449,058    |   |                      | $
|Deferred revenue                                                                                                                                                                          |  |                     | 189,268    |   |                      |  
|Taxes payable                                                                                                                                                                             |  |                     | 2,726,821  |   |                      |  
|Accrued expense and other payables                                                                                                                                                        |  |                     | 1,173,555  |   |                      |  
|Due to related parties                                                                                                                                                                    |  |                     | 567,346    |   |                      |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                 |  |                     | 5,106,048  |   |                      |  
|TOTAL LIABILITIES                                                                                                                                                                         |  |                     | 5,106,048  |   |                      |  
|                                                                                                                                                                                          |  |                     |            |   |                      |  
|Commitments and contingencies                                                                                                                                                             |  |                     |            |   |                      |  
|                                                                                                                                                                                          |  |                     |            |   |                      |  
|SHAREHOLDERS’ EQUITY:                                                                                                                                                                     |  |                     |            |   |                      |  
|Ordinary Shares, $0.00284 par value 50,000,000 shares authorized; 16,021,126.7606 and 17,605,633.8028 shares issued and outstanding as of June 30, 2019 and June 30, 2018, respectively * |  |                     | 45,500     |   |                      |  
|Additional paid-in capital                                                                                                                                                                |  |                     | 421,398    |   |                      |  
|Statutory reserve                                                                                                                                                                         |  |                     | 875,271    |   |                      |  
|Accumulated other comprehensive income (loss)                                                                                                                                             |  |                     | (54,021    | ) |                      |  
|Retained earnings                                                                                                                                                                         |  |                     | 4,704,824  |   |                      |  
|TOTAL SHAREHOLDERS’ EQUITY                                                                                                                                                                |  |                     | 5,992,972  |   |                      |  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                |  | $                   | 11,099,020 |   |                      | $










*       Retrospectively
restated for effect of reverse split.



B. Capitalization and Indebtedness



Not applicable.



C. Reasons for the Offer and Use of Proceeds



Not applicable.





4









D. Risk Factors



Risks Related to Our Business



Our limited operating history may
not provide an adequate basis to judge our future prospects and results of operations.



We began our business operations in November 2013.
Our limited operating history may not provide a meaningful basis for you to evaluate our business, financial performance and prospects.
It is also difficult to evaluate the viability of our pre-movie advertising network and other advertising media dedicated to the
film industry because we do not have sufficient experience to address the risks frequently encountered by early stage companies
using new forms of advertising media and entering new and rapidly evolving markets. We have only started our Film Production Business
since 2017 and our Movie Theater Operating Business since 2019, and there had been no revenue from this business during the fiscal years
ended June 30, 2017 and 2018. During the fiscal year ended June 30, 2019, our revenue from the Film Production Business and
the Movie Theater Operating Business was US$775,080 and US$341,575, respectively. For the fiscal year ended June 30, 2019, our
revenue derived from the Film Production Business and the Movie Theater Operating Business represents 7% and 3% of our total revenue,
respectively.



Certain members of our senior management
team have worked together for only a relatively short period of time and it may be difficult for you to evaluate their effectiveness,
on an individual or collective basis, and ability to address future challenges to our business.



Our business is susceptible to fluctuations
in the advertising market of China.



We conduct our Multi-Channel Advertising
Business primarily in China. Our business depends substantially on the conditions of the PRC advertising market. Demand for pre-movie
advertising in China has grown rapidly in the recent decade but such growth is often coupled with volatility in market conditions
and fluctuation in pre-movie advertising slot prices. Fluctuations of supply and demand in China’s advertising market are
caused by economic, social, political and other factors. Over the years, the Chinese government has announced and implemented
various policies and measures aimed to regulate the advertising markets, prohibiting, among other things, misleading content, superlative
wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement
of the public interest. These measures can affect advertising clients’ eligibility to purchase advertising slots. These measures
have affected and may continue to affect the conditions of China’s advertising market and cause fluctuations in advertising
slot pricing and transaction volume. Furthermore, there may be situations in which advertising clients see a reduced need for marketing
initiatives and reduce their spending on such initiatives, which could potentially adversely affect our results of operations.
To the extent fluctuations in the advertising market adversely affect advertising transaction volumes or prices, our financial
condition and results of operations may be materially and adversely affected.



We may incur liability for unpaid
taxes, including interest and penalties.



In the normal course of its business, our
Company, including in particular LMG and WFOE, may be subject to challenges from various PRC taxing authorities regarding the amounts
of taxes due. In accordance with U.S. GAAP standard, we recorded a tax liability of US$2,726,821 and US$1,616,184 as of June 30,
2019 and 2018, respectively, for the possible underpayment of income and business taxes. It is possible that our tax liability
for past years may be higher than those amounts, if the PRC authorities determine that we are subject to penalties or that we have
not paid the correct amount. Although our management believes it may be able to negotiate with local PRC taxing authorities a reduction
to any amounts that such authorities may believe are due and a reduction to any interest or penalties thereon, we have no guarantee
that we will be able to negotiate such a reduction. To the extent we are able to negotiate such amounts, national-level taxing
authorities may take the position that localities are without power to reduce such liabilities, and such PRC taxing authorities
may attempt to collect unpaid taxes, interest, and penalties in amounts greatly exceeding management’s estimates, resulting
in a material and adverse impact on our financial condition and results of operations.



A severe or prolonged slowdown in
the global or Chinese economy could materially and adversely affect our business and our financial condition.



The rapid growth of the Chinese
economy has slowed down since 2012 and such slowdown may continue. There is considerable uncertainty over the long-term
effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of
the world’s leading economies, including the United States and China. There have been concerns over unrest and
terrorist threats in the Middle East, Europe and Africa, which have resulted in volatility in oil and other markets. There
have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential
conflicts in relation to territorial disputes. Economic conditions in China are sensitive to global economic conditions, as
well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in
China. Any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business,
results of operations and financial condition. In addition, continued turbulence in the international markets may adversely
affect our ability to access capital markets to meet liquidity needs.





5







Failure to maintain or enhance our
brands or image could have a material and adverse effect on our business and results of operations.



We believe our “Yuezhong” brand
is well-recognized among advertising clients and other film industry players such as cinema operators, film producers and advertising
agencies in the local markets we operate in. Our brand is integral to our sales and marketing efforts. Our continued success in
maintaining and enhancing our brand and image depends to a large extent on our ability to satisfy customer needs by further developing
and maintaining quality of services across our operations, as well as our ability to respond to competitive pressures. If we are
unable to satisfy customer needs or if our public image or reputation were otherwise diminished, our business transactions with
our customers may decline, which could in turn adversely affect our results of operations.



We may not be able to successfully
execute our strategy of expanding into new geographical markets in China, which could have a material and adverse effect on our
business and results of operations.



We plan to expand our business into new
geographical areas in China, such as first-tier, second-tier, and third-tier cities in the eastern seaboard area and central China.
As China is a large and diverse market, consumer trends and demands may vary significantly by region and our experience in the
markets in which we currently operate may not be applicable in other parts of China. As a result, we may not be able to leverage
our experience to expand into other parts of China. When we enter new markets, we may face intense competition from companies with
greater experience or an established presence in the targeted geographical areas or from other companies with similar expansion
targets. In addition, our business model may not be successful in new and untested markets and markets with a different legal and
business environment, such as Hong Kong and Macau. Therefore, we may not be able to grow our revenues in the new cities we enter
into due to the substantial costs involved.



If advertising clients or the viewing
public do not accept, or lose interest in, our pre-movie advertising network, we may be unable to generate sufficient cash flow
from our operating activities and our prospects and results of operations could be negatively affected.



The market for pre-movie advertising networks
in China is relatively new and its potential is uncertain. We compete for advertising spending with many forms of more established
advertising media, such as television, print media, Internet and other types of out-of-home advertising. Our success depends on
the acceptance of our pre-movie advertising network by advertising clients and agencies and their continuing and increased interest
in this medium as a component of their advertising strategies. Our success also depends on the viewing public continuing to be
receptive towards our media network. Advertising clients may elect not to use our services if they believe that consumers are not
receptive to our network or that our network does not provide sufficient value as an effective advertising medium. Likewise, if
consumers find some element of our network to be disruptive or intrusive, movie theaters may decide not to allow us to operate
the film screens in movie theaters and advertising clients may view our network as a less attractive advertising medium compared
to other alternatives. In that event, advertising clients may determine to reduce their spending on our network and pre-movie advertising.



Pre-Movie advertising is a relatively new
concept in China and in the advertising industry generally. If we are not able to adequately track filmgoers’ response to
our programs, in particular tracking the demographics of filmgoers most receptive to pre-movie advertising, we will not be able
to provide sufficient feedback and data to existing and potential advertising clients to help us generate demand and determine
pricing. Without improved market research, advertising clients may reduce their use of pre-movie advertising and instead turn to
more traditional forms of advertising that have more established and proven methods of tracking effectiveness.



If a substantial number of advertising
clients lose interest in advertising on our media network for these or other reasons or become unwilling to purchase advertising
time slots on our network, we will be unable to generate sufficient revenues and cash flow to operate our business, and our revenues,
prospects and results of operations could be negatively affected.





6







We derive a large portion of our
revenues from the provision of Multi-Channel Advertising Services. If there is a downturn in the film industry, we may not be able
to diversify our revenue sources and our ability to generate revenues and our results of operations could be materially and adversely
affected.



A large portion of our historical revenues
and expected future revenues have been and will be generated from the provision of Multi-Channel Advertising Services, in particular
through the display of advertisements on film screens before a movie starts. Our plan to increase our investments in film and TV
programs production and distribution is also closely related to the film industry.



We do not have any current plans to expand
outside of sectors related to the film industry and enter into other sectors to diversify our revenue sources. As a result, if
there were a downturn in the film industry for any reason, we may not be able to diversify our revenue sources and our ability
to generate revenues and our results of operations could be materially and adversely affected.



If we are unable to carry out our
operations as specified in existing service rights agreements, retain existing service rights agreements or obtain new service
rights agreements on commercially advantageous terms, we may be unable to maintain or expand our network coverage and our costs
may increase significantly in the future.



Our ability to generate revenues from advertising
sales depends largely upon our ability to operate on a large network of film screens that show our programs in movie theaters.
This, in turn, requires that we retain existing service rights agreements and obtain new service rights agreements to operate in
movie theaters.



We currently have service rights to place
our pre-movie advertisements on film screens in 16 cities. We operate in 42 movie theaters of Wanda Cinemas and 33 movie theaters
of Focus Film. We plan to gradually roll out our operations in 50 additional cities. We cannot, however, assure you that we will
be able to obtain service rights agreements with Wanda Cinemas or Focus Film in these cities as well.



All of our service rights agreements to
operate in movie theaters have terms ranging from 12 to 24 months without any automatic renewal provisions. Our service rights
agreements to operate in the 33 movie theaters of Focus Film are subject to renewal before December 31, 2019, and our
service rights agreements to operate in the 42 movie theaters of Wanda Cinemas are subject to renewal before December 30,
2020. Movie theaters tend to increase service rights fees over time. After the renewal of the Focus Film and Wanda Cinemas advertising
services agreements, we may experience a significant increase in our costs of revenues. If we are unable to pass increased service
rights costs on to our advertising clients through rate increases, our operating margins and earnings could decrease and our results
of operations could be materially and adversely affected.



Furthermore, as of September 30, 2019,
all our service rights agreements to operate in movie theaters contained provisions granting us certain exclusive advertising rights.
The scope of the exclusivity, however, varies from agreement to agreement. We cannot assure you that we will be able to retain
these agreements, with or without exclusivity provisions, upon their expiration. If we were to lose exclusivity, in particular
with the major movie theaters and leading movie theater operators, we may lose market share if our customers decide to place their
advertisements on any competing film screens or otherwise decrease their spending on our network. Furthermore, certain service
rights agreements contain provisions allowing the movie theaters to terminate the agreements unilaterally without any compensation
due to change of law or violations of the service rights agreements. We cannot assure you that our service rights agreements will
not be terminated, whether with or without justification.



We plan to renew our service rights agreements
and enter into new service rights agreements for operating film screens in additional movie theaters. There is no assurance that
we will be able to retain our service rights agreements or obtain new service rights agreements on exclusive or satisfactory terms,
or at all. If we fail to retain our service rights agreements to operate in major movie theaters, or retain exclusivity, if a significant
number of our existing service rights agreements are terminated or not renewed, or if we are unable to effectively expand our network
by obtaining new service rights agreements for our advertisements, advertising clients may find advertising on our network unattractive
and may not wish to purchase advertising time slots on our network, which would cause our revenues to decline and our business
and prospects to deteriorate.



A substantial majority of our pre-movie
advertising revenues are currently concentrated in the movie theaters of Wanda Cinemas and Focus Film in Heilongjiang and Liaoning
and a large portion of our Event Planning and Execution Services revenues are concentrated in a single client, Renhe Xinhai Advertising
Company Limited (“Renhe”). If any of these companies experiences a material business disruption, we would likely incur
substantial losses of revenues.



Although we have expanded our source
of revenues by entering into an agreement with Focus Film in September 2018, a substantial majority of our pre-movie
advertising revenues are still concentrated in 42 movie theaters of Wanda Cinemas in Heilongjiang and Liaoning and 33 movie
theaters of Focus Film in Liaoning. In the fiscal year ended June 30, 2018, we derived about 90% of our pre-movie
advertising revenue from the movie theaters of Wanda Cinemas. During the fiscal year ended June 30, 2019, we still derived a
majority of our pre-movie advertising revenue from the movie theaters of Wanda Cinemas. A material business disruption
affecting Wanda Cinemas or Focus Film could render our advertising media in such movie theaters inoperative or materially
limit the locations where we can place our pre-movie advertisements.





7







In the past, almost all of our Event Planning
and Execution Services revenues were derived from services provided to a single client, Renhe. We derived 43% and 13% of our total
revenue from Renhe in the fiscal years ended June 30, 2017 and 2018, respectively. Although we increased the number of clients
for our Event Planning and Execution Business to twelve during the fiscal year ended June 30, 2019, Renhe still contributed 15%
of our total revenue during that period. We expect our services provided to Renhe to continue to contribute a significant portion
of our revenues in the foreseeable future. If Renhe experienced any business difficulties or our business relationship with Renhe
were disrupted and we are not able to add other source of revenue, we would likely incur substantial losses of revenues.



One or more of our regional distributors
could engage in activities that are harmful to our reputation in the industry and to our business.



As of September 30, 2019, we covered
13 out of the 16 cities where we provide our pre-movie advertising network through contractual arrangements with regional distributors.
Under these arrangements, we provide our business model and operating expertise to local advertising companies in exchange for
their acting as regional distributors of our pre-movie advertising services. Our contractual arrangements with our regional distributors,
however, do not provide us with control or oversight over their everyday business activities, and one or more of our regional distributors
may engage in activities that violate PRC laws and regulations governing the advertising industry and advertising content, or other
PRC laws and regulations generally. Some of our regional distributors may not possess all the licenses required to operate an advertising
business, or may fail to maintain the licenses they currently hold, which could result in local regulators suspending the operations
of the network in those cities. In addition, although we have the right to review the advertising content that our regional distributors
display on the portion of our pre-movie advertising network that they operate independently, our regional distributors may include
advertising content on their part of the pre-movie advertising network and violate PRC advertising laws or regulations or expose
them and us to lawsuits or result in the revocation of their business license. If any of these events occurs, it could harm our
reputation in the industry.



If we are unable to attract advertising
clients to purchase advertising time slots on our network, we will be unable to maintain or increase our advertising fees, which
could negatively affect our ability to grow our profits.



The fees we charge advertising clients
and agencies for time slots on our network depend on the size and quality of our network and the demand by advertising clients
for advertising time on our network. We believe advertising clients choose to advertise on our network in part based on the size
of our network and the desirability of the locations of the movie theaters we operate in. If we fail to maintain or increase the
number of film screens we operate on or solidify our brand name and reputation as a quality pre-movie advertising provider, advertising
clients may be unwilling to purchase time on our network or to pay the levels of advertising fees we require to grow our profits.



When our current pre-movie advertising
network of film screens reaches saturation in the major movie theaters where we operate, we may be unable to offer additional time
slots to satisfy all of our advertising clients’ needs, which could hamper our ability to generate higher levels of revenues
and profitability over time.



When our pre-movie advertising network
of film screens reaches saturation in any particular movie theater, we may be unable to offer additional advertising time slots
to satisfy all of our advertising clients’ needs. We would need to increase our advertising rates for advertising in such
movie theaters in order to increase our revenues. However, advertising clients may be unwilling to accept rate increases, which
could hamper our ability to generate higher levels of revenues over time. In particular, the utilization rates of our advertising
time slots in the movie theaters with best location are higher than those in other movie theaters and saturation of film screens
in these movie theaters could have a material adverse effect on our growth prospects.



If we cannot manage our growth effectively
and efficiently, our results of operations or profitability could be adversely affected.



Our revenue for the fiscal year
ended June 30, 2018 was US$5,037,793, an increase of 32% from US$3,817,574 for the fiscal year ended June 30, 2017.
Our revenue for the fiscal year ended June 30, 2019 was US$11,679,690, an increase of 132% from US$5,037,793 for the fiscal
year ended June 30, 2018. We intend to continue to expand our services and operations. This expansion has placed, and will
continue to place, substantial demands on our managerial, operational, technological and other resources. Our planned
expansion will also place significant demands on us to maintain the quality of our services to ensure that our brand does not
suffer as a result of any deviations, whether actual or perceived, in the quality of our services. In order to manage and
support our growth, we must continue to improve our existing operational, administrative and technological systems and our
financial and management controls, and recruit, train and retain additional qualified advertising service professionals as
well as other administrative and sales and marketing personnel, particularly as we expand into new markets and launch new
business initiatives. We may not be able to effectively and efficiently manage the growth of our operations, recruit and
retain qualified personnel and integrate new expansion into our operations. As a result, our quality of service may
deteriorate and our results of operations or profitability could be adversely affected.





8







If we are unable to compete successfully,
our financial condition and results of operations may be harmed.



In the pre-movie advertising market inside
Heilongjiang and Liaoning, we believe that we currently do not have any credible competitors because we currently occupy 82% of
the market share in the pre-movie advertising market in Heilongjiang and Liaoning. We, however, compete for overall advertising
spending with other alternative media companies, such as Internet, street furniture, billboard and public transportation advertising
companies, and with traditional advertising media, such as newspapers, television, magazines and radio. We also compete for advertising
dollars spent in the pre-movie advertising industry and face competition from new entrants into film multimedia industry in the
future. Competition in the advertising industry is primarily based on quality of services or program, brand name recognition, network
size and geographic coverage, price, and range of services.



Significant competition could reduce our
operating margins and profitability and result in a loss of market share. Some of our existing and potential competitors may have
competitive advantages, such as significant greater brand recognition, financial, marketing or other resources and may be able
to mimic and adopt our business model. Several of our competitors have significantly larger advertising networks than we do, which
gives them an ability to reach a larger number of overall potential consumers and which make them less susceptible to downturns
in particular sectors, such as film industry. Significant competition will provide advertising clients with a wider range of media
and advertising service alternatives, which could lead to lower prices and decreased revenues, gross margins and profits.



We may be subject to, and may expend
significant resources in defending against, government actions and civil suits based on the content we provide through our pre-movie
advertising network.



Civil claims may be filed against us for
fraud, defamation, subversion, negligence, copyright or trademark infringement or other violations due to the nature and content
of the information displayed on our network. If consumers find the content displayed on our network to be offensive, movie theaters
may seek to hold us responsible for any consumer claims or may terminate their relationships with us. Offensive and objectionable
content and legal standards for defamation and fraud in China are less defined than in other more developed countries and we may
not be able to properly screen out unlawful content.



In addition, if the security of the content
management system of our pre-movie advertising network is breached and unauthorized images, text or audio sounds are displayed
on our network, viewers or the PRC government may find these images, text or audio sounds to be offensive, which may subject us
to civil liability or government censure despite our efforts to ensure the security of our content management system. Any such
event may also damage our reputation. If our advertising viewers do not believe our content is reliable or accurate, our business
model may become less appealing to viewers in China and our advertising clients may be less willing to place advertisements on
our network.



If we fail to hire, train and retain
qualified managerial and other employees, our business and results of operations could be materially and adversely affected.



We place substantial reliance on the advertising
market experience and knowledge of our senior management team as well as their relationships with other industry participants.
Mr. Bo Jiang, our chairman, and Mr. Tao Jiang, our chief executive officer, are particularly important to our future
success due to their substantial experience and reputation in the advertising market. We do not carry, and do not intend to procure,
key person insurance on any of our senior management team. The loss of the services of one or more members of our senior management
team due to their departure, or otherwise, could hinder our ability to effectively manage our business and implement our growth
strategies. Finding suitable replacements for our current senior management could be difficult, and competition for such personnel
of similar experience is intense. If we fail to retain our senior management, our business and results of operations could be materially
and adversely affected.



Our advertising service
professionals interact with our customers on a daily basis. They are critical to maintaining the quality and consistency of
our services and our brand and reputation. It is important for us to attract qualified managerial and other employees who
have experience in advertising related services and are committed to our service approach. There may be a limited supply of
qualified individuals in some of the cities in China where we have operations and other cities into which we intend to
expand. We must hire and train qualified managerial and other employees on a timely basis to keep pace with our rapid growth
while maintaining consistent quality of services across our operations in various geographic locations. We must also provide
continuous training to our managerial and other employees so that they are equipped with up-to-date knowledge of various
aspects of our operations and can meet our demand for high-quality services. If we fail to do so, the quality of our services
may decrease in one or more of the markets where we operate, which in turn, may cause a negative perception of our brand and
adversely affect our business.





9







Any failure to register our trademarks
or protect our copyright, and other intellectual property rights could have a negative impact on our business.



The Company is currently in the process
of registering the “Leaping Media Group” trademark and owns the copyright of its logo, the web TV series “Meet
Myself,” and the film “The Master-Hand.” We believe our trademarks in the registration process, copyright, and
other intellectual property rights are critical to our success. Any unauthorized use of our trademarks in the registration process
and other intellectual property rights could harm our competitive advantages and business. Historically, China has not protected
intellectual property rights to the same extent as the United States or the Cayman Islands, and infringement of intellectual property
rights continues to pose a serious risk of doing business in China. Monitoring and preventing fraudulent or unauthorized use is
difficult. The measures we take to protect our intellectual property rights may not be adequate. Furthermore, the application of
laws governing intellectual property rights in China and abroad is uncertain and evolving, and could involve substantial risks
to us. If we are unable to adequately protect our brand, trademarks in the registration process and other intellectual property
rights, we may lose these rights and our business may suffer materially.



The Company owns the internet domain names
 “yzcmmedia.cn” and “yzcmmedia.com.” As internet domain name rights are not rigorously regulated or enforced
in China, other companies may incorporate in their domain names elements similar in writing or pronunciation to “Yuezhong”
or their Chinese equivalents in the future. This may result in confusion between those companies and our company and may lead to
the dilution of our brand value, which could adversely affect our business.



Future acquisitions may have an adverse
effect on our ability to manage our business.



We may acquire businesses, technologies,
services or products which are complementary to our core digital media network business. Future acquisitions may expose us to potential
risks, including risks associated with: the integration of new operations, services and personnel; unforeseen or hidden liabilities;
the diversion of resources from our existing business and technology; our potential inability to generate sufficient revenue to
offset new costs; the expenses of acquisitions; or the potential loss of or harm to relationships with both employees and advertising
clients resulting from our integration of new businesses.



Any of the potential risks listed above
could have a material and adverse effect on our ability to manage our business, our revenues and net income. We may need to raise
additional debt funding or sell additional equity securities to make such acquisitions. The raising of additional debt funding
by us, if required, would result in increased debt service obligations and could result in additional operating and financing covenants,
or liens on our assets, that would restrict our operations. The sale of additional equity securities could result in additional
dilution to our shareholders.



We have
no control over theater chain companies and our Movie Theater Operating Business may be adversely affected if our access to films
is limited or delayed.



In China, film
production and distribution entities provide films directly to theater chain companies. Operators of movie theaters lack opportunities
to negotiate directly with the film production and distribution entitles for purposes of movie screening. For a movie theater to
get the license to screen any movies, it is required to join an existing theater chain or establish its own theater chain. Therefore,
we rely on theater chain companies, over whom we have no control, for the films that we exhibit. Although we have entered into
Theater Chain Agreements with Liaoning North Cinema Line Co., Ltd., according to which the theater chain company will provide us
with a certain number of films each year. We cannot decide which particular films would be provided to us or whether the films
provided to us are popular at the moment of exhibition. If the theater chain we have joined could not obtain licenses for first-run
exhibition of popular films, our access to such films would be limited or delayed and our business may be adversely affected. To
the extent that we are unable to obtain the license for the exhibition of a popular film in our theaters, our operating results
may be adversely affected.



Our Movie
Theater Operating Business depends on film production and performance.



Our ability
to operate successfully depends upon the availability, diversity, and appeal of films, our ability to obtain licensed films,
and the performance of such films in our markets. The most attended films are usually released during the summer, the
calendar year-end holidays, and other holidays, making our Movie Theater Operating Business highly seasonal. Poor performance
of, or any disruption in the production of these films (including by reason of a strike or lack of adequate financing), or a
reduction in the marketing efforts of the major film studios, could hurt our business and results of operations. Conversely,
the successful performance of these films, particularly the sustained success of any one film, or an increase in effective
marketing efforts of the major film studios, may generate positive results for our business and operations in a specific
fiscal quarter or year that may not necessarily be indicative of, or comparable to, future results of operations.





10







Our movie
theaters are subject, at times, to intense competition.



Our movie theaters
are subject to varying degrees of competition in the geographic areas in which we operate. Competitors may be national circuits,
regional circuits, or smaller independent exhibitors. Competition among theater exhibition companies is often intense with respect
to the following factors:



• Attracting
patrons. The competition for patrons is dependent upon factors such as the availability of popular films, the location and
number of theaters and screens in a market, the comfort and quality of the theaters, and pricing. Competitors have built or may
be planning to build theaters in certain areas where we operate, which could result in excess capacity and increased competition
for patrons.



•Licensing
films. We believe that the principal competitive factors with respect to film licensing include licensing terms, number of
seats and screens available for a particular picture, revenue potential, and the location and condition of an exhibitor’s
theaters.



• New
sites and acquisitions. We must compete with exhibitors and others in our efforts to locate and acquire attractive new and
existing sites for our theaters. There can be no assurance that we will be able to acquire such new sites or existing theaters
at reasonable prices or on favorable terms. Moreover, some of these competitors may be stronger financially than we are. As a result
of the foregoing, we may not succeed in acquiring theaters or may have to pay more than we would prefer to make an acquisition.



The theatrical
exhibition industry also faces competition from other forms of out-of-home entertainment, such as concerts, amusement parks, and
sporting events and from other distribution channels for filmed entertainment, such as cable television, pay-per-view, and home
video systems, and from other forms of in-home entertainment.



An increase
in the use of alternative film delivery methods or other forms of entertainment may drive down the attendance of our theaters and
limit our ticket prices.



We compete with
other film delivery methods, including network, syndicated cable and satellite television, and DVDs, as well as video-on-demand,
pay-per-view services, and downloads via the Internet. We also compete for the public's leisure time and disposable income with
other forms of entertainment, including sporting events, amusement parks, live music concerts, live theater, and restaurants. An
increase in the popularity of these alternative film delivery methods and other forms of entertainment could reduce attendance
at our theaters, limit the prices we can charge for admission, and materially adversely affect our business and results of operations.



General
political, social, and economic conditions can reduce the attendance of our movie theaters.



Our success depends
on general political, social, and economic conditions and the willingness of consumers to spend money at movie theaters. If going
to films becomes less popular or consumers spend less on concessions, our operations could be adversely affected. In addition,
our operations could be adversely affected if consumers' discretionary income falls as a result of an economic downturn. Geopolitical
events, including the threat of domestic terrorism or cyber attacks, could cause people to avoid our theaters or other public places
where large crowds are in attendance. In addition, due to our concentration in certain markets, natural disasters such as hurricanes
or earthquakes in those markets could adversely affect our overall results of operations.



Risks Relating to Doing Business in
the PRC



There are uncertainties under the
Foreign Investment Law relating to the status of businesses in China controlled by foreign invested projects primarily through
contractual arrangements, such as our business.



The Ministry of Commerce of the
People’s Republic of China (the “MOFCOM”), and the National Development and Reform Commission, or
 “NDRC,” promulgated the Special Measures for Foreign Investment Access (2019 version), or the
 “2019 Negative List,” on June 30, 2019, which became effective on July 30, 2019. According to the 2019 Negative
List, the advertising services sector and event planning and execution services sector, in which the Company is currently
engaged in business operations, are not deemed to be either “restricted” or “prohibited” for foreign
investors. The MOFCOM and NDRC, however, publish new Catalogues from time to time that may change the scope of the
 “negative list,” and as such it is uncertain whether future Catalogues may re-classify the advertising services
sector or event planning and execution services sector in the “negative list.” Pursuant to the 2019 Negative
List, foreign investors are also prohibited from investing in film production or distribution companies, movie theater
operating companies, and film importing business; as for construction and operation of movie theaters, the
controlling shareholder shall be Chinese citizens or institutions. LMG is currently engaged in the business of producing
films and operating movie theaters, which are on the 2019 Negative List.





11







The 2019 Negative List also states that
foreign investors are prohibited to invest in the production and operation of broadcasting and TV programs. In addition, according
to the Administrative Rules on Production and Operation of Broadcasting and Television Programs, wholly foreign-owned
enterprises, joint ventures, and cooperative enterprises in the PRC are not allowed to establish any institution aiming at the
production and operation of broadcasting and TV programs, or engaging in any activities for production and operation of broadcasting
and TV programs. The required Broadcasting and Television Program Production and Operation Permit is also prohibited to be issued
to any wholly foreign-owned enterprises, joint ventures, or cooperative enterprises in the PRC. Our VIE, LMG, and its subsidiary,
Yuezhong (Beijing) Film Co., Ltd., are currently holding their Broadcasting and Television Program Production and Operation Permit
for the production of TV programs as part of our major business. Our offshore special purpose vehicle, or the “SPV”,
is not allowed to be a shareholder of our VIE.



The MOFCOM published a discussion draft
of the proposed Foreign Investment Law in January 2015, or the “2015 FIL Draft,” which expanded the definition of foreign
investment and introduced the principle of  “actual control” in determining whether a company is considered an
FIE. Under the 2015 FIL Draft, VIEs that are controlled via contractual arrangement would also be deemed as FIEs if they are ultimately
 “controlled” by foreign investors. On March 15, 2019, the National People’s Congress approved the Foreign Investment
Law of the PRC, or the “FIL,” which will come into effect on January 1, 2020, repealing simultaneously the Law of the
PRC on Sino-foreign Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned Enterprises, and the Law of the PRC on Sino-foreign
Cooperative Joint Ventures, together with their implementation rules and ancillary regulations. Pursuant to the FIL, foreign investment
refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises, or other organizations,
including investment in new construction project, establishment of foreign funded enterprise or increase of investment, merger
and acquisition, and investment in any other way stipulated under laws, administrative regulations, or provisions of the State
Council. Although the FIL has deleted the particular reference to the concept of “actual control” and contractual
arrangements in the 2015 FIL Draft, there is still uncertainty regarding whether our VIE would be identified as a FIE in the future.
As a result, we cannot assure you that the FIL, when it becomes effective, will not have a material and adverse effect on our ability
to conduct our business through our contractual arrangements.



If we are deemed to have a non-PRC entity
as a controlling shareholder, the provisions regarding control through contractual arrangements could reach our VIE arrangement,
and as a result LMG could become subject to restrictions on foreign investment, which may materially impact the viability of our
current and future operations. Specifically, we may be required to modify our corporate structure, change our current scope of
operations, obtain approvals or face penalties or other additional requirements, compared to entities which do have PRC controlling
shareholders. Uncertainties exist with respect to the interpretation and implementation of FIL and how it may impact the viability
of our current corporate structure, corporate governance and business operations.



It is uncertain whether we would be considered
as ultimately controlled by Chinese parties. Mr. Bo Jiang, our chairman and a PRC citizen, Mr. Tao Jiang, our chief executive
officer and a PRC citizen, and Di Wang, our vice president and a PRC citizen, beneficially and indirectly own 74.72% of our outstanding
voting securities. It is uncertain, however, if these factors would be sufficient to give them control over us under the FIL. If
future revisions or implementation rules of the FIL mandate further actions, such as the MOFCOM market entry clearance or certain
restructuring of our corporate structure and operations, there may be substantial uncertainties as to whether we can complete these
actions in a timely manner, if at all, and our business and financial condition may be materially and adversely affected.



Changes in the policies of the PRC
government could have a significant impact upon our ability to operate profitably in the PRC.



We conduct all of our operations and all
of our revenue is generated in the PRC. Accordingly, economic, political and legal developments in the PRC will significantly affect
our business, financial condition, results of operations and prospects. Policies of the PRC government can have significant effects
on economic conditions in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the
PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations or their interpretation,
particularly those dealing with the advertising and movie industries, including censorship and other restriction on material which
can be transmitted over advertising network, security, intellectual property, money laundering, taxation and other laws that affect
our ability to operate our pre-movie advertising network.





12







Because our business is dependent
upon government policies that encourage a market-based economy, change in the political or economic climate in the PRC may impair
our ability to operate profitably, if at all.



Although the PRC government has been pursuing
a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over
economic growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that
encourage private ownership of businesses. Restrictions on private ownership of businesses would affect the securities business
in general and businesses using advertising service in particular. We cannot assure you that the PRC government will pursue policies
favoring a market oriented economy or that existing policies will not be significantly altered, especially in the event of a change
in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.



The tariffs by the U.S. government
and the trade war between the U.S. and China, and on a larger scale, internationally, may dampen global growth. If the U.S. government,
in the future, subjects the services that we provide to tariffs, our business operations and revenues may be negatively impacted.



The U.S. government has recently, among
other actions, imposed new or higher tariffs on specified products imported from China to penalize China for what it characterizes
as unfair trade practices and China has responded by imposing new or higher tariffs on specified products imported from the United
States. Based on our analysis of the list of products affected by the tariffs, we expect that the tariffs will not have a material
direct impact on our business operations, as currently, we are based in the PRC, and provide services to customers exclusively
located within the PRC market. The imposed tariffs, however, may cause the depreciation of the RMB currency and a contraction of
certain PRC industries that will likely be affected by the tariffs. As such, there may be potential decrease in the spending powers
of advertising customers, which in turn, may lead to a contraction of the PRC advertising market. As such, we may have access to
fewer business opportunities and our operation may be negatively impacted. In addition, future actions or escalations by either
the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact
on our business and we cannot provide any assurances as to whether such actions will occur or the form that they may take.



Our shareholders are not in compliance
with the PRC’s regulations relating to offshore investment activities by PRC residents, and as a result, the Company and
its shareholders may be subject to penalties if we are not able to remediate the non-compliance.



In July 2014, the State Administration
of Foreign Exchange, or “SAFE,” promulgated the Circular on Issues Concerning Foreign Exchange Administration over
the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents via Special Purpose Vehicles, or “Circular
37,” which replaced Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing
and Roundtrip Investment through Offshore Special Purpose Vehicles, or “Circular 75.” According to Circular 37, prior
registration with the local SAFE branch is required for Chinese residents to contribute domestic assets or interests to offshore
companies, known as SPVs. Moreover, Circular 37 applies retroactively. As a result, Chinese residents who have contributed domestic
assets or interests to a SPV, but failed to complete foreign exchange registration of overseas investments as required before July 4,
2014, are required send a letter to SAFE and its branches for explanation. SAFE and its branches shall, under the principle of
legality and legitimacy, conduct supplementary registration, and impose administrative punishment on those in violation of the
administrative provisions on the foreign exchange pursuant to the law. Circular 37 further requires amendment to a PRC resident’s
registration in the event of any significant changes with respect to the SPV, such as an increase or decrease in the capital contributed
by PRC individuals, share transfer or exchange, merger, division, or other material event. Further, foreign investment enterprises
established by way of round-tripping shall complete the relevant foreign exchange registration formalities pursuant to the prevailing
foreign exchange control provisions for direct investments by foreign investors, and disclose the relevant information such as
actual controlling party of the shareholders truthfully.



Mr. Bo Jiang, Mr. Tao Jiang, and Ms. Di
Wang, who are our beneficial owners and PRC residents, have not completed the initial foreign exchange registration. We have requested
our shareholders who are Chinese residents to make the necessary applications, filings, and amendments as required under Circular
37 and other related rules. We attempt to comply, and attempt to ensure that our shareholders who are subject to these rules comply,
with the relevant requirements. We cannot, however, provide any assurances that all of our shareholders who are Chinese residents
will comply with our request to obtain any applicable registration or comply with other requirements required by Circular 37 or
other related rules.



We cannot assure you that our
shareholders who are PRC residents will in the future provide sufficient supporting documents required by the SAFE or
complete the required registration with the SAFE in a timely manner, or at all. Any failure by any of our shareholders who is
a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these regulations could
subject our SPV to restrictions imposed on foreign exchange activities, including restrictions on its ability to receive
registered capital as well as additional capital from Chinese resident shareholders, and repatriation of profits and
dividends derived from SPV by Chinese residents to China are illegal. In addition, the failure of the Chinese resident
shareholders to complete the registration may subject the shareholders to fines less than RMB50,000 (approximately
US$7,278.02).





13







In addition, pursuant to Circular
37 and Provisional Measures on Administration of Filing for Establishment and Change of Foreign Investment Enterprises, when
WFOE completes establishment registration formalities with the State Administration for Industry and Commerce (the “SAIC”)
branches, the establishment filing information for foreign investment enterprise shall be submitted together online to the MOFCOM.
Due to the shareholders’ failure to complete the foreign exchange registration process required by Circular 37, WFOE could
not complete the required filing obligations as a foreign investment enterprise and WFOE or its shareholder might be subject to
a fine of not more than RMB30,000 (approximately US$4,366.81).



Further, failure by WFOE to obtain the
certificate of establishment filing results in its inability to complete the foreign exchange registration. As a result, our SPV
cannot contribute registered capital as well as additional capital to WFOE. The offshore financing funds are also not allowed to
be used in China. If WFOE fails to obtain necessary registered capital within the approved business time limit, the industries
and commercial administrative authorities might revoke its business license. Due to the failure by WFOE to complete the foreign
exchange registration, WFOE is also unable to pay dividends or make distributions to our SPV.



Failure to comply with the SAFE registration
requirements could also result in penalties under PRC law for evasion of foreign exchange regulations. According to the Foreign
Exchange Control Regulations of PRC, which was promulgated on August 5, 2008, persons who evade foreign exchange by transferring
foreign exchange from China to overseas or by using fraudulent means to transfer domestic capital to overseas in violation of the
provisions shall be ordered by the foreign exchange control authorities to recover the foreign exchange within a stipulated period
and be subject to a fine of not more than 30% of the amount of evaded foreign exchange; where the case is serious, a fine ranging
from 30% of the amount of evaded foreign exchange to the equivalent value shall be imposed; where the case constitutes a criminal
offence, criminal liability shall be pursued in accordance with the law. Persons who remit foreign exchange into China in violation
of the provisions shall be ordered by the foreign exchange control authorities to make correction and be subject to a fine of not
more than 30% of the illegal amount; where the case is serious, a fine ranging from 30% of the illegal amount to the equivalent
value shall be imposed. Persons who engage in illegal conversion of foreign currencies shall be ordered by the foreign exchange
control authorities to do a reverse exchange of the funds involved in the illegal conversion of foreign currencies and be subject
to a fine of not more than 30% of the illegal amount.



Failure to make adequate contributions
to various employee benefit plans as required by PRC regulations may subject us to penalties.



We are required under PRC law to participate
in various government sponsored employee benefit plans, including social insurance fees and housing provident funds, and contribute
to the plans in amounts equal to certain percentages of salaries of our employees at locations where we operate our businesses.
LMG has not made adequate employee benefit payments to the social insurance fees, or opened bank accounts for its employees’
housing fund deposits and deposited employees’ housing funds, as required by PRC laws and regulations. LMG may be required
to make up the contributions for the social insurance fees and pay late fees equal to 0.05% of the shortage of contributions for
each day LMG fails to make up the contributions. Fines up to three times of such shortage may be imposed on LMG if it fails to
make up the difference within the time frame prescribed by relevant government authorities.



In addition, the relevant PRC authorities
may order LMG to open bank accounts for housing fund deposits, make the payment, and deposit the unpaid housing funds within a
prescribed time limit. If LMG fails to go through the formalities to open the accounts within the prescribed time limit, a fine
of not less than RMB10,000 (approximately US$1,455.60) nor more than RMB50,000 (approximately US$7,278.02) shall be imposed. If
LMG fails to make the payment and deposit the housing funds within the prescribed time limit, an application may be made to the
people’s court for compulsory enforcement. If we are subject to late fees or fines in relation to the underpaid employee
benefits, our financial condition and results of operations may be adversely affected.



We have not completed the necessary
filing procedures for our original Internet film “The Master-Hand,” and, as a result, the planned release of the film
may be delayed or we may even be ordered to cancel the release, which could materially and adversely affect our business and our
financial condition.



According to the Notice on Further
Strengthening the Planning, Construction and Management of Internet Original Audio-video Programs, basic information
of key Internet audio-video programs, which are Internet movies (micro movies) with an investment of more than RMB one million
(approximately US$145,560.41), shall be filed for record by the Internet audio-video service entities at the stage of creation
planning.





14







In addition, according to the Notice
on Further Strengthening the Management of Internet Audio-video Programs including Web Series and Micro Movies as well as the Supplementary
Notice on Further Perfecting the Management of Internet Audio-video Programs including Web Series and Micro Movies, prior
to publishing Internet audio-video programs, including web series and micro movies, Internet audio-video service entities shall
organize examiners to review on such programs. After this self-examination is completed, the Internet audio-video service entities
shall also submit information of their self-examined programs to provincial branches of the State Administration of Press, Publication,
Radio, Film, and Television (the “SAPPRFT”) for record-filing and obtain the filing numbers. The programs shall not
be published online until the processes of information record-filing have been completed and the filing numbers have been labeled
on the programs by the Internet audio-video service entities.



As of the date of this annual report, although
we have submitted an application for record-filing for our original Internet film script of the film “The Master-Hand”
for its creation planning information, we have not completed the filing procedures as required by the regulations. We cannot estimate
the specific timeline for us to complete such filing procedures or assure you that the filing procedures will be completed. As
a result, the release of the film may be delayed or we may even be ordered to cancel the release, which could materially and adversely
affect our business and our financial condition.



Because our business is conducted
in RMB and the price of our Ordinary Shares is quoted in United States dollars, changes in currency conversion rates may affect
the value of your investments.



Our business is conducted in the PRC, our
books and records are maintained in RMB, which is the currently of the PRC, and the financial statements that we file with the
SEC and provide to our shareholders are presented in United States dollars. Changes in the exchange rate between the RMB and dollar
affect the value of our assets and the results of our operations in United States dollars. The value of the RMB against the United
States dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and
economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB
may materially and adversely affect our cash flows, revenue and financial condition. Further, our Ordinary Shares are offered in
United States dollars, we will need to convert the net proceeds we receive into RMB in order to use the funds for our business.
Changes in the conversion rate between the United States dollar and the RMB will affect that amount of proceeds we will have available
for our business.



Under the PRC Enterprise Income Tax
Law, or the EIT Law, we may be classified as a “resident enterprise” of China, which could result in unfavorable tax
consequences to us and our non-PRC shareholders.



The EIT Law and its implementing rules
provide that enterprises established outside of China whose “de facto management bodies” are located in China are considered
 “resident enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de
facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance
and assets of an enterprise. In April 2009, the State Administration of Taxation, or SAT, issued a circular, known as Circular
82, which provides certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled
enterprise that is incorporated offshore is located in China. However, there are no further detailed rules or precedents governing
the procedures and specific criteria for determining “de facto management body.” Although our board of directors and
management are located in the PRC, it is unclear if the PRC tax authorities would determine that we should be classified as a PRC
 “resident enterprise.”



If we are deemed as a PRC “resident
enterprise,” we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although
dividends distributed to us from our existing PRC subsidiary and any other PRC subsidiaries which we may establish from time to
time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have
a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends,
if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were
considered a PRC “resident enterprise,” any dividends we pay to our non-PRC investors, and the gains realized from
the transfer of our Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at
a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions
of any applicable tax treaty). It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any
tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise.
This could have a material and adverse effect on the value of your investment in us and the price of our Ordinary Shares.





15







There are significant uncertainties
under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary
to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.



Under the PRC EIT Law and its implementation
rules, the profits of an FIE generated through operations, which are distributed to its immediate holding company outside the PRC,
will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and the PRC, such rate may
be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our PRC subsidiary
is wholly-owned by our Hong Kong subsidiary. Moreover, under the Notice of the State Administration of Taxation on Issues regarding
the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the tax payer needs to satisfy
certain conditions to enjoy the benefits under a tax treaty. The beneficial owner of the relevant dividends and the corporate shareholder
to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds during the 12 consecutive months
preceding the receipt of the dividends. Further, the State Administration of Taxation promulgated the Notice on How to Understand
and Recognize the “Beneficial Owner” in Tax Treaties on October 27, 2009, which limits the “beneficial owner”
to individuals, projects or other organizations normally engaged in substantive operations, and sets forth certain detailed factors
in determining the “beneficial owner” status. In current practice, a Hong Kong enterprise must obtain a tax resident
certificate from the relevant Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax
authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain
the tax resident certificate from the relevant Hong Kong tax authority. As of the date of this annual report, we have not commenced
the application process for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance
that we will be granted such a Hong Kong tax resident certificate.



Even after we obtain the Hong Kong tax
resident certificate, we are required by applicable tax laws and regulations to file required forms and materials with relevant
PRC tax authorities to prove that we can enjoy 5% lower PRC withholding tax rate. Yuezhong Media HK intends to obtain the required
materials and file with the relevant tax authorities when it plans to declare and pay dividends, but there is no assurance that
the PRC tax authorities will approve the 5% withholding tax rate on dividends received from Yuezhong Media HK.



Our contractual arrangements with
LMG and its shareholders may not be effective in providing control over LMG.



All of our current revenue and net income
is derived from LMG and its subsidiaries. We do not have an equity ownership interest in LMG but rely on contractual arrangements
with LMG to control and operate its business and the business of its subsidiaries. However, these contractual arrangements may
not be effective in providing us with the necessary control over LMG and its operations. Any deficiency in these contractual arrangements
may result in our loss of control over the management and operations of LMG, which will result in a significant loss in the value
of an investment in our company. We rely on contractual rights through our VIE structure to effect control over and management
of LMG and its subsidiaries which exposes us to the risk of potential breach of contract by the shareholders of LMG. In addition,
as our chairman Mr. Bo Jiang, our CEO Mr. Tao Jiang, and our vice president Ms. Di Wang, as of the date of this
annual report, own 50%, 25%, and 25% of LMG’s outstanding equity, respectively, it may be difficult for us to change our
corporate structure if such shareholders refuse to cooperate with us.



Because we conduct our business through
LMG, a VIE, if we fail to comply with applicable law, we could be subject to severe penalties and our business could be adversely
affected.



We operate our business through LMG, a
VIE, the equity of which is owned by Mr. Bo Jiang, our chairman, Mr. Tao Jiang, our CEO, and Ms. Di Wang, our vice
president, through a series of contractual agreements, as a result of which, under United States generally accepted accounting
principles, the assets and liabilities of LMG are treated as our assets and liabilities and the results of operations of LMG are
treated in all respects as if they were the results of our operations. There are uncertainties regarding the interpretation and
application of PRC laws, rules and regulations, including but not limited to the laws, rules and regulations governing the validity
and enforcement of the contractual arrangements between WFOE and LMG.



On or around September 2011, various
media sources reported that the China Securities Regulatory Commission (the “CSRC”) had prepared a report proposing
pre-approval by a competent central government authority of offshore listings by China-based companies with VIE structures that
operate in industry sectors subject to foreign investment restrictions. However, it is unclear whether the CSRC officially issued
or submitted such a report to a higher level government authority or what any such report provides, or whether any new PRC laws
or regulations relating to VIE structures will be adopted or what they would provide.





16







If WFOE, LMG or their ownership structure
or the contractual arrangements are determined to be in violation of any existing or future PRC laws, rules or regulations, or
WFOE or LMG fails to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities
would have broad discretion in dealing with such violations, including:



| | · | revoking the business and operating licenses
of WFOE or LMG;
| | - | ------------------------------------------------------------

| | · | discontinuing or restricting the operations
of WFOE or LMG;
| | - | -----------------------------------------------------------

| | · | imposing conditions or requirements with
which we, WFOE, or LMG may not be able to comply;
| | - | ------------------------------------------------------------------------------------------

| | · | requiring us, WFOE, or LMG to restructure
the relevant ownership structure or operations which may significantly impair the rights of the holders of our Ordinary Shares
in the equity of LMG;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | restricting or prohibiting our use of
the proceeds from our initial public offering to finance our business and operations in China; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | · | imposing fines.
| | - | ---------------



We cannot assure you that the PRC courts
or regulatory authorities may not determine that our corporate structure and contractual arrangements violate PRC laws, rules or
regulations. If the PRC courts or regulatory authorities determine that our contractual arrangements are in violation of applicable
PRC laws, rules or regulations, our contractual arrangements will become invalid or unenforceable, and LMG will not be treated
as a VIE and we will not be entitled to treat LMG’s assets, liabilities and results of operations as our assets, liabilities
and results of operations, which could effectively eliminate the assets, revenue and net income of LMG from our balance sheet,
which would most likely require us to cease conducting our business and would result in the delisting of our Ordinary Shares from
Nasdaq Capital Market and a significant impairment in the market value of our Ordinary Shares.



If we become directly subject to
the scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources
to investigate and resolve the matter which could harm our business operations, stock price and reputation.



U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial
commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial
and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate
governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism
and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some
cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions
and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny,
criticism and negative publicity will have on us, our business and our stock price. If we become the subject of any unfavorable
allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate
such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing
our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you
could sustain a significant decline in the value of our stock.



The disclosures in our reports and
other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the
PRC.



We are regulated by the SEC and our reports
and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under
the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the
review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject
to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the capital markets
in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that
no local regulator has done any review of us, our SEC reports, other filings or any of our other public pronouncements.



Increases in labor costs in the PRC
may adversely affect our business and our profitability.



China’s economy has experienced increases
in labor costs in recent years. China’s overall economy and the average wage in China are expected to continue to grow.
The average wage level for our employees has also increased in recent years. We expect that our labor costs, including wages
and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to our customers by
increasing prices for our products or services, our profitability and results of operations may be materially and adversely affected.



In addition, we have been subject to
stricter regulatory requirements in terms of entering into labor contracts with our employees and paying various statutory
employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance
and childbearing insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor
Contract Law, or the Labor Contract Law, that became effective in January 2008 and its implementing rules that became
effective in September 2008 and its amendments that became effective in July 2013, employers are subject to
stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of
employees’ probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our
employees or otherwise change our employment or labor practices, the Labor Contract Law and its implementation rules may
limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business
and results of operations. Besides, pursuant to the Labor Contract Law and its amendments, dispatched employees are intended
to be a supplementary form of employment and the fundamental form should be direct employment by enterprises and
organizations that require employees. Further, it is expressly stated in the Interim Provisions on Labor Dispatch that became
effective on March 1, 2014 that the number of seconded employees an employer uses may not exceed 10% of its total labor
force and the employer has a two-year transition period to comply with such requirement. The transition period ended
on February 29, 2016, and those PRC subsidiaries have taken steps to decrease the number of seconded employees. If the
relevant PRC subsidiaries are deemed to have violated the limitation on the use of seconded employees under the relevant
labor laws and regulations, we may be subject to fines and incur other costs to make required changes to our current
employment practices.





17







As the interpretation and implementation
of labor-related laws and regulations are still evolving, we cannot assure you that our employment practice does not and will not
violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we
are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our
employees and our business, financial condition and results of operations could be materially and adversely affected.



PRC regulation of loans to and direct
investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us
from using the proceeds of our initial public offering to make loans or additional capital contributions to WFOE, our PRC subsidiary,
or to our VIE, which could materially and adversely affect our liquidity and our ability to fund and expand our business.



Any funds we transfer to WFOE, our PRC
subsidiary, or to our VIE, either as a shareholder loan or as an increase in registered capital, are subject to approval by or
registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises,
or “FIEs,” the combined amount of offshore capital contributions and loans cannot exceed the FIE’s approved total
investment amount. Any capital contributions to our PRC subsidiary must be filed with the MOFCOM or its local counterparts, and
registered with a local bank authorized by SAFE. In addition, (a) any loan provided by us to WFOE, which is a FIE, cannot
exceed the difference between its total investment amount and registered capital, and must be registered with SAFE or its local
counterparts, and (b) any loan provided by us to our VIE which is a domestic PRC entity, over a certain threshold, must be
approved by the relevant government authorities and must be registered with SAFE or its local counterparts. Given that the approved
registered capital and total investment amount written in the article of WFOE are currently the same, if we seek to make a capital
contribution to WFOE we must first apply to increase both its registered capital and total investment amount, while if we seek
to provide a loan to WFOE, we must first increase its total investment amount. We currently do not have any immediate plans to
utilize the proceeds from our initial public offering to make capital contribution into WFOE or provide any loan to WFOE or to
our VIE. See “Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds—Use of Proceeds.”
If we seek to make capital contribution into WFOE or provide any loan to WFOE or to our VIE in the future, we may not be able to
obtain the required government approvals or complete the required registrations on a timely basis, if at all. If we fail to receive
such approvals or complete such registrations, our ability to use the proceeds of our initial public offering and to capitalize
our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our
business.



On March 30, 2015, SAFE promulgated
the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises,
or “SAFE Circular 19.” SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the
foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to
prohibit FIEs from using the RMB fund converted from their foreign exchange capitals for expenditure beyond their business scopes,
providing entrusted loans or repaying loans between non-financial enterprises. Violations of these Circulars could result in severe
monetary or other penalties. Although the Company currently does not have any immediate plans to convert the net proceeds of its
initial public offering to RMB, SAFE Circular 19 and relevant foreign exchange regulatory rules potentially limit our ability to
use RMB converted from the net proceeds of the offering to fund the establishment of new entities in China by our VIE or to invest
in or acquire any other PRC companies through WFOE or our VIE, which may adversely affect our business, financial condition, and
results of operations.



The failure to comply with PRC regulations
relating to mergers and acquisitions of domestic projects by offshore special purpose vehicles may subject us to severe fines or
penalties and create other regulatory uncertainties regarding our corporate structure.



On August 8, 2006, MOFCOM, joined
by the CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the SAIC, and SAFE,
jointly promulgated regulations entitled the Provisions Regarding Mergers and Acquisitions of Domestic Projects by Foreign Investors
(the “M&A Rules”), which took effect as of September 8, 2006, and as amended on June 22, 2009. These
regulations, among other things, have certain provisions that require offshore special purpose vehicles formed for the purpose
of acquiring PRC domestic companies and controlled directly or indirectly by PRC individuals and companies, to obtain the approval
of the MOFCOM prior to engaging in such acquisitions and to obtain the approval of the CSRC prior to publicly listing their securities
on an overseas stock market. On September 21, 2006, the CSRC published on its official website a notice specifying the documents
and materials that are required to be submitted for obtaining CSRC approval.





18







The application of the M&A Rules with
respect to our corporate structure remains unclear, with no current consensus existing among leading PRC law firms regarding the
scope and applicability of the M&A Rules. Thus, it is possible that the appropriate PRC government agencies, including MOFCOM,
would deem that the M&A Rules required us or our entities in China to obtain approval from the MOFCOM or other PRC regulatory
agencies in connection with WFOE’s control of LMG through contractual arrangements. If the CSRC, MOFCOM, or another PRC regulatory
agency determines that government approval was required for the VIE arrangement between WFOE and LMG, or if prior CSRC approval
for overseas financings is required and not obtained, we may face severe regulatory actions or other sanctions from the MOFCOM,
the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines or other penalties on our
operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from overseas
financings into the PRC, restrict or prohibit payment or remittance of dividends to us or take other actions that could have a
material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading
price of our Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable
for us, to delay or cancel overseas financings, to restructure our current corporate structure, or to seek regulatory approvals
that may be difficult or costly to obtain.



The M&A Rules, along with certain foreign
exchange regulations discussed below, will be interpreted or implemented by the relevant government authorities in connection with
our future offshore financings or acquisitions, and we cannot predict how they will affect our acquisition strategy. For example,
LMG’s ability to remit its profits to us or to engage in foreign-currency-denominated borrowings, may be conditioned upon
compliance with the SAFE registration requirements by Mr. Bo Jiang, principal shareholder of the Registrant and the VIE, over
whom we may have no control.



Our contractual agreements with LMG
are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements.



As all of our contractual arrangements
with LMG are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted
in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Disputes arising from these
contractual arrangements between us and LMG will be resolved through arbitration in China, although these disputes do not include
claims arising under the United States federal securities law and thus do not prevent you from pursuing claims under the United
States federal securities law. The legal environment in the PRC is not as developed as in the United States. As a result, uncertainties
in the PRC legal system could further limit our ability to enforce these contractual arrangements, through arbitration, litigation
and other legal proceedings remain in China, which could limit our ability to enforce these contractual arrangements and exert
effective control over LMG. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts
take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons.
In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over LMG, and
our ability to conduct our business may be materially and adversely affected.



Risks Relating to the Trading Market



We do not intend to pay dividends
for the foreseeable future.



We currently intend to retain any future
earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable
future. As a result, you may only receive a return on your investment in our Ordinary Shares if the market price of our Ordinary
Shares increases.



If securities or industry analysts
do not publish research or reports about our business, or if the publish a negative report regarding our Ordinary Shares, the price
of our Ordinary Shares and trading volume could decline.



The trading market for our Ordinary
Shares may depend in part on the research and reports that industry or securities analysts publish about us or our business.
We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our
Ordinary Shares would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which could cause the price of our Ordinary Shares
and the trading volume to decline.





19







The market price of our Ordinary
Shares may be volatile or may decline regardless of our operating performance.



The market price of our Ordinary Shares
may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:



| | · | actual or anticipated fluctuations in our revenue and other operating results;                                                                                                                                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;                                                                                                
| | · | actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
| | · | announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;                                                  
| | · | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;                                                                                                             
| | · | lawsuits threatened or filed against us; and                                                                                                                                                                                      
| | · | other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.                                                                                                              



In addition, the stock markets have experienced
extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many
companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance
of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention
of management from our business, and adversely affect our business.



Since our chairman, our CEO, and
our vice president currently together own 74.72% of our Ordinary Shares, they have the ability to elect directors and approve matters
requiring shareholder approval by way of ordinary resolution or special resolution.



Mr. Bo Jiang, our chairman, is currently
the beneficial owner of 5,985,915.4930, or 37.36% of our issued Ordinary Shares. Mr. Tao Jiang, our CEO, is currently the
beneficial owner of 2,992,957.7465, or 18.68% of our issued Ordinary Shares. Ms. Di Wang, our vice president, is currently
the beneficial owner of 2,992,957.7465, or 18.68% of our issued Ordinary Shares. The three of them together are holding 74.72%
of our outstanding Ordinary Shares. As result, they will be able to exert significant voting influence over fundamental and significant
corporate matters and transactions. They may have the power to elect all directors and approve all matters requiring shareholder
approval without the votes of any other shareholder. They will have significant influence over a decision to enter into any corporate
transaction and has the ability to prevent any transaction that requires the approval of shareholders, regardless of whether or
not our other shareholders believe that such transaction is in our best interests. Such concentration of voting power could have
the effect of delaying, deterring, or preventing a change of control or other business combination, which could, in turn, have
an adverse effect on the market price of our Ordinary Shares or prevent our shareholders from realizing a premium over the then-prevailing
market price for their Ordinary Shares.



If we fail to maintain an effective
system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent
fraud.



We are subject to reporting
obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by
Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, adopted rules requiring every public company
to include a management report on such company’s internal controls over financial reporting in its annual report, which
contains management’s assessment of the effectiveness of the company’s internal controls over financial
reporting. As we are an “emerging growth company,” we are expected to first include a management report on our
internal controls over financial reporting in our annual report in the second fiscal year end following the effectiveness of
our initial public offering. As such, these requirements are expected to first apply to our annual report on Form 20-F
for the fiscal year ending on June 30, 2020. Our management may conclude that our internal controls over our financial
reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting
is effective, our independent registered public accounting firm may still decline to attest to our management’s
assessment or may issue a report that is qualified if it is not satisfied with our internal controls or the level at which
our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from
us. Our reporting obligations as a public company will place a significant strain on our management, operational and
financial resources and systems for the foreseeable future.





20







We are a private company with limited accounting
personnel and other resources with which to address our internal controls and procedures. We plan to remedy our material weaknesses
and other control deficiencies in time to meet the deadline imposed by Section 404 of the Sarbanes-Oxley Act. If we fail to
timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal
controls over financial reporting. Moreover, effective internal controls over financial reporting are necessary for us to produce
reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective
internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial
statements, which in turn could harm our business and negatively impact the trading price of our Ordinary Shares. Furthermore,
we anticipate that we will incur considerable costs and devote significant management time and efforts and other resources to comply
with Section 404 of the Sarbanes-Oxley Act.



We will incur increased costs as
a result of being a public company.



Once we become a public company, we will
incur significant legal, accounting and other expenses that we do not incur as a private company prior to our initial public offering.
In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and Nasdaq, have required
changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal,
accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition,
we incur ongoing additional costs associated with our public company reporting requirements. We are currently evaluating and monitoring
developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or
the timing of such costs.



Because we are an “emerging
growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor
confidence in us and our Ordinary Shares.



We are an “emerging growth company,”
as defined in the JOBS Act, and we intend to take advantage of certain exemptions from disclosure and other requirements applicable
to other public companies that are not emerging growth companies including, most significantly, not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company.
As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain
information they may deem important.



We will incur increased costs after
we cease to qualify as an “emerging growth company.”



The Sarbanes-Oxley Act of 2002, as well
as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on the corporate governance
practices of public companies. As an “emerging growth company” pursuant to the JOBS Act, we may take advantage of specified
reduced reporting and other requirements that are otherwise applicable generally to public companies. We expect these rules and
regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and
costly. After we are no longer an “emerging growth company,” we expect to incur significant additional expenses and
devote substantial management effort toward ensuring compliance increased disclosure requirements.



Because we are a foreign private
issuer and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection
than you would have if we were a domestic issuer.



Nasdaq Listing Rule requires listed companies
to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted
to, and we may, follow home country practice in lieu of the above requirements, or we may choose to comply with the above requirement
within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does not require a majority
of our board to consist of independent directors. Thus, although director must act in the best interests of the Company, it is
possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of
our company may decrease as a result. In addition, the Nasdaq Listing Rules also require U.S. domestic issuers to have a compensation
committee, a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with
a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. The Nasdaq Listing Rules may
require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote
on all equity compensation plans and material revisions to those plans, certain ordinary share issuances. We intend to comply with
the requirements of Nasdaq Listing Rules in determining whether shareholder approval is required on such matters and to appoint
a nominating and corporate governance committee. However, we may consider following home country practice in lieu of the requirements
under the Nasdaq listing rules with respect to certain corporate governance standards which may afford less protection to investors.





21







If we cease to qualify as a foreign
private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic
issuers, and we would incur significant additional legal, accounting, and other expenses that we would not incur as a foreign private
issuer.



As a foreign private issuer, we are exempt
from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and
principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of
the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with
the SEC as frequently or as promptly as United States domestic issuers, and we are not required to disclose in our periodic reports
all of the information that United States domestic issuers are required to disclose. While we currently expect to qualify as a
foreign private issuer immediately following the completion of our initial public offering, we may cease to qualify as a foreign
private issuer in the future.



Anti-takeover provisions in our amended
and restated memorandum and articles of association may discourage, delay or prevent a change in control.



Some provisions of our amended and restated
memorandum and articles of association, as adopted by special resolutions on December 11, 2018, may discourage, delay or prevent
a change in control of our company or management that shareholders may consider favorable, including, among other things, the following:



| | · | provisions that authorize our board of
directors to issue shares with preferred, deferred or other special rights or restrictions without any further vote or action by
our shareholders; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

​

| | · | provisions that restrict the ability of
our shareholders to call meetings and to propose special matters for consideration at shareholder meetings.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



Our board of directors may decline
to register transfers of Ordinary Shares in certain circumstances.



Except in connection with the settlement
of trades or transactions entered into through the facilities of a stock exchange or automated quotation system on which our Ordinary
Shares are listed or traded from time to time, our board of directors may, in its sole discretion, decline to register any transfer
of any Ordinary Share which is not fully paid up or on which we have a lien.



Where the Ordinary Shares are not listed
on or subject to the rules of Nasdaq Capital Market, our board of directors may, in its absolute discretion, decline to register
any transfer of any Ordinary Share that has not been fully paid up or is subject to a company lien. Our board of directors may
also decline to register any transfer of such Ordinary Share unless:



| | · | the instrument of transfer is lodged with
us, accompanied by the certificate for the Ordinary Shares to which it relates and such other evidence as our board of directors
may reasonably require to show the right of the transferor to make the transfer;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the instrument of transfer is in respect
of only one class of Ordinary Shares;
| | - | ------------------------------------------------------------------------------

| | · | the instrument of transfer is properly
stamped, if required;
| | - | ------------------------------------------------------------

| | · | the Ordinary Share transferred is fully
paid and free of any lien in favor of us;
| | - | ---------------------------------------------------------------------------------

| | · | any fee related to the transfer has been
paid to us; and
| | - | --------------------------------------------------------

| | · | the transfer is not to more than four
joint holders.
| | - | ----------------------------------------------------



If our directors refuse to register a transfer,
they are required, within one month after the date on which the instrument of transfer was lodged, to send to each of the transferor
and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement
in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods
as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended
nor the register closed for more than 30 days in any year.



This, however, is unlikely to affect market
transactions of the Ordinary Shares purchased by investors in the public offering. Once the Ordinary Shares have been listed, the
legal title to such Ordinary Shares and the registration details of those Ordinary Shares in the Company’s register of members
will remain with DTC/Cede & Co. All market transactions with respect to those Ordinary Shares will then be carried out without
the need for any kind of registration by the directors, as the market transactions will all be conducted through the DTC systems.





22







The laws of the Cayman Islands may
not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United
States.



Our corporate affairs are governed by our
amended and restated memorandum and articles of association, by the Companies Law (2018 Revision) of the Cayman Islands and by
the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders
and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common
law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent
in the Cayman Islands and from English common law. Decisions of the Privy Council (which is the final Court of Appeal for British
overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts,
and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts
of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority.
The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly
established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has
a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty
protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders
of a corporation incorporated in a jurisdiction in the United States.



You may be unable to present proposals
before annual general meetings or extraordinary general meetings not called by shareholders.



Cayman Islands law provides shareholders
with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal
before a general meeting. However, these rights may be provided in a company’s articles of association. Our articles of association
allow our shareholders holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition
a general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least
twenty-one clear days is required for the convening of our annual general shareholders’ meeting and at least 14 clear days’
notice any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one
shareholder present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in the
Company.



Because we are a Cayman Islands corporation
and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors
or to enforce any judgment you may obtain.



We are incorporated in the Cayman Islands
and conduct our operations primarily in China. Substantially all of our assets are located outside of the United States and the
proceeds of our initial public offering will primarily be held in banks outside of the United States. In addition, all of our directors
and officers reside outside of the United States. As a result, it may be difficult or impossible for you to bring an action against
us or against these individuals in the United States in the event that you believe we have violated your rights, either under United
States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing
an action of this kind, the laws of the Cayman Islands and of China may not permit you to enforce a judgment against our assets
or the assets of our directors and officers.



Recently introduced economic substance
legislation of the Cayman Islands may adversely impact us or our operations.



The Cayman Islands, together with several
other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council
of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity.
With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Law, 2018 (the “Substance Law”)
came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities
which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January
1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. However, it is anticipated that the Company
itself may remain out of scope of the legislation or else be subject to more limited substance requirements. Although it is presently
anticipated that the Substance Law will have little material impact on the Company or its operations, as the legislation is new
and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of
these legislative changes on the Company.





23







If we are classified as a passive
foreign investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax
consequences.



A non-U.S. corporation such as ourselves
will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either



| | · | At least 75% of our gross income for the
year is passive income; or
| | - | -------------------------------------------------------------------

| | · | The average percentage of our assets
(determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production
of passive income is at least 50%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Passive income generally includes dividends,
interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains
from the disposition of passive assets.



If we are determined to be a PFIC for any
taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the
U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.



Based on our operations and the composition
of our assets, we do not expect to be treated as a PFIC under the current rules. It is possible that, however, more than 50% of
our assets may be assets which produce passive income. We will make this determination following the end of any particular tax
year. Although the law in this regard is unclear, we are treating LMG as being owned by us for United States federal income tax
purposes, not only because we control their management decisions, but also because we are entitled to the economic benefits associated
with LMG, and as a result, we are treating LMG as our wholly-owned subsidiary for U.S. federal income tax purposes. For purposes
of the PFIC analysis, in general, according to Internal Revenue Code Section 1297(c), a non-U.S. corporation is deemed to
own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity
by value. Although WFOE does not technically own any stock in LMG, because of its control over management decisions of LMG, its
entitlement to economic benefits associated with LMG, and the inclusion of LMG as part of the consolidated group (under Accounting
Standards Codification (ASC) Topic 810, “Consolidation,” VIEs are generally consolidated with other related entities
under common control), there is a risk that WFOE’s interest in LMG might be considered a deemed stock interest. Therefore,
the income and assets of LMG should be included in the determination of whether or not we are a PFIC in any taxable year Since
there is little to no guidance other than the statute itself (Internal Revenue Code Section 1297(c)) and analogous portions
of the code, treasury regulations and other accepted authorities, the IRS could challenge our position that the look through rule
should apply in this. In the event the IRS takes the position that we should not treated as owning LMG for United States federal
income tax purposes, we would likely be treated as a PFIC.



Item 4. INFORMATION ON THE COMPANY



A. History and Development of the Company



On August 21, 2018, we established
a holding company, Leaping Group, under the laws of the Cayman Islands. Leaping Group owns 100% of Yuezhong International, a British
Virgin Islands company incorporated on September 4, 2018. Yuezhong International owns 100% of Yuezhong Media HK, a Hong Kong
company incorporated on July 16, 2018.



On October 12, 2018, WFOE was incorporated
pursuant to PRC laws as a wholly foreign owned enterprise. Yuezhong Media HK holds 100% of the equity interests in WFOE.



We operate through our VIE, LMG, and its
subsidiaries. LMG was established in 2013 as a limited company pursuant to PRC laws, and began generating revenue in 2014. Since
the inception of LMG, we have consolidated our business practice, consistently expanded our business operation beyond Event Planning
and Execution Services to include Multi-Channel Advertising Services and more recently in 2017, started to invest in films and
TV programs production and distribution. We established a wholly owned subsidiary of LMG, Horgos Xinyuezhong Film Media Co., Ltd.
in 2017 pursuant to PRC laws, which was subsequently dissolved on April 17, 2019. The related parties of LMG also established
companies pursuant to PRC laws, including Shenyang Tianniu Media Co., Ltd. in 2013, Yuezhong Media (Dalian) Co., Ltd. in 2016,
Yuezhong (Beijing) Film Co., Ltd. in 2017, and Harbin Yuechuzhong Media Co., Ltd., Shenyang Xiagong Hotel Management Co., Ltd.,
and Liaoning Leaping International Cinema Management Co., Ltd. in 2018. The ownership of these companies was transferred to LMG,
resulting in these companies being wholly owned subsidiaries of LMG.



Pursuant to PRC laws, each entity
formed under PRC law shall have certain business scope as submitted to the Administration of Industry and Commerce or its
local counterpart. Pursuant to specific business scopes, approval by the relevant competent regulatory agencies may be
required prior to commencement of business operations. As such, WFOE’s business scope is to primarily engage in
technology development, provision of technology service, technology consulting; development of computer software and
hardware, computer network technology, game software; provision of enterprise management and related consulting service,
human resource consulting service and intellectual property consulting service. Since the sole business of WFOE is to provide
LMG with technical support, consulting services and other management services relating to its day-to-day business operations
and management in exchange for a service fee approximately equal to LMG’s net income after the deduction of the
required PRC statutory reserve, such business scope is necessary and appropriate under PRC laws. LMG, on the other hand, is
also able to, pursuant to its business scope, provide Multi-Channel Advertising Services, Event Planning and Execution
Services, and Film Production Services.





24









We control LMG through contractual arrangements,
which are described under “—B. Business Overview—Contractual Arrangements between WFOE and LMG.”



Our principal executive offices are located
at 2010 Huaruntiexi Center, Tiexi District, Shenyang, Liaoning Province, People’s Republic of China, and our telephone number
is +86-02422598763. Our registered office in the Cayman Islands is located at 89 Nexus Way, Camana Bay, Grand Cayman KY1-9009,
Cayman Islands, and the phone number of our registered office is +1 (345) 949-9876. We maintain a corporate website at http://www.yzcmmedia.cn/.
Our website or any other website does not constitute a part of this annual report.



For information regarding our principal
capital expenditures, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”



Emerging Growth Company Status



We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we are eligible to take advantage of certain
exemptions from various reporting and financial disclosure requirements that are applicable to other public companies that are
not emerging growth companies, including, but not limited to, (1) presenting only two years of audited financial statements and
only two years of related management’s discussion and analysis of financial condition and results of operations in this annual
report, (2) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (3)
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (4) exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved. We intend to take advantage of these exemptions.



In addition, Section 107 of the JOBS Act
also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act, for complying with new or revised accounting standards. As a result, an emerging growth company can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies.



We could remain an emerging growth company
for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed
US$1.07 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange
Act, which would occur if the market value of our Ordinary Shares that is held by non-affiliates exceeds US$700 million as of the
last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months,
or (3) the date on which we have issued more than US$1 billion in non-convertible debt during the preceding three-year period.



Foreign Private Issuer Status



We are a foreign private issuer within
the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable to United States domestic
public companies. For example:



| | · | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;                                                                                                                                                   
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;                                                                                   
| | · | we are not required to provide the same level of disclosure on certain issues, such as executive compensation;                                                                                                                                                 
| | · | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;                                                                                                                          
| | · | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and                                                         
| | · | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.





25







B. Business Overview



Overview



We conduct substantially all of our business
through our VIE, LMG, and its subsidiaries, in China. We primarily conduct Multi-Channel Advertising Business, Event Planning and
Execution Business, Film Production Business, and Movie Theater Operating Business. Currently, our primary market is Heilongjiang
and Liaoning, covering major second-tier cities in the areas such as Harbin and Shenyang.



For the fiscal years ended June 30,
2019, 2018 and 2017, our revenues were primarily generated from our Multi-Channel Advertising Business and Event Planning and Execution
Business. The revenue derived from our Multi-Channel Advertising business accounted for 68%, 80% and 57% of our total revenue in
the fiscal years ended June 30, 2019, 2018 and 2017, respectively.



Our Multi-Channel Advertising Services
include advertising creation and production, pre-movie advertisements display, and advertising result evaluation. Typically, we
will sign an advertising service agreement with an advertising client to undertake the advertising campaign of the client. The
scope of service varies according to clients’ needs; it could be a full package of all the above services, or the combination
of the latter two services. The price of 15-second slots on our pre-movie advertising network currently ranges from US$3,810 to
US$5,276 based on the number of movie theaters in which the advertisement is placed, the length of the time slot purchased, as
well as the duration of the advertising campaign.



Our Event Planning and Execution Services
include planning and arrangement of events, and production of related advertising materials. After entering an event planning and
execution service agreement with a client, we will first decide on the suitable form for a marketing event. If it is an offline
event, we choose an event venue based on the target customers and budget, design and order exhibition models, decorate the venue,
and hold the event on the designated date. If it is an online event, our creatives come up with ideas and discuss them with our
client, our designers design a website based on the idea, and our background supporters make sure that the website is successfully
launched and maintained. Typical marketing events include brand promotion through elevator and in-store LED billboard advertisements
and potential customer information collection by offering incentives such as static display, performances, free movie tickets,
and VR experiences. Our fee for providing Event Planning and Execution Services for an event is negotiated with the client on a
case-by-case basis, depending on the scale and length of the event, the number of employees and independent contractors involved,
and the desired effect of the event.



Our Film Production Services include investment
in films and TV programs and their distribution in movie theaters or through online platforms. We did not generate any revenue
from our Film Production Business in the fiscal years ended June 30, 2017 and 2018. The only film or TV program we released
in those fiscal years was the web TV series “Meet Myself.” This web TV series debuted in April 2018, and
we started to receive from our distributor fees during the fiscal year ended June 30, 2019.



Our Movie Theater Operating Business includes
the investment in and running of movie theaters in China. On February 2, June 16, and September 17, 2019, we opened our first three
movie theaters in Shenyang, respectively. As of June 30, 2019, we had been operating two movie theaters in Shenyang. As of the
date of this annual report, we are operating three movie theaters in Shenyang with a total of 17 screens. The operating of our
own movie theaters will further enhance both our Multi-Channel Advertising Business and Film Production Business. In the fiscal
year ended June 30, 2019, we had total revenues of approximately US$341,575 generated from our Movie Theater Operating Business.



Contractual Arrangements between
WFOE and LMG



Neither we nor our subsidiaries own any
equity interest in LMG. Instead, we control and receive the economic benefits of LMG’s business operation through a series
of contractual arrangements. WFOE, LMG and its shareholders entered into a series of contractual arrangements, also known as VIE
Agreements, on October 15, 2018. The VIE agreements are designed to provide WFOE with the power, rights and obligations equivalent
in all material respects to those it would possess as the sole equity holder of LMG, including absolute control rights and the
rights to the assets, property and revenue of LMG.



According to the Exclusive Service Agreement,
LMG is obligated to pay service fees to WFOE approximately equal to the net income of LMG after deduction of the required PRC statutory
reserve.





26







Each of the VIE Agreements is described
in detail below:



Exclusive Service Agreement



Pursuant to the Exclusive Service Agreement
between LMG and WFOE, WFOE provides LMG with technical support, consulting services, intellectual services and other management
services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology,
human resources, and information. For services rendered to LMG by WFOE under the Exclusive Service Agreement, WFOE is entitled
to collect a service fee equal to the remaining amount of LMG’s profit before tax after deducting relevant costs and reasonable
expenses.



The term of the Exclusive Service Agreement
is 10 years unless terminated earlier by WFOE with 30-day prior notice. LMG does not have the right to terminate that agreement
unilaterally. The agreement would renew automatically by 10 years after expiration, with no limit on times of renewal.



The CEO of WFOE, Mr. Tao Jiang, is
currently managing LMG pursuant to the terms of the Exclusive Service Agreement. WFOE has absolute authority relating to the management
of LMG, including but not limited to decisions with regard to expenses, salary raises and bonuses, hiring, firing, and other operational
functions. The Exclusive Service Agreement does not prohibit related party transactions. Upon the establishment of the audit committee
at the consummation of the Company’s initial public offering, the audit committee will be required to review and approve
in advance any related party transactions, including transactions involving WFOE or LMG.



Equity Pledge Agreement



Under the Equity Pledge Agreement between
WFOE, and Mr. Bo Jiang, Mr. Tao Jiang, and Ms. Di Wang, together holding 100% of the shares of LMG (the “LMG
Shareholders”), the LMG Shareholders pledged all of their equity interests in LMG to WFOE to guarantee the performance of
LMG’s obligations under the Exclusive Service Agreement, Call Option Agreement and Shareholders’ Voting Rights Proxy
Agreement (collectively, the “Transaction Agreements”). Under the terms of the Equity Pledge Agreement, in the event
that LMG or the LMG Shareholders breach their respective contractual obligations under the Transaction Agreements, WFOE, as pledgee,
will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity
interests. The LMG Shareholders also agreed that upon occurrence of any event of default, as set forth in the Equity Pledge Agreement,
WFOE is entitled to dispose of the pledged equity interests in accordance with applicable PRC laws. The LMG Shareholders further
agreed not to dispose of the pledged equity interests or take any actions that would prejudice WFOE’s interest.



The Equity Pledge Agreement is effective
until the latest date of the following: (1) the secured debt in the scope of pledge is cleared off; (2) pledgees exercise
their pledge rights pursuant to provisions and conditions of the Equity Pledge Agreement; and (3) pledgors transfer all the
pledged equity interests to pledgees according to the Call Option Agreement, or other entity or individual designated by it.



The purposes of the Equity Pledge Agreement
are to (1) guarantee the performance of LMG’s obligations under the Transaction Agreements, (2) make sure the LMG
Shareholders do not transfer or assign the pledged equity interests, or create or allow any encumbrance that would prejudice WFOE’s
interests without WFOE’s prior written consent, and (3) provide WFOE control over LMG. In the event LMG breaches its
contractual obligations under the Transaction Agreements, WFOE will be entitled to foreclose on the LMG Shareholders’ equity
interests in LMG and may (1) exercise its option to purchase or designate third parties to purchase part or all of their equity
interests in LMG and in this situation, WFOE may terminate the Equity Pledge Agreement and the other VIE agreements after acquisition
of all equity interests in LMG or form a new VIE structure with the third parties designated by WFOE, or (2) dispose of the
pledged equity interests and be paid in priority out of proceeds from the disposal in which case the existing VIE structure will
be terminated.



On February 22, 2019, the LMG shareholders
pledged all of their equity interests in LMG to WFOE and completed the registration process.



Call Option Agreement



Under the Call Option Agreement, the LMG
Shareholders irrevocably granted WFOE (or its designee) an exclusive option to purchase, to the extent permitted under PRC law,
once or at multiple times, at any time, part or all of their equity interests in LMG or the assets of LMG. The option price is
the minimum amount to the extent permitted under PRC law.



Under the Call Option Agreement, WFOE may
at any time under any circumstances, purchase, or have its designee purchase, at its discretion, to the extent permitted under
PRC law, all or part of the LMG Shareholders’ equity interests in LMG or the assets of LMG. The Call Option Agreement, together
with the Equity Pledge Agreement, the Exclusive Service Agreement, and the Shareholders’ Voting Rights Proxy Agreement and
Powers of Attorney, enable WFOE to exercise effective control over LMG.



27







The Call Option Agreement remains effective
until all the equity or assets of LMG is legally transferred under the name of WFOE and/or other entity or individual designated
by it.



Shareholders’ Voting Rights
Proxy Agreement and Powers of Attorney



Under the Shareholders’ Voting Rights
Proxy Agreement and each of the Powers of Attorney, the LMG Shareholders authorized WFOE to act on their behalf as their exclusive
agent and attorney with respect to all rights as shareholders, including but not limited to: (a) attending shareholders’
meetings; (b) exercising all the shareholder’s rights, including voting, that shareholders are entitled to under the
laws of China and the Articles of Association, including but not limited to the sale or transfer or pledge or disposition of shares
in part or in whole; and (c) designating and appointing on behalf of shareholders the legal representative, the executive
director, supervisor, the chief executive officer, and other senior management members of LMG.



The term of the Shareholders’ Voting
Rights Proxy Agreement and each of the Powers of Attorney is the same as the term of the Call Option Agreement. The Powers of Attorney
is irrevocable and continuously valid from the date of execution of the Powers of Attorney, so long as the LMG Shareholders are
shareholders of LMG.



Spousal Consent



Ms. Wei Tang, the spouse of Mr. Bo
Jiang, a shareholder of LMG, agreed, via a spousal consent, to the execution of the “Transaction Documents” including:
(a) Call Option Agreement entered into with WFOE and LMG; (b) Shareholders’ Voting Rights Proxy Agreement entered
into with WFOE and LMG; (c) Equity Pledge Agreement entered into with WFOE; and (d) Powers of Attorney executed by Mr. Bo
Jiang, and the disposal of the equity interests of LMG held by Mr. Bo Jiang and registered in his name.



Ms. Wei Tang further undertakes not
to make any assertions in connection with the equity interests of LMG which are held by Mr. Bo Jiang. She confirms that Mr. Bo
Jiang can perform, amend, or terminate the Transaction Documents without her authorization or consent. She undertakes to execute
all necessary documents and take all necessary actions to ensure appropriate performance of the agreements.



Ms. Wei Tang also undertakes that
if she obtains any equity interest of LMG which are held by Mr. Bo Jiang for any reasons, she shall be bound by the Transaction
Documents and the Exclusive Service Agreement entered into between WFOE and LMG (as amended time to time) and comply with the obligations
thereunder as a shareholder of LMG. For this purpose, upon WFOE’s request, she shall sign a series of written documents in
substantially the same format and content as the Transaction Documents and Exclusive Service Agreement (as amended from time to
time).



Competitive Strengths



We believe that the following competitive
strengths differentiate us from our competitors:



Largest Pre-Movie Advertising Network
in Heilongjiang and Liaoning



Our pre-movie advertising network delivers
to a mostly young and affluent audience that we believe allows for effective targeting of marketing messages and measurable results,
yielding a superior return on investment for advertising clients as compared to many traditional platforms. As a result, we are
able to compete effectively for marketing spending by advertising clients and have developed relationships with a diversified group
of local, regional, national, and international advertising brands and agencies throughout China.



We currently, directly or through our regional
distributors, operate the largest pre-movie advertising network in Heilongjiang and Liaoning that consists of over 605 film screens
in 75 movie theaters in 16 cities in Heilongjiang and Liaoning. As of September 30, 2019, we occupied approximately 82% of the
market share of the pre-movie advertising market in Heilongjiang and Liaoning. Our advertising programs account for over 20% of
the total length of the advertising programs played on these film screens, including pre-movie local advertisements, pre-movie
national advertisements, pre-roll advertisements, and public interest advertisements of the movie theaters.



We believe the established scale of
our pre-movie advertising network provides our advertising clients with more choices in selecting and combining different
movie theaters, cinema operators and locations that are tailored to the needs of their advertising campaigns. The large scale
and attractive viewer demographic of our pre-movie advertising network provides us with a competitive advantage over other
competing advertising network in Heilongjiang and Liaoning.





28







Our broad geographic network efficiently
covers mainstream consumers with an age between 25 and 45 years old, especially young people who frequent movie theaters.
According to Frost & Sullivan, typical filmgoers are young, affluent and well-educated. We believe that this demographic is
highly sought after by advertising clients and difficult to reach effectively using traditional media platforms. According to the
data of CTR Market Research, during 2017 and the first quarter of 2018, the increase rate of advertising spending in the movie
theaters was the highest among all types of media platforms.



We believe that pre-movie advertising benefits
from the visual quality and impact of the “big screen” and digital surround sound presented in a distraction-free environment.
According to industry studies provided by CTR Market Research, pre-movie advertising is one of the most effective marketing methods,
five to six times more effective than advertising through television in terms of unaided recall rates. Pre-Movie advertising is
one of the few media platforms that the viewer does not have the ability to skip or turn off.



Advertising Service Agreements and Established
Relationships with Major Movie Theater Operators



Advertising service agreements are critical
for our Multi-Channel Advertising Business. There is a limited number of large movie theaters in China and film screens where advertisements
can be placed are also limited. We have entered into advertising service agreements with Wanda Cinemas, the largest cinema chain
in China, and with Focus Film. All of our advertising service agreements provide us with certain exclusivity rights; we have obtained
the exclusive right to place our pre-movie local advertisements on the film screens in 42 movie theaters operated by Wanda Cinemas
in Heilongjiang and Liaoning and 33 movie theaters operated by Focus Film in Liaoning. We believe our large number of advertising
service agreements and the strong relationships with major movie theater operators enable us to strengthen our leading position
in the pre-movie advertising market in Heilongjiang and Liaoning.



Highly Recognized Brand Name with a
Large Base of Advertising Clients



We have built a highly recognized brand
name in Northeast China by developing a reputation for consistently and effectively delivering large-scale yet focused, high-quality
cinema digital media content. Our success in maintaining and enhancing our brand and image is demonstrated by our numerous awards,
including winning the Great Wall Award of the 25th China International Advertising Festival in October 2018 and becoming one
of the “Belt and Road Initiative SME Cooperation Key Project Promotion” enterprises on November 27, 2017, according
to a certificate issued by the 25th China International Advertising Festival and a certificate issued by China Association
for Small & Medium Commercial Enterprises, respectively. Our brand name and reputation have enabled us to develop and retain
a strong advertising client base and our programs include advertisements for international and domestic brand name companies. Since
commencing operations on November 19, 2013, to June 30, 2019, a total of 433 advertising clients, including many companies
in the Fortune Global 500, have purchased advertising time slots on our network, of which 269 are returning clients who purchased
advertising time slots more than once. Our top advertising clients for the fiscal years ended June 30, 2017, 2018 and
2019 included Liaoning Lottery Ticket Center, Shenyang Zhonghai Haijia Real Estate Development Co.,
Ltd., Shenzhen Xiangjiang Business Management Co., Ltd. (Shenyang), Postal Savings Bank of China Shenyang Branch Office, Postal
Savings Bank of China (Liaoning), China Construction Bank (Liaoning), Agricultural Bank of China (Liaoning), and Shenyang Zhonghai
Xinhaihui Real Estate Co., Ltd. Our advertising clients also included China Unicom (Liaoning), Bank of China (Liaoning),
Agricultural Bank of China (Liaoning), China Construction Bank (Liaoning), and China Mobile (Liaoning).



Strong Management and Sales Team with
Extensive Industry Experience



Our management team has significant experience
in advertising sales and marketing, movie theater operations, digital network design and operations, and finance. Our senior management
has many years of experience in their respective areas of expertise. Our marketing managers have an average of five years
of experience in the advertising industry in China and have worked for a number of major domestic and international advertising
firms in China. We believe that our management and sales team will be able to effectively grow our business through continued operating
improvement and expansion of our products and services.



Integration of Film and TV Industry



We work with market-leading film distributors
and online entertainment services in China to invest and distribute films and TV programs. The web TV series “Meet Myself”
we invested in generated over 14 million video clicks within four weeks of its release on iQIYI, an online entertainment service
in China, in April 2018. Our fast-developing film and TV investment and distribution business will provide us with another
driving force in our profits and distinguishes us with other advertising companies that rely solely on their advertising businesses.



29







Growth Strategies



Our goal is to become one of China’s
leading film industry multimedia service providers, and with geographical coverage in major first-tier and second-tier cities on
the eastern seaboard and in the central area of China. Accomplishing this goal requires the successful implementation of the following
strategies:



Expand the Geographic Coverage and Reach
of Our Multi-Channel Advertising Network



We intend to expand the geographic coverage
and reach of our multi-channel advertising network by connecting additional movie theaters and other advertising resources to our
network. Currently, our pre-movie advertising network covers 16 cities in the two provinces of Heilongjiang and Liaoning. We plan
to expand our network into eight provinces on the eastern seaboard and in the central area of China during the next three years,
to cover a total of 120 cities, including first-tier cities such as Hangzhou, Jinan, Nanjing, Qingdao, and Wuhan. In addition,
after the completion of our proposed initial public offering on the Nasdaq Capital Market, we may take advantage of the newly established
platform and purchase pre-movie and outdoor advertising resources in the U.S.



Continue to Promote Our Brand Name and
the Value of Pre-Movie Advertising



We will continue to promote our brand name
through proactive sale and marketing efforts. We believe this will allow us to broaden our client base as well as strengthen our
relationships with cinema operators, advertising agencies and content providers. We will also take initiatives to highlight the
value of pre-movie advertising relative to other media. We will continue to utilize research tools that enable our clients to better
understand how our network can successfully reach their target audiences and promote their advertising campaigns. As a result,
we intend to increase the number of our advertising clients from 433 now to a significantly larger number.



Increase the Investment in Film and
TV Program Production



We plan to increase our investment in the
Film Production Business and produce in at least one TV series and two films every year. Since the successful release of the web
TV series “Meet Myself” in April 2018, we have been considering the investment of the second season; we have also invested
in the film “The Master-Hand,” which was filmed in 2018 and is planned to be released in February 2020. We will continue
to work with both movie theaters and online platforms to increase our effort in the advertising and distribution of films and TV
programs. Some of the companies we currently work with are Wanda Cinemas, Enlight Media, Emperor Entertainment Group, and iQIYI.
Our cooperation with both channels provides our clients with more options when distributing their films and TV programs. In addition,
we intend to purchase high-quality Chinese and international TV programs and films with a focus on U.S. animations, and work with
Broadway producers to introduce more Broadway shows to the Chinese audience.



Purchase and Operate Movie Theaters



We plan to invest in or build 50 movie
theaters in China through strategic relationships and acquisitions in the next three years. These movie theaters will be located
in first-tier and second-tier cities in China, such as Changchun, Hangzhou, Harbin, Qingdao, Shenyang, and Wuhan. As we look for
suitable places for our planned movie theaters, we have assumed a lease agreement with Shenyang Parkson Shopping Plaza Co., Ltd.
and entered into another lease agreement with Zhongyao Real Estate Development (Shenyang) Co., Ltd. On February 2, June 16, and
September 17, 2019, we opened our first three movie theaters in Shenyang, respectively. We are also in the process of renovating
the space for our fourth movie theater and we are hopeful that they should be open in the coming months. The operating of
our own movie theaters will further enhance both our Multi-Channel Advertising Business and Film Production Business.



Our Multi-Channel Advertising Business



Business Relationship with Wanda Cinemas
and Focus Film



We have been the exclusive provider of
pre-movie local advertising in 22 movie theaters of Wanda Cinemas in Liaoning since January 1, 2017, pursuant to an advertising
services agreement entered into with Wanda Cinemas on November 9, 2016, and supplemental agreements entered into on August 1,
2017, and November 30, 2017. We have extended the service period to December 30, 2020, and increased the number of movie
theaters where we are the exclusive provider of pre-movie local advertising to 27 pursuant to an advertising services agreement
entered into with Wanda Cinemas on November 12, 2018.





30







Key provisions of the agreements for years
2017 to 2020 include:



| | · | a service period from January 1,
2017, to December 30, 2020;
| | - | ------------------------------------------------------------

| | · | a priority for contract extension under
the same conditions when the agreements expire;
| | - | ---------------------------------------------------------------------------------------

| | · | exclusive rights to provide two-minute
pre-movie local advertising in the movie theaters of Wanda Cinemas in Liaoning subject to Wanda Cinemas’ rights to do the
following on a limited basis: display pre-movie national advertisements and pre-roll advertisements on film screens; set the minimum
pre-movie local advertisement prices in the movie theaters; regulate the content and quality of pre-movie local advertisements
according to related laws and movie theater rules; examine the source of pre-movie local advertisements and refuse to display advertisements
from competitors of Wanda Cinemas;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | rights to provide one-minute advertising
on both the static and the spliced LCD screens in the movie theaters of Wanda Cinemas in Liaoning; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------

| | · | installment payments of movie theater
access fees to Wanda Cinemas.
| | - | -------------------------------------------------------------------



We have been the exclusive provider of
pre-movie local advertising in 14 movie theaters of Wanda Cinemas in Heilongjiang since December 27, 2017, pursuant to an
advertising services agreement entered into with Wanda Cinemas on November 27, 2017. We have extended the service period to
December 30, 2020, and increased the number of movie theaters where we are the exclusive provider of pre-movie local advertising
to 15 pursuant to an advertising services agreement entered into with Wanda Cinemas on November 12, 2018.



Key provisions of the agreement for the years
2018 to 2020 include:



| | · | a service period from December 27,
2017, to December 30, 2020;
| | - | --------------------------------------------------------------

| | · | a priority for contract extension under
the same conditions when the agreement expires;
| | - | ---------------------------------------------------------------------------------------

| | · | exclusive rights to provide two-minute
pre-movie local advertising in the movie theaters of Wanda Cinemas in Heilongjiang subject to Wanda Cinemas’ rights to do
the following on a limited basis: display pre-movie national advertisements and pre-roll advertisements on film screens; set the
minimum pre-movie local advertisement prices in the movie theaters; regulate the content and quality of pre-movie local advertisements
according to related laws and movie theater rules; examine the source of pre-movie local advertisements and refuse to display advertisements
from competitors of Wanda Cinemas;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | rights to provide one-minute advertising
on both the static and the spliced LCD screens in the movie theaters of Wanda Cinemas in Heilongjiang; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | · | installment payments of a movie theater
access fee to Wanda Cinemas.
| | - | --------------------------------------------------------------------



Since September 1, 2018, we have also
been the exclusive provider of pre-movie local advertising in 33 movie theaters of Focus Film in the five cities of Shenyang, Dalian,
Fushun, Yingkou, and Panjin in Liaoning, pursuant to an advertising services agreement entered into with Focus Film on August 10,
2018, and its supplemental agreements.



Key provisions of the agreements include:



| | · | a service period from September 1,
2018, to December 31, 2019;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | exclusive rights to provide pre-movie
local advertising in the movie theaters of Focus Film subject to Focus Film’s rights to do the following on a limited basis:
display pre-movie national advertisements and pre-roll advertisements on film screens; set the minimum pre-movie local advertisement
prices in the movie theaters; regulate the content and quality of pre-movie local advertisements according to related laws and
movie theater rules; examine the source of pre-movie local advertisements and refuse to display advertisements from competitors
of Focus Film;

| | · | a promise to provide pre-movie local advertising
services for additional movie theaters of Focus Film in the five cities upon notice in the future; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | installment payments of a movie theater
access fee to Focus Film.                                                                                      



Business Relationship with Our Regional
Distributors



As of June 30, 2019, we had
entered into advertising services distribution agreements with nine regional distributors in Liaoning and two regional
distributor in Heilongjiang. Pursuant to the advertising services distribution agreements, we granted the regional
distributors the exclusive rights to provide pre-movie local advertising in 33 movie theaters in seven cities of Liaoning and
15 movie theaters in six cities of Heilongjiang. Our advertising services distribution agreements with our regional
distributors have terms ranging from 11 to 24 months without automatic renewal provisions. We have the rights under the
advertising services distribution agreements to set the minimum pre-movie local advertisement prices in the movie theaters,
regulate the content and quality of pre-movie local advertisements according to related laws and movie theater rules, and
examine the source of pre-movie local advertisements and refuse to display advertisements from our competitors.





31







Each of our regional distributors operates
independently from us and is responsible for independently complying with all relevant PRC laws and regulations including those
related to advertising. We periodically monitor our regional distributors to ensure that they have obtained all required licenses
and are complying with regulations relating to advertising content. See “Item 3. Key Information — D. Risk Factors — Risks
Related to Our business — One or more of our regional distributors could engage in activities
that are harmful to our reputation in the industry and to our business.”



Elevator and Supermarket Advertising



We provide tailored advertising programs
in supermarkets for international and domestic brands and help them expand in the market of Liaoning. From September 1, 2016, to
August 31, 2018, we also provided advertising services in 50,000 elevators in Liaoning. The revenue from these services accounted
for 7%, 5% and 1.5% of our revenue for the fiscal years ended June 30, 2017, 2018, and 2019, respectively. Our long-term
clients include Heilongjiang Red Star Group Food Co., Ltd., Ningbo FOTILE Kitchen Ware Co., Ltd., and China Overseas Land and Investment
Limited. We work with supermarket companies such as CR Vanguard, Tesco, and Carrefour to advertise our clients’ products
directly in their supermarkets in Liaoning. The “last-meter” advertisements connect the brands with consumers and greatly
boost sales of our clients.



Multi-Channel Advertising Clients



Advertising clients purchase advertising
slots on our advertising network directly and negotiate the terms of the advertising purchase agreements directly with us. Our
top advertising clients for fiscal year ended June 30, 2017 included Shenyang Zhongchen Huatong Lexus Automobile Service Co.,
Ltd., Shenzhen Xiangjiang Business Management Co., Ltd. (Shenyang), Shenyang GOME Electrical Appliances Co., Ltd., Ningbo FOTILE
Sales and Marketing Co., Ltd., and Shenyang Jinlang Lexus Automobile Sales and Service Co., Ltd., which collectively accounted
for 15% of our revenue for the fiscal year ended June 30, 2017. Our top advertising clients for fiscal year ended June 30,
2018 included Shenyang Zhongchen Huatong Lexus Automobile Service Co., Ltd., Liaoning CoolPaul Culture and Media Co. Ltd., Ningbo
FOTILE Sales and Marketing Co., Ltd., Shenzhen Xiangjiang Business Management Co., Ltd. (Shenyang), and Heilongjiang Yingri Media
and Culture Communication Co. Ltd., which collectively accounted for 24% of our revenue for the fiscal year ended June 30,
2018. Our top advertising clients for fiscal year ended June 30, 2019 included Liaoning Lottery Ticket
Center, Shenzhen Xiangjiang Business Management Co., Ltd. (Shenyang), Postal Savings Bank of China Shenyang Branch Office, Agricultural
Bank of China (Liaoning), and China Construction Bank (Liaoning), which collectively accounted for 9.96% of our revenue
for the fiscal year ended June 30, 2019.



Our advertising business
has a diverse customer base, consisting of national, regional and local advertising clients. We have business relationships with
many national advertising clients across a wide variety of industries, such as automobile, appliance, and financial industry. For
the fiscal year ended June 30, 2019, the top three industries which advertise on our network were financial industry, welfare lottery,
and real estate based on the revenues derived from companies in these industries. Advertising for financial industry, welfare lottery,
and real estate, accounted for approximately 10.34%, 6.91%, and 3.33% of our revenues for the fiscal year ended June 30, 2019.



From the commencement of
our operations on November 19, 2013, to June 30, 2019, a total of 433 advertising clients have purchased advertising time slots
on our network, including leading international brand name advertising clients Toyota, Lexus, GOME, and FOTILE. The total number
of our advertising clients increased from 287 for the fiscal year ended June 30, 2018, to 433 for the fiscal year ended June 30,
2019.



Sales and Marketing



We provide a number of
services in connection with each client’s advertising campaign. We rely on our experienced sales team to assist advertising
clients in structuring advertising campaigns by analyzing advertising clients’ target audiences and consumer products and
services.



Our experiences
advertising sales team consists of eight people and is organized by region and city with presence in two provinces,
Heilongjiang and Liaoning. Our regional marketing manager of Heilongjiang has over two years of work experience in Toutiao,
one of China’s largest mobile platforms, and our regional marketing manager of Liaoning has over five years of work
experience in Sina Corp. (Liaoning). The members of our current sales team have an average of three years of sales experience
in the advertising industry. We provide in-house education and training to our sales team to ensure they provide our current
and prospective clients with comprehensive information about our services, the advantages of using our pre-movie
advertising network as a marketing channel, and relevant information regarding the advertising industry. Our
performance-linked compensation structure and career-oriented training are key drivers that motivate our sales
employees.





32







We provide a number of
services in connection with each client’s advertising campaign following the sales process. Our network operations team monitors
the advertisements played in our network on a daily basis and receives detailed data from ticketing companies, such as Mtime and
Maoyan. They are also responsible for compiling brief reports that are supplied to clients on the first and last day of advertisement
display as evidence of the broadcast of their advertisements on our network. The brief reports generally include a list of movie
theaters where the advertisements of clients were displayed as well as photographs and videos of representative film screens showing
their advertisements being displayed. A more detailed report is supplied to clients seven business days following the last day
of the advertisement display, after we conduct on-site evaluations and polls to analyze the effectiveness of and public reaction
to the advertisement.



We believe our advertising
clients derive substantial value from our ability to provide advertising services targeted at segments of consumer markets. Market
research is an important part of evaluating the effectiveness and value of our business to advertising clients. We conduct market
research, consumer surveys, demographic analysis, and other advertising industry research for internal use to evaluate new and
existing advertising channels. We also receive annual research reports containing relevant market study data from CTR Market Research.
We typically consult such studies to assist us in evaluating the effectiveness of our network to our advertising clients and to
illustrate to our clients our ability to reach targeted demographic groups effectively. A number of these studies contain research
on the numbers and socio-economic and demographic profiles of the people who visit the locations of our network.



Brand Promotion



Locating and attracting
potential advertising clients is crucial to our Multi-Channel Advertising Business. During the fiscal years ended June 30, 2018
and 2019, we spent about US$19,766 and US$2,903 on the promotion of our brand, respectively. We actively attend various public
relation events to promote our brand image and the value of pre-movie advertising. We market our advertising services by displaying
our name and logo and playing short videos about our company on all of our film screens. We also market our brand through:



·       referrals
from advertising clients who use our Multi-Channel Advertising Service;

·       social
media, principally Weibo, Toutiao, NetEase, and WeChat;

·       advertisements
on outdoor billboard or through radio broadcasts;

·       newsletters
to our potential advertising clients; and

·       business
relationships with well-known corporations and online platforms.



Pre-Movie Advertising
Programs



Our pre-movie advertising
program plays before a movie for about two minutes once per movie. We compile each program from advertisements of five-, 15-, or
30-seconds in length provided by advertising clients to us. Substantially all of the content on our pre-movie advertising network
consists of audiovisual advertising provided to us by our advertising clients. We also produce or create a small portion of the
advertising content shown on our network based on materials provided by our advertising clients and according to their requests.
Our programming team edits, compiles and records into digital format all of our network programs. All of the advertising content
displayed on the portion of the network we operate directly is reviewed by qualified members of our staff in the local branch and
our headquarters to ensure compliance with PRC laws and regulations. See “Item 4. Information on the Company — B. Business
Overview — PRC Regulations — Regulations on Advertising Content.” We update advertising content for our pre-movie
advertising programs played on the film screens on a weekly or biweekly basis.



Pricing



The prices for using our
advertising slots vary by the number of movie theaters in which the advertisement is placed, the length of the time slot purchased,
as well as the duration of the advertising campaign. We review and adjust the prices of our advertising slots periodically, charging
higher prices during Chinese New Year and the summer period, when the demand for advertising slots is stronger.





33







Our Event Planning and Execution
Business



We provide Event Planning and Execution
Services to our clients in Heilongjiang and Liaoning. The revenue from Event Planning and Execution Services was US$1,642,203,
US$1,032,195, and US$2,604,892 for the fiscal years ended June 30, 2017, 2018, and 2019, respectively, which accounted
for 43%, 20%, and 22% of our total revenue for the fiscal years ended June 30, 2017, 2018, and 2019, respectively.



In the fiscal year ended June 30, 2018,
we derived substantially all of Event Planning and Execution Services revenue from the services provided to a single client, Renhe,
a limited liability company incorporated in 2004 under PRC law and located in Beijing, China. Renhe is an advertising agency with
strategic cooperation relationship with FAW Toyota Motor Sales Co., Ltd. (“FTMS”). It offers brand promotion and public
relationship services and organizes auto shows for FTMS. In the fiscal year ended June 30, 2019, we
increased the number of event planning and execution clients to 12, although Renhe remained our largest event planning and execution
client and contributed 15% of our total revenue during that period.



We are usually hired by our clients to
design and organize both online and offline marketing events for their products. For a particular product, we first decide on the
suitable form for a marketing event according to the market position and sales projection of the product. If it is an offline event,
we choose an event venue based on the target customers and budget, design and order exhibition models, decorate the venue, and
hold the event on the designated date. If it is online event, our creatives come up with ideas and discuss them with our client,
our designers design a website based on the idea, and our background supporters make sure that the website is successfully launched
and maintained. Typical marketing events include brand promotion through elevator and in-store LED billboard advertisements and
potential customer information collection by offering incentives such as static display, performance, free movie tickets, and VR
experiences.



Our fee for providing Event Planning and
Execution Services for an event is negotiated with the client on a case-by-case basis, depending on the scale and length of the
event, the number of employee and independent contractor involved, and the desired effect of the event.



As of the date of this annual report, we
have four employees dedicated to Event Planning and Execution Services, including one creative, two graphic designers, and one
3D visual designer. An offline event typically requires the participation of about 10 to 20 employees and 15 to 20 independent
contractors depending on the size of the event, and an online event typically requires the participation of six employees.



Our Film Production Business



We started to invest in films and TV programs
and distribute them in movie theaters or through online platforms in May 2017. We invested US$181,770 in the web TV series
 “Meet Myself,” which was distributed together with Beijing Xiyuan International Culture and Media Co., Ltd. and released
in April 2018 through iQIYI, a market-leading online entertainment service platform in China. The web TV series was recommended
by iQIYI on its home page and received over 14 million video clicks within four weeks of its release. Additionally, as of
June 30, 2019, we had invested US$323,725 in the film “The Master-Hand,” which was filmed in 2018 and is planned
to be released in February 2020.



There was no revenue from the Film Production
Business during the fiscal years ended June 30, 2017, and June 30, 2018. During the fiscal year ended June 30, 2019,
we generated revenue of approximately US$775,080 from the Film Production Business. The only film or TV program we released in
those periods was the web TV series “Meet Myself.” This web TV series debuted in April 2018, and we received apportioned
fees from our distributor during the fiscal year ended June 30, 2019.



Our Movie Theater Operating Business



We opened our first movie theater in Shenyang
in February 2019. Even though we are new to the business of movie theater operation, the expansion of this business area has been
rapid since it was our emphasis during the fiscal year ended June 30, 2019. As of June 30, 2019, we owned and operated two movie
theaters in Shenyang with a total of11 film screens, and we opened a third movie theater with six film screens in Shenyang in September
2019. We have entered Theater Chain Agreements with Liaoning North Cinema Line Co., Ltd., pursuant to which we agreed to join its
theater chain and Liaoning North Cinema Line Co., Ltd. agreed to provide each of our movie theaters approximately 300 new films
and certain number of old firms each year for a period of eight years.



Our theaters are predominately located
in metropolitan areas, which we believe offers our theaters operational advantages. We offer consumers a fully immersive out-of-home
entertainment experience by featuring a wide selection of popular movies, throughout the day at different price points. This broad
entertainment options appeals to consumers across different age and gender. In the fiscal year ended June 30, 2019, approximately
92,783 consumers had attended our theaters.





34







During the fiscal year ended June 30, 2019,
we generated revenues of approximately US$341,575 from the Movie Theater Operating Business. As of June 30, 2019, we had nine employees
dedicated to Movie Theater Operating Business. We plan to continue invest in our theaters and upgrading the consumer experience,
including (1) providing better quality equipment and services, (2) providing a wider selection of food and beverages, and (3) introducing
loyalty program.



Competition



Our Multi-Channel Advertising Business
and Event Planning and Execution Business compete primarily with several different groups of competitors:



| | · | advertising companies that operate pre-movie advertising networks, and out-of-home digital advertising
networks beyond the film sector;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | · | in-house advertising companies of cinemas that may operate their own advertising networks; and
| | - | ----------------------------------------------------------------------------------------------

| | · | other advertising media companies, such as Internet, street furniture displays, billboards and
public transport advertising companies, and with traditional advertising media, such as newspapers, TV, magazines and radio, some
of which may advertise near the cinemas in which we have exclusive contract rights to operate pre-movie advertising.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We compete for advertising clients primarily
on the basis of network size and coverage, location, price, quality of our programs, and the range of services that we offer and
our brand recognition. In the advertising market, our main competitors include Focus Media Holding Ltd., JCDecaux, and VisionChina
Media Inc., all of which operate in multiple cities in China. In addition, we compete with local advertising providers in each
geographic market where we have a presence. Our major competitor in the Heilongjiang market is Harbin Zhuri Media Co., Ltd. Our
major competitors in the Liaoning market are Shenyang Focus Media Co., Ltd. and Shenyang Xinliaoguang Advertisement Co., Ltd.



Inside the pre-movie advertising market
of Heilongjiang and Liaoning, we believe that we currently do not have any credible competitors because as of September 30, 2019,
we occupied 82% of the market share in the pre-movie advertising market in Heilongjiang and Liaoning. Companies that offer Multi-Channel
Advertising Services in Northeast China include Harbin Zhuri Media Co., Ltd. and Jilin Xinzhan Media Co., Ltd.



Although we currently do not operate our
Multi-Channel Advertising Business outside Heilongjiang and Liaoning, we plan to expand it to cover major cities in eight provinces
on the eastern seaboard and in the central area of China. In the pre-movie advertising markets outside Heilongjiang and Liaoning,
our potential competitors include Shanghai Jingmao Culture Communication Co., Ltd., and Wanda Media Co., Ltd. Many competitors
have a longer history than us in the pre-movie advertising industry and may have a more extensive network that extends beyond the
film sector and offers a more diversified portfolio. This may make their networks more attractive to advertising clients and less
reliant on a particular advertising sector. In addition, we may also face competition from new entrants into the pre-movie advertising
sector in the future.



Our Film Production Business competes with
other investors and distributors of films and TV programs, internet media and entertainment services, as well as major TV stations.



Our Movie Theater Operating Business competes
with national movie circuits, regional circuits, or smaller independent exhibitors. Our main competitors include Wanda Cinemas,
Dadi Cinemas, Jingyi Cinemas, and CGV Cinemas, all of which have significant presence in Shenyang, the major areas in which we
operate our movie theaters. Although we currently do not operate our movie theaters outside Shenyang, we plan to build new theaters
in cities in Northeast China, such as Dalian, Harbin and Anshan. In those markets, our potential competitors include Wanda Cinemas,
Dadi Cinemas, Jingyi Cinemas, and CGV Cinemas. Many competitors have a longer history than us in the movie theater operating business.
Potential customers’ familiarity with their theater brand may make their theaters more attractive to moviegoers. In addition,
we may also face competition from new entrants into the movie theater operating business in the future. Further, the theatrical
exhibition industry faces competition from other forms of entertainment such as concerts, amusement parks and sports events, and
from other channels for filmed entertainment, such as DVDs, online streaming, and home video systems.



Employees



Please refer to “Item 6. Directors, Senior Management
and Employees—D. Employees.”



Seasonality



Revenues generated by our Movie Theater
Operating Business are dependent upon the timing of movie releases by theater chain companies. The most marketable movies are usually
released during the summer, the year-end holiday seasons and other holidays. Therefore, our business is seasonal, with higher attendance
and revenues generally occurring during the summer months and holiday seasons.





35







Legal Proceedings



We are not currently a party to any litigation
or legal proceeding the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected
to have a material adverse effect on our business, operating results, cash flows or financial condition.



Tax



LMG and WFOE, as PRC entities, are subject
to enterprise income tax (“EIT”) according to applicable PRC tax rules and regulations.



PRC enterprises are required to prepay
the EIT on a monthly or quarterly basis and to file provisional EIT returns with the tax authorities within 15 days of the end
of each quarter based on actual monthly or quarterly profits. Enterprises that have difficulty in paying monthly or quarterly tax
based on actual monthly or quarterly profits may make payments based on the monthly or quarterly average taxable income in the
preceding calendar year, or by any other methods approved by the relevant tax authorities. LMG and WFOE, have filed all quarterly
EIT returns based on actual quarterly profits since inception.



Yuezhong Media HK, a Hong Kong entity,
is subject to a 16.5% tax rate according to Hong Kong tax rules and regulations for any revenues it may generate.



Facilities and Intellectual Property



For details of our facilities, please refer
to “Item 4. Information on the Company—D. Property, Plants and Equipment.”



The Company is currently in the process
of registering the “Leaping Media Group” trademark. The Company owns the copyright of its logo, the web TV series “Meet
Myself,” and the film “The Master-Hand,” and the internet domain names “yzcmmedia.cn” and “yzcmmedia.com.”



PRC Regulations



We operate our business in China under
a legal regime consisting of the National People’s Congress, which is the country’s highest legislative body, the State
Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies
under its authority. This section summarizes the principal PRC regulations applicable to our business.



Regulation on Advertising Services



The Standing Committee of the National
People’s Congress, enacted the Advertising Law of the People’s Republic of China, or the Advertising Law,
on October 27, 1994, and revised it on October 26, 2018. As the most important law aimed at regulating the advertising service
industry, the Advertising Law sets the code of conduct for enterprise providing advertising services in China. The Advertising
Law stipulates in detail the content, forms for distribution, productions and areas prohibited from advertising, as well as penalties
and liabilities for violating the Advertising Law.



Regulation on Foreign Direct Investment in Advertising
Companies



According to the Provisions
on Guiding the Orientation of Foreign Investment (Order No. 346 of the State Council), which were promulgated by the
State Council of the PRC on February 11, 2002, and came into effect on April 1, 2002, projects with foreign investment
are divided into four categories, namely, encouraged, permitted, restricted and prohibited. The encouraged, permitted,
restricted and prohibited projects with foreign investment are listed in the Catalogue of Industries for Guiding
Foreign Investment (2017 version), or the Catalogue, which was jointly amended by the NDRC and the MOFCOM, on
June 28, 2017, and came into effect on July 28, 2017, and the 2019 Negative List, which came into effect on
July 30, 2019. According to the Catalogue and the 2019 Negative List, advertising service is a permitted industry. Since
foreign investors have been permitted to directly own 100% interest in advertising companies in China, we would not be
subject to access restrictions for operations in advertising industry as required by the Chinese government. We are not
required to apply to the MOFCOM for special approval for our operations. We are permitted to acquire the equity interests of
our VIE under the rules allowing for whole foreign ownership.





36







Regulations on Business License for Advertising Companies



The State Council promulgated the Regulations
on Control of Advertisement, on October 26, 1987, according to which a company that wishes to engage in advertising activities
must obtain from the State Administration for Industry and Commerce, or the SAIC, or its local branches, a business license which
specifically includes advertising within its scope. Companies conducting advertising activities without such a license may be subject
to penalties, including fines, confiscation of advertising income and orders to cease advertising operations. The business license
of an advertising company is valid for the duration of its existence, unless the license is suspended or revoked due to a violation
of any relevant law or regulation. We do not expect to encounter any difficulties in maintaining our business licenses. LMG, our
VIE, has obtained such a business license from the local branches of the SAIC as required by existing PRC regulations.



Regulations on Advertising Content



The Advertising Law sets forth certain
content requirements for advertisements in China, which include prohibitions on, among other things, misleading content, superlative
wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement
of the public interest. Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are also prohibited. The dissemination
of tobacco advertisements via media is also prohibited as well as the display of tobacco advertisements in any waiting lounge,
theater, cinema, conference hall, stadium or other public area. There are also specific restrictions and requirements regarding
advertisements that relate to matters such as patented products or processes, pharmaceuticals, medical instruments, agrochemical,
foodstuff, alcohol and cosmetics. In addition, all advertisements relating to pharmaceuticals, medical instruments, agrochemical
and veterinary pharmaceuticals advertised through radio, film, television, newspaper, magazine, out-of-home and other forms of
media, together with any other advertisements which are subject to censorship by administrative authorities according to relevant
laws and administrative regulations, must be submitted to the relevant administrative authorities for content approval prior to
dissemination.



Regulations on Production and Operation of Radio/Television
Programs



On July 19, 2004, the SAPPRFT promulgated
the Administrative Measures on the Production and Operation of Radio and Television Programs, or the “Radio
and Television Program Production Measures,” which came into effect on August 20, 2004 and were amended on August 28,
2015. The Radio and Television Program Production Measures provide that any business that produces or operates radio or television
programs must obtain a Broadcasting and Television Program Production and Operation Permit. Entities holding such permits shall
conduct their business within the permitted scope as provided in their permits.



On July 6, 2012, the State Administration
of Press, Publication, Radio, Film and Television, or the SAPPRFT, and the Cyberspace Administration of China, or the CAC, promulgated
the Notice on Further Strengthening on the Administration of Internet Audio-video Programs including Web TV Series and
Micro Movies. On January 12, 2014, the SAPPRFT promulgated the Supplementary Notice on Further Improving the Administration
of Internet Audio-video Programs including Web TV Series and Micro Movies, or the “Supplementary Notice,” providing
that the entities engaged in producing internet audio-video programs, including web TV series and micro movies, shall legally obtain
the Broadcasting and Television Program Production and Operation Permit.



Each of LMG and Yuezhong (Beijing) Film
Co., Ltd. has obtained a Broadcasting and Television Program Production and Operation Permit for their respective businesses.



Regulations on Internet Audio-video
Programs



According to the Notice on
Further Strengthening the Planning, Construction and Management of Internet Original Audio-video Programs issued by the
SAPPRFT, Internet movies (micro movies) with an investment of more than RMB one million (approximately US$145,560.41) are key
Internet original audio-video programs. For a key internet audio-video program, Internet audio-video service entities shall
record its name, production agency subject matter, and duration, a content brief of no less than 1500 words, an explanation
of its ideological connotation of no less than 300 words, and other relevant information at the stage of creation planning,
and file the records through the recording system for web series, micro movies, and other Internet audio-video programs.



37







According to the Notice on Further
Strengthening the Management of Internet Audio-video Programs including Web Series and Micro Movies as well as the Supplementary
Notice on Further Perfecting the Management of Internet Audio-video Programs including Web Series and Micro Movies, prior
to publishing Internet audio-video programs, including web series and micro movies, Internet audio-video service entities shall
organize examiners to review such programs. After this self-examination is completed, the Internet audio-video service entities
shall also submit information of their self-examined programs to provincial branches of the SAPPRFT. The programs shall not be
published online until the processes of information filing have been completed and the filing numbers have been labeled on the
programs by the Internet audio-video service entities.



As of the date of this annual report, we
have not completed the above-mentioned filing procedures as required by the regulations for our original Internet film “The
Master-Hand.” See “Item 3. Key Information — D. Risk Factors — Risks Relating to Doing Business in
the PRC —We have not completed the necessary filing procedures for our original Internet film ‘The Master-Hand,’
and, as a result, the planned release of the film may be delayed or we may even be ordered to cancel the release, which could materially
and adversely affect our business and our financial condition.”



Regulations on Foreign Investment
in Film Production Companies



According to the 2019 Negative List, which
came into effect on July 30, 2019, foreign investors are prohibited from investing in film production or distribution companies,
cinema line companies and film importing business. As for construction and operation of movie theaters, the controlling shareholder
shall be Chinese citizens or institutions.



In view of these restrictions on foreign
direct investment in film production companies under which our business may fall, including radio/television programs production,
film production and operation business, we have established various domestic consolidated affiliated entities to engage in film
production business. LMG, our VIE, holds the Broadcasting and Television Program Production and Operation Permit and is responsible
for our Film Production Business; WFOE is not involved in film production, although it provides management and consulting services
to LMG and receives service fees from LMG through contractual arrangements. For a detailed discussion of our consolidated affiliated
entities, please refer to Contractual Arrangements between WFOE and LMG above. Due to the lack of interpretative guidance from
the relevant PRC governmental authorities, there are uncertainties regarding whether PRC governmental authorities would consider
our corporate structure and contractual arrangements to constitute foreign ownership of a film production business. See “Item
3. Key Information — D. Risk Factors — Risks Relating to Doing Business in the PRC— There are
uncertainties under the Foreign Investment Law relating to the status of businesses in China controlled by foreign invested projects
primarily through contractual arrangements, such as our business.” In order to comply with PRC regulatory requirements,
we operate a substantial portion of our business through our consolidated affiliated entities, which we have contractual relationships
with but we do not have actual ownership interests in. If our current ownership structure is found to be in violation of current
or future PRC laws, rules, or regulations regarding the legality of foreign investment in film production or distribution business
and other types of businesses on which foreign investment is restricted or prohibited, we could be subject to severe penalties.



Regulations on Film Production



On November 7, 2016, the Standing
Committee of the National People’s Congress promulgated the Film Industry Promotion Law of the People’s Republic of
China (the “Film Promotion Law”), which took effect on March 1, 2017. On April 3, 2004, the SAPPRFT promulgated
the Provisions on the Archival Filing of Film Scripts (Abstracts) and the Administration of Films, or the “Filing
Provisions,” which took effect on June 22, 2006, and was amended on December 11, 2017. The Film Promotion Law and
Filing Provisions provide that any person or any organization that plans to make a film shall, prior to the production of the film
is commenced, file an outline of the film script, with the SAPPRFT or its local branches in the PRC. If the film involves a major
theme or a theme relating to national security, diplomacy, nationality, religion, or military affairs, the film script shall be
submitted for review according to relevant regulations of the PRC. Where the outline of the film script conforms to the required
standards, the SAPPRFT or its local branches shall make an announcement on the basic information about the film to be made, and
issue a filing certificate within the time limit prescribed in the Administrative License Law. The producer of the film is not
qualified to apply for a Film Release License until it obtains a filing certificate. Only when the Film Release License has been
issued could the film be distributed and projected in movie theaters.



Regulations on Movie Censorship



Pursuant to the Film Promotion Law,
a legal person or any other organization shall submit a film completed by it to the film department of the State Council or
the film department of the people’s government of the province, autonomous region, or municipality directly under the
Chinese central government for censorship. The film department shall make a censorship decision within 30 days of
acceptance of the application for censorship. If the film conforms to the provisions of the Film Promotion Law, the film
department shall permit the public release of the film, grant a permit for public release of the film, and issue an
announcement of it; otherwise, it shall not permit the public release of the film, and notify in writing the applicant of the
decision and the reasons.





38







According to the Film Promotion Law, a
film shall not include: (1) any content violating the basic principles as established in the Constitution or instigating resistance
to or disruption of the implementation of the Constitution, laws, and administrative regulations; (2) any content jeopardizing
China’s unity, sovereign, or territorial integrity, leaking national secrets, endangering national security, damaging China’s
dignity, honor, and interests, or advocating terrorism or extremism; (3) any content defaming fine national cultural traditions,
instigating ethnic hate or discrimination, infringing upon ethnic customs and habits, distorting national history or national historical
figures, hurting national sentiments, or undermining national solidarity; (4) any content instigating the disruption of the
religious policies of the state or propagating cults or superstition; (5) any content jeopardizing social ethics, disrupting
the public order, undermining social stability, advocating obscenity, gambling, or drug abuse, highlighting violence or terror,
instigating crimes or teaching methods for committing crimes; (6) any content infringing upon the lawful rights and interests
of minors or damaging the physical and mental health of minors; (7) any content insulting or defaming others, disseminating
others’ privacy, or infringing upon the lawful rights and interests of others; and (8) any other content as prohibited
by the laws and administrative regulations.



Regulations on Film Projection



According to the Film Promotion Law and
the Regulations on the Administration of Films which took effective on February 1, 2002, upon the approval of
the film authority under the local people's government at the county level and the issuance of the “License for Operating
Projection of Films,” an enterprise with appropriate conditions in terms of personnel, site, technology, and equipment may
carry out film projection activities at cinemas and other fixed projection sites. Cinemas shall abide by the laws and administrative
regulations on public security, fire control, and public place hygiene, maintain the public order and environmental hygiene at
projection sites, and ensure the safety and health of audience. A film is not allowed to be distributed or projected until it has
obtained the License for Public Projection of Film. Projection of films shall be undertaken in compliance with the state regulations
regarding the time proportions specified for domestic films and imported films. The time of projection allotted by a film projection
unit to domestic films shall account for no less than two-thirds of the total amount of time of projection each year. Cinemas
shall truthfully keep statistics of film sales revenue and provide authentic and accurate statistics, and shall not cheat or mislead
the audience or disturb film market order by any illegal means such as fabricating transactions, or falsely reporting or concealing
sales revenue.



Those who establish a film projection unit
or those who are engaged in the activities of film projection without authorization, shall be banned by SAIC or its local branches,
and shall be investigated for criminal liabilities in accordance with the provisions in the Criminal Law on the crime of illegal
business operation. If the case is not serious enough for criminal punishment, the illegal proceeds and special instruments and
equipment used in the illegal operation shall be confiscated. In addition, if the amount of illegal proceeds is no less than RMB50,000
(approximately US$7,278.02), a fine of no less than five times but no more than 10 times the amount of illegal proceeds shall be
imposed; if there are no illegal proceeds or the amount of illegal proceeds is less than RMB50,000 (approximately US$7,278.02),
a fine of no less than RMB200,000 (approximately US$29,112.08) but no more than RMB500,000 (approximately US$72,780.20) shall be
imposed.



Liaoning Leaping International Cinema Management
Co., Ltd. has obtained the License for Operating Projection of Films, which will expire on January 29, 2022, the
Hygiene License, which will expire on January 29, 2023, and the certification for fire control examination. Liaoning Leaping International
Cinema Management Co., Ltd. is allowed to engage in the film projection business.



Regulations on Intellectual Property
Rights



Regulations on copyright



The Copyright Law of the
People’s Republic of China, or the Copyright Law, which took effect on June 1, 1991 and was amended in 2001
and in 2010, provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, own
copyright in their copyrightable works, which include, among others, works of literature, art, natural science, social
science, engineering technology and computer software. Copyright owners enjoy certain legal rights, including right of
publication, right of authorship and right of reproduction. In line with the Copyright Law, the copyright of a
cinematographic work or a work created in a way similar to cinematography shall be enjoyed by the producer. However, the
authors of the screenplay, musical works and other works that are included in a cinematographic work or a work created in a
way similar to cinematography and can be exploited separately shall be entitled to exercise their copyright
independently.





39







Regulations on domain names



The Ministry of Industry and Information
Technology of the PRC, or the MIIT, promulgated the Measures on Administration of Internet Domain Names, or the Domain
Name Measures, on August 24, 2017, which took effect on November 1, 2017, and replaced the Administrative Measures
on China Internet Domain Namepromulgated by the MIIT on November 5, 2004. According to the Domain Name Measures, the
MIIT is in charge of the administration of PRC internet domain names. The domain name registration follows a first-to-file principle.
Applicants for registration of domain names shall provide true, accurate and complete information of their identities to domain
name registration service institutions. The applicants will become the holder of such domain names upon completion of the registration
procedure. As of September 18, 2019, we have registered http://www.yzcmmedia.com as our domain name in the PRC.



Regulations on Wholly Foreign-owned
Enterprises



According to the Law of the People’s
Republic of China on Wholly Foreign-Owned Enterprises, which was promulgated by the Standing Committee of the National People’s
Congress on October 31, 2000, and then amended on September 2016, the establishment of a wholly foreign-owned enterprise
shall be subjected to record-filing administrative measures only, as long as the wholly foreign-owned enterprise does not involve
the implementation of special access management measures prescribed by the State. The business scope of the wholly foreign-owned
enterprise we established, Yuezhong (Shenyang) Technology Co., Ltd., is to primarily engage in technology development, provision
of technology service, technology consulting; development of computer software and hardware, computer network technology, game
software; provision of enterprise management and related consulting service, human resource consulting service and intellectual
property consulting service. Since the sole business of WFOE is to provide LMG with technical support, consulting services and
other management services relating to its day-to-day business operations and management in exchange for a service fee approximately
equal to the net income of LMG after the deduction of the required PRC statutory reserve, such business scope is necessary and
appropriate under PRC laws and does not involve any industries subjected to permission or approval procedures.



According to the Interim Measures
for the Administration of Establishment and Change Filings of Foreign-invested Enterprises, which was promulgated by the MOFCOM
and became effective on July 30, 2017, the Administrative Regulations on the Company Registration, which was promulgated
by the State Council on June 24, 1994, became effective on July 1, 1994, and latest amended on February 6, 2016,
and other laws and regulations governing the FIEs and company registrations, the establishment of an FIE and any capital increase
and other major changes in an FIE shall be registered with the SAIC or its local counterparts, and shall be filed via the foreign
investment comprehensive administrative system, or the FICMIS (the “MOFCOM Filing”) if such an FIE does not involve
special access administrative measures prescribed by the PRC government.



Based on the forgoing regulations, as for
changes of business scope of WFOE, unless involved in the industries restricted for foreign investment, WFOE only needs to apply
for archival filing to the MOFCOM or its local offices, and change of registration to the SAIC or its local offices. WFOE has not
completed the required registration procedures to the MOFCOM or SAIC branch due to Chinese shareholders’ failure to perform
the foreign exchange registration process stipulated by SAFE Circular 37. See “Item 3. Key Information —
D. Risk Factors — Risks Relating to Doing Business in the PRC — Our shareholders are not in compliance
with the PRC’s regulations relating to offshore investment activities by PRC residents, and as a result, the Company and
its shareholders may be subject to penalties if we are not able to remediate the non-compliance.”



Further, foreign investment enterprises
established by way of round-tripping shall complete the relevant foreign exchange registration formalities pursuant to the prevailing
foreign exchange control provisions for direct investments by foreign investors, and disclose the relevant information such as
actual controlling party of the shareholders truthfully. WFOE has not completed such registration formalities. See “Item
3. Key Information — D. Risk Factors — Risks Relating to Doing Business in the PRC — Our shareholders
are not in compliance with the PRC’s regulations relating to offshore investment activities by PRC residents, and as a result,
the Company and its shareholders may be subject to penalties if we are not able to remediate the non-compliance.”





40







Regulations on Foreign Exchange



General administration of foreign exchange



According to the Regulations
on the Control of Foreign Exchange, which were promulgated by the State Council on January 29, 1996, came into
effect on April 1, 1996, and were amended on January 14, 1997, and August 5, 2008, payments for transactions
that take place within the PRC must be made in RMB. Unless otherwise approved, PRC companies may not repatriate foreign
currency payments received from abroad or retain the same abroad. RMB is convertible into other currencies for current
account items, such as trade-related receipts and payments and payment of interest and dividends. The conversion of RMB into
other currencies and remittance of the converted foreign currency outside the PRC for of capital account items, such as
direct equity investments, loans and repatriation of investment, requires the prior approval from the SAFE or its local
office. According to regulations on foreign exchange settlement of FIEs, they may retain foreign exchange in accounts with
designated foreign exchange banks under the current account items subject to a cap set by the SAFE or its local office.
Foreign exchange proceeds under the current accounts may be either retained or sold to a financial institution engaged in
settlement and sale of foreign exchange pursuant to relevant SAFE rules and regulations. For foreign exchange proceeds under
the capital accounts, approval from the SAFE is generally required for the retention or sale of such proceeds to a financial
institution engaged in settlement and sale of foreign exchange.



SAFE Circular No. 59



Pursuant to the Circular of the
SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, promulgated by
SAFE on November 19, 2012, which became effective on December 17, 2012, and was further amended on May 4, 2015,
approval is not required for opening a foreign exchange account and depositing foreign exchange into the accounts relating to the
direct investments. SAFE Circular No. 59 also simplified foreign exchange-related registration required for the foreign investors
to acquire the equity interests of Chinese companies and further improve the administration on foreign exchange settlement for
FIEs.



SAFE Circular No. 13



Pursuant to the Circular on Further
Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, effective from June 1, 2015, which
cancels the administrative approvals of foreign exchange registration of direct domestic investment and direct overseas investment
and simplifies the procedure of foreign exchange-related registration, the investors shall register with banks for direct domestic
investment and direct overseas investment.



SAFE Circular No. 19



The Notice of the State Administration
of Foreign Exchange on Reforming the Mode of Management of Settlement of Foreign Exchange Capital of Foreign-Funded Enterprises,
or the SAFE Circular No.19, which was promulgated by the SAFE on March 30, 2015, and became effective on June 1, 2015,
provides that an FIE may, according to its actual business needs, settle with a bank the portion of the foreign exchange capital
in its capital account for which the relevant foreign exchange administration has confirmed monetary capital contribution rights
and interests (or for which the bank has registered the injection of the monetary capital contribution into the account). Pursuant
to the SAFE Circular No.19, for the time being, FIEs are allowed to settle 100% of their foreign exchange capitals on a discretionary
basis; an FIE shall truthfully use its capital for its own operational purposes within the scope of business; where an ordinary
FIE makes domestic equity investment with the amount of foreign exchanges settled, the invested enterprise shall first go through
domestic re-investment registration and open a corresponding account for foreign exchange settlement pending payment with the foreign
exchange administration or the bank at the place where it is registered.



Based on the foregoing, when setting up
a new FIE, the FIE shall register with the bank located at its registered place after obtaining the business license, and if there
is any change in capital or other changes relating to the basic information of the FIE, including without limitation any increase
in its registered capital or total investment, the FIE shall register such changes with the bank located at its registered place
after obtaining the approval from or completing the filing with competent authorities. Pursuant to the relevant foreign exchange
laws and regulations, the above-mentioned foreign exchange registration with the banks will typically take less than four weeks
upon the acceptance of the registration application. If we intend to provide funding to our wholly foreign owned subsidiaries through
capital injection at or after their establishment, we shall register the establishment of and any follow-on capital increase in
our wholly foreign owned subsidiaries with the State Administration for Industry and Commerce or its local counterparts, file such
via the FICMIS and register such with the local banks for the foreign exchange related matters.





41







Offshore Investment



Under the Circular of the
State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration over the Overseas
Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles, or the SAFE
Circular 37, issued by the SAFE and effective on July 4, 2014, PRC residents are required to register with the local
SAFE branch prior to the establishment or control of an offshore special purpose vehicle, or SPV, which is defined as
offshore enterprises directly established or indirectly controlled by PRC residents for offshore equity financing of the
enterprise assets or interests they hold in China. An amendment to registration or subsequent filing with the local SAFE
branch by such PRC resident is also required if there is any change in basic information of the offshore company or any
material change with respect to the capital of the offshore company. At the same time, the SAFE has issued
the Operation Guidance for the Issues Concerning Foreign Exchange Administration over
Round-trip Investment regarding the procedures for SAFE registration under the SAFE Circular 37, which became
effective on July 4, 2014, as an attachment of Circular 37.



Under the relevant rules, any failure by
any of our shareholders who is a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these
regulations could subject our SPV to restrictions imposed on foreign exchange activities, including restrictions on its ability
to receive registered capital as well as additional capital from PRC resident shareholders, and contribute registered capital as
well as additional capital to WFOE. If WFOE fails to obtain necessary registered capital within the approved business time limit,
the industries and commercial administrative authorities might revoke its business license. Due to the failure by shareholders
to complete the registration, WFOE is also unable to pay dividends or make distributions to our SPV, and repatriation of profits
and dividends derived from SPV by PRC residents to China are illegal. The offshore financing funds are also not allowed to be used
in China. In addition, the failure of the PRC resident shareholders to complete the registration may subject the shareholders to
fines less than RMB50,000 (approximately US$7,278.02).



Regulations on Employment and Social
Welfare



Labor Contract Law



The Labor Contract Law of the PRC,
or the Labor Contract Law, which was promulgated on January 1, 2008, and amended on December 28, 2012, is primarily aimed
at regulating the rights and obligations of employers and employees, including the establishment, performance and termination of
labor contracts. Pursuant to the Labor Contract Law, labor contracts shall be concluded in writing if labor relationships are to
be or have been established between employers and the employees. Employers are prohibited from forcing employees to work above
certain time limit and employers shall pay employees for overtime work in accordance to national regulations. In addition, employee
wages shall be no lower than local standards on minimum wages and shall be paid to employees timely.



Social Insurance and Housing Fund



As required under the Regulation
of Insurance for Labor Injury implemented on January 1, 2004, and amended in 2010, the Provisional Measures
for Maternity Insurance of Employees of Corporations implemented on January 1, 1995, the Decisions on the
Establishment of a Unified Program for Old-Aged Pension Insurance of the State Council issued on July 16, 1997, the Decisions
on the Establishment of the Medical Insurance Program for Urban Workers of the State Council promulgated on December 14,
1998, the Unemployment Insurance Measures promulgated on January 22, 1999, and the Social Insurance
Law of the PRC implemented on July 1, 2011, employers are required to provide their employees in the PRC with welfare
benefits covering pension insurance, unemployment insurance, maternity insurance, labor injury insurance and medical insurance.



In accordance with the Regulations
on the Management of Housing Fund which was promulgated by the State Council in 1999 and amended in 2002, employers must
register at the designated administrative centers and open bank accounts for depositing employees’ housing funds. Employer
and employee are also required to pay and deposit housing funds, with an amount no less than 5% of the monthly average salary of
the employee in the preceding year in full and on time.



C. Organizational Structure



The following diagram illustrates our corporate
structure as of the date of this annual report:





42











D. Property, Plants and Equipment



Our principal executive office is located
at 2010 Huaruntiexi Center, Tiexi District, Shenyang, Liaoning Province, People’s Republic of China. We lease over 7,230
square feet of office space for our headquarters pursuant to a lease agreement entered on July 23, 2018. The lease will expire
on July 22, 2020, with monthly rental expenses of RMB55,000 (approximately US$8,005.82). We also lease approximately 80,654 square
feet of spaces for our movie theaters in Shenyang.



Our subsidiary in Harbin, Harbin Yuechuzhong
Media Co., Ltd., leases approximately 1,151 square feet of office space pursuant to a lease agreement entered on January 8, 2018,
with monthly rental expenses of RMB1,000 (approximately US$145.56). The lease expired on January 7, 2019, and was renewed for additional
12 months on January 8, 2019.



Our other subsidiaries do not lease office
space.



Item 4A. UNRESOLVED STAFF COMMENTS



Not applicable.



Item 5. OPERATING AND FINANCIAL REVIEW
AND PROSPECTS



The following discussion of our financial
condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements
and their related notes included in this annual report. This report contains forward-looking statements. See “Item 5. Operating
and Financial Review and Prospects — G. Safe Harbor.” In evaluating our business, you should carefully consider the
information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution
you that our businesses and financial performance are subject to substantial risks and uncertainties.





43







A. Operating Results



Overview



We conduct substantially
all of our business through our VIE, LMG, and its subsidiaries, in China. We primarily engage in Multi-Channel Advertising Business,
Event Planning and Execution Business, Film Production Business, and Movie Theater Operating Business. Currently, our primary market
is Heilongjiang Province and Liaoning Province, covering major second-tier cities in the areas such as Harbin and Shenyang.



For the fiscal
years ended June 30, 2019, 2018 and 2017, our revenues were primarily generated from our Multi-Channel Advertising Business and
Event Planning and Execution Business. In fiscal year 2019, we also generated revenue from releasing our TV series through iQiYi
and from operating our movie theaters.



Major Factors Affecting our Results
of Operations



Our operating
results are subject to general conditions typically affecting the advertising, media and entertainment industry, including but
not limited to:



| | · | changes
in governmental policies and laws affecting advertising and film and TV investment;
| | - | -------------------------------------------------------------------------------------------

| | · | uneven
economic growth and development across different regions of China;
| | - | -------------------------------------------------------------------------

| | · | supply
of and demand for films and pre-movie advertisements in local markets;
| | - | -----------------------------------------------------------------------------

| | · | entry
barriers and competition from other advertising and film companies; and
| | - | -----------------------------------------------------------------------------

| | · | increases
in operating costs and expenses due to inflation and other factors.
| | - | -----------------------------------------------------------------------------



Unfavorable changes
in any of these general conditions could negatively affect our advertising volume, sales of our films and TV programs, and operation
of our movie theaters and otherwise adversely affect our results of operations.



Our operating
results are more directly affected by company-specific factors including:



| | · | our
revenue growth; and
| | - | -----------------------

| | · | our
ability to effectively manage our operating costs and expenses.
| | - | -------------------------------------------------------------------



Key Components of Results
of Operations



Results of Operations for
Years Ended June 30, 2019 and 2018



Revenue



Our revenues for the years ended
June 30, 2019 and 2018 were derived from the following sources:





|                                 |  | For the Years Ended June 30, |            |  | Change | 
|-------------------------------- |  | ---------------------------- | ---------- |  | ------ | 
|                                 |  | 2019                         |            |  | %      | 
|Multi-Channel
    Advertising    |  | $                            | 7,958,143  |  |        | 
|Event
    Planning and Execution |  |                              | 2,604,892  |  |        | 
|Film
    Production              |  |                              | 775,080    |  |        | 
|Movie
    Theater Operating      |  |                              | 341,575    |  |        | 
|Total
    revenues               |  | $                            | 11,679,690 |  |        | 



Our revenues increased by $6,641,897,
or 132%, from $5,037,793 for the year ended June 30, 2018, to $11,679,690 for the year ended June 30, 2019.



Multi-Channel advertising
revenue for the year ended June 30, 2019, was $7,958,143, an increase of 99% from $4,005,598 for the year ended June 30,
2018, primarily driven by an increase in pre-movie advertisement display. The pre-movie advertisement display revenue
increased by 109% from $3,725,921 for the year ended June 30, 2018, to $ 7,779,784 for the year ended June 30, 2019. The
increase was due to an increased number of film screens on which we provided pre-movie advertising services, from 307 in the
year ended June 30, 2018, to 605 in the year ended June 30, 2019. The increase was also due to the opening of our own movie
theaters. In fiscal year 2019, we opened our first two movie theaters in Shenyang. We expect our multi-channel advertising
revenue will increase in the future as a result of opening of additional new movie theaters and obtaining new customers.



44









Event planning and execution
revenue for the year ended June 30, 2019, was $2,604,892, an increase of 152% from $1,032,195 for the year ended June 30, 2018.
Revenue generated from event planning and execution is directly related to the size and number of projects we undertake. In the
year ended June 30, 2018, we had 35 projects, while in fiscal year 2019, we had 50 projects and many of which were larger projects
and generated higher revenue. During the year ended June 30, 2019, we put greater efforts into developing this service and expanded
our team, which helped us undertake more sizable projects and generate increased service revenue from our Event Planning and Execution
Business.



Our Film Production Business
include investment in films and TV programs and their distribution in movie theaters or through online platforms. In April 2018,
we released the web TV series “Meet Myself.” Our revenue from film production business amounted to $775,080 for the
year ended June 30, 2019, for distributing “Meet Myself ” through the online platform. There was no such revenue for
the year ended June 30, 2018. We expect to generate more revenue in film production business due to the release of new TV series
and films.



Our movie theater operating
revenue is generated primarily from box office admissions and snack and beverage sales. On February 1, 2019, and June 16, 2019,
we opened our first and second movie theaters in Shenyang, respectively, with a total of 11 screens. Our revenue from movie theater
operating amounted to $341,575 for the year ended June 30, 2019. We opened our third movie theater in Shenyang on September 17,
2019, and are also in the process of renovating the space for our fourth movie theater and expect it to open soon. We expect our
movie theater operating revenue will increase in the future as a result of opening of additional new movie theaters.



Cost of revenues



Our cost of revenues for the years ended June
30, 2019 and 2018, was derived from the following sources:





|                              |  | For the Years Ended June 30, |           |  | Change | 
|----------------------------- |  | ---------------------------- | --------- |  | ------ | 
|                              |  | 2019                         |           |  | %      | 
|Multi-Channel Advertising     |  | $                            | 2,519,575 |  |        | 
|Event Planning and Execution  |  |                              | 455,825   |  |        | 
|Film Production               |  |                              | 176,346   |  |        | 
|Movie Theater Operating       |  |                              | 145,836   |  |        | 
|Business taxes and surcharges |  |                              | 90,011    |  |        | 
|Total Cost of revenues        |  | $                            | 3,387,593 |  |        | 



Cost of revenues
for the year ended June 30, 2019, was $3,387,593, an increase of $1,734,794, or 105%, from $1,652,799 for the year ended June 30,
2018.



Cost of multi-channel
advertising increased by 86% from $1,357,409 for the year ended June 30, 2018, to $2,519,575 for the year ended June 30, 2019,
primarily driven by an increase in the total number of film screens on which we provided pre-movie advertising services, from 307
in the year ended June 30, 2018, to 605 in the year ended June 30, 2019. Our fees paid for the exclusive rights to display pre-movie
advertisements increased proportionately with the increase of the number of film screens on which we provided pre-movie advertising
services.



Our costs of
the Event Planning and Execution Business included venue rental fees, equipment costs, performers compensation, and other expenses
in related activities. The number of event planning and execution projects increased from 35 for the year ended June 30, 2018,
to 50 for the year ended June 30, 2019. Cost of event planning and execution increased by 144% from $187,160 for the year ended
June 30, 2018, to $455,825 for the year ended June 30, 2019. In fiscal year 2019, in response to our rapid market growth and customer
development, we expanded our team and internally established our service teams including the commerce, media, and technology departments.
The percentage increase in cost of revenue was less than the percentage increase in revenue, mainly because some services previously
outsourced to third parties at higher costs were performed in-house at lower costs.



Our costs
associated with film production primarily include amortization of the direct production costs and production overhead costs
incurred on our web TV series. We continued to release our web TV series “Meet Myself ” through the online
platform iQiYi during the year ended June 30, 2019. Costs of film production amounted to $176,346 for the year ended June 30,
2019, as compared to $Nil for the year ended June 30, 2018.



Our costs associated
with movie theater operating primarily include film exhibition costs, which is accrued on the applicable admissions revenues and
estimates of the final settlement pursuant to our film licenses. Costs of movie theater operating amounted to $145,836 for the
year ended June 30, 2019, as compared to $Nil for the year ended June 30, 2018.





45







Gross profit and gross margin



Our gross profits for the years ended June 30,
2019 and 2018, are shown in the in the following table:



|                                 |  | For
    the Years Ended June 30, |           |  | Change | 
|-------------------------------- |  | -------------------------------- | --------- |  | ------ | 
|                                 |  | 2019                             |           |  | %      | 
|Multi-Channel
    Advertising    |  | $                                | 5,377,238 |  |        | 
|Event
    Planning and Execution |  |                                  | 2,128,991 |  |        | 
|Film
    Production              |  |                                  | 592,761   |  |        | 
|Movie
    Theater Operating      |  |                                  | 193,107   |  |        | 
|Total
    gross profit           |  | $                                | 8,292,097 |  |        | 



As a result of the foregoing,
we had gross profit of $8,292,097 and $3,384,994 for the year ended June 30, 2019 and 2018, respectively. The gross margins were
71% and 67% for the year ended June 30, 2019 and 2018, respectively, primarily as a result of increased gross margins of our event
planning and execution services, as mentioned before.



Operating
expenses



The following table sets forth the breakdown
of our operating expenses for the years ended June 30, 2019 and 2018:





|                                    |  | For the Year Ended June 30, |           |  | Change | 
|----------------------------------- |  | --------------------------- | --------- |  | ------ | 
|                                    |  | 2019                        |           |  | %      | 
|Selling and marketing expenses      |  | $                           | 62,811    |  |        | 
|General and administrative expenses |  |                             | 1,342,480 |  |        | 
|Total Amount                        |  | $                           | 1,405,291 |  |        | 



Selling and marketing expenses



Selling and marketing expenses
increased by 2% from $61,587 for the year ended June 30, 2018, to $62,811 for the year ended June 30, 2019, primarily due to an
increase in promotion expenses of $17,977 for our newly opened movie theaters. The increase was partially offset by the decrease
in our advertising expenses. The advertising expenses decreased by $16,863 from $19,766 for the year ended June 30, 2018, to $2,903
for the year ended June 30, 2019. As we established stable relationships with our suppliers and customers, we had decreased expenditures
related to promotions in the year ended June 30, 2019.



General and administrative expenses



General and
administrative expenses increased by 1,086,057 from $256,423 for the year ended June 30, 2018, to $1,342,480 for the year
ended June 30, 2019, primarily as a result of increased audit fees and other professional consulting expenses, bad debt
expenses, as well as entertainment and business travel expenses. In connection with our IPO efforts, we incurred audit fees
of $312,866 during the year ended June 30, 2019, as compared to $Nil in the same period in 2018. Consulting expenses in
connection with the preparation of our IPO also increased by $249,209 as compared to $Nil in the same period in 2018. Rental
expenses increased by $285,167 from $50,212 for the year ended June 30, 2018, to $335,379 for the year ended June 30, 2019,
because we entered into new leases for our movie theaters. Meanwhile, during the year ended June 30, 2019, management
determined that the collection of some of our accounts receivable associated with multi-channel advertising services could
not be reasonably assured, and accrued for bad debt expenses of $87,166 in accordance with our bad debt policy, an increase
of $48,111 as compared with $39,055 in the same period in 2018. In addition, entertainment and business travel expenses
increased by $35,758 from $16,420 in the year ended June 30, 2018, to $52,178 in the year ended June 30, 2019. We expect our
general and administrative expenses, including, but not limited to, salaries and business consulting expenses, to continue to
increase in the foreseeable future, as our business further grows. We expect our professional fees for legal, audit, and
advisory services to increase as we become a public company upon the completion of the proposed initial public offering.





46







Income tax expenses



Income tax expenses amounted to $1,699,690 and
$741,557 for the years ended June 30, 2019 and 2018, respectively. The increase resulted from the increased taxable income for
the year ended June 30, 2019.



Net income



As a result of the foregoing,
our net income for the years ended June 30, 2019 and 2018 was $5,188,919 and $2,325,599, respectively.



Results of Operations for
Years Ended June 30, 2018 and 2017



Revenue



Our revenues for the years ended June 30,
2018 and 2017, were derived from the following sources:



|                             |  | For the Year Ended June 30, |           |  | Change | 
|---------------------------- |  | --------------------------- | --------- |  | ------ | 
|                             |  | 2018                        |           |  | %      | 
|Multi-Channel Advertising    |  | $                           | 4,005,598 |  |        | 
|Event Planning and Execution |  |                             | 1,032,195 |  |        | 
|Total revenues               |  | $                           | 5,037,793 |  |        | 



Our revenues increased by $1,220,219, or
32% from $3,817,574 for the year ended June 30, 2017, to $5,037,793 for the year ended June 30, 2018.



Multi-Channel advertising revenue for the
year ended June 30, 2018, was $4,005,598, an increase of 84% from $2,175,371 for the year ended June 30, 2017, primarily driven
by the increase in pre-movie advertisements display. The pre-movie advertisements display revenue increased by 95% from $1,910,718
for the year ended June 30, 2017, to $3,725,921 for the year ended June 30, 2018. The increase was due to the increase of film
screens the Company was granted, from 148 in fiscal year 2017 to 307 in fiscal year 2018.



Event planning and execution revenue for
the year ended June 30, 2018, was $1,032,195, a decrease of 37% from $1,642,203 for the year ended June 30, 2017. Revenue generated
from event planning and execution is directly related to the size and amount of projects we undertake. In 2017, there was one major
project for Event Planning and Execution Services, while there was no such project in 2018.



We did not derive any revenue from our
Film Production Business in the fiscal years ended June 30, 2017 and 2018. The only film or TV program we released in those fiscal
years was the web TV series “Meet Myself.” Although the web TV series debuted in April 2018, we did not receive from
our distributor any fees during the fiscal years ended June 30, 2017 and 2018, because the distribution of the web TV series was
still ongoing.





47







Cost of revenues



Our cost of revenues for the years ended June 30, 2018 and 2017,
was derived from the following sources:



|                             |  | For the Year Ended June 30, |           |  | Change | 
|---------------------------- |  | --------------------------- | --------- |  | ------ | 
|                             |  | 2018                        |           |  | %      | 
|Multi-Channel Advertising    |  |                             | 1,357,409 |  |        | 
|Event Planning and Execution |  |                             | 187,160   |  |        | 
|Cost of revenues             |  |                             | 1,544,569 |  |        | 



Cost of revenues for the year ended June
30, 2018, was $1,544,569, an increase of $674,797, or 78%, from $869,772 for the year ended June 30, 2017.



Cost of multi-channel advertising increased
by 76% from $769,406 for the year ended June 30, 2017, to $1,357,409 for the year ended June 30, 2018, primarily driven by an increase
in the revenue of pre-movie advertisements display. Our fees paid for the exclusive rights to display pre-movie advertisements
increase proportionately with the increase of the number of film screens we were granted.



Cost of event planning and execution increased
by 86% from $100,366 for the year ended June 30, 2017, to $187,160 for the year ended June 30, 2018, because of an increase of
the offline marketing event planning and execution. The projects of offline marketing event planning and execution increased by
12 from four projects for the year ended June 30, 2017, to 16 projects for the year ended June 30, 2018. The cost of the offline
marketing event planning and execution included venue rental fees, equipment costs, performer salary, and other expenses in related
activities.



Gross profit and gross margin



Our gross profits for the years ended June 30, 2018 and 2017
are shown in the in the following table:



|                             |  | For the Year Ended June 30, |           |  | Change | 
|---------------------------- |  | --------------------------- | --------- |  | ------ | 
|                             |  | 2018                        |           |  | %      | 
|Multi-Channel Advertising    |  | $                           | 2,562,134 |  |        | 
|Event Planning and Execution |  |                             | 822,860   |  |        | 
|Total gross profit           |  | $                           | 3,384,994 |  |        | 



As a result of the foregoing, we had gross
profit of $3,384,994 and $2,880,794 for the years ended June 30, 2018 and 2017, respectively. The gross margins were 67% and 75%
for the years ended June 30, 2018 and 2017, respectively, primarily as a result of the increased cost of event planning and execution
for the year ended June 30, 2018.



Operating expenses



The following table sets forth the breakdown
of our operating expenses for the years ended June 30, 2018 and 2017:



|                                    |  | The Year Ended June 30, |         |  | Change | 
|----------------------------------- |  | ----------------------- | ------- |  | ------ | 
|                                    |  | 2018                    |         |  | %      | 
|Selling and marketing expenses      |  | $                       | 61,587  |  |        | 
|General and administrative expenses |  |                         | 256,423 |  |        | 
|Total Amount                        |  | $                       | 318,010 |  |        | 





48







Selling and marketing expenses



Selling and marketing expenses decreased
by 87% from $485,594 for the year ended June 30, 2017, to $61,587 for the year ended June 30, 2018, primarily due to a decrease
in our brand promotion expenses. The brand promotion expenses decreased by $460,010 from $461,332 for the year ended June 30, 2017,
to $1,322 for the year ended June 30, 2018. As we established stable relationships with our suppliers and customers, we have decreased
expenditures related to promotions in 2018.



General and administrative expenses



General and administrative expenses increased
by 29% from $198,027 for the year ended June 30, 2017, to $256,423 for the year ended June 30, 2018, primarily as a result of increased
rental expenses and bad debt expenses. Rental expenses increased by $15,411 from $34,801 for fiscal year 2017, to $50,212 for fiscal
year 2018. Meanwhile, at the end of fiscal year 2018, management determined that the collection of advertising revenues from customers
for the amount of $39,055, could not be reasonably assured and accrued for bad debt expenses.



Income tax expenses



Income tax expenses amounted to $741,557
and $554,521 for fiscal years 2018 and 2017, respectively. The increase resulted from an increased income before income taxes in
fiscal year 2018.



Net income



As a result of the foregoing, our net income
for the years ended June 30, 2018, and June 30, 2017, was $2,325,599 and $1,642,569, respectively.



B. Liquidity and Capital Resources



Cash Flows for the
Fiscal Year Ended June 30, 2019, Compared to the Fiscal Year Ended June 30, 2018



As of June 30, 2019, we
had cash and cash equivalents of $194,488 and a total working capital of $4,566,249, which were all held in PRC. Management believes
that we will generate sufficient cash flows to fund our operations and to meet our obligations on timely basis for the next 12
months by the successful implementation of our business plans.



As of June 30,
2019, our principal sources of cash were revenues from our Multi-Channel Advertising Business and Event Planning and Execution
Business. Most of our cash resources were used to pay for the exclusive rights for pre-movie advertisements, services received
from third parties, rental expenses and capital expenditures, dividends to shareholders, and payroll.



Under applicable
PRC regulations, foreign invested enterprises, or FIEs, in China may pay dividends only out of their accumulated profits, if any,
determined in accordance with PRC accounting standards and regulations. In addition, a FIE in China is required to set aside at
least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the cumulative amount
of such reserves reach 50% of its registered capital. These reserves are not distributable as cash dividends.



In addition,
all of our businesses and assets are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange
transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies
at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank
of China or other regulatory institutions requires the submission of a payment application form together with suppliers’
invoices, shipping documents, and signed contracts. These currency exchange control procedures imposed by the PRC government authorities
may restrict the ability of our PRC subsidiary to transfer its net assets to the parent company, Leaping Group, through loans,
advances, or cash dividends.





49







The following table provides
the information about our working capital as of June 30, 2019 and 2018:



|                    |  | As of          |           |  | As of         |   |           | Change | 
|------------------- |  | -------------- | --------- |  | ------------- | - | --------- | ------ | 
|                    |  | June 30,  2019 |           |  | June 30, 2018 |   |           | Amount | 
|Current assets      |  | $              | 9,672,297 |  |               | $ | 2,537,419 |        | 
|Current liabilities |  |                | 5,106,048 |  |               |   | 2,025,435 |        | 
|Working capital     |  | $              | 4,566,249 |  |               | $ | 511,984   |        | 



As of June 30, 2019, we
had working capital of $4,566,249, an increase of $4,054,265, or 792%, from $511,984 as of June 30, 2018.



As of June 30, 2019, our
total current assets were $9,672,297, which primarily included $7,384,640 in accounts receivable. We collected $0.6 million (RMB4.4
million) of accounts receivable balance subsequently during the July to September 2019 period and expect to substantially collect
the remaining accounts receivable balance within the next few months. The collection of our accounts receivable will make cash
available to use in our operation as working capital, if necessary. In connection with our IPO efforts, we also incurred deferred
offering costs of $1,403,604, which will be offset against our IPO proceeds once we complete the IPO. As of June 30, 2019, we also
had accrued expense and other payables of $1,173,555, which primarily included payables for deferred offering costs, professional
service fees, and others. As of June 30, 2019, our total current liabilities were $5,106,048, which primarily included $2,726,821
in taxes payable, $1,173,555 in accrued expense and other payables, and $449,058 in accounts payable.



As of June 30, 2018, our
total current assets were $2,537,419, which primarily included $2,122,803 in accounts receivable and $362,549 in deposits. Our
total current liabilities were $2,025,435 as of June 30, 2018, which primarily included $1,616,184 in taxes payable and $382,713
in deferred revenue and accrued expense and other payables.



Cash and cash equivalent



As of June 30, 2019, we
had cash and cash equivalent of $194,488, an increase of $174,924 from $19,564 as of June 30, 2018, mainly due to cash inflows
from our operating activities.



The following table summarizes our cash flows
for the years ended June 30, 2019 and 2018:



|                                           |  | For the years ended June 30, |          
|------------------------------------------ |  | ---------------------------- | ---------
|                                           |  | 2019                         |          
|Net cash provided by operating activities  |  | $                            | 1,965,866
|Net cash used in investing activities      |  |                              | (918,678 
|Net cash used in financing activities      |  |                              | (870,443 
|Effect of changes of foreign exchange rate |  |                              | (1,821   
|Net increase (decrease) in cash            |  | $                            | 174,924  



Cash flow provided by
operating activities



Net cash provided by operating
activities increased from $1,638,638 during the year ended June 30, 2018, to $1,965,866 during the year ended June 30, 2019.



During the year ended June
30, 2019, cash provided by operating activities was $1,965,866, mainly derived from a net income of $5,188,919, and the increase
of bad debt provision of $87,166, the increase of taxes payable of $1,176,205 due to our increased taxable income for the year
ended June 30, 2019, and the increased accrued expense and other payables of $1,023,101. The increase was partially offset by the
increase of accounts receivable of $5,494,486 because we had increased revenue in all of our segments. Most of our accounts receivable
were aged below nine months. We collected $0.6 million (RMB 4.4 million) of accounts receivable balance subsequently during the
July to September 2019 period and expect to substantially collect the remaining accounts receivable balance within the next few
months.



During the year ended June
30, 2018, cash provided by operating activities was $1,638,638, mainly derived from a net income of $2,325,599, and the increase
of bad debt provision of $39,055, the increase of taxes payable of $1,013,951, and the increase of deferred revenue of $113,021,
the decrease of advance to suppliers of $271,154, offset by the decrease of deferred tax assets of $38,019, the increase of accounts
receivable of $1,297,604, the increase of deposit receivables of $279,725, the increase of inventories of $141,640, the increase
of prepaid expense of $30,508, the decrease of accounts payable of $75,833, and the decrease of other payable of $260,813.





50







Cash flow used in investing
activities



Net cash used in investing
activities was $918,678 for the year ended June 30, 2019, which represented the purchase of property and equipment and construction
in progress. There were no investing activities during the years ended June 30, 2018.



Cash flow used in financing activities



Net cash used in financing
activities was $870,443 for the year ended June 30, 2019, primarily due to increased deferred offering costs directly associated
with our IPO amounted to $1,412,531. We have paid various service fees such as legal fees, underwriter due diligence fees, investor
relationship fees, capital market advisory fees, as well as secretary company services fees to various service providers and we
expect to offset such deferred offering costs against with the IPO proceeds once we complete our IPO in the near future.



Net cash used
in financing activities was $1,739,766 for the year ended June 30, 2018, primarily due to the payment of dividend to our shareholders
of $2,157,623.



Cash Flows for the
Fiscal Year Ended June 30, 2018, Compared to the Fiscal Year Ended June 30, 2017



As of June 30,
2018, we had cash and cash equivalents of $19,564 and a total working capital of $511,984, which are all held in PRC. Management
believes that we will generate sufficient cash flows to fund our operations and to meet our obligations on timely basis for the
next 12 months by the successful implementation of our business plans.



The following table summarizes our cash
flows for the years ended June 30, 2018 and 2017:



|                                           |  | For the years ended June 30, |           
|------------------------------------------ |  | ---------------------------- | ----------
|                                           |  | 2018                         |           
|Net cash provided by operating activities  |  | $                            | 1,638,638 
|Net cash used in financing activities      |  |                              | (1,739,766
|Effect of changes of foreign exchange rate |  |                              | 4,499     
|Net (decrease) increase in cash            |  | $                            | (96,629   



Cash flow provided by operating activities



Net cash provided by operating activities
increased from $1,100,498 during the year ended June 30, 2017, to $1,638,638 during the year ended June 30, 2018.



During the year ended June 30, 2018,
cash provided by operating activities was $1,638,638, mainly derived from a net income of  $2,325,599, and the increase of
bad debt provision of  $39,055, the increase of taxes payable of  $1,013,951, and the increase of deferred revenue
of  $113,021, the decrease of advance to suppliers of  $271,154, offset by the decrease of deferred tax assets of 
$38,019, the increase of accounts receivable of  $1,297,604, the increase of deposit receivables of  $279,725, the
increase of inventories of $141,640, the increase of prepaid expense of  $30,508, the decrease of accounts payable of 
$75,833, and the decrease of other payable of  $260,813.



During the year ended June 30, 2017,
the cash provided by operating activities was $1,100,498, mainly derived from a net income of  $1,642,569, and the decrease
of deposit receivables of  $49,321, the decrease deferred tax assets of  $172,525, the increase of deferred revenue
of  $8,891, the increase of taxes payable of  $597,083, and the increase of other payables of  $357,363, offset
by the increase of accounts receivable of  $588,414, the increase of inventories of  $147,989, the increase of advance
to suppliers of  $223,329, and the decrease of accounts payable of  $767,522.





51







Cash flow used in financing activities



Net cash used in financing activities
increased from $1,006,428 during the year ended June 30, 2017, to $1,739,766 during the
year ended June 30, 2018, primarily due to the payment of dividend to shareholders. The payment of dividends to shareholders
was $2,157,623 and $986,044 for the years ended June 30, 2018 and 2017, respectively.



C. Research and Development, Patents
and Licenses, etc.



Research and Development



None.



Intellectual Property



See “Item 4. Information on our Company
 — B. Business Overview — Facilities and Intellectual Property”.



D. Trend Information



Other than as disclosed elsewhere in this
annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended June 30, 2019 that
are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources,
or that are reasonably likely to cause the disclosed information to be not necessarily indicative of future operating results or
financial conditions.



E. Off-Balance Sheet Arrangements



As of June 30, 2019 and 2018, we had not
entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.



F. Tabular Disclosure of Contractual
Obligations



We entered several leases for office spaces
and movie theaters located at Shenyang and Harbin in China. Rental expenses charged to operations under operating leases for the
years ended June 30, 2019, 2018 and 2017, amounted to $335,379, $50,212 and $34,801, respectively.



As of June 30, 2019, the future
minimum rent payable under non-cancelable operating leases were:



For the 12 months ended June 30,





|2020       |  | $ | 521,905   | 
|---------- |  | - | --------- | 
|2021       |  |   | 475,359   | 
|2022       |  |   | 474,797   | 
|2023       |  |   | 486,265   | 
|2024       |  |   | 489,823   | 
|Thereafter |  |   | 2,646,590 | 
|Total      |  | $ | 5,094,739 | 



G. Safe Harbor



This annual report contains forward-looking
statements that are based on our management’s beliefs and assumptions and on information currently available to us. These
statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from those expressed or implied by the forward-looking statements.





52







You can identify these forward-looking
statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,”
 “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,”
 “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current
expectations and projections about future events and financial trends that we believe may affect our financial condition, results
of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements
relating to:



| | · | future financial and operating results, including revenues, income, expenditures, cash balances and other financial items;    
| | - | ------------------------------------------------------------------------------------------------------------------------------
| | · | our ability to execute our growth and expansion, including our ability to meet our goals;                                     
| | · | current and future economic and political conditions;                                                                         
| | · | our ability to compete in an industry with low barriers to entry;                                                             
| | · | our ability to continue to operate through our VIE structure;                                                                 
| | · | our capital requirements and our ability to raise any additional financing which we may require;                              
| | · | our ability to attract new clients, and further enhance our brand recognition;                                                
| | · | our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business;
| | · | trends and competition in the advertising industry; and                                                                       
| | · | other assumptions described in this annual report underlying or relating to any forward-looking statements.                   



You should thoroughly read this annual
report and the documents that we refer to in this annual report with the understanding that our actual results in the future may
be materially different from or worse than what we expect. We qualify all of our forward-looking statements by these cautionary
statements. Other sections of this annual report include additional factors which could adversely affect our business and financial
performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it
is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on
our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Important risks and factors that could cause our actual results to be materially different
from our expectations are generally set forth in “Item 3. Key Information—D. Risk Factors” and elsewhere in this
annual report.



The forward-looking statements made in
this annual report relate only to events or information as of the date on which these statements are made in this annual report.
We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise, after the date of this annual report. You should not rely upon forward-looking statements as predictions of future
events.



Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



A. Directors and Senior Management



The following table sets forth information regarding our directors and executive officers as of the date
of this annual report.



|Name                |  | Age |  | Position(s)                                 
|------------------- |  | --- |  | --------------------------------------------
|Bo Jiang            |  | 38  |  | Chairman of the Board and Director          
|Tao Jiang*          |  | 32  |  | Chief Executive Officer and Director Nominee
|Di Wang             |  | 31  |  | Vice President                              
|Liquan Wang         |  | 32  |  | Vice President                              
|Ziwei Xu            |  | 31  |  | Chief Financial Officer                     
|Douglas Menelly*    |  | 44  |  | Independent Director Nominee                
|Adam (Xin) He*      |  | 46  |  | Independent Director Nominee                
|Christopher Kohler* |  | 39  |  | Independent Director Nominee                



* This individual has indicated his assent to occupy such position
as of the date of this annual report.

​



53









Mr. Bo Jiang has been
our Company’s Chairman of the Board since August 2018 and the chairman of LMG since April 2015. From April 2013
to March 2015, Mr. Jiang served as the vice president of China Business Times. From May 2009 to April 2013,
Mr. Jiang served as the office director of Liaoshen Evening News. From September 2006 to May 2009, Mr. Jiang
served as the director of the Business Planning Department of Chinese Business Morning News. Mr. Jiang has over 15 years
of experience of investment in the film industry and management of media companies. Mr. Jiang holds an Executive Master of
Business Administration degree from Liaoning University.



Mr. Tao Jiang is a director
nominee of the Company and has been our chief executive officer (“CEO”) since August 2018. Mr. Jiang is the
founder of LMG and has been its CEO since November 2013. From October 2012 to October 2013, Mr. Jiang served
as the sales director of Focus Media (Shenyang) Co., Ltd. Mr. Jiang holds a bachelor’s degree in Accounting from Liaoning
University of International Business and Economics.



Ms. Di Wang has been
our vice president since August 2018, and the vice president of LMG since January 2017. From March 2011 to December 2016,
Ms. Wang served as the operation manager of China Resources (Shenyang) Co., Ltd. Ms. Wang holds a bachelor’s degree
in Accounting from Liaoning University of International Business and Economics.



Mr. Liquan Wang has
been our vice president since August 2018, and the vice president of LMG since January 2018. Since January 2018,
Mr. Wang has served as the CEO of Harbin Yuechuzhong Media Co., Ltd., a wholly-owned PRC subsidiary of the Company. From January 2016
to November 2017, Mr. Wang served as the sales director of Toutiao (Liaoning). From July 2015 to October 2015,
Mr. Wang served as the sales director of Sohu Focus (Shenyang). From February 2006 to July 2015, Mr. Wang served
as the reporter, editor, and sector director of China Business Times. Mr. Wang holds a bachelor’s degree in Journalism
from Liaoning University.



Ms. Ziwei Xu has been
our chief financial officer (“CFO”) since August 2018, and the CFO of LMG since November 2013. From July 2011
to September 2013, Ms. Xu served as an auditor of Ruihua Certified Public Accountants, LLP (Liaoning Branch). Ms. Xu
holds a bachelor’s degree in International Economics and Trade from Liaoning University of Science and Technology.



Mr. Douglas Menelly
is an independent director nominee of the Company. Mr. Menelly is the co-founder of E-Options Communications Consulting and has
served as its managing director since January 2018. Before founding E-Options Communications Consulting, Mr. Menelly worked at
Aspen Insurance Group, and served as the senior vice president for corporate communications from August 2016 to October 2017, the
global head of marketing from July 2015 to August 2016, and the senior vice president for marketing from November 2013 to July
2015. From December 2011 to November 2013, Mr. Menelly served as the global communications director of American International Group.
From November 2009 to October 2011, Mr. Menelly served as the vice president for investor relations & communications of SinoHub,
Inc. From March 2006 to August 2009, Mr. Menelly served as the general manager for Asia and the vice president for finance &
business development of Willex Industrial. From December 2002 to March 2006, Mr. Menelly served as a broker, assistant vice president,
and vice president of Marsh & McLennan, subsequently. Mr. Menelly received his Executive MBA degree from Columbia Business
School in 2012, his master’s degree in Operations Management from New York University in 2001, and his bachelor’s degree
in Civil Engineering from State University of New York in 1997.



Mr. Adam (Xin) He is an independent
director nominee of the Company. Since May 2012, he has served as the chief financial officer of Wanda America Investment Holding
Company, a U.S. subsidiary of Dalian Wanda Group, a Fortune Global 500 company. As the chief financial officer of Wanda America
Investment Holding Company, he managed a 101-story landmark “Vista Tower” development in downtown Chicago and a NYSE-traded
company, AMC Entertainment Holdings, Inc., the largest movie exhibitor in the U.S. He also served as an independent director at
Nasdaq listed companies iFresh Inc. from November 2017 to March 2018 and Professional Diversity Network and Energy Focus Inc. from
July 2014 to July 2015. From December 2010 to May 2012, Mr. He served as the financial controller at Xinyuan Real Estate Co., Ltd.,
an NYSE-listed developer of large scale, high-quality residential real estate projects. He also worked as a chief financial officer
at China Transport Holding Group in Hunan, China, from September 2009 to December 2010, an auditor at Ernst & Young, LLP in
New York from August 2008 to September 2009, and a financial manager at Chinatex Group in Beijing from May 1997 to August 2008.
Mr. He received a bachelor’s degree and a master’s degree in taxation from Central University of Finance and Economics
in Beijing in 1993 and 2001, and a master’s degree in accounting from Seton Hall University in New Jersey in 2017. He is
a Certified Public Accountant in both the United States and the PRC.





54







Mr. Christopher Kohler
is an independent director nominee of the Company. Mr. Kohler has been the owner of Chris Kohler Consulting, Inc. since April
2012, providing accounting and finance consulting to businesses with temporary and/or ongoing accounting and financial needs.
Mr. Kohler has served as the corporate controller of BlackRidge Technology International, Inc. since July 2017. From May 2014
to December 2016, Mr. Kohler served as the vice president and corporate controller of Bearcat Energy LLC. From July 2011 to
July 2014, Mr. Kohler served as a manager of Now CFO, LLC. From September 2010 to July 2011, Mr. Kohler served as a staff
accountant of Spicer Jeffries, LLP. From March 2009 to September 2010, Mr. Kohler served as a finance/accounting associate of
Tempo Financial. From March 2002 to December 2008, Mr. Kohler served as a branch manager and consumer underwriter for several
banking institutions. Mr. Kohler received his MBA degree in Finance and Master of Accountancy from University of Colorado in
2010 and his Bachelor of Science in Marketing from Indiana University in 2002.



Pursuant to our amended and restated articles
of association, as adopted by special resolutions on December 11, 2018, the minimum number of directors shall consist of not
less than one person unless otherwise determined by the shareholders in a general meeting. Unless removed or re-appointed, each
director shall be appointed for a term expiring at the next-following annual general meeting, if any is held. At any annual general
meeting held, our directors will be elected by a majority vote of shareholders eligible to vote at that meeting. At each annual
general meeting, each director so elected shall hold office for a one-year term and until the election of their respective successors
in office or removed.



Family Relationships



Our chairman, Mr. Bo Jiang, and our CEO, Mr. Tao Jiang,
are siblings; Mr. Tao Jiang and our Vice President, Ms. Di Wang, are spouses. None of the other directors or executive
officers has a family relationship as defined in Item 401 of Regulation S-K.



B. Compensation



The following table sets forth certain
information with respect to compensation for the fiscal year ended June 30, 2019, earned by or paid to our chief executive officer
and principal executive officer, our principal financial officer, and our other most highly compensated executive officers whose
total compensation exceeded US$100,000 (the “Named Executive Officers”).





|Name and Principal Position          |  | Salary ($) |           |  | Bonus ($) |  |   | Stock Awards ($) |  |  | Option Awards ($) |  |  | Non-Equity Incentive  Plan Compensation |   |  | Deferred Compensation Earnings |  |   | Other |  |  | Total ($) | 
|------------------------------------ |  | ---------- | --------- |  | --------- |  | - | ---------------- |  |  | ----------------- |  |  | --------------------------------------- | - |  | ------------------------------ |  | - | ----- |  |  | --------- | 
|Tao Jiang CEO of the Company and LMG |  |            | 14,069.23 |  |           |  | 0 |                  |  |  | 0                 |  |  |                                         | 0 |  |                                |  | 0 |       |  |  | 0         | 
|                                     |  |            |           |  |           |  |   |                  |  |  |                   |  |  |                                         |   |  |                                |  |   |       |  |  |           | 
|Ziwei Xu CFO of the Company and LMG  |  |            | 8,793.27  |  |           |  | 0 |                  |  |  | 0                 |  |  |                                         | 0 |  |                                |  | 0 |       |  |  | 0         | 



Agreements with Named Executive Officers



We have entered into employment agreements
with each of our executive officers. Pursuant to employment agreements, the form of which was filed as Exhibit 10.10 to our
registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission
on January 2, 2019, we agreed to employ each of our executive officers for a specified time period, which will be renewed upon
both parties’ agreement 30 days before the end of the current employment term, and payment of cash compensation and
benefits shall become payable when the Company becomes a public reporting company in the US. We may terminate the employment for
cause, at any time, without notice or remuneration, for certain acts of the executive officer, including but not limited to the
commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment, conviction of
a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe neglect
of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice.
Each executive officer has agreed to hold, both during and after the employment agreement expires, in strict confidence and not
to use or disclose to any person, corporation or other entity without written consent, any confidential information.



Our amended and restated employment agreement
with Tao Jiang, our CEO, provides for a term of five years beginning on August 21, 2018, with an annual salary of US$14,069.23.



Our amended and restated employment agreement
with Ziwei Xu, our CFO, provides for a term of five years beginning on August 21, 2018, with an annual salary of US$8,793.27.





55







Compensation of Directors



For the fiscal years ended June 30,
2019, we did not compensate our directors for their services other than to reimburse them for out-of-pocket expenses incurred in
connection with their attendance at meetings of the Board of Directors.



C. Board Practices



Pursuant to our amended and restated articles
of association, as adopted by special resolutions on December 11, 2018, the minimum number of directors shall consist of not less
than one person unless otherwise determined by the shareholders in a general meeting. Unless removed or re-appointed, each director
shall be appointed for a term expiring at the next-following annual general meeting, if any is held. At any annual general meeting
held, our directors will be elected by a majority vote of shareholders eligible to vote at that meeting. At each annual general
meeting, each director so elected shall hold office for a one-year term and until the election of their respective successors in
office or removed.



Involvement in Certain Legal Proceedings



To the best of our knowledge, none of our
directors or executive officers has, during the past 10 years, been involved in any legal proceedings described in subparagraph
(f) of Item 401 of Regulation S-K.



Board of Directors



Our board of directors consists of one director as of the date of this annual report.



Duties of Directors



Under Cayman Islands law, all of our directors
owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties. The Companies
Law (2018 Revision) of the Cayman Islands imposes a number of statutory duties on a director. A Cayman Islands director’s
fiduciary duties are not codified, however the courts of the Cayman Islands have held that a director owes the following fiduciary
duties: (a) a duty to act in what the director bona fide considers to be in the best interests of the company,
(b) a duty to exercise their powers for the purposes they were conferred, (c) a duty to avoid fettering his or her discretion
in the future and (d) a duty to avoid conflicts of interest and of duty. The common law duties owed by a director are those
to act with skill, care and diligence that may reasonably be expected of a person carrying out the same functions as are carried
out by that director in relation to the company and, also, to act with the skill, care and diligence in keeping with a standard
of care commensurate with any particular skill they have which enables them to meet a higher standard than a director without those
skills. In fulfilling their duty of care to us, our directors must ensure compliance with our amended articles of association,
as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our directors is breached.



Terms of Directors and Executive Officers



Each of our directors holds office until
a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such
director holds office until the next following annual meeting of shareholders at which time such director is eligible for re-election.
All of our executive officers are appointed by and serve at the discretion of our board of directors.



Qualification



There is currently no shareholding qualification
for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.



Insider Participation Concerning Executive Compensation



Our board of directors, which comprises one director, Mr. Bo Jiang, has been making all determinations
regarding executive officer compensation from the inception of the Company up and will continue to make such determinations until
the time when the other director and the three independent directors are installed.





56







Committees of the Board of Directors



We will establish three committees
under the board of directors: an audit committee, a compensation committee and a nominating and corporate governance
committee upon closing of our offering. We have adopted a charter for each of the three committees. Each committee’s
members and functions are described below.



Audit Committee.Our audit committee
will consist of Douglas Menelly, Adam (Xin) He, and Christopher Kohler. Douglas Menelly will be the chairman of our audit committee.
We have determined that Douglas Menelly, Adam (Xin) He, and Christopher Kohler will satisfy the “independence” requirements
of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. Our board also has
determined that Douglas Menelly qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses
financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee will oversee our accounting and financial
reporting processes and the audits of the financial statements of our company. The audit committee will be responsible for, among
other things:



| | · | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | reviewing with the independent auditors any audit problems or difficulties and management’s response;                                                                             
| | · | discussing the annual audited financial statements with management and the independent auditors;                                                                                  
| | · | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;
| | · | reviewing and approving all proposed related party transactions;                                                                                                                  
| | · | meeting separately and periodically with management and the independent auditors; and                                                                                             
| | · | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.             



Compensation Committee. Our compensation
committee will consist of Douglas Menelly, Adam (Xin) He, and Christopher Kohler upon the effectiveness of their appointments.
Christopher Kohler will be the chairman of our compensation committee. We have determined that Douglas Menelly, Adam (Xin) He,
and Christopher Kohler will satisfy the “independence” requirements of Section 5605(a)(2) of the NASDAQ Listing
Rules and Rule 10A-3 under the Securities Exchange Act. The compensation committee will assist the board in reviewing and
approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our
chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation
committee will be responsible for, among other things:



| | · | reviewing and approving to the board with respect to the total compensation package for our most senior executive officers;                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | approving and overseeing the total compensation package for our executives other than the most senior executive officers;                                                  
| | · | reviewing and recommending to the board with respect to the compensation of our directors;                                                                                 
| | · | reviewing periodically and approving any long-term incentive compensation or equity plans;                                                                                 
| | · | selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and
| | · | reviewing programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.                                                                    





57







Nominating and Corporate Governance
Committee. Our nominating and corporate governance committee will consist of Douglas Menelly, Adam (Xin)
He, and Christopher Kohler upon the effectiveness of their appointments. Adam (Xin) He will be the chairperson of our nominating
and corporate governance committee. Douglas Menelly, Adam (Xin) He, and Christopher Kohler satisfy the “independence”
requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Securities Exchange Act. The
nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our
directors and in determining the composition of the board and its committees. The nominating and corporate governance committee
will be responsible for, among other things:



| | · | identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy;                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us;                                                                                                                                                
| | · | identifying and recommending to our board the directors to serve as members of committees;                                                                                                                                                                                                                                        
| | · | advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and
| | · | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.                                                                                                                                                             



D. Employees



As of September 30, 2019, we had approximately
50 full-time employees. The table below sets forth the numbers of employees by area of business:



|Function                                |  | Number
 of
 Employees |    |  | % of 
Total | 
|--------------------------------------- |  | --------------------- | -- |  | ----------- | 
|Film Production Department              |  |                       | 5  |  |             | 
|Event Planning and Execution Department |  |                       | 4  |  |             | 
|Multi-Channel Advertising Department    |  |                       | 7  |  |             | 
|Operation Department                    |  |                       | 4  |  |             | 
|Finance Department                      |  |                       | 5  |  |             | 
|Human Resources Department              |  |                       | 5  |  |             | 
|Movie Theater Management Department     |  |                       | 20 |  |             | 
|Total                                   |  |                       | 50 |  |             | 



Generally, we enter into standard employment
contracts with our officers, managers, and other employees. According to these contracts, all of our employees are prohibited from
engaging in any other employment during the period of their employment with us. The employment contracts with officers and managers
are subject to renewal every five years and the employment contracts with other employees are subject to renewal every two years.
None of our employees is a member of a labor union and we consider our relationship with our employees to be good.



E. Share Ownership



The following table sets forth information
with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Ordinary Shares as of
the date of this annual report.



| | · | each of our directors and executive officers who beneficially own our Ordinary Shares; and
| | - | ------------------------------------------------------------------------------------------
| | · | each person known to us to own beneficially more than 5.0% of our Ordinary Shares.        



Beneficial ownership includes voting or
investment power with respect to the securities. Except as indicated below, and subject to applicable community property laws,
the persons named in the table have sole voting and investment power with respect to all Ordinary Shares shown as beneficially
owned by them. Percentage of beneficial ownership of each listed person is based on 16,021,126.7606 Ordinary Shares outstanding
as of the date of this annual report.



Information with respect to beneficial
ownership has been furnished by each director, officer, or beneficial owner of 5% or more of our Ordinary Shares. Beneficial ownership
is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with
respect to securities. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage
ownership of such person, Ordinary Shares underlying options, warrants, or convertible securities held by each such person that
are exercisable or convertible within 60 days of the date of this annual report are deemed outstanding, but are not deemed outstanding
for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as
required by applicable community property laws, all persons listed have sole voting and investment power for all Ordinary Shares
shown as beneficially owned by them. As of the date of the annual report, we have seven shareholders of record, none of whom is
located in the United States.



58







|                                                                     |  | Ordinary Shares Beneficially Owned |                
|-------------------------------------------------------------------- |  | ---------------------------------- | ---------------
|                                                                     |  | Number                             |                
|Directors and Executive Officers(1):                                 |  |                                    |                
|Bo Jiang                                                             |  |                                    | 5,985,915.4930 
|Tao Jiang                                                            |  |                                    | 2,992,957.7465 
|Di Wang                                                              |  |                                    | 2,992,957.7465 
|Liquan Wang                                                          |  |                                    | 0              
|Ziwei Xu                                                             |  |                                    | 0              
|Douglas Menelly                                                      |  |                                    | 0              
|Adam (Xin) He                                                        |  |                                    | 0              
|Christopher Kohler                                                   |  |                                    | 0              
|All directors and executive officers as a group (eight individuals): |  |                                    | 11,971,830.9859
|                                                                     |  |                                    |                
|5% Shareholders(2):                                                  |  |                                    |                
|Fenton Holding Co., Ltd.(3)                                          |  |                                    | 1,408,450.7042 
|Hailu Holding Co., Ltd.(4)                                           |  |                                    | 1,760,563.3803 



| | (1) | Unless otherwise indicated, the business address of each of the individuals is 2010 Huaruntiexi Center, Tiexi District, Shenyang, Liaoning Province, People’s Republic of China. The business address of Douglas Menelly is 53 Union Drive, Merrick, NY 11566. The business address of Adam (Xin) He is 1030 N State St, Apt 15LM, Chicago, IL 60610. The business address of Christopher Kohler is 11419 Canterberry Ln, Parker, CO.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Unless otherwise indicated, the business address of the following shareholders is ABM Chambers, PO Box 2283, Road Town, Tortola, British Virgin Islands.                                                                                                                                                                                                                                                                             
| | (3) | Ms. Min Zhang is the 100% owner of Fenton Holding Co., Ltd. that holds 1,408,450.7042 Ordinary Shares.                                                                                                                                                                                                                                                                                                                               
| | (4) | Ms. Lu Li is the 100% owner of Hailu Holding Co., Ltd. that holds 1,760,563.3803 Ordinary Shares.                                                                                                                                                                                                                                                                                                                                    



Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A. Major Shareholders



Please refer to “Item 6. Directors,
Senior Management and Employees—E. Share Ownership.”



B. Related Party Transactions



Contractual Arrangements with WFOE,
LMG and Its Shareholders



We conduct our advertising related business
through LMG, a VIE that we control through a series of contractual arrangements between our PRC subsidiary WFOE, LMG, and its shareholders
including but not limited to our principal shareholders, Mr. Bo Jiang, Mr. Tao Jiang, and Ms. Di Wang. Such contractual
arrangements provide us (i) the power to control LMG, (ii) the exposure or rights to variable returns from our involvement
with LMG, and (iii) the ability to affect those returns through use of our power over LMG to affect the amount of our returns.
Therefore, we control LMG. For a description of these contractual arrangements, see “Item 4. Information on the Company —
B. Business Overview — Contractual Arrangements between WFOE and LMG.”



Material Transactions with Related Parties



On August 24, 2018, the Company issued
50,000,000 Ordinary Shares to our Beneficial Owners, including some of our executive officers and directors indirectly, in connection
with entering into the VIE contractual arrangements, in a private transaction under the Cayman Islands laws, with 17,000,000 Ordinary
Shares issued to Mr. Bo Jiang, our chairman of the board and director, 8,500,000 Ordinary Shares issued to Mr. Tao Jiang,
our CEO, and 8,500,000 Ordinary Shares issued to Ms. Di Wang, our vice president.





59







As of June 30, 2019 and 2018, the
balances of due to related party were mainly loans provided by Mr. Tao Jiang, the CEO and director of the Company, to fund the
Company’s operations as set forth in the table below. The payables are unsecured, non-interest bearing and due on demand.



|                           |  | As of June 30,
 2019 |         |  | As of June 30,
 2018 |  
|-------------------------- |  | -------------------- | ------- |  | -------------------- | -
|Amount due to Tao Jiang    |  | $                    | 567,346 |  |                      | $
|Total due to related party |  | $                    | 567,346 |  |                      | $



Employment Agreements



See “Item 6. Directors, Senior Management
and Employees — B. Compensation — Agreements with Named Executive Officers.”



C. Interests of Experts and Counsel



Not applicable.



Item 8. FINANCIAL INFORMATION



A. Consolidated Statements and Other
Financial Information



We have appended consolidated financial
statements filed as part of this annual report.



Legal Proceedings



From time to time, we are subject to legal
proceedings, investigations and claims incidental to the conduct of our business. We are not currently a party to any legal proceeding
or investigation which, in the opinion of our management, is likely to have a material adverse effect on our business, financial
condition or results of operations, except for the disclosure under “Item 4. Information on the Company—B. Business
Overview—Legal Proceedings.”



Dividend Policy



We intend to keep any future earnings to
finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.



Under Cayman Islands law, a Cayman Islands
company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a
dividend be paid if this would result in the company being unable to pay its debts due in the ordinary course of business.



If we determine to pay dividends on any
of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary,
Yuezhong Media HK.



Current PRC regulations permit our indirect
PRC subsidiaries to pay dividends to Yuezhong Media HK only out of their accumulated profits, if any, determined in accordance
with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least
10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital.
Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare
fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory
reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings
of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.





60







The PRC government also imposes
controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may
experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the
payment of dividends from our profits, if any. Furthermore, if our subsidiaries and affiliates in the PRC incur debt on their
own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If
we or our subsidiaries are unable to receive all of the revenues from our operations through the current contractual
arrangements, we may be unable to pay dividends on our Ordinary Shares.



Cash dividends, if any, on our Ordinary
Shares will be paid in U.S. dollars. Yuezhong Media HK may be considered a non-resident enterprise for tax purposes, so that any
dividends WFOE pays to Yuezhong Media HK may be regarded as China-sourced income and as a result may be subject to PRC withholding
tax at a rate of up to 10%. See “Item 10. Additional Information — E. Taxation — People’s Republic
of China Taxation — Enterprise Income Tax.”



In order for us to pay dividends to our
shareholders, we will rely on payments made from LMG to WFOE, pursuant to contractual arrangements between them, and the distribution
of such payments to Yuezhong Media HK as dividends from LMG. Certain payments from our LMG to WFOE are subject to PRC taxes, including
business taxes and VAT. In addition, if LMG or its subsidiaries or branches incur debt on their own behalves in the future, the
instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.



Pursuant to the Arrangement between Mainland
China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double
Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than
25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied,
including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the
Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the 12 consecutive months
preceding its receipt of the dividends. In current practice, a Hong Kong project must obtain a tax resident certificate from the
Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax
resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate
from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement
with respect to dividends to be paid by our PRC subsidiary to its immediate holding company, Yuezhong Media HK. As of the date
of this annual report, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Yuezhong
Media HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to Yuezhong Media HK. See
 “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the PRC — There are significant
uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our
PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”



B. Significant Changes



Except as disclosed elsewhere in this annual
report, we have not experienced any significant changes since the date of our audited consolidated financial statements included
in this annual report.



Item 9. THE OFFER AND LISTING



A. Offer and Listing Details.



We have applied to list the Ordinary Shares
on the Nasdaq Capital Market under the symbol “YZCM.”



B. Plan of Distribution



Not applicable.



C. Markets



We have applied to list the Ordinary Shares
on the Nasdaq Capital Market under the symbol “YZCM.”



D. Selling Shareholders



Not applicable.



E. Dilution



Not applicable.



F. Expenses of the Issue



Not applicable.





61







Item 10. ADDITIONAL INFORMATION



A. Share Capital



Not applicable.



B. Memorandum and Articles of Association



We incorporate by reference into this annual
report the description of our amended and restated memorandum and articles of association and Exhibits 3.1 and 3.2 contained in
our registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission
on January 2, 2019.



C. Material Contracts



We have not entered into any material contracts
other than in the ordinary course of business and other than those described in “Item 4. Information on the Company”
or elsewhere in this annual report.



D. Exchange Controls



See “Item 4. Information on the Company
 — B. Business Overview — PRC Regulations — Regulations on Foreign Exchange.”



E. Taxation



People’s Republic of China Taxation



The following brief description of Chinese
enterprise laws is designed to highlight the enterprise-level taxation on our earnings, which will affect the amount of dividends,
if any, we are ultimately able to pay to our shareholders.



Enterprise Income Tax



According to the Enterprise Income
Tax Law of the People’s Republic of China, or the EIT Law, which was promulgated by the Standing Committee of the National
People’s Congress on March 16, 2007, and became effective on January 1, 2008, and then amended on February 24,
2017, and the Implementation Rules of the EIT Law, or the Implementation Rules, which were promulgated by the State
Council on December 6, 2007, and became effective on January 1, 2008, enterprises are divided into resident enterprises
and non-resident enterprises. Resident enterprises pay enterprise income tax on their incomes obtained in and outside the PRC at
the rate of 25%. Non-resident enterprises setting up institutions in the PRC pay enterprise income tax on the incomes obtained
by such institutions in and outside the PRC at the rate of 25%. Non-resident enterprises with no institutions in the PRC, and non-resident
enterprises with income having no substantial connection with their institutions in the PRC, pay enterprise income tax on their
income obtained in the PRC at a reduced rate of 10%.



We are a holding company incorporated in
the Cayman Islands and we gain substantial income by way of dividends paid to us from our PRC subsidiary. The EIT Law and its implementation
rules provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders
that are non-resident enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor’s
jurisdiction of incorporation has a tax treaty with China that provides for a preferential tax rate or a tax exemption.



Under the EIT Law, an enterprise
established outside of China with a “de facto management body” within China is considered a “resident
enterprise,” which means that it is treated in a manner similar to a Chinese enterprise for enterprise income tax
purposes. Although the implementation rules of the EIT Law define “de facto management body” as a managing body
that actually, comprehensively manage and control the production and operation, staff, accounting, property and other aspects
of an enterprise, the only official guidance for this definition currently available is set forth in SAT Notice 82, which
provides guidance on the determination of the tax residence status of a Chinese-controlled offshore incorporated enterprise,
defined as an enterprise that is incorporated under the laws of a foreign country or territory and that has a PRC enterprise
or enterprise group as its primary controlling shareholder. Although Leaping Group Co., Ltd. does not have a PRC enterprise
or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated
enterprise within the meaning of SAT Notice 82, in the absence of guidance specifically applicable to us, we have applied the
guidance set forth in SAT Notice 82 to evaluate the tax residence status of Leaping Group Co., Ltd. and its subsidiaries
organized outside the PRC.





62







According to SAT Notice 82, a Chinese-controlled
offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body”
in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met:
(i) the places where senior management and senior management departments that are responsible for daily production, operation
and management of the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions
(such as money borrowing, lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal
and salary and wages) are decided or need to be decided by organizations or persons located within the territory of China; (iii)
main property, accounting books, corporate seal, the board of directors and files of the minutes of shareholders’ meetings
of the enterprise are located or preserved within the territory of China; and (iv) one half  (or more) of the directors or
senior management staff having the right to vote habitually reside within the territory of China.



We believe that we do not meet some of
the conditions outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of
Leaping Group Co., Ltd., including the resolutions and meeting minutes of our board of directors and the resolutions and meeting
minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding
companies with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the PRC tax
authorities. Accordingly, we believe that Leaping Group Co., Ltd. and its offshore subsidiaries should not be treated as a “resident
enterprise” for PRC tax purposes if the criteria for “de facto management body” as set forth in SAT Notice 82
were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax
authorities and uncertainties remain with respect to the interpretation of the term “de facto management body” as applicable
to our offshore entities, we will continue to monitor our tax status.



The implementation rules of the EIT Law
provide that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from
transferring equity interests of enterprises domiciled in the PRC, then such dividends or gains are treated as China-sourced income.
It is not clear how “domicile” may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction
where the enterprise is a tax resident. Therefore, if we are considered as a PRC tax resident enterprise for PRC tax purposes,
any dividends we pay to our overseas shareholders which are non-resident enterprises as well as gains realized by such shareholders
from the transfer of our shares may be regarded as China-sourced income and as a result become subject to PRC withholding tax at
a rate of up to 10%. We are unable to provide a “will” because Dentons, our PRC counsel believes that it is more likely
than not that the Company and its offshore subsidiaries would be treated as a non-resident enterprise for PRC tax purposes because
they do not meet some of the conditions out lined in SAT Notice. In addition, we are not aware of any offshore holding companies
with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the PRC tax authorities
as of the date of this annual report. Therefore we believe that it is possible but highly unlikely that the income received by
our overseas shareholders will be regarded as China-sourced income.



See “Item 3. Key Information
 — D. Risk Factors — Risks Relating to Doing Business China — Under the PRC Enterprise Income Tax Law, or the
EIT Law, we may be classified as a ‘resident enterprise’ of China, which could result in unfavorable tax consequences
to us and our non-PRC shareholders.”



Currently, as resident enterprises in the
PRC, WFOE as well as LMG and its subsidiaries in PRC are generally subject to the enterprise income tax at the rate of 25%, except
that once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the part of its
taxable income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and 3 million is
subject to a reduced rate of 10%. LMG paid enterprise income taxes of approximately US$415,688 and US$4,572 in the years ended
June 30, 2019 and 2018). The EIT is calculated based on the entity’s global income as determined under PRC tax laws
and accounting standards. If the PRC tax authorities determine that LMG is a PRC resident enterprise for enterprise income tax
purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident
enterprises. In addition, non-resident enterprise shareholders may be subject to a 10% PRC withholding tax on gains realized on
the sale or other disposition of our Ordinary Shares, if such income is treated as sourced from within the PRC. It is unclear whether
our non-PRC individual shareholders would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders
in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to dividends or gains realized by
non-PRC individuals, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty.
However, it is also unclear whether non-PRC shareholders of the Company would be able to claim the benefits of any tax treaties
between their country of tax residence and the PRC in the event that the Company is treated as a PRC resident enterprise. There
is no guidance from the PRC government to indicate whether or not any tax treaties between the PRC and other countries would apply
in circumstances where a non-PRC company was deemed to be a PRC tax resident, and thus there is no basis for expecting how tax
treaty between the PRC and other countries may impact non-resident enterprises.





63







Value-added Tax



Pursuant to the Provisional Regulations
on Value-Added Tax of the PRC, or the VAT Regulations, which were promulgated by the State Council on December 13, 1993,
and took effect on January 1, 1994, and were amended on November 10, 2008, February 6, 2016, and November 19,
2017, respectively, and the Rules for the Implementation of the Provisional Regulations on Value Added Tax of the PRC, which
were promulgated by the MOF, on December 25, 1993, and were amended on December 15, 2008, and October 28, 2011,
respectively, entities and individuals that sell goods or labor services of processing, repair or replacement, sell services, intangible
assets, or immovables, or import goods within the territory of the People’s Republic of China are taxpayers of value-added
tax. The VAT rate is 17% for taxpayers selling goods, labor services, or tangible movable property leasing services or importing
goods, except otherwise specified; 11% for taxpayers selling goods, labor services, or tangible movable property leasing services
or importing goods, except otherwise specified; 6% for taxpayers selling services or intangible assets.



According to Provisions in the
Notice on Adjusting the Value added Tax Rates (Cai Shui [2018] No. 32), or the Notice, issued by the SAT and the MOF,
where taxpayers make VAT taxable sales or import goods, the applicable tax rates shall be adjusted from 17% to 16% and from 11%
to 10%, respectively. The Notice took effect on May 1, 2018, and the adjusted VAT rates took effect at the same time.



The Notice of the Ministry of Finance
and the State Administration of Taxation on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax in an
All-round Manner on March 23, 2016, which took effect on May 1, 2016. Pursuant to such circular, the Value Added
Tax Pilot Program has been applicable nationwide since May 1, 2016.



According to the VAT Regulations and the
related rules, as of the date of this annual report, as taxpayers selling services, LMG and its consolidated affiliated entities
except Liaoning Leaping International Cinema Management Co., Ltd., are generally subject to a 6% VAT rate. Liaoning Leaping International
Cinema Management Co., Ltd. is subject to a 3% VAT rate.



Dividend Withholding Tax



The Enterprise Income Tax Law provides
that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-PRC resident
investors which do not have an establishment or place of business in the PRC, or which have such establishment or place of business
but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends
are derived from sources within the PRC.



Pursuant to an Arrangement Between
the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance Arrangement, and other applicable PRC laws, if
a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and
requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the
Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on the Circular
on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, or the SAT Circular 81, issued on
February 20, 2009, by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits
from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may
adjust the preferential tax treatment. According to the Circular on Several Questions regarding the “Beneficial Owner”
in Tax Treaties, which was issued on February 3, 2018, by the SAT and took effect on April 1, 2018, when determining
the applicant’s status of the “beneficial owner” regarding tax treatments in connection with dividends, interests
or royalties in the tax treaties, several factors, including without limitation, whether the applicant is obligated to pay more
than 50% of his or her income in 12 months to residents in third country or region, whether the business operated by the applicant
constitutes the actual business activities, and whether the counterparty country or region to the tax treaties does not levy any
tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be
analyzed according to the actual circumstances of the specific cases. This circular further provides that applicants who intend
to prove his or her status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau
according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment
of the Treatment under Tax Agreements.



As of the date of this annual report, when
considered as a non-PRC resident investor, which is much more likely to happen than not, Yuezhong Media HK shall be subject to
the dividend withholding tax at the rate of 10%. Upon identified as the Hong Kong resident enterprise stipulated by the Double
Tax Avoidance Arrangement and other applicable laws, the withholding tax may be reduced to 5%.





64







Hong Kong Taxation



Entities incorporated in Hong Kong are
subject to profits tax in Hong Kong at the rate of 16.5% for each of the years ended June 30, 2019, 2018, and 2017.



British Virgin Islands Taxation



The British Virgin Islands currently levies
no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature
of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the
British Virgin Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within
the jurisdiction of the British Virgin Islands. No stamp duty is payable in the British Virgin Islands on the issue of shares by,
or any transfers of shares of, British Virgin Islands companies (except those which hold interests in land in the British Virgin
Islands). The British Virgin Islands is not party to any double tax treaties that are applicable to any payments made to or by
the Company. The British Virgin Islands is not a party to any double tax treaties that are applicable to any payments made to our
by the Company. There are no exchange control regulations or currency restrictions in the British Virgin Islands.



Payments of dividends and capital in respect
of our Ordinary Shares will not be subject to taxation in the British Virgin Islands and no withholding will be required on the
payment of a dividend or capital to any holder of our Ordinary Shares, as the case may be, nor will gains derived from the disposal
of our Ordinary Shares be subject to British Virgin Islands income or corporation tax.



Cayman Islands Taxation



The Cayman Islands currently levies no
taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman
Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction
of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of,
Cayman Islands companies (except those which hold interests in land in the Cayman Islands). The Cayman Islands is not party to
any double tax treaties that are applicable to any payments made to or by the Company. There are no exchange control regulations
or currency restrictions in the Cayman Islands.



Payments of dividends and capital in respect
of our Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment
of a dividend or capital to any holder of our Ordinary Shares, as the case may be, nor will gains derived from the disposal of
our Ordinary Shares be subject to Cayman Islands income or corporation tax.



United States Federal Income Tax Considerations



The following does not address the tax
consequences to any particular investor or to persons in special tax situations such as:



| | · | banks;                                                                                                                                   
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| | · | financial institutions;                                                                                                                  
| | · | insurance companies;                                                                                                                     
| | · | regulated investment companies;                                                                                                          
| | · | advertising investment trusts;                                                                                                           
| | · | broker-dealers;                                                                                                                          
| | · | persons that elect to mark their securities to market;                                                                                   
| | · | U.S. expatriates or former long-term residents of the U.S.;                                                                              
| | · | governments or agencies or instrumentalities thereof;                                                                                    
| | · | tax-exempt entities;                                                                                                                     
| | · | persons liable for alternative minimum tax;                                                                                              
| | · | persons holding our Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction;                                
| | · | persons that actually or constructively own 10% or more of our voting power or value (including by reason of owning our Ordinary Shares);
| | · | persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation; or          
| | · | persons holding our Ordinary Shares through partnerships or other pass-through entities.                                                 





65







Material Tax Consequences Applicable
to U.S. Holders of Our Ordinary Shares



The following sets forth the material U.S.
federal income tax consequences related to the ownership and disposition of our Ordinary Shares. It is directed to U.S. Holders
(as defined below) of our Ordinary Shares and is based upon laws and relevant interpretations thereof in effect as of the date
of this annual report, all of which are subject to change. This description does not deal with all possible tax consequences relating
to ownership and disposition of our Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the
tax consequences under non-U.S. tax laws, state, local and other tax laws.



The following brief description applies
only to U.S. Holders (defined below) that hold Ordinary Shares as capital assets and that have the U.S. dollar as their functional
currency. This brief description is based on the federal income tax laws of the United States in effect as of the date of this
annual report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as
well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities
are subject to change, which change could apply retroactively and could affect the tax consequences described below.



The brief description below of the U.S.
federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of Ordinary Share
and you are, for U.S. federal income tax purposes,



| | · | an individual who is a citizen or resident of the United States;                                                                                                                                                                                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;                                                                                          
| | · | an estate whose income is subject to U.S. federal income taxation regardless of its source; or                                                                                                                                                                                       
| | · | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.



Prospective purchasers are urged to consult
their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as
the state, local, foreign, and other tax consequences to them of the purchase, ownership, and disposition of our Ordinary Shares.



Taxation of Dividends and Other Distributions
on our Ordinary Shares



Subject to the PFIC (defined below) rules
discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount
of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by
you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined
under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received
deduction allowed to corporations in respect of dividends received from other U.S. corporations.



With respect to non-corporate U.S. Holders,
including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income,
provided that (1) the Ordinary Shares are readily tradable on an established securities market in the United States, or we are
eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information
program, (2) we are not a PFIC (defined below) for either our taxable year in which the dividend is paid or the preceding taxable
year, and (3) certain holding period requirements are met. Because there is no income tax treaty between the United States and
the Cayman Islands, clause (1) above can be satisfied only if the Ordinary Shares are readily tradable on an established securities
market in the United States. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause
(1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Capital
Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect
to our Ordinary Shares, including the effects of any change in law after the date of this annual report.



Dividends will constitute foreign source
income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above),
the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to
the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends.
The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this
purpose, dividends distributed by us with respect to our Ordinary Shares will constitute “passive category income”
but could, in the case of certain U.S. Holders, constitute “general category income.”





66







To the extent that the amount of the
distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax
principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares, and to the extent the
amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate
our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution
will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as
capital gain under the rules described above.



Taxation of Dispositions of Ordinary
Shares



Subject to the passive foreign investment
company rules discussed below, you will recognize taxable gain or loss on any sale, exchange, or other taxable disposition of a
share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars)
in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual
U.S. Holder, who has held the Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The
deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as
United States source income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign
tax credits.



Passive Foreign Investment Company
(“PFIC”)



A non-U.S. corporation is considered a
PFIC, as defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:



| | · | at least 75% of its gross income for such taxable year is passive income; or                                                                                                                                                         
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”).



Passive income generally includes dividends,
interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains
from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate
share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In
determining the value and composition of our assets for purposes of the PFIC asset test, the value of our assets must be determined
based on the market value of our Ordinary Shares from time to time, which could cause the value of our non-passive assets to be
less than 50% of the value of all of our assets on any particular quarterly testing date for purposes of the asset test.



Based on our operations and the composition
of our assets we do not expect to be treated as a PFIC under the current PFIC rules. However, we must make a separate determination
each year as to whether we are a PFIC, and there can be no assurance with respect to our status as a PFIC for our current taxable
year or any future taxable year. It is possible that, for our current taxable year or for any subsequent taxable year, more than
50% of our assets may be assets held for the production of passive income. We will make this determination following the end of
any particular tax year. Although the law in this regard is unclear, we are treating LMG as being owned by us for United States
federal income tax purposes, not only because we control their management decisions, but also because we are entitled to the economic
benefits associated with LMG, and as a result, we are treating LMG as our wholly-owned subsidiary for U.S. federal income tax purposes.
If we are not treated as owning LMG for United States federal income tax purposes, we would likely be treated as a PFIC. In addition,
because the value of our assets for purposes of the asset test will generally be determined based on the market price of our Ordinary
Shares and because cash is generally considered to be an asset held for the production of passive income, our PFIC status will
depend in large part on the market price of our Ordinary Shares. Accordingly, fluctuations in the market price of the Ordinary
Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects
and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in our initial
public offering. We are under no obligation to take steps to reduce the risk of our being classified as a PFIC, and as stated above,
the determination of the value of our assets will depend upon material facts (including the market price of our Ordinary Shares
from time to time and the amount of cash we raise in our initial public offering) that may not be within our control. If we are
a PFIC for any year during which you hold Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years
during which you hold Ordinary Shares. However, if we cease to be a PFIC and you did not previously make a timely “mark-to-market”
election as described below, you may avoid some of the adverse effects of the PFIC regime by making a “purging election”
(as described below) with respect to the Ordinary Shares.





67







If we are a PFIC for your taxable
year(s) during which you hold Ordinary Shares, you will be subject to special tax rules with respect to any “excess
distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the
Ordinary Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a
taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three
preceding taxable years or your holding period for the Ordinary Shares will be treated as an excess distribution. Under
these special tax rules:



| | · | the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares;                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and                                                         
| | · | the amount allocated to each of your other taxable year(s) will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.



The tax liability for amounts allocated
to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for
such years, and gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even if you hold
the Ordinary Shares as capital assets.



A U.S. Holder of  “marketable
stock” (as defined below) in a PFIC may make a mark-to-market election, under Section 1296 of the US Internal Revenue Code,
for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year
which you hold (or are deemed to hold) Ordinary Shares and for which we are determined to be a PFIC, you will include in your income
each year an amount equal to the excess, if any, of the fair market value of the Ordinary Shares as of the close of such taxable
year over your adjusted basis in such Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You
are allowed an ordinary loss for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value
as of the close of the taxable year. However, such ordinary loss is allowable only to the extent of any net mark-to-market gains
on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market
election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary
loss treatment also applies to any loss realized on the actual sale or disposition of the Ordinary Shares, to the extent that the
amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary Shares. Your basis in the
Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax
rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower
applicable capital gains rate for qualified dividend income discussed above under “—Taxation of Dividends and Other
Distributions on our Ordinary Shares” generally would not apply.



The mark-to-market election is available
only for “marketable stock”, which is stock that is traded in other than de minimis quantities on at least 15 days
during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable
U.S. Treasury regulations), including the Nasdaq Capital Market. If the Ordinary Shares are regularly traded on the Nasdaq Capital
Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were we to be or become
a PFIC.



Alternatively, a U.S. Holder of stock in
a PFIC may make a “qualified electing fund” election, under Section 1295(b) of the US Internal Revenue Code, with respect
to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election
with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s
earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides
such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations.
We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election.
If you hold Ordinary Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service
Form 8621 in each such year and provide certain annual information regarding such Ordinary Shares, including regarding distributions
received on the Ordinary Shares and any gain realized on the disposition of the Ordinary Shares.



If you do not make a timely “mark-to-market”
election (as described above), and if we were a PFIC at any time during the period you hold our Ordinary Shares, then such Ordinary
Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless
you make a “purging election” for the year we cease to be a PFIC. A “purging election” creates a deemed
sale of such Ordinary Shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The
gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess
distribution, as described above. As a result of the purging election, you will have a new basis (equal to the fair market value
of the Ordinary Shares on the last day of the last year in which we are treated as a PFIC) and holding period (which new holding
period will begin the day after such last day) in your Ordinary Shares for tax purposes.



You are urged to consult your tax advisors
regarding the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed above.



68







Information Reporting and Backup
Withholding



Dividend payments with respect to our Ordinary
Shares and proceeds from the sale, exchange, or redemption of our Ordinary Shares may be subject to information reporting to the
U.S. Internal Revenue Service and possible U.S. backup withholding, under Section 3406 of the US Internal Revenue Code with, at
a current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification
number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup
withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal
Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information
reporting and backup withholding rules.



Backup withholding is not an additional
tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain
a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the
U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders.
However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup
withholding), and such brokers or intermediaries may be required by law to withhold such taxes.



Under the Hiring Incentives to Restore
Employment Act of 2010, certain U.S. Holders are required to report information relating to our Ordinary Shares, subject to certain
exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching
a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each
year in which they hold Ordinary Shares.



F. Dividends and Paying Agents



Not applicable.



G. Statement by Experts



Not applicable.



H. Documents on Display



We have previously filed with the SEC our
registration statements on Form F-1 (File Number 333-229116), as amended.



We are subject to the periodic reporting
and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information
with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year.
Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates
at the public reference facilities maintained by the SEC at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549. The public
may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information
regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt
from the rules of the Exchange Act prescribing, among other things, the furnishing and content of proxy statements to shareholders,
and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act.



I. Subsidiary Information



For a listing of our subsidiaries, see
 “Item 4. Information on the Company — C. Organizational Structure.”



Item 11. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



Foreign Exchange Risk



Our functional currency is the RMB.
Any significant revaluation of RMB against U.S. dollar may materially the value of, and any dividends payable on, our
Ordinary Shares in U.S. dollars in the future. See “Item 3. Key Information — D. Risk Factors — Risks
Related to Doing Business in the PRC — Because our business is conducted in RMB and the price of our Ordinary Shares is
quoted in United States dollars, changes in currency conversion rates may affect the value of your
investments.”



69







Concentration Risks



The Company’s sales
are made to customers that are located primarily in China. The Company has a concentration of its revenues and receivables with
specific customers. For the years ended June 30, 2019, 2018 and 2017, a major customer accounted for 15%, 13% and 43% of the Company’s
total revenue, respectively.



As of June 30, 2019, four
customers represented 29%, 13%, 11% and 11% of the net accounts receivable balance. As of June 30, 2018, two customers represented
36% and 22% of the net accounts receivable balance, respectively.



For the year ended June
30, 2019, the Company purchased 51% and 18% of its services from two suppliers, respectively. For the year ended June 30, 2018
and 2017, the Company purchased approximately 84% and 80% of its services from one major supplier, respectively.



Risks related to our VIE structure



We believe that the contractual arrangements with our VIE and
the respective shareholders are currently in compliance with PRC laws and regulations. However, if the legal structure and contractual
arrangements were to be found in violation of PRC laws and regulations, the PRC government could:



| | · | revoke the business and operating licenses of our PRC subsidiary and
VIE;
| | - | -------------------------------------------------------------------------

| | · | discontinue or restrict the operations of any related-party transactions
between our PRC subsidiary and VIE;
| | - | ------------------------------------------------------------------------------------------------------------

| | · | limit our business expansion in China by way of entering into contractual
arrangements;
| | - | ---------------------------------------------------------------------------------------

| | · | require us or our PRC subsidiary and VIE to restructure the relevant
ownership structure or operations; or
| | - | ----------------------------------------------------------------------------------------------------------

| | · | restrict or prohibit our use of the proceeds of our initial public
offering to finance our business and operations in China.
| | - | ----------------------------------------------------------------------------------------------------------------------------



Our ability to conduct business may be
negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, we may not be able
to consolidate our VIE in our consolidated financial statements as we may lose the ability to exert effective control over the
VIE and their respective shareholders and we may lose the ability to receive economic benefits from the VIE. We, however, do not
believe such actions would result in the liquidation or dissolution of our Company, our PRC subsidiary and VIE.



The interests of the shareholders of VIE
may diverge from that of our Company and that may potentially increase the risk that they would seek to act contrary to the contractual
terms, for example by influencing VIE not to pay the service fees when required to do so. We cannot assure that when conflicts
of interest arise, shareholders of VIE will act in the best interests of us or that conflicts of interests will be resolved in
our favor. Currently, we do not have existing arrangements to address potential conflicts of interest the shareholders of VIE may
encounter in its capacity as beneficial owners and directors of VIE, on the one hand, and as beneficial owners and directors of
our Company, on the other hand. We believe the shareholders of VIE will not act contrary to any of the contractual arrangements
and the exclusive option agreements provide us with a mechanism to remove the current shareholders of VIE should they act to the
detriment of our Company. We rely on certain current shareholders of VIE to fulfill their fiduciary duties and abide by laws of
the PRC and act in the best interest of our Company. If we cannot resolve any conflicts of interest or disputes between us and
the shareholders of VIE, we would have to rely on legal proceedings, which could result in disruption of its business, and there
is substantial uncertainty as to the outcome of any such legal proceedings.



Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



A. Debt Securities



Not applicable.



B. Warrants and Rights



Not applicable.



C. Other Securities



Not applicable.



D. American Depositary Shares



Not applicable.





70







Part II



Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



None.



Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS



See “Item 10. Additional Information” for a description
of the rights of securities holders.



Use of Proceeds



The following “Use of Proceeds”
information relates to the registration statement on Form F-1, as amended (File Number 333-229116) for our upcoming initial public
offering of 2,000,000 Ordinary Shares at the initial public offering price range of between $4.00 to $6.00, which was declared
effective by the SEC on March 21, 2019..



We still intend to use the proceeds from
our upcoming initial public offering as disclosed in our registration statement on Form F-1.



Item 15. CONTROLS AND PROCEDURES



Disclosure Controls and Procedures



Under the supervision and with the participation of our management, including our chief executive officer
and chief financial officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which
is defined in Rules 13a-15(e) of the Exchange Act, as of June 30, 2019. Based on that evaluation, our management has concluded
that, as of June 30, 2019, our disclosure controls and procedures were not effective in ensuring that the information required
to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized, and reported,
within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our conclusion
is based on the fact that we do not have in-house personnel in our accounting department with sufficient knowledge of the U.S.
GAAP and SEC reporting rules.



Management’s Annual Report on
Internal Control over Financial Reporting



This annual report does not include a report
of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s
registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for
newly public companies.



Attestation Report of the Registered
Public Accounting Firm



This annual report on Form 20-F does not
include an attestation report of the company’s registered public accounting firm due to rules of the SEC where domestic and
foreign registrants that are non-accelerated filers, which we are, and “emerging growth companies” which we also are,
are not required to provide the auditor attestation report.



Changes in Internal Control over Financial
Reporting



There were no changes in our internal controls
over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.



Item 16A. AUDIT COMMITTEE FINANCIAL
EXPERT



Douglas Menelly qualifies as an “audit
committee financial expert” as defined in Item 16A of Form 20-F. Douglas Menelly satisfies the “independence”
requirements of Section 5605(a)(2) of the NASDAQ Listing Rules as well as the independence requirements of Rule 10A-3 under the
Exchange Act.



Item 16B. CODE OF ETHICS



The Company adopted a code of ethics as
of the date of the filing of their Form F-1 on January 2, 2019, and filed it as exhibit 99.1 to the Form F-1.



Item 16C. PRINCIPAL ACCOUNTANT FEES
AND SERVICES



The following table sets forth the aggregate
fees by categories specified below in connection with certain professional services rendered and billed by Friedman LLP, our independent
registered public accounting firm for the periods indicated.





71









|                   |  | For the Fiscal Years Ended June 30, |        
|------------------ |  | ----------------------------------- | -------
|                   |  | 2019                                |        
|Audit fees         |  | $                                   | 210,000
|Audit-Related Fees |  | $                                   | —      
|Tax Fees           |  | $                                   | —      
|All Other Fees     |  | $                                   | —      
|Total Fees         |  | $                                   | 210,000





The policy of our audit committee is to
pre-approve all audit and non-audit services provided by Friedman LLP, our independent registered public accounting firm including
audit services, audit-related services, tax services and other services as described above, other than those for de minimis services
which are approved by the audit committee prior to the completion of the audit.



Item 16D. EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES



Not applicable.



Item 16E. PURCHASES OF EQUITY SECURITIES
BY THE ISSUER AND AFFILIATED PURCHASERS



None.



Item 16F. CHANGE IN REGISTRANT’S
CERTIFYING ACCOUNTANT



None.



Item 16G. CORPORATE GOVERNANCE



As a Cayman Islands company sought to be
listed on the Nasdaq Capital Market, we are subject to the Nasdaq Capital Market corporate governance listing standards. However,
Nasdaq Capital Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country.
Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq
Capital Market corporate governance listing standards.



Nasdaq Listing Rule 5605(b)(1) requires
listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however,
we are permitted to, and we may follow home country practice in lieu of the above requirements, or we may choose to comply with
the above requirement within one year of listing. The corporate governance practice in our home country, the Cayman Islands, does
not require a majority of our board to consist of independent directors. Currently, a majority of our board members are independent.
Other than those described above, there are no significant differences between our corporate governance practices and those followed
by U.S. domestic companies under Nasdaq Capital Market corporate governance listing standards.



Item 16H. MINE SAFETY DISCLOSURE



Not applicable.





72







Part III



Item 17. FINANCIAL STATEMENTS



We have elected to provide financial statements
pursuant to Item 18.



Item 18. FINANCIAL STATEMENTS



The consolidated financial statements of
Leaping Group Co., Ltd., and its subsidiaries are included at the end of this annual report.



Item 19. EXHIBITS



EXHIBIT INDEX



|Exhibit
    No. |  | Description                                                                                                                                                                                                                                                                                                                                                           
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1             |  | Amended and Restated
    Memorandum of Association of the Registrant (incorporated herein by reference to Exhibit 3.1 to the registration statement
    on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                
|1.2             |  | Amended and Restated
    Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.2 to the registration statement on
    Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                  
|2.1             |  | Registrant’s
    Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.1 to the registration statement on
    Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                           
|4.1             |  | Form of Pre-movie
    Advertisement Release Agreement (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1
    (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                              
|4.2             |  | Form of Event Planning
    and Execution Agreement (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1 (File
    No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                 
|4.3             |  | Form of Advertising
    Service Distribution Agreement (incorporated herein by reference to Exhibit 10.3 to the registration statement on Form F-1
    (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                             
|4.4             |  | Pre-movie Advertisement
    Regional Agency Agreement, dated November 27. 2017, between Muwei Fashion Culture Media (Tianjin) Co., Ltd. and LMG (incorporated
    herein by reference to Exhibit 10.4 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially
    filed with the Securities and Exchange Commission on January 2, 2019)
|4.5             |  | Pre-movie Advertisement
    Regional Agency Agreement, dated November 27, 2017, between Tianjin Wanda Media Co., Ltd. and LMG (incorporated herein by
    reference to Exhibit 10.5 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with
    the Securities and Exchange Commission on January 2, 2019)                  
|4.6             |  | Pre-movie Advertisement
    Regional Agency Agreement, dated November 12, 2018, between Tianjin Wanda Media Co., Ltd. and LMG (incorporated herein by
    reference to Exhibit 10.6 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with
    the Securities and Exchange Commission on January 2, 2019)                  
|4.7             |  | Pre-movie Advertisement
    Regional Agency Agreement, dated November 12, 2018, between Tianjin Wanda Media Co., Ltd. and LMG (incorporated herein by
    reference to Exhibit 10.7 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with
    the Securities and Exchange Commission on January 2, 2019)                  
|4.8             |  | Pre-movie Advertisement
    Local Agency Agreement between Youmu Advertising Co., Ltd. and LMG (incorporated herein by reference to Exhibit 10.8 to the
    registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission
    on January 2, 2019)                                                 
|4.9             |  | Media Authorization
    Agency Agreement, dated February 20, 2019, between Beijing Yi Shi Advertising Media Co., Ltd. and LMG (incorporated herein
    by reference to Exhibit 10.9 to the post-effective amendment to registration statement on Form F-1 (File No. 333-229116),
    filed with the Securities and Exchange Commission on September 30, 2019)         





73









|4.10  |  | Form
    of Employment Agreement (incorporated herein by reference to Exhibit 10.10 to the registration statement on Form F-1 (File
    No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                                                                                                  
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.11  |  | Form of Indemnification
    Agreement (incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1 (File No. 333-229116),
    as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                                                                                             
|4.12  |  | The Exclusive Service
    Agreement, dated October 15, 2018, between Yuezhong Shenyang and LMG (incorporated herein by reference to Exhibit 10.12 to
    the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange
    Commission on January 2, 2019)                                                                                                                
|4.13  |  | Equity Pledge Agreement,
    dated October 15, 2018, by and among Bo Jiang, Tao Jiang, Di Wang and Yuezhong Shenyang (incorporated herein by reference
    to Exhibit 10.13 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities
    and Exchange Commission on January 2, 2019)                                                                                          
|4.14  |  | Call Option Agreement,
    dated October 15, 2018, by and among Bo Jiang, Tao Jiang, Di Wang and Yuezhong Shenyang (incorporated herein by reference
    to Exhibit 10.14 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities
    and Exchange Commission on January 2, 2019)                                                                                            
|4.15  |  | Shareholders’
    Voting Rights Proxy Agreement, dated October 15, 2018, by and among Bo Jiang, Tao Jiang, Di Wang and Yuezhong Shenyang (incorporated
    herein by reference to Exhibit 10.15 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially
    filed with the Securities and Exchange Commission on January 2, 2019)                                                                      
|4.16  |  | Spousal Consent,
    dated October 15, 2018, by Wei Tang (incorporated herein by reference to Exhibit 10.16 to the registration statement on Form
    F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                                                                          
|4.17  |  | House Lease Contract,
    dated January 8, 2018, between Cheng Zhang and LMG (incorporated herein by reference to Exhibit 10.17 to the registration
    statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January
    2, 2019)                                                                                                                                  
|4.18  |  | House Lease Contract,
    dated June 13, 2018, by and among Lili Pang, LMG (incorporated herein by reference to Exhibit 10.18 to the registration statement
    on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                                                        
|4.19  |  | Contractual Rights
    and Obligations Transfer Tripartite Agreement, dated August 14, 2018, by and among Liaoning CoolPaul Culture and Media Co.,
    Ltd., Shenyang Parkson Shopping Plaza Co., Ltd. and LMG (incorporated herein by reference to Exhibit 10.19 to the registration
    statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January
    2, 2019)
|4.20  |  | Lease Agreement,
    dated November 23, 2018, between Zhongyao Real Estate Development (Shenyang) Co., Ltd. and LMG (incorporated herein by reference
    to Exhibit 10.20 to the registration statement on Form F-1 (File No. 333-229116), as amended, initially filed with the Securities
    and Exchange Commission on January 2, 2019)                                                                                           
|4.21  |  | Lease Agreement,
    dated March 31, 2019, by and between LMG and Shenyang Shida Logistics LLC (incorporated herein by reference to Exhibit 10.22
    to the post-effective amendment to registration statement on Form F-1 (File No. 333-229116), filed with the Securities and
    Exchange Commission on September 30, 2019)                                                                                                       
|4.22  |  | Lease Agreement,
    dated May 13, 2019, by and between LMG and Shenyang Vanke Yongan Real Estate Co., Ltd. (incorporated herein by reference to
    Exhibit 10.23 to the post-effective amendment to registration statement on Form F-1 (File No. 333-229116), filed with the
    Securities and Exchange Commissions on September 30, 2019)                                                                                         
|4.23  |  | Form of Theater
    Chain Agreement with Liaoning North Cinema Line Co., Ltd. (incorporated herein by reference to Exhibit 10.24 to the post-effective
    amendment to registration statement on Form F-1 (File No. 333-229116), filed with the Securities and Exchange Commission on
    September 30, 2019)                                                                                                                        
|4.24* |  | Amended and Restated
    Consulting Agreement, dated December 10, 2018, by and between LMG and Qianhai Asia Era (Shenzhen) International Financial
    Services Co., Ltd.                                                                                                                                                                                                                                                             
|8.1   |  | List of subsidiaries
    of the Registrant (incorporated herein by reference to Exhibit 21.1 to the registration statement on Form F-1 (File No. 333-229116),
    as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                                                                                         
|11.1  |  | Code of Business
    Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration statement on Form
    F-1 (File No. 333-229116), as amended, initially filed with the Securities and Exchange Commission on January 2, 2019)                                                                                                                                                          
|12.1* |  | Certification of
    Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                               





74







|12.2*       |     | Certification
    of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                  
|----------- | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13.1 **     |     | Certification of
    Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.                                                                               
|13.2 **     |     | Certification of
    Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.                                                                               
|101. INS*** |     | XBRL Instance Document                                                                                                                                                                                                                   
|101. SCH*** |     | XBRL Taxonomy Extension Schema Document                                                                                                                                                                                                  
|101. CAL*** |     | XBRL Taxonomy Calculation Linkbase Document                                                                                                                                                                                              
|101. DEF*** |     | XBRL Taxonomy Extension Definition Linkbase Document                                                                                                                                                                                     
|101. LAB*** |     | XBRL Taxonomy Extension Label Linkbase Document                                                                                                                                                                                          
|101. PRE*** |     | XBRL Taxonomy Extension Presentation Linkbase Document                                                                                                                                                                                   
|            | *   | Filed with this annual report on Form 20-F                                                                                                                                                                                               
|            | **  | Furnished with this annual report on Form 20-F                                                                                                                                                                                           
|            | *** | As permitted by Rule 405 of Regulation S-T, the registrant’s XBRL (eXtensible Business Reporting
Language) information will be furnished in an amendment to this Form 20-F that will be filed no more than 30 days after the date
hereof.





75







SIGNATURES



The registrant hereby certifies that it
meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.



Leaping Group Co., Ltd.



|                       | By: | /s/ Tao Jiang          
|---------------------- | --- | -----------------------
|                       |     | Tao Jiang              
|                       |     | Chief Executive Officer
|                       |     |                        
|Date: October 31, 2019 |     |                        





76









LEAPING GROUP CO., LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                        | Page          
|----------------------------------------------------------------------------------------------------------------------- | --------------
|                                                                                                                        |               
|Report
    of Independent Registered Public Accounting Firm                                                             | F-2           
|                                                                                                                        |               
|Consolidated
    Balance Sheets as of June 30, 2019 and 2018                                                            | F-3           
|                                                                                                                        |               
|Consolidated
    Statements of Income and Comprehensive Income for the Fiscal Years Ended June 30, 2019, 2018, and 2017 | F-4           
|                                                                                                                        |               
|Consolidated
    Statements of Changes in Shareholders’ Equity for the Fiscal Years Ended June 30, 2019, 2018, and 2017 | F-5           
|                                                                                                                        |               
|Consolidated
    Statements of Cash Flows for the Fiscal Years Ended June 30, 2019, 2018, and 2017                      | F-6           
|                                                                                                                        |               
|Notes
    to the Consolidated Financial Statements                                                                      | F-7
    – F-24





F-1











REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Shareholders and the Board of Directors of 
Leaping Group Co., Ltd. and Subsidiaries



Opinion on the Financial Statements



We have audited the
accompanying consolidated balance sheets of Leaping Group Co., Ltd. and its subsidiaries (collectively, the “Company”)
as of June 30, 2019 and 2018, and the related consolidated statements of income and comprehensive income, changes in shareholders’
equity, and cash flows for each of the three years in the period ended June 30, 2019, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the results of its
operations and its cash flows for each of the three years in the period ended June 30, 2019, in conformity with accounting
principles generally accepted in the United States of America.



Basis for Opinion



These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.



We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion.



Our audits included
performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ Friedman LLP

​We have served as the Company’s auditor since 2018.



New York, New York 
September 30, 2019











F-2







LEAPING GROUP CO., LTD.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                          |  | As of June 30, 2019 |            |   | As of June 30,  2018 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ---------- | - | -------------------- | -
|ASSETS                                                                                                                                                                                    |  |                     |            |   |                      |  
|CURRENT ASSETS:                                                                                                                                                                           |  |                     |            |   |                      |  
|Cash                                                                                                                                                                                      |  | $                   | 194,488    |   |                      | $
|Accounts receivable, net                                                                                                                                                                  |  |                     | 7,384,640  |   |                      |  
|Deposits                                                                                                                                                                                  |  |                     | 570,204    |   |                      |  
|Deferred offering costs                                                                                                                                                                   |  |                     | 1,403,604  |   |                      |  
|Advances to suppliers                                                                                                                                                                     |  |                     | 22,862     |   |                      |  
|Prepaid expenses and other receivables                                                                                                                                                    |  |                     | 96,499     |   |                      |  
|TOTAL CURRENT ASSETS                                                                                                                                                                      |  |                     | 9,672,297  |   |                      |  
|Inventories, net                                                                                                                                                                          |  |                     | 332,542    |   |                      |  
|Property and equipment, net                                                                                                                                                               |  |                     | 1,015,959  |   |                      |  
|Deferred tax assets                                                                                                                                                                       |  |                     | 78,222     |   |                      |  
|TOTAL ASSETS                                                                                                                                                                              |  | $                   | 11,099,020 |   |                      | $
|                                                                                                                                                                                          |  |                     |            |   |                      |  
|LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                      |  |                     |            |   |                      |  
|CURRENT LIABILITIES:                                                                                                                                                                      |  |                     |            |   |                      |  
|Accounts payable                                                                                                                                                                          |  | $                   | 449,058    |   |                      | $
|Deferred revenue                                                                                                                                                                          |  |                     | 189,268    |   |                      |  
|Taxes payable                                                                                                                                                                             |  |                     | 2,726,821  |   |                      |  
|Accrued expense and other payables                                                                                                                                                        |  |                     | 1,173,555  |   |                      |  
|Due to related parties                                                                                                                                                                    |  |                     | 567,346    |   |                      |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                 |  |                     | 5,106,048  |   |                      |  
|TOTAL LIABILITIES                                                                                                                                                                         |  |                     | 5,106,048  |   |                      |  
|                                                                                                                                                                                          |  |                     |            |   |                      |  
|Commitments and contingencies                                                                                                                                                             |  |                     |            |   |                      |  
|                                                                                                                                                                                          |  |                     |            |   |                      |  
|SHAREHOLDERS’ EQUITY:                                                                                                                                                                     |  |                     |            |   |                      |  
|Ordinary Shares, $0.00284 par value 50,000,000 shares authorized; 16,021,126.7606 and 17,605,633.8028 shares issued and outstanding as of June 30, 2019 and June 30, 2018, respectively * |  |                     | 45,500     |   |                      |  
|Additional paid-in capital                                                                                                                                                                |  |                     | 421,398    |   |                      |  
|Statutory reserve                                                                                                                                                                         |  |                     | 875,271    |   |                      |  
|Accumulated other comprehensive income (loss)                                                                                                                                             |  |                     | (54,021    | ) |                      |  
|Retained earnings                                                                                                                                                                         |  |                     | 4,704,824  |   |                      |  
|TOTAL SHAREHOLDERS’ EQUITY                                                                                                                                                                |  |                     | 5,992,972  |   |                      |  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                |  | $                   | 11,099,020 |   |                      | $



*Retrospectively restated for effect of reverse split. Prior to the reverse split, the authorized share capital was US$50,000 and consisted of 50,000 ordinary shares of US$0.001 par value.



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



F-3







LEAPING GROUP CO., LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



|                                              |  | For the Years Ended June 30, |                
|--------------------------------------------- |  | ---------------------------- | ---------------
|                                              |  | 2019                         |                
|REVENUE                                       |  | $                            | 11,679,690     
|Cost of revenue                               |  |                              | 3,297,582      
|Business taxes and surcharges                 |  |                              | 90,011         
|Total cost of revenue                         |  |                              | 3,387,593      
|GROSS PROFIT                                  |  |                              | 8,292,097      
|                                              |  |                              |                
|Selling expenses                              |  |                              | 62,811         
|General and administrative expenses           |  |                              | 1,342,480      
|Total operating expenses                      |  |                              | 1,405,291      
|INCOME FROM OPERATIONS                        |  |                              | 6,886,806      
|                                              |  |                              |                
|OTHER INCOME (EXPENSES)                       |  |                              |                
|Interest income                               |  |                              | 158            
|Other income (expenses)                       |  |                              | 1,645          
|Total other income (expenses), net            |  |                              | 1,803          
|                                              |  |                              |                
|INCOME BEFORE INCOME TAX PROVISION            |  |                              | 6,888,609      
|                                              |  |                              |                
|PROVISION FOR INCOME TAXES                    |  |                              | 1,699,690      
|                                              |  |                              |                
|NET INCOME                                    |  |                              | 5,188,919      
|Other comprehensive income (loss)             |  |                              | (64,021        
|COMPREHENSIVE INCOME                          |  | $                            | 5,124,898      
|                                              |  |                              |                
|Earnings per common share - basic and diluted |  | $                            | 0.310          
|Weighted average shares - basic and diluted*  |  |                              | 16,728,728.5356



* Retrospectively restated for effect of reverse split.



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







F-4







LEAPING
GROUP CO., LTD

CONSOLIDATION STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY





|                                        |  |                     |                 |   |            |   |        |                 |  |   |          |  |  | Accumulated   |         |  |                                                        |  
|--------------------------------------- |  | ------------------- | --------------- | - | ---------- | - | ------ | --------------- |  | - | -------- |  |  | ------------- | ------- |  | ------------------------------------------------------ | -
|                                        |  |                     |                 |   |            |   |        |                 |  |   |          |  |  |               |         |  | Other                                                  |  
|                                        |  | Ordinary
    Shares |                 |   | Additional |   |        | Statutory       |  |   | Retained |  |  | Comprehensive |         |  | Shareholders'                                          |  
|                                        |  | Shares*             |                 |   | Amount     |   |        | Paid-in Capital |  |   | Reserve  |  |  | Earnings      |         |  | Income
                                         (Loss) |  
|Balance, June 30,
    2016              |  |                     | 17,605,633.8028 |   |            | $ | 50,000 |                 |  | $ | 416,898  |  |  | $             | -       |  |                                                        | $
|                                        |  |                     |                 |   |            |   |        |                 |  |   |          |  |  |               |         |  |                                                        |  
|Net income for the year                 |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Appropriation of statutory
    reserves |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | 123,759 |  |                                                        |  
|Foreign currency translation
    gain   |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Profit dividend                         |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Balance, June 30, 2017                  |  |                     | 17,605,633.8028 |   |            | $ | 50,000 |                 |  | $ | 416,898  |  |  | $             | 123,759 |  |                                                        | $
|                                        |  |                     |                 |   |            |   |        |                 |  |   |          |  |  |               |         |  |                                                        |  
|Net income for the year                 |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Appropriation of statutory
    reserve  |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | 232,577 |  |                                                        |  
|Foreign currency translation
    gain   |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Profit
    dividend                     |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Balance, June
    30, 2018              |  |                     | 17,605,633.8028 |   |            | $ | 50,000 |                 |  | $ | 416,898  |  |  | $             | 356,336 |  |                                                        | $
|                                        |  |                     |                 |   |            |   |        |                 |  |   |          |  |  |               |         |  |                                                        |  
|Share cancellation                      |  |                     | (1,584,507.0422 | ) |            |   | (4,500 | )               |  |   | 4,500    |  |  |               | -       |  |                                                        |  
|Net income for the period               |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Appropriation of statutory
    reserve  |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | 518,935 |  |                                                        |  
|Foreign
    currency translation loss   |  |                     | -               |   |            |   | -      |                 |  |   | -        |  |  |               | -       |  |                                                        |  
|Balance, June
    30, 2019              |  |                     | 16,021,126.7606 |   |            | $ | 45,500 |                 |  | $ | 421,398  |  |  | $             | 875,271 |  |                                                        | $



* Retrospectively
restated for effect of reverse split.



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





F-5







LEAPING GROUP CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  | For the Years Ended |           
|--------------------------------------------------------------------------------- |  | ------------------- | ----------
|                                                                                  |  | June 30,            |           
|                                                                                  |  | 2019                |           
|Cash flows from operating activities:                                             |  |                     |           
|Net Income                                                                        |  | $                   | 5,188,919 
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                     |           
|Provision for doubtful accounts                                                   |  |                     | 87,166    
|Depreciation of property and equipment                                            |  |                     | 59,297    
|Deferred tax benefit                                                              |  |                     | (16,066   
|Changes in operating assets and liabilities:                                      |  |                     |           
|Accounts receivable, net                                                          |  |                     | (5,494,486
|Deposits                                                                          |  |                     | (222,100  
|Advances to suppliers                                                             |  |                     | (20,565   
|Prepaid expenses and other receivables                                            |  |                     | (59,977   
|Inventories, net                                                                  |  |                     | (59,891   
|Accounts payable                                                                  |  |                     | 327,165   
|Deferred revenue                                                                  |  |                     | (22,902   
|Taxes payable                                                                     |  |                     | 1,176,205 
|Accrued expense and other payables                                                |  |                     | 1,023,101 
|Net cash provided by operating activities                                         |  |                     | 1,965,866 
|                                                                                  |  |                     |           
|Cash flows from investing activities:                                             |  |                     |           
|Purchase of property and equipment                                                |  |                     | (883,871  
|Purchase of construction in progress                                              |  |                     | (34,807   
|Net cash used in investing activities                                             |  |                     | (918,678  
|                                                                                  |  |                     |           
|Cash flows from financing activities:                                             |  |                     |           
|Proceeds from related party loans                                                 |  |                     | 542,088   
|Deferred offering costs                                                           |  |                     | (1,412,531
|Dividend payment to shareholders                                                  |  |                     | -         
|Net cash used in financing activities                                             |  |                     | (870,443  
|                                                                                  |  |                     |           
|Effect of exchange rate fluctuation on cash                                       |  |                     | (1,821    
|                                                                                  |  |                     |           
|Net increase (decrease) in cash                                                   |  |                     | 174,924   
|Cash at beginning of year                                                         |  |                     | 19,564    
|Cash at end of year                                                               |  | $                   | 194,488   
|                                                                                  |  |                     |           
|Supplemental cash flow information                                                |  |                     |           
|Cash paid for income taxes                                                        |  | $                   | 415,688   
|                                                                                  |  |                     |           
|Non-cash investing and financing activities                                       |  |                     |           
|Non-cash payment for property and equipment purchase                              |  | $                   | 35,173    



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





F-6







LEAPING GROUP CO., LTD.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 — ORGANIZATION
AND BUSINESS DESCRIPTION



Leaping Group Co., Ltd.
(“Leaping Group” or the “Company”) was incorporated under the laws of the Cayman Islands on August 21,
2018.



On July 16, 2018,
Yuezhong Media Co., Limited (“Yuezhong Media HK”) was incorporated in accordance with laws and regulations of Hong
Kong. On September 4, 2018, Yuezhong International Co., Ltd (“Yuezhong International”) was incorporated under
the law of British Virgin Islands. Leaping Group owns 100% of Yuezhong International. Yuezhong International owns 100% of Yuezhong
Media HK. Yuezhong Media HK and Yuezhong International are currently not engaging in any active business and merely acting as holding
companies.



On October, 12, 2018,
Yuezhong (Shenyang) Technology Co., Ltd. (“Yuezhong Shenyang” or “WFOE”) was incorporated, as a wholly
foreign-owned enterprise in the People’s Republic of China (“PRC” or “China”). WFOE is wholly owned
by Yuezhong Media HK.



Leaping Media Group
Co., Ltd (“LMG”) was incorporated on November 19, 2013, as a limited company pursuant to PRC laws. LMG also owns
100% of the following companies: Horgos Xinyuezhong Film Media Co., Ltd., incorporated on December 25, 2017 and dissolved
on April 17, 2019; Shenyang Tianniu Media Co., Ltd. (“Shenyang Tianniu”), incorporated on January 10, 2013; Yuezhong
Media (Dalian) Co., Ltd., incorporated on March 15, 2016; Yuezhong (Beijing) Film Co., Ltd., incorporated on May 26,
2017; Harbin Yuechuzhong Media Co., Ltd. (“Harbin Yuechuzhong”), incorporated on January 10, 2018; Shenyang Xiagong
Hotel Management Co., Ltd., incorporated on June 11, 2018; and Liaoning Leaping International Cinema Management Co., Ltd.
(“Liaoning Cinema”), incorporated on September 29, 2018.



On October 15,
2018, WFOE entered into a series of agreements with the shareholders of LMG. These agreements are designed to provide WFOE with
the power, rights, and obligations equivalent in all material respects to those it would possess as the sole equity holder of LMG,
including absolute control rights and the rights to the assets, property, and revenue of LMG. According to the Exclusive Service
Agreement, LMG is obligated to pay service fees to WFOE approximately equal to the net income of LMG. In essence, WFOE has gained
effective control over LMG. Therefore, the Company believes that LMG should be considered as a Variable Interest Entity (“VIE”)
under the Statement of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
810 “Consolidation.” Accordingly, the accounts of LMG are consolidated with those of WFOE and are ultimately consolidated
into those of Leaping Group.



The above-mentioned
transaction was considered a reorganization of the Company (the “Reorganization”). After the Reorganization, Leaping
Group ultimately owns 100% equity interests of Yuezhong Media HK and WFOE, which further has the effective control over the operating
entity, LMG and its subsidiaries through the VIE agreements.



In accordance with Accounting
Standards Codification (“ASC”) 805-50-25, the Reorganization has been accounted for as a recapitalization among entities
under common control since the same controlling shareholder controlled all these entities before and after the Reorganization.
The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if
the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated
financial statements. Results of operations for the period presented comprise those of the previously separate entities combined
from the beginning of the period to the end of the period. By eliminating the effects of intra-entity transactions in determining
the results of operations for the period before the Reorganization, those results will be on substantially the same basis as the
results of operations for the period after the date of combination. The effects of intra-entity transactions on current assets,
current liabilities, revenue, and cost of sales for periods presented and on retained earnings (accumulated deficit) at the beginning
of the periods presented are eliminated to the extent possible. Furthermore, ASC 805-50-45-5 indicates that the financial statements
and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information.



F-7









LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 — ORGANIZATION
AND BUSINESS DESCRIPTION (Continued)



Leaping Group, through
its subsidiaries and its VIE (collectively, the “Group”), is principally engaged in the Multi-Channel Advertising Business,
Event Planning and Execution Business, Film Production Business and Movie Theater Operating Business in China.



NOTE 2 — SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation and Principles
of Consolidation



The accompanying consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”)
and have been consistently applied. The consolidated financial statements include the financial statements of Leaping Group, its
subsidiaries and its affiliates controlled by the VIE agreements. All inter-company balances and transactions have been eliminated
upon consolidation.



Details of the subsidiaries and VIEs of the Company are set
out below:



|Name of Entity                           | ​ | ​ | Date of 
Incorporation | ​ | ​ | Place of 
Incorporation | ​ | ​ | % of 
Ownership | ​ | ​ | Principal Activities                                                     | ​
|---------------------------------------- | - | - | ---------------------- | - | - | ----------------------- | - | - | --------------- | - | - | ------------------------------------------------------------------------ | -
|Parent company:                          | ​ | ​ | ​                      | ​ | ​ | ​                       | ​ | ​ | ​               | ​ | ​ | ​                                                                        | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Leaping Group Co., Ltd                   | ​ | ​ | August 21, 2018        | ​ | ​ | Cayman Islands          | ​ | ​ | Parent          | ​ | ​ | Investment holding                                                       | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Subsidiaries:                            | ​ | ​ | ​                      | ​ | ​ | ​                       | ​ | ​ | ​               | ​ | ​ | ​                                                                        | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Yuezhong International Co., Ltd          | ​ | ​ | September 4, 2018      | ​ | ​ | British Virgin Islands  | ​ | ​ | 100%            | ​ | ​ | Investment holding                                                       | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Yuezhong Media Co., Limited              | ​ | ​ | July 16, 2018          | ​ | ​ | Hong Kong               | ​ | ​ | 100%            | ​ | ​ | Investment holding                                                       | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Yuezhong (Shenyang) Technology Co., Ltd. | ​ | ​ | October, 12, 2018      | ​ | ​ | PRC                     | ​ | ​ | 100%            | ​ | ​ | Investment holding                                                       | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Variable interest entities:              | ​ | ​ | ​                      | ​ | ​ | ​                       | ​ | ​ | ​               | ​ | ​ | ​                                                                        | ​
|                                         |   |   |                        |   |   |                         |   |   |                 |   |   |                                                                          |  
|Leaping Media Group Co., Ltd.            | ​ | ​ | November 19, 2013      | ​ | ​ | PRC                     | ​ | ​ | Nil             | ​ | ​ | Multi-Channel advertising, event planning and execution, film production | ​



|Subsidiaries of variable interest entity:                  | ​ | ​ | ​                                                               | ​ | ​ | ​   | ​ | ​ | ​   | ​ | ​ | ​                            | ​
|---------------------------------------------------------- | - | - | --------------------------------------------------------------- | - | - | --- | - | - | --- | - | - | ---------------------------- | -
|                                                           |   |   |                                                                 |   |   |     |   |   |     |   |   |                              |  
|Yuezhong (Beijing) Film Co., Ltd.                          | ​ | ​ | May 26, 2017                                                    | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Film production              | ​
|                                                           |   |   |                                                                 |   |   |     |   |   |     |   |   |                              |  
|Yuezhong Media (Dalian) Co., Ltd.                          | ​ | ​ | March 15, 2016                                                  | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Advertising                  | ​
|                                                           |   |   |                                                                 |   |   |     |   |   |     |   |   |                              |  
|Shenyang Tianniu Media Co., Ltd.                           | ​ | ​ | January 10, 2013                                                | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Advertising                  | ​
|                                                           |   |   |                                                                 |   |   |     |   |   |     |   |   |                              |  
|Shenyang Xiagong Hotel Management Co., Ltd.                | ​ | ​ | June 11, 2018                                                   | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Hotel management             | ​
|                                                           |   |   |                                                                 |   |   |     |   |   |     |   |   |                              |  
|Harbin Yuechuzhong Media Co., Ltd.                         | ​ | ​ | January 10, 2018                                                | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Event planning and execution | ​
|                                                           |   |   |                                                                 |   |   |     |   |   |     |   |   |                              |  
|Horgos Xinyuezhong Film Media Co., Ltd.                    | ​ | ​ | December 25, 2017
        
        (Dissolved on April 17,2019) | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Film production              | ​
|Liaoning Leaping International Cinema Management Co., Ltd. | ​ | ​ | September 29, 2018                                              | ​ | ​ | PRC | ​ | ​ | Nil | ​ | ​ | Movie Theater Operating      |  





F-8







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



The Company has adopted
the guidance of accounting for VIE, which requires the VIE to be consolidated by the primary beneficiary of the entity. The Company’s
management made evaluations of the relationships between the Company and its VIE and the economic benefit flow of contractual arrangements
with the VIE. In connection with such evaluation, management also took into account the fact that, as a result of such contractual
arrangements, the Company controls the shareholders’ voting interests in the VIE. As a result of such evaluation, management
concluded that the Company is the primary beneficiary of its VIE. As a result, the Company consolidates all of its VIE in its consolidated
financial statements.



Consolidation of Variable Interest
Entities



In accordance with accounting
standards regarding consolidation of VIEs, VIEs are generally entities that lack sufficient equity to finance their activities
without additional financial support from other parties or whose equity holders lack adequate decision making ability. The VIE
with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE.
The primary beneficiary is required to consolidate the VIE for financial reporting purposes. The Company has determined that WFOE
is the primary beneficiary of LMG’s risks and rewards.



The following tables
set forth the assets, liabilities, results of operations, and changes in cash of the VIE, LMG, which were included in the Company’s
consolidated balance sheets, statements of income and comprehensive income and cash flows:



|                    |  | As of June 30,
 2019 |            |  | As of June 30,
 2018 |  
|------------------- |  | -------------------- | ---------- |  | -------------------- | -
|Current assets      |  | $                    | 9,672,297  |  |                      | $
|Non-current assets  |  |                      | 1,426,723  |  |                      |  
|Total assets        |  |                      | 11,099,020 |  |                      |  
|Current liabilities |  |                      | 5,106,048  |  |                      |  
|Total liabilities   |  |                      | 5,106,048  |  |                      |  
|Net assets          |  | $                    | 5,992,972  |  |                      | $



|           |  | For the years ended June 30, |           
|---------- |  | ---------------------------- | ----------
|           |  | 2019                         |           
|Revenue    |  | $                            | 11,679,690
|Net income |  | $                            | 5,188,919 





|                                            |  | For the years ended June 30, |          
|------------------------------------------- |  | ---------------------------- | ---------
|                                            |  | 2019                         |          
|Net cash provided by operating activities   |  | $                            | 1,965,866
|Net cash used in investing activities       |  |                              | (918,678 
|Net cash used in financing activities       |  |                              | (870,443 
|Effect of exchange rate fluctuation on cash |  |                              | (1,821   
|Net increase (decrease) in cash             |  | $                            | 174,924  





F-9









LEAPING GROUP CO., LTD.



NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



Use of Estimates



The preparation of financial
statements in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts
of assets and liabilities, the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions. Significant
accounting estimates reflected in the Company’s consolidated financial statements include the allowances for doubtful accounts.
Actual results could differ from these estimates.



Cash



The Company considers
all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be
cash equivalents. As of June 30, 2019 and 2018, the Company had no cash equivalents. The Company maintains cash with various
financial institutions mainly in the PRC. Balances in banks in the PRC are uninsured.



Accounts Receivable, net



Accounts receivable
are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts.



The Company determines
the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company
establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts
due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision
on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge
recorded in the consolidated statements of income and comprehensive income. Actual amounts received may differ from management’s
estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for
doubtful accounts after management has determined that the likelihood of collection is not probable. As of June 30, 2019 and
2018, the allowances for doubtful accounts from accounts receivable were $123,621 and $38,386, respectively.



Inventories, net



The Company produces
and contracts third parties to produce films and television series to be shown in movie theaters and/or on popular online portal.
Produced content includes direct production costs, production overhead and acquisition costs and is stated at the lower of unamortized
cost or estimated fair value. Produced content also includes cash expenditures made to enter into arrangements with third parties
to co-produce certain of its theatrical and television productions.



The Company uses the
individual-film-forecast-computation method and amortizes the produced content based on the ratio of current period actual revenue
(numerator) to estimated remaining unrecognized ultimate revenue as of the beginning of the fiscal year (denominator) in accordance
with ASC subtopic 926-20, Entertainment — Films, Other Assets — Film Costs (“ASC 926-20”).
Ultimate revenue estimates for the produced content are periodically reviewed and adjustments, if any, will result in prospective
changes to amortization rates. When estimates of total revenues and other events or changes in circumstances indicate that a film
or television series has a fair value that is less than its unamortized cost, a loss is recognized currently for the amount by
which the unamortized cost exceeds the film or television series’ fair value. For the years ended June 30, 2019, 2018
and 2017, based on management analysis, no impairment was recorded.





F-10







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



Property and Equipment, net



Property and equipment
are stated at cost less accumulated depreciation. Depreciation of property and equipment is provided using the straight-line method
over their expected useful lives, as follows:



|                                  |  | Useful life                         
|--------------------------------- |  | ------------------------------------
|Furniture, fixtures and equipment |  | 5 years                             
|Transportation vehicles           |  | 3-5 years                           
|Leasehold improvement             |  | Lesser of useful life and lease term



Expenditures for maintenance
and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for
major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated
depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated
statements of income and other comprehensive income in income from operations.



Accounts Payable



Accounts payable includes
all operating payables, including those related to all media and production costs. These payables are due within 12 months.



Revenue Recognition



The Company’s
revenues are principally derived from the Multi-Channel Advertising Business, Event Planning and Execution Business, Film Production
Business, and Movie Theater Operating Business.



On July 1, 2018,
the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“ASC Topic
606”) using the modified retrospective method for contracts that were not completed as of July 1, 2018. The adoption
of this standard did not have a material impact on the Company’s consolidated financial statements, and no adjustments to
opening retained earnings were made as the Company’s revenue was recognized based on the amount of consideration expects
to receive in exchange for satisfying the performance obligations.



ASC 606, Revenue from
Contracts with Customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of
revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle
requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the
consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations
are satisfied.



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. The Company has assessed the impact
of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences
that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price,
customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded
that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606
and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.





F-11







LEAPING GROUP
CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



Multi-Channel advertising



The Company’s
Multi-Channel Advertising Services include pre-movie advertisements display, elevator and supermarket advertising, and brand promotion.
Most of the Company’s client contracts are individually negotiated and, accordingly, the service period and prices vary significantly.
Service periods typically range from one day to one year.



The Company provides
advertising services over the contract period. Revenues from advertising services are recognized on straight-line basis over the
contract period, which approximates the pattern of when the underlying services are performed. Prepayments for advertising services
are deferred and recognized as revenue when the advertising services are rendered and the Company’s performance obligations
are satisfied.



The Company also provides
advertising services through its regional distributors. Pursuant to advertising services distribution agreements, the Company grants
the regional distributors the exclusive rights to provide local pre-movie advertising. The advertising services distribution agreements
with these regional distributors typically have terms ranging from 11 to 24 months without automatic renewal provisions. Under
the advertising services distribution agreements, the Company has the right to set the minimum local pre-movie advertisement prices
in the movie theaters, regulate the content and quality of local pre-movie advertisements according to related laws and movie theater
rules, and examine the source of local pre-movie advertisements and refuse to display advertisements from any competitors. The
receipt of distribution fee is initially recorded as deferred revenue and is recognized as revenue ratably as services are rendered
and the Company’s performance obligations are satisfied.



Event planning and execution



The Company’s
Event Planning and Execution Business includes planning and arrangement of events, and production of related advertising materials.
From the preparation of the events to executing it typically takes no more than one week. Revenue is realized when the service
is performed in accordance with the client arrangement and upon the completion of the earnings process.



Film production



The Company has already
finished the production of one television series and is in the process of producing more television series and movies. Revenues
from the online distribution of the television series are recognized when viewers have clicked the content and viewed the content
for certain length, as agreed with the distributors.



Movie Theater Operating



The Company’s
movie theater operating revenues are generated primarily from box office admissions and theater food and beverage sales. Revenues
of this business line are recognized when admissions and food and beverage sales are received at the theaters and are reported
net of sales tax. The Company defers 100% of the revenue associated with the sales of gift cards and packaged tickets until such
time as the items are redeemed.



Contract Balances and Remaining Performance
Obligations



Contract balances typically
arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs.



The Company’s
contract assets, consist primarily of accounts receivable related to providing multi-channel advertising and event planning and
execution services to customers, in which the Company’s contracted performance obligations have been satisfied, amount billed
and the Company has an unconditional right to payment. The Company had accounts receivable related to revenues from contracts with
customers of  $7,384,640 and $2,122,803 as of June 30, 2019 and 2018, respectively.





F-12







LEAPING GROUP CO.,
LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



The Company’s
contract liabilities, which are reflected in its consolidated balance sheets as deferred revenue of  $189,268 and $219,936
as of June 30, 2019 and 2018, respectively, consist primarily of the Company’s unsatisfied performance obligations as
of the balance sheet dates.



Refer to Note 12 — Segment
reporting for details of revenue segregation.



Cost of Revenue



Cost of the multi-channel
advertising revenues consists primarily of payments to movie theater operators for pre-movie advertising right and the billboards
of elevators and supermarkets.



Cost of event planning
and execution consists primarily of advertising design costs, salary and benefits expenses, leasing costs, and other related expenses.



Cost of film production consists primarily
of direct production costs and production overhead.



Cost of movie theater
operating consists primarily of film exhibition costs, which is accrued on the applicable admissions revenues and estimates of
the final settlement pursuant to film licenses of the Company. These licenses typically state that rental fees are based on aggregate
terms established prior to the opening of the film.



Income Taxes



The Company accounts
for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective
tax bases.



Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.



The provisions of ASC
740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated
financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation
also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax
assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company
does not believe that there was any uncertain tax position at June 30, 2019 and 2018.



The Company’s
operating subsidiary and VIE in China are subject to the income tax laws of the PRC. No taxable income was generated outside the
PRC for the years ended June 30, 2019, 2018 and 2017. As of June 30, 2019, the tax years ended December 31,
2014, through December 31, 2018, for the Company’s PRC subsidiary and VIE remain open for statutory examination by PRC
tax authorities.



Value Added Tax (“VAT”)



Sales revenue derived
from advertising service revenues is subject to VAT. The applicable VAT rates for the Company is 6% for the years ended June 30,
2019, 2018 and 2017.



Entities that are VAT
general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance
between input VAT and output VAT is recorded in the line item of taxes payable on the consolidated balance sheets. All of the VAT
returns of the Company have been and remain subject to examination by the tax authorities for five years from the date of
filing.





F-13







LEAPING GROUP
CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



Foreign Currency Translation



Since the Company operates
in the PRC, the Company’s functional currency is the Chinese Renminbi (“RMB”). The Company’s consolidated
financial statements have been translated into the reporting currency, the United States Dollar (“USD or US$”). Assets
and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical
rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation
adjustments are reported under other comprehensive income (loss). Gains and losses resulting from the translations of foreign currency
transactions and balances are reflected in the result of operations. RMB is not freely convertible into foreign currency and all
foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could
have been, or could be, converted into US$ at the rates used in translation.



|                   |  | June 30, 2019  |  | June 30, 2018  |  | June 30, 2017 
|------------------ |  | -------------- |  | -------------- |  | --------------
|Year-end spot rate |  | US$1=RMB6.8668 |  | US$1=RMB6.6198 |  | US$1=RMB6.7774
|Average rate       |  | US$1=RMB6.8234 |  | US$1=RMB6.5064 |  | US$1=RMB6.8124



Earnings per Share



The Company computes
earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC
260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided
by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive
effect on a per share basis of potential common shares (for example, convertible securities, options and warrants) as if they had
been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive
effect (namely those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
There is no anti-dilutive effect for the years ended June 30, 2019, 2018 and 2017.



Comprehensive Income



Comprehensive income
consists of two components, net income and other comprehensive income (loss). The foreign currency translation gain or loss resulting
from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income (loss) in the consolidated
statements of income and comprehensive income.



Fair Value of Financial Instruments



The Company follows
the provisions of FASB ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as
follows:



Level 1 — Inputs
are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.



Level 2 — Inputs
are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or
corroborated by observable market data.



Level 3 — Inputs
are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.





F-14







LEAPING GROUP
CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



The carrying amounts
reported in the balance sheets for cash, accounts receivable, deposits, deferred offering costs, other current assets, accounts
payable, deferred revenue, taxes payable, other payables, and due to related parties approximate their fair value based on the
short-term maturity of these instruments.



Commitments and Contingencies



In the normal course
of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover
a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been incurred and
the amount of the assessment can be reasonably estimated.



If the assessment of
a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated,
then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially
material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature
of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.



Loss contingencies considered
remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.



Concentration and Credit Risk



Substantially all of
the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign
exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign
currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s
Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices,
shipping documents and signed contracts.



The Company maintains
certain bank accounts in the PRC, Hong Kong, and British Virgin Islands, which are not insured by Federal Deposit Insurance Corporation
(“FDIC”) insurance or other insurance. As of June 30, 2019 and 2018, $143,128 and $14,205 of the Company’s
cash were on deposit at financial institutions in the PRC where there currently is no rule or regulation requiring such financial
institutions to maintain insurance to cover bank deposits in the event of bank failure.



Accounts receivable
are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by
the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.



The Company’s
sales are made to customers that are located primarily in China. The Company has a concentration of its revenues and receivables
with specific customers. For the years ended June 30, 2019, 2018 and 2017, a major customer accounted for 15%, 13% and 43%
of the Company’s total revenue, respectively.



As of June 30,
2019, four customers represented 29%, 13%, 11% and 11% of the net accounts receivable balance. As of June 30, 2018, two customers
represented 36% and 22% of the net accounts receivable balance, respectively.



For the year ended June 30,
2019, the Company purchased 51% and 18% of its services from two suppliers, respectively. For the years ended June 30,
2018 and 2017, the Company purchased approximately 84% and 80% of its services from one major supplier, respectively.



Statements of Cash Flows



In accordance with FASB
ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company are calculated based upon the local currencies
and translated at the average rate of exchange during the reporting period. As a result, amounts related to assets and liabilities
reported on the Company’s consolidated statements of cash flows will not necessarily agree with changes in the corresponding
balances on the balance sheet.





F-15







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



Recent Accounting Pronouncements



In February 2016,
the FASB issued ASU 2016-02, Leases (Topic 842). The main objective is to increase transparency and comparability among organizations
by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.
The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years,
for (1) public business entities, (2) not-for-profit entities that have issued, or are conduit bond obligors for, securities
that are traded, listed, or quoted on an exchange or an over-the-counter market, and (3) employee benefit plans that file
financial statements with the SEC. For all other entities, the ASU is effective for fiscal years beginning after December 15,
2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all
entities. The Company will adopt this new lease standard within annual reporting period of June 30, 2020, and the Company
is currently evaluating the impact of this new standard on its financial statements and related disclosures, and the Company estimated
that the adoption of this AUS will not have material impact on the results of the operations and cash flows.



In July 2017, the
FASB issued ASU 2017-11, “Earnings Per Share (Topic 260),” Distinguishing Liabilities from Equity (Topic 480), Derivatives
and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked
financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should
be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing
whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements
for equity-classified instruments. The amendments in Part II of this Update re-characterize the indefinite deferral of certain
provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do
not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all
entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that includes that interim period. The Company expects that the adoption
of this ASU will not have a material impact on its financial statements.



In
September 2017, the FASB issued ASU 2017-13, “Revenue from Contracts with Customers (Topic 606) and Leases (Topic
842).” The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and
ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides
that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning
after December 15, 2017, including interim reporting periods within that reporting period. All other entities are
required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting
periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public
business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after
December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC
Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years
beginning after December 15, 2020.” ASU 2017-13 clarifies that the SEC would not object to certain public business
entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13,
however, limits such election to certain public business entities that “otherwise would not meet the definition of a
public business entity except for a requirement to include or inclusion of its financial statements or financial
information in another entity’s filings with the SEC.” The Company adopted ASC 606 on July 1, 2018, using
the modified retrospective method. The Company has completed the assessment of the impact of this new guidance by reviewing
its existing customer contracts and current accounting policies and practices to identify differences that might result from
applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments,
transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was
no change to the timing and pattern of revenue recognition for its current revenue streams in the scope of Topic 606. The
adoption of Topic 606 did not result in a cumulative catch-up adjustment to the Company’s opening balance sheets of
retained earnings at the effective date and therefore there were no material changes to the Company’s consolidated
financial statements.







F-16







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



In November 2017,
the FASB issued ASU 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605),
and Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the new revenue recognition standard. This
standard will be effective for fiscal years beginning after December 15, 2018. The Company adopted ASC 606 on July 1,
2018, using the modified retrospective method. There was no change to the timing and pattern of revenue recognition for its current
revenue streams in scope of Topic 606. The adoption of Topic 606 did not result in a cumulative catch-up adjustment to the Company’s
opening balance sheets of retained earnings at the effective date and therefore there were no material changes to the Company’s
consolidated financial statements.



In March 2018,
the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin
No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax
Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No.
118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that
impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international
tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material
impact on its consolidated financial statements.



In July 2018, the
FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” which clarifies how to apply certain
aspects of the new leases standard. This ASU addresses the rate implicit in the lease, impairment of the net investment in the
lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that
depend on an index or rate and certain transition adjustments. This ASU has the same effective date and transition requirements
as the new leases standard, which is effective for annual periods beginning after December 15, 2018. The Company is currently
evaluating the impact of this new standard on its financial statements and related disclosures, and the Company estimated that
the adoption of this AUS will not have material impact on the results of the operations and cash flows.



In July 2018, the
FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” which provides a new transition method and
a practical expedient for separating components of a contract. This ASU is intended to reduce costs and ease the implementation
of the new leasing standard for financial statement preparers. The effective date and transition requirements for the amendments
related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02. The
Company is currently evaluating the impact of this new standard on its financial statements and related disclosures, and the Company
estimated that the adoption of this AUS will not have material impact on the results of the operations and cash flows.



In August 2018,
the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the
Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial
statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between
Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation
processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of
significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective
for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. The Company expects that the adoption of this ASU will not have a material impact on the Company’s consolidated financial
statements.





F-17







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)



On March 6, 2019,
the FASB issued ASU 2019-02, Entertainment — Films — Other Assets — Film
Costs (Subtopic 926-20) and Entertainment — Broadcasters — Intangibles — Goodwill
and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials.
ASU 2019-02 helps organizations align their accounting for production costs for films and episodic content produced for television
and streaming services. For public business entities, the amendments in ASU 2019-02 are effective for fiscal years beginning
after December 15, 2019, and interim periods within those fiscal years. For all other entities, the amendments are effective
for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption
is permitted, including early adoption in an interim period. The amendments in this ASU should be applied prospectively. Under
a prospective transition, an entity should apply the amendments at the beginning of the period that includes the adoption date.
The Company is now assessing the impact of the new guidance and does not expects that the adoption of this ASU will not have a
material impact on the Company’s 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 consolidated financial position, statements of operations and cash flows.



NOTE 3 — ACCOUNTS RECEIVABLE, NET



Accounts receivable consisted of the following:



|                                      |  | As of June 30, 
2019 |           |   | As of June 30, 
2018 |  
|------------------------------------- |  | -------------------- | --------- | - | -------------------- | -
|Accounts receivable                   |  | $                    | 7,508,261 |   |                      | $
|Less: allowance for doubtful accounts |  |                      | (123,621  | ) |                      |  
|Accounts receivable, net              |  | $                    | 7,384,640 |   |                      | $



Allowance for doubtful accounts movement is as follows:



|                                         |  | For the years ended June 30, |        
|---------------------------------------- |  | ---------------------------- | -------
|                                         |  | 2019                         |        
|Beginning balance                        |  | $                            | 38,386 
|Provision for doubtful accounts          |  |                              | 87,166 
|Foreign currency translation adjustments |  |                              | (1,931 
|Ending balance                           |  | $                            | 123,621





F-18







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4 — DEFERRED OFFERING COSTS



Deferred offering costs
consisted principally of legal, underwriting, and other professional service expenses in connection with the Initial Public Offering
(the “IPO”) of the Company’s ordinary shares. As of June 30, 2019 and 2018, the Company capitalized $1,403,604
and $Nil of deferred offering costs. Such costs will be deferred until the closing of the IPO, at which time the deferred costs
will be offset against the offering proceeds.



NOTE 5 — INVENTORIES, NET



|                                        |  | As of June 30, 
2019 |         |  | As of June 30,
 2018 |  
|--------------------------------------- |  | -------------------- | ------- |  | -------------------- | -
|Film production costs                   |  | $                    |         |  |                      | $
|In development                          |  |                      | 8,817   |  |                      |  
|In production                           |  |                      | 323,725 |  |                      |  
|Total film production costs             |  |                      | 332,542 |  |                      |  
|                                        |  |                      |         |  |                      |  
|Television production costs             |  |                      |         |  |                      |  
|Released, less accumulated amortization |  |                      | -       |  |                      |  
|Total television production costs       |  |                      | -       |  |                      |  
|Total inventories                       |  | $                    | 332,542 |  |                      | $



Amortization expense was $176,346, $Nil and
$Nil for the years ended June 30, 2019, 2018 and 2017, respectively.



The Company expects to amortize $323,725
of the film production costs during the fiscal year ending June 30, 2020.



NOTE 6 — PROPERTY AND EQUIPMENT, NET



Property and equipment, net, consist of the following:



|                                  |  | As of June 30, 
2019 |           |   | As of June 30,
 2018 |  
|--------------------------------- |  | -------------------- | --------- | - | -------------------- | -
|Furniture, fixtures and equipment |  | $                    | 404,352   |   |                      | $
|Leasehold improvement             |  |                      | 600,991   |   |                      |  
|Transportation vehicles           |  |                      | 34,951    |   |                      |  
|Subtotal                          |  |                      | 1,040,294 |   |                      |  
|Less: accumulated depreciation    |  |                      | (58,922   | ) |                      |  
|                                  |  | $                    | 981,372   |   |                      | $
|Construction in Progress          |  | $                    | 34,587    |   |                      | $
|Property and equipment, net       |  | $                    | 1,015,959 |   |                      | $



Depreciation expense was $59,297, $Nil and
$Nil for the years ended June 30, 2019, 2018 and 2017, respectively.





F-19











LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7 — ACCRUED EXPENSE AND OTHER PAYABLES



|                                  |  | As of June 30,
 2019 |           |  | As of June 30,
 2018 |  
|--------------------------------- |  | -------------------- | --------- |  | -------------------- | -
|Deposits from customers           |  | $                    | 36,255    |  |                      | $
|Deferred offering costs payable   |  |                      | 901,763   |  |                      |  
|Professional service fees payable |  |                      | 104,982   |  |                      |  
|Accrued expense                   |  |                      | 123,932   |  |                      |  
|Others                            |  |                      | 6,623     |  |                      |  
|                                  |  | $                    | 1,173,555 |  |                      | $



Deposits from customers were mainly received
from advertising agents for multi-channel advertising.



NOTE 8 — TAXES



a. VAT, Business Tax and related surcharges



Effective on September 1,
2012, a pilot program (the “Pilot Program”) for transition from the imposition of PRC business tax (“Business
Tax”) to the imposition of VAT for revenues from certain industries and certain cities. On May 1, 2016, the transition
from the imposition of Business Tax to the imposition of VAT, was expanded to all industries in China, and as a result all of the
Company’s revenues have been subject to a 6% VAT and related surcharges on VAT payable at a rate of 12% since that date.
To record VAT payable, the Company adopted the net presentation method, which presents the difference between the output VAT (at
a rate of 6%) and the available input VAT amount (at the rate applicable to the supplier).



There is a culture construction
fee surcharge of 3% on gross revenues from the multi-channel advertising businesses.



b. Income tax



Cayman Islands



Under the current tax
laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, no Cayman Islands withholding
tax will be imposed upon the payment of dividends by the Company to its shareholders.



British Virgin Islands



Yuezhong International
was incorporated in the British Virgin Islands and is not subject to income taxes or capital gain tax under current laws of British
Virgin Islands.



Hong Kong



Entities incorporated
in Hong Kong are subject to profits tax in Hong Kong at the rate of 16.5% for the years ended June 30, 2019, 2018 and
2017, and there are no withholding taxes in Hong Kong on remittance of dividends.



China



The Corporate Income
Tax Law generally applies an income tax rate of 25% to all enterprises. Once an enterprise meets certain requirements and is identified
as a small-scale minimal profit enterprise, the part of its taxable income not more than RMB1 million is subject to a reduced rate
of 5% and the part between RMB1 million and 3 million is subject to a reduced rate of 10%.





F-20







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8 — TAXES (Continued)



(i)The components of the income tax provision are as follows:



|                             |  | For the years ended June 30, |          
|---------------------------- |  | ---------------------------- | ---------
|                             |  | 2019                         |          
|Current income tax provision |  | $                            | 1,715,756
|Deferred income tax benefit  |  |                              | (16,066  
|Total                        |  | $                            | 1,699,690

​

(ii)The following table summarizes deferred tax assets resulting
from differences between the financial reporting basis and tax basis of assets and liabilities:



|                                |  | As of June 30, 2019 |        |  | As of June 30, 2018 |  
|------------------------------- |  | ------------------- | ------ |  | ------------------- | -
|Allowance for doubtful accounts |  | $                   | 30,905 |  |                     | $
|Deferred revenue                |  |                     | 47,317 |  |                     |  
|Total deferred tax assets       |  | $                   | 78,222 |  |                     | $



No valuation allowance
against the deferred tax assets is considered necessary since the Company believes that it will more likely than not to utilize
the future benefits.



The following table
reconciles the statutory rates to the Company’s effective tax rate for the years ended June 30, 2019, 2018 and
2017:



|                                                                  |  | For the years ended June 30, |     
|----------------------------------------------------------------- |  | ---------------------------- | ----
|                                                                  |  | 2019                         |     
|China Statutory income tax rate                                   |  |                              | 25  
|Favorable tax rate impact (a)                                     |  |                              | (0.4
|Non-deductible expenses (non-taxable income)-permanent difference |  |                              | 0.1 
|Effective tax rate                                                |  |                              | 24.7



(a) Shenyang Tianniu, Harbin Yuechuzhong
and Liaoning Cinema are subject to corporate income tax at a reduced rate of 10% as approved by local government as small-scaled
minimal profit enterprises.



c. Taxes payable



Taxes payable consisted of the following:



|                                  |  | As of June 30, 2019 |           |  | As of June 30,  2018 |  
|--------------------------------- |  | ------------------- | --------- |  | -------------------- | -
|Value-added tax                   |  | $                   | 160,781   |  |                      | $
|Corporate income tax              |  |                     | 2,399,384 |  |                      |  
|Related surcharges on VAT payable |  |                     | 166,656   |  |                      |  
|Total                             |  | $                   | 2,726,821 |  |                      | $





F-21







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 9 — SHAREHOLDERS’ EQUITY



Ordinary shares



When the Company was
incorporated in the Cayman Islands on August 21, 2018, 50,000,000 Ordinary Shares were authorized, issued and outstanding
at par value of US$0.001.



On August 24, 2018,
the Company issued 50,000,000 Ordinary Shares to certain founder shareholders in connection with entering into the VIE contractual
arrangements. On October 19, 2018, one of the Company’s founder shareholders, Asia Equity Exchange Group Co., Ltd., transferred
5,000,000 Ordinary Shares it owned to Mr. Bo Jiang, chairman of the Company. On October 23, 2018, Mr. Bo Jiang transferred 4,500,000
Ordinary Shares to ATIF Holdings Limited, (“ATIF,” formerly known as Asia Times Holdings Limited), a British Virgin
Islands company, as compensation for consulting services to be provided by Qianhai Asia Era (Shenzhen) International Financial
Services Co., Ltd., a PRC company and a VIE of ATIF (“Qianhai,” formerly known as Qianhai Asia Times (Shenzhen) International
Financial Services Co., Ltd.), in connection with the Company’s proposed initial public offering. Pursuant to that certain
Amended and Restated Consulting Agreement between Qianhai and LMG dated December 10, 2018, ATIF agreed to receive cash instead
of Ordinary Shares as compensation. As a result, the 4,500,000 Ordinary Shares previously held by ATIF have been returned to the
Company and cancelled.



On February 26, 2019,
the Company’s shareholders approved a reverse split of the outstanding Ordinary Shares at a ratio of 1-for-2.84 shares, which
was effected on February 26, 2019 (the “Share Consolidation”). All references to Ordinary Shares, options to purchase
Ordinary Shares, share data, per share data, and related information have been retroactively adjusted, where applicable, in this
annual report to reflect the reverse split of the Company’s Ordinary Shares as if it had occurred at the beginning of the
earlier period presented. Furthermore, on February 26, 2019, the authorized share capital was increased to US$142,000 divided
into 50,000,000 Ordinary Shares of  $0.00284 each, and therefore the Company maintains the same number of shares that were
previously available to be issued prior to the Share Consolidation (that being 50,000,000). The Company believes it is appropriate
to reflect the Share Consolidation on a retroactive basis pursuant to ASC 260. As of June 30, 2019 and 2018, there were 50,000,000
Ordinary Shares authorized at par value of  $0.00284, and 16,021,126.7606 and 17,605,633.8028 (respectively) shares issued
and outstanding, giving the effect of the Share Consolidation and the share repurchase detailed above.



Statutory reserve



The Company is required
to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve,
based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).
Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance
with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the surplus reserve
are made at the discretion of the Board of Directors. As of June 30, 2019 and 2018, the balance of statutory reserves was
$875,271 and $356,336, respectively.





F-22







LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 10 — RELATED PARTY TRANSACTIONS



a) The table below sets forth the major related parties
and their relationships with the Company:



|Name of related party |  | Relationship with the Company  
|--------------------- |  | -------------------------------
|Tao Jiang             |  | CEO and director of the Company



b) The Group had the following related party balances
with the major related party:



As of June 30,
2019 and 2018, the balances of due to related party were mainly loans provided by the CEO and director of the Company to fund the
Company’s operations as set forth in the table below. The payables are unsecured, non-interest bearing and due on demand.



|                           |  | As of June 30, 2019 |         |  | As of June 30, 2018 |  
|-------------------------- |  | ------------------- | ------- |  | ------------------- | -
|Amount due to Tao Jiang    |  | $                   | 567,346 |  |                     | $
|Total due to related party |  | $                   | 567,346 |  |                     | $



NOTE 11 — COMMITMENTS



Operating lease commitments



The Company leases facilities
in the PRC under non-cancelable operating leases expiring on different dates. Payments under operating leases are expensed on a
straight-line basis over the periods of the respective leases. The Company’s lease agreements are entered into with third
parties and usually have a renewal option with an advance notice period of one to 12 months, and no restrictions or contingent
rents. For lease agreements with escalated rental payments, they are recognized on a straight-line basis over the lease term.



The Company’s
leases mainly include office buildings and movie theaters. Rental expense charged to operations under operating leases for the
years ended June 30, 2019, 2018 and 2017, amounted to 335,379, $50,212 and $34,801, respectively.



Future minimum lease
obligations for operating leases with initial terms in excess of one year at June 30, 2019 are as follows:







|For
the 12 months ending June 30, |  |   |           | 
|--------------------------------- |  | - | --------- | 
|                                  |  |   |           | 
|2020                              |  | $ | 521,905   | 
|2021                              |  |   | 475,359   | 
|2022                              |  |   | 474,797   | 
|2023                              |  |   | 486,265   | 
|2024                              |  |   | 489,823   | 
|Thereafter                        |  |   | 2,646,590 | 
|Total                             |  | $ | 5,094,739 | 



NOTE 12 — SEGMENT REPORTING



ASC
280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis
consistent with the Company’s internal organizational structure as well as information about geographical areas,
business segments and major customers in financial statements for details on the Company’s business segments. The
Company uses the “management approach” in determining reportable operating segments. The management approach
considers the internal organization and reporting used by the Company’s chief operating decision maker for making
operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating
decision maker, reviews operation results by the revenue of different services. Based on management’s assessment, the Company
has determined that it has four operating segments: multi-channel advertising, event planning and execution, film production and
movie theater operating.





F-23









LEAPING GROUP CO., LTD.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



NOTE 12 — SEGMENT REPORTING (Continued)



The following tables
present summary information by segment for the years ended June 30, 2019, 2018 and 2017, respectively:



|                                      |  | For
    the year ended June 30, 2019 |          
|------------------------------------- |  | ------------------------------------ | ---------
|                                      |  | Multi-Channel

    Advertising       |          
|Revenue                               |  | $                                    | 7,958,143
|Cost
    of revenue and related taxes |  |                                      | 2,580,905
|Gross profit                          |  |                                      | 5,377,238
|Operating
    expenses                |  |                                      | 957,517  
|Income
    from operations            |  |                                      | 4,419,721
|Net
    income                        |  | $                                    | 3,330,128



|                                      |  | For
    the year ended June 30, 2018 |          
|------------------------------------- |  | ------------------------------------ | ---------
|                                      |  | Multi-Channel

    Advertising       |          
|Revenue                               |  | $                                    | 4,005,598
|Cost
    of revenue and related taxes |  |                                      | 1,443,464
|Gross profit                          |  |                                      | 2,562,134
|Operating
    expenses                |  |                                      | 252,853  
|Income
    from operations            |  |                                      | 2,309,281
|Net
    income                        |  | $                                    | 1,751,062



|                                      |  | For
    the year ended June 30, 2017 |          
|------------------------------------- |  | ------------------------------------ | ---------
|                                      |  | Multi-Channel

    Advertising       |          
|Revenue                               |  | $                                    | 2,175,371
|Cost
    of revenue and related taxes |  |                                      | 807,590  
|Gross profit                          |  |                                      | 1,367,781
|Operating
    expenses                |  |                                      | 389,548  
|Income
    from operations            |  |                                      | 978,233  
|Net
    income                        |  | $                                    | 731,303  





|                             |  | As of June 30,
 2019 |            |  | As of June 30,
 2018 |  
|---------------------------- |  | -------------------- | ---------- |  | -------------------- | -
|Total assets:                |  | $                    |            |  |                      | $
|Multi-Channel Advertising    |  |                      | 7,311,842  |  |                      |  
|Event Planning and Execution |  |                      | 2,393,342  |  |                      |  
|Film Production              |  |                      | 332,542    |  |                      |  
|Movie Theater Operating      |  |                      | 1,061,294  |  |                      |  
|Total Assets                 |  | $                    | 11,099,020 |  |                      | $



NOTE 13 — SUBSEQUENT EVENTS



These consolidated financial
statements were approved by management and available for issuance on September 30, 2019. The Company evaluated subsequent
events through the date these consolidated financial statements were issued.





F-24